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China BAK Battery, Inc. (Parent Company)
 12 Months Ended
Sep. 30, 2016
China BAK Battery, Inc. (Parent Company) [Text Block]
23.

China BAK Battery, Inc. (Parent Company)

Under PRC regulations, subsidiaries in PRC (“the PRC subsidiaries”) may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC GAAP. In addition, the PRC subsidiaries are required to set aside at least 10% of their after tax net profits each year, if any, to fund the statutory general reserve until the balance of the reserves reaches 50% of their registered capital. The statutory general reserves are not distributable in the form of cash dividends to the Company and can be used to make up cumulative prior year losses, if any, and may be converted into share capital by the issue of new shares to shareholders in proportion to their existing shareholdings, or by increasing the par value of the shares currently held by them, provided that the reserve balance after such issue is not less than 25% of the registered capital. As of September 30, 2015 and 2016, additional transfers of $15,250,000 and $15,019,489 were required for Dalian BAK Power and Dalian BAK Trading before the statutory general reserve reached 50% of the registered capital of the PRC subsidiaries, respectively. As of September 30, 2015 and 2016, there was nil and $1,230,511 appropriation from retained earnings and set aside for statutory general reserves by the PRC subsidiaries. BAK Dalian did not have after tax net profits since its incorporation and therefore no appropriation was made to fund its statutory general reserve as of September 30, 2015 and 2016. Dalian BAK Power had after tax profits of $15,769,742 and after tax loss of $10,790,255 in fiscal 2015 and 2016, respectively.

Schedule I of Article 504 of Regulation SX requires the condensed financial information of the registrant (Parent Company) to be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. For purposes of this test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiaries in the form of loans, advances or cash dividends without the consent of a third party (i.e., lender, regulatory agency, foreign government, etc.).

SCHEDULE I – CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CHINA BAK BATTERY, INC.
PARENT COMPANY STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND 2016

    2015     2016  
             
REVENUE, net $   -   $   -  
             
OPERATING EXPENSES:            
             
   Salaries and consulting expenses   (795,167 )   (1,565,530 )
             
   General and administrative   (848,679 )   (439,009 )
             
       Total operating expenses   (1,643,846 )   (2,004,539 )
             
LOSS FROM OPERATIONS   (1,643,846 )   (2,004,539 )
             
OTHER INCOME:   -     182,708  
             
LOSS ATTRIBUTABLE TO PARENT COMPANY   (1,643,846 )   (1,821,831 )
             
EQUITY IN EARNINGS (LOSS) OF SUBSIDIARIES   17,517,772     (10,830,363 )
             
NET INCOME (LOSS) AVAILABLE TO SHAREHOLDERS $ 15,873,926   $ (12,652,194 )

CHINA BAK BATTERY, INC.
PARENT COMPANY BALANCE SHEETS
AS OF SEPTEMBER 30, 2015 AND 2016

    2015     2016  
ASSETS            
             
CURRENT ASSETS:            
   Other receivables $   -   $   -  

Total current assets

   -     -  
             
   Interests in subsidiaries   23,279,070     16,684,482  
             Total assets $ 23,279,070   $ 16,684,482  
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
             
CURRENT LIABILITIES:            
   Accrued expenses and other payables $ 1,610,183   $ 1,594,486  
       Total current liabilities   1,610,183     1,594,486  
             
SHAREHOLDERS' EQUITY   21,668,887     15,089,996  
                 Total liabilities and shareholders' equity $ 23,279,070   $ 16,684,482  

CHINA BAK BATTERY, INC.
PARENT COMPANY STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND 2016

    2015     2016  
CASH FLOWS FROM OPERATING ACTIVITIES:            
   Net income (loss) available to shareholders $ 15,873,926   $ (12,652,194 )
   Adjustments to reconcile net income to net cash used in operating activities:            
       Equity in (earnings) loss of subsidiaries   (17,517,772 )   10,830,363  
       Provision for doubtful debts   7,000     -  
       Share based compensation   750,167     1,462,197  
       Change in operating assets and liabilities            

       Accrued expenses and other payable

   (27,501 )   (15,697 )

       Net cash used in operating activities

   (914,180 )   (375,331 )
             
CASH FLOWS FROM INVESTING ACTIVITIES:            
   Decrease (increase) in interest in subsidiaries   914,180     (5,141,269 )
                 Net cash provided by (used in) investing activities   914,180     (5,141,269 )
             
CASH FLOWS FROM FINANCING ACTIVITIES:            
   Proceeds from issuance of common stock   -     5,516,600  
                 Net cash provided by financing activities   -     5,516,600  
             
CHANGE IN CASH   -     -  
             
CASH, beginning of year   -     -  
             
CASH, end of year $   -   $ -  

The condensed parent company financial statements have been prepared using the equity method to account for its subsidiaries. Refer to the consolidated financial statements and notes presented above for additional information and disclosures with respect to these financial statements.