10KSB/A 1 bak10ksba2093005.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB/A (Amendment No. 2) (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2005 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period ____________to Commission file number 000-49712 CHINA BAK BATTERY, INC. (Name of small business issuer in its charter) Nevada 88-0442833 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) BAK Industrial Park, No. 1 BAK Street 518119 Kuichong Town, Longgang District (Zip Code) Shenzhen, People's Republic of China (Address of principal executive offices) Issuer's telephone number, including area code: (86-755) 8977-0093 Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001. Check whether the issuer is not required to file reports pursuant to Section 13 of 15(d) of the Exchange Act [ ] Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained herein, and none will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] The issuer's revenues for its most recent fiscal year were: $101,921,583. Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act) YES [ ] NO [X] The aggregate market value of the voting common stock held by non-affiliates of the issuer, based on the average bid and asked price of such stock, was $177,408,565.75 at November 30, 2005. At November 30, 2005, the registrant had outstanding 48,878,396 shares of par value $.001 common stock. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] EXPLANATORY NOTE This Amendment No. 2 to the Annual Report on Form 10-KSB for the year ended September 30, 2005 of China BAK Battery, Inc. (the "Annual Report") is filed solely for the purpose of (i) correcting the reference in Part II, Item 5 to the "NASD's Over the Counter Market" to the "Over the Counter Market," (ii) adding in Part III, Item 9, certain information relating to four individuals who have been chosen to become directors, but whose election has not yet become effective and (iii) adding to Item III, Part 10, certain conforming information. The filing of this Amendment No. 2 to the Annual Report is not a representation by the Company that any statements contained in items of the Annual Report other than that information being amended are true or complete as of any date subsequent to the date of the Annual Report. i CHINA BAK BATTERY, INC. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL ----------------------------------------------------------------------- BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES ---------------------------------------------- Common Stock and Dividend Policy There is no established public trading market for our common stock, and our common stock is not listed for trading on any securities exchange or the NASDAQ. However, over-the-counter trades in our common stock are quoted on the Over-the-Counter Bulletin Board under the symbol "CBBT.OB." On November 30, 2005, the last reported sales price for our common stock was $7.50 per share. The following table sets forth, for the quarters indicated, the range of closing high and low bid prices of our common stock as reported by the Over-the-Counter Bulletin Board, as adjusted for all previously effected stock splits. These quotations reflect inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions. Common Stock ------------------- By Quarter Ended High Low ---------------- --------- --------- Fiscal 2003 ------------------------------------------------- March 31, 2003................................ $.39 $.37 June 30, 2003................................. $.60 $.60 September 30, 2003............................ $1.01 $1.01 December 31, 2003............................. $1.01 $1.01 Fiscal 2004 ------------------------------------------------- March 31, 2004................................ $1.01 $1.01 June 30, 2004................................. $1.01 $1.01 September 30, 2004............................ $1.45 $1.02 December 31, 2004............................. $3.50 $1.25 Fiscal 2005 ------------------------------------------------- March 31, 2005................................ $7.30 $2.80 June 30, 2005................................. $8.50 $5.00 September 30, 2005............................ $7.75 $6.54 ----------- In reviewing the foregoing table, it should be noted that the exchange of stock by which China BAK acquired BAK International and its subsidiary BAK Battery occurred on January 20, 2005. As of November 30, 2005, there were 48,878,396 shares of our common stock outstanding held by approximately 148 stockholders of record. We have never paid any cash dividends on our common stock. We do not anticipate paying any cash dividends or making any other cash distributions on our common stock in the foreseeable future. Should we decide in the future to do so, as a holding company, our ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries. Our operating subsidiaries may be subject, from time to time, to restrictions on their ability to make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into dollars or other hard currency and other regulatory restrictions. We currently intend to retain future earnings, if any, to finance operations and the expansion of our business. Please see Item 11 "Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters" for a description of securities authorized for issuance under equity compensation plans. Recent Sales of Unregistered Securities On September 16, 2005 the Company issued an aggregate of 7,899,863 shares of its common stock to certain accredited investors as that term is defined in Rule 502 of Regulation D promulgated under the Securities Act of 1933, as amended, at a purchase price of $5.50 per share, for a total purchase price of $43,449,246. In connection with the closing of that issuance, the Company issued warrants to purchase an aggregate of 631,989 shares of common stock at an exercise price of $7.92 per share exercisable for a period ending three years after the date of issuance to certain persons as part of an agreed upon fee. The securities were issued in reliance upon the exemption contained in Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended. The purchasers were not solicited through any form of general solicitation or advertising. The purchasers represented to the Company, among other things, that they were acquiring the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof, that they were accredited investors as that term is defined in Rule 502 of Regulation D promulgated under the Securities Act of 1933, as amended, and appropriate legends were placed upon the securities issued. All purchasers were provided, and acknowledged that they had adequate access to, information about the Company. On January 20, 2005 we completed a stock exchange transaction with the stockholders of BAK International, Ltd., a Hong Kong company ("BAK International"). The exchange was consummated under Nevada law pursuant to the terms of a Securities Exchange Agreement dated effective as of January 20, 2005 by and among CBBI, BAK International and the stockholders of BAK International. Pursuant to the Securities Exchange Agreement, we issued 39,826,075 shares of our common stock, par value $0.001 per share, to the stockholders of BAK International, representing approximately 97.2% of our post-exchange issued and outstanding common stock, in exchange for 100% of the outstanding capital stock of BAK International. We presently carry on the business of Shenzhen BAK Battery Co., Ltd., a Chinese corporation and BAK International's wholly-owned subsidiary, or BAK Battery. The 39,826,075 shares were issued in 2 separate transactions. The first transaction culminated in the issuance of 31,225,642 to the original shareholders of Shenzhen BAK Battery, Co., Ltd. for an aggregate cash consideration of $11,500,000. This amount approximated the capitalization of Shenzhen BAK Battery, Ltd. at the time of the agreement was entered into. The second transaction culminated in the issuance of 8,600,433 shares for an aggregate cash consideration of $17,000,000. ($15,528,629 net of issuance costs). The foregoing shares were issued in private transactions or private placements intending to meet the requirements of one or more exemptions from registration. In addition to any noted exemption below, we relied upon Regulation D and Section 4(2) of the Securities Act of 1933, as amended (the "Act"). The investors were not solicited through any form of general solicitation or advertising, the transactions being non-public offerings, and the sales were conducted in private transactions where the investor identified an investment intent as to the transaction without a view to an immediate resale of the securities; the shares were "restricted securities" in that they were both legended with reference to Rule 144 as such and the investors identified they were sophisticated as to the investment decision and in most cases we reasonably believed the investors were "accredited investors" as such term is defined under Regulation D based upon statements and information supplied to us in writing and verbally in connection with the transactions. We never utilized an underwriter for an offering of our securities and no sales commissions were paid to any third party in connection with the above-referenced sales. On June 10, 2004, we issued 99,858 shares of our $ 0.001 par value common stock in full settlement of debt, in the amount of $49,929, owed to Harry Miller, our former President and Chief Executive Officer. The price of the transaction was $0.50 per share. The issuance of these shares to Mr. Miller was not registered under the Securities Act of 1933 in reliance on the exemption therefrom contained in Section 4(2) of such act and Regulation D as promulgated thereunder. 2 PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS ------------------------------------------------------------ The following table provides information about our executive officers, directors and director nominees and their respective ages and positions as of December 31, 2005. The Company's sole director, Mr. Xiangqian Li, will serve as a director until whichever of the following first occurs: his successor is elected and qualified, his resignation, his removal from office by a vote of the stockholders or his death: NAME AGE POSITION HELD ---- --- ------------- Xiangqian Li 37 Director, Chairman of the Board, President and Chief Executive Officer Yongbin Han 36 Chief Financial Officer, Secretary and Treasurer Huanyu Mao 54 Chief Operating Officer and Chief Technical Officer Xiangqian Li has served as our Director, Chairman of the Board, President and Chief Executive Officer since January 20, 2005. Mr. Li has been Chairman of Board of Directors and General Manager of BAK Battery since April 2001 and has also served as BAK Battery's general manager since December 2003. Previously, Mr. Li served as (i) Chairman of the Board of Directors and General Manager of Shenzhen BAK Li-ion Battery Co., Ltd. from December 2000 until March 2001; (ii) as Chairman of the Board of Directors and General Manager of Jilin Province Huaruan Technology Company Limited by Stocks ("Huaruan Technology") from March 2001 until June 2001; and (iii) as Chairman of the Board of Directors of Huaruan Technology from January 2001 until June 2003. Prior to 2001 Mr. Li was self employed. Mr. Li graduated from Lanzhou Railway Institute and holds a Bachelors degree in gas engineering. He is pursuing a Doctorate of quantity economics from Jilin University. Yongbin Han has served as our Chief Financial Officer and Secretary since January 20, 2005. Mr. Han is a Chinese certified public accountant and certified tax agent. Mr. Han has been Deputy General Manager of BAK Battery since April 2003. In that capacity he oversees the finance and accounting department. Previously, Mr. Han served as (i) Deputy General Manager of Huaruan Technology from January 2002 until April 2003 and (ii) Department Manager of Zhonghongxin Jianyuan Accounting Firm from July 1995 until July 2001. Mr. Han graduated from Changchun Tax Institute with a Bachelors degree in accounting. Huanyu Mao has served as our Chief Technical Officer since January 20, 2005. Dr. Mao has been Chief Scientist of BAK Battery since September 2004. From 1997 until September 2004 Dr. Mao served as Chief Engineer of Tianjin Lishen Company. Dr. Mao received a Doctorate degree in electrochemistry in conducting polymers from Memorial University of Newfoundland, Canada. By the written consent of holders of a majority of the shares of common stock of the Company, Dr. Huanyu Mao, Mr. Richard Goodner, Mr. Joseph R. Mannes and Mr. Donald A. Preston have been chosen to become directors of the Company, although their elections will not be effective until the end of the twentieth calendar day after an Information Statement under Section 14(c) of the Securities Exchange Act of 1934, as amended, which includes information relating to the choice of those individuals to become directors, is sent to the stockholders of the Company. An Information Statement has not been sent to stockholders of the Company and accordingly, Dr. Mao and Messrs. Goodner, Mannes and Preston are not yet directors of the Company. Richard B. Goodner, 60, currently serves as Vice President - Legal Affairs and General Counsel for U.S. Home Systems, Inc., a Nasdaq National Market System publicly traded company and has held that position since June 2003. Prior to working with U.S. Home Systems, Inc., Mr. Goodner was a partner in the law firm of Jackson Walker L.L.P. from 1997 to 2003. Mr. Goodner holds a Bachelor of Arts degree in Economics from Eastern New Mexico University and a law degree from Southern Methodist University. 3 Joseph R. Mannes, 47, currently serves as the Managing Director - Corporate Finance of SAMCO Capital Markets, a division of Penson Financial Services, Inc. and has held this position since 2001. Prior to working with SAMCO Capital Markets, Mr. Mannes served as Vice President, Chief Financial Officer and Secretary of Clearwire Technologies, Inc. from 1998 to 2001. Mr. Mannes holds a Bachelor of Arts degree. in Philosophy and French from Dartmouth College and an M.B.A. in Finance and Accounting from the Wharton School Graduate Division of the University of Pennsylvania. Donald A. Preston, 55, currently serves as Managing Director for Lincoln Financial Advisors, a subsidiary of the Lincoln Financial Group. Mr. Preston has served in this and other management capacities with Lincoln Financial Advisors over the last 20 years. Mr. Preston holds a Bachelor of Business Administration degree in General Business from St. John Fisher College and Chartered Life Underwriter and Chartered Financial Consultant degrees in Financial Planning from American College. Board Composition and Committees The board of directors is currently composed of one member, Xiangqian Li. After the election of the four individuals describe above becomes effective, the board of directors will consist of five members. All Board action requires the approval of a majority of the directors in attendance at a meeting at which a quorum is present. We have purchased officers and directors liability insurance. We currently do not have standing audit, nominating or compensation committees. We intend, however, to establish an audit committee and a compensation committee of the board of directors as soon as practicable. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and evaluating and administering our system of internal controls over financial reporting. The compensation committee will be primarily responsible for reviewing and approving our salary and benefits policies (including stock options), including compensation of executive officers. Director Compensation At present we do not pay our directors a fee for attending scheduled and special meetings of our board of directors. We intend to reimburse each director for reasonable travel expenses related to such director's attendance at board of directors and committee meetings. Once the election of Messrs. Goodner, Mannes and Preston becomes effective and they become independent members of our board, we expect to pay fees comparable to those paid by other public companies in our peer group. Indebtedness of Directors and Executive Officers None of our directors or officers or their respective associates or affiliates is indebted to us. Involvement in Certain Legal Proceedings In the normal course of business, various claims are made against us. At this time, in the opinion of management, there are no pending claims the outcome of which are expected to result in a material adverse effect on our consolidated financial position or results of operations. Family Relationships There are no family relationships among our directors or officers. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires our directors, executive officers and holders of more than 10% of our Common Stock to file with the Commission initial reports of ownership and reports of changes in ownership of our Common Stock and other equity securities. Officers, directors and greater than 10% stockholders are required by the Commission regulations to furnish us with copies of all Section 16(a) reports 4
they file. To our knowledge, based solely on a review of the copies of such reports and written representations that no other reports were required, we believe that all filing requirements applicable to our officers, directors and greater than 10% stockholders were satisfied during the fiscal year ended September 30, 2005, with the exception of a Form 4 filed on behalf of Yongbin Han and a Form 4 filed on behalf of Dr. Huanyu Mao. ITEM 10. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------- The following table sets forth, as of November 30, 2005, certain information with respect to the beneficial ownership of our common stock by (i) each director and officer of CBBI, (ii) each person known to CBBI to be the beneficial owner of five percent or more of the outstanding shares of common stock of CBBI, and (iii) all directors and officers of CBBI as a group. Unless otherwise indicated, the person or entity listed in the table is the beneficial owner of, and has sole voting and investment power with respect to, the shares indicated. Certain principal stockholders are selling stockholders in this offering. Amount and Nature of Beneficial Ownership(1) ----------------------------------------- Number Percent of Name of Beneficial Owner of Shares(2) Voting Stock(3) ------------------------ --------- ------------ Xiangqian Li 21,233,437(4) 43.4% BAK Industrial park, No. 1 BAK Street Kuichong Town Longgang District, Shenzhen People's Republic of China The Pinnacle Fund, L.P.(5) 2,612,751 5.3% 4965 Preston Park Blvd., Suite 240 Plano, TX 75093 Huanyu Mao 249,805 * BAK Industrial park, No. 1 BAK Street Kuichong Town Longgang District, Shenzhen People's Republic of China Yongbin Han 312,256 * BAK Industrial park, No. 1 BAK Street Kuichong Town Longgang District, Shenzhen People's Republic of China Directors, persons chosen to become directors and executive 21,795,498 44.6% officers as a group (6 persons) --------------------
*Denotes less than 1% of the outstanding shares of common stock. (1) On November 30, 2005, there were 48,878,396 shares of common stock outstanding and no issued and outstanding preferred stock. Each person named above has the sole investment and voting power with respect to all shares of common stock shown as beneficially owned by the person, except as otherwise indicated below. (2) Under applicable SEC rules, a person is deemed to be the "beneficial owner" of a security with regard to which the person directly or indirectly, has or shares (a) the voting power, which includes the power to vote or direct the voting of the security, or (b) the investment power, which includes the power to dispose, or direct the disposition, of the security, in each case irrespective of the person's economic interest in the security. Under these SEC rules, a person is deemed to beneficially own securities which the 5
person has the right to acquire within 60 days through the exercise of any option or warrant or through the conversion of another security. (3) In determining the percent of voting stock owned by a person on November 30, 2005, (a) the numerator is the number of shares of common stock beneficially owned by the person, including shares the beneficial ownership of which may be acquired within 60 days upon the exercise of options or warrants or conversion of convertible securities, and (b) the denominator is the total of (i) the 48,878,396 shares in the aggregate of common stock outstanding on November 30, 2005, and (ii) any shares of common stock which the person has the right to acquire within 60 days upon the exercise of options or warrants or conversion of convertible securities. Neither the numerator nor the denominator includes shares which may be issued upon the exercise of any other options or warrants or the conversion of any other convertible securities. (4) Mr. Li is a party to an Escrow Agreement pursuant to which he agreed to place 2,179,550 shares of his common stock into escrow for the benefit of the selling stockholders in the event we fail to satisfy certain "performance thresholds", as defined in the Escrow Agreement, which Escrow Agreement is incorporated by reference as a material exhibit to the registration statement of which this prospectus is a part and is on file with the SEC. CBBI's net income for the fiscal year ended September 30, 2005 exceeded the "performance threshold" for such period; accordingly, 1,089,775 of the shares placed in escrow by Mr. Li will be released to Mr. Li. Mr. Li is also a party to a Lock-up Agreement pursuant to which he has agreed, except for distributions of his shares of common stock required under the Escrow Agreement, not to transfer his common stock for a period commencing January 20, 2005 and ending 12 months after the date our common stock is listed on either the Nasdaq Stock Market or another national stock exchange or quotation medium. The Lock-up Agreement is incorporated by reference as a material exhibit to the registration statement of which this prospectus is a part and is on file with the SEC. Mr. Li is also a party to a Pledge Agreement pursuant to which he has agreed to pledge 19,053,887 shares of his common stock to Shenzhen Development Bank (Longgang Branch) as security for a comprehensive credit facility of the Company. (5) Barry Kitt has sole voting and investment control over the securities held by The Pinnacle Fund, L.P. Equity Compensation Plan Information The following table provides information about the securities authorized for issuance under our equity compensation plans. In accordance with the rules of the Commission, the information in the table is presented as of September 30, 2005, the end of our most recently completed fiscal year. Number of securities to remaining available for Number of securities to future issuance under equity be issued upon exercise Weighted-average exercise compensation plans of outstanding options, price of outstanding options (excluding securities Plan category warrants and rights warrants and rights reflected in column (a)) -------------------- ----------------------- ---------------------------- ---------------------------- (a) (b) (c) Equity compensation plans approved by security holders -- -- -- Equity compensation plans not approved by 2,000,000 6.25 2,000,000 security holders Total 2,000,000 6.25 2,000,000
6 ITEM 13. EXHIBITS -------- 31.1 Chief Executive Officer Certification furnished pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Chief Financial Officer Certification furnished pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Chief Executive Officer Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Chief Financial Officer Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 7 SIGNATURES Pursuant to the requirements of the Securities Act, the Company and has duly caused this Amendment No. 1 to Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: February 1, 2006 CHINA BAK BATTERY, INC. By: /s/ Xiangqian Li ------------------------------------------------ Xiangqian Li Chairman, President, Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this Amendment No. 1 to Annual Report has been signed below by the following persons in the capacities and on the dates indicated. Name Office Date ---- ------ ---- /s/ Xiangqian Li ------------------ Chairman, President, Chief Executive February 1, 2006 Xiangqian Li Officer and Director (Principal Executive Officer) /s/ Yongbin Han ------------------ Chief Financial Officer, Secretary, February 1, 2006 Yongbin Han and Treasurer (Principal Financial and Accounting Officer 8