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|UNITED STATES                                                          
|-----------------------------------------------------------------------
|SECURITIES AND EXCHANGE
      COMMISSION                               
|Washington, D.C. 20549                                                 
|                                                                       
|FORM
      10-Q                                                        
|(Mark One)                                                             
|                                                                       
|[X ]                                                                   
|                                                                       
|For the quarterly period ended: June 30,
      2011                    
|                                                                       
|[    ]                                                                 
|                                                                       
|For the transition period from
      ______________to _________________

Commission File Number: 001-32898

CHINA BAK BATTERY, INC.(Exact name of registrant as specified in its charter)

|Nevada                                        | 88-0442833                          
|--------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation | (I.R.S. Employer Identification No.)
|or organization)                              |                                     

BAK Industrial ParkNo. 1 BAK
StreetKuichong Town, Longgang DistrictShenzhen 518119Peoples Republic of China(Address of principal executive
offices, Zip Code) (86-755) 8977-0093(Registrants telephone number, including area code)

_____________________________________________________(Former
name, former address and former fiscal year, if changed since last report)

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 and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted 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 and post such files).

Yes [   ]  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 the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

|Large accelerated filer   [   ]                                                    |  | Accelerated filer   [ X ]              
|---------------------------------------------------------------------------------- |  | ---------------------------------------
|Non-accelerated filer   [  
      ]  (Do not check if a smaller reporting company) |  | Smaller reporting company 
       [   ]

Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).

Yes [   ]   No [ X ]

The number of shares outstanding of each of the issuers
classes of common stock, as of August 8, 2011 is as follows:

|Class of Securities            | Shares Outstanding
|------------------------------ | ------------------
|Common Stock, $0.001 par value | 63,816,276        

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CHINA BAK
BATTERY, INC.

|TABLE OF CONTENTS      
|-----------------------
|                       
|PART I                 
|FINANCIAL INFORMATION  
|ITEM 1.                
|ITEM 2.                
|ITEM 3.                
|ITEM 4.                
|PART II                
|OTHER
      INFORMATION
|ITEM 1.                
|ITEM 1A.               
|ITEM 2.                
|ITEM 3.                
|ITEM 4.                
|ITEM 5.                
|ITEM 6.                

F-1

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|PART I FINANCIAL
      INFORMATION                                                                                                                              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------
|ITEM 1.                                                                                                                                                         
|CHINA BAK BATTERY, INC. AND
      SUBSIDIARIES CONDENSED INTERIM CONSOLIDATED FINANCIAL
      STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30,
      2011
|                                                                                                                                                                
|Contents                                                                                                                                                        
|Condensed Interim
      Consolidated Balance Sheets as of September 30, 2010 and June 30, 2011
      (unaudited)                                                
|Condensed Interim Consolidated Statements of
      Operations and Comprehensive Loss for the three months ended June 30, 2010
      and 2011 (unaudited)        
|Condensed Interim Consolidated
      Statements of Operations and Comprehensive Loss for the nine months ended
      June 30, 2010 and 2011 (unaudited)         
|Condensed Interim Consolidated Statements of
      Shareholders Equity for the nine months ended June 30, 2010 and 2011
      (unaudited)                      
|Condensed Interim Consolidated
      Statements of Cash Flows for the three months ended June 30, 2010 and 2011
      (unaudited)                               
|Condensed Interim Consolidated Statements of Cash
      Flows for the nine months ended June 30, 2010 and 2011 (unaudited)                                      
|Notes to the Condensed
    Interim
      Consolidated Financial Statements (unaudited)                                                                          

F-1

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|PART I                                              | 
|--------------------------------------------------- | 
|FINANCIAL
      INFORMATION                         | 
|Item 1. Financial Statements.                       | 
|China BAK Battery, Inc. and
      subsidiaries      | 
|Condensed interim consolidated balance
      sheets | 
|As of September 30, 2010 and June 30,
      2011    | 
|(In US$)                                            | 
|                                                    | 
|                                                    | 
|                                                    | 
|Assets                                              | 
|Current assets                                      | 
|Cash and cash equivalents                           | 
|Pledged deposits                                    | 
|Trade accounts receivable, net                      | 
|Inventories                                         | 
|Prepayments and other receivables                   | 
|Deferred tax assets                                 | 
|Total
      current assets                          | 
|Property, plant and equipment, net                  | 
|Lease prepayments, net                              | 
|Intangible assets, net                              | 
|Deferred tax assets                                 | 
|Total
      assets                                  | 

See accompanying notes to the condensed interim consolidated
financial statements.

F-2

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|China BAK Battery, Inc. and
      subsidiaries                                    | 
|--------------------------------------------------------------------------------- | 
|Condensed interim consolidated balance
      sheets                               | 
|As of September 30, 2010 and June 30, 2011
      (continued)                      | 
|(In US$)                                                                          | 
|                                                                                  | 
|                                                                                  | 
|                                                                                  | 
|                                                                                  | 
|Liabilities                                                                       | 
|Current liabilities                                                               | 
|Short-term bank loans                                                             | 
|Current maturities of long-term bank loans                                        | 
|Accounts and bills payable                                                        | 
|Accrued expenses and other payables                                               | 
|Total
      current liabilities                                                   | 
|Long-term bank loans, less current maturities                                     | 
|Deferred revenue                                                                  | 
|Other long-term payables                                                          | 
|Deferred tax liabilities                                                          | 
|Total liabilities                                                                 | 
|Commitments and contingencies                                                     | 
|Shareholders equity                                                              | 
|Common stock US$ 0.001 par value;                                                 | 
|100,000,000 authorized;
      63,612,526 and 63,616,276 issued and outstanding as | 
|of
      September 30, 2010 and June 30, 2011 respectively                        | 
|Donated shares                                                                    | 
|Additional paid-in capital                                                        | 
|Statutory reserves                                                                | 
|Accumulated deficit                                                               | 
|Accumulated other comprehensive income                                            | 
|                                                                                  | 
|Less: Treasury shares                                                             | 
|Total
      shareholders equity                                                  | 
|Total liabilities and shareholders equity                                        | 

See accompanying notes to the condensed interim consolidated
financial statements.

F-3

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China BAK Battery, Inc. and subsidiariesCondensed
interim consolidated statements of operations and comprehensive loss For the
three months ended June 30, 2010 and 2011(Unaudited) (In US$)

|                                                         |   | Three months ended June
      30, |  
|-------------------------------------------------------- | - | --------------------------------- | -
|                                                         |   | 2010                              |  
|Net revenues                                             | $ | 58,557,246                        |  
|Cost of revenues                                         |   | (59,764,391                       | )
|Gross (loss) / profit                                    |   | (1,207,145                        | )
|Operating expenses:                                      |   |                                   |  
|Research
      and development expenses                  |   | (2,129,607                        | )
|Sales and marketing
      expenses                       |   | (2,586,950                        | )
|General
      and administrative expenses                |   | (7,429,001                        | )
|Impairment charge                                        |   | (5,057,745                        | )
|Total
      operating expenses                           |   | (17,203,303                       | )
|Operating loss                                           |   | (18,410,448                       | )
|Finance costs, net                                       |   | (2,022,042                        | )
|Government grant income                                  |   | 58,673                            |  
|Other income                                             |   | 107,243                           |  
|Loss before income taxes                                 |   | (20,266,574                       | )
|Income tax benefits                                      |   | 2,003,609                         |  
|Net loss                                                 | $ | (18,262,965                       | )
|Other comprehensive income                               |   |                                   |  
|- Foreign currency
      translation adjustment          |   | 1,297,751                         |  
|Comprehensive loss                                       | $ | (16,965,214                       | )
|Net loss per share:                                      |   |                                   |  
|- Basic                                                  | $ | (0.29                             | )
|- Diluted                                                | $ | (0.29                             | )
|Weighted average number of shares of
      common stock: |   |                                   |  
|- Basic                                                  |   | 62,887,664                        |  
|- Diluted                                                |   | 62,887,664                        |  

See accompanying notes to the condensed interim consolidated
financial statements.

F-4

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China BAK Battery, Inc. and subsidiariesCondensed
interim consolidated statements of operations and comprehensive loss For the
nine months ended June 30, 2010 and 2011(Unaudited) (In US$)

|                                                         |   | Nine months ended June
      30, |  
|-------------------------------------------------------- | - | -------------------------------- | -
|                                                         |   | 2010                             |  
|Net revenues                                             | $ | 159,208,513                      |  
|Cost of revenues                                         |   | (141,853,023                     | )
|Gross profit                                             |   | 17,355,490                       |  
|Operating expenses:                                      |   |                                  |  
|Research
      and development expenses                  |   | (5,523,092                       | )
|Sales and marketing
      expenses                       |   | (6,320,569                       | )
|General
      and administrative expenses                |   | (20,884,801                      | )
|Impairment charge                                        |   | (5,057,745                       | )
|Total
      operating expenses                           |   | (37,786,207                      | )
|Operating loss                                           |   | (20,430,717                      | )
|Finance costs, net                                       |   | (6,365,775                       | )
|Government grant income                                  |   | 492,947                          |  
|Other (expense) / income                                 |   | (31,065                          | )
|Loss before income taxes                                 |   | (26,334,610                      | )
|Income tax benefits                                      |   | 2,129,507                        |  
|Net loss                                                 | $ | (24,205,103                      | )
|Other comprehensive income                               |   |                                  |  
|- Foreign currency
      translation adjustment          |   | 1,026,145                        |  
|Comprehensive loss                                       | $ | (23,178,958                      | )
|Net loss per share:                                      |   |                                  |  
|- Basic                                                  | $ | (0.39                            | )
|- Diluted                                                | $ | (0.39                            | )
|Weighted average number of shares of
      common stock: |   |                                  |  
|- Basic                                                  |   | 62,285,862                       |  
|- Diluted                                                |   | 62,285,862                       |  

See accompanying notes to the condensed interim consolidated
financial statements.

F-5

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|China BAK Battery,
      Inc. and subsidiaries Condensed interim consolidated statements
      of shareholders equity For the nine months ended June 30, 2010
      and 2011 (Unaudited)
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                         
|                                                                                                                                                                                         
|                                                                                                                                                                                         
|                                                                                                                                                                                         
|                                                                                                                                                                                         
|Balance as of
      October 1, 2009                                                                                                                                                      
|Net loss                                                                                                                                                                                 
|Share-based
      compensation for employee stock awards                                                                                                                                 
|Exercise of stock options
      awards                                                                                                                                                   
|Issuance of
      common stock to non- employee directors                                                                                                                                
|Issuance of new common stock                                                                                                                                                             
|Appropriation
      to statutory reserves                                                                                                                                                
|Foreign currency translation
      adjustment                                                                                                                                            
|Balance as of
      June 30, 2010                                                                                                                                                        
|Balance as of October 1, 2010                                                                                                                                                            
|Net loss                                                                                                                                                                                 
|Share-based compensation for
      employee stock awards                                                                                                                                 
|Issuance of
      common stock to non- employee directors                                                                                                                                
|Appropriation to statutory
      reserves                                                                                                                                                
|Foreign
      currency translation adjustment                                                                                                                                            
|Balance as of June 30, 2011                                                                                                                                                              

See accompanying notes to the condensed interim consolidated
financial statements.

F-6

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|China BAK Battery, Inc. and
      subsidiaries                                        |  
|------------------------------------------------------------------------------------- | -
|Condensed interim consolidated statements of
      cash flows                         |  
|For the three months ended June 30, 2010 and
      2011                               |  
|(Unaudited)                                                                           |  
|(In US$)                                                                              |  
|                                                                                      |  
|                                                                                      |  
|Cash flow from operating
      activities                                             |  
|Net loss                                                                              | $
|Adjustments to reconcile net loss to
      net cash provided by operating activities: |  
|Depreciation and
      amortization                                                   |  
|Provision
      for doubtful debts                                                    |  
|Provision for obsolete
      inventories                                              |  
|Impairment charge                                                                     |  
|Gain on disposal of
      property, plant and equipment                               |  
|Share-based compensation                                                              |  
|Deferred income taxes                                                                 |  
|Deferred
      revenue                                                                |  
|Exchange loss                                                                         |  
|Changes in operating assets and
      liabilities:                                    |  
|Trade accounts receivable                                                             |  
|Inventories                                                                           |  
|Prepayments and other
      receivables                                               |  
|Accounts
      and bills payable                                                      |  
|Accrued expenses and
      other payables                                             |  
|Net cash provided by operating
      activities                                       |  
|Cash flow from investing activities                                                   |  
|Purchases of property, plant and
      equipment                                      |  
|Purchases of intangible assets                                                        |  
|Proceeds from disposal of property,
      plant and equipment                         |  
|Net cash used in investing activities                                                 | $

See accompanying notes to the condensed interim consolidated
financial statements.

F-7

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China BAK Battery, Inc. and subsidiaries Condensed
interim consolidated statements of cash flows For the three months ended
June 30, 2010 and 2011(continued)(Unaudited) (In US$)

|                                                                   |   | Three months ended June
      30, |  
|------------------------------------------------------------------ | - | --------------------------------- | -
|                                                                   |   | 2010                              |  
|Cash flow from financing
      activities                          |   |                                   |  
|Proceeds from borrowings                                           | $ | 48,020,212                        |  
|Repayment of borrowings                                            |   | (67,250,509                       | )
|Decrease / (increase) in pledged deposits                          |   | 8,793,960                         |  
|Net cash (used in) / provided by
      financing activities        |   | (10,436,337                       | )
|Effect of exchange rate changes on cash and cash
      equivalents |   | 2,521                             |  
|Net decrease in cash and cash
      equivalents                    |   | (14,769,385                       | )
|Cash and cash equivalents at the beginning of
      period         |   | 39,644,408                        |  
|Cash and cash equivalents at the
      end of period               | $ | 24,875,023                        |  
|Supplemental disclosure of cash flow
      information:            |   |                                   |  
|Cash received during the period for:                               |   |                                   |  
|Bills receivable
      discounted to banks                         | $ | 15,947,373                        |  
|Cash paid during the period for:                                   |   |                                   |  
|Income taxes                                                       | $ | 621,442                           |  
|Interest,
      net of amounts capitalized                         | $ | 2,960,974                         |  

See accompanying notes to the condensed interim consolidated
financial statements.

F-8

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|China BAK Battery, Inc. and
      subsidiaries                                        |  
|------------------------------------------------------------------------------------- | -
|Condensed interim consolidated statements of
      cash flows                         |  
|For the nine months ended June 30, 2010 and
      2011                                |  
|(Unaudited)                                                                           |  
|(In US$)                                                                              |  
|                                                                                      |  
|                                                                                      |  
|Cash flow from operating
      activities                                             |  
|Net loss                                                                              | $
|Adjustments to reconcile net loss to
      net cash (used in) / provided by operating |  
|activities:                                                                           |  
|Depreciation and amortization                                                         |  
|Provision for doubtful
      debts                                                    |  
|Provision
      for /  (recovery of provision for) obsolete inventories               |  
|Impairment charge                                                                     |  
|Gain on
      disposal of property, plant and equipment                               |  
|Share-based compensation                                                              |  
|Deferred
      income taxes                                                           |  
|Deferred revenue                                                                      |  
|Exchange
      gain                                                                   |  
|Changes in operating assets and liabilities:                                          |  
|Trade
      accounts receivable                                                       |  
|Inventories                                                                           |  
|Prepayments and other receivables                                                     |  
|Accounts and bills
      payable                                                      |  
|Accrued
      expenses and other payables                                             |  
|Net cash (used in) / provided by operating
      activities                           |  
|Cash flow from investing
      activities                                             |  
|Purchases of property, plant and equipment                                            |  
|Purchases of intangible assets                                                        |  
|Proceeds from disposal of property, plant and
      equipment                         |  
|Net cash used in investing
      activities                                           | $
|                                                                                      |  

See accompanying notes to the condensed interim consolidated
financial statements.

F-9

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China BAK Battery, Inc. and subsidiaries Condensed
interim consolidated statements of cash flows For the nine months ended June
30, 2010 and 2011(continued)(Unaudited) (In US$)

|                                                                   |   | Nine months ended June 30, |  
|------------------------------------------------------------------ | - | -------------------------- | -
|                                                                   |   | 2010                       |  
|Cash flow from financing
      activities                          |   |                            |  
|Proceeds from borrowings                                           | $ | 189,852,315                |  
|Repayment of borrowings                                            |   | (205,519,128               | )
|Decrease in pledged deposits                                       |   | 21,882,643                 |  
|Proceeds from issuance of capital
      stock, net                 |   | 19,616,080                 |  
|Net cash provided by / (used in) financing
      activities        |   | 25,831,910                 |  
|Effect of exchange rate changes on cash
      and cash equivalents |   | (698,405                   | )
|Net decrease in cash and cash equivalents                          |   | (5,803,329                 | )
|Cash and cash equivalents at the
      beginning of period         |   | 30,678,352                 |  
|Cash and cash equivalents at the end of
      period               | $ | 24,875,023                 |  
|Supplemental disclosure of cash
      flow information:            |   |                            |  
|Cash received during the period for:                               |   |                            |  
|Bills
      receivable discounted to banks                         | $ | 16,533,342                 |  
|Cash paid during the period for:                                   |   |                            |  
|Income
      taxes                                                 | $ | 843,781                    |  
|Interest, net of amounts
      capitalized                         | $ | 6,603,127                  |  

See accompanying notes to the condensed interim consolidated
financial statements.

F-10

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China BAK Battery, Inc. and subsidiariesNotes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|1 | Principal Activities, Basis of Presentation and Organization
|- | ------------------------------------------------------------

Principal Activities

China BAK Battery, Inc. (China BAK) is a corporation formed
in the State of Nevada on October 4, 1999 as Medina Copy, Inc. The Company
changed its name to Medina Coffee, Inc. on October 6, 1999 and subsequently
changed its name to China BAK Battery, Inc. on February 14, 2005. China BAK and
its subsidiaries (hereinafter, collectively referred to as the Company) are
principally engaged in the manufacture, commercialization and distribution of a
wide variety of standard and customized lithium ion (known as "Li-ion" or
"Li-ion cell") rechargeable batteries for use in cellular telephones, as well as
various other portable electronic applications, including high-power handset
telephones, laptop computers, power tools, digital cameras, video camcorders,
MP3 players, electric bicycles, hybrid/electric motors, and general industrial
applications.

The shares of the Company traded in the over-the-counter market
through the Over-the-Counter Bulletin Board from 2005 until May 31, 2006, when
the Company obtained approval to list its common stock on The NASDAQ Global
Market, and trading commenced that same date under the symbol "CBAK".

Basis of Presentation and Organization

As of June 30, 2011, the Companys subsidiaries consisted of:
i) BAK International Limited (BAK International), a wholly owned limited
liability company incorporated in Hong Kong on December 29, 2003 as BATCO
International Limited, which changed its name to BAK International Limited on
November 3, 2004; ii) Shenzhen BAK Battery Co., Ltd. (Shenzhen BAK), a wholly
owned limited liability company established on August 3, 2001 in the Peoples
Republic of China (PRC); iii) BAK Electronics (Shenzhen) Co., Ltd. (BAK
Electronics), a wholly owned limited liability company established on August
15, 2005 in the PRC; iv) BAK International (Tianjin) Ltd. (BAK Tianjin), a
wholly owned limited liability company established on December 12, 2006 in the
PRC; v) BAK Battery Canada Ltd. (BAK Canada), a wholly owned limited liability
company established on December 20, 2006 in Canada as BAK Canada Battery Ltd.,
which changed its name to BAK Battery Canada Ltd. on December 22, 2006; vi) BAK
Europe GmbH (BAK Europe), a wholly owned limited liability company established
in Germany on November 28, 2007; vii) BAK Telecom India Private Limited (BAK
India), a wholly owned limited liability company established in India on August
14, 2008; and viii) Tianjin Meicai New Materials Technology Co., Ltd. (Tianjin
Meicai), a wholly owned limited liability company established on February 22,
2011 in the PRC. BAK International beneficially owns 100% of BAK India partly
through a nominee agreement with one of its employees.

F-11

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China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|1 | Principal Activities, Basis of Presentation and Organization (continued)
|- | ------------------------------------------------------------------------

Basis of Presentation and Organization (continued)

BAK Tianjin was established in Tianjin Technology Industrial District on December 12, 2006 as a wholly owned subsidiary of BAK International with registered capital of US$99,990,000. Pursuant to BAK Tianjins articles of association and
relevant PRC regulations, BAK International was required to contribute US$20,000,000 to BAK Tianjin as capital (representing 20% of BAK Tianjins registered capital) before March 11, 2007. An extension from the Business Administration
Bureau of Beichen District, Tianjin, was obtained to make this contribution no later than December 11, 2007. On November 16, 2007, BAK International contributed approximately US$20,000,000 capital to BAK Tianjin. The remaining US$79,990,000
was originally required to be fully contributed no later than December 11, 2008 and an extension from the Business Administration Bureau of Beichen District, Tianjin, was obtained to make this contribution no later than December 11, 2009. On
November 16, 2009, BAK International contributed approximately US$9,000,000 capital to BAK Tianjin and as of November 16, 2009, the total contribution from BAK International was US$29,000,000. The remaining US$70,990,000 was originally
required to be fully contributed no later than December 11, 2009 and an extension from the Business Administration Bureau of Beichen District, Tianjin, was obtained to make this contribution no later than December 2012. BAK Tianjin is principally
engaged in the manufacture of larger lithium ion batteries for use in cordless power tools and various types of vehicles.

On November 6, 2004, BAK International, a non-operating holding company that had substantially the same shareholders as Shenzhen BAK, entered into a share swap transaction with the shareholders of Shenzhen BAK for the purpose of the subsequent
reverse acquisition of the Company as described below. Pursuant to the terms of the share swap transaction, BAK International acquired all of the outstanding shares of Shenzhen BAK for US$11.5 million in cash, while the shareholders of Shenzhen
BAK acquired substantially all of the outstanding shares of BAK International for US$11.5 million in cash. As a result, Shenzhen BAK became a wholly-owned subsidiary of BAK International. After the share swap transaction was completed, there
were 31,225,642 shares of BAK International stock outstanding, exactly the same as the number of shares of capital stock of Shenzhen BAK that had been outstanding immediately prior to the share swap, and the shareholders of BAK International were
substantially the same as the shareholders of Shenzhen BAK prior to the share swap. Consequently, the share swap transaction between BAK International and the shareholders of Shenzhen BAK was accounted for as a reverse acquisition of Shenzhen BAK
with no adjustment to the historical basis of the assets and liabilities of Shenzhen BAK.

On January 20, 2005, the Company completed a share swap transaction with the shareholders of BAK International. The share swap transaction, also referred to as the reverse acquisition of the Company, was consummated under Nevada law
pursuant to the terms of a Securities Exchange Agreement entered by and among China BAK, BAK International and the shareholders of BAK International on January 20, 2005. Pursuant to the Securities Exchange Agreement, the Company issued 39,826,075
shares of common stock, par value US$0.001 per share, to the shareholders of BAK International (including 31,225,642 shares to the original shareholders and 8,600,433 shares to new investors who had purchased shares in the private placement
described below), representing approximately 97.2% of the Companys post-exchange issued and outstanding common stock, in exchange for 100% of the outstanding capital stock of BAK International.

F-12

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|1 | Principal Activities, Basis of Presentation and Organization (continued)
|- | ------------------------------------------------------------------------

Basis of Presentation and Organization (continued)

The share swap transaction has been accounted for as a capital-raising transaction of the Company whereby the historical financial statements and operations of Shenzhen BAK are consolidated using historical carrying amounts. The 1,152,458 shares of
China BAK outstanding prior to the stock exchange transaction were accounted for at the net book value at the time of the transaction, which was a deficit of US$1,672.

Also on January 20, 2005, immediately prior to consummating the share swap transaction, BAK International executed a private placement of its common stock with unrelated investors whereby it issued an aggregate of 8,600,433 shares of common stock
for gross proceeds of US$17,000,000. In conjunction with this financing, Mr. Xiangqian Li, the Chairman and Chief Executive Officer of the Company, agreed to place 2,179,550 shares of the Company's common stock owned by him into an escrow
account pursuant to an Escrow Agreement dated January 20, 2005 (the Escrow Agreement). Pursuant to the Escrow Agreement, 50% of the escrowed shares were to be released to the investors in the private placement if audited net income of
the Company for the fiscal year ended September 30, 2005 was not at least US$12,000,000, and the remaining 50% were to be released to investors in the private placement if audited net income of the Company for the fiscal year ended September 30,
2006 was not at least US$27,000,000. If the audited net income of the Company for the fiscal years ended September 30, 2005 and 2006 reached the above-mentioned targets, the 2,179,550 shares would be released to Mr. Xiangqian Li in the amount of
50% upon reaching the 2005 target and the remaining 50% upon reaching the 2006 target.

Under accounting principles generally accepted in the United States of America (US GAAP), escrow agreements such as the one established by Mr. Xiangqian Li generally constitute compensation if, following attainment of a performance
threshold, shares are returned to a company officer. The Company determined that without consideration of the compensation charge, the performance thresholds for the year ended September 30, 2005 would be achieved. However, after consideration of a
related compensation charge, the Company determined that such thresholds would not have been achieved. The Company also determined that, even without consideration of a compensation charge, the performance thresholds for the year ended September 30,
2006 would not be achieved. No compensation charge was recorded by the Company for the years ended September 30, 2005 and 2006.

While the 1,089,775 escrow shares relating to the 2005 performance threshold were previously released to Mr. Xiangqian Li, Mr. Xiangqian Li executed a further undertaking on August 21, 2006 to return those shares to the escrow agent for the
distribution to the relevant investors. However, such shares were not returned to the escrow agent, but, pursuant to a Delivery of Make Good Shares, Settlement and Release Agreement between the Company, BAK International and Mr. Li entered into on
October 22, 2007 (the Li Settlement Agreement), such shares were ultimately delivered to the Company as described below. Because the Company failed to satisfy the performance threshold for the fiscal year ended September 30, 2006, the
remaining 1,089,775 escrow shares relating to the fiscal year 2006 performance threshold were released to the relevant investors. As Mr. Li has not retained any of the shares placed into escrow, and as the investors party to the Escrow Agreement are
only shareholders of the Company and do not have and are not expected to have any other relationship to the Company, the Company has not recorded a compensation charge for the years ended September 30, 2005 and 2006.

F-13

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|1 | Principal Activities, Basis of Presentation and Organization (continued)
|- | ------------------------------------------------------------------------

Basis of Presentation and Organization (continued)

At the time the escrow shares relating to the 2006 performance threshold were
transferred to the investors in fiscal year 2007, the Company should have
recognized a credit to donated shares and a debit to additional paid-in capital,
both of which are elements of shareholders equity. This entry is not material
because total ordinary shares issued and outstanding, total shareholders equity
and total assets do not change; nor is there any impact on income or earnings
per share. Therefore, previously filed consolidated financial statements for the
fiscal year ended September 30, 2007 will not be restated. This share transfer
has been reflected in these financial statements by reclassifying the balances
of certain items as of October 1, 2007. The balances of donated shares and
additional paid-in capital as of October 1, 2007 were credited and debited by
US$7,955,358 respectively.

In November 2007, Mr. Xiangqian Li delivered the 1,089,775 shares related to the 2005 performance threshold to BAK International pursuant to the Li Settlement Agreement; BAK International in turn delivered the shares to the Company. Such shares
(other than those issued to investors pursuant to the 2008 Settlement Agreements, as described below) are now held by the Company. Upon receipt of these shares, the Company and BAK International released all claims and causes of action against Mr.
Xiangqian Li regarding the shares, and Mr. Xiangqian Li released all claims and causes of action against the Company and BAK International regarding the shares. Under the terms of the Li Settlement Agreement, the Company commenced negotiations with
the investors who participated in the Companys January 2005 private placement in order to achieve a complete settlement of BAK Internationals obligations (and the Companys obligations to the extent it has any) under the applicable
agreements with such investors.

Beginning on March 13, 2008, the Company has entered into settlement agreements (the 2008 Settlement Agreements) with certain investors in the January 2005 private placement.

Pursuant to the 2008 Settlement Agreements, the Company and the settling investors have agreed, without any admission of liability, to a settlement and mutual release from all claims relating to the January 2005 private placement, including all
claims relating to the escrow shares related to the 2005 performance threshold that had been placed into escrow by Mr. Xiangqian Li, as well as all claims, including claims for liquidated damages relating to registration rights granted in connection
with the January 2005 private placement. Under the 2008 Settlement Agreement, the Company has made settlement payments to each of the settling investors of the number of shares of the Companys common stock equivalent to 50% of the number of
the escrow shares related to the 2005 performance threshold these investors had claimed; aggregate settlement payments as of June 30, 2011 amounted to 368,745 shares. Share payments to date have been made in reliance upon the exemptions from
registration provided by Section 4(2) and/or other applicable provisions of the Securities Act of 1933, as amended. In accordance with the 2008 Settlement Agreements, the Company filed a registration statement covering the resale of such shares
which was declared effective by the SEC on June 26, 2008.

The Companys condensed interim consolidated financial statements have been prepared in accordance with US GAAP.

F-14

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|1 | Principal Activities, Basis of Presentation and Organization (continued)
|- | ------------------------------------------------------------------------

Basis of Presentation and Organization (continued)

The interim results of operations are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2011. The Companys consolidated balance sheet as of September 30, 2010 has been taken from the
Companys audited consolidated balance sheet as of that date. All other financial statements contained herein are unaudited and, in the opinion of management, contain all adjustments (consisting only of normal recurring accruals) necessary for
a fair presentation of financial position, results of operations and cash flows for the periods presented. The Companys accounting policies and certain other disclosure are set forth in the notes to the consolidated financial statements
contained in the Companys Annual Report on Form 10-K for the year ended September 30, 2010. These financial statements should be read in conjunction with the Companys audited consolidated financial statements and notes thereto.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. This basis of accounting differs in certain material respects from that used for the
preparation of the books of account of the Companys principal subsidiaries, which are prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises with limited liabilities established
in the PRC, Hong Kong, India, Canada or Germany, the accounting standards used in the places of their domicile. The accompanying condensed interim consolidated financial statements reflect necessary adjustments not recorded in the books of account
of the Company's subsidiaries to present them in conformity with US GAAP.

The Company has a working capital deficiency and accumulated deficit from net losses incurred for each of the three years in the fiscal year ended September 30, 2010 and for the nine months ended June 30, 2011. These factors may raise doubts about
the Company's ability to continue as a going concern. The interim consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company accordingly has developed
a strategic plan to generate a positive cash flow from operating activities for the fiscal year ending September 30, 2011 (the FY2011 Turnaround Plan). Under the FY2011 Turnaround Plan, the Company will implement cost reductions on both
manufacturing costs and operating expenses to improve profit margins as well as reduce receivable turnover days through stronger credit controls.

F-15

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|1 | Principal Activities, Basis of Presentation and Organization (continued)
|- | ------------------------------------------------------------------------

Basis of Presentation and Organization (continued)

Recently Issued Accounting Standards

In July 2010, the FASB issued ASU 2010-20 Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The objective of ASU 2010-20 is to provide financial statement users
with greater transparency about an entitys allowance for credit losses and the credit quality of its financing receivables. Under ASU 2010-20, an entity is required to provide disclosures so that financial statement users can evaluate the
nature of the credit risk inherent in the entitys portfolio of financing receivables, how that risk is analyzed and assessed to arrive at the allowance for credit losses, and the changes and reasons for those changes in the allowance for
credit losses. ASU 2010-20 is applicable to all entities, both public and non-public and is effective for interim and annual reporting periods ending on or after December 15, 2010. Comparative disclosure for earlier reporting periods that ended
before initial adoption is encouraged but not required. However, comparative disclosures are required to be disclosed for those reporting periods ending after initial adoption.

The FASB issued Accounting Standards Update (ASU) No. 2011-01, Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20.  The amendments in this ASU temporarily delay
the effective date of the disclosure about troubled debt restructurings in ASU 2010-20 for public entities. The delay is intended to allow the Board time to complete its deliberations on what constitutes a troubled debt restructuring. The effective
date of the new disclosures about troubled debt restructuring for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. Currently, that guidance is anticipated to be effective for
interim and annual periods ending after June 15, 2011. The adoption of this ASU
is not expected to have a material impact on the Companys financial statements.

The FASB issued ASU 2011-02, Receivables (Topic 310): A Creditors Determination of Whether a Restructuring is a Troubled Debt Restructuring. The amendments to Topic 310 clarify the guidance on a creditors evaluation of
whether a debtor is experiencing financial difficulties. This ASU is anticipated
to be effective for interim and annual periods beginning on or after June 15,
2011. A creditor should evaluate whether it is probable that the debtor would be in payment default on any of its debts in foreseeable future without the modification. In addition, the amendments to
Topic 310 clarify that a creditor is precluded from using the effective interest rate test in the debtors guidance on restructuring of payables (paragraph 470-60-55-10) when evaluating whether a restructuring constitutes a troubled debt
restructuring. An entity should disclose the total amount of receivables and the allowance for credit losses as of the end of the period of adoption related to those receivables that are newly considered impaired under Section 310-10-35 for which
impairment was previously measured under Subtopic 450-20, Contingencies  Loss Contingencies. The management is assessing the impact of this ASU on the Companys financial statements.

F-16

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|1 | Principal Activities, Basis of Presentation and Organization (continued)
|- | ------------------------------------------------------------------------

In April 2011, the FASB issued ASU 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements.  The amendments in this ASU remove from the assessment of effective control (1) the
criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related
to that criterion. The guidance in this ASU is effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that
occur on or after the effective date. Early adoption is not permitted. The management is assessing the impact of this ASU on the Companys financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The FASB and the International Accounting Standard
Board (IASB) works together to ensure that fair value has the same meaning in U.S. GAAP and International Financial Reporting Standards (IFRSs) and that their respective fair value measurement and disclosure requirements are the same
(except for minor differences in wording and style). The Boards concluded that the amendments in this ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP
and IFRSs. The amendments in this ASU explain how to measure fair value. They do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting. The
amendments in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011.  Early application by public entities is not permitted. The management is
assessing the impact of this ASU on the Companys financial statements.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income.  In this ASU, the entity has the option to present the total of comprehensive income, the components of net income, and
the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with
total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This Update eliminates the option to present the components of other comprehensive income
as part of the statement of changes in stockholders' equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.
The amendments in this ASU update are to be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early application by public entities
is permitted. The management is assessing the impact of this ASU on the Companys financial statements.

F-17

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|2 | Pledged Deposits
|- | ----------------

Pledged deposits as of September 30, 2010 and June 30, 2011
consisted of the following:

|                                     |   | September 30, |  |   | June 30,  | 
|------------------------------------ | - | ------------- |  | - | --------- | 
|                                     |   | 2010          |  |   | 2011      | 
|Pledged deposits with banks for:     |   |               |  |   |           | 
|Construction payable                 | $ | 463,410       |  | $ | 4,210,395 | 
|Short-term bank
      loans (Note 7) |   | 658,508       |  |   | -         | 
|Bills
      payable                  |   | 8,303,920     |  |   | 2,367,328 | 
|                                     | $ | 9,425,838     |  | $ | 6,577,723 | 

Deposits pledged for construction payable are generally
released when the relevant construction projects are completed.

|3 | Trade Accounts Receivable, net
|- | ------------------------------

Trade accounts receivable as of September 30, 2010 and June 30,
2011 consisted of the following:

|                                      |   | September 30, |   |   | June 30,    |  
|------------------------------------- | - | ------------- | - | - | ----------- | -
|                                      |   | 2010          |   |   | 2011        |  
|Trade accounts receivable             | $ | 98,625,901    |   | $ | 91,987,398  |  
|Less: Allowance for doubtful accounts |   | (23,354,925   | ) |   | (27,750,893 | )
|                                      |   | 75,270,976    |   |   | 64,236,505  |  
|Bills receivable                      |   | 10,927,263    |   |   | 6,914,807   |  
|                                      | $ | 86,198,239    |   | $ | 71,151,312  |  

F-18

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|3 | Trade Accounts Receivable, net (continued)
|- | ------------------------------------------

An analysis of the allowance for doubtful accounts for the nine
months ended June 30, 2010 and 2011 is as follows:

|                                  |   | Nine months ended June 30, | 
|--------------------------------- | - | -------------------------- | 
|                                  |   | 2010                       | 
|Balance at beginning of period    | $ | 13,081,331                 | 
|Addition of bad debt expense, net |   | 8,563,300                  | 
|Foreign exchange adjustment       |   | 146,755                    | 
|Balance at end of period          | $ | 21,791,386                 | 

|  |            
|- | -----------
|4 | Inventories

Inventories as of September 30, 2010 and June 30, 2011
consisted of the following:

|                                   |   | September 30, |   |   | June 30,   |  
|---------------------------------- | - | ------------- | - | - | ---------- | -
|                                   |   | 2010          |   |   | 2011       |  
|Raw materials                      | $ | 18,357,473    |   | $ | 23,479,568 |  
|Work-in-progress                   |   | 6,771,843     |   |   | 14,305,571 |  
|Finished goods                     |   | 47,458,604    |   |   | 49,783,064 |  
|                                   |   | 72,587,920    |   |   | 87,568,203 |  
|Provision for obsolete inventories |   | (8,539,554    | ) |   | (8,589,346 | )
|                                   | $ | 64,048,366    |   | $ | 78,978,857 |  

Part of the Companys inventories with carrying value of
US$22,417,504 and US$23,207,600 as of September 30, 2010 and June 30, 2011,
respectively, was pledged as collateral under certain loan agreements (see Note
7).

F-19

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|5 | Prepayments and Other Receivables
|- | ---------------------------------

Prepayments and other receivables as of September 30, 2010 and
June 30, 2011 consisted of the following:

|                                               |   | September 30, |   |   | June 30,  |  
|---------------------------------------------- | - | ------------- | - | - | --------- | -
|                                               |   | 2010          |   |   | 2011      |  
|Prepayments for raw materials and
      others | $ | 2,198,770     |   | $ | 1,220,528 |  
|Other receivables                              |   | 3,952,530     |   |   | 4,732,006 |  
|Less: Allowance for doubtful
      accounts    |   | (638,079      | ) |   | (674,691  | )
|                                               | $ | 5,513,221     |   | $ | 5,277,843 |  

|  |                                   
|- | ----------------------------------
|6 | Property, Plant and Equipment, net

Property, plant and equipment as of September 30, 2010 and June
30, 2011 consisted of the following:

|                                                                  |   | September 30, |   |   | June 30,    |  
|----------------------------------------------------------------- | - | ------------- | - | - | ----------- | -
|                                                                  |   | 2010          |   |   | 2011        |  
|Buildings                                                         | $ | 121,050,663   |   | $ | 126,348,185 |  
|Machinery and equipment                                           |   | 135,127,265   |   |   | 145,878,969 |  
|Office equipment                                                  |   | 2,207,168     |   |   | 2,489,881   |  
|Motor vehicles                                                    |   | 1,416,369     |   |   | 1,442,101   |  
|                                                                  |   | 259,801,465   |   |   | 276,159,136 |  
|Accumulated depreciation                                          |   | (61,340,759   | ) |   | (75,551,978 | )
|Construction in progress                                          |   | 33,791,211    |   |   | 52,293,602  |  
|Prepayment for acquisition of property, plant and
      equipment |   | 2,550,733     |   |   | 1,332,082   |  
|Assets held for abandonment                                       |   | 1,043,835     |   |   | 1,077,343   |  
|Net book value                                                    |   | 235,846,485   |   |   | 255,310,185 |  
|Impairment charge                                                 |   | (6,961,909    | ) |   | (7,426,978  | )
|Carried amount                                                    | $ | 228,884,576   |   | $ | 247,883,207 |  

Property, plant and equipment with net book value of US$148,910
were sold during the three months ended June 30, 2011 for US$624,777, resulting
in a gain of US$469,860.

F-20

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|6     | Property, Plant and Equipment, net
    (continued)                                                                                                                                               
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                  
|*(i)* | Depreciation expense for the nine months ended June
      30, 2010 and 2011 is included in the condensed interim consolidated
      statements of operations and comprehensive loss as
  follows:

|                                    |   | Nine months ended June 30, | 
|----------------------------------- | - | -------------------------- | 
|                                    |   | 2010                       | 
|Cost of revenues                    | $ | 9,302,306                  | 
|Research and development expenses   |   | 485,684                    | 
|Sales and marketing expenses        |   | 444,561                    | 
|General and administrative expenses |   | 1,898,721                  | 
|                                    | $ | 12,131,272                 | 

|     |                         
|---- | ------------------------
|(ii) | Construction in Progress

Construction in progress mainly comprises capital expenditures
for construction of the Companys new corporate campus, including offices and
factories.

For the nine months ended June 30, 2010 and 2011, the Company
capitalized interest of US$745,342 and US$242,508 respectively to the cost of
construction in progress.

|(iii) | Pledged Property, Plant and Equipment
|----- | -------------------------------------

As of September 30, 2010 and June 30, 2011, machinery and
equipment with net book value of US$59,735,854 and US$57,704,693 of the Company
were pledged as collateral under certain loan arrangements (see Notes 7 and 8).

|(iv) | Assets held for abandonment
|---- | ---------------------------

Assets held for abandonment as of September 30, 2010 and June
30, 2011 consisted of the following:

|                        |   | September 30, |   |  | June 30,  |  
|----------------------- | - | ------------- | - |  | --------- | -
|                        |   | 2010          |   |  | 2011      |  
|Net book value          | $ | 1,043,835     |   |  | 1,077,343 |  
|Less: impairment charge |   | (819,874      | ) |  | (857,645  | )
|Carried amount          | $ | 223,961       |   |  | 219,698   |  

The carried amount as of June 30, 2011 composed of the
machinery and equipment relating to steel-case cell production line and certain
used assets which have been written down to their salvage value of $219,698.

F-21

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|7 | Short-term Bank Loans
|- | ---------------------

The Company obtained several short-term loan facilities from
financial institutions in the PRC. These facilities were secured by the
Companys assets with the following carrying values:

|                                            |   | September 30, |  |   | June 30,   | 
|------------------------------------------- | - | ------------- |  | - | ---------- | 
|                                            |   | 2010          |  |   | 2010       | 
|Pledged deposits (Note 2)                   | $ | 658,508       |  | $ | -          | 
|Inventories (Note 4)                        |   | 22,417,504    |  |   | 23,207,600 | 
|Machinery and equipment, net (Note
      6) |   | 31,788,414    |  |   | 26,045,793 | 
|                                            | $ | 54,864,426    |  | $ | 49,253,393 | 

As of September 30, 2010 and June 30, 2011, the Company had
several short-term bank loans with aggregate outstanding balances of
US$137,418,187 and US$138,097,318, respectively. The loans were primarily
obtained for general working capital, carried interest rates ranging from 4.56%
to 6.94% per annum, and had maturity dates ranging from 3 to 12 months. Each
loan is guaranteed by Mr. Xiangqian Li, who did not receive any compensation for
acting as guarantor.

As of June 30, 2011, the Company had pledged the land use
rights certificate in relation to the land on which Shenzhen BAKs
corporate campus had been constructed for short-term bank loans amounting to
US$61,886,933 borrowed from Shenzhen Eastern Branch, Agricultural Bank of China.
As of June 30, 2011, the aggregate net book value of the buildings and land use
rights in relation to the land use rights certificate was US$132,626,166.

|8 | Long-term Bank Loans
|- | --------------------

As of September 30, 2010 and June 30, 2011, the Company had
long-term bank loans of US$41,846,006 and US$37,999,474, respectively. As of
June 30, 2011, US$14,791,874 was borrowed under a four-year long-term loan
credit facility from China Development Bank, bearing interest at the benchmark
rate of the Peoples Bank of China (PBOC) for three-year to five-year
long-term loans, which is currently 5.94% per annum. This long-term bank loan is
repayable on February 28, 2016.

Two other long-term loans totaled an aggregate borrowed amount
of US$7,735,866 as of June 30, 2011. These loans were borrowed under a five-year
long-term loan credit facility from Shenzhen Eastern Branch, Agricultural Bank
of China, and carry interest at 90% of the benchmark rate of the PBOC for
three-year to five-year long-term loans. The first loan of US$6,188,694
currently carries interest at 5.184% per annum and is repayable on January 25,
2012. The second loan of US$1,547,172 currently carries annual interest of
5.184% and is repayable on January 25, 2012.

Another loan of US$15,471,734 as of June 30, 2011 was borrowed
under a four-year long-term loan credit facility from Tianjin Branch,
Agricultural Bank of China and carries interest at the benchmark rate of the
PBOC for three-year to five-year long-term loans, which is currently 5.76% per
annum.

F-22

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|8 | Long-term Bank Loans (continued)
|- | --------------------------------

This loan is repayable in two installments of US$7,735,867 on
December 26, 2011 and US$7,735,867 on May 26, 2012.

The long-term bank loan with China Development Bank is: (i)
guaranteed by Mr. Xiangqian Li; (ii) secured by certain shares of the Company
owned by Mr. Xiangqian Li; and (iii) to be secured by the property ownership and
land use rights certificate relating to the land on which the Companys Research
and Development Test Centre is to be constructed and the facilities to be
constructed thereon. On April 7, 2010, the pledge of the land use rights
certificate to China Development Bank was approved by the relevant government
bureau. On April 20, 2010, the relevant land use rights certificate was pledged
to China Development Bank.

The long-term bank loan with Shenzhen Eastern Branch,
Agricultural Bank of China is: (i) guaranteed by Mr. Xiangqian Li; (ii) secured
by the Companys machinery and equipment with carrying values of US$29,750,958
as of June 30, 2011 (see Note 6); and (iii) secured by the property ownership
certificate and land use rights certificate in relation to the land on which
Shenzhen BAKs corporate campus had been constructed and any machinery and
equipment purchased and used in the campus subsequent to such construction.

The long-term bank loan with Tianjin Branch, Agricultural Bank
of China is secured by the machinery and equipment purchased for the automated
high-power lithium battery cells production line in Tianjin with carrying values
of US$1,907,942 as of June 30, 2011.

Mr. Xiangqian Li did not receive any compensation for pledging
his shares in the Company or acting as guarantor for the above long-term bank
loans.

The aggregate maturities of long-term bank loans as of June 30,
2011 are as follows:

|Fiscal years ending on June 30, |   |            | 
|------------------------------- | - | ---------- | 
|2012                            | $ | 23,207,600 | 
|2014 or after                   |   | 14,791,874 | 
|                                | $ | 37,999,474 | 

|  |                         
|- | ------------------------
|9 | Other Long-term payables

Other long-term payables as of June 30, 2011 include a
government subsidy of approximately US$7,500,000 received for the Companys
automated high-power lithium battery project from the National Development and
Reform Commission and the Ministry of Industry and Information Technology.

|10 | Share-based Compensation
|-- | ------------------------

(i)Options

The Company grants share options to officers and employees and
restricted shares of common stock to its non-employee directors as rewards for
their services.

F-23

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|10 | Share-based Compensation (continued)
|-- | ------------------------------------

Stock Option Plan

In May 2005, the Board of Directors adopted the China BAK
Battery, Inc. 2005 Stock Option Plan (the Plan). The Plan originally
authorized the issuance of up to 4,000,000 shares of the Companys common stock,
pursuant to stock options granted under the Plan, or as grants of restricted
stock. The exercise price of options granted pursuant to the Plan must be at
least equal to the fair market value of the Companys common stock at the date
of the grant. Fair market value is determined at the discretion of the
designated committee on the basis of reported sales prices for the Companys
common stock over a ten business day period ending on the grant date. The Plan
will terminate on May 16, 2055. On July 28, 2008, the Companys stockholders
approved certain amendments to the Plan, including an amendment increasing the
total number of shares available for issuance under the Plan to 8,000,000.

Pursuant to the Plan, the Company granted options to purchase
2,000,000 shares of common stock with an exercise price of US$6.25 per share on
May 16, 2005. In accordance with the vesting provisions of the grants, the
options became vested and exercisable under the following schedule:

|                       |  |  | Percentage of  |  |  | Initial         | 
|---------------------- |  |  | -------------- |  |  | --------------- | 
|Number of
      Shares |  |  | Options Issued |  |  | Vesting Date    | 
|800,000                |  |  | 40%            |  |  | July 1, 2007    | 
|600,000                |  |  | 30%            |  |  | January 1, 2008 | 
|600,000                |  |  | 30%            |  |  | July 1, 2008    | 
|2,000,000              |  |  | 100%           |  |  |                 | 

Subsequent to the grant date, options to purchase 200,000
shares of common stock were forfeited because the optionees terminated their
employment with the Company. In addition, on September 28, 2006, options to
purchase a total of 1,400,000 shares of common stock were cancelled pursuant to
the Termination and Release Agreements signed on that day.

F-24

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|10 | Share-based Compensation (continued)
|-- | ------------------------------------

A summary of share option plan activity for these options
during the nine months ended June 30, 2011 is presented below:

|                                  |  |           |  |   |                |  |  | Weighted    |  |   |           | 
|--------------------------------- |  | --------- |  | - | -------------- |  |  | ----------- |  | - | --------- | 
|                                  |  |           |  |   | Weighted       |  |  | average     |  |   |           | 
|                                  |  |           |  |   | average        |  |  | remaining   |  |   | Aggregate | 
|                                  |  | Number of |  |   | exercise price |  |  | contractual |  |   | intrinsic | 
|                                  |  | shares    |  |   | per share      |  |  | term        |  |   | value (1) | 
|Outstanding as of October 1, 2010 |  | 200,000   |  | $ | 6.25           |  |  |             |  |   |           | 
|Exercised                         |  | -         |  |   | -              |  |  |             |  |   |           | 
|Forfeited                         |  | -         |  |   | -              |  |  |             |  |   |           | 
|Cancelled                         |  | -         |  |   | -              |  |  |             |  |   |           | 
|Outstanding as of June 30, 2011   |  | 200,000   |  | $ | 6.25           |  |  | -           |  | $ | -         | 
|Exercisable as of June 30, 2011   |  | 200,000   |  | $ | 6.25           |  |  | -           |  | $ | -         | 

(1) Aggregate intrinsic value represents the value of the
Companys closing stock price on June 30, 2011 (US$1.01) in excess of the
exercise price multiplied by the number of options outstanding or exercisable.

The weighted-average grant-date fair value of options granted
during 2005 was US$3.67 per share. No non-cash share-based compensation expense
was recognized in respect of these share options for the nine months ended June
30, 2010 and 2011.

The fair value of the above option awards was estimated on the
date of grant using the Black-Scholes Option Valuation Model together with the
following assumptions:

|Expected volatility     |  | 59.85%  | 
|----------------------- |  | ------- | 
|Expected dividends      |  | Nil     | 
|Expected life           |  | 6 years | 
|Risk-free interest rate |  | 4.13%   | 

As of June 30, 2011, there were no unrecognized compensation
costs related to non-vested share options.

Pursuant to the Plan, the Company also granted options to
purchase 1,501,500 shares of the Companys common stock with a weighted-average
exercise price of US$3.28 per share on June 25, 2007. In accordance with the
vesting provisions of the grants, the options will become vested and exercisable
during the period from December 31, 2007 to February 9, 2012 according to each
employees respective agreement.

F-25

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|10 | Share-based Compensation (continued)
|-- | ------------------------------------

A summary of share option plan activity for these options
during the nine months ended June 30, 2011 is presented below:

|                                  |  |           |  |   |                 |  |  | Weighted    |  |   |           | 
|--------------------------------- |  | --------- |  | - | --------------- |  |  | ----------- |  | - | --------- | 
|                                  |  |           |  |   | Weighted        |  |  | average     |  |   |           | 
|                                  |  |           |  |   | average         |  |  | remaining   |  |   | Aggregate | 
|                                  |  | Number of |  |   | exercise        |  |  | contractual |  |   | intrinsic | 
|                                  |  | shares    |  |   | price per share |  |  | term        |  |   | value (1) | 
|Outstanding as of October 1, 2010 |  | 923,500   |  | $ | 3.29            |  |  |             |  |   |           | 
|Exercised                         |  | -         |  |   | -               |  |  |             |  |   |           | 
|Forfeited                         |  | -         |  |   | -               |  |  |             |  |   |           | 
|Cancelled                         |  | -         |  |   | -               |  |  |             |  |   |           | 
|Outstanding as of June 30, 2011   |  | 923,500   |  | $ | 3.29            |  |  | 2.1 years   |  | $ | -         | 
|Exercisable as of June 30, 2011   |  | 665,500   |  | $ | 3.18            |  |  | 1.6 years   |  | $ | -         | 

(1) Aggregate intrinsic value represents the value of the
Companys closing stock price on June 30, 2011 (US$1.01) in excess of the
exercise price multiplied by the number of options outstanding or exercisable.

The weighted-average grant-date fair value of options granted
during 2007 was US$2.15 per share. The Company recorded non-cash share-based
compensation expense of US$172,115 and US$49,224 for the nine months ended June
30, 2010 and 2011 respectively, in respect of share options granted on June 25,
2007, which was allocated to cost of revenues, sales and marketing expenses,
general and administrative expenses and research and development expenses
respectively.

The fair value of the above option awards granted on June 25,
2007 was estimated on the date of grant using the Black-Scholes Option Valuation
Model that uses the following assumptions:

|Expected volatility     |  | 69.44%       | 
|----------------------- |  | ------------ | 
|Expected dividends      |  | Nil          | 
|Expected life           |  | 4 - 10 years | 
|Risk-free interest rate |  | 5.09%        | 

As of June 30, 2011, there were unrecognized compensation costs
of US$24,604 related to the above non-vested share options. These costs are
expected to be recognized over a weighted average period of 0.1 year.

Pursuant to the Plan, the Company also granted options to
purchase 360,000 shares of common stock with an exercise price of US$4.30 per
share on January 28, 2008. In accordance with the vesting provisions of the
grants, the options will become vested and exercisable during the period from
April 28, 2008 to January 28, 2011 according to each employees respective
agreement.

F-26

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|10 | Share-based Compensation (continued)
|-- | ------------------------------------

A summary of share option plan activity for these options
during the nine months ended June 30, 2011 is presented below:

|                                  |  | Number of shares |  |   | Weighted average exercise price per share |  |  | Weighted average remaining contractual term |  |   | Aggregate intrinsic value (1) | 
|--------------------------------- |  | ---------------- |  | - | ----------------------------------------- |  |  | ------------------------------------------- |  | - | ----------------------------- | 
|Outstanding as of October 1, 2010 |  | 360,000          |  | $ | 4.30                                      |  |  |                                             |  |   |                               | 
|Exercised                         |  | -                |  |   | -                                         |  |  |                                             |  |   |                               | 
|Forfeited                         |  | -                |  |   | -                                         |  |  |                                             |  |   |                               | 
|Cancelled                         |  | -                |  |   | -                                         |  |  |                                             |  |   |                               | 
|Outstanding as of June 30, 2011   |  | 360,000          |  | $ | 4.30                                      |  |  | 1.6 years                                   |  | $ | -                             | 
|Exercisable as of June 30, 2011   |  | 360,000          |  | $ | 4.30                                      |  |  | 1.6 years                                   |  | $ | -                             | 

(1) Aggregate intrinsic value represents the value of the
Companys closing stock price on June 30, 2011 (US$1.01) in excess of the
exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted
on January 28, 2008 was US$3.59 per share. The Company recorded non-cash
share-based compensation expense of US$138,451 and US$14,812 for the nine months
ended June 30, 2010 and 2011, respectively, in respect of share options granted
on January 28, 2008, which was allocated to general and administrative expenses
and research and development expenses respectively.

The fair value of the above option awards granted on January
28, 2008 was estimated on the date of grant using the Black-Scholes Option
Valuation Model that uses the following assumptions.

|Expected volatility     |  | 120.23% | 
|----------------------- |  | ------- | 
|Expected dividends      |  | Nil     | 
|Expected life           |  | 5 years | 
|Risk-free interest rate |  | 3.59%   | 

As of June 30, 2011, there were no unrecognized compensation
costs related to non-vested share options.

On May 29, 2008, the Compensation Committee of the Companys
Board of Directors recommended and approved the grant of options to purchase
1,080,000 shares of the Companys common stock to Mr. Xiangqian Li and options
to purchase 170,000 shares to five other employees, with an exercise price of
US$4.18 per share. In accordance with the vesting provisions of the grants, the
options will become vested and exercisable during the period from September 30,
2008 to May 29, 2012 according to each employees respective agreement.

F-27

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|10 | Share-based Compensation (continued)
|-- | ------------------------------------

A summary of share option plan activity for these options
during the nine months ended June 30, 2011 is presented below:

|                                  |  |           |  |   |                |  |  | Weighted    |  |   |           | 
|--------------------------------- |  | --------- |  | - | -------------- |  |  | ----------- |  | - | --------- | 
|                                  |  |           |  |   | Weighted       |  |  | average     |  |   |           | 
|                                  |  |           |  |   | average        |  |  | remaining   |  |   | Aggregate | 
|                                  |  | Number of |  |   | exercise price |  |  | contractual |  |   | intrinsic | 
|                                  |  | shares    |  |   | per share      |  |  | term        |  |   | value (1) | 
|Outstanding as of October 1, 2010 |  | 1,250,000 |  | $ | 4.18           |  |  |             |  |   |           | 
|Exercised                         |  | -         |  |   | -              |  |  |             |  |   |           | 
|Forfeited                         |  | -         |  |   | -              |  |  |             |  |   |           | 
|Cancelled                         |  | -         |  |   | -              |  |  |             |  |   |           | 
|Outstanding as of June 30, 2011   |  | 1,250,000 |  | $ | 4.18           |  |  | 1.9 years   |  | $ | -         | 
|                                  |  |           |  |   |                |  |  | 0.75        |  |   |           | 
|Exercisable as of June 30, 2011   |  | 980,000   |  | $ | 4.18           |  |  | years       |  | $ | -         | 

(1) Aggregate intrinsic value represents the value of the
Companys closing stock price on June 30, 2011 (US$1.01) in excess of the
exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted
on May 29, 2008 was US$2.36 per share. The Company recorded non-cash share-based
compensation expense of US$479,598 and US$149,858 for the nine months ended June
30, 2010 and 2011 respectively, in respect of share options granted on May 29,
2008, which was allocated to general and administrative expenses and research
and development expenses respectively.

The fair value of the above option awards granted on May 29,
2008 was estimated on the date of grant using the Black-Scholes Option Valuation
Model that uses the following assumptions.

|Expected volatility     |  | 59.48%  | 
|----------------------- |  | ------- | 
|Expected dividends      |  | Nil     | 
|Expected life           |  | 5 years | 
|Risk-free interest rate |  | 4.01%   | 

As of June 30, 2011, there were unrecognized compensation costs
of US$22,832 related to the above non-vested share options. These costs are
expected to be recognized over a weighted average period of 0.1 years.

F-28

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|10 | Share-based Compensation (continued)
|-- | ------------------------------------

On June 22, 2009, the Compensation Committee of the Companys
Board of Directors recommended and approved the grant of options to purchase
1,928,200 shares of the Companys common stock to certain key employees,
officers and consultants with an exercise price of US$2.81 per share. In
accordance with the vesting provisions of the grants, the options will become
vested and exercisable over five years in twenty equal quarterly installments on
the first day of each fiscal quarter beginning on October 1, 2009.

A summary of share option plan activity for these options
during the nine months ended June 30, 2011 is presented below:

|                                  |  |           |  |   |           |  |  |             |  |   |           | 
|--------------------------------- |  | --------- |  | - | --------- |  |  | ----------- |  | - | --------- | 
|                                  |  |           |  |   | Weighted  |  |  | Weighted    |  |   |           | 
|                                  |  |           |  |   | average   |  |  | average     |  |   |           | 
|                                  |  |           |  |   | exercise  |  |  | remaining   |  |   | Aggregate | 
|                                  |  | Number of |  |   | price     |  |  | contractual |  |   | intrinsic | 
|                                  |  | shares    |  |   | per share |  |  | term        |  |   | value (1) | 
|Outstanding as of October 1, 2010 |  | 1,694,355 |  | $ | 2.81      |  |  |             |  |   |           | 
|Exercised                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Forfeited                         |  | 51,000    |  |   | 2.81      |  |  |             |  |   |           | 
|Cancelled                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Outstanding as of June 30, 2011   |  | 1,643,355 |  | $ | 2.81      |  |  | 4.9 years   |  | $ | -         | 
|Exercisable as of June 30, 2011   |  | 504,960   |  | $ | 2.81      |  |  | 4.9 years   |  | $ | -         | 

(1) Aggregate intrinsic value represents the value of the
Companys closing stock price on June 30, 2011 (US$1.01) in excess of the
exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted
on June 22, 2009 was US$2.46 per share. The Company recorded non-cash
share-based compensation expense of US$1,003,633 and of US$725,259 for the nine
months ended June 30, 2010 and 2011, respectively, in respect of share options
granted on June 22, 2009, which was allocated to general and administrative
expenses and research and development expenses respectively.

The fair value of the above option awards granted on June 22,
2009 was estimated on the date of grant using the Black-Scholes Option Valuation
Model that uses the following assumptions.

|Expected volatility     |  | 111.03% | 
|----------------------- |  | ------- | 
|Expected dividends      |  | Nil     | 
|Expected life           |  | 7 years | 
|Risk-free interest rate |  | 3.69%   | 

As of June 30, 2011, there were unrecognized compensation costs
of US$1,023,171 related to the above non-vested share options. These costs are
expected to be recognized over a weighted average period of 1.6 years.

F-29

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|10 | Share-based Compensation (continued)
|-- | ------------------------------------

On June 26, 2009, the Compensation Committee of the Companys
Board of Directors recommended and approved the grant of options to purchase
75,000 shares of the Companys common stock to certain key management with an
exercise price of US$3.24 per share. In accordance with the vesting provisions
of the grants, the options will become vested and exercisable over five years in
twenty equal quarterly installments on the first day of each fiscal quarter
beginning on October 1, 2009.

A summary of share option plan activity for these options
during the nine months ended June 30, 2011 is presented below:

|                                  |  |           |  |   |           |  |  |             |  |   |           | 
|--------------------------------- |  | --------- |  | - | --------- |  |  | ----------- |  | - | --------- | 
|                                  |  |           |  |   | Weighted  |  |  | Weighted    |  |   |           | 
|                                  |  |           |  |   | average   |  |  | average     |  |   |           | 
|                                  |  |           |  |   | exercise  |  |  | remaining   |  |   | Aggregate | 
|                                  |  | Number of |  |   | price     |  |  | contractual |  |   | intrinsic | 
|                                  |  | shares    |  |   | per share |  |  | term        |  |   | value (1) | 
|Outstanding as of October 1, 2010 |  | 75,000    |  | $ | 3.24      |  |  |             |  |   |           | 
|Exercised                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Forfeited                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Cancelled                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Outstanding as of June 30, 2011   |  | 75,000    |  | $ | 3.24      |  |  | 4.9 years   |  | $ | -         | 
|Exercisable as of June 30, 2011   |  | 18,750    |  | $ | 3.24      |  |  | 4.9 years   |  | $ | -         | 

(1) Aggregate intrinsic value represents the value of the
Companys closing stock price on June 30, 2011 (US$1.01) in excess of the
exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted
on June 26, 2009 was US$2.86 per share. The Company recorded non-cash
share-based compensation expense of US$67,320 and US$35,777 for the nine months
ended June 30, 2010 and 2011, respectively, in respect of share options granted
on June 26, 2009, which was allocated to research and development expenses.

The fair value of the above option awards granted on June 26,
2009 was estimated on the date of grant using the Black-Scholes Option Valuation
Model that uses the following assumptions.

|Expected volatility     |  | 113.58% | 
|----------------------- |  | ------- | 
|Expected dividends      |  | Nil     | 
|Expected life           |  | 7 years | 
|Risk-free interest rate |  | 3.51%   | 

As of June 30, 2011, there were unrecognized compensation costs
of US$56,271 related to the above non-vested share options. These costs are
expected to be recognized over a weighted average period of 1.4 years.

F-30

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|10 | Share-based Compensation (continued)
|-- | ------------------------------------

On March 11, 2010, the Compensation Committee of the Companys
Board of Directors recommended and approved the grant of options to purchase
50,000 shares of the Companys common stock to certain key management with an
exercise price of US$2.58 per share. In accordance with the vesting provisions
of the grants, the options will become vested and exercisable over two years in
two equal installments beginning on each anniversary of the grant day on March
11, 2010.

A summary of share option plan activity for these options
during the nine months ended June 30, 2011 is presented below:

|                                  |  |           |  |   |           |  |  |             |  |   |           | 
|--------------------------------- |  | --------- |  | - | --------- |  |  | ----------- |  | - | --------- | 
|                                  |  |           |  |   | Weighted  |  |  | Weighted    |  |   |           | 
|                                  |  |           |  |   | average   |  |  | average     |  |   |           | 
|                                  |  |           |  |   | exercise  |  |  | remaining   |  |   | Aggregate | 
|                                  |  | Number of |  |   | price     |  |  | contractual |  |   | intrinsic | 
|                                  |  | shares    |  |   | per share |  |  | term        |  |   | value (1) | 
|Outstanding as of October 1, 2010 |  | 50,000    |  | $ | 2.58      |  |  |             |  |   |           | 
|Exercised                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Forfeited                         |  | 50,000    |  |   | 2.58      |  |  |             |  |   |           | 
|Cancelled                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Outstanding as of June 30, 2011   |  | -         |  | $ | -         |  |  | -           |  | $ | -         | 
|Exercisable as of June 30, 2011   |  | -         |  | $ | -         |  |  | -           |  | $ | -         | 

(1) Aggregate intrinsic value represents the value of the
Companys closing stock price on June 30, 2011 (US$1.01) in excess of the
exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted
on March 11, 2010 was US$1.51 per share. The Company recorded non-cash
share-based compensation expense of US$17,202 for the nine months ended June 30,
2010 in respect of share options granted on March 11, 2010 and no non-cash
share-based compensation expense was recognized in respect of these share
options for the nine months ended June 30, 2011.

The fair value of the above option awards granted on March 11,
2010 was estimated on the date of grant using the Black-Scholes Option Valuation
Model that uses the following assumptions.

|Expected volatility     |  | 76.32%  | 
|----------------------- |  | ------- | 
|Expected dividends      |  | Nil     | 
|Expected life           |  | 4 years | 
|Risk-free interest rate |  | 3.72%   | 

As of June 30, 2011, there were no unrecognized compensation
costs related to non-vested share options.

F-31

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|10 | Share-based Compensation (continued)
|-- | ------------------------------------

On April 8, 2010, the Compensation Committee of the Companys
Board of Directors recommended and approved the grant of options to purchase
100,000 shares of the Companys common stock to certain key management with an
exercise price of US$2.43 per share. In accordance with the vesting provisions
of the grants, the options will become vested and exercisable in eight equal
installments beginning on each quarter after September 30, 2010.

A summary of share option plan activity for these options
during the nine months ended June 30, 2011 is presented below:

|                                  |  |           |  |   |           |  |  |             |  |   |           | 
|--------------------------------- |  | --------- |  | - | --------- |  |  | ----------- |  | - | --------- | 
|                                  |  |           |  |   | Weighted  |  |  | Weighted    |  |   |           | 
|                                  |  |           |  |   | average   |  |  | average     |  |   |           | 
|                                  |  |           |  |   | exercise  |  |  | remaining   |  |   | Aggregate | 
|                                  |  | Number of |  |   | price     |  |  | contractual |  |   | intrinsic | 
|                                  |  | shares    |  |   | per share |  |  | term        |  |   | value (1) | 
|Outstanding as of October 1, 2010 |  | 100,000   |  | $ | 2.43      |  |  |             |  |   |           | 
|Exercised                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Forfeited                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Cancelled                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Outstanding as of June 30, 2011   |  | 100,000   |  | $ | 2.43      |  |  | 6.2 years   |  | $ | -         | 
|Exercisable as of June 30, 2011   |  | 25,000    |  | $ | 2.43      |  |  | 6.2 years   |  | $ | -         | 

(1) Aggregate intrinsic value represents the value of the
Companys closing stock price on June 30, 2011 (US$1.01) in excess of the
exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted
on April 8, 2010 was US$1.41 per share. The Company recorded non-cash
share-based compensation expense of US$23,273 and US$37,326 for the nine months
ended June 30, 2010 and 2011 in respect of share options granted on April 8,
2010 which was allocated to research and development expense.

The fair value of the above option awards granted on April 8,
2010 was estimated on the date of grant using the Black-Scholes Option Valuation
Model that uses the following assumptions.

|Expected volatility     |  | 51.79%    | 
|----------------------- |  | --------- | 
|Expected dividends      |  | Nil       | 
|Expected life           |  | 7.5 years | 
|Risk-free interest rate |  | 3.90%     | 

As of June 30, 2011, there were unrecognized compensation costs
of US$54,664 related to the above non-vested share options. These costs are
expected to be recognized over a weighted average period of 1.9 years.

F-32

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|10 | Share-based Compensation (continued)
|-- | ------------------------------------

On July 23, 2010, the Compensation Committee of the Companys
Board of Directors recommended and approved the grant of options to purchase
80,000 shares of the Companys common stock to certain key management with an
exercise price of US$1.58 per share. In accordance with the vesting provisions
of the grants, the options will become vested and exercisable in eight equal
installments beginning on each quarter after September 30, 2010.

A summary of share option plan activity for these options
during the nine months ended June 30, 2011 is presented below:

|                                  |  |           |  |   |           |  |  |             |  |   |           | 
|--------------------------------- |  | --------- |  | - | --------- |  |  | ----------- |  | - | --------- | 
|                                  |  |           |  |   | Weighted  |  |  | Weighted    |  |   |           | 
|                                  |  |           |  |   | average   |  |  | average     |  |   |           | 
|                                  |  |           |  |   | exercise  |  |  | remaining   |  |   | Aggregate | 
|                                  |  | Number of |  |   | price     |  |  | contractual |  |   | intrinsic | 
|                                  |  | shares    |  |   | per share |  |  | term        |  |   | value (1) | 
|Outstanding as of October 1, 2010 |  | 80,000    |  | $ | 1.58      |  |  |             |  |   |           | 
|Exercised                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Forfeited                         |  | 80,000    |  |   | 1.58      |  |  |             |  |   |           | 
|Cancelled                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Outstanding as of June 30, 2011   |  | -         |  | $ | -         |  |  | -           |  | $ | -         | 
|Exercisable as of June 30, 2011   |  | -         |  | $ | -         |  |  | -           |  | $ | -         | 

(1) Aggregate intrinsic value represents the value of the
Companys closing stock price on June 30, 2011 (US$1.01) in excess of the
exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted
on July 23, 2010 was US$1.58 per share. No non-cash share-based compensation
expense was recognized in respect of these share options for the nine months
ended June 30, 2011, in respect of share options granted on July 23, 2010.

The fair value of the above option awards granted on July 23,
2010 was estimated on the date of grant using the Black-Scholes Option Valuation
Model that uses the following assumptions.

|Expected volatility     |  | 58.50%    | 
|----------------------- |  | --------- | 
|Expected dividends      |  | Nil       | 
|Expected life           |  | 5.0 years | 
|Risk-free interest rate |  | 2.99%     | 

As of June 30, 2011, there were no unrecognized compensation
costs related to non-vested share options.

F-33

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|10 | Share-based Compensation (continued)
|-- | ------------------------------------

On May 26, 2011, the Compensation Committee of the Companys
Board of Directors recommended and approved the grant of options to purchase
160,800 shares of the Companys common stock to certain key management with an
exercise price of US$1.28 per share. In accordance with the vesting provisions
of the grants, the options will become vested and exercisable in twelve equal
installments beginning on each quarter after September 30, 2011.

A summary of share option plan activity for these options
during the nine months ended June 30, 2011 is presented below:

|                                  |  |           |  |   |           |  |  |             |  |   |           | 
|--------------------------------- |  | --------- |  | - | --------- |  |  | ----------- |  | - | --------- | 
|                                  |  |           |  |   | Weighted  |  |  | Weighted    |  |   |           | 
|                                  |  |           |  |   | average   |  |  | average     |  |   |           | 
|                                  |  |           |  |   | exercise  |  |  | remaining   |  |   | Aggregate | 
|                                  |  | Number of |  |   | price     |  |  | contractual |  |   | intrinsic | 
|                                  |  | shares    |  |   | per share |  |  | term        |  |   | value (1) | 
|Outstanding as of October 1, 2010 |  | 160,800   |  | $ | 1.28      |  |  |             |  |   |           | 
|Exercised                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Forfeited                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Cancelled                         |  | -         |  |   | -         |  |  |             |  |   |           | 
|Outstanding as of June 30, 2011   |  | 160,800   |  | $ | 1.28      |  |  | 5.9 years   |  | $ | -         | 
|Exercisable as of June 30, 2011   |  | -         |  | $ | -         |  |  | -           |  | $ | -         | 

(1) Aggregate intrinsic value represents the value of the
Companys closing stock price on June 30, 2011 (US$1.01) in excess of the
exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted
on May 26, 2011 was US$0.65 per share. The Company recorded non-cash share-based
compensation expense of US$8,832 for the nine months ended June 30, 2011 in
respect of share options granted on May 26, 2011, which was allocated to general
and administrative expenses.

The fair value of the above option awards granted on May 26,
2011 was estimated on the date of grant using the Black-Scholes Option Valuation
Model that uses the following assumptions.

|Expected volatility     |  | 50.90%    | 
|----------------------- |  | --------- | 
|Expected dividends      |  | Nil       | 
|Expected life           |  | 6.0 years | 
|Risk-free interest rate |  | 3.06%     | 

As of June 30, 2011, there were unrecognized compensation costs
of US$96,480 related to the above non-vested share options. These costs are
expected to be recognized over a weighted average period of 3.0 years.

F-34

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|10 | Share-based Compensation (continued)
|-- | ------------------------------------
|   |                                     
|   | (ii) Restricted Shares              

Pursuant to the Plan and in accordance with the China BAK Battery, Inc. Compensation Plan for Non-Employee Directors, the Company granted 5,000 restricted shares to each of the existing elected independent directors with a fair value of US$1.68
per share on July 1, 2010. The eligible directors shall vest in their rights under the restricted shares according to the following schedule:

| | (i)  | 25% of the restricted shares granted will immediately vest on the grant date; and                                                                                                                                                                                                                         
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                           
| | (ii) | The remaining 75% of the restricted shares will vest in three equal quarterly installments on the last day of each subsequent quarter or in three equal quarterly installments on the last day of each calendar quarter beginning on
the last day of the first full calendar quarter after the grant date.

The Company recorded non-cash share-based compensation expense of US$6,854 for the nine months ended June 30, 2011, in respect of the restricted shares granted in July 1, 2010, which was allocated to general and administrative expenses.

The first and second 25% of the restricted shares were already issued as fully paid shares of common stock to the Companys three independent directors on August 4, 2010 and October 6, 2010. According to the resolution of Compensation Committee
on December 28, 2010, the third and forth 25% of the restricted shares were cancelled. As of June 30, 2011, there were no unrecognized compensation costs associated with these restricted shares granted to non-employee directors.

Pursuant to the Plan, the Compensation Committee of the Companys Board of Directors recommended and approved the grant of 500,000 restricted shares to Chief Executive Officer, Mr. Xiangqian Li with a fair value of US$2.81 per share on June
22, 2009. In accordance with the vesting schedule of the grant, the restricted shares will vest in twenty equal quarterly installments on the first day of each fiscal quarter beginning on October 1, 2009.

The Company recorded non-cash share-based compensation expense of US$444,132 and of US$239,478 for the nine months ended June 30, 2010 and 2011 respectively in respect of the restricted shares granted on June 22, 2009, which was allocated to
general and administrative expenses.

As of June 30, 2011, there were unrecognized stock-based compensation costs of US$351,632 associated with these restricted shares granted to Mr. Xiangqian Li. These costs are expected to be recognized over a weighted-average period of 2.6 years.

As the Company itself is an investment holding company which is not expected to generate operating profits to realize the tax benefits arising from its net operating loss carried forward, no income tax benefits were recognized for such stock-based
compensation cost under the Stock Option Plan for the nine months ended June 30, 2010 and 2011.

F-35

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|11 | Net Loss per Share
|-- | ------------------

The calculation of basic net loss per share is based on the net
loss for the nine months ended June 30, 2011 attributable to equity shareholders
of $14,986,650 (nine months ended June 30, 2010: $24,205,103) and the weighted
average number of shares of common stock of 62,895,164 issued and outstanding
during the nine months ended June 30, 2011 (nine months ended June 30, 2010:
62,285,862).

The effects of 4,667,155 shares of stock options, 500,000
shares of restricted stock and 1,447,500 warrants outstanding during the nine
months ended or as of June 30, 2010 were all anti-dilutive and the effects of
4,712,655 shares of stock options, 500,000 shares of restricted stock and
1,447,500 warrants outstanding during the nine months ended or as of June 30,
2011 were all anti-dilutive. As such, basic and diluted net loss per share for
the nine months ended June 30, 2010 and 2011 are the same.

|12 | Fair Value of Financial Instruments
|-- | -----------------------------------

The fair value of a financial instrument is the amount at which
the instrument could be exchanged in a current transaction between willing
parties. The carrying amounts of financial assets and liabilities, such as cash
and cash equivalents, pledged deposits, trade accounts receivable, other
receivables, short-term bank loans, long-term bank loans, accounts and bills
payable and other payables, approximate their fair values because of the short
maturity of these instruments and market rates of interest.

|13  | Commitments and Contingencies
|--- | -----------------------------
|    |                              
|(i) | Capital Commitments          

As of September 30, 2010 and June 30, 2011, the Company had the
following contracted capital commitments:

|                              |   | September 30, |  |   | June 30,  | 
|----------------------------- | - | ------------- |  | - | --------- | 
|                              |   | 2010          |  |   | 2011      | 
|For construction of buildings | $ | 1,784,549     |  | $ | -         | 
|For purchases of equipment    |   | 4,166,911     |  |   | 3,798,000 | 
|                              | $ | 5,951,460     |  | $ | 3,798,000 | 

F-36

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|13   | Commitments and Contingencies (continued)         
|---- | --------------------------------------------------
|     |                                                   
|(ii) | Land Use Rights and Property Ownership Certificate

According to the relevant PRC laws and regulations, a land use rights certificate, along with government approvals for land planning, project planning and construction, needs to be obtained before construction of a building is commenced. A property
ownership certificate shall be granted by the government upon application under the condition that the aforementioned certificate and government approvals have been obtained.

The Company did not obtain the land use right certificate and approvals for project-planning and construction relating to the premises occupied by the Company, BAK Industrial Park, before construction of the buildings was commenced. On July 3, 2009,
the Company had obtained the approval for project-planning and construction from the local government of Shenzhen. On June 2, 2011, the Company obtained the property ownership certificate relating to BAK Industrial Park.

Pursuant to the land use rights certificate relating to the Companys Tianjin facility, the Tianjin government had requested that the Company complete the construction of the Tianjin facility before September 30, 2008. As of June 30, 2011, the
Company was in the process of negotiating with the relevant government bureau for the extension of the completion date. If the Company fails to obtain the approval for the extension of the completion date from the relevant government bureau, there
is a risk that the land use rights certificate relating to the Companys Tianjin facility will become invalid. However, management believes that this possibility, while present, is remote.

Pursuant to the land use rights certificate that the Company obtained relating to the Research and Development Test Centre to be constructed in Shenzhen, the Company must complete at least 25% of the construction of the Research and Development Test
Centre by September 30, 2008. On November 11, 2008 and May 27, 2009, the Company has signed two supplement agreements with Shenzhen government to increase the dimensions of the Research and Development Test Centre. According to the supplement
agreements, the Company is required to complete the construction by May 6, 2011. According to the property ownership and land use rights certificate, such rights may not be pledged without the approval of the relevant government office. The Company
is required to pledge its property ownership and land use rights certificate in relation to the Research and Development Test Centre to China Development Bank according to the loan agreement entered into with it. On April 7, 2010, the pledge of the
land use rights certificate to China Development Bank was approved by the relevant government bureau. On April 20, 2010, the relevant land use rights certificate was pledged to China Development Bank.

F-37

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|13   | Commitments and Contingencies (continued)                     
|---- | --------------------------------------------------------------
|     |                                                               
|(ii) | Land Use Rights and Property Ownership Certificate
(continued)

On December 15, 2008, the Company purchased insurance for its manufacturing facilities at BAK Industrial Park in Shenzhen, China. Under the insurance policy entered into with Ping An Property & Casualty Insurance Company of China, Ltd, the
insured amount for our manufacturing facilities at BAK Industrial Park is RMB585,373,070 (approximately $85.8 million) for the period from November 26, 2008 to August 25, 2010. On August 20, 2010, the Company purchased the new insurance for its
manufacturing facilities at BAK Industrial Park in Shenzhen, China. Under the new insurance policy entered into with Ping An Property & Casualty Insurance Company of China, Ltd, the insured amount for our manufacturing facilities at BAK
Industrial Park is RMB550,000,000 (approximately $82.2 million) for the period from August 26, 2010 to March 26, 2012.

On July 2, 2010, the Company purchased insurance for its manufacturing facilities in Tianjin, China. Under the insurance policy entered into with Ping An Property & Casualty Insurance Company of China, Ltd, the insured amount for our
manufacturing facilities in Tianjin is RMB220,991,420 (approximately $33.0 million) for the period from July 2, 2010 to July 2, 2011.

The Company is not able to insure its new Research and Development Test Centre to be constructed in Shenzhen, China, until it receives the required property ownership and land use rights certificates. Upon receipt of such certificates, the Company
intends to procure such insurance. As discussed above, the Company has obtained the land use rights certificate to the land relating to these facilities. The application for a property ownership certificate is in process with respect to the
Companys facilities in Shenzhen.

F-38

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|13    | Commitments and Contingencies
    (continued)
|----- | ---------------------------------------------
|      |                                              
|(iii) | Guarantees                                   

In order to secure the supplies of certain raw materials and
equipment and upon the request of suppliers, the Company has given guarantees to
certain suppliers which are summarized as follows:

|                                                                                              |   | September 30, |  |   | June 30,   | 
|--------------------------------------------------------------------------------------------- | - | ------------- |  | - | ---------- | 
|                                                                                              |   | 2010          |  |   | 2011       | 
|Guaranteed for Shenzhen Tongli Hi- tech Co.
      Ltd. - a non-related party                  | $ | 2,241,750     |  | $ | 2,320,760  | 
|Guaranteed for Hunan Reshine New Material Ltd. - a
      non-related party                    |   | 5,978,001     |  |   | 6,188,693  | 
|Guaranteed for Nanjing Special Metal
      Equipment Co. Ltd. - a non-related party           |   | 14,197,752    |  |   | 6,188,693  | 
|Guaranteed for Siping JuyuanHanyang Plate Heat
      Exchanger Co. Ltd. - a non-related party |   | 2,989,000     |  |   | -          | 
|Guaranteed for Shanghai Global Children
      Products Co. Ltd. a non- related party         |   | 747,250       |  |   | 1,547,173  | 
|Guaranteed for Beijing Triolion Technology Co. Ltd.
       a non-related party               |   | 597,800       |  |   | -          | 
|Guaranteed for Tianjin Bike New Energy
      Research Institute - a non- related party        |   | -             |  |   | 7,735,867  | 
|Guaranteed for Shenzhen Yasu Technology Co. Ltd. - a
      non-related party                  |   | 4,483,501     |  |   | 9,283,040  | 
|Guaranteed for
      Shenzhen B&G Technology Development Co. Ltd. - a non-related party       |   | 8,967,001     |  |   | -          | 
|                                                                                              | $ | 40,202,055    |  | $ | 33,264,226 | 

Management has assessed the fair value of the obligation
arising from the above financial guarantees and considered it immaterial to the
condensed interim consolidated financial statements. Therefore, no obligations
in respect of the above guarantees were recognized as of June 30, 2011.

|(iv) | Outstanding Discounted Bills and
    Transferred Bills
|---- | ------------------------------------------------------

From time to time, the Company factors bills receivable to
banks and endorses the bank acceptance bills received to its suppliers, vendors
or other parties for settlement of its liabilities to these creditors. At the
time of the factoring and transfer, all rights and privileges of holding the
receivables are transferred to the banks and the creditors. The Company removes
the assets from its books and records a corresponding expense for the amount of
the discount. The Company remains contingently liable on the amount outstanding
in the event the bill issuer defaults.

F-39

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|13 | Commitments and Contingencies
    (continued)
|-- | ---------------------------------------------

|     |                                                                   
|---- | ------------------------------------------------------------------
|(iv) | Outstanding Discounted Bills and
    Transferred Bills (continued)

The Company's outstanding discounted and transferred bills as
of September 30, 2010 and June 30, 2011 are summarized as follows:

|                      |   | September 30, |  |   | June 30,   | 
|--------------------- | - | ------------- |  | - | ---------- | 
|                      |   | 2010          |  |   | 2011       | 
|Bank acceptance bills | $ | 21,464,186    |  | $ | 18,137,071 | 

|   |                           
|-- | --------------------------
|14 | Significant Concentrations

(a) Customers and Credit Concentrations

The Company had only one customer that individually comprised
10% or more of net revenue for the nine months ended June 30, 2011, as follows:

|                            |   | Nine months ended June 30 | 
|--------------------------- | - | ------------------------- | 
|                            |   | 2010                      | 
|Simplo Technology Co., Ltd. | $ | 8,845,863                 | 

As of June 30, 2010 and 2011, approximately 6% and 8% of gross
trade accounts receivable was due from Simplo Technology Co., Ltd. respectively.

(b) Credit Risk

Financial instruments that potentially subject the Company to a
significant concentration of credit risk consist primarily of cash and cash
equivalents and pledged deposits. As of September 30, 2010 and June 30, 2011,
substantially all of the Companys cash and cash equivalents and pledged
deposits were held by major financial institutions located in the PRC, which
management believes are of high credit quality.

|15 | Segment Information
|-- | -------------------

The Company currently engages in the manufacture,
commercialization and distribution of a wide variety of standard and customized
lithium ion rechargeable batteries for use in a wide array of applications.
During the nine months ended June 30, 2011, the Company manufactured five types
of Li-ion rechargeable batteries: aluminum-case cell, battery pack, cylindrical
cell, lithium polymer cell and high-power lithium battery cell. The Company's
products are sold to packing plants operated by third parties primarily for use
in mobile phones and other electronic devices. Net revenues for the nine months
ended June 30, 2010 and 2011 were as follows:

F-40

---

China BAK Battery, Inc. and subsidiaries Notes to
the condensed interim consolidated financial statements For the nine months
ended June 30, 2010 and 2011(Unaudited)

|15 | Segment Information (continued)
|-- | -------------------------------

Net
revenues by product:

|                                 |   |             |  |  | Nine months ended June 30, |  |   |             | 
|-------------------------------- | - | ----------- |  |  | -------------------------- |  | - | ----------- | 
|                                 |   | 2010        |  |  | 2011                       | 
|                                 |   |             |  |  | %                          |  |   |             | 
|Aluminum-case cell               | $ | 82,981,567  |  |  | 52.12                      |  | $ | 60,714,157  | 
|Battery pack                     |   | 33,582,225  |  |  | 21.09                      |  |   | 41,608,428  | 
|Cylindrical cells                |   | 34,271,145  |  |  | 21.53                      |  |   | 42,959,323  | 
|Lithium polymer cells            |   | 7,160,445   |  |  | 4.50                       |  |   | 7,148,846   | 
|High-power lithium battery cells |   | 1,213,131   |  |  | 0.76                       |  |   | 4,939,694   | 
|                                 | $ | 159,208,513 |  |  | 100.00                     |  | $ | 157,370,448 | 

Net revenues by geographic area:

|                 |   | Nine months ended June 30, | 
|---------------- | - | -------------------------- | 
|                 |   | 2010                       | 
|                 |   |                            | 
|PRC Mainland     | $ | 111,314,061                | 
|PRC Taiwan       |   | 26,243,343                 | 
|India            |   | 4,366,267                  | 
|Hong Kong, China |   | 15,280,278                 | 
|Others           |   | 2,004,564                  | 
|                 | $ | 159,208,513                | 

Substantially all of the Companys long-lived assets are
located in the PRC.

|16 | Subsequent Events
|-- | -----------------

The Company evaluated all events or transactions that occurred
after June 30, 2011 through the date of these financial statements were issued
and has determined that there are no material recognizable  subsequent events
or transactions which would require recognition or disclosure in the financial
statements.

F-41

---

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------------

Special Note Regarding Forward Looking
Statements

Statements contained in this Report include forward-looking
statements within the meaning of such term in Section 27A of the Securities Act
of 1933, as amended, or the Securities Act, and Section 21E of the Securities
Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking
statements involve known and unknown risks, uncertainties and other factors
which could cause actual financial or operating results, performances or
achievements expressed or implied by such forward-looking statements not to
occur or be realized. Forward-looking statements made in this Report generally
are based on our best estimates of future results, performances or achievements,
predicated upon current conditions and the most recent results of the companies
involved and their respective industries. Forward-looking statements may be
identified by the use of forward-looking terminology such as may, will,
could, should, project, expect, believe, estimate, anticipate,
intend, continue, potential, opportunity or similar terms, variations of
those terms or the negative of those terms or other variations of those terms or
comparable words or expressions. Potential risks and uncertainties include,
among other things, such factors as:

- our ability to continue as a going concern;
- our anticipated growth strategies and our ability to manage the expansion
  of our business operations effectively;
- our future business development, results of operations and financial
  condition;
- our ability to fund our operations and manage our substantial short-term
  indebtedness;
- our ability to maintain or increase our market share in the competitive
  markets in which we do business;
- our ability to keep up with rapidly changing technologies and evolving
  industry standards, including our ability to achieve technological advances;
- our dependence on the growth in demand for the portable electronic devices
  that are powered by our products;
- our ability to diversify our product offerings and capture new market
  opportunities;
- our ability to obtain original equipment manufacturer, or OEM,
  qualifications from brand names;
- our ability to source our needs for skilled labor, machinery and raw
  materials economically;
- our ability to secure raw materials in the future and to manage the costs
  of raw materials or to secure alternative or substitute raw materials;
- our ability to maintain low costs without damaging our competitive
  position;
- uncertainties with respect to the PRC legal and regulatory environment;
- our ability to remediate any material weaknesses in our internal control
  over financial reporting;
- our ability to obtain property ownership rights to our facilities; and
- other risks identified in this Report and in our other reports filed with
  the U.S. Securities and Exchange Commission, or SEC.

Additional disclosures regarding factors that could cause our
results and performance to differ from results or performance anticipated by
this Report are discussed in other reports that we file with the SEC, including
without limitation our Annual Report on Form 10-K for the fiscal year ended
September 30, 2010, or the 2010 Form 10-K. Readers are urged to carefully review
and consider the various disclosures made by us in this Report and our other
filings with the SEC. These reports attempt to advise interested parties of the
risks and factors that may affect our business, financial condition and results
of operations and prospects. The forward-looking statements made in this Report
speak only as of the date hereof and we
disclaim any obligation to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

1

---

Use of Terms

Except as otherwise indicated by the context, all references in this Report to: we, us, our and the Company are to the combined business of China BAK Battery, Inc. and its consolidated subsidiaries.
Unless the context requires otherwise, all references to:

- BAK Canada are to our Canadian subsidiary, BAK Battery Canada Ltd.;
- BAK Electronics are to our PRC subsidiary, BAK Electronics (Shenzhen) Co., Ltd.;
- BAK Europe are to our German subsidiary, BAK Europe GmbH;
- BAK India are to our Indian subsidiary, BAK Telecom India Private Limited;
- BAK International are to our Hong Kong subsidiary, BAK International Limited;
- BAK Tianjin are to our PRC subsidiary, BAK International (Tianjin) Ltd.;
- China, Chinese and PRC are to the Peoples Republic of China, excluding for the purposes of this Report only, Taiwan, Hong Kong and Macau;
- Exchange Act are to the Securities Exchange Act of 1934, as amended;
- RMB are to Renminbi, the legal currency of China; and
- Securities Act are to the Securities Act of 1933, as amended;
- Shenzhen BAK are to our PRC subsidiary, Shenzhen BAK Battery Co., Ltd.;
- Tianjin Meicai are to our PRC subsidiary, Tianjin Meicai New Materials Technology Co., Ltd.;
- U.S. dollar, $ and US$ are to the legal currency of the United States of America.

Overview

We are a leading global manufacturer of lithium based battery cells. We produce battery cells that are the principal component of rechargeable batteries commonly used to power the following applications:

- cellular phones and smart phones  customer categories include OEM customers and replacement battery manufacturers;
- notebook computers;
- portable consumer electronics, such as digital cameras, portable media players, portable gaming devices, personal digital assistants, or PDAs, camcorders, digital cameras, and Bluetooth headsets; and
- light electric vehicles, hybrid electric vehicles, electric vehicles, cordless power tools, and uninterruptible power supplies, or UPS.

We conduct all of our manufacturing operations in China, in close proximity to Chinas electronics manufacturing base and its rapidly growing market,
and sell our products to customers both in China and abroad . Historically, we have primarily manufactured prismatic lithium-ion cells for the cellular phone replacement
battery market and the OEM market. Our products are packed into batteries by third-party battery pack manufacturers in accordance with the specifications of manufacturers of portable electronic applications. At the request of our customers that
order prismatic battery packs, we also engage battery pack manufacturers to assemble our prismatic cells into batteries for a fee and then sell battery packs to these customers both for the replacement and OEM markets.

2

---

As we expand our production capacity and add other lithium-ion battery cell product lines in response to evolving market demands, we have derived and will continue to derive an increasing portion of our revenues from our other product lines.

Third Fiscal Quarter Financial Performance Highlights

During the third quarter of fiscal year 2011, we generated $47.1 million in net revenues, up 0.9% from $46.7 million last quarter and down 19.5% from $58.6 million for the same quarter in fiscal year 2010.

Gross profit for the third quarter of fiscal year 2011 was $3.6 million, down 19.2% from $4.4 million last quarter and up 397.7% from $1.2 million in gross loss in the same quarter of last year. Gross margin was 7.6%, compared with 9.5%
last quarter and negative 2.1% in the year ago period. The decline in gross margin compared with last quarter was mainly attributable to a decline in sales volume as a result of the introduction of built-in high capacity polymer batteries being
adopted by domestic OEM customers. The increase in gross margin compared with the same quarter of last year was mainly attributable to a decrease in prismatic sales volume during the nine months ended June 30, 2011, and a significant write down of
obsolete inventory over the nine months ended June 30, 2010.

We had access to $223.9 millionin short-term credit facilities and $46.4 millionin long-term credit facilities as of June 30, 2011. As of June 30, 2011, the principal outstanding amounts included short-term bank loans of
$138.1 million, long-term bank loans of $23.2 million maturing within one year, long-term bank loans of $14.8 million maturing in over one year, and bills payable of $38.7 million, leaving $55.5 million of short-term funds
available for additional cash needs.

Financial Statement Presentation

Net revenues. Our net revenues represent the invoice value of our products sold, net of value added taxes, or VAT, sales returns, trade discounts and allowances. We are subject to VAT, which is levied on most of our products at the
rate of 17% on the invoice value of our products. Provision for sales returns are recorded as a reduction of revenue in the same period that revenue is recognized. The provision for sales returns represents our best estimate of the amount of goods
that will be returned from our customers based on historical sales returns data.

Cost of Revenues. Cost of revenues consists primarily of material costs, employee remuneration for staff engaged in production activity, equity-based compensation, depreciation and related expenses that are directly attributable to the
production of products. Cost of revenues also includes write-downs of inventory to lower of cost or market. Cost of revenues from the sales of battery packs includes the fees we pay to pack manufacturers for assembling our prismatic cells into
battery packs.

Research and Development Expenses. Research and development expenses are primarily comprised of remuneration for R&D staff, equity-based compensation, depreciation and maintenance expenses relating to R&D equipment, and R&D
material costs.

Sales and Marketing Expenses. Sales and marketing expenses consist primarily of remuneration for staff involved in selling and marketing efforts, including staff engaged in the packaging of goods for shipment, advertising cost,
depreciation, equity-based compensation and travel and entertainment expenses. We do not pay slotting fees to retail companies for displaying our products, engage in cooperative advertising programs, participate in buy-down programs or similar
arrangements. No material estimates are required by management to determine our actual marketing or advertising costs for any period.

General and Administrative Expenses. General and administrative expenses consist primarily of employee remuneration, equity-based compensation, professional fees, insurance, benefits, general office expenses, depreciation, liquidated
damages, and bad debt expenses.

Fixed Assets Impairment Charges. Impairment charges consist primarily of impairment losses for long-lived assets. These losses reflect the amounts by which the carrying values of these assets exceed their estimated fair value as
determined by their estimated future discounted cash flows.

Finance Costs, Net. Finance costs consist primarily of interest income, interest on bank loans, net of capitalized interest, and bank charges.

Government Grant Income / Other Income and Expenses. Income from government grants consist primarily of grant funds awarded to Shenzhen BAK as consideration for its contributions to the Shenzhen areas economy and as subsidies for
land-use rights at BAK Industrial Park. Our Tianjin subsidiary also received a government grant for its R&D and
production work on electric vehicles. No present or future obligations arise from the receipt of these funds. No present or future obligations arise from the receipt of these funds.

3

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Income Taxes. Under PRC income tax laws and regulations, before January 1, 2008, a foreign-invested enterprise, or FIE, was generally subject to an enterprise income tax rate of 33.0%, which included a 30.0% state income tax and a 3.0%
local income tax. However, from at least calendar year 2002 through calendar year 2007, an enterprise recognized as a Manufacturing Enterprise Located in Special Economic Zone under PRC tax laws was entitled to a preferential income tax
rate of 15%. Moreover, a foreign-invested manufacturing enterprise, starting from its first profitable calendar year after offset of accumulated tax losses, was entitled to a two-year exemption from enterprise income tax followed by a three-year 50%
reduction in its enterprise income tax rate, also referred to herein as the tax holiday. An enterprise qualified for such treatment may receive a further tax rate reduction related to the size of qualified capital contributions received.
In addition, from at least calendar year 2002 through calendar year 2007, an enterprise qualified as an advanced technology enterprise under PRC tax law was also entitled to a 50% reduction of income taxes.

On March 16, 2007, the National Peoples Congress of the PRC determined to adopt the new corporate income tax law, or the New CIT Law. The New CIT Law unifies the application scope, tax rate, tax deduction and preferential policy for both
domestic enterprises and FIEs. The New CIT Law became effective on January 1, 2008. According to the New CIT Law, the applicable income tax rate for Shenzhen BAK, BAK Electronics and BAK Tianjin will be 25% after their preferential tax holidays and
the transition period have ended. During the transition period, tax rates for subject entities was 18% and 20% for the calendar years 2008 and 2009, respectively, and is expected to be 22% and 24% for the calendar years 2010 and 2011, respectively,
before the application of applicable tax holidays or other tax preferences.

Shenzhen BAK and BAK Electronics are both registered and operate in Shenzhen, the PRC, and are each recognized as Manufacturing Enterprise Located in Special Economic Zone. As a result, they have been entitled to a preferential
enterprise income tax rate of 15%. In accordance with the relevant income tax laws, the profits of Shenzhen BAK and BAK Electronics were fully exempted from income tax for two years from the first profitable calendar year of operations after offset
of accumulated taxable losses, followed by a 50% exemption for the immediate next three calendar years.

The tax holiday of Shenzhen BAK commenced in 2002, the first calendar year in which Shenzhen BAK had assessable profit, and ended on December 31, 2006. In addition, due to additional capital contributed by BAK International to Shenzhen BAK in both
2005 and 2006 and Shenzhen BAKs qualification as an advanced technology enterprise in 2007 and 2008, Shenzhen BAK was granted a preferential income tax rate of 7.5%, 11.8% and 12.6% for calendar years 2007, 2008 and 2009, respectively. In
accordance with the transition period of the New CIT Law and before considering the above-mentioned tax concessions, Shenzhen BAKs income tax rate for calendar years 2010 and 2011 are expected to be 22% and 24%, respectively, and starting in
calendar year 2012, it is expected to be subject to an income tax rate of 25%. Therefore, Shenzhen BAKs income tax rates after consideration of its tax concessions are expected to be 15% for both calendar years 2010 and 2011and starting in
calendar year 2012, it is expected to be subject to an income tax rate of 25%.

For BAK Electronics, established in August 2005, the same tax holiday was in effect for calendar years 2006 and 2007, making BAK Electronics fully exempt from any enterprise income tax. Following the tax holiday, a three-year 50% reduction in BAK
Electronics enterprise income tax rate commenced. Pursuant to the transition period of the New CIT Law, BAK Electronics income tax rates for calendar years 2010 and 2011 were expected to be 22% and 24%, respectively, and starting in
calendar year 2012 it was expected to be subject to an income tax rate of 25%. Taking the 50% reduction into account, BAK Electronics income tax rates are now expected to be 11% and 24% for calendar years 2010 and 2011, respectively, with no
change in its expected 2012 tax rate of 25%. BAK Electronics did not incur any enterprise income tax for calendar year 2010 due to the current tax losses.

Shenzhen BAK and BAK Electronics received in aggregate a tax benefit of $311,000 pursuant to their transitional tax rate for the nine months ended June 30, 2011, or $0.005 per basic share.

Tianjin Meicai is currently paying no enterprise income tax due to current tax losses.

BAK Tianjin is currently paying no enterprise income tax due to cumulative tax losses.

Our Canadian, German, Indian, and Hong Kong subsidiariesBAK Canada, BAK Europe, BAK India, and BAK Internationalare subject to profits taxes in their respective countries at rates of 38%, 25%, 30%, and 16.5% respectively. However,
because they do not have any assessable income derived from or arising in those countries, they have not paid any such tax.

4

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Our effective tax benefit rate was 2.1% for the nine months
ended June 30, 2011 and our effective tax benefit rate was 8.0% for the nine
months ended June 30, 2010.

Pursuant to the Provisional Regulation of China on Value Added
Tax and its implementing rules, all entities and individuals that are engaged in
the sale of goods, the provision of repairs and replacement services and the
importation of goods in China are generally required to pay VAT at a rate of
17.0% of the gross sales proceeds received, less any deductible VAT already paid
or borne by the taxpayer. Further, when exporting goods, the exporter is
entitled to some or all of the refund of VAT that it has already paid or borne.
Our imported raw materials that are used for manufacturing export products and
are deposited in bonded warehouses are exempt from import VAT.

Results of Operations

Comparison of Three Months Ended June 30, 2011 and June
30, 2010

The following table sets forth key components of our results of
operations for the periods indicated. All amounts, other than percentages, are
in thousands of U.S. dollars.

|                                                       |   | Three Months Ended
      June |   |   |         |   |   |         |  
|------------------------------------------------------ | - | ----------------------------- | - | - | ------- | - | - | ------- | -
|                                                       |   | 30,                           |   |   |         |   |   |         |  
|                                                       |   | 2011                          |   |   | 2010    |   | $ | Change  |  
|Net revenues                                           | $ | 47,130                        |   | $ | 58,557  |   | $ | (11,427 | )
|Cost of revenues                                       |   | 43,537                        |   |   | 59,764  |   |   | (16,227 | )
|Gross profit / (loss)                                  |   | 3,593                         |   |   | (1,207  | ) |   | 4,800   |  
|Operating expenses:                                    |   |                               |   |   |         |   |   |         |  
|Research
      and development expenses                |   | 1,839                         |   |   | 2,130   |   |   | (291    | )
|Sales and marketing
      expenses                     |   | 2,042                         |   |   | 2,587   |   |   | (545    | )
|General
      and administrative expenses              |   | 5,042                         |   |   | 7,429   |   |   | (2,387  | )
|Property, plant and equipment
      impairment charges |   | -                             |   |   | 5,057   |   |   | (5,057  | )
|Total operating expenses                               |   | 8,923                         |   |   | 17,203  |   |   | (8,280  | )
|Operating loss                                         |   | (5,330                        | ) |   | (18,410 | ) |   | 13,080  |  
|Finance costs, net                                     |   | (2,711                        | ) |   | (2,022  | ) |   | (689    | )
|Government grant income                                |   | 405                           |   |   | 59      |   |   | 346     |  
|Other income                                           |   | 391                           |   |   | 107     |   |   | 284     |  
|Income tax benefits                                    |   | -                             |   |   | 2,004   |   |   | (2,004  | )
|Net loss                                               | $ | (7,245                        | ) | $ | (18,262 | ) | $ | 11,017  |  

Net Revenues. Net revenues decreased to $47.1
million for the three months ended June 30, 2011 as compared to $58.6 million
for the same period of the prior year, a decrease of $11.4 million or 19.5% .
The following sets forth the breakdown of our net revenues by battery cell type
for the periods indicated.

|                                 |   | Three Months Ended | 
|-------------------------------- | - | ------------------ | 
|                                 |   | June 30,           | 
|                                 |   | 2011               | 
|                                 |   | (in thousands)     | 
|Prismatic cells                  |   |                    | 
|Aluminum-case cells              | $ | 13,865             | 
|Battery packs                    |   | 11,911             | 
|Cylindrical cells                |   | 17,291             | 
|Lithium polymer cells            |   | 2,009              | 
|High-power lithium battery cells |   | 2,054              | 
|Total                            | $ | 47,130             | 

- Net revenues from sales of aluminum-case cells decreased to $13.9 million
  in the three months ended June 30, 2011, from $30.5 million in the same period
  in fiscal year 2010, a decrease of $16.6 million or 54.4%, resulting from a
  decrease in our average selling price of 1.7% and a significant decrease in
  our sales volume of 61.8% as a result of the introduction of built-in high
  capacity polymer batteries being adopted by domestic OEM customers.

5

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- Net revenues from sales of battery packs decreased to $11.9 million in the three months ended June 30, 2011, from $12.2 million in the same period in fiscal year 2010, a decrease of $366,000 or 3.0%. This resulted from a decrease in
sales volume of 27.1% due to increased export sales, offset by a 56.8% increase in average selling price.
- Net revenues from sales of cylindrical cells increased to $17.3 million in the three months ended June 30, 2011, from $12.8 million in the same period in fiscal year 2010, an increase of $4.5 million or 35.4%, due to an increase in sales
volume of 60.7% driven by increased sales to laptop manufacturers and offset by a decrease in our average selling prices of 9.5% which was driven by strong market competition on price.
- We sold $2.0 million in lithium polymer cells in the three months ended June 30, 2011, compared to $2.3 million in lithium polymer cells in the same period in fiscal year 2010, a decrease of $265,000 or 11.7%, resulting from a decrease
of 26.1% in sales volume and offset by an increase of 20.7% in our average selling price. The decrease in sales volume was primary due to a slowdown in orders from new customers and the postponement of new product offerings by some of our current
clients.
- We also sold approximately $2.1 million in high-power lithium battery cells in the three months ended June 30, 2011, as compared to $697,000 in high-power lithium battery cells in the same period of fiscal year 2010, due to our increased
sales of products used in electric bicycles, power tools, uninterruptible power supplies, and other applications from our Tianjin facility.

Cost of Revenues. Cost of revenues decreased to $43.5 million for the three months ended June 30, 2011, as compared to $59.8 million for the same period in fiscal year 2010, a decrease of $16.2 million or 27.2% . The
decrease in cost of revenues is due to a write down of obsolete inventory of $5.6 million during the three months ended June 30, 2010.

As a result, gross profit for the three months ended June 30, 2011 was $3.6 million, or 7.6% of net revenues, as compared to gross loss of $1.2 million, or negative 2.1% of net revenues, for the same period in fiscal year 2010. The increase
in our gross profit as a percentage of net revenues was primarily due to a write down of obsolete inventory of $5.6 million during the three months ended June 30, 2010.

Research and Development Costs. Research and development costs decreased to $1.8 million for the three months ended June 30, 2011, as compared to $2.1 million for the same period in fiscal year 2010, a decrease of $291,000
or 13.7% . This decrease was mainly due to a decrease in research funds by approximately $299,000 as a result of a decrease in R&D projects.

Sales and Marketing Expenses. Sales and marketing expenses decreased to $2.0 million for the three months ended June 30, 2011, as compared to $2.6 million for the same period in fiscal year 2010, a decrease of $545,000, or
21.1% . This decrease was mainly due to (1) a decrease in packaging expenses of $128,000, (2) a decrease in the salaries and benefits of sales and marketing staff of $117,000, and (3) a decrease in repair and maintenance expenses of
$279,000 in line with the decrease in revenues from sales during the three months ended June 30, 2011. As a percentage of revenues, sales and marketing expenses have slightly decreased to 4.3% for the three months ended June 30, 2011 from 4.4%
for the same period in 2010, due to the decrease in revenues from sales during the three months ended June 30, 2011.

General and Administrative Expenses. General and administrative expenses decreased to $5.0 million, or 10.7% of revenues, for the three months ended June 30, 2011, as compared to $7.4 million, or 12.7% of revenues, for the same
period in fiscal year 2010, a decrease of $2.4 million, or 32.1% . Bad debt expenses decreased by $2.4 million during the three months ended June 30, 2011.

Property, Plant and Equipment Impairment Charge. We recognized a property, plant and equipment impairment charge of $5.1 million for the quarter ended June 30, 2010. During the course of our strategic review of our
operations for quarter ended June 30, 2010, we assessed the recoverability of the carrying value of certain property, plant and equipment which resulted in impairment losses of $5.1 million. There was no similar charge for the quarter ended June
30, 2011.

Operating Loss. As a result of the above, operating loss totaled $5.3 million for the three months ended June 30, 2011, as compared to an operating loss of $18.4 million for the same period of the prior year, a decrease of
$13.1 million, or 71.0% .

Finance Costs, Net. Finance costs, net, increased to $2.7 million for the three months ended June 30, 2011, as compared to $2.0 million for the same period of the prior fiscal year, an increase of $689,000 or 34.1% . The
increase in net finance costs is mainly attributable to an increase in the average bank loan
interest rates on both our short-term and long-term bank loans during the three
months ended June 30, 2011.

6

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Government Grant Income / Other Income and
Expenses.We had deferred revenue from government grant
income of $405,000and other income of $391,000for the
three-month period ended June 30, 2011, as compared to government grant income
of $59,000and other income of $107,000for the same period of the
prior fiscal year. The government grant income for the three months ended June
30, 2011 and June 30, 2010 mainly consisted of subsidies to pay for the land use
rights to our corporate campus at BAK Industrial Park and government grant funds
to subsidize certain lithium battery projects. No present or future obligation
will arise from the receipt of such income.

Income Tax Benefits (Expense). No income tax
benefits were recognizedfor the three months ended June 30, 2011, as
compared to income tax expenses of $2.0 million for the same period of 2010. The
change was the result of a deferred tax provision during the three months ended
June 30, 2011.

Net Loss. As a result of the foregoing, we had a
net loss of $7.2 million for the three months ended June 30, 2011 compared to
$18.3 million for the same period of 2010.

Comparison of Nine Months Ended June 30, 2011 and June
30, 2010

The following table sets forth key components of our results of
operations for the periods indicated. All amounts, other than percentages, are
in thousands of U.S. dollars.

|                                                      |   | Nine Months Ended |   |   |         |   |   |         |  
|----------------------------------------------------- | - | ----------------- | - | - | ------- | - | - | ------- | -
|                                                      |   | June 30,          |   |   |         |   |   |         |  
|                                                      |   | 2011              |   |   | 2010    |   | $ | Change  |  
|Net revenues                                          | $ | 157,370           |   | $ | 159,209 |   | $ | (1,839  | )
|Cost of revenues                                      |   | 139,332           |   |   | 141,853 |   |   | (2,521  | )
|Gross profit                                          |   | 18,038            |   |   | 17,356  |   |   | 682     |  
|Operating expenses:                                   |   |                   |   |   |         |   |   |         |  
|Research
      and development expenses               |   | 5,416             |   |   | 5,523   |   |   | (107    | )
|Sales and marketing
      expenses                    |   | 6,514             |   |   | 6,321   |   |   | 193     |  
|General
      and administrative expenses             |   | 15,071            |   |   | 20,885  |   |   | (5,814  | )
|Property, plant and
      equipment impairment charge |   | -                 |   |   | 5,058   |   |   | (5,058  | )
|Total operating expenses                              |   | 27,001            |   |   | 37,787  |   |   | (10,786 | )
|Operating loss                                        |   | (8,963            | ) |   | (20,431 | ) |   | 11,468  |  
|Finance costs, net                                    |   | (8,063            | ) |   | (6,366  | ) |   | (1,697  | )
|Government grant income                               |   | 1,042             |   |   | 493     |   |   | 549     |  
|Other income / (expenses)                             |   | 681               |   |   | (31     | ) |   | 712     |  
|Income tax benefit                                    |   | 316               |   |   | 2,130   |   |   | (1,814  | )
|Net loss                                              | $ | (14,987           | ) | $ | (24,205 | ) | $ | 9,218   |  

Net Revenues. Net revenues decreased to $157.4
million for the nine months ended June 30, 2011 as compared to $159.2 million
for the same period of the prior year, a decrease of $1.8 million or 1.2% . The
following sets forth the breakdown of our net revenues by battery cell type for
the periods indicated.

|                                 |   | Nine Months Ended | 
|-------------------------------- | - | ----------------- | 
|                                 |   | June 30,          | 
|                                 |   | 2011              | 
|                                 |   | (in thousands)    | 
|Prismatic cells                  |   |                   | 
|Aluminum-case cells              | $ | 60,714            | 
|Battery packs                    |   | 41,608            | 
|Cylindrical cells                |   | 42,959            | 
|Lithium polymer cells            |   | 7,149             | 
|High-power lithium battery cells |   | 4,940             | 
|Total                            | $ | 157,370           | 

7

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- Net revenues from sales of aluminum-case cells decreased to $60.7 million in the nine months ended June 30, 2011, from $83.0 million in the same period in fiscal year 2010, a decrease of $22.3 million or 26.8%, resulting from a decrease
of sales volume of 29.9% driven by decreased sales in the PRC, offset by an increase in our average price of 3.8%.
- Net revenues from sales of battery packs increased to $41.6 million in the nine months ended June 30, 2011, from $33.6 million in the same period in fiscal year 2010, an increase of $8.0 million or 23.9%. This resulted from an increase
in sales volume of 15.7% due to increased export sales and a 5.8% increase in average selling price.
- Net revenues from sales of cylindrical cells increased to $43.0 million in the nine months ended June 30, 2011, from $34.3 million in the same period in fiscal year 2010, an increase of $8.7 million or 25.4%. This resulted from an
increase in sales volume of 21.5% due to increased domestic sales.
- We sold $7.1 million in lithium polymer cells in the nine months ended June 30, 2011, compared to $7.2 million in lithium polymer cells in the same period in fiscal year 2010, a slight decrease of $11,000 or 0.2%, resulting from a
decrease of 2.7% in sales volume, offset by an increase of 32.6% in our average selling price.
- We also sold approximately $4.9 million in high-power lithium battery cells in the nine months ended June 30, 2011, as compared to $1.2 million in high-power lithium battery cells in the same period of fiscal year 2010, due to our increased
sales of products used in electric bicycles, power tools, uninterruptible power supplies, and other applications from our Tianjin facility.

Cost of Revenues. Cost of revenues decreased to $139.3 million for the nine months ended June 30, 2011, as compared to $141.9 million for the same period in fiscal year 2010, a decrease of $2.5 millionor 1.8% . The
decrease in cost of revenues correlates to a decrease in prismatic sales volume during the nine months ended March 31, 2011 and a significant write down of obsolete inventory over the nine months ended June 30, 2010.

As a result, gross profit for the nine months ended June 30, 2011 was $18.0 million, or 11.5% of net revenues, as compared to gross profit of $17.4 million, or 10.9% of net revenues, for the same period in fiscal year 2010. Our increase in
gross profit as a percentage of net revenues was primarily due to a decrease in prismatic sales volume during the nine months ended June 30, 2011, and a significant write down of obsolete inventory over the nine months ended June 30, 2010.

Research and Development Costs. Research and development costs decreased to $5.4 million for the nine months ended June 30, 2011, as compared to $5.5 million for the same period in fiscal year 2010, a decrease of $107,000
or 1.9% . Equity-based compensation included in R&D costs during the nine months ended June 30, 2011 decreased by $190,000 compared to the nine months ended June 30, 2011 as charges relating to outstanding stock options to R&D staff had
already been reflected in large part in the same periods in the fiscal year 2010.

Sales and Marketing Expenses. Sales and marketing expenses increased to $6.5 million for the nine months ended June 30, 2011, as compared to $6.3 million for the same period in fiscal year 2010, an increase of $193,000, or
3.1% . Salaries and welfare increased $349,000 primarily due to increased basic salaries and benefits in response to guidance issued to Shenzhen-based companies by relevant local government authorities during the three months ended June 30, 2010
and effective July 1, 2010. In addition, packaging expense decreased by $216,000 in line with the decrease in sales during the nine months ended June 30, 2011. As a percentage of revenues, sales and marketing expenses have increased to 4.1% for
the nine months ended June 30, 2011 from 3.9% for the same period in 2010, due to the decrease in revenues from sales.

General and Administrative Expenses. General and administrative expenses decreased to $15.1 million, or 9.6% of revenues, for the nine months ended June 30, 2011, as compared to $20.9 million, or 13.1% of revenues, for the same
period in fiscal year 2010, a decrease of $5.8 million, or 27.8% . Bad debt expenses decreased by $5.5 million during the nine months ended June 30, 2011.

Property, Plant and Equipment Impairment Charge. We recognized a property, plant and equipment impairment charge totaling $5.1 million for the nine months ended June 30, 2010. During the course of our strategic review of our
operations for the nine months ended June 30, 2010, we assessed the recoverability of the carrying value of certain property, plant and equipment which resulted in impairment losses of $5.1 million. There was no similar charge for the nine
months ended June 30, 2011.

8

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Operating Loss. As a result of the above,
operating loss totaled $8.9 million for the nine months ended June 30, 2011, as
compared to $20.4 million for the same period of the prior year, a decrease of
$11.5 million, or 56.1% .

Finance Costs, Net. Finance costs, net, increased
to $8.1 million for the nine months ended June 30, 2011, as compared to $6.4
million for the same period of the prior fiscal year, an increase of $1.7
million or 26.6% . The increase in net finance costs is mainly attributable to
an increase in the average bank loan interest rates on both our short-term and
long-term bank loans and in discounts charged for bills receivable recognized
during the nine months ended June 30, 2011.

Government Grant Income / Other Income and
Expenses.We had deferred revenue from government grant
income of $1.0 millionand other income of $682,000for the nine
months ended June 30, 2011, as compared to government grant income of
$493,000and other expenses of $32,000for the same period of the
prior fiscal year. The government grant income for the nine months ended June
30, 2011 and 2010 mainly consisted of subsidies to pay for the land use rights
to our corporate campus at BAK Industrial Park and government grant funds to
subsidize certain lithium battery projects. No present or future obligation will
arise from the receipt of such income.

Income Tax Benefits (Expense). Income tax
benefits were $316,000for the nine months ended June 30, 2011, as
compared to income tax benefits of $2.1 million for the same period of 2010. The
change was the result of a deferred tax provision during the nine months ended
June 30, 2011

Net Loss. As a result of the foregoing, we had a
net loss of $15.0 millionfor the nine months ended June 30, 2011
compared to $24.2 million for the same period of 2010.

Liquidity and Capital Resources

We have historically financed our liquidity requirements from a
variety of sources, including short-term bank loans, long-term bank loans and
bills payable under bank credit agreements, sale of bills receivable and
issuance of capital stock. As of June 30, 2011, we had cash and cash equivalents
of $17.1 million, as compared to $22.6 million as of September 30, 2010. In
addition, we had pledged deposits amounting to $6.6 million and $9.4 million as
of June 30, 2011 and September 30, 2010, respectively. Typically, our banks
require their borrowers to maintain deposits of approximately 10% to 100% of the
outstanding loan balances and bills payable. The individual bank loans have
maturities ranging from three to twelve months which coincides with the periods
the cash remains pledged to the banks.

We had access to $223.9 millionin short-term credit
facilities and $46.4 millionin long-term credit facilities as of June
30, 2011. As of June 30, 2011, the principal outstanding amounts included
short-term bank loans of $138.1 million, long-term bank loans of $23.2
millionmaturing within one year, long-term bank loans of $14.8
millionmaturing in over one year, and bills payable of $38.7 million,
leaving $55.5 millionof short-term funds available for additional cash
needs.

|The following table sets forth a summary of our cash
      flows for the periods indicated: |   |                   |   |   |         |  
|------------------------------------------------------------------------------------------- | - | ----------------- | - | - | ------- | -
|Cash Flow                                                                                   |  
|(All amounts in thousands of U.S.
      dollars)                                            |  
|                                                                                            |   | Nine Months Ended |  
|                                                                                            |   | June 30           |  
|                                                                                            |   | 2011              |   |   | 2010    |  
|Net cash provided by / (used in)
      operating activities                                 | $ | 25,719            |   | $ | (10,685 | )
|Net cash used in investing activities                                                       |   | (25,907           | ) |   | (20,252 | )
|Net cash (used in) / provided by
      financing activities                                 |   | (6,051            | ) |   | 25,832  |  
|Effect of exchange rate on cash and cash equivalents                                        |   | 749               |   |   | (698    | )
|Net decrease in cash and cash
      equivalents                                             |   | (5,490            | ) |   | (5,803  | )
|Cash and cash equivalents at beginning of the period                                        |   | 22,589            |   |   | 30,678  |  
|Cash and cash equivalents at end of
      period                                            |   | 17,099            |   |   | 24,875  |  

Operating Activities

Net cash provided by operating activities was $25.7 millionin the nine months ended June 30, 2011, compared to $10.7 million of net
cash used in operating activities in the same period in fiscal year 2010. The
increase of $36.4 million in operating activities was mainly attributable to the settlement
of overdue accounts receivables and longer credit terms we obtained from our
suppliers.

9

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Investing Activities

Net cash used in investing activities was $25.9 million in the
nine months ended June 30, 2011, compared to $20.3 million of net cash used in
investing activities in the same period in fiscal year 2010. The net cash used
in investing activities during the period ended June 30, 2011 was mainly used
for procurement of machinery and equipment for our high-power lithium battery
cell line and construction of our Research and Development Test Centre in
Shenzhen.

Financing Activities

Net cash used in financing activities was $6.1 millionin the nine months ended June 30, 2011, compared to $25.8 million net cash
provided by financing activities in the same period in 2010. This was mainly
attributable to (i) net proceeds of $19.6 million from a registered direct
offering of common stock and warrants to purchase common stock completed in
October 2009, (ii) a $18.6 million decrease in cash deposits at banks as
collateral in the nine months ended June 30, 2011, and (iii) increased
borrowings, net of repayments, of $6.4 million in the nine months ended June 30,
2011.

As of June 30, 2011, the principal amounts outstanding under
our credit facilities and lines of credit were as follows:

|                                                  |   |                |  |   | Amount     | 
|------------------------------------------------- | - | -------------- |  | - | ---------- | 
|                                                  |   |                |  |   | Borrowed   | 
|                                                  |   |                |  |   | (includes  | 
|                                                  |   | Maximum        |  |   | bank loans | 
|                                                  |   | Amount         |  |   | and bills  | 
|                                                  |   | Available      |  |   | payable)   | 
|                                                  |   | (in thousands) | 
|Short-term credit facilities:                     |   |                |  |   |            | 
|Agricultural Bank of China                        | $ | 61,887         |  | $ | 61,887     | 
|Shenzhen Development Bank                         |   | 30,943         |  |   | 23,208     | 
|China CITIC Bank                                  |   | 16,245         |  |   | 6,189      | 
|Bank of China                                     |   | 69,623         |  |   | 46,584     | 
|China Everbright Bank                             |   | 18,566         |  |   | 10,945     | 
|Bank of Communications                            |   | 4,549          |  |   | 4549       | 
|Industrial Bank                                   |   | 9,670          |  |   | 7,736      | 
|Tianjin Branch, Bank of Dalian                    |   | 12,377         |  |   | 7,181      | 
|SubtotalShort-term credit facilities             | $ | 223,860        |  | $ | 168,279    | 
|Long-term credit facilities:                      |   |                |  |   |            | 
|Agricultural Bank of China                        |   | 7,736          |  |   | 7,736      | 
|China Development Bank                            |   | 23,208         |  |   | 14,792     | 
|Agricultural Bank of China, Tianjin Jinxin Branch |   | 15,471         |  |   | 15,471     | 
|SubtotalLong-term credit facilities              | $ | 46,415         |  | $ | 37,999     | 
|Lines of Credit:                                  |   |                |  |   |            | 
|Shenzhen Branch, Bank of China                    |   |                |  |   | 6,466      | 
|Tianjin Branch, Bank of China                     |   |                |  |   | 109        | 
|Tianjin Branch, Bank of Dalian                    |   |                |  |   | 1,946      | 
|SubtotalLines of credit                          |   |                |  | $ | 8,521      | 
|Total Principal Outstanding                       | $ | 270,275        |  | $ | 214,799    | 

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The above principal outstanding amounts under credit facilities and lines of credit included short-term bank loans of $138.1 million, long-term bank loans of $14.8 million maturing within one year and long-term bank loans of $23.2
million maturing in over one year, and bills payable of $38.7 million.

For the purpose of presentation, the effect of increases in bills payable balances is included in operating activities in the statements of cash flows.

During the three months ended June 30, 2011, we renewed two comprehensive credit facility agreements with a maximum loan amount of approximately $85.8 million, and four short-term bank loan agreements became effective totaling approximately
$67.9 million. The material financing terms of these loans are described below.

On May 6, 2011, we renewed our comprehensive credit facility agreement with Shenzhen Branch, China Citic Bank, or China Citic Bank, to provide a maximum loan amount of RMB 105 million (approximately $16.2 million). Loans may be drawn at any time
from May 6, 2011 to May 6, 2012 and will be due based on each loan agreement. This credit facility was guaranteed by BAK International and Mr. Xiangqian Li. As of June 30, 2011, we had borrowed $6.2 million under a loan, currently carrying
annual interest at 110% of the benchmark rate announced by the Peoples Bank of China, or the PBOC, with a rate in line with the benchmark interest rate adjustment of the PBOC under this credit facility, and is due on June 3, 2012.

On May 3, 2011, we renewed our comprehensive credit facility agreement with Shenzhen Longgang Branch, Bank of China, or Bank of China, to provide a maximum loan amount of RMB 450 million (approximately $69.6 million). Loans may be drawn at any
time from May 3, 2011 to May 3, 2012 and will be due based on each loan agreement. This credit facility was guaranteed by BAK International and Mr. Xiangqian Li. As of June 30, 2011, we had two outstanding short-term loans under the comprehensive
credit facility. The first loan, of approximately $23.2 million, currently carries annual interest at the benchmark rate of the PBOC on the date of the loan agreement and adjusted every six months, and is repayable on August 23, 2011. The second
loan, of approximately $7.7 million, currently carries annual interest at 95% of the benchmark rate of the PBOC and is due on November 9, 2011, and $15.6 million of notes payable under this credit facility agreement. We had also borrowed
$6.5 million of notes payable separate from the credit facility.

As of June 30, 2011, we had a comprehensive credit facility agreement with Shenzhen Development Bank, Longgang Branch, or Shenzhen Development Bank, to provide a maximum loan amount of RMB 200 million (approximately $30.9 million). Loans may be
drawn at any time from January 26, 2011 to January 18, 2012 and will be due based on each loan agreement. This credit facility agreement was guaranteed by BAK International, BAK Tianjin and Mr. Xiangqian Li, and also was secured by $23.2 million
of inventory. As of June 30, 2011, we had three outstanding short-term loans under the comprehensive credit facility with Shenzhen Development Bank totaling approximately $23.2 million. The first loan, dated January 25, 2011, was approximately
$10.8 million, carried a floating interest rate equal to the benchmark rate of the PBOC on the date of the loan agreement and adjusted quarterly, and is repayable on January 24, 2012. The second loan, dated January 30, 2011, was approximately
$9.3 million, carried a floating interest rate equal to the benchmark rate of the PBOC on the date of the loan agreement and adjusted quarterly, and is repayable on January 29, 2012. The third loan, dated June 13, 2011, was approximately
$3.1 million, currently carries annual interest at the benchmark rate of the PBOC on the date of the loan agreement and adjusted quarterly, and is repayable on June 16, 2012. The third loan was borrowed after a predecessor loan was repaid on
August 2, 2010, not December 31, 2010 as had been reported in our Form 10-Q for the fiscal quarter ended December 31, 2010.

As of June 30, 2011, we had a comprehensive credit facility agreement with Industrial Bank, Shenzhen Hi-tech District Branch, or Shenzhen Industrial Bank, to provide a maximum loan amount of RMB 62.6 million (approximately $9.7 million). Loans
may be drawn at any time over the one-year period beginning December 26, 2010 and will be due based on each loan agreement. This credit facility agreement was guaranteed by BAK International, BAK Tianjin and Mr. Xiangqian Li. As of June 30, 2011, we
had borrowed approximately $7.7 millionunder the loan agreement, carrying annual interest rate at 6.391% and the due date is December 10, 2011.

As of June 30, 2011, we had a comprehensive credit facility agreement with Tianjin Branch, Bank of Dalian, to provide a maximum loan amount of RMB 80 million (approximately $12.4 million), effective January 2011. Loans may be drawn at any time
over the period from October 27, 2010 to January 26, 2012 and will be due based on each loan agreement. This credit facility agreement was guaranteed up to RMB 50 million by Shenzhen BAK Battery Co., Ltd. and Mr. Xiangqian Li. As of June 30, 2011,
we had borrowed approximately $6.2 million under a loan agreement dated October 27, 2010, bearing annual interest of 6.116%, adjusted monthly, repayable on October 26, 2011, and $1.0 million notes payable under this credit facility
agreement. In addition, we had also borrowed $1.9 million of short term loans separate from the credit facility.

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As of June 30, 2011, we had a guaranty contract with Shanghai Pudong Development Bank to provide guaranty for the loans drawn from November 30, 2010 to October 25, 2011. The maximum guaranty amount for all loans will be RMB 30 million (approximately
$4.6 million). As of June 30, 2011, we had no borrowings under this guaranty.

As of June 30, 2011, we had a comprehensive credit facility agreement with Agricultural Bank of China, Shenzhen Eastern Branch, or Agricultural Bank  Shenzhen Branch, to provide a maximum loan amount of RMB 450 million (approximately $69.6
million), including RMB 400 million (approximately $61.9 million) of one-year term credit facilities and RMB 50 million (approximately $7.7 million) of five-year term credit facilities. This comprehensive credit facility agreement renewed a
predecessor credit facility agreement between Shenzhen BAK and Agricultural Bank  Shenzhen Branch dated November 26, 2009 and governs all loans that were subject to the predecessor agreement at the time of the renewal. New loans may be drawn
under this credit facility from November 15, 2010 through November 10, 2011, with the term of the loan established at the time each new loan is drawn, except as to funds borrowed under a loan agreement between Shenzhen BAK and Agricultural Bank
 Shenzhen Branch dated November 23, 2006 and effective December 18, 2006, or the 2006 Loan Agreement, which may be drawn at any time within five years of December 18, 2006, and which will mature five years after such funds are drawn. Pursuant
to the comprehensive credit facility, Shenzhen BAK must obtain prior approval from Agricultural Bank  Shenzhen Branch to renew long-term loans that are subject to this credit facility. In addition, Shenzhen BAK undertook to ensure that the
percentage of certain business conducted with Agricultural Bank  Shenzhen Branch relative to such business it conducts with all financial institutions combined be at least equal to the percentage of its indebtedness to Agricultural Bank 
Shenzhen Branch relative to its indebtedness to all financial institutions combined (referred to as the Percentages Undertaking). The business referred to in the preceding sentence refers to the volume of transactional
payments that are drawn from Shenzhen BAKs accounts with Agricultural Bank Shenzhen Branch or applicable financial institutions and the amount of foreign currencies deposited with Agricultural Bank  Shenzhen Branch or applicable
financial institutions. Shenzhen BAK also undertook not to issue any dividends without the written consent of Agricultural Bank  Shenzhen Branch prior to the expiration of all loans under this credit facility (this undertaking and the
Percentages Undertaking are collectively referred to as the Undertakings). The obligations of Shenzhen BAK under this comprehensive credit facility are guaranteed by Mr. Xiangqian Li, BAK Tianjin, and BAK International. Shenzhen
BAKs obligations under this credit facility agreement are also guaranteed by Shenzhen BAKs pledge of the property ownership and land use rights certificates relating to its manufacturing and other facilities in Shenzhen, PRC, known as
BAK Industrial Park. In the event that Shenzhen BAK breaches any of the Undertakings or any guaranteed party breaches any of its guaranty obligations, Agricultural Bank  Shenzhen Branch may, in addition to exercising any other applicable
remedies under the applicable agreements, accelerate repayment of all loan amounts governed by this credit facility.

As of June 30, 2011, we had six outstanding short-term loans under the comprehensive credit facility with Agricultural Bank  Shenzhen Branch, totaling approximately $61.9 million, carrying annual interest at 5.31% and 5.0445%, adjusted
quarterly. The first loan, of approximately $9.3 million, currently carries annual interest at the benchmark rate of the PBOC and is due on April 13, 2012. The second loan, of approximately $11.6 million, currently carries annual interest at
the benchmark rate of the PBOC and is due on April 14, 2012. The third loan, of approximately $13.9 million, currently carries annual interest at the benchmark rate of the PBOC and is due on April 18, 2012. The fourth loan, of
approximately $11.6 million, currently carries annual interest at 95% of the benchmark rate of the PBOC and is due on December 21, 2011. The fifth loan, of approximately $7.7 million, currently carries annual interest at the benchmark rate
of the PBOC and is due on January 11, 2012. The sixth loan, of approximately $7.8 million, currently carries annual interest at the benchmark rate of the PBOC and is due on January 18, 2012. Each of the loan agreements specifically provides for
acceleration of repayment of the loan under certain conditions, as well as other penalties and remedies.

As of June 30, 2011, we also had two five-year term loans totaling approximately $7.7 million under the Agricultural Bank  Shenzhen Branch comprehensive credit facility carrying interest at 90% of the benchmark rate of the PBOC for
three-year to five-year long-term loans. The first loan, of approximately $6.1 million, currently carries annual interest of 5.184% and is due on January 25, 2012. The second loan, of approximately $9.1 million, currently carries annual
interest of 5.184% and is due in two installments of approximately $7.6 million on January 25, 2011, which we repaid on January 25, 2011, and approximately $1.6 million on January 25, 2012, respectively. These five-year term loans are
specifically: (i) guaranteed by Mr. Xiangqian Li; (ii) secured by Shenzhen BAKs machinery and equipment with carrying values of approximately $29.8 million as of June 30, 2011; and (iii) secured by the property ownership and land use
rights certificates with an aggregate net book value of $111.6 million as of June 30, 2011 in relation to the land on which Shenzhen BAKs corporate campus had been constructed and any machinery and equipment purchased and used at the
campus subsequent to such construction.

As of June 30, 2011, we had a comprehensive credit facility agreement with China Everbright Bank to provide a maximum amount of RMB 120 million (approximately $18.6 million) including RMB 40 million to support bank acceptance bills (instruments
commonly used in China that are similar to letters of credit) and RMB 80 million to cover discounts on our notes receivable due to their assignment to certain banks, suppliers, vendors, and other creditors from November 8, 2010 to

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November 8, 2011. This credit facility agreement is guaranteed by BAK International and Mr. Xiangqian Li. As of June 30, 2011, we had borrowed $10.9 million of notes payable under this credit facility.

As of June 30, 2011, we had also borrowed $0.1 million of notes payable outside any credit facility from Bank of China, Tianjin Branch.

As of June 30, 2011, we had a comprehensive credit facility agreement, dated as of June 28, 2010, with Bank of Communications to provide a maximum loan amount of RMB 50 million (approximately $7.6 million). This credit facility agreement is
guaranteed by BAK Tianjin and Mr. Xiangqian Li. Loans may be drawn at any time from June 28, 2010 to June 28, 2011. We had borrowed $4.5 million of notes payable under this credit facility from Bank of Communications.

As of June 30, 2011, we had a six-year long-term loan agreement expiring on February 9, 2016 of RMB 150 million (approximately $23.2 million) with Shenzhen Branch, China Development Bank, or China Development Bank. Under the loan agreement, the
loan amount was to be drawn in four installments as follows: (1) RMB 50 million (approximately $7.7 million) in February 2010; (2) RMB 30 million (approximately $4.7 million) in July 2010; (3) RMB 30 million (approximately $4.7 million)
in January 2011; and (4) RMB 40 million (approximately $6.1 million) in June 2011. The loan principal is to be repaid in seven installments according to the following schedule: (1) RMB 10 million (approximately $1.5 million) on November 21, 2012; (2) RMB 20 million
(approximately $3.1 million) on May 21, 2013; (3) RMB 20 million (approximately $3.1 million) on November 21, 2013; (4) RMB 20 million (approximately $3.1 million) on May 21, 2014; (5) RMB 25 million (approximately $3.9 million) on
November 21, 2014; (6) RMB 25 million (approximately $3.9 million) on May 21, 2015; and (7) RMB 30 million (approximately $4.6 million) on February 9, 2016. The interest rate
was originally agreed to be 5.90% for the first installment and the then-published base
rate for 6-year loans published by the PBOC for subsequent installments. Interest is to be calculated and settled every March 20, June 20, September 20, and December 20 each year, and payable the following business day.
Pursuant to a Supplemental Agreement dated June 13, 2011, all loans under the
agreement carry interest at 105% of the PBOC benchmark rate. The loan proceeds must be
used for the construction of our Research & Development Test Centre in Shenzhen. The long-term loan is secured by Shenzhen BAKs pledge of its land use rights certificates, property ownership and equipment built-up by use of this long-term
loan pursuant to the loan agreement. According to the property ownership and land use rights certificate that we obtained in relation to this facility, the certificate may not be pledged without the approval of the relevant government office. On
April 7, 2010, the pledge of the land use rights certificate to China Development Bank was approved by the relevant government bureau. For further discussion regarding the status of property ownership rights relating to this facility, please see
Managements Discussion and Analysis of Financial Condition and Results of Operations  Capital Expenditures. The obligations of Shenzhen BAK under this loan agreement are guaranteed by Mr. Xiangqian Li. In consultation with
China Development Bank, as of June 30, 2011, we have borrowed approximately $14.8million in two loans under this agreement based on our updated evaluation of the expected construction costs of our Research & Development Test Centre.
As of June 30, 2011, we had borrowed approximately RMB 95.6 million (or approximately $14.8 million)
under this loan. China Development Bank has not charged any interest or
penalties relating to the portion of the loan that we have not drawn. The loans
currently carry annual interest at 7.4025%. The loan proceeds are repayable in
accordance with the repayment schedule described above.

As of June 30, 2011, we had a four-year, long-term loan agreement expiring May 26, 2012 of RMB 100 million (approximately $15.5 million) with Agricultural Bank of China, Tianjin Branch, or Agricultural Bank  Tianjin Branch. This loan
agreement is secured by the machinery and equipment purchased for the automated high-power lithium battery cells production line at our Tianjin facility with carrying values of approximately $1.9 million as of June 30, 2011. As of June 30, 2011,
we had borrowed $15.5 million under this loan agreement, payable in two installments: (i) RMB 50 million (approximately $7.7 million) on December 26, 2011; and (ii) RMB 50 million (approximately $7.8 million) on May 26, 2012.

We had negative working capital of $106.0 million as of June 30, 2011, as compared to negative working capital of $70.8 million as of September 30, 2010. Current assets as of June 30, 2011 were $186.6 million compared with $194.6
million as of September 30, 2010, a decrease of $8.0 million. Current liabilities as of June 30, 2011 were $292.7 million compared with $265.5 million as of September 30, 2010, an increase of $27.2 million. We had short-term bank
loans maturing in less than one year of $138.1 million and long-term bank loans maturing within one year of $23.2 million as of June 30, 2011, or a total of $161.3 million of loans maturing within one year, as compared to a total of
$149.4 million of such loans as of September 30, 2010, an increase of $11.9 million. We had long-term bank loans maturing in over one year of $14.8 million as of June 30, 2011, as compared to $29.9 million of such loans as of
September 30, 2010, a decrease of $15.1 million.

We believe that our current cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures for at least the next 12
months. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our existing cash and amount available under existing credit facilities is insufficient to meet our
requirements, we may seek to sell additional equity securities, debt securities
or borrow from lending institutions. We can make no assurances that financing
will be available in the amounts we need or on terms acceptable to us, if at
all. The sale of additional equity securities, including convertible debt
securities, would dilute the interests of our current shareholders. The
incurrence of debt would divert cash for working capital and capital
expenditures to service debt obligations and could result in operating and
financial covenants that restrict our operations and our ability to pay
dividends to our shareholders. If we are unable to obtain additional equity or
debt financing as required, our business operations and prospects may
suffer.

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Capital Expenditures

We made capital expenditures of $26.5 million and 20.3 million
in the nine months ended June 30, 2011 and 2010, respectively. Our capital
expenditures were used primarily to purchase plant and equipment to expand our
production capacity.

The following table sets forth the breakdown of our capital
expenditures by use for the periods indicated.

|                           |   | Nine Months Ended | 
|-------------------------- | - | ----------------- | 
|                           |   | June 30,          | 
|                           |   | 2011              | 
|                           |   | (in thousands)    | 
|Construction costs         | $ | 13,156            | 
|Purchase of equipment      |   | 13,376            | 
|Total capital expenditures | $ | 26,532            | 

We estimate that our total capital expenditures in fiscal year
2011 will reach approximately $35.0 million, to purchase manufacturing equipment
for our production lines and for the construction of our new Research and
Development Test Centre at our Shenzhen facility.

We have completed the construction and put into use facilities
measuring 218,178 square meters comprised of manufacturing facilities,
warehousing and packaging facilities, dormitory space, dining halls and
administrative offices at the BAK Industrial Park in Shenzhen. Of that space,
approximately 81,411 square meters are manufacturing facilities. We have also
completed the construction and put into use facilities measuring 65,907 square
meters comprised of manufacturing facilities, dormitory space, dining halls and
other facilities in Tianjin. Of that space, approximately 44,129 square meters
are manufacturing facilities. The primary reasons for our continuing investments
in the facilities in Tianjin are to realize the benefits of our prior investment
in these facilities, to position the Company to capitalize on our knowledge of
and experience with established markets for lithium-phosphate technology, such
as electric bicycles, cordless power tools, and to penetrate emerging consuming
markets for this technology, such as electric cars, electric buses, light
electric vehicles, and hybrid electric vehicles. We have received several
contracts to supply high-power lithium cells for use in electric cars, electric
bicycles, UPS, and other applications.

According to the relevant PRC laws and regulations, a land use
right certificate, along with government approvals for land planning, project
planning, and construction must be obtained before the construction of any
building is commenced. An ownership certificate will be granted by the
government upon application under the condition that the aforementioned
certificate and government approvals are obtained. We recently obtained the land
use right to the tract of property on which we have constructed and on which we
plan further construction of our manufacturing facilities and other related
facilities in Shenzhen. While we have been constructing and have completed a
substantial part of the construction of our facilities with the approval of the
local government of Kuichong Township of Longgang District of Shenzhen, we
understand it did not have the authority to grant us the land use rights
certificate. However, the Company obtained approval for project planning and
construction from the government of Shenzhen on June 20, 2007. Under an
agreement with the government of Shenzhen for the acquisition of the land use
rights to BAK Industrial Park dated June 29, 2007, effective June 2008, the
government agreed to provide us with the land use rights certificate relating to
BAK Industrial Park on the condition that we would pay it an additional
$11,819,841. According to a notice received from the government of Shenzhen on
June 6, 2008, we obtained government grants of $7,889,991 to subsidize this
additional payment. As of September 30, 2008, we had fully paid the remaining
cost of $3,929,850 and had obtained the land use rights certificate for BAK
Industrial Park. On June 2, 2011, we had obtained the property ownership
certificate relating to BAK Industrial Park.

We have insurance for our manufacturing facilities for Shenzhen
BAK located in BAK Industrial Park and our manufacturing facilities at our
Tianjin facility. However, we are not able to insure our new Research and
Development Test

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Centre to be constructed in Shenzhen, China, until we receive the required certificate of property ownership. Upon receipt of the certificate of property ownership, we intend to procure such insurance. The application for the certificate of property
ownership rights is in process with respect to our facilities at Tianjin (see discussion of our Research and Development Test Centre below).

As of September 30, 2007, we had fully paid the lease prepayment amount of $14.1 million for the acquisition of land use rights regarding our Tianjin facility. As of September 30, 2008, we had obtained the relevant land use rights certificate to
this facility. As of June 30, 2011, we were in the process of obtaining the relevant property ownership rights certificate to this facility.

Pursuant to our land use rights certificate relating to our Tianjin facility, the Tianjin government had originally requested that we complete construction of the Tianjin facility before September 30, 2008. As of September 30, 2008, we had not done
so. Notwithstanding this requirement, we have obtained an extension from the Business Administration Bureau of Beichen District, Tianjin, to make the remaining contribution of the registered capital by December 11, 2009, which we interpreted as an
extension of the completion date of construction to this date. On November 16, 2009, BAK International contributed approximately US$9,000,000 capital to BAK Tianjin and as of November 16, 2009, the total contribution from BAK International was
US$29,000,000. The remaining US$70,990,000 was originally required to be fully contributed no later than December 11, 2009 and an extension from the Business Administration Bureau of Beichen District, Tianjin, was obtained to complete this
contribution no later than December 2012. As of June 30, 2011, we were in the process of negotiating with the relevant government bureau for the extension of the completion date of the construction of the Tianjin facility.

As of September 30, 2007, we had paid the lease prepayment amount of $717,000 for the acquisition of land use rights for a new Research and Development Test Centre to be constructed in Shenzhen, China. As of September 30, 2008, we had obtained
the relevant property ownership and land use rights certificate. Pursuant to the property ownership and land use rights certificate, we are required to complete at least 25% of the construction of the new Research and Development Test Centre
facility by September 30, 2008. As of September 30, 2008, we had not done so. Notwithstanding this requirement, the Shenzhen government has agreed to increase the dimensions of the Research and Development Test Centre and signed two supplemental
agreements with us. According to the supplemental agreements, we are required to complete the construction by May 6, 2011. As of June 30, 2011, we are in the process of applying for an extension from the Shenzhen government. In addition, according
to the property ownership and land use rights certificate, such land may not be pledged without the approval of the relevant government office. We are required to pledge our property ownership and land use rights certificate in relation to the new
Research and Development Test Centre to China Development Bank pursuant to the loan agreement entered into with it. On April 7, 2010, the pledge of the land use rights certificate to China Development Bank was approved by the relevant government
bureau. On April 20, 2010, the relevant land use rights certificate was pledged to China Development Bank. In addition, the so-named property ownership and land use rights certificate relating to this facility that we were issued lacks
certain terms relating to property ownership rights, which appears to indicate that the granting government has so far only granted us the relevant land use rights. As a result, this certificate may not be adequate evidence of our property ownership
rights to this property. We anticipate that the government will re-grant this certificate with adequate property ownership indicia after we have satisfied the above construction requirement and followed certain procedures.

Contractual Obligations and Commercial Commitments

Please refer to Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations Contractual Obligations and Commercial Commitments in the 2010 Form 10-K for a discussion of our contractual
obligations and commercial commitments as of September 30, 2010. There were no material changes outside the ordinary course of our business in our contractual obligations and commercial commitments for the quarter ended June 30, 2011.

Off-Balance Sheet Transactions

In the ordinary course of business practices in China, we enter into transactions with banks or other lenders where we guarantee the debt of other parties. These parties may be related to or unrelated to us. Conversely, our debt with lenders may
also be guaranteed by other parties which may be related or unrelated to us.

Under U.S. GAAP, these transactions may not be recorded on our balance sheet or may be recorded in amounts different than the full contract or notional amount of the transaction. Our primary off-balance sheet arrangements would result from our loan
guaranties in which Shenzhen BAK, BAK International, BAK Tianjin, and/or Mr. Xiangqian Li, our director, Chairman, President, and Chief Executive Officer, would provide contractual assurance of the debt, or guarantee the timely re-payment of
principal and interest of the guaranteed party. Neither Shenzhen BAK, BAK International, BAK Tianjin, nor

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Mr. Xiangqian Li received, nor is entitled to receive, any consideration for the above-referenced guarantees, and we are not independently obligated to indemnify any of those guarantors for any amounts paid by them pursuant to any guarantee.

Typically, no fees are received for this service. Thus, in those transactions, Shenzhen BAK would have a contingent obligation related to the guarantee of payment in the event the underlying loan is in default.

Transactions described above require accounting treatment under ASC Topic 460 Guarantees. Under that standard, we would be required to recognize the fair value of guarantees issued or modified after December 31, 2002, for non-contingent
guarantee obligations, and also a liability for contingent guarantee obligations based on the probability that the guaranteed party will not perform under the contractual terms of the guaranty agreement.

We have assessed the contingent liabilities arising from the above-described guarantees and have considered them immaterial to the consolidated financial statements. Therefore, no liabilities in respect of the guarantees were recognized as of June
30, 2011. As of June 30, 2011, we provided the guarantees for the following non-related parties: Nanjing Special Metal Equipment Co., Ltd., Hunan Reshine New Material Ltd, Shenzhen Tongli Hi-tech Co. Ltd., Shanghai Global Children Products Co. Ltd.,
Shenzhen Yasu Technology Co. Ltd. and Tianjin Bike New Energy Research Institute. The maximum amount of our exposure for these guarantees was $33.3 million and $40.2 million at June 30, 2011 and September 30, 2010, respectively.

Critical Accounting Policies

Our consolidated financial information has been prepared in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (1) the reported amounts of our assets and liabilities, (2) the disclosure of our
contingent assets and liabilities at the end of each fiscal period and (3) the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these estimates based on our own historical experience, knowledge and
assessment of current business and other conditions, our expectations regarding the future based on available information and reasonable assumptions, which together form our basis for making judgments about matters that are not readily apparent from
other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their
application.

When reviewing our financial statements, the following also should be considered: (1) our selection of critical accounting policies, (2) the judgment and other uncertainties affecting the application of those policies, and (3) the sensitivity of
reported results to changes in conditions and assumptions. We believe the following accounting policies involve the most significant judgment and estimates used in the preparation of our financial statements.

Recoverability of Long-Lived Assets

Our business is capital intensive and has required, and will continue to require, significant investments in property, plant and equipment. As of June 30, 2011 and September 30, 2010, the carrying amount of property, plant and equipment, net was
$247.9 million and $228.9 million, respectively. We assess the recoverability of property, plant and equipment to be held and used by a comparison of the carrying amount of an asset or group of assets to the future net undiscounted cash
flows expected to be generated by the asset or group of assets. If such assets are considered impaired, the impairment recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

A prolonged general economic downturn and, specifically, a continued downturn in the battery cell industry as well as other market factors could intensify competitive pricing pressure, create an imbalance of industry supply and demand, or otherwise
diminish volumes or profits. Such events, combined with changes in interest rates, could adversely affect our estimates of future net cash flows to be generated by our long-lived assets. Consequently, it is possible that our future operating results
could be materially and adversely affected by additional impairment charges related to the recoverability of our long-lived assets.

We have not recognized any additional impairment charges for the long-lived assets for the nine months ended June 30, 2011.

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Inventory Obsolescence

We review our inventory for potential impairment on a quarterly or more frequent basis as deemed necessary. Such review includes, but is not limited to, reviewing the levels of inventory versus customer requirements and obsolescence. The review and
evaluation also considers the potential sale of impaired inventory at lower than market prices. At each balance sheet date, we identify inventories that are worth less than cost and write them down to their net realizable value and the difference is
charged to our cost of revenues of that period. Though management considers such write-down of inventories adequate and proper, changes in sales volumes due to unexpected economic or competitive conditions are among the factors that could materially
affect the adequacy of such write-down.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our accounts receivable. We determine the allowance based on historical write-off experience, customer specific facts and economic conditions. Bad
debt expense is included in the general and administrative expenses. We review outstanding account balances individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and
the potential for recovery is considered remote. As of June 30, 2011 and September 30, 2010, we had not charged off any balances as we had yet to exhaust all means of collection.

Equity-Based Compensation

We adopted the provisions of ASC Topic 718 Compensation  Stock Compensation, which requires the use of the fair value method of accounting for share-based compensation. Under the fair value based method, compensation cost related
to employee stock options or similar equity instruments is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. ASC Topic 718 also requires measurement of cost of
a liability-classified award based on its current fair value. The fair value of the liability-classified award will be subsequently re-measured at each reporting date through the settlement date. Change in fair value during the requisite service
period will be recognized as compensation cost over that period.

We determine fair value using the Black-Scholes model. Under this model, certain assumptions, including the risk-free interest rate, the expected life of the options and the estimated fair value of our ordinary shares and the expected volatility,
are required to determine the fair value of the options. If different assumptions had been used, the fair value of the options would have been different from the amount we computed and recorded, which would have resulted in either an increase or
decrease in the compensation expense.

Pursuant to ASC Topic 718, we have recognized compensation costs of $1.3 millionin relation to stock-based awards to our employees and non-employee directors for the nine months ended June 30, 2011, as an increase in both the operating
costs and shareholders equity.

Recently Issued Accounting Pronouncements

Please refer to note 1 to our condensed interim consolidated financial statements, Principal Activities, Basis of Presentation and Organization  Recently Issued Accounting Standards, for a discussion of relevant pronouncements.

Exchange Rates

The financial records of Shenzhen BAK, BAK Electronics, BAK Tianjin and Tianjin Meicai are maintained in RMB. In order to prepare our financial statements, we have translated amounts in RMB into amounts in U.S. dollars. The amounts of our assets and
liabilities on our balance sheets are translated using the closing exchange rate as of the date of the balance sheet. Revenues, expenses, gains and losses are translated using the average exchange rate prevailing during the period covered by such
financial statements. Adjustments resulting from the translation, if any, are included in our cumulative other comprehensive income/(loss) in our stockholders equity section of our balance sheet. All other amounts that were originally booked
in RMB and translated into U.S. dollars were translated using the closing exchange rate on the date of recognition. Consequently, the exchange rates at which the amounts in those comparisons were computed varied from year to year.

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|                                                                                                                                                                                                 |  | RMB per U.S. Dollar | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------- | 
|                                                                                                                                                                                                 |  | 2011                | 
|Balance sheet items as of June 30                                                                                                                                                                |  | 6.4634              | 
|Amounts included in the statement of
      operations and comprehensive income, statement of changes in stockholders
      equity and statement of cash flows for the nine months ended June 30 |  | 6.5616              | 
|Balance sheet items as of September
      30                                                                                                                                                     |  | -                   | 

**ITEM 3.** **QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.**

**Interest Rate Risk**

We are exposed to interest rate risk primarily with respect to
our short-term bank loans and long-term bank loans. Although the interest rates,
which are based on the banks prime rates with respect to our short-term loans
are fixed for the terms of the loans, the terms are typically three to twelve
months for short-term bank loans and interest rates are subject to change upon
renewal. There were no material changes in interest rates for short-term bank
loans renewed during the nine months ended June 30, 2011.

Please refer to Item 2, Managements Discussion and Analysis
of Financial Condition and Results of Operations Liquidity and Capital
Resources  Financing Activities for a discussion of our credit facilities and
loan agreements.

A hypothetical 1.0% increase in the annual interest rates for
all of our credit facilities under which we had outstanding borrowings at June
30, 2011, would increase net loss before provision for income taxes by
approximately $1.7 million, or 11.5%, for the nine months ended June 30, 2011.
Management monitors the banks prime rates in conjunction with our cash
requirements to determine the appropriate level of debt balances relative to
other sources of funds. We have not entered into any hedging transactions in an
effort to reduce our exposure to interest rate risk.

Foreign Exchange Risk

Although our reporting currency is the U.S. dollar, the
financial records of our operating subsidiaries are maintained in their local
currency, the RMB, which is our functional currency. Approximately 97.2% of our
revenues and 96.3% of our costs and expenses for the nine months ended June 30,
2011 are denominated in RMB, with the balance denominated in U.S. dollars. Approximately 99.8% of our assets except for
cash were denominated in RMB as of June 30, 2011. As a result, we are exposed to
foreign exchange risk as our revenues and results of operations may be affected
by fluctuations in the exchange rate between U.S. dollars and RMB. If the RMB
depreciates against the U.S. dollar, the value of our RMB revenues, earnings and
assets as expressed in our U.S. dollar financial statements will decline. Assets
and liabilities of our operating subsidiaries are translated into U.S. dollars
at the exchange rate at the balance sheet date, their equity accounts are
translated at historical exchange rates, and their income and expenses items are
translated using the average rate for the period. Any resulting exchange
differences are recorded in accumulated other comprehensive income or loss. An
average appreciation (depreciation) of the RMB against the U.S. dollar of 5%
would increase (decrease) our comprehensive income by $8.8 million based on our
outstanding revenues, costs and expenses, assets, and liabilities denominated in
RMB as of June 30, 2011. As of June 30, 2011, our accumulated other
comprehensive income was $33.4 million. We have not entered into any hedging
transactions in an effort to reduce our exposure to foreign exchange risk.

Inflation Risk

Inflationary factors such as increases in the cost of our
products and overhead costs may adversely affect our operating results. Although
we do not believe that inflation has had a material impact on our financial
position or results of operations to date, a high rate of inflation in the
future may have an adverse effect on our ability to maintain current levels of
gross margin and selling and general and administrative expenses as a percentage
of net revenues if the selling prices of our products do not increase with these
increased costs.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

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As required by Rule 13a-15 under the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of June 30, 2011. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer
and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive officer and our chief financial officer. Based upon, and as of the date of this evaluation, our chief executive officer and chief
financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2011.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during our fiscal quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

There have been no material changes to the risk factors disclosed in our 2010 Form 10-K. Investors are directed to Item 1, Risk Factors of the 2010 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. (REMOVED AND RESERVED).

ITEM 5. OTHER INFORMATION.

We have no information to disclose that was required to be in a report on Form 8-K during the period covered by this Report, but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees
to our board of directors.

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ITEM 6. EXHIBITS.

The following exhibits are filed as part of this report or incorporated by reference:

|Exhibit No. | Description                                                                                                                                                                                   
|----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1        | Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                
|31.2        | Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                
|32.1        | Certifications of Principal Executive Officer
      furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.                 
|32.2        | Certifications of Principal
      Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                 
|99.1        | Comprehensive Credit Facility Agreement of
      Maximum Amount (English summary), dated May 3, 2011, between Shenzhen BAK
      Battery Co., Ltd. and Shenzhen Longgang Branch, Bank of China
|99.2        | Guaranty Contract of Maximum
      Amount (English summary), dated May 3, 2011, between BAK International
      Limited and Shenzhen Longgang Branch, Bank of China                           
|99.3        | Guaranty Contract of Maximum Amount (English
      summary), dated May 3, 2011, between Xiangqian Li and Shenzhen Longgang
      Branch, Bank of China                                        
|99.4        | Comprehensive Credit Facility
      Agreement of Maximum Amount (English summary), dated May 6, 2011, between
      Shenzhen BAK Battery Co., Ltd. and Shenzhen Branch, China CITIC Bank      
|99.5        | Loan Agreement (English summary), dated June 3,
      2011, between Shenzhen BAK Battery Co., Ltd. and Shenzhen Branch, China
      CITIC Bank                                                
|99.6        | Guaranty Contract of Maximum
      Amount (English summary), dated May 6, 2011, between Xiangqian Li and
      Shenzhen Branch, China CITIC Bank                                              
|99.7        | Guaranty Contract of Maximum Amount (English
      summary), dated May 6, 2011, between BAK International Limited and
      Shenzhen Branch, China CITIC Bank                                 
|99.8        | Loan Agreement (English
      summary), dated April 13, 2011, between Shenzhen BAK Battery Co., Ltd. and
      Shenzhen Eastern Branch, Agricultural Bank of China                            
|99.9        | Loan Agreement (English summary), dated April
      14, 2011, between Shenzhen BAK Battery Co., Ltd. and Shenzhen Eastern
      Branch, Agricultural Bank of China                            
|99.10       | Loan Agreement (English
      summary), dated April 18, 2011, between Shenzhen BAK Battery Co., Ltd. and
      Shenzhen Eastern Branch, Agricultural Bank of China                            
|99.11       | Loan Agreement (English summary), dated June
      13, 2011, between Shenzhen BAK Battery Co., Ltd. and Longgang Branch,
      Shenzhen Development Bank Co., Ltd.                            
|99.12       | Mortgage Contract of Maximum
      Amount (English summary), dated June 13, 2011, between Shenzhen BAK
      Battery Co., Ltd. and Longgang Branch, Shenzhen Development Bank Co., Ltd.       
|99.13       | Loan Certificate, dated June 13, 2011, between
      Shenzhen BAK Battery Co., Ltd. and China Development Bank                                                                                
|99.14       | Supplemental Agreement dated June 13, 2011,
    between Shenzhen BAK Battery Co., Ltd. and China Development Bank                                                                             

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 9, 2011

CHINA BAK BATTERY, INC.

By:   /s/Xiangqian Li         Xiangqian Li, Chief Executive Officer(Principal Executive Officer)

By:   /s/ Ke Marcus Cui         
Ke Marcus Cui, Chief Financial Officer (Principal Financial Officer and PrincipalAccounting Officer)

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