Prepaid Land Use Rights, net

12 Months Ended

Sep. 30, 2014

Prepaid Land Use Rights, net [Text Block]

9. Prepaid Land Use Rights, net

(a) Prepaid land use rights as of September 30, 2013 and 2014 consisted of the followings:

		2013			2014
Prepaid land use rights	$	25,104,833		$	9,152,400
Accumulated amortization		(3,664,541	)		-
	$	21,440,292		$	9,152,400
Less: Classified as current assets		(707,810	)		(183,048	)
	$	20,732,482		$	8,969,352

Pursuant to a land use rights acquisition agreement dated August 10, 2014, the Company acquired the rights to use a piece of land with an area of 153,832 m ² in Dalian Economic Zone for 50 years up to August 9, 2064, at a total consideration of $8,646,000 (RMB53.1 million). Other incidental costs incurred totaled $506,400 (RMB3.1 million).

Amortization expenses of the prepaid land use rights were $728,208 and $418,720 for the years ended September 30, 2013 and 2014, respectively.

(b) Disposal of Tianjin Meicai

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 to transfer all the equity interest of Tianjin Meicai to Tianjin Zhantuo with a consideration of RMB180 million (approximately $29.3 million). The equity transfer was completed on August 27, 2013 and a gain on disposal of approximately $1.3 million was recognized for the year ended September 30, 2013.

The consideration of RMB180 million (approximately $29.3 million) was repaid as follows:-

- Offset against other short-term loans of RMB15,688,200 (approximately $2.6 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 $15.0 million); and

- Remaining balance of RMB42,676,800 (approximately $7.0 million) payable in cash within 30 days upon completion. As of September 30, 2013, an amount of RMB3 million (approximately $0.5 million) had been paid. The remaining balance of RMB39.7 million (approximately $6.5 million) remained outstanding as of September 30, 2013 (Note 6).