XML 77 R23.htm IDEA: XBRL DOCUMENT v2.4.0.8
Commitments and Contingencies
 9 Months Ended
Jun. 30, 2014
Commitments and Contingencies [Text Block]

17. Commitments and Contingencies

(i) Capital Commitments

As of September 30, 2013 and June 30, 2014, the Company had the following contracted capital commitments:

 

   September 30,2013     June 30, 2014  

For construction of buildings

 $ 321,668   $ 11,119,956  

For purchase of equipment

   1,174,695     -  

Capital injection to Dalian BAK Power (Note 1)

   -     25,000,000  

 

 $ 1,496,363   $ 36,119,956  

(ii) Guarantees

In order to secure the supplies of certain raw materials and equipment and upon the request of suppliers, the Company has given guarantees of bank borrowings with a maximum obligation period of from one to three years to certain parties to the maximum extent of $31.0 million (including $4.9 million to a related party) and nil as of September 30, 2013 and June 30, 2014, respectively.

During the three months ended June 30, 2013 and 2014, the Company recorded a reversal of loss arising from loan guarantees of $0.8 million and nil, respectively.

During the nine months ended June 30, 2013 and 2014, the Company recorded a net loss arising from loan guarantees of $2.0 million and nil, respectively.

(iii) 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, 2013 and June 30, 2014 are summarized as follows:

    September 30,2013     June 30, 2014  
Bank acceptance bills $ 20,307,818   $   -  

(iv) Litigation

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. Other than the legal proceeding set forth below, the Company is currently not aware of any such legal proceedings or claims that the Company believe will have an adverse effect on our business, financial condition or operating results:

China BAK Battery, Inc. has been named as a second defendant in the case of Safeco Ins. Co. of Am. v. Hewlett-Packard Co. et al., filed in the Superior Court of the State of California, County of Ventura. It is an action for negligence and strict product liability. The plaintiff alleges that a product manufactured by the Company was used in a Hewlett Packard laptop, which malfunctioned and caused fire damage in the home of a consumer (the Plaintiff’s insured). The total damages sought are $126,978, plus interest and fees. The Company believes that the plaintiff's claims are without merit and intends to vigorously defend itself in this lawsuit.

An individual named Steven R. Ruth filed suit against China BAK Battery, Inc. in United States District Court for the Western District of Texas in 2013 alleging breach of contract. The company did not receive notice of this lawsuit and the plaintiff sought a default judgment, which the court granted in January 2014. Accordingly, the court entered judgment in favor of Mr. Ruth in the amount of $442,629.21. The company later learned of the existence of both the lawsuit and the default judgment and it is seeking to have the default judgment vacated so it will have the opportunity to defend against the lawsuit. The Company believes that the plaintiff’s claims are without merit and intends to vigorously defend itself in this lawsuit.