On April 3, 2013, the Company entered into a guarantee agreement with Jilin Province Trust & Investment Co., Ltd, under which the Company agrees to guarantee loans to its chemical raw material supplier, Hubei Yanguang Energy Technology Co. Ltd., a non-related party, to the extent of RMB30 million (approximately $4.9 million) that it owes to other parties. The guarantee period is from April 3, 2013 to April 2, 2016. The Company believes that Hubei Yanguang Energy Technology Co. Ltd owns assets including land use rights covering an area of approximately 1,330,000 square meters and buildings thereon in Hubei, the PRC, and should be financially capable to repay the above mentioned loans upon maturity in April 2014.

It is a common practice among companies in the region of China where the Company is located to provide guarantees for bank debts of existing or prospective business partners with no consideration given. It is considered a “favor for favor” business practice and is commonly required by the lending banks in these cases.

The Company has also guaranteed the loans of a related party under the common control of Mr. Xiangqian Li in the amount of approximately $11.2 million and $4.9 million as of September 30, 2012 and 2013, respectively.

Tianjin New Energy is a company under the common control of Mr Xianqian Li, the Company's CEO. The Company entered into various guarantee contracts to serve as the guarantor for the bank loans borrowed from Bank of Dalian by Tianjin New Energy in the amount of $4.9 million as of September 30, 2013 extending to various periods up to October 15, 2013. On July 11, 2013, Tianjin New Energy repaid the loan which matured on October 15, 2013 and renewed the facilities with Bank of Dalian. The Company entered into a guarantee agreement to the extent of RMB30 million (approximately $4.9 million) with the guarantee period from July 11, 2013 to July 10, 2016.

On January 5, 2013, the Company received a notice that the Shenzhen Langjin Technology Development Co. Ltd. had defaulted on their loan guaranteed by the Company and two other companies and demanded immediate payment of the full guaranteed amount RMB60 million ($9.7 million) from the Company and two other co-guarantors. As the two other co-guarantors had the ability to pay RMB14 million ($2.3 million) only, the Company was demanded to pay the remaining balance. As of September 30, 2013, the Company has paid China Agricultural Bank an amount of RMB46,490,253 ($7.5 million). The Company was able to recover an indemnification amount from Shenzhen Langjin that totaled RMB46,456,681 ($7.5 million). The Company recorded a net loss arising from loan guarantee of Shenzhen Langjin of RMB33,572 ($5,424) for the year ended September 30, 2013.

As of September 30, 2013 and as of the filing date of this form 10-K, the Company has assessed the performance risk of these guarantees and the fair value of the obligation arising there from and has considered it is immaterial to the consolidated financial statements. Therefore, except for the obligations relateing to Shenzhen Langjin, no obligations in respect of the above guarantees were recognized as of September 30, 2013.

(iv) Outstanding Discounted Bills and Transferred Bills

From time to time, the Company factors bills receivable to banks and endorses the bank acceptance bills received to its suppliers, vendors or other parties for settlement of its liabilities to these creditors. At the time of the factoring and transfer, all rights and privileges of holding the receivables are transferred to the banks and the creditors. The Company removes the assets from its books and records a corresponding expense for the amount of the discount.

The Company's outstanding discounted and transferred bills as of September 30, 2012 and 2013 are summarized as follows: