2017 Audited Financial Statements of Unconsolidated Affiliate of Hexion Inc
EX-10.90 2 exhibit1090-2017.htm AUDITED FINANCIAL STATEMENTS OF UNCONSOLIDATED AFFILIATE Exhibit
Exhibit 10.90
MOMENTIVE UV COATINGS (SHANGHAI) CO., LTD.
FINANCIAL STATEMENTS AND
REPORT OF THE AUDITORS
FOR THE YEAR ENDED 31 DECEMBER 2017
Audit Report
SAAF (2018) AR.NO.070
TO THE BOARD OF DIRECTORS OF
MOMENTIVE UV COATINGS (SHANGHAI) CO., LTD.
We have audited the accompanying financial statements of Momentive UV Coatings (Shanghai) Co., Ltd. (hereinafter referred to as “the Company”),including the balance sheet as of 31 December 2017 and the income statement, cash flow statement for the year then ended as well as notes to the financial statements.
1. Responsibility of the Company’s management on these financial statements
Management is responsible for the preparation of these financial statements. This responsibility includes: (1) these financial statements are prepared in accordance with Accounting Standards for Business Enterprises and the Accounting System for Business Enterprises, and present fairly. (2) designing, implementing and maintaining internal control relevant to the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
2. Responsibility of certified public accountants
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in United States of America. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider the internal control relevant to the preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
3. Auditor’s opinion
In our opinion, the financial statements of Momentive UV Coatings (Shanghai) Co., Ltd. have been prepared in accordance with U.S. Generally accepted accounting principles, and present fairly, in all material respects, the financial position of the Company as of 31 December 2017, and the results of its operations and cash flows for the year then ended.
/s/ Shanghai Asahi Accounting Firm Chinese CPA : Li Can
Chinese CPA : Zhu Jun
Shanghai P. R. China February 22, 2018
BALANCE SHEET ( to be continued)
AS AT 31 DECEMBER 2017
(All amounts in Rmb Yuan unless otherwise stated)
31 December | 31 December | |||||
ASSETS | Notes | 2017 | 2016 | |||
Current assets | ||||||
Cash at bank and in hand | 4.1 | 17,028,827.70 | 11,677,321.79 | |||
Notes receivable | 4.2 | 34,706,282.28 | 26,576,197.31 | |||
Accounts receivable | 2.6, 4.3 | 82,854,248.92 | 89,902,219.94 | |||
Other receivables | 2.6 | 2,400.00 | 2,400.00 | |||
Inventories | 2.7, 4.4 | 15,844,695.65 | 18,707,271.67 | |||
Prepaid expenses | — | 4,512.95 | ||||
Total current assets | 150,436,454.55 | 146,869,923.66 | ||||
Fixed assets | ||||||
Fixed assets - cost | 2.8, 4.5 | 6,652,902.87 | 6,628,202.01 | |||
Less: Accumulated depreciation | 2.8, 4.5 | 6,105,199.31 | 5,881,545.21 | |||
Fixed assets - net | 547,703.56 | 746,656.8 | ||||
Less: Provision for impairment of fixed assets | — | — | ||||
Fixed assets - net book value | 547,703.56 | 746,656.8 | ||||
Other assets | ||||||
Long-term prepaid expenses | 2.9 | 482,063.89 | 142,500.00 | |||
Deferred tax - debit | 126,654.49 | 240,760.17 | ||||
TOTAL ASSETS | 151,592,876.49 | 147,999,840.63 | ||||
The accompanying notes form an integral part of these financial statements.
BALANCE SHEET (continued)
AS AT 31 DECEMBER 2017
(All amounts in Rmb Yuan unless otherwise stated)
31 DECEMBER | 31 DECEMBER | |||||
LIABILITIES AND OWNERS’ EQUITY | Notes | 2017 | 2016 | |||
Current liabilities | ||||||
Short-term bank borrowings | 15,000,000.00 | — | ||||
Accounts payable | 4.6 | 34,208,095.93 | 47,965,757.51 | |||
Salary payable | 650,000.00 | 980,000.00 | ||||
Tax payable | 4.7 | 3,672,341.93 | 7,834,795.03 | |||
Other surcharges | — | 10,543.40 | ||||
Dividend payable | 9,000,000.00 | 22,461,693.80 | ||||
Other payable | 4.8 | 1,513,164.86 | 1,887,909.46 | |||
Total current liabilities | 64,043,602.72 | 81,140,699.20 | ||||
Total liabilities | 64,043,602.72 | 81,140,699.20 | ||||
Owners' equity | ||||||
Paid-in capital | 4.9 | 4,138,525.00 | 4,138,525.00 | |||
Surplus reserve | 4.10 | 2,100,000.00 | 2,100,000.00 | |||
Undistributed profits | 4.11 | 81,310,748.77 | 60,620,616.43 | |||
Total owners' equity | 87,549,273.77 | 66,859,141.43 | ||||
TOTAL LIABILITIES AND OWNERS’ EQUITY | 151,592,876.49 | 147,999,840.63 | ||||
The accompanying notes form an integral part of these financial statements.
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2017
(All amounts in Rmb Yuan unless otherwise stated)
Notes | Year 2017 | Year 2016 | Year 2015 | ||||
Revenues from main operations | 2.10 4.12 | 344,034,346.69 | 334,219,891.26 | 342,012,867.83 | |||
Less: Costs main operations | 4.12 | 246,795,208.60 | 233,818,221.1 | 261,367,286.76 | |||
Surcharges for main operations | 845,169.28 | 979,176.41 | 786,737.38 | ||||
Profit from main operations | 96,393,968.81 | 99,422,493.75 | 79,858,843.69 | ||||
Less: Selling and distribution expenses | 4.13 | 3,311,996.76 | 4,128,783.69 | 4,820,806.92 | |||
Other operation income | 256.41 | 388.89 | 47,638.49 | ||||
General and administrative expenses | 4.14 | 42,741,332.18 | 17,416,177.1 | 11,657,992.28 | |||
Finance (income) expenses - net | 4.15 | 2,964,599.83 | (2,695,350.25 | ) | (1,092,332.51 | ) | |
Operating profit | 47,376,296.45 | 80,573,272.1 | 64,520,015.49 | ||||
Non-operating income | 4.16 | 273,121.29 | 191,919.03 | 87,342.07 | |||
Non-operating expense | 4.16 | — | 2,046.15 | — | |||
Total profit | 47,649,417.74 | 80,763,144.98 | 64,607,357.56 | ||||
Less: Income taxes | 2.11 | 11,959,285.40 | 20,237,953.84 | 16,196,870.02 | |||
Net profit | 35,690,132.34 | 60,525,191.14 | 48,410,487.54 | ||||
The accompanying notes form an integral part of these financial statements.
CASHFLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2017
(All amounts in Rmb Yuan unless otherwise stated)
1. Cash flows from operating activities | Year 2017 | Year 2016 | Year 2015 | |||
Cash received from sales of goods or rendering of services | 403,969,468.06 | 406,222,940.09 | 382,507,558.14 | |||
Cash received relating to other operating activities | 273,121.29 | 191,919.03 | 87,342.07 | |||
Sub-total of cash inflows | 404,242,589.35 | 406,414,859.12 | 382,594,900.21 | |||
Cash paid for goods and services | (305,120,883.87 | ) | (277,618,516.29 | ) | (287,000,379.42 | ) |
Cash paid to and on behalf of employees | (8,168,074.26 | ) | (7,989,408.44 | ) | (7,633,928.62 | ) |
Payments of taxes and levies | (32,730,895.84 | ) | (47,133,802.28 | ) | (21,917,429.15 | ) |
Cash paid relating to other operating activities | (37,162,567.98 | ) | (5,730,450.09 | ) | (6,870,003.19 | ) |
Sub-total of cash outflows | (383,182,421.95 | ) | (338,472,177.1 | ) | (323,421,740.38 | ) |
Net cash flows from operating activities | 21,060,167.40 | 67,942,682.02 | 59,173,159.83 | |||
2. Cash flows from investing activities | ||||||
intangible assets and other long-term assets | — | 23,398.06 | — | |||
Sub-total of cash inflows | — | 23,398.06 | — | |||
Cash paid to acquire fixed assets, intangible assets and other long-term assets | (595,246.68 | ) | (212,142.73 | ) | (356,027.35 | ) |
Sub-total of cash outflows | (595,246.68 | ) | (212,142.73 | ) | (356,027.35 | ) |
Net cash flows used in investing activities | (595,246.68 | ) | (188,744.67 | ) | (356,027.35 | ) |
3. Cash flows from financing activities | ||||||
Cash received from bank loans | 15,000,000.00 | — | — | |||
Sub-total of cash inflows | 15,000,000.00 | — | — | |||
Cash payments for distribution of dividends or profits | (29,346,226.12 | ) | (87,145,723.63 | ) | (57,000,000 | ) |
Sub-total of cash outflows | (29,346,226.12 | ) | (87,145,723.63 | ) | (57,000,000.00 | ) |
Net cash flows used in financing activities | (14,346,226.12 | ) | (87,145,723.63 | ) | (57,000,000.00 | ) |
4. Effect of foreign exchange rate changes on cash and cash equivalents | (767,188.69 | ) | (415,321.51 | ) | (458,617 | ) |
5. Net increase (used) in cash and cash equivalents | 5,351,505.91 | (19,807,107.79 | ) | 1,358,515.48 | ||
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2017
(Amounts expressed in Renminbi (“RMB”) unless otherwise stated)
1. COMPANY BACKGROUND AND PRINCIPAL ACTIVITIES
Momentive UV Coatings (Shanghai) Co., Ltd., formally known as Borden UV (Shanghai) Co., Ltd.༈¨”the Company”༉©is a Sino-foreign equity joint venture enterprise between Borden UV Coatings Holdings (Shanghai) Limited and Prime Union Limited. The Company was established on 18 March 2004 with the approval of the Shanghai Municipal Government in Shangwaihuhuiduzizi[2004]0768 and the business license number is 913101157595925826 with the operation period of 30 years. The Company’s registered capital is USD$500,000.00.
The approved Company’s business operation scope includes manufacture and sale of various kinds of UV coatings and provision of related technical consulting services (Comment: extracted from Articles of Associations of the Company.)
In 2007, the Company’s prior shareholder Borden UV Coating Holding (Shanghai) Limited was renamed Hexion Specialty UV Coating (Shanghai) Limited and transferred 0.01% of its shares to Prime Union Limited, and the Company was renamed Hexion UV Coatings (Shanghai) Co., Ltd.. In 2013, based on the approvals of the Company’s Board of Directors and the Pudong District of Shanghai Municipal government, the Company was renamed Momentive UV Coatings (Shanghai) Co., Ltd., and one of the Company’s investors, Hexion Specialty UV Coatings (Shanghai) Ltd., was renamed Momentive Specialty UV Coatings (Shanghai) Limited. In 2016 Momentive Specialty UV Coatings (Shanghai) Limited was renamed Hexion UV Coatings (Shanghai) Limited.
2. PRINCIPAL ACCOUNTING POLICIES
2.1 Accounting standards
The Company adopts accounting principles generally accepted in the United States of America.
2.2 Accounting period
The Company’s accounting year starts on 1 January and ends on 31 December.
2.3 Basis of accounting and measurement bases
The Company follows the accrual method of accounting. Assets are initially recorded at their actual costs and are subsequently adjusted for impairment, if any, as events and circumstances warrant.
2.4 Reporting currency
The recording currency of the Company is RMB Yuan.
2.5 Foreign currency translation
Except for the accounting treatment for paid-in capital, foreign currency transactions are translated into RMB at the exchange rates stipulated by the People’s Bank of China on the first day of the month in which the transactions took place. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into RMB at the stipulated exchange rates by the People’s Bank of China at the balance sheet date. Exchange differences arising from these translations are expensed, except for those which occurred in the pre-operation period, which are recorded as long-term deferred expenses, and those attributable to foreign currency borrowings that have been taken out specifically for the construction of fixed assets, which are capitalized as part of the fixed asset costs.
2.6 Provision for Bad Debt
Full provisions are applied to receivables where events or changes in circumstances indicate that the balances cannot be collected (the debtor is deregistered, bankrupt and the Company can not take back the accounts receivable according to the bankruptcy procedure in law; the debtor is dead, has no heritage to pay or has no haeres; has solid evidence that the accounts receivable aged over three years and can not be taken back). When the bad debt occurs, it is written off through the bad debt provision with the approvals according to the authorized level.
2.7 Inventories
2.7.1 Inventories include materials in transit, raw materials, work in progress, finished goods, low cost consumables and packaging materials.
2.7.2 Inventories are stated at the lower of cost or market.
2.7.3 The inventory issuance cost was determined using the weighted average method.
2.7.4 Low cost consumables are fully amortized when issued for use.
2.8 Fixed assets and depreciation
2.8.1 Fixed assets include buildings, machinery and equipment used in production or rendering of services, or held for management purposes, which have useful lives of more than one year.
2.8.2 Fixed assets purchased or constructed by the Company are recorded at actual cost.
2.8.3 Fixed assets are depreciated using the straight-line method to write off the cost of the assets to their residual values of 0% which represents their estimated salvage value over their estimated useful lives. Their estimated useful lives are as follows:
Category: | useful lives (years) : | Annual depreciation rate (%): |
Machinery | 10 | 10 |
Electronic equipment | 10 | 10 |
Motor vehicle | 10 | 10 |
Other equipment | 10 | 10 |
2.9 Long-term prepaid expenses
Long-term prepaid expenses was recorded in actual cost and are amortized on the straight-line basis over the expected beneficial periods and are presented at cost net of accumulated amortization.
2.10 Sales of goods
Revenue from the sale of goods is recognized when significant risks and rewards of ownership of the goods are transferred to the buyer, the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and it is probable that the economic benefit associated with the transaction will flow to the Company and the relevant revenue and costs can be measured reliably. |
2.11 Enterprise income tax (“EIT”)
EIT is recognized under the liability method (balance sheet approach).
3. Taxations
The Company’s applicable major taxations and rate are as follows:
Category: | Tax base: | Statutory Tax %: |
Value added tax | Valuation amount | 17 |
EIT | Taxable income | 25 |
The actual EIT rate applicable for 2017 was 25%.
4. NOTES TO MAJOR ACCOUNTS IN THE FINANCIAL STATEMENTS
4.1 Cash at bank and in hand
Item: | 31 December 2017 | 31 December 2016 | ||||||||||
Original currency | Exchange rate | RMB equivalent | Original currency | Exchange rate | RMB equivalent | |||||||
Cash in hand | 20,988.16 | 42,907.15 | ||||||||||
RMB | 20,988.16 | 42,907.15 | ||||||||||
Cash at bank | 17,007,839.54 | 11,634,414.64 | ||||||||||
RMB | 13,452,674.30 | 7,973,653.18 | ||||||||||
USD | 544,085.77 | 6.5342 | 3,555,165.24 | 527,715.36 | 6.937 | 3,660,761.46 | ||||||
Total | 17,028,827.70 | 11,677,321.79 | ||||||||||
4.2 Notes Receivable
Category: | 31 December 2017 | 31 December 2016 |
Bank Note | 34,706,282.28 | 26,576,197.31 |
The top major debtors are as follows:
No. | Debtor Name: | Note Quantity: | 31 December 2017 |
1 | Zhong Tian Technology Optical Fiber Co., Ltd. | 12 | 23,495,820.80 |
2 | Changfei Optical Fiber Co., Ltd. | 5 | 7,223,975.61 |
3 | Jiangdong Science and Technology Co., Ltd. | 3 | 3,500,000.00 |
4 | Chengdu Zhongzhu Optic fiver Co., Ltd | 1 | 260,147.10 |
5 | Nanjing Wasin Fujikura Optical Communication Ltd. | 1 | 138,338.77 |
Total | 34,618,282.28 | ||
No. | Debtor Name: | Note Quantity: | 31 December 2016 |
1 | Zhong Tian Technology Optical Fiber Co., Ltd. | 3 | 14,335,673.48 |
2 | Changfei Optical Fiber Co., Ltd. | 7 | 7,746,600.00 |
3 | Nanjing Fiberhome Fujikura Optical Communication Ltd. | 3 | 3,800,000.00 |
4 | Zhongzhu Optic fiber Co., Ltd | 4 | 693,923.83 |
Total | 26,576,197.31 | ||
4.3 Accounts Receivable
31 December 2017 | 31 December 2016 |
82,854,248.92 | 89,902,219.94 |
The top 5 major debtors are as follows:
Debtor Name: | Nature: | 31 December 2017 | % |
Furukawa Japan | Goods sold | 28,660,953.62 | 35% |
Changfei Optical Fiber Co., Ltd. | Goods sold | 12,555,200.09 | 15% |
OFSLLC | Goods sold | 10,416,000.29 | 13% |
Jiangdong Science and Technology Co., Ltd. | Goods sold | 10,244,520.00 | 12% |
Zhong Tian Technology Optical Fiber Co., Ltd. | Goods sold | 9,676,269.00 | 12% |
Total | 71,552,943.00 | 86% | |
There was no receivable from related parties as of 31 December 2017.
Aging: | 31 December 2017 | % | 31 December 2016 | % | ||||
Within 1 year | 82,854,248.92 | 100 | 89,901,173.79 | 99.999 | ||||
1 to 2 years | — | — | 1,046.15 | 0.001 | ||||
Total | 82,854,248.92 | 100 | 89,902,219.94 | 100 | ||||
4.4 Inventory
Item: | 31 December 2017 | 31 December 2016 | ||||
Amount | Reserve | Amount | Reserve | |||
Raw materials | 8,227,171.32 | — | 9,093,245.46 | — | ||
Packing material | 100,480.10 | — | 121,466.70 | — | ||
Low valued consumables | 504,684.53 | — | 513,825.99 | — | ||
Finished goods | 7,012,359.70 | — | 8,978,733.52 | — | ||
Total | 15,844,695.65 | — | 18,707,271.67 | — | ||
4.5 Fixed Assets and Accumulated Depreciation
Original Cost
Category: | 31 December 2017 | Addition | Deductions | 31 December 2016 | ||||
Machinery | 3,014,713.91 | — | — | 3,014,713.91 | ||||
Electronic equipment | 946,226.85 | 7,094.02 | — | 939,132.83 | ||||
Motor Vehicle | 413,071.79 | — | — | 413,071.79 | ||||
Other equipment | 2,278,890.32 | 17,606.84 | — | 2,261,283.48 | ||||
Total | 6,652,902.87 | 24,700.86 | — | 6,628,202.01 | ||||
Accumulated depreciation
Category: | 31 December 2017 | Addition | Deductions | 31 December 2016 | ||||
Machinery | 2,834,972.35 | 122,073.39 | — | 2,712,898.96 | ||||
Electronic equipment | 852,763.03 | 19,541.34 | — | 833,221.69 | ||||
Motor Vehicle | 232,906.67 | 7,114.42 | — | 225,792.25 | ||||
Other equipment | 2,184,557.26 | 74,924.95 | — | 2,109,632.31 | ||||
Total | 6,105,199.31 | 223,654.10 | — | 5,881,545.21 | ||||
4.6 Accounts Payable
31 December 2017 | 31 December 2016 |
34,208,095.93 | 47,965,757.51 |
The top 5 major Creditors are as follows:
Creditor Name: | Nature: | 31 December 2017 | |
Sartomer Logistics (Shanghai) Co., Ltd. | Goods Purchased | 10,409,966.94 | |
MIWON | Goods Purchased | 10,181,015.43 | |
Shuangjian | Goods Purchased | 2,747,500.00 | |
Tianjin Jiuruixianghe | Goods Purchased | 1,781,000.00 | |
Allnex Resins (Shanghai) Co., Ltd. | Goods Purchased | 1,485,212.63 | |
Total | 26,604,695.00 | ||
Creditor Name: | Nature: | 31 December 2016 | |
MIWON | Goods Purchased | 15,236,204.82 | |
Sartomer Logistics (Shanghai) Co., Ltd. | Goods Purchased | 14,174,942.96 | |
Shuangjian | Goods Purchased | 6,354,397.84 | |
Linjia Machine | Goods Purchased | 2,040,680.00 | |
Allnex Resins (Shanghai) Co., Ltd. | Goods Purchased | 1,634,068.80 | |
Total | 39,440,294.42 | ||
4.7 Taxes Payable
Item: | 31 December 2017 | 31 December 2016 | ||
VAT payable | 1,389,892.02 | 637,109.93 | ||
EIT payable | 1,921,599.59 | 6,858,152.38 | ||
Individual income tax payable | 277,456.80 | 276,272.32 | ||
City construction tax | 13,898.92 | 10,543.40 | ||
Extra charges of education funds | 69,494.60 | 52,717.00 | ||
Total | 3,672,341.93 | 7,834,795.03 | ||
4.8 Other Payables
31 December 2017 | 31 December 2016 |
1,513,164.86 | 1,887,909.46 |
The top 3 major Creditors are as follows:
Creditor Name: | Nature: | 31 December 2017 | |
Fishand Richardson PC | Lawyer fee | 1,164,880.98 | |
Caribou Specialty Materials | Technology service charge | 294,039.00 | |
TaiWan Polychem | Market promotion | 52,681.27 | |
Creditor Name: | Nature: | 31 December 2016 | |
Fishand Richardson PC | Lawyer fee | 1,478,573.62 | |
Caribou Specialty Materials | Technology service charge | 288,416.74 | |
Momentive Chemical | Overseas market promotion | 152,614.00 | |
4.9 Paid-in Capital
Investor Name: | 31 December 2017, 2016, 2015 | |||||
In USD$ | RMB equivalent | (%) | ||||
Hexion UV coatings (Shanghai) Limited | 249,950.00 | 2,068,848.65 | 49.99% | |||
Prime Union Limited | 250,050.00 | 2,069,676.35 | 50.01% | |||
Total | 500,000.00 | 4,138,525.00 | 100.00 | % | ||
4.10 Surplus Reserve
Item: | 31 December 2017, 2016, 2015 |
Reserve fund | 2,100,000.00 |
Total | 2,100,000.00 |
4.11 Retained Earnings
Item: | 2017 | 2016 | 2015 | |||
Retained earning, beginning | 60,620,616.43 | 96,557,119.09 | 118,292,355.18 | |||
Add: current year profit | 35,690,132.34 | 60,525,191.14 | 48,410,487.54 | |||
Less: Profit distribution to equity owners | 15,000,000.00 | 96,461,693.8 | 70,145,723.63 | |||
Retained earning, ending | 81,310,748.77 | 60,620,616.43 | 96,557,119.09 | |||
4.12 Operation Income / Operation Cost
Operation Income for Year 2017 | Operation Income for Year 2016 | Operation Income for year 2015 | |||||||||
Sales | Other Operation Income | Sales | Other Operation Income | Sales | Other Operation Income | ||||||
344,034,346.69 | 256.41 | 334,219,891.26 | 388.89 | 342,012,867.83 | 47,638.49 | ||||||
Operation Cost for year 2017 | Operation Cost for year 2016 | Operation Cost for year 2015 | |||
Cost of sales | Other Operation Cost | Cost of sales | Other Operation Cost | Cost of sales | Other Operation Cost |
246,795,208.60 | — | 233,818,221.10 | — | 261,367,286.76 | — |
4.13 Selling and distribution expenses
Year 2017 | Year 2016 | Year 2015 | |||
3,311,996.76 | 4,128,783.69 | 4,820,806.92 | |||
The major 2017 items include:
Item: | Year 2017 | Year 2016 | Year 2015 | |||
Transportation | 3,148,268.11 | 2,709,713.24 | 2,918,723.12 | |||
Market promotion | (143,252.00 | ) | 1,042,392.38 | 369,000.00 | ||
Gas and parking | 88,505.85 | 111,927.71 | 126,631.67 | |||
Custom inspection | 59,391.23 | 50,334.64 | 74,999.99 | |||
Office expense | 46,950.82 | 33,284.66 | 45,743.30 | |||
4.14 G&A Expenses
Year 2017 | Year 2016 | Year 2015 | |||
42,741,332.18 | 17,416,177.10 | 11,657,992.28 | |||
The major 2017 items include:
Item | Year 2017 | Year 2016 | Year 2015 | |||
Consultant fees | 32,420,062.21 | 7,425,998.20 | — | |||
Overseas R & D fee | 4,067,513.60 | 3,466,126.79 | 3,384,203.73 | |||
Payroll | 3,893,449.31 | 4,010,501.34 | 3,829,369.58 | |||
Statutory social insurance | 522,638.10 | 458,919.92 | 453,578.50 | |||
Entertainment expenses | 453,526.00 | 453,334.71 | 416,872.58 | |||
Office expense | 378,853.77 | 399,906.96 | 407,177.19 | |||
Taxes | 204,579.96 | 310,493.10 | 190,366.33 | |||
Lawyer fees | — | — | 1,928,804.70 | |||
4.15 Financial Expenses
Item: | Year 2017 | Year 2016 | Year 2015 | |||
Interest expense | 884,532.32 | 455,052.04 | 45,584.94 | |||
Interest income | (41,330.03 | ) | (162,426.65 | ) | (82,315.96 | ) |
Foreign exchange loss (gain) | 2,093,345.22 | (3,049,485.53 | ) | (1,133,604.97 | ) | |
Bank charges | 28,052.32 | 61,509.89 | 78,003.48 | |||
Total | 2,964,599.83 | (2,695,350.25 | ) | (1,092,332.51 | ) | |
4.16 Non-operation Income / Non-operation (Expense)
Item | Year 2017 | Year 2016 | Year 2015 | ||||
Net non-operation result | 273,121.29 | 189,872.88 | 87,342.07 | ||||
Total non-operation income | 273,121.29 | 191,919.03 | 87,342.07 | ||||
1. tax return | — | 122,322.16 | 18,000.00 | ||||
2. service charge return for tax payment | — | 16,423.10 | 45,966.07 | ||||
3. sponsor | — | 9,000.00 | 22,376.00 | ||||
4. Government subsidies | 200,000.00 | — | — | ||||
5. other | 73,121.29 | 44,173.77 | 1,000.00 | ||||
Total non-operation expense | — | 2,046.15 | — | ||||
4.17 Cash Flow Information
Supplemental Information | Year 2017 | Year 2016 | Year 2015 | |||
Reconciliation of net profit to cash flows from operating activities | ||||||
Net profit | 35,690,132.34 | 60,525,191.14 | 48,410,487.54 | |||
Adjust for:Provision for asset impairment | — | — | — | |||
Depreciation of tangible assets | 223,654.10 | 363,104.37 | 570,797.00 | |||
Amortization of long-term prepaid expenses | 230,981.93 | 90,000.00 | 37,500.00 | |||
Amortization of prepaid expense | 4,512.95 | (320.95 | ) | (4,192.00 | ) | |
Losses on disposal of fixed assets, intangible assets and other long-term assets | — | (23,398.06 | ) | — | ||
Finance expenses | 1,651,721.01 | 415,321.51 | 458,617.00 | |||
Decrease in deferred tax debit | 114,105.68 | (201,915.74 | ) | 479,683.42 | ||
Decrease in inventories | 2,862,576.02 | 2,158,597.73 | 1,589,183.75 | |||
(Increase) Decrease in operating receivables | (1,082,113.95 | ) | 22,091,110.19 | (16,040,544.12 | ) | |
Increase in operating payables | (18,635,402.68 | ) | (17,475,008.17 | ) | 23,671,627.24 | |
Net cash flows from operating activities | 21,060,167.40 | 67,942,682.02 | 59,173,159.83 | |||
5. Related party relationships and transactions
5.1 Related party relationships
Name: | Related party relationships |
Momentive Specialty UV coatings ( Shanghai) Limited (Renamed to Hexion UV Coating (Shanghai ) Limited in 2015) | Investor |
Prime Union Limited | Investor |
5.2 Transactions
There were no material related party transactions in 2017.
6. Subsequent event
On October 31, 2016 DSM filed a petition with the International Trade Commission (ITC) to commence an investigation against MUV and its customer OFS for allegedly importing UV curable coatings that infringe four DSM patents. In response, the ITC commenced an investigation. On February 6, 2017, the Federal District Court in the Southern District of Ohio stayed the infringement case pending the outcome of the ITC investigation. On February 15, 2018, the Administrative Law Judge in the ITC investigation issued an Initial Determination recommending that the ITC find many of the claims invalid but also that MUV infringed certain claims in two of DSM’s patents. MUV is filing a petition with the ITC to request that it reject the infringement findings in the Initial Determination and find that MUV’s products do not infringe any valid claims in DSM’s patents. A decision from the ITC is expected in Q2 2018.
