PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements.) This section presents unaudited condensed consolidated financial statements for Q1 2021 and 2022, with detailed notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's financial position, including assets, liabilities, and equity, at specific dates Condensed Consolidated Balance Sheets (as of Dec 31, 2021 and Mar 31, 2022) | Metric | Dec 31, 2021 (US$) | Mar 31, 2022 (US$) | | :----------------------------- | :----------------- | :----------------- | | Total Assets | 262,617,997 | 278,795,221 | | Total Liabilities | 121,733,424 | 136,763,173 | | Total Equity | 140,884,573 | 142,032,048 | | Current Assets | 122,841,687 | 139,976,970 | | Current Liabilities | 112,767,476 | 126,793,973 | | Cash and cash equivalents | 7,357,875 | 5,608,465 | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) This statement details the company's revenues, expenses, and net income or loss over the reporting periods Condensed Consolidated Statements of Operations (Three Months Ended March 31) | Metric | 2021 (US$) | 2022 (US$) | Change (US$) | Change (%) | | :-------------------------------------------------- | :--------- | :--------- | :----------- | :--------- | | Net revenues | 9,416,049 | 80,196,298 | 70,780,249 | 752% | | Gross profit | 1,839,429 | 5,316,354 | 3,476,925 | 189% | | Operating loss | (27,882) | (1,335,261) | (1,307,379) | 4689% | | Net income | 29,608,168 | 680,503 | (28,927,665) | -98% | | Net income attributable to shareholders | 29,609,282 | 444,453 | (29,164,829) | -98% | | Basic Income per share | 0.35 | 0.01 | (0.34) | -97% | | Diluted Income per share | 0.35 | 0.01 | (0.34) | -97% | - The significant decrease in net income for Q1 2022 compared to Q1 2021 was largely due to a substantial reduction in the gain from changes in the fair value of warrants liability, which dropped from **$28.43 million** in Q1 2021 to **$1.63 million** in Q1 2022[13](index=13&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This statement outlines changes in the company's equity components, including capital and accumulated deficit Condensed Consolidated Statements of Changes in Shareholders' Equity (as of March 31) | Metric | 2021 (US$) | 2022 (US$) | | :----------------------------------- | :--------- | :--------- | | Total Shareholders' Equity | 97,882,963 | 142,032,048 | | Accumulated Deficit | (154,375,029) | (122,053,806) | | Additional Paid-in Capital | 241,048,002 | 241,981,141 | | Non-controlling interests | 1,718 | 7,870,073 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31) | Metric | 2021 (US$) | 2022 (US$) | | :------------------------------------------------------- | :--------- | :--------- | | Net cash provided by operating activities | 763,859 | 5,051,103 | | Net cash used in investing activities | (5,681,131) | (2,717,822) | | Net cash provided by financing activities | 65,349,690 | 1,898,756 | | Net increase in cash and cash equivalents and restricted cash | 60,768,702 | 4,395,938 | | Cash and cash equivalents and restricted cash at end of period | 81,440,200 | 30,750,562 | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Principal Activities, Basis of Presentation and Organization](index=11&type=section&id=1.%20Principal%20Activities%2C%20Basis%20of%20Presentation%20and%20Organization) This note details core business, Hitrans acquisition, COVID-19 impact, going concern, and accounting policies - The company's core business is the manufacture, commercialization, and distribution of high-power lithium-ion rechargeable batteries for various applications[21](index=21&type=chunk) - CBAK Energy Technology, Inc. acquired **81.56%** of Hitrans in November **2021**, expanding into the NCM precursor and cathode materials business[45](index=45&type=chunk)[55](index=55&type=chunk) - The COVID-19 pandemic caused operational disruptions in **2021**, including facility suspensions, and is expected to continue to materially adversely impact product demand[58](index=58&type=chunk) - The company's accumulated deficit and significant short-term debt raise substantial doubt about its ability to continue as a going concern, with plans to improve profitability and secure additional financing[59](index=59&type=chunk) - The company adopted ASU **2021-04** (Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options) from January **1**, **2022**, with no material impact on financial statements[62](index=62&type=chunk) [Note 2. Pledged deposits](index=20&type=section&id=2.%20Pledged%20deposits) Pledged deposits increased to **$25.14 million** by March 31, 2022, primarily to secure bills payable Pledged Deposits (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :----------------------- | :----------- | :----------- | | Pledged deposits with banks for bills payable | 18,996,749 | 25,141,517 | | Others | - | 580 | | **Total** | **18,996,749** | **25,142,097** | [Note 3. Trade and Bills Receivable, net](index=20&type=section&id=3.%20Trade%20and%20Bills%20Receivable%2C%20net) Trade and bills receivable, net, increased to **$50.27 million** by March 31, 2022, with higher bills receivable Trade and Bills Receivable, net (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :----------------------------- | :----------- | :----------- | | Trade accounts receivable | 48,707,457 | 46,364,398 | | Less: Allowance for doubtful accounts | (4,618,269) | (4,904,450) | | Bills receivable | 5,817,941 | 8,805,836 | | **Total** | **49,907,129** | **50,265,784** | - The allowance for doubtful accounts increased from **$4.62 million** at December **31**, **2021**, to **$4.90 million** at March **31**, **2022**, with a provision of **$322,928** for the period[74](index=74&type=chunk) [Note 4. Inventories](index=21&type=section&id=4.%20Inventories) Inventories significantly increased to **$41.87 million** by March 31, 2022, across all categories Inventories (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :--------------- | :----------- | :----------- | | Raw materials | 11,323,638 | 15,484,667 | | Work in progress | 8,093,002 | 9,428,354 | | Finished goods | 10,716,700 | 16,958,128 | | **Total** | **30,133,340** | **41,871,149** | - Write-downs of obsolete inventories increased from **$233,305** for the three months ended March **31**, **2021**, to **$406,152** for the same period in **2022**[77](index=77&type=chunk) [Note 5. Prepayments and Other Receivables](index=21&type=section&id=5.%20Prepayments%20and%20Other%20Receivables) Prepayments and other receivables increased to **$14.52 million** by March 31, 2022, due to VAT and supplier prepayments Prepayments and Other Receivables (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :-------------------------- | :----------- | :----------- | | Value added tax recoverable | 7,144,712 | 8,332,545 | | Prepayments to suppliers | 4,663,431 | 5,060,156 | | Prepaid operating expenses | 683,648 | 758,411 | | **Total (net)** | **12,746,990** | **14,516,068** | [Note 6. Property, Plant and Equipment, net](index=21&type=section&id=6.%20Property%2C%20Plant%20and%20Equipment%2C%20net) Net property, plant, and equipment decreased to **$88.53 million** by March 31, 2022, due to depreciation Property, Plant and Equipment, net (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :-------------------------- | :----------- | :----------- | | Carrying amount | 90,042,773 | 88,532,811 | | Accumulated depreciation | (15,312,245) | (17,620,341) | | Depreciation expense (3 months ended Mar 31) | 698,618 (2021) | 2,271,267 (2022) | - The company believes there was no impairment of property, plant, and equipment during the three months ended March **31**, **2021** and **2022**[82](index=82&type=chunk) [Note 7. Construction in Progress](index=22&type=section&id=7.%20Construction%20in%20Progress) Construction in progress increased to **$28.41 million** by March 31, 2022, for facilities and production lines Construction in Progress (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :------------------------------------------------ | :----------- | :----------- | | Construction in progress | 21,619,522 | 22,277,466 | | Prepayment for acquisition of property, plant and equipment | 5,723,570 | 6,132,827 | | **Carrying amount** | **27,343,092** | **28,410,293** | - Capitalized interest for construction in progress was **$213,583** for the three months ended March **31**, **2021**, but nil for the same period in **2022**[85](index=85&type=chunk) [Note 8. Non-marketable equity securities](index=22&type=section&id=8.%20Non-marketable%20equity%20securities) Non-marketable equity securities were valued at **$714,504** as of March 31, 2022, with no impairment Non-marketable Equity Securities (US$) | Category | Mar 31, 2022 | | :--------------- | :----------- | | Cost | 1,419,312 | | Impairment | (704,808) | | **Carrying amount** | **714,504** | - CBAK Power acquired **9.74%** of the equity interests of Hunan DJY Technology Co., Ltd. for **$1.40 million** in April **2021**[86](index=86&type=chunk) - No impairment loss was recognized for non-marketable equity securities for the three months ended March **31**, **2022**[87](index=87&type=chunk) [Note 9. Lease](index=23&type=section&id=9.%20Lease) This note details prepaid land use rights, sales-type leases, and operating leases, with increased expenses Prepaid Land Use Rights (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :-------------------------- | :----------- | :----------- | | Balance | 13,797,230 | 13,737,871 | | Amortization charge (3 months ended Mar 31) | (89,718) | | Foreign exchange adjustment | 30,359 | Net Investment in Sales-Type Leases (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :------------------------------------------ | :----------- | :----------- | | Total future minimum lease payments receivable | 1,737,817 | 1,587,106 | | Non-current portion | 838,528 | 714,933 | | Interest income (3 months ended Mar 31) | 26,637 (2021) | 29,069 (2022) | - Operating lease cost increased significantly from **$11,321** for the three months ended March **31**, **2021**, to **$212,691** for the same period in **2022**[98](index=98&type=chunk) [Note 10. Intangible Assets, net](index=27&type=section&id=10.%20Intangible%20Assets%2C%20net) Intangible assets decreased to **$1.83 million** by March 31, 2022, due to amortization of a sewage permit Intangible Assets, net (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :-------------------- | :----------- | :----------- | | Carrying amount | 1,961,739 | 1,834,351 | | Accumulated amortization | (62,561) | (194,420) | | Amortization expenses (3 months ended Mar 31) | 686 (2021) | 131,571 (2022) | - The company obtained a five-year sewage discharge permit for its Zhejiang manufacturing facilities on January **27**, **2022**[105](index=105&type=chunk) [Note 11. Acquisition of subsidiaries](index=27&type=section&id=11.%20Acquisition%20of%20subsidiaries) CBAK Power acquired **81.56%** of Hitrans for **$24.95 million**, recognizing **$1.61 million** in goodwill - CBAK Power acquired **81.56%** of registered equity interests (representing **75.57%** of paid-up capital) of Zhejiang Hitrans Lithium Battery Technology Co., Ltd. (Hitrans)[108](index=108&type=chunk) - The acquisition was completed on November **26**, **2021**, with a total purchase consideration of **$24.95 million**[113](index=113&type=chunk)[118](index=118&type=chunk) - The transaction resulted in the recognition of **$1.61 million** in goodwill, attributed to the strategic value and expected synergies from combining operations[118](index=118&type=chunk) - After the completion of the acquisition, Hitrans became a wholly-owned subsidiary of the Company[116](index=116&type=chunk) [Note 12. Goodwill](index=30&type=section&id=12.%20Goodwill) Goodwill increased slightly to **$1.65 million** by March 31, 2022, with no impairment recognized Goodwill (US$) | Category | Jan 1, 2022 | Mar 31, 2022 | | :---------------------- | :---------- | :----------- | | Balance | 1,645,232 | 1,650,629 | | Foreign exchange adjustment | 5,397 | | **Balance at end of period** | | **1,650,629** | - No impairment loss of Goodwill was recognized for the three months ended March **31**, **2022** and **2021**[120](index=120&type=chunk) [Note 13. Trade and Bills Payable](index=30&type=section&id=13.%20Trade%20and%20Bills%20Payable) Trade and bills payable increased significantly to **$79.27 million** by March 31, 2022, driven by bank bills Trade and Bills Payable (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :---------------------------- | :----------- | :----------- | | Trade accounts payable | 40,352,638 | 46,550,602 | | Bills payable – Bank acceptance bills | 25,023,574 | 32,719,399 | | **Total** | **65,376,212** | **79,270,001** | - Bank acceptance bills were pledged by the company's bank deposits, bills receivable, and prepaid land use rights[123](index=123&type=chunk) [Note 14. Loans](index=31&type=section&id=14.%20Loans) Short-term bank borrowings increased to **$14.67 million** by March 31, 2022, with new facilities secured Loans (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :---------------------- | :----------- | :----------- | | Short-term bank borrowings | 8,811,820 | 14,674,721 | | Other short-term loans | 4,679,122 | 746,699 | | **Total** | **13,490,942** | **15,421,420** | - The company obtained new one-year term facilities from Agricultural Bank of China, Jiangsu Gaochun Rural Commercial Bank, and China Zheshang Bank Co., Ltd. Shangyu Branch in Q1 **2022**, totaling approximately **$4.8 million**[132](index=132&type=chunk)[133](index=133&type=chunk) - These facilities are secured by pledged deposits, bills receivables, right-of-use assets, buildings, and personal guarantees from the CEO and his wife[135](index=135&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) [Note 15. Accrued Expenses and Other Payables](index=34&type=section&id=15.%20Accrued%20Expenses%20and%20Other%20Payables) Accrued expenses and other payables increased to **$24.48 million** by March 31, 2022, due to customer deposits Accrued Expenses and Other Payables (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :----------------------------------- | :----------- | :----------- | | Construction costs payable | 2,036,008 | 1,529,170 | | Equipment purchase payable | 8,697,637 | 8,079,179 | | Customer deposits | 1,420,414 | 4,671,400 | | Accrued staff costs | 2,924,105 | 2,942,699 | | Accrued expenses | 4,161,548 | 3,601,292 | | Dividend payable to non-controlling interest | 1,444,737 | 1,446,583 | | **Total** | **22,963,700** | **24,477,309** | - The remaining provision for liquidated damages related to registration rights agreements was approximately **$159,000** as of March **31**, **2022**[145](index=145&type=chunk) [Note 16. Balances and Transactions With Related Parties](index=35&type=section&id=16.%20Balances%20and%20Transactions%20With%20Related%20Parties) This note details significant related party transactions and balances, with increased purchases and sales Related Party Transactions (Three Months Ended March 31) | Transaction | 2021 (US$) | 2022 (US$) | | :---------------------------------------------------------------- | :--------- | :--------- | | Purchase of finished goods from Zhengzhou BAK Battery Co., Ltd | 1,259,309 | 5,164,433 | | Sales of finished goods and raw materials to Zhengzhou BAK Battery Co., Ltd | 108,290 | 25,823,532 | | Sales of finished goods and raw materials to Shenzhen BAK Power Battery Co., Ltd | - | 112,468 | Key Related Party Balances (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :---------------------------------------------------------------- | :----------- | :----------- | | Receivables from Shenzhen BAK Power Battery Co., Ltd | 2,263,955 | 1,134,585 | | Trade receivable, net – Zhengzhou BAK Battery Co., Ltd. | 14,583,061 | 12,963,529 | | Trade payable, net – Zhengzhou BAK Battery Co., Ltd | (572,768) | (3,057,449) | | Payables to Shenzhen BAK Power Battery Co., Ltd | (326,507) | (325,624) | [Note 17. Deferred Government Grants](index=38&type=section&id=17.%20Deferred%20Government%20Grants) Deferred government grants decreased to **$9.47 million** by March 31, 2022, amortized against depreciation Deferred Government Grants (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :-------------------- | :----------- | :----------- | | Total government grants | 10,023,677 | 9,473,191 | | Current portion | (3,834,481) | (2,270,463) | | Non-current portion | 6,189,196 | 7,202,728 | | Offset against depreciation expenses (3 months ended Mar 31) | 38,133 (2021) | 566,972 (2022) | - Grants were received for land use rights, construction of manufacturing sites in Dalian, and to finance moving costs, construction works, and equipment purchases in Nanjing[162](index=162&type=chunk)[163](index=163&type=chunk) [Note 18. Product Warranty Provisions](index=39&type=section&id=18.%20Product%20Warranty%20Provisions) Product warranty provisions remained stable at **$2.03 million** by March 31, 2022, for EV and LEV batteries Product Warranty Provisions (US$) | Category | Dec 31, 2021 | Mar 31, 2022 | | :-------------------- | :----------- | :----------- | | Balance at end of year | 2,028,266 | 2,027,664 | | Current portion | (127,837) | (104,122) | | Non-current portion | 1,900,429 | 1,923,542 | | Warranty costs incurred | (34,439) (2021) | (9,419) (2022) | - Warranty coverage ranges from **six months** to **eight years**, depending on the product (battery cells, LEV modules, EV modules)[167](index=167&type=chunk) [Note 19. Income Taxes, Deferred Tax Assets and Deferred Tax Liabilities](index=40&type=section&id=19.%20Income%20Taxes%2C%20Deferred%20Tax%20Assets%20and%20Deferred%20Tax%20Liabilities) The company recorded an income tax credit for Q1 2022, with PRC subsidiaries enjoying a **15%** preferential rate Income Taxes (US$) | Category | Mar 31, 2021 | Mar 31, 2022 | | :-------------------- | :----------- | :----------- | | PRC income tax | - | - | | Deferred income tax credit | - | 93,546 | | **Total Income tax credit** | **-** | **93,546** | - CBAK Power and Hitrans are recognized as 'High-new technology enterprises' and enjoy a preferential tax rate of **15%** from **2021** to **2024**[177](index=177&type=chunk) - A valuation allowance of **$36.75 million** was provided as of March **31**, **2022**, against deferred tax assets due to the unlikelihood of realizing these potential tax benefits in the foreseeable future[181](index=181&type=chunk) [Note 20. Statutory reserves](index=42&type=section&id=20.%20Statutory%20reserves) PRC subsidiaries maintain statutory reserves, with **$1.23 million** held as of March 31, 2022, restricted from distribution - PRC subsidiaries are required to maintain a statutory reserve, with **$1.23 million** held as of March **31**, **2022**[185](index=185&type=chunk) - The statutory reserve is restricted for distribution or transfer out of the PRC[185](index=185&type=chunk) [Note 21. Fair Value of Financial Instruments](index=42&type=section&id=21.%20Fair%20Value%20of%20Financial%20Instruments) The company uses a three-level hierarchy for fair value measurements, with warrants valued using the Binomial Model - The company classifies fair value measurements into **Level 1** (quoted prices), **Level 2** (observable inputs), and **Level 3** (unobservable, significant inputs)[186](index=186&type=chunk)[187](index=187&type=chunk) - The fair value of warrants and share options is determined using the Binomial Model with **Level 3** inputs[189](index=189&type=chunk) - The carrying amounts of most other financial assets and liabilities approximate their fair values due to their short maturity or market interest rates[189](index=189&type=chunk) [Note 22. Employee Benefit Plan](index=43&type=section&id=22.%20Employee%20Benefit%20Plan) The company participates in a government-mandated defined contribution plan, with increased employee benefits expensed Employee Benefits Expensed (US$) | Period | Amount | | :-------------------------- | :--------- | | Three months ended Mar 31, 2021 | 255,989 | | Three months ended Mar 31, 2022 | 569,536 | - Full-time employees in the PRC participate in a government-mandated defined contribution plan covering pension, medical care, housing, and other welfare benefits[190](index=190&type=chunk) [Note 23. Share-based Compensation](index=43&type=section&id=23.%20Share-based%20Compensation) This note details restricted share and stock option grants, with decreased share-based compensation expenses - Total non-cash share-based compensation expense decreased from **$148,818** for Q1 **2021** to **$34,779** for Q1 **2022**[16](index=16&type=chunk) - An Employees Stock Ownership Program granted options for **2,750,002** share units in November **2021**, with vesting semi-annually over five years starting May **30**, **2022**. No stock compensation expenses were recorded for Q1 **2022**[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) - As of March **31**, **2022**, there was **$35,942** in unrecognized stock-based compensation associated with restricted share units granted on October **23**, **2020**[202](index=202&type=chunk) [Note 24. Income (Loss) Per Share](index=46&type=section&id=24.%20Income%20(Loss)%20Per%20Share) Basic and diluted EPS significantly decreased to **$0.01** for Q1 2022, reflecting a sharp decline in net income Income Per Share (US$) | Metric | Mar 31, 2021 | Mar 31, 2022 | | :-------------------------------------------------- | :----------- | :----------- | | Basic Income per share | 0.35 | 0.01 | | Diluted Income per share | 0.35 | 0.01 | | Weighted average shares outstanding – basic | 84,283,605 | 88,713,841 | | Weighted average shares outstanding – diluted | 84,933,913 | 88,734,957 | - For the three months ended March **31**, **2022**, **2,750,002** unvested options and all outstanding warrants were anti-dilutive and excluded from diluted EPS computation[211](index=211&type=chunk) [Note 25. Warrants](index=46&type=section&id=25.%20Warrants) Warrants are derivative liabilities, with a **$1.63 million** fair value gain in Q1 2022 due to share price decline Warrants Liability (US$) | Metric | Dec 31, 2021 | Mar 31, 2022 | | :------------------------------------------------ | :----------- | :----------- | | Balance at the beginning of the year | 5,846,000 | 5,846,000 | | Fair value change of the issued warrants included in earnings | (61,802,000) (FY2021) | (1,632,000) (Q1 2022) | | **Balance at end of period** | **5,846,000** | **4,214,000** | - The fair value of outstanding warrants is calculated using the Binomial Model with **Level 3** inputs, considering market price, exercise price, risk-free rate, dividend yield, expected term, and volatility[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[219](index=219&type=chunk) - As of March **31**, **2022**, there were **9,092,499** warrants outstanding with a weighted average exercise price of **$7.19**[220](index=220&type=chunk) [Note 26. Commitments and Contingencies](index=49&type=section&id=26.%20Commitments%20and%20Contingencies) The company has **$172 million** in capital commitments and is involved in ongoing litigation Contracted Capital Commitments (US$ as of Mar 31, 2022) | Category | Amount | | :-------------------------- | :----------- | | For construction of buildings | 1,582,346 | | For purchases of equipment | 13,093,091 | | Capital injection | 157,296,525 | | **Total** | **171,971,962** | - An ongoing lawsuit with Shenzhen Huijie Purification System Engineering Co., Ltd. regarding construction costs was remanded for retrial, with CBAK Power accruing **$0.9 million** for construction costs as of March **31**, **2022**[225](index=225&type=chunk) - A lawsuit with Haoneng for equipment purchase failure was settled by an agreement requiring CBAK Power to purchase at least **$2.4 million** in equipment by December **31**, **2023**, or pay a penalty[227](index=227&type=chunk) [Note 27. Concentrations and Credit Risk](index=50&type=section&id=27.%20Concentrations%20and%20Credit%20Risk) The company faces significant customer and supplier concentrations, managing credit risk with major PRC financial institutions Customer Concentration (Q1 2022) | Customer | % of Net Revenue | | :--------- | :--------------- | | Customer D | 30.05% | | Zhengzhou BAK Battery Co., Ltd | 32.20% | Supplier Concentration (Q1 2022) | Supplier | % of Net Purchase | | :--------- | :---------------- | | Supplier B | 25.30% | | Supplier C | 23.71% | - Credit risk related to cash and cash equivalents is managed by holding funds in major financial institutions located in the PRC, which management believes are of high credit quality[236](index=236&type=chunk) [Note 28. Segment Information](index=51&type=section&id=28.%20Segment%20Information) The company operates in two segments: CBAK (lithium battery cells) and Hitrans (materials), primarily in PRC - The company operates in two reportable segments: CBAK (manufacture and distribution of high-power lithium battery cells) and Hitrans (development and manufacturing of NCM precursor and cathode materials)[237](index=237&type=chunk) Net Revenues by Segment (Three Months Ended March 31, 2022) | Segment | Net Revenues (US$) | | :------ | :----------------- | | CBAT | 15,020,686 | | Hitrans | 65,175,612 | | **Consolidated Total** | **80,196,298** | Net Revenues by Product (Three Months Ended March 31) | Product Category | 2021 (US$) | 2022 (US$) | | :------------------------------------------------ | :--------- | :--------- | | High power lithium batteries | 9,416,049 | 15,020,686 | | Materials used in manufacturing of lithium batteries | - | 65,175,612 | | **Total Consolidated Revenue** | **9,416,049** | **80,196,298** | - Substantially all of the company's operations and long-lived assets are located in the PRC[238](index=238&type=chunk)[245](index=245&type=chunk) [Note 29. Subsequent events](index=53&type=section&id=29.%20Subsequent%20events) No material subsequent events were disclosed between March 31, 2022, and the financial statements issue date - The company has determined that there are no items to disclose as subsequent events from March **31**, **2022**, to the date the financial statements were issued[246](index=246&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses Q1 2022 financial condition, revenue growth, operating loss, and liquidity challenges [Special Note Regarding Forward Looking Statements](index=54&type=section&id=Special%20Note%20Regarding%20Forward%20Looking%20Statements) This note clarifies that the report contains forward-looking statements subject to risks and uncertainties - The report contains forward-looking statements that are not guarantees of future performance and involve risks and uncertainties[249](index=249&type=chunk) - The company disclaims any obligation to update or revise forward-looking statements, except as required by law[250](index=250&type=chunk) [Use of Terms](index=54&type=section&id=Use%20of%20Terms) This section defines key terms and abbreviations used throughout the report - This section defines key terms and abbreviations used throughout the report, including company names, subsidiaries, currencies, and regulatory bodies[251](index=251&type=chunk)[253](index=253&type=chunk) [Overview](index=55&type=section&id=Overview) The company manufactures lithium batteries, expanded into NCM materials via Hitrans, and is expanding capabilities - The company manufactures new energy high-power lithium batteries and has expanded into NCM precursor and cathode materials through the acquisition of Hitrans[254](index=254&type=chunk) - The company operates in two segments: high-power lithium battery cells and materials used in high-power lithium battery cells[255](index=255&type=chunk) - The company is expanding manufacturing capabilities in Dalian and Nanjing and expects to secure more orders from the booming new energy market[257](index=257&type=chunk) [Financial Performance Highlights for the Quarter Ended March 31, 2022](index=56&type=section&id=Financial%20Performance%20Highlights%20for%20the%20Quarter%20Ended%20March%2031%2C%202022) This section summarizes key financial metrics and performance trends for Q1 2022 Financial Highlights (Three Months Ended March 31, 2022 vs 2021) | Metric | 2021 (US$ Million) | 2022 (US$ Million) | Change (US$ Million) | Change (%) | | :-------------------- | :----------------- | :----------------- | :------------------- | :--------- | | Net revenues | 9.4 | 80.2 | 70.8 | 752% | | Gross profit | 1.8 | 5.3 | 3.5 | 189% | | Operating loss | (0.03) | (1.3) | (1.3) | 4668% | | Net income | 29.6 | 0.7 | (28.9) | -98% | | Fully diluted EPS | 0.35 | 0.01 | (0.34) | -97% | [Financial Statement Presentation](index=56&type=section&id=Financial%20Statement%20Presentation) This section describes the accounting policies and principles applied in preparing the financial statements - Revenue from product sales is recognized upon delivery to the customer, net of discounts and allowances[261](index=261&type=chunk) - Cost of revenues includes material costs, employee remuneration, share-based compensation, depreciation, and inventory write-downs[262](index=262&type=chunk) - PRC subsidiaries are subject to a **25%** income tax rate, with Hitrans and CBAK Power enjoying a preferential **15%** rate as 'High and New Technology Enterprises'[264](index=264&type=chunk) [Results of Operations](index=57&type=section&id=Results%20of%20Operations) This section analyzes the company's revenues, costs, and profitability for the reporting period Net Revenues by Product (Three Months Ended March 31) | Product Category | 2021 (US$ Million) | 2022 (US$ Million) | Change (US$ Million) | Change (%) | | :------------------------------------------------ | :----------------- | :----------------- | :------------------- | :--------- | | High power lithium batteries | 9.4 | 15.0 | 5.6 | 60% | | Materials used in manufacturing of lithium batteries | - | 65.2 | 65.2 | - | | **Total** | **9.4** | **80.2** | **70.8** | **752%** | - Gross profit margin decreased from **19.5%** in Q1 **2021** to **6.6%** in Q1 **2022**, mainly due to an increase in raw material prices[272](index=272&type=chunk) - Research and development expenses increased by **585%** to **$3.3 million** in Q1 **2022**, driven by the incorporation of Hitrans' R&D personnel, growth at Nanjing CBAK and Nanjing Daxin, and higher material costs[273](index=273&type=chunk) - The change in fair value of warrants liability resulted in a gain of **$1.6 million** in Q1 **2022**, a significant decrease from the **$28.4 million** gain in Q1 **2021**, primarily due to share price decline[278](index=278&type=chunk) [Liquidity and Capital Resources](index=60&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, working capital, and ability to meet financial obligations - As of March **31**, **2022**, the company had a net working capital of **$13.2 million** and an accumulated deficit of **$122.1 million**, raising substantial doubt about its ability to continue as a going concern[280](index=280&type=chunk)[281](index=281&type=chunk) Summary of Cash Flows (Three Months Ended March 31) | Activity | 2021 (US$ Million) | 2022 (US$ Million) | | :------------------------------------ | :----------------- | :----------------- | | Net cash provided by operating activities | 0.8 | 5.1 | | Net cash used in investing activities | (5.7) | (2.7) | | Net cash provided by financing activities | 65.4 | 1.9 | | Cash and cash equivalents at end of period | 81.4 | 30.8 | - The company plans to renew existing loans upon maturity and raise additional funds through bank borrowings and equity financing to meet daily cash demands and finance expansion[299](index=299&type=chunk) [Capital Expenditures](index=66&type=section&id=Capital%20Expenditures) This section details the company's investments in property, plant, and equipment for future growth - Capital expenditures decreased to **$3.4 million** in Q1 **2022** from **$5.7 million** in Q1 **2021**, primarily for the construction of Dalian and Nanjing facilities[308](index=308&type=chunk) - Estimated total capital expenditures for fiscal year **2022** are approximately **$15.0 million**, allocated for renovating product lines and constructing new plants[308](index=308&type=chunk) [Critical Accounting Policies](index=66&type=section&id=Critical%20Accounting%20Policies) This section highlights accounting policies requiring significant judgment and estimation - There were no material changes to the critical accounting policies previously disclosed in the Annual Report on Form **10-K** for the year ended December **31**, **2021**[310](index=310&type=chunk) [Changes in Accounting Standards](index=66&type=section&id=Changes%20in%20Accounting%20Standards) This section addresses the impact of recently adopted or issued accounting pronouncements - Refer to Note **1** of the condensed consolidated financial statements for discussions on recently adopted and recently issued but not yet adopted accounting pronouncements[311](index=311&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section states no material quantitative or qualitative disclosures about market risk are applicable - This section is not applicable for the current reporting period, indicating no material market risk disclosures are required[312](index=312&type=chunk) [Item 4. Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded disclosure controls were ineffective due to material weaknesses; remediation efforts are underway [Evaluation of Disclosure Controls and Procedures](index=66&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were ineffective as of March 31, 2022 - Management concluded that the company's disclosure controls and procedures were ineffective as of March **31**, **2022**[315](index=315&type=chunk) - Material weaknesses identified include a lack of appropriate policies and procedures for evaluating accounting and disclosures of key documents, and insufficient skilled accounting personnel[315](index=315&type=chunk)[316](index=316&type=chunk) [Changes in Internal Control over Financial Reporting](index=67&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Remediation efforts include hiring a CFO and providing financial personnel training to address weaknesses - Remediation measures include hiring a permanent Chief Financial Officer with significant U.S. GAAP and SEC reporting experience[316](index=316&type=chunk) - The company is providing regular training to financial personnel on internal control, risk management, and U.S. GAAP accounting guidelines[317](index=317&type=chunk) - Except for the described matters, there were no other changes in internal controls over financial reporting during Q1 **2022** that materially affected or are reasonably likely to materially affect internal control[319](index=319&type=chunk) PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other required disclosures [Item 1. Legal Proceedings](index=68&type=section&id=Item%201.%20Legal%20Proceedings.) Information on legal proceedings is incorporated by reference from Note 26 'Commitments and Contingencies' - Information on legal proceedings is incorporated by reference from Note **26** 'Commitments and Contingencies—(ii) Litigation' in the financial statements[322](index=322&type=chunk) [Item 1A. Risk Factors](index=68&type=section&id=Item%201A.%20Risk%20Factors.) No material changes from risk factors previously disclosed in the Annual Report on Form 10-K for 2021 - There are no material changes from the risk factors previously disclosed in the Annual Report on Form **10-K** for the fiscal year ended December **31**, **2021**[323](index=323&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) No unregistered sales of equity securities or common stock repurchases occurred during the period - No unregistered sales of equity securities or repurchase of common stock occurred during the period covered by this report, other than as previously disclosed in current reports on Form **8-K**[323](index=323&type=chunk) [Item 3. Defaults Upon Senior Securities](index=68&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) There were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[323](index=323&type=chunk) [Item 4. Mine Safety Disclosures](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[323](index=323&type=chunk) [Item 5. Other Information](index=68&type=section&id=Item%205.%20Other%20Information.) There is no other information to report for the period - There is no other information to report[323](index=323&type=chunk) [Item 6. Exhibits](index=68&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed as part of the Form 10-Q report, including certifications and XBRL files - Exhibits include Certifications of Principal Executive Officer (**31.1**, **32.1**) and Principal Financial Officer (**31.2**, **32.2**) pursuant to the Sarbanes-Oxley Act of **2002**[324](index=324&type=chunk) - The report also includes various Inline XBRL Taxonomy Extension Documents (**101.INS**, **101.SCH**, **101.CAL**, **101.DEF**, **101.LAB**, **101.PRE**)[324](index=324&type=chunk)

Financial Data and Key Metrics Changes - The company's net revenue surged more than eight-fold year-over-year to $80.2 million, primarily driven by the battery business and materials for lithium battery cells [5][13] - Cost of revenues increased by 888% to $74.9 million, resulting in a gross profit of $5.3 million, which is an increase of 189% from the prior year [13][14] - Gross margin decreased to 6.6% from 19.5% in the same period of 2021 due to rising raw material costs [14] - Operating expenses rose 256% to $6.7 million, with R&D expenses increasing by 585% to $3.3 million [14] Business Line Data and Key Metrics Changes - Approximately $50 million of the revenue came from the battery business, while about $65 million was derived from materials for lithium battery cells due to the Hitrans merger [5] - The material business from Hitrans is a major revenue stream benefiting from material price inflation [8] - The company is focusing on maintaining stable revenues from batteries used in uninterruptible supplies and expanding the revenue share of large cylindrical batteries [7] Market Data and Key Metrics Changes - As of May 9, the company had outstanding battery orders worth approximately JPY400 million (about $59 million) [7] - The company expects to receive larger orders in the third quarter, particularly in energy storage [21] Company Strategy and Development Direction - The company aims to lead in lithium-ion production and electric energy solutions while maximizing shareholder value through upstream and downstream investments [10] - Plans to develop large cylindrical batteries targeting light electric vehicles and passenger-grade EV markets [6] - The company is actively seeking quality assets and valuable targets in the new energy industry to stabilize its supply chain and enhance investment returns [10][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the pandemic has introduced uncertainties but noted that their plants have not been significantly affected by lockdowns [24] - The company remains optimistic about growth and future business potential, especially with increasing production capacity at the Nanjing facility [6][20] Other Important Information - The company has signed long-term supply agreements with major suppliers to secure materials and mitigate the impact of rising raw material prices [9] - The change in fair value of warrants was $1.6 million in the first quarter compared to $28.4 million in the prior year [15] Q&A Session Summary Question: Update on the development of the 46800 battery - The company has completed the prototype development of the 46800 battery and is proceeding with further developments [18] Question: Production situation in the Nanjing plant and major products - Production capacity in Nanjing is increasing, with a focus on two-wheelers and three-wheelers, expecting significant orders by the end of June [21] Question: Impact of COVID-19 on performance - The pandemic has brought uncertainties, but the company has managed to keep operations running smoothly across its plants [24] Question: Plans for further acquisitions or mergers - The company is open to more acquisitions similar to Hitrans to enhance financial investment and core business development [27][28] Question: Plans for new production lines in 2022 - The company is expanding production capacity in Dalian and is prepared to invest in new production lines if customer demand increases [32]

CBAK Energy Technology, Inc. (NASDAQ:CBAT) Q3 2021 Earnings Conference Call November 12, 2021 8:00 AM ET Company Participants Terry Li – Investor Relations Director Yunfei Li – Chief Executive Officer Xiangyu Pei – Interim Chief Financial Officer Conference Call Participants Laura Liu – Stone Street Group Operator Good day, ladies and gentlemen. Thank you for standing by and welcome to CBAK Energy Technology’s Third Quarter 2021 Earnings Conference Call. Currently all participants are in a listen-only mode. ...

CBAK Energy Technology, Inc. (NASDAQ:CBAT) Q2 2021 Earnings Conference Call August 16, 2021 8:00 AM ET Company Participants Thierry Li – Investor Relations Director Yunfei Li – Chief Executive Officer Xiangyu Pei – Chief Financial Officer Mr. Xiujun Tian – General Engineer Interpreter – Mr.Bing Conference Call Participants Karl Birkenfeld – American Trust Howard Yufem – Linden Capital Laura Liu – Stone Street Group Lucy Liu – Venture Capital Unidentified Analyst – Analyst Operator Good day, ladies and gentl ...