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Lease Prepayments, Net

12 Months Ended

Sep. 30, 2012

9	Lease Prepayments, net

	Lease prepayments as of September 30, 2011 and 2012 consisted of the following:

		2011			2012
Lease prepayments	$	36,406,288		$	36,977,372
Accumulated amortization		(3,675,581	)		(4,473,511	)
	$	32,730,707		$	32,503,861

During the year ended September 30, 2007, the Company fully paid the lease prepayment of US$717,344 in relation to the right to use the land in Shenzhen relating to its new Research and Development Test Centre. The Company obtained the related property ownership and land use rights certificate during the fiscal year ended September 30, 2008. The Company also fully paid the lease prepayment of US$14,119,888 for the right to use the land relating to its Tianjin facility. As of September 30, 2008, the Company had obtained related land use rights certificate of the land relating to the Tianjin facility, but the Tianjin government had requested that the Company complete the construction of the facility on the land before September 30, 2008, which the Company had not done. As of September 30, 2012, the Company was in the course of negotiating with the relevant government bureau for an extension of the completion date.

The lease prepayment with a cost of US$3,498,035 represents the right to use the land on which the Company’s corporate campus had been constructed and is owned by the PRC government. According to the agreement with the local government of Kuichong Township of Longgang District of Shenzhen, the Company is obligated to pay approximately US$13.60 per square meter to the local government to obtain the right to use the land for a period of 50 years. According to a preliminary measurement conducted in 2004, total consideration payable by the Company in respect of the land use rights amounted to US$4,029,038, which was reduced to US$3,246,791 in accordance with the results of the final measurement by the local government in 2005. The local government granted permission to the Company to commence the construction of a new production plant. On June 20, 2007, the Company obtained the approvals for project planning and construction from the government of Shenzhen. Under the agreement with the local government of Shenzhen for the acquisition of land use rights for BAK Industrial Park entered into on June 29, 2007, the Company was required to pay an additional US$11,819,841 to acquire the land for BAK Industrial Park. Additionally, according to a notice received from the local government of Shenzhen on June 6, 2008, the Company obtained government grants totaling US$7,889,991 to subsidize such additional cost of the land use rights. The Company had fully paid the remaining cost of US$3,929,850 and had obtained the land use rights certificate. On July 3, 2009, the Company had obtained the approval for project-planning and construction from the local government of Shenzhen. On June 2, 2011, the Company obtained the property ownership certificate relating to BAK Industrial Park.

	Amortization expenses for the above lease prepayments were approximately US$712,000 and US$734,000 for the years ended September 30, 2011 and 2012 respectively. Estimated amortization expense for the next five years is approximately US$740,000 each year, respectively.

	The Company has committed to pledge its property ownership and land use rights certificate relating to the Company’s Research and Development Test Centre (Note 12) to China Development Bank with the net book value of US$4,919,301 as of September 30, 2012. On April 7, 2010, the pledge of the land use rights certificate to China Development Bank was approved by the relevant government bureau. On April 20, 2010, the relevant land use rights certificate was pledged to China Development Bank.

	On March 12, 2012, the Company borrowed a non-interest bearing loan in the amount of approximately US$7,586,776 from a third-party Tianjin Zhantuo International Trading Co., Ltd. The Company has pledged one portion of its land use right located in Tianjin Industrial Park Zone with net book value of US$4,793,816 to Tianjin Zhantuo International Trading Co., Ltd.