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.