Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following management's discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. Our financial statements are prepared in U.S. dollars and in accordance with U.S. GAAP.

Special Note Regarding Forward Looking Statements

Statements contained in this report include "forward-looking statements" within the meaning of such term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as "believe," "expect," "anticipate," "project," "target," "plan," "optimistic," "intend," "aim," "will" or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A, "Risk Factors" described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

Use of Terms

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to:

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"BAK Asia" are to our Hong Kong subsidiary, China BAK Asia Holdings Limited;

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"CBAK Power" are to our PRC subsidiary, Dalian CBAK Power Battery Co., Ltd.;

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"CBAK Shangqiu" are to our PRC subsidiary, CBAK New Energy (Shangqiu) Co., Ltd.;

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"Company", "we", "us" and "our" are to the combined business of CBAK Energy Technology, Inc., a Nevada corporation, and its consolidated subsidiaries;

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"Exchange Act" are to the Securities Exchange Act of 1934, as amended.

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"Hitrans" are to our 74.36% owned PRC subsidiary, Zhejiang Hitrans Lithium Battery Technology (we hold 73.46% of registered equity interests of Hitrans, representing 79.64% of paid-up capital).

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"Nanjing BFD" are to our PRC subsidiary, Nanjing BFD New Energy Technology Co., Ltd., a company that was previously named Nanjing Daxin New Energy Automobile Industry Co., Ltd. until February 24, 2023;

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"Nanjing CBAK" are to our PRC subsidiary, Nanjing CBAK New Energy Technology Co., Ltd.;

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"RMB" are to Renminbi, the legal currency of China;

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"SEC" are to the United States Securities and Exchange Commission; and

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"U.S. dollar", "$" and "US$" are to the legal currency of the United States;

Overview

We are a manufacturer of new energy high power lithium and sodium batteries that are mainly used in light electric vehicles, electric vehicles, energy storage such as residential energy supply & uninterruptible power supply (UPS) application, and other high-power applications. Our primary product offerings consist of new energy high power lithium and sodium batteries. In addition, after completing the acquisition of 81.56% of registered equity interests (such ownership percentage reduced to 73.46% of registered equity interests (representing 79.64% of paid-up capital as of March 31, 2026)) of Hitrans in November 2021, we entered the business of developing and manufacturing NCM precursor and cathode materials. Hitrans is a leading developer and manufacturer of ternary precursor and cathode materials in China, whose products have a wide range of applications on batteries that would be applied to electric vehicles, electric tools, high-end digital products and storage, among others.

As of March 31, 2026, we report financial and operational information in two segments: (i) production of high-power lithium and sodium battery cells, and (ii) manufacture and sale of materials used in high-power lithium battery cells.

We currently conduct our business primarily through (i) CBAK Power; (ii) Nanjing CBAK; (iii) CBAK Shangqiu; (iv) Nanjing BFD; and (v) Hitrans.

Financial Performance Highlights for the Quarter Ended March 31, 2026

The following are some financial highlights for the quarter ended March 31, 2026:

	●	Net revenues: Net revenues increased by $34.7 million, or 99%, to $69.6 million for the three months ended March 31, 2026, from $34.9 million for the same period in 2025.
	●	Gross profit: Gross profit was $1.0 million, representing a decrease of $3.8 million, or 78.3% for the three months ended March 31, 2026, from gross profit of $4.8 million for the same period in 2025.
	●	Operating loss: Operating loss was $9.7 million for the three months ended March 31, 2026, reflecting an increase of $6.8 million from an operating loss of $2.9 million for the same period in 2025.
	●	Net loss: Net loss was $9.0 million for the three months ended March 31, 2026, compared to $2.1 million for the same period in 2025.
	●	Fully diluted loss per share: Fully diluted loss per share was $0.1 for the three months ended March 31, 2026, as compared to $0.02 for the same period in 2025.

Financial Statement Presentation

Net revenues. 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 our product, which occurs at a point in time, typically upon delivery to the customer. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that would have been recognized is one year or less or the amount is immaterial.

Revenue from product sales is recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our 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.

Cost of revenues. Cost of revenues consists primarily of material costs, employee remuneration for staff engaged in production activity, share-based compensation, depreciation and related expenses that are directly attributable to the production of products. Cost of revenues also includes write-downs of inventory to lower of cost and net realizable value.

Research and development expenses. Research and development expenses primarily consist of remuneration for R&D staff, share-based compensation, depreciation and maintenance expenses relating to R&D equipment, and R&D material costs.

Sales and marketing expenses. Sales and marketing expenses consist primarily of remuneration for staff involved in selling and marketing efforts, including staff engaged in the packaging of goods for shipment, warranty expenses, advertising cost, depreciation, share-based compensation and travel and entertainment expenses. We do not pay slotting fees to retail companies for displaying our products, engage in cooperative advertising programs, participate in buy-down programs or similar arrangements.

General and administrative expenses. General and administrative expenses consist primarily of employee remuneration, share-based compensation, professional fees, insurance, benefits, general office expenses, depreciation, liquidated damage charges and bad debt expenses.

Finance costs, net. Finance costs consist primarily of interest income and interest on bank loans, net of capitalized interest.

Other income, net. Other income consists primarily of government subsidies received and income generated from non-operating agency-based service.

Income tax expenses. Our subsidiaries in PRC are subject to an income tax rate of 25%, except that Hitrans, CBAK Power, Nanjing CBAK and Nanjing BFD have been recognized as "High and New Technology Enterprises" and enjoy a preferential tax rate of 15% for three years from the approval date, expiring in 2025 to 2026. Our Hong Kong subsidiaries, BAK Asia, BAK Investment and Hong Kong Hitrans, are subject to profits tax at a rate of 16.5%. However, because we did not have any assessable income derived from or arising in Hong Kong, BAK Asia, BAK Investment and Hong Kong Hitrans did not pay any such tax. CBAK Malaysia is subject to income tax laws of Malaysia at the statutory rate of 24%. CBAK Energy California is subject to US federal income tax at a statutory rate of 21% and California state franchise tax at a flat rate of 8.84%. We did not have any assessable income derived from or arising in Malaysia and the United States for the three months ended March 31, 2025 and 2026.

Results of Operations

Comparison of Three Months Ended March 31, 2025 and 2026

The following tables set forth key components of our results of operations for the periods indicated.

(All amounts, other than percentages, in thousands of U.S. dollars)

		Three Months Ended March 31,								Change
		2025				2026				$				%
Net revenues		$	34,939			$	69,618				34,679				99	%
Cost of revenues			(30,137	)			(68,578	)			(38,441	)			128	%
Gross profit			4,802				1,040				(3,762	)			-78	%
Operating expenses:
Research and development expenses			(3,024	)			(4,220	)			(1,196	)			40	%
Sales and marketing expenses			(896	)			(1,998	)			(1,102	)			123	%
General and administrative expenses			(3,804	)			(4,510	)			(706	)			19	%
Allowance of credit losses, net			58				(12	)			(70	)			-121	%
Total operating expenses			(7,666	)			(10,740	)			(3,074	)			40	%
Operating loss			(2,864	)			(9,700	)			(6,836	)			239	%
Finance income (expense), net			45				(416	)			(461	)			-1,024	%
Other income, net			713				2,068				1,355				190	%
Share of income of equity investee			55				-				(55	)			-100	%
Change in fair value of financial derivatives			-				(906	)			(906	)			n/a
Loss before income tax			(2,051	)			(8,954	)			(6,903	)			337	%
Income tax expenses			-				(7	)			(7	)			n/a
Net income (loss)			(2,051	)			(8,961	)			(6,910	)			337	%
Less: Net loss (income) attributable to non-controlling interests			472				(325	)			(797	)			-169	%
Net loss attributable to shareholders of CBAK Energy Technology, Inc.		$	(1,579	)		$	(9,286	)			(7,707	)			488	%

Net revenues. Net revenues increased by $34.7 million, or 99%, to $69.6 million for the three months ended March 31, 2026, from $34.9 million for the same period in 2025.

The following table sets forth the breakdown of our net revenues by end-product applications.

(All amounts in thousands of U.S. dollars other than percentages)

		Three months ended March 31,								Change
		2025				2026				$			%
High power lithium batteries used in:
Electric vehicles		$	538				2			(536	)			-100	%
Light electric vehicles			2,845				15,408			12,563				442	%
Residential energy supply & uninterruptible power supplies			16,981				22,110			5,129				30	%
			20,364				37,520			17,156				84	%
Materials used in manufacturing of lithium batteries
Cathode			11,261				32,076			20,815				185	%
Precursor			3,314				22			(3,292	)			-99	%
			14,575				32,098			17,523				120	%
Total		$	34,939			$	69,618			34,679				99	%

Net revenues from sales of batteries for electric vehicles were $1,538 for the three months ended March 31, 2026, as compared to $537,507 in the same period of 2025. As our existing cell form factors are well aligned with current market demand across applications in residential energy storage, UPS systems, backup power for AI data centers and light electric vehicles, our sales team focused more on these applications.

Net revenues from sales of batteries for light electric vehicles were $15.4 million for the three months ended March 31, 2026, as compared to $2.8 million in the same period of 2025, an increase of $12.6 million, or 442%. We strive to continue to penetrate the market for batteries used in light electric vehicles, especially the international market such as India, Vietnam and Africa. We believe that our sales campaign in the international market has contributed to a rebound in our sales volume in this sector.

Net revenues from sales of batteries for residential energy supply and uninterruptible power supplies were $22.1 million in the three months ended March 31, 2026, as compared with $17.0 million in the same period in 2025, representing an increase of $5.1 million, or 30%.

Net revenues from sales of materials used in manufacturing lithium batteries were $32.1 million for the three months ended March 31, 2026, as compared to $14.6 million for the same period of 2025, representing an increase of $17.5 million, or 120%. This increase primarily resulted from the successful acquisition of new customers and a highly favorable raw material pricing environment.

Cost of revenues. Cost of revenues increased to $68.6 million for the three months ended March 31, 2026, as compared to $30.1 million for the same period in 2025, an increase of $38.5 million, or 128%. The cost of revenues increased from rising material costs and initial friction costs associated with the Nanjing Phase II expansion and the Dalian 40135 capacity ramp-up. We write down the inventory value whenever there is an indication that it is impaired.

Gross profit. Gross profit for the three months ended March 31, 2026 was $1.0 million, or 1.5% of net revenues as compared to gross profit of $4.8 million, or 13.7% of net revenues, for the same period in 2025. The significant decline in gross profits aligns with the substantial drop in sales of batteries for residential energy supply and uninterruptible power supplies, which have a higher gross profit margin compared to other products. This margin compression was exacerbated by rapidly rising raw material costs that were not fully absorbed by customer pricing. Additionally, initial friction costs associated with the Nanjing Phase II expansion and the Dalian Model 40135 capacity ramp-up temporarily weighed on profitability.

Research and development expenses. Research and development expenses increased to approximately $4.2 million for the three months ended March 31, 2026, as compared to approximately $3.0 million for the same period in 2025, an increase of $1.2 million, or 40%. The increase primarily resulted from the increase of materials and consumables used for the development of series 60 batteries and the increase in salaries and social insurance expenses due to a growing number of employees at CBAK Power and Nanjing CBAK. The materials and consumables used were $0.7 million for the three months ended March 31, 2026 compared to $0.3 million for the same period in 2025. Salaries and social insurance increased by $0.5 million for the three months ended March 31, 2026, compared to the same period in 2025.

Sales and marketing expenses. Sales and marketing expenses increased to approximately $2.0 million for the three months ended March 31, 2026, as compared to approximately $0.9 million for the same period in 2025, an increase of approximately $1.1 million, or 123%. The increase was mainly from our increase of delivery charges by $0.5 million for our overseas sales.

General and administrative expenses. General and administrative expenses increased to $4.5 million for the three months ended March 31, 2026, as compared to $3.8 million for the same period in 2025, representing an increase of $0.7 million, or 19%. The increase mainly resulted from the increase of salaries and social insurance and depreciation expenses corresponding to our expansion in Dalian and Nanjing.

Allowance on expected credit losses, net. The expected credit losses expenses was $12,198 for the three months ended March 31, 2026, as compared to a reversal of $58,395 for the same period in 2025. We determine the allowance based on the current expected credit loss model. The allowance for credit losses is adjusted each period for changes in expected lifetime credit losses.

Operating loss. As a result of the above, our operating loss totaled $9.7 million for the three months ended March 31, 2026, as compared to $2.9 million for the same period in 2025, representing an increase of loss of $6.8 million, or 239%.

Finance income (expenses), net. Finance expenses, net were $0.4 million for the three months ended March 31, 2026, as compared to finance income of $45,120 for the same period in 2025. We did not have any interest capitalization for the three months ended March 31, 2026, compared to $91,289 of interest capitalized for the three months ended March 31, 2025.

Other income, net. Other income was $2.1 million for the three months ended March 31, 2026, as compared to $0.7 million for the same period in 2025. For the three months ended March 31, 2026, we generated $0.6 million from agency-based services provided and received $1.0 million of government assistance. For the three months ended March 31, 2025, we generated $0.5 million from agency-based services provided and received $0.1 million of government assistance.

Loss on derivatives instruments. Loss on derivatives instruments was $0.9 million and nil for the three months ended March 31, 2026 and 2025, respectively. We have entered into foreign currency forward contracts, options swaps, and commodity contracts to mitigate our exposures to exchange rate and raw materials price fluctuations.

Income tax. Income tax expenses were $7,426 and nil for the three months ended March 31, 2026 and 2025, respectively. The income tax expenses for the three months ended March 31, 2026 were incurred by Hitrans segment.

Net loss. As a result of the foregoing, we had a net loss of $9.0 million for the three months ended March 31, 2026, compared to $2.1 million for the same period in 2025.

Liquidity and Capital Resources

We have financed our liquidity requirements from a variety of sources, including short-term bank loans, other short-term loans and bills payable under bank credit agreements, advances from our related and unrelated parties, investors and issuance of capital stock and other equity-linked securities.

We incurred a net loss of $9.0 million for the three months ended March 31, 2026. As of March 31, 2026, we had cash and cash equivalents of $98.6 million. Our total current assets were $238.4 million and our total current liabilities were $368.2 million as of March 31, 2026, resulting in a net working capital deficit of $129.8 million.

As of March 31, 2026, we had an accumulated deficit of $143.1 million. We had an accumulated deficit from recurring net losses and significant short-term debt obligations maturing in less than one year as of March 31, 2026. These factors raise substantial doubt about our ability to continue as a going concern. The report from our independent registered public accounting firm for the year ended December 31, 2025 included an explanatory paragraph with respect to the substantial doubt about our ability to continue as a going concern.

The accompanying condensed consolidated financial statements have been prepared assuming we 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 condensed 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 our ability to continue as a going concern.

Lending from Financial Institutions

In January 2023, Hitrans renewed the banking facilities with Shaoxing Branch of Bank of Communications Co., Ltd with a maximum amount of RMB160.0 million (approximately $22.1 million) with the term from January 2023 to December 2027. On January 22, 2025, Hitrans and Bank of Communications entered into a new banking facility for another five years from January 22, 2025 to January 22, 2030 for a maximum guarantee of loan amount to RMB155.8 million (approximately $21.5 million). The facility was secured by Hitrans's land use rights and buildings. On October 24, 2025, Hitrans and Bank of Communications renewed the facility to a maximum guarantee of loan amount to RMB162.0 million (approximately $23.1 million). Under the facility, Hitrans borrowed RMB155.2 million (approximately $22.4 million) as of March 31, 2026, bearing interest at 2.45% to 3.0% per annum expiring through April 2026 to March 2027.

On April 9, 2024, Hitrans and China Zheshang Bank Co., Ltd Shangyu Branch entered into a short-term loan agreement for one year from April 9, 2024 to April 7, 2025 for a maximum loan amount to RMB5.5 million (approximately $0.8 million) bearing interest rate at 4.05% per annum. Hitrans borrowed RMB5.5 million (approximately $0.8 million) on the same date. Hitrans early repaid the loan on January 24, 2025.

On September 29, 2024, Hitrans and Zhejiang Shangyu Rural Commercial Bank entered into a short-term credit-guaranteed loan agreement for RMB15 million (approximately $2.0 million) with the term of one year from September 29, 2024 to September 26, 2025 bearing 4.00% interest rate. Hitrans borrowed RMB15 million (approximately $2.1 million) on the same date. Hitrans repaid the loan on September 26, 2025.

On December 31, 2024, Hitrans and China Everbright Bank Co., Ltd Shaoxing Branch entered into a short-term loan agreement for RMB10 million (approximately $1.4 million) with the term of one year from December 31, 2024 to December 30, 2025 bearing 2.9% interest rate. Hitrans borrowed RMB10 million (approximately $1.4 million) on the same date. Hitrans repaid the loan on December 30, 2025.

On January 17, 2025, Hitrans entered into a long-term Maximum Pledge Agreement with Zhejiang Shangyu Rural Commercial Bank, for the period from January 17, 2025 to September 25, 2027, with a maximum facility amount of RMB76.56 million (approximately $10.54 million). The facility was secured by the land use right and buildings of Hitrans. Hitrans has borrowed RMB52.9 million (approximately $7.7 million) as of March 31, 2026, bearing interest rate at 2.41% - 2.96% per annum expiring through June 2027 to September 2027.

On January 20, 2025, Nanjing CBAK entered into an unsecured revolving loan agreement with Bank of Ningbo Co., Ltd. Gaochun Branch with a maximum amount of RMB10 million (approximately $1.4 million) bearing interest at 2.8% per annum (LPR interest rate -30 bp), with a one-year loan period ending on January 20, 2026. Nanjing CBAK borrowed RMB10 million (approximately $1.4 million) under this loan agreement on January 20, 2025. Nanjing CBAK early repaid the loan on September 20, 2025.

On February 19, 2025, Nanjing CBAK obtained a RMB30 million facility (approximately $4.2 million) from Jiangsu Gaochun Rural Commercial Bank, with the term from February 19, 2025 to September 23, 2027. The facility was guaranteed by 100% equity in CBAK Nanjing held by BAK Investment. Nanjing CBAK borrowed RMB29 million (approximately $4.2 million) as of March 31, 2026, bearing interest rate at 2.26% to 2.78% per annum, repayable through May 2026 to March 2027.

On February 25, 2025, Hitrans entered into a short-term factoring loan agreement with China Construction Bank Co., Ltd for a maximum amount of RMB10 million (approximately $1.4 million) for a period of one year from February 28, 2025 to February 27, 2026, bearing interest of 3.7% per annum. Hitrans borrowed RMB10 million (approximately $1.4 million) on the same date. Hitrans repaid the factoring loan in February 2026.

Hitrans entered into another short-term factoring loan agreement with China Construction Bank Co., Ltd for a maximum amount of RMB10 million (approximately $1.4 million) for a period of one year from November 28, 2025 to November 27, 2026, bearing interest of 3.1% per annum. Hitrans borrowed RMB10 million (approximately $1.4 million) on the same date. Hitrans borrowed another RMB9.3 million (approximately $1.3 million), bearing interest of 3.0% per annum for one year from March 5, 2026 to March 5, 2027.

On June 28, 2025, Nanjing CBAK entered into a short-term loan agreement with Agricultural Bank of China Co., Limited for RMB12 million (approximately $1.7 million) from June 28, 2025 to June 26, 2026, bearing interest 2.60% per annum. Nanjing CBAK borrowed RMB12 million (approximately $1.7 million) on the same date. Nanjing CBAK early repaid the loan on July 18, 2025.

On June 30, 2025, CBAK Power obtained a banking facility from China Guangfa Bank Co., Ltd with a maximum amount of RMB100 million (approximately $14 million) for a term to June 12, 2026 for short-term borrowings and issuance of acceptance bills to settle materials suppliers, guaranteed by Power's buildings and pledged deposits. CBAK Power borrowed HKD10 million (approximately $1.4 million) from the above facility, bearing interest at 2.65% per annum, repayable on August 14, 2026. CBAK Power early repaid the loan on November 14, 2025.

CBAK Power has borrowed a series of acceptance bills totaling RMB51.5 million (approximately $7.45 million) for various terms expiring through April to September 2026, which was secured by CBAK Power's buildings and pledged deposit of RMB45.9 million (approximately $6.6 million).

On July 30, 2025, Hitrans entered into a short-term loan agreement with Industrial Bank Co., Ltd for RMB10 million (approximately $1.5 million) for a period of one year from July 31, 2025 to July 30, 2026 bearing interest of 3% per annum. Hitrans borrowed RMB10 million (approximately $1.4 million) on July 31, 2025.

On August 13, 2025, CBAK Power obtained a banking facility from China Construction Bank for RMB78.0 million (approximately $11.3 million) for a period to August 13, 2035. On August 29, 2025, CBAK Power drawn RMB10 million (approximately $1.4 million) from the facility for a period of one year, bearing interest of 2.2% per annum, repayable on August 21, 2026. On February 11, 2026, CBAK Power drawn RMB15 million (approximately $2.2 million) from the facility for a period of one year, bearing interest of 2.2% per annum, repayable on February 11, 2027.

On December 17, 2025, Nanjing BFD entered into a short-term loan agreement with Bank of China Co., Limited for RMB10 million (approximately $1.4 million) from December 17, 2025 to December 16, 2026, bearing interest 2.30% per annum. The loan was guaranteed by CBAK Nanjing. Nanjing BFD borrowed RMB10 million (approximately $1.4 million) on the same date.

On March 27, 2026, Nanjing CBAK obtained a bank loan from Ningbo Bank Co., Ltd Nanjing Gaochun Branch for RMB10 million (approximately $1.4 million), for the period from March 27, 2026 to November 3, 2026, bearing interest of 3.0% per annum. The loan did not require any security or guarantee from Nanjing CBAK.

CBAK Power borrowed a series of acceptance bills from China Zheshang Bank Co., Ltd. Shenyang Branch totaling RMB60.3 million (approximately $8.7 million) for various terms expiring through April to September 2026, which was secured by CBAK Power's pledged deposits of RMB32.8 million (approximately $4.8 million)), and CBAK Power's pledged bills receivable of RMB11.2 million (approximately $1.6 million).

Nanjing CBAK borrowed a series of acceptance bills from China Zheshang Bank Co., Ltd. Shenyang Branch totaling RMB69.5 million (approximately $10.1 million) for various terms expiring through April to August 2026, which was secured by Nanjing CBAK's pledged deposit of RMB62.4 million (approximately $9.0 million), and Nanjing CBAK's pledged bills receivable of RMB7.4 million (approximately $1.1 million).

Hitrans borrowed a series of acceptance bills from China Zheshang Bank Co., Ltd totaling RMB36.7 million (approximately $5.3 million) for various terms expiring through April to June 2026, which was secured by Hitrans's pledged deposit of RMB36.7 million (approximately $5.3 million).

Nanjing CBAK borrowed a series of acceptance bills from Bank of Nanjing totaling RMB89.0 million (approximately $12.9 million) for various terms expiring through April to September 2026, which was secured by Nanjing CBAK's pledged deposit of RMB79.0 million (approximately $11.4 million) and the balance guaranteed by 100% equity of CBAK Nanjing held by BAK Investment.

Nanjing CBAK borrowed a series of acceptance bills from Bank of Ningbo totaling RMB10.2 million (approximately $1.5 million) for various terms expiring in July 2026, which was secured by Nanjing CBAK's pledged deposit of RMB10.2 million (approximately $1.5 million).

Hitrans borrowed a series of acceptance bills from Bank of Communications Co., Ltd. Shangyu Branch totaling RMB67.9 million (approximately $9.8 million) expiring through May to August 2026, which was secured by Hitrans's pledged deposit of RMB67.9 million (approximately $9.8 million).

Hitrans borrowed a series of acceptance bills from Zhejiang Shangyu Rural Commercial Bank Co., Ltd totaling RMB80.0 million (approximately $11.6 million) expiring through May to September 2026, which was secured by Hitrans's pledged deposit of RMB80.0 million (approximately $11.6 million).

CBAK Power borrowed a series of acceptance bills from Industrial and Commercial Bank of China totaling RMB71.9 million (approximately $10.4 million) expiring through April to September 2026, which was secured by CBAK Power's pledged deposit of RMB72.0 million (approximately $10.4 million)).

CBAK Power borrowed a series of acceptance bills from China Construction Bank Co., Ltd totaling RMB100.0 million (approximately $14.5 million) expiring through June to August 2026.

Hitrans borrowed a series of acceptance bills from Industrial Bank totaling RMB2.1 million (approximately $0.3 million) expiring in July 2026, which was secured by Hitrans's pledged deposit of RMB2.1 million (approximately $0.3 million).

Nanjing CBAK borrowed a series of acceptance bills from Agricultural Bank of China totaling RMB29.7 million (approximately $4.3 million) expiring through June to September 2026, which was secured by Nanjing CBAK's pledged deposit of RMB9.7 million (approximately $1.4 million) and the balance guaranteed by 100% equity in CBAK Naning held by BAK Investment.

Nanjing CBAK obtained serval letter of credit from Bank of Ningbo totaled RMB15.0 million (approximately $2.2 million) for settlement of materials purchase for a period of one year expiring through September to November 2026, which was secured by Nanjing CBAK's pledged deposit of RMB15.0 million (approximately $2.2 million).

Hitrans borrowed a series of acceptance bill from Bank of Ningbo of RMB20 million (approximately $2.9 million) expiring through June to August 2026, which was secured by Hitran's bills receivables of RMB20 million (approximately $2.9 million).

Haisheng borrowed a series of acceptance bills from China Zheshang Bank Co., Ltd totaling RMB57.3 million (approximately $8.3 million) for various terms expiring through July to September 2026, which was secured by Haisheng's pledged deposit of RMB57.3 million (approximately $8.3 million).

Hitrans borrowed a series of acceptance bills from China CITIC Bank Shaoxing Branch totaling RMB32 million (approximately $4.6 million) for various terms expiring through August to September 2026, which was secured by Hitrans's pledged deposits of RMB32 million (approximately $4.6 million).

Haisheng borrowed a series of acceptance bills from China CITIC Bank Shaoxing Branch totaling RMB13.9 million (approximately $2.0 million) for various terms expiring through July to September 2026, which was secured by Haisheng's pledged deposits of RMB6.4 million (approximately $0.9 million) and bills receivables of RMB7.5 million (approximately $1.1 million).

Equity and Debt Financings from Investors

We have also obtained funds through private placements, registered direct offerings and other equity and note financings.

On December 8, 2020, we entered into a securities purchase agreement with certain institutional investors, pursuant to which we issued in a registered direct offering, an aggregate of 9,489,800 shares of common stock of the Company at a per share purchase price of $5.18, and warrants to purchase an aggregate of 3,795,920 shares of common stock of the Company at an exercise price of $6.46 per share, for gross proceeds of approximately $49.16 million, before deducting fees to the placement agent and other offering expenses payable by the Company.

On February 8, 2021, we entered into another securities purchase agreement with the same investors, pursuant to which we issued in a registered direct offering, an aggregate of 8,939,976 shares of common stock of the Company at a per share purchase price of $7.83. In addition, we issued to the investors (i) in a concurrent private placement, the Series A-1 warrants to purchase a total of 4,469,988 shares of common stock, at a per share exercise price of $7.67; (ii) in the registered direct offering, the Series B warrants to purchase a total of 4,469,988 shares of common stock, at a per share exercise price of $7.83; and (iii) in the registered direct offering, the Series A-2 warrants to purchase up to 2,234,992 shares of common stock, at a per share exercise price of $7.67. We received gross proceeds of approximately $70 million from the registered direct offering and the concurrent private placement, before deducting fees to the placement agent and other offering expenses payable by the Company.

As of March 31, 2026, all the warrants described above had expired without being exercised.

Summary of Cash Flows

We currently are expanding our product lines and manufacturing capacity in our Dalian, Nanjing, Zhejiang and Anhui facilities, which requires additional funding to finance the expansion. We may also require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. We plan to renew our bank loans upon maturity, if required, and plan to raise additional funds through bank borrowings and equity financing in the future to meet our daily cash demands, if required. However, there can be no assurance that we will be successful in obtaining such financing. If our existing cash and bank borrowings are insufficient to meet our requirements, we may seek to sell equity securities, debt securities or borrow from lending institutions. We can make no assurance that financing will be available in the amounts we need or on terms acceptable to us, if at all. The sale of equity securities, including convertible debt securities, would dilute the interests of our current shareholders. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer.

The following table sets forth a summary of our cash flows for the periods indicated:

(All amounts in thousands of U.S. dollars)

		Three Months Ended March 31,
		2025				2026
Net cash (used in) provided by operating activities		$	(9,621	)		$	22,285
Net cash used in investing activities			(9,903	)			(11,784	)
Net cash provided by financing activities			5,926				11,314
Effect of exchange rate changes on cash and cash equivalents and restricted cash			347				1,105
Net (decrease) increase in cash and cash equivalents and restricted cash			(13,251	)			22,920
Cash and cash equivalents and restricted cash at the beginning of period			60,786				75,677
Cash and cash equivalents and restricted cash at the end of period		$	47,535			$	98,597

Operating Activities

Net cash provided by operating activities was $22.3 million in the three months ended March 31, 2026. The net cash provided by operating activities for the three months ended March 31, 2026 was mainly attributable to our increase of trade and bills payable of $47.3 million and net off by the increase of inventories of $26.8 million.

Net cash used in operating activities was $9.7 million in the three months ended March 31, 2025. The net cash used in operating activities for the three months ended March 31, 2025 was mainly attributable to our increase of inventories of $8.7 million, an increase of trade and bills receivable of $7.4 million offset by a decrease of prepayments and other receivables and an increase in trade and bills payable of $8.2 million.

Investing Activities

Net cash used in investing activities was $11.8 million for the three months ended March 31, 2026 for the purchase of property, plant and equipment.

Net cash used in investing activities was $9.9 million for the three months ended March 31, 2025. The net cash used in investing activities comprised the purchases of property, plant and equipment and construction in progress $12.7 million offset by $2.8 million government subsidy received.

Financing Activities

Net cash provided by financing activities was $11.3 million in the three months ended March 31, 2026. The net cash provided by financing activities for the three months ended March 31, 2026 was mainly attributable to $23.3 million proceeds from bank borrowings offset by repayment of bank borrowings of $11.4 million and repayment of finance lease $0.6 million.

Net cash provided by financing activities was $5.9 million in the three months ended March 31, 2025. The net cash provided by financing activities for the three months ended March 31, 2025 was mainly attributable to $24.3 million proceeds from bank borrowings offset by repayment of bank borrowings of $17.1 million and $1.3 million net movement of short-term time deposits.

As of March 31, 2026, the principal amounts outstanding under our credit facilities and lines of credit were as follows:

(All amounts in thousands of U.S. dollars)

		Maximum amount available				Amount borrowed
Long-term credit facilities:
Zhejiang Shangyu Rural Commercial Bank			11,075				7,652
Short-term credit facilities:
Bank of China Nanjing Gaochun Branch			1,447				1,447
Bank of Communications Co., Ltd Shaoxing Shangyu Branch			22,533				22,444
Bank of Ningbo Co., Ltd. Gaochun Branch			1,447				1,447
China Construction Bank Co., Ltd. Dalian Zhuanghe Branch			11,278				3,616
China Construction Bank Co., Ltd. Shaoxing Branch			2,792				2,792
Industrial Bank Co., Ltd. Shaoxing Shangyu Branch			1,447				1,447
Jiangsu Gaochun Rural Commercial Bank			4,340				4,195
			45,284				37,388
Other lines of credit:
Agricultural Bank of China Nanjing Gaochun Branch			4,293				4,293
Bank of Communications Co., Ltd Shaoxing Shangyu Branch			9,817				9,817
Bank of Nanjing Gaochun Branch			12,870				12,870
Bank of Ningbo Co., Ltd. Gaochun Branch			3,642				3,642
Bank of Ningbo Co., Ltd. Shaoxing Shangyu Branch			2,893				2,893
China CITIC Bank Shaoxing Branch			6,641				6,641
China Construction Bank Co., Ltd. Dalian Zhuanghe Branch			14,460				14,460
China Guangfa Bank Co., Ltd. Dalian Ganjingzi Branch			21,099				7,450
China Zheshang Bank Co., Ltd. Shaoxing Shangyu Branch			5,310				5,310
China Zheshang Bank Co., Ltd. Shenyang Branch			18,779				18,779
Industrial and Commercial Bank of China Co., Ltd. Dalian Zhuanghe Branch			10,398				10,398
Industrial Bank Co., Ltd. Shaoxing Branch			297				297
Zhejiang Shangyu Rural Commercial Bank			19,846				19,846
			130,345				116,696
Total			186,704				161,736

Capital Expenditures

We incurred capital expenditures of $11.8 million and $12.6 million in the three months ended March 31, 2026 and 2025, respectively. Our capital expenditures were used primarily to construct or upgrade our Dalian, Nanjing, Zhejiang and Anhui facilities.

We estimate that our total capital expenditures in fiscal year 2026 will reach approximately $40 million. Such funds will be mainly used to construct new plants with new product lines and battery module packing lines.

Critical Accounting Policies and Estimates

Our condensed consolidated financial information has been prepared in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (1) the reported amounts of our assets and liabilities, (2) the disclosure of our contingent assets and liabilities at the end of each fiscal period and (3) the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and reasonable assumptions, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.

There were no material changes to the critical accounting policies previously disclosed in our audited consolidated financial statements for the year ended December 31, 2025 included in the Annual Report on Form 10-K filed on March 31, 2026.

Changes in Accounting Standards

Please refer to Note 1 to our condensed consolidated financial statements, "Principal Activities, Basis of Presentation and Organization-Recently Adopted Accounting Standards" and "-Recently Issued But Not Yet Adopted Accounting Pronouncements" for a discussion of relevant pronouncements.