Related Party Transactions

3 Months Ended

Mar. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions

Note 5. Related Party Transactions

In August 2011, our consolidated joint venture, Beijing JiYa Semiconductor Material Co., Ltd (JiYa), entered into a non-interest bearing note agreement for $1.7 million (Rmb 10,485,200) with one of its equity investment entities. Under the loan agreement, JiYa loaned $789,000 (Rmb 4,959,000) to its equity investment entity in August 2011 and the remaining amount of $880,000 (Rmb 5,526,200) was loaned during the three months ended March 31, 2012. The original term of the loan was two years and ten months and the loan was payable to JiYa in three installments with the first installment of $417,000 (Rmb 2,620,000) due in December 2012, the second installment of $834,000 (Rmb 5,240,000) due in December 2013, and the last installment of $418,000 (Rmb 2,625,200) due in May 2014. During the three months ended December 31, 2012, the parties signed an addendum to the note agreement to delay the first repayment of $417,000 (Rmb 2,620,000) to June 2013.  As of March 31, 2013, we included $1.3 million (Rmb 7,860,000) in "Related party notes receivable – short term" and $418,000 (Rmb 2,625,200) in "related party notes receivable – long term" in our condensed consolidated balance sheets.

In August 2011, our consolidated joint venture, Nanjing Jin Mei Gallium Co., Ltd. (Jin Mei) loaned $796,000 (Rmb 5,000,000) to its equity investment entity for construction purposes. As of March 31, 2013, this balance was included in "related party notes receivable – short term" in our condensed consolidated balance sheets. During the three months ended December 31, 2012, the parties signed a note agreement retroactively to set forth the terms for the loan. The loan bears interest at 6.7% per annum, subject to adjustment to market rate, and the principal is due on December 31, 2013.

Beginning in 2012, JiYa is contractually obligated under an agency sales agreement to sell raw material on behalf of one of its equity investment entities. JiYa bills to the customers and remits the receipts, net of its portions of sales commission, to this equity investment entity. For the three months ended March 31, 2013 and 2012, JiYa has recorded $10,000 and $0 of income from agency sales respectively, which was included in "other expense, net" in our condensed consolidated statements of operations. As of March 31, 2013 and December 31, 2012, payable of $355,000 and $257,000 to this equity investment entity for delivery in transit was included in "accrued liabilities" in the condensed consolidated balance sheets.

JiYa also purchases raw materials from one of its equity investment entities for production in the ordinary course of business. As of March 31, 2013 and December 31, 2012, amounts payable of $795,000 and $1.1 million respectively, were included in "accounts payable" in our condensed consolidated balance sheets.

Beginning in 2012, Jin Mei is contractually obligated under an agency sales agreement to sell raw material on behalf of its equity investment entity. Jin Mei bills to the customers and remits the receipts, net of its portions of sales commission, to this equity investment entity.   For the three months ended March 31, 2013 and 2012, Jin Mei has recorded $65,000 and $45,000 income from agency sales, which was included in "other expense, net" in the condensed consolidated statements of operations respectively.

During the three months ended September 30, 2012, Tongmei paid $118,000 (Rmb 740,924) on behalf of Donghai County Dongfang High Purity Electronic Materials Co., Ltd., its unconsolidated joint venture, to purchase materials. As of March 31, 2013, this balance was included in "prepaid expenses and other current assets" in our condensed consolidated balance sheets.

Our Related Party Transactions Policy seeks to prohibit all conflicts of interest in transactions between related parties and us, unless they have been approved by our Board of Directors. This policy applies to all of our employees and directors, our subsidiaries and our joint ventures. Our executive officers retain board seats on the Board of Directors of the companies in which we have invested in our China joint ventures. See Note 6 for further details.