Construction Loan Facility and Lines of Credit

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

CONSTRUCTION LOAN FACILITY AND LINES OF CREDIT

NOTE 8 – CONSTRUCTION LOAN FACILITY AND LINES OF CREDIT

Construction Loan Facility

The Company obtained a construction loan facility dated June 21, 2013, in the aggregate amount of RMB 80,000,000 (approximately $13 million). The loan facility is for an eight-year term, which commenced on July 11, 2013, the initial draw-down date. The proceeds of the loan were used for and are collateralized by the construction of the Company’s new production facility and the included production line equipment and machinery. The loan bears interest based upon 110% of the PRC government’s eight-year term rate effective on the actual draw-down date, subject to annual adjustments based on 110% of the floating rate for the same type of loan on the anniversary from the draw-down date and its subsequent anniversary dates. The interest rate has remained at 5.39% on the anniversary dates which were July 10, 2017, 2018 and 2019, respectively. The loan required interest only payments for the first two years. Beginning July 11, 2015, the principal was due in at least two (2) annual installments with the first annual payment being due within six month period after July 10, 2015 and the second annual payment being due July 10, 2016 and each following year over the next five years through July 11, 2021 on the identical terms as described above for 2015. The Company has made all required payments due under the loan. As of September 30, 2020, the Company had no additional amounts available to it under this facility. During the nine months ended September 30, 2020, the Company made principal payments in the amount of $2,145,389 (RMB 15,000,000). The Company made the required RMB 14,000,000 (approximately $2 million) payment due under the loan on July 10, 2020.

Lines of Credit

In April 2020, the Company obtained a line of credit from Postal Savings Bank of China for an aggregate amount of RMB 10,000,000 (approximately $1.4 million), of which RMB 5,000,000 (approximately $0.7 million) were advanced in April, and RMB 3,000,000 (approximately $0.4 million) were advanced in July. The loan bears interest at a rate of 4.25% per annum. Advances on the line of credit are due two years from the date of the advance. A third party company has guaranteed the loan as being a second priority creditor in the collateral in certain land use rights and buildings next to the creditor of the construction loan facility as discussed above. In addition, the Company’s Chief Executive Officer and Chair of the Board personally guaranteed the new line of credit. The Company has an additional RMB 5,000,000 (approximately $0.7 million) available under the line, subject to a risk review and approval by the third party guarantee company. Total interest expense under this facility for the three and nine months ended September 30, 2020 was $10,420 and $15,410, respectively. The Company repaid RMB 500,000 (approximately $0.7 million) to Postal Savings Bank of China in October 2020 as per the payment schedule.

On June 30, 2020 the Company obtained a line of credit with Bank of Communications for an aggregate amount of RMB 8,500,000 (approximately $1.2 million) of which RMB 8,500,000 have been advanced. The loan bears interest at the rate of 4.05% per annum. The line of credit is due in one year on the anniversary date of the line of credit. In addition, the Company’s Chief Executive Officer and Chair of the Board personally guaranteed the new line of credit and pledged personal assets as collateral for the loan. Total interest for the three and nine months ended September 30, 2020 was $11,372.

The Company obtained a line of credit of RMB 3,200,000 (approximately $0.5 million) from China CITIC Bank in September, 2020 and obtained an advance of RMB 2,343,340 ($344,098), and the remaining of RMB 856,660 ($125,793) in October under this line. The loan bears interest at the rate of 4.50% per annum. The line of credit is due in one year on the anniversary date of the advance. In addition, the Company’s Chief Executive Officer and Chair of the Board personally guaranteed the new line of credit and pledged personal assets as collateral for the loan. Total interest for the three and nine months ended September 30, 2020 was $377, respectively.

Principal payments required for the remaining terms of the loan facility and the lines of credit for the twelve month periods ended September 30, are as follows:

Year	Lines of Credit		Construction Loan Facility		Total
2021	$	1,827,189	$	2,202,611	$	4,029,800
2022		939,781		-		939,781
	$	2,766,970	$	2,202,611	$	4,969,581

Fair Value of Construction Loan Facility and Lines of Credit – Based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities, the carrying amounts of the construction loan facility outstanding as of September 30, 2020 and December 31, 2019 approximated their fair value because the underlying instrument bears an interest rate that approximated current market rates.