ACQUISITION

3 Months Ended

Jun. 30, 2011

Business Combination Disclosure [Text Block]

3. ACQUISITION

On January 6, 2011, the Company through its wholly owned subsidiary, Harbin ZQPT, acquired all of the assets of Shenzhen ZQ. In exchange for the assets of Shenzhen ZQ, Harbin ZQPT paid to Shenzhen ZQ 135,000,000 Renminbi (approximately $20.5 million), of which 111,250,000 Renminbi (approximately $16.9 million) are being used to satisfy the liabilities of Shenzhen ZQ.

Shenzhen ZQ manufactures small rechargeable polymer lithium-ion batteries. The acquisition was a strategic move to expand the Company’s product variety and manufacturing capacity. In addition, Shenzhen is a distribution center for batteries, by having a presence in Shenzhen, it will benefit the Company’s overall strategic development plan.

The purchase method of accounting is used to account for the acquisition by the Company. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Company’s share of the identifiable net assets and intangible assets acquired is recorded as goodwill.

If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the excess of the value of the net assets acquired over the purchase price is recorded as “other income (expense): gain on bargain purchase” in the Company’s Consolidated Statement of Income. Acquisition-related costs, such as professional fees and administrative costs are recorded as expenses in the period in which they are incurred and the services rendered.

The purchase price for the assets of Shenzhen ZQ was allocated to tangible assets acquired and liabilities assumed, and a portion of the purchase price was paid to vendors for equipment that Shenzhen ZQ committed to acquire. The estimated fair value of the tangible assets acquired and liabilities assumed approximated their historical cost basis. The excess of the purchase price over net assets and payment to vendors for equipment is recorded in goodwill. The Company also acquired an established customer list and certain technology of Shenzhen ZQ, the Company is in the process of appraising the fair value of these intangible assets and expects to complete the appraisal by the end of third quarter of 2011. Goodwill will be adjusted upon completion of the fair value appraisal of the acquired intangible assets of Shenzhen ZQ.

The purchase price paid for the assets of Shenzhen ZQ has been preliminarily allocated as follows:

Cash and cash equivalents	$	52,588
Accounts receivable		3,359,157
Inventories		1,863,674
Fixed Assets		9,745,726
Intangible assets		9,487
Accounts payable		(2,129,603	)
Taxes payable		(167,845	)
Other payable and accrued expenses		(10,624,173	)
Long-term payable		(100,783	)
Due to previous shareholder		(1,522,047	)

Net assets acquired		486,181
Purchase price used for payment of liability arising from commitment to pay vendors for equipment purchases		16,932,771
Goodwill upon acquisition		3,128,680
Total purchase price	$	20,547,632

The following unaudited pro forma financial information presents the consolidated results of the Company for the three and six months ended June 30, 2010 as though the acquisition of the assets of Shenzhen ZQ was completed as at the beginning of three and six months ended June 30, 2010.

	For the three months ended June 30, 2010
	As reported		Pro forma adjustments		Pro forma results
Revenue	$	22,835,358	$	2,792,078	$	25,627,436
Net income	$	12,510,238	$	(829,551)	$	11,680,687
Earnings per share - basic	$	0.20	$	(0.02)	$	0.19
Earnings per share - diluted	$	0.18	$	(0.01)	$	0.17

	For the six months ended June 30, 2010
	As reported		Pro forma adjustments		Pro forma results
Revenue	$	42,384,375	$	4,103,144	$	46,487,519
Net income	$	20,034,811	$	(540,176)	$	19,494,635
Earnings per share - basic	$	0.33	$	(0.01)	$	0.32
Earnings per share - diluted	$	0.29	$	(0.01)	$	0.28

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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+ Details

ADVANCED BATTERY TECHNOLOGIES, INC. 10-Q