CBAK Energy Technology, Inc. — FY2021 Form 10-K
Reporting period: Year ended December 31, 2021; this is an annual filing, not standalone fourth-quarter results. The company manufactures high-power lithium batteries and, following its November 2021 acquisition of Hitrans, cathode materials and precursors. Operations are primarily in China.
Financial performance and position
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $52.7 million | $37.6 million |
| Gross profit / margin | $5.1 million / 9.7% | $2.7 million / 7.2% |
| Operating loss | $11.7 million | $8.5 million |
| Net income (loss) | $61.6 million | $(7.8) million |
| Net cash used in operating activities | $4.3 million | $5.1 million |
Net income was dominated by a $61.8 million noncash gain from changes in the fair value of warrant liabilities and a $7.7 million income-tax credit. The company remained loss-making at the operating level; reported earnings therefore do not reflect operating cash generation.
Revenue mix shifted: UPS battery sales increased 46% to $33.3 million; Hitrans contributed $17.9 million of cathode and precursor sales after acquisition; raw-material trading fell 96% to $0.5 million. EV battery sales were about $0.2 million. Gross margin improved, which management attributed to productivity, cost control and production-line upgrades.
At year-end, cash and cash equivalents were $7.4 million and pledged deposits were $19.0 million, together $26.4 million of cash and restricted cash. Current assets were $122.8 million and current liabilities $112.8 million. Trade and bills receivable rose 69% to $49.9 million, while inventory increased to $30.1 million from $5.3 million. Bank borrowings were $8.8 million; other short-term loans were $4.7 million, and trade and bills payable were $65.4 million. Total liabilities were $121.7 million and equity $140.9 million. Capital expenditures were $19.2 million; investing cash outflow was $38.1 million and financing cash inflow $48.3 million.
Material changes and business developments
- Revenue grew 40%, led by UPS batteries and newly consolidated Hitrans materials sales; the prior-year raw-material trading business contracted sharply.
- The company acquired 81.56% of Hitrans registered equity interests, representing 75.57% of paid-up capital. Hitrans added a second reportable segment and $17.9 million of FY2021 revenue.
- Year-end trade and bills payable more than doubled, and inventory rose substantially. Receivables also grew faster than revenue, increasing working-capital demands.
- FY2021 included $5.3 million of R&D expense and $10.0 million of general and administrative expense, both materially higher than in 2020.
Outlook, risks and unusual items
Management estimates FY2022 capital expenditures of approximately $30 million for new plants, product lines and battery-module packing lines. Its Gaochun/Nanjing expansion plan targets up to 8 GWh of annual lithium-battery capacity in two phases, subject to market acceptance and possible schedule changes. The filing reports 0.7 GWh of Phase I capacity operating by year-end 2021 and a separate 0.4 GWh Dalian line placed into operation. Management also describes planned development of new battery models and a light-electric-vehicle business; the EV production line had not begun commercial production as of the filing.
The auditor expressed substantial doubt about the company’s ability to continue as a going concern, citing negative operating cash flow, accumulated deficit and significant near-term obligations. Management plans to renew or obtain borrowings and pursue equity financing, but financing is not assured. The company reported an accumulated deficit of $122.5 million and committed capital expenditures, equipment purchases and capital contributions totaling $174.0 million at year-end, including $159.9 million of capital contributions.
Other significant risks include ineffective disclosure controls and internal control over financial reporting, with material weaknesses involving accounting policies for key agreements and insufficient U.S. GAAP expertise; customer and supplier concentration; long collection terms and rising receivables; volatile raw-material prices; and COVID-related facility suspensions. The top five customers represented about 54% of revenue, versus 80% in 2020.
The Hitrans acquisition brought integration and funding obligations, including approximately RMB99.8 million of subscribed registered capital due by May 31, 2025. A dispute over a remaining RMB3 million ($0.5 million) acquisition-related deposit was subject to legal action. The filing also describes ongoing litigation with a contractor, with the matter remanded for retrial. The company’s auditor was identified by the PCAOB as subject to its inspection determination, creating potential U.S. trading or delisting risk under the HFCA Act. The company also warns of PRC regulatory uncertainty and limits on moving funds from China.
Investor verification priorities
- Separate recurring operating performance from the $61.8 million noncash warrant gain and $7.7 million tax credit; confirm the underlying drivers of the operating loss.
- Verify liquidity and refinancing capacity, including the availability of pledged cash, maturities of bills and short-term obligations, and progress on planned financing.
- Assess receivable collectability, customer concentration and subsequent collections; the filing reports a $4.6 million doubtful-account allowance and large balances due from major customers.
- Track Hitrans integration, repayment and capital-contribution commitments, and resolution of the disputed deposit and contractor litigation.
- Monitor execution, utilization and funding of planned capacity expansion and the stated FY2022 capital-expenditure program.
- Confirm remediation of material control weaknesses and developments affecting PCAOB auditor inspection and Nasdaq listing status.