ITEM
1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On July 20, 2021, Dalian CBAK Power Battery Co., Ltd. (“CBAK
Power”), a wholly-owned subsidiary of CBAK Energy Technology, Inc. (the “Company”) in China, entered into a framework
agreement relating to CBAK Power’s investment in Zhejiang Meidu Hitrans Lithium Battery Technology Co., Ltd (“Hitrans”),
pursuant to which CBAK Power will acquire 81.56% of the equity interests of Hitrans (the “Acquisition Agreement”). In our
Annual Report on Form 10-K for the fiscal year 2020 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, we disclosed
that CBAK Power entered into a framework investment agreement (the “Letter of Intent”) with Hangzhou Juzhong Daxin Asset Management
Co., Ltd. (“Juzhong Daxin”) on April 1, 2021 for a potential acquisition of Hitrans and CBAK Power had paid $3.05 million
(RMB20 million) to Juzhong Daxin as a security deposit. Hitrans is an unrelated third party engaging in the research, production and sale
of lithium-ion battery materials and is one of the key suppliers of the Company in fiscal 2020.
Under
the Acquisition Agreement, CBAK Power will acquire 60% ownership of Hitrans from Zhejiang Meidu Graphene Technology Co., Ltd. (“Meidu
Graphene”) valued at RMB118 million ($18.21 million) and 21.56% ownership of Hitrans from Hitrans’s management shareholders
valued at approximately RMB40.74 million ($6.29 million). Two individuals among Hitrans management shareholders, including Hitrans’s
CEO, Mr. Haijun Wu (“Mr. Wu”), will keep 2.50% ownership of Hitrans and New Era Group Zhejiang New Energy Materials Co.,
Ltd. (“New Era”) will continue to hold 15% ownership of Hitrans after the acquisition.
As
of the date of the Acquisition Agreement, the 25% ownership of Hitrans held by Hitrans management shareholders was frozen as a result
of a litigation arising from the default by Hitrans management shareholders on debts borrowed from Zhejiang Meidu Pawn Co., Ltd. (“Pawn
Co.”) whereby the 25% ownership of Hitrans was pledged as collateral. Mr. Junnan Ye (“Mr. Ye”), acting as an intermediary,
will first acquire 22.5% ownership of Hitrans, free of any encumbrances, from Hitrans management shareholders. Pursuant to the Acquisition
Agreement, within five days of CBAK Power’s obtaining 21.56% ownership of Hitrans from Mr. Ye, CBAK Power will pay approximately
RMB40.74 million ($6.29 million) in cash, which amount shall be used toward the repayment of debts due to Pawn Co.
In
addition, as of the date of the Acquisition Agreement, Meidu Graphene’s 60% ownership of Hitrans was frozen as a result of a litigation
arising from Hitrans’s failure to make payments to New Era in connection with the purchase of land use rights, plants, equipment,
pollution discharge permit and other assets (the “Assets”) under certain asset transfer agreements as well as Meidu Graphene’s
guarantee for Hitrans’s payment obligations thereunder. As a part of the transaction, CBAK Power will enter into a loan agreement
with Hitrans to lend Hitrans approximately RMB131 million ($20.22 million) (the “Hitrans Loan”) by remitting approximately
RMB131 million into the account of Shaoxing Intermediate People’s Court (the “Court”) to remove the freeze on Meidu
Graphene’s 60% ownership of Hitrans. Moreover, Juzhong Daxin will return RMB15 million ($2.32 million) of the security deposit
to CBAK Power before CBAK Power wires approximately RMB131 million to the Court and will retain RMB5 million ($0.77 million) as commission
for facilitating the acquisition. CBAK Power will pay all other fees due to Juzhong Daxin in accordance with the Letter of Intent.
According to the Acquisition Agreement, Mr. Ye will first acquire 60%
ownership of Hitrans, free of any encumbrances, from Meidu Graphene. Thereafter, CBAK Power will assign RMB118 million of the Hitrans
Loan to Mr. Junnan Ye as consideration for the acquisition of 60% ownership of Hitrans from Mr. Ye (the “Assignment”). Hitrans
shall repay RMB118 million to Mr. Ye in accordance with a separate loan repayment agreement (the “Loan Repayment Agreement”)
to be entered into among Mr. Ye, Hitrans, CBAK Power and Mr. Wu. Under the Loan Repayment Agreement, Hitrans shall repay Mr. Ye at least
RMB70 million ($10.80 million) within two months of obtaining the title to the Assets from New Era and the remaining balance by December
31, 2021, with a fixed interest of RMB3.5 million ($0.54 million) which can be reduced by up to RMB1 million ($0.15 million) if the loan
is prepaid. CBAK Power will provide guarantee to Mr. Ye on Hitrans’s repayment obligations under the Loan Repayment Agreement. Hitrans
shall repay the remaining approximately RMB13 million ($2.01 million) of the Hitrans Loan to CBAK Power at an interest rate of 6% per
annum, maturing in one year from the date of the Assignment.
The
foregoing description of the Acquisition Agreement and the Loan Repayment Agreement does not purport to be complete and is qualified
in its entirety by reference to the full text of such agreements, copies of which are attached hereto as Exhibits 10.1 and 10.2, respectively,
and are incorporated herein by reference.
CBAK
Power aims to complete the acquisition of 81.56% ownership of Hitrans in the third quarter of 2021. The Company expects to strengthen
its competitiveness and supply chain in the market of high power lithium batteries through this acquisition.