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Prepaid Land Use Rights, net and Assets and Liabilities Held For Sale

9 Months Ended

Jun. 30, 2013

Prepaid Land Use Rights, net and Assets and Liabilities Held For Sale [Text Block]

7. Prepaid Land Use Rights, net and Assets and Liabilities Held For Sale

(a) Prepaid land use rights, net

Prepaid land use rights as of September 30, 2012 and June 30, 2013 consisted of the followings:

		September 30,			June 30,
		2012			2013

Prepaid land use rights	$	36,977,372		$	26,461,409
Accumulated amortization		(4,473,511	)		(3,959,131	)
	$	32,503,861		$	22,502,278

Amortization expenses of the prepaid land use rights were $383,858 and $254,386 for the three months ended June 30, 2012 and 2013 and $922,641 and $831,840 for the nine months June 30, 2012 and 2013 respectively.

The Company has committed to pledge its construction in progress and land use rights certificate relating to the Company’s Research and Development Test Centre (Note 9) to China Development Bank with the net carrying amount of $42,342,009 as of June 30, 2013. 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 $12,741,967 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 (note (b)) with a net book value of $9,946,322 to Tianjin Zhantuo International Trading Co., Ltd.

(b) Assets and liabilities held for sale

In May 2013, management of the Company decided to sell the land use rights and the related construction in progress of the new energy base in Tianjin owned by Tianjin Meicai. On July 12, 2013, BAK Tianjin entered into an equity transfer agreement with Tianjin Zhantuo International Trading Limited (“Tianjin Zhantuo”) to transfer all the equity interest of Tianjin Meicai to Tianjin Zhantuo with a consideration of RMB180 million (approximately $29.3 million). Management expects that the equity transfer be completed in September 2013 and would result in a gain on disposal of approximately $1.8 million. The prepaid land use rights, construction in progress and related liabilities underlying this agreement were recognized as assets and liabilities held for sale. As of June 30, 2013, assets and liabilities held for sale were $42,193,176 and $29,569,144 respectively.

The consideration of RMB180 million (approximately $29.3 million) will be payable as follows:-

-	Offset against other short-term loans of RMB15,688,200 (approximately $2.5 million) owed to Tianjin Aifuyi Auto Parts Co., Ltd. and RMB30,000,000 (approximately $4.9 million) owed by BAK Tianjin to Tianjin Zhantuo
-	Offset against an amount owed by BAK Tianjin to Tianjin Meicai in the amount of RMB91,635,000 (approximately $14.9 million)
-	The remaining balance of RMB42,676,800 (approximately $7.0 million) will be payable within 30 days upon completion