EX-99.1 2 cb9035ex991.htm EXHIBIT 99.1

Exhibit 99.1

 

 

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Investor Presentation

February 2007

[LOGO OF CHINA BAK BATTERY, INC.]


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Safe Harbor Statement

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This presentation includes or incorporates by reference statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.  These statements include, but are not limited to, information or assumptions about revenues, gross profit, expenses, income, capital and other expenditures, financing plans, capital structure, cash flow, liquidity, management’s plans, goals and objectives for future operations and growth.  In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other comparable terminology.  You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect actual results, levels of activity, performance or achievements.

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[LOGO OF CHINA BAK BATTERY, INC.]




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Investment Considerations

 

One of the world’s biggest & fastest growing Li-ion battery cell manufacturers

 

 

 

 

Large & growing $2.5 billion Li-ion battery market

 

 

 

 

Expanding Li-ion product opportunities

 

 

 

 

Recurring revenue stream

 

 

 

 

Low cost manufacturing

 

 

 

 

State-of-the-art technical capability

 

 

 

 

Multiple growth opportunities

[GRAPHIC APPEARS HERE]

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Li-Ion Cell Market in China

 

Li-Ion cell/battery producers growing more rapidly in China than rest of of world

 

 

 

 

Production shift of OEM’s factories to Asia in general and China in particular

 

 

 

 

Lower cost vs. Japan and Korea:  manufacturing costs, logistics, import duty

 

 

 

 

Replacement cell phone market unique to China:

 

 

 

 

 

 

416 million cell phone subscribers growing by another 250 million over the next 5 years

 

 

 

 

 

 

Cell phones are sold and resold through an existing distribution network – not disposed of like in the US

 

 

 

 

 

 

BAK sells replacement batteries to the installed base of cell phones


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Li-ion vs. Competing Technologies

Feature

 

NiCd

 

NiMH

 

Li-ion


 


 


 


Operating Voltage

 

1.2

 

1.2

 

3.6

Cycle Life

 

500

 

500

 

1,000

Rapid Charge

 

Not Good

 

Good

 

Good

Memory Effect

 

Yes

 

No

 

No

Environmental Impact

 

Cadmium (poisonous)

 

None

 

None

Li-ion Batteries are the “defacto standard” in most applications due to higher power and longer duration

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Key Rechargeable Battery Applications

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Notebook Computers

PDAs

Digital Cameras

 

 

 

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Li-ion Rechargeable Batteries

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Cell phones

Bluetooth Headsets

 

 

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Cordless power tools

 

Hybrid-electric vehicles

 

 

 

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MP3/Portable Entertainment

Uninterruptible Power Supply

Light-electric vehicles


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Replacement Battery Market

 

BAK has 60% share of this market

 

 

 

 

 

Provides recurring revenue stream

 

 

 

 

 

BAK’s historical core business

 

 

 

 

 

 

Sales of steel and aluminum case battery cells to replacement battery manufacturers

 

 

 

 

 

 

These manufacturers, who sell under their own brand name or private-label brands, are predominantly Chinese manufactures

 

 

 

 

 

Relationships with key battery pack customers, including:

 

 

 

 

 

 

SCUD (Fujian) Electronics Co., Ltd.

 

 

 

 

 

 

Desay Power Tech. Co., Ltd.

 

 

 

 

 

 

Shenzhen Ya Litong Electronic Co., Ltd.


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The “Razor Blade” Business Model

Lithium batteries are consumable products.  More devices in use creates a recurring revenue stream along the lines of a “razor and razorblade” model

 

Consumables are sold to the installed base

 

 

 

 

Potential market expands at a geometric rate

 

 

 

 

Stability; Predictability; “Evolutionary rather than Revolutionary” changes

[CHART APPEARS HERE]

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Sales to Mobile Phone OEMs

 

The competitive environment

 

 

 

 

 

Product safety is the OEM’s primary concern.

 

 

 

 

 

 

Most OEM cells manufactured in Japan or Korea

 

 

 

 

 

 

BAK believes it has a significant cost manufacturing advantage over Japanese and Korean suppliers

 

 

 

 

 

New Customers

 

 

 

 

 

BAK has announced a number of new customers:  Lenovo, Ben Q Siemens,  China Tech Faith Wireless, UTStarcom, SIM Technology Group, Longcheer Technology, Hisense

 

 

 

 

 

Qualification underway with international Tier 1 OEM’s


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High Power Cells:
Sales to A123 Systems

 

First high power cell application:  DeWalt’s 36V line of power tools: “The power of corded without the cord”

 

 

 

 

Sales to A123 Systems 15% of Q1 2007 revenues

 

 

 

 

New high-powered battery products for applications in power tools, medical devices and hybrid electric vehicles

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Laptop Power Products

 

Began commercial production in July 2006

 

 

 

 

Significant increase in manufacturing sophistication as compared to mobile phone cells

 

 

 

 

Customers

 

 

 

 

 

Shenzhen Fonleate Electronics

 

 

 

 

 

 

In negotiations with several Tier 1 OEMs

 

 

 

 

 

Production is currently 40,000 pieces per day

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Lithium Polymer Product Line

 

Utilized for small-format batteries customized in size and shape for specific applications

 

 

 

 

Current Capacity > 1 million pieces per month

 

 

 

 

Current applications include:

 

 

 

 

 

MP3 players

 

 

 

 

 

 

Bluetooth headsets

 

 

 

 

 

 

Ultra light cell phones

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Low Cost Manufacturing

 

Factory structure combines automated and manual processes that utilize low cost Chinese cost labor

 

 

 

 

 

Automated equipment sourced in PRC and Taiwan

 

 

 

 

 

 

New equipment like slitters, electrode processing equipment, and winders that decrease cost, decrease process variability, improve product reliability and safety.

 

 

 

 

 

Strategic sourcing initiatives and use of purchasing power to gain the lowest material cost




International Labor Cost Comparison
(per hour)

Domestic Labor Cost Comparison
(per hour)

 

 

[CHART APPEARS HERE]

[CHART APPEARS HERE]

 

 


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[LOGO OF CHINA BAK BATTERY, INC.]




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World Class Technical Capability

 

BAK facilities meet or exceed international standards

 

 

 

 

 

 

EU and CE attestation, UL Authentication, ISO9001: 2000, ISO4001:1996 certified

 

 

 

 

 

 

Most advanced Li-ion research lab in China

 

 

 

 

 

 

State-of-the-art analytical equipment

 

 

 

 

 

 

Advanced automated model plant

 

 

 

 

 

World class scientists BAK R&D Center

 

 

 

 

 

R&D organization focus:

 

 

 

 

 

 

Joint program development with customers and partners

 

 

 

 

 

 

Unique ability to transition laboratory technology to manufacturing practice


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State of the Art Facilities

 

90-Acre industrial campus in Shenzhen including R&D center

 

 

 

 

1.9 million sq. ft. of manufacturing space

 

 

 

 

10,500+ employees

 

 

 

 

New planned facility in Tianjin

 

 

 

 

New R&D offices planned in central Shenzhen

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[LOGO OF CHINA BAK BATTERY, INC.]




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Company Growth Plans

Distribution Channels


 

 

Replacement Battery
Manufacturers

 

OEM
(Original Equipment Manufacturer)






Mobile Phones

60%+ Market Share

Automated, process controlled production capability established

 

Strong relationships with key battery pack manufacturers

Growth catalyst: New OEM customers

 

Growth catalyst:  Organic growth with market

Early success with China “Tier 1” OEM’s

 

 

 

Targeting international “Tier 1” OEM’s






Laptop Computers

Growth catalyst: New battery pack manufacturer customers

Automated process controlled production capability established April 2006

 

 

 

Growth catalyst: New OEM customers


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[LOGO OF CHINA BAK BATTERY, INC.]




[GRAPHIC APPEARS HERE]

Company Growth Plans

OEM

(Original Equipment Manufacturer)


Lithium Polymer

Production capability established 2006

 

Growth catalyst:  New customer development; continue to add manufacturing capacity




Lithium Phosphate

Production established 2006 to supply A123 with nano lithium phosphate based cells for high power applications.

High Power

Initial application:  Power tools manufactured by Black and Decker’s DeWalt division.

 

Growth catalyst:  supply to A123




High power

Planned facility announced in Tianjin.

 

Target applications:  UPS, LEV.

 

Potential applications:  HEV


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[LOGO OF CHINA BAK BATTERY, INC.]




[GRAPHIC APPEARS HERE]

Company Management

 

Mr. Xiangqian Li, Chief Executive Officer

 

 

 

 

 

Founder provided initial capital of $2.4 million from personal funds

 

 

 

 

 

 

Full time, operating CEO

 

 

 

 

 

Dr Huanyu Mao, Chief Operating Officer

 

 

 

 

 

Significant expertise in Li Ion technology: equipment, materials and production processes

 

 

 

 

 

 

Successful tenure as CTO at Lishen; previous to that NEC Moli Energy

 

 

 

 

 

 

PhD in Electrochemistry Memorial University of Newfoundland; postdoctoral work at Simon Fraser University; widely published technical author; 7 LI-Ion patents

 

 

 

 

 

Mr. Hongbin Han, Chief Financial Officer

 

 

 

 

 

Chinese CPA and Chinese certified tax agent.

 

 

 

 

 

Mr. Jim Groh, US Representative

 

 

 

 

 

US based management presence


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Financial Overview

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[GRAPHIC APPEARS HERE]

Revenue Growth

[CHART APPEARS HERE]

For the fiscal years ended September 30 and the year- to-date period ended December 31.

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[LOGO OF CHINA BAK BATTERY, INC.]




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Gross Profit Growth

[CHART APPEARS HERE]

For the fiscal years ended September 30 and the year- to-date period ended December 31.

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[LOGO OF CHINA BAK BATTERY, INC.]




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Net Income Growth

[CHART APPEARS HERE]

For the fiscal years ended September 30 and the year- to-date period ended December 31.

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[LOGO OF CHINA BAK BATTERY, INC.]




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Capital Structure

Shares Outstanding

 

48.9 million

Float

 

Message 21 million

Insider ownership

 

46%

Institutional Ownership

 

69%


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[LOGO OF CHINA BAK BATTERY, INC.]




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Income Statement

(US$ in millions)

 

Fiscal Year
Ended 9/30/05

 

Fiscal Year
Ended 9/30/06

 

Three months
Ended 12/31/06

 


 



 



 



 

Revenues

 

$

101.9

 

$

143.8

 

$

43.1

 

Gross Profit

 

$

25.9

 

$

39.6

 

$

8.2

 

Operating Expenses

 

$

10.4

 

$

17.1

 

$

4.6

 

Operating Income

 

$

15.5

 

$

22.5

 

$

3.6

 

Pre-tax Income

 

$

13.1

 

$

20.7

 

$

3.6

 

Net Income

 

$

12.4

 

$

20.2

 

$

3.6

 


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[LOGO OF CHINA BAK BATTERY, INC.]




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Strong Balance Sheet

(US$ in millions)

 

9/30/2006

 

12/31/06

 


 



 



 

Current Assets

 

$

146.9

 

$

148.0

 

Total Assets

 

$

259.7

 

$

264.6

 

Cash & Restricted Cash

 

$

34.1

 

$

34.8

 

Current Liabilities

 

$

145.7

 

$

128.8

 

Short term Bank Loans & Notes Payable

 

$

67.9

 

$

71.1

 

Shareholders’ Equity

 

$

113.6

 

$

122.6

 

Total Liabilities and Stockholders’ Equity

 

$

259.7

 

$

264.6

 


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[LOGO OF CHINA BAK BATTERY, INC.]




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Investment Considerations

 

One of the world’s biggest & fastest growing Li-ion battery cell manufacturers

 

 

 

 

Large & growing $2.5 billion Li-ion battery market

 

 

 

 

Expanding Li-ion product opportunities

 

 

 

 

Recurring revenue stream

 

 

 

 

Low cost manufacturing

 

 

 

 

State-of-the-art technical capability

 

 

 

 

Multiple growth opportunities

[GRAPHIC APPEARS HERE]

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[LOGO OF CHINA BAK BATTERY, INC.]




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Questions and Answers

 

[LOGO OF CHINA BAK BATTERY, INC.]