Core Viewpoint - Huayang New Energy (EPOW) shows a significant increase in revenue and a notable investment in manufacturing capabilities, indicating growth potential in the electric vehicle and lithium-ion battery materials sector [1] Financial Performance - As of December 31, 2024, Huayang New Energy reported total revenue of $64.9977 million, representing a year-on-year growth of 44.28% [1] - The company recorded a net profit attributable to shareholders of -$11.7764 million, which reflects a year-on-year increase of 51.4% in losses [1] Company Overview - Huayang New Energy is headquartered in Zibo, Shandong Province, China, and is engaged in the research, manufacturing, and sales of graphite anode materials for electric vehicles and other lithium-ion batteries through joint ventures [1] - The company is constructing a manufacturing facility covering 138,000 square meters in Guizhou Province, China, which utilizes inexpensive electricity from renewable sources to significantly reduce costs and minimize environmental impact [1] - The founder and CEO, Hu Haiping, has been a key pioneer in China's graphite anode industry since 1999, and the core team consists of industry veterans with decades of experience and multiple successful entrepreneurial ventures in lithium battery anode materials [1] Strategic Initiatives - In addition to its core business, Huayang New Energy operates a traditional internet knowledge-sharing platform and is exploring strategic alternatives for this segment [1]

Core Viewpoint - Huayang New Energy (EPOW) shows significant growth in revenue and a strategic focus on sustainable manufacturing in the lithium battery sector [1] Financial Performance - As of December 31, 2024, Huayang New Energy reported total revenue of $64.9977 million, representing a year-on-year increase of 44.28% [1] - The company recorded a net profit attributable to shareholders of -$11.7764 million, which is a 51.4% increase in losses compared to the previous year [1] Company Overview - Huayang New Energy is headquartered in Zibo, Shandong Province, China, and is engaged in the research, manufacturing, and sales of lithium-ion battery graphite anode materials through joint ventures [1] - The company is constructing a manufacturing plant in Guizhou Province, covering an area of 138,000 square meters, which utilizes low-cost electricity from renewable energy sources to significantly reduce costs and minimize environmental impact [1] - The founder and CEO, Hu Haiping, has been a key pioneer in China's graphite anode industry since 1999, and the core team consists of industry veterans with decades of experience and multiple successful entrepreneurial ventures in lithium battery anode materials [1] Strategic Initiatives - In addition to its core business, Huayang New Energy operates a traditional internet knowledge-sharing platform and is exploring strategic alternatives for this segment [1]

Core Viewpoint - The negative electrode materials industry in China is experiencing significant challenges despite a 26% year-on-year increase in shipment volume to 2.08 million tons in 2024, leading to market polarization with a concentration ratio (CR6) of 76% among top companies, while smaller firms are exiting the market due to cost pressures and technical barriers [1] Group 1: Company Performance - Huiyang New Energy (EPOW.US) achieved over 500 million yuan in sales in 2024, marking a growth of over 40%, significantly outpacing many competitors [1] - The company has shown continuous high growth since 2022, with revenues increasing from 38.13 million USD in 2022 (up 414.57% year-on-year) to 45.05 million USD in 2023 (an 18.16% increase) [1] - By 2024, Huiyang New Energy ranked 11th among hundreds of negative electrode material suppliers in China, entering the first tier of the industry and ranking in the top 3 in the energy storage segment [1] Group 2: Leadership and Innovation - The founder and chairman, Hu Haiping, is a seasoned industry expert, previously leading Shanghai Shanshan Technology Co. and transforming it into a global leader in new energy [2] - Huiyang New Energy has a strong R&D team with 12 laboratories and over 100 intellectual property applications, establishing a patent matrix in multiple developed countries [3] - The company has received significant funding support for its silicon-carbon and hard carbon projects, being the only negative electrode material enterprise selected for a high-value core patent cultivation project in Guizhou Province [3] Group 3: Market Strategy and Future Outlook - Huiyang New Energy has developed a comprehensive ecosystem focused on innovation, product performance, and customer expansion, allowing it to select high-margin orders effectively [4] - The global demand for negative electrode materials is expected to grow, with projections of 2.625 million tons by 2025 and 4.023 million tons by 2028, indicating a compound annual growth rate of 16.71% from 2024 to 2028 [4] - The company plans to increase its total output to approximately 30,000 tons in 2024 and 40,000 to 50,000 tons in 2025, with expectations of reaching breakeven by 2025 due to scale effects and high-margin order selection [4][5] - Huiyang New Energy aims for an annual production capacity of 140,000 tons, which could exceed 5% of the global total once fully operational by early 2029 [5]

PART I [Item 3. Key Information](index=7&type=section&id=Item%203.%20KEY%20INFORMATION) The company outlines its holding structure, reliance on a Chinese VIE, key financial data, and significant regulatory and operational risks - The company operates as a Cayman Islands holding company with substantial business conducted in the PRC through a joint venture (Sunrise Guizhou) and a Variable Interest Entity (VIE), SDH [25](index=25&type=chunk)[26](index=26&type=chunk) - The VIE structure is used to operate the knowledge sharing platform, and while consolidated under U.S. GAAP, the agreements pose significant risks regarding control and enforcement[26](index=26&type=chunk)[27](index=27&type=chunk) - The company is subject to PRC regulatory risks, including potential cybersecurity reviews by the CAC and filing requirements with the CSRC for overseas listings[29](index=29&type=chunk)[30](index=30&type=chunk) - The Holding Foreign Companies Accountable Act (HFCA Act) risk is currently mitigated as the PCAOB was able to inspect the company's auditor in 2022[32](index=32&type=chunk) VIE Contribution to Consolidated Financials | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **% of Total Assets** | 4.05% | 5.48% | 8.79% | | **% of Total Liabilities** | 7.14% | 6.54% | 13.04% | | **% of Total Net Revenues** | 1.05% | 1.46% | 1.61% | [Selected Condensed Consolidating Financial Schedule](index=11&type=section&id=Selected%20Condensed%20Consolidating%20Financial%20Schedule) Financial schedules detail the performance of the Parent, Subsidiaries, and VIE, with Subsidiaries driving revenue and losses Condensed Consolidating Statement of Operations Data (Year ended Dec 31, 2024) | (US$) | Parent | Subsidiaries | VIE and VIE's subsidiaries | Group consolidated | | :--- | :--- | :--- | :--- | :--- | | **Revenues, net** | - | 71,276,389 | 2,899,946 | 64,997,741 | | **(Loss) Profit from operations** | (1,776,146) | (15,469,759) | 649,577 | (16,596,328) | | **Net (loss) income** | (1,778,111) | (17,057,370) | 854,317 | (17,981,164) | Condensed Consolidating Balance Sheet Data (As of Dec 31, 2024) | (US$) | Parent | Subsidiaries | VIE and VIE's subsidiaries | Group consolidated | | :--- | :--- | :--- | :--- | :--- | | **Total assets** | 16,982,761 | 141,690,551 | 19,360,549 | 143,023,032 | | **Total liabilities** | 252,338 | 122,482,787 | 13,398,312 | 115,728,359 | Condensed Consolidating Statement of Cash Flows Data (Year ended Dec 31, 2024) | (US$) | Parent | Subsidiaries | VIE and VIE's subsidiaries | Group consolidated | | :--- | :--- | :--- | :--- | :--- | | **Net cash used in operating activities** | (1,269,634) | (2,574,103) | (1,508,420) | (5,352,157) | | **Net cash provided by (used in) investing activities** | 1,071,942 | (2,293,647) | 423,298 | 632,461 | | **Net cash (used in) provided by financing activities** | (150,000) | 11,251,341 | 961,196 | 10,631,669 | [Risk Factors](index=15&type=section&id=D.%20Risk%20Factors) The company faces substantial business, corporate structure, Chinese regulatory, and market risks - **Business Risks:** The company has a limited operating history in the graphite anode business, has incurred substantial losses (**$18.0M in 2024**, **$32.9M in 2023**), and faces substantial doubt about its ability to continue as a going concern[47](index=47&type=chunk)[54](index=54&type=chunk) - **Corporate Structure Risks:** The company relies on contractual VIE arrangements that may be deemed non-compliant by PRC authorities, and the dual-class share structure concentrates **87.9% of voting power** with the CEO[48](index=48&type=chunk)[90](index=90&type=chunk)[106](index=106&type=chunk) - **China-Specific Risks:** The PRC government exerts substantial influence, and recent regulations on data security (CAC) and overseas listings (CSRC) add uncertainty, while the **HFCA Act poses a potential delisting risk**[49](index=49&type=chunk)[50](index=50&type=chunk)[113](index=113&type=chunk) - **Market Risks:** The company has identified **several material weaknesses in its internal controls** over financial reporting, its stock price may be volatile, and it does not intend to pay dividends[56](index=56&type=chunk)[173](index=173&type=chunk)[176](index=176&type=chunk) [Item 4. Information on the Company](index=43&type=section&id=Item%204.%20INFORMATION%20ON%20THE%20COMPANY) The company details its strategic shift to graphite anode manufacturing, which now dominates revenue, and its VIE-based legacy business - The company was incorporated in the Cayman Islands in 2019, completed its IPO in 2021, and changed its name to Sunrise New Energy Co., Ltd in 2022[192](index=192&type=chunk)[193](index=193&type=chunk)[200](index=200&type=chunk) - The company's core business shifted in 2022 to manufacturing graphite anode materials, which now represents **99.03% of total revenue** for fiscal year 2024[210](index=210&type=chunk)[214](index=214&type=chunk) - The legacy knowledge sharing business is operated through a VIE structure (SDH), which is controlled via contractual arrangements rather than equity ownership[208](index=208&type=chunk)[337](index=337&type=chunk) [History and Development of the Company](index=43&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) The company shifted its focus from corporate consulting to graphite anode manufacturing in 2022 via a joint venture - The holding company, Sunrise New Energy Co., Ltd., was incorporated in the Cayman Islands on February 22, 2019, and completed its IPO on Nasdaq on February 11, 2021[192](index=192&type=chunk)[193](index=193&type=chunk) - In April 2022, the company entered the graphite anode materials business by forming the Sunrise Guizhou joint venture, in which its subsidiary now holds a **39.35% equity interest**[197](index=197&type=chunk)[198](index=198&type=chunk) - The company changed its name from Global Internet of People, Inc. to Sunrise New Energy Co., Ltd. in August 2022 and adopted a dual-class share structure in February 2024[200](index=200&type=chunk)[201](index=201&type=chunk) [Business Overview](index=44&type=section&id=B.%20Business%20Overview) The company's operations are dominated by its graphite anode business, with the legacy knowledge sharing platform now contributing less than 1% of revenue - The graphite anode business (Sunrise Guizhou) has a **30,000-ton annual capacity** and is constructing a third phase for an additional 20,000 tons[210](index=210&type=chunk)[217](index=217&type=chunk) - In FY2024, the graphite anode business had significant customer concentration, with **one customer accounting for 67% of its total sales**[82](index=82&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) - The legacy knowledge sharing business has declined significantly, with its revenue contribution falling to **approximately 0.97% of the total in FY2024**[214](index=214&type=chunk)[216](index=216&type=chunk)[229](index=229&type=chunk) Revenue Breakdown by Business Segment (USD) | Business Segment | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Graphite anode business** | 64,365,362 | 44,384,004 | 37,580,677 | | **Knowledge sharing and enterprise business** | 632,379 | 666,401 | 544,991 | | **Total revenues, net** | **64,997,741** | **45,050,405** | **38,125,668** | [Organizational Structure](index=69&type=section&id=C.%20Organizational%20Structure) The company uses a holding structure with PRC operations controlled via a joint venture and a VIE for its legacy business - The company does not own any equity in its VIE, SDH, but controls it through a series of contractual arrangements entered into by its wholly-owned subsidiary, GIOP BJ[337](index=337&type=chunk) - Key VIE agreements include an Exclusive Technical and Consulting Services Agreement, Equity Pledge Agreement, Exclusive Option Agreement, and Powers of Attorney to ensure control[338](index=338&type=chunk)[341](index=341&type=chunk)[344](index=344&type=chunk)[347](index=347&type=chunk) [Property, Plants and Equipment](index=70&type=section&id=D.%20Property,%20Plants%20and%20Equipment) The company's primary physical assets are its manufacturing facilities in Guizhou Province, China, owned by its joint venture - Sunrise Guizhou owns its primary manufacturing site in Guizhou Province, China, which covers approximately **294,453 square meters**[351](index=351&type=chunk)[352](index=352&type=chunk) - The VIE leases 567 square meters of office space, with operating lease expenses of **$21,495 in FY2024**, a significant decrease from prior years[350](index=350&type=chunk) [Operating and Financial Review and Prospects](index=71&type=section&id=Item%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) The company analyzes its revenue growth, persistent net losses, negative gross margin, and significant going concern risks - The company has incurred significant recurring losses and has a **working capital deficit of $23.7 million** as of Dec 31, 2024, raising substantial doubt about its ability to continue as a going concern[416](index=416&type=chunk)[419](index=419&type=chunk) Key Financial Results (Years ended Dec 31) | (USD) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Total Revenues** | 64,997,741 | 45,050,405 | 38,125,668 | | **Gross Loss** | (5,797,580) | (12,403,251) | (1,350,378) | | **Loss from Operations** | (16,596,328) | (30,530,005) | (18,809,133) | | **Net Loss** | (17,981,164) | (32,920,724) | (23,124,402) | | **Net Loss Attributable to Shareholders** | (11,776,436) | (24,232,580) | (22,636,622) | | **Loss Per Share (Basic & Diluted)** | (0.48) | (1.08) | (0.98) | Summary of Cash Flows (Years ended Dec 31) | (USD) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Net cash used in operating activities** | (5,352,157) | (7,282,995) | (9,573,401) | | **Net cash provided by (used in) investing activities** | 632,461 | (7,003,035) | (45,609,072) | | **Net cash provided by financing activities** | 10,631,669 | 13,679,267 | 45,760,061 | [Results of Operations](index=72&type=section&id=Results%20of%20Operations) Revenue grew due to higher graphite anode sales volume, but intense price competition led to a gross loss, though the net loss improved - FY2024 revenue increased **44.28% YoY to $65.0M**, driven by a significant increase in graphite anode sales volume from 12,513 tons to 28,221 tons[362](index=362&type=chunk)[364](index=364&type=chunk) - The average selling price of graphite anode materials **decreased by 34.35%** in 2024 due to industry overcapacity, contributing to a gross loss for the segment[364](index=364&type=chunk)[371](index=371&type=chunk) - Total operating expenses **decreased by 40.43%** in FY2024, mainly due to lower G&A costs and the non-recurrence of a prior-year intangible asset impairment[372](index=372&type=chunk)[375](index=375&type=chunk)[377](index=377&type=chunk) - **Net loss improved to $18.0M** in FY2024 from $32.9M in FY2023, reflecting higher revenue and lower operating expenses[386](index=386&type=chunk) [Liquidity and Capital Resources](index=81&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces significant liquidity challenges and going concern doubts due to recurring losses and a working capital deficit - The company incurred a **net loss of $18.0M** and had a **working capital deficit of $23.7M** as of Dec 31, 2024, raising substantial doubt about its ability to continue as a going concern[416](index=416&type=chunk) - As of Dec 31, 2024, the company was in **default on covenants for loans totaling over $27.7M**, but has since obtained waivers or has not faced demands for accelerated repayment[417](index=417&type=chunk)[418](index=418&type=chunk) - Subsequent to year-end, the company secured new financing, including a bank loan of **~$41.1M** and a capital increase agreement for **~$27.4M**[422](index=422&type=chunk)[424](index=424&type=chunk) - As of Dec 31, 2024, **94.93% of the company's cash** and equivalents were held in the PRC and denominated in RMB[428](index=428&type=chunk)[429](index=429&type=chunk) [Directors, Senior Management and Employees](index=87&type=section&id=Item%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, compensation, board structure, and employee base, highlighting the CEO's controlling voting power - The board of directors consists of five members: Haiping Hu (CEO & Chairman), Chao Liu (CFO & Director), and three independent directors[459](index=459&type=chunk)[460](index=460&type=chunk) - The company has a 2022 Share Incentive Plan and a 2024 Share Incentive Plan authorizing a combined **6,292,200 Class A Ordinary Shares**[470](index=470&type=chunk)[479](index=479&type=chunk) - As of April 30, 2025, the company had **317 full-time employees**, with 300 at the Sunrise Guizhou graphite anode business[499](index=499&type=chunk)[500](index=500&type=chunk) - CEO and Chairman Haiping Hu beneficially owns 31.96% of total ordinary shares, representing approximately **87.90% of the aggregate voting power**[505](index=505&type=chunk) FY2024 Executive and Director Compensation | Name | Position | Total Compensation (US$) | | :--- | :--- | :--- | | Haiping Hu | CEO, Chairman | 675,060 | | Chao Liu | CFO, Director | 94,744 | | Jian Pei | Independent Director | 16,522 | | Xiang Luo | Independent Director | 16,522 | | Xin Zhang | Independent Director | - | [Major Shareholders and Related Party Transactions](index=94&type=section&id=Item%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) The company engages in extensive related party transactions, primarily with entities controlled by its CEO, who is the controlling shareholder - The company has numerous transactions with related parties controlled by CEO Haiping Hu, including Zhuhai Investment, Bally Corp., and Shanghai Huiyang[510](index=510&type=chunk) - CEO Haiping Hu and his spouse have provided personal guarantees for numerous financing arrangements, including lines of credit and bank loans totaling tens of millions of dollars[520](index=520&type=chunk)[522](index=522&type=chunk)[527](index=527&type=chunk) Due to Related Parties (As of Dec 31) | (USD) | 2024 | 2023 | | :--- | :--- | :--- | | Zhuhai Investment (controlled by CEO) | 3,442,663 | 2,183,911 | | Shanghai Huiyang (controlled by CEO's family) | 235,001 | 800,785 | | **Total Due to Related Parties** | **4,196,805** | **4,464,165** | [Financial Information](index=97&type=section&id=Item%208.%20FINANCIAL%20INFORMATION) The company reports no material legal proceedings and does not intend to pay dividends, retaining earnings for business expansion - The company is not currently involved in any material legal or administrative proceedings[533](index=533&type=chunk) - The company has no present plan to pay cash dividends and intends to retain future earnings to finance business expansion[534](index=534&type=chunk) [Additional Information](index=98&type=section&id=Item%2010.%20ADDITIONAL%20INFORMATION) This section covers the company's corporate structure, share capital, and tax considerations in the Cayman Islands, PRC, and U.S - The company's authorized share capital is divided into **3.5 billion Class A Ordinary Shares** (1 vote) and **1.5 billion Class B Ordinary Shares** (20 votes)[547](index=547&type=chunk) - The Cayman Islands levies no corporate income tax, and the company has received a 20-year tax exemption certificate[550](index=550&type=chunk)[552](index=552&type=chunk) - In the PRC, the company is subject to a standard **25% Enterprise Income Tax**, and dividends from PRC subsidiaries are subject to a 10% withholding tax[553](index=553&type=chunk)[847](index=847&type=chunk) - The company does not expect to be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes for the current taxable year[571](index=571&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=105&type=section&id=Item%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to interest rate, credit, liquidity, and foreign exchange risks - The company faces interest rate risk from its bank loans, credit risk from customer concentration, and **significant liquidity risk** due to its financial condition[581](index=581&type=chunk)[582](index=582&type=chunk)[583](index=583&type=chunk) - Significant foreign exchange risk exists as almost all revenues and assets are in RMB, while financial statements are reported in USD[584](index=584&type=chunk) PART II [Material Modifications to the Rights of Security Holders and Use of Proceeds](index=106&type=section&id=Item%2014.%20MATERIAL%20MODIFICATIONS%20TO%20THE%20RIGHTS%20OF%20SECURITY%20HOLDERS%20AND%20USE%20OF%20PROCEEDS) Shareholder rights were modified via a share re-designation, and proceeds from the 2021 IPO have been partially invested - In February 2024, shareholders approved the re-designation of Ordinary Shares into **Class A (1 vote) and Class B (20 votes) Ordinary Shares**[591](index=591&type=chunk) - From its 2021 IPO, the company received net proceeds of **$24.61 million**, of which **$10.76 million** has been invested as capital into the Sunrise Guizhou joint venture[593](index=593&type=chunk) [Controls and Procedures](index=106&type=section&id=Item%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls were not effective due to several material weaknesses in internal control over financial reporting - Management concluded that **disclosure controls and procedures were not effective** as of December 31, 2024[595](index=595&type=chunk) - **Material weaknesses** in internal control were identified, including a lack of formal policies, insufficient staff with U.S. GAAP knowledge, and inadequate access restrictions[597](index=597&type=chunk) - Remediation efforts include hiring more qualified accounting personnel, implementing U.S. GAAP training, and preparing a comprehensive accounting policies manual[598](index=598&type=chunk) [Corporate Governance and Other Matters](index=107&type=section&id=Item%2016.%20Corporate%20Governance%20and%20Other%20Matters) This section covers governance topics, including a change in accountant and reliance on home country practices in lieu of certain Nasdaq rules - The company changed its independent registered public accounting firm on March 3, 2025, appointing **Wei, Wei & Co., LLP**[610](index=610&type=chunk) - As a foreign private issuer, the company follows Cayman Islands home country practice in lieu of certain Nasdaq listing rules, including those for shareholder approval[613](index=613&type=chunk)[615](index=615&type=chunk)[616](index=616&type=chunk) - The company has established a cybersecurity risk management process and reports that no incidents have materially affected the business to date[621](index=621&type=chunk) Principal Accountant Fees (USD) | Service | 2024 | 2023 | | :--- | :--- | :--- | | Audit fees | 322,700 | 381,100 | | **Total** | **322,700** | **381,100** | PART III [Financial Statements](index=110&type=section&id=Item%2018.%20FINANCIAL%20STATEMENTS) The audited financial statements include a 'Going Concern' uncertainty from the auditor due to the company's significant financial challenges - The independent auditor's report includes a **'Going Concern' paragraph**, citing significant working capital deficiency, recurring operating losses, and negative cash flows[637](index=637&type=chunk)[645](index=645&type=chunk) - The company adopted ASC 326 for credit losses on January 1, 2023, with an allowance for credit losses on accounts receivable of **$7.9 million** as of December 31, 2024[716](index=716&type=chunk)[717](index=717&type=chunk) - The company recorded significant impairment charges on inventories, totaling **$3.96 million in 2024** and **$7.24 million in 2023**[721](index=721&type=chunk) Consolidated Balance Sheet Highlights (As of Dec 31) | (USD) | 2024 | 2023 | | :--- | :--- | :--- | | **Total Current Assets** | 63,010,873 | 35,815,895 | | **Total Assets** | 143,023,032 | 120,504,530 | | **Total Current Liabilities** | 86,756,609 | 63,488,418 | | **Total Liabilities** | 115,728,359 | 75,172,766 | | **Total Equity** | 27,294,673 | 10,788,578 |

Core Insights - Sunrise New Energy Co., Ltd. has received approval for a project focused on sodium-ion battery hard carbon anode materials, securing approximately $960,000 in funding from the Guizhou Provincial Department of Science and Technology [1][4] Company Overview - Sunrise is a leading innovator in battery materials, particularly in sodium-ion and lithium-ion battery technologies [1][5] - The company operates a manufacturing facility in Guizhou Province with a production capacity of 50,000 tons, utilizing renewable energy sources to minimize costs and environmental impact [5] Industry Context - Sodium-ion batteries are recognized for their cost-efficiency and performance in low temperatures, making them suitable for large-scale energy storage and electric vehicles, especially in colder regions [2] - The commercialization of sodium-ion batteries has faced challenges due to the lack of suitable anode materials, which Sunrise aims to address with its proprietary hard carbon anode technology [2][3] Technological Advancements - Sunrise's hard carbon anode technology boasts an initial Coulombic efficiency of ≥90% and a capacity retention rate of ≥85% after 1,000 cycles, which are significant improvements for sodium-ion battery development [3]

Unaudited Condensed Consolidated Financial Statements [Unaudited Condensed Consolidated Balance Sheets](index=1&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to **$141.6M**, liabilities to **$102.6M**, and equity to **$38.9M**, primarily from reclassifying non-controlling interests Condensed Consolidated Balance Sheet Summary (in USD) | Balance Sheet Item | June 30, 2024 | December 31, 2023 | Change | | :--- | :--- | :--- | :--- | | **Total Current Assets** | $61,079,455 | $35,815,895 | +70.5% | | Cash and cash equivalents | $15,235,345 | $1,395,945 | +991.4% | | Inventories, net | $25,273,067 | $15,843,546 | +59.5% | | **Total Assets** | **$141,563,806** | **$120,504,530** | **+17.5%** | | **Total Current Liabilities** | $70,584,403 | $63,488,418 | +11.2% | | Accounts payable | $44,342,437 | $33,872,581 | +30.9% | | Long-term loan, non-current | $27,007,382 | $3,507,092 | +669.8% | | **Total Liabilities** | **$102,613,979** | **$75,172,766** | **+36.5%** | | Redeemable non-controlling interest | - | $34,543,186 | -100.0% | | **Total Equity** | **$38,949,827** | **$10,788,578** | **+261.0%** | [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Revenues rose **7.6%** to **$22.3M**, **gross profit** plunged **97.2%** to **$17K**, resulting in a **$6.0M net loss** Statement of Operations Summary (in USD) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenues | $22,283,171 | $20,708,491 | +7.6% | | Total Cost of Revenues | $22,265,782 | $20,089,164 | +10.8% | | **Gross Profit** | **$17,389** | **$619,327** | **-97.2%** | | Total Operating Expenses | $5,422,092 | $6,047,385 | -10.3% | | Loss from Operations | ($5,404,703) | ($5,428,058) | -0.4% | | **Net Loss** | **($6,040,235)** | **($5,827,309)** | +3.7% | | Net Loss Attributable to Shareholders | ($4,451,462) | ($4,709,149) | -5.5% | | **Loss Per Share (Basic & Diluted)** | **($0.21)** | **($0.21)** | **0.0%** | [Unaudited Condensed Consolidated Statements of Changes in Equity](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity increased to **$38.9M**, primarily from reclassifying **$35.5M** redeemable non-controlling interests to permanent equity - The primary driver for the increase in **total equity** was the extinguishment of **redeemable non-controlling interests**, which added **$35.5 million** to non-controlling interests[7](index=7&type=chunk) - The company's **accumulated deficit** worsened, increasing from **($30.5 million)** to **($34.9 million)** due to the **net loss** of **$4.45 million** attributable to ordinary shareholders during the period[7](index=7&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash and equivalents increased by **$13.0M**, fueled by **$18.1M** from financing despite **$6.9M** used in operations Cash Flow Summary (in USD) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($6,949,921) | ($4,287,079) | | Net cash provided by (used in) investing activities | $2,045,759 | ($3,976,396) | | Net cash provided by financing activities | $18,067,381 | $10,957,860) | | **Net increase in cash and cash equivalents** | **$12,997,173** | **$2,411,448** | - The company raised **$27.8 million** from new **long-term loans**, which was the main source of financing cash flow[11](index=11&type=chunk) - A significant use of cash in operations was a **$12.7 million** increase in **inventories**[11](index=11&type=chunk) Notes to the Unaudited Condensed Consolidated Financial Statements [Note 1 – Organization and Business Description](index=6&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20BUSINESS%20DESCRIPTION) EPOW, a Cayman Islands holding company, manufactures lithium battery materials in PRC and operates a VIE for knowledge sharing - The company's **primary business** is manufacturing lithium battery materials for clients in the PRC through its subsidiary, Sunrise Guizhou[19](index=19&type=chunk) - The company utilizes a **VIE structure** for its peer-to-peer knowledge sharing and enterprise services business, where it controls the entity (SDH) through contractual arrangements rather than equity ownership[20](index=20&type=chunk)[21](index=21&type=chunk) - The company acknowledges risks related to the **VIE structure**, as PRC government actions could negatively affect its ability to control the VIE and consolidate its financial results[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=12&type=section&id=NOTE%202%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Financial statements follow U.S. GAAP, recognizing graphite anode revenue upon delivery, with significant customer concentration - **Revenue** from the **primary business**, sales of graphite anode materials, is recognized at a point in time when the customer accepts the goods, generally at delivery[94](index=94&type=chunk) - The company has two operating segments: **graphite anode business** and **peer-to-peer knowledge sharing and enterprise business**[258](index=258&type=chunk) - There is significant **customer concentration risk**, with one client accounting for **59%** of **total revenues** for the six months ended June 30, 2024[128](index=128&type=chunk) [Note 3 – Going Concern](index=24&type=section&id=NOTE%203%20%E2%80%93%20GOING%20CONCERN) Recurring **net losses**, negative **operating cash flow**, and a **working capital deficit** raise substantial doubt, though a loan waiver was obtained - Adverse conditions including a **net loss** of **$6.0 million**, **net cash used in operations** of **$6.9 million**, and a **working capital deficit** of **$9.5 million** raise substantial doubt about the company's ability to continue as a going concern[138](index=138&type=chunk) - The company was in **default** of **financial covenants** on a **long-term loan** agreement with China Construction Bank (CCB) as of June 30, 2024, specifically for failing to maintain profitability and exceeding the asset-liability ratio limit[139](index=139&type=chunk)[193](index=193&type=chunk) - A written **waiver** for the **loan default** was obtained from CCB on September 30, 2024, preventing accelerated repayment[139](index=139&type=chunk) [Notes 16 & 17 – Debt and Financing](index=33&type=section&id=NOTE%2016%20%26%2017%20%E2%80%93%20DEBT%20AND%20FINANCING) Total loans reached **$32.3M**, largely from new CCB **long-term loans**, with a covenant default later waived - The company entered into several **sale-and-leaseback contracts** which are accounted for as debt financing arrangements, with a **total outstanding balance** of **$5.0 million** as of June 30, 2024[184](index=184&type=chunk) - In H1 2024, the company obtained two new **long-term loans** from China Construction Bank totaling RMB **200 million** (approx. **$27.3 million**), significantly increasing its **long-term debt**[187](index=187&type=chunk)[191](index=191&type=chunk) - The company was not in compliance with **financial covenants** for the CCB loan, including profitability and asset-liability ratio requirements, as of June 30, 2024[193](index=193&type=chunk) [Note 19 – Related Party Transactions](index=38&type=section&id=NOTE%2019%20%E2%80%93%20RELATED%20PARTY%20BALANCE%20AND%20TRANSACTIONS) Extensive related party transactions exist, with CEO Mr. Haiping Hu providing **personal guarantees** for substantial company debt - As of June 30, 2024, the company had **$5.8 million** due to related parties, with the largest balance of **$4.0 million** owed to Zhuhai Investment, a company controlled by CEO Mr. Haiping Hu[213](index=213&type=chunk) - CEO Mr. Haiping Hu and his spouse provide **personal guarantees** for numerous financing arrangements, including credit facilities with Everbright Bank, Post Bank, CCB, and various **sales-and-leaseback financing contracts**[218](index=218&type=chunk)[219](index=219&type=chunk)[224](index=224&type=chunk) [Note 20 – Redeemable Non-Controlling Interests](index=41&type=section&id=NOTE%2020%20%E2%80%93%20REDEEMABLE%20NON-CONTROLLING%20INTERESTS) An amendment reclassified **$35.5M** of **redeemable non-controlling interests** to **permanent equity**, boosting **total equity** - The **redeemable non-controlling interest** was related to a RMB **200 million** investment by New Kinetic Partnership in the subsidiary Sunrise Guizhou, which was redeemable upon certain events like failure to IPO[226](index=226&type=chunk)[227](index=227&type=chunk) - On June 18, 2024, the terms were amended to remove key redemption rights, leading to the **reclassification** of the equity interest from mezzanine to **permanent equity**[230](index=230&type=chunk) Movement of Redeemable Non-Controlling Interests (in USD) | Description | Six Months Ended June 30, 2024 | | :--- | :--- | | Balance at beginning of period | $34,543,186 | | Accretion to redemption value | $1,792,027 | | **Reclassification to permanent equity** | **($35,527,114)** | | Foreign exchange effect | ($808,099) | | **Balance at end of period** | **$0** | [Note 21 – Shareholders' Equity](index=42&type=section&id=NOTE%2021%20%E2%80%93%20SHAREHOLDERS%27%20EQUITY) Shares re-designated into Class A/B; a 1-for-10 reverse stock split approved; **$607K** share-based compensation recorded - In February 2024, the company re-designated its authorized share capital into **3.5 billion** Class A ordinary shares and **1.5 billion** Class B ordinary shares. Class B shares carry **20 votes** each, while Class A shares carry **1 vote** each[236](index=236&type=chunk)[238](index=238&type=chunk) - Shareholders approved a **1-for-10** share consolidation (reverse stock split) in September 2024, but it is not yet effective as of the report date[240](index=240&type=chunk) - **Share-based compensation expense** was **$607,742** for the six months ended June 30, 2024, down from **$1,348,581** in the prior year period[245](index=245&type=chunk) [Note 24 – Segment Reporting](index=46&type=section&id=NOTE%2024%20%E2%80%93%20SEGMENT%20REPORTING) The **graphite anode business** generated **$21.6M** revenue but incurred a **gross loss**, while **knowledge sharing** was profitable Segment Performance (in USD) | Segment | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | | **Graphite anode business** | Revenues | $21,561,285 | $20,467,706 | | | **Gross Profit (Loss)** | **($423,467)** | **$595,768** | | **Peer-to-peer knowledge sharing** | Revenues | $721,886 | $240,785 | | | **Gross Profit** | **$440,856** | **$23,559** | - The company's core **graphite anode business** became unprofitable at the **gross margin level** in the first half of 2024, indicating severe pressure on pricing or costs[260](index=260&type=chunk) [Note 26 – Condensed Financial Information of the Parent Company](index=47&type=section&id=NOTE%2026%20%E2%80%93%20CONDENSED%20FINANCIAL%20INFORMATION%20OF%20THE%20PARENT%20COMPANY) The parent company, a holding entity, holds **investments in subsidiaries and VIE**, reporting a **$4.5M net loss** Parent Company Condensed Balance Sheet (in USD) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $2,463,486 | $3,030,688 | | Investment in subsidiaries and VIE | $3,440,152 | $6,710,750 | | **Total Assets** | **$5,903,638** | **$9,741,438** | | Total Liabilities | $37,743 | $31,824 | | **Total Equity** | **$5,865,895** | **$9,709,614** | - The parent company's **net loss** of **$4.45 million** for H1 2024 includes **$3.27 million** from its **equity in the losses** of its subsidiaries and VIE[273](index=273&type=chunk)

Core Viewpoint - Sunrise New Energy Co., Ltd. has reported significant sales growth in the electric vehicle and energy storage sectors, with a 449.8% increase in sales volume in October 2024 compared to October 2023, and a cumulative sales increase of 131.1% from January to October 2024 [1][2]. Sales Performance - In October 2024, the company achieved a sales volume of 3,419 tons, reflecting a remarkable growth rate [1]. - Cumulative sales from January to October 2024 reached 22,476 tons, indicating a substantial increase compared to the same period in 2023 [1]. Partnerships and Market Position - The surge in orders is attributed to partnerships with leading battery manufacturers, including CATL, HiTHIUM Energy Storage, and Pylon Technologies, which are key players in the EV and energy storage markets [2]. - CATL holds approximately 40% of the global market share in the EV and energy storage battery sector [2]. Company Overview - Sunrise New Energy is headquartered in Zibo, Shandong Province, China, and specializes in manufacturing graphite anode material for lithium-ion batteries [4]. - The company has a manufacturing facility with a production capacity of 50,000 tons located in Guizhou Province, utilizing renewable energy sources to minimize environmental impact [4]. - The management team consists of industry experts with extensive experience in the graphite anode sector [4].

Company Overview - Sunrise New Energy Co., Ltd. is headquartered in Zibo, Shandong Province, China, and is engaged in the manufacturing and sale of graphite anode material for lithium-ion batteries [3] - The company operates a joint venture that has completed a manufacturing facility in Guizhou Province with a production capacity of 50,000 tons, utilizing inexpensive renewable energy [3] - The management team consists of experts with extensive experience in the graphite anode industry, and the company also runs a knowledge-sharing platform in China [3] Project Announcement - Sunrise announced that its project on "Key Technologies and Engineering for New Silicon-Carbon Anode Materials in Lithium-Ion Batteries" received approval from the Guizhou Provincial Department of Science and Technology [1] - The project was awarded a special technology fund of USD 1.04 million after multiple evaluations [1] - The project features advanced technology with a specific capacity of ≥1900mAh/g, a first coulomb efficiency of ≥91%, and a cycle life of 1000 cycles with a capacity retention rate of ≥80%, positioning it at the forefront of global battery technology [1] CEO Statement - The CEO of Sunrise, Mr. Haiping Hu, emphasized that this project is unique in Guizhou Province, being the only one led by an anode materials company to receive such funding [2] - He highlighted the company's commitment to research and production of cutting-edge anode materials for lithium batteries, aiming to create value and deliver strong returns to shareholders [2] - The achievement reflects the company's dedication and expertise in advancing battery technology [2]

Company Overview - Sunrise New Energy Co., Ltd. is a leading manufacturer of lithium-ion battery anode materials, holding over 70 patents globally [1][2] - The company offers a diverse range of anode materials, including synthetic graphite, natural graphite, composite graphite, soft carbon, hard carbon, and silicon-carbon, utilized in electronics, electric vehicles, and energy storage [1][2] - Sunrise has established strong R&D partnerships with multiple industry-leading enterprises across the value chain [1] Recent Performance - In the first half of 2024, Sunrise sold 10,400 tons of products, marking a 132% increase compared to the same period last year [2] - The company's production capacity is designed to meet the growing demand for high-end anode materials from its contracted leading enterprises [2] Technological and Environmental Commitment - The manufacturing facility in Guizhou Province has a production capacity of 50,000 tons and operates on inexpensive electricity from renewable sources, positioning Sunrise as a low-cost and environmentally friendly producer [3] - The company emphasizes technological innovation and industrialization, contributing positively to the economy of Guizhou Province [2]

Company Overview - Sunrise New Energy Co., Ltd. is headquartered in Zibo, Shandong Province, China, and is engaged in the manufacturing and sale of graphite anode material for lithium-ion batteries [3] - The company operates a joint venture that has completed a manufacturing facility in Guizhou Province with a production capacity of 50,000 tons, utilizing inexpensive electricity from renewable sources [3] - The management team consists of experts with extensive experience and a strong track record in the graphite anode industry [3] Financial Developments - Sunrise New Energy has secured an additional $13.75 million low-interest loan from China Construction Bank, bringing the total loans received from CCB in 2024 to $27.51 million [1] - The new funds will enhance the company's liquidity, allowing for quicker delivery of orders from major global lithium battery manufacturers such as CATL, BYD, and HiTHIUM [1] - The CEO of Sunrise New Energy, Mr. Haiping Hu, emphasized that this bank loan underscores the company's strong reputation and provides significant low-interest capital without diluting shareholder equity, enabling the company to take on more orders and increase revenue and profitability [2]