Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of ~~November 9, 2017,~~May 12, 2021, the Company had ~~31,644,004~~30,851,776 shares of common stock issued and outstanding.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or the Company’s future financial performance. The Company has attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “expects,” “can,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology. Such statements are subject to certain risks and uncertainties, including the matters set forth in this Quarterly Report or other reports or documents the Company files with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. The Company’s expectations are as of the date this Form 10-Q is filed, and the Company does not intend to update any of the forward-looking statements after the date this Quarterly Report on Form 10-Q is filed to conform these statements to actual results, unless required by law. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2020, as filed with the Securities and Exchange Commission.

Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income

Three Months Ended March 31, 2021 and ~~Nine Months Ended September 30, 2017 and 2016~~2020

China Automotive Systems, Inc., “China Automotive,” was incorporated in the State of Delaware on June 29, 1999 under the name Visions-In-Glass, Inc. China Automotive, including, when the context so requires, its subsidiaries ~~and the joint ventures~~ described below, is referred to herein as the “Company.” The Company is primarily engaged in the manufacture and sale of automotive systems and components, as described below.

Great Genesis Holdings Limited, a company incorporated in Hong Kong on January 3, 2003 under the Companies Ordinance in Hong Kong as a limited liability company, “Genesis,” is a wholly-owned subsidiary of the Company.

Henglong USA Corporation, “HLUSA,” incorporated on January 8, 2007 in Troy, Michigan, is a wholly-owned subsidiary of the Company, and mainly engages in marketing of automotive parts in North America, and provides after-sales service and research and development support accordingly.

The Company owns the following aggregate net interests in the following ~~Sino-foreign joint ventures, wholly-owned~~ subsidiaries ~~and joint ventures~~ organized in the People's Republic of China, the “PRC,” and Brazil as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016.~~2020.

Basis of Presentation –- The accompanying condensed unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. The details of subsidiaries are disclosed in Note 1. Significant inter-company balances and transactions have been eliminated upon consolidation. The condensed unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions in ~~Article 10 of~~ Regulation S-X. Accordingly they do not include all of the information and footnotes required by such accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of the Company’s management, contain all necessary adjustments, which include normal recurring adjustments, for a fair statement of the results of operations, financial position and cash flows for the interim periods presented.

The condensed consolidated balance sheet as of December 31, ~~2016~~2020 is derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company’s management believes that the disclosures contained in these financial statements are adequate to make the information presented herein not misleading. For further information, please refer to the financial statements and the notes thereto included in the Company’s 2016 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission.

The results of operations for the three months ~~and nine months~~ ended ~~September 30, 2017~~March 31, 2021 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, ~~2017.~~2021.

Estimation - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Foreign Currencies - China Automotive, the parent company, and HLUSA maintain their books and records in United States Dollars, “USD,” their functional currency. The Company’s subsidiaries based in the PRC and Genesis maintain their books and records in Renminbi, “RMB,” their functional currency. The Company’s subsidiary based in Brazil maintains its books and records in Brazilian ~~reais,~~real, “BRL,” its functional currency. In accordance with ~~ASC~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 830, ~~“FASB Accounting Standards Codification”,~~ foreign currency transactions denominated in currencies other than the functional currency are remeasured into the functional currency at the rate of exchange prevailing at the balance sheet date for monetary items. Nonmonetary items are remeasured at historical rates. Income and expenses are remeasured at the rate in effect on the transaction dates. Transaction gains and losses, if any, are included in the determination of net income for the period.

~~In January 2017,~~No accounting standards newly issued during the FASB issued ASU 2017-04: Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the Board eliminated Step 2 from the goodwill impairment test. Under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity should apply the amendments in this Update on a prospective basis. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. ASU 2017-05 is designed to provide guidance on how to recognize gain and losses on sales, including partial sales, of nonfinancial assets to noncustomers. ASU 2017-05 is effective beginning January 1, 2018. Early adoption is permitted but the standard is required to be adopted concurrently with ASU 2014-09. The adoption of this guidance is not expected to have a material effect on the Company's consolidated financial statements.

In May 2017, the FASB issued guidance within ASU 2017-09: Scope of Modification Accounting. The amendments in ASU 2017-09 to Topic 718, Compensation - Stock Compensation, provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity should account for the effects of a modification unless all of the following conditions are met: the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified; the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments should be applied prospectively to an award modified on or after the adoption date. The amendments are effective for annual periods, and interim periods within those annual periods, beginning after Decemberthree months ended March 31, ~~2017. Early adoption is permitted, including adoption in any interim period. The adoption of this guidance is not expected to have~~2021, had a material impact on the ~~Company's consolidated~~Company’s financial ~~statements.~~statements or disclosures.

~~There have been no updates to the significant accounting policies set forth in the notes to the consolidated financial statements for the year ended December 31, 2016.~~

Short-term investments comprise time deposits with terms of three months or more which are due within one year and wealth management financial products with maturities within one year. The carrying values of time deposits approximate fair value because of their short maturities. The interest earned is recognized in the consolidated statements of income over the contractual term of the deposits. The wealth management financial products are measured at fair value and classified as Level 2 within the fair value measurement hierarchy. The fair values weremeasured by using directly or indirectly observable inputs in the marketplace. Changes in the fair value are reflected in other income in the consolidated statements of operations and comprehensive income.

~~The Company’s short-term investments as of September 30, 2017 and December 31, 2016 are summarized as follows~~

As of September 30, 2017, the Company had pledged short-term investments of RMB 13.9 million, equivalent to approximately $2.1 million, to secure standby letters of credit under Bank of China and China CITIC Bank (Note 13). The use of the pledged short-term investments is restricted.

The Company’s accounts and notes receivable, net as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 are summarized as follows (figures are in thousands of USD):

As of December 31, 2016, the Company collateralized its notes receivable in an amount of RMB 249.9 million, equivalent to approximately $36.0 million, as security for the credit facilities with banks in China and the Chinese government, including RMB 224.6 million, equivalent to approximately $32.4 million, in favor of Industrial and Commercial Bank of China, Jingzhou Branch, “ICBC Jingzhou”, for the purpose of obtaining the Henglong Standby Letter of Credit (as defined in Note 13), which is used as security for the non-revolving credit facility in the amount of $30.0 million provided by Industrial and Commercial Bank of China (Macau) Limited, “ICBC Macau”, and RMB 25.2 million, equivalent to approximately $3.6 million, as security in favor of the Chinese government for the low-interest government loan (See Note 13).

The Company’s ~~advance payments and others~~inventories as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 consisted of the following (figures are in thousands of USD):

The Company recorded $1.0 million and $0.8 million of inventory write-down to cost of product sold for the three months ended March 31, 2021 and 2020, respectively.

The Company’s ~~inventories as of September 30, 2017~~long-term investments at March 31, 2021 and December 31, ~~2016 consisted of the following (figures are in thousands of USD):~~

~~Provision for inventories amounted to $4.4 million and $2.4 million for the nine months ended September 30, 2017 and 2016, respectively.~~

~~The Company’s other receivables as of September 30, 2017 and December 31, 2016~~2020, are summarized as follows (figures are in thousands of USD):

Long-term time deposits are time deposits with maturities of longer than one year. Time deposits with original maturities of longer than one year but due within the next 12 months are included in short-term investments. As of September 30, 2017 and December 31, 2016, short-term investments include $1.0 million and $4.8 million, respectively, of time deposits with original maturities of longer than one year but due within the next 12 months.

As of September 30, 2017 and December 31, 2016, the Company had pledged long-term time deposits of nil and RMB 6.0 million (equivalent to approximately $0.9 million), respectively, to secure loans under the credit facility issued by ICBC Brazil. The use of the pledged long-term time deposits is restricted (See Note 13).

On January 24, 2010, the Company invested $3.1 million to establish a joint venture company, Beijing Henglong, with Hainachuan. The Company owns 50% of the equity in Beijing Henglong and can exercise significant influence over Beijing Henglong’s operating and financial policies. The Company accounted for Beijing Henglong’s operational results using the equity method. As of September 30, 2017 and December 31, 2016, the Company had $4.2 million and $3.8 million, respectively, of net equity in Beijing Henglong.

On September 22, 2014, Hubei Henglong entered into an agreement with other parties to establish a venture capital fund, the “Suzhou Venture Fund”, which mainly focuses on investments in emerging automobiles and parts industries. Hubei Henglong has committed to make investments of RMB 50.0 million, equivalent to approximately $7.5 million, in the Suzhou Venture Fund in three installments. As of September 30, 2017, Hubei Henglong has completed a capital contribution of RMB 50.0 million, equivalent to approximately $7.5 million, representing 12.5% of the Suzhou Venture Fund’s shares. As a limited partner, Hubei Henglong has more than virtually no influence over the Suzhou Venture Fund’s operating and financial policies. The investment is accounted for using the equity method. As of September 30, 2017 and December 31, 2016, the Company had $8.1 million and $5.3 million, respectively, of net equity in the Suzhou Venture Fund.

In May 2016, Hubei Henglong entered into an agreement with other parties to establish a venture capital fund, the “Chongqing Venture Fund”. Hubei Henglong has committed to make investments of RMB 120.0 million, equivalent to approximately $18.1 million, in the Chongqing Venture Fund in three installments. As of September 30, 2017, Hubei Henglong has completed a capital contribution of RMB 84.0 million, equivalent to approximately $12.7 million, representing 35.0% of the Chongqing Venture Fund’s shares. As a limited partner, Hubei Henglong has more than virtually no influence over the Chongqing Venture Fund’s operating and financial policies. The investment is accounted for using the equity method. As of September 30, 2017 and December 31, 2016, the Company had $12.5 million and $6.8 million, respectively, of net equity in the Chongqing Venture Fund.

In October 2016, Hubei Henglong invested RMB 3.0 million, equivalent to approximately $0.5 million, to establish a joint venture company, Chongqing Jinghua Automotive Intelligent Manufacturing Technology Research Co., Ltd., “Chongqing Jinghua”, with five other parties. The Company owns 30% of the equity in Chongqing Jinghua, and can exercise significant influence over Chongqing Jinghua’s operating and financial policies. The Company accounts for Chongqing Jinghua’s operational results with the equity method. As of September 30, 2017 and December 31, 2016, the Company had $0.5 million and $0.4 million, respectively, of net equity in Chongqing Jinghua.

The Company’s consolidated financial statements reflect the net income of non-consolidated affiliates of $0.5 million and $0.6 million for the nine months ended September 30, 2017 and 2016, respectively.

The Company’s property, plant and equipment, net as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 are summarized as follows (figures are in thousands of USD):

The Company must use the loans for the purpose as prescribed in the loan contracts. If the Company fails to do so, it will be charged penalty interest and/or trigger early repayment. The Company complied with such financial covenants as of March 31, 2021.

The Company’s ~~intangible assets~~accounts and notes payable as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 are summarized as follows (figures are in thousands of USD):

~~In accordance with the provisions of~~~~ASC Topic 740, “Income Taxes”,~~ the Company assesses, on a quarterly basis, its ability to realize its deferred tax assets. Based on the more likely than not standard in the guidance and the weight of available evidence, the Company believes a valuation allowance against its deferred tax assets is necessary. In determining the need for a valuation allowance, the Company considered the following significant factors: an assessment of recent years’ profitability and losses by tax authorities; the Company’s expectation of profits based on margins and volumes expected to be realized, which are based on current pricing and volume trends; the long period in all significant operating jurisdictions before the expiry of net operating losses, noting further that a portion of the deferred tax asset is composed of deductible temporary differences that are subject to an expiry period until realized under tax law. The Company will continue to evaluate the provision of valuation allowance in future periods.

~~The components of estimated deferred income tax assets as of September 30, 2017 and December 31, 2016 are as follows (figures are in thousands of USD):~~

~~Loans consist of the following as of September 30, 2017 and December 31, 2016 (figures are in thousands of USD):~~

On May 22, 2012, the Company drew down the full amount of $30.0 million under the Credit Facility and provided the Henglong Standby Letter of Credit for an amount of $31.6 million in favor of ICBC Macau. The Henglong Standby Letter of Credit issued by ICBC Jingzhou is collateralized by Henglong’s notes receivable of RMB 207.1 million, equivalent to approximately $32.6 million. The Company also paid an arrangement fee of $0.1 million to ICBC Macau and $0.1 million to ICBC Jingzhou. The original maturity date of the Credit Facility was May 22, 2013 and was extended to May 12, 2017. The interest rate of the Credit Facility under the extended term is three-month LIBOR plus 0.7% per annum. Except for the above, all other terms and conditions as stipulated in the Credit Agreement remained unchanged. As of December 31, 2016, the interest rate of the Credit Facility was 1.7% per annum.

On April 20, 2017, the Company entered into a credit facility agreement, the “Credit Agreement,” with ICBC Macau to obtain a non-revolving credit facility in the amount of $20.0 million, the “Credit Facility”. The Credit Facility will expire on May 12, 2018 unless the Company draws down the line of credit in full prior to such expiration date, and the maturity date for the loan drawdown is the earlier of (i) 12 months from the date of drawdown or (ii) one month before the expiry of the standby letter of credit obtained by Henglong from ICBC Jingzhou as security for the Credit Facility, the “Henglong Standby Letter of Credit”. The interest rate of the Credit Facility is calculated based on a three-month LIBOR plus 1.30% per annum, subject to the availability of funds and fluctuation at ICBC Macau’s discretion. Interest is calculated daily based on a 360-day year and it is fixed one day before the first day of each interest period. The interest period is defined as three months from the date of drawdown. As security for the Credit Facility, the Company was required to provide ICBC Macau with the Henglong Standby Letter of Credit for a total amount of not less than $23.9 million if the Credit Facility is fully drawn.

On May 5, 2017, the Company drew down the full amount of $20.0 million under the Credit Facility and provided the Henglong Standby Letter of Credit for an amount of $23.4 million in favor of ICBC Macau. The Henglong Standby Letter of Credit issued by ICBC Jingzhou is collateralized by Henglong’s notes receivable of RMB 158.9 million, equivalent to approximately $23.9 million. The Company also paid an arrangement fee of $0.04 million to ICBC Jingzhou. The maturity date of the Credit Facility is May 12, 2018.

On April 28, 2017, Great Genesis drew down the full amount of $9.9 million under the Taishin Bank Credit Facility and provided the Henglong Standby Letter of Credit for an amount of $10.0 million in favor of Taishin Bank. Henglong’s Standby Letter of Credit issued by China CITIC Bank Wuchang branch is collateralized by Henglong’s short-term investments of RMB 4.0 million, equivalent to approximately $0.6 million, and notes receivable of RMB 79.4 million, equivalent to approximately $12.0 million.

On July 22, 2014, Great Genesis drew down a loan amounting to $5.0 million provided by HSBC HK and Hubei Henglong provided a Standby Letter of Credit for an amount of $5.4 million in favor of HSBC HK. Hubei Henglong’s Standby Letter of Credit was issued by HSBC Bank (China) Company Limited Wuhan branch and is collateralized by long-term time deposits of Hubei Henglong of RMB 33.0 million, equivalent to approximately $4.8 million.

On July 7, 2016, HSBC HK agreed to extend the maturity date of the HSBC Credit Facility to July 1, 2017. Hubei Henglong provided a Standby Letter of Credit in an amount of $5.1 million in favor of HSBC HK. The Standby Letter of Credit was issued by HSBC Bank (China) Company Limited Wuhan branch and was collateralized by short-term time deposits of Hubei Henglong of RMB 36.0 million, equivalent to approximately $5.2 million. The interest rate of the HSBC Credit Facility under the extended term was revised as three-month LIBOR plus 0.8% per annum, i.e. 1.95% per annum. Except for the above, all other terms and conditions as stipulated in the Credit Agreement remained unchanged. The Company repaid this bank loan on July 14, 2017.

On May 6, 2016, Brazil Henglong drew down a loan amounting to $0.1 million provided by HSBC Brazil. The loan matured on October 9, 2017 and has an annual interest rate of 8.2%.Hubei Henglong provided a Standby Letter of Credit for an amount of $0.1 million in favor of HSBC Brazil. Hubei Henglong’s Standby Letter of Credit was issued by China CITIC Bank Wuhan branch and is collateralized by short-term investments of Hubei Henglong of RMB 0.5 million, equivalent to approximately $0.1 million. The Company repaid this bank loan on October 9, 2017.

On August 26, 2016, Brazil Henglong entered into a credit facility agreement with Bank of China (Brazil) to obtain a credit facility in the amount of $0.6 million, the “Bank of China Credit Facility”. The Bank of China Credit Facility will expire on January 15, 2018. As security for the Bank of China Credit Facility, the Company’s subsidiary Hubei Henglong is required to provide Bank of China (Brazil) with a Standby Letter of Credit for a total amount of $0.9 million if the Bank of China Credit Facility is fully drawn.

On August 26, 2016, Brazil Henglong drew down a loan amounting to $0.6 million provided by Bank of China (Brazil). The loan will mature on January 15, 2018 and has an annual interest rate of 4.0%. Interest is paid semiannually and the principal repayment is at maturity. Hubei Henglong provided a Standby Letter of Credit for an amount of $0.9 million in favor of Bank of China (Brazil). Hubei Henglong’s Standby Letter of Credit was issued by Bank of China Jingzhou branch and is collateralized by long-term time deposits of Hubei Henglong of RMB 6.0 million, equivalent to approximately $0.9 million.

On September 26, 2016, Hubei Henglong entered into a credit facility agreement with China CITIC Bank to obtain credit facilities in the amount of RMB 100.0 million (equivalent to $15.1 million as of September 30, 2017), the “Hubei Henglong CITIC Credit Facility”. The Hubei Henglong CITIC Credit Facility expired on September 26, 2017. Henglong provided a guarantee for the Hubei Henglong CITIC Credit Facility. On March 3, 2017, Hubei Henglong drew down loans amounting to RMB 28.7 million, RMB 28.7 million and 38.2 million (equivalent to $4.3 million, $4.3 million and $5.8 million), respectively. The loans will mature on February 2, 8 and 9, 2018, respectively. The annual interest rate of the loans is 5.0%. The principal and interest will be paid at maturity.

On April 21, 2017, the Company received an interest-free Chinese government loan of RMB 10.0 million, equivalent to approximately $1.5 million, which will mature on December 8, 2017. Jiulong pledged RMB 10.0 million, equivalent to approximately $1.5 million, of notes receivable as security for the Chinese government loan (See Note 4).

~~The Company’s accounts and notes payable as of September 30, 2017 and December 31, 2016 are summarized as follows (figures are in thousands of USD):~~

The Company’s accrued expenses and other payables as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 are summarized as follows (figures are in thousands of USD):

For the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, the warranties activities were as follows (figures are in thousands of USD):

~~For the nine months ended September 30, 2017 and 2016, and for the year ended December 31, 2016, the warranties activities were as follows (figures are in thousands of USD):~~

Nine Months Ended September 30, Year Ended
December 31,
2017 2016 2016
Balance at beginning of the period $ 26,225 $ 23,059 $ 23,059
Additions during the period 11,182 5,433 16,522
Settlement within period, by cash or actual materials (15,423 ) (8,434 ) (11,781 )
Foreign currency translation loss (1,133 ) 655 (1,575 )
Balance at end of the period $ 20,851 $ 20,713 $ 26,225

~~16.~~

~~Taxes payable~~

~~The Company’s taxes payable as of September 30, 2017 and December 31, 2016 are summarized as follows (figures are in thousands of USD):~~

September 30, 2017 December 31, 2016
Value-added tax payable $ 2,374 $ 7,662
Income tax payable 1,019 3,390
Other tax payable 407 622
Total $ 3,800 $ 11,674

~~17.~~10.

~~Advances~~Other long-term payable

On January 31, 2018, the Company entered into an equipment sales agreement with a third party (the “buyer-lessor”) and simultaneously entered into a four-year contract to lease back the equipment from the buyer-lessor. The carrying value of the equipment was RMB 91.3 million (equivalent to $13.9 million as of March 31, 2021) and the sales price was RMB 100.0 million (equivalent to $15.2 million as of March 31, 2021). Pursuant to the terms of the contract, the Company is required to pay to the buyer-lessor lease payments over four (4) years with a quarterly lease payment of approximately $1.0 million and is entitled to obtain the ownership of this equipment at a nominal price upon the expiration of the lease. The Company is of the view that the transaction does not qualify as a sale. Therefore, the transaction was accounted for as a financing transaction by the Company. As of March 31, 2021, $4.2 million was recognized as other payable (See Note 9) and $0.04 million was recognized as other long-term payable to the buyer-lessor according to the contract term.

11.	Redeemable non-controlling interests

In September ~~30, 2017~~2020, one of the Company’s subsidiaries issued shares to Hubei Venture Fund amounting to $0.7 million. The shares will be transferred to the Company and ~~December 31, 2016, advances payable~~the other shareholder of the subsidiary on a pro rata basis at the holder’s option if the subsidiary fails to complete a qualified IPO in a pre-agreed period of time after their issuance with a transfer price of par plus 6% per year. $0.5 million of the shares are subject to purchase by the Company ~~were $0.8 million~~ and ~~$0.7 million, respectively.~~are therefore accounted for as redeemable non-controlling interests in mezzanine equity and are accreted to the redemption value over the period starting from the issuance date.

~~The amounts are special subsidies made by~~For the ~~Chinese government~~three months ended March 31, 2021, the Company recognized accretion of $0.007 million to the ~~Company to offset the costs and charges related to the improvement of production capacities and improvement~~redemption value of the ~~quality of products. For~~shares over the ~~government subsidies~~period starting from the issuance date with ~~no further conditions~~a corresponding reduction to be met, the amounts are recorded as other income when received; for the amounts with certain operating conditions, the government subsidies are recorded as advances payable when received and will be recorded as a deduction of related expenses and cost when the conditions are met.

~~The balances are unsecured, interest-free and will be repayable to the Chinese government if the usage of such advance does not continue to qualify for the subsidy.~~retained earnings.

~~18.~~12.

Additional paid-in capital

The Company’s positions in respect of the amounts of additional paid-in capital for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, and the year ended December 31, 2016~~2020, are summarized as follows (figures are in thousands of USD):

	Nine Months Ended September 30,					Year Ended December 31,		Three Months Ended March 31,
	2017			2016		2016		2021		2020
Balance at beginning of the period	$	64,764		$	64,627	$	64,627	$	64,273	$	64,466
Acquisition of the non-controlling interest in Brazil Henglong⁽¹⁾		(458	)		-		-
Share-based compensation⁽²⁾		100			-		137
Share-based compensation									88		-
Acquisition of the non-controlling interest in USAI									-		(29	)
Balance at end of the period	$	64,406		$	64,627	$	64,764	$	64,361	$	64,437

13.

~~(1)~~

In May 2017, the Company obtained an additional 15.84% equity interest in Brazil Henglong for nil consideration. The Company retained its controlling interest in Brazil Henglong and the acquisition of the non-controlling interest was accounted for as an equity transaction.Stock Options

~~(2)~~

On December 2, 2016 and August 16, 2017, the Company granted 22,500 and 22,500 stock options, respectively, to the Company’s independent directors, with the exercise price equal to the closing price of the Company’s common stock traded on NASDAQ one day before the date of grant and on the date of grant. The fair value of the stock options was determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option model requires management to make various estimates and assumptions, including expected term, expected volatility, risk-free rate and dividend yield. The expected term represents the period of time that stock-based compensation awards granted are expected to be outstanding and is estimated based on considerations including the vesting period, contractual term and anticipated employee exercise patterns. Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate is based on the U.S. Treasury yield curve in relation to the contractual life of stock-based compensation instruments. The dividend yield assumption is based on historical patterns and future expectations for the Company’s dividends.

The Company’s stock option plan was approved at the Annual Meeting of Stockholders held on June 28, 2005, and extended to June 27, 2025 at the Annual Meeting of Stockholders held on September 16, 2014. The maximum common shares available for issuance under this plan is 2,200,000. The stock incentive plan provides for the issuance, to the Company’s officers, directors, management and employees who served over three years or have given outstanding performance, of options to purchase shares of the Company’s common stock. The Company has issued 658,850 stock options under this plan, and there remain 1,541,150 stock options issuable in the future as of March 31, 2021.

~~Assumptions~~Under the aforementioned plan, the stock options granted will have an exercise price equal to the closing price of the Company’s common stock traded on NASDAQ one day before the date of grant, and will expire two to five years after the grant date. The stock options granted during the three months ended March 31, 2021 were exercisable immediately on the grant date. Stock options will be settled in shares of the Company’s common stock upon exercise and are recorded in the Company’s consolidated balance sheets under the caption “Additional paid-in capital.” As of March 31, 2021, the Company has sufficient unissued registered common stock for settlement of the stock incentive plan mentioned above.

The fair value of stock options was determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option model requires management to make various estimates and assumptions, including expected term, expected volatility, risk-free rate, and dividend yield. The expected term represents the period of time that stock-based compensation awards granted are expected to be outstanding and is estimated based on considerations including the vesting period, contractual term and anticipated employee exercise patterns. Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate is based on the U.S. Treasury yield curve in relation to the contractual life of stock-based compensation instruments. The dividend yield assumption is based on historical patterns and future expectations for the Company dividends.

For the stock options granted during the three months ended March 31, 2021, assumptions used to estimate the fair value of ~~the~~ stock options on the grant ~~dates are~~date is as follows:

Issuance Date Expected volatility Risk-free rate Expected term (years) Dividend yield

December 2, 2016 134.8 % 1.84 % 5 0.00 %
August 16, 2017 139.2 % 1.79 % 5 0.00 %

Issuance Date		Expected volatility				Risk-free rate				Expected term (years)				Dividend yield
February 3, 2021			76.91	%			0.46	%			5				0.00	%

The stock options granted during ~~2017 and 2016~~the three months ended March 31, 2021 were exercisable ~~immediately. Their~~immediately and their fair ~~values~~value on the grant ~~dates~~date using the Black-Scholes option pricing model ~~were$0.1 million and~~was $0.1 ~~million, respectively.~~million. For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~the year ended December 31, 2016,~~2020, the Company recognized stock-based compensation expenses of $0.1 million and nil, respectively.

The activities of stock options are summarized as follows, including granted, exercised and forfeited.

						Weighted-Average
				Weighted-Average		Contractual
	Shares			Exercise Price		Term (years)
Outstanding - January 1, 2020		30,000		$	4.99		5
Expired		(7,500	)		5.58		5
Outstanding - December 31, 2020		22,500		$	4.79		5
Granted		22,500			6.26		5
Outstanding - March 31, 2021		45,000		$	5.52		5

The following is a summary of the range of exercise prices for stock options that are outstanding and exercisable at March 31, 2021:

	Outstanding Stock		Weighted Average		Weighted Average		Number of Stock
Range of Exercise Prices	Options		Remaining Life		Exercise Price		Options Exercisable
$2.37 - $6.95		45,000		2.39	$	5.52		45,000

As of March 31, 2021 and December 31, 2020, the total intrinsic value of the Company’s stock options that were exercisable was $0.2 million and $0.1 million, respectively.

For the three months ended March 31, 2021 and 2020, no Company’s stock options were exercised.

During the three months ended March 31, 2021, the weighted average fair value of the Company’s stock options granted was $3.92. No stock option was granted during the three months ended March 31, 2020.

~~19.~~14.

Retained earnings

Appropriated

Pursuant to the relevant PRC laws, the profits distribution of the Company’s ~~Sino-foreign~~ subsidiaries, which are based on their PRC statutory financial statements, ~~other than the financial statement that was prepared in accordance with generally accepted accounting principles in the United States of America,~~ are available for distribution in the form of cash dividends after these subsidiaries have paid all relevant PRC tax liabilities, provided for losses in previous years, and made appropriations to statutory surplus at 10%.

of their respective after-tax profits each year. When the statutory surplus reserve reaches 50% of the registered capital of a company, no additional reserve is required. For the three months ended March 31, 2021 and 2020, no ~~longer required. However,~~statutory reserve was appropriated by the ~~reserve cannot be distributed to joint venture partners. Based on the business licenses of the PRC~~ subsidiaries the registered capital of Henglong, Jiulong, Shenyang, USAI, Jielong, Wuhu, Hubei Henglong and Chongqing are $10.0 million, $4.2 million (equivalent to RMB 35.0 million), $8.1 million (equivalent to RMB 67.5 million), $2.6 million, $6.0 million, $3.8 million (equivalent to RMB 30.0 million), $39.0 million and $9.5 million (equivalent to RMB 60.0 million), respectively.in China.

The Company’s activities in respect of the amounts of appropriated retained earnings for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, and the year ended December 31, 2016~~2020, are summarized as follows (figures are in thousands of USD):

	Nine Months Ended September 30,				Year Ended December 31,		Three Months Ended March 31,
	2017		2016		2016		2021		2020
Balance at beginning of the period	$	10,549	$	10,379	$	10,379	$	11,303	$	11,265
Appropriation of retained earnings		124		142		170
Balance at end of the period	$	10,673	$	10,521	$	10,549	$	11,303	$	11,265

Unappropriated

The Company’s activities in respect of the amounts of the unappropriated retained earnings for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, and the year ended December 31, 2016~~2020, are summarized as follows (figures are in thousands of USD):

Nine Months Ended September 30, Year Ended
December 31,
2017 2016 2016
Balance at beginning of the period $ 228,963 $ 206,622 $ 206,622
Net income attributable to parent company 19,694 16,755 22,511
Appropriation of retained earnings (124 ) (142 ) (170 )
Balance at end of the period $ 248,533 $ 223,235 $ 228,963

	Three Months Ended March 31,
	2021			2020
Balance at beginning of the period	$	215,491		$	221,298
Cumulative effect of accounting change - credit loss		-			(789	)
Net income/(loss) attributable to parent company		3,213			(28	)
Accretion of redeemable non-controlling interests		(7	)		-
Balance at end of the period	$	218,697		$	220,481

~~20.~~15.

Accumulated other comprehensive income

The Company’s activities in respect of the amounts of ~~the~~ accumulated other comprehensive income for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, and the year ended December 31, 2016~~2020, are summarized as follows (figures are in thousands of USD):

	Nine Months Ended September 30,						Year Ended December 31,			Three Months Ended March 31,
	2017			2016			2016			2021			2020
Balance at beginning of the period	$	(892	)	$	18,412		$	18,412		$	17,413		$	(3,462	)
Other comprehensive income related to the non-controlling interests acquired by the Company		(67	)		-			-
Foreign currency translation adjustment attributable to parent company		13,681			(8,128	)		(19,304	)		(2,128	)		(4,508	)
Balance at end of the period	$	12,722		$	10,284		$	(892	)	$	15,285		$	(7,970	)

	~~21.~~16.	Treasury stock

Treasury stock represents shares repurchased by the Company that are no longer outstanding and are held by the Company. Treasury stock is accounted for under the cost method. On August 13, 2020, the Board of Directors of the Company approved a share repurchase program under which the Company was permitted to repurchase up to $5.0 million of its common stock from time to time in the open market at prevailing market prices not to exceed $3.50 per share through August 12, 2021. As of March 31, 2021, the Company had cumulatively repurchased 322,269 of the shares that were authorized to be repurchased under the program that was approved on August 13, 2020. The repurchased shares are presented as “treasury stock” on the balance sheet.

Treasury stock represents shares repurchased by the Company that are no longer outstanding and are held by the Company. Treasury stock is accounted for under the cost method. On December 18, 2015, the Board of Directors of the Company approved a share repurchase program under which the Company was permitted to repurchase up to $5.0 million of its common stock from time to time in the open market at prevailing market prices or in privately negotiated transactions through December 17, 2016. The repurchase program terminated on December 17, 2016. During the year ended December 31, 2016, under the repurchase program, the Company repurchased 477,015 shares of the Company’s common stock for cash consideration of $1.9 million on the open market. The repurchased shares are presented as “treasury stock” on the balance sheet.

~~22.~~17.

Non-controlling interests

The Company’s activities in respect of the amounts of the non-controlling interests’ equity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, and the year ended December 31, 2016~~2020, are summarized as follows (figures are in thousands of USD):

Nine Months Ended September 30, Year Ended
December 31,
2017 2016 2016
Balance at beginning of the period $ 5,412 $ 8,252 $ 8,252
Income attributable to non-controlling interests 353 164 466
Dividends declared to the non-controlling interest holders of joint-venture companies (See Note 15) (608 ) (464 ) (464 )
Acquisition of the non-controlling interest in Brazil Henglong 458 - -
Other comprehensive income related to the non-controlling
interests acquired by the Company 67 - -
Non-controlling interests change due to the disposal of Fujian Qiaolong - (2,150 ) (2,150 )
Foreign currency translation adjustment attributable to non-controlling interests 467 (307 ) (692 )
Balance at end of the period $ 6,149 $ 5,495 $ 5,412

	Three Months Ended March 31,
	2021			2020
Balance at beginning of the period	$	16,170		$	20,250
Net income/(loss) attributable to non-controlling interests		18			(600	)
Acquisition of the non-controlling interest in USAI		-			29
Cumulative effect of accounting change - credit loss		-			(102	)
Dividends declared to non-controlling interest holders of non-wholly owned subsidiaries		-			(430	)
Foreign currency translation adjustment attributable to non-controlling interests		(143	)		(453	)
Balance at end of the period	$	16,045		$	18,694

~~23.~~18.

~~Gain on other~~Net product sales

~~Gain~~Revenue Disaggregation

Management has concluded that the disaggregation level is the same under both the revenue standard and the segment reporting standard. Please refer to Note 25.

Contract Assets and Liabilities

Contract assets, such as costs to obtain or fulfill contracts, are an insignificant component of the Company’s revenue recognition process. The majority of the Company’s cost of fulfillment as a manufacturer of products is classified as inventory, fixed assets and intangible assets, which are accounted for under the respective guidance for those asset types. Other costs of contract fulfillment are immaterial due to the nature of the Company’s products and their respective manufacturing processes.

Contract liabilities are mainly customer deposits. As of March 31, 2021 and December 31, 2020, the Company has customer deposits of $1.1 million and $1.5 million, respectively, which were included in other current liabilities on ~~other sales mainly consisted of net amount retained from sales of materials, property, plant and equipment, and scraps. For~~ the ~~nine~~consolidated balance sheets. During the three months ended ~~September 30, 2017, gain on other~~March 31, 2021, $1.0 million was received and $1.4 million (including $1.4 million from the beginning balance of customer deposits) was recognized as net product sales ~~amounted to $5.9 million as compared to $2.0 million for~~revenue. During the ~~nine~~three months ended ~~September 30, 2016, representing~~March 31, 2020, $0.3 million was received and $0.6 million (including $0.6 million from the beginning balance of customer deposits) was recognized as net product sales revenue. Customer deposits represent non-refundable cash deposits for customers to secure rights to an ~~increase~~amount of ~~$3.9 million. During the second quarter of 2017,~~products produced by the Company ~~disposed~~under supply agreements. When the products are shipped to customers, the Company will recognize revenue and bill the customers to reduce the amount of ~~a building located in Jingzhou and recognized a gain of $2.2 million.~~ the customer deposit liability.

~~24.~~19.

Financial ~~income,~~expense, net

During the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, the Company recorded financial ~~income,~~expense, net which is summarized as follows (figures are in thousands of USD):

	Nine Months Ended September 30,
	2017			2016			Three Months Ended March 31,
							2021			2020
Interest income	$	2,474		$	1,777		$	313		$	351
Foreign exchange loss, net		(173	)		(30	)		(469	)		(711	)
Gain of cash discount, net		-			3
Bank fees		(392	)		(480	)		(83	)		(171	)
Total financial income, net	$	1,909		$	1,270
Total financial expense, net							$	(239	)	$	(531	)

~~25.~~20.

~~Income tax rate~~

The Company’s subsidiaries registered in the PRC are subject to national and local income taxes within the PRC at the applicable tax rate of 25% on the taxable income as reported in their PRC statutory financial statements in accordance with the relevant income tax laws applicable to foreign invested enterprise, unless preferential tax treatment is granted by local tax authorities. If the enterprise meets certain preferential terms according to the China income tax law, such as assessment as a “High & New Technology Enterprise” by the government, the enterprise will be subject to enterprise income tax at a rate of 15%.

Pursuant to the New China Income Tax Law and the Implementing Rules, “New CIT”, which became effective as of January 1, 2008, dividends generated after January 1, 2008 and payable by a foreign-invested enterprise to its foreign investors will be subject to a 10% withholding tax if the foreign investors are considered non-resident enterprises without any establishment or place within China or if the dividends payable have no connection with the establishment or place of the foreign investors within China, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement.

Genesis, the Company’s wholly-owned subsidiary and the direct holder of the equity interests in the Company’s subsidiaries in China, is incorporated in Hong Kong. According to the Mainland China and Hong Kong Taxation Arrangement, dividends paid by a foreign-invested enterprise in China to its direct holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5%, if the foreign investor directly owns at least 25% of the shares of the foreign-invested enterprise. Under the New CIT, if Genesis is regarded as a non-resident enterprise, it is required to pay an additional 5% withholding tax for any dividends payable to it from the PRC subsidiaries.

According to PRC tax regulation, the Company should withhold income taxes for the profits distributed from the PRC subsidiaries to Genesis, the subsidiaries’ holding company incorporated in Hong Kong. For the profits that the PRC subsidiaries intended to distribute to Genesis, the Company accrues the withholding income tax as deferred tax liabilities. As of September 30, 2017, the Company has recognized deferred tax liabilities of $0.2 million for the remaining undistributed profits to Genesis of $4.5 million. The Company intended to re-invest the remaining undistributed profits generated from the PRC subsidiaries in those subsidiaries permanently. As of September 30, 2017 and December 31, 2016, the Company still had undistributed earnings of approximately $266.4 million and $239.8 million, respectively, from investment in the PRC subsidiaries that are considered permanently reinvested. Had the undistributed earnings been distributed to Genesis and not permanently reinvested, the tax provision as of September 30, 2017 and December 31, 2016 of approximately $13.3 million and $12.0 million, respectively, would have been recorded. Such undistributed profits will be reinvested in Genesis and not further distributed to the parent company incorporated in the United States going forward.

In 2014, Jiulong was awarded the title of “High & New Technology Enterprise” and, based on the PRC income tax law, it is subject to enterprise income tax at a rate of 15% from 2014 to 2016. The Company estimated the applied tax rate in 2017 to be 15% as it is probable to pass the re-assessment in 2017 and continue to qualify as “High & New Technology Enterprise”.

In 2014, Henglong was awarded the title of “High & New Technology Enterprise” and, based on the PRC income tax law, it is subject to enterprise income tax at a rate of 15% from 2014 to 2016. The Company estimated the applied tax rate in 2017 to be 15% as it is probable to pass the re-assessment in 2017 and continue to qualify as “High & New Technology Enterprise”.

In 2009, Shenyang was awarded the title of “High & New Technology Enterprise” and, based on the PRC income tax law, it was subject to enterprise income tax at a rate of 15% for 2009, 2010 and 2011. In 2012, the Company passed the re-assessment of the government based on PRC income tax laws. Accordingly, it continued to be taxed at the 15% tax rate in 2012, 2013 and 2014. In 2015, the Company passed the re-assessment of the government based on PRC income tax laws. Accordingly, it continues to be taxed at the 15% tax rate in 2015, 2016 and 2017.

In 2012, Wuhu was awarded the title of “High & New Technology Enterprise” and, based on the PRC income tax law, it was subject to enterprise income tax at a rate of 15% for 2013 and 2014. In 2015, the Company passed the re-assessment of the government based on PRC income tax laws. Accordingly, it continues to be taxed at the 15% tax rate in 2015 and 2016. The Company estimated the applied tax rate in 2017 to be 15% as it is probable to pass the re-assessment in 2017 and continue to qualify as “High & New Technology Enterprise”.

In 2013, Jielong was awarded the title of “High & New Technology Enterprise” and, based on the PRC income tax law, it was subject to enterprise income tax at a rate of 15% for 2013, 2014 and 2015. In 2016, the Company passed the re-assessment of the government based on PRC income tax laws. Accordingly, it continues to be taxed at the 15% tax rate from 2016 to 2018.

In 2011, Hubei Henglong was awarded the title of “High & New Technology Enterprise”. Based on the PRC income tax law, it was subject to enterprise income tax at a rate of 15% for 2013. The Company has passed the re-assessment in 2014 and continues to qualify as a “High & New Technology Enterprise”. Accordingly, it continues to be taxed at the 15% tax rate in 2014, 2015 and 2016. The Company estimated the applied tax rate in 2017 to be 15% as it is probable to pass the re-assessment in 2017 and continue to qualify as “High & New Technology Enterprise”.

~~According to the New CIT, USAI, Wuhan Chuguanjie, Shanghai Henglong and Testing Center are subject to income tax at a rate of 25% in 2016 and 2017.~~

Chongqing Henglong was established in 2012. According to the New CIT, Chongqing Henglong is subject to income tax at a uniform rate of 25%. No provision for Chongqing Henglong is made as it had no assessable income for the nine months ended September 30, 2017 and 2016.

Based on Brazilian income tax laws, Brazil Henglong is subject to income tax at a uniform rate of 15%, and a resident legal person is subject to additional tax at a rate of 10% for the part of taxable income over $0.12 million, equivalent to approximately BRL 0.24 million. The Company had no assessable income in Brazil for the nine months ended September 30, 2017 and 2016.

The profits tax rate of Hong Kong is 16.5%. No provision for Hong Kong tax is made as Genesis is an investment holding company, and had no assessable income in Hong Kong for the nine months ended September 30, 2017 and 2016.

The enterprise income tax rate of the United States is 35%. No provision for U.S. tax is made for CAAS and HLUSA as a whole, as the Company had no assessable income in the United States for the nine months ended September 30, 2017 and 2016.

The Company’s effective tax rate was 17.3% and 18.2% for the three months and nine months ended September 30, 2017, respectively, compared with 17.4% and 17.3% for the three months and nine months ended September 30, 2016, respectively.

~~26.~~

~~Income~~Income/(loss) per share

Basic income per share is computed using the weighted average number of ordinary shares outstanding during the period. Diluted income per share is computed using the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. The dilutive effect of outstanding stock options is determined based on the treasury stock method.

The ~~calculation~~calculations of basic and diluted income per share attributable to the parent company for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, was~~2020, were as follows (figures are in thousands of USD, except share and per share amounts):

Three Months Ended September 30,
2017 2016
Numerator:
Net income attributable to the parent company’s common shareholders – Basic and Diluted $ 5,059 $ 5,682
Denominator:
Weighted average shares outstanding 31,644,004 31,911,360
Dilutive effects of stock options 267 362
Denominator for dilutive income per share – Diluted 31,644,271 31,911,722

Net income per share attributable to parent company’s common shareholders – Basic $ 0.16 $ 0.18
Net income per share attributable to parent company’s common shareholders – Diluted $ 0.16 $ 0.18

The calculation of basic and diluted income per share attributable to the parent company for the nine months ended September 30, 2017 and 2016, was (figures are in thousands of USD, except share and per share amounts):

	Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2021		2020
Numerator:
Net income attributable to the parent company’s common shareholders – Basic and Diluted	$	19,694	$	16,755
Net income/(loss) attributable to the parent company’s common shareholders - Basic and Diluted					$	3,206	$	(28	)
Denominator:
Weighted average shares outstanding		31,644,004		32,038,933		30,851,776		31,174,045
Dilutive effects of stock options		3,829		1,581		5,960		-
Denominator for dilutive income per share – Diluted		31,647,833		32,040,514
Denominator for dilutive income per share - Diluted						30,857,736		31,174,045

Net income per share attributable to parent company’s common shareholders – Basic	$	0.62	$	0.52
Net income per share attributable to parent company’s common shareholders – Diluted	$	0.62	$	0.52
Net income/(loss) per share attributable to parent company’s common shareholders - Basic					$	0.10	$	-
Net income/(loss) per share attributable to parent company’s common shareholders - Diluted					$	0.10	$	-

As of ~~September 30, 2017 and 2016,~~March 31, 2021, the exercise prices for ~~90,000~~30,000 shares, ~~and 82,500 shares, respectively,~~ of outstanding stock options were above the weighted average market price of the Company’s common stock during the ~~nine~~three months ended ~~September 30, 2017 and 2016, respectively, and~~March 31, 2021. Therefore, these stock options were excluded from the calculation of the diluted income per share for the corresponding periods presented.

For the three months ended March 31, 2020, assumed conversion of the stock options has not been reflected in the dilutive calculation pursuant to ASC 260, “Earnings Per Share,” due to the anti-dilutive effect as a result of the Company’s net loss. The effects of all outstanding share options with common share equivalents of 74 shares, have been excluded from the calculation of the diluted loss per share for the three months ended March 31, 2020, due to their anti-dilutive effect.

~~27.~~21.

Significant concentrations

A significant portion of the Company’s business is conducted in China where the currency is the RMB. Regulations in China permit foreign owned entities to freely convert the RMB into foreign currency for transactions that fall under the "current ~~account,"~~account", which includes trade related receipts and payments, interest and dividends. Accordingly, the Company’s Chinese subsidiaries may use RMB to purchase foreign ~~exchange~~currency for settlement of such "current account" transactions without pre-approval. ~~However, pursuant to applicable regulations, foreign-invested enterprises~~

China Automotive, the parent company, may depend on dividend payments from Genesis and HLUSA, which are generated from their subsidiaries in China, ~~may pay~~“China-based Subsidiaries,” after they receive payments from the China-based Subsidiaries. Regulations in the PRC currently permit payment of dividends of a PRC company only out of ~~their~~ accumulated profits ~~if any,~~as determined in accordance with ~~the~~accounting standards and regulations in China. Under PRC ~~law. In calculating accumulated profits, foreign investment enterprises in China~~law China-based Subsidiaries are required to ~~allocate~~set aside at least 10% of their ~~annual net income~~after-tax profit based on PRC accounting standards each year ~~if any,~~ to ~~fund certain reserve funds, including mandated employee benefits funds, unless these~~their general reserves ~~have reached~~until the cumulative amount reaches 50% of their paid-in capital. These reserves are not distributable as cash dividends, or as loans or advances. These foreign-invested enterprises may also allocate a portion of their after-tax profits, at the ~~registered capital~~discretion of their boards of directors, to their staff welfare and bonus funds. Any amounts so allocated may not be distributed and, accordingly, would not be available for distribution to Genesis and HLUSA.

The PRC government also imposes controls on the ~~enterprises.~~convertibility of RMB into foreign currencies and, in certain cases, the remittance of currencies out of China. The China-based Subsidiaries may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currencies. If China Automotive is unable to receive dividend payments from its subsidiaries, including the China-based subsidiaries, China Automotive may be unable to effectively finance its operations or pay dividends on its shares.

Transactions other than those that fall under the "current account" and that involve conversion of RMB into foreign currency are classified as "capital account" transactions; examples of "capital account" transactions include repatriations of investment by or loans to foreign owners, or direct equity investments in a foreign entity by a China domiciled entity. "Capital account" transactions require prior approval from China's State Administration of Foreign Exchange, or SAFE, or its provincial branch to convert a remittance into a foreign currency, such as ~~USD,~~U.S. Dollars, and transmit the foreign currency outside of China.

This system could be changed at any time and any such change may affect the ability of the Company or its subsidiaries in China to repatriate capital or profits, if any, outside China. Furthermore, SAFE has a significant degree of administrative discretion in implementing the laws and has used this discretion to limit convertibility of current account payments out of China. Whether as a result of a deterioration in the Chinese balance of payments, a shift in the Chinese macroeconomic prospects or any number of other reasons, China could impose additional restrictions on capital remittances abroad. As a result of these and other restrictions under the laws and regulations of the People's Republic of China, or the PRC, the Company’s ~~PRC~~China subsidiaries are restricted in their ability to transfer a portion of their net assets to the parent. The Company has no assurance that the relevant Chinese governmental authorities in the future will not limit further or eliminate the ability of the Company’s ~~PRC~~China subsidiaries to purchase foreign currencies and transfer such funds to the Company to meet its liquidity or other business needs. Any inability to access funds in China, if and when needed for use by the Company outside of China, could have a material and adverse effect on the Company’s liquidity and its business.

The Company grants credit to its customers including Xiamen Joylon, Xiamen Automotive Parts, Shanghai Fenglong and JingzhouYude, which are related parties of the Company. The Company’s customers are mostly located in the PRC.

During the nine months ended September 30, 2017, the Company’s ten largest customers accounted for 56.1% of its consolidated net product sales, with one customer individually accounting for more than 10% of consolidated net sales i.e., 14.75%. As of September 30, 2017, approximately 6.6% of accounts receivable were from trade transactions with the aforementioned customer and there was no individual customer with a receivables balance of more than 10% of total accounts receivable.

During the nine months ended September 30, 2016, the Company’s ten largest customers accounted for 62.7% of its consolidated net product sales, with one customer individually accounting for more than 10% of consolidated net sales, i.e., 12.9%. As of September 30, 2016, approximately 3.8% of accounts receivable were from trade transactions with the aforementioned customer and there was no individual customer with a receivables balance of more than 10% of total accounts receivable.

~~28.~~22.

Related party transactions and balances

Related party transactions are as follows (figures are in thousands of USD):

Related sales

Three Months Ended September 30,
2017 2016
Merchandise sold to related parties $ 7,563 $ 9,950
Rental income obtained from related parties 20 23
Materials and others sold to related parties 376 551
Total $ 7,959 $ 10,524

	Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2021		2020
Merchandise sold to related parties	$	25,684	$	28,589	$	16,575	$	7,494
Materials and others sold to related parties						426		270
Rental income obtained from related parties		66		91		106		77
Materials and others sold to related parties		1,186		1,231
Total	$	26,936	$	29,911	$	17,107	$	7,841

Related purchases

	Three Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2021		2020
Materials purchased from related parties	$	6,549	$	5,869	$	8,214	$	3,134
Technology purchased from related parties		-		135
Equipment purchased from related parties		4,857		4,370		225		69
Others purchased from related parties		156		149		10		4
Total	$	11,562	$	10,523	$	8,449	$	3,207

Nine Months Ended September 30,
2017 2016
Materials purchased from related parties $ 20,195 $ 18,912
Technology purchased from related parties - 362
Equipment purchased from related parties 9,281 7,900
Others purchased from related parties 371 524
Total $ 29,847 $ 27,698

~~Loan transaction to a related party~~

Nine Months Ended September 30,
2017 2016
Related party loan $ 29,182 $ -

Related receivables

September 30, 2017 December 31, 2016
Accounts and notes receivable from related parties $ 17,607 $ 20,984

		March 31, 2021				December 31, 2020
Accounts and notes receivable from related parties		$	19,274			$	17,622

Related ~~advances and loan balance~~advance payments

September 30, 2017 December 31, 2016
Advance payments for property, plant and equipment to related parties $ 4,813 $ 5,005
Advance payments and others to related parties 31,397 624
Total $ 36,210 $ 5,629

	March 31, 2021		December 31, 2020
Advance payments for property, plant and equipment to related parties	$	2,393	$	3,284
Advance payments and others to related parties		551		522
Total	$	2,944	$	3,806

Related payables

September 30, 2017 December 31, 2016
Accounts and notes payable $ 5,749 $ 6,803

		March 31, 2021				December 31, 2020
Accounts and notes payable		$	10,984			$	12,730

These transactions were consummated under similar terms as those with the Company's third party customers and suppliers.

As of ~~November 9, 2017,~~May 12, 2021, Hanlin Chen, the ~~Company’s Chairman,~~chairman of the board of directors of the Company, owns ~~56.4%~~57.9% of the common stock of the Company and has the effective power to control the vote on substantially all significant matters without the approval of other stockholders.

~~29.~~23.

Commitments and contingencies

Legal proceedings

On January 7, 2019, three purported stockholders of the Company filed a stockholder derivative complaint on behalf of the Company against the Company’s directors Hanlin Chen, Qizhou Wu and Guangxun Xu and former directors Arthur Wong and Robert Tung in the Delaware Court of Chancery, alleging that they had (a) breached their fiduciary duties by approving and paying excessive compensation to the non-employee directors of the Company, Arthur Wong, Guangxun Xu and Robert Tung, and (b) failed to make full and accurate disclosure of all material information with respect to director qualification and director compensation paid in 2017 in the Company’s annual proxy statement on Schedule 14A filed on October 10, 2018. The directors have engaged their own counsel to answer this complaint. On April 9, 2019, the Company moved to dismiss the complaint. The motion to dismiss was denied on July 17, 2019. In November 2020, the Company reached a settlement to resolve the lawsuit for the sum of $55,998. The Company did not admit any liability in reaching the settlement. On February 5, 2021, the Court of Chancery conducted a hearing to confirm the settlement of the stockholder derivative action. The Court entered a Final Order and Judgment approving the settlement. The Court further ordered that the plaintiffs’ application for an award of attorneys’ fees and reimbursement of litigation expenses be reduced from $100,000 to $30,000. The Court’s Final Order and Judgment is publicly available on the Court of Chancery docket. As of March 31, 2021, the Company has received above settlement of $55,998 from the directors and paid the above attorneys’ fees and reimbursement of litigation expenses.

Other than as described above, the Company is not a party to any pending or, to the best of the Company’s knowledge, any threatened legal ~~proceedings. In addition,~~proceedings and no director, officer or affiliate of the Company, or owner of record of more than five percent of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.

Other commitments and contingencies

In addition to the bank loans, notes payables and the related interest, the following table summarizes the Company’s major commitments and contingencies as of ~~September 30, 2017~~March 31, 2021 (figures are in thousands of USD):

	Payment obligations by period												Payment obligations by period
	2017 ⁽¹⁾		2018		2019		2020		Thereafter		Total		2021		2022		2023		Thereafter		Total
Obligations for investment contracts⁽¹⁾		-	$	5,424	$	-	$	-	$	-	$	5,424	$	2,678	$	-	$	-	$	-	$	2,678
Obligations for purchasing and service agreements		16,496		5,650		2,530		-		-		24,676		19,873		1,550		-		-		21,423
Total	$	16,496	$	11,074	$	2,530	$	-	$	-	$	30,100	$	22,551	$	1,550	$	-	$	-	$	24,101

(1)

In ~~May 2016,~~April 2019, Hubei Henglong entered into an agreement with other parties ~~to establish a venture capital fund, the “Chongqing Venture Fund”. Hubei Henglong has~~and committed to ~~make investments of~~contribute RMB ~~120.0~~5.0 million, equivalent to approximately ~~$18.1~~$0.7 million, ~~in the Chongqing Venture Fund in three installments.~~to Jiangsu Intelligent Networking Automotive Innovation Center Co. Ltd., “Jiangsu Intelligent”, representing 19.2% of Jiangsu Intelligent’s shares. As of ~~September 30, 2017,~~March 31, 2021, Hubei Henglong has completed a capital contribution of RMB ~~84.0~~3.0 million, equivalent to approximately ~~$12.7 million, representing 35.0% of the Chongqing Venture Fund’s shares.~~$0.4 million. According to the agreement, the remaining capital commitment of RMB ~~36.0~~2.0 million, equivalent to approximately ~~$5.4~~$0.3 million, will be paid ~~upon capital calls received from~~in 2021.

In November 2019, Hubei Henglong entered into an agreement with other parties and committed to purchase 70% of the ~~Chongqing Venture Fund.~~shares of Hefei Senye Light Plastic Technology Co., Ltd. for total consideration of RMB 33.6 million, equivalent to approximately $5.0 million. As of March 31, 2021, Hubei Henglong has paid the amount of RMB 18.0 million, equivalent to approximately $2.6 million, which was reported in other non-current assets as the transfer of shares had not been consummated. According to the agreement, of the remaining consideration of RMB 15.6 million, equivalent to approximately $2.4 million, will be paid in 2021.

~~30.~~24.

Off-balance sheet arrangements

As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, the Company did not have any significant transactions, obligations or relationships that could be considered off-balance sheet arrangements.

~~31.~~25.

Segment reporting

The accounting policies of the product sectors (each entity manufactures and sells different products and represents a different product sector) are the same as those described in the summary of significant accounting policies disclosed in the Company’s 2020 Annual Report on Form 10-K except that the disaggregated financial results for the product sectors have been prepared using a management approach, which is consistent with the basis and manner in which management internally disaggregates financial information for the purposes of assisting them in making internal operating decisions. Generally, the Company evaluates performance based on stand-alone product sector operating income and accounts for ~~inter segment~~inter-segment sales and transfers as if the sales or transfers were to third parties, at current market prices. Each product sector is considered a reporting segment.

As of ~~September 30, 2017,~~March 31, 2021, the Company had 1115 product sectors, ~~five~~six of which were principal profit makers and were reported as separate sectors and engaged in the production and sales of power steering (Henglong, Jiulong, Shenyang, Wuhu, Henglong KYB and Hubei Henglong), and one holding company (Genesis). The other nine sectors were engaged in the development, manufacturing and sale of high polymer materials (Wuhu Hongrun), R&D services (Changchun Hualong), automobile steering columns (Jielong), provision of after-sales and R&D services (HLUSA), production and sale of power steering (Chongqing Henglong), trade (Brazil Henglong), manufacture and sales of automobile electronic systems and parts (Wuhan Chuguanjie), research and development of intelligent automotive technology (Jingzhou Qingyan) and manufacture and sales of automotive motors and electromechanical integrated systems (Wuhan Hyoseong).

As of March 31, 2020, the Company had 14 product sectors, six of which were principal profit makers and were reported as separate sectors and engaged in the production and sales of power steering (Henglong, Jiulong, Shenyang, Wuhu, Henglong KYB and Hubei Henglong), and one holding company (Genesis). The other eight sectors were engaged in the production and sale of ~~sensor~~ modular sensors (USAI), automobile steering columns (Jielong), provision of after sales and R&D services (HLUSA), production and sale of power steering (Chongqing Henglong), trade (Brazil Henglong), ~~and~~ manufacture and sales of automobile electronic systems and parts (Wuhan Chuguanjie)~~. Since the revenues, net income~~, research and ~~net assets~~development of these six sectors collectively are less than 10% of consolidated revenues, net income and net assets, respectively, in the condensed unaudited consolidated financial statements, the Company incorporated these six sectors into “Other Sectors.”

As of September 30, 2016, the Company had eleven product sectors, five of which were principal profit makers and were reported as separate sectors and engaged in the production and sales of power steering (Henglong, Jiulong, Shenyang, Wuhu and Hubei Henglong), and one holding company (Genesis). The other six sectors were engaged in the production and sale of sensor modular (USAI), automobile steering columns (Jielong), provision of after sales and R&D services (HLUSA), production and sale of power steering (Chongqing Henglong), trade (Brazil Henglong),intelligent automotive technology (Jingzhou Qingyan) and manufacture and sales of ~~automobile electronic~~automotive motors and electromechanical integrated systems ~~and parts~~ (Wuhan ~~Chuguanjie)~~Hyoseong). Since the revenues, net income and net assets of these seven sectors collectively are less than 10% of consolidated revenues, net income and net assets, respectively, in the condensed unaudited consolidated financial statements, the Company incorporated these six sectors into “Other Sectors.”

The Company’s product sector information for the three months ended March 31, 2021 and ~~nine months ended September 30, 2017 and 2016,~~2020, is as follows (figures are in thousands of USD):

	Net Product Sales						Net Income (Loss)						Net Product Sales						Net Income/(Loss)
	Three Months Ended						Three Months Ended						Three Months Ended						Three Months Ended
	September 30						September 30						March 31,						March 31,
	2017			2016			2017			2016			2021			2020			2021			2020
Henglong	$	55,790		$	57,530		$	689		$	3,771		$	49,079		$	23,907		$	799		$	(682	)
Jiulong		26,067			17,787			478			1,083			33,719			12,759			1,000			(1,450	)
Shenyang		10,103			8,239			486			457			4,092			2,793			353			(170	)
Wuhu		6,503			5,088			118			21			4,159			2,803			7			239
Hubei Henglong		24,812			13,912			2,680			735			35,458			28,132			666			4,065
Other Sectors		14,961			11,588			777			(269	)
Henglong KYB														18,206			6,126			165			(907	)
Other Entities														21,237			9,482			508			(1,935	)
Total Segments		138,236			114,144			5,228			5,798			165,950			86,002			3,498			(840	)
Corporate		-			-			317			808			-			-			(217	)		(61	)
Eliminations		(19,871	)		(19,518	)		(317	)		(747	)		(35,609	)		(12,447	)		(50	)		273
Total	$	118,365		$	94,626		$	5,228		$	5,859		$	130,341		$	73,555		$	3,231		$	(628	)

Net Product Sales Net Income (Loss)
Nine Months Ended Nine Months Ended
September 30 September 30
2017 2016 2017 2016
Henglong $ 191,093 $ 195,940 $ 6,300 $ 13,389
Jiulong 75,525 54,976 3,739 2,219
Shenyang 28,777 24,898 1,271 995
Wuhu 18,254 15,897 215 96
Hubei Henglong 66,855 42,815 5,518 2,286
Other Sectors 40,821 29,558 1,341 162
Total Segments 421,325 364,084 18,384 19,147
Corporate - - 3,367 (1,317 )
Eliminations (65,992 ) (51,587 ) (1,704 ) (911 )
Total $ 355,333 $ 312,497 $ 20,047 $ 16,919

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with the Company’s condensed unaudited consolidated financial statements and the related notes thereto and the other financial information contained elsewhere in this Report.

General Overview

China Automotive Systems, Inc. is a leading power steering systems supplier for the China automobile industry. The Company has business ~~relations~~relationships with more than sixty vehicle manufacturers, including China’s top ranking domestic automobile manufacturers such as JAC ~~Motors,~~motors, Changan Automobile Group, BAIC Group, ~~SAIC~~Dongfeng Group, ~~and Dongfeng Auto Group, the five largest automobile manufacturers in China; Shenyang~~ Brilliance Jinbei, ~~Co., Ltd., the largest light vehicle manufacturer in China;~~ Chery, ~~Automobile Co., Ltd., the largest state owned car manufacturer in China;~~ BYD ~~Auto Co., Ltd.~~ and Zhejiang Geely, ~~Automobile Co., Ltd., the largest privately owned car manufacturers in China. The PRC-based joint ventures of~~as well as Sino-foreign or foreign automobile manufacturer such as General Motors, ~~(GM), Volkswagen,~~ Citroen, ~~and~~Fiat Chrysler North America ~~are all key customers.~~and Ford. Starting in 2008, the Company has supplied power steering ~~pumps and power steering gear~~gears to the Sino-foreign joint ventures established by GM, Citroen and Volkswagen in China. The Company has supplied power steering ~~gears~~gear to Fiat Chrysler North America since ~~2009.~~2009 and to Ford Motor Company since 2016.

Most of the Company’s production and research and development institutes are located in China. ~~The~~As of March 31, 2021, the Company has approximately ~~3,000~~4,566 employees dedicated to design, development, manufacture and sales of its products. By leveraging its extensive experience, innovative technology and geographic strengths, the Company aims to grow leading positions in automotive power steering systems and to further improve overall margins, long-term operating profitability and cash flows. To achieve these goals and to respond to industry factors and trends, the Company is continuing work to improve its operations and business structure and achieve profitable growth.

In addition, as a result of COVID-19, the Company’s businesses, results of operations, financial position and cash flows had been materially and adversely affected in the first quarter of 2020. The Company resumed operation in March of 2020. However, because of the significant uncertainties surrounding COVID-19, which are still evolving, the extent of the business disruption, including the duration and the related financial impact on subsequent periods cannot be reasonably estimated at this time. See “Item 1A. Risk Factors—Our business operations have been and may continue to be materially and adversely affected by the outbreak of the coronavirus disease (COVID-19)” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Corporate Structure

The Company, through its subsidiaries, engages in the manufacture and sales of automotive systems and components. Great Genesis Holdings Limited, a company incorporated in Hong Kong on January 3, 2003 under the Companies Ordinance of Hong Kong as a limited liability company, “Genesis,” is a wholly-owned subsidiary of the Company and the holding company of the Company’s joint ventures in the PRC. Henglong USA Corporation, “HLUSA,” incorporated on January 8, 2007 in Troy, Michigan, is a wholly-owned subsidiary of the Company, and mainly engages in marketing of automotive parts in North America, and provides after-sales service and research and development support. CAAS Brazil’s Imports And Trade In Automotive Parts Ltd., “Brazil Henglong,” was established by Hubei Henglong Automotive System Group Co., Ltd., formerly known as ~~JingzhouHengsheng~~Jingzhou Hengsheng Automotive System Co., Ltd., “Hubei Henglong,” as a Sino-foreign joint venture company with two Brazilian citizens in Brazil in August 2012. In May 2017, the Company obtained an additional 15.84% equity interest in Brazil Henglong for nil consideration. The Company retained its controlling interest in Brazil Henglong and the acquisition of the non-controlling interest was accounted for as an equity transaction. Fujian Qiaolong was acquired by the Company in the second quarter of 2014, as a joint venture company that mainly manufactures and distributes drainage and rescue vehicles with mass flow, drainage vehicles with vertical downhole operation, crawler-type mobile pump stations, high-altitude water supply and discharge drainage vehicles, long-range control crawler-type mobile pump stations and other vehicles, which was disposed of by the Company in the second quarter of 2016. USAI was established in 2005, and the Company and Hubei Wanlong owned 83.34% and 16.66%, respectively. In May 2020, USAI merged with and into Wuhan Chuguanjie, a wholly-owned subsidiary of Wuhan Jielong, and it deregistered from the local business administration on April 28, 2020. Following the merger, 85.0% of Wuhan Chuguanjie was owned by the Company and 15.0% was owned by Hubei Wanlong. In April 2020, Hubei Henglong acquired 100.00% of the shares of Changchun Hualong Automotive Technology Co., Ltd., “Changchun Hualong”, for total consideration of RMB 1.20 million, equivalent to approximately $0.2 million. Changchun Hualong mainly engages in design and R&D of automotive parts. Wuhu Hongrun New Material Co., Ltd., “Wuhu Hongrun” was formed in December 2019, which mainly engages in the development, manufacturing and sale of high polymer materials.

Critical Accounting Estimates

The Company prepares its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amount of revenues and expenses during the reporting periods. Management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions. The following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Company’s condensed consolidated financial statements.

The Company considers an accounting estimate to be critical if:

It requires the Company to make assumptions about matters that were uncertain at the time it was making the estimate, and

Changes in the estimate or different estimates that the Company could have selected would have had a material impact on the Company’s financial condition or results of operations.

The table below presents information about the nature and rationale for the Company’s critical accounting estimates:

Balance Sheet Caption ~~Caption~~		Critical Estimate Item ~~Estimate~~ ~~Item~~	Nature of Estimates Required ~~Required~~	Assumptions/Approaches Used ~~Used~~	Key Factors
Accrued liabilities and other long-term liabilities		Warranty obligations	Estimating warranty requires the ~~Company~~Com-pany to forecast the resolution of existing claims and expected future claims on products sold. OEMs (Original Equipment Manufacturers) are increasingly seeking to hold suppliers responsible for product warranties, which may impact the Company’s exposure to these costs.	The Company bases its estimate on historical trends of units sold and payment amounts, combined with its current understanding of the status of existing claims and discussions with its customers.	·OEM sourcing ·OEM policy decisions regarding warranty claims

Property, plant and equipment, intangible assets and other long-term assets	Valuation of long- lived assets and investments		The Company is required from time to time to review the recoverability of certain of its assets based on projections of anticipated future cash flows, including future profitability assessments of various product lines.	The Company estimates cash flows using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments.	·Future production estimates ·Customer preferences and decisions

Accounts receivable	Allowance for doubtful accounts		The Company is required from time to time to review the credit of customers and make timely provision of allowance for doubtful accounts.	The Company estimates the collect-ability of the receivables based on the future cash flows using historical experiences.	Customer credit

Inventory	Write-down of inventory		The Company is required from time to time to review the cash ability of inventory based on projections of anticipated future cash flows, including write-down of inventory for prices that are higher than market price and undesirable inventories.	The Company estimates cash flows using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments.	·Future production estimates ·Customer preferences and decisions

Deferred income taxes

Recoverability of deferred tax assets

The Company is required to estimate whether recoverability of its deferred tax assets is more likely than not based on forecasts of taxable earnings in the related tax jurisdiction.

The Company uses historical and projected future operating results, based upon approved business plans, including a review of the eligible carry forward period, tax planning opportunities and other relevant considerations.

·Tax law changes

·Variances in future projected profitability, including by taxing entity

~~Tax payable and deferred tax assets/liabilities~~

~~Uncertain tax positions~~

The Company is required to determine and assess all material positions, including all significant uncertain positions in all tax years that are still subject to assessment or challenge under relevant tax statutes.

The Company applies a more likely than not threshold and a two-step approach for tax position measurement and financial statement recognition. For the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement.

~~·An allocation or a shift of income between jurisdictions~~

~~·The characterization of income or a decision to exclude reporting taxable income in a tax return~~

~~·A decision to classify a transaction, entity, or other position in a tax return as tax exempt~~

In addition, there are other items within the Company’s financial statements that require estimation, but are not as critical as those discussed above, including provision of accounts and notes receivable. Although not significant in recent years, changes in estimates used in these and other items could have a significant effect on the Company’s consolidated financial statements.

Recent Accounting Pronouncements

Please see Note 2 to the consolidated financial statements under Item 1 of Part I of this ~~Report.~~report.

Results of Operations

~~Results of Operations—~~Three Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020

Net Product Sales Cost of Products Sold
(in thousands of USD,
except percentages) (in thousands of USD,
except percentages)
2017 2016 Change 2017 2016 Change
Henglong $ 55,790 $ 57,529 (1,739 ) -3.02 % $ 47,639 $ 47,616 $ 23 0.05 %
Jiulong 26,067 17,787 8,280 46.55 22,804 14,934 7,870 52.70
Shenyang 10,103 8,239 1,864 22.62 8,757 7,070 1,687 23.85
Wuhu 6,503 5,089 1,414 27.79 5,926 4,696 1,230 26.20
Hubei Henglong 24,812 13,913 10,899 78.34 17,656 10,270 7,386 71.92
Other Sectors 14,961 11,589 3,372 29.10 12,653 9,606 3,047 31.72
Total Segments 138,236 114,146 24,090 21.10 115,435 94,192 21,243 22.55
Elimination (19,871 ) (19,520 ) (351 ) 1.80 (19,557 ) (19,551 ) (6 ) 0.03
Total $ 118,365 $ 94,626 $ 23,739 25.09 % $ 95,878 $ 74,641 $ 21,237 28.45 %

Selected highlights from our results of operations are as follows (in thousands of U.S. dollars):

	Three Months Ended March 31,
	2021		2020			Change			Change%
Net product sales	$	130,341	$	73,555		$	56,786			77.2	%
Cost of products sold		110,593		62,403			48,190			77.2
Gain on other sales		1,316		600			716			119.3
Selling expenses		5,609		2,118			3,491			164.8
General and administrative expenses		4,615		3,429			1,186			34.6
Research and development expenses		6,680		5,193			1,487			28.6
Other income, net		1,723		117			1,606			1,372.6
Interest expense		343		365			(22	)		-6.0
Income taxes		641		514			127			24.7
Net income/(loss)		3,231		(628	)		3,859			-614.5
Net income/(loss) attributable to non-controlling interests		18		(600	)		618			-103.0
Net income/(loss) attributable to parent company’s common shareholders	$	3,206		(28	)	$	3,234			-11,550.0	%

Net Product Sales and Cost of Products Sold

	Net Product Sales											Cost of Products Sold
	(in thousands of USD, except percentages)											(in thousands of USD, except percentages)
	2021			2020			Change					2021			2020			Change
Henglong	$	49,079		$	23,907		$	25,172		105.3	%	$	45,119		$	23,069		$	22,050		95.6	%
Jiulong		33,719			12,759			20,960		164.3			30,668			13,347			17,321		129.8
Shenyang		4,092			2,793			1,299		46.5			3,313			2,421			892		36.8
Wuhu		4,159			2,803			1,356		48.4			3,872			2,375			1,497		63.0
Hubei Henglong		35,458			28,132			7,326		26.0			29,485			19,307			10,178		52.7
Henglong KYB		18,206			6,126			12,080		197.2			16,895			6,083			10,812		177.7
Other Entities		21,237			9,482			11,755		124.0			16,738			8,388			8,350		99.5
Total Segments		165,950			86,002			79,948		93.0			146,090			74,990			71,100		94.8
Elimination		(35,609	)		(12,447	)		(23,162	)	186.1			(35,497	)		(12,587	)		(22,910	)	182.0
Total	$	130,341		$	73,555		$	56,786		77.2	%	$	110,593		$	62,403		$	48,190		77.2	%

Net Product Sales

Net product sales were ~~$118.4~~$130.3 million for the three months ended ~~September 30, 2017,~~March 31, 2021, compared to ~~$94.6~~$73.6 million for the same period in ~~2016,~~2020, representing an increase of ~~$23.8~~$56.7 million, or ~~25.2%.~~77.0%, mainly due to the market recovery after COVID-19.

~~The Company’s net product sales were affected by the change in the product mix.~~ Net sales of traditional steering products and parts were ~~$92.7~~$105.6 million for the three months ended ~~September 30, 2017,~~March 31, 2021, compared to ~~$69.0~~$65.5 million for the same period in ~~2016,~~2020, representing an increase of ~~$23.7~~$40.1 million, or ~~34.3%~~61.2%. Net sales of ~~EPS~~electric power steering (“EPS”) were ~~$25.7~~$24.7 million for the three months ended ~~September 30, 2017, consistent with $25.6~~March 31, 2021 and $8.1 million for the same period in ~~2016.~~2020, representing an increase of $16.6 million. As a percentage of net sales, sales of EPS were ~~21.7%~~19.0% for the three months ended ~~September 30, 2017,~~March 31, 2021, compared ~~to 27.0%~~with 11.0% for the same period in ~~2016.~~ 2020.

The increase in net product sales was ~~mainly~~ due to ~~increased~~the effects of three major factors: i) the increase in sales volume led to a sales increase of $60.7 million due to the increase in demand as a result of the recovery of manufacturing and operations of the ~~changes~~Company’s customers after COVID-19 around the world; ii) the decrease in average selling price of steering gears led to a sales decrease of $7.9 million; and iii) the ~~product mix in the three months ended September 30, 2017.~~

~~The foreign exchange rate~~appreciation of the RMB against the U.S. dollar in ~~the third~~this quarter ~~of 2017 was generally consistent with~~compared to the same ~~period~~quarter last year resulted in ~~2016, so there was no significant impact on the Company’s revenue and costs as a result of foreign currency translation differences.~~

~~In summary, due to the recovery of Chinese automobile industry, the sales of steering gears started to grow, which led to an increase in sales volume and contributed to~~ a sales increase of $11.6 million. Some of the Company’s subsidiaries are gradually shifting their strategy from focusing on sales volume to focusing on high gross margin products and developing new markets such as exports, and the change in product mix led to an increase in average selling price of steering gears and contributed to a sales increase of $12.3 million. The effect of foreign currency translation of the RMB against the U.S. dollar led to a sales decrease of $0.2$3.9 million.

Further analysis by segment (before elimination) is as follows:

Henglong mainly engages in providing passenger vehicle steering systems. Net product sales for Henglong were ~~$55.8~~$49.1 million for the three months ended ~~September 30, 2017,~~March 31, 2021, compared with ~~$57.5~~$23.9 million for the three months ended September 30, 2016, representing a decrease of $1.7 million, or 3.0%. A decrease in sales volume led to a sales decrease of $13.3 million and an increase in average selling price led to a sales increase of $11.6 million.

~~Net product sales for Jiulong were $26.1 million for the three months ended September 30, 2017, compared with $17.8 million for the three months ended September 30, 2016,~~March 31, 2020, representing an increase of ~~$8.3~~$25.2 million, or ~~46.6%~~105.4%. ~~Jiulong is gradually shifting its strategy from focusing on sales volume to focusing on high gross margin products and developing new markets such as exports.~~ An increase in sales volume led to a sales increase of ~~$6.2~~$24.5 million, ~~and an increase in average selling price led to a sales increase of $2.1 million.~~

Net product sales for Shenyang were $10.1 million for the three months ended September 30, 2017, compared to $8.2 million for the same period in 2016, representing an increase of $1.9 million, or 23.2%. Shenyang’s products are mainly sold to Shenyang Brilliance Jinbei Co., Ltd., “Brilliance Jinbei”, one of China’s largest commercial car manufacturers. The sales of Shenyang are mainly impacted by the demand of Brilliance Jinbei. An increase in sales volumes led to a sales increase of $0.4 million and an increase in average selling price led to a sales increase of $1.5 million.

Net product sales for Wuhu were $6.5 million for the three months ended September 30, 2017, compared to $5.1 million for the same period in 2016, representing an increase of $1.4 million, or 27.5%. An increase in sales volumes led to a sales increase of $2.0 million and a decrease in ~~average~~ selling price led to a sales decrease of ~~$0.6 million.~~

Net product sales for Hubei Henglong were $24.8 million for the three months ended September 30, 2017, compared to $13.9 million for the same period in 2016, representing an increase of $10.9 million, or 78.4%. Hubei Henglong’s products are mainly sold to Chrysler and Ford. The significant increase in the sales of Hubei Henglong was mainly due to the new products developed for Chrysler and Ford that began mass production at the end of 2016. An increase in sales volumes led to a sales increase of $15.2 million and a decrease in average selling price led to a sales decrease of $4.3 million.

Net product sales for Other Sectors were $15.0 million for the three months ended September 30, 2017, compared to $11.6 million for the same period in 2016, representing an increase of $3.4 million, or 29.3%, primarily due to an increase in average selling price of Jielong, which manufactures automobile steering columns for both HPS and EPS.

~~Cost of Products Sold~~

For the three months ended September 30, 2017, the cost of products sold was $95.9 million, compared to $74.6 million for the same period of 2016, representing an increase of $21.3 million, or 28.6%. The increase in the cost of products sold was mainly due to the effect of an increase in sales volumes which led to a cost of products sold increase of $10.0 million and an increase in unit cost which led to a cost of products sold increase of $11.3 million. Further analysis is as follows:

Cost of products sold for Henglong was $47.6 million for the three months ended September 30, 2017, consistent with $47.6 million for the same period of 2016. A decrease in sales volume led to a cost of products sold decrease of $10.8 million and an increase in unit cost led to a cost of products sold increase of $10.8 million.

•

Cost of products sold for Jiulong was $22.8 million for the three months ended September 30, 2017, compared to $14.9 million for the same period of 2016, representing an increase of $7.9 million, or 53.0%. An increase in sales volume led to a cost of products sold increase of $5.8 million and an increase in unit cost led to a cost of products sold increase of $2.1 million.

Cost of products sold for Shenyang was $8.8 million for the three months ended September 30, 2017, compared to $7.1 million for the same period of 2016, representing an increase of $1.7 million, or 23.9%. The increase in cost of products sold was mainly due to an increase in sales volumes, which led to a cost of products sold increase of $0.4 million, and an increase in unit cost, which led to a cost of products sold increase of $1.3 million.

Cost of products sold for Wuhu was $5.9 million for the three months ended September 30, 2017, compared to $4.7 million for the same period of 2016, representing an increase of $1.2 million, or 25.5%. The increase in cost of products sold was mainly due to an increase in sales volumes, which led to a cost of products sold increase of $1.9 million, and a decrease in unit cost, which led to a cost of products sold decrease of $0.7 million.

Cost of products sold for Hubei Henglong was $17.7 million for the three months ended September 30, 2017, compared to $10.3 million for the same period of 2016, representing an increase of $7.4 million, or 71.8%. The increase in cost of products sold was mainly due to an increase in sales volumes, which led to a cost of products sold increase of $11.3 million, and a decrease in unit cost, which led to a cost of products sold decrease of $3.9 million.

Cost of products sold for Other Sectors was $12.7 million for the three months ended September 30, 2017, compared to $9.6 million for the same period of 2016, representing an increase of $3.1 million, or 32.3%, primarily due to the increase in unit cost of Jielong.

Gross margin was 19.0% for the three months ended September 30, 2017, compared to 21.1% for the same period of 2016, representing a decrease of 2.1%, mainly due to the changes in the product mix for the three months ended September 30, 2017.

~~Gain on Other Sales~~

Gain on other sales mainly consisted of net amount retained from sales of materials, property, plant and equipment, land use rights, and scraps. For the three months ended September 30, 2017, gain on other sales amounted to $0.6 million, as compared to$0.1 million for the three months ended September 30, 2016, representing an increase of $0.5 million. The increase was mainly due to increased sales volume of materials.

~~Selling Expenses~~

Selling expenses were $4.5 million for the three months ended September 30, 2017, as compared to $3.8 million for the same period of 2016, representing an increase of $0.7 million, or 18.4%, which was mainly due to increased logistics fees related to the increase in revenue.

~~General and Administrative Expenses~~

General and administrative expenses were $4.4 million for the three months ended September 30, 2017, as compared to $3.7 million for the same period of 2016, representing an increase of $0.7 million, or 18.9%, which was mainly due to higher payroll expenses.

~~Research and Development Expenses~~

Research and development expenses were $9.2 million for the three months ended September 30, 2017, as compared to $6.7 million for the three months ended September 30, 2016, representing an increase of $2.5 million, or 37.3%, which was mainly due to increased expenditures on R&D activities for EPS products. The Company’s research and development expenses were mainly used for the development and trial production of EPS and other new products. The Company’s research and development expenditures have continued to be significant in the past several years.

The global automotive parts industry is highly competitive; winning and maintaining new business requires suppliers to rapidly produce innovative products on a cost-competitive basis. In the past several years, the Company has continued to purchase advanced manufacturing equipment for newly developed products, hiring senior technicians and actively seeking external technical support.

~~Income from Operations~~

Income from operations was $4.9 million for the three months ended September 30, 2017, compared to $5.7 million for the three months ended September 30, 2016, representing a decrease of $0.8 million, or 14.0%,including an increase of $2.5 million in gross profit, an increase of $0.5 million in gain on other sales and an increase of $3.8 million in operating expenses.

~~Other Income, Net~~

Other income, net was $0.1 million for the three months ended September 30, 2017, compared to other income, net of $0.4 million for the three months ended September 30, 2016, representing a decrease of $0.3 ~~million, or 75.0%, primarily as a result of the gain on disposal of a subsidiary amounting to $0.7 million in 2016, whereas there was no such gain in the current quarter.~~

~~Interest Expense~~

Interest expense was $0.3 million for the three months ended September 30, 2017, compared to interest expense of $0.2 million for the three months ended September 30, 2016, representing an increase of $0.1 million, or 50.0%, primarily due to the new bank loans borrowed in 2017.

~~Financial Income, Net~~

Financial income, net, was $1.0 million for the three months ended September 30, 2017, compared to financial income of $0.8 million for the three months ended September 30, 2016, representing an increase of $0.2 million, or 25%, which was mainly due to the interest income of $0.5 million generated from the loan to Henglong Real Estate, one of the Company’s related parties (See Note 5).

~~Income Before Income Tax Expenses and Equity in Earnings of Affiliated Companies~~

Income before income tax expenses and equity in earnings of affiliated companies was $5.7 million for the three months ended September 30, 2017, compared to $6.7 million for the three months ended September 30, 2016, representing a decrease of $1.0 million, or 14.9%, which was mainly due to a decrease in operating income of $0.8 million, a decrease in other income of $0.3 million, an increase in interest expense of $0.1 million and an increase in financial income of $0.2 million.

~~Income Taxes~~

Income tax expense was $1.0 million for the three months ended September 30, 2017, compared to $1.2 million of income tax expense for the three months ended September 30, 2016, representing a decrease of $0.2 million, or 16.7%. The income before income tax decreased to $5.7 million for the three months ended September 30, 2017 from $6.7 million for the same period in 2016 and the effective tax rate decreased to 17.3% from 17.4% for the same period in 2016.

~~Net Income~~

Net income was $5.2 million for the three months ended September 30, 2017, compared to net income of $5.9 million for the three months ended September 30, 2016, representing a decrease of $0.7 million, or 11.9%, which was mainly due to a decrease in income before income tax expenses and equity in earnings of affiliated companies of $1.0 million, a decrease in income tax of $0.2 million and an increase in equity in earnings of affiliated companies of $0.2 million.

~~Net Income Attributable to Non-controlling Interests~~

Net income attributable to non-controlling interests amounted to $0.2 million for the three months ended September 30, 2017, substantially consistent with $0.2 million for the three months ended September 30, 2016.

The Company owns equity interests in nine non-wholly owned subsidiaries established in the PRC and Brazil, through which it conducts its operations. Except for Beijing Henglong and Chongqing Jinghua, which are accounted for under the equity method, all of the operating results of these non-wholly owned subsidiaries were consolidated in the Company’s financial statements as of September 30, 2017 and 2016.

~~Net Income Attributable to Parent Company’s Common Shareholders~~

Net income attributable to parent company’s common shareholders was $5.1 million for the three months ended September 30, 2017, compared to net income attributable to parent company’s common shareholders of $5.7 million for the three months ended September 30, 2016, representing a decrease of $0.6 million, which was mainly due to a decrease in net income of $0.7 million.

~~Results of Operations—Nine Months Ended September 30, 2017 and 2016~~

Net Product Sales Cost of Products Sold
(in thousands of USD,
except percentages) (in thousands of USD,
except percentages)
2017 2016 Change 2017 2016 Change
Henglong $ 191,093 $ 195,940 (4,847 ) -2.47 % $ 164,765 $ 165,421 $ (656 ) -0.40 %
Jiulong 75,525 54,976 20,549 37.38 65,358 47,583 17,775 37.36
Shenyang 28,777 24,898 3,879 15.58 25,123 21,710 3,413 15.72
Wuhu 18,254 15,897 2,357 14.83 16,891 14,459 2,432 16.82
Hubei Henglong 66,855 42,815 24,040 56.15 46,220 31,418 14,802 47.11
Other Sectors 40,821 29,558 11,263 38.11 34,492 24,216 10,276 42.43
Total Segments 421,325 364,084 57,241 15.72 352,849 304,807 48,042 15.76
Elimination (65,992 ) (51,587 ) (14,405 ) 27.92 (65,693 ) (51,455 ) (14,238 ) 27.67
Total $ 355,333 $ 312,497 $ 42,836 13.71 % $ 287,156 $ 253,352 $ 33,804 13.34 %

~~Net Product Sales~~

~~Net product sales were $355.3 million for the nine months ended September 30, 2017, compared to $312.5 million for the same period in 2016, representing an increase of $42.8 million, or 13.7%.~~

The Company’s net product sales were affected by the change in the product mix. Net sales of traditional steering products and parts were $270.2 million for the nine months ended September 30, 2017, compared to $226.8 million for the same period in 2016, representing an increase of $43.4 million, or 19.1%. Net sales of EPS were $85.1 million for the nine months ended September 30, 2017, compared to $85.7 million for the same period in 2016, representing a decrease of $0.6 million, or 0.7%. As a percentage of net sales, sales of EPS were 24.0% for the nine months ended September 30, 2017, compared to 27.4% for the same period in 2016. The increase in net product sales was mainly due to increased sales and the changes in the product mix for the nine months ended September 30, 2017.

The depreciation of China’s currency, the RMB, against the U.S. dollar in the first nine months of 2017 as compared to the first nine months of 2016 had a negative impact on net sales as more than 80% of the Company’s business is conducted in China.

In summary, due to the recovery of Chinese automobile industry, the sales of steering gears started to grow, which led to an increase in sales volume and contributed to a sales increase of $52.2 million. Some of the Company’s subsidiaries are gradually shifting their strategy from focusing on sales volume to focusing on high gross margin products and developing new markets such as exports, and the change in product mix led to an increase in average selling price of steering gears and contributed to a sales increase of $4.5 million. The effect of foreign currency translation of the RMB against the U.S. dollar led to a sales decrease of $13.9 million.

~~Further analysis by segment (before elimination) is as follows:~~

Net product sales for Henglong were $191.1 million for the nine months ended September 30, 2017, compared with $195.9 million for the nine months ended September 30, 2016, representing a decrease of $4.8 million, or 2.5%. A decrease in sales volume led to a sales decrease of $1.7 million, an increase in average selling price led to a sales increase of $4.0 million, and the effect of foreign currency translation of the RMB against the U.S. dollar led to a sales ~~decrease~~increase of ~~$7.1~~$1.0 million.

Jiulong mainly engages in providing commercial vehicle steering systems. Net product sales for Jiulong were ~~$75.5~~$33.7 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, compared with ~~$55.0~~$12.8 million for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2020, representing an increase of ~~$20.5~~$20.9 million, or ~~37.3%~~163.3%. ~~Jiulong is gradually shifting its strategy from focusing on sales volume~~The increase was primarily due to ~~focusing on high gross margin products and developing new markets such as exports.~~the increased demand in the China commercial vehicle market after the COVID-19 pandemic along with China’s economic stimulus policies. An increase in sales volume led to a sales increase of ~~$17.6~~$20.3 million, ~~an increase~~a decrease in ~~average~~ selling price led to a sales ~~increase~~decrease of ~~$5.2~~$0.2 million, and the effect of foreign currency translation of the RMB against the U.S. dollar led to a sales ~~decrease~~increase of ~~$2.3~~$0.8 million.

Shenyang mainly engages in providing vehicle steering systems to Shenyang Brilliance Jinbei Automobile Co., Ltd. (“Jinbei”), one of the major automotive manufacturers in China. Net product sales for Shenyang were ~~$28.8~~$4.1 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, compared to ~~$24.9~~$2.8 million for the same period in ~~2016,~~2020, representing an increase of ~~$3.9~~$1.3 million, or ~~15.7%~~46.4%. Shenyang’s products are mainly sold to Shenyang Brilliance Jinbei Co., Ltd., “Brilliance Jinbei”, one of China’s largest commercial car manufacturers. The sales of Shenyang are mainly impacted by the demand of Brilliance Jinbei. An increase in sales ~~volumes~~volume led to a sales increase of ~~$4.4~~$1.5 million, ~~an increase~~a decrease in ~~average~~ selling price led to a sales ~~increase~~decrease of $0.4 million, and the effect of foreign currency translation of the RMB against the U.S. dollar led to a sales ~~decrease~~increase of ~~$0.9~~$0.2 million.

	•	Net product sales for Wuhu were $18.3 million for the nine months ended September 30, 2017, compared to $15.9 million for the same period in 2016, representing an increase of $2.4 million, or 15.1%. An increase in sales volumes led to a sales increase of $4.2 million, a decrease in average selling price Wuhu mainly engages in providing vehicle steering systems to Chery Automobile Co., Ltd. (“Chery”), one of the major automotive manufacturers in China. Net product sales for Wuhu were $4.2 million for the three months ended March 31, 2021, compared to $2.8 million for the same period in 2020, representing an increase of $1.4 million, or 50.0%. An increase in sales volumes led to a sales increase of $2.5 million, a decrease in selling prices led to a sales decrease of $1.3 ~~million, and the effect of foreign currency translation of the RMB against the U.S. dollar led to a sales decrease of $0.5 million.~~

	•	Net product sales for Hubei Henglong were $66.9 million for the nine months ended September 30, 2017, compared to $42.8 million for the same period in 2016, representing an increase of $24.1 million, or 56.3%. Hubei Henglong’s products are mainly sold to Chrysler and Ford. The significant increase in the sales of Hubei Henglong was mainly due to the new products developed for Chrysler and Ford that began mass production at the end of 2016. An increase in sales volumes led to a sales increase of $32.8 million, a decrease in average selling price led to a sales decrease of $6.7 million, and the effect of foreign currency translation of the RMB against the U.S. dollar led to a sales decrease of $2.0 million.

Net product sales for Other Sectors were $40.8 million for the nine months ended September 30, 2017, compared to $29.6 million for the same period in 2016, representing an increase of $11.2 million, or 37.8%, primarily due to an increase in the sales of Jielong, which manufactures automobile steering columns for both HPS and EPS.

~~Cost of Products Sold~~

For the nine months ended September 30, 2017, the cost of products sold was $287.2 million, compared to $253.4 million for the same period of 2016, representing an increase of $33.8 million, or 13.3%. The increase in the cost of products sold was mainly due to the net effect of a net increase in sales volumes which led to a cost of products sold increase of $41.1 million, an increase in unit cost which led to a cost of products sold increase of $4.3 million, and the effect of foreign currency translation of the RMB against the U.S. dollar which led to a cost of products sold decrease of $11.6 million. Further analysis is as follows:

Cost of products sold for Henglong was $164.8 million for the nine months ended September 30, 2017, compared to $165.4 million for the same period of 2016, representing a decrease of $0.6 million, or 0.4%. A decrease in sales volumes led to a cost of products sold decrease of $1.0 million, an increase in unit cost led to a cost of products sold increase of $6.4 million, and the effect of foreign currency translation of the RMB against the U.S. dollar led to a ~~cost~~sales increase of ~~products sold decrease of $6.0~~$0.2 million.

~~Cost of products sold~~Hubei Henglong mainly engages in providing vehicle steering systems to Chrysler and Ford. Net product sales for ~~Jiulong was $65.4~~Hubei Henglong were $35.5 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, compared ~~to $47.6~~with $28.1 million for the ~~same period of 2016,~~three months ended March 31, 2020, representing an increase of ~~$17.8~~$7.4 million, or ~~37.4%~~26.3%. An increase in sales volume led to a ~~cost of products sold~~sales increase of ~~$15.6~~$8.3 million, ~~an increase~~a decrease in ~~unit cost~~selling price led to a ~~cost~~sales decrease of ~~products sold increase of $4.3~~$1.8 million, and the effect of foreign currency translation of the RMB against the U.S. dollar led to a ~~cost~~sales increase of ~~products sold decrease of $2.1~~$0.9 million.

~~Cost of products sold~~

Henglong KYB mainly engages in providing passenger EPS products. Net product sales for ~~Shenyang was $25.1~~Henglong KYB were $18.2 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, compared ~~to $21.7~~with $6.1 million for the ~~same period of 2016,~~three months ended March 31, 2020, representing an increase of ~~$3.4~~$12.1 million, or ~~15.7%~~198.4%. ~~The increase in cost of products sold was mainly due to an~~An increase in sales ~~volumes, which~~volume led to a ~~cost of products sold~~sales increase of ~~$4.2~~$12.1 million, a decrease in selling price led to a sales decrease of $0.5 million, and the effect of foreign currency translation of the RMB against the U.S. dollar ~~which~~led to a sales increase of $0.5 million.

Net product sales for other entities were $21.2 million for the three months ended March 31, 2021, compared to $9.5 million for the same period in 2020, representing an increase of $11.7 million, or 123.2%, mainly caused by increases in sales of Jielong and Chongqing

Cost of Products Sold

For the three months ended March 31, 2021, the cost of products sold was $110.6 million, compared to $62.4 million for the same period of 2020, representing an increase of $48.2 million, or 77.2%. The increase in cost of sales was mainly due to the effect of the following major factors: i) the decrease in unit price led to a cost of ~~products sold~~sales decrease of ~~$0.8~~$6.3 million; (ii) the increase in sales volumes led to a cost of sales increase of $50.6 million; and iii) the appreciation of the RMB against the U.S. dollar resulted in a cost of sales increase of $3.9 million.

Gross margin was ~~19.2%~~15.1% for the ~~nine~~three months ended ~~September 30, 2017, compared to 18.9%~~March 31, 2021, which is consistent with 15.2% for the same period of ~~2016, representing an increase of 0.3%, mainly due to increased sales and the changes in the product mix in the nine months ended September 30, 2017.~~

Gain on other sales mainly consisted of net amount retained from sales of materials, property, plant and equipment, land use rights, and scraps. For the nine months ended September 30, 2017, gain on other sales amounted to $5.9 million, as compared to $2.0 million for the nine months ended September 30, 2016, representing an increase of $3.9 million. The increase was mainly due to the gain on disposal of a building of $2.2 million and increased sales volume of materials.2020.

Selling expenses were ~~$13.2~~$5.6 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, as compared to ~~$12.3~~$2.1 million for the same period of ~~2016,~~2020, representing an increase of ~~$0.9~~$3.5 million, ~~or 7.3%,~~ which was ~~mainly~~primarily due to higher sales volume and increased ~~logistics fees related to the increase in revenue.~~air freight charge.

General and administrative expenses were ~~$14.0~~$4.6 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, as compared to ~~$12.0~~$3.4 million for the same period of ~~2016,~~2020, representing an increase of ~~$2.0~~$1.2 million, or ~~16.7%~~35.3%, which was mainly due to the ~~allowance for doubtful accounts of $1.0 million and higher~~increased payroll expenses.

Research and development expenses were ~~$23.7~~$6.7 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, as compared to ~~$18.8~~$5.2 million for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2020, representing an increase of ~~$4.9~~$1.5 million ~~or 26.1%,~~ which was mainly due to increased expenditures on R&D activities for EPS products. The Company’s research and development expenses were mainly used for the development and trial production of EPS and other new products. The Company’s research and development expenditures have continued to be significant in the past several years.

~~Income from operations~~Other income, net was ~~$23.2~~$1.7 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, as compared to ~~$18.0~~$0.1 million for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2020, representing an increase of ~~$5.2~~$1.6 million, ~~or 28.9%, including an increase~~which was mainly due to the various government subsidies of ~~$9.0~~$1.4 million ~~in gross profit, an increase of $3.9 million in gain on other sales and an increase of $7.7 million in operating expenses.~~

Other expense, net was $0.1 million for the nine months ended September 30, 2017, compared to other income, net of $1.0 million for the nine months ended September 30, 2016, representing an increase in other expense of $1.1 million, primarily as a result of the gain on disposal of a subsidiary amounting to $0.7 million in 2016 whereas there was no such gainreceived in the ~~current period.~~first three months of 2021, whereas only $0.5 million was received in the same period of last year.

Interest expense was ~~$1.2~~$0.3 million for the ~~nine~~three months ended ~~September 30, 2017, compared to interest expense of $0.5~~March 31, 2021, which is consistent with $0.4 million for the ~~nine~~three months ended ~~September 30, 2016, representing an increase of $0.7 million, primarily due to the new bank loans borrowed in 2017 and higher interest rates.~~

Financial income, net, was $1.9 million for the nine months ended September 30, 2017, compared to financial income, net of $1.3 million for the nine months ended September 30, 2016, representing an increase of $0.6 million, or 46.2%, which was mainly due to the interest income of $0.9 million generated from the loan to Henglong Real Estate, one of the Company’s related parties (See Note 5).

~~Income Before Income Tax Expenses and Equity in Earnings of Affiliated Companies~~

Income before income tax expenses and equity in earnings of affiliated companies was $23.9 million for the nine months ended September 30, 2017, compared to $19.8 million for the nine months ended September 30, 2016, representing an increase of $4.1 million, or 20.7%, which was mainly due to an increase in operating income of $5.2 million, an increase in other expense of $1.1 million, an increase in interest expense of $0.7 million and an increase in financial income of $0.6 million.

Income tax expense was ~~$4.4~~$0.6 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, compared to ~~$3.4 million of income tax expense for the nine months ended September 30, 2016, representing an increase of $1.0 million, or 29.4%. The income before income tax increased to $23.9~~$0.5 million for the ~~nine~~three months ended ~~September 30, 2017 from $19.8 million for the same period in 2016 and the effective tax rate increased to 18.2% from 17.3%.~~

Net income was $20.0 million for the nine months ended September 30, 2017, compared to net income of $16.9 million for the nine months ended September 30, 2016, representing an increase of $3.1 million, or 18.3%,March 31, 2020, which was ~~mainly~~ due to anthe increase in income before income tax ~~expenses and equity in earnings of affiliated companies of $4.1 million, an increase in income tax of $1.0 million and a decrease in equity in earnings of affiliated companies of $0.1 million.~~ expenses.

Net income attributable to non-controlling interests amounted to ~~$0.4~~$0.02 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, compared to ~~$0.2~~net loss attributable to non-controlling interests of $0.6 million for the ~~nine~~three months ended ~~September 30, 2016.~~

The Company owns equity interests in nine non-wholly owned subsidiaries established in the PRC and Brazil, through which it conducts its operations. Except for Beijing Henglong and Chongqing Jinghua, which are accounted for under the equity method, all the operating results of these non-wholly owned subsidiaries were consolidated in the Company’s financial statements as of September 30, 2017 and 2016.March 31, 2020.

Net ~~Income~~Income/(loss) Attributable to Parent Company’s Common Shareholders

Net income attributable to parent company’s common shareholders was ~~$19.7~~$3.2 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, compared to net loss attributable to parent company’s common shareholders of $0.03 million for the three months ended March 31, 2020, representing an increase in net income attributable to parent company’s common shareholders of $16.8 million for the nine months ended September 30, 2016, representing an increase of $2.9 million, or 17.3%, which was mainly due to an increase in net income of $3.1 million and an increase in net income attributable to non-controlling interests of $0.2$3.2 million.

On August 2, 2017, the Company issued a press release announcing the appointment by the special committee (the “Special Committee”) of the Company’s board of directors (the “Board”) of HoulihanLokey Capital, Inc. as its financial advisor and Kirkland & Ellis as its U.S. legal counsel in connection with its review and evaluation of the previously announced preliminary non-binding proposal letter that the Board received on May 14, 2017 from Mr.Hanlin Chen, the Chairman of the Board of the Company, relating to a possible “going private” transaction, as well as in connection with its review and evaluation of any other sale, merger, business combination or other corporate transaction, with Mr. Chen or any other party, and any other strategic alternatives.

As previously announced, Mr. Chen has submitted a preliminary non-binding proposal to the Board to acquire all of the outstanding shares of common stock of the Company not already beneficially owned by Mr. Chen for $5.45 per share of common stock in cash. Mr. Chen and his affiliates currently beneficially own approximately 56.4% of the issued and outstanding shares of common stock of the Company on a fully diluted and as-converted basis. The proposal is expressly conditioned on approval by a special committee of the Board comprised of independent directors and is subject to a non-waivable condition requiring approval by a majority vote of the Company’s unaffiliated stockholders. The Special Committee, consisting of Mr. Arthur Wong, Mr. Robert Tung and Mr. Guangxun Xu, is empowered to, and will be responsible for, among other things, investigating, evaluating, negotiating and making a recommendation to the Board with respect to the proposal. The Special Committee is also empowered to retain its own independent advisors to assist in the evaluation of the proposal and any alternative proposals.

The Board cautions the Company's shareholders, and others considering trading in its securities, that it has only received a proposal. No decision has been made with respect to the Company's response to the proposal. There can be no assurance that any definitive offer will be made, that any agreement will be executed or that a transaction with Mr. Chen or any other transaction will be approved or consummated. The Company is not obligated to make, and does not at this time anticipate making, any further public statements about this matter or the activities of the special committee unless and until either the Company enters into a definitive agreement for a transaction or the special committee determines that no such transaction will be effected.

The Company has historically financed its liquidity requirements from a variety of sources, including short-term borrowings under bank credit agreements, bankers’ acceptances, issuances of capital stock and notes and internally generated cash. As of ~~September 30, 2017,~~March 31, 2021, the Company had cash and cash equivalents and ~~time deposits included in~~ short-term investments of ~~$79.2~~$105.2 million, compared to ~~$61.6~~$107.4 million as of December 31, ~~2016,~~2020, representing ~~an increase~~a decrease of ~~$17.6~~$2.2 million, or ~~28.7%~~2.0%. ~~Short-term investments included pledged short-term investments of $2.1 million and $5.7 million as of September 30, 2017 and December 31, 2016, respectively.~~

The Company had working capital (total current assets less total current liabilities) of ~~$167.2~~$130.5 million as of ~~September 30, 2017,~~March 31, 2021, compared to ~~$161.0~~$121.2 million as of December 31, ~~2016,~~2020, representing an increase of ~~$6.2~~$9.3 million, or ~~3.9%~~7.7%.

~~The~~Except for the expected distribution of dividends from the Company’s PRC subsidiaries to the Company in order to fund the payment of the one-time transition tax due to the U.S. Tax Reform, the Company intends to indefinitely reinvest the funds in subsidiaries established in the PRC.

~~The Company believes~~We cannot predict the impact COVID-19 may have on our cash flow for the rest of 2021. However, based on our liquidity assessment, we believe that ~~in view of its current~~our cash ~~position, the cash expected to be generated~~flow from ~~the~~ operations and ~~funds available~~proceeds from ~~bank borrowings as detailed in subsequent paragraphs~~our financing activities will be sufficient to meet ~~its~~our anticipated cash needs, including our cash needs for working capital and capital ~~expenditure requirements, including~~expenditures, for the ~~repayment of bank loans,~~foreseeable future and for at least twelve months ~~commencing from~~subsequent to the ~~date~~filing of this report.

The Company’s capital source is multifaceted, such as bank loans and ~~banker’s~~banks’ acceptance facilities. In financing activities and operating activities, the Company’s banks require the Company to sign line of credit agreements and repay ~~all existing borrowings under~~ such facilities within one ~~year.~~to two years. On the condition that the Company can provide adequate mortgage security and has not violated the terms of the line of credit agreement, such ~~one year~~ facilities can be extended for another ~~year.~~one to two years.

The Company had short-term loans of ~~$73.6~~$46.2 million (See Note ~~13)~~7) and bankers’ acceptances of ~~$79.9~~$86.6 million (See Note ~~14)~~8) as of ~~September 30, 2017.~~March 31, 2021.

The Company currently expects to be able to obtain similar bank loans, i.e., RMB loans, and bankers’ acceptance facilities in the future if it can provide adequate mortgage security following the termination of the above-mentioned agreements, see the table under “Bank Arrangements” below for more information. If the Company is not able to do so, it will have to refinance such debt as it becomes due or repay that debt to the extent it has cash available from operations or from the proceeds of additional issuances of capital stock. ~~Owing~~Due to a depreciation of assets, the value of the mortgages securing the above-mentioned bank loans and banker's acceptances ~~will~~is expected to be reduced by approximately ~~$12.3~~$16.2 million over the next 12 months. If the Company wishes to ~~obtain~~maintain the same amount of bank loans and banker's acceptances in the future, it ~~will have~~may be required by the banks to provide additional mortgages of ~~$12.3~~$16.2 million as of the maturity date of such line of credit agreements, see the table under “Bank Arrangements” below for more information. The Company can still obtain a reduced line of credit with a reduction of ~~$8.9~~$8.6 million, which is ~~72.0%~~52.9%, the mortgage ~~rate,~~ratio, of ~~$12.3~~$16.2 million, if it cannot provide additional mortgages. The Company expects that the reduction in bank loans will not have a material adverse effect on its liquidity.

As of ~~September 30, 2017,~~March 31, 2021, the principal outstanding under the Company’s credit facilities and lines of credit was as follows (figures are in thousands of USD):

The Company may request the banks to issue notes payable or bank loans within its credit line using a 365-day revolving line.

The Company’s bank loan terms range from ~~eleven~~9 months to ~~eighteen~~23 months. Pursuant to the comprehensive credit line arrangement, the Company pledged and guaranteed:

1. ~~Equipment with an assessed value of approximately $56.2 million as security for its revolving comprehensive credit facility with Hubei Bank.~~

~~2. Land use rights, buildings and equipment with an assessed value of approximately $10.6 million as security for its revolving comprehensive credit facility with China Construction Bank.~~

3. Land use rights and buildings with an assessed value of approximately ~~$15.6~~$9.7 million as security for its comprehensive credit facility with China Everbright Bank.

2. Buildings with an assessed value of approximately $22.4 million as security for its revolving comprehensive credit facility with Shanghai Pudong Development Bank.

4.3. Land use rights and buildings with an assessed value of approximately ~~$9.3~~$21.7 million as security for its comprehensive credit facility with China CITIC Bank Wuhan ~~branch.~~Branch.

5.4. Land use rights and buildings with an assessed value of approximately ~~$5.7~~$6.7 million as security for its comprehensive credit facility with China CITIC Bank Shenyang ~~branch.~~Branch.

~~6. Land use rights and buildings~~5. Equipment with an assessed value of approximately ~~$7.7~~$70.9 million as security for its revolving comprehensive credit facility with Hubei Bank.

6. Buildings with an assessed value of approximately $2.4 million as security for its comprehensive credit facility with ~~China Everbright Bank.~~Bank of Chongqing.

7. ~~On April 20, 2017, the Company entered into a Credit Agreement~~Buildings with ~~ICBC Macau to obtain the Credit Facility. The interest rate~~an assessed value of ~~the Credit Facility is calculated based on a three-month LIBOR plus 1.30% per annum, subject to the availability~~approximately $4.2 million as security for its comprehensive credit facility with Agricultural Bank of funds and fluctuation at ICBC Macau’s discretion. Interest is calculated daily based on a 360-day year and it is fixed one day before the first day of each interest period. The interest period is defined as three months from the date of drawdown.China.

As security for the Credit Facility, the Company was required to provide ICBC Macau with the Henglong Standby Letter of Credit for a total amount of not less than $23.9 million if the Credit Facility is fully drawn.

~~On May 5, 2017, the Company drew down the full amount of $20.0 million under the Credit Facility~~Short-term and provided the Henglong Standby Letter of Credit for an amount of $23.9 million in favor of ICBC Macau. The Henglong Standby Letter of Credit issued by ICBC Jingzhou is collateralized by Henglong’s notes receivable of RMB 158.5 million, equivalent to approximately $23.9 million. The Company also paid an arrangement fee of $0.04 million to ICBC Jingzhou. The maturity date of the Credit Facility is May 12, 2018.

8. On April 1, 2016, Brazil Henglong entered into a credit facility agreement with HSBC Brazil to obtain a credit facility in the amount of $0.1 million, the “HSBC Brazil Credit Facility”. The HSBC Brazil Credit Facility expired on October 27, 2017. As security for the HSBC Credit Facility, the Company’s subsidiary Hubei Henglong was required to provide HSBC Brazil with the Standby Letter of Credit for a total amount of $0.1 million if the HSBC Brazil Credit Facility was fully drawn.

On May 6, 2016, Brazil Henglong drew down a loan amounting to $0.1 million provided by HSBC Brazil. The loan matured on October 9, 2017 and had an annual interest rate of 8.2%.Hubei Henglong provided a Standby Letter of Credit for an amount of $0.1 million in favor of HSBC Brazil. Hubei Henglong’s Standby Letter of Credit was issued by China CITIC Bank Wuhan branch and was collateralized by short-term investments of Hubei Henglong of RMB 0.5 million, equivalent to approximately $0.1 million. The Company repaid this bank loan in October 9, 2017.

9. On August 26, 2016, Brazil Henglong entered into a credit facility agreement with Bank of China (Brazil) to obtain a credit facility in the amount of $0.6 million, the “Bank of China Credit Facility”. The Bank of China Credit Facility will expire on January 15, 2018. As security for the Bank of China Credit Facility, the Company’s subsidiary Hubei Henglong is required to provide Bank of China (Brazil) with a Standby Letter of Credit for a total amount of $0.9 million if the Bank of China Credit Facility is fully drawn.

10. On April 25, 2017, Great Genesis entered into a credit facility agreement with Taishin Bank to obtain a non-revolving credit facility in the amount of $10.0 million, the “Taishin Bank Credit Facility”. The Taishin Bank Credit Facility will expire on April 25, 2018 and has an annual interest rate of 2.7%. Interest is paid quarterly and the principal repayment is payable at maturity. As security for the Taishin Bank Credit Facility, the Company’s subsidiary Henglong is required to provide Taishin Bank with the Standby Letter of Credit for a total amount of not less than $10.0 million if the Taishin Bank Credit Facility is fully drawn.

The following table summarizes the Company’s expected cash outflows resulting from financial contracts and commitments (in thousands of USD). The Company has not included information on its recurring purchases of materials for use in its manufacturing operations. These amounts are generally consistent from year to year, closely reflecting the Company’s levels of production, and are not long-term in nature (being less than three months in length).

The following table summarizes the contract information of short-term and long-term borrowings between the banks, government and the Company as of ~~September 30, 2017~~March 31, 2021 (figures are in thousands of USD).

The Company must use the loans for the purpose described ~~in the table. For the two bank loans with ICBC Macau~~ and HSBC Bank (China) Company Limited, if the Company fails to do so, it will be charged a penalty interest at 60% to 100% of the specified loan rate listed in the table above. Except for the loan granted by ICBC Macau as disclosed in the section “Capital Source” above, the Company has to pay interest at the interest rate described in the table on the 20th of each month, quarter or semiannual period, as applicable. If the Company fails to do so, it will be charged compound interest at the specified rate in the above table. The Company has to repay the principal outstanding on the specified date in the table. If it fails to do so, it will be charged aadditional 30% to 100% penalty ~~interest at 50% of the specified loan rate.~~interest.

~~Management believes that the~~The Company has complied with such financial covenants as of ~~September 30, 2017, and will continue to comply with them.~~March 31, 2021.

The following table summarizes the contract information of issuing notes payable between the banks and the Company as of ~~September 30, 2017~~March 31, 2021 (figures are in thousands of USD):

The Company must use notes payable for the purpose described in the table. If it fails to do so, the banks will no longer issue the notes payable, and it may have an adverse effect on the Company’s liquidity and capital resources. The Company has to deposit a sufficient cash ~~in the designated account of the bank~~ on the due date of notes payable for payment to the suppliers. If the bank has advanced payment for the Company, it will be charged aan additional 50% penalty ~~interest at 50% of the loan rate that is published by the People’s Bank of China for the same period.~~interest. The Company complied with such financial covenants as of ~~September 30, 2017, and believes it will continue to comply with them.~~March 31, 2021.

Net cash ~~provided by~~used in operating activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 was ~~$43.0~~$0.8 million, compared with net cash provided byin operating activities of ~~$13.1~~$29.2 million for the same period of ~~2016,~~2020, representing an increase in net cash outflows by $30.0 million, which was mainly due to (1) the increase in net income excluding non-cash items by $5.7 million, (2) the decrease in cash inflows from movements of ~~$29.9~~accounts and notes receivable by $37.4 million, (3) the decrease in the cash outflows from movements of accounts and notes payable by $19.6 million, and (4) a combination of other factors contributing an increase of cash outflows by $17.9 million.

Net cash used in investing activities for the three months ended March 31, 2021 was $5.8 million, as compared to net cash provided by investing activities of $1.7 million for the same period of 2020, representing an increase in net cash outflows by $7.5 million, which was mainly due to the net effect of (1) ~~the~~an increase in ~~net income excluding non-cash items~~payments to acquire property, plant and equipment by ~~$6.7~~$1.3 million, and (2) a combination of other factors contributing an increase of cash inflows by $6.3 million, primarily including an increase in purchase of short-term investment by $14.7 million, offset by the increase in cash ~~inflows~~received from ~~movements of operating assets and liabilities by $23.2 million. The increase in cash inflows was primarily due to the offsetting effect of (1) the~~decrease in cash inflows due to the movement of pledged deposits by $8.5 million, (2) the increase in cash outflows due to the movement of accounts and notes payable by $18.0 million, (3) the increase in cash inflows due to the movement of accounts and notes receivable by $51.3 million, (4) the decrease in cash outflows due to the movement of inventories by $11.8 million, (5) the increase in cash outflows due to the movement of accrued expenses and other payables by $7.5 million and (6) the increase in cash outflows due to the movement of tax payable by $8.2 million.

The Company used net cash of $50.5 million in investment activities during the nine months ended September 30, 2017, compared to $46.0 million for the same period of 2016, representing an increase of cash outflows by $4.5 million, which was mainly due to (1) a decrease in purchases of property, plant and equipment of $8.0 million, (2) a decrease in cash used in purchases of short-term investments of $3.2 million, (3) an increase in other receivables of $2.2 million, (4) an increase in cash used in purchase of long-term time deposit by $5.8 million, (5) an increase in proceeds from maturities of short-term ~~investments~~investment and long-term time deposits by ~~$20.5~~$4.1 million, and ~~(6) an increase~~a decrease in ~~cash outflows due to a loan to a related party~~investment under the equity method by ~~$29.0~~$2.6 million.

Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 was ~~$30.4~~$1.4 million, compared to net cash ~~provided by~~used in financing activities of ~~$3.6~~$2.9 million for the same period of ~~2016,~~2020, representing an increase ~~of $26.8~~in net cash inflows by $4.3 million, which was mainly due to the net effect of (1) ~~increased~~a decrease in proceeds ~~of $57.9 million~~ from bank ~~and government loans~~loan by $1.8 million, and (2) ~~increased repayments~~a decrease in repayment of ~~$32.1 million to banks and the government.~~bank loans by $6.1 million.

There were no material changes to the disclosure made in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 regarding this matter.

The Company’s management, under the supervision and with the participation of its chief executive officer and chief financial officer, Messrs. Wu Qizhou and Li Jie, respectively, evaluated the effectiveness of the Company’s disclosure controls and procedures as of ~~September 30, 2017,~~March 31, 2021, the end of the period covered by this Report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this Form 10-Q, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, Messrs. Wu and Li concluded that the Company’s disclosure controls and procedures were effective as of ~~September 30, 2017.~~March 31, 2021.

The Company’s disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of its disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

There have been no changes in the Company’s internal control over financial reporting during the three months ended ~~September 30, 2017~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been no material changes from the risk factors previously disclosed in Item 1A of the Company’s ~~2016~~2020 Annual Report on Form 10-K.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Delaware		33-0885775
(State or other jurisdiction of incorporation or		(I.R.S. ~~employer identification number)~~Employer Identification No.)
organization)

Title of each class	~~Issuer’s telephone number~~Trading symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value	CAAS	The Nasdaq Capital Market

		Page

	Part I — Financial Information	4

Item 1.	Unaudited Financial Statements.	4
	Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended March 31, 2021 and ~~Nine Months Ended September 30, 2017 and 2016~~2020	4
	Condensed Unaudited Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020	65
	Condensed Unaudited Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	76
	Notes to Condensed Unaudited Consolidated Financial Statements	97
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	3221
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	5132
Item 4.	Controls and Procedures.	5132

	Part II — Other Information	33

Item 1.	Legal Proceedings.	5133
Item 1A.	Risk Factors.	5233
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	5233
Item 3.	Defaults Upon Senior Securities.	5233
Item 4.	Mine Safety Disclosures.	5233
Item 5.	Other Information.	5233
Item 6.	Exhibits.	5234

Signatures		5335

	Three Months Ended September 30,
	2017			2016
Net product sales ($7,563 and $9,950 sold to related parties for the three months ended September 30, 2017 and 2016)	$	118,365		$	94,626
Cost of products sold ($6,549 and $5,869 purchased from related parties for the three months ended September 30, 2017 and 2016)		95,878			74,641
Gross profit		22,487			19,985
Gain on other sales		553			22
Less: Operating expenses
Selling expenses		4,537			3,840
General and administrative expenses		4,390			3,741
Research and development expenses		9,194			6,723
Total operating expenses		18,121			14,304
Income from operations		4,919			5,703
Other income		100			420
Interest expense		(318	)		(201	)
Financial income, net		1,027			800
Income before income tax expenses and equity in earnings of affiliated companies		5,728			6,722
Less: Income taxes		991			1,167
Equity in earnings of affiliated companies		491			304
Net income		5,228			5,859
Net income attributable to non-controlling interests		169			177
Net income attributable to parent company’s common shareholders	$	5,059		$	5,682
Comprehensive income:
Net income	$	5,228		$	5,859
Other comprehensive income:
Foreign currency translation gain/(loss), net of tax		6,705			(2,139	)
Comprehensive income		11,933			3,720
Comprehensive income attributable to non-controlling interests		386			119
Comprehensive income attributable to parent company	$	11,547		$	3,601

Net income attributable to parent company’s common shareholders per share

Basic –	$	0.16		$	0.18

Diluted-	$	0.16		$	0.18
Weighted average number of common shares outstanding
Basic		31,644,004			31,911,360
Diluted		31,644,271			31,911,722

	March 31, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	90,374		$	97,248
Pledged cash		31,663			30,813
Accounts and notes receivable, net - unrelated parties		217,372			216,519
Accounts and notes receivable - related parties		19,273			17,621
Inventories		89,638			88,325
Other current assets		30,963			25,132
Total current assets		479,283			475,658
Non-current assets:
Property, plant and equipment, net		138,542			141,004
Land use rights, net		10,626			10,774
Long-term investments	��	45,518			49,766
Other non-current assets		27,794			30,358
Total assets	$	701,763		$	707,560

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term loans	$	46,193		$	44,238
Accounts and notes payable - unrelated parties		212,925			212,522
Accounts and notes payable - related parties		10,984			12,730
Accrued expenses and other payables		51,458			55,607
Other current liabilities		27,216			29,387
Total current liabilities		348,776			354,484
Long-term liabilities:
Other long-term payable		35			1,126
Long-term tax payable		23,884			23,884
Other non-current liabilities		8,105			8,151
Total liabilities	$	380,800		$	387,645

Commitments and Contingencies (See Note 23)

Mezzanine equity:
Redeemable non-controlling interests		530			523

Stockholders’ equity:
Common stock, $0.0001 par value - Authorized - 80,000,000 shares; Issued - 32,338,302 and 32,338,302 shares as of March 31, 2021 and December 31, 2020, respectively	$	3		$	3
Additional paid-in capital		64,361			64,273
Retained earnings-
Appropriated		11,303			11,303
Unappropriated		218,697			215,491
Accumulated other comprehensive income		15,285			17,413
Treasury stock - 1,486,526 and 1,486,526 shares as of March 31, 2021 and December 31, 2020, respectively		(5,261	)		(5,261	)
Total parent company stockholders' equity		304,388			303,222
Non-controlling interests		16,045			16,170
Total stockholders' equity		320,433			319,392
Total liabilities, mezzanine equity and stockholders' equity	$	701,763		$	707,560

	(86) 716- 412- ~~7912~~7901
	(Registrant’s telephone number, including area code)

	September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	55,382		$	31,092
Pledged cash		31,075			30,799
Short-term investments		23,829			30,475
Accounts and notes receivable, net - unrelated parties		269,943			285,731
Accounts and notes receivable, net - related parties		17,607			20,984
Advance payments and others - unrelated parties		12,235			10,203
Advance payments and others - related parties		31,397			624
Inventories		73,030			68,050
Current deferred tax assets		7,476			7,946
Total current assets		521,974			485,904
Non-current assets:
Long-term time deposits		6,027			865
Property, plant and equipment, net		115,302			101,478
Intangible assets, net		512			617
Other receivables, net - unrelated parties		2,234			2,252
Advance payment for property, plant and equipment - unrelated parties		14,222			14,506
Advance payment for property, plant and equipment - related parties		4,813			5,005
Long-term investments		25,341			16,431
Non-current deferred tax assets		4,295			4,641
Total assets	$	694,720		$	631,699

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank and government loans	$	73,594		$	40,820
Accounts and notes payable - unrelated parties		224,758			216,993
Accounts and notes payable - related parties		5,749			6,803
Customer deposits		869			700
Accrued payroll and related costs		7,460			6,971
Accrued expenses and other payables		32,883			35,882
Accrued pension costs		4,750			4,130
Taxes payable		3,800			11,674
Amounts due to shareholders/directors		335			312
Advances payable (current portion)		399			382
Current deferred tax liabilities		190			193
Total current liabilities		354,787			324,860
Long-term liabilities:
Long-term bank loan		-			608
Advances payable		354			339
Total liabilities	$	355,141		$	325,807

Commitments and Contingencies (See Note 29)

Stockholders’ equity:
Common stock, $0.0001 par value - Authorized - 80,000,000 shares; Issued – 32,338,302 and 32,338,302 shares as of September 30, 2017 and December 31, 2016, respectively	$	3		$	3
Additional paid-in capital		64,406			64,764
Retained earnings-
Appropriated		10,673			10,549
Unappropriated		248,533			228,963
Accumulated other comprehensive income/(loss)		12,722			(892	)
Treasury stock – 694,298 and 694,298 shares as of September 30, 2017 and December 31, 2016, respectively		(2,907	)		(2,907	)
Total parent company stockholders' equity		333,430			300,480
Non-controlling interests		6,149			5,412
Total stockholders' equity		339,579			305,892
Total liabilities and stockholders' equity	$	694,720		$	631,699

	Percentage Interest
Name of Entity	September 30, 2017			December 31, 2016
Shashi Jiulong Power Steering Gears Co., Ltd., “Jiulong”¹		100.00	%		100.00	%
JingzhouHenglong Automotive Parts Co., Ltd., “Henglong”²		100.00	%		100.00	%
Shenyang Jinbei Henglong Automotive Steering System Co., Ltd., “Shenyang”³		70.00	%		70.00	%
Universal Sensor Application Inc., “USAI”⁴		83.34	%		83.34	%
Wuhan Jielong Electric Power Steering Co., Ltd., “Jielong”⁵		85.00	%		85.00	%
Wuhu Henglong Automotive Steering System Co., Ltd., “Wuhu”⁶		77.33	%		77.33	%
Hubei Henglong Automotive System Group Co., Ltd, “Hubei Henglong”⁷		100.00	%		100.00	%
JingzhouHenglong Automotive Technology (Testing) Center, “Testing Center”⁸		100.00	%		100.00	%
Beijing HainachunHenglong Automotive Steering System Co., Ltd., “Beijing Henglong”⁹		50.00	%		50.00	%
Chongqing HenglongHongyan Automotive System Co., Ltd., “Chongqing Henglong”¹⁰		70.00	%		70.00	%
CAAS Brazil’s Imports and Trade In Automotive Parts Ltd., “Brazil Henglong”¹¹		95.84	%		80.00	%
Fujian Qiaolong Special Purpose Vehicle Co., Ltd., “Fujian Qiaolong”¹²		0.00	%		0.00	%
Wuhan Chuguanjie Automotive Science and Technology Ltd., “Wuhan Chuguanjie”¹³		85.00	%		85.00	%
Hubei Henglong Group Shanghai Automotive Electronics Research and Development Ltd., “Shanghai Henglong”¹⁴		100.00	%		100.00	%

	Percentage Interest
Name of Entity	March 31, 2021			December 31, 2020
Shashi Jiulong Power Steering Gears Co., Ltd., “Jiulong” ¹		100.00	%		100.00	%
Jingzhou Henglong Automotive Parts Co., Ltd., “Henglong” ²		100.00	%		100.00	%
Shenyang Jinbei Henglong Automotive Steering System Co., Ltd., “Shenyang” ³		70.00	%		70.00	%
Wuhan Jielong Electric Power Steering Co., Ltd., “Jielong” ⁴		85.00	%		85.00	%
Wuhu Henglong Automotive Steering System Co., Ltd., “Wuhu” ⁵		77.33	%		77.33	%
Hubei Henglong Automotive System Group Co., Ltd., “Hubei Henglong” ⁶		100.00	%		100.00	%
Jingzhou Henglong Automotive Technology (Testing) Center, “Testing Center” ⁷		100.00	%		100.00	%
Chongqing Henglong Hongyan Automotive System Co., Ltd., “Chongqing Henglong” ⁸		70.00	%		70.00	%
CAAS Brazil’s Imports and Trade In Automotive Parts Ltd., “Brazil Henglong” ⁹		95.84	%		95.84	%
Wuhan Chuguanjie Automotive Science and Technology Ltd., “Wuhan Chuguanjie” ¹⁰		85.00	%		85.00	%
Hubei Henglong Group Shanghai Automotive Electronics Research and Development Ltd., “Shanghai Henglong” ¹¹		100.00	%		100.00	%
Jingzhou Qingyan Intelligent Automotive Technology Research Institute Co., Ltd., “Jingzhou Qingyan” ¹²		60.00	%		60.00	%
Hubei Henglong & KYB Automobile Electric Steering System Co., Ltd., “Henglong KYB” ¹³		66.60	%		66.60	%
Hyoseong (Wuhan) Motion Mechatronics System Co., Ltd., “Wuhan Hyoseong” ¹⁴		51.00	%		51.00	%
Wuhu Hongrun New Material Co., Ltd., “Wuhu Hongrun” ¹⁵		62.00	%		62.00	%
Changchun Hualong Automotive Technology Co., Ltd., “Changchun Hualong” ¹⁶		100.00	%		100.00	%

	6.
5.	Wuhu was established in 2006 and mainly engages in the production and sales of automobile steering systems.

	7.
6.	On March 7, 2007, Genesis established Hubei Henglong, formerly known as ~~JingzhouHengsheng~~Jingzhou Hengsheng Automotive System Co., Ltd., its wholly-owned subsidiary, to engage in the production and sales of automotive steering systems. On July 8, 2012, Hubei Henglong changed its name to Hubei Henglong Automotive System Group Co., Ltd.

	~~14.~~
11.	In January 2015, Hubei Henglong formed Hubei Henglong Group Shanghai Automotive Electronics Research and Development Ltd., “Shanghai Henglong”, which mainly engages in the design and sales of automotive electronics.

12.	In November 2017, Hubei Henglong formed Jingzhou Qingyan Intelligent Automotive Technology Research Institute Co., Ltd., “Jingzhou Qingyan”, which mainly engages in the research and development of intelligent automotive technology.

13.	In August 2018, Hubei Henglong and KYB (China) Investment Co., Ltd. (“KYB”) established Hubei Henglong KYB Automobile Electric Steering System Co., Ltd., “Henglong KYB”, which mainly engages in design, manufacture, sales and after-sales service of automobile electronic systems. Hubei Henglong owns 66.6% of the shares of this entity and has consolidated it since its establishment.

14.	In March 2019, Hubei Henglong and Hyoseong Electric Co., Ltd. established Hyoseong (Wuhan) Motion Mechatronics System Co., Ltd., “Wuhan Hyoseong”, which mainly engages in the design, manufacture and sales of automotive motors and electromechanical integrated systems. Hubei Henglong owns 51.0% of the shares of Wuhan Hyoseong and has consolidated it since its establishment.
15.	In December 2019, Hubei Henglong formed Wuhu Hongrun New Material Co., Ltd., “Wuhu Hongrun”, which mainly engages in the development, manufacturing and sale of high polymer materials. Hubei Henglong owns 62.0% of the shares of Wuhu Hongrun and has consolidated it since its establishment.

	3.
~~Short-term investments~~There have been no updates to the significant accounting policies set forth in the notes to the consolidated financial statements for the year ended December 31, 2020.

	September 30, 2017		December 31, 2016
Time deposits	$	5,100	$	30,217
Wealth management financial products measured at fair value		18,729		258
Total	$	23,829	$	30,475

	September 30, 2017			December 31, 2016
Accounts receivable - unrelated parties	$	150,696		$	154,403
Notes receivable - unrelated parties^(1) (2)		120,438			132,409
Total accounts and notes receivable- unrelated parties		271,134			286,812
Less: allowance for doubtful accounts - unrelated parties		(1,191	)		(1,081	)
Accounts and notes receivable, net - unrelated parties		269,943			285,731
Accounts and notes receivable, net - related parties		17,607			20,984
Accounts and notes receivable, net	$	287,550		$	306,715

	~~(2)~~	As of ~~September 30, 2017,~~March 31, 2021 and December 31, 2020, the Company ~~collateralized~~pledged its notes receivable in ~~an amount~~amounts of ~~RMB 268.3~~$8.1 million ~~equivalent to approximately $40.4~~and $8.2 million, respectively, as security for the credit facilities with banks in China and the Chinese government, including RMB 158.9 million, equivalent to approximately $23.9 million, in favor of Industrial and Commercial Bank of China, Jingzhou Branch, “ICBC Jingzhou”, for the purpose of obtaining the Henglong Standby Letter of Credit (as defined in Note 13), which is used as security for the non-revolving credit facility in the amount of $23.9 million provided by Industrial and Commercial Bank of China (Macau) Limited, “ICBC Macau”, RMB 30.0 million, equivalent to approximately $4.5 million, as securitycollateral in favor of the ~~Chinese~~local government for the ~~low interest~~ government ~~loan~~loans; and pledged its notes receivable in amounts of $6.3 million and $5.5 million, respectively, as collateral for banks to endorse the payment of the Company’s notes payable to the noteholders upon maturity (See Note ~~13),~~7).

Allowance for doubtful accounts receivable reversed in the consolidated statements of operations amounted to $0.2 million and ~~RMB 79.4~~$0.02 million, ~~equivalent to approximately $12.0 million, in favor of China CITIC Bank, Wuhan Branch, “CITIC Wuhan”,~~respectively, for the ~~purpose~~three months ended March 31, 2021 and 2020.

During the three months ended March 31, 2021, the Company’s five largest customers accounted for 43.3% of ~~obtaining~~its consolidated net product sales, with one customer individually accounting for more than 10% of consolidated net sales, i.e., 16.5%. As of March 31, 2021, approximately 8.1% of accounts receivable were from trade transactions with the ~~Henglong Standby Letter~~aforementioned customers and there was no individual customer with a receivables balance of ~~Credit(as defined in Note 13)~~more than 10% of total accounts receivable. During the three months ended March 31, 2020, the Company’s five largest customers accounted for 53.7% of its consolidated net product sales, with one customer individually accounting for more than 10% of consolidated net sales, i.e., ~~which~~33.7%. As of March 31, 2020, approximately 8.8% of accounts receivable were from trade transactions with the aforementioned customers and there was ~~used to obtain the facility~~no individual customer with a receivables balance of ~~Taishin Bank in the amount~~more than 10% of ~~$10.0 million(See Note 13).~~total accounts receivable.

	March 31, 2021		December 31, 2020
Raw materials	$	27,274	$	24,367
Work in process		10,508		10,098
Finished goods		51,856		53,860
Total	$	89,638	$	88,325

	September 30, 2017			December 31,2016
Other receivables - unrelated parties⁽¹⁾	$	1,009		$	738
Other receivables - employee housing loans⁽²⁾		1,291			1,577
Less: allowance for doubtful accounts - unrelated parties		(66	)		(63	)
Other receivables, net - unrelated parties	$	2,234		$	2,252

	September 30, 2017			December 31, 2016
Other receivables - related parties⁽¹⁾	$	576		$	559
Less: allowance for doubtful accounts - related parties		(576	)		(559	)
Other receivables, net - related parties	$	-		$	-

	March 31, 2021		December 31, 2020
Chongqing Venture Fund⁽¹⁾	$	18,286	$	20,230
Hubei Venture Fund		14,171		14,473
Suzhou Venture Fund		7,328		7,740
Beijing Henglong ⁽¹⁾		3,749		5,241
Henglong Tianyu		1,022		1,070
Chongqing Jinghua		565		599
Jiangsu Intelligent		397		413
Total	$	45,518	$	49,766

(1)	~~(1)~~Depreciation charges were $6.4 million and $5.0 million for the three months ended March 31, 2021 and 2020, respectively.

(2)	As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, the Company pledged property, plant and equipment with a net book value of approximately ~~$25.9~~$63.0 million and ~~$28.5~~$66.1 million, respectively, as security for its comprehensive credit facilities with banks in China.

	March 31, 2021			December 31, 2020
Short-term bank loans ⁽¹⁾	$	38,584		$	36,575
Current portion of long-term government loan ⁽²⁾		7,609			7,663
Subtotal		46,193			44,238
Long-term government loans ⁽²⁾		7,609			7,663
Less: Current portion of long-term government loans ⁽²⁾		(7,609	)		(7,663	)
Subtotal		-			-
Total bank and government loans	$	46,193		$	44,238

	September 30, 2017			December 31, 2016
Costs:
Patent technology	$	2,076		$	1,986
Management software license		1,218			1,165
Total intangible assets		3,294			3,151
Less: Amortization⁽¹⁾		(2,782	)		(2,534	)
Total intangible assets, net	$	512		$	617

	September 30, 2017			December 31, 2016

Losses carry forward (U.S.)⁽¹⁾	$	6,389		$	6,216
Losses carry forward (Non-U.S.)⁽¹⁾		2,307			2,887
Product warranties and other reserves		4,290			4,766
Property, plant and equipment		4,422			4,204
Share-based compensation		220			247
Bonus accrual		230			231
Other accruals		1,439			1,551
Deductible temporary difference related to revenue recognition		153			191
Others		1,365			1,206
Total deferred tax assets, net		20,815			21,499
Less: Valuation allowance		(9,044	)		(8,912	)
Total deferred tax assets, net of valuation allowance⁽²⁾	$	11,771		$	12,587

	September 30, 2017		December 31, 2016
Short-term bank loan⁽¹⁾	$	9,794	$	2,162
Short-term bank loan^{(2) (3) (4) (5)}		30,484		35,054
Short-term bank loans⁽⁶⁾		28,796		-
Short-term government loan⁽⁷⁾		4,520		3,604
Bank and government loans	$	73,594	$	40,820

	September 30, 2017		December 31, 2016
Accounts payable - unrelated parties	$	142,594	$	138,053
Notes payable - unrelated parties⁽¹⁾		82,164		78,940
Accounts and notes payable- unrelated parties		224,758		216,993
Accounts payable - related parties		5,749		6,803
Balance at end of period	$	230,507	$	223,796

	September 30, 2017		December 31, 2016
Value-added tax payable	$	2,374	$	7,662
Income tax payable		1,019		3,390
Other tax payable		407		622
Total	$	3,800	$	11,674

	Net Product Sales						Net Income (Loss)
	Nine Months Ended						Nine Months Ended
	September 30						September 30
	2017			2016			2017			2016
Henglong	$	191,093		$	195,940		$	6,300		$	13,389
Jiulong		75,525			54,976			3,739			2,219
Shenyang		28,777			24,898			1,271			995
Wuhu		18,254			15,897			215			96
Hubei Henglong		66,855			42,815			5,518			2,286
Other Sectors		40,821			29,558			1,341			162
Total Segments		421,325			364,084			18,384			19,147
Corporate		-			-			3,367			(1,317	)
Eliminations		(65,992	)		(51,587	)		(1,704	)		(911	)
Total	$	355,333		$	312,497		$	20,047		$	16,919

	Bank	Due Date	Amount Available ⁽⁴⁾		Amount Used			Assessed Mortgage Value⁽⁵⁾
1. Comprehensive credit facilities	Hubei Bank⁽⁶⁾	Sep-2017	$	27,121	$	6,192		$	56,193

2. Comprehensive credit facilities	China Construction Bank	Dec-2017		4,520		653			10,604

3. Comprehensive credit facilities	Shanghai Pudong Development Bank⁽¹⁾⁽⁶⁾	Oct-2017		19,587		9,608			15,559

4. Comprehensive credit facilities	China CITIC Bank ⁽¹⁾	Sep-2017		60,269		52,990			9,256

	China CITIC Bank ⁽¹⁾	Jul-2019		3,255		2,260			5,730

5. Comprehensive credit facilities	Hua Xia Bank⁽¹⁾	Jul-2017		30,135		1,784			-

6. Comprehensive credit facilities	China Everbright Bank	Dec-2017		4,520		2,728			7,715

7. Comprehensive credit facilities	ICBC Macau	May-2018		23,844		20,000			23,945

8. Comprehensive credit facilities	HSBC (Brazil) Company Limited	Oct-2017		70		4			75

9. Comprehensive credit facilities	Bank of China (Brazil)	Feb-2018		610		622			904

10. Comprehensive credit facilities	Bank of China⁽¹⁾	Apr-2018		22,601		8,109			-

11. Comprehensive credit facilities	China Merchants Bank⁽¹⁾	Apr-2018		15,067		2,117			-

12. Comprehensive credit facilities	Taishin International Bank	Apr-2018		10,000		9,858			12,570

Total			$	221,599	$	116,925	⁽²⁾	$	142,551	⁽³⁾

	Bank	Due Date	Amount Available⁽³⁾		Amount Used⁽⁴⁾		Assessed Mortgage Value⁽⁵⁾
1. Comprehensive credit facilities	China Everbright Bank ⁽¹⁾	Mar 2021		4,565		3,453		9,678

2. Comprehensive credit facilities	Shanghai Pudong Development Bank ⁽²⁾	Oct 2021		19,783		10,637		22,385

3. Comprehensive credit facilities	China CITIC Bank ⁽²⁾	Aug 2022		64,675		22,605		21,680
	China CITIC Bank ⁽²⁾	Aug 2021		10,652		2,563		-
	China CITIC Bank	Jun 2022		3,287		1,671		6,712

4. Comprehensive credit facilities	Hubei Bank	Mar 2022		25,870		24,070		70,943

5. Comprehensive credit facilities	Bank of Chongqing	Sep 2021		761		228		2,377

6. Comprehensive credit facilities	Bank of China ⁽²⁾	Sep 2020		17,653		13,087		-

7. Comprehensive credit facilities	China Merchants Bank ⁽²⁾	Oct 2021		22,826		8,742		-

8. Comprehensive credit facilities	Agricultural Bank of China	Mar 2022		1,522		1,065		4,227

9. Comprehensive credit facilities	Huishang Bank	May 2021		1,522		-		-

Total			$	173,116	$	88,121	$	138,002

(1)	~~Each~~These facilities have expired. The Company is currently in the process of ~~Hubei Henglong’s~~negotiating with these banks to renew the credit facilities.

(2)	The comprehensive credit facilities with Shanghai Pudong Development Bank ~~is required to be~~are guaranteed by ~~Jielong and Hubei~~ Henglong in addition to the above pledged assets. ~~Each of Hubei Henglong, Henglong, Jiulong, Jielong, Chuguanjie and USAI’s~~The comprehensive credit facilities with China CITIC Bank ~~is required to be~~are guaranteed by Henglong and Hubei Henglong in addition to the above pledged ~~assets and Henglong’s comprehensive credit facilities with Hua Xia Bank are required to be guaranteed by Hubei Henglong. Each of Hubei Henglong, Henglong, Jiulong, Jielong’s~~assets. The comprehensive credit facilities with Bank of China ~~is required to be~~are guaranteed by Hubei ~~Henglong and Henglong, and Henglong’s~~Henglong. The comprehensive credit facilities with China Merchants Bank are ~~required to be~~ guaranteed by Hubei Henglong.

~~(2)~~(3)	“Amount available” is used for the drawdown of bank loans and issuance of bank notes at the Company’s discretion. If the Company elects to utilize the facility by issuance of bank notes, additional collateral is requested to be pledged to the bank.

(4)	“Amount used” represents the credit facilities used by the Company for the purpose of bank loans or notes payable during the facility contract period. The loans or notes payable under the credit facilities will remain outstanding regardless of the expiration of the relevant credit facilities until the separate loans or notes payable expire. The amount used includes bank loans of ~~$69.1~~$38.6 million and notes payable of ~~$46.5~~$49.5 million as of ~~September 30, 2017. The remainder of $4.5 million of government loan and $35.7 million of notes payable was secured by bank notes or time deposits without utilization of credit lines.~~March 31, 2021.

~~(3)~~(5)	In order to obtain lines of credit, the Company needs to pledge certain assets to banks. As of ~~September 30, 2017,~~March 31, 2021, the pledged assets included ~~$35.9 million accounts~~property, plant and ~~notes receivable, $1.6 million of time deposits~~equipment and ~~other pledged assets~~land use rights with an aggregate assessed value of ~~$105.1~~$138.0 million.

~~(4)~~	The amount available is used for the drawdown of bank loans and issuance of bank notes. For the drawdown of bank loans, this amount represents the amount that the Company can borrow immediately; for issuance of bank notes, the Company needs to pledge additional collateral in order to utilize these bank facilities.

~~(5)~~	~~The pledged cash deposits were not included in the assessed mortgage value.~~

~~(6)~~	As at the date of this report, the comprehensive credit facilities with Hubei Bank and Shanghai Pudong Development Bank have expired. The Company is negotiating the renewals of the credit facilities with the banks and expects to obtain the renewals in late November 2017. As the Company has obtained sufficient comprehensive lines of credit from other banks, the Company does not anticipate any significant adverse impact on its financial position if the Company fails to renew these credit facilities.

			Payment Due Dates
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 Years
Short-term loan including interest payable	$	74,951	$	74,951	$	-	$	-	$	-
Notes payable⁽¹⁾		82,165		82,165		-		-		-
Obligation for investment contract⁽²⁾		5,424		-		5,424		-		-
Other contractual purchase commitments, including service agreements		24,676		16,496		8,180		-		-
Total	$	187,216	$	173,612	$	13,604	$	-	$	-

~~(1)~~	~~Notes payable do not bear interest.~~

~~(2)~~	In May 2016, Hubei Henglong entered into an agreement with other parties to establish a venture capital fund, the “Chongqing Venture Fund”. Hubei Henglong has committed to make investments of RMB 120.0 million, equivalent to approximately $18.1 million, into the Chongqing Venture Fund in three installments. As of September 30, 2017, Hubei Henglong has completed a capital contribution of RMB 84.0 million, equivalent to approximately $12.7 million, representing 35.0% of the Chongqing Venture Fund’s shares. According to the agreement, the remaining capital commitment of RMB 36.0 million, equivalent to approximately $5.4 million, will be paid upon capital calls received from the Chongqing Venture Fund.

Bank Government	Purpose	Borrowing Date	Borrowing Term (Months)		Annual Interest Rate			Date of Interest Payment	Due Date	Amount Payable on Due Date
Bank of China (Brazil)	Working Capital	Aug. 26, 2016		18		4.01	%	Pay semi annually	Jan. 15, 2018		622
														Borrowing				Annual			Date of
HSBC (Brazil) Company Limited	Working Capital	May 6, 2016		17		8.21	%	Pay quarterly	Oct. 9, 2017		4
Bank													Borrowing	Term				Interest			Interest
Government												Purpose	Date	(Months)		Principal		Rate			Payment	Due Date
Financial Bureau of Jingzhou Development Zone												Working Capital	Aug 07, 2019		23		3,044		3.80	%	Pay annually	Jun 30, 2021

Financial Bureau of Jingzhou Development Zone												Working Capital	Sep 03, 2019		22		4,565		3.80	%	Pay annually	Jun 30, 2021

Agricultural Bank of China												Working Capital	Mar 18, 2021		12		1,065		4.05	%	Pay monthly	Mar 17, 2022

China CITIC Bank												Working Capital	Jun 19, 2020		12		2,729		2.50	%	Pay in arrear	Jun 18, 2021

China CITIC Bank												Working Capital	Mar 22, 2021		12		4,112		3.45	%	Pay in arrear	Mar 22, 2022

Bank of China ⁽¹⁾												Working Capital	Apr 29, 2020		12		6,087		3.92	%	Pay monthly	Apr 28, 2021

China CITIC Bank ⁽¹⁾												Working Capital	Apr 29, 2020		12		1,522		4.35	%	Pay monthly	Apr 29, 2021

China CITIC Bank	Working Capital	Nov. 4, 2016		12		5.22	%	Pay monthly	Nov. 4, 2017		2,260	Working Capital	May 20, 2020		12		1,522		4.35	%	Pay monthly	May 20, 2021

China CITIC Bank	Working Capital	Mar. 3, 2017		11		4.99	%	Pay in arrear	Feb. 5, 2018		4,896	Working Capital	May 29, 2020		12		1,522		4.00	%	Pay monthly	May 29, 2021

China CITIC Bank	Working Capital	Mar. 3, 2017		11		4.99	%	Pay in arrear	Feb. 6, 2018		4,895	Working Capital	Jun 19, 2020		12		2,922		2.50	%	Pay in arrear	Jun 18, 2021

China CITIC Bank	Working Capital	Mar. 3, 2017		11		4.99	%	Pay in arrear	Feb. 7, 2018		4,607	Working Capital	Mar 22, 2021		12		6,831		3.45	%	Pay in arrear	Mar 18, 2022

China CITIC Bank	Working Capital	Mar. 3, 2017		11		4.99	%	Pay in arrear	Feb. 8, 2018		4,318
Bank of China												Working Capital	Jun 28, 2020		12		7,000		3.80	%	Pay monthly	Jun 27, 2021

China CITIC Bank	Working Capital	Mar. 3, 2017		11		4.99	%	Pay in arrear	Feb. 2, 2018		4,322	Working Capital	Sep 03, 2020		12		1,522		4.35	%	Pay monthly	Sep 03, 2021

China CITIC Bank	Working Capital	Mar. 3, 2017		11		4.99	%	Pay in arrear	Feb. 9, 2018		5,758	Working Capital	Sep 11, 2020		12		1,522		5.22	%	Pay monthly	Sep 11, 2021

Financial Bureau of Jingzhou Development Zone	Working Capital	Apr. 21, 2017		8		0.00	%	N/A	Dec. 8, 2017		1,507
Bank of ChongQing												Working Capital	Dec 29, 2020		9		228		4.05	%	Pay monthly	Sep 19, 2021
																$	46,193
ICBC Macau	Working Capital	May 5, 2017		12		2.63	%	Pay quarterly	May 4, 2018		20,000

Taishin International Bank	Working Capital	Apr. 28, 2017		12		2.65	%	Pay quarterly	Apr. 23, 2018		9,858

Financial Bureau of Jingzhou Development Zone	Working Capital	Aug. 17, 2017		12		1.50	%	Pay in arrear	Aug. 16, 2018		3,013

Bank of China (JingzhouShashi)	Working Capital	Sep. 28, 2017		12		4.57	%	Pay monthly	Sep. 27, 2018		7,534
Total										$	73,594