UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For The Quarterly Period Ended September 30, 2014 |
|
OR |
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For The Transition Period From To
COMMISSION FILE NO.: 001-34098
HIGHPOWER
INTERNATIONAL, INC.
(Exact name of Registrant as specified in
its charter)
Delaware |
|
20-4062622 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer
Identification Number) |
Building A1, 68 Xinxia Street, Pinghu,
Longgang,
Shenzhen, Guangdong, 518111, People’s
Republic of China
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP
CODE)
(86) 755-89686238
(COMPANY’S
TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes x
No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x
No ¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” as defined in
Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ |
Accelerated filer ¨ |
|
|
Non-accelerated filer ¨ |
Smaller reporting company x |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨
No x
The registrant had 15,052,158 shares of common
stock, par value $0.0001 per share, outstanding as of November 12, 2014.
HIGHPOWER INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTERLY
PERIOD ENDED September 30, 2014
INDEX
Item 1. Consolidated Financial Statements
HIGHPOWER INTERNATIONAL, INC.AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars except Number of Shares)
|
|
September 30, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
$ |
|
|
$ |
|
ASSETS | |
| | | |
| | |
Current Assets: | |
| | | |
| | |
Cash and cash equivalents | |
| 11,802,804 | | |
| 7,973,459 | |
Restricted cash | |
| 15,467,638 | | |
| 28,586,121 | |
Accounts receivable, net | |
| 38,107,418 | | |
| 33,961,014 | |
Notes receivable | |
| 2,460,187 | | |
| 1,014,891 | |
Prepayments | |
| 4,482,975 | | |
| 4,969,743 | |
Other receivables | |
| 715,550 | | |
| 1,063,656 | |
Inventories | |
| 20,567,199 | | |
| 19,739,360 | |
| |
| | | |
| | |
Total Current Assets | |
| 93,603,771 | | |
| 97,308,244 | |
| |
| | | |
| | |
Property, plant and equipment, net | |
| 49,383,533 | | |
| 48,548,203 | |
Land use right, net | |
| 4,312,435 | | |
| 4,421,415 | |
Intangible asset, net | |
| 612,500 | | |
| 650,000 | |
Deferred tax assets | |
| 1,626,446 | | |
| 802,225 | |
Foreign currency derivatives assets | |
| - | | |
| 63,289 | |
| |
| | | |
| | |
TOTAL ASSETS | |
| 149,538,685 | | |
| 151,793,376 | |
| |
| | | |
| | |
LIABILITIES AND EQUITY | |
| | | |
| | |
| |
| | | |
| | |
LIABILITIES | |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Foreign currency derivatives liabilities | |
| 4,976 | | |
| - | |
Accounts payable | |
| 50,067,002 | | |
| 40,026,698 | |
Deferred income | |
| 1,635,959 | | |
| 675,521 | |
Short-term loan | |
| 15,817,971 | | |
| 36,142,105 | |
Notes payable | |
| 27,002,824 | | |
| 25,271,256 | |
Other payables and accrued liabilities | |
| 6,819,899 | | |
| 7,801,431 | |
Income taxes payable | |
| 2,046,929 | | |
| 1,279,658 | |
Current portion of long-term loan | |
| 1,951,442 | | |
| 1,967,536 | |
| |
| | | |
| | |
Total Current Liabilities | |
| 105,347,002 | | |
| 113,164,205 | |
| |
| | | |
| | |
Warrant Liability | |
| 2,385,739 | | |
| - | |
Long-term loan | |
| 2,439,302 | | |
| 3,935,071 | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
| 110,172,043 | | |
| 117,099,276 | |
| |
| | | |
| | |
COMMITMENTS AND CONTINGENCIES | |
| - | | |
| - | |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Stated in US Dollars
except Number of Shares)
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
EQUITY | |
| | | |
| | |
Stockholders’ equity | |
| | | |
| | |
Preferred stock | |
| | | |
| | |
(Par value: $0.0001, Authorized: 10,000,000 shares, Issued and outstanding: none) | |
| - | | |
| - | |
| |
| | | |
| | |
Common stock | |
| | | |
| | |
(Par value: $0.0001, Authorized: 100,000,000 shares, 15,052,158 shares issued and outstanding at September 30, 2014 and 13,978,106 shares issued and outstanding at December 31, 2013) | |
| 1,505 | | |
| 1,398 | |
Additional paid-in capital | |
| 10,403,566 | | |
| 6,011,305 | |
Statutory and other reserves | |
| 3,142,411 | | |
| 3,142,411 | |
Retained earnings | |
| 19,142,391 | | |
| 18,390,875 | |
Accumulated other comprehensive income | |
| 5,517,730 | | |
| 5,848,859 | |
| |
| | | |
| | |
Total equity for the Company’s stockholders | |
| 38,207,603 | | |
| 33,394,848 | |
| |
| | | |
| | |
Non-controlling interest | |
| 1,159,039 | | |
| 1,299,252 | |
| |
| | | |
| | |
TOTAL EQUITY | |
| 39,366,642 | | |
| 34,694,100 | |
| |
| | | |
| | |
TOTAL LIABILITIES AND EQUITY | |
| 149,538,685 | | |
| 151,793,376 | |
See notes to consolidated financial statements
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
(Stated in US Dollars except Number of Shares)
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| |
$ | | |
$ | | |
$ | | |
$ | |
| |
| | |
| | |
| | |
| |
Net sales | |
| 44,474,560 | | |
| 38,852,978 | | |
| 111,769,510 | | |
| 94,429,966 | |
Cost of sales | |
| (35,069,440 | ) | |
| (31,609,991 | ) | |
| (88,703,954 | ) | |
| (76,689,340 | ) |
Gross profit | |
| 9,405,120 | | |
| 7,242,987 | | |
| 23,065,556 | | |
| 17,740,626 | |
| |
| | | |
| | | |
| | | |
| | |
Research and development expenses | |
| (2,056,045 | ) | |
| (1,531,477 | ) | |
| (5,844,962 | ) | |
| (3,984,942 | ) |
Selling and distribution expenses | |
| (1,697,674 | ) | |
| (1,598,397 | ) | |
| (4,822,560 | ) | |
| (4,386,375 | ) |
General and administrative expenses, including stock-based compensation | |
| (3,295,262 | ) | |
| (2,957,467 | ) | |
| (10,178,838 | ) | |
| (8,375,713 | ) |
Foreign currency transaction gain (loss) | |
| (15,369 | ) | |
| (154,453 | ) | |
| 334,326 | | |
| (374,410 | ) |
Gain (loss) on derivative instruments | |
| 59,785 | | |
| 45,033 | | |
| (56,349 | ) | |
| 267,316 | |
Total operating expenses | |
| (7,004,565 | ) | |
| (6,196,761 | ) | |
| (20,568,383 | ) | |
| (16,854,124 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income from operations | |
| 2,400,555 | | |
| 1,046,226 | | |
| 2,497,173 | | |
| 886,502 | |
| |
| | | |
| | | |
| | | |
| | |
Loss on change of fair value of warrant liability | |
| (1,286,335 | ) | |
| - | | |
| (1,211,787 | ) | |
| - | |
Other income | |
| 590,117 | | |
| 479,288 | | |
| 1,493,491 | | |
| 976,673 | |
Interest expenses | |
| (458,534 | ) | |
| (444,706 | ) | |
| (1,528,077 | ) | |
| (1,146,118 | ) |
Income before taxes | |
| 1,245,803 | | |
| 1,080,808 | | |
| 1,250,800 | | |
| 717,057 | |
| |
| | | |
| | | |
| | | |
| | |
Income taxes expenses | |
| (439,659 | ) | |
| (372,023 | ) | |
| (628,872 | ) | |
| (579,352 | ) |
Net income | |
| 806,144 | | |
| 708,785 | | |
| 621,928 | | |
| 137,705 | |
| |
| | | |
| | | |
| | | |
| | |
Less: net loss attributable to non-controlling interest | |
| (68,023 | ) | |
| (33,443 | ) | |
| (129,588 | ) | |
| (104,932 | ) |
Net income attributable to the Company | |
| 874,167 | | |
| 742,228 | | |
| 751,516 | | |
| 242,637 | |
| |
| | | |
| | | |
| | | |
| | |
Comprehensive income | |
| | | |
| | | |
| | | |
| | |
Net income | |
| 806,144 | | |
| 708,785 | | |
| 621,928 | | |
| 137,705 | |
Foreign currency translation gain (loss) | |
| 19,368 | | |
| 232,201 | | |
| (341,754 | ) | |
| 531,143 | |
Comprehensive income | |
| 825,512 | | |
| 940,986 | | |
| 280,174 | | |
| 668,848 | |
| |
| | | |
| | | |
| | | |
| | |
Less: comprehensive loss attributable to non-controlling
interest | |
| (67,486 | ) | |
| (25,145 | ) | |
| (140,213 | ) | |
| (90,620 | ) |
Comprehensive income attributable to the Company | |
| 892,998 | | |
| 966,131 | | |
| 420,387 | | |
| 759,468 | |
| |
| | | |
| | | |
| | | |
| | |
Earnings per share of common stock attributable to the
Company | |
| | | |
| | | |
| | | |
| | |
- Basic | |
| 0.06 | | |
| 0.05 | | |
| 0.05 | | |
| 0.02 | |
- Diluted | |
| 0.06 | | |
| 0.05 | | |
| 0.05 | | |
| 0.02 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of common stock outstanding | |
| | | |
| | | |
| | | |
| | |
- Basic | |
| 15,052,158 | | |
| 13,657,930 | | |
| 14,632,491 | | |
| 13,607,474 | |
- Diluted | |
| 15,590,142 | | |
| 13,657,930 | | |
| 15,045,776 | | |
| 13,607,474 | |
See notes to consolidated financial statements
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in US Dollars)
| |
Nine months ended September 30, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
(Unaudited) | |
| |
$ | | |
$ | |
Cash flows from operating activities | |
| | | |
| | |
Net income | |
| 621,928 | | |
| 137,705 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 3,161,384 | | |
| 1,832,596 | |
Allowance for doubtful accounts | |
| 103 | | |
| (3,643 | ) |
Loss on disposal of property, plant and equipment | |
| 346,866 | | |
| 108,652 | |
Loss on derivative instruments | |
| 67,748 | | |
| 117,966 | |
Deferred income tax | |
| (830,413 | ) | |
| (76,813 | ) |
Share based payment | |
| 1,064,969 | | |
| 159,352 | |
Loss on change of fair value of warrant liability | |
| 1,211,787 | | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (4,404,612 | ) | |
| (7,918,758 | ) |
Notes receivable | |
| (1,453,621 | ) | |
| (1,048,133 | ) |
Prepayments | |
| 448,249 | | |
| (2,191,905 | ) |
Other receivable | |
| 339,411 | | |
| (9,515 | ) |
Inventories | |
| (989,237 | ) | |
| (188,974 | ) |
Accounts payable | |
| 10,701,057 | | |
| 7,255,970 | |
Deferred income | |
| 1,635,985 | | |
| - | |
Other payables and accrued liabilities | |
| (920,591 | ) | |
| 2,251,556 | |
Income taxes payable | |
| 777,753 | | |
| 37,821 | |
Net cash flows provided by operating activities | |
| 11,778,766 | | |
| 463,877 | |
| |
| | | |
| | |
Cash flows from investing activities | |
| | | |
| | |
Acquisition of plant and equipment | |
| (5,864,112 | ) | |
| (11,905,424 | ) |
Net cash flows used in investing activities | |
| (5,864,112 | ) | |
| (11,905,424 | ) |
| |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | |
Proceeds from short-term bank loans | |
| 15,821,648 | | |
| 30,408,328 | |
Repayment of short-term bank loans | |
| (35,934,559 | ) | |
| (15,748,524 | ) |
Repayment of long-term bank loans | |
| (1,463,605 | ) | |
| (1,449,322 | ) |
Proceeds from notes payable | |
| 34,246,949 | | |
| 32,308,322 | |
Repayment of notes payable | |
| (32,308,636 | ) | |
| (32,097,470 | ) |
Proceeds from issuance of capital stock, net | |
| 4,633,164 | | |
| - | |
Change in restricted cash | |
| 12,900,973 | | |
| (2,540,084 | ) |
Net cash flows provided by (used in) financing activities | |
| (2,104,066 | ) | |
| 10,881,250 | |
Effect of foreign currency translation on cash and cash equivalents | |
| 18,757 | | |
| 367,544 | |
Net increase (decrease) in cash and cash equivalents | |
| 3,829,345 | | |
| (192,753 | ) |
Cash and cash equivalents - beginning of period | |
| 7,973,459 | | |
| 6,627,334 | |
Cash and cash equivalents - end of period | |
| 11,802,804 | | |
| 6,434,581 | |
| |
| | | |
| | |
Supplemental disclosures for cash flow information: | |
| | | |
| | |
Cash paid for: | |
| | | |
| | |
Income taxes | |
| 681,533 | | |
| 618,344 | |
Interest expenses | |
| 1,489,796 | | |
| 1,146,118 | |
Non-cash transactions | |
| | | |
| | |
Accounts payable for construction in progress | |
| 648,385 | | |
| 1,408,336 | |
Offset of deferred income and property, plant and equipment | |
| 669,995 | | |
| - | |
See notes to consolidated financial statements
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| 1. | Organization and basis of presentation |
The consolidated financial statements
include the financial statements of Highpower International, Inc. (“Highpower”) and its subsidiaries, Hong Kong Highpower
Technology Company Limited (“HKHTC”), Shenzhen Highpower Technology Company Limited (“SZ Highpower”), Highpower
Energy Technology (Huizhou) Company Limited (“HZ Highpower”), Springpower Technology (Shenzhen) Company Limited (“SZ
Springpower”), Ganzhou Highpower Technology Company Limited (“GZ Highpower”), Icon Energy System Company Limited
(“ICON”) and Huizhou Highpower Technology Company Limited ("HZ HTC"). Highpower and its subsidiaries are
collectively referred to as the “Company”.
Highpower was incorporated in
the State of Delaware on January 3, 2006. HKHTC was incorporated in Hong Kong on July 4, 2003. All other subsidiaries are incorporated
in the People’s Republic of China (“PRC”).
On May 15, 2013, GZ Highpower
increased its paid-in capital from RMB15,000,000 ($2,381,293) to RMB30,000,000 ($4,807,847). SZ Highpower holds 60% of the equity
interest of GZ Highpower, and four founding management members of GZ Highpower hold the remaining 40%.
In April 2014, the Company and
certain institutional investors entered into a securities purchase agreement, pursuant to which the Company sold 1,000,000 shares
of common stock and warrants exercisable for 500,000 shares of common stock in a registered direct offering at a price of $5.05
per fixed combination for aggregate proceeds of $5.05 million. The shares and warrants were sold in multiples of a fixed combination
consisting of (i) one share of common stock and (ii) one immediately exercisable warrant to purchase 0.50 shares of common stock.
The net proceeds from the offering was $4,633,164, after deducting fees due the placement agent and offering expenses.
The subsidiaries of the Company
and their principal activities are described as follows:
Name of company |
|
Place and date
incorporation |
|
Attributable equity
interest
held |
|
Principal activities |
Hong Kong Highpower Technology Co., Ltd
("HKHTC") |
|
Hong Kong
July 4, 2003 |
|
100% |
|
Investment holding |
Shenzhen Highpower Technology Co., Ltd
("SZ Highpower") |
|
PRC
October 8, 2002 |
|
100% |
|
Manufacturing & marketing of batteries |
Highpower Energy Technology (Huizhou) Co., Ltd
("HZ Highpower") |
|
PRC
January 29, 2008 |
|
100% |
|
Inactive |
Springpower Technology (Shenzhen) Co., Ltd
("SZ Springpower") |
|
PRC
June 4, 2008 |
|
100% |
|
Research & manufacturing of batteries |
Ganzhou Highpower Technology Co., Ltd
("GZ Highpower") |
|
PRC
September 21, 2010 |
|
60% |
|
Processing, marketing and research of battery materials |
Icon Energy System Co., Ltd.
("ICON") |
|
PRC
February 23, 2011 |
|
100% |
|
Research and production of advanced battery packs and systems |
Huizhou Highpower Technology Co., Ltd
("HZ HTC") |
|
PRC
March 8, 2012 |
|
100% |
|
Manufacturing & marketing of batteries |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 2. | Summary of significant accounting policies |
Basis of presentation
The accompanying consolidated
balance sheet as of December 31, 2013, which has been derived from audited financial statements, and the unaudited interim consolidated
financial statements as of September 30, 2014 and for the three and nine month periods ended September 30, 2014 and 2013 have been
prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information
and disclosures, which are normally included in financial statements prepared in accordance with United States generally accepted
accounting principles (U.S. GAAP), have been condensed or omitted pursuant to such rules and regulations, although we believe that
the disclosures made are adequate to provide for fair presentation. The interim financial information should be read in conjunction
with the Financial Statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2013, previously filed with the SEC.
In the opinion of management,
all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s consolidated
financial position as of September 30, 2014, its consolidated results of operations and cash flows for the nine month periods ended
September 30, 2014 and 2013, as applicable, have been made. The interim results of operations are not necessarily indicative of
the operating results for the full fiscal year or any future periods.
Consolidation
The consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated
in consolidation. Non-controlling interests represent the equity interest in the GZ Highpower that is not attributable to the Company.
Use of estimates
The preparation of financial
statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates
and assumptions include revenues; the allowance for doubtful receivables; recoverability of the carrying amount of inventory; fair
values of financial instruments; and the assessment of deferred tax assets or liabilities. These estimates are often based on complex
judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable. Actual results
could differ from these estimates.
Concentrations of credit risk
Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist principally of accounts receivable. The Company extends
credit based on an evaluation of the customer’s financial condition, generally without requiring collateral or other security.
In order to minimize the credit risk, the management of the Company has delegated a team responsible for determining credit limits,
credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. Further, the
Company reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment
losses are made for irrecoverable amounts. In this regard, the management of the Company considers that the Company’s credit
risk is significantly reduced.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 2. | Summary of significant accounting policies (continued) |
No customer accounted for 10%
or more of total sales during nine months ended September 30, 2014. During the nine months ended September 30, 2013, there was
one customer, Energizer Holdings, Inc., that accounted for 11.3% of total net sales.
No supplier accounted for 10%
or more of total purchase amount during nine months ended September 30, 2014, and one major supplier accounted for 15.0% of total
purchase amount during nine months ended September 30, 2013.
None of the Company’s customers
accounted for 10% or more of the accounts receivable as of September 30, 2014 and December 31, 2013.
Cash and cash equivalents
Cash and cash equivalents include
all cash, deposits in banks and other liquid investments with initial maturities of three months or less.
Restricted cash
Restricted cash include time
deposits and cash security for bank acceptance bills.
Accounts receivable
Accounts receivable are stated
at the original amount less an allowance for doubtful receivables, if any, based on a review of all outstanding amounts at period
end. An allowance is also made when there is objective evidence that the Company will not be able to collect all amounts due according
to the original terms of the receivables. Bad debts are written off when identified. The Company extends unsecured credit to customers
in the normal course of business and believes all accounts receivable in excess of the allowances for doubtful receivables to be
fully collectible. The Company does not accrue interest on trade accounts receivable.
Notes receivable
Notes receivable represent banks’
acceptances that have been arranged with third-party financial institutions by certain customers to settle their purchases from
us. These banks’ acceptances are non-interest bearing and are collectible within six months.
Inventories
Inventories are stated at
lower of cost or market. Cost is determined using the weighted average method. Inventory includes raw
materials, packing materials, consumables, work in progress and finished goods. The variable production overhead is allocated to
each unit of production on the basis of the actual use of the production facilities. The allocation of fixed production overhead
to the costs of conversion is based on the normal capacity of the production facilities.
Property, plant and equipment
Property, plant and equipment
are stated at cost less accumulated depreciation. Cost represents the purchase price of the asset and other costs incurred to bring
the asset into its existing use. Maintenance, repairs and betterments, including replacement of minor items, are charged to expense;
major additions to physical properties are capitalized.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 2. | Summary of significant accounting policies (continued) |
Depreciation of property, plant
and equipment is provided using the straight-line method over their estimated useful lives at the following annual rates:
Buildings | |
2.5% - 10% |
Furniture, fixtures and office equipment | |
20% |
Leasehold improvement | |
20 - 50% |
Machinery and equipment | |
10% |
Motor vehicles | |
20% |
Upon sale or disposal, the applicable
amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount less proceeds from disposal
is charged or credited to income.
Construction in progress represents
capital expenditures for direct costs of construction or acquisition and design fees incurred, and the interest expense directly
related to the construction. Capitalization of these costs ceases and the construction in progress is transferred to the appropriate
category of property, plant and equipment when substantially all the activities necessary to prepare the assets for their intended
use are completed. Construction in progress is not depreciated.
Land use rights, net
Land use rights represent payments
for the rights to use certain parcels of land for a certain period of time in the PRC. Land use rights are carried at cost and
charged to expense on a straight-line basis over the period the rights are granted.
Intangible assets
Intangible assets represent a
royalty-bearing, non-exclusive license to use certain patents owned by Ovonic Battery Company, Inc. (“Ovonic”), an
unrelated party, to manufacture rechargeable nickel metal hydride batteries for portable consumer applications (“Consumer
Batteries”) in the PRC, and a royalty-bearing, non-exclusive worldwide license to use certain patents owned by Ovonic to
manufacture, sell and distribute Consumer Batteries. The value of the licenses was established based on historic acquisition costs.
An exclusive proprietary technology
contributed by the four founding management members of GZ Highpower in exchange for the paid-in capital of GZ Highpower is recorded
at the four management members’ historical cost basis of nil.
Intangible assets are amortized
over their estimated useful lives, and are reviewed annually for impairment, or more frequently, if indications of possible impairment
exist.
Government grants
Government grants are recognized
when received and all the conditions for their receipt have been met.
Specifically, government grants
whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets is recognized on
the consolidated balance sheet as deferred income and deducted in calculating the carrying amount of the related asset. The revenue
from such grants is recognized in profit or loss over the life of the related depreciable asset as a reduction of depreciation
expense. As of September 30, 2014 and December 31, 2013, the Company recorded deferred income of $1,635,959 and $657,521, respectively,
for the government grants to purchase non-current assets.
Government grants as compensation
for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future
related benefit are recognized as other income in the period in which they become receivable. In the nine months ended September
30, 2014 and 2013, approximately $292,197 and $345,718 of government grants were recognized as other income, respectively.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 2. | Summary of significant accounting policies (continued) |
Revenue recognition
The Company recognizes revenue
when persuasive evidence of an arrangement exists, the sales price is fixed or determinable, delivery of the product has occurred,
title and risk of loss have transferred to the customers and collectability of the receivable is reasonably assured. The majority
of domestic sales contracts transfer title and risk of loss to customers upon receipt. The majority of oversea sales contracts
transfer title and risk of loss to customers when goods were delivered to the carriers. Revenue is presented net of any sales tax
and value added tax.
The Company does not have arrangements
for returns from customers and does not have any future obligations directly or indirectly related to product resale by customers.
The Company has no incentive programs.
Cost of sales
Cost of revenues consists primarily
of material costs, employee compensation, depreciation and related expenses, which are directly attributable to the production
of products. Write-down of inventories to lower of cost or market is also recorded in cost of revenues.
Shipping and handling
Shipping and handling expenses
are recorded as selling expenses when occurred. Shipping and handling expenses relating to sales were $663,069 and $582,907, respectively,
for the nine months ended September 30, 2014 and 2013.
Research and development
Research and development expenses
include expenses directly attributable to the conduct of research and development programs, including the expenses of salaries,
employee benefits, materials, supplies, and maintenance of research equipment. All expenditures associated with research and development
are expensed as incurred.
Advertising
Advertising, which generally
represents the cost of promotions to create or stimulate a positive image of the Company or a desire to buy the Company’s
products and services, is expensed as incurred. No significant advertising expense was recorded for the nine months ended September
30, 2014 and 2013.
Share-based compensation
The Company recognizes compensation
expense associated with the issuance of equity instruments to employees for their services. The fair value of the equity instruments
is estimated on the date of grant and is expensed in the financial statements over the vesting period. The input assumptions used
in determining fair value are the expected life, expected volatility, risk-free rate and the dividend yield.
Share-based compensation associated
with the issuance of equity instruments to nonemployees is measured with the fair value of the equity instrument issued or committed
to be issued, as this is more reliable than the fair value of the services received. The fair value is measured at the date that
the commitment for performance by the counterparty has been reached or the counterparty's performance is complete.
Income taxes
The Company recognizes deferred
tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences
between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws
and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 2. | Summary of significant accounting policies (continued) |
Uncertain tax positions
The Company accounts for uncertainty
in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the
tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that
the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step
is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. The Company
classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt)
of cash within one year. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in
the provision for income taxes. There were no uncertain tax positions as of September 30, 2014 and December 31, 2013.
Comprehensive income
Recognized revenue, expenses,
gains and losses are included in net income or loss. Although certain changes in assets and liabilities are reported as separate
components of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive
income or loss. The components of other comprehensive income or loss are consisted solely of foreign currency translation adjustments,
net of the income tax effect.
Foreign currency translation
and transactions
Highpower’s functional
currency is the United States dollar ("US$"). HKHTC's functional currency is the Hong Kong dollar ("HK$").
The functional currency of the Company’s subsidiaries in the PRC is the Renminbi ("RMB").
Most of the Company’s oversea
sales are priced and settled with US$. At the date a foreign currency transaction is recognized, each asset, liability, revenue,
expense, gain, or loss arising from the transaction is measured initially in the functional currency of the recording entity by
use of the exchange rate in effect at that date. The increase or decrease in expected functional currency cash flows upon settlement
of a transaction resulting from a change in exchange rates between the functional currency and the currency in which the transaction
is denominated is recognized as foreign currency transaction gain or loss that is included in determining net income for the period
in which the exchange rate changes. At each balance sheet date, recorded balances that are denominated in a foreign currency are
adjusted to reflect the current exchange rate.
The Company’s reporting
currency is US$. Assets and liabilities of HKHTC and the PRC subsidiaries are translated at the current exchange rate at the balance
sheet dates, revenues and expenses are translated at the average exchange rates during the reporting periods, and equity accounts
are translated at historical rates. Translation adjustments are reported in other comprehensive income.
Segment Reporting
The Company uses the “management
approach” in determining reportable operating segments. The management approach considers the internal organization and reporting
used by the Company's chief operating decision maker for making operating decisions and assessing performance as the source for
determining the Company's reportable segments. The Company’s reportable segments are based on products, geography, legal
structure, management structure, or any other manner in which management disaggregates a company. Therefore the Company categorizes
its business into three reportable segments, namely (i) Ni-MH Batteries; (ii) Lithium Batteries; and (iii) New Materials.
Fair value of financial instruments
The carrying values of the Company’s
financial instruments, including cash and cash equivalents, restricted cash, trade and other receivables, deposits, trade and other
payables, and bank borrowings, approximate their fair values due to the short-term maturity of such instruments.
The Company defines fair value
as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted
to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it
considers assumptions that market participants would use when pricing the asset or liability.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 2. | Summary of significant accounting policies (continued) |
The Company establishes a fair
value hierarchy that requires maximizing the use of observable inputs and minimizing the use of unobservable inputs when measuring
fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input
that is significant to the fair value measurement.
The Company measures fair value
using three levels of inputs that may be used to measure fair value:
-Level 1 applies to assets or
liabilities for which there are quoted prices in active markets for identical assets or liabilities.
-Level 2 applies to assets or
liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data.
-Level 3 applies to assets or
liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the
fair value of the assets or liabilities.
Warrant Liabilities
For warrants that are not indexed
to the Company’s stock, the Company records the fair value of the issued warrants as a liability at each balance sheet date
and records changes in the estimated fair value as a non-cash gain or loss in the consolidated statement of operations and comprehensive
loss. The fair values of these warrants have been determined using the Black-Scholes pricing model. The Black-Scholes pricing model
provides for assumptions regarding volatility, call and put features and risk-free interest rates within the total period to maturity.
These values are subject to a significant degree of judgment on the part of the Company.
Derivatives
From time to time the Company
may utilize foreign currency forward contracts to reduce the impact of foreign currency exchange rate risk. Management considered
that the foreign currency forwards did not meet the criteria for designated hedging instruments and hedged transactions to qualify
for cash flow hedge or fair value hedge accounting. The currency forwards therefore are accounted for as derivatives, with fair
value changes reported as gain (loss) of derivative instruments in the income statement.
Earnings per share
Basic earnings per share (“EPS”)
is computed by dividing income attributable to holders of common shares by the weighted average number of common shares outstanding
during the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common
shares were exercised or converted into common shares. Potential dilutive securities are excluded from the calculation of diluted
EPS in loss periods as their effect would be anti-dilutive.
Recently issued accounting
pronouncements
As of November 12, 2014, the
Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-01 up to ASU No. 2014-16, which are not expected
to have a material impact on the consolidated financial statements upon adoption.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
As of September 30, 2014 and
December 31, 2013, restricted cash consisted of the following:
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Securities for bank acceptance bill | |
| 13,113,711 | | |
| 14,132,921 | |
Time deposits | |
| 2,353,927 | | |
| 14,453,200 | |
| |
| 15,467,638 | | |
| 28,586,121 | |
During the nine months ended
September 30, 2014, the Company repaid a series of short-term borrowings which resulted in a decrease in time deposits as of September
30, 2014.
| 4. | Accounts receivable, net |
As of September 30, 2014 and
December 31, 2013, accounts receivable consisted of the following:
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Accounts receivable | |
| 40,604,434 | | |
| 36,467,233 | |
Less: allowance for doubtful debts | |
| 2,497,016 | | |
| 2,506,219 | |
| |
| 38,107,418 | | |
| 33,961,014 | |
The Company recorded bad debt
expense of $103 during the nine months ended September 30, 2014, and the Company reversed bad debt expenses of $3,643 during the
nine months ended September 30, 2013.
The Company wrote off accounts
receivable of $2,948 and $1,713, respectively, in the nine months ended September 30, 2014 and 2013.
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Purchase deposits paid | |
| 2,303,820 | | |
| 2,876,267 | |
Value-added tax prepayment | |
| 1,094,804 | | |
| 1,032,619 | |
Deferred share-based compensation | |
| - | | |
| 131,812 | |
Rental deposit | |
| 265,543 | | |
| 209,095 | |
Deferred insurance fee | |
| 72,752 | | |
| 53,297 | |
Advances to staff for operations | |
| 138,425 | | |
| 48,499 | |
Other deposits and prepayments | |
| 607,631 | | |
| 618,154 | |
| |
| 4,482,975 | | |
| 4,969,743 | |
Other deposits and prepayments
represent deferred expenses and prepayments to services providers.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Deposit for land use right | |
| 514,361 | | |
| 518,603 | |
Others | |
| 201,189 | | |
| 545,053 | |
| |
| 715,550 | | |
| 1,063,656 | |
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Raw materials | |
| 4,799,204 | | |
| 4,281,232 | |
Work in progress | |
| 2,516,244 | | |
| 2,047,627 | |
Finished goods | |
| 12,864,660 | | |
| 13,087,995 | |
Packing materials | |
| 25,647 | | |
| 20,591 | |
Consumables | |
| 361,444 | | |
| 301,915 | |
| |
| 20,567,199 | | |
| 19,739,360 | |
Where there is evidence that
the utility of inventories, in their disposal in the ordinary course of business, will be less than cost, whether due to physical
deterioration, obsolescence, changes in price levels, or other causes, the inventories are written down to fair value. $747,340
and $138,213 was written down for inventories in the nine months ended September 30, 2014 and 2013, respectively.
| 8. | Property, plant and equipment, net |
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Cost | |
| | | |
| | |
Construction in progress | |
| 2,583,000 | | |
| 6,681,652 | |
Furniture, fixtures and office equipment | |
| 3,691,244 | | |
| 3,282,818 | |
Leasehold improvement | |
| 2,044,879 | | |
| 940,089 | |
Machinery and equipment | |
| 26,119,952 | | |
| 24,600,773 | |
Motor vehicles | |
| 1,339,782 | | |
| 1,430,611 | |
Building | |
| 25,541,312 | | |
| 21,521,416 | |
| |
| 61,320,169 | | |
| 58,457,359 | |
Less: accumulated depreciation | |
| 11,936,636 | | |
| 9,909,156 | |
| |
| 49,383,533 | | |
| 48,548,203 | |
The Company recorded depreciation
expenses of $3,051,069 and $1,722,992 for the nine months ended September 30, 2014 and 2013, and $1,071,176 and $621,589 for the
three months ended September 30, 2014 and 2013, respectively.
During the nine months ended
September 30, 2014 and 2013, the Company deducted deferred income related to government grants of $669,995 and $nil, respectively,
in calculating the carrying amount of property, plant and equipment.
The buildings comprising the
Huizhou facilities were pledged as collateral for bank loans as of September 30, 2014 and December 31, 2013. The carrying amount
of the building was $10,595,293 and $10,867,411 as of September 30, 2014 and December 31, 2013, respectively.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Cost | |
| | | |
| | |
Land located in Huizhou | |
| 3,491,953 | | |
| 3,520,752 | |
Land located in Ganzhou | |
| 1,362,280 | | |
| 1,373,515 | |
| |
| 4,854,233 | | |
| 4,894,267 | |
Accumulated amortization | |
| (541,798 | ) | |
| (472,852 | ) |
Net | |
| 4,312,435 | | |
| 4,421,415 | |
As of September 30, 2014, land
use rights of the Company included certain parcels of land located in Huizhou City, Guangdong Province, PRC and Ganzhou City, Jiangxi
Province, PRC. Land use rights for land in Huizhou City with an area of approximately 126,605 square meters and in Ganzhou City
with an area of approximately 58,669 square meters will expire on May 23, 2057 and January 4, 2062, respectively.
Land use rights are being amortized
annually using the straight-line method over a contract term of 50 years. Estimated amortization for the coming years is as follows:
| |
$ | |
Remaining 2014 | |
| 24,222 | |
2015 | |
| 97,087 | |
2016 | |
| 97,087 | |
2017 | |
| 97,087 | |
2018 | |
| 97,087 | |
2019 | |
| 97,087 | |
2020 and thereafter | |
| 3,802,778 | |
| |
| 4,312,435 | |
The Company recorded amortization
expenses of $72,815 and $72,104 for the nine months ended September 30, 2014 and 2013, respectively, and $24,222 and $24,214 for
the three months ended September 30, 2014 and 2013, respectively.
The land use right for land located
in Huizhou City was pledged as collateral for bank loans as of September 30, 2014 and December 31, 2013.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Cost | |
| | | |
| | |
Consumer battery license fee | |
| 1,000,000 | | |
| 1,000,000 | |
| |
| | | |
| | |
Accumulated amortization | |
| (387,500 | ) | |
| (350,000 | ) |
Net | |
| 612,500 | | |
| 650,000 | |
The Company is amortizing the
$1,000,000 cost of the Consumer Battery License Agreement with Ovonic over a period of 20 years on the straight line basis over
the estimated useful life of the underlying technology, which is based on the Company’s assessment of existing battery technology,
current trends in the battery business, potential developments and improvements, and the Company’s current business plan.
As of September 30, 2014 and
December 31, 2013, the Company had an exclusive proprietary technology with historical cost of zero but still in use. The exclusive
proprietary technology was contributed by four founding management members of GZ Highpower in exchange for the paid-in capital
of GZ Highpower. The historical cost basis was recorded at $nil at the four management members’ historical cost basis.
Amortization expenses included
in selling and distribution expenses were $37,500 for the nine months ended September 30, 2014 and 2013, and $12,500 for the three
months ended September 30, 2014 and 2013.
| 11. | Other payables and accrued liabilities |
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Accrued expenses | |
| 4,100,994 | | |
| 3,877,095 | |
Royalty payable | |
| 577,721 | | |
| 582,486 | |
VAT payable | |
| 588,864 | | |
| 1,406,086 | |
Sales deposits received | |
| 1,216,310 | | |
| 1,574,258 | |
Other payables | |
| 336,010 | | |
| 361,506 | |
| |
| 6,819,899 | | |
| 7,801,431 | |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
The Company and its subsidiaries
file tax returns separately.
1) VAT
Pursuant to the Provisional Regulation
of the PRC on VAT and the related implementing rules, all entities and individuals ("taxpayers") that are engaged in
the sale of products in the PRC are generally required to pay VAT at a rate of 17% of the gross sales proceeds received, less any
deductible VAT already paid or borne by the taxpayers. Further, when exporting goods, the exporter is entitled to a portion of
or all the refund of VAT that it has already paid or incurred. The Company’s PRC subsidiaries are subject to VAT at 17% of
their revenues.
2) Income tax
United States
Highpower was incorporated in
Delaware and is subject to U.S. federal income tax with a system of graduated tax rates ranging from 15% to 35%. As Highpower does
not conduct any business in the U.S. or Delaware, it is not subject to U.S. or Delaware state corporate income tax. No deferred
U.S. taxes are recorded since all accumulated profits in the PRC will be permanently reinvested in the PRC.
Hong Kong
HKHTC, which is incorporated
in Hong Kong, is subject to a corporate income tax rate of 16.5%.
PRC
In accordance with the relevant
tax laws and regulations of the PRC, a company registered in the PRC is subject to income taxes within the PRC at the applicable
tax rate on taxable income.
SZ Highpower has obtained the
approval and is qualified as a High-Tech Enterprise ("NHTE") status by the Shenzhen Tax Bureau according to the PRC Enterprise
Income Tax Law. It is eligible to enjoy a preferential tax rate of 15% from 2011 to 2013. SZ Highpower has reapplied for High-Tech
Enterprise status in the second quarter of 2014. If SZ Highpower fails to obtain the approval in 2014, SZ Highpower will be subject
to income tax at a rate of 25% starting with calendar year 2014.
SZ Springpower received High-Tech
Enterprise ("NHTE") status in 2013, which is valid for 3 calendar years. As a result, SZ Springpower is entitled to a
preferential enterprise income tax rate of 15% from 2013 to 2015. SZ Springpower will reapply for High-Tech Enterprise status in
2016. If SZ Springpower fails to obtain the approval in 2016, SZ Springpower will be subject to income tax at a rate of 25% starting
with calendar year 2016.
All the other PRC subsidiaries
are not entitled to any tax holiday. They were subject to income tax at a rate of 25% for calendar years 2014 and 2013.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
The components of the provision
for income taxes expenses are:
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Current | |
| 720,932 | | |
| 311,110 | | |
| 1,459,285 | | |
| 656,165 | |
Deferred | |
| (281,273 | ) | |
| 60,913 | | |
| (830,413 | ) | |
| (76,813 | ) |
Total | |
| 439,659 | | |
| 372,023 | | |
| 628,872 | | |
| 579,352 | |
The reconciliation of income
tax expense computed at the statutory tax rate applicable to the Company to income tax expense is as follows:
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Income before tax | |
| 1,245,803 | | |
| 1,080,808 | | |
| 1,250,800 | | |
| 717,057 | |
| |
| | | |
| | | |
| | | |
| | |
Provision for income taxes at applicable income
tax rate | |
| 154,019 | | |
| 271,265 | | |
| 73,150 | | |
| 168,845 | |
Effect of preferential tax rate | |
| (332,606 | ) | |
| (32,272 | ) | |
| (546,529 | ) | |
| 11,698 | |
R&D expenses eligible for super deduction | |
| 74 | | |
| - | | |
| (71,531 | ) | |
| - | |
Non-deductible expenses | |
| 43,591 | | |
| 22,092 | | |
| 124,082 | | |
| 65,791 | |
Change in valuation allowance | |
| 574,581 | | |
| 110,938 | | |
| 1,049,700 | | |
| 333,018 | |
Effective enterprise income tax | |
| 439,659 | | |
| 372,023 | | |
| 628,872 | | |
| 579,352 | |
3) Deferred tax assets
Deferred tax assets and deferred
tax liabilities reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purpose and the tax bases used for income tax purpose. The following represents the tax effect of each major type of
temporary difference.
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Tax loss carry-forward | |
| 4,080,648 | | |
| 2,601,823 | |
Allowance for doubtful receivables | |
| 111,109 | | |
| 112,446 | |
Allowance for inventory obsolescence | |
| 191,410 | | |
| 46,441 | |
Fair value change of currency forwards | |
| 746 | | |
| (9,493 | ) |
Difference for sales cut-off | |
| 47,068 | | |
| 46,824 | |
Deferred income | |
| 245,394 | | |
| 168,880 | |
Property, plant and equipment subsidized
by government grant | |
| 164,358 | | |
| - | |
Total gross deferred tax assets | |
| 4,840,733 | | |
| 2,966,921 | |
Valuation allowance | |
| (3,214,287 | ) | |
| (2,164,696 | ) |
Total net deferred tax assets | |
| 1,626,446 | | |
| 802,225 | |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
Notes payable are presented to
certain suppliers as a payment against the outstanding trade payables. These notes payable are bank guarantee promissory notes
which are non-interest bearing and generally mature within nine months. The outstanding bank guarantee promissory notes are secured
by restricted cash deposited in banks. Outstanding notes payable were $27,002,824 and $25,271,256 as of September 30, 2014 and
December 31, 2013, respectively.
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Short- term bank loans guaranteed and repayable within one year | |
| 15,817,971 | | |
| 36,142,105 | |
As of September 30, 2014, the
above bank borrowings were for working capital and capital expenditure purposes and were secured by personal guarantees executed
by certain directors of the Company, a land use right with a carrying amount of $3,020,539, the building with a carrying amount
of $10,595,293.
The loans as of September 30,
2014 were primarily obtained from three banks with interest rates ranging from 1.0% to 7.5% per annum. The interest expenses were
$1,240,334 and $741,153 for the nine months ended September 30, 2014 and 2013, respectively, and $370,775 and $321,965 for the
three months ended September 30, 2014 and 2013, respectively.
The Company entered into various credit contracts and
revolving lines of credit, which were used for short-term loans and bank acceptance bills. The following tables summarize the unused
lines of credit as of September 30, 2014 and December 31, 2013:
| |
September 30, 2014 (Unaudited) |
Lender | |
Starting date | |
Maturity date | |
Line of credit | | |
Unused line of credit | |
| |
| |
| |
$ | | |
$ | |
Bank of China | |
3/10/2014 | |
3/10/2015 | |
| 12,603,060 | | |
| 285,381 | |
Bank of China | |
7/23/2014 | |
7/23/2015 | |
| 3,949,346 | | |
| 67,247 | |
Industrial and Commercial Bank of China | |
7/26/2012 | |
7/25/2015 | |
| 6,504,805 | | |
| 5,041,224 | |
The Shanghai Cmmercial&saving | |
8/19/2014 | |
11/19/2014 | |
| 4,500,000 | | |
| 4,500,000 | |
China Minsheng Banking Corp.,Ltd | |
5/22/2014 | |
5/21/2015 | |
| 3,252,403 | | |
| 3,252,403 | |
China Citic Bank | |
6/25/2014 | |
6/25/2015 | |
| 8,014,850 | | |
| 6,104,063 | |
Total | |
| |
| |
| 38,824,464 | | |
| 19,250,318 | |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 15. | Lines of credit (continued) |
| |
December 31, 2013 |
Lender | |
Starting date | |
Maturity date | |
Line of credit | | |
Unused line of credit | |
| |
| |
| |
$ | | |
$ | |
Industrial and Commercial Bank of China | |
7/26/2012 | |
7/25/2015(ii) | |
| 6,558,452 | | |
| 1,803,574 | |
China Citic Bank | |
3/29/2013 | |
3/29/2014(ii) | |
| 7,378,259 | | |
| 5,738,646 | |
Bank of China | |
1/25/2013 | |
1/25/2014(i) | |
| 3,689,129 | | |
| 247,582 | |
Bank of China | |
1/10/2013 | |
1/10/2014(ii) | |
| 12,707,001 | | |
| 1,674,876 | |
China Everbright Bank | |
5/30/2013 | |
5/29/2014(i) | |
| 8,438,433 | | |
| 1,382,194 | |
China Everbright Bank | |
9/4/2013 | |
9/3/2014(i) | |
| 1,147,729 | | |
| - | |
Industrial Bank Co., Ltd | |
7/24/2013 | |
7/24/2014(i) | |
| 8,198,065 | | |
| 6,558,452 | |
Jiang Su Bank Co., Ltd | |
6/21/2013 | |
6/20/2014(i) | |
| 4,918,839 | | |
| - | |
Ping An Bank | |
11/12/2013 | |
9/17/2014(i) | |
| 11,477,291 | | |
| 7,564,027 | |
Shanghai Commercial & Saving Bank | |
8/29/2013 | |
8/29/2014(i) | |
| 3,000,000 | | |
| 1,250,000 | |
Industrial and Commercial Bank of China(Macau) Ltd | |
7/29/2013 | |
1/29/2014(i) | |
| 7,093,296 | | |
| 3,084,294 | |
Total | |
| |
| |
| 74,606,494 | | |
| 29,303,645 | |
(i) The lines of credit from
these banks are terminated at maturity dates.
(ii) The lines of credit from
these banks are rolled over after maturity dates.
The lines of credits from Bank
of China, Industrial and Commercial Bank of China, China Everbright Bank, Jiang Su Bank, Industrial Bank Co. Ltd, Ping An Bank
Co., Ltd and China Citic Bank are guaranteed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan.
Certain of the agreements governing
the Company’s loans include standard affirmative and negative covenants, including restrictions on granting additional pledges
on the Company’s property and incurring additional debt and obligations to provide advance notice of major corporate actions,
and other covenants including: that the borrower may not serve as a guarantor for more than double its net assets; that the borrower
is restricted in certain circumstances from using the loans in connection with related party transactions or other transactions
with affiliates; that the borrower must provide monthly reports to certain lenders describing the actual use of loans; that the
borrower may need to obtain approval to engage in major corporate transactions; and that the borrower may need to obtain approval
to increase overseas investments, guarantee additional debt or incur additional debt by an amount which exceeds 20% of its total
net assets should the lender determine that such action would have a material impact on the ability of the borrower to repay the
loan. The covenants in these loan agreements could prohibit the Company from incurring any additional debt without consent from
its lenders. The Company believes it would be able to obtain consents from the lenders in the event it needed to do so. The agreements
governing the Company’s loans may also include covenants that, in certain circumstances, may require the Company’s
PRC operating subsidiaries to give notice to, or obtain consent from, certain of their lenders prior to making a distribution of
net profit, as well as covenants restricting the ability of the Company’s PRC operating subsidiaries from extending loans.
As of September 30, 2014 and December 31, 2013, the Company was in compliance with all material covenants in its loan agreements.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| |
September 30, 2014 | | |
December 31, 2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Long term loans from Bank of China | |
| 4,390,744 | | |
| 5,902,607 | |
Less: current portion of long-term borrowings | |
| 1,951,442 | | |
| 1,967,536 | |
Long-term bank loans, net of current portion | |
| 2,439,302 | | |
| 3,935,071 | |
On January 13, 2012, the Company
borrowed $8,127,042 (RMB50 million) from the Bank of China, which is guaranteed by the Company’s Chief Executive Officer,
Mr. Dang Yu Pan. It is a five-year long-term loan, with an annual interest rate of 7.04%, which was equal to 110% of the benchmark-lending
rate of the People’s Bank of China (“PBOC”) as of September 30, 2014. Interest expenses are to be paid quarterly.
The interest expenses were $287,743
and $404,965 for the nine months ended September 30, 2014 and 2013, respectively, and $87,759 and $122,741 for the three months
ended September 30, 2014 and 2013, respectively.
The principal is to be repaid
quarterly from September 30, 2012. 2% of the principal was repaid on each of September 30, 2012 and December 30, 2012, respectively.
Thereafter 6% of the principal is to be repaid every quarter after December 31, 2012 until the maturity date. The repayment schedule
of the principal is summarized as in below table:
| |
$ | |
Remaining 2014 | |
| 487,860 | |
2015 | |
| 1,951,442 | |
2016 | |
| 1,951,442 | |
| |
| 4,390,744 | |
| 17. | Share-based Compensation |
2008 Omnibus Incentive Plan
The 2008 Omnibus Incentive Plan
(the "2008 Plan") was approved by the Company’s Board of Directors on October 29, 2008 to be effective at such
date, subject to approval of the Company’s stockholders, which occurred on December 11, 2008. The 2008 Plan has a ten year
term. The 2008 Plan reserves two million shares of common stock for issuance, subject to adjustment in the event of a recapitalization
in accordance with the terms of the 2008 Plan.
The 2008 Plan authorizes the
issuance of awards including stock options, restricted stock units (RSUs), restricted stock, unrestricted stock, stock appreciation
rights (SARs) and other equity and/or cash performance incentive awards to employees, directors, and consultants of the Company.
Subject to certain restrictions, the Compensation Committee of the Board of Directors has broad discretion to establish the terms
and conditions for awards under the 2008 Plan, including the number of shares, vesting conditions and the required service or performance
criteria. Options and SARs may have a contractual term of up to ten years and generally vest over three to five years with an exercise
price equal to the fair market value on the date of grant. Incentive stock options (ISOs) granted must have an exercise price equal
to or greater than the fair market value of the Company’s common stock on the date of grant. Repricing of stock options and
SARs is permitted without stockholder approval. If a particular award agreement so provides, certain change in control transactions
may cause such awards granted under the 2008 Plan to vest at an accelerated rate, unless the awards are continued or substituted
for in connection with the transaction As of September 30, 2014, approximately 661,204 shares of common stock remained available
for issuance pursuant to awards granted under the 2008 Plan.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 17. | Share-based Compensation (continued) |
Options Granted to Employees
| |
Number of Shares | | |
Weighted Average Exercise Price | | |
Remaining Contractual
Term in Years | |
| |
| | |
$ | | |
| |
Outstanding, January 1, 2013 | |
| 665,000 | | |
| 2.81 | | |
| 8.35 | |
| |
| | | |
| | | |
| | |
Granted | |
| 540,000 | | |
| 2.63 | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | |
Forfeited | |
| (100,000 | ) | |
| 1.15 | | |
| - | |
Canceled | |
| - | | |
| - | | |
| - | |
Outstanding, December 31, 2013 | |
| 1,105,000 | | |
| 2.87 | | |
| 8.51 | |
Exercisable, December 31, 2013 | |
| 380,000 | | |
| 3.14 | | |
| 7.19 | |
Vested and expected to vest, December 31, 2013 | |
| 940,022 | | |
| 2.90 | | |
| 8.33 | |
| |
Number of Shares | | |
Weighted Average Exercise Price | | |
Remaining Contractual
Term in Years | |
| |
| | |
$ | | |
| |
Outstanding, January 1, 2014 | |
| 1,105,000 | | |
| 2.87 | | |
| 8.51 | |
| |
| | | |
| | | |
| | |
Granted | |
| - | | |
| - | | |
| - | |
Exercised | |
| (160,000 | ) | |
| 2.69 | | |
| - | |
Forfeited | |
| (29,204 | ) | |
| 2.63 | | |
| - | |
Canceled | |
| - | | |
| - | | |
| - | |
Outstanding, September 30, 2014 | |
| 915,796 | | |
| 2.91 | | |
| 7.23 | |
Exercisable, September 30, 2014 | |
| 265,000 | | |
| 3.45 | | |
| 3.96 | |
Vested and expected to vest, September 30, 2014 | |
| 837,760 | | |
| 2.93 | | |
| 7.08 | |
The aggregate intrinsic value
of options vested and expected to vest as of September 30, 2014 and December 31, 2013 was approximately $4.6 million and $nil,
respectively. Intrinsic value is calculated as the amount by which the current market value of a share of common stock exceeds
the exercise price multiplied by the number of option shares.
During the nine months ended
September 30, 2014, the Company did not grant any new options to employees. One employee exercised his options to purchase 160,000
shares of the Company’s common stock. As a result, the Company issued 74,052 shares of common stock to this employee by net
share settlement. Two employees had resigned and their options to purchase a total of 29,204 shares of the Company’s common
stock were forfeited.
During the nine months ended
September 30, 2013, no options was granted, exercised or forfeited.
The estimated fair value of share-based
compensation to employees is recognized as a charge against income on a ratable basis over the requisite service period, which
is generally the vesting period of the award.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 17. | Share-based Compensation (continued) |
Restricted Stock Awards Granted
to Employees
During the year ended December
31, 2013 the Company granted 246,000 shares of restricted stock to members of the Board of Directors as Restricted Stock Awards
(“RSA”) under 2008 Plan. The RSAs granted in 2013 had the following vesting periods; 30% immediately upon grant, 30%
vest on first anniversary of the grant date, and 40% vest on the second anniversary of grant date. The RSAs are governed by agreements
between the Company and recipients of the awards. Terms of the agreements are determined by the Compensation Committee. There were
no RSAs granted to employees during the nine months ended September 30, 2014 and 2013.
The following table summarizes
the restricted stock awards activities for the nine months ended September 30, 2014:
| |
Number of Shares | | |
Weighted Average Exercise Price | | |
Remaining Contractual
Term in Years | |
| |
| | |
$ | | |
| |
Outstanding, January 1, 2014 | |
| 172,200 | | |
| 2.81 | | |
| 1.77 | |
| |
| | | |
| | | |
| | |
Granted | |
| - | | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | |
Outstanding, September 30, 2014 | |
| 172,200 | | |
| 2.81 | | |
| 1.02 | |
Expected to vest, September 30, 2014 | |
| 137,601 | | |
| 2.81 | | |
| 1.02 | |
Share-based
Compensation to Nonemployees
On July 15, 2013, the Company
entered into an agreement with a consulting firm. In return for the consulting firm’s financial advisory service in the coming
two years, the Company issued an aggregate of 150,000 shares of the Company’s common stock to the consulting firm on August
15, 2013. The shares were fully vested upon issuance and the fair value of the shares was $171,000 which was based on the closing
market price of the Company’s common stock on August 15, 2013. The share-based compensation was being amortized over the
consulting service period. In the second quarter of 2014, the service agreement was terminated. Therefore, the remaining unamortized
balance, approximately $131,812, was recognized as share-based compensation expense during the nine months ended September 30,
2014.
The Company also agreed to issue
another 150,000 shares of the Company’s common stock to the consulting firm after a specific financing target is completed.
As the financing target was not achieved before the termination of the service agreement in the second quarter of 2014, such 150,000
shares of common stock was not issued to the consulting firm.
Also, in connection with this
consulting agreement, on January 17, 2014 the Company issued five year warrants to purchase 200,000 shares of the Company’s
common stock. The shares were fully vested upon issuance and the aggregate fair value of the warrants was approximately $390,000,
which was calculated using the Black-Scholes pricing model, with the following weighted-average assumptions:
| |
Nine months Ended September 30, | |
| |
2014 | | |
2013 | |
Expected volatility | |
| 83.6 | % | |
| NA | |
Risk-free interest rate | |
| 1.64 | % | |
| NA | |
Expected term from grant date (in years) | |
| 5.0 | | |
| NA | |
Dividend rate | |
| - | | |
| NA | |
Fair value | |
| 1.95 | | |
| NA | |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 17. | Share-based Compensation (continued) |
Expected
Term
The expected term of the warrants
issued during the nine months ended September 30, 2014, represents the remaining contractual term of the warrants.
Expected
Volatility
The expected volatility used
for the nine-month periods ended September 30, 2014 is based upon the Company’s own trading history.
Risk-Free
Interest Rate
The risk-free interest rate assumption
is based on U.S. Treasury instruments with a term consistent with the remaining contractual term of the warrants issued during
the first quarter of 2014.
Dividend
Yield
The Company has never declared
or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and therefore, used an expected dividend
yield of zero in the valuation model.
Forfeitures
The Company estimates forfeitures
at the time of grant and revises the estimates in subsequent periods if actual forfeitures differ from what was estimated. The
forfeiture rate is applied to stock options and restricted stock awards. The Company uses historical data to estimate pre-vesting
forfeitures and records stock-based compensation expense only for those awards that are expected to vest. All stock-based payment
awards are amortized on a ratable basis over the requisite service periods of the awards, which are generally the vesting periods.
The Company records stock-based compensation expense only for those awards that are expected to vest.
The fair value of the warrants
are being amortized over the remaining consulting service period. For the three months ended March 31, 2014, approximately $154,291
was recognized as stock-based compensation expense and approximately $235,496 remains capitalized on the balance sheet as of March
31, 2014, which will be amortized to expense over the next five quarters. In the second quarter of 2014, the service agreement
was terminated. Therefore, the remaining unamortized balance, approximately $235,000, was recognized as share-based compensation
expense during the three months ended June 30, 2014.
Total Share-based Compensation
Expenses
As of September 30, 2014 the
gross amount of unrecognized share-based compensation expense relating to unvested share-based awards held by employees was approximately
$1.1 million, which the Company anticipates recognizing as a charge against income over a weighted average period of 1.80 years.
In connection with the grant
of stock options, restricted stock awards and warrants to employees and nonemployees, the Company recorded stock-based compensation
charges of $543,369 and $521,599, respectively, for the nine-month period ended September 30, 2014 and stock-based compensation
charges of $141,037 and $18,315, respectively, for the nine-month period ended September 30, 2013. The Company recorded stock-based
compensation charges of $148,725 and $nil, respectively, for the three-month period ended September 30, 2014 and stock-based compensation
charges of $46,830 and $17,812, respectively, for the three-month period ended September 30, 2013.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
Basic earnings per common share
is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding
during the period. Diluted earnings per common share is computed by dividing income available to common stockholders by the weighted-average
number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock
outstanding that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities
include outstanding stock options, restricted shares. The dilutive effect of potential dilutive securities is reflected in diluted
earnings per common share by application of the treasury stock method. Under the treasury stock method, an increase in the fair
market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities.
The Company excludes potential common stock in the diluted EPS computation in periods of losses from continuing operations, as
their effect would be anti-dilutive.
The following table sets forth
the computation of basic and diluted earnings per common share for the nine months ended September 30, 2014 and 2013, and the three
months ended September 30, 2014 and 2013.
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Net income attributable to the Company | |
| 874,167 | | |
| 742,228 | | |
| 751,516 | | |
| 242,637 | |
| |
| | | |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding | |
| | | |
| | | |
| | | |
| | |
- Basic | |
| 15,052,158 | | |
| 13,657,930 | | |
| 14,632,491 | | |
| 13,607,474 | |
- Diluted | |
| 15,590,142 | | |
| 13,657,930 | | |
| 15,045,776 | | |
| 13,607,474 | |
| |
| | | |
| | | |
| | | |
| | |
Earnings per common share | |
| | | |
| | | |
| | | |
| | |
- Basic | |
| 0,06 | | |
| 0.05 | | |
| 0.05 | | |
| 0.02 | |
- Diluted | |
| 0.06 | | |
| 0.05 | | |
| 0.05 | | |
| 0.02 | |
Diluted earnings per share takes
into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and
converted into common stock.
There were 565,000 options and
warrants outstanding as of September 30, 2013, which were not included in the computation of diluted EPS for the periods ended
September 30, 2013 because of their excise price would be above average market value.
915,796 shares of stock options
and 200,000 shares of warrants with a total dilutive effect of 525,716 shares were included in the computation of diluted EPS for
the three months ended September 30, 2014. There were 540,001 options and warrants outstanding as of September 30, 2014, which
were not included in the computation of diluted EPS for the periods ended September 30, 2014 because of their excise price would
be above average market value.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 19. | Securities Offering Transaction |
In April 2014, the Company and
certain institutional investors entered into a securities purchase agreement, pursuant to which the Company sold 1,000,000 shares
of common stock and warrants exercisable for 500,000 shares of common stock in a registered direct offering at a price of $5.05
per fixed combination for aggregate proceeds of $5.05 million. The shares and warrants were sold in multiples of a fixed combination
consisting of (i) one share of common stock and (ii) one immediately exercisable warrant to purchase 0.50 shares of common stock.
The net proceeds from the offering was $4,633,164, after deducting fees due the placement agent and offering expenses.
The warrants have an initial
exercise price of $6.33 per share and are exercisable until April 17, 2017. The exercise price of the warrants, and in some cases
the number of shares issuable upon exercise of the warrants, will be subject to appropriate adjustment in relation to certain events.
In addition, if the Company issues shares in the future at a price below $6.33 per share, the exercise price of the warrants will
be reduced to such lower price. No adjustment will be made to the number of shares purchasable in such event.
The warrants were classified
as a liability. The aggregate fair value of the warrant liability at issuance dates was $1,173,952. The residual balance of $3,459,212
was allocated to common shares issued.
The fair values of the warrants
as of April 17, 2014 were calculated using the Black-Scholes pricing model with the following assumptions:
| |
April 17, 2014 | |
| |
2014 | | |
2013 | |
Expected volatility | |
| 85.76 | % | |
| NA | |
Risk-free interest rate | |
| 0.9 | % | |
| NA | |
Expected term (in years) | |
| 3.0 | | |
| NA | |
Dividend rate | |
| - | | |
| NA | |
Fair value | |
$ | 2.3 | | |
| NA | |
The fair value of the investor
warrant liability will be re-measured at each period and recorded as a gain or loss on fair value of warrant liability. As of September
30, 2014, the fair value of warrant liability was $2,385,739 and the Company recognized a loss of $1,286,335 on the change of fair
value of warrant liability.
The fair values of the warrants
as of September 30, 2014 were calculated using the Black-Scholes pricing model with the following assumptions:
| |
Nine months Ended September 30, | |
| |
2014 | | |
2013 | |
Expected volatility | |
| 93.79 | % | |
| NA | |
Risk-free interest rate | |
| 0.8 | % | |
| NA | |
Expected term (in years) | |
| 2.6 | | |
| NA | |
Dividend rate | |
| - | | |
| NA | |
Fair value | |
$ | 4.8 | | |
| NA | |
In conjunction with the securities
offering transaction, the Company issued three year warrants to investment bankers to purchase 40,000 shares of the Company’s
common stock at $6.33 per share. The aggregate fair value of the warrants was $94,982, which was recognized as a share-based compensation
and resulted in an increase of additional paid-in capital. As such compensation was offering cost, it resulted in a reduction in
additional paid-in capital. Hence, such transaction has no net impact on the Company’s financial position as of September
30, 2014.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 20. | Defined contribution plan |
Full-time employees of the Company
in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical
care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the PRC
operating subsidiaries of the Company make contributions to the government for these benefits based on certain percentages of the
employees’ salaries. Except for pension benefits, medical care, employee housing fund and other welfare benefits mentioned
above, the Company has no legal obligation for the benefits beyond the contributions made.
The total amounts for such employee
benefits, which were expensed as incurred, were $1,128,544 and $1,257,546 for the nine months ended September 30, 2014 and 2013,
respectively, and $424,841 and $434,486 for the three months ended September 30, 2014 and 2013, respectively.
| 21. | Non-controlling interest |
GZ Highpower is the Company’s
majority-owned subsidiary which is consolidated in the Company’s financial statements with a non-controlling interest recognized.
GZ Highpower is engaged in processing, marketing and research of battery materials. The Company holds 60% interest of GZ Highpower
as of September 30, 2014 and December 31, 2013.
On May 15, 2013, GZ Highpower
increased its paid-in capital from RMB15,000,000 ($2,381,293) to RMB30,000,000 ($4,807,847). SZ Highpower contributed to the increased
paid-in capital with cash of RMB 9,000,000 ($1,456,193), while the non-controlling shareholders contributed with an exclusive proprietary
technology with fair value of 6,000,000 ($970,795). The exclusive proprietary technology, however, was recorded at the four management
members’ historical cost basis of nil. Therefore, an increase of $582,477, which was the 40% of the RMB 9,000,000 ($1,456,193),
was recorded in non-controlling interest.
As of September 30, 2014 and
December 31, 2013, non-controlling interest related to GZ Highpower in the consolidated balance sheet was $1,159,039 and $1,299,252,
respectively.
Non-controlling interest related
to GZ Highpower in the consolidated statements of operations was loss of $129,588 and $104,932 for the nine months ended September
30, 2014 and 2013, respectively, and $68,023 and $33,443 for the three months ended September 30, 2014 and 2013.
| 22. | Commitments and contingencies |
Operating leases commitments
The Company leases factory and
office premises under various non-cancelable operating lease agreements that expire at various dates through years 2014 to 2017,
with options to renew the leases. All leases are on a fixed repayment basis. None of the leases includes contingent rentals. Minimum
future commitments under these agreements as of September 30, 2014 are as follows:
| |
$ | |
Remaining 2014 | |
| 401,347 | |
2015 | |
| 1,480,887 | |
2016 | |
| 1,338,853 | |
2017 | |
| 333,989 | |
| |
| 3,555,076 | |
Rent expenses for the nine months
ended September 30, 2014 and 2013 were $1,183,430 and $992,054, respectively, and for the three months ended September 30, 2014
and 2013, rent expenses were $391,109 and $361,672, respectively.
Capital commitments and contingency
The Company had contracted capital
commitments of $nil and $990,031 for the construction of the Ganzhou plant as of September 30, 2014 and December 31, 2013, respectively.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
The reportable segments are components
of the Company that offer different products and are separately managed, with separate financial information available that is
separately evaluated regularly by the Company’s chief operating decision maker (“CODM”), the Chief Executive
Officer, in determining the performance of the business. The Company categorizes its business into three reportable segments, namely
(i) Ni-MH Batteries; (ii) Lithium Batteries; and (iii) New Materials.
The CODM evaluates performance
based on each reporting segment’s net sales, cost of sales, gross profit and total assets. Net sales, cost of sales, gross
profit and total assets by segments is set out as follows:
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Net sales | |
| | | |
| | | |
| | | |
| | |
Ni-MH Batteries | |
| 22,468,264 | | |
| 23,278,902 | | |
| 57,109,202 | | |
| 56,195,672 | |
Lithium Batteries | |
| 21,069,435 | | |
| 14,960,966 | | |
| 51,971,642 | | |
| 36,541,465 | |
New Materials | |
| 936,861 | | |
| 613,110 | | |
| 2,688,666 | | |
| 1,692,829 | |
Total | |
| 44,474,560 | | |
| 38,852,978 | | |
| 111,769,510 | | |
| 94,429,966 | |
| |
| | | |
| | | |
| | | |
| | |
Cost of Sales | |
| | | |
| | | |
| | | |
| | |
Ni-MH Batteries | |
| 17,843,761 | | |
| 19,220,485 | | |
| 45,357,950 | | |
| 45,491,987 | |
Lithium Batteries | |
| 16,355,265 | | |
| 11,859,111 | | |
| 40,935,690 | | |
| 29,664,911 | |
New Materials | |
| 870,414 | | |
| 530,395 | | |
| 2,410,314 | | |
| 1,532,442 | |
Total | |
| 35,069,440 | | |
| 31,609,991 | | |
| 88,703,954 | | |
| 76,689,340 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Gross Profit | |
| | | |
| | | |
| | | |
| | |
Ni-MH Batteries | |
| 4,624,503 | | |
| 4,058,417 | | |
| 11,751,252 | | |
| 10,703,685 | |
Lithium Batteries | |
| 4,714,170 | | |
| 3,101,855 | | |
| 11,035,952 | | |
| 6,876,554 | |
New Materials | |
| 66,447 | | |
| 82,715 | | |
| 278,352 | | |
| 160,387 | |
Total | |
| 9,405,120 | | |
| 7,242,987 | | |
| 23,065,556 | | |
| 17,740,626 | |
| |
| |
| |
September 30,2014 | | |
December 31,2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Total Assets | |
| | | |
| | |
Ni-MH Batteries | |
| 52,909,634 | | |
| 66,960,366 | |
Lithium Batteries | |
| 87,904,413 | | |
| 76,357,912 | |
New Materials | |
| 8,724,638 | | |
| 8,475,098 | |
Total | |
| 149,538,685 | | |
| 151,793,376 | |
| |
| | | |
| | |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Stated in US Dollars) |
| 23. | Segment information (continued) |
All long-lived assets of the
Company are located in the PRC. Geographic information about the sales and accounts receivable based on the location of the Company’s
customers is set out as follows:
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Net sales | |
| | | |
| | | |
| | | |
| | |
China (including Hong Kong) | |
| 27,698,729 | | |
| 25,308,214 | | |
| 72,064,966 | | |
| 52,936,205 | |
Asia, others | |
| 3,979,662 | | |
| 3,975,389 | | |
| 8,304,209 | | |
| 11,084,009 | |
Europe | |
| 10,465,002 | | |
| 6,999,347 | | |
| 23,908,064 | | |
| 22,466,996 | |
North America | |
| 2,128,707 | | |
| 2,406,305 | | |
| 6,725,849 | | |
| 7,181,805 | |
South America | |
| 116,227 | | |
| 90,849 | | |
| 317,928 | | |
| 382,215 | |
Africa | |
| 43,872 | | |
| 28,877 | | |
| 281,016 | | |
| 248,275 | |
Others | |
| 42,361 | | |
| 43,997 | | |
| 167,478 | | |
| 130,461 | |
| |
| 44,474,560 | | |
| 38,852,978 | | |
| 111,769,510 | | |
| 94,429,966 | |
| |
September 30, 2014 | | |
December 31, 2013 | |
| |
(Unaudited) | | |
| |
| |
$ | | |
$ | |
Accounts receivable | |
| | | |
| | |
China (including Hong Kong) | |
| 26,077,073 | | |
| 24,554,617 | |
Asia, others | |
| 2,564,187 | | |
| 3,278,001 | |
Europe | |
| 8,610,537 | | |
| 5,191,444 | |
North America | |
| 776,601 | | |
| 863,156 | |
South America | |
| 38,465 | | |
| 50,691 | |
Africa | |
| 22,500 | | |
| 25 | |
Others | |
| 18,055 | | |
| 23,080 | |
| |
| 38,107,418 | | |
| 33,961,014 | |
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion relates to the
financial condition and results of operations of Highpower International, Inc. (the “Company”) and its wholly-owned
subsidiary, Hong Kong Highpower Technology Company Limited (“HKHTC”), HKHTC’s wholly-owned subsidiaries Shenzhen
Highpower Technology Company Limited (“SZ Highpower”), Icon Energy System Company Limited (“ICON”) and
Highpower Energy Technology (Huizhou) Company limited (“HZ Highpower”), which has not yet commenced operations; SZ
Highpower’s wholly-owned subsidiary, Huizhou Highpower Technology Company Limited (“HZ HTC”) and its 60%-owned
subsidiary Ganzhou Highpower Technology Company Limited (“GZ Highpower”); and SZ Highpower’s and HKHTC’s
jointly owned subsidiary, Springpower Technology (Shenzhen) Company Limited (“SZ Springpower”).
Forward-Looking Statements
This management’s discussion and
analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial
statements and the related notes that are included in this Quarterly Report and the audited consolidated financial statements and
related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained
in our Annual Report on Form 10-K for the year ended December 31, 2013 (the “Annual Report”).
This report contains forward-looking statements
that involve substantial risks and uncertainties. All statements other than historical facts contained in this report, including
statements regarding our future financial position, results of operations, cash flows, business strategy and plans and objectives
of management for future operations, are forward-looking statements. The words “anticipates,” “believes,”
“expects,” “plans,” “intends,” “seeks,” “estimates,” “projects,”
“predicts,” “could,” “should,” “would,” “will,” “may,”
“might,” and similar expressions, or the negative of such expressions, are intended to identify forward-looking statements.
Such statements reflect management’s current views with respect to future events and financial performance and involve risks
and uncertainties, including, without limitation, economic downturn and uncertainty in Asia and Europe adversely affecting
demand for our products; fluctuations in the cost of raw materials; our dependence on, or inability to attract additional, major
customers for a significant portion of our net sales; our ability to increase manufacturing capabilities to satisfy orders from
new customers; our ability to maintain increased margins; changes in the laws of the PRC that affect our operations; the devaluation
of the U.S. Dollar relative to the Renminbi; our dependence on the growth in demand for portable electronic devices and the success
of manufacturers of the end applications that use our battery products; our responsiveness to competitive market conditions; our
ability to successfully manufacture our products in the time frame and amounts expected; the market acceptance of our battery products,
including our lithium products; our ability to successfully develop products for and penetrate the electric transportation market;
our ability to continue R&D development to keep up with technological changes; our exposure to product liability, safety, and
defect claims; rising labor costs, volatile metal prices, and inflation; changes in foreign, political, social, business and economic
conditions that affect our production capabilities or demand for our products; and various other matters, many of which are beyond
our control. Actual results may vary materially and adversely from those anticipated, believed, estimated or otherwise indicated
should one or more of these risks or uncertainties occur or if any of the risks or uncertainties described elsewhere in this report
or in the “Risk Factors” section of our Annual Report occur. Consequently, all of the forward-looking statements made
in this filing are qualified by these cautionary statements and there can be no assurance of the actual results or developments.
Overview
Highpower was incorporated in the state
of Delaware on January 3, 2006 and was originally organized as a “blank check” shell company to investigate and acquire
a target company or business seeking the perceived advantages of being a publicly held corporation. On November 2, 2007, we closed
a share exchange transaction, pursuant to which we (i) became the 100% parent of HKHTC and its wholly-owned subsidiary, SZ Highpower,
(ii) assumed the operations of HKHTC and its subsidiary and (iii) changed our name to Hong Kong Highpower Technology, Inc. We subsequently
changed our name to Highpower International, Inc. in October 2010.
HKHTC was incorporated in Hong Kong in
2003 under the Companies Ordinance of Hong Kong. HKHTC formed HZ Highpower and SZ Springpower in 2008. HZ Highpower has
not yet commenced business operations as of August 12, 2014. On October 8, 2013, SZ Springpower further increased its registered
capital to $15,000,000. SZ Highpower holds 69.97% of the equity interest of SZ Springpower, and HKHTC holds the remaining 30.03%.
In February 2011, HKHTC formed another wholly-owned subsidiary, Icon Energy System Company Limited, a company organized under the
laws of the PRC, which commenced operations in July 2011.
SZ Highpower was founded in 2001 in the
PRC. SZ Highpower formed GZ Highpower in September 2010. As of September 30, 2014, the paid-in capital of GZ Highpower was RMB30,000,000
($4,807,847). SZ Highpower holds 60% of the equity interest of GZ Highpower, and the four founding management members of GZ Highpower
hold the remaining 40%. SZ Highpower formed HZ HTC in March 2012, which engages in the manufacture of batteries.
Through SZ Highpower, we manufacture Nickel
Metal Hydride (“Ni-MH”) batteries for both consumer and industrial applications. We have developed significant expertise
in Ni-MH battery technology and large-scale manufacturing that enables us to improve the quality of our battery products, reduce
costs, and keep pace with evolving industry standards. In 2008, we commenced manufacturing two lines of Lithium-Ion (“Li-ion”)
and Lithium polymer rechargeable batteries through SZ Springpower for higher-end, high-performance applications, such as laptops,
digital cameras and wireless communication products. Our automated machinery allows us to process key aspects of the manufacturing
process to ensure high uniformity and precision, while leaving the non-key aspects of the manufacturing process to manual labor.
We employ a broad network of sales staff
in China and Hong Kong, which target key customers by arranging in-person sales presentations and providing post-sale services.
The sales staff works with our customers to better address customers’ needs.
Critical Accounting Policies, Estimates and Assumptions
The Securities and Exchange Commission
(“SEC”) defines critical accounting policies as those that are, in management's view, most important to the portrayal
of our financial condition and results of operations and those that require significant judgments and estimates.
The preparation of these consolidated financial
statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses, as well as the disclosure of contingent assets and liabilities at the date of our financial statements. We base our
estimates on historical experience, actuarial valuations and various other factors that we believe to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily
apparent from other sources. Some of those judgments can be subjective and complex and, consequently, actual results may differ
from these estimates under different assumptions or conditions. While for any given estimate or assumption made by our management
there may be other estimates or assumptions that are reasonable, we believe that, given the current facts and circumstances, it
is unlikely that applying any such other reasonable estimate or assumption would materially impact the financial statements. The
accounting principles we utilized in preparing our consolidated financial statements conform in all material respects to U.S. generally
accepted accounting principles.
Use of Estimates. The preparation
of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant items subject
to such estimates and assumptions include, but are not limited to, revenues; the allowance for doubtful receivables; recoverability
of the carrying amount of inventory; fair values of financial instruments; and the assessment of deferred tax assets or liabilities.
These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently
uncertain and unpredictable. Actual results could differ from these estimates.
Accounts Receivable. Accounts
receivable are stated at original amount less allowance made for doubtful receivables, if any, based on a review of all outstanding
amounts at the period end. An allowance is also made when there is objective evidence that the Company will not be able to collect
all amounts due according to the original terms of receivables. Bad debts are written off when identified. The Company extends
unsecured credit to customers in the normal course of business and believes all accounts receivable in excess of the allowances
for doubtful receivables to be fully collectible. The Company does not accrue interest on trade accounts receivable.
Revenue Recognition. The
Company recognizes revenue when all of the following criteria exist: (1) persuasive evidence of an arrangement exists; (2) delivery
has occurred or services have been rendered; (3) price to the buyer is fixed or determinable; and (4) collectability is reasonably
assured.
The Company does not have arrangements
for returns from customers and does not have any future obligations directly or indirectly related to product resale by the customer.
We have no incentive programs.
Inventories. Inventories
are stated at the lower of cost or market value. Costs are determined on a weighted-average method. Inventory includes raw materials,
packing materials, work-in-process, consumables and finished goods. The variable production overhead is allocated to each unit
of production on the basis of the actual use of the production facilities. The allocation of fixed production overhead to the costs
of conversion is based on the normal capacity of the production facilities.
Income Taxes. The Company
recognizes deferred assets and liabilities for the expected future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income taxes are recognized for the consequences in future years of differences
between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws
and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Foreign Currency Translation and
Transactions. Highpower International’s functional currency is the United States dollar (“US$”). HKHTC’s
functional currency is the Hong Kong dollar (“HK$”). The functional currency of the Company’s subsidiaries in
the PRC is the Renminbi (“RMB”).
At the date a foreign currency transaction
is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction is measured initially in the
functional currency of the recording entity by use of the exchange rate in effect at that date. The increase or decrease in expected
functional currency cash flows upon settlement of a transaction resulting from a change in exchange rates between the functional
currency and the currency in which the transaction is denominated is recognized as foreign currency transaction gain or loss that
is included in determining net income for the period in which the exchange rate changes. At each balance sheet date, recorded balances
that are denominated in a foreign currency are adjusted to reflect the current exchange rate.
The Company’s reporting currency
is the US$. Assets and liabilities of HKHTC and the PRC subsidiaries are translated at the current exchange rate at the balance
sheet dates, revenues and expenses are translated at the average exchange rates during the reporting periods, and equity accounts
are translated at historical rates. Translation adjustments are reported in other comprehensive income.
Results of Operations
Three Months Ended September 30, 2014 and 2013
Net sales for the three months ended September
30, 2014 were $44.5 million compared to $38.9 million for the three months ended September 30, 2013, an increase of $5.6 million,
or 14.5%. The increase was due to a $6.1 million increase in net sales of our lithium batteries (resulting from a 41.8% increase
in the volume of batteries sold which was partly offset a 0.7% decrease in the average selling price of such batteries) and a $323,751
increase in revenue from our new material business, which was partly offset by a $810,638 decrease in net sales of our Ni-MH batteries
(resulting from a 9.1% increase in the number of Ni-MH battery units sold which was partly offset a 11.5% decrease in the average
selling price of such batteries),The increase in the number of Ni-MH battery units sold in the three months ended September 30,
2014 was primarily attributable to increased orders from our new customers and the increase in the volume of lithium batteries
sold in the three months ended September 30, 2014 was primarily attributable growth in global demand for mobile and portable products,
and electrical vehicles.
Cost of sales mainly consists of nickel,
cobalt, lithium derived materials, labor, and overhead. Costs of sales were $35.1 million for the three months ended
September 30, 2014, as compared to $31.6 million for the comparable period in 2013. As a percentage of net sales, cost
of sales decreased to 78.9% for the three months ended September 30, 2014 compared to 81.4% for the comparable period in 2013. This
decrease was attributable to decrease of unit cost of Ni-MH batteries.
Gross profit for the three months ended
September 30, 2014 was $9.4 million, or 21.1% of net sales, compared to $7.2 million, or 18.6% of net sales for the comparable
period in 2013. Management considers gross profit margin a key performance indicator in managing our business. Gross profit
margins are usually a factor of cost of sales, product mix and demand for product. This increase was attributable to decrease of
unit cost of Ni-MH batteries.
To cope with pressure on our gross margins
we control production costs by preparing budgets for each department and comparing actual costs with our budgeted figures monthly
and quarterly. Additionally, we have reorganized the Company’s production structure and have focused more attention on employee
training to enhance efficiency. We also intend to expand our market share by investing in greater promotion of our products in
regions such as the U.S., Russia, Europe and India, and by expanding our sales team with more experienced sales personnel. We have
also begun production capacity expansion for our lithium batteries business to take advantage of the strong demand for such products
globally.
Research and development expenses were
approximately $2.1 million, or 4.6% of net sales, for the three months ended September 30, 2014 as compared to approximately $1.5
million, or 3.9% of net sales, for the comparable period in 2013, an increase of 34.3%. The increase was due to the expansion of
our workforce to expand our research and development in lithium batteries, particularly in the area of new product development
for the electrical vehicles and energy storage sectors.
Selling and distribution expenses were
$1.7 million, or 3.8% of net sales, for the three months ended September 30, 2014 compared to $1.6 million, or 4.1% of net sales,
for the comparable period in 2013, an increase of 6.2%. Selling and distribution expenses increased due to the expansion of our
sales force and marketing activities, participation in industry trade shows, and international travel to promote and sell our products
globally.
General and administrative expenses were
$3.3 million, or 7.4% of net sales, for the three months ended September 30, 2014, compared to $3.0 million, or 7.6% of net sales,
for the comparable period in 2013. The primary reason for the increase was due to the expansion of our workforce at our Huizhou
facility, Included in this amount was non-cash share-based compensation expense of $148,725, up from $64,642 in the third quarter
of 2013.
We experienced a loss of $15,369 and $154,453
on the exchange rate difference between the U.S. Dollar and the RMB for the three months ended September 30, 2014 and 2013, respectively.
The loss in exchange rate difference was due to the appreciation of the RMB relative to the U.S. Dollar over the respective periods.
We experienced a gain on derivative instruments
of $59,785 in the three months ended September 30, 2014, which included a loss of $3,414 on settled currency forwards and a gain
of $63,199 on unsettled currency forwards, as compared to a gain of $45,033 for the comparable period in 2013, which included a
gain of $39,025 on settled currency forwards and a gain of $6,008 on unsettled currency forwards.
Interest expenses were $458,534 for the
three months ended September 30, 2014, as compared to approximately $444,706 for the comparable period in 2013. The fluctuation
was due to a $13,828 increase in interest expense related to an increase in bank borrowing and interest rate.
Other income, which consists of bank interest
income, government grants and sundry income, was approximately $590,117 for the three months ended September 30, 2014, as compared
to approximately $479,288 for the comparable period in 2013, an increase of $110,829. The increase was due to an increase in government
grants and bank interest income.
During the three months ended September
30, 2014, we recorded provision for income tax expenses of $439,659 as compared to income tax expense of $372,023 for the comparable
period in 2013. The increase was due to the increase in net income during the three months ended September 30, 2014.
Net income attributable to the Company
(excluding net loss attributable to non-controlling interest) for the three months ended September 30, 2014 was $874,167, compared
to net income attributable to the Company (excluding net loss attributable to non-controlling interest) of $742,228 for the comparable
period in 2013.
Nine months Ended September 30, 2014 and 2013
Net sales for the nine months ended September
30, 2014 were $111.8 million compared to $94.4 million for the nine months ended September 30, 2013, an increase of $17.4 million,
or 18.4%. The increase was due to a $15.4 million increase in net sales of our lithium batteries (resulting from a 32.4% increase
in the volume of batteries sold and an 7.4% increase in the average selling price of such batteries) and a $913,530 increase in
net sales of our Ni-MH batteries (resulting from a 11.3% increase in the number of Ni-MH battery units sold which was partly offset
a 8.7% decrease in the average selling price of such batteries), and a $995,837 increase in revenue from our new material business.
The increase in the number of Ni-MH battery units sold in the nine months ended September 30, 2014 was primarily attributable to
increased orders from our new customers and the increase in the volume of lithium batteries sold in the nine months ended September
30, 2014 was primarily attributable growth in global demand for mobile and portable products, and electrical vehicles.
Cost of sales mainly consists of nickel,
cobalt, lithium derived materials, labor, and overhead. Costs of sales were $88.7 million for the nine months ended September
30, 2014, as compared to $76.7 million for the comparable period in 2013. As a percentage of net sales, cost of sales
decreased to 79.4% for the nine months ended September 30, 2014 compared to 81.2% for the comparable period in 2013. This
decrease was attributable to decrease of unit cost of Ni-MH batteries.
Gross profit for the nine months ended
September 30, 2014 was $23.1 million, or 20.6% of net sales, compared to $17.7 million, or 18.8% of net sales for the comparable
period in 2013. Management considers gross profit margin a key performance indicator in managing our business. Gross profit
margins are usually a factor of cost of sales, product mix and demand for product. This increase was attributable to decrease of
unit cost of Ni-MH batteries.
To cope with pressure on our gross margins
we control production costs by preparing budgets for each department and comparing actual costs with our budgeted figures monthly
and quarterly. Additionally, we have reorganized the Company’s production structure and have focused more attention on employee
training to enhance efficiency. We also intend to expand our market share by investing in greater promotion of our products in
regions such as the U.S., Russia, Europe and India, and by expanding our sales team with more experienced sales personnel. We have
also begun production capacity expansion for our lithium batteries business to take advantage of the strong demand for such products
globally.
Research and development expenses were
approximately $5.8 million, or 5.2% of net sales, for the nine months ended September 30, 2014 as compared to approximately $4.0
million, or 4.2% of net sales, for the comparable period in 2013, an increase of 46.7%. The increase was due to the expansion of
our workforce to expand our research and development in lithium batteries, particularly in the area of new product development
for the electrical vehicles and energy storage sectors.
Selling and distribution expenses were
$4.8 million, or 4.3% of net sales, for the nine months ended September 30, 2014 compared to $4.4 million, or 4.6% of net sales,
for the comparable period in 2013, an increase of 9.9%. Selling and distribution expenses increased due to the expansion of our
sales force and marketing activities, participation in industry trade shows, and international travel to promote and sell our products
globally.
General and administrative expenses were
$10.2 million, or 9.1% of net sales, for the nine months ended September 30, 2014, compared to $8.4 million, or 8.9% of net sales,
for the comparable period in 2013. The primary reason for the increase was due to the expansion of our workforce at our Huizhou
facility, Included in this amount was non-cash share-based compensation expense of $ 1.1 million, up from $159,352 in the first
three quarters of 2013.
We experienced a gain of $334,326 for the
nine months ended September 30, 2014 and a loss of $374,410 for the nine months ended September 30, 2013 on the exchange rate difference
between the U.S. Dollar and the RMB. The gain in exchange rate difference was due to the depreciation of the RMB relative to the
U.S. Dollar over the respective periods.
We experienced a loss on derivative instruments
of $56,349 in the nine months ended September 30, 2014, which included a gain of $11,400 on settled currency forwards and a loss
of $67,749 on unsettled currency forwards, as compared to a gain of $267,316 for the comparable period in 2013, which included
a gain of $384,508 on settled currency forwards and a loss of $117,192 on unsettled currency forwards.
Interest expenses were $1,528,077 for the
nine months ended September 30, 2014, as compared to $1,146,118 for the comparable period in 2013. The fluctuation was due to a
$381,959 increase in interest expense related to an increase in bank borrowing and interest rate.
Other income, which consists of bank interest
income, government grants and sundry income, was approximately $1,493,491 for the nine months ended September 30, 2014, as compared
to approximately $976,673 for the comparable period in 2013, an increase of $516,818. The increase was due to an increase in government
grants and bank interest income.
During the nine months ended September
30, 2014, we recorded provision for income tax expense of $628,872 as compared to $579,352 for the comparable period in 2013.
Net income attributable to the Company
(excluding net loss attributable to non-controlling interest) for the nine months ended September 30, 2014 was $751,516, compared
to net income attributable to the Company (excluding net loss attributable to non-controlling interest) of $242,637 for the comparable
period in 2013.
Foreign Currency and Exchange Risk
Though the reporting currency is the US$,
the Company maintains its financial records in the functional currency of Renminbi (“RMB”). Substantially all of our
operations are conducted in the PRC and we pay the majority of our expenses in RMB. Approximately 60% of our sales are made in
U.S. Dollars. During the nine months ended September 30, 2014, the exchange rate of the RMB to the U.S. Dollar devaluated 0.8%
from the level at the end of December 31, 2013. Future appreciation of the RMB against the U.S. Dollar would increase our costs
when translated into U.S. Dollars and could adversely affect our margins unless we make sufficient offsetting sales. Conversion
of RMB into foreign currencies is regulated by the People’s Bank of China through a unified floating exchange rate system.
Although the PRC government has stated its intention to support the value of the RMB, there can be no assurance that such exchange
rate will not continue to appreciate significantly against the U.S. Dollar. Exchange rate fluctuations may also affect the value,
in U.S. Dollar terms, of our net assets. In addition, the RMB is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions. Due to the volatility of the US Dollar to our functional currency
the Company put into place a hedging program to attempt to protect it from significant changes to the US Dollar which affects the
value of its US dollar receivables and sales. As of September 30, 2014, the Company had a series of currency forwards totaling
a notional amount of $1.0 million expiring on October. The terms of these derivative contracts are generally for 24 months or less.
Changes in the fair value of these derivative contracts are recorded in earnings to offset the impact of loss on derivative instruments.
The net loss of $56,349 are included in “loss of derivative instruments” for the nine months ended September 30, 2014
and the net gain of $267,316 attributable to these activities are included in “gain of derivative instruments” for
the nine months ended September 30, 2013, respectively.
Liquidity and Capital Resources
We had cash and cash equivalents of approximately
$11.8 million as of September 30, 2014, as compared to $8.0 million as of December 31, 2013. Our funds are kept in financial institutions
located in the PRC, which do not provide insurance for amounts on deposit. Moreover, we are subject to the regulations of the PRC
which restrict the transfer of cash from the PRC, except under certain specific circumstances. Accordingly, such funds may not
be readily available to us to satisfy obligations incurred outside the PRC.
To provide liquidity and flexibility in
funding our operations, we borrowed amounts under bank facilities and other external sources of financing. As of September 30,
2014, we had in place general banking facilities with five financial institutions aggregating $38.8 million. The maturity of these
facilities is generally within one year. The facilities are subject to regular review and approval. Certain of these banking facilities
are guaranteed by our Chief Executive Officer, Mr. Dang Yu Pan, and contain customary affirmative and negative covenants for secured
credit facilities of this type. Interest rates are generally based on the banks’ reference lending rates. No significant
commitment fees are required to be paid for the banking facilities. As of September 30, 2014, we had utilized approximately $19.5
million under such general credit facilities and had available unused credit facilities of $19.3 million.
On April 17, 2014, we issued 1,000,000
shares of common stock and warrants exercisable for 500,000 shares of common stock in a registered direct offering at a price of
$5.05 per fixed combination. The net proceeds from the offering was $4.6 million, after deducting fees due the placement agent
and offering expenses.
For the nine months ended September 30,
2014, net cash provided by operating activities was approximately $11.8 million, as compared to $463,877 for the comparable period
in 2013. The net cash increase of $11.3 million provided by operating activities is primarily attributable to, among other items,
a decrease of $2.6 million in cash outflow from prepayment, a decrease of $3.4 million in outflow from accounts payable, an increase
of $3.5 million in cash inflow from accounts receivable which was significantly offset by a increase of $3.2 million in cash outflow
from other payables and accrued liabilities, and a decrease of $800,263 in cash inflow from inventories.
Net cash used in investing activities was
$5.9 million for the nine months ended September 30, 2014 compared to $11.9 million for the comparable period in 2013. The net
decrease of $6.0 million of cash used in investing activities was primarily attributable to a decrease in cash outflow from acquisition
of plant and equipment for our strategic change.
Net cash used in financing activities was
$2.1 million during the nine months ended September 30, 2014, as compared to $10.9 million provided by financing activities for
the comparable period in 2013. The net decrease of $13.0 million in net cash used in financing activities was primarily attributable
to a decrease of $14.6 million in proceeds from short-term bank loans, an increase of $20.2 million in repayment of short-term
bank loans, which was partly offset by a increase of $15.4 million in restricted cash, an increase of $4.6 million in proceeds
from issuance of capital stock, net.
For the nine months ended September 30,
2014 and 2013, our inventory turnover was 5.9 times and 6.0 times, respectively. The average days outstanding of our accounts receivable
at September 30, 2014 was 87 days, as compared to 84 days at September 30, 2013. Inventory turnover and average days outstanding
are key operating measures that management relies on to monitor our business. In the next 12 months, we expect to expand our
research, development and manufacturing of lithium-based batteries and anticipate additional capital expenditures.
We are required to contribute a portion
of our employees’ total salaries to the Chinese government’s social insurance funds, including medical insurance, unemployment
insurance and job injuries insurance, and a housing assistance fund, in accordance with relevant regulations. Total contributions
to the funds were approximately $424,841 and $434,486 in the three months ended September 30, 2014 and 2013, respectively, and
$1,128,544 and $1,257,546 in the nine months ended September 30, 2014 and 2013, respectively. We expect the amount of our contribution
to the government’s social insurance funds to increase in the future as we expand our workforce and operations.
Based upon our present plans, we believe
that cash on hand, cash flow from operations and funds available under our bank facilities will be sufficient to meet our capital
needs for the next 12 months. However, our ability to maintain sufficient liquidity depends partially on our ability to achieve
anticipated levels of revenue, while continuing to control costs. If we did not have sufficient available cash, we would have to
seek additional debt or equity financing through other external sources, which may not be available on acceptable terms, or at
all. Failure to maintain financing arrangements on acceptable terms would have a material adverse effect on our business, results
of operations and financial condition.
The use of working capital is primarily
for the maintenance of our accounts receivable and inventory. We provide our major customers with payment terms ranging from 10
to 90 days. Additionally, our production lead time is approximately 30 to 40 days, from the inspection of incoming materials, to
production, testing and packaging. We need to keep a large supply of raw materials, work-in-process and finished goods inventory
on hand to ensure timely delivery of our products to customers. We use two methods to support our working capital needs: (i) paying
our suppliers under payment terms ranging from 60 to 150 days; and (ii) using short-term bank loans. Upon receiving payment for
our accounts receivable, we pay our short-term loans. Our working capital management practices are designed to ensure that we maintain
sufficient working capital.
Recent Accounting Pronouncements
The FASB issued ASU No. 2013-01 up to ASU
2014-16 which are not expected to have a material impact on the consolidated financial statements upon adoption.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
Not required for a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls
and procedures”, which are designed to ensure that information required to be disclosed in the reports we file or submit
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information
is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer,
or CFO, as appropriate to allow timely decisions regarding required disclosure.
Based on an evaluation carried out as of
the end of the period covered by this quarterly report, under the supervision and with the participation of our management, including
our CEO and CFO, who have concluded that, our disclosure controls and procedures (as defined in Rule 13a-15(e) under
the Exchange Act) were effective as of September 30, 2014.
Changes in Internal Control over Financial Reporting
Based on the evaluation of our management
as required by paragraph (d) of Rule 13a-15 of the Exchange Act, there were no changes in our internal control over financial reporting
that occurred during our quarter ended September 30, 2014 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Any investment in our common stock involves a high degree of risk. Investors should carefully consider
the risks described herein and in our Annual Report on Form 10-K as filed
with the SEC on March 31, 2014 and all of the information contained in our public filings before deciding whether to purchase our
common stock. There have been no material revisions to the “Risk Factors” as set forth
in our Annual Report on Form 10-K.
Item 2. Unregistered Sale of Equity Securities and Use of
Proceeds
None.
Item 3. Default Upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
Working Capital Loan Contract Between
SZ Highpower and Bank of China, Buji Sub-branch
On July 14, 2014, SZ Highpower entered
into a working capital loan contract with Bank of China, Buji Sub-branch providing for an aggregate loan of RMB20,000,000 (US$3,252,403)
to be used by SZ Highpower to purchase raw materials. The term of the loan is 12 months from the first withdrawal date. SZ Highpower
must withdraw the loan on or before July 30, 2014, after which time the bank may cancel all or part of the facility. The interest
rate will float and adjust every 6 months. Upon the first withdraw and during the first floating period, the interest rate will
equal the one year benchmark lending rate promulgated by the People’s Bank of China, plus 25%. The loan is guaranteed by
SZ Springpower and our Chief Executive Officer, Dang Yu Pan.
The following constitute events of default
by SZ Highpower under the loan agreement: failure to comply with repayment obligations under the affiliated specific credit line
contract; failure to use borrowed funds according to the specified purposes; any statement made by SZ Highpower in the contract
turns out to be untrue or in violation of any commitments in the affiliated specific credit line contract; failure to provide an
additional guarantor as required by the affiliated specific credit line contract; significant business difficulties or risks, deteriorated
financial losses or losses of assets, or other financial crisis; breach of covenants in other credit agreements with the bank or
affiliated institutions of the bank; any guarantor breaches a contract or defaults under any agreement with the bank or affiliated
institutions of the bank; termination of its business or engagement due to any wind-up, cancellation or bankruptcy issues; involvement
or potential involvement in significant economic disputes, litigation, arbitration or assets seizure or confiscation, or its involvement
in other judicial proceedings or administrative punishment proceedings that have affected or may affect its capacity to perform
its obligations under the affiliated specific credit line contract; an abnormal change in any major individual investor or key
management member of SZ Highpower or such a person or entity’s becoming subject to investigation or restriction by the judiciary,
which have or may affect SZ Highpower’s performance of obligation under affiliated specific credit line contract; Bank of
China’s discovery of any situation that may affect the financial position or performance capacities of SZ Highpower or a
guarantor after the bank’s annual review of SZ Highpower’s financial position and performance; failure to provide the
relevant documentation acceptable to Bank of China about the inflows and outflows of large-sum and abnormal capital in capital
recovery account; or being in violation of other rights and obligations under the affiliated specific credit line contract.
Upon the occurrence of an event of default,
the bank may: request SZ Highpower or any guarantor to rectify the event of default within a specified time period; reduce, temporarily
suspend or permanently terminate SZ Highpower’s credit limit in whole or in part; temporarily suspend or permanently terminate
in part or in whole SZ Highpower’s application for specific credit line under the agreement; announce the immediate expiration
of all the credit lines granted under the affiliated specific credit line contract as well as other contracts; terminate or release
the contract, terminate or release in part or in whole any of the affiliated specific credit line contract as well as the other
contracts executed between SZ Highpower and the bank; request compensation from SZ Highpower on the losses thereafter caused; hold
SZ Highpower’s deposit account at the bank in custody for repayment of amounts due under the contract; exercise the real
rights for security; request repayment from a guarantor; or take any other procedures deemed necessary by the bank.
Credit Line Contract Between SZ Springpower
and Bank of China, Buji Sub-branch
On July 23, 2014, SZ Springpower entered
into a comprehensive credit line contract with Bank of China, Buji Sub-branch, which provides for a revolving line of credit of
up to RMB60,000,000 (US$9,757,208), consisting of up to RMB30,000,000 (US$4,878,604) in loans and up to RMB30,000,000 (US$4,878,604)
in bank acceptances, with a term of one year. SZ Springpower may withdraw the loan in stages: 1) SZ Springpower can use the credit
of up to RMB20,000,000, consisting of up to RMB10,000,000 in loans and up to RMB10,000,000 in bank acceptances, after all SZ Highpower,
HZ HTC, our Chief Technology Officer, Wen Liang Li, and our Chief Executive Officer, Dang Yu Pan as a guarantee; 2) SZ Springpower
can use the credit of RMB20,000,000 in loans, after secured by a land use right of GZ Highpower; 3) SZ Springpower can use the
credit of RMB20,000,000 in bank acceptances, after secured by the building of GZ Highpower.
The following constitute events of default
by SZ Springpower under the loan agreement: failure to comply with repayment obligations under the agreement or any affiliated
credit lines; failure to use borrowed funds according to the specified purposes; any statement made by SZ Springpower in the agreement
is untrue or in violation of any commitments in the loan agreement or affiliated loan contracts; failure to provide an additional
guarantor as required by the loan agreement; significant business difficulties or risks, deteriorated financial losses or losses
of assets, or other financial crisis; violation of other rights and obligations under the agreement; or breach of covenants by
SZ Springpower or any guarantor in other credit agreements with the bank or affiliated institutions of the bank.
Upon the occurrence of an event of default,
the bank may: request SZ Springpower or any guarantor to rectify the event of default within a specified time period; reduce, temporarily
suspend or permanently terminate SZ Springpower’s credit limit in whole or in part; temporarily suspend or permanently terminate
in part or in whole SZ Springpower’s application for specific credit line under the agreement; announce the immediate expiration
of all the credit lines granted under the agreement and affiliated specific credit line contracts; terminate or release the agreement,
terminate or release in part or in whole any of the affiliated specific credit line contracts as well as the other contracts executed
between SZ Springpower and the bank; request compensation from SZ Springpower on the losses thereafter caused; hold SZ Springpower’s
deposit account at the bank in custody for repayment of amounts due under the agreement; exercise the real rights for security;
request repayment from a guarantor; or take any other procedures deemed necessary by the bank.
Credit Contract Between HKHTC and
Shanghai Commercial & Savings Bank Ltd., Hong Kong Branch
On August 19, 2014, HKHTC entered into
a non-revolving short-term secured loan facility with Shanghai Commercial & Savings Bank Ltd., Hong Kong Branch providing for
an aggregate loan of $4,500,000. HKHTC may withdraw the loan, from time to time as needed, within three months from August 19,
2014, and shall give notice to the Bank no later than 2 business days before the drawdown date. All the outstanding liabilities
under the facility shall be repaid by the final maturity date, which is 12 months after the drawdown date. The interest rate charged
on the loans is at 3% per annum above 6-Month LIBOR or 1.3% p.a. above 6-Month TAIFX, whichever is higher, but in any event not
to be less than the bank’s cost of funds. Interest is payable quarterly commencing three months after the drawdown date or
at the due date, whichever is earlier. The loan is guaranteed by our Chief Executive Officer, Dang Yu Pan.
The following constitute events of default
under the loan facility: HKHTC fails to pay any amounts payable under the facility on its due date; HKHTC fails to perform any
of its obligations under the contract; any representation or warranty of HKHTC in the loan facility is or proves to have been untrue
or inaccurate in any material respect; HKHTC’s bankruptcy; any shareholder (being a company) commits an act to go into voluntary
liquidation or reconstruction or amalgamation; or the occurrence of any situation which in the bank’s opinion may materially
and adversely affect HKHTC’s ability to perform its obligations under the loan facility.
At any time upon demand, the bank may declare
the amount of the facility outstanding, accrued interest and all other sums payable immediately due and payable.
Working Capital Loan Contract Between
SZ Springpower and Bank of China, Buji Sub-branch
On August 7, 2014, SZ Springpower entered
into a working capital loan contract with Bank of China, Buji Sub-branch providing for an aggregate loan of RMB10,000,000 (US$1,626,201)
to be used by SZ Springpower to purchase raw materials. The term of the loan is 12 months from the first withdrawal date. SZ Springpower
must withdraw the loan within 30 days from August 7, 2014, after which time the bank may cancel all or part of the facility. The
interest rate will float and adjust every 6 months. Upon the first withdraw and during the first floating period, the interest
rate will equal the one year benchmark lending rate promulgated by the People’s Bank of China, plus 20%. The loan is guaranteed
by SZ Highpower, HZ HTC, our Chief Technology Officer, Wen Liang Li, and our Chief Executive Officer, Dang Yu Pan.
The following constitute events of default
by SZ Springpower under the loan agreement: failure to comply with repayment obligations under the affiliated specific credit line
contract; failure to use borrowed funds according to the specified purposes; any statement made by SZ Springpower in the contract
turns out to be untrue or in violation of any commitments in the affiliated specific credit line contract; failure to provide an
additional guarantor as required by the affiliated specific credit line contract; significant business difficulties or risks, deteriorated
financial losses or losses of assets, or other financial crisis; breach of covenants in other credit agreements with the bank or
affiliated institutions of the bank; any guarantor breaches a contract or defaults under any agreement with the bank or affiliated
institutions of the bank; termination of its business or engagement due to any wind-up, cancellation or bankruptcy issues; involvement
or potential involvement in significant economic disputes, litigation, arbitration or assets seizure or confiscation, or its involvement
in other judicial proceedings or administrative punishment proceedings that have affected or may affect its capacity to perform
its obligations under the affiliated specific credit line contract; an abnormal change in any major individual investor or key
management member of SZ Springpower or such a person or entity’s becoming subject to investigation or restriction by the
judiciary, which have or may affect SZ Springpower’s performance of obligation under affiliated specific credit line contract;
Bank of China’s discovery of any situation that may affect the financial position or performance capacities of SZ Springpower
or a guarantor after the bank’s annual review of SZ Springpower’s financial position and performance; failure to provide
the relevant documentation acceptable to Bank of China about the inflows and outflows of large-sum and abnormal capital in capital
recovery account; or being in violation of other rights and obligations under the affiliated specific credit line contract.
Upon the occurrence of an event of default,
the bank may: request SZ Springpower or any guarantor to rectify the event of default within a specified time period; reduce, temporarily
suspend or permanently terminate SZ Springpower’s credit limit in whole or in part; temporarily suspend or permanently terminate
in part or in whole SZ Springpower’s application for specific credit line under the agreement; announce the immediate expiration
of all the credit lines granted under the affiliated specific credit line contract as well as other contracts; terminate or release
the contract, terminate or release in part or in whole any of the affiliated specific credit line contract as well as the other
contracts executed between SZ Springpower and the bank; request compensation from SZ Springpower on the losses thereafter caused;
hold SZ Springpower’s deposit account at the bank in custody for repayment of amounts due under the contract; exercise the
real rights for security; request repayment from a guarantor; or take any other procedures deemed necessary by the bank.
The information set forth above is included
herewith for the purpose of providing the disclosure required under Item 1.01and Item 2.03 of Form 8-K. The preceding summaries
of the above-referenced loan agreements are qualified in their entirety by reference to the complete text of the agreements, which
are attached hereto as Exhibits 10.1-10.4 and are incorporated by reference herein. You are urged to read the entire text of the
loan agreements attached hereto.
Item 6. Exhibits
Exhibit
Number |
|
Description of Document |
|
|
|
10.1 |
|
Comprehensive Credit Line Contract dated July 23, 2014 between Springpower Technology (Shenzhen) Co. Ltd. and Bank of China, Buji Sub-branch (translated to English) |
10.1(a) |
|
Maximum Amount Guaranty Contract dated July 23, 2014 between Shenzhen Highpower Technology (Shenzhen) Co. Ltd. and Bank of China, Buji Sub-branch (translated to English) |
10.1(b) |
|
Maximum Amount Guaranty Contract dated July 23, 2014 between Huizhou Highpower Technology (Shenzhen) Co., Ltd. and Bank of China, Buji Sub-branch (translated to English) |
10.1(c) |
|
Maximum Amount Guaranty Contract dated July 23, 2014 between Dangyu Pan and Bank of China, Buji Sub-branch (translated to English) |
10.1(d) |
|
Maximum Amount Guaranty Contract dated July 23, 2014 between Wenliang Li and Bank of China, Buji Sub-branch (translated to English) |
10.2 |
|
Working Capital Loan Contract dated July 14, 2014 between Shenzhen Highpower Technology Co., Ltd. and Bank of China, Buji Sub-branch (translated to English) |
10.3 |
|
Working Capital Loan Contract dated August 7, 2014 between Springpower Technology (Shenzhen) Co. Ltd. and Bank of China, Buji Sub-branch (translated to English) |
10.4 |
|
Banking Facility and Guaranty dated August 19, 2014 between Hong Kong
Highpower Technology Company Limited and The Shanghai Commercial & Savings Bank, LTD. |
31.1 |
|
Certification of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 |
|
Certification of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 |
** |
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS |
|
XBRL Instance Document |
101.SCH |
|
XBRL Taxonomy Extension Schema Document |
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
** |
This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. |
HIGHPOWER INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Highpower International, Inc. |
|
|
|
|
|
|
Dated: November 12, 2014 |
|
/s/ Dang Yu Pan |
|
|
By: |
Dang Yu Pan |
|
Its: |
Chairman of the Board and Chief Executive Officer
(principal executive officer and duly authorized officer) |
|
|
|
|
|
/s/ Henry Sun |
|
|
By: |
Henry Sun |
|
Its: |
Chief Financial Officer
(principal financial and accounting officer) |
Exhibit 10.1
Comprehensive Credit Line Contract
Reference No. : 2014zhenzhongyinbuexiezi
No.0000716
Party A: Springpower Technology (Shenzhen) Co.,
Ltd
Business License: 440306503295562
Legal Representative: Dangyu Pan
Address: Factory A, Chaoshun Industrial Zone, Renmin Road, Fumin
Residential Area, Guanlan, BaoAn District,
Postal code: 518000
Deposit A/C and financial institutions: 764057938815/
Bank of China, Pinghu Sub-branch, Shenzhen,
Telephone: 2802 9923; Facsimile: 2802 9923
Party B: Bank of China, Buji Sub-branch.
Legal Representative: Yanshan Li
Address: 108, Buji Road, Buji Town, Longgang
District, Shenzhen;
Postal code: 518112
Telephone: 2827 4825; Facsimile: 2827 0847
The parties agree as follow.
Clause 1 Scope of Business
Satisfied by condition precedent defined in
this contract, Party A is allowed to apply for recurring, temporary or one-off credit line from Party B in the form of a short-term
loan, deposit account overdraft, bank acceptance, trade finance, bank guarantee, or other monetary financing or credit authorization
business (“Specific credit line business”).
The trade finance business under this contract
is included and limited to: international letter of credit, domestic letter of credit, import bill advance, shipping guarantee,
packing credit, export bill purchase, export bill discount, import bill advance under LC, negotiation credit and other international
and domestic trade finance business.
The bank guarantee business under this contract
is including bank guarantee, standby letter of credit and all sorts of bank guarantee business.
Clause 2 Types and amount of credit line
Party B agrees to offer the following:
Currency in: Renminbi
Amount: |
Renmibi Sixty million |
|
RMB 60,000,000.00 |
Types: |
1. Loans : RMB30,000,000.00 |
|
2. Bank Acceptances: RMB30,000,000.00 |
Clause 3 Usage of credit lines
|
1. |
Within the credit line period, under the agreed upper limits on each type of credit line, Party A can use the credit line recurrently. If Party A needs to apply for the one-off credit line, a written application is required. And both parties should agree that Party B has the final say on whether and how the one-off credit line will be granted. Party B will notify Party A in written once the decision is made. |
|
2. |
This contract will override all the credit line contracts previously signed by Party A and Party B. Upon the effective date of this contract, all the used and unused credit lines prior to this contract will be considered as used and unused credit lines under this contract |
|
3. |
Unless otherwise agreed, the following business will not occupy the credit line under this contract. |
|
1) |
Export bill purchase business with precisely matched bills, documents and certificates |
|
2) |
Outwards letters of credit, bank guarantee and trade finance business which Party B agreed to act as confirming bank. |
|
3) |
Any credit line business which guaranteed by Party A by deposits, government bonds, deposit certificates issued by Party B, bank acceptance, guarantee or standby letters of credit accepted by Party B |
|
4) |
Any other business agreed by both parties. |
The above defined businesses, although
they will not occupy the credit limits under this contract, they will still be considered as inseparable part of the contract.
Clause 4 Application of specific credit
line business
Written applications or separate contracts
are required from Party A to apply for a specific credit line.
Clause 5 Period
The credit line defined in clause 2 under
this contract will be started from the effective date and end on Jul 23th 2015.
Upon negotiation, both parties can extend
the contract period by signing supplementary contracts. Party B will continue to provide credit lines under supplementary contracts.
All terms and conditions under this contract have the equivalent legal effects and restrictions on the supplementary contracts.
The termination of a specific credit line
will only occur when all the rights and obligations are fulfilled. The above period has no limitation on specific credit line under
this contract.
Clause 6 Condition Precedents of specific
credit line business
Party A should fulfill the following conditions
precedent before applying for a specific credit line business
|
1) |
File the necessary documents, stamps and signatures in Party B in relating to this contract and all the specific credit line contract under this contracts; |
|
2) |
Open the necessary bank account; |
|
3) |
Make sure the required guarantee contracts are properly in place; |
|
4) |
Other conditions precedent required for specific credit line contracts; |
|
5) |
Other conditions precedent required by Party B. |
Clause 7 Guaranty
For all the liabilities occurred under this
contract and the specific credit line contract affiliated to this contract should be guaranteed by the following:
Maximum Amount Guarantee provided by:
1) |
Shenzhen Highpower Technology Co. Ltd, a guarantee contract is signed separately; |
2) | Huizhou Highpower Technology Co. Ltd,
a guarantee contract is signed separately; |
3) | Dangyu Pan, a guarantee contract is signed
separately; |
4) | Wenliang Li, a guarantee contract is signed
separately |
Collateral on the Maximum Amount
|
1) |
The collateral is provided by Ganzhou Highpower Technology Co. Ltd, a collateral contract is signed separately; |
Under certain circumstances that Party A or
the Guarantor might be unable to fulfill or make Party B believe they are unable to fulfill the contractual capacity, e.g: Guarantee
Contracts are invalid, Party A is or will be under significant business difficulties or risks: deteriorated financials, litigation
issues which might affect its repayment ability, Guarantors were found default in other contracts with Party B, devaluation, dismissal
or damage of collaterals which might cause the value of the collaterals slaked or losses. Party B reserves the right to and Party
A has the obligation to additional or replace the guarantor.
Clause 8 Statement and Commitment
|
1) |
Party A is legally registered and operating, and owning the full civil rights required by this contract. |
|
2) |
Signing and performing the contract is the true will of Party A, Party A has been granted all. necessary authorizations in effect before signing the contract. The contract does not form a default for other contracts signed and performed by Party A. It is Party A’s responsibility to complete all required approvals, registrations, permits and filings. |
|
3) |
All documents and information provided by Party A to Party B are true, complete, accurate and effective. |
|
4) |
All the transactions mentioned by Party A for apply specific credit line should be real and not for illegal purposes such as: money laundry. |
|
5) |
No hidden events regarding Party A and guarantor’s financial and repayment abilities. |
|
1) |
Timely delivery of the financial statements and other relevant information, (including but not limited to annual, quarterly and monthly financial reports. |
|
2) |
Cooperate in Party B’s exam and inspection on the utilization of the loan as well as Party A’s financials and operations. |
|
3) |
Any counter-guarantee agreement between the guarantors and Party A will not affect the Party B’s underlying rights under this contract. |
|
4) |
Under circumstances Party A or Guarantor’s capability of performing the contract might be affected, Party A should notify Party B in time. Those circumstances include but are not limited to significant organizational changes, e.g. business splitting, merger and termination, disposal of major assets, restructuring, reorganization, joint venture arrangement with foreign capitals, changing of controlling shareholders or de facto control of Party A, capital reduction, liquidation, re-pledge of the encumbered assets, withdrawal, bankruptcy, dissolution and involvement in significant lawsuits. |
|
5) |
As for undefined business practice, Party A is committed to follow Party B’s regulation and normal practice in daily operation. |
|
6) |
Party A committed not to distribute bonus during the credit period. |
|
7) |
Agreed by both parties, for the purpose to ensure the Party B’s claims on credit funds and Party B’s convenience to monitoring the repayment progress, Party A should guarantee the proportion of sales fund received in Party A’s account opened with Party B over Party A’s total sales should be matching to the proportion of Party A’s credit line received from Party B over Party A’s total credit line received from financial institution. |
|
8) |
At any time, credit balance does not exceed 10 million. |
Clause 9 Related party and related party
transaction of Party A
Party A is not defined as Group Credit Customer
by Party B in accordance with “Guidance of Risk Management by Commercial Banks for Granting Credit to Customer Groups”
Clause 10 Breach of Covenants
Any of the following situations would be considered
as breach of contract covenant:
|
1. |
Party A does not perform the repayment obligation under this contract or the affiliated specific credit line contracts. |
|
2. |
Party A does not use the credit funds according to agreed purposes. |
|
3. |
Party A’s statement in this contract or the affiliated specific contracts are untrue or in violation with Party A’s commitment in this or the affiliated specific contracts. |
|
4. |
Under the circumstance defined in 2.4) in Clause 8, Party A refused to provide additional guarantee or replacement of new guarantor. |
|
5. |
Party B is or will be under significant business difficulties or risks: deteriorated financials, significant financial losses and loss of assets (including but not limited asset losses for fulfill guarantee obligations) or other financial crisis. |
|
6. |
Party A is in violation with other rights and obligations agreed in this contract. |
|
7. |
Party A breaches the covenants on other credit line contracts with Party B or other affiliated institutions of Bank of China. |
|
8. |
Guarantors breach the covenants on other credit line contracts with Party B or other affiliated institutions of Bank of China. |
When any of the above mentioned
situations noticed, Party B will perform the following in separate or all at the same time:
|
1) |
Request Party A or Guarantor to rectify within a definite time. |
|
2) |
Reduce, temporarily pause or permanently terminate Party A’s Credit limit in part or in all. |
|
3) |
Temporarily pause or permanently terminate in part or in all of Party A’s application on specific credit line under this contract. |
|
4) |
Announce the immediate expiration on all the credit lines granted under this contract and affiliated specific credit line contracts. |
|
5) |
Terminate or release this contract, terminate or release in part or in all of the affiliated specific credit line contracts as well as the other contracts signed between Party A and Party B. |
|
6) |
Request compensation from Party A on the losses thereafter caused. |
|
7) |
Party A’s deposit account in Party B will be hold in custody for debt pay off for the comprehensive credit line and specific credit line under this contract. All the undue liabilities were deeming due and entitled the immediate payoff from Party A’s restricted accounts. If the currency in deposit account is different from the currency of the liabilities, the exchange rate on the date of the hold in custody will be applied. |
|
8) |
Real rights granted by way of security will be executed. |
|
9) |
Assume the guarantee responsibility on Guarantors. |
|
10) |
Other necessary procedures on Party B’s concern. |
Clause 11 Rights reserved
Either party might reserve part of or all
of the rights under this contract and the affiliated specific credit line contracts, this does not imply the party has surrendered
or remitted the unperformed rights and obligations.
Either party might sometimes tolerate, extend
or delay the execution of certain rights, this does not deem as the party has surrendered or remitted the rights.
Clause 12 Change, Modification, Termination
and Partial invalidity
Upon negotiation and agreement by both parties,
this contract can be changed and modified, the written record of the changes and modifications should form the inseparable part
of this contract.
Unless ruled by law or both parties formed
a separate agreement, the contract would not be terminated prior to all the rights and obligations defined are fulfilled.
Unless ruled by law or both parties formed
a separate agreement, the void of single terms under this contract should no invalid other contract under this contract.
Clause 13 Applicable Law and Resolution
for Dispute
|
1. |
This contract is entered into according with the People’s Republic of China, and applicable to the law of the People’s Republic of China. |
|
2. |
The resolution of dispute should be appealed in Party B or other Bank of China subsidiaries defined in this contract or other affiliated contracts. |
Clause 14 Attachments
Below attachments are agreed by both parties,
formed an inseparable part of this contract, thereafter in the same legal position as this contract.
Attachment 1: Appendix terms.
Clause 15 Other terms and conditions
|
1. |
Without Party B’s prior written approval, Party A is not allowed to transfer the rights and obligations under this contract to any 3rd Party. |
|
2. |
Party A should give the consent that Party B might somehow authorize other affiliated institutions of Bank of China to perform the obligation. The performing party is entitled to all the rights and obligations under this contract and the affiliated credit line contracts, the performing party reserves the rights to appeal a resolution of dispute if necessary. |
|
3. |
The contract has equivalent restrictions to the successors or inherits of both parties. |
|
4. |
Unless otherwise agreed, the domicile addresses stated in this contract are for corresponding use; both parties should notify each other in writing if there is any change of its domicile addresses. |
|
5. |
The title and name of business product are for business purposes, will not used for interpretation of the contract terms and the rights and obligations. |
|
6. |
If required by the governing institutions, Party B might not be able to perform the obligations agreed in this contract. Party B is exempted from punishment under this circumstance. |
Clause 16 Effectiveness of the contract
This contract is established and comes into
effect upon signing or sealing by the legal representatives (or person-in-charge) of Party A and Party B or their duly authorized
agents, together with sealing by the company chop.
This contract will be printed and signed in
seven copies, Party A and the guarantors hold one copy each, Party B holds three copies, collateral registry authority holds one
copy, each copy has the same legal effect.
/s/ Dangyu Pan
Stamp of Party A
Signature of director or authorized
representative
Jul 23, 2014
/s/ [COMPANY SEAL]
Stamp of Party B
Signature of legal representative or authorized
representative
Jul 23, 2014
Attachment 1:
If there are discrepancies in contents
in the attachment with this contract, this contract should prevail.
Specific to the 2nd paragraph of
Clause 3: “This contract will override all the credit line contracts previously signed by Party A and Party B. Upon
the effective date of this contract, all the used and unused credit lines prior to this contract will be considered as used and
unused credit lines under this contract”.
In preceding clause, “all the credit
line contracts previously signed” refers to “Comprehensive Credit Line Contract” 2013zhenzhongyinbuexiezi No.
00000132.
Exhibit 10.1(a)
Maximum Amount Guaranty Contract
Reference No. : 2014zhenzhongyinbubaoezi
No.0053
Guarantor: Shenzhen Highpower Technology
(Shenzhen) Co., Ltd
Business License: 440307503274740
Legal Representative: Dangyu Pan
Address: Building A2, Luoshan Industrial Zone,
Longgang District, Shenzhen
Postal code: 518111
Deposit A/C and financial institutions: Bank
of China, Pinghu Sub-branch, Shenzhen,
Telephone: 8968 6236; Facsimile: 8968 6298
Creditor: Bank of China, Buji Sub-branch.
Legal Representative: LI YANSHAN
Address: 108, Buji Road, Buji Town, Longgang
District, Shenzhen; Postal code: 518112
Telephone: 2827 4825; Facsimile: 2827 0847
To guarantee the performing of the principle
contract stated in Clause 1, both parties agree the following:
Clause 1 Principle Contract
|
1. |
The principle contract is “Comprehensive credit contract (2014zhenzhongyinbuexiezi No 0000716)” and its supplements signed between Creditor and Debtor |
Clause 2 Principle Creditor’s rights
and the period
Unless otherwise agreed, the creditor’s
rights under the following contracts and the creditor’s rights occurred before the engagement of this contract constitutes
the principle creditor’s rights of this contract.
|
1. |
The creditor’s right occurred under comprehensive contract starting from the date of effectiveness, and ends upon the expiration of all the specific creditor’s rights. |
Clause 3 The maximum amount guaranteed
|
1. |
The maximum amount assumed guaranteed is: |
Currency: Renminbi
Amount (Capital letter): sixty
million
Amount (in numbers): 60,000,000
|
2. |
The principle creditor’s rights under the principle contract constitute the principle creditor’s rights under this contract, which includes: loan principle, interest, compound interest, punitive interest, liquidated damage, the cost for realization of the creditor’s right (includes but not limited to the announcement fee, delivery fees, appraisal fees, legal fees, travel expenses, assessment fees, auction fees, the property preservation fee, compulsory execution fee and etc), as well as the Pledgee’s loss due to the breach of covenants. |
The sum of the above terms constitutes
the maximum amount of guaranteed for this contract.
Clause 4 Types of guaranty
Joint responsibility guaranty.
Clause 5 The guarantee responsibilities
Under the circumstance that, the debtor of
principle contract failed to pay off the creditor’s rights when due (on due date or early termination date), the guaranty
is assumed to be responsible in accordance with this contract.
The due date in the previous sentence means
the repayment date agreed in the principle contract. The early termination date is the termination date request by creditor per
law or per agreements under the principle contracts.
Creditor’s rights on other guarantee
contracts or collateral contracts should not have an impact on the performing of this contract. Guarantor should assume responsibility
under this contract rather than plea with the execution in order.
Clause 6 The responsible period
The responsible period for this contract is
two years after the establishment of the creditor’s rights under Clause 2
During the period, Creditor is entitled to
the right to request the assumption of responsibility from Guarantor in full or in part on one or on all creditor rights.
Clause 7 The duration of action
During the period that the creditor’s
rights have not been paid off when due, Guarantor is assumed responsible under the joint responsibility guarantee. Creditor is
entitled to claim the rights within the responsible period defined in Clause 6, the duration of action started upon the request.
Clause 8 The relationship between this
contract and the principle contract
Upon the termination or early termination
of the principle contract, Guarantor assumes guarantee responsibility on occurred debt.
The change of principle contract will not
be informed to the Guarantor unless under the following circumstances, change of currency, interest rate, amount, period, or other
terms which might affect the increase of the amount of the principle creditor’s rights or extend the effective period of
the principle contract. Guarantor remains obligated to assume the guarantee responsibility to the changed principle contract.
Under the previous stated circumstance which
Guarantor‘s consent is required, Pledgor Guarantor is entitled to the right to reject to assume the guarantee responsibility
on the incremental portion.
Under the circumstances that, Creditor provide
the letter of credit, trade financing services to debtor under the principle contract, Guarantor won’t be notified but assumed
guarantee responsibility. It is the Creditor’s responsibility to registry for the incremental business contract.
Clause 9 Statements and Commitments
Guarantor’s statement:
1. Guarantor is legally registered
and operating, and owns the full civil rights required by this contract.
2. Signing and performing the
contract is the true will of Guarantor, Guarantor has been granted all necessary authorizations in effect before signing the contract.
The contract does not form a default for other contracts signed and performed by Guarantor. It is Guarantor’s responsibility
to complete all required approvals, registrations, permits and filings.
3. All document and information
provided by Guarantor to Creditor are true, complete, accurate and effective.
4. Guarantor is willing to cooperate
in the check and inspection on its financial conditions performed by Creditor.
5. Guarantor did not conceal any
existing liability upon the signing of the contract.
6. Inform the Creditor in time
for any issues might affect Guarantor’s performing capability, which including but not limited to business splitting, merger
and termination, disposal of major assets, restructuring, reorganization, joint venture arrangement with foreign capitals, changing
of controlling shareholders or de facto control of Party A, capital reduction, liquidation, re-pledge the encumbered assets, withdrawal,
bankruptcy, dissolution and involved in significant law suits.
Clause 10 Breach of covenants
Any of the following situations would be considered
as breach of contract covenant:
1. Guarantor is in violation with the previous
terms of the contract.
2. The statements of the Guarantor is untrue
or in violation with its commitments.
3. The occurrence of issues defined under
the point 6 of clause 9 which might affect the Guarantor’s financial position and performing capability.
4. Experiencing the termination of operation
or bankruptcy.
5. In violation with other rights and obligations
agreed in this contract.
6. Guarantor breaches the covenants on other
credit line contracts with Party B or other affiliated institutions of Bank of China.
When any of the above mentioned situations
noticed, Creditor will perform the following in separate or all at the same time:
1) Request Guarantor to rectify within a definite
time.
2) Reduce, temporarily pause or permanently
terminate Guarantor’s Credit limit in part or in all.
3) Temporarily pause or permanently terminate
in part or in all of Guarantor’s application on specific credit line under this contract.
4) Announce the immediate expiration on all
the credit lines granted under this contract and affiliated specific credit line contracts.
5) Terminate or release this contract, terminate
or release in part or in all of the affiliated specific credit line contracts as well as the other contracts signed between Guarantor
and Creditor.
6) Request compensation from Guarantor on
the losses thereafter caused.
7) Assume the guarantee responsibility on
Guarantors.
8) Other necessary procedures on Party B’s
concern
Clause 11 Rights reserved
Either party might reserve part of or all
of the rights under this contract and the affiliated specific credit line contracts, this does not imply the party has surrendered
or remitted the unperformed rights and obligations.
Either party might sometimes tolerate, extend
or delay the execution of certain rights, this does not deem as the party has surrendered or remitted the rights.
Clause 12 Change, Modification, Termination
and Partial invalidity
Upon negotiation and agreed by both parties,
this contract can be changed and modified, the written record of the changes and modifications should form the inseparable part
of this contract.
Unless ruled by law or both parties formed
a separate agreement, the contract would not be terminated prior to all the rights and obligations defined are fulfilled.
Unless ruled by law or both parties formed
a separate agreement, the void of single terms under this contract should no invalid other contract under this contract.
Clause 13 Applicable Law and Resolution
for Dispute
1. This contract is entered into according
with the People’s Republic of China, and applicable to the law of the People’s Republic of China.
2. The resolution of dispute should be appealed
in Party B or other Bank of China subsidiaries defined in this contract or other affiliated contracts
Clause 14 Attachments
Not applicable
Clause 15 Other terms and conditions
1. Without Creditor’s prior written
approval, Guarantor is not allowed to transfer the rights and obligations under this contract to 3rd Parties.
2. Guarantor should give the consent that
Creditor might somehow authorize other affiliated institution of Bank of China to perform the obligation. The performing party
entitles all the rights and obligations under this contract and the affiliated credit line contracts, the performing party reserves
the rights to appeal a resolution of dispute if necessary.
3. The contract has equivalent restrictions
to the successors or inherits of both parties.
4. Unless otherwise agreed, the domicile addresses
stated in this contract are for corresponding use; both parties should notify each other in writing about any changes of its domicile
addresses.
5. The title and name of business product
is for business purposes, will not used for interpretation of the contract terms and the rights and obligations.
Clause 16 Effectiveness of the contract
This contract is established and enters into
effective upon signing or sealing by the legal representatives (or person-in-charge) of Guarantor and Creditor or their duly authorized
agents, together with sealing by the company chop.
The pledge is established upon the effectiveness
of this contract.
This contract will be printed and signed in
five copies, Guarantor and the debtor hold one copy each, Creditor holds three copies; each copy has the same legal effect
[COMPANY SEAL]
Stamp of Guarantor (if Guarantor is a corporation)
Signature of Authorized Representative
Jul 23, 2014
/s/ [COMPANY SEAL]
Stamp of Creditor (if Creditor is a corporation)
Signature of legal representative or authorized
representative
Jul 23, 2014
Exhibit 10.1(b)
Maximum Amount Guaranty Contract
Reference No. : 2014zhenzhongyinbubaoezi
No.0054
Guarantor: Huizhou Highpower Technology
(Shenzhen) Co., Ltd
Business License: 441300000177233
Legal Representative: Dangyu Pan
Address: Xinhu Industrial Zone, Maan town, District, Huizhou, Guangdong
Postal code: 516000
Deposit A/C and financial institutions: Bank
of China, Pinghu Sub-branch, Shenzhen/ 764062693628
Telephone: 8968 6236; Facsimile: 8968 6298
Creditor: Bank of China, Buji Sub-branch.
Legal Representative: LI YANSHAN
Address: 108, Buji Road, Buji Town, Longgang
District, Shenzhen; Postal code: 518112
Telephone: 2827 4825; Facsimile: 2827 0847
To guarantee the performing of the principle
contract stated in Clause 1, both parties agree the following:
Clause 1 Principle Contract
|
1. |
The principle contract is “Comprehensive credit contract (2014zhenzhongyinbuexiezi No 0000716)” and its supplements signed between Creditor and Debtor |
Clause 2 Principle Creditor’s rights
and the period
Unless otherwise agreed, the creditor’s
rights under the following contracts and the creditor’s rights occurred before the engagement of this contract constitutes
the principle creditor’s rights of this contract.
|
1. |
The creditor’s right occurred under comprehensive contract starting from the date of effectiveness, and ends upon the expiration of all the specific creditor’s rights. |
Clause 3 The maximum amount guaranteed
|
1. |
The maximum amount assumed guaranteed is: |
Currency: Renminbi
Amount (Capital letter): sixty
million
Amount (in numbers): 60,000,000
|
2. |
The principle creditor’s rights under the principle contract constitute the principle creditor’s rights under this contract, which includes: loan principle, interest, compound interest, punitive interest, liquidated damage, the cost for realization of the creditor’s right (includes but not limited to the announcement fee, delivery fees, appraisal fees, legal fees, travel expenses, assessment fees, auction fees, the property preservation fee, compulsory execution fee and etc), as well as the Pledgee’s loss due to the breach of covenants. |
The sum of the above terms constitutes the
maximum amount of guaranteed for this contract.
Clause 4 Types of guaranty
Joint responsibility guaranty.
Clause 5 The guarantee responsibilities
Under the circumstance that, the debtor of
principle contract failed to pay off the creditor’s rights when due (on due date or early termination date), the guaranty
is assumed to be responsible in accordance with this contract.
The due date in the previous sentence means
the repayment date agreed in the principle contract. The early termination date is the termination date request by creditor per
law or per agreements under the principle contracts.
Creditor’s rights on other guarantee
contracts or collateral contracts should not have an impact on the performing of this contract. Guarantor should assume responsibility
under this contract rather than plea with the execution in order.
Clause 6 The responsible period
The responsible period for this contract is
two years after the establishment of the creditor’s rights under Clause 2
During the period, Creditor is entitled to
the right to request the assumption of responsibility from Guarantor in full or in part on one or on all creditor rights.
Clause 7 The duration of action
During the period that the creditor’s
rights have not been paid off when due, Guarantor is assumed responsible under the joint responsibility guarantee. Creditor is
entitled to claim the rights within the responsible period defined in Clause 6, the duration of action started upon the request.
Clause 8 The relationship between this
contract and the principle contract
Upon the termination or early termination
of the principle contract, Guarantor assumes guarantee responsibility on occurred debt.
The change of principle contract will not
be informed to the Guarantor unless under the following circumstances, change of currency, interest rate, amount, period, or other
terms which might affect the increase of the amount of the principle creditor’s rights or extend the effective period of
the principle contract. Guarantor remains obligated to assume the guarantee responsibility to the changed principle contract.
Under the previous stated circumstance which
Guarantor‘s consent is required, Pledgor Guarantor is entitled to the right to reject to assume the guarantee responsibility
on the incremental portion.
Under the circumstances that, Creditor provide
the letter of credit, trade financing services to debtor under the principle contract, Guarantor won’t be notified but assumed
guarantee responsibility. It is the Creditor’s responsibility to registry for the incremental business contract.
Clause 9 Statements and Commitments
Guarantor’s statement:
1. Guarantor is legally registered
and operating, and owns the full civil rights required by this contract.
2. Signing and performing the
contract is the true will of Guarantor, Guarantor has been granted all necessary authorizations in effect before signing the contract.
The contract does not form a default for other contracts signed and performed by Guarantor. It is Guarantor’s responsibility
to complete all required approvals, registrations, permits and filings.
3. All document and information
provided by Guarantor to Creditor are true, complete, accurate and effective.
4. Guarantor is willing to cooperate
in the check and inspection on its financial conditions performed by Creditor.
5. Guarantor did not conceal any
existing liability upon the signing of the contract
6. Inform the Creditor in time
for any issues might affect Guarantor’s performing capability, which including but not limited to business splitting, merger
and termination, disposal of major assets, restructuring, reorganization, joint venture arrangement with foreign capitals, changing
of controlling shareholders or de facto control of Party A, capital reduction, liquidation, re-pledge the encumbered assets, withdrawal,
bankruptcy, dissolution and involved in significant law suits.
Clause 10 Breach of covenants
Any of the following situations would be considered
as breach of contract covenant:
1. Guarantor is in violation with the previous
terms of the contract.
2. The statements of the Guarantor is untrue
or in violation with its commitments
3. The occurrence of issues defined under
the point 6 of clause 9 which might affect the Guarantor’s financial position and performing capability.
4. Experiencing the termination of operation
or bankruptcy.
5. In violation with other rights and obligations
agreed in this contract.
6. Guarantor breaches the covenants on other
credit line contracts with Party B or other affiliated institutions of Bank of China.
When any of the above mentioned situations
noticed, Creditor will perform the following in separate or all at the same time:
1) Request Guarantor to rectify within a definite
time.
2) Reduce, temporarily pause or permanently
terminate Guarantor’s Credit limit in part or in all.
3) Temporarily pause or permanently terminate
in part or in all of Guarantor’s application on specific credit line under this contract.
4) Announce the immediate expiration on all
the credit lines granted under this contract and affiliated specific credit line contracts.
5) Terminate or release this contract, terminate
or release in part or in all of the affiliated specific credit line contracts as well as the other contracts signed between Guarantor
and Creditor.
6) Request compensation from Guarantor on
the losses thereafter caused.
7) Assume the guarantee responsibility on
Guarantors.
8) Other necessary procedures on Party B’s
concern
Clause 11 Rights reserved
Either party might reserve part of or all
of the rights under this contract and the affiliated specific credit line contracts, this does not imply the party has surrendered
or remitted the unperformed rights and obligations.
Either party might sometimes tolerate, extend
or delay the execution of certain rights, this does not deem as the party has surrendered or remitted the rights.
Clause 12 Change, Modification, Termination
and Partial invalidity
Upon negotiation and agreed by both parties,
this contract can be changed and modified, the written record of the changes and modifications should form the inseparable part
of this contract.
Unless ruled by law or both parties formed
a separate agreement, the contract would not be terminated prior to all the rights and obligations defined are fulfilled.
Unless ruled by law or both parties formed
a separate agreement, the void of single terms under this contract should no invalid other contract under this contract.
Clause 13 Applicable Law and Resolution
for Dispute
1. This contract is entered into according
with the People’s Republic of China, and applicable to the law of the People’s Republic of China.
2. The resolution of dispute should be appealed
in Party B or other Bank of China subsidiaries defined in this contract or other affiliated contracts
Clause 14 Attachments
Not applicable
Clause 15 Other terms and conditions
1. Without Creditor’s prior written
approval, Guarantor is not allowed to transfer the rights and obligations under this contract to 3rd Parties.
2. Guarantor should give the consent that
Creditor might somehow authorize other affiliated institution of Bank of China to perform the obligation. The performing party
entitles all the rights and obligations under this contract and the affiliated credit line contracts, the performing party reserves
the rights to appeal a resolution of dispute if necessary.
3. The contract has equivalent restrictions
to the successors or inherits of both parties.
4. Unless otherwise agreed, the domicile addresses
stated in this contract are for corresponding use; both parties should notify each other in writing about any changes of its domicile
addresses.
5. The title and name of business product
is for business purposes, will not used for interpretation of the contract terms and the rights and obligations.
Clause 16 Effectiveness of the contract
This contract is established and enters into
effective upon signing or sealing by the legal representatives (or person-in-charge) of Guarantor and Creditor or their duly authorized
agents, together with sealing by the company chop.
The pledge is established upon the effectiveness
of this contract.
This contract will be printed and signed in
five copies, Guarantor and the debtor hold one copy each, Creditor holds three copies; each copy has the same legal effect.
[COMPANY SEAL]
Stamp of Guarantor (if Guarantor is a corporation)
Signature of Authorized Representative
Jul 23, 2014
/s/ [COMPANY SEAL]
Stamp of Creditor (if Creditor is a corporation)
Signature of legal representative or authorized
representative
Jul 23, 2014
Exhibit 10.1(c)
Maximum Amount Guaranty Contract
(Applicable if guarantor is natural person)
Reference No. : 2014zhenzhongyinbubaoezi
No.0055
Guarantor: Dangyu Pan
Type of certification: Identification Card
Certification number: 430104196803184316
Address: Building A2, Luoshan Industrial Zone,
Longgang District, Shenzhen
Postal code: 518111
Telephone: 8968 6236; Facsimile: 8968 6298
Creditor: Bank of China, Buji Sub-branch.
Legal Representative: LI YANSHAN
Address: 108, Buji Road, Buji Town, Longgang
District, Shenzhen; Postal code: 518112
Telephone: 2827 4825; Facsimile: 2827 0847
To guarantee the performing of the principle
contract stated in Clause 1, both parties agree the following:
Clause 1 Principle Contract
1. The principle contract is “Comprehensive
credit contract (2014zhenzhongyinbuexiezi No 0000716)” and its supplements signed between Creditor and Debtor
Clause 2 Principle Creditor’s rights
and the period
Unless otherwise agreed, the creditor’s
rights under the following contracts and the creditor’s rights occurred before the engagement of this contract constitutes
the principle creditor’s rights of this contract.
1. The creditor’s right occurred under
comprehensive contract starting from the date of effectiveness, and ends upon the expiration of all the specific creditor’s
rights.
Clause 3 The maximum amount guaranteed
|
1. |
The maximum amount assumed guaranteed is: |
Currency: Renminbi
Amount (Capital letter): sixty
million
Amount (in numbers): 60,000,000
|
2. |
The principle creditor’s rights under the principle contract constitute the principle creditor’s rights under this contract, which includes: loan principle, interest, compound interest, punitive interest, liquidated damage, the cost for realization of the creditor’s right (includes but not limited to the announcement fee, delivery fees, appraisal fees, legal fees, travel expenses, assessment fees, auction fees, the property preservation fee, compulsory execution fee and etc), as well as the Pledgee’s loss due to the breach of covenants. |
The sum of the above terms constitutes
the maximum amount of guaranteed for this contract.
Clause 4 Types of guaranty
Joint responsibility guaranty
Clause 5 The guarantee responsibilities
Under the circumstance that, the debtor of
principle contract failed to pay off the creditor’s rights when due (on due date or early termination date), the guaranty
is assumed to be responsible in accordance with this contract.
The due date in the previous sentence means
the repayment date agreed in the principle contract. The early termination date is the termination date request by creditor per
law or per agreements under the principle contracts.
Creditor’s rights on other guarantee
contracts or collateral contracts should not have an impact on the performing of this contract. Guarantor should assume responsibility
under this contract rather than plea with the execution in order.
Clause 6 The responsible period
The responsible period for this contract is
two years after the establishment of the creditor’s rights under Clause 2
During the period, Creditor is entitled to
the right to request the assumption of responsibility from Guarantor in full or in part on one or on all creditor rights.
Clause 7 The duration of action
During the period that the creditor’s
rights have not been paid off when due, Guarantor is assumed responsible under the joint responsibility guarantee. Creditor is
entitled to claim the rights within the responsible period defined in Clause 6, the duration of action started upon the request.
Clause 8 The relationship between this
contract and the principle contract
Upon the termination or early termination
of the principle contract, Guarantor assumes guarantee responsibility on occurred debt.
The change of principle contract will not
be informed to the Guarantor unless under the following circumstances, change of currency, interest rate, amount, period, or other
terms which might affect the increase of the amount of the principle creditor’s rights or extend the effective period of
the principle contract. Guarantor remains obligated to assume the guarantee responsibility to the changed principle contract.
Under the previous stated circumstance which
Guarantor‘s consent is required, Pledgor Guarantor is entitled to the right to reject to assume the guarantee responsibility
on the incremental portion.
Under the circumstances that, Creditor provide
the letter of credit, trade financing services to debtor under the principle contract, Guarantor won’t be notified but assumed
guarantee responsibility. It is the Creditor’s responsibility to registry for the incremental business contract.
Clause 9 Statements and Commitments
Guarantor’s statement:
|
a) |
Guarantor is a natural person who possesses the capacity for civil rights and civil conducts in People’s Republic of China to perform this contract. Party A can perform the civil conduct independently, no bad credit records such as debt overdue, overdue interest, malicious overdraft on credit card, no criminal records, qualified to be a legal guarantor. |
|
b) |
Guarantor has full understanding about the terms and conditions set forth in the contract. It is Guarantor’s true will to provide guarantee to debtor. |
|
c) |
The establishment of this contract will not constitute a breach of covenant of any other previous contract Guarantor engaged in. |
|
d) |
All documents and information provided by Guarantor to Creditor are true, complete, accurate and effective. |
|
e) |
Guarantor is willing to cooperate in the checking and inspection of its financial conditions performed by Creditor. |
|
f) |
Guarantor did not conceal any existing liability upon the signing of the contract. |
|
g) |
Inform the Creditor in time for any issues might affect Guarantor’s performing capability, which including but not limited to losses of assets, transfer, donation, assume responsibility on liabilities, involved in significant law suits or disputes. |
|
h) |
If the Guarantor is married, make sure the sponsor’s consent is obtained. |
Clause 10 Authorization of access to personal
information
Guarantor authorizes the access of personal
information in the personal credit information database in the People’s Bank of China to Creditor under the following circumstances.
|
1. |
Reference check on the Guarantor’s credit status. |
|
2. |
Reference check on the Guarantor’s guarantee status. |
|
3. |
After-loan management on the personal credit and guarantee status |
|
4. |
Accept the credit line application of which the Guarantor guaranteed or to be legal representative or one of the funders. |
Clause 11 Breach of covenants
Any of the following situations would be considered
as breach of contract covenant:
1. Guarantor is in violation with the previous
terms of the contract.
2. The statements of the Guarantor is untrue
or in violation with its commitments.
3. The occurrence of issues defined under
the point 7 of clause 9 which might affect the Guarantor’s financial position and performing capability.
4. In violation with other rights and obligations
agreed in this contract.
5. Guarantor breaches the covenants on other
credit line contracts with Party B or other affiliated institutions of Bank of China.
When any of the above mentioned situations
noticed, Creditor will perform the following in separate or all at the same time:
1) Request Guarantor to rectify within a definite
time.
2) Reduce, temporarily pause or permanently
terminate Guarantor’s Credit limit in part or in all.
3) Temporarily pause or permanently terminate
in part or in all of Guarantor’s application on specific credit line under this contract.
4) Announce the immediate expiration on all
the credit lines granted under this contract and affiliated specific credit line contracts.
5) Terminate or release this contract, terminate
or release in part or in all of the affiliated specific credit line contracts as well as the other contracts signed between Guarantor
and Creditor.
6) Request compensation from Guarantor on
the losses thereafter caused.
7) Assume the guarantee responsibility on
Guarantors.
8) Other necessary procedures on Party B’s
concern.
Clause 12 Rights reserved
Either party might reserve part of or all
of the rights under this contract and the affiliated specific credit line contracts, this does not imply the party has surrendered
or remitted the unperformed rights and obligations.
Either party might sometimes tolerate, extend
or delay the execution of certain rights, this does not deem as the party has surrendered or remitted the rights.
Clause 13 Change, Modification, Termination
and Partial invalidity
Upon negotiation and agreement by both parties,
this contract can be changed and modified, the written record of the changes and modifications should form the inseparable part
of this contract.
Unless ruled by law or both parties formed
a separate agreement, the contract would not be terminated prior to all the rights and obligations defined are fulfilled.
Unless ruled by law or both parties formed
a separate agreement, the void of single terms under this contract should no invalid other contract under this contract.
Clause 14 Applicable Law and Resolution
for Dispute
1. This contract is entered into according
with the People’s Republic of China, and applicable to the law of the People’s Republic of China.
2. The resolution of dispute should be appealed
in Party B or other Bank of China subsidiaries defined in this contract or other affiliated contracts.
Clause 15 Attachments
Consent Letter
Clause 16 Other terms and conditions
|
1. |
Without Creditor’s prior written approval, Guarantor is not allowed to transfer the rights and obligations under this contract to 3rd Parties. |
|
2. |
Guarantor should give the consent that Creditor might somehow authorize other affiliated institutions of Bank of China to perform the obligation. The performing party is entitled to all the rights and obligations under this contract and the affiliated credit line contracts, the performing party reserves the rights to appeal a resolution of dispute if necessary. |
|
3. |
The contract has equivalent restrictions to the successors or inherits of both parties. |
|
4. |
Unless otherwise agreed, the domicile addresses stated in this contract are for corresponding use; both parties should notify each other in writing about any changes of its domicile addresses. |
|
5. |
The title and name of business product is for business purposes, will not used for interpretation of the contract terms and the rights and obligations. |
Clause 17 Effectiveness of the contract
This contract is established and entered into
effective upon signing or sealing by the legal representatives (or person-in-charge) of Pledgor and Pledgee or their duly authorized
agents, together with sealing by the company chop.
The pledge is established upon the effectiveness
of this contract.
This contract will be printed and signed in
five copies, Guarantor and the debtor hold one copy each, Creditor holds three copies; each copy has the same legal effect
/s/ Dangyu Pan
Signature of Guarantor and Sponsor
Jul 23, 2014
/s/ [COMPANY SEAL]
Stamp of Creditor (if Pledgee is a corporation)
Signature of legal representative or authorized
representative
Jul 23,2014
Consent letter
I (name: Zhoutao Wang, certificate type: Identification
Card, ID number: 430104196810294329) am the spouse of the guarantor Dangyu Pan under the maximum amount guarantee contract (No.
: 2014zhenzhongyinbubaoezi No.0055). I agree to undertake the responsibility of the maximum amount guarantee contract by the couple's
property.
Exhibit 10.1(d)
Maximum Amount Guaranty Contract
(Applicable if guarantor is natural person)
Reference No. : 2014zhenzhongyinbubaoezi
No.0056
Guarantor: Wenliang Li
Type of certification: Identification Card
Certification number: 230103196507173213
Address: Building A2, Luoshan Industrial Zone,
Longgang District, Shenzhen
Postal code: 518111
Telephone: 8968 6236; Facsimile: 8968 6298
Creditor: Bank of China, Buji Sub-branch.
Legal Representative: LI YANSHAN
Address: 108, Buji Road, Buji Town, Longgang
District, Shenzhen; Postal code: 518112
Telephone: 2827 4825; Facsimile: 2827 0847
To guarantee the performing of the principle
contract stated in Clause 1, both parties agree the following:
Clause 1 Principle Contract
1. The principle contract is “Comprehensive
credit contract (2014zhenzhongyinbuexiezi No 0000716)” and its supplements signed between Creditor and Debtor
Clause 2 Principle Creditor’s rights
and the period
Unless otherwise agreed, the creditor’s
rights under the following contracts and the creditor’s rights occurred before the engagement of this contract constitutes
the principle creditor’s rights of this contract.
1. The creditor’s right occurred under
comprehensive contract starting from the date of effectiveness, and ends upon the expiration of all the specific creditor’s
rights.
Clause 3 The maximum amount guaranteed
|
1. |
The maximum amount assumed guaranteed is: |
Currency: Renminbi
Amount (Capital letter): sixty
million
Amount (in numbers): 60,000,000
|
2. |
The principle creditor’s rights under the principle contract constitute the principle creditor’s rights under this contract, which includes: loan principle, interest, compound interest, punitive interest, liquidated damage, the cost for realization of the creditor’s right (includes but not limited to the announcement fee, delivery fees, appraisal fees, legal fees, travel expenses, assessment fees, auction fees, the property preservation fee, compulsory execution fee and etc), as well as the Pledgee’s loss due to the breach of covenants. |
The sum of the above terms constitutes the
maximum amount of guaranteed for this contract.
Clause 4 Types of guaranty
Joint responsibility guaranty.
Clause 5 The guarantee responsibilities
Under the circumstance that, the debtor of
principle contract failed to pay off the creditor’s rights when due (on due date or early termination date), the guaranty
is assumed to be responsible in accordance with this contract.
The due date in the previous sentence means
the repayment date agreed in the principle contract. The early termination date is the termination date request by creditor per
law or per agreements under the principle contracts.
Creditor’s rights on other guarantee
contracts or collateral contracts should not have an impact on the performing of this contract. Guarantor should assume responsibility
under this contract rather than plea with the execution in order.
Clause 6 The responsible period
The responsible period for this contract is
two years after the establishment of the creditor’s rights under Clause 2
During the period, Creditor is entitled to
the right to request the assumption of responsibility from Guarantor in full or in part on one or on all creditor rights.
Clause 7 The duration of action
During the period that the creditor’s
rights have not been paid off when due, Guarantor is assumed responsible under the joint responsibility guarantee. Creditor is
entitled to claim the rights within the responsible period defined in Clause 6, the duration of action started upon the request.
Clause 8 The relationship between this
contract and the principle contract
Upon the termination or early termination
of the principle contract, Guarantor assumes guarantee responsibility on occurred debt.
The change of principle contract will not
be informed to the Guarantor unless under the following circumstances, change of currency, interest rate, amount, period, or other
terms which might affect the increase of the amount of the principle creditor’s rights or extend the effective period of
the principle contract. Guarantor remains obligated to assume the guarantee responsibility to the changed principle contract.
Under the previous stated circumstance which
Guarantor‘s consent is required, Pledgor Guarantor is entitled to the right to reject to assume the guarantee responsibility
on the incremental portion.
Under the circumstances that, Creditor provide
the letter of credit, trade financing services to debtor under the principle contract, Guarantor won’t be notified but assumed
guarantee responsibility. It is the Creditor’s responsibility to registry for the incremental business contract.
Clause 9 Statements and Commitments
Guarantor’s statement:
|
a) |
Guarantor is a natural person who possesses the capacity for civil rights and civil conducts in People’s Republic of China to perform this contract. Party A can perform the civil conduct independently, no bad credit records such as debt overdue, overdue interest, malicious overdraft on credit card, no criminal records, qualified to be a legal guarantor. |
|
b) |
Guarantor has full understanding about the terms and conditions set forth in the contract. It is Guarantor’s true will to provide guarantee to debtor. |
|
c) |
The establishment of this contract will not constitute a breach of covenant of any other previous contract Guarantor engaged in. |
|
d) |
All documents and information provided by Guarantor to Creditor are true, complete, accurate and effective. |
|
e) |
Guarantor is willing to cooperate in the checking and inspection of its financial conditions performed by Creditor. |
|
f) |
Guarantor did not conceal any existing liability upon the signing of the contract. |
|
g) |
Inform the Creditor in time for any issues might affect Guarantor’s performing capability, which including but not limited to losses of assets, transfer, donation, assume responsibility on liabilities, involved in significant law suits or disputes. |
|
h) |
If the Guarantor is married, make sure the sponsor’s consent is obtained. |
Clause 10 Authorization of access to personal
information
Guarantor authorizes the access of personal
information in the personal credit information database in the People’s Bank of China to Creditor under the following circumstances.
|
1. |
Reference check on the Guarantor’s credit status. |
|
2. |
Reference check on the Guarantor’s guarantee status. |
|
3. |
After-loan management on the personal credit and guarantee status. |
|
4. |
Accept the credit line application of which the Guarantor guaranteed or to be legal representative or one of the funders. |
Clause 11 Breach of covenants
Any of the following situations would be considered
as breach of contract covenant:
1. Guarantor is in violation with the previous
terms of the contract.
2. The statements of the Guarantor is untrue
or in violation with its commitments.
3. The occurrence of issues defined under
the point 7 of clause 9 which might affect the Guarantor’s financial position and performing capability.
4. In violation with other rights and obligations
agreed in this contract.
5. Guarantor breaches the covenants on other
credit line contracts with Party B or other affiliated institutions of Bank of China.
When any of the above mentioned situations
noticed, Creditor will perform the following in separate or all at the same time:
1) Request Guarantor to rectify within a definite
time.
2) Reduce, temporarily pause or permanently
terminate Guarantor’s Credit limit in part or in all.
3) Temporarily pause or permanently terminate
in part or in all of Guarantor’s application on specific credit line under this contract.
4) Announce the immediate expiration on all
the credit lines granted under this contract and affiliated specific credit line contracts.
5) Terminate or release this contract, terminate
or release in part or in all of the affiliated specific credit line contracts as well as the other contracts signed between Guarantor
and Creditor.
6) Request compensation from Guarantor on
the losses thereafter caused.
7) Assume the guarantee responsibility on
Guarantors.
8) Other necessary procedures on Party B’s
concern.
Clause 12 Rights reserved
Either party might reserve part of or all
of the rights under this contract and the affiliated specific credit line contracts, this does not imply the party has surrendered
or remitted the unperformed rights and obligations.
Either party might sometimes tolerate, extend
or delay the execution of certain rights, this does not deem as the party has surrendered or remitted the rights.
Clause 13 Change, Modification, Termination
and Partial invalidity
Upon negotiation and agreement by both parties,
this contract can be changed and modified, the written record of the changes and modifications should form the inseparable part
of this contract.
Unless ruled by law or both parties formed
a separate agreement, the contract would not be terminated prior to all the rights and obligations defined are fulfilled.
Unless ruled by law or both parties formed
a separate agreement, the void of single terms under this contract should no invalid other contract under this contract.
Clause 14 Applicable Law and Resolution
for Dispute
1. This contract is entered into according
with the People’s Republic of China, and applicable to the law of the People’s Republic of China.
2. The resolution of dispute should be appealed
in Party B or other Bank of China subsidiaries defined in this contract or other affiliated contracts.
Clause 15 Attachments
Consent Letter
Clause 16 Other terms and conditions
|
1. |
Without Creditor’s prior written approval, Guarantor is not allowed to transfer the rights and obligations under this contract to 3rd Parties. |
|
2. |
Guarantor should give the consent that Creditor might somehow authorize other affiliated institutions of Bank of China to perform the obligation. The performing party is entitled to all the rights and obligations under this contract and the affiliated credit line contracts, the performing party reserves the rights to appeal a resolution of dispute if necessary. |
|
3. |
The contract has equivalent restrictions to the successors or inherits of both parties. |
|
4. |
Unless otherwise agreed, the domicile addresses stated in this contract are for corresponding use; both parties should notify each other in writing about any changes of its domicile addresses. |
|
5. |
The title and name of business product is for business purposes, will not used for interpretation of the contract terms and the rights and obligations. |
Clause 17 Effectiveness of the contract
This contract is established and entered into
effective upon signing or sealing by the legal representatives (or person-in-charge) of Pledgor and Pledgee or their duly authorized
agents, together with sealing by the company chop.
The pledge is established upon the effectiveness
of this contract.
This contract will be printed and signed in
five copies, Guarantor and the debtor hold one copy each, Creditor holds three copies; each copy has the same legal effect
/s/ Wenliang Li
Signature of Guarantor and Sponsor
Jul 23, 2014
/s/ [COMPANY SEAL]
Stamp of Creditor (if Pledgee is a corporation)
Signature of legal representative or authorized
representative
Jul 23, 2014
Consent letter
I (name: Hong Liu, certificate type: Identification
Dard, ID number: 220427197009130026) am the spouse of the guarantor Wenliang Li under the maximum amount guarantee contract (No.
: 2014zhenzhongyinbubaoezi No.0056). I agree to undertake the responsibility of the maximum amount guarantee contract by the couple's
property.
Exhibit 10.2
Working Capital Loan Contract
Reference No. : 2014zhenzhongyinbujiezi No.00043
Party A: Shenzhen Highpower Technology
Co., Ltd
Business License: 440307503274740
Legal Representative: Dangyu Pan
Address: Building 1, 68 Xinxia Street, Pinghu
Town, Longgang District, Shenzhen, Guangdong, China
Postal code: 518111
Deposit A/C and financial institutions: Bank
of China, Pinghu Sub-branch, Shenzhen, 744557938816
Telephone: 8968 6236; Facsimile: 8968 6298
Party B: Bank of China, Buji Sub-branch.
Legal Representative: Yanshan Li
Address: 108, Buji Road, Buji Town, Longgang
District, Shenzhen; Postal code: 518112
Telephone: 0755-2827 4825; Facsimile: 0755-2827
0847
This contract is the affiliated specific credit
contract under the “Comprehensive Credit Line Contract” (Reference No.: 2014zhenzhongyinebuxiezi No. 0000162), which
is signed by Shenzhen Highpower Technology Co., Ltd and Bank of China, Buji Sub-branch.
The parties agree as follow.
Clause 1 Amount
Party B agrees to provide the following loan:
Currency in: |
RMB |
Amount: |
RMB Twenty million only |
|
RMB 20,000,000.00 |
Clause 2 Period
The period of the loan is 12 months starting
from the first withdrawal date in part or in whole. It is Party A’s obligation to withdraw funds on the date as agreed. Any
late withdrawal will not result in delay/extension of repayment.
Clause 3 Use of loan
Purpose of loan: Purchase of raw materials
Party A is prohibited from changing the use
of loan without Party B’s written approval. The restrictions include but are not limited to changing the use of loan to fixed
assets or equity investments, as well as production activities prohibited by the central governments.
Clause 4 lending rate and interest calculations
Lending rate is floating rate, which is reset
every six months starting from the first withdrawal date. The rate resetting date is the first day of each floating period.
For each withdrawal in installments:
■ RMB floating rate
A. First withdrawal (during the first floating
period) interest rate is the one-year benchmark lending interest rate, set by People's Bank of China, plus 25%;
B. On the interest resetting date, the new
interest rate is the spot one-year lending interest rate, benchmarked by People’s Bank of China, plus 25% on all outstanding
loan amounts.
2. Interest calculation
Interest is calculated starting from the actual
withdrawal date on the actual amount of money withdrawn and the number of days outstanding.
Interest calculation formula: Interest = Principal
× actual number of days × daily rate.
Daily rate calculation is: daily rate = APR
/ 360.
3. The method of interest settlement
Interest settlement takes place on the 20th
of each month; the 21st is the interest payment date.
If the final loan principal payment date is
different from the interest payment date, the borrower should pay off all interest on the principal payment date.
4. Penalty interest
(1) For the loan overdue or violated use the
loan purpose, penalty interest rate will apply to the loan amount that is overdue or misappropriated from the date of overdue or
misappropriation until the principal and interest are paid off.
On both overdue and misappropriation of loans,
a higher penalty interest rate shall be charged.
(2) If the borrower does not pay interest
and/or penalty interest by the interest payment date, the interest is calculated based on Clause 3 and 4.
(3) Penalty rate
■ The penalty interest rate on floating-rate
loans
According to the floating period and the method
of floating as agreed in Clause 1, the penalty interest rate of the overdue loan shall be the agreed interest rate plus 50%, and
the penalty interest rate of the misappropriated loan shall be the agreed interest rate plus 100.
Clause 5 Withdrawal Conditions
Withdrawal must meet the following conditions:
1. This contract and its attachments have
become effective.
2. Party A has provided guarantees requested
by Party B, and the guarantee contract has become effective and has accomplished legal procedures of approval and registration.
3. Party A has provided Party B with loan
documents, seals, personnel list, specimen signature, and completed the relevant evidence.
4. Party A has opened the account for fulfilling
this contract requested by Party B.
5. Party A should submit written withdrawal
application, documentary proof for using of loans and complete the relevant formalities for withdrawal before 5 banking days.
6. Party A has submitted resolution books
and power of attorney signed by the board or other authorities to Party B.
Withdrawal can be refused by Party B if Party
A has not met the above conditions, but agreed by Party B.
Clause 6 Date and method of withdrawal
1. All loans should be withdrawn in 30 days
from 14th Jul 2014.
2. Party B has the right to refuse the withdrawal
application of unused loan which is over the date of withdrawal.
Clause 7 Payment of the loan
1. The account
The loan should be granted and paid through
the account opened by Party A:
Account Name: Shenzhen Highpower Technology
Co., Ltd.
2. The way of payment
(1)
The way of payment should be in accordance with laws and regulations, regulatory requirements and the contract. The way of single
payment of the Loan should be approved in written withdrawal application. Party B has the right to change the way of payment or
stop providing the loan if the way of payment in the application doesn’t meet the requirement.
(2)
Party B is entrusted with the commission to pay money to Party A’s trading partner who must meet the loan purpose under
Party A’s withdrawal application and payment order. According to the rules of CBRC (China Banking Regulatory Commission)
and internal management provisions of lender, if any of the following condition is satisfied, entrusting Party B to pay money
to Party A’s trading partner should be taken:
| A. | Party A and Party B establish new credit operation
relationship. Besides, Party A doesn’t meet the internal credit requirement of Party B. |
| B. | There is clear information of Party A’s trading
partner who is going to be paid (specific account name and number) and individual sum of money is less than 10 million (Foreign
currency should be converted according to the exchange rate on withdrawal date). |
| C. | Other circumstances agreed between Party A and Party
B. |
(3) Borrower (Party A) makes the payment on
its own. Lender (Party B) should issue a loan to borrower’s account according to borrower’s application. Borrower can
pay money to its trading partner by itself. Except for the pre-described circumstances about entrusted payment, borrower can decide
its own way to payment method.
(4) The change of payment: The way of payment
should be changed when the payment, credit rating or other conditions of Party A has changed after submitting withdrawal application.
Party A should provide the written change application, should resubmit the withdrawal application and documentary proof for using
of loans if the sum, payment object or the use of loans has changed.
3. The specific requirements of entrusted
payment
(1) Entrusted payment. Party B pays to the
specified account directly which is written in this contract, including the name of account, account number and the sum of payment.
(2) To provide the transaction information.
Party A should provide the account of loans, the account information of counterparty and relevant documents when entrusted payment.
All document provided to Party B should be true, integral and effective, or Party B does not assume any responsibility for failed
transaction, and occurred repayment obligations do not be affected.
(3) Party B’s obligations under the
entrusted payment
| A. | Party B pays to the specified account after examination and approval of Party A’s commission
books and other related transaction information when entrusted payment. |
| B. | If Party B found that the proof materials and other related trading purposes material provided by
Party A does not comply with this contract or the presence of other defects, Party B has the right to require Party A to supplement,
replace, description or re-submit the relevant materials. Before these materials are submitted, Party B has the right to refuse
the issuance and payment of the relevant amounts. |
| C. | Party B will assume no responsibility and the generated obligations of Party A will be not affected
if Party B cannot pay the loan to the counterparty in time in accordance with payment order of Party A because of the refund by
opening bank of the counterparty. Party A hereby authorizes Party B to freeze the fund returned by opening bank of the counterparty.
In this case, Party A shall resubmit the payment order and use proven materials and other related transaction materials. |
(4) Party A shall not use piecemeal way to
circumvent the trustee to pay Party B.
4. After receiving loan, Party A should provide
Party B with usage record and concerned information in time according to Party B’s requirement.
5. Party B has right to redefine the terms
of payment and loan disbursement or stop the loan if the following situations occurred:
(1) Party A violates the contract to circumvent
entrusted payment of Party B by piecemeal way.
(2) Party A's credit status drops or main
business profitability is not good.
(3) The use of loan is abnormal.
(4) Party A fails to provide the records and
information of the loan requested by Party B timely.
(5) Party A contravenes this section to use
the loan.
Clause 8 Repayment
1. Party A shall specify the following account
as capital recovery account and provide the information of this account. Party B has the right to ask Party A to explain inflows
and outflows of large-sum and abnormal capital, as well as monitor capital recovery account.
Account Name: Shenzhen Highpower Technology
Co., Ltd.
2. Except otherwise agreed, on the expiry
date, Party A must repay all the loans under this contract.
(1)
Party A should pay off the loan at the expiry.
(2) Party A should follow the below repayment
plan:
Payment Schedule |
Payment Amount |
|
|
|
|
(3) If Party A wants to change the plan of
repayment, a written application confirmed in writing by both parties jointly should be submitted in 10 banking days before the
loans maturity.
3. Unless otherwise agreed, Party A has the
right to decide repayment order of the principal or interest. If there are several expiring loans or overdue loans which are repaid
in installment way under this contract, Party B has the right to decide the liquidation sequence of a repayment. Party B has the
right to decide the priority of the repayment order if multiple contracts expire at the same time.
4. Unless otherwise agreed, Party A can repay
in advance, but Party A should notice Party B in written 15 banking days advance. The amount of the first advance payment used
to repay the final maturity of the loan, in reverse order to repay the loans.
5. Party A must deposit funds in the following
account three banking days advance of every expiring principle with interest. Party B has the right to take the funds from the
account on the expiry date.
Account Name: Shenzhen Highpower Technology
Co., Ltd.
Clause 9 Guarantee
|
1. |
To ensure that borrowing under this agreement is repaid, the following guarantees shall be adopted: |
|
1) |
This contract is the main contract of Pledge Contract of Maximum Amount (NO: 2014ZHENZHONGYINBUDIEZI0015) signed by SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD. And Party B. |
|
2) |
This contract is the main contract of Pledge Contract of Maximum Amount (NO: 2014ZHENZHONGYINBUDIEZI0016B) signed by SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD. And Party B. |
|
3) |
This contract is the main contract of Guaranty Contract of Maximum Amount (NO: 2014ZHENZHONGYINBUBAOEZI0013) signed by SPRINGPOWER TECHNOLOGY (SHENZHEN) CO., LTD. (Guarantor) and Party B. Guarantor provides the maximum amount guarantee. |
|
4) |
This contract is the main contract of Guaranty Contract of Maximum Amount (NO: 2014ZHENZHONGYINBUBAOEZI0014) signed by DAGNYU PAN (Guarantor) And Party B. Guarantor provides the maximum amount guarantee. |
|
2. |
Under certain circumstance, Party B believes that will affect the capacity for fulfilling the contract of Party A or Guarantor, or Guarantee Contracts are invalid, revoked or dissolved, or the financial position of Party A/Guarantor deteriorate or Party A/Guarantor involved in litigation issues, or other factors which might affect its repayment ability, or guarantors were found default in other contracts with Party B, or devaluation, dismiss or damage of collaterals which might cause the value of the collaterals slaked or losses, Party B reserves the right to request Party A and Party A has the obligation to add or replace the guarantor. |
Clause 10 Statement and Commitment
|
1) |
Party A is legally register and exist with full capacity for civil rights and civil conduct. |
|
2) |
Signing and performing the contract is the true will of Party A, Party A has been granted all legal and valid authorizations before signing the contract. The contract does not form a default for other contracts signed and performed by Party A and other legal documents. It is Party A’s responsibility to complete all required approvals, registrations, permits and filings. |
|
3) |
All document and information, financial statement, certificates and other materials provided by Party A to Party B are true, complete, accurate and effective. |
|
4) |
All the transactions mentioned by Party A for apply specific credit line should be real and not for illegal purposes such as: money laundry. |
|
5) |
No hidden events regarding Party A and guarantor’s financial and repayment abilities. |
|
6) |
Party A and the loan project reach the national environmental standards, not in the list of the enterprises which have problems of energy consumption and pollution, don’t have the risk of energy consumption and pollution. |
|
1) |
Party A shall submit the financial statements and other relevant information regularly, including but not limited to annual, quarterly and monthly financial reports. |
|
2) |
Any counter-guarantee agreement between the guarantors and Party A will not affect the Party B’s underlying rights under this contract. |
|
3) |
Cooperated in Party B’s exam and inspection on the utilization of the loan as well as Party A’s financials and operations. |
|
4) |
Under circumstances Party A or Guarantor’s capability of performing the contract might be affected, Party A should notify Party B in written in time. Those circumstances included but not limited to merger, division, decrease of capital, equity transfer, investment, a substantial increase of debt financing, a major asset and credit assignment. |
Party A should notify Party B in time, when
the following things occurred:
A. changes of articles of association,
the scope of business, registered capital and legal representative of Party A or Guarantor.
B. Any form of management mode
change, including joint operation, invest and cooperate with foreigners, contract management, reorganization, restructuring, listing
plan.
C. Party A is involved in major
litigation or arbitration, or property or collateral is seized, detained or regulated, or set new guarantee in collateral.
D. Out of business, dissolution,
liquidation, suspend business for rectification, cancellation, revocation of the business license or (be) filed for bankruptcy.
E. Shareholders, directors and
senior management personnel suspected of serious cases or economic disputes.
F. Default events in other contracts.
G. Operating difficulties and financial
situation has deteriorated.
(5) The repayment to Party B prior to shareholders,
and is comparable to other creditors of the same kind debts.
Party A is prohibited to repay the loan to
shareholders before paying off the principal and interests under the contract.
(6) If Party A fails to pay principal, interests
and fees on time in the fiscal year, any form of dividends is forbidden.
(7) Party A cannot dispose of assets to reduce
its debt paying ability and promises the total amount of external guarantee is not 1 time higher than its net assets, and the total
amount of external guarantee and the amount of single guarantee shall not exceed the limitation set by the articles of association.
(8) Except the use agreed in this contract
or agreed by Party B, Party A is prohibited to transfer the loans to other accounts or related accounts.
Party A should provide documentary proof when
the loan is transferred to other accounts or related accounts.
(9) Party B has the right to call the loan
advanced according to the situation of capital return of Party A.
Clause 11 Disclosure of the affiliated
transaction inside Party A’s group
Party A is a Group customer confirmed by
Party B according to the “Commercial Bank Group guidelines for customer credit risk management business”(hereinafter
referred to as “guideline”). During the credit period, Party A shall promptly report to Party B about more than 10%
of net assets associated with the transaction, including but not limited to: the parties to the transaction of the association;
trading program and nature of the transaction; the amount of the transaction or the corresponding ratio; pricing policies (including
no amount or only nominal amounts of transactions).
Under any of the following circumstances,
Party B shall have the right to unilaterally decide to suspend the unused loan and recover part or all of the principal and interest
of the loan in advance: use the false contracts which are signed with affiliated parties to discount or pledge at bank and to obtain
bank funds or credit with notes receivable and accounts receivable without actual trade background; the occurrence of major mergers,
acquisitions and reorganization which are considered by Party B may affect the loan safety; evasion or discarding of bank debts
on purpose through affiliated transactions; other circumstances stipulated in article eighteenth of “guidelines”.
Clause 12 Breach of Covenants
Each of the following events and issues constitute
Party A in the event of default under the contract:
|
1. |
Party A did not perform the repayment obligation under this contract. |
|
2. |
Party A has not used the credit funds according to agreed purposes, or has not paid the loan by agreed way in this contract. |
|
3. |
Party A’s statements in this contract are untrue or in violation with commitments made by Party A in this contract. |
|
4. |
Under the circumstance defined in item 2, No.4 specification of Clause 10, Party A refused to provide additional guarantee or replacement of a new guarantor. |
|
5. |
Deterioration of credit, or profitability, debt paying ability, operating ability, cash flow and other financial indicators of Party A deteriorate, breaking the contract index constraint agreed or other financial covenants. |
|
6. |
Party A breaches other contracts signed with Party B or other affiliated institutions of Bank of China. |
|
7. |
Guarantors breach contracts, or have default events with Party B or other affiliated institutions of Bank of China. |
|
8. |
The termination of business or dissolution, revocation or bankruptcy of Party A. |
|
9. |
Party A is or may be involved in major economic disputes, litigation, arbitration, or its assets were seized, detained or enforced, or investigated or punished by the judicial organ or taxation, industry and commerce administrative organs in accordance with the law, has been or may affect its ability to fulfill the obligations under this contract. |
|
10. |
Abnormal change, missing, legal restriction of personal liberty and investigation by judicial authorities of Party A’s major individual investors, key management personnel, which have been or may affect Party A to fulfill the obligations under this contract. |
|
11. |
Party B finds the problems which may affect the borrower or guarantor's financial situation and performance capabilities when reviewing Party A’s financial condition and performance capabilities every year (every year from the effective date of the contract). |
|
12. |
Party A cannot provide materials to Party B to explain large and abnormal capital inflow and outflow in the account. |
|
13. |
Party A is in violation with other rights and obligations agreed in this contract. |
When any of the above situations
occurred, Party B will perform the following in separate or all at the same time according to the specific situation:
|
1) |
Require Party A or Guarantor to rectify defaults within a definite time. |
|
2) |
Reduce completely or partly, pause or terminate Party A’s Credit limit. |
|
3) |
Pause or terminate completely or partly Party A’s business applications in this contract or in other contracts between Party A and Party B specific credit line under this contract. Pause or terminate completely or partly, or cancel or stop offering, paying and settling the unissued loans and unsettled trade financing. |
|
4) |
Announce the immediate expiration on all or part of the outstanding loans, principle and interest of trade financing and other accounts payable under this contract or other contracts between Party A and Party B. |
|
5) |
Terminate or release this contract, terminate or release contracts between Party A and Party B completely or partly. |
|
6) |
Require compensation from Party A on the losses caused by Party A to Party B. |
|
7) |
Deduct the fund from Party A’s deposit accounts to pay off the debts to Party B under this contract. All the undue funds in the accounts were considered as acceleration of maturity. If the currency in deposit account is different from the currency of Party B’s loans, the exchange rate on the date of the hold in custody will be applied. |
|
8) |
Real rights of pledge will be executed. |
|
9) |
Require Guarantors assume liability of guaranty. |
|
10) |
Other necessary or probable procedures on Party B’s concern. |
Clause 13 Rights reserved
One party does not perform part or all of
the rights under this contract, nor does not require the other party to perform, undertake part or all of the obligations and responsibilities,
which does not mean the abdication of the right or exemption of the obligation and responsibility.
Any tolerance, extension or delay from one
party to another party for exercising of rights under this contract does not affect the rights one party enjoys according to this
contract and laws and regulations, and does not mean the abdication of the right.
Clause 14 Changes, Modification, Termination
Upon negotiation and agreed by both parties,
this contract can be changed and modified by written. Any of the changes and modifications should form the inseparable part of
this contract.
Unless otherwise provided for in any law or
regulation or stipulated between the parties, this contract would not be terminated prior to all the rights and obligations are
fulfilled.
Unless otherwise provided for in any law or
regulation or stipulated between the parties, the invalidation of single terms under this contract should not affect the validation
of other terms under this contract.
Clause 15 Applicable Law and Resolution
for Dispute
| 1. | This contract is applicable to the laws of People’s
Republic of China. |
During the performance
of this contract or in connection with all disputes relating to this contract, the two parties settled through friendly consultations.
If negotiation cannot reach agreement, both parties can apply to the local people's court of Party A or other affiliated institutions
of Bank of China.
Clause 16 Attachments
The Appendix hereof and the other appendix
confirmed by both parties shall form an integral part of this contract, and shall be of legally equal effect with this contract.
|
1. |
Withdrawal application; |
Clause 17 Other terms and conditions
|
1. |
Without Party B’s written approval, Party A is not allowed to transfer the rights and obligations under this contract to the 3rd Parties. |
|
2. |
Party A should give the consent that Party B might somehow authorize other affiliated institution of Bank of China to perform the obligation. The performing party entitles all the rights and obligations under this contract, the performing party reserves the rights to appeal a resolution of dispute if necessary. |
|
3. |
The contract has equivalent restrictions to the successors or inherits of both parties. |
|
4. |
Unless otherwise agreed, the domicile addresses stated in this contract are for corresponding use; both parties should notify each other in writing about any changes of its domicile addresses. |
|
5. |
The transactions under the contract based on independent interests. According to relevant laws, regulations and regulatory requirements, other parties of the transaction constitutes a connected party or associated persons, any party shall not seek to use this relationship to affect the fair of transaction. |
|
6. |
The title and name of business in this contract is only for business purposes, will not be used for interpretation of the contract terms, the rights and obligations. |
|
7. |
In accordance with the provisions of the relevant laws and regulations, supervision, Party B has the right to provide the information of this contract and other relevant information to the credit system of the people's Bank of China and other legally established credit information database, for organizations or individuals who have the appropriate qualifications to query and use. |
|
8. |
If the drawdown date or the repayment date is in legal holidays, then it is delayed to the first working day after the holidays. |
|
9. |
If required by the governing institutions, Party B might not be able to perform the obligations agreed in this contract, Party B has the right to stop or change the contract or its clauses, and Party B is exempted from punishment under this circumstance. |
Clause 18 Effective of the contract
This contract enters into force upon the date
when it is signed or sealed and affixed with official seals by the legal representatives or entrusted agents of Party A and Party
B.
This contract is signed in quadruplicate and
each party holds two copies, which have the equal legal effect.
/s/ [Stamp of Party A]
Signature
Jul 14, 2014
/s/ [Stamp of Party B]
Signature
Jul 14, 2014
Exhibit 10.3
Working Capital Loan Contract
Reference No. : 2014zhenzhongyinbujiezi No.00050
Party A: Springpower Technology (Shenzhen) Co.,
Ltd
Business License: 440306503295562
Legal Representative: Dangyu Pan
Address: Factory A, Chaoshun Industrial Zone, Renmin Road, Fumin
Residential Area, Guanlan, BaoAn District,
Postal code: 518000
Deposit A/C and financial institutions: Bank of China, Pinghu
Sub-branch, Shenzhen, Telephone: 2802 9923; Facsimile: 2802 9923
Party B: Bank of China, Buji Sub-branch.
Legal Representative: Li Yanshan
Address: 108, Buji Road, Buji Town, Longgang
District, Shenzhen; Postal code: 518112
Telephone: 0755-2827 4825; Facsimile: 0755-2827
0847
This contract is the affiliated specific credit
contract under the “Comprehensive Credit Line Contract” (Reference No.: 2014zhenzhongyinebuxiezi No. 0000716), which
is signed by Springpower Technology (Shenzhen) Co., Ltd and Bank of China, Buji Sub-branch.
The parties agree as follow.
Clause 1 Amount
Party B agrees to provide the following loan:
Currency in: |
RMB |
Amount: |
RMB Ten million only |
|
RMB 10,000,000.00 |
Clause 2 Period
The period of the loan is 12 months starting
from the first withdrawal date in part or in whole. It is Party A’s obligation to withdraw funds on the date as agreed. Any
late withdrawal will not result in delay/extension of repayment.
Clause 3 Use of loan
Purpose of loan: Purchase of raw materials
Party A is prohibited from changing the use
of loan without Party B’s written approval. The restrictions include but are not limited to changing the use of loan to fixed
assets or equity investments, as well as production activities prohibited by the central governments.
Clause 4 lending rate and interest
calculations
The second rate rule applies:
| (1) | Fixed lending rate. The leading rate is fixed during the whole loan period. |
| (2) | Lending rate is floating, which is reset every six months starting from the first withdrawal date.
The rate resetting date is the first day of each floating period. |
For each withdrawal in installments:
■ RMB floating rate
A. First withdrawal (during the first floating
period) interest rate is the twelve-month benchmark lending interest rate, set by People's Bank of China, plus 20%;
B. On the interest resetting date, the new
interest rate is the spot one-year lending interest rate, benchmarked by People’s Bank of China, plus 20% on all outstanding
loan amounts.
2. Interest calculation
Interest is calculated starting from the actual
withdrawal date on the actual amount of money withdrawn and the number of days outstanding.
Interest calculation formula: Interest = Principal
× actual number of days × daily rate.
Daily rate calculation is: daily rate = APR
/ 360.
3. The method of interest settlement
Interest settlement takes place on the 20th
of each month, the 21st is the interest payment date.
If the final loan principal payment date is
different from the interest payment date, the borrower should pay off all interest on the principal payment date.
4. Penalty interest
(1) For the loan overdue or violated use the
loan purpose, penalty interest rate will apply to the loan amount that is overdue or misappropriated from the date of overdue or
misappropriation until the principal and interest are paid off.
On both overdue and misappropriation of loans,
a higher penalty interest rate shall be charged.
(2) If the borrower does not pay interest
and/or penalty interest by the interest payment date, the interest is calculated based on Clause 3 and 4.
(3) Penalty rate
■ The penalty interest rate on
floating-rate loans
According to the floating period and the method
of floating as agreed in Clause 1, the penalty interest rate of the overdue loan shall be the agreed interest rate plus 50%, and
the penalty interest rate of the misappropriated loan shall be the agreed interest rate plus 100%;
Clause 5 Withdrawal Conditions
Withdrawal must meet the following conditions:
1. This contract and its attachments have
become effective.
2. Party A has provided guarantees requested
by Party B, and the guarantee contract has become effective and has accomplished legal procedures of approval and registration.
3. Party A has provided Party B with loan
documents, seals, personnel list, specimen signature, and complete the relevant evidence.
4. Party A has opened the account for fulfilling
this contract requested by Party B.
5. Party A should submit written withdrawal
application, documentary proof for using of loans and complete the relevant formalities for withdrawal before 5 banking days.
6. Party A has submitted resolution books
and power of attorney signed by the board or other authorities to Party B.
Withdrawal can be refused by Party B if Party
A has not met the above conditions, but agreed by Party B.
Clause 6 Date and method of withdrawal
1. All loans should be withdrawn in 30 days
from 7th Aug 2014.
2. Party B has the right to refuse the withdrawal
application of unused loan which is over the date of withdrawal.
Clause 7 Payment of the loan
1. The account
The loan should be granted and paid through
the account opened by Party A:
Account Name: Springpower Technology (Shenzhen)
Co., Ltd
2. The way of payment
(1) The way of payment should be in accordance
with laws and regulations, regulatory requirements and the contract. The way of single payment of the Loan should be approved in
written withdrawal application. Party B has the right to change the way of payment or stop providing the loan if the way of payment
in the application doesn’t meet the requirement.
(3) Borrower makes the payment on its own.
(4) The change of payment. The way of payment
should be changed when the payment, credit rating or other conditions of Party A has changed after submitting withdrawal application.
Party A should provide the written change application, should resubmit the withdrawal application and documentary proof for using
of loans if the sum, payment object or the use of loans has changed.
3. The specific requirements of entrusted
payment
(1) Entrusted payment. Party B pay to the
specified account directly which is written in this contract, including the name of account, account number and the sum of payment.
(2) To provide the transaction information.
Party A should provide the account of loans, the account information of counterparty and relevant documents when entrusted payment.
All document provided to Party B should be true, integral and effective, or Party B does not assume any responsibility for failed
transaction, and occurred repayment obligations do not be affected.
(3) Party B’s obligations under the
entrusted payment
A. Party B pays to the specified account after
examination and approval of Party A’s commission books and other related transaction information when entrusted payment.
B. If Party B found that the proof materials
and other related trading purposes material provided by Party A does not comply with this contract or the presence of other defects,
Party B has the right to require Party A to supplement, replace, description or re-submit the relevant materials. Before these
materials are submitted, Party B has the right to refuse the issuance and payment of the relevant amounts.
C. Party B will assume no responsibility and
the generated obligations of Party A will be not affected if Party B cannot pay the loan to the counterparty in time in accordance
with payment order of Party A because of the refund by opening bank of the counterparty. Party A hereby authorizes Party B to freeze
the fund returned by opening bank of the counterparty. In this case, Party A shall resubmit the payment order and use proven materials
and other related transaction materials.
(4) Party A shall not piecemeal way to circumvent
the trustee to pay Party B.
5. Party B has right to redefine the terms
of payment and loan disbursement or stop the loan if the following situations occurred:
(1) Party A violates the contract to circumvent
entrusted payment of Party B by piecemeal way.
(2) Party A's credit status drops or main
business profitability is not good.
(3) The use of loan is abnormal.
(4) Party A fails to provide the records and
information of the loan requested by Party B timely.
(5) Party A contravenes this section to use
the loan.
Clause 8 Repayment
1. Party A shall specify the following account
as capital recovery account and provide the information of this account. Party B has the right to ask Party A to explain inflows
and outflows of large-sum and abnormal capital, as well as monitor capital recovery account.
Account Name: Springpower Technology (Shenzhen)
Co., Ltd
2. Except otherwise agreed, on the expiry
date, Party A must repay all the loans under this contract.
If Party A wants to change the plan of repayment,
a written application confirmed in writing by both parties jointly should be submitted in 10 banking days before the loans maturity.
3. Unless otherwise agreed, Party A has the
right to decide repayment order of the principal or interest. If there are several expiring loans or overdue loans which are repaid
in installment way under this contract, Party B has the right to decide the liquidation sequence of a repayment. Party B has the
right to decide the priority of the repayment order if multiple contracts expire at the same time.
4. Unless otherwise agreed, Party A can repay
in advance, but Party A should notice Party B in written 15 banking days advance. The amount of the first advance payment used
to repay the final maturity of the loan, in reverse order to repay the loans.
5. Party A must deposit funds in the following
account three banking days advance of every expiring principle with interest. Party B has the right to take the funds from the
account on the expiry date.
Account Name: Springpower Technology (Shenzhen)
Co., Ltd
Clause 9 Guarantee
|
1. |
To ensure that borrowing under this agreement is repaid, the following guarantees shall be adopted: |
|
1) |
This contract is the main contract of Guaranty Contract of Maximum Amount (NO: 2014ZHENZHONGYINBUBAOEZI0053) signed by SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD. (Guarantor) and Party B. Guarantor provides the maximum amount guarantee. |
|
2) |
This contract is the main contract of Guaranty Contract of Maximum Amount (NO: 2014ZHENZHONGYINBUBAOEZI0054) signed by HUIZHOU HIGHPOWER TECHNOLOGY CO., LTD. (Guarantor) and Party B. Guarantor provides the maximum amount guarantee. |
|
3) |
This contract is the main contract of Guaranty Contract of Maximum Amount (NO: 2014ZHENZHONGYINBUBAOEZI0055) signed by DAGNYU PAN (Guarantor) And Party B. Guarantor provides the maximum amount guarantee. |
|
4) |
This contract is the main contract of Guaranty Contract of Maximum Amount (NO: 2014ZHENZHONGYINBUBAOEZI0056) signed by WENLIANG LI (Guarantor) And Party B. Guarantor provides the maximum amount guarantee. |
5) |
This contract is the main contract of mortgage Contract of Maximum Amount (NO: 2014ZHENZHONGYINBUDIEZI0023) signed by GANZHOU HIGHPOWER TECHNOLOGY CO., LTD. (Guarantor) And Party B. Guarantor provides the maximum amount mortgage. |
|
2. |
Under certain circumstance, Party B believes that will affect the capacity for fulfilling the contract of Party A or Guarantor, or Guarantee Contracts are invalid, revoked or dissolved, or the financial position of Party A/Guarantor deteriorate or Party A/Guarantor involved in litigation issues, or other factors which might affect its repayment ability, or guarantors were found default in other contracts with Party B, or devaluation, dismiss or damage of collaterals which might cause the value of the collaterals slaked or losses, Party B reserves the right to request Party A and Party A has the obligation to add or replace the guarantor. |
Clause 10 Statement and Commitment
|
1) |
Party A is legally register and exist with full capacity for civil rights and civil conduct; |
|
2) |
Signing and performing the contract is the true will of Party A, Party A has been granted all legal and valid authorizations before signing the contract. The contract does not form a default for other contracts signed and performed by Party A and other legal documents. It is Party A’s responsibility to complete all required approvals, registrations, permits and filings. |
|
3) |
All document and information, financial statement, certificates and other materials provided by Party A to Party B are true, complete, accurate and effective. |
|
4) |
All the transactions mentioned by Party A for apply specific credit line should be real and not for illegal purposes such as: money laundry. |
|
5) |
No hidden events regarding Party A and guarantor’s financial and repayment abilities. |
|
6) |
Party A and the loan project reach the national environmental standards, not in the list of the enterprises which have problems of energy consumption and pollution, don’t have the risk of energy consumption and pollution. |
|
1) |
Party A shall submit the financial statements and other relevant information regularly, including but not limited to annual, quarterly and monthly financial reports. |
|
2) |
Any counter-guarantee agreement between the guarantors and Party A will not affect the Party B’s underlying rights under this contract. |
|
3) |
Cooperated in Party B’s exam and inspection on the utilization of the loan as well as Party A’s financials and operations. |
|
4) |
Under circumstances Party A or Guarantor’s capability of performing the contract might be affected, Party A should notify Party B in written in time. Those circumstances included but not limited to merger, division, decrease of capital, equity transfer, investment, a substantial increase of debt financing, a major asset and credit assignment. |
Party A should notify Party B in time, when
the following things occurred:
A. changes of articles of association,
the scope of business, registered capital and legal representative of Party A or Guarantor.
B. Any form of management mode
change, including joint operation, invest and cooperate with foreigners, contract management, reorganization, restructuring, listing
plan.
C. Party A is involved in major
litigation or arbitration, or property or collateral is seized, detained or regulated, or set new guarantee in collateral.
D. Out of business, dissolution,
liquidation, suspend business for rectification, cancellation, revocation of the business license or (be) filed for bankruptcy.
E. Shareholders, directors and
senior management personnel suspected of serious cases or economic disputes.
F. Default events in other contracts.
G. Operating difficulties and financial
situation has deteriorated.
(5) The repayment to Party B prior to shareholders,
and is comparable to other creditors of the same kind debts.
Party A is prohibited to repay the loan to
shareholders before paying off the principal and interests under the contract.
(6) If Party A fails to pay principal, interests
and fees on time in the fiscal year, any form of dividends is forbidden.
(7) Party A cannot dispose of assets to reduce
its debt paying ability and promises the total amount of external guarantee is not 1 time higher than its net assets, and the total
amount of external guarantee and the amount of single guarantee shall not exceed the limitation set by the articles of association.
(8) Except the use agreed in this contract
or agreed by Party B, Party A is prohibited to transfer the loans to other accounts or related accounts.
Party A should provide documentary proof when
the loan is transferred to other accounts or related accounts.
(9) Party B has the right to call the loan
advanced according to the situation of capital return of Party A.
Clause 11 disclosure of the affiliated transaction
inside Party A 's group
Party A is a Group customer confirmed by
Party B according to the "Commercial Bank Group guidelines for customer credit risk management business"(hereinafter
referred to as “guideline”). During the credit period, Party A shall promptly report to Party B about more than 10%
of net assets associated with the transaction, including but not limited to: the parties to the transaction of the association;
trading program and nature of the transaction; the amount of the transaction or the corresponding ratio; pricing policies (including
no amount or only nominal amounts of transactions).
Under any of the following circumstances,
Party B shall have the right to unilaterally decide to suspend the unused loan and recover part or all of the principal and interest
of the loan in advance: use the false contracts which are signed with affiliated parties to discount or pledge at bank and to obtain
bank funds or credit with notes receivable and accounts receivable without actual trade background; the occurrence of major mergers,
acquisitions and reorganization which are considered by Party B may affect the loan safety; evasion or discarding of bank debts
on purpose through affiliated transactions; other circumstances stipulated in article eighteenth of "guidelines".
Clause 12 Breach of Covenants
Each of the following events and issues constitute
Party A in the event of default under the contract:
|
1. |
Party A did not perform the repayment obligation under this contract; |
|
2. |
Party A has not used the credit funds according to agreed purposes, or has not paid the loan by agreed way in this contract; |
|
3. |
Party A’s statements in this contract are untrue or in violation with commitments made by Party A in this contract. |
|
4. |
Under the circumstance defined in 2.(4) of Clause 10, Party A refused to provide additional guarantee or replacement of a new guarantor. |
|
5. |
Deterioration of credit, or profitability, debt paying ability, operating ability, cash flow and other financial indicators of Party A deteriorate, breaking the contract index constraint agreed or other financial covenants. |
|
6. |
Party A breaches other contracts signed with Party B or other affiliated institutions of Bank of China. |
|
7. |
Guarantors breach contracts, or have default events with Party B or other affiliated institutions of Bank of China. |
|
8. |
The termination of business or dissolution, revocation or bankruptcy of Party A. |
|
9. |
Party A is or may be involved in major economic disputes, litigation, arbitration, or its assets were seized, detained or enforced, or investigated or punished by the judicial organ or taxation, industry and commerce administrative organs in accordance with the law, has been or may affect its ability to fulfill the obligations under this contract. |
|
10. |
Abnormal change, missing, legal restriction of personal liberty and investigation by judicial authorities of Party A’s major individual investors, key management personnel, which have been or may affect Party A to fulfill the obligations under this contract. |
|
11. |
Party B finds the problems which may affect the borrower or guarantor's financial situation and performance capabilities when reviewing Party A’s financial condition and performance capabilities every year (every year from the effective date of the contract); |
|
12. |
Party A cannot provide materials to Party B to explain large and abnormal capital inflow and outflow in the account. |
|
13. |
Party A is in violation with other rights and obligations agreed in this contract. |
When any of the above situations
occurred, Party B will perform the following in separate or all at the same time according to the specific situation:
|
1) |
Require Party A or Guarantor to rectify defaults within a definite time. |
|
2) |
Reduce completely or partly, pause or terminate Party A’s Credit limit. |
|
3) |
Pause or terminate completely or partly Party A’s business applications in this contract or in other contracts between Party A and Party B specific credit line under this contract. Pause or terminate completely or partly, or cancel or stop offering, paying and settling the unissued loans and unsettled trade financing. |
|
4) |
Announce the immediate expiration on all or part of the outstanding loans, principle and interest of trade financing and other accounts payable under this contract or other contracts between Party A and Party B. |
|
5) |
Terminate or release this contract, terminate or release contracts between Party A and Party B completely or partly. |
|
6) |
Require compensation from Party A on the losses caused by Party A to Party B. |
|
7) |
Deduct the fund from Party A’s deposit accounts to pay off the debts to Party B under this contract. All the undue funds in the accounts were considered as acceleration of maturity. If the currency in deposit account is different from the currency of Party B’s loans, the exchange rate on the date of the hold in custody will be applied. |
|
8) |
Real rights of pledge will be executed. |
|
9) |
Require Guarantors assume liability of guaranty. |
|
10) |
Other necessary or probable procedures on Party B’s concern. |
Clause 13 Rights reserved
One party does not perform part or all of
the rights under this contract, nor does not require the other party to perform, undertake part or all of the obligations and responsibilities,
which does not mean the abdication of the right or exemption of the obligation and responsibility.
Any tolerance, extension or delay from one
party to another party for exercising of rights under this contract does not affect the rights one party enjoys according to this
contract and laws and regulations, and does not mean the abdication of the right.
Clause 14 Changes, Modification, Termination
Upon negotiation and agreed by both parties,
this contract can be changed and modified by written. Any of the changes and modifications should form the inseparable part of
this contract.
Unless otherwise provided for in any law or
regulation or stipulated between the parties, this contract would not be terminated prior to all the rights and obligations are
fulfilled.
Unless otherwise provided for in any law or
regulation or stipulated between the parties, the invalidation of single terms under this contract should not affect the validation
of other terms under this contract.
Clause 15 Applicable Law and Resolution
for Dispute
| 1. | This contract is applicable to the laws of People’s
Republic of China. |
During the performance
of this contract or in connection with all disputes relating to this contract, the two parties settled through friendly consultations.
If negotiation cannot reach agreement, both parties can apply to the local people's court of Party A or other affiliated institutions
of Bank of China.
Clause 16 Attachments
The Appendix hereof and the other appendix
confirmed by both parties shall form an integral part of this contract, and shall be of legally equal effect with this contract.
|
1. |
Withdrawal application; |
Clause 17 Other terms and conditions
|
1. |
Without Party B’s written approval, Party A is not allowed to transfer the rights and obligations under this contract to the 3rd Parties. |
|
2. |
Party A should give the consent that Party B might somehow authorize other affiliated institution of Bank of China to perform the obligation. The performing party entitles all the rights and obligations under this contract, the performing party reserves the rights to appeal a resolution of dispute if necessary. |
|
3. |
The contract has equivalent restrictions to the successors or inherits of both parties. |
|
4. |
Unless otherwise agreed, the domicile addresses stated in this contract are for corresponding use; both parties should notify each other in writing about any changes of its domicile addresses. |
|
5. |
The transactions under the contract based on independent interests. According to relevant laws, regulations and regulatory requirements, other parties of the transaction constitutes a connected party or associated persons, any party shall not seek to use this relationship to affect the fair of transaction. |
|
6. |
The title and name of business in this contract is only for business purposes, will not be used for interpretation of the contract terms, the rights and obligations. |
|
7. |
In accordance with the provisions of the relevant laws and regulations, supervision, Party B has the right to provide the information of this contract and other relevant information to the credit system of the people's Bank of China and other legally established credit information database, for organizations or individuals who have the appropriate qualifications to query and use. |
|
8. |
If the drawdown date or the repayment date is in legal holidays, then it is delayed to the first working day after the holidays. |
|
9. |
If required by the governing institutions, Party B might not be able to perform the obligations agreed in this contract, Party B has the right to stop or change the contract or its clauses, and Party B is exempted from punishment under this circumstance. |
Clause 18 Effective of the contract
This contract enters into force upon the date
when it is signed or sealed and affixed with official seals by the legal representatives or entrusted agents of Party A and Party
B.
This contract is signed in quadruplicate and
each party holds two copies, which have the equal legal effect.
/s/ [Stamp of Party A]
Signature
Aug 7, 2014
/s/ [Stamp of Party B]
Signature
Aug 7, 2014
Exhibit 10.4
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Exhibit 31.1
Certification of Chief Executive Officer
pursuant to Item 601(b)(31) of Regulation S-K,
as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
I, Dang Yu Pan, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Highpower International, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 12, 2014 |
|
/s/ |
Dang Yu Pan |
|
By: |
Dang Yu Pan |
|
Chairman of the Board and Chief Executive Officer |
(Principal Executive Officer) |
Exhibit 31.2
Certification
of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K,
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
I, Henry Sun, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Highpower International, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 12, 2014 |
|
|
|
/s/ Henry Sun |
|
|
|
Henry Sun |
|
Chief Financial Officer |
|
(Principal Financial Officer) |
|
Exhibit 32.1
Certification of Chief Executive Officer
and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
In connection with
the quarterly report of Highpower International, Inc. (the “Company”) on Form 10-Q for the quarter ending September
30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned,
in the capacities and on the date indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
(1) The Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information
contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Dang Yu Pan |
|
|
|
|
|
Dang Yu Pan |
|
Chairman of the Board and Chief Executive Officer |
|
(Principal Executive Officer) |
|
November 12, 2014 |
|
|
|
/s/ Henry Sun |
|
|
|
|
|
Henry Sun |
|
Chief Financial Officer |
|
(Principal Financial and Accounting Officer) |
|
November 12, 2014 |
|
The foregoing certification is being
furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not filed with the Securities and Exchange
Commission as part of the Form 10-Q or as a separate disclosure document and is not incorporated by reference into any filing
of Highpower International, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
irrespective of any general incorporation language contained in such filing. A signed original of this written statement required
by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange
Commission or its staff upon request.
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