CBAK Energy(CBAT) - 2024 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and comprehensive notes for the periods ended September 30, 2024 Item 1. Financial Statements. This section presents the unaudited condensed consolidated financial statements and comprehensive notes for the periods ended September 30, 2024 Condensed Consolidated Balance Sheets | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | Change (US$) | % Change | | :-------------------------------- | :----------------- | :----------------- | :----------- | :------- | | Total Current Assets | 128,423,485 | 130,460,117 | 2,036,632 | 1.59% | | Total Assets | 281,155,260 | 293,477,354 | 12,322,094 | 4.38% | | Total Current Liabilities | 160,495,555 | 154,221,243 | (6,274,312) | -3.91% | | Total Liabilities | 167,696,919 | 163,094,240 | (4,602,679) | -2.74% | | Total Shareholders' Equity | 112,824,305 | 131,166,059 | 18,341,754 | 16.26% | - The company's total assets increased by 4.38% from December 31, 2023, to September 30, 2024, primarily driven by an increase in cash and cash equivalents and short-term deposits. Total liabilities decreased by 2.74%, while total shareholders' equity increased by 16.26%[6][7] Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) | Metric (US$) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Revenues | 63,441,109 | 44,628,241 | 148,258,680 | 151,243,718 | | Gross Profit | 12,248,578 | 6,954,557 | 19,038,964 | 38,463,630 | | Operating Income (Loss) | 5,289,094 | (827,873) | (1,364,846) | 15,382,590 | | Net Income (Loss) | 5,764,148 | (685,539) | 620,439 | 14,910,120 | | Net Income Attributable to CBAK Energy Technology, Inc. | 6,334,792 | 17,647 | 2,319,447 | 16,299,559 | | Basic EPS | 0.07 | 0.00 | 0.03 | 0.18 | | Diluted EPS | 0.07 | 0.00 | 0.03 | 0.18 | - For the three months ended September 30, 2024, net revenues decreased by 30% YoY, leading to a significant drop in gross profit and a shift from operating income to operating loss. Net income attributable to shareholders also saw a substantial decline. However, for the nine months ended September 30, 2024, net revenues slightly increased by 2% YoY, gross profit more than doubled, and the company turned an operating loss into a significant operating income, resulting in a substantial increase in net income attributable to shareholders[9] Condensed Consolidated Statements of Changes in Shareholders' Equity | Metric (US$) | Balance as of Jan 1, 2024 | Net Income (Loss) | Share-based Compensation | Common Stock Issued | Foreign Currency Translation Adjustment | Balance as of Sep 30, 2024 | | :--------------------------------------- | :------------------------ | :---------------- | :----------------------- | :------------------ | :-------------------------------------- | :------------------------- | | Common Stock Issued | 90,063 | - | - | 20 | - | 90,083 | | Donated Shares | 14,101,689 | - | - | - | - | 14,101,689 | | Additional Paid-in Capital | 247,465,817 | - | 266,815 | (20) | - | 247,732,612 | | Statutory Reserves | 1,230,511 | - | - | - | - | 1,230,511 | | Accumulated Deficit | (134,395,762) | 16,299,559 | - | - | - | (118,096,203) | | Accumulated Other Comprehensive Loss | (11,601,403) | - | - | - | 1,747,838 | (9,826,023) | | Total Shareholders' Equity | 113,458,341 | 14,910,120 | 266,815 | - | 1,747,838 | 130,383,114 | - For the nine months ended September 30, 2024, total equity increased significantly, primarily driven by net income and positive foreign currency translation adjustments. Share-based compensation also contributed to the increase in additional paid-in capital[18][19] Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (US$) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :----------------------------------------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | 20,744,957 | 30,078,220 | | Net cash used in investing activities | (28,737,354) | (20,111,730) | | Net cash provided by (used in) financing activities | 18,525,022 | (21,462,580) | | Effect of exchange rate changes on cash and cash equivalents and restricted cash | (2,200,580) | 537,582 | | Net increase (decrease) in cash and cash equivalents and restricted cash | 8,332,045 | (10,958,508) | | Cash and cash equivalents and restricted cash at the end of period | 45,688,121 | 47,864,308 | - Net cash provided by operating activities increased by 44.9% for the nine months ended September 30, 2024, compared to the same period in 2023. However, the company shifted from net cash provided by financing activities in 2023 to net cash used in financing activities in 2024, primarily due to higher repayments of bank borrowings and placement of term deposits. Net cash used in investing activities decreased by 30% YoY[20] Notes to the Condensed Consolidated Financial Statements 1. Principal Activities, Basis of Presentation and Organization - CBAK Energy Technology, Inc. (formerly China BAK Battery, Inc.) manufactures and distributes high-power lithium-ion rechargeable batteries for various applications, including cordless power tools, electric vehicles, and energy storage. The company's common stock trades on the Nasdaq Capital Market under the symbol 'CBAT'[21][24] - The company's financial statements are prepared under US GAAP, requiring management estimates and assumptions. Several new accounting standards (ASU 2021-08, ASU 2023-01, ASU 2023-02) were adopted on January 1, 2024, but did not have a material impact[58][59][77][78][79][80] - As of September 30, 2024, the Company had $25.7 million in bank loans and approximately $128.5 million in other current liabilities. The company is expanding manufacturing capacity in Dalian, Nanjing, and Zhejiang, requiring additional funding, and plans to raise funds through bank borrowings and equity financing[64][65] - The company has an accumulated deficit and significant short-term debt, raising substantial doubt about its ability to continue as a going concern. Plans include improving profitability and obtaining additional debt/shareholder financing[69] 2. Pledged deposits | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :--------------- | :----------------- | :----------------- | | Pledged Deposits | 54,179,549 | 37,415,946 | - Pledged deposits decreased from $54.18 million as of December 31, 2023, to $37.42 million as of September 30, 2024, primarily consisting of deposits with banks for bills payable[6][85] 3. Short-term deposits | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :----------------- | :----------------- | :----------------- | | Short-term Deposits | - | 13,788,170 | - Short-term deposits, with maturities of six months, increased from nil as of December 31, 2023, to $13.79 million as of September 30, 2024. These deposits are placed in reputable financial institutions in the PRC, and interest earned is recorded as finance income[6][86] 4. Trade and Bills Receivable, net | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :-------------------------- | :----------------- | :----------------- | | Trade Receivable | 29,368,296 | 27,619,823 | | Less: Allowance for Credit Losses | (3,198,249) | (2,921,714) | | Bills Receivable | 2,483,000 | 10,212,675 | | Total Trade and Bills Receivable, net | 28,653,047 | 34,910,784 | - Net trade and bills receivable increased by 21.8% from $28.65 million to $34.91 million. This was driven by a significant increase in bills receivable, while trade receivable slightly decreased and the allowance for credit losses also decreased[87] 5. Inventories | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :--------------- | :----------------- | :----------------- | | Raw Materials | 3,779,414 | 3,240,516 | | Work in Progress | 9,525,568 | 4,596,060 | | Finished Goods | 20,108,440 | 16,102,349 | | Total Inventories | 33,413,422 | 23,938,925 | - Total inventories decreased by 28.3% from $33.41 million to $23.94 million, with significant reductions in work in progress and finished goods. Write-downs of obsolete inventories charged to cost of revenues increased from $2.07 million in 9M 2023 to $3.36 million in 9M 2024[89][90] 6. Prepayments and Other Receivables | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :-------------------------- | :----------------- | :----------------- | | Value Added Tax Recoverable | 5,248,210 | 3,386,543 | | Prepayments to Suppliers | 1,341,596 | 5,412,119 | | Interest Receivable | - | 224,129 | | Total Prepayments and Other Receivables, net | 7,459,254 | 9,950,350 | - Net prepayments and other receivables increased by 33.4% from $7.46 million to $9.95 million, primarily due to a substantial increase in prepayments to suppliers and the emergence of interest receivable[91] 7. Property, Plant and Equipment, net | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :-------------------------- | :----------------- | :----------------- | | Buildings | 45,843,428 | 46,377,779 | | Machinery and Equipment | 83,625,645 | 87,744,432 | | Accumulated Depreciation | (30,407,634) | (38,784,168) | | Carrying Amount | 91,628,832 | 89,365,457 | - The net carrying amount of property, plant, and equipment decreased by 2.47% from $91.63 million to $89.37 million. Depreciation expense for the nine months ended September 30, 2024, was $5.92 million, a decrease from $6.74 million in the same period of 2023. No impairment was recognized in either period[93][94][95] 8. Construction in Progress | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :-------------------------- | :----------------- | :----------------- | | Construction in Progress | 24,876,463 | 28,164,152 | | Prepayment for Acquisition of PP&E | 12,921,399 | 10,829,466 | | Carrying Amount | 37,797,862 | 38,993,618 | - Construction in progress increased by 3.16% from $37.80 million to $38.99 million, primarily due to capital expenditures for facilities and production lines of CBAK Power, Nanjing CBAK, and Hitrans. Capitalized interest for the nine months ended September 30, 2024, was $640,938[96][97] 9. Long-term investments, net | Investment Type | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :--------------------------------------- | :----------------- | :----------------- | | Investments in Equity Method Investees | 1,926,611 | 1,690,957 | | Investments in Non-marketable Equity | 638,394 | 645,580 | | Total Long-term Investments, net | 2,565,005 | 2,336,537 | - Total long-term investments decreased by 8.9% from $2.57 million to $2.34 million. The company disposed of its equity interest in Guangxi Guiwu CBAK New Energy Technology Co., Ltd. for $0.3 million, recording a gain of $26,967. An impairment loss of $2.4 million was recorded in 2023 for the investment in Zhejiang Shengyang Renewable Resources Technology Co., Ltd.[100][101][103][104] 10. Lease | Lease Type | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :-------------------------- | :----------------- | :----------------- | | Prepaid Land Use Rights | 11,712,704 | 11,601,078 | | Operating Lease Right-of-Use Assets, net | 1,084,520 | 3,713,242 | | Operating Lease Liability, current | 691,992 | 1,527,829 | | Operating Lease Liability, non-current | 475,302 | 2,683,772 | | Finance Lease Liability, current | 1,643,864 | 762,694 | | Finance Lease Liability, non-current | - | - | - Prepaid land use rights remained stable at $11.6 million. Operating lease right-of-use assets significantly increased from $1.08 million to $3.71 million, reflecting new lease agreements for warehouse, office, factory, and staff quarters spaces. Finance lease liabilities decreased from $1.64 million to $0.76 million[6][111][115][123][124][126] | Lease Expense (US$) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating Lease Cost | 110,057 | 337,405 | 375,804 | 957,144 | | Finance Lease Interest | 4,995 | 20,242 | 11,622 | 60,479 | 11. Intangible Assets, net | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :-------------------------- | :----------------- | :----------------- | | Computer Software at Cost | 139,732 | 158,831 | | Sewage Discharge Permit | 1,715,450 | 1,734,761 | | Accumulated Amortization | (1,013,822) | (1,386,479) | | Carrying Amount | 841,360 | 507,113 | - Net intangible assets decreased by 39.7% from $841,360 to $507,113, primarily due to accumulated amortization. Amortization expenses for the nine months ended September 30, 2024, were $352,481[130][131] 12. Acquisition of subsidiaries - The company completed the acquisition of 81.56% registered equity interests (75.57% paid-up capital) of Hitrans on November 26, 2021, for a total purchase consideration of $24.95 million. This acquisition resulted in the recognition of $1.61 million in goodwill, representing the strategic value and expected synergies[133][139][144] - Goodwill was fully impaired as of December 31, 2022, due to Hitrans' financial performance falling below original expectations, leading to an impairment loss of $1.56 million[145][150] 13. Goodwill | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :--------------- | :----------------- | :----------------- | | Balance | - | - | - Goodwill was fully impaired as of December 31, 2022, and remained at nil as of September 30, 2024. The impairment test in 2022 indicated that the fair value of the Hitrans reporting unit was lower than its carrying value due to underperforming financial results[145][146][150] 14. Deposit paid for acquisition of long-term investments | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :--------------------------------------- | :----------------- | :----------------- | | Investments in Non-marketable Equity | 7,101,492 | 16,500,192 | - Deposits paid for acquisition of long-term investments increased by 132.3% from $7.10 million to $16.50 million. This is primarily related to Nanjing CBAK's agreement to acquire a 5% equity interest in Shenzhen BAK Power Battery Co., Ltd. (BAK SZ) for $35.7 million, with $16.5 million paid as of September 30, 2024[151] 15. Trade and Bills Payable | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :-------------------------- | :----------------- | :----------------- | | Trade Payable | 26,764,807 | 33,866,587 | | Bills Payable – Bank Acceptance Bills | 55,664,768 | 52,812,825 | | Bills Payable – Letter of Credit | - | 2,792,779 | | Total Trade and Bills Payable | 82,429,575 | 89,472,191 | - Total trade and bills payable increased by 8.5% from $82.43 million to $89.47 million. This increase was driven by higher trade payables and the introduction of letter of credit payables, partially offset by a decrease in bank acceptance bills. All bills payable mature within one year and are secured by pledged deposits, short-term deposits, bills receivable, and prepaid land use rights[154][155] 16. Loans | Loan Type | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :-------------------------- | :----------------- | :----------------- | | Short-term Bank Borrowings | 32,587,676 | 25,708,098 | | Other Short-term Loans | 339,552 | 337,147 | | Total Loans | 32,927,228 | 26,045,245 | - Short-term bank borrowings decreased by 21.2% from $32.59 million to $25.71 million. The company actively managed its bank loans, repaying several short-term facilities and securing new ones, with interest rates ranging from 3.0% to 4.6% per annum. Many loans are guaranteed by former CEO Mr. Yunfei Li and his wife, or secured by company assets like land use rights and buildings[156][157][158][159][160][161][162][163][165][166][167][168][169][170][171][172][173][174] | Secured Assets (US$) | Dec 31, 2023 | Sep 30, 2024 | | :------------------- | :----------- | :----------- | | Pledged Deposits | 54,167,834 | 37,374,690 | | Term Deposits | - | 13,788,170 | | Bills Receivables | 281,805 | 2,822,455 | | Right-of-Use Assets | 5,287,708 | 5,223,832 | | Buildings | 9,707,862 | 4,018,644 | | Total Secured Assets | 69,445,209 | 63,227,791 | 17. Accrued Expenses and Other Payables | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :--------------------------------------- | :----------------- | :----------------- | | Construction Costs Payable | 15,571,808 | 9,214,798 | | Equipment Purchase Payable | 13,665,499 | 12,146,810 | | Accrued Staff Costs | 3,386,142 | 4,174,522 | | Customer Deposits | 2,875,131 | 3,130,200 | | Total Accrued Expenses and Other Payables | 41,992,540 | 35,144,908 | - Accrued expenses and other payables decreased by 16.3% from $41.99 million to $35.14 million. This was mainly due to a reduction in construction costs payable and equipment purchase payable, partially offset by an increase in accrued staff costs[185] 18. Balances and Transactions With Related Parties | Related Party Transaction (US$) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :----------------------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Purchase of batteries from Zhengzhou BAK Battery Co., Ltd | 7,554,266 | 24,595 | 11,057,190 | 7,036,768 | | Purchase of materials from Zhejiang Shengyang Renewable Resources Technology Co., Ltd. | 3,778,670 | 1,419,467 | 9,008,190 | 4,792,917 | | Sales of cathode raw materials to Zhengzhou BAK Battery Co., Ltd | 5,822,065 | 5,166,669 | 22,815,451 | 14,183,130 | | Related Party Balance (US$) | Dec 31, 2023 | Sep 30, 2024 | | :----------------------------------------------------------------- | :----------- | :----------- | | Receivables from Shenzhen BAK Power Battery Co., Ltd | 74,946 | 7,580 | | Trade Receivables from Zhengzhou BAK Battery Co., Ltd | 12,441,715 | 4,921,121 | | Prepayments to Zhengzhou BAK Battery Co., Ltd | - | 3,898,336 | | Trade Payables to Zhejiang Shengyang Renewable Resources Technology Co., Ltd. | 3,489,324 | 3,500,853 | - The company engages in significant transactions with related parties, including purchases and sales of batteries and raw materials. Notably, purchases from Zhengzhou BAK Battery Co., Ltd. decreased significantly in Q3 2024, while sales of cathode raw materials to the same entity also decreased year-to-date. Prepayments to Zhengzhou BAK Battery Co., Ltd. for battery purchases emerged as a new significant balance[192][195][198] 19. Deferred Government Grants | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :-------------------------- | :----------------- | :----------------- | | Total Government Grants | 6,578,863 | 6,278,736 | | Less: Current Portion | (375,375) | (499,861) | | Non-current Portion | 6,203,488 | 5,778,875 | - Total deferred government grants decreased by 4.56% from $6.58 million to $6.28 million. These grants are recognized over the period necessary to match them with the costs they are intended to compensate, such as land use rights, construction works, and equipment purchases for new manufacturing sites and production lines[199][201][202][203][204] 20. Product Warranty Provisions | Metric | Dec 31, 2023 (US$) | Sep 30, 2024 (US$) | | :-------------------------- | :----------------- | :----------------- | | Balance at Beginning of Year | 476,828 | 546,444 | | Warranty Costs Incurred | (16,359) | (270,737) | | Provision for the Year | 66,182 | 148,627 | | Balance at End of Year | 546,444 | 427,449 | | Less: Current Portion | (23,870) | (17,099) | | Non-current Portion | 522,574 | 410,350 | - Product warranty provisions decreased by 21.8% from $546,444 to $427,449. Warranty costs incurred significantly increased from $16,359 to $270,737, while the provision for the year also increased from $66,182 to $148,627[207] 21. Income Taxes, Deferred Tax Assets and Deferred Tax Liabilities | Income Tax (US$) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | PRC Income Tax (Current) | - | 339,287 | - | 2,188,800 | | PRC Income Tax (Deferred) | (305,431) | - | (1,015,626) | - | | Total Income Tax Credit (Expenses) | (305,431) | 339,287 | (1,015,626) | 2,188,800 | - The company recorded income tax expenses of $2.19 million for the nine months ended September 30, 2024, compared to a tax credit of $1.02 million in the same period of 2023. Several PRC subsidiaries (CBAK Power, Hitrans, Nanjing CBAK) benefit from a preferential tax rate of 15% as 'High-new technology enterprises'[208][214] | Deferred Tax Assets (US$) | Dec 31, 2023 | Sep 30, 2024 | | :--------------------------------------- | :----------- | :----------- | | Net Operating Loss Carried Forward | 36,103,945 | 38,096,824 | | Valuation Allowance | (43,645,828) | (43,730,575) | | Deferred Tax Assets, Non-current | 203,240 | - | - The company's U.S. entity has significant net operating loss carryforwards ($103.58 million), and PRC subsidiaries have $73.32 million. A full valuation allowance is provided against these potential tax benefits due to management's belief that future operating profits are unlikely in the foreseeable future[218] 22. Statutory reserves - PRC subsidiaries are required to maintain a statutory reserve from annual profits, typically not less than 10%, up to 50% of registered capital. As of September 30, 2024, $1,230,511 in PRC statutory reserves are restricted for distribution[221][222] 23. Fair Value of Financial Instruments - The company uses a fair value hierarchy (Level 1, 2, 3) for financial instruments. The fair value of warrants and share options is determined using the Binomial Model with Level 3 inputs. Carrying amounts of most financial assets and liabilities approximate their fair values due to short maturity or market interest rates[223][224][225][227][228] 24. Employee Benefit Plan | Employee Benefits Expensed (US$) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Employee Benefits Expensed | 499,734 | 1,502,916 | 1,664,263 | 4,074,966 | - Total employee benefits expensed increased significantly, by 200.7% for the three months and 144.8% for the nine months ended September 30, 2024, reflecting participation in government-mandated defined contribution plans in the PRC[229] 25. Share-based Compensation | Share-based Compensation Expense (US$) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Restricted Share Units (Oct 2020 Grant) | - | - | 6,529 | - | | Restricted Share Units & Options (Apr 2023 Grant) | 96,301 | 51,081 | 919,135 | 238,190 | | Restricted Share Units & Options (Aug 2023 Grant) | 34,169 | 6,968 | 34,169 | 28,625 | - The company granted restricted share units and options under its 2015 Equity Incentive Plan. As of September 30, 2024, there was $1,328,299 in unrecognized stock-based compensation related to the November 2021 options grant and $131,460 for the April 2023 options grant, and $27,121 for the August 2023 options grant[240][245][249] | Stock Option Activity | Jan 1, 2024 | Sep 30, 2024 | | :--------------------------------------- | :---------- | :----------- | | Outstanding Number of Shares | 3,314,128 | 3,230,128 | | Weighted Average Exercise Price | $1.30 | $1.37 | | Exercisable Number of Shares | 546,338 | 1,042,458 | | Weighted Average Remaining Contractual Term (Years) | 4.3 | 3.6 | 26. Income Per Share | EPS Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income Attributable to Shareholders (US$) | 6,334,792 | 17,647 | 2,319,447 | 16,299,559 | | Weighted Average Shares Outstanding – Basic | 89,473,026 | 89,931,617 | 89,171,988 | 89,929,477 | | Basic EPS (US$) | 0.07 | 0.00 | 0.03 | 0.18 | | Diluted EPS (US$) | 0.07 | 0.00 | 0.03 | 0.18 | - Basic and diluted EPS for the three months ended September 30, 2024, were $0.00, a significant decrease from $0.07 in the prior year. However, for the nine months ended September 30, 2024, basic and diluted EPS increased to $0.18, up from $0.03 in the prior year, reflecting improved year-to-date profitability[252] 27. Warrants - All warrants issued in the December 2020 and February 2021 financings, including Series B and Series A-2 warrants, had expired as of September 30, 2024. Consequently, there were no outstanding warrants or warrants liability as of that date[256][259] 28. Commitments and Contingencies | Capital Commitments (US$) | Dec 31, 2023 | Sep 30, 2024 | | :--------------------------------------- | :----------- | :----------- | | For Construction of Buildings | 1,104,571 | 2,668,538 | | For Purchases of Equipment | 31,437,525 | 25,543,391 | | Capital Injection | 267,557,243 | 255,385,310 | | Total Contracted Capital Commitments | 300,099,339 | 283,597,239 | - Total contracted capital commitments decreased by 5.5% from $300.10 million to $283.60 million. This includes commitments for building construction, equipment purchases, and capital injections. The company is also involved in a lawsuit where Haoneng sought $1.61 million for unpaid equipment costs, which was settled by an agreement to purchase equipment worth $2.4 million by December 31, 2023[260][262] 29. Concentrations and Credit Risk | Customer Concentration (Net Revenue) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Customer B | 33.5% | 20.3% | | Customer A | * | 19.2% | | Zhengzhou BAK Battery Co., Ltd | * | 11.6% | | Customer Concentration (Net Revenue) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Customer B | 30.9% | 38.1% | | Zhengzhou BAK Battery Co., Ltd | 15.4% | * | | Customer A | * | 10.3% | - The company has significant customer concentrations, with Customer B accounting for 38.1% of net revenue for the nine months ended September 30, 2024. Credit risk is managed through ongoing credit evaluations of customers and maintaining reserves for potential credit losses[264][267] 30. Segment Information - The company operates in two reportable segments: (i) production of high-power lithium and sodium battery cells (CBAK) and (ii) manufacture and sales of materials used in high-power lithium battery cells (Hitrans). The CEO reviews financial information for these segments to allocate resources and assess performance[268][269] | Segment Performance (US$) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | CBAT Segment | | | | Net Revenues | 96,163,040 | 113,897,786 | | Gross Profit | 18,336,732 | 39,040,824 | | Operating Income (Loss) | 6,146,019 | 22,499,181 | | Net Income (Loss) | 6,746,883 | 21,610,408 | | Hitrans Segment | | | | Net Revenues | 52,095,640 | 37,345,932 | | Gross Profit (Loss) | 702,232 | (577,194) | | Operating Income (Loss) | (6,661,367) | (5,578,219) | | Net Income (Loss) | (5,412,787) | (5,161,805) | - The CBAK segment showed strong growth for the nine months ended September 30, 2024, with net revenues increasing by 18.4%, gross profit more than doubling, and operating income significantly improving. Conversely, the Hitrans segment experienced a 28.4% decrease in net revenues and shifted to a gross loss, though its operating loss slightly improved[273][275] | Product Revenue (US$) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | High Power Lithium Batteries: | | | | Electric Vehicles | 2,358,842 | 1,012,655 | | Light Electric Vehicles | 4,230,066 | 8,249,437 | | Residential Energy Supply & UPS | 89,574,132 | 104,635,694 | | Materials Used in Manufacturing of Lithium Batteries: | | | | Cathode | 31,071,175 | 26,776,945 | | Precursor | 21,024,465 | 10,568,987 | | Net Revenues by Geographic Area (US$) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Mainland China | 87,662,906 | 75,886,271 | | Europe | 57,550,138 | 65,883,182 | | Others | 3,045,636 | 9,474,265 | 31. Subsequent events - Effective October 24, 2024, Mr. Yunfei Li resigned as Chief Executive Officer and President, and Mr. Zhiguang Hu was appointed as his successor[280] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on the company's financial condition, results of operations, liquidity, capital resources, and critical accounting policies Overview - CBAK Energy Technology is a manufacturer of new energy high-power lithium and sodium batteries, primarily for light electric vehicles, electric vehicles, electric tools, and energy storage. Following the acquisition of Hitrans in November 2021, the company also develops and manufactures NCM precursor and cathode materials[288] - The company operates in two segments: (i) production of high-power lithium and sodium battery cells and (ii) manufacture and sales of materials used in high-power lithium battery cells. Key operating entities include CBAK Power, Nanjing CBAK, CBAK Shangqiu, Nanjing BFD, and Hitrans[290] - CBAK is expanding its lithium battery manufacturing capabilities with Nanjing facilities (Phase I at 2 GWh, Phase II commencing operations in 2025 for a total of 20 GWh) and a leased Shangqiu facility (0.5 GWh). The company is optimistic about future prospects due to growing demand and Chinese government support for the new energy industry[291][293] Financial Performance Highlights for the Quarter Ended September 30, 2024 | Metric (US$) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2024 | Change (US$) | % Change | | :--------------------------------------- | :-------------------------- | :-------------------------- | :----------- | :------- | | Net Revenues | 63,441,109 | 44,628,241 | (18,812,868) | -29.65% | | Gross Profit | 12,248,578 | 6,954,557 | (5,294,021) | -43.22% | | Operating Income (Loss) | 5,289,094 | (827,873) | (6,116,967) | -115.65% | | Net Income | 6,334,792 | 17,647 | (6,317,145) | -99.72% | | Fully Diluted Income Per Share | 0.07 | 0.00 | (0.07) | -100.00% | - For the quarter ended September 30, 2024, net revenues decreased by 30%, leading to a 43% drop in gross profit. The company shifted from an operating income of $5.3 million to an operating loss of $0.8 million, and net income attributable to shareholders fell by 99.7% to $17,647[294][295][296] Financial Statement Presentation - Revenue recognition follows a five-step model, with product sales recognized upon customer control, typically at delivery. Cost of revenues includes material costs, employee remuneration, share-based compensation, depreciation, and inventory write-downs. Operating expenses are categorized into R&D, sales and marketing, and general and administrative expenses. Finance costs include interest income and expense, net of capitalized interest. Income tax rates vary by subsidiary, with preferential rates for 'High and New Technology Enterprises' in China[297][301][303][304][305] Results of Operations Comparison of Three Months Ended September 30, 2023 and 2024 | Metric (US$ thousands) | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2024 | Change (US$ thousands) | % Change | | :--------------------------------------- | :-------------------------- | :-------------------------- | :--------------------- | :------- | | Net Revenues | 63,441 | 44,628 | (18,813) | -30% | | Cost of Revenues | (51,193) | (37,674) | 13,519 | -26% | | Gross Profit | 12,248 | 6,954 | (5,294) | -43% | | Total Operating Expenses | (6,959) | (7,782) | (823) | 12% | | Operating Income (Loss) | 5,289 | (828) | (6,117) | -116% | | Net Income Attributable to CBAK Energy Technology, Inc. | 6,335 | 17 | (6,318) | -100% | - Net revenues decreased by 30% due to a 34% drop in residential energy supply & UPS battery sales (attributed to a one-month production suspension at the Dalian factory for upgrades) and a 42% decrease in lithium battery manufacturing materials sales (due to falling raw material prices). Sales of light electric vehicle batteries, however, surged by 341%[309][310][311][312] - Gross profit declined by 43% to $7.0 million, with the gross margin falling from 19.3% to 15.6%. Operating expenses increased by 12%, primarily driven by a 33% rise in R&D expenses due to increased headcount at Nanjing CBAK and the new Shangqiu operation. This led to an operating loss of $0.8 million, a 116% decrease from the prior year's operating income[314][316][320] Comparison of Nine Months Ended September 30, 2023 and 2024 | Metric (US$ thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | Change (US$ thousands) | % Change | | :--------------------------------------- | :-------------------------- | :-------------------------- | :--------------------- | :------- | | Net Revenues | 148,259 | 151,244 | 2,985 | 2% | | Cost of Revenues | (129,220) | (112,780) | 16,440 | -13% | | Gross Profit | 19,039 | 38,464 | 19,425 | 102% | | Total Operating Expenses | (20,404) | (23,081) | (2,677) | 13% | | Operating Income (Loss) | (1,365) | 15,383 | 16,748 | -1227% | | Net Income Attributable to CBAK Energy Technology, Inc. | 2,319 | 16,299 | 13,980 | 603% | - Net revenues increased by 2% to $151.2 million, driven by a 17% increase in residential energy supply & UPS battery sales and a 95% increase in light electric vehicle battery sales. However, electric vehicle battery sales decreased by 57%, and lithium battery manufacturing materials sales decreased by 28% due to falling raw material prices[326][327][328][329] - Gross profit more than doubled to $38.5 million, with the gross margin improving from 12.8% to 25.4%. Operating expenses increased by 13%, mainly due to a 15% rise in R&D expenses and a 47% increase in sales and marketing expenses (driven by promotion and shipping costs for overseas markets). The company achieved an operating income of $15.4 million, a significant turnaround from a $1.4 million operating loss in the prior year[331][332][333][336] Liquidity and Capital Resources This section analyzes the company's cash flows from operating, investing, and financing activities, along with its overall liquidity position and capital expenditure plans - As of September 30, 2024, the company had $47.9 million in cash and cash equivalents, with total current assets of $130.5 million and total current liabilities of $154.2 million, resulting in a net working capital deficit of $23.7 million. An accumulated deficit of $118.1 million and significant short-term debt raise substantial doubt about the company's ability to continue as a going concern[341][342] - The company plans to meet liquidity requirements through improving profitability, renewing existing bank loans, and seeking additional debt and equity financing. However, there is no assurance that such financing will be available on acceptable terms[340][373] Operating Activities | Cash Flow (US$ thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Net Cash Provided by Operating Activities | 20,745 | 30,078 | - Net cash provided by operating activities increased by 44.9% to $30.1 million for the nine months ended September 30, 2024, primarily driven by net income and an increase in trade and bills payable[376] Investing Activities | Cash Flow (US$ thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Net Cash Used in Investing Activities | (28,737) | (20,112) | - Net cash used in investing activities decreased by 30% to $20.1 million, mainly comprising purchases of property, plant, and equipment ($11.5 million) and deposits for long-term investments ($9.1 million)[378] Financing Activities | Cash Flow (US$ thousands) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Net Cash Provided by (Used in) Financing Activities | 18,525 | (21,463) | - Net cash used in financing activities was $21.5 million for the nine months ended September 30, 2024, a significant shift from $18.5 million provided in the prior year. This was primarily due to $47.9 million in bank loan repayments and $13.5 million (net) in term deposit placements, partially offset by $40.9 million in new bank borrowings[380] Capital Expenditures | Capital Expenditures (US$ millions) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Capital Expenditures | 24.9 | 11.5 | - Capital expenditures decreased to $11.5 million for the nine months ended September 30, 2024, from $24.9 million in the prior year. These funds were primarily used for constructing or upgrading facilities in Dalian, Nanjing, and Zhejiang. Total capital expenditures for fiscal year 2024 are estimated at $30.0 million for new plants and production lines[383] Critical Accounting Policies - There were no material changes to the critical accounting policies previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[385] Changes in Accounting Standards - The company adopted ASU 2021-08 (Business Combinations), ASU 2023-01 (Lease Common Control Arrangements), and ASU 2023-02 (Investments—Equity Method and Joint Ventures) effective January 1, 2024, with no material impact. Recently issued but not yet adopted ASUs include 2023-06 (disclosure/presentation improvements), 2023-07 (segment disclosures), and 2023-09 (income tax disclosures), which are currently being evaluated for potential impact[77][78][80][81][82][83] Item 3. Quantitative and Qualitative Disclosures About Market Risk. This section states that there are no applicable quantitative and qualitative disclosures about market risk - Not applicable[387] Item 4. Controls and Procedures. This section details the evaluation of the company's disclosure controls and procedures, identifying material weaknesses and outlining remediation efforts Evaluation of Disclosure Controls and Procedures - As of September 30, 2024, the company's disclosure controls and procedures were deemed ineffective. 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[389][390][391] - Remediation measures include hiring a permanent CFO with relevant experience (Mr. Jiewei Li appointed on August 22, 2023) and providing regular training to financial personnel on internal control, risk management, and US GAAP accounting guidelines[391][392] Changes in Internal Control over Financial Reporting - Except for the material weaknesses noted in the evaluation of disclosure controls and procedures, there were no other changes in internal controls over financial reporting during the quarter ended September 30, 2024, that materially affected or are reasonably likely to materially affect internal control over financial reporting[394] PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. LEGAL PROCEEDINGS. This section incorporates by reference the legal proceedings information from Note 28 'Commitments and Contingencies—(ii) Litigation' in the financial statements - Information on legal proceedings is incorporated by reference from Note 28 'Commitments and Contingencies—(ii) Litigation' in Part I, Item 1 of this Form 10-Q[396] Item 1A. RISK FACTORS. This section states that there are no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K - 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, 2023[397] Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. This section confirms that there were no unregistered sales of equity securities or repurchases of common stock during the reporting period, other than those previously disclosed - Other than as previously disclosed in current reports on Form 8-K, there were no unregistered sales of equity securities or repurchase of common stock during the period covered by this report[397] Item 3. DEFAULTS UPON SENIOR SECURITIES. This section states that there were no defaults upon senior securities - None[398] Item 4. MINE SAFETY DISCLOSURES. This section states that mine safety disclosures are not applicable to the company - Not applicable[398] Item 5. OTHER INFORMATION. This section provides information on other matters, specifically regarding securities trading plans of directors and executive officers - During the fiscal quarter ended September 30, 2024, no director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or a 'non-Rule 10b5-1 trading arrangement'[398] Item 6. EXHIBITS. This section lists the exhibits filed as part of this report or incorporated by reference, including certifications and XBRL interactive data files - Exhibits include Certifications of Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1, 32.2) and various XBRL Interactive Data Files (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[399]