Company Quick10K Filing
Quick10K
Highpower International
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$3.67 16 $57
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-13 Earnings, Regulation FD, Exhibits
8-K 2019-04-18 Other Events, Exhibits
8-K 2019-03-13 Regulation FD, Other Events, Exhibits
8-K 2018-12-01 Shareholder Vote
8-K 2018-11-13 Earnings, Regulation FD, Exhibits
8-K 2018-08-13 Earnings, Regulation FD, Exhibits
8-K 2018-06-25 Regulation FD, Exhibits
8-K 2018-06-02 Other Events, Exhibits
8-K 2018-04-06 Other Events, Exhibits
8-K 2018-04-02 Earnings, Regulation FD, Exhibits
8-K 2018-03-13 Regulation FD, Exhibits
8-K 2018-03-12 Earnings, Regulation FD, Exhibits
WBA Walgreens Boots Alliance 48,970
BRO Brown & Brown 8,930
BRKS Brooks Automation 2,770
CBT Cabot 2,760
HAIN Hain Celestial Group 2,390
TBNK Territorial Bancorp 276
MBCN Middlefield Banc 132
APT Alpha Pro Tech 50
OTTW Ottawa Bancorp 45
EXNT Enxnet 0
HPJ 2019-03-31
Item 1. Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
Item 3. Default Upon Senior Securities
Item 4. Mine Safety Disclosures.
Item 5. Other Information
Item 6. Exhibits
EX-10.1 tv521016_ex10-1.htm
EX-10.2 tv521016_ex10-2.htm
EX-10.2A tv521016_ex10-2a.htm
EX-10.2B tv521016_ex10-2b.htm
EX-10.2C tv521016_ex10-2c.htm
EX-10.2D tv521016_ex10-2d.htm
EX-10.3 tv521016_ex10-3.htm
EX-10.3A tv521016_ex10-3a.htm
EX-10.3B tv521016_ex10-3b.htm
EX-10.3C tv521016_ex10-3c.htm
EX-10.3D tv521016_ex10-3d.htm
EX-10.4 tv521016_ex10-4.htm
EX-10.4A tv521016_ex10-4a.htm
EX-10.4B tv521016_ex10-4b.htm
EX-10.4C tv521016_ex10-4c.htm
EX-10.4D tv521016_ex10-4d.htm
EX-31.1 tv521016_ex31-1.htm
EX-31.2 tv521016_ex31-2.htm
EX-32.1 tv521016_ex32-1.htm

Highpower International Earnings 2019-03-31

HPJ 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 tv521016_10q.htm FORM 10-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For The Quarterly Period Ended March 31, 2019

 

OR

  

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  

For The Transition Period From                   To                  

 

COMMISSION FILE NO.001-34098

 

HIGHPOWER INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware   20-4062622

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

Building A1, 68 Xinxia Street, Pinghu, Longgang,

Shenzhen, Guangdong, 518111, People’s Republic of China

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

 

(86) 755-89686238

(COMPANY’S TELEPHONE NUMBER, INCLUDING AREA CODE)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x    No ¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x    No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” as defined in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer x Smaller reporting company x
Emerging growth company ¨  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).  Yes ¨    No x

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.0001   HPJ   Nasdaq Stock Market LLC (Nasdaq Global Market)
Preferred Stock Purchase Rights   HPJ   Nasdaq Stock Market LLC (Nasdaq Global Market)

 

The registrant had 15,567,953 shares of common stock, par value $0.0001 per share, outstanding as of May 13, 2019.

 

 

   

 

 

HIGHPOWER INTERNATIONAL, INC.

FORM 10-Q

 FOR THE QUARTERLY PERIOD ENDED March 31, 2019

INDEX

 

      Page
Part I   Financial Information  
         
  Item 1.   Consolidated Financial Statements  
           
        (a) Condensed Consolidated Balance Sheets as of March 31, 2019 (Unaudited) and December 31, 2018 2
             
        (b) Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended March 31 2019 and 2018 (Unaudited) 4
             
      (c) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 (Unaudited) 5
           
      (d) Condensed Consolidated Statements of Change in Equity for the Three Months Ended March 31, 2019 and 2018 (Unaudited) 6
           
      (e) Notes to Condensed Consolidated Financial Statements (Unaudited) 7
           
  Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
           
  Item 3.   Quantitative and Qualitative Disclosures About Market Risk 25
         
  Item 4.   Controls and Procedures 25
         
Part II   Other Information  
           
    Item 1.   Legal Proceedings 25
           
    Item 1A.   Risk Factors 25
           
    Item 2.   Unregistered Sale of Equity Securities and Use of Proceeds 26
           
    Item 3.   Default Upon Senior Securities 26
           
    Item 4.   Mine Safety Disclosures 26
           
    Item 5.   Other Information 26
           
    Item 6.   Exhibits 27
           
Signatures 28

 

 1 

 

Item 1. Consolidated Financial Statements

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

 

   March 31,   December 31, 
   2019   2018 
   (Unaudited)     
   $   $ 
ASSETS          
Current Assets:          
Cash   24,167,300    24,916,484 
Restricted cash   39,562,823    44,495,633 
Accounts receivable, net   59,037,769    77,279,817 
Amount due from a related party   61,131    477,663 
Notes receivable   4,375,399    256,712 
Advances to suppliers   926,624    2,292,843 
Prepayments and other receivables   8,282,896    10,457,789 
Inventories   58,456,282    54,790,461 
           
Total Current Assets   194,870,224    214,967,402 
           
Property, plant and equipment, net   68,148,472    56,523,177 
Long-term prepayments   1,949,214    2,617,419 
Land use right, net   2,476,691    2,445,751 
Other assets   635,015    643,128 
Deferred tax assets, net   983,879    865,370 
Long-term investments   9,768,087    9,993,852 
Right-of-use assets   5,272,558    - 
           
TOTAL ASSETS   284,104,140    288,056,099 
           
LIABILITIES AND EQUITY          
           
LIABILITIES          
Current Liabilities:          
Accounts payable   68,943,619    66,486,690 
Deferred government grants   473,111    464,206 
Short-term loans   17,749,981    24,856,744 
Non-financial institution borrowing   -    8,761,426 
Notes payable   75,053,041    73,607,284 
Foreign exchange derivative liabilities   2,240    521,509 
Amount due to related parties   9,011,760    6,116,851 
Other payables and accrued liabilities   23,733,687    25,860,703 
Income taxes payable   4,246,421    4,124,719 
Lease liabilities, current   1,866,177    - 
           
Total Current Liabilities   201,080,037    210,800,132 
           
Lease liabilities, non current   3,550,051    - 
           
TOTAL LIABILITIES   204,630,088    210,800,132 
           
COMMITMENTS AND CONTINGENCIES   -    - 

 

See notes to condensed consolidated financial statements

 

 2 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

 

   March 31,   December 31, 
   2019   2018 
   (Unaudited)     
    $    $ 
EQUITY          
Stockholders’ equity          
Preferred stock          
(Par value: $0.0001, Authorized: 10,000,000 shares, Issued and outstanding: none)   -    - 
Common stock          
(Par value: $0.0001, Authorized: 100,000,000 shares, 15,567,953 shares issued and outstanding at March 31, 2019 and 15,559,658 at December 31, 2018, respectively)   1,557    1,556 
Additional paid-in capital   14,067,883    13,863,282 
Statutory and other reserves   8,012,052    8,012,052 
Retained earnings   56,481,633    56,173,912 
Accumulated other comprehensive income (loss)   910,927    (794,835)
           
TOTAL EQUITY   79,474,052    77,255,967 
           
TOTAL LIABILITIES AND EQUITY   284,104,140    288,056,099 

 

See notes to condensed consolidated financial statements

 

 3 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Stated in US Dollars)

 

  

Three months ended

March 31,

 
   2019   2018 
   (Unaudited)   (Unaudited) 
   $   $ 
Net sales   58,113,480    49,783,453 
Cost of sales   (45,452,951)   (42,217,126)
Gross profit   12,660,529    7,566,327 
           
Research and development expenses   (2,986,709)   (2,561,837)
Selling and distribution expenses   (2,792,862)   (1,975,096)
General and administrative expenses   (4,823,489)   (4,114,810)
Foreign currency transaction loss   (1,250,895)   (1,014,693)
Total operating expenses   (11,853,955)   (9,666,436)
           
Income (loss) from operations   806,574    (2,100,109)
           
Changes in fair value of foreign exchange derivatives   387,100    703,715 
Government grants   221,435    329,820 
Other income   66,698    23,561 
Equity in (loss) earnings of investee   (418,204)   156,250 
Interest expenses   (470,423)   (241,852)
Income (loss) before income taxes   593,180    (1,128,615)
           
Income taxes (expense) benefit   (285,459)   9,679 
Net income (loss)   307,721    (1,118,936)
           
Comprehensive income          
Net income (loss)   307,721    (1,118,936)
Foreign currency translation gain   1,705,762    2,836,556 
Comprehensive income   2,013,483    1,717,620 
           
Earnings (loss) per share of common stock attributable to the Company          
- Basic   0.02    (0.07)
- Diluted   0.02    (0.07)
           
Weighted average number of common stock outstanding          
- Basic   15,566,478    15,509,658 
- Diluted   15,604,907    15,509,658 

 

See notes to condensed consolidated financial statements

 

 4 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

 

   Three Months Ended March 31, 
   2019   2018 
   (Unaudited)   (Unaudited) 
   $   $ 
Cash flows from operating activities          
Net income (loss)   307,721    (1,118,936)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:          
Depreciation and amortization   1,729,440    1,475,228 
Bad debt expense   89,427    18,524 
Loss on disposal of property, plant and equipment   -    21,805 
Deferred taxes   (102,366)   (356,616)
Changes in fair value of foreign exchange derivatives   (387,100)   (414,042)
Equity in loss (earnings) of investee   418,204    (156,250)
Share based compensation   204,602    241,421 
Changes in operating assets and liabilities:          
Accounts receivable   18,954,393    3,713,692 
Notes receivable   (4,120,877)   2,622,925 
Advances to suppliers   1,412,642    (236,789)
Prepayments and other receivables   2,379,960    (601,315)
Amount due from a related party   426,432    285,657 
Amount due to related parties   113,794    - 
Inventories   (2,626,489)   (10,779,233)
Accounts payable   (6,016,313)   (1,377,447)
Deferred government grants   -    475,783 
Other payables and accrued liabilities   (2,287,547)   665,379 
Income taxes payable   57,542    19,371 
Net cash flows provided by (used in) operating activities   10,553,465    (5,500,843)
           
Cash flows from investing activities          
Acquisitions of plant and equipment   (4,336,823)   (1,553,979)
Payment for long-term investment   (313,073)   (317,188)
Net cash flows used in investing activities   (4,649,896)   (1,871,167)
           
Cash flows from financing activities          
Proceeds from short-term bank loans   5,963,296    14,427,164 
Repayments of short-term bank loans   (13,560,014)   - 
Proceeds from a related party   2,981,648    - 
Repayments of non-financial institution borrowing   (8,944,944)   - 
Proceeds from notes payable   30,205,286    28,429,600 
Repayments of notes payable   (30,171,519)   (26,488,407)
Payment of derivative instruments   (143,089)   - 
Net cash flows (used in) provided by financing activities   (13,669,336)   16,368,357 
Effect of foreign currency translation on cash   2,083,773    2,046,039 
Net (decrease) increase in cash and restricted cash   (5,681,994)   11,042,386 
Cash and restricted cash- beginning of year   69,412,117    40,456,117 
Cash and restricted cash- end of year   63,730,123    51,498,503 
           
Supplemental disclosures for cash flow information:          
Cash paid for:          
Income taxes   330,283    327,565 
Interest expenses   863,923    114,588 
Non-cash investing and financing activities:          

Purchase of plant and equipment financed by accounts payable

   7,203,680    - 
Reconciliation of cash and restricted cash:          
Cash   24,167,300    18,859,355 
Restricted cash   39,562,823    32,639,148 
Total cash and restricted cash shown in the condensed consolidated statements of cash flows   63,730,123    51,498,503 

 

See notes to condensed consolidated financial statements

 

 5 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY

(Stated in US Dollars)

 

   Common stock   Additional
paid-in
   Statutory
and other
   Retained
   Accumulated
other
comprehensive
    
   Shares   Amount   capital   reserves   earnings   income   Total 
         $    $    $    $    $    $ 
Balance, January 1, 2018   15,509,658    1,551    12,709,756    6,549,815    44,481,568    3,469,495    67,212,185 
Foreign currency translation adjustments   -    -    -    -    -    2,836,556    2,836,556 
Share-based compensation expenses   -    -    241,421    -    -    -    241,421 

Net loss

   -    -    -    -    (1,118,936)   -    (1,118,936)
Balance, March 31, 2018   15,509,658    1,551    12,951,177    6,549,815    43,362,632    6,306,051    69,171,226 
                                    
Balance, January 1, 2019   15,559,658    1,556    13,863,282    8,012,052    56,173,912    (794,835)   77,255,967 
Exercise of the warrants   8,295    1    (1)   -    -    -    - 
Foreign currency translation adjustments   -    -    -    -    -    1,705,762    1,705,762 
Share-based compensation expenses   -    -    204,602    -    -    -    204,602 
Net income   -    -    -    -    307,721    -    307,721 
Balance, March 31, 2019   15,567,953    1,557    14,067,883    8,012,052    56,481,633    910,927    79,474,052 

 

See notes to condensed consolidated financial statements

 

 6 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

 

1.Organization

 

The consolidated financial statements include the financial statements of Highpower International, Inc. ("Highpower") and its 100%-owned subsidiary Hong Kong Highpower Technology Company Limited (“HKHTC”), HKHTC’s wholly-owned subsidiary Shenzhen Highpower Technology Company Limited (“SZ Highpower”), SZ Highpower’s and HKHTC’s jointly owned subsidiaries, Springpower Technology (Shenzhen) Company Limited (“SZ Springpower”) and Icon Energy System Company Limited (“ICON”) and SZ Highpower’s and SZ Springpower’s jointly owned subsidiary Huizhou Highpower Technology Company Limited (“HZ HTC”). Highpower and its direct and indirect wholly owned subsidiaries are collectively referred to as the "Company".

 

2.Summary of significant accounting policies

 

Basis of presentation

 

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. The interim financial information should be read in conjunction with the Financial Statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 28, 2019.

 

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair presentation of the Company’s consolidated financial position as of March 31, 2019, its consolidated results of operations for the three months ended March 31, 2019, cash flows for the three months ended March 31, 2019 and change in equity for the three months ended March 31, 2019, as applicable, have been made. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2019 or any future periods.

 

Concentrations of credit risk

 

One major customer accounted for 10.9% of the total sales for the three months ended March 31, 2019. There was no customer accounted for over 10% or more of the total sales during the three months ended March 31, 2018.

 

One supplier accounted for 12.2% and 21.2% of the total purchase amount during the three months ended March 31, 2019 and 2018, respectively.

 

One customer accounted for 12.6% of the accounts receivable as of March 31, 2019. No customer accounted for 10% or more of the accounts receivable as of December 31, 2018.

 

 7 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

 

2.Summary of significant accounting policies (continued)

 

Recently issued accounting standards

 

On February 25, 2017, the FASB issued ASU 2016-02, Leases (Topic 842). It requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset (“ROU asset”) representing its right to use the underlying asset for the lease term. We adopted this guidance in the first quarter of 2019 using the modified retrospective approach, electing the package of practical expedients, and the practical expedient to not separate lease and non-lease components for data center operating leases. We also elected the optional transition method that permits adoption of the new standard prospectively, as of the effective date, without adjusting comparative periods presented. Adoption of the standard resulted in the recognition of $5.3 million of ROU assets and $5.4 million of lease liabilities on the consolidated balance sheet at adoption related to office space, data and fulfillment centers, and other corporate assets.

 

See Note 7 for disclosure required by ASC 842.

 

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The amendments in this Update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this Update also require certain disclosures about stranded tax effects. Public business entities should apply the amendments in ASU 2018-02 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The adoption of this guidance did not have a material impact on the Company's consolidated financial condition, results of operations or cash flows.

 

In March 2018, the FASB issued ASU No. 2018-05, Income Tax (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This update adds SEC paragraphs pursuant to the SEC Staff Accounting Bulletin No. 118, which expresses the view of the staff regarding application of Topic 740, Income Taxes, in the reporting period that includes December 22, 2017 - the date on which the Tax Act was signed into law. The adoption of this guidance did not have a material impact on the Company's consolidated financial condition, results of operations or cash flows.

 

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.

 

 8 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

 

3.Revenue Recognition

 

The Company follows the guidance under ASC 606 effective January 1, 2018. The following table disaggregates product sales by business segment and by geography, which provides information as to the major source of revenue. See Note 16 for additional description of the reportable business segments and the products being sold in each segment.

 

   Three months ended March 31, 2019 
   Lithium Business  

Ni-MH Batteries and

Accessories

   Consolidated 
   (Unaudited)   (Unaudited)   (Unaudited) 
   $   $   $ 
Primary Geographic Markets               
China Mainland   23,064,520    4,906,515    27,971,035 
Asia, others   17,011,230    6,059,484    23,070,714 
Europe   1,403,314    3,217,017    4,620,331 
North America   1,251,103    1,066,423    2,317,526 
Others   -    133,874    133,874 
Total sales   42,730,167    15,383,313    58,113,480 

 

The Company has elected to apply the practical expedient in paragraph ASC 606-10-50-14 and does not disclose information about remaining performance obligations (i) contracts that have an original expected length of one year or less; and (ii) contracts where revenue is recognized as invoiced.

 

The Company does not have amounts of contract assets since revenue is recognized as control of goods is transferred. The contract liabilities consist of advance payments from customers. The contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting period. All contract liabilities are expected to be recognized as revenue within one year and are included in other payables and accrued liabilities in the condensed consolidated balance sheets.

 

4.Accounts receivable, net

 

   March 31,   December 31, 
   2019   2018 
   (Unaudited)     
   $   $ 
Accounts receivable   59,189,232    77,340,837 
Less: allowance for doubtful accounts   151,463    61,020 
    59,037,769    77,279,817 

 

 9 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

 

5.Inventories

 

   March 31,   December 31, 
   2019   2018 
   (Unaudited)     
   $   $ 
Raw materials   28,701,009    25,952,099 
Work in progress   9,377,147    10,192,772 
Finished goods   20,141,273    18,348,119 
Packing materials   31,193    14,394 
Consumables   205,660    283,077 
    58,456,282    54,790,461 

 

6.Property, plant and equipment, net

 

   March 31,   December 31, 
   2019   2018 
   (Unaudited)     
   $   $ 
Cost          
Construction in progress   11,339,810    6,991,889 
Furniture, fixtures and office equipment   7,699,164    7,221,527 
Leasehold improvement   7,258,819    7,090,162 
Machinery and equipment   48,551,295    40,316,428 
Motor vehicles   1,609,150    1,508,398 
Buildings   19,534,641    19,166,951 
    95,992,879    82,295,355 
Less: accumulated depreciation   27,844,407    25,772,178 
    68,148,472    56,523,177 

 

The construction in process represented buildings and machines under construction or testing as of March 31, 2019 and December 31, 2018.

 

The Company recorded depreciation expenses of $1,700,934 and $1,445,700 for the three months ended March 31, 2019 and 2018, respectively.

 

During the three months ended March 31, 2019, the Company deducted deferred government grants of $nil on the carrying amount of property, plant and equipment. During the year ended December 31, 2018, the Company deducted deferred government grants of $75,584 in calculating the carrying amount of property, plant and equipment.

 

The buildings comprising the Huizhou facilities were pledged as collateral for bank loans. The net carrying amounts of the buildings were $8,641,385 and $8,536,246 as of March 31, 2019 and December 31, 2018, respectively.

 

The buildings located in Shenzhen, Guangdong was pledged as collateral for bank loans. The net carrying amount of the buildings was $354,583 and $353,752 as of March 31, 2019 and December 31, 2018, respectively.

 

 10 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

 

7.Leases

 

The Company has various non-cancelable lease agreements for certain of the warehouses and accommodations with original lease periods expiring between 2019 and 2022. The lease terms may include options to extend or terminate the lease when it is reasonably certain the Company will exercise that option. Certain of the arrangements have free rent periods or escalating rent payment provisions. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheets. The Company recognizes rental expense on a straight-line basis over the lease term.

 

The following table provides a summary of leases by balance sheet location as of March 31, 2019:

  

    Balance Sheet Location   March 31, 2019  
        (Unaudited)  
        $  
Assets            
Operating   Right-of-use assets     5,272,558  
Total leased assets         5,272,558  
             
Liabilities            
Operating - current   Lease liabilities, current     1,866,177  
Operating - non current   Lease liabilities, non current     3,550,051  
Total lease liabilities         5,416,228  

 

The components of lease expense for the three months ended March 31, 2019 were as follows:

 

   Statement of Income Location  Three months ended
March 31, 2019
 
      (Unaudited) 
      $ 
Lease Costs        
Operating lease expense  Cost of sales, Selling and distribution expenses, General and administrative expenses, Research and development expenses   757,707 
Total net lease costs      757,707 

 

Maturity of lease liabilities under the non-cancelable operating leases as of March 31, 2019 were as follows:

 

   Operating 
   (Unaudited) 
   $ 
Remaining 2019   1,635,280 
2020   1,888,266 
2021   1,715,654 
2022   745,078 
Total lease payments   5,984,278 
Less: interest   568,050 
Present value of lease liabilities   5,416,228 

 

 11 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

 

7.Leases (continued)

 

Future minimum rental payments under the non-cancelable operating leases as of December 31, 2018 were as follows:

 

   Leases (1) 
   $ 
2019   2,288,437 
2020   1,790,861 
2021   1,621,298 
2022   668,792 
    6,369,388 

 

(1) Amounts are based on ASC 840, Leases that was superseded upon our adoption of ASC 842, Leases on January 1, 2019.

 

The following table provides a summary of the lease terms and discount rates for the three months ended March 31, 2019:

 

   Three months ended March 31, 2019 
Weighted Average Remaining Lease Term     
Operating leases   3.00 years 
      
Weighted Average Discount Rate     
Operating leases   6.18%

 

As most of the leases do not provide an implicit rate, the Company use the incremental borrowing rate based on the information available at the lease commencement date to determine the present value of lease payments.

 

Supplemental information related to the leases for the three months ended March 31, 2019 is as follows:

 

   Three months ended
March 31, 2019
 
   (Unaudited) 
   $ 
Cash paid for amounts included in the measurement of lease liabilities:     
Operating cash flows from operating leases   626,145 

 

 12 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

 

8.Long-term investments

  

    March 31, 2019     December 31, 2018  
    (Unaudited)              
    $     Interest
%
    $     Interest
%
 
Equity method investments                                
-Ganzhou Highpower Technology Company Limited (“GZ Highpower”) (1)     7,490,318       31.294 %     7,683,900       31.294 %
-Shenzhen V-power Innovative Technology Co., Ltd (“V-power”) (2)     530,662       49.000 %     595,730       49.000 %
Cost method investment                                
-Huizhou Yipeng Energy Technology Co Ltd.     1,747,107       4.654 %     1,714,222       4.654 %
      9,768,087               9,993,852          

 

(1) Investment in GZ Highpower

 

On December 21, 2017, after the completion of the capital increase to GZ Highpower by other shareholders, the Company lost the controlling power over GZ Highpower and deconsolidated GZ Highpower. Thereafter, the investment was recorded under the equity method.

 

The equity in loss of investee was $341,576 for the three months ended March 31, 2019. The equity in earnings of investee was $156,250 for the three months ended March 31, 2018.

 

(2) Investment in V-power

 

On February 28, 2018, the Company signed an investment agreement with a related company and a group of individuals (the “Founder Team”) with an aggregate amount of RMB4.9 million (approximately $0.7 million) for 49% of the equity interest of V-power, which was recorded under the equity method. In addition, the Company agreed to transfer the 15% of original equity interest of V-power to the Founder Team as compensation under voluntary assignment as any of the following requirements met: 1. annual sales revenue higher or equal to RMB30 million before the first capital increase of V-power; and 2. valuation of V-power higher or equal to RMB30 million before equity issuance. As of March 31, 2019, the Company injected RMB4.2 million (approximately $0.6 million) to V-power, and the unpaid amount was recorded as amount due to a related party (See Note 17).

 

The equity in loss of investee was $76,628 and $nil for the three months ended March 31, 2019 and 2018, respectively.

 

 13 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

 

9.Taxation

 

Highpower and its direct and indirect wholly owned subsidiaries file tax returns separately.

 

1) VAT

 

Pursuant to the Provisional Regulation of the PRC on VAT and the related implementing rules, all entities and individuals ("taxpayers") that are engaged in the sale of products in the PRC are generally required to pay VAT, at a rate of which was changed from 17% to 16% on May 1, 2018 of the gross sales proceeds received, less any deductible VAT already paid or borne by the taxpayers. Further, when exporting goods, the exporter is entitled to a portion of or all the refund of VAT that it has already paid or incurred. The Company’s PRC subsidiaries are subject to VAT on their revenues.

 

2) Income tax

 

United States

 

Tax Reform

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into legislation. The 2017 Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 34% to 21%, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax.

 

On December 22, 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740, Income Taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

 

The one-time transition tax is based on the total post-1986 earnings and profits (“E&P”) for which the Company has previously deferred U.S. income taxes.

 

The Company evaluated the Global Intangible Low Taxed Income ("GILTI") inclusion on current earnings and profits of greater than 10% owned foreign controlled corporations. The Company has evaluated whether it has additional provision amount resulted by the GILTI inclusion on current earnings and profits of its foreign controlled corporations. The law also provides that corporate taxpayers may benefit from a 50% reduction in the GILTI inclusion, which effectively reduces the 21% U.S. corporate tax rate on the foreign income to an effective rate of 10.5%. The GILTI inclusion further provides for a foreign tax credit in connection with the foreign taxes paid. In 2019, the Company recorded a GILTI inclusion of $7,830,673. However, the total tax of $245,585 is fully offset by the deemed paid foreign tax credit.

 

The Company completed quantification of the Tax Act impact. The final adjustment is not material.

 

 14 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

 

9.Taxation (continued)

 

Hong Kong

 

HKHTC, which was incorporated in Hong Kong, is subject to a corporate income tax rate of 16.5%.

 

In accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income. In March 2018, the Hong Kong Government introduced a two-tiered profit tax rate regime by enacting the Inland Revenue (Amendment) (No.3) Ordinance 2018 (the “Ordinance”). Under the two-tiered profits tax rate regime, the first $2 million of assessable profits of qualifying corporations is taxed at 8.25% and the remaining assessable profits at 16.5%. The Ordinance is effective from the year of assessment 2018-2019. According to the policy, if no election has been made, the whole of the taxpaying entity’s assessable profits will be chargeable to Profits Tax at the rate of 16.5% or 15%, as applicable. Because the preferential tax treatment is not elected by the Company, HKHTC is subject to income tax at a rate of 16.5%.

 

PRC

 

In accordance with the relevant tax laws and regulations of the PRC, a company registered in the PRC is subject to income taxes within the PRC at the applicable tax rate on taxable income.

 

In China, the companies granted with National High-tech Enterprise (“NHTE”) status enjoy 15% income tax rate. This status needs to be renewed every three years. If these subsidiaries fail to renew NHTE status, they will be subject to income tax at a rate of 25% after the expiration of NHTE status. All the PRC subsidiaries received NHTE status and enjoy 15% income tax rate for calendar year 2019 and 2018.

 

The components of the income taxes expense (benefit) are:

 

   Three months ended March 31, 
   2019   2018 
   (Unaudited)   (Unaudited) 
   $   $ 
Current   387,825    346,937 
Deferred   (102,366)   (356,616)
Total income taxes expense (benefit)   285,459    (9,679)

 

The reconciliation of income taxes expenses (benefit) computed at the PRC statutory tax rate to income tax expense is as follows:

 

    Three months ended March 31,  
    2019     2018  
    (Unaudited)     (Unaudited)  
    $     $  
Income (loss) before tax     593,180       (1,128,615 )
                 
Provision for income taxes at PRC statutory income tax rate (25%)     148,295       (282,154 )
Impact of different tax rates in other jurisdictions     118,621       58,660  
Effect of PRC preferential tax rate     (190,307 )     6,453  
R&D expenses eligible for super deduction     (138,394 )     -  
Other non-deductible expenses     100,362       16,576  
Change in valuation allowance of deferred tax assets     246,882       190,786  
Effective enterprise income tax expense (benefit)     285,459       (9,679 )

 

 15 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

  

9.Taxation (continued)

 

3) Deferred tax assets, net

 

Deferred tax assets and deferred tax liabilities reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purpose and the tax bases used for income tax purpose. The following represents the tax effect of each major type of temporary difference.

 

   March 31,   December 31, 
   2019   2018 
   (Unaudited)     
   $   $ 
Tax loss carry-forward   1,408,109    1,096,956 
Allowance for doubtful receivables   22,719    9,153 
Impairment for inventory   382,398    382,375 
Difference for sales cut-off   25,340    15,526 
Deferred government grants   70,967    69,631 
Property, plant and equipment subsidized by government grant   246,965    250,563 
Impairment for property, plant and equipment   117,384    138,122 
Total gross deferred tax assets   2,273,882    1,962,326 
Valuation allowance   (1,290,003)   (1,096,956)
Total net deferred tax assets   983,879    865,370 

 

As of March 31, 2019, the Company had net operating loss carry-forwards in Hong Kong of $7,818,199 without expiration and in the PRC of $787,374, which will expire in 2023.

 

The Company has deferred tax assets which consisted of tax loss carry-forwards and other items that can be carried forward to offset future taxable income. Management determined it is more likely than not that part of the deferred tax assets could not be utilized, so a valuation allowance was provided for as of March 31, 2019 and December 31, 2018. The net valuation allowance increased by $0.2 million and $0.2 million during the three months ended March 31, 2019 and 2018, respectively.

 

10.Notes payable

 

Notes payable presented to certain suppliers as a payment against the outstanding trade payables.

 

Notes payable are mainly bank acceptance bills which are non-interest bearing and generally mature within one year. The outstanding bank acceptance bills are secured by restricted cash deposited in banks. Outstanding bank acceptance bills were $75,053,041 and $73,607,284 as of March 31, 2019 and December 31, 2018, respectively.

 

11.Short-term loans

 

As of March 31, 2019, the bank borrowings were for working capital and capital expenditure purposes with maturity of one year and were secured by personal guarantees executed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan, the land use right with a net carrying amount of $2,476,691 and the buildings with a net carrying amount of $8,995,968, respectively.

 

The loans were primarily obtained from three banks with interest rates ranging from 5.6160% to 6.5253% per annum and 5.2300% to 6.5253% per annum as of March 31, 2019 and December 31, 2018, respectively. The interest expenses were $344,983 and $111,713 for the three months ended March 31, 2019 and 2018, respectively.

 

 16 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

  

12.Non-financial institution borrowing

  

For the three months ended March 31, 2019, the Company paid back $8,944,944 to the third party non-financial institution.

 

The interest expense of the above borrowing was $4,922 and $162,303 for the three months ended March 31, 2019 and 2018, respectively

 

13.Lines of credit

  

The Company entered into various credit contracts and revolving lines of credit, which were used for short-term loans and bank acceptance bills. As of March 31, 2019, the total and unused lines of credit were $109.6 million and $33.6 million, respectively, with maturity dates from May 2019 to October 2021. As of December 31, 2018, the total and unused lines of credit were $102.6 million and $23.8 million, respectively, with maturity dates from March 2019 to October 2021.

 

These lines of credit were guaranteed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan. The Company’s buildings and the land use right were pledged as collateral for these line of credit.

 

14.

Earnings (loss) per share

 

The following table sets forth the computation of basic and diluted earnings (loss) per common share for the three months ended March 31, 2019 and 2018.

 

   Three months ended March 31, 
   2019   2018 
   (Unaudited)   (Unaudited) 
   $   $ 
Numerator:          
Net income (loss) attributable to the Company   307,721    (1,118,936)
           
Denominator:          
Weighted-average shares outstanding          
- Basic   15,566,478    15,509,658 
- Dilutive effects of equity incentive awards   38,429    - 
- Diluted   15,604,907    15,509,658 
           
Net earnings (loss) per share:          
- Basic   0.02    (0.07)
- Diluted   0.02    (0.07)

 

Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. Potential dilutive securities are excluded from the calculation of diluted EPS in loss periods as their effect would be anti-dilutive.

  

 17 

 

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

 

15.Defined contribution plan

  

Full-time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits (“the Benefits”) are provided to employees. Chinese labor regulations require that the PRC operating subsidiaries of the Company make contributions to the government for these benefits based on certain percentages of the employees’ salaries. Except for contributions made related to the Benefits, the Company has no legal obligation.

 

The total contributions made, which were expensed as incurred, were $983,374 and $653,957 for the three months ended March 31, 2019 and 2018, respectively.

 

16.Segment information

 

The reportable segments are components of the Company that offer different products and are separately managed, with separate financial information available that is separately evaluated regularly by the Company’s chief operating decision maker (“CODM”), the Chief Executive Officer, in determining the performance of the business. The Company categorizes its business into two reportable segments, namely (i) Lithium Business and (ii) Ni-MH Batteries and Accessories.

 

The CODM evaluates performance based on each reporting segment’s net sales, cost of sales, gross profit and total assets. Net sales, cost of sales, gross profit and total assets by segments is set out as follows:

 

   Three months ended March 31, 
   2019   2018 
   (Unaudited)   (Unaudited) 
   $   $ 
Net sales          
Lithium Business   42,730,167    36,596,655 
Ni-MH Batteries and Accessories   15,383,313    13,186,798 
Total   58,113,480    49,783,453 
           
Cost of Sales          
Lithium Business   33,628,468    30,791,339 
Ni-MH Batteries and Accessories   11,824,483    11,425,787 
Total   45,452,951    42,217,126 
           
Gross Profit          
Lithium Business   9,101,699    5,805,316 
Ni-MH Batteries and Accessories   3,558,830    1,761,011 
Total   12,660,529    7,566,327 

  

   March 31,   December 31, 
   2019   2018 
   (Unaudited)     
   $   $ 
Total Assets          
Lithium Business   221,165,885    231,795,621 
Ni-MH Batteries and Accessories   62,938,255    56,260,478 
Total   284,104,140    288,056,099 

 

 18 

  

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

 

16.Segment information (continued)

   

All long-lived assets of the Company are located in the PRC. Geographic information about the sales and accounts receivable based on the locations of the Company’s customers is set out as follows:

 

   Three months ended March 31, 
   2019   2018 
   (Unaudited)   (Unaudited) 
   $   $ 
Net sales          
China Mainland   27,971,035    28,305,763 
Asia, others   23,070,714    15,754,396 
Europe   4,620,331    4,537,903 
North America   2,317,526    1,164,831 
Others   133,874    20,560 
    58,113,480    49,783,453 

 

   March  31,   December 31, 
   2019   2018 
   (Unaudited)     
   $   $ 
Accounts receivable          
China Mainland   37,572,057    38,048,651 
Asia, others   17,487,874    33,237,051 
Europe   3,244,105    5,413,343 
North America   696,234    566,769 
Others   37,499    14,003 
    59,037,769    77,279,817 

 

17.Related party balance and transaction

 

Related party balance

 

   March 31   December 31, 
   2019   2018 
   (Unaudited)     
   $   $ 
Accounts receivable   -    476,093 
Other receivable   61,131    1,570 
Amount due from a related party- GZ Highpower   61,131    477,663 
           
Other payable-investment (1)   104,178    408,867 
Loan from Mr. Dang Yu Pan (2)   8,907,582    5,707,984 
Amount due to related parties   9,011,760    6,116,851 

  

(1)The Company signed an investment agreement with an aggregate amount of RMB4.9 million (approximately $0.7 million) in investing for 49% of the equity interest of V-power which was set up on March 1, 2018. On April 28, 2018, the Company injected RMB2.1 million (approximately $0.3 million) to V-power. On January 14, 2019, the Company injected RMB2.1 million (approximately $0.3 million) to V-power and the unpaid amount was recorded as amount due to a related party. (See Note 8)

 

(2)The Company entered into a loan agreement with a maximum amount of RMB60 million (approximately $8.9 million) with Mr. Dang Yu Pan on July 20, 2018. As of March 31, 2019, the Company withdrew an aggregate amount of RMB58.2 million (approximately $8.7 million). The interest rate is 5.65% per annum. The Company accrued interest expense $113,795 for the three months ended March 31, 2019.

 

 19 

  

 HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

  

 

17.Related party balance and transaction (continued)

 

Related party transaction

 

   Three months ended March 31, 
   2019   2018 
   (Unaudited)   (Unaudited) 
   $   $ 
GZ Highpower          
Sales   200,733    225,787 
           
V-Power          
Payment of investment   313,073    - 
           
Dang Yu Pan          
Loan from Dang Yu Pan   2,981,648    - 
Interest expense   113,795      

 

18.Subsequent event

 

The Company has evaluated subsequent events through the issuance of the unaudited condensed consolidated financial statements and no other subsequent event is identified that would have required adjustment or disclosure in the consolidated financial statements.

 

 20 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes that are included in this Quarterly Report and the audited consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with SEC on March 28, 2019 (the “Annual Report”).

 

Special Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

 

Overview

 

Net sales increased by $8.3 million, or 16.7%, during the first quarter of 2019 compared to the same quarter in 2018. The main driver was our lithium business, including high-end consumer products, industrial applications and increased demand for artificial intelligence products.

 

Lithium business net sales increased by $6.1 million, or 16.8%, during the first quarter of 2019 compared to the same quarter in 2018.

 

Ni-MH batteries and accessories net sales increased by $2.2 million, or 16.7%, during the first quarter of 2019 compared to the same quarter in 2018.

 

Gross profit during the first quarter of 2019 was $12.7 million, or 21.8% of net sales, compared to $7.6 million, or 15.2% of net sales, for the comparable period in 2018.

 

For 2019, we will continue to drive business growth and seek to continuously improve our labor efficiency.

 

Critical Accounting Policies

 

See Note 2 to the accompanying unaudited condensed consolidated financial statements for our critical accounting policies.

  

 21 

 

Results of Operations

 

The following table sets forth the unaudited consolidated statements of operations of the Company for the three months ended March 31, 2019 and 2018, both in US$ and as a percentage of net sales.

 

Consolidated Statements of Operations

 

(Dollars in Thousands, Except Per Share                              
Amounts)   Three months ended March 31,  
    2019           2018           Increased
(decreased)
%
 
    (Unaudited)           (Unaudited)              
Net Sales     58,113       100.0 %     49,783       100.0 %     16.7 %
Cost of Sales     (45,452 )     (78.2 %)     (42,217 )     (84.8 %)     7.7 %
Gross profit     12,661       21.8 %     7,566       15.2 %     67.3 %
                                         
Research and development expenses     (2,987 )     (5.1 %)     (2,562 )     (5.1 %)     16.6 %
Selling and distribution expenses     (2,793 )     (4.8 %)     (1,975 )     (4.0 %)     41.4 %
General and administrative expenses     (4,823 )     (8.3 %)     (4,115 )     (8.3 %)     17.2 %
Foreign currency transaction loss     (1,251 )     (2.2 %)     (1,015 )     (2.0 %)     23.3 %
Income (loss) from operations     807       1.4 %     (2,101 )     (4.2 %)     138.4 %
                                         
Changes in fair value of foreign exchange derivatives     386       0.7 %     704       1.4 %     (45.0 %)
Government grants     221       0.4 %     330       0.7 %     (32.9 %)
Other income     67       0.1 %     24       0.0 %     183.1 %
Equity in (loss) earnings of investee     (418 )     (0.7 %)     156       0.3 %     (367.7 %)
Interest expenses     (470 )     (0.8 %)     (242 )     (0.5 %)     94.5 %
Income (loss) before income taxes     593       1.0 %     (1,129 )     (2.3 %)     152.6 %
                                         
Income taxes (expense) benefit     (285 )     (0.5 %)     10       0.0 %     (3,049.3 %)
Net income (loss)     308       0.5 %     (1,119 )     (2.2 %)     127.5 %
                                         
Diluted earnings (loss) per common stock attributable to the Company     0.02               (0.07 )                

 

Net sales

 

Net sales for the three months ended March 31, 2019 were $58.1 million compared to $49.8 million for the comparable period in 2018, an increase of $8.3 million, or 16.7%. Net sales of Lithium business increased by $6.1 million, or 16.8%, during the three months ended March 31, 2019, compared to the comparable period in 2018. Ni-MH batteries and accessories net sales increased by $2.2 million, or 16.7%, during the three months ended March 31, 2019, compared to the comparable period in 2018. The increase in net sales was mainly due to the optimization of our sales structure.

 

Gross profit

 

Gross profit for the three months ended March 31, 2019 was $12.7 million, or 21.8% of net sales, compared to $7.6 million, or 15.2% of net sales, for the comparable period in 2018. This increase was attributed to the product mix and improvement in our labor efficiency.

 

Research and development expenses

 

Research and development expenses were $3.0 million, or 5.1% of net sales, for the three months ended March 31, 2019, compared to $2.6 million, or 5.1% of net sales, for the comparable period in 2018. The Company will continue to invest on R&D activities in the future.

 

 22 

 

Selling and distribution expenses

 

Selling and distribution expenses were $2.8 million, or 4.8% of net sales, for the three months ended March 31, 2019, compared to $2.0 million, or 4.0% of net sales, for the comparable period in 2018. The increase of expenses was mainly driven by expanded business scale, including marketing expenses for more brand customers.

 

General and administrative expenses

 

General and administrative expenses were $4.8 million, or 8.3% of net sales, for the three months ended March 31, 2019, compared to $4.1 million, or 8.3% of net sales, for the comparable period in 2018.

 

Foreign currency transaction loss

 

We experienced a loss of $1.3 million and $1.0 million for the three months ended March 31, 2019 and 2018, respectively, on the exchange rate difference between the US$ and the RMB. The loss in exchange rate difference was due to the influence of the RMB relative to the US$ over the respective periods.

 

Changes in fair value of foreign exchange derivatives

 

We experienced a gain on derivative instruments of $0.4 million and $0.7 million for the three months ended March 31, 2019 and 2018, respectively.

 

Government grants

 

Government grants were $0.2 million for the three months ended March 31, 2019, compared to $0.3 million for the comparable period in 2018.

 

Other income

 

Other income was $66,698 for the three months ended March 31, 2019, compared to other income was $23,561 for the comparable period in 2018.

 

Equity in (loss) earnings of investees 

 

Equity in loss of investees were $418,204 for the three months ended March 31, 2019, compared to equity in earnings of investee $156,250 for the comparable period in 2018.

 

Interest expenses

 

Interest expenses were $470,423 for the three months ended March 31, 2019, compared to interest expenses of $241,852 for the comparable period in 2018.

 

Income taxes (expense) benefit

 

Income taxes expense was $285,459 for the three months ended March 31, 2019, compared to income taxes benefit of $9,679 for comparable period in 2018.

 

Net income (loss)

 

Net income attributable to the Company for the three months ended March 31, 2019 was $0.3 million. Net loss attributable to the Company of $1.1 million for the comparable period in 2018, increased by $1.4 million, or 127.5%.

 

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Reconciliation of Net Income to EBITDA

 

A table reconciling earnings before interest, income tax, depreciation and amortization (“EBITDA”), a non-GAAP financial measure, to the appropriate GAAP measure is included with the Company's financial information below. EBITDA was derived by taking earnings before interest expense (net), taxes, depreciation and amortization. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. The Company believes this non-GAAP measure is useful to investors as it provides a basis for evaluating the Company's operating results in the ordinary course of its operations. This non-GAAP measure is not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with, and not in lieu of, the corresponding GAAP measures.

 

   Three months ended March 31, 
   2019   2018 
   (Unaudited)   (Unaudited) 
    $    $ 
Net income (loss) attributable to the Company   307,721    (1,118,936)
           
Interest expenses   470,423    241,852 
Income taxes expenses (benefit)   285,459    (9,679)
Depreciation and Amortization   1,729,440    1,475,228 
           
EBITDA   2,793,043    588,465 

 

Liquidity and Capital Resources

 

We had cash of approximately $24.2 million as of March 31, 2019, compared to $24.9 million as of December 31, 2018.

 

To provide liquidity and flexibility in funding our operations, we borrow funds under bank facilities and other external sources of financing. As of March 31, 2019, we had lines of credit with seven financial institutions aggregating $109.6 million. The maturities of these facilities vary from May 2019 to October 2021. The facilities are subject to regular review and approval. Certain of these bank facilities are guaranteed by our Chief Executive Officer, Mr. Dang Yu Pan, pledged by land use right and buildings, and contain customary affirmative and negative covenants for secured credit facilities of this type. Interest rates are generally based on the banks’ reference lending rates. No significant commitment fees are required to be paid for the bank facilities. As of March 31, 2019, we had utilized approximately $76.0 million under such general credit facilities and had available unused credit facilities of $33.6 million.

 

Net cash provided by operating activities was approximately $10.6 million for the three months ended March 31, 2019, compared to net cash used in operating activities of $5.5 million for the comparable period in 2018. The net cash increase of $16.1 million provided by operating activities is primarily due to an increase of $15.2 million in cash inflow from accounts receivable, a decrease of $8.2 million in cash outflow from inventories and an increase of $6.7 million in cash outflow from notes receivable.

 

Net cash used in investing activities was $4.6 million for the three months ended March 31, 2019, compared to net cash used in investing activities of $1.9 million for the comparable period in 2018. The net cash increase of $2.7 million used in investing activities is primarily due to an increase of $2.8 million in cash outflow from acquisitions of plant and equipment.

 

Net cash used in financing activities was $13.7 million for the three months ended March 31, 2019, compared to net cash provided by financing activities of $16.4 million for the comparable period in 2018. The net cash increase of $30.1 million in net cash used in financing activities was primarily attributable to an increase of $13.6 million in cash outflow from repayments of short-term bank loans, a decrease of $8.5 million in cash inflow from proceeds from short-term bank loans and an increase of $8.9 million in cash outflow from repayments of non-financial institution borrowing.

 

 24 

 

Recent Accounting Standards

 

Please refer to Note 2 (Recently issued accounting standards).

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not required for a smaller reporting company.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

(a) Evaluation of disclosure controls and procedures

 

Disclosure controls and procedures are controls and other procedures that are designed and adopted by management to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is properly recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that all necessary information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

As of the end of the period covered by this Quarterly Report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

 

(b) Changes in Internal Control over Financial Reporting

 

There were no significant changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2019, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Part II. Other Information

 

Item 1. Legal Proceedings

 

From time to time, we are subject to certain legal proceedings, claims and disputes that arise in the ordinary course of our business. Although we cannot predict the outcomes of these legal proceedings, we do not believe these actions, in the aggregate, will have a material adverse impact on our financial position, results of operations or liquidity. We are currently not a party to any material legal proceedings

 

Item 1A. Risk Factors

 

Any investment in our common stock involves a high degree of risk. Investors should carefully consider the risks described herein and in our Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the SEC on March 28, 2019 and all of the information contained in our public filings before deciding whether to purchase our common stock. Other than as set forth below, there have been no material revisions to the “Risk Factors” as set forth in our Annual Report on Form 10-K.

 

 25 

 

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Default Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information

 

Working Capital Loan Contract between SZ Highpower and Bank of China, Buji Sub-branch

 

On January 9, 2019, SZ Highpower entered into a working capital loan contract with Bank of China, Buji Sub-branch providing for an aggregate loan of RMB40,000,000 ($5,953,001) to be used by SZ Highpower to purchase raw materials. The term of the loan is 12 months from the first withdrawal date. SZ Highpower must withdraw the facility within 30 days from January 10, 2019, after which time the bank may cancel all or part of the facility. The interest rate will equal the one year benchmarked by interbank rates, plus 1.345%. The loan is guaranteed by SZ Springpower and our Chief Executive Officer, Dang Yu Pan. The Company’s real estate properties and land use rights in Huizhou also serve as collateral for the loan. The balance of loan was $4,464,751 as of March 31, 2019.

 

The following constitute events of default under each loan agreement: failure to comply with repayment obligations under the agreement or any affiliated credit lines contract; failure to use borrowed funds according to the specified purposes; any statement made by SZ Highpower in the agreement is untrue or in violation of any commitments in the loan agreement or affiliated loan contracts; failure to provide an additional guarantor as required by the loan agreement; significant business difficulties or risks, deteriorated financial losses or losses of assets, or other financial crisis; breach of covenants in other credit agreements with the bank or affiliated institutions of the bank; any guarantor breaches a contract or defaults under any agreement with the bank or affiliated institutions of the bank; termination of its business or engagement due to any wind-up, cancellation or bankruptcy issues; involvement or potential involvement in significant economic disputes, litigation, arbitration or assets seizure or confiscation, or its involvement in other judicial proceedings or administrative punishment proceedings that have affected or may affect its capacity to perform its obligations under the affiliated specific credit line contract; an abnormal change in any major individual investor or key management member of SZ Highpower or such a person or entity’s becoming subject to investigation or restriction by the judiciary, which have or may affect SZ Highpower’s performance of obligation under affiliated specific credit line contract; Bank of China’s discovery of any situation that may affect the financial position or performance capacities of SZ Highpower or a guarantor after the bank’s annual review of SZ Highpower’s financial position and performance; failure to provide the relevant documentation acceptable to Bank of China about the inflows and outflows of large-sum and abnormal capital in capital recovery account; or being in violation of other rights and obligations under the affiliated specific credit line contract.

 

Upon the occurrence of an event of default, the bank may: request SZ Highpower or any guarantor to rectify the event of default within a specified time period; reduce, temporarily suspend or permanently terminate SZ Highpower’s credit limit in whole or in part; temporarily suspend or permanently terminate in part or in whole SZ Highpower’s application for specific credit line under the agreement; announce the immediate expiration of all the credit lines granted under the affiliated specific credit line contract as well as other contracts; terminate or release the contract, terminate or release in part or in whole any of the affiliated specific credit line contract as well as the other contracts executed between SZ Highpower and the bank; require compensation from SZ Highpower on the losses thereafter caused; hold SZ Highpower’s deposit account at the bank in custody for repayment of amounts due under the contract; exercise the real rights for security; request repayment from a guarantor; or take any other procedures deemed necessary by the bank.

 

 26 

 

Comprehensive Credit Line Contract between SZ Springpower and Bank of Beijing Co., Ltd. Shenzhen Branch

 

On January 22, 2019, SZ Springpower entered into a comprehensive credit line contract with the Bank of Beijing Co., Ltd. Shenzhen Branch, which provides for a revolving line of credit of up to RMB50,000,000 ($7,441,251). SZ Springpower may withdraw the loan, from time to time as needed, on or before January 21, 2020. The loan is guaranteed by SZ Highpower, ICON, HZ HTC and our Chief Executive Officer, Dang Yu Pan. The used facility was $3,159,555 as of March 31, 2019.

 

The following constitute events of default under the loan contracts: SZ Springpower fails to use the credit limit as per the agreements in this contract or specific business contracts, or fails to pay interest, principal or other funds payable on time in full amount, or fails to timely pay fully on time, causing that Bank of Beijing pays in advance; SZ Springpower fails to (or affirmatively shows or shows that it won’t with behavior) totally and duly perform the commitments, guarantee, obligations or responsibilities under this contract or specific business contracts; the guarantor fails to totally and duly perform the commitments, guarantee, obligations or responsibilities under this contract or specific business contracts, or has other default event under the guarantee document, or the collateral / pledge (if any) is damaged, lost, the ownership is shifted, closed/ frozen / detained or compulsorily executed, or the guarantee document or any guarantee right of Bank of Beijing is regarded as invalid, revoked or dissolved without the written consent of Bank of Beijing; any significant credit finance, guarantee, compensation or other repayment liability of the credit grantee can’t be performed when mature; or the operation license of the main business or significant business is suspended or canceled, or business suspension and rectification / takeover / dissolution / declaration of bankruptcy, etc. are entered; the financial or operational status of the credit grantee has significant and adverse change, or has bad credit record, or involves in the dispute or administrative punishment, etc. that has significant adverse influence on its repayment ability or the performance of this contract and specific business contracts, or has other situation that has serious adverse influence on the creditor’s right or guarantee right of Bank of Beijing.

 

Upon the occurrence of an event of default, the bank may: adjust the maximum amount of the line of credit and/or cancel the comprehensive contract, terminate the unused portion of the credit line.

 

Basic Credit Line Contract Between SZ Springpower and Industrial Bank Co., Ltd., Shenzhen Longgang Branch

Basic Credit Line Contract Between HZ HTC and Industrial Bank Co., Ltd., Shenzhen Longgang Branch

 

On March 19, 2019, each of SZ Springpower and HZ HTC entered into a basic credit line contract with Industrial Bank Co., Ltd., Shenzhen Longgang Branch. SZ Springpower’s loan agreement provides for a revolving line of credit of up to RMB40,000,000 ($5,953,001) and HZ HTC’s loan agreement provides for a revolving line of credit of up to RMB20,000,000 ($2,976,501). Each Company may withdraw the loan from time to time as needed on or before March 19, 2019. SZ Springpower’s loan is guaranteed by SZ Highpower, HZ HTC, ICON and our Chief Executive Officer, Dang Yu Pan. HZ HTC’s loan is guaranteed by SZ Highpower, SZ Springpower, ICON and our Chief Executive Officer, Dang Yu Pan. The used facility of SZ Springpower and HZ HTC was $4,991,324 and $nil as of March 31, 2019.

 

The following constitute events of default under the loan contract: any information provided by or representation or warranty made by the borrower proves to have been untrue, inaccurate, incomplete or misleading; a deterioration or obvious weakening of the borrower’s credit standing or ability to repay the loan; a cross default under certain agreements involving the borrower or a guarantor, or their affiliated related parties; the borrower’s violation of any obligations in an affiliated specific credit line contract; the borrower’s failure to timely repay the principal, interest and fees under the contract and any specific contract; the borrower’s suspension of payment, or failure or indication that it is unable to repay, the debt due; the borrower’s termination of its business, liquidation, bankruptcy, dissolution, or revocation or cancellation of it business permit; the borrower’s involvement in a major business dispute or deteriorated financial situation; or the emergence of any other situation that endanger, damage, or may endanger, damage the bank’s rights and benefits.

 

Upon the occurrence of an event of default, the bank may: temporarily suspend or permanently terminate the borrower’s credit limit in whole or in part; announce the immediate expiration of all or part of the debts under the contract; terminate the contract and declare all amounts outstanding under the contract immediately due and payable; request overdue interest from the borrower caused by the default; request penalty interest; or request compensation in full from the borrower for the breach. 

 

Item 6. Exhibits

 

Exhibit

Number

  Description of Document
     
10.1   Working Capital Loan Contract dated January 9, 2019, between Shenzhen Highpower Technology Co., Ltd. and Bank of China, Buji Sub-branch, (translated to English).
     
10.2   Comprehensive Credit Line Contract dated January 22, 2019, between Springpower Technology (Shenzhen) Company Limited and Bank of Beijing Co., Ltd. Shenzhen Branch (translated to English).
     
10.2(a)   Maximum Warranty Contract dated January 22, 2019, between Icon Energy System (Shenzhen) Company Limited and Bank of Beijing Co., Ltd. Shenzhen Branch (translated to English).
     
10.2(b)   Maximum Warranty Contract dated January 22, 2019, between Huizhou Highpower Technology Co., Ltd. and Bank of Beijing Co., Ltd. Shenzhen Branch (translated to English).
     
10.2(c)   Maximum Warranty Contract dated January 22, 2019, between Shenzhen Highpower Technology Co., Ltd. and Bank of Beijing Co., Ltd. Shenzhen Branch (translated to English).
     
10.2(d)   Maximum Warranty Contract dated January 22, 2019, between Dang Yu Pan and Bank of Beijing Co., Ltd. Shenzhen Branch (translated to English).
     
10.3   Basic Credit Line Contract dated March 19, 2019, between Springpower Technology (Shenzhen) Company Limited and Industrial Bank Co., Ltd., Shenzhen Longgang Branch (translated to English).
     
10.3(a)   Maximum Amount Guaranty Contract dated March 19, 2019, between Icon Energy System (Shenzhen) Company Limited and Industrial Bank Co., Ltd., Shenzhen Longgang Branch (translated to English).
     
10.3(b)   Maximum Amount Guaranty Contract dated March 19, 2019, between Huizhou Highpower Technology Co., Ltd. and Industrial Bank Co., Ltd., Shenzhen Longgang Branch (translated to English).
     
10.3(c)   Maximum Amount Guaranty Contract dated March 19, 2019, between Shenzhen Highpower Technology Co., Ltd. and Industrial Bank Co., Ltd., Shenzhen Longgang Branch (translated to English).
     
10.3(d)   Maximum Amount Guaranty Contract dated March 19, 2019, between Dang Yu Pan and Industrial Bank Co., Ltd., Shenzhen Longgang Branch (translated to English).
     
10.4   Basic Credit Line Contract dated March 19, 2019, between Huizhou Highpower Technology Co., Ltd. and Industrial Bank Co., Ltd., Shenzhen Longgang Branch (translated to English).
     
10.4(a)   Maximum Amount Guaranty Contract dated March 19, 2019, between Icon Energy System (Shenzhen) Company Limited and Industrial Bank Co., Ltd., Shenzhen Longgang Branch (translated to English).
     
10.4(b)   Maximum Amount Guaranty Contract dated March 19, 2019, between Springpower Technology (Shenzhen) Company Limited and Industrial Bank Co., Ltd., Shenzhen Longgang Branch (translated to English).
     
10.4(c)   Maximum Amount Guaranty Contract dated March 19, 2019, between Shenzhen Highpower Technology Co., Ltd. and Industrial Bank Co., Ltd., Shenzhen Longgang Branch (translated to English).
     
10.4(d)   Maximum Amount Guaranty Contract dated March 19, 2019, between Dang Yu Pan and Industrial Bank Co., Ltd., Shenzhen Longgang Branch (translated to English).
     
31.1   Certification of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2   Certification of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1*   Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

* This exhibit shall not be deemed “filed” for purposes of Section18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

 

 27 

   

HIGHPOWER INTERNATIONAL, INC.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Highpower International, Inc.
     
     
Dated: May 13, 2019   /s/ Dang Yu Pan
  By: Dang Yu Pan
  Its: Chairman of the Board and Chief Executive Officer
(principal executive officer and duly authorized officer)
     
    /s/ Sunny Pan
  By: Sunny Pan
  Its: Chief Financial Officer
(principal financial and accounting officer)

 

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