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Related Party Transactions
 12 Months Ended
Dec. 31, 2018
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 4 - RELATED PARTY TRANSACTIONS

 

Related parties with whom the Company conducted business consist of the following:

 

Name of Related Party   Nature of Relationship
Xiao Ping Zhang   Principal shareholder, Chairman of the Board and Chief Executive Officer
     
Shu Ping Chi   Shareholder, member of the Board, wife of Xiao Ping Zhang
     
Xiao Feng Zhang   Shareholder, member of the Board, brother of Xiao Ping Zhang
     
Ruili Group Co., Ltd. (“Ruili Group”)   10% shareholder of Joint Venture and is collectively controlled by Xiao Ping Zhang, Shu Ping Chi, and Xiao Feng Zhang
     
Guangzhou Ruili Kormee Automotive Electronic Control Technology Co., Ltd. (“Guangzhou Kormee”)   Controlled by Ruili Group
     
Wenzhou Ruili Kormee Automotive Electronics Co., Ltd. (“Ruian Kormee” and formerly known as “Ruian Kormee Automobile Braking Co., Ltd.”)   Wholly controlled by Guangzhou Kormee
     
Chuangchun Kormee Auto Electric Co., Ltd. (“Chuangchun Kormee”)   Wholley controlled by Guangzhou Kormee
     
Shanghai Dachao Electric Technology Co., Ltd. (“Shanghai Dachao”)   Ruili Group holds 49% of the equity interests in Shanghai Dachao
     
Ruili MeiLian Air Management System (LangFang) Co., Ltd. (“Ruili Meilian”)   Controlled by Ruili Group
     
Wenzhou Lichuang Automobile Parts Co., Ltd. (“Wenzhou Lichuang”)   Controlled by Ruili Group
     
Ningbo Ruili Equipment Co., Ltd. (“Ningbo Ruili”)   Controlled by Ruili Group
     
Shanghai Ruili Real Estate Development Co., Ltd. (“Shanghai Ruili”)   Wholly owned by Ruili Group
     
Kunshan Yuetu Real Estate Development Co., Ltd. (“Kunshan Yuetu”)   Collectively owned by Ruili Group and Shu Ping Chi
     
Shanghai Tabouk Auto Components Co., Ltd. (“Shanghai Tabouk”)   Collectively owned by Xiao Feng Zhang and Xiao Ping Zhang
     
Hangzhou Ruili Property Development Co., Ltd.   Collectively owned by Ruili Group and Xiao Ping Zhang
     
Hangzhou Hangcheng Friction Material Co., Ltd. (“Hangzhou Hangcheng”)   Controlled by Ruili Group
     
Hangzhou Ruili Binkang Real Estate Development Co. Ltd.   Controlled by Hangzhou Ruili Property Development Co., Ltd.
     
Hangzhou Ruili Real Estate Group Co. Ltd.   Controlled by Ruili Group

  

The Company continues to purchase primarily packaging materials from Ruili Group. In addition, the Company purchases automotive components from other related parties, including Guangzhou Kormee, Ruian Kormee, Ruili Meilian, Shanghai Dachao, Wenzhou Lichuang, Hangzhou Hangcheng, Changchun Kormee, and molds from Ningbo Ruili used in its production.

 

The Company sells certain automotive products to the Ruili Group. The Company also sells parts to Guangzhou Kormee, Ruian Kormee, Shanghai Tabouk, Ruili Meilian and Changchun Kormee.

 

The following related party transactions occurred for the years ended December 31, 2018 and 2017:

  

   For the Years Ended
December 31,		 
   2018   2017 
PURCHASES FROM:        
Guangzhou Ruili Kormee Automative Eletronic Control Technology Co., Ltd.  $6,279,500   $4,487,457 
Wenzhou Ruili Kormee Automotive Electronics Co., Ltd.   3,371,361    1,357,612 
Shanghai Dachao Electric Technology Co., Ltd.   720,489    188,899 
Ruili MeiLian Air Management System (LangFang) Co., Ltd.   8,438,181    4,106,986 
Ruili Group Co., Ltd.   7,909,463    5,478,853 
Chuangchun Kormee Auto Electric Co., Ltd.   20,045    — 
Ningbo Ruili Equipment Co., Ltd.   4,093,773    — 
Hangzhou Hangcheng Friction Material Co., Ltd.   1,056,860    — 
Wenzhou Lichuang Auto Parts Co., Ltd.   15,933,012    5,446,212 
Total Purchases  $47,822,684   $21,066,019 
SALES TO:          
Guangzhou Ruili Kormee Automative Eletronic Control Technology Co., Ltd.  $10,020,480   $7,467,661 
Wenzhou Ruili Kormee Automotive Electronics Co., Ltd.   61,172    135,911 
Ruili MeiLian Air Management System (LangFang) Co., Ltd.   1,315,649    1,253,664 
Ruili Group Co., Ltd.   17,140,343    14,108,062 
Chuangchun Kormee Auto Electric Co., Ltd.   59,525    — 
Shanghai Tabouk Auto Components Co., Ltd.   1,676,791    1,411,324 
Total Sales  $30,273,960   $24,376,622 

   

   As of
December 31,		 
   2018   2017 
ADVANCES TO RELATED PARTIES        
         
Ruili Group Co., Ltd.   79,739,417    5,711,605 
Shanghai Ruili Real Estate Development Co., Ltd.   —    65,069,497 
Kunshan Yuetu Real Estate Development Co., Ltd.  $—   $1,537,122 
           
Total  $79,739,417   $72,318,224 

   

   As of Ended
December 31,		 
   2018   2017 
ACCOUNTS RECEIVABLE FROM RELATED PARTY        
         
Shanghai Tabouk Auto Components Co., Ltd  $261,889   $1,297,734 
           
Total  $261,889   $1,297,734 
           
ACCOUNTS PREPAYMENT TO RELATED PARTY          
           
Ningbo Ruili Equipment Co., Ltd.  $3,670,573   $999,527 
           
 Total  $3,670,573   $999,527 
           
ACCOUNTS PAYABLE TO RELATED PARTIES          
           
Guangzhou Ruili Kormee Automotive Electronic Control Technology Co., Ltd.   7,877,485    3,414,719 
Shanghai Dachao Electric Technology Co., Ltd.   56,883    83,178 
Ruili MeiLian Air Management System (LangFang) Co., Ltd.   5,628,155    1,993,787 
Wenzhou Lichuang Auto Parts Co., Ltd.   9,898,777    10,405,120 
Chuangchun Kormee Auto Electric Co., Ltd.   9,206    — 
Hangzhou HangCheng Friction Material Co., Ltd.   334,694    — 
           
Total  $23,805,200   $15,896,804 

 

   For the Years Ended
December 31,		 
   2018   2017 
DUE TO RELATED PARTY        
         
Wenzhou Ruili Kormee Automotive Electronics Co., Ltd.  $5,959,752   $1,572,963 
           
   $5,959,752   $1,572,963 

  

From time to time, the Company borrows from Ruili Group and its controlled companies for working capital purposes. In order to obtain the loans and mutually benefit both the debtor and creditor of the arrangement, the Company also advances to Ruili Group and its controlled companies, usually in a short term. All the loans borrowed from related parties are non-interest bearing, unsecured and due on demand. The advances to Shanghai Ruili and Kunshan Yuetu are due on demand, unsecured, and bear an interest rate of 5.22% per annum. In May 2018 the Company received repayments from Shanghai Ruili and Kunshan Yuetu in full. The interests received from these two related parties amount to $741,254 and $182,270 for the years ended December 31, 2018 and 2017, respectively.

 

The advances to Ruili Group were due on demand, unsecured, and bear no interest during the year ended December 31, 2017. In year 2018, the Company charged Ruili Group an interest on the average balance advanced to them. The Company received interests of $ 2,361,866 from Ruili Group during the year ended December 31, 2018, representing an effective interest rate of approximately 8.40% per annum.

 

During the year ended December 31, 2018, the Company obtained net proceeds of $9,669,326 in cash from related parties. Repayments in bank acceptance notes to related parties totaled $5,097,556. In the same period, the Company provided Ruili Group net proceeds of $146,944,697, and received repayment in the form of bank acceptance notes amounted to $70,818,463. The Company also advanced to Shanghai Ruili and Kunshan Yuetu in the amounts of $49,561,855 and $15,226,835, respectively, and collected cash repayment from them in the amounts of $112,857,719 and $16,719,662, respectively.

 

During the year ended December 31, 2017, the Company obtained loans in a total amount of $103,775,545, of which $88,197,285 was obtained from Ruili Group and $15,578,260 from Ruian Kormee. The Company also borrowed the amount of $35,706,576 in the form of bank acceptance notes from Ruili Group. Cash repayments to related parties totaled $139,482,122, including $123,903,862 to Ruili Group and $15,578,260 to Ruian Kormee. During the year ended December 31, 2017, the Company advanced to its related parties in the amount of $186,885,309, including $117,296,565 to Ruili Group, $2,185,691 to Ruian Kormee, $65,918,404 to Shanghai Ruili and $1,484,649 to Kunshan Yuetu. Cash repayments received from related parties amounted to $118,436,661, including $115,467,364 from Ruili Group and $2,969,297 from Shanghai Ruili. The Company, Ruian Kormee, and Ruili Group also agreed that Ruili Group would transfer $3,711,622 in 2017 to Ruian Kormee by adjusting their corresponding balances with the Company.

  

The Company entered into a lease agreement with Ruili Group. See Note 18 for more details.

   

The Company provided a guarantee for the credit line granted to Ruili Group by the China Merchants Bank in the amount of RMB 40,000,000 (approximately $5,828,185) for a period of 12 months starting on October 24, 2016. The credit line was renewed on October 19, 2017 for 6 months. On April 13, 2018, Ruili Group and the bank reached another extension agreement and the guarantee will be provided by the Company until April 12, 2019.

 

The Company provided a guarantee for the credit line granted to Ruili Group by Bank of Ningbo in a maximum amount of RMB 210,000,000 (approximately $30,597,972) for the period from July 20, 2018 to July 20, 2028.

 

 In year 2018, the Company also has a bank deposit in the amount of RMB 20,000,000 (approximately $2,914,093) used as a guarantee for loans obtained by Wenzhou Lichuang from China Merchant Bank. The amount was included in restricted cash, current. Also see Note 2.

 

The Company has short term bank loans guaranteed or pledged by related parties. See Note 11 for more details.