PART I FINANCIAL INFORMATION [Item 1. Financial Statements.](index=4&type=section&id=Item%201.%20Financial%20Statements.) This section presents the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2020 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly decreased while total equity increased between December 2019 and June 2020 | Metric | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:---| | Total Assets | 95,583,557 | 92,407,808 | | Total Current Assets | 28,488,995 | 27,503,370 | | Total Liabilities | 81,925,501 | 77,284,571 | | Total Current Liabilities | 58,998,150 | 64,213,897 | | Total Equity | 13,658,056 | 15,123,237 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Net revenues increased and net loss significantly reduced for the three and six months ended June 30, 2020 | Metric | 3 Months Ended Jun 30, 2019 (US$) | 3 Months Ended Jun 30, 2020 (US$) | 6 Months Ended Jun 30, 2019 (US$) | 6 Months Ended Jun 30, 2020 (US$) | |:---|:---|:---|:---|:---| | Net Revenues | 4,270,936 | 4,624,247 | 9,442,611 | 11,525,521 | | Gross (Loss) Profit | (219,576) | 87,610 | (448,584) | 293,613 | | Operating Loss | (2,065,985) | (909,783) | (4,604,380) | (2,885,285) | | Net Loss | (2,334,174) | (1,198,167) | (5,141,507) | (3,552,278) | | Basic and Diluted Loss per Share | (0.07) | (0.02) | (0.16) | (0.06) | [Condensed Consolidated Statements of Changes in Shareholders' Equity (Deficit)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity%20(Deficit)) Shareholders' equity increased to $15.12 million by June 30, 2020, driven by common stock issuance despite a net loss | Metric | Jan 1, 2020 (US$) | Jun 30, 2020 (US$) | |:---|:---|:---| | Total Shareholders' Equity | 13,658,056 | 15,123,237 | | Common Stock Issued (shares) | 53,220,902 | 63,802,338 | | Additional Paid-in Capital | 180,208,610 | 185,487,657 | | Accumulated Deficit | (176,177,413) | (179,734,609) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated positive cash flow in H1 2020, a significant reversal from a cash outflow in H1 2019 | Cash Flow Activity | 6 Months Ended Jun 30, 2019 (US$) | 6 Months Ended Jun 30, 2020 (US$) | |:---|:---|:---| | Net Cash (Used in) Provided by Operating Activities | (4,892,178) | 1,981,672 | | Net Cash Used in Investing Activities | (1,406,484) | (779,064) | | Net Cash Provided by (Used in) Financing Activities | 6,090,395 | (2,077,522) | | Net Decrease in Cash and Cash Equivalents | (166,231) | (962,962) | | Cash and Cash Equivalents at End of Period | 17,523,262 | 6,170,986 | [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain the company's business, accounting policies, debt, equity, and legal contingencies [1. Principal Activities, Basis of Presentation and Organization](index=12&type=section&id=1.%20Principal%20Activities%2C%20Basis%20of%20Presentation%20and%20Organization) The company manufactures high-power lithium-ion batteries and faces going concern doubts due to recurring net losses - CBAK Energy Technology, Inc. focuses on manufacturing and distributing **high-power lithium-ion rechargeable batteries** for various applications including electric vehicles and uninterruptible power supplies[15](index=15&type=chunk) - The company has established new subsidiaries to **expand its business** in developing, manufacturing, and selling new energy high-power lithium batteries[37](index=37&type=chunk) - As of June 30, 2020, the company's working capital deficiency and recurring net losses raise **substantial doubts about its ability to continue as a going concern**[46](index=46&type=chunk) - The company has engaged in multiple **debt-to-equity conversion agreements** with various creditors and investors to manage its debt and raise capital[54](index=54&type=chunk)[56](index=56&type=chunk)[59](index=59&type=chunk) [2. Pledged deposits](index=26&type=section&id=2.%20Pledged%20deposits) Pledged deposits increased to $6.02 million by June 2020, primarily securing bills payable and legal disputes | Pledged Deposits | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | For Bills Payable | 4,021,255 | 4,622,244 | | For Others (Legal Disputes) | 1,499,736 | 1,392,933 | | Total Pledged Deposits | 5,520,991 | 6,015,177 | - Several bank deposits were frozen due to lawsuits and arbitrations, with some settlements leading to the release of funds[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) [3. Trade Accounts and Bills Receivable, net](index=27&type=section&id=3.%20Trade%20Accounts%20and%20Bills%20Receivable%2C%20net) Net trade accounts and bills receivable increased by 45.2% to $11.55 million in the first half of 2020 | Metric | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Trade Accounts Receivable | 12,517,626 | 16,464,428 | | Allowance for Doubtful Accounts | (4,650,686) | (5,009,230) | | Net Trade Accounts Receivable | 7,866,940 | 11,455,198 | | Bills Receivable | 85,480 | 92,261 | | Total Trade Accounts and Bills Receivable, net | 7,952,420 | 11,547,459 | | Allowance for Doubtful Accounts | Jun 30, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Balance at Beginning of Period | 3,657,173 | 4,650,686 | | Provision for the Period | 605,098 | 968,627 | | Reversal - Recoveries by Cash | (281,160) | (540,925) | | Charged to Consolidated Statements of Operations | 323,938 | 427,702 | | Foreign Exchange Adjustment | 2,939 | (69,158) | | Balance at End of Period | 3,984,050 | 5,009,230 | [4. Inventories](index=28&type=section&id=4.%20Inventories) Total inventories decreased by 38.2% to $5.36 million, mainly due to a reduction in finished goods | Inventory Category | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Raw Materials | 482,836 | 542,413 | | Work in Progress | 1,254,490 | 1,042,250 | | Finished Goods | 6,929,388 | 3,774,913 | | Total Inventories | 8,666,714 | 5,359,576 | - Write-downs of obsolete inventories charged to cost of revenues were **$457,039 for the six months ended June 30, 2020**[102](index=102&type=chunk)[103](index=103&type=chunk) [5. Prepayments and Other Receivables](index=28&type=section&id=5.%20Prepayments%20and%20Other%20Receivables) Prepayments and other receivables decreased slightly to $4.43 million due to lower value-added tax recoverable | Category | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Value Added Tax Recoverable | 4,124,624 | 3,520,903 | | Prepayments to Suppliers | 60,090 | 301,964 | | Prepaid Operating Expenses | 317,151 | 381,525 | | Total Prepayments and Other Receivables, net | 4,735,913 | 4,425,349 | [6. Payables to Former Subsidiaries, net](index=29&type=section&id=6.%20Payables%20to%20Former%20Subsidiaries%2C%20net) Payables to former subsidiaries remained stable at approximately $1.51 million as of June 30, 2020 | Former Subsidiary | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | BAK Tianjin | - | 10,936 | | BAK Shenzhen | 1,483,352 | 1,497,587 | | Total Payables to Former Subsidiaries | 1,483,352 | 1,508,523 | - Shenzhen BAK assigned its rights to **$4.3 million in unpaid inventory costs** owed by CBAK Power, which was subsequently converted into common stock[106](index=106&type=chunk) [7. Property, Plant and Equipment, net](index=29&type=section&id=7.%20Property%2C%20Plant%20and%20Equipment%2C%20net) Net property, plant, and equipment decreased by 6.7% to $35.62 million due to accumulated depreciation | Category | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Buildings | 27,262,301 | 26,012,510 | | Machinery and Equipment | 22,719,932 | 22,391,950 | | Accumulated Depreciation | (8,044,692) | (9,046,208) | | Carrying Amount | 38,177,565 | 35,622,684 | - The company has not yet obtained property ownership certificates for buildings with a carrying amount of **$23.11 million** as of June 2020[108](index=108&type=chunk) [8. Construction in Progress](index=31&type=section&id=8.%20Construction%20in%20Progress) Construction in progress increased to $22.26 million, primarily for facilities and production lines | Category | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Construction in Progress | 21,613,577 | 22,154,205 | | Prepayment for Acquisition of Property, Plant and Equipment | 94,047 | 104,449 | | Carrying Amount | 21,707,624 | 22,258,654 | - **Capitalized interest** for construction in progress was **$620,222** for the six months ended June 30, 2020[111](index=111&type=chunk) [9. Right-of-use assets](index=31&type=section&id=9.%20Right-of-use%20assets) Right-of-use assets, mainly prepaid land leases, decreased to $7.01 million due to amortization | Metric | Amount (US$) | |:---|:--- | | Balance as of January 1, 2020 | 7,194,195 | | Amortization Charge for the Period | (79,881) | | Foreign Exchange Adjustment | (103,601) | | Balance as of June 30, 2020 | 7,010,713 | [10. Intangible Assets, net](index=31&type=section&id=10.%20Intangible%20Assets%2C%20net) Net intangible assets, consisting of computer software, decreased to $12,387 due to amortization | Metric | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Computer Software at Cost | 30,648 | 30,205 | | Accumulated Amortization | (15,470) | (17,818) | | Net Intangible Assets | 15,178 | 12,387 | - Amortization expenses were **$2,582** for the six months ended June 30, 2020[113](index=113&type=chunk) [11. Trade Accounts and Bills Payable](index=32&type=section&id=11.%20Trade%20Accounts%20and%20Bills%20Payable) Trade accounts and bills payable remained stable at $14.76 million as of June 30, 2020 | Category | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Trade Accounts Payable | 11,157,014 | 9,509,354 | | Bank Acceptance Bills | 3,915,094 | 4,583,372 | | Commercial Acceptance Bills | - | 670,679 | | Total Trade Accounts and Bills Payable | 15,072,108 | 14,763,405 | - All bills payable are of a trading nature and mature within one year, with bank acceptance bills pledged by bank deposits[114](index=114&type=chunk)[115](index=115&type=chunk) [12. Loans](index=32&type=section&id=12.%20Loans) Total bank loans decreased slightly to $25.56 million, with a significant portion reclassified as current | Loan Type | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Short-term Bank Loan | 5,730,289 | 5,647,478 | | Current Maturities of Long-term Bank Loans | 10,844,463 | 19,914,792 | | Long-term Bank Borrowings | 9,519,029 | - | | Total Bank Loans | 26,093,781 | 25,562,270 | | Other Short-term Loans | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Advances from Related Parties | 399,149 | 467,273 | | Advances from Unrelated Third Party | 6,952,438 | 4,672,237 | | Total Other Short-term Loans | 7,351,587 | 5,139,510 | - The company obtained banking facilities from China Everbright Bank for **RMB200 million (approx $28.3 million)** with a repayment schedule extending to June 2021[115](index=115&type=chunk)[117](index=117&type=chunk) - Other short-term loans from related and unrelated parties totaled **$5.14 million** as of June 30, 2020[127](index=127&type=chunk) [13. Accrued Expenses and Other Payables](index=37&type=section&id=13.%20Accrued%20Expenses%20and%20Other%20Payables) Accrued expenses and other payables decreased to $14.66 million due to reduced construction costs payable | Category | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Construction Costs Payable | 1,335,483 | 424,275 | | Equipment Purchase Payable | 7,440,131 | 7,434,478 | | Accrued Staff Costs | 2,485,384 | 2,672,735 | | Other Payables and Accruals | 2,346,403 | 2,599,088 | | Total Accrued Expenses and Other Payables | 15,527,589 | 14,664,868 | - The company has a remaining provision of **$159,000** for accrued liquidated damages related to past registration rights agreements[135](index=135&type=chunk)[137](index=137&type=chunk) [14. Deferred Government Grants](index=38&type=section&id=14.%20Deferred%20Government%20Grants) Deferred government grants decreased to $4.13 million as a portion was recognized as income or offset expenses | Category | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Total Government Grants | 4,260,833 | 4,129,272 | | Less: Current Portion | (142,026) | (139,974) | | Non-current Portion | 4,118,807 | 3,989,298 | - Government grants of **$70,307** for the six months ended June 30, 2020, were offset against depreciation expenses[140](index=140&type=chunk) [15. Product Warranty Provision](index=38&type=section&id=15.%20Product%20Warranty%20Provision) The company maintains a product warranty provision for new battery products with coverage up to eight years - Warranty coverage ranges from **six months to eight years** depending on the battery product type[141](index=141&type=chunk) [16. Notes payable](index=38&type=section&id=16.%20Notes%20payable) Two promissory notes with Atlas Sciences, LLC have been partially converted into common stock through exchanges | Metric | 3 Months Ended Jun 30, 2020 (US$) | 6 Months Ended Jun 30, 2020 (US$) | |:---|:---|:--- | | Note I: Amortization of Debt Discount | 31,597 | 63,194 | | Note I: Coupon Interest | 26,944 | 59,262 | | Note II: Amortization of Debt Discount | 37,917 | 75,417 | | Note II: Coupon Interest | 41,883 | 83,964 | - Note I, with an original principal of $1,395,000, has seen **$650,000 of principal converted into common stock**[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) - Note II, with an original principal of $1,670,000, had **$250,000 of its principal exchanged for common stock**[152](index=152&type=chunk)[153](index=153&type=chunk) [17. Income Taxes, Deferred Tax Assets and Deferred Tax Liabilities](index=41&type=section&id=17.%20Income%20Taxes%2C%20Deferred%20Tax%20Assets%20and%20Deferred%20Tax%20Liabilities) The company reported no income tax expense due to net losses and maintains a full valuation allowance against deferred tax assets | Deferred Tax Assets | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | Net Operating Loss Carried Forward | 29,361,274 | 30,094,323 | | Valuation Allowance | (32,944,381) | (33,541,535) | | Deferred Tax Assets, Non-current | - | - | - **No provision for income taxes** was made as the company had no taxable income[160](index=160&type=chunk) - Subsidiary CBAK Power is entitled to a **preferential tax rate of 15%** as a 'High-new technology enterprise'[162](index=162&type=chunk) - The company has U.S. net operating loss carryforwards of **$103.58 million** and PRC net operating loss carryforwards of **$33.37 million**[165](index=165&type=chunk) [18. Share-based Compensation](index=45&type=section&id=18.%20Share-based%20Compensation) The company recognized non-cash share-based compensation expenses from restricted shares granted under its 2015 Equity Incentive Plan | Non-vested Restricted Share Units (August 23, 2019 grant) | Number of Shares | |:---|:--- | | Non-vested shares as of January 1, 2020 | 1,505,833 | | Vested | (293,498) | | Forfeited | (58,333) | | Non-vested shares as of June 30, 2020 | 1,154,002 | - Non-cash share-based compensation expenses were **$454,096** for the six months ended June 30, 2020[176](index=176&type=chunk) - As of June 30, 2020, unrecognized stock-based compensation associated with restricted shares totaled **$510,732**[176](index=176&type=chunk) [19. Loss Per Share](index=47&type=section&id=19.%20Loss%20Per%20Share) Basic and diluted loss per share decreased in H1 2020 due to a lower net loss and more shares outstanding | Metric | 3 Months Ended Jun 30, 2019 | 3 Months Ended Jun 30, 2020 | 6 Months Ended Jun 30, 2019 | 6 Months Ended Jun 30, 2020 | |:---|:---|:---|:---|:--- | | Net Loss Attributable to Shareholders | (2,317,384) | (1,197,215) | (5,104,776) | (3,557,196) | | Weighted Average Shares (Basic and Diluted) | 35,379,994 | 60,430,255 | 32,095,479 | 56,877,900 | | Loss Per Share – Basic and Diluted | (0.07) | (0.02) | (0.16) | (0.06) | - For the six months ended June 30, 2020, **1,154,002 unvested restricted shares were anti-dilutive** and excluded from the diluted EPS computation[179](index=179&type=chunk) [20. Fair Value of Financial Instruments](index=48&type=section&id=20.%20Fair%20Value%20of%20Financial%20Instruments) The carrying amounts of the company's financial instruments approximate their fair values - The company classifies fair value measurements into a **three-level hierarchy** based on observable and unobservable inputs[180](index=180&type=chunk)[181](index=181&type=chunk) - Carrying amounts of most financial assets and liabilities **approximate their fair values** due to short maturity or market interest rates[182](index=182&type=chunk) [21. Commitments and Contingencies](index=49&type=section&id=21.%20Commitments%20and%20Contingencies) The company has significant capital commitments and is involved in numerous legal proceedings over unpaid costs | Capital Commitments | Dec 31, 2019 (US$) | Jun 30, 2020 (US$) | |:---|:---|:--- | | For Construction of Buildings | 3,397,961 | 1,729,629 | | For Purchases of Equipment | - | 303,976 | | Capital Injection to CBAK Power, CBAK Trading and CBAK Energy | 83,900,000 | 82,565,000 | | Total Contracted Capital Commitments | 87,297,961 | 84,598,605 | - The company is involved in multiple lawsuits and arbitrations concerning unpaid fees, leading to **bank deposit freezes** in several instances[185](index=185&type=chunk)[188](index=188&type=chunk)[192](index=192&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)[203](index=203&type=chunk) - A significant legal dispute with Anyuan Bus for **$2.47 million** remains in the enforcement phase[187](index=187&type=chunk) [22. Concentrations and Credit Risk](index=53&type=section&id=22.%20Concentrations%20and%20Credit%20Risk) The company faces significant customer and supplier concentration risk | Top Customers (3 Months Ended Jun 30, 2020) | Net Revenue (US$) | % of Total | |:---|:---|:--- | | Customer B | 2,584,606 | 55.89% | | Customer D | 1,626,944 | 35.18% | | Top Customers (6 Months Ended Jun 30, 2020) | Net Revenue (US$) | % of Total | |:---|:---|:--- | | Customer B | 4,677,699 | 41.04% | | Customer D | 2,009,845 | 17.44% | | Customer E | 3,767,605 | 32.69% | | Top Customers (Accounts Receivable Jun 30, 2020) | Accounts Receivable (US$) | % of Total | |:---|:---|:--- | | Customer B | 1,740,448 | 15.19% | | Customer C | 1,519,014 | 13.26% | | Customer E | 4,103,268 | 35.82% | - Shenzhen BAK was a significant supplier, accounting for **64.96% of net purchases** for the six months ended June 30, 2020[209](index=209&type=chunk) [23. Segment Information](index=55&type=section&id=23.%20Segment%20Information) The company operates in a single segment, with revenues shifting towards uninterruptible power supplies | Product Application | 3 Months Ended Jun 30, 2019 (US$) | 3 Months Ended Jun 30, 2020 (US$) | 6 Months Ended Jun 30, 2019 (US$) | 6 Months Ended Jun 30, 2020 (US$) | |:---|:---|:---|:---|:--- | | Electric Vehicles | 326,484 | 118,737 | 1,540,570 | 333,855 | | Light Electric Vehicles | - | 2,593 | - | 3,344 | | Uninterruptable Supplies | 3,944,452 | 4,502,917 | 7,902,041 | 11,188,322 | | Total Net Revenues | 4,270,936 | 4,624,247 | 9,442,611 | 11,525,521 | - The company operates as a **single business segment** producing high-power lithium battery cells[215](index=215&type=chunk) - **Mainland China** accounts for the vast majority of net revenues[216](index=216&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=56&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses improved financial results, ongoing liquidity management, and expansion efforts amid market challenges [Overview](index=57&type=section&id=Overview) The company manufactures high-power lithium batteries and saw revenue growth driven by uninterruptible power supply sales | Metric | 3 Months Ended Jun 30, 2019 (US$) | 3 Months Ended Jun 30, 2020 (US$) | |:---|:---|:--- | | Revenues | 4.3 million | 4.6 million | | Net Loss | 2.3 million | 1.2 million | - The company's core business is developing and manufacturing **new energy high-power lithium batteries**[222](index=222&type=chunk) - Business is conducted through wholly-owned operating subsidiaries in China[224](index=224&type=chunk)[225](index=225&type=chunk) - Revenue grew by **$2.1 million (22.1%)** for the six months ended June 30, 2020, driven by increased sales of batteries for uninterruptible power supplies (UPS)[228](index=228&type=chunk) [Recent Developments](index=59&type=section&id=Recent%20Developments) Key developments include a major investment agreement, ongoing debt-to-equity conversions, and new subsidiary formations - BAK Asia entered a framework investment agreement to develop lithium battery projects with a production capacity of **8Gwh**[230](index=230&type=chunk) - The company continued to engage in **debt-to-equity exchange agreements** with Atlas Sciences, LLC[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) - Two new subsidiaries were formed in China to **expand the new energy high-power lithium battery business**[236](index=236&type=chunk) [Financial Performance Highlights for the Quarter Ended June 30, 2020](index=60&type=section&id=Financial%20Performance%20Highlights%20for%20the%20Quarter%20Ended%20June%2030%2C%202020) The company reported an 8% revenue increase and significant reductions in operating and net losses for Q2 2020 | Metric | Q2 2019 (US$) | Q2 2020 (US$) | Change (US$) | Change (%) | |:---|:---|:---|:---|:--- | | Net Revenues | 4.3 million | 4.6 million | 0.3 million | 8% | | Gross Profit (Loss) | (0.2 million) | 0.1 million | 0.3 million | (140)% | | Operating Loss | (2.1 million) | (0.9 million) | 1.2 million | 56% | | Net Loss | (2.3 million) | (1.2 million) | 1.1 million | 49% | | Fully Diluted Loss per Share | (0.07) | (0.02) | - | - | [Financial Statement Presentation](index=61&type=section&id=Financial%20Statement%20Presentation) This section outlines the company's revenue recognition policy and defines key expense categories - Revenue from product sales is recognized when the **customer obtains control of the product**, typically upon delivery[241](index=241&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk) - Cost of revenues includes material costs, employee remuneration, depreciation, and inventory write-downs[245](index=245&type=chunk) - Operating expenses are categorized into **research and development, sales and marketing, and general and administrative expenses**[246](index=246&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk) [Results of Operations](index=62&type=section&id=Results%20of%20Operations) Financial performance improved in H1 2020 with increased revenues and reduced losses, driven by strong UPS battery sales [Comparison of Three Months Ended June 30, 2019 and 2020](index=62&type=section&id=Comparison%20of%20Three%20Months%20Ended%20June%2030%2C%202019%20and%202020) Net revenues increased 8% to $4.6 million in Q2 2020, while the company achieved a gross profit and reduced its net loss by 49% | Metric | Q2 2019 (US$ thousands) | Q2 2020 (US$ thousands) | Change (US$ thousands) | Change (%) | |:---|:---|:---|:---|:--- | | Net Revenues | 4,271 | 4,625 | 354 | 8 | | Gross (Loss) Profit | (220) | 88 | 308 | (140) | | Operating Loss | (2,067) | (910) | 1,157 | 56 | | Net Loss | (2,335) | (1,198) | 1,137 | 49 | | High Power Lithium Batteries Used In | Q2 2019 (US$ thousands) | Q2 2020 (US$ thousands) | Change (US$ thousands) | Change (%) | |:---|:---|:---|:---|:--- | | Electric Vehicles | 326 | 119 | (207) | (63) | | Uninterruptable Supplies | 3,945 | 4,503 | 558 | 14% | - Research and development expenses **decreased by 25%** due to lower salaries and government relief measures[255](index=255&type=chunk) - Sales and marketing expenses **decreased by 62%**, and general and administrative expenses **decreased by 7%** due to cost control[256](index=256&type=chunk)[258](index=258&type=chunk) [Comparison of Six Months Ended June 30, 2019 and 2020](index=65&type=section&id=Comparison%20of%20Six%20Months%20Ended%20June%2030%2C%202019%20and%202020) Net revenues increased 22% to $11.5 million in H1 2020, while the company achieved a gross profit and reduced its net loss by 31% | Metric | H1 2019 (US$ thousands) | H1 2020 (US$ thousands) | Change (US$ thousands) | Change (%) | |:---|:---|:---|:---|:--- | | Net Revenues | 9,443 | 11,526 | 2,083 | 22 | | Gross (Loss) Profit | (449) | 294 | 743 | 166 | | Operating Loss | (4,605) | (2,885) | 1,720 | 37 | | Net Loss | (5,142) | (3,552) | 1,590 | 31 | | High Power Lithium Batteries Used In | H1 2019 (US$ thousands) | H1 2020 (US$ thousands) | Change (US$ thousands) | Change (%) | |:---|:---|:---|:---|:--- | | Electric Vehicles | 1,541 | 334 | (1,207) | (78) | | Uninterruptable Supplies | 7,902 | 11,189 | 3,287 | 42 | - Gross profit improved significantly due to **enhanced product quality and cost control**[267](index=267&type=chunk)[269](index=269&type=chunk) - All operating expense categories decreased, primarily due to **reduced salaries and government relief measures**[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk) [Liquidity and Capital Resources](index=68&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces significant liquidity challenges and relies on external financing and debt conversions to fund operations - As of June 30, 2020, the company had a **working capital deficiency of $36.7 million** and an **accumulated deficit of $179.7 million**[279](index=279&type=chunk) - The company has obtained and renewed various banking facilities, including a **RMB200 million (approx $28.3 million) facility**[280](index=280&type=chunk)[281](index=281&type=chunk) - The company has utilized **debt-to-equity conversions** to manage its liabilities, converting approximately **$18.7 million** in various debts into common stock[291](index=291&type=chunk)[293](index=293&type=chunk)[296](index=296&type=chunk)[299](index=299&type=chunk)[306](index=306&type=chunk) - Capital expenditures for H1 2020 were **$0.8 million**, with an estimated **$4.0 million** for the full year to expand manufacturing lines[325](index=325&type=chunk) - The company plans to raise additional funds through **bank borrowings and equity financing** to meet cash demands and finance expansion[313](index=313&type=chunk)[315](index=315&type=chunk) [Contractual Obligations and Commercial Commitments](index=76&type=section&id=Contractual%20Obligations%20and%20Commercial%20Commitments) Total contractual obligations were $126.5 million as of June 30, 2020, all due within one year | Contractual Obligations | Total (US$ thousands) | Less than 1 year (US$ thousands) | |:---|:---|:--- | | Current Maturities of Long-term Bank Loans | 19,915 | 19,915 | | Short-term Bank Loans | 5,647 | 5,647 | | Bills Payable | 5,254 | 5,254 | | Other Short-term Loans | 5,140 | 5,140 | | Notes Payable | 2,722 | 2,722 | | Capital Injection to CBAK Trading | 2,565 | 2,565 | | Capital Injection to CBAK Power | 30,000 | 30,000 | | Capital Injection to CBAK Energy | 50,000 | 50,000 | | Total | 126,518 | 126,518 | [Off-Balance Sheet Transactions](index=77&type=section&id=Off-Balance%20Sheet%20Transactions) The company has not engaged in any off-balance sheet transactions or arrangements - The company has not entered into any **off-balance sheet transactions**[330](index=330&type=chunk) [Critical Accounting Policies](index=77&type=section&id=Critical%20Accounting%20Policies) Financial statements are prepared under U.S. GAAP, with no material changes to critical accounting policies - The preparation of financial statements under U.S. GAAP involves **significant judgments, estimates, and assumptions**[331](index=331&type=chunk) - **No material changes** were made to the critical accounting policies previously disclosed in the 2019 Annual Report[332](index=332&type=chunk) [Changes in Accounting Standards](index=77&type=section&id=Changes%20in%20Accounting%20Standards) The company adopted a new standard for fair value measurement and is evaluating others for future implementation - The company applied **ASU 2018-13, Fair Value Measurement**, beginning January 1, 2020[87](index=87&type=chunk) - The company is evaluating the impact of **ASU No. 2016-13 (Credit Losses)** and **ASU 2019-12 (Income Taxes)**[88](index=88&type=chunk)[89](index=89&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=78&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) No quantitative and qualitative disclosures about market risk are applicable for the reported period - The company has **no applicable quantitative and qualitative disclosures** about market risk for the period[335](index=335&type=chunk) [Item 4. Controls and Procedures.](index=78&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and procedures were ineffective due to material weaknesses in internal control - The company's disclosure controls and procedures were deemed **ineffective** as of June 30, 2020[337](index=337&type=chunk) - Material weaknesses identified include a **lack of appropriate accounting policies** and **insufficient skilled accounting personnel** with U.S. GAAP experience[338](index=338&type=chunk)[339](index=339&type=chunk) - Remediation measures include **hiring a permanent Chief Financial Officer** and providing staff training[339](index=339&type=chunk)[340](index=340&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings.](index=79&type=section&id=Item%201.%20Legal%20Proceedings.) The company is involved in numerous legal proceedings related to unpaid construction, equipment, and material costs - The company is a party to various lawsuits and arbitrations with suppliers and contractors[343](index=343&type=chunk)[345](index=345&type=chunk)[346](index=346&type=chunk)[349](index=349&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[359](index=359&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk) - Many legal actions involve claims for unpaid contract amounts, often leading to court orders to **freeze the company's bank deposits**[343](index=343&type=chunk)[347](index=347&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[357](index=357&type=chunk)[360](index=360&type=chunk) - Some cases have reached **settlements or final judgments**, while others remain ongoing[344](index=344&type=chunk)[353](index=353&type=chunk) [Item 1A. Risk Factors.](index=83&type=section&id=Item%201A.%20Risk%20Factors.) There are no material changes to the risk factors previously disclosed in the 2019 Annual Report - **No material changes** from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2019[363](index=363&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=83&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) No unregistered sales of equity securities or stock repurchases occurred during the period, other than previously reported - No unregistered sales of equity securities or repurchase of common stock occurred during the reporting period, other than those **previously disclosed in Form 8-K**[364](index=364&type=chunk) [Item 3. Defaults Upon Senior Securities.](index=83&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) There were no defaults upon senior securities during the period - There were **no defaults** upon senior securities[364](index=364&type=chunk) [Item 4. Mine Safety Disclosures.](index=83&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) Mine safety disclosures are not applicable to the company - Mine safety disclosures are **not applicable**[364](index=364&type=chunk) [Item 5. Other Information.](index=83&type=section&id=Item%205.%20Other%20Information.) There is no other information to report for the period - **No other information** to report[364](index=364&type=chunk) [Item 6. Exhibits.](index=83&type=section&id=Item%206.%20Exhibits.) This section lists the certifications and XBRL documents filed as exhibits with the report - Exhibits include **Certifications of Principal Executive Officer and Principal Financial Officer** and XBRL documents[365](index=365&type=chunk)[368](index=368&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10−Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File Number: 001-32898 CBAK ENERGY TECHNOLOGY, INC. (Exact Name of Registrant as Specified in Its Charter) | --- | --- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________to _____________ Commission File No. 001-32898 CBAK ENERGY TECHNOLOGY, INC. (Exact Name of Registrant as Specified in Its Charter) Nevada CBAK Industrial ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements, management's analysis, market risk, and internal control evaluations [ITEM 1. FINANCIAL STATEMENTS.](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS.) This section presents the unaudited condensed consolidated financial statements, highlighting a shift to net loss, decreased assets, and going concern doubts - The company reported a **net loss of $6.9 million** for the nine months ended September 30, 2019, a significant decline from a net income of $1.9 million in the prior year[9](index=9&type=chunk) - The company faces substantial doubt about its ability to continue as a going concern due to a **working capital deficiency of $34.3 million** and recurring net losses[39](index=39&type=chunk)[247](index=247&type=chunk) Key Financial Position Changes (Dec 31, 2018 vs. Sep 30, 2019) | Metric | Dec 31, 2018 (US$) | Sep 30, 2019 (US$) | Change (%) | | :---------------------------------- | :----------------- | :----------------- | :--------- | | Total Assets | 127,583,642 | 110,403,810 | -13.5% | | Total Liabilities | 127,256,343 | 98,898,014 | -22.3% | | Total Equity | 327,299 | 11,505,796 | 3414.0% | | Cash and cash equivalents | 449,670 | 198,671 | -55.8% | | Pledged deposits | 17,239,823 | 8,382,707 | -51.3% | | Trade accounts and bills receivable, net | 21,751,032 | 16,654,801 | -23.4% | | Inventories | 9,622,361 | 10,878,801 | 13.1% | | Current maturities of long-term bank loans | 3,659,324 | 10,562,506 | 188.6% | | Trade accounts and bills payable | 52,495,063 | 38,868,418 | -26.0% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (US$) | Metric | Dec 31, 2018 | Sep 30, 2019 | | :---------------------------------- | :----------- | :----------- | | Cash and cash equivalents | 449,670 | 198,671 | | Pledged deposits | 17,239,823 | 8,382,707 | | Trade accounts and bills receivable, net | 21,751,032 | 16,654,801 | | Inventories | 9,622,361 | 10,878,801 | | Total current assets | 56,369,692 | 42,110,452 | | Property, plant and equipment, net | 38,908,503 | 41,042,524 | | Construction in progress | 25,001,813 | 20,345,515 | | Total assets | 127,583,642 | 110,403,810 | | Current maturities of long-term bank loans | 3,659,324 | 10,562,506 | | Other short-term loans | 14,147,801 | 8,299,381 | | Trade accounts and bills payable | 52,495,063 | 38,868,418 | | Total current liabilities | 92,948,960 | 76,402,050 | | Total liabilities | 127,256,343 | 98,898,014 | | Total shareholders' equity | 315,322 | 11,433,390 | | Total equity | 327,299 | 11,505,796 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section details the company's revenues, expenses, and net income or loss over specific periods Condensed Consolidated Statements of Operations and Comprehensive Loss (US$ thousands) | Metric | 3 Months Ended Sep 30, 2018 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | | :-------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net revenues | 5,589,371 | 8,089,804 | 14,952,470 | 17,532,415 | | Cost of revenues | (7,426,846) | (7,431,039) | (18,186,164) | (17,322,234) | | Gross profit (loss) | (1,837,475) | 658,765 | (3,233,694) | 210,181 | | Total operating expenses | (2,277,940) | (2,158,814) | (6,584,961) | (6,314,610) | | Operating loss | (4,115,415) | (1,500,049) | (9,818,655) | (6,104,429) | | Finance expenses, net | (299,591) | (324,522) | (605,756) | (973,504) | | Other income, net | 12,335,569 | 37,503 | 12,331,453 | 149,358 | | Income (Loss) before income tax | 7,920,563 | (1,787,068) | 1,907,042 | (6,928,575) | | Net income (loss) | 7,920,563 | (1,787,068) | 1,907,042 | (6,928,575) | | Net income (loss) attributable to shareholders | 7,928,527 | (1,772,622) | 1,918,499 | (6,877,398) | | Income (Loss) per share – Basic | 0.30 | (0.04) | 0.07 | (0.19) | | Income (Loss) per share – Diluted | 0.30 | (0.04) | 0.07 | (0.19) | [Condensed Consolidated Statements of Changes in Shareholders' Equity (Deficit)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity%20(Deficit)) This section outlines changes in the company's equity components, including common stock, retained earnings, and other comprehensive income Changes in Shareholders' Equity (Deficit) (US$) | Metric | Balance as of Jan 1, 2019 | Net loss | Share-based compensation | Common stock issued to investors | Foreign currency translation adjustment | Balance as of Sep 30, 2019 | | :---------------------------------- | :------------------------ | :--------- | :----------------------- | :----------------------------- | :-------------------------------------- | :------------------------- | | Common stock issued | 26,792 | - | - | 17,396 | - | 44,320 | | Additional paid-in capital | 155,931,770 | - | 432,785 | 18,355,929 | - | 174,720,352 | | Accumulated deficit | (165,409,890) | (6,877,398) | - | - | - | (172,287,288) | | Accumulated other comprehensive loss | (1,498,940) | - | - | - | (810,644) | (2,309,584) | | Total shareholders' equity | 327,299 | (6,928,575) | 432,785 | 18,373,325 | (817,888) | 11,505,796 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (US$ thousands) | Cash Flow Activity | 9 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | | :---------------------------------------------------------------------------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by (used in) operating activities | 9,140,725 | (13,906,068) | | Net cash used in investing activities | (6,561,028) | (1,998,476) | | Net cash provided by financing activities | 7,371,361 | 7,290,693 | | Effect of exchange rate changes on cash and cash equivalents and restricted cash | (1,052,946) | (494,264) | | Net increase (decrease) in cash and cash equivalents and restricted cash | 8,898,112 | (9,108,115) | | Cash and cash equivalents and restricted cash at the beginning of period | 10,748,713 | 17,689,493 | | Cash and cash equivalents and restricted cash at the end of period | 19,646,825 | 8,581,378 | [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 additional information supporting the condensed consolidated financial statements [1. Principal Activities, Basis of Presentation and Organization](index=11&type=section&id=1.%20Principal%20Activities%2C%20Basis%20of%20Presentation%20and%20Organization) This note describes the company's core business, its organizational structure, and the basis for preparing the financial statements - CBAK Energy Technology, Inc. focuses on the manufacture, commercialization, and distribution of high-power lithium-ion rechargeable batteries for various applications including cordless power tools, electric vehicles, and uninterruptible power supplies[17](index=17&type=chunk) - The company's common stock trading symbol changed from CBAK to **CBAT on November 30, 2018**, and began trading on the Nasdaq Capital Market on June 21, 2019[19](index=19&type=chunk) - The company has a working capital deficiency and accumulated deficit, raising substantial doubt about its ability to continue as a going concern, though management believes future market demand for high-power lithium-ion products will lead to profitability[39](index=39&type=chunk)[50](index=50&type=chunk) - The company is evaluating the impact of new accounting standards ASU No. 2016-13 (Credit Losses) and ASU No. 2018-07 (Share-Based Payment Accounting) and intends to adopt ASU No. 2017-04 (Goodwill Impairment) for the fiscal year beginning January 1, 2020[55](index=55&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk) [2. Pledged deposits](index=24&type=section&id=2.%20Pledged%20deposits) This note details the company's pledged bank deposits, including amounts frozen due to legal disputes Pledged Deposits (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :-------------------------- | :----------- | :----------- | | Pledged deposits with bank for bills payable | 16,014,118 | 6,994,110 | | Others* | 1,225,705 | 1,388,597 | | Total Pledged deposits | 17,239,823 | 8,382,707 | - A portion of bank deposits totaling **$1,179,313** (RMB 8,430,792) was frozen until August 27, 2020, due to a lawsuit by Shenzhen Huijie Purification System Engineering Co., Ltd[60](index=60&type=chunk) - Additional bank deposits of **$0.16 million** (RMB1,117,269) and **$52,990** (RMB378,820) were frozen due to arbitration cases with Shenzhen Xinjiatuo Automobile Technology Co., Ltd and CBAK Suzhou employees, respectively[61](index=61&type=chunk)[63](index=63&type=chunk) [3. Trade Accounts and Bills Receivable, net](index=26&type=section&id=3.%20Trade%20Accounts%20and%20Bills%20Receivable%2C%20net) This note provides a breakdown of trade accounts and bills receivable, net of allowances for doubtful accounts Trade Accounts and Bills Receivable, net (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :---------------------------------- | :----------- | :----------- | | Trade accounts receivable | 19,054,863 | 20,596,681 | | Less: Allowance for doubtful accounts | (3,657,173) | (3,943,983) | | Bills receivable | 6,353,342 | 2,103 | | Total | 21,751,032 | 16,654,801 | Allowance for Doubtful Accounts Analysis (US$) | Metric | Dec 31, 2018 | Sep 30, 2019 | | :----------------------------------------------------------------- | :----------- | :----------- | | Balance at beginning of period | 3,700,922 | 3,657,173 | | Provision for the period (9 months) | 474,950 | 735,619 | | Charged to consolidated statements of operations and comprehensive (loss) income (9 months) | 162,488 | 443,020 | | Balance at end of period | 3,657,173 | 3,943,983 | [4. Inventories](index=26&type=section&id=4.%20Inventories) This note details the composition of inventories and changes in inventory write-downs Inventories (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :----------------- | :----------- | :----------- | | Raw materials | 1,675,383 | 1,422,821 | | Work in progress | 2,737,415 | 1,089,938 | | Finished goods | 5,209,563 | 8,366,042 | | Total | 9,622,361 | 10,878,801 | - Write-downs of inventories to lower of cost or net realizable value **decreased significantly** for the three months ended September 30, 2019 (nil vs. $729,247 in 2018), but remained at **$557,668** for the nine months ended September 30, 2019 ($730,446 in 2018)[67](index=67&type=chunk)[68](index=68&type=chunk) [5. Prepayments and Other Receivables](index=26&type=section&id=5.%20Prepayments%20and%20Other%20Receivables) This note outlines the company's prepayments and other receivables, including value-added tax recoverable Prepayments and Other Receivables (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :-------------------------- | :----------- | :----------- | | Value added tax recoverable | 5,359,275 | 4,906,241 | | Prepayments to suppliers | 1,157,966 | 32,040 | | Total | 7,143,454 | 5,838,302 | [6. Payables to Former Subsidiaries](index=28&type=section&id=6.%20Payables%20to%20Former%20Subsidiaries) This note details outstanding payables owed to the company's former subsidiaries Payables to Former Subsidiaries (US$) | Subsidiary | Dec 31, 2018 | Sep 30, 2019 | | :----------------- | :----------- | :----------- | | BAK Tianjin | 972,913 | - | | BAK Shenzhen | 3,328,733 | 855,860 | | Total | 4,301,646 | 855,860 | [7. Property, Plant and Equipment, net](index=28&type=section&id=7.%20Property%2C%20Plant%20and%20Equipment%2C%20net) This note presents the carrying amount of property, plant, and equipment, including depreciation and uncertified ownership Property, Plant and Equipment, net (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :-------------------------- | :----------- | :----------- | | Buildings | 23,626,924 | 27,492,988 | | Machinery and equipment | 22,159,752 | 22,180,789 | | Carrying amount | 38,908,503 | 41,042,524 | - The company incurred depreciation expense of **$2,064,576** for the nine months ended September 30, 2019, up from $1,749,608 in the same period of 2018[73](index=73&type=chunk) - The company has not yet obtained property ownership certificates for buildings with a carrying amount of **$25,135,164** as of September 30, 2019, but management believes it has legal title due to land use rights[73](index=73&type=chunk) [8. Construction in Progress](index=29&type=section&id=8.%20Construction%20in%20Progress) This note details the company's ongoing construction projects and capitalized interest expenses Construction in Progress (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :------------------------------------------------ | :----------- | :----------- | | Construction in progress | 23,562,557 | 20,211,782 | | Prepayment for acquisition of property, plant and equipment | 1,439,256 | 133,733 | | Carrying amount | 25,001,813 | 20,345,515 | - Capitalized interest for construction in progress increased to **$1,099,687** for the nine months ended September 30, 2019, from $912,702 in the same period of 2018[76](index=76&type=chunk) [9. Prepaid Land Use Rights, net](index=29&type=section&id=9.%20Prepaid%20Land%20Use%20Rights%2C%20net) This note describes the company's prepaid land use rights, their amortization, and the non-current portion Prepaid Land Use Rights, net (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :-------------------------- | :----------- | :----------- | | Prepaid land use rights | 8,167,587 | 7,858,480 | | Accumulated amortization | (721,470) | (812,043) | | Carrying amount | 7,446,117 | 7,046,437 | | Less: Classified as current assets | (163,352) | (157,170) | | Non-current portion | 7,282,765 | 6,889,267 | - The company acquired rights to use **153,832 m² of land** in Dalian for 50 years, with amortization expenses of **$122,812** for the nine months ended September 30, 2019[77](index=77&type=chunk)[78](index=78&type=chunk) [10. Intangible Assets, net](index=29&type=section&id=10.%20Intangible%20Assets%2C%20net) This note provides information on the company's intangible assets, primarily computer software, and their amortization Intangible Assets, net (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :-------------------------- | :----------- | :----------- | | Computer software at cost | 31,025 | 29,850 | | Accumulated amortization | (10,156) | (13,798) | | Total | 20,869 | 16,052 | - Amortization expenses for intangible assets were **$4,195** for the nine months ended September 30, 2019, up from $2,515 in the same period of 2018[79](index=79&type=chunk) [11. Trade Accounts and Bills Payable](index=30&type=section&id=11.%20Trade%20Accounts%20and%20Bills%20Payable) This note details the company's trade accounts and bills payable, including their nature and maturity Trade Accounts and Bills Payable (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :-------------------------- | :----------- | :----------- | | Trade accounts payable | 23,134,269 | 24,946,847 | | Bank acceptance bills | 28,911,556 | 13,921,571 | | Commercial acceptance bills | 449,238 | - | | Total | 52,495,063 | 38,868,418 | - All bills payable are of a trading nature and mature within **six months to one year** from the issue date[80](index=80&type=chunk) [12. Loans](index=30&type=section&id=12.%20Loans) This note provides a breakdown of the company's bank loans and other short-term loans, including debt cancellation activities Bank Loans (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :---------------------------------- | :----------- | :----------- | | Current maturities of long-term bank loans | 3,659,324 | 10,562,506 | | Long-term bank borrowings | 20,614,194 | 9,388,894 | | Total | 24,273,518 | 19,951,400 | - The company had unutilized committed banking facilities of **$4.6 million** as of September 30, 2019[92](index=92&type=chunk) - The company engaged in multiple debt cancellation agreements in 2019, converting approximately **$14.5 million** in various debts (First, Second, Third, Fourth, Fifth Debts, and Unpaid Earnest Money) into common stock issued to creditors[96](index=96&type=chunk)[98](index=98&type=chunk)[101](index=101&type=chunk)[44](index=44&type=chunk)[47](index=47&type=chunk) Other Short-term Loans (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :-------------------------------------------------------------------------------- | :----------- | :----------- | | Advance from related parties – Tianjin New Energy | 11,095,070 | - | | Advance from related parties – Mr. Xiangqian Li | 100,000 | 100,000 | | Advance from related parties – Mr. Yunfei Li | 116,307 | 403,274 | | Advance from related parties – Shareholders | 2,035,381 | 1,024,434 | | Advances from unrelated third party – Jilin Province Trust Co. Ltd | - | 5,539,335 | | Total Other short-term loans | 14,147,801 | 8,299,381 | [13. Accrued Expenses and Other Payables](index=35&type=section&id=13.%20Accrued%20Expenses%20and%20Other%20Payables) This note details the company's accrued expenses and other payables, including construction costs and liquidated damages Accrued Expenses and Other Payables (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :-------------------------- | :----------- | :----------- | | Construction costs payable | 5,950,746 | 2,172,282 | | Equipment purchase payable | 6,510,571 | 7,393,938 | | Liquidated damages | 1,210,119 | 1,210,119 | | Accrued staff costs | 2,362,466 | 2,516,972 | | Total | 18,201,351 | 16,383,921 | - The company has outstanding liquidated damages of **$1,210,119** as of September 30, 2019, related to past registration rights agreements[105](index=105&type=chunk)[106](index=106&type=chunk) [14. Deferred Government Grants](index=37&type=section&id=14.%20Deferred%20Government%20Grants) This note explains the company's deferred government grants and their amortization against depreciation expenses Deferred Government Grants (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :-------------------------- | :----------- | :----------- | | Total government grants | 4,457,064 | 4,184,634 | | Less: Current portion | (143,775) | (138,334) | | Non-current portion | 4,313,289 | 4,046,300 | - Government grants are amortized on a straight-line basis over the estimated useful lives of the depreciable facilities constructed, with **$108,094** offset against depreciation expenses for the nine months ended September 30, 2019[111](index=111&type=chunk)[112](index=112&type=chunk) [15. Product Warranty Provision](index=39&type=section&id=15.%20Product%20Warranty%20Provision) This note describes the company's product warranty programs and the associated provision for potential claims - The company provides warranty programs for its EV and LEV battery products, with coverage periods ranging from **six to twelve months** for battery cells, **twelve to twenty-seven months** for LEV battery modules, and **three to eight years** (or 120,000-200,000 km) for EV battery modules[113](index=113&type=chunk) - The product warranty provision was **$2,201,296** as of September 30, 2019, slightly down from $2,250,615 as of December 31, 2018[6](index=6&type=chunk)[113](index=113&type=chunk) [16. Notes payable](index=39&type=section&id=16.%20Notes%20payable) This note details the company's notes payable, including issuance terms, interest, and amortization of debt discount Notes Payable (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :-------------------------- | :----------- | :----------- | | Notes payable, net of debt discount | - | 1,293,630 | - On July 24, 2019, the company issued a promissory note with an original principal amount of **$1,395,000**, bearing 10% interest and maturing in 12 months, receiving proceeds of $1,250,000 after discount and expenses[114](index=114&type=chunk) - The company recorded **$23,630** from debt discount amortization and **$26,371** from coupon interest as interest expense for the three months ended September 30, 2019[115](index=115&type=chunk) [17. Income Taxes, Deferred Tax Assets and Deferred Tax Liabilities](index=39&type=section&id=17.%20Income%20Taxes%2C%20Deferred%20Tax%20Assets%20and%20Deferred%20Tax%20Liabilities) This note discusses the company's income tax provisions, deferred tax assets, and unrecognized tax benefits - No provision for income taxes was made for the three and nine months ended September 30, 2018 and 2019, as the company had no taxable income in the United States or Hong Kong[116](index=116&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - The company's PRC subsidiaries are subject to an enterprise income tax rate of **25%**[125](index=125&type=chunk) Deferred Tax Assets (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :---------------------------------- | :----------- | :----------- | | Net operating loss carried forward | 26,595,654 | 28,502,024 | | Valuation allowance | (30,523,274) | (31,954,197) | | Deferred tax assets, non-current | - | - | - A full valuation allowance was provided against the company's net operating loss carryforwards (**$103.6 million** for US entity, **$27.0 million** for PRC subsidiaries as of Sep 30, 2019) due to management's belief that these tax benefits will not be realized in the foreseeable future[127](index=127&type=chunk) Unrecognized Tax Benefits (Gross UTB) (US$) | Metric | Jan 1, 2019 | Sep 30, 2019 | | :---------------------------------------------------- | :---------- | :---------- | | Balance as of period | 7,129,285 | 6,859,474 | | Decrease in unrecognized tax benefits taken in current period | (269,811) | (269,811) | [18. Share-based Compensation](index=43&type=section&id=18.%20Share-based%20Compensation) This note details the company's non-cash share-based compensation expenses and outstanding restricted share units - The company recorded non-cash share-based compensation expense of **$396,144** for the three and nine months ended September 30, 2019, primarily from restricted share units granted on August 23, 2019[141](index=141&type=chunk) - As of September 30, 2019, **1,887,000 restricted share units** were granted, with **1,580,000 non-vested units** remaining and **$1,302,156** in unrecognized stock-based compensation[140](index=140&type=chunk)[141](index=141&type=chunk) - No income tax benefits were recognized for stock-based compensation cost due to the company's investment holding nature and unlikelihood of generating operating profits to realize tax benefits[142](index=142&type=chunk) [19. Income (Loss) Per Share](index=46&type=section&id=19.%20Income%20(Loss)%20Per%20Share) This note presents the basic and diluted income (loss) per share, including the impact of anti-dilutive securities Income (Loss) Per Share (US$) | Metric | 3 Months Ended Sep 30, 2018 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | | :---------------------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) attributable to shareholders of CBAK Energy Technology, Inc. | 7,928,527 | (1,772,622) | 1,918,499 | (6,877,398) | | Weighted average shares outstanding – basic | 26,660,814 | 42,262,408 | 26,642,749 | 35,508,896 | | Income (Loss) per share – Basic | 0.30 | (0.04) | 0.07 | (0.19) | | Income (Loss) per share – Diluted | 0.30 | (0.04) | 0.07 | (0.19) | - For the three and nine months ended September 30, 2019, **1,580,000 unvested restricted shares** were anti-dilutive and excluded from diluted EPS computation[145](index=145&type=chunk) [20. Fair Value of Financial Instruments](index=46&type=section&id=20.%20Fair%20Value%20of%20Financial%20Instruments) This note discusses the fair value measurements of financial instruments and their classification within a three-level hierarchy - The carrying amounts of financial assets and liabilities (cash, pledged deposits, receivables, payables, loans) approximate their fair values due to their short maturity or market interest rates[148](index=148&type=chunk) - Fair value measurements are classified into a three-level hierarchy: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs), and **Level 3** (unobservable inputs)[146](index=146&type=chunk)[147](index=147&type=chunk) [21. Commitments and Contingencies](index=47&type=section&id=21.%20Commitments%20and%20Contingencies) This note outlines the company's capital commitments and ongoing legal contingencies, including frozen bank deposits Contracted Capital Commitments (US$) | Category | Dec 31, 2018 | Sep 30, 2019 | | :------------------------------------------------ | :----------- | :----------- | | For construction of buildings | 3,439,794 | 3,309,613 | | For purchases of equipment | 2,226,776 | 335,502 | | Capital injection to CBAK Power and CBAK Trading | 20,400,000 | 23,900,000 | | Total | 26,066,570 | 27,545,115 | - The company is involved in a lawsuit with Shenzhen Huijie, resulting in frozen bank deposits of **$1,179,318** and ongoing appeals regarding construction costs[151](index=151&type=chunk)[152](index=152&type=chunk) - A full provision of **$2,437,867** was made against a receivable from Anyuan Bus, with the court affirming the original judgment against the company's appeal to add shareholders as debtors[154](index=154&type=chunk)[155](index=155&type=chunk) - Bank deposits of **$0.16 million** were frozen due to arbitration with Shenzhen Xinjiatuo Automobile Technology Co., Ltd, against which the company filed a counterclaim[156](index=156&type=chunk) - Bank deposits of **$0.17 million** were frozen due to employee arbitration at CBAK Suzhou, with an agreement reached to pay salaries and compensation[157](index=157&type=chunk) [22. Concentrations and Credit Risk](index=50&type=section&id=22.%20Concentrations%20and%20Credit%20Risk) This note identifies significant customer concentrations and credit risk exposures, particularly regarding cash holdings Customer Concentration (Net Revenue) | Customer | 3 Months Ended Sep 30, 2019 (%) | 9 Months Ended Sep 30, 2019 (%) | | :---------------------------------- | :------------------------------ | :------------------------------ | | Customer A | 26.19% | 34.19% | | Customer D | 27.99% | 19.00% | | Zhengzhou BAK Battery Co., Ltd | 23.99% | 11.07% | Customer Concentration (Accounts Receivable, net) | Customer | Dec 31, 2018 (%) | Sep 30, 2019 (%) | | :---------------------------------- | :--------------- | :--------------- | | Customer A | 11.49% | 9.16% | | Customer C | 14.89% | 13.25% | | Zhengzhou BAK Battery Co., Ltd | * | 12.69% | | Customer E | 27.82% | * | - Substantially all of the company's cash and cash equivalents are held by major financial institutions located in the PRC[164](index=164&type=chunk) [23. Segment Information](index=52&type=section&id=23.%20Segment%20Information) This note provides details on the company's single operating segment and its net revenues by product category and geographic area - The company operates in a single business segment: the manufacture, commercialization, and distribution of high-power lithium-ion rechargeable batteries[166](index=166&type=chunk)[167](index=167&type=chunk) Net Revenues by Product (US$) | Product Category | 3 Months Ended Sep 30, 2018 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Electric vehicles | 2,280,763 | 2,885,305 | 4,099,646 | 4,425,875 | | Light electric vehicles | 44,195 | - | 64,315 | - | | Uninterruptable supplies | 3,264,413 | 5,204,499 | 10,788,509 | 13,106,540 | | Total | 5,589,371 | 8,089,804 | 14,952,470 | 17,532,415 | Net Revenues by Geographic Area (US$) | Geographic Area | 3 Months Ended Sep 30, 2018 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Mainland China | 3,799,136 | 8,016,931 | 12,299,525 | 17,034,593 | | USA | 1,765,193 | (3,638) | 1,858,225 | 219,827 | | Total | 5,589,371 | 8,089,804 | 14,952,470 | 17,532,415 | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.](index=53&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) Management discusses financial condition and operations, highlighting revenue growth, net loss, liquidity challenges, and debt cancellation activities - Net revenues increased by **44.74% to $8.1 million** for the three months and by **17.26% to $17.5 million** for the nine months ended September 30, 2019, primarily driven by sales for uninterruptible power supplies and electric vehicles[218](index=218&type=chunk)[235](index=235&type=chunk) - The company shifted from a gross loss to a gross profit for both the three and nine months ended September 30, 2019, due to improved production efficiency and cost control[228](index=228&type=chunk)[239](index=239&type=chunk) - Net income shifted to a **net loss of $1.8 million** for the three months and **$6.9 million** for the nine months ended September 30, 2019, largely due to a significant decrease in other income (a one-time gain on technology transfer in 2018)[233](index=233&type=chunk)[245](index=245&type=chunk) - The company executed multiple debt cancellation agreements in 2019, converting approximately **$14.5 million** in various debts into common stock to improve its capital structure[192](index=192&type=chunk)[194](index=194&type=chunk)[197](index=197&type=chunk)[200](index=200&type=chunk) - A **working capital deficiency of $34.3 million** and recurring net losses raise substantial doubt about the company's ability to continue as a going concern, though management plans to secure additional financing and anticipates growth from the new energy market[247](index=247&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) [Special Note Regarding Forward Looking Statements](index=53&type=section&id=Special%20Note%20Regarding%20Forward%20Looking%20Statements) This note cautions readers about forward-looking statements, which involve risks and uncertainties, and disclaims any update obligation - The report contains forward-looking statements regarding market growth, product demand, financial projections, and management strategies, which involve risks and uncertainties[170](index=170&type=chunk) - Readers are cautioned to review disclosures in this report and other SEC filings, and the company disclaims any obligation to update forward-looking statements except as required by law[171](index=171&type=chunk) [Use of Terms](index=53&type=section&id=Use%20of%20Terms) This note defines key terms used throughout the report and provides context for company entities and stock trading - This section defines key terms used throughout the report, including 'Company', 'BAK Asia', 'CBAK Trading', 'CBAK Power', 'CBAK Suzhou', 'China/PRC', 'RMB', 'U.S. dollar', 'SEC', 'Securities Act', and 'Exchange Act'[172](index=172&type=chunk) - CBAK New Energy (Suzhou) Co., Ltd. was established on May 4, 2018, focusing on new energy high-power battery packs[173](index=173&type=chunk) - The company's common stock trading symbol changed to **CBAT on November 30, 2018**, and began trading on the Nasdaq Capital Market on June 21, 2019[173](index=173&type=chunk) [Overview](index=54&type=section&id=Overview) This section provides a general overview of the company's operations, financial highlights, and going concern issues - The company's Dalian manufacturing facilities commenced commercial operations in July 2015, focusing on developing, manufacturing, and selling new energy high-power lithium batteries for electric vehicles, light electric vehicles, and other high-power applications[174](index=174&type=chunk) Financial Overview (3 Months Ended Sep 30) | Metric | 2018 (US$ million) | 2019 (US$ million) | Change (%) | | :----------------- | :----------------- | :----------------- | :--------- | | Net revenues | 5.6 | 8.1 | 45% | | Net profit (loss) | 7.9 | (1.8) | -122.8% | - As of September 30, 2019, the company had an accumulated deficit of **$172.3 million** and net assets of **$11.5 million**, with a working capital deficiency and short-term debt obligations raising substantial doubts about its ability to continue as a going concern[176](index=176&type=chunk) [Bank Loans](index=54&type=section&id=Bank%20Loans) This section details the company's banking facilities, loan balances, repayments, and unutilized credit lines - The company has various banking facilities from Chinese banks, including long-term loans and revolving bank acceptance bills, secured by assets such as land use rights, buildings, machinery, equipment, and cash[181](index=181&type=chunk)[184](index=184&type=chunk)[186](index=186&type=chunk) - As of September 30, 2019, the company had **RMB142.6 million** (approximately **$19.94 million**) borrowed under a China Everbright Bank facility and **$4.6 million** in unutilized committed banking facilities[181](index=181&type=chunk)[186](index=186&type=chunk) - The company repaid **RMB0.8 million** (**$0.11 million**) in December 2018 and **RMB24.3 million** (**$3.4 million**) in June 2019 for bank loans[181](index=181&type=chunk) - On October 15, 2019, the company borrowed **RMB28 million** (approximately **$3.9 million**) in bills payable from China Everbright Bank, secured by cash[186](index=186&type=chunk) [Personal Loans and Debt Cancellation](index=55&type=section&id=Personal%20Loans%20and%20Debt%20Cancellation) This section describes the company's debt cancellation agreements, converting various loans into common stock - In January 2019, the company converted **$5.0 million** (First Debt) in loans from Tianjin New Energy to Mr. Dawei Li and Mr. Yunfei Li into **5,098,040 shares** of common stock[191](index=191&type=chunk)[192](index=192&type=chunk) - In April 2019, **$5.4 million** (Second Debt) in loans from Tianjin New Energy was converted into **5,205,905 shares** of common stock for Mr. Jun Lang, Ms. Jing Shi, and Asia EVK[193](index=193&type=chunk)[194](index=194&type=chunk) - In July 2019, **$3.9 million** (Third Debt) and **$3.2 million** (Fourth Debt) totaling **$7.1 million** were converted into **7,092,219 shares** of common stock for Mr. Dawei Li, Mr. Yunfei Li, and Asia EVK[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - In October 2019, **$4.2 million** (Fifth Debt) and Unpaid Earnest Money were converted into **8,600,017 shares** of common stock for Mr. Shangdong Liu, Mr. Shibin Mao, Ms. Lijuan Wang, and Mr. Ping Shen[199](index=199&type=chunk)[200](index=200&type=chunk) - The Chinese government's subsidy policies for new energy vehicles, while promoting long-term development, led to a sharp decrease in EV battery prices and a temporary reduction in the company's R&D investment for new EV products[205](index=205&type=chunk) [Financial Performance Highlights for the Quarter Ended September 30, 2019](index=59&type=section&id=Financial%20Performance%20Highlights%20for%20the%20Quarter%20Ended%20September%2030%2C%202019) This section summarizes key financial performance metrics for the quarter, including revenues, gross profit, and net loss Financial Highlights (3 Months Ended Sep 30) | Metric | 2018 (US$ million) | 2019 (US$ million) | Change (%) | | :---------------------------------- | :----------------- | :----------------- | :--------- | | Net revenues | 5.6 | 8.1 | 45% | | Gross profit (loss) | (1.8) | 0.7 | 138.9% | | Operating loss | (4.1) | (1.5) | 63.4% | | Net loss | (7.9) | (1.8) | -122.8% | | Fully diluted income (loss) per share | 0.30 | (0.04) | -113.3% | [Financial Statement Presentation](index=59&type=section&id=Financial%20Statement%20Presentation) This section outlines the company's accounting policies for revenue recognition, cost of revenues, operating expenses, and income taxes - The company recognizes revenues following the five-step model prescribed under ASU No. 2014-09, typically upon delivery of products to the customer[209](index=209&type=chunk)[210](index=210&type=chunk) - Cost of revenues includes material costs, employee remuneration, share-based compensation, depreciation, and inventory write-downs[213](index=213&type=chunk) - Operating expenses are categorized into research and development, sales and marketing, and general and administrative expenses[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk) - Income tax expenses are applied at **25%** for PRC subsidiaries, **16.5%** for the Hong Kong subsidiary, and up to **21%** for the U.S. entity, with no tax provision made due to lack of assessable income[217](index=217&type=chunk) [Results of Operations](index=60&type=section&id=Results%20of%20Operations) This section analyzes the company's financial results, comparing performance across different periods [Comparison of Three Months Ended September 30, 2018 and 2019](index=60&type=section&id=Comparison%20of%20Three%20Months%20Ended%20September%2030%2C%202018%20and%202019) This section compares the company's financial performance for the three months ended September 30, 2018 and 2019 Results of Operations (3 Months Ended Sep 30, US$ thousands) | Metric | 2018 | 2019 | Change ($) | Change (%) | | :-------------------------------------------------- | :--- | :--- | :--------- | :--------- | | Net revenues | 5,589 | 8,089 | 2,500 | 44.74 | | Gross profit (loss) | (1,838) | 659 | 2,497 | 135.85 | | Operating loss | (4,115) | (1,500) | 2,615 | 63.55 | | Net income (loss) | 7,921 | (1,787) | (9,708) | (122.56) | | Net income (loss) attributable to shareholders | 7,929 | (1,773) | (9,702) | (122.36) | Net Revenues by Product (3 Months Ended Sep 30, US$ thousands) | Product Category | 2018 | 2019 | Change ($) | Change (%) | | :---------------------------------- | :--- | :--- | :--------- | :--------- | | Electric vehicles | 2,281 | 2,885 | 604 | 26.47 | | Light electric vehicles | 44 | - | (44) | (100) | | Uninterruptable supplies | 3,264 | 5,204 | 1,941 | 59.43 | - Gross profit improved significantly due to enhanced production line efficiency and cost control, shifting from a gross loss of **$1.8 million** in 2018 to a gross profit of **$0.7 million** in 2019[228](index=228&type=chunk) - Other income decreased by **99.70% to $0.04 million** in 2019, primarily because of a **$12.3 million gain** on the transfer of patented proprietary technology recorded in 2018[219](index=219&type=chunk)[233](index=233&type=chunk) [Comparison of Nine Months Ended September 30, 2018 and 2019](index=62&type=section&id=Comparison%20of%20Nine%20Months%20Ended%20September%2030%2C%202018%20and%202019) This section compares the company's financial performance for the nine months ended September 30, 2018 and 2019 Results of Operations (9 Months Ended Sep 30, US$ thousands) | Metric | 2018 | 2019 | Change ($) | Change (%) | | :-------------------------------------------------- | :--- | :--- | :--------- | :--------- | | Net revenues | 14,952 | 17,532 | 2,580 | 17.26 | | Gross profit (loss) | (3,234) | 210 | 3,444 | 106.49 | | Operating loss | (9,819) | (6,105) | 3,714 | 37.82 | | Net income (loss) | 1,907 | (6,929) | (8,836) | (463.35) | | Net income (loss) attributable to shareholders | 1,918 | (6,878) | (8,796) | (458.60) | Net Revenues by Product (9 Months Ended Sep 30, US$ thousands) | Product Category | 2018 | 2019 | Change ($) | Change (%) | | :---------------------------------- | :--- | :--- | :--------- | :--------- | | Electric vehicles | 4,100 | 4,426 | 326 | 7.95 | | Light electric vehicles | 64 | - | (64) | (100) | | Uninterruptable supplies | 10,788 | 13,106 | 2,318 | 21.49 | - Finance expenses, net, increased by **60.82% to $1 million**, primarily due to higher average bank loan balances and new borrowings from Jilin Province Trust Co. Ltd. in 2019[234](index=234&type=chunk)[244](index=244&type=chunk) - Research and development expenses decreased by **27.6% to $1.4 million**, partly due to reduced material usage and less R&D after the technology transfer in 2018[240](index=240&type=chunk) - General and administrative expenses increased by **9.7% to $4.0 million**, mainly due to a **$0.3 million increase** in the allowance for doubtful accounts[242](index=242&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, working capital, and plans for future financing and growth - As of September 30, 2019, the company had cash and cash equivalents of **$0.2 million** and a net working capital deficiency of **$34.3 million**, raising substantial doubts about its ability to continue as a going concern[247](index=247&type=chunk) - The company plans to expand product lines and manufacturing capacity, and intends to raise additional funds through bank borrowings and equity financing, anticipating increased orders from the new energy market[249](index=249&type=chunk)[250](index=250&type=chunk) Cash Flow Summary (9 Months Ended Sep 30, US$ thousands) | Cash Flow Activity | 2018 | 2019 | | :---------------------------------------------------------------- | :--- | :--- | | Net cash provided by (used in) operating activities | 9,141 | (13,906) | | Net cash used in investing activities | (6,561) | (1,999) | | Net cash provided by financing activities | 7,371 | 7,291 | | Net increase (decrease) in cash and cash equivalents and restricted cash | 8,898 | (9,108) | | Cash and cash equivalents and restricted cash at the end of period | 19,647 | 8,581 | - Net cash used in operating activities was **$13.9 million** in 2019, a significant shift from $9.1 million provided in 2018, mainly due to net loss and settlements of payables[254](index=254&type=chunk) - Net cash provided by financing activities remained stable at **$7.3 million** in 2019, primarily from borrowings and a promissory note, offset by bank loan repayments[256](index=256&type=chunk) [Capital Expenditures](index=67&type=section&id=Capital%20Expenditures) This section details the company's capital expenditures for manufacturing facilities and future expansion plans - Capital expenditures decreased to **$2.0 million** for the nine months ended September 30, 2019, from $6.6 million in the same period of 2018, primarily for the construction of Dalian manufacturing facilities[259](index=259&type=chunk) - The company estimates total capital expenditures for the year ending December 31, 2019, to be approximately **$6.0 million**, aimed at expanding new automatic manufacturing lines[259](index=259&type=chunk) [Contractual Obligations and Commercial Commitments](index=67&type=section&id=Contractual%20Obligations%20and%20Commercial%20Commitments) This section outlines the company's various contractual obligations and commercial commitments, including loans and capital injections Contractual Obligations and Commercial Commitments (As of Sep 30, 2019, US$ thousands) | Contractual Obligations | Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than 5 years | | :------------------------------------------------ | :---- | :--------------- | :---------- | :---------- | :---------------- | | Current maturities of long-term bank loans | 10,562 | 10,562 | - | - | - | | Long-term bank loans | 9,389 | - | 9,389 | - | - | | Bills payable | 13,922 | 13,922 | - | - | - | | Notes payable | 1,294 | 1,294 | - | - | - | | Other short-term loans | 8,299 | 8,299 | - | - | - | | Capital injection to CBAK Trading | 3,900 | 3,900 | - | - | - | | Capital injection to CBAK Power | 20,000 | 20,000 | - | - | - | | Capital commitments for construction of buildings | 3,310 | 3,310 | - | - | - | | Capital commitments for purchase of equipment | 336 | 336 | - | - | - | | Future interest payment on bank loans | 1,640 | 1,226 | 414 | - | - | | Total | 73,508 | 63,705 | 9,803 | - | - | [Off-Balance Sheet Transactions](index=68&type=section&id=Off-Balance%20Sheet%20Transactions) This section confirms the absence of any off-balance sheet transactions or arrangements - The company has not entered into any off-balance sheet transactions, agreements, or contractual arrangements with unconsolidated entities[261](index=261&type=chunk) [Critical Accounting Policies](index=68&type=section&id=Critical%20Accounting%20Policies) This section refers to the company's critical accounting policies and estimates, prepared under U.S. GAAP - The company's condensed consolidated financial information is prepared in accordance with U.S. GAAP, requiring significant judgments, estimates, and assumptions[262](index=262&type=chunk) - A detailed description of critical accounting policies and estimates is available in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018[263](index=263&type=chunk) [Changes in Accounting Standards](index=68&type=section&id=Changes%20in%20Accounting%20Standards) This section directs readers to Note 1 for details on recently issued accounting standards - Refer to Note 1 of the condensed consolidated financial statements for a discussion of recently issued accounting standards[264](index=264&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.](index=68&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK.) This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company - This item is marked as 'Not applicable'[265](index=265&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES.](index=68&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES.) This section evaluates the effectiveness of disclosure controls and internal control over financial reporting, noting material weaknesses and remediation plans - Management concluded that the company's disclosure controls and procedures were **ineffective** as of September 30, 2019[267](index=267&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 with US GAAP and SEC reporting experience[269](index=269&type=chunk)[270](index=270&type=chunk) - Remediation plans involve providing training to the financial team and hiring a permanent chief financial officer with significant US GAAP and SEC reporting experience[271](index=271&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=68&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section details the evaluation of disclosure controls, concluding their ineffectiveness due to material weaknesses - The Chief Executive Officer and Interim Chief Financial Officer concluded that disclosure controls and procedures were **ineffective** as of September 30, 2019[267](index=267&type=chunk) - Material weaknesses include the absence of appropriate policies for accounting and disclosures of key documents and agreements, and a shortage of skilled accounting personnel with US GAAP and SEC reporting experience[269](index=269&type=chunk)[270](index=270&type=chunk) - Remediation efforts include providing training to the financial team and hiring a permanent CFO with relevant experience[271](index=271&type=chunk) [Changes in Internal Control over Financial Reporting](index=69&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports no material changes in internal control over financial reporting, aside from previously discussed weaknesses - No material changes in internal controls over financial reporting occurred during the quarter ended September 30, 2019, other than the material weaknesses previously discussed[273](index=273&type=chunk) [PART II. OTHER INFORMATION](index=70&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides disclosures on legal proceedings, risk factors, equity sales, and other miscellaneous information [ITEM 1. LEGAL PROCEEDINGS.](index=70&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS.) This section details ongoing legal proceedings, including lawsuits with contractors and customers, and employee arbitrations, resulting in frozen assets - A lawsuit with Shenzhen Huijie Purification System Engineering Co., Ltd. has resulted in CBAK Power's bank deposits of **$1,179,318** being frozen until August 27, 2020, with ongoing appeals regarding construction costs[275](index=275&type=chunk)[276](index=276&type=chunk) - The company made a full provision of **$2,437,867** against a receivable from Pingxiang Anyuan Tourism Bus Manufacturing Co., Ltd. (Anyuan Bus), after the court affirmed the original judgment and dismissed the company's appeal to add shareholders as debtors[278](index=278&type=chunk)[279](index=279&type=chunk) - Bank deposits of **$0.16 million** were frozen due to an arbitration with Shenzhen Xinjiatuo Automobile Technology Co., Ltd., against which the company filed a counterclaim for **$0.28 million**[280](index=280&type=chunk) - Bank deposits of **$0.17 million** were frozen due to employee arbitration at CBAK Suzhou for unpaid salaries and compensation, with an agreement subsequently reached for payment[281](index=281&type=chunk) [ITEM 1A. RISK FACTORS.](index=72&type=section&id=ITEM%201A.%20RISK%20FACTORS.) This section states that there are no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 - There are no material changes from the risk factors previously disclosed in Item 1A 'Risk Factors' of the Annual Report on Form 10-K for the fiscal year ended December 31, 2018[283](index=283&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.](index=72&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS.) This section indicates that there were no unregistered sales of equity securities or use of proceeds to report for the period - This item is marked as 'None'[283](index=283&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES.](index=72&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES.) This section states that there were no defaults upon senior securities to report for the period - This item is marked as 'None'[283](index=283&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES.](index=72&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES.) This section indicates that mine safety disclosures are not applicable to the company - This item is marked as 'Not applicable'[283](index=283&type=chunk) [ITEM 5. OTHER INFORMATION.](index=72&type=section&id=ITEM%205.%20OTHER%20INFORMATION.) This section states that there is no other information to report for the period - This item is marked as 'None'[283](index=283&type=chunk) [ITEM 6. EXHIBITS.](index=72&type=section&id=ITEM%206.%20EXHIBITS.) This section lists the exhibits filed as part of the report, including certifications of principal executive and financial officers under the Sarbanes-Oxley Act and various XBRL documents - Exhibits include Certifications of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 and furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002[284](index=284&type=chunk) - XBRL documents (Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents) are also filed as exhibits[284](index=284&type=chunk) [SIGNATURES](index=73&type=section&id=SIGNATURES) This section confirms the official signing of the report by the company's principal executive and financial officers - The report was duly signed on November 19, 2019, by Yunfei Li, Chief Executive Officer, and Xiangyu Pei, Interim Chief Financial Officer, of CBAK Energy Technology, Inc[286](index=286&type=chunk) [EXHIBIT INDEX](index=74&type=section&id=EXHIBIT%20INDEX) This section provides a comprehensive list of all exhibits accompanying the report - This section provides a duplicate list of the exhibits filed with the report, consistent with Item 6[287](index=287&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Nevada 88-0442833 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.001 par value CBAT Nasdaq Capital Market Class of Securities Shares Outstanding Common Stock, $0.001 par value 36,951,423 FORM 10−Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.001 par value CBAT Nasdaq Global Market FORM 10−Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ______ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2018 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________to _____________ Commission File No. 001-32898 | --- | --- | |-----------------------------|-------| | | | | Accelerated Filer | ☐ | | Smaller reporting ...