4 .	DISCONTINUED OPERATIONS

On September 26, 2016, the Company entered into a Master Transaction Agreement with Beijing Shihui, under which the Buyer agreed to purchase the corn seed production and distribution assets, the office building in Beijing,

hina

, and generally the business of commercial corn seed production and sales operated by the Company. On August 16, 2017, the Company entered into a Supplemental Agreement to

the

Master Transaction Agreement, pursuant to which, the aggregate purchase price was increased from RMB 400,000 to RMB 421,000 and certain payment arrangement provisions were amended.

The overall transaction is conducted in two steps. The first step is the sale of the equity held by Beijing Origin of each of the Denong, Changchun Origin and Linze Origin companies, and the second step is the sale of a company holding the assets of Zhengzhou Branch and the office building in Beijing, PRC. The second step requires Beijing Origin to effect a restructuring to form a

n entity

to own the current office building located in Beijing,

China

and certain other assets (together the “Zhengzhou Branch Assets”), which

entity

is sold to the Buyer so as to transfer the building and assets to the Buyer.

When the first step is completed (the “First Closing”), the Buyer should

Beijing Origin

a total consideration of

221,000,

consisting of cash payment of RM

79,000 and bank loans reduction of RMB

142,000,

for the 98.58% equity ownership interest in Denong, 100% equity ownership interest in Changchun Origin and 100% equity ownership interest in Linze Origin (together the “VIE Subsidiaries”). The First Closing is conditioned (among other things) on Beijing Origin acquiring the current minority percentage ownership of Changchun Origin that is held by the Company’s Chairman, so as to deliver to the Buyer 100% of the equity ownership of Changchun Origin. The minority interest of Denong should continue to be held by two third parties and should not be sold to the Buyer. When the second step is completed (the “Second Closing”), the Buyer should

give

Beijing Origin

a tot

al consideration of

RMB200,000

payable in cash after offsetting the then outstanding payables to the Buyer up to RM

150,000, for th

100% ownership interest in an entity formed by Beijing Origin as part of its reorganization to hold the Zhengzhou Branch Assets.

On July 31, 2017, the Company completed the First Closing and sold the VIE subsidiaries. On August 31, 2017, the Company

transferred the

control of Zhengzhou Branch

to Beijing Shihui pursuant to a Management Agreement

and the net assets

in Zhengzhou Branch

intended to be sold at the Second Closing are considered sold. Of the total purchase price of RMB421

,000

, RMB347,085 was allocated to the aforementioned disposed entities and assets and RMB73,915 was allocated to the office building in Beijing,

China

. As of September 30, 2017, (1) total cash consideration of RMB45,400 inclusive of the RMB10

,000

deposits was received, (2) principal amount of the bank loans amounted to RMB142,000 in the VIE subsidiaries was offset against the purchase price, (3) outstanding payables of RMB121,485 by Zhengzhou Branch to Buyer was offset against the purchase price. During the year ended September 30, 2017, we recognized a loss of RMB3,282 on the sale of commercial corn seed production and sales business operated by the Company. The loss is

reported in

discontinued operation

in the consolidated statements of operations and comprehensive income.

The assets and liabilities of the entities that were sold and to be sold have been reclassified as “assets of discontinued operations” and “liabilities of discontinued operations” within current and non-current assets and liabilities, respectively, on the consolidated balance sheets as of September 30, 2016 and 2017. The results of operations of the entities or assets that were sold and to be sold have been reclassified to

“

net income (loss) from discontinued operations

”

in the consolidated statements of

income

and comprehensive income for the years ended September 30, 2015, 2016 and 2017.

Results of discontinued operations are summarized as follows:

	Year ended September 30,
	2015		2016		2017		2017
	RMB		RMB		RMB		US$
Revenues		376,250		334,770		235,823		35,532
Cost of revenues		(264,039)		(259,253)		(172,180)		(25,943)
Gross profit		112,211		75,517		63,643		9,589
Operating expenses
Selling and marketing		(39,987)		(38,079)		(21,149)		(3,187)
General and administrative		(26,576)		(30,373)		(17,602)		(2,652)
Research and development		(2,599)		(2,760)		(659)		(99)
Other income (expense), net		8,586		(1,301)		360		54
Total operating expenses, net		(60,576)		(72,513)		(39,050)		(5,884)

Income from discontinued operations		51,635		3,004		24,593		3,705

Interest expense		(8,067)		(6,644)		(5,480)		(826)
Interest income		119		93		34		5
Impairment on plant and equipment and inventories		-		-		(44,706)		(6,736)
Income (loss) before income taxes from discontinued operations		43,687		(3,547)		(25,559)		(3,852)

Income tax (expense) benefits from discontinued operations
Current		(1,295)		(1,436)		(1,281)		(193)
Deferred		-		-		-		-
Income tax (expenses) benefit from discontinued operations		(1,295)		(1,436)		(1,281)		(193)

Loss on disposal of commercial seed business		-		-		(3,282)		(495)
Net income (loss) from discontinued operations		42,392		(4,983)		(30,122)		(4,540)
Less: Net income (loss) attributable to non-controlling interests		(916)		(480)		821		124
Net income (loss) from discontinued operations attributable to Origin Agritech Ltd.		43,308		(4,503)		(30,943)		(4,664)

Assets and liabilities from discontinued operations are summarized as follows:

	September 30,
	2016		2017		2017
	RMB		RMB		US$
Assets of discontinued operations
Cash and cash equivalents		50,934		-		-
Accounts receivable		491		24		4
Advances to suppliers		2,778		-		-
Advances to growers		21,672		-		-
Inventories		367,462		22,003		3,315
Income tax recoverable		48		-		-
Other current assets		3,064		-		-
Current assets of discontinued operations		446,449		22,027		3,319

Land use rights, net		16,341		5,258		793
Plant and equipment, net		161,690		32,484		4,894
Goodwill		11,973		-		-
Acquired intangible assets, net		3,038		-		-
Other assets		727		-		-
Non-current assets of discontinued operations		193,769		37,742		5,687

Total assets of discontinued operations		640,218		59,769		9,006

Liabilities of discontinued operations
Short-term borrowings		85,000		-		-
Accounts payable		3,083		-		-
Due to growers		19,926		6,535		985
Due to related parties		91,304		22,640		3,411
Advances from customers		208,844		1,866		281
Deferred revenues		7,008		-		-
Other payables and accrued expenses		13,994		-		-
Current liabilities of discontinued operations		429,159		31,041		4,677
Other long-term liability		8,080		-		-
Non-current liabilities of discontinued operations		8,080		-		-

Total liabilities of discontinued operations		437,239		31,041		4,677

The Company has combined cash flows from discontinued operations with cash flows from continuing operations within the operating, investing and financing categories within the consolidated statement of cash flows. Cash and non-cash items for certain operating and investing activities related to discontinued operations for the years ended September 30, 2015, 2016 and 2017 are as follows:

	Year Ended September 30
	2015		2016		2017		2017
	RMB		RMB		RMB		US$
Depreciation and amortization		14,195		13,878		12,483		670
Asset impairment		56,411		26,941		44,706		6,736
Capital expenditures		3,334		2,510		-		-

Related party transactions that are reported in discontinued operations are as follows:

(1)

Due to related parties

	September 30,
	2016		2017
	RMB		RMB

Beijing Shihui (i)		91,304		22,640

		91,304		22,640

Note (i): The balance as of September 30, 2016 and 2017 represented the advance from Beijing Shihui for its seed sales.

(2)

Sales to related parties

	Year ended September 30,
	2015		2016		2017
	RMB		RMB		RMB

Beijing Shihui		40,586		102,234		183,487