ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
FINANCIAL STATEMENTS
CBAK ENERGY TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2018 AND 2019
CBAK ENERGY TECHNOLOGY, INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
Report of Independent Registered Public
Accounting Firm
To the Shareholders and Board of Directors of
CBAK Energy Technology, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of CBAK Energy Technology, Inc. and subsidiaries (the “Company”) as of December 31, 2019 and 2018, and
the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity and cash
flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Company as of December 31, 2019 and 2018, and the consolidated results of its operations
and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with U.S. generally accepted
accounting principles.
Going Concern
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated
financial statements, the Company has a working capital deficiency, accumulated deficit from recurring net losses and significant
short-term debt obligations maturing in less than one year as of December 31, 2019. All these factors raise substantial doubt about
its ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1 to
the consolidated financial statements. These consolidated financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
/s/ Centurion ZD CPA& Co.
Centurion ZD CPA & Co.
We have served as the Company’s auditor since 2016.
Hong Kong, China
May 14, 2020
CBAK Energy Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
As of December 31, 2018 and 2019
(In US$ except for number of shares)
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
Note
|
|
2018
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
449,670
|
|
|
$
|
1,612,957
|
|
Pledged deposits
|
|
3
|
|
|
17,239,823
|
|
|
|
5,520,991
|
|
Trade accounts and bills receivable, net
|
|
4
|
|
|
21,751,032
|
|
|
|
7,952,420
|
|
Inventories
|
|
5
|
|
|
9,622,361
|
|
|
|
8,666,714
|
|
Prepayments and other receivables
|
|
6
|
|
|
7,143,454
|
|
|
|
4,735,913
|
|
Prepaid land use rights, current portion
|
|
10
|
|
|
163,352
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
56,369,692
|
|
|
|
28,488,995
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
8
|
|
|
38,908,503
|
|
|
|
38,177,565
|
|
Construction in progress
|
|
9
|
|
|
25,001,813
|
|
|
|
21,707,624
|
|
Prepaid land use rights, non-current
|
|
10
|
|
|
7,282,765
|
|
|
|
-
|
|
Right-of-use assets
|
|
10
|
|
|
-
|
|
|
|
7,194,195
|
|
Intangible assets, net
|
|
11
|
|
|
20,869
|
|
|
|
15,178
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
$
|
127,583,642
|
|
|
$
|
95,583,557
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Trade accounts and bills payable
|
|
12
|
|
$
|
52,495,063
|
|
|
$
|
15,072,108
|
|
Current maturities of long-term bank loans
|
|
13
|
|
|
3,659,324
|
|
|
|
16,574,752
|
|
Other short-term loans
|
|
13
|
|
|
14,147,801
|
|
|
|
7,351,587
|
|
Notes payables
|
|
17
|
|
|
-
|
|
|
|
2,846,736
|
|
Accrued expenses and other payables
|
|
14
|
|
|
18,201,351
|
|
|
|
15,527,589
|
|
Payables to former subsidiaries, net
|
|
7
|
|
|
4,301,646
|
|
|
|
1,483,352
|
|
Deferred government grants, current
|
|
15
|
|
|
143,775
|
|
|
|
142,026
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
92,948,960
|
|
|
|
58,998,150
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term bank loans
|
|
13
|
|
|
20,614,194
|
|
|
|
9,519,029
|
|
Deferred government grants, non-current
|
|
15
|
|
|
4,313,289
|
|
|
|
4,118,807
|
|
Product warranty provisions
|
|
16
|
|
|
2,250,615
|
|
|
|
2,246,933
|
|
Long term tax payable
|
|
|
|
|
7,129,285
|
|
|
|
7,042,582
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
127,256,343
|
|
|
|
81,925,501
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
Common stock $0.001 par value; 500,000,000 authorized; 26,791,684 issued and 26,647,478 outstanding as of December 31, 2018; and 53,220,902 issued and 53,076,696 outstanding as of December 31, 2019
|
|
|
|
|
26,792
|
|
|
|
53,222
|
|
Donated shares
|
|
|
|
|
14,101,689
|
|
|
|
14,101,689
|
|
Additional paid-in capital
|
|
|
|
|
155,931,770
|
|
|
|
180,208,610
|
|
Statutory reserves
|
|
|
|
|
1,230,511
|
|
|
|
1,230,511
|
|
Accumulated deficit
|
|
|
|
|
(165,409,890
|
)
|
|
|
(176,177,413
|
)
|
Accumulated other comprehensive loss
|
|
|
|
|
(1,498,940
|
)
|
|
|
(1,744,730
|
)
|
|
|
|
|
|
4,381,932
|
|
|
|
17,671,889
|
|
Less: Treasury shares
|
|
|
|
|
(4,066,610
|
)
|
|
|
(4,066,610
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
|
|
|
315,322
|
|
|
|
13,605,279
|
|
Non-controlling interests
|
|
|
|
|
11,977
|
|
|
|
52,777
|
|
Total equity
|
|
|
|
|
327,299
|
|
|
|
13,658,056
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholder’s equity
|
|
|
|
$
|
127,583,642
|
|
|
$
|
95,583,557
|
|
See accompanying notes to the consolidated
financial statements.
CBAK Energy Technology, Inc. and
Subsidiaries
Consolidated Statements of Operations
and Comprehensive Income (Loss)
For the years ended December 31, 2018
and 2019
(In US$ except for number of shares)
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
Note
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
Net revenues
|
|
24
|
|
$
|
24,433,304
|
|
|
$
|
22,194,348
|
|
Cost of revenues
|
|
|
|
|
(27,731,901
|
)
|
|
|
(21,571,822
|
)
|
Gross (loss) profit
|
|
|
|
|
(3,298,597
|
)
|
|
|
622,526
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
|
|
|
(2,481,038
|
)
|
|
|
(1,905,504
|
)
|
Sales and marketing expenses
|
|
|
|
|
(2,081,138
|
)
|
|
|
(1,020,929
|
)
|
General and administrative expenses
|
|
|
|
|
(4,497,338
|
)
|
|
|
(4,411,878
|
)
|
Impairment charge on property, plant and equipment
|
|
8
|
|
|
(918,461
|
)
|
|
|
(2,326,552
|
)
|
Provision for doubtful accounts
|
|
4
|
|
|
(162,488
|
)
|
|
|
(1,046,360
|
)
|
Total operating expenses
|
|
|
|
|
(10,140,463
|
)
|
|
|
(10,711,223
|
)
|
Operating loss
|
|
|
|
|
(13,439,060
|
)
|
|
|
(10,088,697
|
)
|
Finance expenses, net
|
|
|
|
|
(834,391
|
)
|
|
|
(1,384,904
|
)
|
Other income, net
|
|
7
|
|
|
12,315,969
|
|
|
|
620,166
|
|
Loss before income tax
|
|
|
|
|
(1,957,482
|
)
|
|
|
(10,853,435
|
)
|
Income tax expense
|
|
18
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
|
|
|
(1,957,482
|
)
|
|
|
(10,853,435
|
)
|
Less: Net loss attributable to non-controlling interests
|
|
|
|
|
14,305
|
|
|
|
85,912
|
|
Net loss attributable to shareholders of CBAK Energy Technology, Inc.
|
|
|
|
$
|
(1,943,177
|
)
|
|
$
|
(10,767,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
(1,957,482
|
)
|
|
|
(10,853,435
|
)
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
– Foreign currency translation adjustment
|
|
|
|
|
(158,948
|
)
|
|
|
(246,416
|
)
|
Comprehensive loss
|
|
|
|
|
(2,116,430
|
)
|
|
|
(11,099,851
|
)
|
Less: Comprehensive loss attributable to non-controlling interests
|
|
|
|
|
14,846
|
|
|
|
86,538
|
|
Comprehensive loss attributable to CBAK Energy Technology, Inc.
|
|
|
|
$
|
(2,101,584
|
)
|
|
$
|
(11,013,313
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
20
|
|
|
|
|
|
|
|
|
– Basic and diluted
|
|
|
|
$
|
(0.07
|
)
|
|
$
|
(0.28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock:
|
|
20
|
|
|
|
|
|
|
|
|
– Basic and diluted
|
|
|
|
|
26,596,263
|
|
|
|
38,965,564
|
|
See accompanying notes to the consolidated
financial statements.
CBAK Energy Technology, Inc. and Subsidiaries
Consolidated Statements of Changes in
Shareholders’ Equity
For the years ended 2018 and 2019
(In US$ except for number of shares)
|
|
Common
stock issued
|
|
|
|
|
|
Additional
|
|
|
Statutory
|
|
|
|
|
|
Accumulated
other
|
|
|
Non-
|
|
|
Treasury
shares
|
|
|
Total
|
|
|
|
Number
|
|
|
|
|
|
Donated
|
|
|
paid-in
|
|
|
reserves
|
|
|
Accumulated
|
|
|
comprehensive
|
|
|
controlling
|
|
|
Number
|
|
|
|
|
|
shareholders’
|
|
|
|
of shares
|
|
|
Amount
|
|
|
shares
|
|
|
capital
|
|
|
(Note 24)
|
|
|
deficit
|
|
|
loss
|
|
|
interests
|
|
|
of shares
|
|
|
Amount
|
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of
January 1, 2018
|
|
|
26,367,523
|
|
|
$
|
26,368
|
|
|
$
|
14,101,689
|
|
|
$
|
155,711,014
|
|
|
$
|
1,230,511
|
|
|
$
|
(163,466,713
|
)
|
|
$
|
(1,340,533
|
)
|
|
$
|
-
|
|
|
|
(144,206
|
)
|
|
$
|
(4,066,610
|
)
|
|
$
|
2,195,726
|
|
Capital contribution from
non-controlling interests of a subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,823
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,943,177
|
)
|
|
|
-
|
|
|
|
(14,305
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,957,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation for
employee and director stock awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
221,180
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
221,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to employees
and directors for stock award
|
|
|
424,161
|
|
|
|
424
|
|
|
|
-
|
|
|
|
(424
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(158,407
|
)
|
|
|
(541
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(158,948
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2018
|
|
|
26,791,684
|
|
|
$
|
26,792
|
|
|
$
|
14,101,689
|
|
|
$
|
155,931,770
|
|
|
$
|
1,230,511
|
|
|
$
|
(165,409,890
|
)
|
|
$
|
(1,498,940
|
)
|
|
$
|
11,977
|
|
|
|
(144,206
|
)
|
|
$
|
(4,066,610
|
)
|
|
$
|
327,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contribution from
non-controlling interests of a subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
127,338
|
|
|
|
-
|
|
|
|
-
|
|
|
|
127,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,767,523
|
)
|
|
|
-
|
|
|
|
(85,912
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,853,435
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation for
employee and director stock awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
770,113
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
770,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to employees
and directors for stock award
|
|
|
433,337
|
|
|
|
434
|
|
|
|
-
|
|
|
|
(434
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to investors
|
|
|
25,995,881
|
|
|
|
25,996
|
|
|
|
-
|
|
|
|
23,507,161
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23,533,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(245,790
|
)
|
|
|
(626
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(246,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2019
|
|
|
53,220,902
|
|
|
$
|
53,222
|
|
|
$
|
14,101,689
|
|
|
$
|
180,208,610
|
|
|
$
|
1,230,511
|
|
|
$
|
(176,177,413
|
)
|
|
$
|
(1,744,730
|
)
|
|
$
|
52,777
|
|
|
|
(144,206
|
)
|
|
$
|
(4,066,610
|
)
|
|
$
|
13,658,056
|
|
See accompanying notes to the consolidated
financial statements.
CBAK Energy Technology, Inc. and subsidiaries
Consolidated statements of cash flows
For the years ended December 31, 2018
and 2019
(In US$)
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,957,482
|
)
|
|
$
|
(10,853,435
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,466,127
|
|
|
|
2,753,200
|
|
Provision for doubtful accounts
|
|
|
162,488
|
|
|
|
1,046,360
|
|
Write-down of inventories
|
|
|
160,469
|
|
|
|
834,362
|
|
Share-based compensation
|
|
|
221,180
|
|
|
|
770,113
|
|
(Gain) Loss on disposal of property, plant and equipment
|
|
|
(10,177
|
)
|
|
|
213,749
|
|
Gain on disposal of patented proprietary technology (Note 7)
|
|
|
(12,118,675
|
)
|
|
|
-
|
|
Impairment charge
|
|
|
918,461
|
|
|
|
2,326,552
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts and bills receivable
|
|
|
33,723,869
|
|
|
|
10,313,229
|
|
Inventories
|
|
|
(475,664
|
)
|
|
|
11,044
|
|
Prepayments and other receivables
|
|
|
(739,871
|
)
|
|
|
2,808,375
|
|
Trade accounts and bills payable
|
|
|
(9,760,687
|
)
|
|
|
(30,530,773
|
)
|
Accrued expenses and other payables and product warranty provisions
|
|
|
1,486,223
|
|
|
|
1,087,216
|
|
Trade receivable from and payables to former subsidiaries
|
|
|
(5,349,699
|
)
|
|
|
(2,002,358
|
)
|
Net cash provided by (used in) operating activities
|
|
|
8,726,562
|
|
|
|
(21,222,366
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Proceeds on disposal of property, plant and equipment
|
|
|
31,594
|
|
|
|
32,719
|
|
Purchases of property, plant and equipment and construction in progress
|
|
|
(7,359,041
|
)
|
|
|
(2,452,907
|
)
|
Net cash used in investing activities
|
|
|
(7,327,447
|
)
|
|
|
(2,420,188
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Capital injection from non-controlling interests
|
|
|
26,823
|
|
|
|
127,338
|
|
Proceeds from bank borrowings
|
|
|
25,316,074
|
|
|
|
5,776,497
|
|
Repayment of bank borrowings
|
|
|
(19,256,963
|
)
|
|
|
(3,643,971
|
)
|
Borrowings from unrelated parties
|
|
|
-
|
|
|
|
6,341,117
|
|
Repayment of borrowings from unrelated parties
|
|
|
-
|
|
|
|
(14,477
|
)
|
Borrowings from related parties
|
|
|
17,903,224
|
|
|
|
492,233
|
|
Repayment of borrowings from related parties
|
|
|
(17,593,772
|
)
|
|
|
(1,365,714
|
)
|
Borrowings from shareholders
|
|
|
-
|
|
|
|
4,053,682
|
|
Repayment of earnest money to shareholders
|
|
|
-
|
|
|
|
(966,579
|
)
|
Proceeds from issuance of promissory notes (Note 17)
|
|
|
-
|
|
|
|
2,750,000
|
|
Net cash provided by financing activities
|
|
|
6,395,386
|
|
|
|
13,550,126
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents and restricted cash
|
|
|
(853,721
|
)
|
|
|
(463,117
|
)
|
Net increase (decrease) in cash and cash equivalents and restricted cash
|
|
|
6,940,780
|
|
|
|
(10,555,545
|
)
|
Cash and cash equivalents and restricted cash at the beginning of year
|
|
|
10,748,713
|
|
|
|
17,689,493
|
|
Cash and cash equivalents and restricted cash at the end of year
|
|
$
|
17,689,493
|
|
|
$
|
7,133,948
|
|
Supplemental non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Transfer of construction in progress to property, plant and equipment
|
|
$
|
8,617,337
|
|
|
$
|
5,975,163
|
|
Proceeds on disposal of patented proprietary technology offset against amount due to a former subsidiary (Note 7)
|
|
|
12,845,795
|
|
|
$
|
-
|
|
Issuance of common stock (Note 1):
- offset short term borrowings (First Debt, Second Debt and Third Debt)
|
|
$
|
-
|
|
|
$
|
15,029,948
|
|
– offset construction cost payable (Fourth Debt)
|
|
$
|
-
|
|
|
$
|
3,343,378
|
|
– offset accounts payable (Fifth Debt) and unpaid earnest money
|
|
$
|
-
|
|
|
$
|
5,159,831
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest, net of amounts capitalized
|
|
$
|
1,013,335
|
|
|
$
|
1,378,349
|
|
See accompanying notes to the consolidated
financial statements.
CBAK Energy Technology, Inc. and subsidiaries
Notes to the consolidated financial statements
For the years ended December 31, 2018
and 2019
(In US$ except for number of shares)
|
1.
|
Principal
Activities, Basis of Presentation and Organization
|
Principal Activities
CBAK Energy Technology, Inc. (formerly
known as China BAK Battery, Inc.) (“CBAK” or the “Company”) is a corporation formed in the State of Nevada
on October 4, 1999 as Medina Copy, Inc. The Company changed its name to Medina Coffee, Inc. on October 6, 1999 and subsequently
changed its name to China BAK Battery, Inc. on February 14, 2005. CBAK and its subsidiaries (hereinafter, collectively referred
to as the “Company”) are principally engaged in the manufacture, commercialization and distribution of a wide variety
of standard and customized lithium ion (known as “Li-ion” or “Li-ion cell”) high power rechargeable batteries.
Prior to the disposal of BAK International Limited (“BAK International”) and its subsidiaries (see below), the batteries
produced by the Company were for use in cellular telephones, as well as various other portable electronic applications, including
high-power handset telephones, laptop computers, power tools, digital cameras, video camcorders, MP3 players, electric bicycles,
hybrid/electric vehicles, and general industrial applications. After the disposal of BAK International and its subsidiaries on
June 30, 2014, the Company will focus on the manufacture, commercialization and distribution of high power lithium ion rechargeable
batteries for use in cordless power tools, light electric vehicles, hybrid electric vehicles, electric cars, electric busses, uninterruptable
power supplies and other high power applications.
The shares of the Company traded in the
over-the-counter market through the Over-the-Counter Bulletin Board from 2005 until May 31, 2006, when the Company obtained approval
to list its common stock on The NASDAQ Global Market, and trading commenced that same date under the symbol “CBAK”.
On January 10, 2017, the Company filed
Articles of Merger with the Secretary of State of Nevada to effectuate a merger between the Company and the Company’s newly
formed, wholly owned subsidiary, CBAK Merger Sub, Inc. (the “Merger Sub”). According to the Articles of Merger, effective
January 16, 2017, the Merger Sub merged with and into the Company with the Company being the surviving entity (the “Merger”).
As permitted by Chapter 92A.180 of Nevada Revised Statutes, the sole purpose of the Merger was to effect a change of the Company’s
name.
Effective November 30, 2018, the trading
symbol for common stock of the Company was changed from CBAK to CBAT. Effective at the opening of business on June 21, 2019, the
Company’s common stock started trading on the Nasdaq Capital Market.
Basis of Presentation and Organization
On November 6, 2004, BAK International,
a non-operating holding company that had substantially the same shareholders as Shenzhen BAK Battery Co., Ltd (“Shenzhen
BAK”), entered into a share swap transaction with the shareholders of Shenzhen BAK for the purpose of the subsequent reverse
acquisition of the Company. The share swap transaction between BAK International and the shareholders of Shenzhen BAK was accounted
for as a reverse acquisition of Shenzhen BAK with no adjustment to the historical basis of the assets and liabilities of Shenzhen
BAK.
On January 20, 2005, the Company completed
a share swap transaction with the shareholders of BAK International. The share swap transaction, also referred to as the “reverse
acquisition” of the Company, was consummated under Nevada law pursuant to the terms of a Securities Exchange Agreement entered
by and among CBAK, BAK International and the shareholders of BAK International on January 20, 2005. The share swap transaction
has been accounted for as a capital-raising transaction of the Company whereby the historical financial statements and operations
of Shenzhen BAK are consolidated using historical carrying amounts.
Also on January 20, 2005, immediately prior
to consummating the share swap transaction, BAK International executed a private placement of its common stock with unrelated investors
whereby it issued an aggregate of 1,720,087 shares of common stock for gross proceeds of $17,000,000. In conjunction with this
financing, Mr. Xiangqian Li, the Chairman and Chief Executive Officer of the Company (“Mr. Li”), agreed to place 435,910
shares of the Company’s common stock owned by him into an escrow account pursuant to an Escrow Agreement dated January 20,
2005 (the “Escrow Agreement”). Pursuant to the Escrow Agreement, 50% of the escrowed shares were to be released to
the investors in the private placement if audited net income of the Company for the fiscal year ended September 30, 2005 was not
at least $12,000,000, and the remaining 50% was to be released to investors in the private placement if audited net income of the
Company for the fiscal year ended September 30, 2006 was not at least $27,000,000. If the audited net income of the Company for
the fiscal years ended September 30, 2005 and 2006 reached the above-mentioned targets, the 435,910 shares would be released to
Mr. Li in the amount of 50% upon reaching the 2005 target and the remaining 50% upon reaching the 2006 target.
Under accounting principles generally accepted
in the United States of America (“US GAAP”), escrow agreements such as the one established by Mr. Li generally constitute
compensation if, following attainment of a performance threshold, shares are returned to a company officer. The Company determined
that without consideration of the compensation charge, the performance thresholds for the year ended September 30, 2005 would be
achieved. However, after consideration of a related compensation charge, the Company determined that such thresholds would not
have been achieved. The Company also determined that, even without consideration of a compensation charge, the performance thresholds
for the year ended September 30, 2006 would not be achieved.
While the 217,955 escrow shares relating
to the 2005 performance threshold were previously released to Mr. Li, Mr. Li executed a further undertaking on August 21, 2006
to return those shares to the escrow agent for the distribution to the relevant investors. However, such shares were not returned
to the escrow agent, but, pursuant to a Delivery of Make Good Shares, Settlement and Release Agreement between the Company, BAK
International and Mr. Li entered into on October 22, 2007 (the “Li Settlement Agreement”), such shares were ultimately
delivered to the Company as described below. Because the Company failed to satisfy the performance threshold for the fiscal year
ended September 30, 2006, the remaining 217,955 escrow shares relating to the fiscal year 2006 performance threshold were released
to the relevant investors. As Mr. Li has not retained any of the shares placed into escrow, and as the investors party to the Escrow
Agreement are only shareholders of the Company and do not have and are not expected to have any other relationship to the Company,
the Company has not recorded a compensation charge for the years ended September 30, 2005 and 2006.
At the time the escrow shares relating
to the 2006 performance threshold were transferred to the investors in fiscal year 2007, the Company should have recognized a credit
to donated shares and a debit to additional paid-in capital, both of which are elements of shareholders’ equity. This entry
is not material because total ordinary shares issued and outstanding, total shareholders’ equity and total assets do not
change; nor is there any impact on income or earnings per share. Therefore, previously filed consolidated financial statements
for the fiscal year ended September 30, 2007 will not be restated. This share transfer has been reflected in these financial statements
by reclassifying the balances of certain items as of October 1, 2007. The balances of donated shares and additional paid-in capital
as of October 1, 2007 were credited and debited by $7,955,358 respectively, as set out in the consolidated statements of changes
in shareholders’ equity.
In November 2007, Mr. Li delivered the
217,955 shares related to the 2005 performance threshold to BAK International pursuant to the Li Settlement Agreement; BAK International
in turn delivered the shares to the Company. Such shares (other than those issued to investors pursuant to the 2008 Settlement
Agreements, as described below) are now held by the Company. Upon receipt of these shares, the Company and BAK International released
all claims and causes of action against Mr. Li regarding the shares, and Mr. Li released all claims and causes of action against
the Company and BAK International regarding the shares. Under the terms of the Li Settlement Agreement, the Company commenced negotiations
with the investors who participated in the Company’s January 2005 private placement in order to achieve a complete settlement
of BAK International’s obligations (and the Company’s obligations to the extent it has any) under the applicable agreements
with such investors.
Beginning on March 13, 2008, the Company
entered into settlement agreements (the “2008 Settlement Agreements”) with certain investors in the January 2005 private
placement. Since the other investors have never submitted any claims regarding this matter, the Company did not reach any settlement
with them.
Pursuant to the 2008 Settlement Agreements,
the Company and the settling investors have agreed, without any admission of liability, to a settlement and mutual release from
all claims relating to the January 2005 private placement, including all claims relating to the escrow shares related to the 2005
performance threshold that had been placed into escrow by Mr. Li, as well as all claims, including claims for liquidated damages
relating to registration rights granted in connection with the January 2005 private placement. Under the 2008 Settlement Agreement,
the Company has made settlement payments to each of the settling investors of the number of shares of the Company’s common
stock equivalent to 50% of the number of the escrow shares related to the 2005 performance threshold these investors had claimed;
aggregate settlement payments as of June 30, 2015amounted to 73,749 shares. Share payments to date have been made in reliance upon
the exemptions from registration provided by Section 4(2) and/or other applicable provisions of the Securities Act of 1933, as
amended. In accordance with the 2008 Settlement Agreements, the Company filed a registration statement covering the resale of such
shares which was declared effective by the SEC on June 26, 2008.
Pursuant to the Li Settlement Agreement,
the 2008 Settlement Agreements and upon the release of the 217,955 escrow shares relating to the fiscal year 2006 performance threshold
to the relevant investors, neither Mr. Li or the Company have any obligations to the investors who participated in the Company’s
January 2005 private placement relating to the escrow shares.
As of December 31, 2019, the Company had
not received any claim from the other investors who have not been covered by the “2008 Settlement Agreements” in the
January 2005 private placement.
As the Company has transferred the 217,955
shares related to the 2006 performance threshold to the relevant investors in fiscal year 2007 and the Company also have transferred
73,749 shares relating to the 2005 performance threshold to the investors who had entered the “2008 Settlement Agreements”
with us in fiscal year 2008, pursuant to “Li Settlement Agreement” and “2008 Settlement Agreements”, neither
Mr. Li nor the Company had any remaining obligations to those related investors who participated in the Company’s January
2005 private placement relating to the escrow shares.
On August 14, 2013, Dalian BAK Trading
Co., Ltd was established as a wholly owned subsidiary of China BAK Asia Holding Limited (“BAK Asia”) with a registered
capital of $500,000. Pursuant to CBAK Trading’s articles of association and relevant PRC regulations, BAK Asia was required
to contribute the capital to CBAK Trading on or before August 14, 2015. On March 7, 2017, the name of Dalian BAK Trading Co., Ltd
was changed to Dalian CBAK Trading Co., Ltd (“CBAK Trading”). On August 5, 2019, CBAK Trading’s registered capital
was increased to $5,000,000. Pursuant to CBAK Trading’s amendment articles of association and relevant PRC regulations, BAK
Asia was required to contribute the capital to CBAK Trading on or before August 1, 2033. Up to the date of this report, the Company
has contributed $2,435,000 to CBAK Trading in cash.
On December 27, 2013, Dalian BAK Power
Battery Co., Ltd was established as a wholly owned subsidiary of BAK Asia with a registered capital of $30,000,000. Pursuant to
CBAK Power’s articles of association and relevant PRC regulations, BAK Asia was required to contribute the capital to CBAK
Power on or before December 27, 2015. On March 7, 2017, the name of Dalian BAK Power Battery Co., Ltd was changed to Dalian CBAK
Power Battery Co., Ltd (“CBAK Power”). On July 10, 2018, CBAK Power’s registered capital was increased to $50,000,000.
On October 29, 2019, CBAK Power’s registered capital was further increased to $60,000,000. Pursuant to CBAK Power’s
amendment articles of association and relevant PRC regulations, BAK Asia was required to contribute the capital to CBAK Power on
or before December 31, 2021. Up to the date of this report, the Company has contributed $29,999,978 to CBAK Power through injection
of a series of patents and cash.
On May 4, 2018, CBAK New Energy (Suzhou)
Co., Ltd (“CBAK Suzhou”) was established as a 90% owned subsidiary of CBAK Power with a registered capital of RMB10,000,000
(approximately $1.5 million). The remaining 10% equity interest was held by certain employees of CBAK Suzhou. Pursuant to CBAK
Suzhou’s articles of association, each shareholder is entitled to the right of the profit distribution or responsible for
the loss according to its proportion to the capital contribution. Pursuant to CBAK Suzhou’s articles of association and relevant
PRC regulations, CBAK Power was required to contribute the capital to CBAK Suzhou on or before December 31, 2019. Up to the date
of this report, the Company has contributed RMB9.0 million (approximately $1.3 million), and the other shareholders have contributed
RMB1.0 million (approximately $0.1 million) to CBAK Suzhou through injection of a series of cash.
On November 21, 2019, Dalian CBAK Energy Technology Co., Ltd
(“CBAK Energy”) was established as a wholly owned subsidiary of BAK Asia with a registered capital of $50,000,000.
Pursuant to CBAK Energy’s articles of association and relevant PRC regulations, BAK Asia was required to contribute the capital
to CBAK Energy on or before November 20, 2022. Up to the date of this report, the Company has contributed nil to CBAK Energy. CBAK
Energy will be focus on manufacture and sale of lithium batteries and lithium batteries’ materials.
The Company’s consolidated financial
statements have been prepared under US GAAP.
The preparation of financial statements
in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could differ from those estimates. This basis of accounting
differs in certain material respects from that used for the preparation of the books of account of the Company’s principal
subsidiaries, which are prepared in accordance with the accounting principles and the relevant financial regulations applicable
to enterprises with limited liability established in the PRC or Hong Kong. The accompanying consolidated financial statements reflect
necessary adjustments not recorded in the books of account of the Company’s subsidiaries to present them in conformity with
US GAAP.
After the disposal of BAK International
Limited and its subsidiaries, namely Shenzhen BAK, Shenzhen BAK Power Battery Co., Ltd (formerly BAK Battery (Shenzhen) Co., Ltd.)
(“BAK Shenzhen”), BAK International (Tianjin) Ltd. (“BAK Tianjin”), Tianjin Chenhao Technological Development
Limited (a subsidiary of BAK Tianjin established on May 8, 2014,“Tianjin Chenhao”), BAK Battery Canada Ltd. (“BAK
Canada”), BAK Europe GmbH (“BAK Europe”) and BAK Telecom India Private Limited (“BAK India”), effective
on June 30, 2014, and as of December 31, 2019, the Company’s subsidiaries consisted of: i) China BAK Asia Holdings Limited
(“BAK Asia”), a wholly owned limited liability company incorporated in Hong Kong on July 9, 2013; ii) Dalian CBAK Trading
Co., Ltd. (“CBAK Trading”), a wholly owned limited company established on August 14, 2013 in the PRC; iii) Dalian CBAK
Power Battery Co., Ltd. (“CBAK Power”), a wholly owned limited liability company established on December 27, 2013 in
the PRC; iv) CBAK New Energy (Suzhou) Co., Ltd. (“CBAK Suzhou”), a 90% owned limited liability company established
on May 4, 2018 in the PRC and v) Dalian CBAK Energy Technology Co., Ltd (“CBAK Energy”), a wholly owned limited liability
company established on November 21, 2019 in the PRC.
The Company continued its business and
continued to generate revenues from sale of batteries via subcontracting the production to BAK Tianjin and BAK Shenzhen, former
subsidiaries before the completion of construction and operation of its facility in Dalian. BAK Tianjin and BAK Shenzhen are now
suppliers of the Company and the Company does not have any significant benefits or liability from the operating results of BAK
Tianjin and BAK Shenzhen except the normal risk with any major supplier.
As of the date of this report, Mr. Xiangqian
Li is no longer a director of BAK International and BAK Tianjin. He remained as a director of Shenzhen BAK and BAK Shenzhen.
On and effective March 1, 2016, Mr. Xiangqian Li resigned as
Chairman, director, Chief Executive Officer, President and Secretary of the Company. On the same date, the Board of Directors of
the Company appointed Mr. Yunfei Li as Chairman, Chief Executive Officer, President and Secretary of the Company. On March 4, 2016,
Mr. Xiangqian Li transferred 3,000,000 shares to Mr. Yunfei Li for a price of $2.4 per share. After the share transfer, Mr. Yunfei
Li held 3,000,000 shares or 17.3% and Mr. Xiangqian Li held 760,557 shares at 4.4% of the Company’s outstanding stock, respectively.
As of December 31, 2019, Mr. Yunfei Li held 8,589,919 shares or 16.2% of the Company’s outstanding stock, and Mr. Xiangqian
Li held none of the Company’s outstanding stock.
The Company had a working capital deficiency,
accumulated deficit from recurring net losses and short-term debt obligations as of December 31, 2018 and 2019. These factors raise
substantial doubts about the Company’s ability to continue as a going concern.
In June and July 2015, the Company received
advances of approximately $9.8 million from potential investors. On September 29, 2015, the Company entered into a Debt Conversion
Agreement with these investors. Pursuant to the terms of the Debt Conversion Agreement, each of the creditors agreed to convert
existing loan principal of $9,847,644 into an aggregate 4,376,731 shares of common stock of the Company (“the Shares”)
at a conversion price of $2.25 per share. Upon receipt of the Shares on October 16, 2015, the creditors released the Company from
all claims, demands and other obligations relating to the Debts. As such, no interest was recognized by the Company on the advances
from investors pursuant to the supplemental agreements with investors and the Debt Conversion Agreement.
In June 2016, the Company received further
advances in the aggregate of $2.9 million from Mr. Jiping Zhou and Mr. Dawei Li. These advances were unsecured, non-interest bearing
and repayable on demand. On July 8, 2018, the Company received further advances of $2.6 million from Mr. Jiping Zhou. On July 28,
2016, the Company entered into securities purchase agreements with Mr. Jiping Zhou and Mr. Dawei Li to issue and sell an aggregate
of 2,206,640 shares of common stock of the Company, at $2.5 per share, for an aggregate consideration of approximately $5.52 million.
On August 17, 2016, the Company issued these shares to the investors.
On February 17, 2017, the Company signed
investment agreements with eight investors (including Mr. Yunfei Li, the Company’s CEO, and seven of the Company’s
existing shareholders) whereby the investors agreed to subscribe new shares of the Company totaling $10 million. Pursuant to the
investment agreements, in January 2017 the 8 investors paid the Company a total of $2.06 million as down payments. Mr. Yunfei Li
agrees to subscribe new shares of the Company totaled $1,120,000 and paid the earnest money of $225,784 in January 2017. On April
1, April 21, April 26 and May 10, 2017, the Company received $1,999,910, $3,499,888, $1,119,982 and $2,985,497 from these investors,
respectively. On May 31, 2017, the Company entered into a securities purchase agreement with the eight investors, pursuant to which
the Company agreed to issue an aggregate of 6,403,518 shares of common stock to these investors, at a purchase price of $1.50 per
share, for an aggregate price of $9.6 million, among which 746,018 shares issued to Mr. Yunfei Li. On June 22, 2017, the Company
issued the shares to the investors.
In 2019, according to the investment agreements
and agreed by the investors, the Company returned partial earnest money of $966,579 (approximately RMB6.7 million) to these investors.
On January 7, 2019, each of Mr. Dawei Li
and Mr. Yunfei Li entered into an agreement with CBAK Power and Tianjin New Energy (note 13) whereby Tianjin New Energy assigned
its rights to loans to CBAK Power of approximately $3.4 million (RMB23,980,950) and $1.7 million (RMB11,647,890) (totaled $5.1
million, the “First Debt”) to Mr. Dawei Li and Mr. Yunfei Li, respectively.
On January 7, 2019, the Company entered
into a cancellation agreement with Mr. Dawei Li and Mr. Yunfei Li. Pursuant to the terms of the cancellation agreement, Mr. Dawei
Li and Mr. Yunfei Li agreed to cancel the First Debt in exchange for 3,431,373 and 1,666,667 shares of common stock of the Company,
respectively, at an exchange price of $1.02 per share. Upon receipt of the shares, the creditors released the Company from any
claims, demands and other obligations relating to the First Debt.
On April 26, 2019, each of Mr. Jun Lang,
Ms. Jing Shi and Asia EVK Energy Auto Limited (“Asia EVK”) entered into an agreement with CBAK Power and Tianjin New
Energy whereby Tianjin New Energy assigned its rights to loans to CBAK Power of approximately $0.3 million (RMB2,225,082), $0.1
million (RMB 912,204) and $5.0 million (RMB35,406,036) (collectively $5.4 million, the “Second Debt”) to Mr. Jun Lang,
Ms. Jing Shi and Asia EVK, respectively.
On April 26, 2019, the Company entered
into a cancellation agreement with Mr. Jun Lang, Ms. Jing Shi and Asia EVK (the creditors). Pursuant to the terms of the cancellation
agreement, the creditors agreed to cancel the Second Debt in exchange for 300,534, 123,208 and 4,782,163 shares of common stock
of the Company, respectively, at an exchange price of $1.1 per share. Upon receipt of the shares, the creditors will release the
Company from any claims, demands and other obligations relating to the Second Debt.
On June 28, 2019, each of Mr. Dawei Li
and Mr. Yunfei Li entered into an agreement with CBAK Power to loan approximately $1.4 million (RMB10,000,000) and $2.5 million
(RMB18,000,000) respectively to CBAK Power for a terms of six months (collectively $3.9 million, the “Third Debt”).
The loan was unsecured, non-interest bearing and repayable on demand.
On July 16, 2019, each of Asia EVK and
Mr. Yunfei Li entered into an agreement with CBAK Power and Dalian Zhenghong Architectural Decoration and Installation Engineering
Co. Ltd. (the Company’s construction contractor) whereby Dalian Zhenghong Architectural Decoration and Installation Engineering
Co. Ltd. assigned its rights to the unpaid construction fees owed by CBAK Power of approximately $2.8 million (RMB20,000,000) and
$0.4 million (RMB2,813,810) (collectively $3.2 million, the “Fourth Debt”) to Asia EVK and Mr. Yunfei Li, respectively.
On July 26, 2019, the Company entered into
a cancellation agreement with Mr. Dawei Li, Mr. Yunfei Li and Asia EVK (the creditors). Pursuant to the terms of the cancellation
agreement, Mr. Dawei Li, Mr. Yunfei Li and Asia EVK agreed to cancel the Third Debt and Fourth Debt in exchange for 1,384,717,
2,938,067 and 2,769,435 shares of common stock of the Company, respectively, at an exchange price of $1.05 per share. Upon receipt
of the shares, the creditors will release the Company from any claims, demands and other obligations relating to the Third Debt
and Fourth Debt. The cancellation agreement contains customary representations and warranties of the creditors. The creditors do
not have registration rights with respect to the shares.
On July 24, 2019, the Company entered into
a securities purchase agreement with Atlas Sciences, LLC (the “Lender”), pursuant
to which the Company issued a promissory note (the “Note 1”) to the Lender. The Note has an original principal amount
of $1,395,000, bears interest at a rate of 10% per annum and will mature 12 months after the issuance, unless earlier paid or redeemed
in accordance with its terms. The Company received proceeds of $1,250,000 after an original issue discount of $125,000 and payment
of Lender’s expenses of $20,000.
On October 10, 2019, each of Mr. Shibin
Mao, Ms. Lijuan Wang and Mr. Ping Shen entered into an agreement with CBAK Power and Zhengzhou BAK New Energy Vehicle Co., Ltd.
(the Company’s supplier of which Mr. Xiangqian Li, the former CEO, is a director of this company) whereby Zhengzhou BAK New
Energy Vehicle Co., Ltd. assigned its rights to the unpaid inventories cost owed by CBAK Power of approximately $2.1 million (RMB15,000,000),
$1.0 million (RMB7,380,000) and $1.0 million (RMB7,380,000) (collectively $4.2 million, the “Fifth Debt”) to Mr. Shibin
Mao, Ms. Lijuan Wang and Mr. Ping Shen, respectively.
On October 14, 2019, the Company entered into a cancellation
agreement with Mr. Shangdong Liu, Mr. Shibin Mao, Ms. Lijuan Wang and Mr. Ping Shen (the creditors). Pursuant to the terms of the
cancellation agreement, Mr. Shangdong Liu, Mr. Shibin Mao, Ms. Lijuan Wang and Mr. Ping Shen agreed to cancel and convert the Fifth
Debt and the Unpaid Earnest Money of approximately $1 million (RMB6,720,000) in exchange for 528,053, 3,536,068, 2,267,798 and
2,267,798 shares of common stock of the Company, respectively, at an exchange price of $0.6 per share. Upon receipt of the shares,
the creditors will release the Company from any claims, demands and other obligations relating to the Fifth Debt and the Unpaid
Earnest Money. The cancellation agreement contains customary representations and warranties of the creditors. The creditors do
not have registration rights with respect to the shares.
On December 30, 2019, the Company
entered into a second securities purchase agreement with Atlas Sciences, LLC (the
“Lender”), pursuant to which the Company issued a promissory note (the “Note II”) to the Lender. The
Note II has an original principal amount of $1,670,000, bears interest at a rate of 10% per annum and will mature 12 months
after the issuance, unless earlier paid or redeemed in accordance with its terms. The Company received proceeds of $1,500,000
after an original issue discount of $150,000 and payment of Lender’s expenses of $20,000.
At December 31, 2019, the Company had aggregate
interest-bearing bank loans of approximately $26.1 million, due in 2020 to 2021, in addition to approximately $42.3 million of
other current liabilities.
As of December 31, 2019, the Company had
unutilized committed banking facilities of $4.7 million.
On January 27, 2020, the Company
entered into an exchange agreement (the “First Exchange Agreement”) with Atlas Sciences, LLC (the
“Lender”), pursuant to which the Company and the Lender agreed to (i) partition a new promissory note in the
original principal amount equal to $100,000 (the “Partitioned Promissory Note) from the outstanding balance of certain
promissory note that the Company issued to the Lender on July 24, 2019, which has an original principal amount of $1,395,000,
and (ii) exchange the Partitioned Promissory Note for the issuance of 160,256 shares of the Company’s common stock, par
value $0.001 per share to the Lender.
On February 20, 2020, the Company
entered into a second exchange agreement (the “Second Exchange Agreement”) with Atlas Sciences, LLC (the
“Lender”), pursuant to which the Company and the Lender agreed to (i) partition a new promissory note in the
original principal amount equal to $100,000 (the “Partitioned Promissory Note”) from the outstanding balance of
certain promissory note that the Company issued to the Lender on July 24, 2019, which has an original principal amount of
$1,395,000, and (ii) exchange the Partitioned Promissory Note for the issuance of 207,641 shares of the Company’s
common stock, par value $0.001 per share to the Lender.
In March 2020, the Company obtained another
one-year term facilities from Jilin Province Trust Co. Ltd. with a maximum amount of RMB40.0 million (approximately $5.7 million),
which was secured by land use rights and buildings of Eodos Liga Energy Co., Ltd . Under the facilities, the Company borrowed RMB24.2
million ($3.5 million) on March 13, 2020.
On April 10, 2020, each of Mr. Yunfei Li,
Mr. Ping Shen and Asia EVK entered into an agreement with CBAK Power and BAK SZ, whereby BAK SZ assigned its rights to the unpaid
inventories cost owed by CBAK Power of approximately $1.0 million (RMB7,000,000), $2.2 million (RMB16,000,000) and $1.0 million
(RMB7,300,000) (collectively $4.3 million, the “Sixth Debt”) to Mr. Yunfei Li, Mr. Ping Shen and Asia EVK, respectively.
On April 27, 2020, the Company entered
into a cancellation agreement with Mr. Yunfei Li, Mr. Ping Shen and Asia EVK (the creditors). Pursuant to the terms of the cancellation
agreement, Mr. Yunfei Li, Mr. Ping Shen and Asia EVK agreed to cancel the Sixth Debt in exchange for 2,062,619, 4,714,557 and 2,151,017
shares of common stock of the Company, respectively, at an exchange price of $0.48 per share. Upon receipt of the shares, the creditors
will release the Company from any claims, demands and other obligations relating to the Sixth Debt. The cancellation agreement
contains customary representations and warranties of the creditors. The creditors do not have registration rights with respect
to the shares.
On April 28, 2020, the Company
entered into a third exchange agreement (the “Third Exchange Agreement”) with Atlas Sciences, LLC (the
“Lender”), pursuant to which the Company and the Lender agreed to (i) partition a new promissory note in the
original principal amount equal to $100,000 (the “Partitioned Promissory Note”) from the outstanding balance of
certain promissory note that the Company issued to the Lender on July 24, 2019, which has an original principal amount of
$1,395,000, and (ii) exchange the Partitioned Promissory Note for the issuance of 312,500 shares of the Company’s
common stock, par value $0.001 per share to the Lender.
The Company is currently expanding its
product lines and manufacturing capacity in its Dalian plant, which requires more funding to finance the expansion. The Company
plans to raise additional funds through banks borrowings and equity financing in the future to meet its daily cash demands, if
required.
However, there can be no assurance that
the Company will be successful in obtaining further financing. The Company expects that it will be able to secure more potential
orders from the new energy market, especially from the electric car market and UPS market. The Company believes that with the booming
future market demand in high power lithium ion products, it can continue as a going concern and return to profitability.
The accompanying consolidated financial
statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization
of assets and the settlement of liabilities in the normal course of business. The consolidated financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification
of liabilities that may result from the outcome of this uncertainty related to the Company’s ability to continue as a going
concern.
2.
|
Summary of Significant Accounting Policies and Practices
|
(a) Principles of Consolidation
The consolidated financial statements include
the financial statements of the Company and its subsidiaries up to the date of disposal. All significant intercompany balances
and transactions have been eliminated prior to consolidation.
(b) Cash and Cash Equivalents
Cash consists of cash on hand and in banks
excluding pledged deposits. The Company considers all highly liquid debt instruments, with initial terms of less than three months
to be cash equivalents.
(c) Trade Accounts and Bills Receivable
Trade accounts and bills receivable are
recorded at the invoiced amount, net of allowances for doubtful accounts and sales returns. The allowance for doubtful accounts
is the Company’s best estimate of the amount of probable credit losses in the Company’s existing trade accounts receivable.
The Company determines the allowance based on historical write-off experience, customer specific facts and economic conditions.
Outstanding accounts receivable balances
are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote.
(d) Inventories
Inventories are stated at the lower of
cost or net realizable value. The cost of inventories is determined using the weighted average cost method, and includes expenditures
incurred in acquiring the inventories and bringing them to their existing location and condition. In case of finished goods and
work in progress, the cost includes an appropriate share of production overhead based on normal operating capacity. Net realizable
value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal,
and transportation.
The Company records adjustments to its
inventory for estimated obsolescence or diminution in net realizable value equal to the difference between the cost of the inventory
and the estimated net realizable value. At the point of loss recognition, a new cost basis for that inventory is established, and
subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
(e) Property, Plant and Equipment
Property, plant and equipment (except construction
in progress) are stated at cost less accumulated depreciation and impairment charges. Depreciation is calculated based on the straight-line
method (after taking into account their respective estimated residual values) over the estimated useful lives of the assets as
follows:
Buildings
|
5 – 35 years
|
Machinery and equipment
|
1 – 15 years
|
Office equipment
|
1 – 5 years
|
Motor vehicles
|
5 – 10 years
|
The cost and accumulated depreciation of
property, plant and equipment sold are removed from the consolidated balance sheets and resulting gains or losses are recognized
in the consolidated statements of operations and comprehensive loss.
Construction in progress mainly represents
expenditures in respect of the Company’s corporate campus, including offices, factories and staff dormitories, under construction.
All direct costs relating to the acquisition or construction of the Company’s corporate campus and equipment, including interest
charges on borrowings, are capitalized as construction in progress. No depreciation is provided in respect of construction in progress.
A long-lived asset to be disposed of by
abandonment continues to be classified as held and used until it is disposed of.
(f) Prepaid Land Use Rights
Prior to the adoption of Accounting Standards
Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASC 842”), land use rights are carried at cost and amortized
on a straight-line basis over the period of rights of 50 years. Upon the adoption of ASC 842 on January 1, 2019, land use rights
acquired are assessed in accordance with ASC 842 and recognized in right-of-use assets if they meet the definition of lease.
(g) Foreign Currency Transactions and
Translation
The reporting currency of the Company is the United States dollar
(“US dollar”). The financial records of the Company’s PRC operating subsidiaries are maintained in their local
currency, the Renminbi (“RMB”), which is the functional currency. The financial records of the Company’s subsidiaries
established in other countries are maintained in their local currencies. Assets and liabilities of the subsidiaries are translated
into the reporting currency at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange
rates, and income and expense items are translated using the average rate for the period. The translation adjustments are recorded
in accumulated other comprehensive loss under shareholders’ equity.
Monetary assets and liabilities denominated
in currencies other than the applicable functional currencies are translated into the functional currencies at the prevailing rates
of exchange at the balance sheet date. Nonmonetary assets and liabilities are remeasured into the applicable functional currencies
at historical exchange rates. Transactions in currencies other than the applicable functional currencies during the period are
converted into the functional currencies at the applicable rates of exchange prevailing at the transaction dates. Transaction gains
and losses are recognized in the consolidated statements of operations.
RMB is not a fully convertible currency.
All foreign exchange transactions involving RMB must take place either through the People’s Bank of China (the “PBOC”)
or other institutions authorized to buy and sell foreign exchange. The exchange rates adopted for the foreign exchange transactions
are the rates of exchange quoted by the PBOC, which are determined largely by supply and demand. Translation of amounts from RMB
into US dollars has been made at the following exchange rates for the respective periods:
Year ended December 31, 2018
|
|
Balance sheet, except for equity accounts
|
RMB 6.8783 to US$1.00
|
Income statement and cash flows
|
RMB 6.6282 to US$1.00
|
|
|
Year ended December 31, 2019
|
|
Balance sheet, except for equity accounts
|
RMB 6.9630 to
US$1.00
|
Income statement and cash flows
|
RMB
6.9073 to US$1.00
|
(h) Intangible Assets
Intangible assets are stated in the balance
sheet at cost less accumulated amortization and impairment, if any. The costs of the intangible assets are amortized on a straight-line
basis over their estimated useful lives. The respective amortization periods for the intangible assets are as follows:
Computer software
|
10 years
|
(i) Impairment of Long-lived Assets
Long-lived assets, which include property,
plant and equipment, prepaid land use rights and intangible assets, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of long-lived assets to
be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows,
an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.
Fair value is generally measured based on either quoted market prices, if available, or discounted cash flow analyses.
(j) Revenue Recognition
The Company recognizes revenues when its
customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive
in exchange for those goods. The Company recognizes revenues following the five step model prescribed under ASU No. 2014-09: (i)
identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction
price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or
as) we satisfy the performance obligation.
Revenues from product sales are recognized
when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the
customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period
of the asset that it would have recognized is one year or less or the amount is immaterial.
Revenues from product sales are recorded
net of reserves established for applicable discounts and allowances that are offered within contracts with the Company’s
customers.
Product revenue reserves, which are classified
as a reduction in product revenues, are generally characterized in the categories: discounts and returns. These reserves are based
on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable
as the amount is payable to the Company’s customer.
(k) Cost of Revenues
Cost of revenues consists primarily of
material costs, employee compensation, depreciation and related expenses, which are directly attributable to the production of
products. Write-down of inventories to lower of cost or market is also recorded in cost of revenues.
(l) Income Taxes
Income taxes are accounted for under the
asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and operating loss and tax credit carry forwards. Deferred tax assets are reduced by a valuation allowance to the extent management
concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using
enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations and comprehensive
loss in the period that includes the enactment date.
The impact of an uncertain income tax positions
on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the
relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.
Interest and penalties on income taxes will be classified as a component of the provisions for income taxes.
The significant uncertain tax position
arose from the subsidies granted by the local government for the Company’s PRC subsidiary, which may be modified or challenged
by the central government or the tax authority. A reconciliation of January 1, 2018, through December 31, 2019 amount of unrecognized
tax benefits excluding interest and penalties (“Gross UTB”) is as follows:
|
|
Gross UTB
|
|
|
Surcharge
|
|
|
Net UTB
|
|
Balance as of January 1, 2018
|
|
$
|
7,537,273
|
|
|
$
|
-
|
|
|
$
|
7,537,273
|
|
Decrease in unrecognized tax benefits taken in current period
|
|
|
(407,988
|
)
|
|
|
-
|
|
|
|
(407,988
|
)
|
Balance as of December 31, 2018
|
|
|
7,129,285
|
|
|
|
-
|
|
|
|
7,129,285
|
|
Decrease in unrecognized tax benefits taken in current year
|
|
|
(86,703
|
)
|
|
|
-
|
|
|
|
(86,703
|
)
|
Balance as of December 31, 2019
|
|
$
|
7,042,582
|
|
|
$
|
-
|
|
|
$
|
7,042,582
|
|
As of December 31, 2018 and 2019, the Company had not accrued
any interest and penalties related to unrecognized tax benefits.
(m) Research and Development and Advertising
Expenses
Research and development and advertising
expenses are expensed as incurred. Research and development expenses consist primarily of remuneration for research and development
staff, depreciation and material costs for research and development.
(n) Bills Payable
Bills payable represent bills issued by
financial institutions to the Company’s vendors. The Company’s vendors receive payments from the financial institutions
directly upon maturity of the bills and the Company is obliged to repay the face value of the bills to the financial institutions.
(o) Warranties
The Company provides a manufacturer’s
warranty on all its products. It accrues a warranty reserve for the products sold, which includes management’s best estimate
of the projected costs to repair or replace items under warranty. These estimates are based on actual claims incurred to date and
an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain given the Company’s
relatively short history of sales of its current products, and changes to its historical or projected warranty experience may cause
material changes to the warranty reserve in the future. The portion of the warranty reserve expected to be incurred within the
next 12 months is included within accrued liabilities and other while the remaining balance is included within other long-term
liabilities on the consolidated balance sheets.
(p) Government Grants
The Company’s subsidiaries in China
receive government subsidies from local Chinese government agencies in accordance with relevant Chinese government policies. In
general, the Company presents the government subsidies received as part of other income unless the subsidies received are earmarked
to compensate a specific expense, which have been accounted for by offsetting the specific expense, such as research and development
expense, interest expenses and removal costs. Unearned government subsidies received are deferred for recognition until the criteria
for such recognition could be met.
Grants applicable to land are amortized
over the life of the depreciable facilities constructed on it. For research and development expenses, the Company matches and offsets
the government grants with the expenses of the research and development activities as specified in the grant approval document
in the corresponding period when such expenses are incurred.
(q) Share-based Compensation
The Company adopted the provisions of ASC
Topic 718 which requires the Company to measure and recognize compensation expenses for an award of an equity instrument based
on the grant-date fair value. The cost is recognized over the vesting period (or the requisite service period). ASC Topic 718 also
requires the Company to measure the cost of a liability classified award based on its current fair value. The fair value of the
award will be remeasured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite
service period are recognized as compensation cost over that period. Further, ASC Topic 718 requires the Company to estimate forfeitures
in calculating the expense related to stock-based compensation.
The fair value of each option award is
estimated on the date of grant using the Black-Scholes Option Valuation Model. The expected volatility was based on the historical
volatilities of the Company’s listed common stocks in the United States and other relevant market information. The Company
uses historical data to estimate share option exercises and employee departure behavior used in the valuation model. The expected
terms of share options granted is derived from the output of the option pricing model and represents the period of time that share
options granted are expected to be outstanding. Since the share options once exercised will primarily trade in the U.S. capital
market, the risk-free rate for periods within the contractual term of the share option is based on the U.S. Treasury yield curve
in effect at the time of grant.
(r) Retirement and Other Postretirement Benefits
Contributions to retirement schemes (which
are defined contribution plans) are charged to cost of revenues, research and development expenses, sales and marketing expenses
and general and administrative expenses in the statement of operations and comprehensive loss as and when the related employee
service is provided.
(s) Loss per Share
Basic and diluted loss per share is computed
by dividing net loss by the weighted average number of ordinary shares outstanding during the year.
(t) Use of Estimates
The preparation of the consolidated financial
statements in accordance with US GAAP requires management of the Company to make a number of estimates and assumptions relating
to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those
estimates. Significant items subject to such estimates and assumptions include revenue recognition, the recoverability of the carrying
amount of long-lived assets, unrecognized tax benefits, impairment on inventories, valuation allowance for receivables and deferred
tax assets, provision for warranty and sales returns, and valuation of share-based compensation expense. Actual results could differ
from those estimates.
(u) Segment Reporting
The Company uses the “management
approach” in determining reportable operating segments. The management approach considers the internal organization and reporting
used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source
for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operating
results solely by monthly revenue of li-ion rechargeable batteries (but not by sub product type or geographic area) and operating
results of the Company and, as such, the Company has determined that the Company has one operating segment as defined by ASC Topic
280 “Segment Reporting”.
(v) Commitments and Contingencies
Liabilities for loss contingencies arising
from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has
been incurred and the amount of the assessment can be reasonably estimated.
(w) Recently Issued Accounting Standards
Newly
adopted accounting pronouncements
On February 25, 2017, the Financial Accounting
Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842). It requires that a lessee recognize the assets and
liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make
lease payments (the lease liability) and a right-of-use asset (“ROU asset”) representing its right to use the underlying
asset for the lease term. The Company adopted this guidance in the first quarter of 2019 using the modified retrospective approach,
electing the package of practical expedients, and the practical expedient to not separate lease and non-lease components for data
center operating leases. The Company also elected the optional transition method that permits adoption of the new standard prospectively,
as of the effective date, without adjusting comparative periods presented. The Company did not have operating leases at January
1, 2019 and December 31, 2019 that require recognition of ROU assets and leases liabilities. The adoption did not impact the Company’s
beginning accumulated deficit, and did not have a material impact on the Company’s consolidated statements of income and
statements of cash flows. For finance leases , the Company recognizes straight-line amortization of the ROU asset and interest
on the lease liability. This is consistent with the historical recognition of finance leases, which was unchanged upon adoption
of ASC 842.
Prior to the adoption of ASC 842, these land use rights and
are amortized on a straight-line basis over the term of the land use right. Upon the adoption of ASC 842 on January 1, 2019, land
use rights acquired are assessed in accordance with ASC 842 and recognized in right-of-use assets if they meet the definition of
lease.
Recent
accounting pronouncements not yet adopted
In June 2016, the FASB issued ASU No.
2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial
assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.
This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured
at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its consolidated
financial statements and related disclosures.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill
Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation.
A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed
the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill
impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests
performed on testing dates after January 1, 2017. The Company currently intends to adopt this guidance for the fiscal year beginning
January 1, 2020, and does not anticipate that the adoption of this guidance will have a material impact on its financial statements
or disclosures because the Company does not currently have any recorded goodwill.
In August 2018,
the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for
Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments
in the fair value hierarchy. The guidance is effective for fiscal years beginning after December 15, 2019, and interim
periods within those fiscal years, with early adoption permitted for any eliminated or modified disclosures. The adoption
of this standard is not expected to have a material impact on the Company’s consolidated financial statements or disclosures.
In December 2019,
the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates
certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application
among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods
within those fiscal years, with early adoption permitted. Upon adoption, the Company must apply certain aspects of this standard
retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect
adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is evaluating the impact this update
will have on its financial statements.
Other accounting
standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.
Pledged deposits as of December 31, 2018 and 2019 consisted
of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Pledged deposits with banks for:
|
|
|
|
|
|
|
Bills payable
|
|
$
|
16,014,118
|
|
|
$
|
4,021,255
|
|
Others*
|
|
|
1,225,705
|
|
|
|
1,499,736
|
|
|
|
$
|
17,239,823
|
|
|
$
|
5,520,991
|
|
*
|
On July 7, 2016, Shenzhen Huijie Purification System Engineering Co., Ltd (“Shenzhen Huijie”), one of the Company’s contractors, filed a lawsuit against CBAK Power in the Peoples’ Court of Zhuanghe City, Dalian for the failure to pay pursuant to the terms of the contract and for entrusting part of the project to a third party without their prior consent. The plaintiff sought a total amount of $1,210,799 (RMB8,430,792), including construction costs of $0.9 million (RMB6.3 million), interest of $29,812 (RMB0.2 million) and compensation of $0.3 million (RMB1.9 million), which were already accrued for as of September 30, 2016. On September 7, 2016, upon the request of Shenzhen Huijie, the Court froze CBAK Power’s bank deposits totaling $1,210,799 (RMB8,430,792) for a period of one year. Further on September 1, 2017, upon the request of Shenzhen Huijie, the Court froze the bank deposits for another year until August 31, 2018. The Court further froze the bank deposits for another year until August 27, 2019 upon the request of Shenzhen Huijie on August 27, 2018.Upon the request from Shenzhen Huijie, the Court again froze the bank deposits for another year until August 27, 2020.
|
On July 25, 2019, CBAK Power
received notice from Shenzhen Court of International Arbitration that Shenzhen Xinjiatuo Automobile Technology Co., Ltd filed arbitration
against the Company for the failure to pay pursuant to the terms of the contract. The plaintiff sought a total amount of $0.16
million (RMB1,112,269), including equipment cost of $0.14 million (RMB976,000) and interest of $0.02 million (RMB136,269). As of
December 31, 2019, the Company has accrued for the equipment cost of $0.14 million (RMB976,000). On August 9, 2019, upon the request
of Shenzhen Xinjiatuo Automobile Technology Co., Ltd, Shenzhen Court of International Arbitration froze CBAK Power’s bank
deposits totaling $0.16 million (RMB1,117,269) for a period of one year to August 2020.
In early September, 2019, several
employees of CBAK Suzhou files arbitration with Suzhou Industrial Park Labor Disputes Arbitration Commission against CBAK Suzhou
for failure to pay their salaries in time. The employees seek for a payment including salaries of $89,295 (RMB 638,359) and compensation
of $75,956 (RMB 543,000), totaling $0.17 million (RMB 1,181,359). In addition, upon the request of the employees, the court of
Suzhou Industrial Park ruled that bank deposits of CBAK Suzhou totaling $0.17 million (RMB 1,181,359) should be frozen for a period
of one year. As of December 31, 2019, $6 (RMB43) was frozen by bank. Subsequent to December 31, 2019, the Company has settled $0.16
million (RMB1,084,717).
In December, 2019, CBAK Power
received notice from Court of Zhuanghe that Dalian Construction Electrical Installation Engineering Co., Ltd. (“Dalian Construction”)
filed a lawsuit against CBAK Power for the failure to pay pursuant to the terms of the construction contract. Dalian Construction
sought a total amount of $99,251 (RMB691,086) and interest $1,884 (RMB12,934). As of December 31, 2019, the Company has accrued
the construction cost of $99,251 (RMB691,086). Upon the request of Dalian Construction for property preservation, the Court of
Zhuanghe ordered to freeze CBAK Power’s bank deposits totaling $101,135 (RMB704,020) for a period of one year to December
2020. As of December 31, 2019, $94,965 (RMB661,240) was frozen by bank.
In February 2020, CBAK Power received notice from Court of Zhuanghe
that Dongguan Shanshan Battery Material Co., Ltd (“Dongguan Shanshan”) filed lawsuit against CBAK Power for the failure
to pay pursuant to the terms of the purchase contract. Dongguan Shanshan sought a total amount of $0.6 million (RMB 4,434,209),
which was already accrued for as of December 31, 2019. Upon the request of Dongguan Shanshan for property preservation, the Court
of Zhuanghe ordered to freeze CBAK Power’s bank deposits totaling $0.6 million (RMB4,434,209) for a period of one year to
December 17, 2020. As of December 31, 2019, $33,504 (RMB233,295) was frozen by bank.
4.
|
Trade Accounts and Bills Receivable, net
|
Trade accounts and bills receivable as of December 31, 2018
and 2019:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Trade accounts receivable
|
|
$
|
19,054,863
|
|
|
$
|
12,517,626
|
|
Less: Allowance for doubtful accounts
|
|
|
(3,657,173
|
)
|
|
|
(4,650,686
|
)
|
|
|
|
15,397,690
|
|
|
|
7,866,940
|
|
Bills receivable
|
|
|
6,353,342
|
|
|
|
85,480
|
|
|
|
$
|
21,751,032
|
|
|
$
|
7,952,420
|
|
Included in trade accounts and bills receivables
are retention receivables of $1,119,490 and $2,159,356 as of December 31, 2018 and 2019. Retention receivables are interest-free
and recoverable at the end of the retention period of three to five years.
An analysis of the allowance for doubtful accounts is as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Balance at beginning of year
|
|
$
|
3,700,922
|
|
|
$
|
3,657,173
|
|
Provision for the year
|
|
|
474,950
|
|
|
|
1,613,402
|
|
Reversal - recoveries by cash
|
|
|
(312,462
|
)
|
|
|
(567,042
|
)
|
Charged to consolidated statements of operations and comprehensive (loss) income
|
|
$
|
162,488
|
|
|
$
|
1,046,360
|
|
Foreign exchange adjustment
|
|
|
(206,237
|
)
|
|
|
(52,847
|
)
|
Balance at end of year
|
|
$
|
3,657,173
|
|
|
$
|
4,650,686
|
|
Inventories as of December 31, 2018 and 2019 consisted of the
following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Raw materials
|
|
$
|
1,675,383
|
|
|
$
|
482,836
|
|
Work in progress
|
|
|
2,737,415
|
|
|
|
1,254,490
|
|
Finished goods
|
|
|
5,209,563
|
|
|
|
6,929,388
|
|
|
|
$
|
9,622,361
|
|
|
$
|
8,666,714
|
|
During the years ended December 31, 2018
and 2019, write-downs of obsolete inventories to lower of cost or net realizable value of $160,469 and $834,362, respectively,
were charged to cost of revenues.
6.
|
Prepayments and Other Receivables
|
Prepayments and other receivables as of December 31, 2018 and
2019 consisted of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Value added tax recoverable
|
|
$
|
5,359,275
|
|
|
$
|
4,124,624
|
|
Prepayments to suppliers
|
|
|
1,157,966
|
|
|
|
60,090
|
|
Deposits
|
|
|
56,974
|
|
|
|
63,184
|
|
Staff advances
|
|
|
54,207
|
|
|
|
53,731
|
|
Prepaid operating expenses
|
|
|
309,415
|
|
|
|
317,151
|
|
Others
|
|
|
212,617
|
|
|
|
124,133
|
|
|
|
|
7,150,454
|
|
|
|
4,742,913
|
|
Less: Allowance for doubtful accounts
|
|
|
(7,000
|
)
|
|
|
(7,000
|
)
|
|
|
$
|
7,143,454
|
|
|
$
|
4,735,913
|
|
7.
|
Payables to former subsidiaries, net
|
Payables to former subsidiaries as of December 31, 2018 and
2019 consisted of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
BAK Tianjin
|
|
$
|
972,913
|
|
|
$
|
-
|
|
BAK Shenzhen
|
|
|
3,328,733
|
|
|
|
1,483,352
|
|
|
|
$
|
4,301,646
|
|
|
$
|
1,483,352
|
|
Balance as of December 31, 2018 and 2019
consisted of payables for purchase of inventories from BAK Tianjin and BAK Shenzhen. From time to time, the Company purchased from
these former subsidiaries products that it did not produce to meet the needs of its customers.
In the third quarter of 2018, the Company
disposed of its patented proprietary technology of high capacity prismatic batteries to BAK Shenzhen at a cash consideration of
$12,845,795 (approximately RMB85.1 million). The Company recognized a net gain of $12,118,675, which was included in other income
for year ended December 31, 2018. The Company and BAK Shenzhen agreed to offset the cash consideration of $12,845,795 against the
amount owed by the Company to BAK Shenzhen.
The above balance is unsecured and non-interest bearing and
repayable on demand.
|
8.
|
Property,
Plant and Equipment, net
|
Property, plant and equipment as of December
31, 2018 and 2019 consisted of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Buildings
|
|
$
|
23,626,924
|
|
|
$
|
27,262,301
|
|
Machinery and equipment
|
|
|
22,159,752
|
|
|
|
22,719,932
|
|
Office equipment
|
|
|
218,581
|
|
|
|
204,196
|
|
Motor vehicles
|
|
|
204,368
|
|
|
|
161,980
|
|
|
|
|
46,209,625
|
|
|
|
50,348,409
|
|
Impairment
|
|
|
(1,840,596
|
)
|
|
|
(4,126,152
|
)
|
Accumulated depreciation
|
|
|
(5,460,526
|
)
|
|
|
(8,044,692
|
)
|
Carrying amount
|
|
$
|
38,908,503
|
|
|
$
|
38,177,565
|
|
During the years ended December 31, 2018
and 2019, the Company incurred depreciation expense of $2,442,428 and $2,728,224, respectively.
The Company has not yet obtained the property
ownership certificates of the buildings in its Dalian manufacturing facilities with a carrying amount of $21,749,145 and $24,671,045
as of December 31, 2018 and 2019, respectively. The Company built its facilities on the land for which it had already obtained
the related land use right. The Company has submitted applications to the Chinese government for the ownership certificates on
the completed buildings located on these lands. However, the application process takes longer than the Company expected and it
has not obtained the certificates as of the date of this report. However, since the Company has obtained the land use right in
relation to the land, the management believe the Company has legal title to the buildings thereon albeit the lack of ownership
certificates.
During the course of the Company’s strategic review of
its operations in the years ended December 31, 2018 and 2019, the Company assessed the recoverability of the carrying value of
certain property, plant and equipment which resulted in impairment losses of approximately $0.9 million and $2.3 million, respectively.
The impairment charge represented the excess of carrying amounts of the Company's property, plant and equipment over the estimated
fair value of the Company's production facilities in Dalian primarily for the production of high-power lithium batteries.
9.
|
Construction
in Progress
|
Construction in progress as of December
31, 2018 and 2019 consisted of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Construction in progress
|
|
$
|
23,562,557
|
|
|
$
|
21,613,577
|
|
Prepayment for acquisition of property, plant and equipment
|
|
|
1,439,256
|
|
|
|
94,047
|
|
Carrying amount
|
|
$
|
25,001,813
|
|
|
$
|
21,707,624
|
|
Construction in progress as of December
31, 2018 and 2019 mainly comprised capital expenditures for the construction of the facilities and production lines of CBAK Power.
For the years ended December 31, 2018
and 2019, the Company capitalized interest of $1,257,136 and $1,516,244, respectively, to the cost of construction in progress.
|
(a)
|
Prepaid Land Use Rights, net
|
Prepaid land use rights as of December 31, 2018 and 2019 consisted
of the followings:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Prepaid land use rights
|
|
$
|
8,167,587
|
|
|
$
|
-
|
|
Accumulated amortization
|
|
|
(721,470
|
)
|
|
|
-
|
|
|
|
$
|
7,446,117
|
|
|
$
|
-
|
|
Less: Classified as current assets
|
|
|
(163,352
|
)
|
|
|
-
|
|
|
|
$
|
7,282,765
|
|
|
$
|
-
|
|
Prepaid land use rights
|
|
$
|
8,167,587
|
|
Accumulated amortization
|
|
|
(721,470
|
)
|
|
|
$
|
7,446,117
|
|
Less: Classified as right-of-use assets upon application of ASC 842
|
|
|
(7,446,117
|
)
|
At January 1, 2019 and December 31, 2019
|
|
$
|
-
|
|
Pursuant to a land use rights acquisition
agreement dated August 10, 2014, the Company acquired the rights to use a piece of land with an area of 153,832m2 in
Dalian Economic Zone for 50 years up to August 9, 2064, at a total consideration of $7,621,715 (RMB53.1 million). Other incidental
costs incurred totaled $446,541 (RMB3.1 million).
Amortization expenses of the prepaid land
use rights were $169,516 for the year ended December 31, 2018.
|
|
Prepaid land lease payments
|
|
Balance as of January 1, 2019
|
|
$
|
7,446,117
|
|
Amortization charge for the year
|
|
|
(162,666
|
)
|
Foreign exchange adjustment
|
|
|
(89,256
|
)
|
Balance as of December 31, 2019
|
|
$
|
7,194,195
|
|
Lump sum payments was made upfront to
acquire the leased land from the owners with lease period for 50 years up to August 9, 2064, and no ongoing payments will be made
under the terms of these land leases.
11.
|
Intangible Assets,
net
|
Intangible assets as of December 31, 2018 and 2019 consisted
of the followings:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Computer software at cost
|
|
$
|
31,025
|
|
|
|
30,648
|
|
Accumulated amortization
|
|
|
(10,156
|
)
|
|
|
(15,470
|
)
|
|
|
$
|
20,869
|
|
|
|
15,178
|
|
Amortization expenses were $3,383 and $5,482 for the years ended
December 31, 2018 and 2019, respectively.
|
12.
|
Trade
Accounts and Bills Payable
|
Trade accounts and bills payable as of December 31, 2018 and
2019 consisted of the followings:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Trade accounts payable
|
|
$
|
23,134,269
|
|
|
$
|
11,157,014
|
|
Bills payable
|
|
|
|
|
|
|
|
|
– Bank acceptance bills
|
|
|
28,911,556
|
|
|
|
3,915,094
|
|
– Commercial acceptance bills
|
|
|
449,238
|
|
|
|
-
|
|
|
|
$
|
52,495,063
|
|
|
$
|
15,072,108
|
|
All the bills payable are of trading nature and will mature
within one year from the issue date.
The bank acceptance bills were pledged by:
(i)
|
the Company’s
bank deposits (Note 3); and
|
(ii)
|
$6,353,342 and nil
of the Company’s bills receivable as of December 31, 2018 and 2019, respectively (Note 4).
|
Bank
loans:
Bank borrowings as of December 31, 2018 and 2019 consisted
of the followings:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Current maturities of long-term bank loans
|
|
$
|
3,659,324
|
|
|
$
|
16,574,752
|
|
Long-term bank borrowings
|
|
|
20,614,194
|
|
|
|
9,519,029
|
|
|
|
$
|
24,273,518
|
|
|
$
|
26,093,781
|
|
On June 14, 2016, the Company renewed
its banking facilities from Bank of Dandong for loans with a maximum amount of RMB130 million (approximately $18.7 million), including
three-year long-term loans and three-year revolving bank acceptance and letters of credit bills for the period from June 13, 2016
to June 12, 2019. The banking facilities were guaranteed by Mr. Yunfei Li (“Mr. Li”), the Company’s CEO, and
Ms. Qinghui Yuan, Mr. Li’s wife, Mr. Xianqian Li, the Company’s former CEO, Ms. Xiaoqiu Yu, the wife of the Company’s
former CEO and Shenzhen BAK Battery Co., Ltd., the Company’s former subsidiary (“Shenzhen BAK”). Under the banking
facilities, the Company borrowed various three-year term bank loans that totaled RMB126.8 million (approximately $18.2 million),
bearing fixed interest at 7.2% per annum. The Company also borrowed various bank acceptance of RMB3.2 million (approximately $0.5
million) under the facilities. The Company repaid the loan and bank acceptance bills on June 12, 2018.
In the second quarter of 2018, the Company
obtained additional banking facilities from Bank of Dandong with bank acceptance bills of RMB5.0 million (approximately $0.7 million)
for a term until October 17, 2018. The Company repaid the bank acceptance bills on October 17, 2018.
On August 2, 2017, the Company obtained
one-year term facilities from China Merchants Bank with a maximum amount of RMB100 million (approximately $14.4 million) including
revolving loans, trade finance, notes discount, and acceptance of commercial bills etc. Any amount drawn under the facilities
requires security in the form of cash or banking acceptance bills receivable of at least the same amount. Under the facilities,
the Company borrowed a series of bank acceptance bills from China Merchants Bank totaled RMB21.3 million (approximately $3.1 million)
for a term until October 25, 2018. The facilities expired on August 1, 2018 and the Company repaid the bills on October 25, 2018.
On November 9, 2017, the Company obtained
banking facilities from China Everbright Bank Dalian Branch with a maximum amount of RMB100 million (approximately $14.4 million)
with the term expiring on November 7, 2018. The banking facilities were secured by the 100% equity in CBAK Power held by BAK Asia.
Under the facilities, bank deposits of approximately 50% were required to secure against this letter of credit. The Company borrowed
a net letter of credit of RMB96.1 million (approximately $13.8 million) to November 7, 2018. The Company repaid the letter of
credit on November 7, 2018.
On June 4, 2018, the Company obtained banking facilities from
China Everbright Bank Dalian Branch with a maximum amount of RMB200 million (approximately $28.7 million) with the term from June
12, 2018 to June 10, 2021, bearing interest at 130% of benchmark rate of the People’s Bank of China (“PBOC”)
for three-year long-term loans, at current rate 6.175% per annum. The loans are repayable in six installments of RMB0.8 million
($0.12 million) on December 10, 2018, RMB24.3 million ($3.50 million) on June 10, 2019, RMB0.8 million ($0.12 million) on December
10, 2019, RMB74.7 million ($10.7 million) on June 10, 2020, RMB0.8 million ($0.12 million) on December 10, 2020 and RMB66.3 million
($9.6 million) on June 10, 2021. The Company repaid the bank loan of RMB0.8 million ($0.12 million) in December 2018, RMB24.3 million
($3.50 million) in June 2019 and RMB0.8 million ($0.12 million) in December 2019. Under the facilities, the Company borrowed RMB141.8
million (approximately $20.4 million) as of December 31, 2019. The facilities were secured by the Company’s land use rights,
buildings, machinery and equipment. The Company repaid the bank loan of RMB0.8 million ($0.12 million), RMB24.3 million ($3.5 million)
and RMB0.8 million ($0.12 million) on December 2018, June 2019 and December 2019 respectively.
Further, in August 2018, the Company borrowed
a total of RMB60 million (approximately $8.6 million) in the form of bills payable from China Everbright Bank Dalian Branch for
a term until August 14, 2019, which was secured by the Company’s cash totaled $8.6 million. The Company discounted these
two bills payable of even date to China Everbright Bank at a rate of 4.0%. The Company repaid these bills payable in August 2019.
On August 22, 2018, the Company obtained
one-year term facilities from China Everbright Bank Dalian Branch with a maximum amount of RMB100 million (approximately $14.4
million) including revolving loans, trade finance, notes discount, and acceptance of commercial bills etc. Any amount drawn under
the facilities requires security in the form of cash or banking acceptance bills receivables of at least the same amount. Under
the facilities, as of December 31, 2018, the Company borrowed a series of bank acceptance bills totaled RMB28.8 million (approximately
$4.1 million) for a term until March 7, 2019, which was secured by bills receivable of $4.1 million. The Company repaid the bank
acceptance bills on March 7, 2019.
In November 2018, the Company borrowed
a total of RMB100 million (approximately $14.4 million) in the form of bills payable from China Everbright Bank Dalian Branch
for a term until November 12, 2019, which was secured by the Company’s cash totaled RMB 50 million (approximately $7.2 million)
and the 100% equity in CBAK Power held by BAK Asia. The Company discounted the bills payable of even date to China Everbright
Bank at a rate of 4.0%. The Company repaid these bills payable in November 2019.
The Company also borrowed a series of
acceptance bills from Industrial Bank Co., Ltd. Dalian Branch totaled RMB1.5 million (approximately $0.2 million) for various
terms through May 21, 2019, which was secured by bills receivable of RMB1.5 million (approximately $0.2 million). The Company
repaid the bank acceptance bills on May 21, 2019.
In October 2019, the Company borrowed
a total of RMB28 million (approximately $4.0 million) in the form of bills payable from China Everbright Bank Dalian Branch for
a term until October 15, 2020, which was secured by the Company’s cash totaled RMB28 million (approximately $4.0 million).
The Company discounted these bills payable of even date to China Everbright Bank at a rate of 3.30%.
In December 2019, the Company obtained banking facilities from
China Everbright Bank Dalian Friendship Branch totaled RMB39.9 million (approximately $5.7 million) for a term until November 6,
2020, bearing interest at 5.655% per annum. The facility was secured by 100% equity in CBAK Power held by BAK Asia and buildings
of Hubei BAK Real Estate Co., Ltd., which Mr. Yunfei Li (“Mr. Li”), the Company’s CEO holding 15% equity interest.
Under the facilities, the Company borrowed RMB39.9 million (approximately $5.7 million) on December 30, 2019.
The facilities were secured by the Company’s
assets with the following carrying amounts:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Pledged deposits (note 3)
|
|
$
|
16,014,118
|
|
|
$
|
4,021,255
|
|
Prepaid land use rights (note 10)
|
|
|
7,446,117
|
|
|
|
-
|
|
Right-of-use assets (note 10)
|
|
|
-
|
|
|
|
7,194,195
|
|
Buildings
|
|
|
17,501,902
|
|
|
|
17,683,961
|
|
Machinery and equipment
|
|
|
10,206,100
|
|
|
|
7,196,810
|
|
Bills receivable (note 4)
|
|
|
6,353,342
|
|
|
|
-
|
|
|
|
$
|
57,521,579
|
|
|
$
|
36,096,221
|
|
As of December 31, 2019, the Company had unutilized committed
banking facilities of $4.7 million.
During the years ended December 31, 2018
and 2019, interest of $2,270,593 and $2,293,440 were incurred on the Company’s bank borrowings, respectively.
Other short-term loans:
Other short-term loans as of December 31, 2018 and 2019 consisted
of the following:
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
Note
|
|
|
2018
|
|
|
2019
|
|
Advance from related parties
|
|
|
|
|
|
|
|
|
|
– Tianjin BAK New Energy Research Institute Co., Ltd (“Tianjin New Energy”)
|
|
|
(a)
|
|
|
$
|
11,095,070
|
|
|
$
|
-
|
|
– Mr. Xiangqian Li, the Company’s Former CEO
|
|
|
(b)
|
|
|
|
100,000
|
|
|
|
100,000
|
|
– Mr. Yunfei Li
|
|
|
(c)(e)
|
|
|
|
116,307
|
|
|
|
212,470
|
|
– Shareholders
|
|
|
(d)(e)
|
|
|
|
2,035,381
|
|
|
|
86,679
|
|
|
|
|
|
|
|
|
13,346,758
|
|
|
|
399,149
|
|
Advances from unrelated third party
|
|
|
|
|
|
|
|
|
|
|
|
|
– Mr. Wenwu Yu
|
|
|
(f)
|
|
|
|
146,813
|
|
|
|
30,135
|
|
– Ms. Longqian Peng
|
|
|
(f)
|
|
|
|
654,230
|
|
|
|
646,273
|
|
– Mr. Shulin Yu
|
|
|
(g)
|
|
|
|
-
|
|
|
|
517,018
|
|
– Jilin Province Trust Co. Ltd
|
|
|
(h)
|
|
|
|
-
|
|
|
|
5,687,204
|
|
– Suzhou Zhengyuanwei Needle Ce Co., Ltd
|
|
|
(i)
|
|
|
|
-
|
|
|
|
71,808
|
|
|
|
|
|
|
|
|
801,043
|
|
|
|
6,952,438
|
|
|
|
|
|
|
|
$
|
14,147,801
|
|
|
$
|
7,351,587
|
|
(a)
|
The Company received
advances from Tianjin New Energy, a related company under the control of Mr. Xiangqian Li, the Company’s former CEO,
which was unsecured, non-interest bearing and repayable on demand. On November 1, 2016, Mr. Xiangqian Li ceased to be a shareholder
but remained as a general manager of Tianjin New Energy.
|
|
|
|
On January 7, 2019, each of Mr.
Dawei Li and Mr. Yunfei Li (the Company’s CEO) entered into an agreement with CBAK Power and Tianjin New Energy
whereby Tianjin New Energy assigned its rights to loans to CBAK Power of approximately $3.4 million (RMB23,980,950) and
$1.7 million (RMB11,647,890) (collectively $5.1 million, the “First Debt”) to Mr. Dawei Li and Mr. Yunfei
Li, respectively.
On January 7, 2019, the Company
entered into a cancellation agreement (note 1) with Mr. Dawei Li and Mr. Yunfei Li (the creditors). Pursuant to the terms
of the cancellation agreement, Mr. Dawei Li and Mr. Yunfei Li agreed to cancel the First Debt in exchange for 3,431,373
and 1,666,667 shares of common stock of the Company, respectively, at an exchange price of $1.02 per share. Upon receipt
of the shares, the creditors will release the Company from any claims, demands and other obligations relating to the First
Debt.
On April 26, 2019, each of Mr.
Jun Lang, Ms. Jing Shi and Asia EVK Energy Auto Limited (“Asia EVK”) entered into an agreement with CBAK Power
and Tianjin New Energy whereby Tianjin New Energy assigned its rights to loans to CBAK Power of approximately $0.3 million
(RMB2,225,082), $0.1 million (RMB 912,204) and $5.2 million (RMB35,406,036) (collectively $5.7 million, the “Second
Debt”) to Mr. Jun Lang, Ms. Jing Shi and Asia EVK, respectively.
On April 26, 2019, the Company
entered into a cancellation agreement (note 1) with Mr. Jun Lang, Ms. Jing Shi and Asia EVK (the creditors). Pursuant
to the terms of the cancellation agreement, the creditors agreed to cancel the Second Debt in exchange for 300,534, 123,208
and 4,782,163 shares of common stock of the Company, respectively, at an exchange price of $1.1 per share. Upon receipt
of the shares, the creditors will release the Company from any claims, demands and other obligations relating to the Second
Debt.
|
(b)
|
Advances from Mr.
Xiangqian Li, the Company’s former CEO, was unsecured, non-interest bearing and repayable on demand.
|
(c)
|
Advances from Mr.
Yunfei Li, the Company’s CEO, was unsecured, non-interest bearing and repayable on demand.
|
(d)
|
The earnest money paid by certain
shareholders in relation to share purchase (note 1) were unsecured, non-interest bearing and repayable on demand.
In 2019, according to the investment
agreements and agreed by the investors, the Company returned partial earnest money of $966,579 (approximately RMB6.7 million)
to these investors.
On October 14, 2019, the Company
entered into a cancellation agreement with Mr. Shangdong Liu, Mr. Shibin Mao, Ms. Lijuan Wang and Mr. Ping Shen (the creditors).
Pursuant to the terms of the cancellation agreement, Mr. Shangdong Liu, Mr. Shibin Mao, Ms. Lijuan Wang and Mr. Ping Shen
agreed to cancel and convert the Fifth Debt (note 1) and the Unpaid Earnest Money in exchange for 528,053, 3,536,068,
2,267,798 and 2,267,798 shares of common stock of the Company, respectively, at an exchange price of $0.6 per share. Upon
receipt of the shares, the creditors will release the Company from any claims, demands and other obligations relating
to the Fifth Debt and the Unpaid Earnest Money.
As of December 31, 2019, earnest
money of $86,679 remained outstanding.
|
|
|
(e)
|
On June 28, 2019, each of Mr.
Dawei Li and Mr. Yunfei Li entered into an agreement with CBAK Power to loans approximately $1.4 million (RMB10,000,000)
and $2.5 million (RMB18,000,000) respectively to CBAK Power for a term of six months (collectively $3.9 million, the “Third
Debt”). The loan was unsecured, non-interest bearing and repayable on demand. On July 26, 2019, the Company entered
into a cancellation agreement with Mr. Dawei Li, Mr. Yunfei Li and Asia EVK (the creditors). Pursuant to the terms of
the cancellation agreement, Mr. Dawei Li, Mr. Yunfei Li and Asia EVK agreed to cancel the Third Debt and Fourth Debt (note
1) in exchange for 1,384,717, 2,938,067 and 2,769,435 shares of common stock of the Company, respectively, at an exchange
price of $1.05 per share. Upon receipt of the shares, the creditors will release the Company from any claims, demands
and other obligations relating to the Third Debt and Fourth Debt.
|
(f)
|
Advances from unrelated third
parties were unsecured, non-interest bearing and repayable on demand.
|
(g)
|
On June 25, 2019,
the Company entered into a loan agreement with Mr. Shulin Yu, an unrelated party, to loan RMB3.6 million (approximately $0.5
million) for a term of one year, bearing annual interest of 10% and the repayment was guaranteed by Mr. Yunfei Li (the Company’s
CEO) and Mr. Wenwu Wang (the Company’s former CFO). As of December 31, 2019, the Company borrowed RMB3.6 million (approximately
$0.5 million).
|
|
|
(h)
|
In January 2019, the Company obtained
one-year term facilities from Jilin Province Trust Co. Ltd. with a maximum amount of RMB40.0 million (approximately $5.8
million), which was secured by land use rights and buildings of Eodos Liga Energy Co., Ltd. Under the facilities,
the Company borrowed a total of RMB39.6 million ($5.7 million) in 2019, bearing annual interest from 11.3% to 11.6%. Subsequent
to December 31, 2019, the Company fully repaid the loan principal and accrued interest.
|
(i)
|
In 2019, the Company
entered into a short term loan agreement with Suzhou Zhengyuanwei Needle Ce Co., Ltd, an unrelated party to loan RMB0.6 million
(approximately $0.1 million), bearing annual interest rate of 12%. As of December 31, 2019,
loan amount of RMB0.5 million ($71,808) remained outstanding.
|
During the years ended December 31, 2018
and 2019, interest of nil and $601,153 were incurred on the Company’s borrowings from unrelated parties, respectively.
14.
|
Accrued Expenses
and Other Payables
|
Accrued expenses and other payables as of December 31, 2018
and 2019 consisted of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Construction costs payable
|
|
$
|
5,950,746
|
|
|
$
|
1,335,483
|
|
Equipment purchase payable
|
|
|
6,510,571
|
|
|
|
7,440,131
|
|
Liquidated damages (note a)
|
|
|
1,210,119
|
|
|
|
1,210,119
|
|
Accrued staff costs
|
|
|
2,362,466
|
|
|
|
2,485,384
|
|
Compensation costs
|
|
|
110,657
|
|
|
|
109,311
|
|
Customer deposits
|
|
|
192,113
|
|
|
|
600,758
|
|
Other payables and accruals
|
|
|
1,864,679
|
|
|
|
2,346,403
|
|
|
|
$
|
18,201,351
|
|
|
$
|
15,527,589
|
|
(a)
|
On August 15, 2006,
the SEC declared effective a post-effective amendment that the Company had filed on August 4, 2006, terminating the effectiveness
of a resale registration statement on Form SB-2 that had been filed pursuant to a registration rights agreement with certain
shareholders to register the resale of shares held by those shareholders. The Company subsequently filed Form S-1 for these
shareholders. On December 8, 2006, the Company filed its Annual Report on Form 10-K for the year ended September 30, 2006
(the “2006 Form 10-K”). After the filing of the 2006 Form 10-K, the Company’s previously filed registration
statement on Form S-1 was no longer available for resale by the selling shareholders whose shares were included in such Form
S-1. Under the registration rights agreement, those selling shareholders became eligible for liquidated damages from the Company
relating to the above two events totaling approximately $1,051,000. As of December 31, 2018 and 2019, no liquidated damages
relating to both events have been paid.
|
On November 9, 2007, the Company
completed a private placement for the gross proceeds to the Company of $13,650,000 by selling 3,500,000 shares of common stock
at the price of $3.90 per share. Roth Capital Partners, LLC acted as the Company’s exclusive financial advisor and placement
agent in connection with the private placement and received a cash fee of $819,000. The Company may have become liable for liquidated
damages to certain shareholders whose shares were included in a resale registration statement on Form S-3 that the Company filed
pursuant to a registration rights agreement that the Company entered into with such shareholders in November 2007. Under the registration
rights agreement, among other things, if a registration statement filed pursuant thereto was not declared effective by the SEC
by the 100th calendar day after the closing of the Company’s private placement on November 9, 2007, or the “Effectiveness
Deadline”, then the Company would be liable to pay partial liquidated damages to each such investor of (a) 1.5% of the aggregate
purchase price paid by such investor for the shares it purchased on the one month anniversary of the Effectiveness Deadline; (b)
an additional 1.5% of the aggregate purchase price paid by such investor every thirtieth day thereafter (pro rated for periods
totaling less than thirty days) until the earliest of the effectiveness of the registration statement, the ten-month anniversary
of the Effectiveness Deadline and the time that the Company is no longer required to keep such resale registration statement effective
because either such shareholders have sold all of their shares or such shareholders may sell their shares pursuant to Rule 144
without volume limitations; and (c) 0.5% of the aggregate purchase price paid by such investor for the shares it purchased in
the Company’s November 2007 private placement on each of the following dates: the ten-month anniversary of the Effectiveness
Deadline and every thirtieth day thereafter (prorated for periods totaling less than thirty days), until the earlier of the effectiveness
of the registration statement and the time that the Company no longer is required to keep such resale registration statement effective
because either such shareholders have sold all of their shares or such shareholders may sell their shares pursuant to Rule 144
without volume limitations. Such liquidated damages would bear interest at the rate of 1% per month (prorated for partial months)
until paid in full.
On December 21, 2007, pursuant
to the registration rights agreement, the Company filed a registration statement on Form S-3, which was declared effective by
the SEC on May 7, 2008. As a result, the Company estimated liquidated damages amounting to $561,174 for the November 2007 registration
rights agreement. As of December 31, 2018 and 2019, the Company had settled the liquidated damages with all the investors and
the remaining provision of approximately $159,000 was included in other payables and accruals.
15.
|
Deferred Government Grants
|
Deferred government grants as of December 31, 2018 and 2019
consist of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Total government grants
|
|
$
|
4,457,064
|
|
|
$
|
4,260,833
|
|
Less: Current portion
|
|
|
(143,775
|
)
|
|
|
(142,026
|
)
|
Non-current portion
|
|
$
|
4,313,289
|
|
|
$
|
4,118,807
|
|
In September 2013, the Management Committee
of Dalian Economic Zone Management Committee (the “Management Committee”) provided a subsidy of RMB150 million to
finance the costs incurred in moving our facilities to Dalian, including the loss of sales while the new facilities were being
constructed. For the year ended September 30, 2015, the Company recognized $23,103,427 as income after offset of the related removal
expenditures of $1,004,027. No such income or offset was recognized in years ended December 31, 2018 and 2019.
On October 17, 2014, the Company received
a subsidy of RMB46.2 million (approximately $6.7 million) pursuant to an agreement with the Management Committee dated July 2,
2013 for costs of land use rights and to be used to construct the new manufacturing site in Dalian. Part of the facilities had
been completed and was operated in July 2015 and the Company has initiated amortization on a straight-line basis over the estimated
useful lives of the depreciable facilities constructed thereon.
The Company offset government grants of
$149,200 and $143,172 for the years ended December 31, 2018 and 2019, respectively, against depreciation expenses of the Dalian
facilities.
|
16.
|
Product
Warranty Provisions
|
The Company maintains a policy of providing
after sales support for certain of its new EV and LEV battery products introduced since October 1, 2015 by way of a warranty program.
The limited cover covers a period of six to twenty four months for battery cells, a period of twelve to twenty seven months for
battery modules for light electric vehicles (LEV) such as electric bicycles, and a period of three years to eight years (or 120,000
or 200,000 km if reached sooner) for battery modules for electric vehicles (EV). The Company accrues an estimate of its exposure
to warranty claims based on both current and historical product sales data and warranty costs incurred. The Company assesses the
adequacy of its recorded warranty liability at least annually and adjusts the amounts as necessary.
Warranty expense is recorded as a component
of sales and marketing expenses. Accrued warranty activity consisted of the following:
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
Balance at beginning of year
|
|
$
|
2,279,831
|
|
|
$
|
2,250,615
|
|
Warranty costs incurred
|
|
|
(47,180
|
)
|
|
|
(85,397
|
)
|
Provision for the year
|
|
|
145,804
|
|
|
|
109,248
|
|
Foreign exchange adjustment
|
|
|
(127,840
|
)
|
|
|
(27,533
|
)
|
Balance at end of year
|
|
$
|
2,250,615
|
|
|
$
|
2,246,933
|
|
Notes payable as of December 31, 2018
and December 31, 2019 consist of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2019
|
|
Notes payable, net of debt discount
|
|
$
|
-
|
|
|
$
|
2,846,736
|
|
On July 24, 2019, the Company entered
into a securities purchase agreement with Atlas Sciences, LLC (the “Lender”), pursuant to which the Company issued
a promissory note (the “Note I”) to the Lender. The Note has an original principal amount of $1,395,000, bears interest
at a rate of 10% per annum and will mature 12 months after the issuance, unless earlier paid or redeemed in accordance with its
terms. The Company received proceeds of $1,250,000 after an original issue discount of $125,000 and payment of Lender’s
expenses of $20,000. Beginning on the date that is six months after July 24, 2019, Lender shall have the right, exercisable at
any time in its sole and absolute discretion, to redeem any amount of this Note up to $250,000.00 per calendar month by providing
written notice to Borrower.
The Company recorded the $125,000 as debt
discount and is being amortized as interest expense over 12 months period. The Company did not assign any value to the redemption
feature of the Note because the redemption of the Note has no value on the redemption portion as of December 31, 2019.
On December 30, 2019, the Company
entered into a securities purchase agreement with Atlas Sciences, LLC (the “Lender”), pursuant to which the Company
issued a promissory note (the “Note II”) to the Lender. The Note has an original principal amount of $1,670,000, bears
interest at a rate of 10% per annum and will mature 12 months after the issuance, unless earlier paid or redeemed in accordance
with its terms. The Company received proceeds of $1,500,000 after an original issue discount of $150,000 and payment of Lender’s
expenses of $20,000. Beginning on the date that is six months after June 30, 2020, Lender shall have the right, exercisable at
any time in its sole and absolute discretion, to redeem any amount of this Note up to $250,000.00 per calendar month by providing
written notice to Borrower.
The Company recorded the $125,000 as debt
discount and is being amortized as interest expense over 12 months period. The Company did not assign any value to the redemption
feature of the Note because the redemption of the Note has no value on the redemption portion as of December 31, 2019.
The Company recorded $55,903 and $62,387
to interest expense from the amortization of debt discount and coupon interest for Note I, respectively, for the year ended December
31, 2019.
The Company recorded $833 and $597 to
interest expense from the amortization of debt discount and coupon interest for Note II, respectively, for the year ended December
31, 2019.
18.
|
Income Taxes,
Deferred Tax Assets and Deferred Tax Liabilities
|
|
(a)
|
Income taxes
in the consolidated statements of comprehensive loss(income)
|
The Company’s provision for income taxes expenses (credit)
consisted of:
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
|
2019
|
|
PRC income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
Current
|
|
|
-
|
|
|
|
-
|
|
Deferred
|
|
$
|
-
|
|
|
$
|
-
|
|
United States Tax
CBAK is a Nevada corporation that is subject
to U.S. corporate income tax on its taxable income at a rate of up to 21% for taxable years beginning after December 31, 2017
and U.S. corporate income tax on its taxable income of up to 35% for prior tax years. The U.S. Tax Reform signed into law on December
22, 2017 significantly modified the U.S. Internal Revenue Code by, among other things, reducing the statutory U.S. federal corporate
income tax rate from 35% to 21% for taxable years beginning after December 31, 2017; limiting and/or eliminating many business
deductions; migrating the U.S. to a territorial tax system with a one-time transition tax on a mandatory deemed repatriation of
previously deferred foreign earnings of certain foreign subsidiaries; subject to certain limitations, generally eliminating U.S.
corporate income tax on dividends from foreign subsidiaries; and providing for new taxes on certain foreign earnings. Taxpayers
may elect to pay the one-time transition tax over eight years, or in a single lump sum.
The U.S. Tax Reform also includes provisions
for a new tax on GILTI effective for tax years of foreign corporations beginning after December 31, 2017. The GILTI provisions
impose a tax on foreign income in excess of a deemed return on tangible assets of controlled foreign corporations (“CFCs”),
subject to the possible use of foreign tax credits and a deduction equal to 50 percent to offset the income tax liability, subject
to some limitations.
To the extent that portions of CBAK’s U.S. taxable income,
such as Subpart F income or GILTI, are determined to be from sources outside of the U.S., subject to certain limitations, the Company
may be able to claim foreign tax credits to offset its U.S. income tax liabilities. If dividends that CBAK receives from its subsidiaries
are determined to be from sources outside of the U.S., subject to certain limitations, CBAK will generally not be required to pay
U.S. corporate income tax on those dividends. Any liabilities for U.S. corporate income tax will be accrued in the Company’s
consolidated statements of comprehensive loss and estimated tax payments will be made when required by U.S. law.
No provision for income taxes in the United
States has been made as CBAK had no taxable income for the years ended December 31, 2018 and 2019.
Hong Kong Tax
BAK Asia is subject to Hong Kong profits
tax rate of 16.5% and did not have any assessable profits arising in or derived from Hong Kong for the years ended December 31,
2018 and 2019 and accordingly no provision for Hong Kong profits tax was made in these periods.
PRC Tax
The CIT Law in China applies an income
tax rate of 25% to all enterprises but grants preferential tax treatment to High-New Technology Enterprises. CBAK Power was regarded
as a “High-new technology enterprise” pursuant to a certificate jointly issued by the relevant Dalian Government authorities.
The certificate was valid for three years commencing from year 2018. Under the preferential tax treatment, CBAK Power was entitled
to enjoy a tax rate of 15% for the years from 2018 to 2020 provided that the qualifying conditions as a High-new technology enterprise
were met.
A reconciliation of the provision for
income taxes determined at the statutory income tax rate to the Company’s income taxes is as follows:
|
|
Year ended December 31,
2018
|
|
|
Year ended December 31,
2019
|
|
Loss before income taxes
|
|
$
|
(1,957,482
|
)
|
|
$
|
(10,853,435
|
)
|
United States federal corporate income tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
Income tax credit computed at United States statutory corporate income tax rate
|
|
|
(411,071
|
)
|
|
|
(2,279,221
|
)
|
Reconciling items:
|
|
|
|
|
|
|
|
|
Over provision of deferred taxation in prior year
|
|
|
|
|
|
|
|
|
Rate differential for PRC earnings
|
|
|
(44,325
|
)
|
|
|
(372,518
|
)
|
Non-deductible expenses
|
|
|
131,888
|
|
|
|
161,576
|
|
Share based payments
|
|
|
46,448
|
|
|
|
161,724
|
|
Recognition of tax losses previously not recognized
|
|
|
(132,104
|
)
|
|
|
(92,668
|
)
|
Valuation allowance on deferred tax assets
|
|
|
409,164
|
|
|
|
2,421,107
|
|
Income tax expenses
|
|
$
|
-
|
|
|
$
|
-
|
|
|
(b)
|
Deferred tax assets and deferred tax liabilities
|
The tax effects of temporary differences
that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2018 and 2019 are presented
below:
|
|
December 31, 2018
|
|
|
December 31, 2019
|
|
Deferred tax assets
|
|
|
|
|
|
|
Trade accounts receivable
|
|
$
|
1,031,389
|
|
|
$
|
1,225,916
|
|
Inventories
|
|
|
1,715,161
|
|
|
|
1,026,483
|
|
Property, plant and equipment
|
|
|
618,416
|
|
|
|
768,975
|
|
Provision for product warranty
|
|
|
562,654
|
|
|
|
561,733
|
|
Net operating loss carried forward
|
|
|
26,595,654
|
|
|
|
29,361,274
|
|
Valuation allowance
|
|
|
(30,523,274
|
)
|
|
|
(32,944,381
|
)
|
Deferred tax assets, non-current
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities, non-current
|
|
$
|
-
|
|
|
$
|
-
|
|
As of December 31, 2019, the Company’s U.S. entity had
net operating loss carry forwards of $103,580,741, of which $102,293 available to reduce future taxable income which will expire
in various years through 2035 and $103,478,448 available to offset capital gains recognized in the succeeding 5 tax years. As of
December 31, 2019, the Company’s PRC subsidiaries had net operating loss carry forwards of $30,437,270, which will expire
in various years through 2029. Management believes it is more likely than not that the Company will not realize these potential
tax benefits as these operations will not generate any operating profits in the foreseeable future. As a result, a valuation allowance
was provided against the full amount of the potential tax benefits.
According to the PRC Tax Administration
and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made
by the taxpayer or its withholding agent. The statute of limitations extends to five years under special circumstances, which
are not clearly defined. In the case of a related party transaction, the statute of limitations is ten years. There is no statute
of limitations in the case of tax evasion.
|
19.
|
Share-based
Compensation
|
Restricted Shares
Restricted shares granted on June 30,
2015
On June 12, 2015, the Board of Director
approved the CBAK Energy Technology, Inc. 2015 Equity Incentive Plan (the “2015 Plan”) for Employees, Directors and
Consultants of the Company and its Affiliates. The maximum aggregate number of Shares that may be issued under the Plan is ten
million (10,000,000) Shares.
On June 30, 2015, pursuant to the 2015
Plan, the Compensation Committee of the Company’s Board of Directors granted an aggregate of 690,000 restricted shares of
the Company’s common stock, par value $0.001, to certain employees, officers and directors of the Company with a fair value
of $3.24 per share on June 30, 2015. In accordance with the vesting schedule of the grant, the restricted shares will vest in
twelve equal quarterly installments on the last day of each fiscal quarter beginning on June 30, 2015 (i.e. last vesting period:
quarter ended March 31, 2018). The Company recognizes the share-based compensation expenses on a graded-vesting method.
The Company recorded non-cash share-based
compensation expense of $17,160 for the year ended December 31, 2018, in respect of the restricted shares granted on June 30,
2015, of which $14,051, $1,990 and $1,119 were allocated to general and administrative expenses, research and development expenses
and sales and marketing expenses, respectively.
The Company recorded non-cash share-based
compensation expense of nil for the year ended December 31, 2019, in respect of the restricted shares granted on June 30, 2015.
As of December 31, 2019, there
was no unrecognized stock-based compensation associated with the above restricted shares. As of December 31, 2019, 1,667 vested
shares were to be issued.
Restricted shares granted on April 19,
2016
On April 19, 2016, pursuant to the Company’s
2015 Equity Incentive Plan, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”)
granted an aggregate of 500,000 restricted shares of the Company’s common stock, par value $0.001 (the “Restricted
Shares”), to certain employees, officers and directors of the Company, of which 220,000 restricted shares were granted to
the Company’s executive officers and directors. There are three types of vesting schedules. First, if the number of restricted
shares granted is below 3,000, the shares will vest annually in 2 equal installments over a two year period with the first vesting
on June 30, 2017. Second, if the number of restricted shares granted is larger than or equal to 3,000 and is below 10,000, the
shares will vest annually in 3 equal installments over a three year period with the first vesting on June 30, 2017. Third, if
the number of restricted shares granted is above or equal to 10,000, the shares will vest semi-annually in 6 equal installments
over a three year period with the first vesting on December 31, 2016. The fair value of these restricted shares was $2.68 per
share on April 19, 2016. The Company recognizes the share-based compensation expenses over the vesting period (or the requisite
service period) on a graded-vesting method.
The Company recorded non-cash share-based
compensation expense of $204,020 for the year ended December 31, 2018, in respect of the restricted shares granted on April 19,
2016 of which $154,647, $26,523, $12,649 and $10,201 were allocated to general and administrative expenses, research and development
expenses, sales and marketing expenses and cost of revenues, respectively.
The Company recorded non-cash share-based
compensation expense of $36,641 for the year ended December 31,2019, in respect of the restricted shares granted on April 19,
2016 of which $27,774, $4,763, $2,272 and $1,832 were allocated to general and administrative expenses, research and development
expenses, sales and marketing expenses and cost of revenues, respectively.
As of December 31, 2019, non-vested restricted
shares granted on April 19, 2016 are as follows:
Non-vested shares as of January
1, 2019
|
|
|
84,830
|
|
Granted
|
|
|
-
|
|
Vested
|
|
|
(84,830
|
)
|
Non-vested shares as of December 31, 2019
|
|
|
-
|
|
As of December 31, 2019, there was no
unrecognized stock-based compensation associated with the above restricted shares and 4,167 shares were to be issued.
Restricted shares granted on August 23,
2019
On August 23, 2019, pursuant to the Company’s
2015 Equity Incentive Plan, the Compensation Committee granted an aggregate of 1,887,000 restricted share units of the Company’s
common stock to certain employees, officers and directors of the Company, of which 710,000 restricted share units were granted
to the Company’s executive officers and directors. There are two types of vesting schedules, (i) the share units will vest
semi-annually in 6 equal installments over a three year period with the first vesting on September 30, 2019; (ii) the share units
will vest annual in 3 equal installments over a three year period with the first vesting on March 31, 2021. The fair value of
these restricted shares was $0.9 per share on August 23, 2019. The Company recognizes the share-based compensation expenses over
the vesting period (or the requisite service period) on a graded-vesting method.
The Company recorded non-cash share-based
compensation expense of $733,472 for the year ended December 31, 2019, in respect of the restricted shares granted on August 23,
2019 of which $567,081, $21,822 and $144,569 were allocated to general and administrative expenses, sales and marketing expenses
and research and development expenses.
As of December 31, 2019, non-vested restricted
share units granted on August 23, 2019 are as follows:
Non-vested share units as of August 23, 2019
|
|
|
|
Granted
|
|
|
1,887,000
|
|
Vested
|
|
|
(307,000
|
)
|
Forfeited
|
|
|
(74,167
|
)
|
Non-vested share units as of December 31, 2019
|
|
|
1,505,833
|
|
As of December 31, 2019, there was unrecognized
stock-based compensation $964,828 associated with the above restricted share units. As of December 31, 2019, no vested shares
were to be issued.
As the Company itself is an investment
holding company which is not expected to generate operating profits to realize the tax benefits arising from its net operating
loss carried forward, no income tax benefits were recognized for such stock-based compensation cost under the stock option plan
for the years ended December 31, 2018 and 2019.
The following is the calculation of loss
per share:
|
|
Year ended
December 31, 2018
|
|
|
Year ended
December 31, 2019
|
|
Net loss
|
|
$
|
(1,957,482
|
)
|
|
$
|
(10,853,435
|
)
|
Less: Net loss attributable to non-controlling interests
|
|
|
14,305
|
|
|
|
85,912
|
|
Net loss attributable to shareholders of CBAK Energy Technology, Inc.
|
|
|
(1,943,177
|
)
|
|
|
(10,767,523
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in basic and diluted computation
|
|
|
26,596,263
|
|
|
|
38,965,564
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.28
|
)
|
Note:
|
Including 57,832
and 5,834 vested restricted shares granted pursuant to the 2015 Plan that were not yet issued as of December 31, 2018 and
2019, respectively.
|
For the years ended December 31, 2018 and 2019, 84,830 and 1,505,833
unvested restricted shares, respectively, were anti-dilutive and excluded from shares used in the diluted computation.
|
21.
|
Fair
Value of Financial Instruments
|
ASC Topic 820, Fair Value Measurement
and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based
on observable and unobservable inputs when measuring fair value. Certain current assets and current liabilities are financial
instruments. Management believes their carrying amounts are a reasonable estimate of fair value because of the short period of
time between the origination of such instruments and their expected realization and, if applicable, their current interest rates
are equivalent to interest rates currently available. The three levels of valuation hierarchy are defined as follows:
|
●
|
Level 1 inputs to
the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
●
|
Level 2 inputs to
the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are
observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
|
|
●
|
Level 3 inputs to
the valuation methodology are unobservable and significant to the fair value measurement.
|
The carrying amounts of financial assets
and liabilities, such as cash and cash equivalents, trade accounts and bills receivable, other receivables, balances with former
subsidiaries, notes payable, other short-term loans, short-term and long-term bank loans and other payables approximate their
fair values because of the short maturity of these instruments or the rate of interest of these instruments approximate the market
rate of interest.
|
22.
|
Commitments
and Contingencies
|
As of December 31, 2018 and 2019, the Company had the following
contracted capital commitments:
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
For construction of buildings
|
|
$
|
3,439,794
|
|
|
$
|
3,397,961
|
|
For purchases of equipment
|
|
|
2,226,776
|
|
|
|
-
|
|
Capital injection to CBAK Trading , CBAK Power and CBAK Energy (Note 1)
|
|
|
20,400,000
|
|
|
|
83,900,000
|
|
|
|
$
|
26,066,570
|
|
|
$
|
87,297,961
|
|
From time to time, the Company may become
involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject
to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm the Company business.
Other than the legal proceeding set forth below, the Company is currently not aware of any such legal proceedings or claims that
the Company believe will have an adverse effect on their business, financial condition or operating results.
On July 7, 2016, Shenzhen Huijie
Purification System Engineering Co., Ltd (“Shenzhen Huijie”), one of the Company’s contractors, filed a
lawsuit against CBAK Power in the Peoples’ Court of Zhuanghe City, Dalian, for the failure to pay pursuant to the terms
of the contract and entrusted part of the project of the contract to a third party without their prior consent. The plaintiff
sought a total amount of $1,210,799 (RMB 8,430,792), including construction costs of $0.9 million (RMB6.1 million, which the
Company already accrued for at June 30, 2016), interest of $30,689 (RMB0.2 million) and compensation of $0.3 million (RMB1.9
million). On September 7, 2016, upon the request of Shenzhen Huijie for property preservation, the Court of Zhuanghe froze
CBAK Power’s bank deposits totaling $1,210,799 (RMB 8,430,792) for a period of one year. On September 1, 2017, upon the
request of Shenzhen Huijie, the Court froze the bank deposits for another one year until August 31, 2018. The Court further
froze the bank deposits for another year until August 27, 2019 upon the request of Shenzhen Huijie on August 27, 2018.
Upon the request from Shenzhen Huijie, the Court again froze the bank deposits for another year until August 27,
2020.
On June 30, 2017, according to the trial of first instance, the Court of Zhuanghe ruled that
CBAK Power should pay the remaining contract amount of RMB6,135,860 (approximately $0.9 million) claimed by Shenzhen Huijie as
well as other expenses incurred including deferred interest, discounted charge on bills payable, litigation fee and property preservation
fee totaled $0.1 million, the Company has accrued for these amounts as of December 31, 2017. On July 24, 2017, CBAK Power filed
an appellate petition to the Intermediate Peoples’ Court of Dalian (“Court of Dalian)” to defend the adjudication
dated on June 30, 2017. On November 17, 2017, the Court of Dalian rescinded the original judgement and remanded the case to the
Court of Zhuanghe for retrial. The Court of Zhuanghe did a retrial and requested an appraisal to be performed by a third-party
appraisal institution on the construction cost incurred and completed by Shenzhen Huijie on the subject project. On November 8,
2018, the Company received from the Court of Zhuanghe the construction-cost-appraisal report which determined that the construction
cost incurred and completed by Shenzhen Huijie for the subject project to be $1,311,197 (RMB9,129,868). On May 20, 2019, the Court
of Zhuanghe entered a judgment that Shenzhen Huijie should pay back to CBAK Power $254,824 (RMB 1,774,337) (the amount CBAK Power
paid in excess of the construction cost appraised by the appraisal institution) and the interest incurred since April 2, 2019.
Shenzhen Huijie filed an appellate petition to the Court of Dalian. As of December 31, 2019, the Company has already paid RMB 10,962,140
(approximately $1,574,342) and accrued RMB6.1 million (approximately $0.9 million ) for the construction cost incurred and completed
by Shenzhen Huijie.
In late February 2018, CBAK Power received
a notice from Court of Zhuanghe that Shenzhen Huijie filed another lawsuit against CBAK Power for breaches under the terms of
a fire-control contract. The plaintiff sought a total amount of RMB244,942 ($35,178), including construction costs of RMB238,735
($34,286) and interest of RMB6,207 ($891), the Company has accrued for these amounts as of December 31, 2019. The Court of Zhuanghe
requested an appraisal to be performed by a third-party appraisal institution on the uncompleted construction cost on the subject
project, which should be deducted from the total construction cost of the contract. Based on the appraisal report from the appraisal
institution, the uncompleted cost was RMB 170,032 ($24,419). On October 16, 2018, the Court of Zhuanghe determined that CBAK Power
should pay RMB77,042 ($11,200) to Shenzhen Huijie after deducting the uncompleted cost, as well as other expenses incurred including
deferred interest and litigation fee. On January 29, 2019, the Intermediate Peoples’ Court of Dalian (“Court of Dalian)”
dismissed the appeal by Shenzhen Huijie and affirmed the original judgement.
In May 2017, CBAK Power filed a
lawsuit in the Court of Zhuanghe against Pingxiang Anyuan Tourism Bus Manufacturing Co., Ltd., (“Anyuan Bus”) one
of CBAK Power’s customers, for failure to pay pursuant to the terms of the sales contract. CBAK Power sought a total
amount of RMB18,279,858 ($2,625,285), including goods amount of RMB17,428,000 ($2,502,944) and interest of RMB851,858
($122,341). On December 19, 2017, the Court of Zhuanghe determined that Anyuan Bus should pay the goods amount of
RMB17,428,000 ($2,502,944) and the interest until the goods amount was paid off, and a litigation fee of RMB131,480
($18,883). Anyuan Bus did not appeal and as a result, the judgment is currently in the enforcement phase. On June 29, 2018,
the Company filed an application with the Court of Zhuanghe for enforcement of the judgement against all of Anyuan Bus’
shareholders, including Jiangxi Zhixin Automobile Co., Ltd, Anyuan Bus Manufacturing Co., Ltd, Anyuan Coal Group Co., Ltd,
Qian Ronghua, Qian Bo and Li Junfu. On October 22, 2018, the Court of Zhuanghe issued a judgment supporting the
Company’s petition that all the Anyuan Bus’ shareholders should be liable to pay the Company the debt as
confirmed under the trial. On November 9, 2018, all the shareholders appealed against the judgment after receiving the notice
from the Court. On March 29, 2019, the Company received judgment from the Court of Zhuanghe that all these six shareholders
cannot be added as judgment debtors. On April 11, 2019, the Company have filed appellate petition to the Intermediate
Peoples’ Court of Dalian challenging the judgment from the Court of Zhuanghe. On October 9, 2019, the Intermediate
Peoples’ Court of Dalian dismissed the appeal by the Company and affirmed the original judgment.
As of December 31, 2018 and 2019, the
Company had made a full provision against the receivable from Anyuan Bus of RMB17,428,000 ($2,502,944).
On July 25, 2019, CBAK Power received
notice from Shenzhen Court of International Arbitration that Shenzhen Xinjiatuo Automobile Technology Co., Ltd filed arbitration
against the Company for the failure to pay pursuant to the terms of the contract. The plaintiff sought a total amount of $0.16
million (RMB1,112,269), including equipment cost of $0.14 million (RMB976,000) and interest of $0.02 million (RMB136,269). As
of December 31, 2019, the Company have accrued the equipment cost of $0.14 million (RMB976,000).
On August 9, 2019, upon the request of Shenzhen Xinjiatuo Automobile
Technology Co., Ltd, Shenzhen Court of International Arbitration froze CBAK Power’s bank deposits totaling $0.16 million
(RMB1,117,269), including equipment cost $0.14 million (RMB976,000), interest $0.02 million (RMB136,269) and litigation fees of
$718 (RMB5,000) for a period of one year to August 2020. The Company believes that the plaintiff’s claims are without merit
and are vigorously defending themselves in this proceeding.
On August 7, 2019, CBAK Power filed counter
claim arbitration against Shenzhen Xinjiatuo Automobile Technology Co., Ltd for return of the prepayment due to the unqualified
equipment, and sought a total amount of $0.29 million (RMB 1,986,400), including return of prepayment of $0.2 million (RMB 1,440,000),
liquidated damages of $68,936 (RMB480,000) and litigation fees of $9,542 (RMB66,440).
In November 2019, CBAK Suzhou received notice from Court of
Suzhou city that Suzhou Industrial Park Security Service Co., Ltd (“Suzhou Security”) filed a lawsuit against CBAK
Suzhou for the failure to pay pursuant to the terms of the sales contract. Suzhou Security sought a total amount of $20,065 (RMB139,713),
including services expenses amount of $19,949 (RMB138,908) and interest of $116 (RMB805). Upon the request of Suzhou
Security for property preservation, the Court of Suzhou froze CBAK Suzhou’s bank deposits totaling $0.02 million (RMB 150,000)
for a period of one year. As of December 31, 2019, nil was frozen by bank and the Company had accrued the service cost of $20,065
(RMB139,713).
In December, 2019, CBAK Power received
notice from Court of Zhuanghe that Dalian Construction Electrical Installation Engineering Co., Ltd. (“Dalian Construction”)
filed a lawsuit against CBAK Power for the failure to pay pursuant to the terms of the construction contract. Dalian Construction
sought a total amount of $99,251 (RMB691,086) and interest $1,884 (RMB12,934). As of December 31, 2019, the Company has accrued
the construction cost of $99,251 (RMB691,086). Upon the request of Dalian Construction for property preservation, the Court of
Zhuanghe ordered to freeze CBAK Power’s bank deposits totaling $101,109 (RMB704,020) for a period of one year to December
2020. As of December 31, 2019, $94,965 (RMB661,240) was frozen by bank.
In February 2020, CBAK Power received notice
from Court of Zhuanghe that Dongguan Shanshan Battery Material Co., Ltd (“Dongguan Shanshan”) filed lawsuit against
CBAK Power for the failure to pay pursuant to the terms of the purchase contract. Dongguan Shanshan sought a total amount of $0.6
million (RMB 4,434,209), which have already been accrued for as of December 31, 2019. Upon the request of Dongguan Shanshan for
property preservation, the Court of Zhuanghe ordered freeze CBAK Power’s bank deposits totaling $0.6 million (RMB4,434,209)
for a period of one year to December 17, 2020. As of December 31, 2019, $33,504 (RMB233,295) was frozen by bank.
On March 20, 2020, CBAK Power received
notice from Court of Nanpi County, Hebei Province that Cangzhou Huibang Engineering Manufacturing Co., Ltd (“Cangzhou Huibang”)
filed lawsuit against CBAK Power for the failure to pay pursuant to the terms of the purchase contract. Dongguan Shanshan sought
a total amount of $0.3 million (RMB 2,029,594), including materials purchase cost of $0.3 million (RMB 1,932,947), and interest
of $13,880 (RMB 96,647). Upon the request of Cangzhou Huibang for property preservation, the Court of Nanpi ordered to freeze CBAK
Power’s bank deposits totaling $ 0.3 million (RMB 2,029,594) for a period of one year to March 3, 2020. As of December 31,
2019, the Company has accrued materials purchase cost of $0.3 million (RMB1,932,947).
In early September, 2019, several employees
of CBAK Suzhou files arbitration with Suzhou Industrial Park Labor Disputes Arbitration Commission against CBAK Suzhou for failure
to pay their salaries in time. The employees seek for a payment including salaries of $89,295 (RMB 638,359) and compensation of
$75,956 (RMB 543,000), totaling $0.17 million (RMB 1,181,359). In addition, upon the request of the employees for property preservation,
bank deposit of $0.17 million (RMB 1,181,359) was frozen by the court of Suzhou for a period of one year. On September 5, 2019,
CBAK Suzhou and the employees reached an agreement that CBAK Suzhou will pay these salaries and compensation. As of December 31,
2019, $6 (RMB43) was frozen by bank. Subsequent to December 31, 2019, the Company fully repaid the salaries and compensation.
23.
|
Concentrations
and Credit Risk
|
The Company had the following customers
that individually comprised 10% or more of net revenue for the years ended December 31, 2018 and 2019 as follows:
|
|
Year ended
|
|
|
Year ended
|
|
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
Customer A
|
|
$
|
6,330,608
|
|
|
|
25.91
|
%
|
|
$
|
7,222,245
|
|
|
|
32.54
|
%
|
Customer B
|
|
|
3,807,854
|
|
|
|
15.58
|
%
|
|
|
*
|
|
|
|
*
|
|
Customer D
|
|
|
*
|
|
|
|
*
|
|
|
|
3,308,638
|
|
|
|
14.91
|
%
|
Zhengzhou BAK Battery Co., Ltd (a)
|
|
|
*
|
|
|
|
*
|
|
|
|
3,961,050
|
|
|
|
17.85
|
%
|
*
|
Comprised less than
10% of net revenue for the respective period.
|
The Company had the following customers that individually comprised
10% or more of net accounts receivable as of December 31, 2018 and 2019 as follows:
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
Customer A
|
|
$
|
1,769,416
|
|
|
|
11.49
|
%
|
|
$
|
1,725,293
|
|
|
|
21.93
|
%
|
Customer B
|
|
|
4,283,023
|
|
|
|
27.82
|
%
|
|
|
*
|
|
|
|
|
*
|
Customer C
|
|
|
2,293,257
|
|
|
|
14.89
|
%
|
|
|
*
|
|
|
|
|
*
|
Customer D
|
|
|
*
|
|
|
|
*
|
|
|
|
1,713,628
|
|
|
|
21.78
|
%
|
Customer E
|
|
|
*
|
|
|
|
*
|
|
|
|
902,309
|
|
|
|
11.47
|
%
|
Customer F
|
|
|
*
|
|
|
|
*
|
|
|
|
830,821
|
|
|
|
10.56
|
%
|
The Company had the following suppliers
that individually comprised 10% or more of net purchase for the years ended December 31, 2018 and 2019 as follows:
|
|
Year ended
|
|
|
Year ended
|
|
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
Supplier A
|
|
$
|
3,719,739
|
|
|
|
16.73
|
%
|
|
$
|
*
|
|
|
|
*
|
|
Supplier B
|
|
|
*
|
|
|
|
*
|
|
|
|
2,920,966
|
|
|
|
21.40
|
%
|
Zhengzhou BAK New Energy Vehicle Co., Ltd (b)
|
|
|
*
|
|
|
|
*
|
|
|
|
3,812,819
|
|
|
|
27.93
|
%
|
*
|
Comprised less than
10% of net purchase for the respective period.
|
The Company had the following suppliers
that individually comprised 10% or more of accounts payable as of December 31, 2018 and 2019 as follows:
|
|
December 31,
2018
|
|
|
December 31,
2019
|
|
Supplier C
|
|
|
2,962,247
|
|
|
|
12.80
|
%
|
|
|
*
|
|
|
|
*
|
|
Supplier D
|
|
|
*
|
|
|
|
*
|
|
|
|
1,126,582
|
|
|
|
10.10
|
%
|
For the years ended December 31, 2018 and 2019, the Company
recorded the following transactions:
|
|
December 31, 2018
|
|
|
December 31, 2019
|
|
Purchase of inventories from
|
|
|
|
|
|
|
BAK Tianjin
|
|
$
|
716,997
|
|
|
$
|
-
|
|
BAK Shenzhen(b)
|
|
|
107,280
|
|
|
|
63,950
|
|
Zhengzhou BAK Battery Co., Ltd (a)
|
|
|
2,032,756
|
|
|
|
-
|
|
Zhengzhou BAK New Energy Vehicle Co., Ltd (b)
|
|
|
-
|
|
|
|
3,812,819
|
|
|
|
|
|
|
|
|
|
|
Net sales of finished goods to
|
|
|
|
|
|
|
|
|
BAK Tianjin
|
|
|
36,766
|
|
|
|
-
|
|
BAK Shenzhen
|
|
|
-
|
|
|
|
526,719
|
|
Zhengzhou BAK Battery Co., Ltd (a)
|
|
|
-
|
|
|
|
3,961,050
|
|
|
|
|
|
|
|
|
|
|
Proceeds on disposal of patented proprietary technology
offset against amount due to BAK Shenzhen (Note 7) (c)
|
|
|
12,845,795
|
|
|
|
-
|
|
|
(a)
|
Mr.
Xiangqian Li, the former CEO, is a director of this company. As of December 31, 2018 and December 31, 2019, payable to Zhengzhou
BAK Battery Co., Ltd were $2,291,261 and nil, respectively, was included in trade accounts and bills payable.
|
|
(b)
|
Mr. Xiangqian Li, our former CEO, is a director of this
company.
|
Financial instruments that potentially
subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents and pledged deposits.
As of December 31, 2018 and 2019, substantially all of the Company’s cash and cash equivalents were held by major financial
institutions located in the PRC, which management believes are of high credit quality.
For the credit risk related to trade accounts
receivable, the Company performs ongoing credit evaluations of its customers and, if necessary, maintains reserves for potential
credit losses.
The Company used to engage in one business
segment, the manufacture, commercialization and distribution of a wide variety of standard and customized lithium ion rechargeable
batteries for use in a wide array of applications. The Company manufactured five types of Li-ion rechargeable batteries: aluminum-case
cell, battery pack, cylindrical cell, lithium polymer cell and high-power lithium battery cell. The Company’s products are
sold to packing plants operated by third parties primarily for use in mobile phones and other electronic devices.
After the disposal of BAK International,
the Company focused on producing high-power lithium battery cells. Net revenues from continuing operations for the years ended
December 31, 2018 and 2019 were as follows:
Net revenues by product:
|
|
Year
ended
|
|
|
Year ended
|
|
|
|
December 31,
2018
|
|
|
December 31, 2019
|
|
High power lithium batteries used in:
|
|
|
|
|
|
|
Electric vehicles
|
|
$
|
8,169,195
|
|
|
$
|
4,509,055
|
|
Light electric vehicles
|
|
|
64,140
|
|
|
|
16,147
|
|
Uninterruptable supplies
|
|
|
16,199,969
|
|
|
|
17,669,146
|
|
Total
|
|
$
|
24,433,304
|
|
|
$
|
22,194,348
|
|
Net revenues by geographic area:
|
|
Year ended
|
|
|
Year ended
|
|
|
|
December 31, 2018
|
|
|
December 31, 2019
|
|
Mainland China
|
|
$
|
21,292,111
|
|
|
|
21,632,637
|
|
Europe
|
|
|
99,996
|
|
|
|
-
|
|
PRC Taiwan
|
|
|
103,256
|
|
|
|
442
|
|
Israel
|
|
|
990,953
|
|
|
|
118,906
|
|
USA
|
|
|
1,833,837
|
|
|
|
285,556
|
|
Others
|
|
|
113,151
|
|
|
|
156,807
|
|
Total
|
|
$
|
24,433,304
|
|
|
$
|
22,194,348
|
|
Substantially all of the Company’s long-lived assets
are located in the PRC.
25.
|
CBAK Energy Technology,
Inc. (Parent Company)
|
Under PRC regulations, subsidiaries in
PRC (“the PRC subsidiaries”) may pay dividends only out of their accumulated profits, if any, determined in accordance
with PRC GAAP. In addition, the PRC subsidiaries are required to set aside at least 10% of their after tax net profits each year,
if any, to fund the statutory general reserve until the balance of the reserves reaches 50% of their registered capital. The statutory
general reserves are not distributable in the form of cash dividends to the Company and can be used to make up cumulative prior
year losses, if any, and may be converted into share capital by the issue of new shares to shareholders in proportion to their
existing shareholdings, or by increasing the par value of the shares currently held by them, provided that the reserve balance
after such issue is not less than 25% of the registered capital. As of December 31, 2018 and 2019, additional transfers of $24,019,489
and $31,269,489 were required for CBAK Power and CBAK Trading before the statutory general reserve reached 50% of the registered
capital of the PRC subsidiaries. As of December 31, 2018 and 2019, there was $1,230,511 appropriation from retained earnings and
set aside for statutory general reserves by the PRC subsidiaries. CBAK Trading, CBAK Energy and CBAK Suzhou did not have after
tax net profits since its incorporation and therefore no appropriation was made to fund its statutory general reserve as of December
31, 2018 and 2019. CBAK Power had after tax loss of $392,959 and $6,406,251 for the years ended December 31, 2018 and 2019, respectively.
Schedule I of Article 504 of Regulation
SX requires the condensed financial information of the registrant (Parent Company) to be filed when the restricted net assets
of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal
year. For purposes of this test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s
proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most
recent fiscal year may not be transferred to the parent company by subsidiaries in the form of loans, advances or cash dividends
without the consent of a third party (i.e., lender, regulatory agency, foreign government, etc.).
SCHEDULE I – CONDENSED FINANCIAL
INFORMATION OF REGISTRANT
CBAK ENERGY TECHNOLOGY, INC.
PARENT COMPANY STATEMENTS OF OPERATIONS
For the years ended December 31, 2018 and
2019
(Unaudited)
|
|
Year ended December 31, 2018
|
|
|
Year
ended
December 31,
2019
|
|
REVENUE, net
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
-
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
Salaries and consulting expenses
|
|
|
451,036
|
|
|
|
978,942
|
|
General and administrative
|
|
|
398,101
|
|
|
|
439,974
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
(849,137
|
)
|
|
|
(1,418,916
|
)
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(849,137
|
)
|
|
|
(1,418,916
|
)
|
|
|
|
|
|
|
|
|
|
Finance expenses
|
|
|
-
|
|
|
|
(120,051
|
)
|
|
|
|
|
|
|
|
|
|
LOSS ATTRIBUTABLE TO PARENT COMPANY
|
|
|
(849,137
|
)
|
|
|
(1,538,967
|
)
|
|
|
|
|
|
|
|
|
|
EQUITY IN LOSS OF SUBSIDIARIES
|
|
|
(1,094,040
|
)
|
|
|
(9,228,556
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO SHAREHOLDERS
|
|
$
|
(1,943,177
|
)
|
|
$
|
(10,767,523
|
)
|
CBAK ENERGY TECHNOLOGY, INC.
PARENT COMPANY BALANCE SHEETS
As of December 31, 2018 and 2019
(Unaudited)
|
|
December 31, 2018
|
|
|
December 31, 2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interests in subsidiaries
|
|
$
|
1,957,493
|
|
|
$
|
18,183,266
|
|
Total assets
|
|
$
|
1,957,493
|
|
|
$
|
18,183,266
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
-
|
|
|
|
2,846,736
|
|
Accrued expenses and other payables
|
|
$
|
1,642,171
|
|
|
$
|
1,731,251
|
|
Total current liabilities
|
|
|
1,642,171
|
|
|
|
4,577,987
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY
|
|
|
315,322
|
|
|
|
13,605,279
|
|
Total liabilities and shareholders’ equity
|
|
$
|
1,957,493
|
|
|
$
|
18,183,266
|
|
CBAK ENERGY TECHNOLOGY, INC.
PARENT COMPANY STATEMENTS OF CASH
FLOWS
For the years ended December 31, 2018 and
2019
(Unaudited)
|
|
Year ended December 31, 2018
|
|
|
Year ended December 31, 2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,943,177
|
)
|
|
$
|
(10,767,523
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Equity in loss of subsidiaries
|
|
|
1,094,040
|
|
|
|
9,228,556
|
|
Share based compensation
|
|
|
221,180
|
|
|
|
770,113
|
|
Change in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accrued expenses and other payable
|
|
|
93,962
|
|
|
|
89,080
|
|
Net cash used in operating activities
|
|
|
(533,995
|
)
|
|
|
(679,774
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Decrease in interest in subsidiaries
|
|
|
533,995
|
|
|
|
(2,070,226
|
)
|
Net cash provided by (used in) investing activities
|
|
|
533,995
|
|
|
|
(2,070,226
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of promissory notes
|
|
|
-
|
|
|
|
2,750,000
|
|
Net cash provided by financing activities
|
|
|
-
|
|
|
|
2,750,000
|
|
|
|
|
|
|
|
|
|
|
CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, beginning of year
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of year
|
|
$
|
-
|
|
|
$
|
-
|
|
The condensed parent company financial
statements have been prepared using the equity method to account for its subsidiaries. Refer to the consolidated financial statements
and notes presented above for additional information and disclosures with respect to these financial statements.
Coronavirus (COVID-19)
An outbreak of respiratory illness caused
by COVID-19 emerged in late 2019 and has spread within the PRC and globally. The coronavirus is considered to be highly contagious
and poses a serious public health threat. Any outbreak of health epidemics or other outbreaks of diseases in the PRC or elsewhere
in the world may materially and adversely affect the global economy, the markets and the Company business. In the first quarter
of 2020, the COVID-19 outbreak has caused disruptions in the Company manufacturing operations and temporary closure of its offices.
The disruption in the procurement, manufacturing and assembly process within the Company’s production facilities has resulted
in delays in the shipment of its products to customers, increased costs and reduced revenue. As of the date of this annual report,
the Company has fully resumed operations.
As the coronavirus epidemic expands globally,
the world economy is suffering a noticeable slowdown. The duration and intensity of disruptions resulting from the coronavirus outbreak is uncertain. It is unclear
as to when the outbreak will be contained, and the Company also cannot predict if the impact will be short-lived or long-lasting. Because of the significant uncertainties surrounding the COVID-19
pandemic, the extent of the business interruption and the related financial impact cannot be reasonably estimated at this time.