China BAK Reports Second Quarter Fiscal Year 2011 Financial Results

Recent Achievements and Highlights

• In February 2011, China BAK secured a new contract to supply lithium-ion high-power batteries to leading e-bike manufacturer, XDS Shenzhen Xidesheng Bicycle Co., Ltd.
• During the second quarter of fiscal 2011, the Company's Tianjin subsidiary, BAK Tianjin continued to expand its customer base and shipped four electric car packs to Tianjin Auto, which will be used to power pure electric cars used for postal deliveries. Upon approval by the local government, the pure electric cars will be used in over 20 cities in China for postal deliveries and is expected to generate high demand

Second Quarter Fiscal Year 2011 Financial Results

Net revenues for the second quarter were $46.7 million, down 26.5% from $63.5 million last quarter and down 7.4% from $50.4 million for the same period in fiscal 2010.

Revenues from prismatic products, including aluminum-case cells and battery packs, which are used in mobile phones and certain personal electronic devices, were $29.0 million, down 38.8% from $47.5 million last quarter and down 16.9% from $35.0 million for the same period in fiscal 2010.

Revenues from cylindrical cells used in notebook computers were $15.2 million, up 45.2% from $10.5 million last quarter and up 13.5% from $13.4 million for the same period in fiscal 2010.

Revenues from lithium polymer cells, used in personal electronic devices such as PDAs, MP3 players and Bluetooth devices, were $1.7 million, down 51.6% from last quarter and down 2.4% from the same period in fiscal 2010.

Revenues from high-power lithium battery cells, used in electric vehicles, electric bicycles, power tools, uninterruptible power supplies, and other applications manufactured at the Company's Tianjin facility, were $0.8 million, down 62.5% from last quarter and up 123.6% from the same period in fiscal 2010.

Gross profit for the second quarter of fiscal year 2011 was $4.4 million, down 55.5% from $10.0 million last quarter and down 50.6% from $9.0 million in the same quarter of last year. Gross margin was 9.5%, compared with 15.7% last quarter and 17.9% in the year ago period. The decline in gross profit was mainly attributable to decline in sales volume and selling price of prismatic cells as a result of traditional seasonality and intense competition in the market. In addition, the decline in selling price of cylindrical cells also caused the decline in gross profit.

Operating expenses totaled $6.3 million, or 13.4% of revenue, in the second quarter down 46.8% from $11.8 million, or 18.6% of revenue, in the last quarter and down 22.9% from $8.1 million, or 16.2% of revenue, in the second quarter of fiscal 2010. Research and development expenses were $1.9 million, or 4.1% of revenue, up 17.4% from $1.6 million, or 2.6% of revenue in the last quarter and up 18.9% from $1.6 million, or 3.2% of revenue in the same quarter of fiscal 2010. Sales and marketing expenses were $2.2 million, or 4.7% of revenue down 3.3% from $2.3 million, or 3.6% of revenue in the last quarter and up 28.9% from $1.7 million, or 3.4% of revenue in the same quarter of fiscal 2010. General and administrative expenses were $2.1 million, or 4.6% of revenue down 72.7% from $7.9 million, or 12.4% of revenue in the last quarter and down 55.4% from $4.8 million or 9.6% of revenue in the same quarter of fiscal 2010. In the second quarter of FY 2011, the Company recognized recovery of doubtful debts of $0.6 million compared with provision for bad debts of $0.9 million in the same quarter of last year.

Operating loss for the second quarter was $1.8 million compared to operating loss of $1.8 million in the last quarter and operating income of $0.9 million in the same quarter of fiscal 2010.

Net loss was $4.1 million, or diluted loss per share of $0.06, in the second quarter of fiscal 2011 compared to net loss of $3.7 million, or diluted loss per share of $0.06, in the last quarter and net loss of $2.5 million, or diluted loss per share of $0.04, in the same quarter of fiscal 2010.

Financial Condition

On March 31, 2011 China BAK had $25.6 million in cash and cash equivalents. For the second quarter of fiscal year 2011, Days Sales Outstanding (DSO) increased to 177 days from 126 days last quarter and Days Sales of Inventory increased to 143 days from 110 days last quarter. Short-term bank loans and long-term bank loans totaled $173.0 million as compared to $177.6 million on December 31, 2010. Shareholders' equity totaled $146.9 million. China BAK had $68.1 million available for borrowing under its credit facilities. The Company generated $2.6 million from cash flow from operating activities in the second quarter of fiscal 2011.

Business Outlook

"Although we experienced seasonality due to the Chinese New Year in February, we were able to report a positive operating cash flow. The decline in average selling prices of our prismatic cells is mainly due to aggressive competition in the market and we are actively pursuing new OEM orders from brand-name cell phone manufactures to increase our OEM market share. We also continue to direct our efforts on enhancing our cost control measures to reduce expenses and improve margins. During the second quarter, we were successful in further reducing our overall debt exposure in line with the goals of our turnaround strategy," commented Ke Marcus Cui, Interim CFO of China BAK.

"We expect our cylindrical cells business to break even in the fourth quarter of fiscal year 2011 due to improved pricing strategy as we expect our new low-cost and longer life cycle cylindrical cells used in notebook computers and power-tool manufacturers to exhibit strong sales volume in the coming quarters. In addition, we anticipate profitability from our prismatic battery business to show improvement in the third quarter due to improved yield and higher capacity utilization," commented Mr. Xiangqian Li, CEO of China BAK.

Conference Call

China BAK will host a conference call at 8:00 p.m. ET on Thursday, April 28, 2011 to discuss results for the second quarter of fiscal year 2011 ended March 31, 2011. Joining Xiangqian Li, China BAK's President and Chief Executive Officer on the call will be Ke Marcus Cui, Interim Chief Financial Officer. To participate in the conference call, please dial the following number approximately fifteen minutes prior to the scheduled conference call time: 877-847-0047 or 212-444-0113. International callers should dial 852-3006-8101. The pass code for the call is 647-312. If you are unable to participate in the call at this time, a replay will be available from 11:00 p.m. ET on Thursday, April 28, 2011 through 11:00 p.m. ET, Friday, May 13, 2011. To access the replay, please dial 866-572-7808. International callers should dial (852) 3012-8000. The pass code for the replay is 647-312. The conference call will be broadcast live over the Internet and can be accessed by all interested parties on the China BAK website at http://www.bak.com.cn/. To listen to the live webcast, please go to China BAK's website at least fifteen minutes prior to the start of the call to register, download and install any necessary audio software. For those unable to participate during the live broadcast, after the call a replay will be available on China BAK's website for a period of one year.

About China BAK Battery Inc.

China BAK Battery, Inc. (NASDAQ: CBAK) is a leading global manufacturer of lithium-based battery cells. The Company produces battery cells that are the principal component of rechargeable batteries commonly used in cellular phones, notebook computers and portable consumer electronics such as digital media devices, portable media players, portable audio players, portable gaming devices, and PDAs. China BAK Battery, Inc.'s production facilities, located in Shenzhen and Tianjin, PRC, cover over three million square feet and have been recently expanded to support the production of larger batteries for various types of vehicles. For more information regarding China BAK Battery, Inc., please visit http://www.bak.com.cn.

Safe Harbor Statement

This press release contains forward-looking statements, which are subject to change. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All "forward-looking statements" relating to the business of China BAK Battery, Inc. and its subsidiary companies, which can be identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties which could cause actual results to differ. These factors include but are not limited to: risks related to China BAK's business and risks related to operating in China. Please refer to China BAK's Annual Report on Form 10-K for the fiscal year ended September 30, 2010, as well as China BAK's Quarterly Reports on Form 10-Q that have been filed since the date of such annual report, for specific details on risk factors. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. China BAK's actual results could differ materially from those contained in the forward-looking statements. China BAK undertakes no obligation to revise or update its forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

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