China XD Plastics Co Ltd

On November 5, 2020, the Company held a special meeting of stockholders, at which the Company’s stockholders voted, among other things, in favor of the proposal to adopt the previously announced agreement and plan of merger (the “Merger Agreement”), dated as of June 15, 2020, by and among the Company, Faith Dawn Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”), and Faith Horizon Inc., a Nevada corporation and wholly owned subsidiary of Parent (“Merger Sub”), providing for the merger of the Merger Sub with and into the Company, with the Company continuing as the surviving corporation and as a wholly-owned subsidiary of Parent (the “Merger”).

The Merger remains subject to various customary closing conditions as set forth in the Merger Agreement. If and when completed, the proposed merger would result in the Company becoming a privately-held company and the common stock of the Company would no longer be listed on the NASDAQ Global Market or any other stock exchange, and price quotations with respect to shares of Company common stock in the public market will no longer be available.

Provision for doubtful accounts was US$6.8 million in the nine-month period ended September 30, 2020 compared to nil in in the same period of 2019. As of September 30, 2020, accounts receivable of US$2.0 million from the Company’s two customers in UAE and US$4.8 million from the Company’s customer in PRC was overdue for more than 12 months. Based on assessment of the collectability of the amounts due from the customers, the Company provided an allowance for doubtful accounts of US$6.8 million for the period ended September 30, 2020.

Provision for long-term prepayments to equipment and construction suppliers was US$21.8 million in the nine-month period ended September 30, 2020 compared to nil in in the same period of 2019. On October 20, 2016, Sichuan Xinda entered into an equipment purchase agreement purchase contract with Peaceful for a total consideration of RMB89.8 million (equivalent to US$13.2 million), and on May 31, 2019, Dubai Xinda entered into an equipment purchase contract with Peaceful for a total consideration of US$18.8 million to purchase production and testing equipment. As of September 30, 2020, Peaceful failed to deliver the equipments under the purchase agreements. Based on the assessment of the realizability of the prepayments, the Company recognized a provision of US$21.8 million for the period ended September 30, 2020.

Net interest expenses were US$55.8 million for the nine-month period ended September 30, 2020, compared to US$45.4 million in the same period of 2019, representing a decrease of 22.9% or US$10.4 million, primarily due to (i) the increase of the average short-term and long-term loan balance in the amount of US$1,777.2 million for the nine-month period ended September 30, 2020, compared to US$884.7 million for the nine-month period ended September 30, 2019; (ii) the increase of interest expense resulting from the average loan interest rate increased to 5.7% for the nine-month period ended September 30, 2020 compared to 5.2% of the same period in 2019; (iii) the decrease of interest income resulting from the average interest rate decreased to 0.5% for the nine-month period ended September 30, 2020 compared to 0.7% of the same period in 2019, and partially offset by (iv) the increase of average deposit balance in the amount of US$386.1 million for the nine-month period ended September 30, 2020 compared to US$244.0 million for the same period in 2019.

Seven lawsuits by purported shareholders have been filed against the Company and members of the Company’s Board of Directors in connection with the proposed transaction contemplated by an agreement and plan of merger, dated June 15, 2020, by and among, the Company, Faith Dawn Limited and Faith Horizon Inc., and approved at a special meeting of the Company’s stockholders held on November 5, 2020, including (i) Sears v. China XD Plastics Company Limited, et al., Case No. 1:20-cv-05156-AT, a putative class action filed on or about July 7, 2020, in the United States District Court for the Southern District of New York, (ii) Post v. China XD Plastics Company Limited, et al., Case No. 1:20-cv-00926-UNA, a putative class action filed on or about July 8, 2020, in the United States District Court for the District of Delaware, which also names the buyers as defendants, (iii) Goebert v. China XD Plastics Company Limited, et al., Case No. 1:20-cv-05312, filed on or about July 10, 2020, in the United States District Court for the Southern District of New York, (iv)  Kothari v. China XD Plastics Company Limited, et al., Case No. 2:20-cv-01330-APG-BNW, a putative class action filed on or about July 17, 2020, in the United States District Court for the District of Nevada, (v) Aerts v. China XD Plastics Company Limited, et al., Case No. A-20-819986-B, a putative class action filed on or about August 21, 2020, in the State of Nevada District Court of Clark County, (vi) Siu v. China XD Plastics Company Limited, et al., Case No. 1:20-cv-07262, filed on or about September 4, 2020, in the United States District Court for the Southern District of New York, and (vii) Feng, et al. v. Han, et al., Case No. A-20-822393-B, a putative class action filed on or about October 2, 2020 in the State of Nevada District Court of Clark County. These complaints challenge the proposed transaction and allege, among other things, that the Company and the Company’s Board of Directors failed to disclose material information in connection with the proposed transaction in the preliminary proxy statement in violation of United States securities laws. Sears v. China XD Plastics Company Limited, et al. and Aerts v. China XD Plastics Company Limited, et al. also allege that the Company's Board of Directors breached its fiduciary duties by approving the terms of the proposed transaction and by approving a materially deficient preliminary proxy statement, and that the Company aided and abetted the Company’s Board of Directors’ alleged breaches of fiduciary duties. Feng, et al. v. Han, et al. alleges, among other things, that the Company’s Board of Directors breached its fiduciary duties by approving the terms of the proposed transaction and by approving a materially deficient proxy statement. The complaints seek relief including injunctive relief, rescission of the merger or rescissory damages, other unspecified damages, and an award of attorneys’ fees and expenses.