UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For The Quarterly Period Ended March 31, 2019

OR

For The Transition Period From                   To                  

COMMISSION FILE NO.001-34098

HIGHPOWER INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

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.

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:

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

Item 1. Consolidated Financial Statements

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

See notes to condensed consolidated financial statements

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

See notes to condensed consolidated financial statements

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Stated in US Dollars)

See notes to condensed consolidated financial statements

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

See notes to condensed consolidated financial statements

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY

(Stated in US Dollars)

See notes to condensed consolidated financial statements

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

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".

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.

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

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.

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

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.

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.

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

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.

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

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:

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

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

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

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

(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:

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:

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

(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.

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

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.

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

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:

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

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

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.

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.

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.

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.

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

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

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.

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.

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.

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

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.

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:

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

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:

Related party balance

 HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Stated in US Dollars)

Related party transaction

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.

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.

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

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.

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%.

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.

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.

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.

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.

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

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.

Exhibit 10.1

Working Capital Loan Contract

Reference No. : 2018nianzhenzhongyinbujiezi No.0134

Party A: Shenzhen Highpower Technology Co., Ltd

Business License:**

Legal Representative: Dangyu Pan

Address:**

Deposit A/C and financial institutions: Bank of China, Pinghu Sub-branch, Shenzhen,

Telephone: ; Facsimile: 0755-89686298

Party B: Bank of China, Buji Sub-branch.

Legal Representative: ZHENG XIAOCHUAN

Address: 108, Buji Road, Buji Town, Longgang District, Shenzhen; Postal code: 518000

Telephone: 0755-22334749; Facsimile: 0755-28850638

Borrowers and lenders through equal consultation, the lender to the borrower liquidity loan agreement and conclude the contract.

This contract is the affiliated specific credit contract under the “Comprehensive Credit Line Contract” (Reference No.: 2018zhenzhongyinebuxiezi No. 00028), which is signed by Shenzhen Highpower Technology Co., Ltd and Bank of China, Buji Sub-branch.

Clause 1 Amount

Party B agrees to provide the following loan:

Currency in: RMB

Amount: RMB FORTY million only

RMB 40,000,000.00

Clause 2 Period

The period of the loan is 12 months starting from the first withdrawal date in part or in whole. It is Party A’s obligation to withdraw funds on the date as agreed. Any late withdrawal will not result in delay/extension of repayment.

Clause 3 Use of loan

Purpose of loan: Purchase of raw materials

Party A is prohibited from changing the use of loan without Party B’s written approval. The restrictions include but are not limited to changing the use of loan to fixed assets or equity investments, as well as production activities prohibited by the central governments.

Clause 4 lending rate and interest calculations

For each withdrawal in installments:

■ RMB floating rate

A. First withdrawal (during the first floating period) interest rate is the twelve-month benchmark lending interest rate, set by Interbank rates, plus 134.5;

B. On the interest resetting date, the new interest rate is the spot one-year lending interest rate, benchmarked by Interbank rates, plus 134.5 on all outstanding loan amounts.

2. Interest calculation

Interest is calculated starting from the actual withdrawal date on the actual amount of money withdrawn and the number of days outstanding.

Interest calculation formula: Interest = Principal × actual number of days × daily rate.

Daily rate calculation is: daily rate = APR / 360.

3. The method of interest settlement

Interest settlement takes place on the 20th of each month, the 21st is the interest payment date.

If the final loan principal payment date is different from the interest payment date, the borrower should pay off all interest on the principal payment date.

4. Penalty interest

(1) For the loan overdue or violated use the loan purpose, penalty interest rate will apply to the loan amount that is overdue or misappropriated from the date of overdue or misappropriation until the principal and interest are paid off.

On both overdue and misappropriation of loans, a higher penalty interest rate shall be charged.

(2) If the borrower does not pay interest and/or penalty interest by the interest payment date, the interest is calculated based on Clause 3 and 4.

(3) Penalty rate

■ The penalty interest rate on floating-rate loans

According to the floating period and the method of floating as agreed in Clause 1, the penalty interest rate of the overdue loan shall be the agreed interest rate plus 50%, and the penalty interest rate of the misappropriated loan shall be the agreed interest rate plus 50%;

Clause 5 Withdrawal Conditions

Withdrawal must meet the following conditions:

1. This contract and its attachments have become effective.

2. Party A has provided guarantees requested by Party B, and the guarantee contract has become effective and has accomplished legal procedures of approval and registration.

3. Party A has provided Party B with loan documents, seals, personnel list, specimen signature, and complete the relevant evidence.

4. Party A has opened the account for fulfilling this contract requested by Party B.

5. Party A should submit written withdrawal application, documentary proof for using of loans and complete the relevant formalities for withdrawal before 5 banking days.

6. Party A has submitted resolution books and power of attorney signed by the board or other authorities to Party B.

Withdrawal can be refused by Party B if Party A has not met the above conditions, but agreed by Party B.

Clause 6 Date and method of withdrawal

Clause 7 Payment of the loan

1. The account

The loan should be granted and paid through the account opened by Party A:

Account Name: Shenzhen Highpower Technology Co., Ltd.

Account number:**

2. The way of payment

(1) The way of payment should be in accordance with laws and regulations, regulatory requirements and the contract. The way of single payment of the Loan should be approved in written withdrawal application. Party B has the right to change the way of payment or stop providing the loan if the way of payment in the application doesn’t meet the requirement.

(3) Borrower makes the payment on its own.

(4) The change of payment. The way of payment should be changed when the payment, credit rating or other conditions of Party A has changed after submitting withdrawal application. Party A should provide the written change application, should resubmit the withdrawal application and documentary proof for using of loans if the sum, payment object or the use of loans has changed.

3. The specific requirements of entrusted payment

(1) Entrusted payment. Party B pay to the specified account directly which is written in this contract, including the name of account, account number and the sum of payment.

(2) To provide the transaction information. Party A should provide the account of loans, the account information of counterparty and relevant documents when entrusted payment. All document provided to Party B should be true, integral and effective, or Party B does not assume any responsibility for failed transaction, and occurred repayment obligations do not be affected.

(3) Party B’s obligations under the entrusted payment

A. Party B pay to the specified account after examination and approval of Party A’s commission books and other related transaction information when entrusted payment.

B. If Party B found that the proof materials and other related trading purposes material provided by Party A does not comply with this contract or the presence of other defects, Party B has the right to require Party A to supplement, replace, description or re-submit the relevant materials. Before these materials are submitted, Party B has the right to refuse the issuance and payment of the relevant amounts.

C. Party B will assume no responsibility and the generated obligations of Party A will be not affected if Party B cannot pay the loan to the counterparty in time in accordance with payment order of Party A because of the refund by opening bank of the counterparty. Party A hereby authorizes Party B to freeze the fund returned by opening bank of the counterparty. In this case, Party A shall resubmit the payment order and use proven materials and other related transaction materials.

(4) Party A shall not piecemeal way to circumvent the trustee to pay Party B.

5. Party B has right to redefine the terms of payment and loan disbursement or stop the loan if the following situations occurred:

(1) Party A violates the contract to circumvent entrusted payment of Party B by piecemeal way.

(2) Party A's credit status drops or main business profitability is not good.

(3) The use of loan is abnormal.

(4) Party A fails to provide the records and information of the loan requested by Party B timely.

(5) Party A contravenes this section to use the loan.

Clause 8 Repayment

1. Party A shall specify the following account as capital recovery account and provide the information of this account. Party B has the right to ask Party A to explain inflows and outflows of large-sum and abnormal capital, as well as monitor capital recovery account.

Account Name: Shenzhen Highpower Technology Co., Ltd.

Account number:**

2. Except otherwise agreed, on the expiry date, Party A must repay all the loans under this contract.

If Party A wants to change the plan of repayment, a written application confirmed in writing by both parties jointly should be submitted in 10 banking days before the loans maturity.

3. Unless otherwise agreed, Party A has the right to decide repayment order of the principal or interest. If there are several expiring loans or overdue loans which are repaid in installment way under this contract, Party B has the right to decide the liquidation sequence of a repayment. Party B has the right to decide the priority of the repayment order if multiple contracts expire at the same time.

4. Unless otherwise agreed, Party A can repay in advance, but Party A should notice Party B in written 15 banking days advance. The amount of the first advance payment used to repay the final maturity of the loan, in reverse order to repay the loans.

5. Party A must deposit funds in the following account three banking days advance of every expiring principle with interest. Party B has the right to take the funds from the account on the expiry date.

Account Name: Shenzhen Highpower Technology Co., Ltd.

Account number: 744557938816

Clause 9 Guarantee

1.       To ensure that borrowing under this agreement is repaid, both parties signed the guarantees.

2.       Under certain circumstance, Party B believes that will affect the capacity for fulfilling the contract of Party A or Guarantor, or Guarantee Contracts are invalid, revoked or dissolved, or the financial position of Party A/Guarantor deteriorate or Party A/Guarantor involved in litigation issues, or other factors which might affect its repayment ability, or guarantors were found default in other contracts with Party B, or devaluation, dismiss or damage of collaterals which might cause the value of the collaterals slaked or losses, Party B reserves the right to request Party A and Party A has the obligation to add or replace the guarantor.

Clause 10 Statement and Commitment

1.       Party A’s statement:

1)       Party A is legally register and exist with full capacity for civil rights and civil conduct;

2)       Signing and performing the contract is the true will of Party A, Party A has been granted all legal and valid authorizations before signing the contract. The contract does not form a default for other contracts signed and performed by Party A and other legal documents. It is Party A’s responsibility to complete all required approvals, registrations, permits and filings.

3)       All document and information, financial statement, certificates and other materials provided by Party A to Party B are true, complete, accurate and effective.

4)       All the transactions mentioned by Party A for apply specific credit line should be real and not for illegal purposes such as: money laundry.

5)       No hidden events regarding Party A and guarantor’s financial and repayment abilities.

6)       Party A and the loan project reach the national environmental standards, not in the list of the enterprises which have problems of energy consumption and pollution, don’t have the risk of energy consumption and pollution.

2.       Party A’s commitment:

1)       Party A shall submit the financial statements and other relevant information regularly, including but not limited to annual, quarterly and monthly financial reports.

2)       Any counter-guarantee agreement between the guarantors and Party A will not affect the Party B’s underlying rights under this contract.

3)       Cooperated in Party B’s exam and inspection on the utilization of the loan as well as Party A’s financials and operations.

4)       Under circumstances Party A or Guarantor’s capability of performing the contract might be affected, Party A should notify Party B in written in time. Those circumstances included but not limited to merger, division, decrease of capital, equity transfer, investment, a substantial increase of debt financing, a major asset and credit assignment.

Party A should notify Party B in time, when the following things occurred:

A. changes of articles of association, the scope of business, registered capital and legal representative of Party A or Guarantor.

B. Any form of management mode change, including joint operation, invest and cooperate with foreigners, contract management, reorganization, restructuring, listing plan.

C. Party A is involved in major litigation or arbitration, or property or collateral is seized, detained or regulated, or set new guarantee in collateral.

D. Out of business, dissolution, liquidation, suspend business for rectification, cancellation, revocation of the business license or (be) filed for bankruptcy.

E. Shareholders, directors and senior management personnel suspected of serious cases or economic disputes.

F. Default events in other contracts.

G. Operating difficulties and financial situation has deteriorated.

(5) The repayment to Party B prior to shareholders, and is comparable to other creditors of the same kind debts.

Party A is prohibited to repay the loan to shareholders before paying off the principal and interests under the contract.

(6) If Party A fails to pay principal, interests and fees on time in the fiscal year, any form of dividends is forbidden.

(7) Party A cannot dispose of assets to reduce its debt paying ability and promises the total amount of external guarantee is not 1 time higher than its net assets, and the total amount of external guarantee and the amount of single guarantee shall not exceed the limitation set by the articles of association.

(8) Except the use agreed in this contract or agreed by Party B, Party A is prohibited to transfer the loans to other accounts or related accounts.

Party A should provide documentary proof when the loan is transferred to other accounts or related accounts.

(9) Party B has the right to call the loan advanced according to the situation of capital return of Party A.

Clause 11 disclosure of the affiliated transaction inside Party A 's group

Party A is a Group customer confirmed by Party B according to the "Commercial Bank Group guidelines for customer credit risk management business"(hereinafter referred to as “guideline”). During the credit period, Party A shall promptly report to Party B about more than 10% of net assets associated with the transaction, including but not limited to: the parties to the transaction of the association; trading program and nature of the transaction; the amount of the transaction or the corresponding ratio; pricing policies (including no amount or only nominal amounts of transactions).

Under any of the following circumstances, Party B shall have the right to unilaterally decide to suspend the unused loan and recover part or all of the principal and interest of the loan in advance: use the false contracts which are signed with affiliated parties to discount or pledge at bank and to obtain bank funds or credit with notes receivable and accounts receivable without actual trade background; the occurrence of major mergers, acquisitions and reorganization which are considered by Party B may affect the loan safety; evasion or discarding of bank debts on purpose through affiliated transactions; other circumstances stipulated in article eighteenth of "guidelines".

Clause 12 Breach of Covenants

Each of the following events and issues constitute Party A in the event of default under the contract:

1.       Party A did not perform the repayment obligation under this contract;

2.       Party A has not used the credit funds according to agreed purposes, or has not paid the loan by agreed way in this contract;

3.       Party A’s statements in this contract are untrue or in violation with commitments made by Party A in this contract.

4.       Under the circumstance defined in 2.(4) of Clause 10, Party A refused to provide additional guarantee or replacement of a new guarantor.

5.       Deterioration of credit, or profitability, debt paying ability, operating ability, cash flow and other financial indicators of Party A deteriorate, breaking the contract index constraint agreed or other financial covenants.

6.       Party A breaches other contracts signed with Party B or other affiliated institutions of Bank of China.

7.       Guarantors breach contracts, or have default events with Party B or other affiliated institutions of Bank of China.

8.       The termination of business or dissolution, revocation or bankruptcy of Party A.

9.       Party A is or may be involved in major economic disputes, litigation, arbitration, or its assets were seized, detained or enforced, or investigated or punished by the judicial organ or taxation, industry and commerce administrative organs in accordance with the law, has been or may affect its ability to fulfill the obligations under this contract.

10.     Abnormal change, missing, legal restriction of personal liberty and investigation by judicial authorities of Party A’s major individual investors, key management personnel, which have been or may affect Party A to fulfill the obligations under this contract.

11.     Party B finds the problems which may affect the borrower or guarantor's financial situation and performance capabilities when reviewing Party A’s financial condition and performance capabilities every year (every year from the effective date of the contract);

12.     Party A cannot provide materials to Party B to explain large and abnormal capital inflow and outflow in the account.

13.     Party A is in violation with other rights and obligations agreed in this contract.

When any of the above situations occurred, Party B will perform the following in separate or all at the same time according to the specific situation:

1)       Require Party A or Guarantor to rectify defaults within a definite time.

2)       Reduce completely or partly, pause or terminate Party A’s Credit limit.

3)       Pause or terminate completely or partly Party A’s business applications in this contract or in other contracts between Party A and Party B specific credit line under this contract. Pause or terminate completely or partly, or cancel or stop offering, paying and settling the unissued loans and unsettled trade financing.

4)       Announce the immediate expiration on all or part of the outstanding loans, principle and interest of trade financing and other accounts payable under this contract or other contracts between Party A and Party B.

5)       Terminate or release this contract, terminate or release contracts between Party A and Party B completely or partly.

6)       Require compensation from Party A on the losses caused by Party A to Party B.

7)       Deduct the fund from Party A’s deposit accounts to pay off the debts to Party B under this contract. All the undue funds in the accounts were considered as acceleration of maturity. If the currency in deposit account is different from the currency of Party B’s loans, the exchange rate on the date of the hold in custody will be applied.

8)       Real rights of pledge will be executed.

9)       Require Guarantors assume liability of guaranty.

10)     Other necessary or probable procedures on Party B’s concern.

Clause 13 Rights reserved

One party does not perform part or all of the rights under this contract, nor does not require the other party to perform, undertake part or all of the obligations and responsibilities, which does not mean the abdication of the right or exemption of the obligation and responsibility.

Any tolerance, extension or delay from one party to another party for exercising of rights under this contract does not affect the rights one party enjoys according to this contract and laws and regulations, and does not mean the abdication of the right.

Clause 14 Changes, Modification, Termination

Upon negotiation and agreed by both parties, this contract can be changed and modified by written. Any of the changes and modifications should form the inseparable part of this contract.

Unless otherwise provided for in any law or regulation or stipulated between the parties, this contract would not be terminated prior to all the rights and obligations are fulfilled.

Unless otherwise provided for in any law or regulation or stipulated between the parties, the invalidation of single terms under this contract should not affect the validation of other terms under this contract.

Clause 15 Applicable Law and Resolution for Dispute

1. This contract is applicable to the laws of People’s Republic of China.

During the performance of this contract or in connection with all disputes relating to this contract, the two parties settled through friendly consultations. If negotiation cannot reach agreement, both parties can apply to the local people's court of Party A or other affiliated institutions of Bank of China.

Clause 16 Attachments

The Appendix hereof and the other appendix confirmed by both parties shall form an integral part of this contract, and shall be of legally equal effect with this contract.

1.       Withdrawal application;

Clause 17 Other terms and conditions

1.       Without Party B’s written approval, Party A is not allowed to transfer the rights and obligations under this contract to the 3rd Parties.

2.       Party A should give the consent that Party B might somehow authorize other affiliated institution of Bank of China to perform the obligation. The performing party entitles all the rights and obligations under this contract, the performing party reserves the rights to appeal a resolution of dispute if necessary.

3.       The contract has equivalent restrictions to the successors or inherits of both parties.

4.       Unless otherwise agreed, the domicile addresses stated in this contract are for corresponding use; both parties should notify each other in writing about any changes of its domicile addresses.

5.       The transactions under the contract based on independent interests. According to relevant laws, regulations and regulatory requirements, other parties of the transaction constitutes a connected party or associated persons, any party shall not seek to use this relationship to affect the fair of transaction.

6.       The title and name of business in this contract is only for business purposes, will not be used for interpretation of the contract terms, the rights and obligations.

7.       In accordance with the provisions of the relevant laws and regulations, supervision, Party B has the right to provide the information of this contract and other relevant information to the credit system of the people's Bank of China and other legally established credit information database, for organizations or individuals who have the appropriate qualifications to query and use.

8.       If the drawdown date or the repayment date is in legal holidays, then it is delayed to the first working day after the holidays.

9.       If required by the governing institutions, Party B might not be able to perform the obligations agreed in this contract, Party B has the right to stop or change the contract or its clauses, and Party B is exempted from punishment under this circumstance.

Clause 18 Effective of the contract

This contract enters into force upon the date when it is signed or sealed and affixed with official seals by the legal representatives or entrusted agents of Party A and Party B.

This contract is signed in quadruplicate, each party holds two copies, which have the equal legal effect.

Exhibit 10.2

C13001 Bank of Beijing

Contract No.: [0528336]

Comprehensive Credit Contract

(Applicable to Single Customer Comprehensive Credit)

Trustee: Springpower Technology (Shenzhen) Company Limited

Creditor Grantor: Bank of Beijing Co., Ltd. Shenzhen Branch

Date of Concluding the Contract: January 22, 2019

Table of Conditions of Comprehensive Credit Contract

Trustee: Springpower Technology (Shenzhen) Company Limited

Business license number/ uniform social credit code:**

Legal representative/ person in charge: PAN Dangyu

Contact: SUN Xun

Correspondence address:**

Creditor grantor (hereinafter referred to as “Bank of Beijing”): Bank of Beijing Co., Ltd. Shenzhen Branch

Legal representative/ person in charge: QU Ruiguang

Correspondence address: First Floor, Bank of Beijing Plaza, China Resources MixC T5, No. 9668, Shennan Avenue, Nanshan District, Shenzhen City

Postal code: 518040 Tel.: 0755-23957000 Fax: 0755-23957009

The trustee and Bank of Beijing (hereinafter collectively referred to as “both parties”) hereby conclude this contract through equality, voluntariness and consensus in the domicile of Bank of Beijing on the date of concluding the contract recorded in the cover page of the contract on the basis of the Contract Law of the People’s Republic of China and other laws and regulations in accordance with the following contract conditions and the Basic Terms and Conditions of Comprehensive Credit Contract.

A. Maximum credit limit (when the amount in words is inconsistent with the amount in numbers, the amount in words shall prevail, same below):

The total amount is marked by RMB, which is (in words) fifty million Yuan only, (in numbers) 50,000,000 Yuan;

B. Limit distribution of specific business (the total balance of the limit actually used in each business shall not exceed the maximum credit line):

(1) This foreign currency loan limit is converted to RMB (in words) fifty million Yuan only in total. The loan term of each loan shall be no more than 12 months. The term of withdrawal is [12] months from the day of concluding the contract. The limit is revolving limit.

(2) The foreign currency (currency) XXX loan limit is converted to RMB (in words) XXX. The loan term of each loan shall be no more than XXX months. The term of withdrawal is [XXX] months from the day of concluding the contract. The limit is XXX revolving limit;

(3) The RMB discount limit is RMB (in words) XXX. The term of withdrawal is [XXX] months from the day of concluding the contract. The limit is XXX revolving limit;

(4) The import and export documentary limit is converted to RMB (in words) XXX. The term stipulated for each business shall be no more than XXX months. The term of withdrawal is [XXX] months from the day of concluding the contract. The limit is XXX revolving limit;

(5) The RMB draft acceptance limit is RMB (in words) XXX. The term of each draft acceptance shall be no more than 12 months. The term of withdrawal is [12] months from the day of concluding the contract. The limit is revolving limit; the ratio of deposit shall not be less than 30%;

(6) The import I/C opening limit is converted to RMB (in words) XXX. If it is usance I/C, the payment term stipulated in each I/C shall be no more than XXX months; the term of withdrawal is [XXX] months from the day of concluding the contract. The limit is XXX revolving limit; the ratio of deposit shall not be less than XXX%;

(7) The domestic I/C opening limit is converted to RMB (in words) XXX. If it is usance I/C, the payment term stipulated in each I/C shall be no more than XXX months; the term of withdrawal is [XXX] months from the day of concluding the contract. The limit is XXX revolving limit; the ratio of deposit shall not be less than XXX%;

(8) The L/G limit is converted to RMB (in words) XXX; the validity term of each L/G stipulated shall be no more than XXX months; the term of withdrawal is [XXX] months from the day of concluding the contract. The limit is XXX revolving limit; the ratio of deposit shall not be less than XXX%;

(9) The corporate account overdraft limit is converted to RMB (in words) XXX; the term of overdraft of each corporate account shall be no more than XXX months; the term of withdrawal is [XXX] months from the day of concluding the contract. The limit is XXX revolving limit;

(10) The factoring limit is converted to RMB (in words) XXX; the term of each factoring shall be no more than XXX months; the term of withdrawal is [XXX] months from the day of concluding the contract. The limit is XXX revolving limit;

(11) The bond underwriting limit is converted to RMB (in words) XXX; the term of withdrawal is [XXX] months from the day of concluding the contract. The limit is XXX revolving limit;

(12) The external guarantee limit is converted to RMB (in words) XXX; the term of each external guarantee limit shall be no more than XXX months; the term of withdrawal is [XXX] months from the day of concluding the contract. The limit is XXX revolving limit; the ratio of deposit shall not be less than XXX%.

(13) Other: ______________________________________________________

C. Prior business included in the limit hereunder:

The business hereunder which has occurred but has not been settled occupies the credit limit hereunder. However, the rights and obligations of the business shall be executed in accordance with this contract (unless specially stipulated herein):

(1) The contract called XXX with the number of [XXX] concluded by and between XXX and the trustee;

(2) The contract called XXX with the number of [XXX] concluded by and between XXX and the trustee;

(3) Other: _________________________________________________

G. Credit purpose:

Meet the trustee’s business need of normal operation in accordance with laws and regulations.

M. Guarantee (the details are subject to the guarantee document):

Warranty guarantee, name of warranty: Icon Energy System (Shenzhen) Company Limited, Huizhou Highpower Technology Co., Ltd., Shenzhen Highpower Technology Company, Limited, and PAN Dangyu.

U. Annex (the following annex is an integral part of this contract):

XXX

W. Enforcement notarization:

No enforcement notarization is required for this contract.

X. Special agreements:

1. The trustee confirms the address of delivery of the documents involved in this contract/ agreement and relevant documents and legal instruments when a dispute occurs to this contract/ agreement and legal consequences as follows: (1) it confirms that its valid address of delivery is the address specified in the front of this contract/ agreement. (2) The address of delivery is applicable to the delivery of all kinds of documents during non-litigation and relevant documents and legal instruments when a dispute occurs, including but not limited to the delivery in the civil supervision procedure and civil litigation procedure (first trial, second trial, re-trial and execution procedure). (3) If the address of delivery needs to be changed, it shall notify Bank of Beijing by mailing thirty working days in advance; if change is notified according to the method specified, the address of delivery changed shall prevail. If the obligation to notify fails to be fulfilled, the original address of delivery shall be still the valid address of delivery. In the event that the legal instruments fail to be actually received as the address of delivery it provides or confirms is not accurate, Bank of Beijing and the court have not been notified after the address of delivery is changed or it or the receiver it designates refuses to sign up, if they are delivered by mailing, the day of returning the instruments shall be deemed as the day of delivery; if they are delivered directly, the day on which the process server indicates the condition on the receipt of delivery shall be deemed as the day of delivery. (4) Whereas it has confirmed the address of delivery, the court may directly deliver by mailing upon delivery. Even if it fails to receive the relevant documents or legal instruments delivered by the court by mailing, it shall be deemed as delivery. (5) After a dispute enters the civil supervision procedure or civil litigation procedure, if it responds to the litigation and directly submits the letter of confirmation of the address of delivery to the court, and if the address of delivery confirmed is changed, the letter of confirmation of the address of delivery that it submits to the court shall prevail.

2. This contract/ agreement is concluded by the parties in Futian District, Shenzhen City. All disputes under this contract/ agreement and related to it shall be first settled through friendly negotiation. If the negotiation fails to work, it shall be submitted to the people’s court with jurisdiction in the place of concluding this contract/ agreement for settlement through litigation.

Y. The trustee hereby confirms: Bank of Beijing has reminded it of paying attention to the terms and conditions concerning liability or right limitation and has made full interpretation and explanation on this contract. Revision and supplementation (if any) reached by both parties has been indicated in the special agreement column or supplementary agreement; after fully reviewing and negotiating and discussing with Bank of Beijing, the trustee comprehensively understands and agrees all contents of this contract including the table of contract conditions, basic terms and conditions and annexes hereto, and has no doubt or objection.

Z. Both parties sign as follows:

Comprehensive Credit Contract Basic Terms

1.1 In this contract, unless otherwise specified, the following words have the following meanings.

This contract: refers to the overall constituted by all the following documents: comprehensive credit contract condition table (the main text is Clauses A to Z), comprehensive credit contract basic terms, the attachments listed in Clause U hereof, and other effective documents to determine the rights and obligations under this contract in accordance with the law (including but not limited to the supplementary agreement, commitment, etc.); however, the terms and conditions of the contract shall be specified in the corresponding terms and conditions in the contract condition table and basic terms if there is no special explanation.

Credit limit: refers to the bank credit fund or principal amount supported by bank credit that Bank of Beijing undertakes to grant or actually grants to the credit grantee in accordance with the terms and conditions of this contract.

Withdrawal period: also known as the period of validity of the limit, means that the credit grantee may apply to Bank of Beijing for the term of the relevant limit.

Limit withdrawal day: refers to the date when the credit grantee begins to take up the limit, such as withdrawal date, acceptance day, opening date for loan business, acceptance of bill of exchange, opening of letter of guarantee/letter of credit respectively.

Limit occupancy period: Refers to the period from the conclusion date of the contract to the validity period expiration date or the date when all credit limit (if any) used by the credit grantee and relevant funds and expenses are liquidated (the later shall prevail).

Specific business: refers to the loan, trade financing, discount, guarantee letter, letter of credit, draft acceptance and other specific credit granting business of Bank of Beijing to the credit grantor under this contract.

Specific business contracts: refer to the legal documents that the credit grantor concludes with Bank of Beijing in order to use the limit under this contract and which constitute contract relationship between the credit grantor and Bank of Beijing under specific business according to law (no matter what its name is), including but not limited to, written, electronic data or other effective forms of business contract, agreement, commitment, business documents, etc.

Guarantee document: refers to any guarantee contract, guarantee clause, guaranty letter, etc., which is set up and signed or agreed by the guarantor.

Third party: in the terms of this contract, the third party means any person or organization other than the parties hereto.

Laws and regulations: refer to the laws, administrative regulations and judicial interpretations of the supreme people's court in the mainland of the People's Republic of China except Hong Kong, Macao and Taiwan.

Financial rules and regulations: refer to the rules, regulations and orders of the banking regulator, the People's Bank of China and the foreign exchange control department.

Working day: refers to any day when the commercial banks in the city where Bank of Beijing is located deal with general corporate business to the external, not including statutory holidays, Saturday and Sunday, but including Saturday and Sunday when the public should work as temporarily stipulated by the government.

1.2 Under any document under this contract or made on the basis of this contract, unless otherwise specified in this document, the words which have been defined in the contract still have the same meaning.

2.1 Refer to Clause A hereof for the maximum credit limit; refer to Clause B hereof for the limit distribution of the specific business, the withdrawal period and the limit type. Without the consent of Bank of Beijing, all kinds of business limits shall not be used for adjustment. Unless otherwise agreed, the unsettled business incurred by the credit grantee in the system of Bank of Beijing occupies the limit of corresponding business herein, which is specifically referred to in Clause C of this contract. Bank of Beijing may arrange or designate other branches of Bank of Beijing Co., Ltd. to handle the specific business under this contract. The above mentioned institutions shall be regarded as the credit grantors of the contract under this contract when handling the business.

2.2 In case that any of the following circumstances occurs, Bank of Beijing can appropriately adjust all or part of limits under this contract which are not yet used or shorten the period of validity: (i) the credit grantee or its guarantor defaults under this contract, the specific business contract or guarantee document; (ii) a significant adverse change occurs to the financial or operational status of the recipient; or (iii) the country or the financial regulator adjusts the credit policy or other related policies, major financial risks occur or lurk in the region where the credit grantee is located, and material adverse changes occur in the market related to the operation of the credit grantee. Bank of Beijing rationally thinks that it has a significant effect on the performance of this contract; or (iv) other circumstances stipulated in this contract, specific business contract or warranty document.

2.3 Refer to Clause B hereof for the limit type. If it is recyclable limit, from the time when the relevant debts have been totally paid off to the expiration date of the withdrawal period, the credit grantee can apply for reuse as per the agreed conditions hereof within the usable limit. The recyclable time within the validity period of limit is limitless; if it is unrecyclable limit, reuse shall not be applied after the credit grantee applies.

3.1 If the expiration date of the validity period (withdrawal period) of the limit is not working day, the last working day before this day shall prevail. During the withdrawal period, maximum credit limit and specific credit limit, the credit grantee may submit an application to Bank of Beijing, the specific business contract should be entered into during the withdrawal period after approval and it may actually use according to the contract; when the withdrawal period expires, the unspent limit by the credit grantee is automatically cancelled.

3.2 Unless the credit grantee and Bank of Beijing agree to change at the appointed time, the credit grantee shall handle according to the following procedures and requirements whenever using the credit limit: (1) the credit grantee shall submit the application to Bank of Beijing in advance, explain the types of credits and amount to be applied, purpose, proposed date of use and fill other necessary contents under this contract and submit the documents required by the business system of Bank of Beijing; (2) Bank of Beijing shall review the application based on the business management system implemented at the appointed time and credit review requirements and the contract; (3) if Bank of Beijing agrees after examination, the parties shall enter into the specific business contract and handle the business procedures as agreed upon, while reducing the credit limit available under this contract; if Bank of Beijing does not agree after the examination, the credit grantee shall be informed.

3.3 Whenever the credit grantee requires using the credit limit, unless the following conditions are met (except the condition which Bank of Beijing decides to give up), Bank of Beijing has no obligation to agree it to use the credit limit:

(1)       The guarantee document of the guarantee referred to in Clause M hereof has been entered into and duly handled delivery, registration and other procedures;

(2)       Margin money has been deposited into Bank of Beijing as per the margin proportion required in Clause B hereof when bank acceptance, letter of guarantee, letter of credit and other business have been handled, pledged to Bank of Beijing as guarantee under this contract and specific business contracts;

(3)       The credit grantee has signed specific business contract with Bank of Beijing and met the conditions required in this contract and specific business contracts. Enough limits available shall be reserved herein;

(4)       The credit grantee has no default event under this contract or specific business contracts; the guarantor has no default event under the guarantee document;

(5)       The effective laws and regulations and financial rules, national credit policies have no significant adverse influence on the performance of the contract by any party of the specific business contract and do not prohibit or restrict the handling of relevant business;

(6)       Other conditions agreed in this contract or specific business contracts, specified in laws, regulations and financial rules.

3.4 The currency, amount, term, interest rate and rate, repayment and other matters of specific business shall be subject to the agreements in specific business contracts. Unless Bank of Beijing and the credit grantee implement corresponding revision on this contract by a written supplementary agreement, the business term agreed in the specific business contracts shall not be over the term specified in Clause B hereof except the automatic extension agreed in the specific business contracts or the term extension due to force majeure.

3.5 The limit amount that each specific business occupies shall be calculated as per the credit fund principal amount and credit support nominal principal amount provided by Bank of Beijing. The limit occupancy amount of foreign currency business shall be converted as per the initial foreign exchange selling price published by Bank of Beijing on the limit withdrawal date. This clause is only set for limit statistics, which shall not be deemed as restriction of the credit grantee’s debt range or the guarantor’s guarantee range. The debt of the credit grantee under each specific business for Bank of Beijing shall be determined based on the specific business contract and other terms of this contract.

3.6 The credit grantee guarantees to use the limit for the purpose agreed in Clause G hereof and the specific business contracts, guarantees that the aforesaid purpose will not violate the stipulations in the laws and regulations and financial rules, promises not to use the limit in the project or business in which commercial bank fund / credit is prohibited to use as specified in the laws, regulations or financial rules. If the credit grantee needs to change the limit purpose, it shall obtain the written consent of Bank of Beijing.

3.7 In order to timely repay the relevant amounts payable, the credit grantee shall open and maintain the relevant account (in case of alternation of account number, it shall be applicable continuously after alternation) at Bank of Beijing. Bank of Beijing may automatically deduct the mature payable amounts of the credit grantee from the account opened by the credit grantee at the system of Bank of Beijing Co., Ltd. and notify the credit grantee by the statement of account or other form.

3.8 Unless there is assured and full contrary evidence, the bank bookkeeping document generated in Bank of Beijing is valid evidence for business occurrence and debt repayment under this contract.

4.1 Both parties hereby undertake and guarantee to each other respectively: (1) this party possesses the qualification and ability to conclude and perform this contract; the personage who represents this party to sign this contract has obtained full authorization and has the right to represent this party to conclude this contract; (2) this party’s conclusion and performance of this contract do not violate the articles of association and other organizational documents, laws and regulations and financial rules and other legal documents which shall be abided by, and any necessary internal and external authorization, permission, filing and other procedures have been obtained to ensure that this contract has legal binding force on this party and may enforce according to law.

4.2 The creditor grantee promises and guarantees to perform the following obligations during the occupancy period:

(1)       The credit grantee has always been the legal entity established according to law and continuing as a going concern and will complete annual inspection and other legal procedures on time; the credit grantee will completely provide Bank of Beijing with the financial and operational status of the credit grantee and other important information related to this contract and the specific business contracts before signing this contract and each application to use the limit is proposed;

(2)       The production and management of the credit grantee are legitimate, abide by the environmental protection requirement specified in laws and regulations, tax payment stipulation and other stipulations; necessary approval and permission documents are timely, legally and validly obtained;

(3)       The credit grantee accepts and actively cooperates Bank of Beijing’s examination and supervision on the credit grantee’s financial status, operation status and the limit use status under this contract, including but not limited to: (i) reasonably explain the execution of each specific business under this contract and provide relevant certificates and prove that the contract is in conformity with the contract as per the requirements of Bank of Beijing, and (ii) provide Bank of Beijing with the audited intact financial statements (including notes) of the previous year and the audit report before the end of Apr. and provide Bank of Beijing with the duplicates of the balance sheet, income statement, cash flow statement and other financial statements as at the end of the last quarter in the first month of every quarter (if there is audited semi-annual or quarterly financial statement, the audited complete statement and audit report shall be provided);

(4)       All application materials, financial statements and other information provided by the credit grantee to Bank of Beijing are true, complete, legal and valid. There is no fraud, major omission or major misdirection;

(5)       The credit grantee shall not withdraw registered capital, fabricate transactions to collect bank funds or credit, escape from debts by transfer of assets, have associated transaction that seriously damages its repayment ability or money laundering and other improper transactions;

(6)       The credit grantee shall provide the guarantee agreed in Clause M hereof to Bank of Beijing at least before the first use of the limit. Refer to the guarantee document for details. The credit grantee undertakes to maintain the pledge rate and mortgage rate under the guarantee document within the agreed scope of the guarantee document (if any); the credit grantee promises to fully understand and agree to and accept the terms and contents of the relevant guarantee document, guarantee that all guarantee provided to Bank of Beijing based on the guarantee document are legal and valid and can be enforced in accordance with the law.

The credit grantee and Bank of Beijing shall bear the stamp duty under this contract which shall be paid by them respectively. The taxes and administrative fees, etc. levied by the government or the institution that exerts administrative functions (except the taxes and dues which shall be borne by Bank of Beijing voluntarily) and notarization expense (if any), guarantee expense (if any) shall be borne by the credit grantee.

6.1 When any or several circumstances occur, default event of the credit grantee shall be constituted:

(1)       The credit grantee 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;

(2)       The credit grantee 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;

(3)       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;

(4)       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;

(5)       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.

6.2 In case that the credit grantee has the default event under this contract or specific business contracts, Bank of Beijing shall be entitled to exert default remedy right based on the contract agreement or/ and laws, regulations, financial rules, including but not limited to adjusting the credit limit and validity period, requiring correcting breach of contract, collecting penalty interest, exert guarantee right and lien according to law, announcing that all or partial debts under this contract and specific business contracts are mature at once, collecting by announcement, requiring compensation for loss and requiring repaying the expenses incurred by Bank of Beijing to realize the creditor’s right and guarantee right (including but not limited to litigation/ arbitration expense, appraisal / authentication / auction and other disposal expenses, attorney expense, expense for investigation, travel fee and other reasonable expenses), etc.

6.3 When the payment currency withdrawn by Bank of Beijing to exert rights is different from the unpaid fund currency by the credit grantee, the creditor’s rights of Bank of Beijing are liquidated after the exchange rate of the applicable bank sold debt currency and the purchased returned money currency published by Bank of Beijing is exchanged. The exchange rate loss and exchange expense incurred shall be borne by the credit grantee. The credit grantee shall be obligated to cooperate with handling the exchange procedure.

6.4 The creditor’s rights of the funds taken back by Bank of Beijing to exert rights are paid off as per the following order: (1) expense to realize the creditor’s right and guarantee right and other expenses which shall be borne by the borrower, (2) damage compensation, indemnity and liquidated damage, (3) default interest, (4) interest, (5) principal, (6) other amounts payable; but Bank of Beijing may alternate the aforesaid liquidation order. If the credit grantee has many mature funds repayable, the repayment order determined by Bank of Beijing shall prevail.

6.5 In case that one party suffers force majeure and this party provides the certificate of the competent authority to the other party within 5 working days after the force majeure occurs, the corresponding default responsibility of this party may be exempted according to law. However, in order to avoid doubts, both parties confirm that the corresponding liability for breach of contract of the credit grantee may be exempted according to law after the force majeure occurs but still have the obligation to repay the used limit principal, interest and the expense to realize the creditor’s right and guarantee right.

7.1 This contract is applicable for the laws and regulations of the People’s Republic of China; all disputes arising from and in connection with this contract shall be solved through friendly negotiation; if the negotiation fails, it shall be submitted to the people’s court at the place where Bank of Beijing for resolution.

7.2 In case that there is affirmative written agreement in the specific business contract, guarantee document on the applicable laws and dispute settlement, it shall be executed as per this agreement. In case that there is no written agreement or the written agreement is unclear or the agreement is invalid / revoked according to law, it is applicable for the laws and regulations of the People’s Republic of China and shall be filed to the people’s court at the place where Bank of Beijing is located for resolution.

8.1 When the special agreement in Clause X hereof is inconsistent with other clauses in the text hereof, the special agreement in this clause shall prevail; the attachments listed in Clause U hereof constitute the component hereof. Unless there is affirmative written agreement in the text or attachment hereof, the text hereof shall prevail when the attachment is inconsistent with the text hereof. Each specific business contract and this contract constitute a complete contract, except as otherwise provided for in this contract situation; when the specific business contract is inconsistent with the contract, the specific business contract shall prevail; the matters which are not agreed in the specific business contracts shall be executed as per the agreements hereof.

8.2 The notice or document sent by any party under this contract: (i) the day of receipt of the notified party or its receiving agent is delivery date if it is handed over in person or by commission; (ii) the 3^rd day after the mail is posted if it is posted by express or registered mail in the same city (including urban and suburban) is delivery date, (iii) the 7^th day after it is mailed if it is mailed by other method is delivery date; when the delivery date determined in accordance with the aforesaid stipulations is inconsistent with the date when the notified party actually receives or officially signs in, the earliest date shall prevail. However, Bank of Beijing requires that the documents delivered by the credit grantee face to face shall be delivered by the special person appointed by the credit grantee to the operator authorized by Bank of Beijing. Either party shall notify the opposite party in time if it alternates the contact info; otherwise, the opposite party shall be entitled to deem the contact info before alternation as valid.

8.3 Bank of Beijing can provide the information related to this contract and specific business contracts to the credit system and information base approved by the government department.

8.4 Unless otherwise agreed hereof, either party shall have the confidentiality obligation before the aforesaid information losses confidentiality, shall not publicly disclose and shall not disclose the commercial secret which is obtained by the party during the conclusion and performance of this contract and belongs to the other party and other unpublished information that the other party requires keeping confidential to any third party without the written permission of the other party. However, if one party discloses in accordance with the stipulations in relevant laws and regulations and the requirements of the competent authority or the listed exchange, or reasonably discloses to auditor, financial consultant, legal consultant or other intermediary institution of this party (this party shall require the aforesaid institutions and personage to bear confidentiality obligation), it is not deemed as breach of the confidentiality obligation.

8.5 The effect of this contract is independent from any guarantee document, specific business contract and any contract/ agreement / commitment and is not affected by the validity and enforceability of the aforesaid documents. When any article or content of this contract is revoked according to law or affirmed as invalid, the effect of other articles and contents are not affected and still valid. When one party breaches the contract, the other party’s nonperformance of the corresponding remedy right shall not be deemed as waiver of right or permission of default.

8.6 This contract is entered into by the credit grantee and Bank of Beijing on the conclusion date of the contract and comes into effect after it signed by the legal representative / principal / authorized representative of both parties and with the unit seal affixed (or the special seal for contract recognized by the document with the official seal affixed). The original of this contract is in triplicate (the originals in the corresponding number shall be signed if notarization is needed or guarantee registration and other procedures need to be handled) with Bank of Beijing holding two copies and the credit grantee holding one copy. Each original has the equal effect. If there is a guarantor, the credit grantee shall be responsible for providing the guarantee with the duplicate of this contract; however, if the credit grantee fails to provide, the creditor’s right and guarantee right of Bank of Beijing will not be adversely influenced.

(No text below)

Exhibit 10.2(a)

C12989 Bank of Beijing

Contract No.: [0528366_003]

Maximum Warranty Contract

(Applicable to a Unit Customer’s Provision of Maximum Warranty Guarantee)

Warrantor:    Icon Energy System (Shenzhen) Company Limited

Creditor:    Bank of Beijing Co., Ltd. Shenzhen Branch

Date of Concluding the Contract:   January 22, 2019

Table of Conditions of Maximum Warranty Contract

Warrantor: Icon Energy System (Shenzhen) Company Limited

Business license number/ uniform social credit code:**

Legal representative/ person in charge: PAN Dangyu

Correspondence address: **

Contact: Hu xianglin

Creditor (hereinafter referred to as “Bank of Beijing”): Bank of Beijing Co., Ltd. Shenzhen Branch

Legal representative/ person in charge: QU Ruiguang

Correspondence address: First Floor, Bank of Beijing Plaza, China Resources MixC T5, No. 9668, Shennan Avenue, Nanshan District, Shenzhen City

The warrantor and Bank of Beijing (hereinafter collectively referred to as “both parties”) hereby conclude this contract through equality, voluntariness and consensus in the domicile of Bank of Beijing on the date of concluding this contract recorded in the cover page of this contract on the basis of the Guarantee Law of the People’s Republic of China and other laws and regulations in accordance with the following contract conditions and the Basic Terms and Conditions of Maximum Warranty Contract for mutual compliance.

A. Principal debtor:

Springpower Technology (Shenzhen) Company Limited

B. Guaranteed master contract:

B.1 The guaranteed master contract is the Comprehensive Credit Contract (including this contract and its valid revision and supplementation) with the number of 0528366 as entered into by and between Bank of Beijing (and other branch institutions in the system of Bank of Beijing which obtain the status of creditor according to the agreements hereof, as credit grantor) and the principal debtor, and all specific business contracts concluded under this creditor contract.

B.2 The guaranteed creditor’s rights (scope of guarantee) hereunder is all creditor’s rights of Bank of Beijing (and other branch institutions in the system of Bank of Beijing which obtain the status of creditor according to the agreements hereof) under the master contract, including the principal creditor’s right capital (the maximum limit is (currency) RMB (amount in words) fifty million Yuan only) and interests, penalty interests, liquidated damages, damage compensation, expenses for realizing the creditor’s rights and guarantee rights and interests and other funds.

B.3 The period of occurrence of the guaranteed principal creditor’s right (creditor’s right determination period) is the period under the credit contract as stated in paragraph B.1 hereof when the specific business may occur, namely, Jan. 22, 2019 to Jan. 21, 2020 (the details are subject to the master contract).

B.4 The debt fulfillment period under the master contract is from the date of concluding the master contract (or the date on which the specific business under the master contract occurs; the earlier shall prevail) to the due date of the abovementioned credit contract and the specific business contract, subject to the master contract.

K. Key financial indicator commitment of warrantor: