During the first quarter of 2009, the increase in revenue was driven by increased sales volume particularly from large and medium capacity battery cells, but was constrained by production capacity limitations. Large capacity battery cells generated $3.8 million in sales, or 35.8% of total revenue for the quarter. Medium capacity battery cells (including miner’s lamps containing such cells) generated $5.9 million in sales, or 55% of total revenue in the first quarter of 2009. Small capacity battery cells generated $976,580 in sales, or 9.1% of total revenue in the first quarter of 2009.

In the first quarter of 2009, gross profit was $5 million, essentially flat to the first quarter of 2008. Gross margin was 47.1% in the first quarter 2009, compared to 50.3% in the prior year’s period. Gross margin performance reflects a higher proportion of sales from lower margin products, primarily medium capacity battery cells.

In the first quarter of 2009, operating income decreased about 7.4% to $4.1 million from $4.5 million during the same period last year. Operating expenses increased 56.7% to $896,319 from $571,890 in the prior year period. The increase reflected non-cash stock compensation expense of about $312,246 and increased expenses related to the operation of the company’s production facility in China and its US-based offices.

Zhiguo Fu, chairman and chief executive officer of Advanced Battery, said, We are pleased with the progress that our company has made despite the difficult economic environment. We were able to achieve suitable revenue growth for the quarter, although we will strive for greater growth in 2009 with increased production capacity and tighter cost controls. As such, we expect the expanded assembly line in Harbin to be operational late in the second quarter of 2009, which will add the production capacity enabling an additional $22 million in revenue generation for 2009. We remain optimistic about our continued growth in the remainder of the year and currently our backlog for the battery business is about $64.0 million as of early May.

Wuxi Angell Update:

Advanced Battery signed a definitive acquisition agreement with Wuxi Angell Autocycle Co. Ltd. (Wuxi Angell) on April 28, 2009 and closed the acquisition in early May 2009.

Zhiguo Fu, stated, We are excited to announce that we have completed the acquisition of Wuxi Angell. The acquisition of Wuxi Angell provides the company entry to the growing electric and hybrid-electric bike market. The benefits of our relationship with Wuxi Angell are evident in the introduction of three new hybrid motorcycles, which debuted in February 2009, and by our recently announced contracts for various types of electric vehicles and hybrid-electric vehicles, with an aggregate contract amount of $24 million.

Balance Sheet:

As of March 31, 2009, the company had $33.5 million of cash and cash equivalents, compared to $32.7 million of cash and cash equivalents at December 31, 2008. The company’s working capital on March 31, 2009 totaled $51.1 million.

Guidance:

On April 2, 2009, Advanced Battery provided financial guidance for the first quarter of 2009, expecting revenue of $10.7 million and net income of $4.65 million. This net income guidance did not take into consideration the parent company’s overseas costs or the non-cash stock compensation expense recognized in the first quarter.

Advanced Battery will refrain from providing financial guidance for 2009 as the company does not believe it can provide meaningful financial guidance with a high degree of accuracy given the Wuxi Angell acquisition, new production capacity coming on line and new product delivery schedules throughout 2009.