SHENZHEN, China, March 26 /Xinhua-PRNewswire/ -- Long-E International, Inc. (Pink Sheets: LOGE), ("Long-E" or the Company"), a leading manufacturer of automotive electronic systems and components in China, announced today financial results for the fiscal year ended December 31, 2007.
Full Year 2007 Highlights
-- Total revenue increased 33.3% to $31.6 million
-- Gross profit increased 28.4% to $9.0 million
-- Operating income decreased 16.7% to $1.4 million
-- Net loss totaled $0.6 million, or $(0.02) per fully diluted share
-- Non-GAAP net income was $1.4 million, or $0.04 per fully diluted share
-- Completed private placement financing generating $5.4 million in gross
proceeds
Full Year 2007 Results
During the fiscal year ended December 31, 2007, total revenue increased 33.3% to $31.6 million from $23.7 million in 2006. This was primarily due to a significant increase of 50.7% in product sales, up to $29.4 million in 2007. The Company's two-way interactive car alarm system remained its top-selling product, accounting for 54% of total revenue in 2007 compared to 66% in 2006. Sales of other car alarm systems, the Company's tire pressure monitoring system ("TPMS"), and its parking sensor system accounted for 19%, 13%, and 14% of total sales, respectively. Sales to distributors for export totaled $6.8 million in 2007, or 23% of total sales, representing an increase of 240% from $2.0 million, or 10% of total sales a year ago. Revenue from assembling and reprocessing accounted for 6.9% of total revenue.
"We are delighted to see double-digit growth in our top line in 2007 and sales growth of higher margin products like our two-way interactive car alarm systems," said Mr. Shengfu Bu, chairman and chief executive officer of Long-E. "We continued to strengthen our domestic and overseas marketing network, particularly with Chinese OEMs/ODMs and the Chinese aftermarket. We have also adjusted our sales strategy to explore opportunities in new markets and enhanced relationships with our key clients."
Gross margin in 2007 was 28.4%, down from 29.5% a year earlier. This was due to a higher cost of goods sold in connection with changes in product offerings, most notably the expanded focus on the production and marketing of two-way interactive visual car alarm systems and TPMS, which also resulted in a $0.5 million write-down of inventory.
Operating expenses were $7.5 million in 2007, up 42.8% from $5.3 million in 2006. This increase was caused by higher general and administrative expenses and increased selling expenses in support of new business. General and administrative expenses increased 99.8%, primarily from increased administrative costs associated with becoming a public company, greater labor costs associated with the additional hiring of qualified staff and the introduction of new management software to improve the Company's competitive capacity. Research and development expenses totaled $0.4 million, compared with $0.6 million in 2006.
Operating income was $1.4 million, down 16.7% from $1.7 million in 2006. Operating margin was 4.5%, down from 7.2% in 2006.
In 2007, net loss was $0.6 million, or ($0.02) per fully diluted share, compared to net income of $0.9 million, or 0.04 per diluted share, a year earlier. Net loss includes the impact of $1.5 million in penalty expenses accrued due to a delay in effectiveness of the registration statement associated with the Company's private placement financing in December 2006. Adjusting net loss to exclude these penalty expenses and non-cash interest expenses associated with the Company's convertible promissory notes and warrants, non-GAAP net income was $1.4 million, or $0.04 per fully diluted share, relatively unchanged from non-GAAP net income of $1.4 million, or $0.07 per fully diluted share, in 2006. Diluted earnings per share reflect increase in weighted average shares outstanding of 10.5 million due to the Company's private placement financings in December 2006 and January 2007.
Financial Condition
As of December 31, 2007, Long-E International had $3.7 million in cash and cash equivalents. Working capital was $8.5 million, up from $3.5 million at December 31, 2006. Total current liabilities, including short-term borrowings, taxes payable and accounts payable was $8.0 million. Shareholders' equity stood at $11.4 million as compared to $4.7 million at December 31, 2006.
In January 2007, the Company completed a private placement financing of convertible promissory notes and warrants, generating $5.4 million in net proceeds. The Company utilized a portion of the proceeds to purchase plant and equipment and working capital requirements.
Business Outlook
In 2008, The Company plans to increase its ongoing investment in research and development, launch the commercial sales of its second generation TPMS and digital parking reverse sensor systems, continue to develop its marketing network, implement stricter and more efficient quality controls, and increase investment in its production management system. Management expects capital expenditures of approximately $15 million in 2008.
The Company foresees expansion in all product areas, however the largest area of growth in the short term is expected to be its TPMS products. The Company is currently working with Tianjin Automotive Research Institute to draft product standards for TPMS in China. In addition, Long-E has recently signed contracts with Hafei, Chery, and SGMW, further strengthening its customer base. With an expanding customer base as well as an increase in orders from existing clients, management expects total revenue growth of 35% to 45% in fiscal 2008.
"We are optimistic that market demand for TPMS will continue to grow with the increasing rate of private car ownership in China," said Mr. Bu. "We look forward to leveraging our technical expertise to provide customers with high quality products to ensure safer driving."
Use of Non-GAAP Financial Measures
GAAP results for the year ended December 31, 2007 and 2006 include non-cash financing charges related to the Company's convertible promissory notes and warrants and penalty expenses related to a delay in the effectiveness of the registration statement associated with its private placement financing in December 2006. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of these items in this release. The Company's management believes that this non-GAAP measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of adjustment to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.
About Long-E International, Inc.
Since its establishment in 2000, Long-E's operations have focused on the development, manufacture, marketing and servicing of automotive electronic systems and components, including alarm systems, tire pressure monitoring systems, and reverse sensor systems. Long-E distributes its products to automotive manufacturers and to the aftermarket through its wholesalers and retailers. The Company's customers include Dongfeng Citroen Automobile, Ltd., Fengshen Automobile, Ltd., Dengfeng Nissan, Dongfeng Liuqi, Dongfeng Liuzhou Automobile Co., Ltd., Hafei Automobile, Changfeng Automobile, Chery Automobile and Dongfeng Peugeot.
Forward-Looking Statements
The information contained herein includes forward-looking statements. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward- looking statements. These risk factors include changes in the laws of the PRC that may affect the Company's operations, the Company's ability to continue to develop and market new or updated products, The Company's ability to expand its presence in international markets, protection of the Company's intellectual property rights in China and in other international markets and other factors listed in the Company's 10K and other filings with the Securities and Exchange Commission. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 protects companies from liability for their forward-looking statements if they comply with the requirements of the Act.
FINANCIAL TABLES BELOW
Long-E International, Inc. and Subsidiaries
AUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended December 31, 2007 and 2006
December 31, December 31,
2007 2006
Product Sales $ 29,389,508 $ 19,481,024
Assembling / Reprocessing Revenues 2,190,238 4,216,135
Total Revenues 31,579,746 23,697,159
Cost of Sales 22,610,851 16,705,371
Gross Profit 8,968,895 6,991,788
Operating Expenses
Selling expenses 3,561,588 2,461,603
General and administrative expenses 3,578,288 1,791,357
Research and development 404,808 578,789
Merger financing cost -- 114,760
Loss on disposal of assets -- 335,803
Total Operating Expenses 7,544,684 5,282,312
Income from Operations 1,424,211 1,709,476
Other Income (Expenses):
Government grant 21,263 --
Interest income 36,512 7,714
Interest expense (57,286) (97,318)
Amortization of discount on convertible
notes (490,692) (500,000)
Registration rights penalty (1,450,600) --
Gain on extinguishment of debt -- 40,991
Sundry income (expense) 68,317 (28,156)
Total Other Income (Expenses) (1,872,486) (576,769)
Income (Loss) before income taxes (448,275) 1,132,707
Provision for income taxes 194,594 274,235
Net Income (Loss) (642,869) 858,472
Foreign currency translation adjustment 778,377 172,074
Comprehensive Income $ 135,508 $ 1,030,546
Net earnings per share, basic $ (0.02) $ 0.04
Weighted average number of shares
outstanding, basic 31,259,714 20,748,984
Net earnings per share, diluted $ (0.02) $ 0.04
Weighted average number of shares
outstanding, diluted 31,259,714 20,804,933
Long-E International, Inc. and Subsidiaries
AUDITED CONSOLIDATED BALANCE SHEETS
At December 31, 2007 and 2006
December 31, December 31,
2007 2006
ASSETS:
Current Assets:
Cash and cash equivalents $ 3,715,010 $ 2,313,080
Trade Receivables, net 6,768,947 4,405,799
Short-term loans receivable 2,333,656 --
Inventories, net 2,763,930 2,118,373
Value-added taxes (VAT) refundable 22,370 55,340
Due from related parties 23,587 1,048
Prepaid expenses and other receivables 810,668 177,166
Total current assets 16,438,168 9,070,806
Plant and equipment, net 2,146,924 1,089,127
Land use right deposit 1,179,980 --
Intangibles, net 53,835 95,864
Total Assets $ 19,818,907 $ 10,255,797
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable-Trade $ 2,670,458 $ 1,965,098
Accrued liabilities and other payables 717,661 357,507
Short term loans 1,545,829 1,174,371
Current portion of bank loans payable 261,435 --
Registration rights penalty payable 323,600 --
Other taxes payable 1,212,896 995,376
Wages payable 810,274 570,215
Corporate income taxes payable 239,361 121,948
Due to related parties 175,718 393,267
Total current liabilities 7,957,232 5,577,782
Long-term Liabilities:
Bank loans payable 20,278 --
Convertible debt, net of debt discount
of $4,862,308 490,692 --
Convertible debt, issued for settlement
of liquidating damage, net of
debt discount of $1,127,000 -- --
Total Liabilities 8,468,202 5,577,782
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.001 Par value;
50,000,000 shares authorized;
issued and outstanding 31,259,714 and
31,259,714 shares, respectively 31,260 31,260
Additional paid-in capital 8,623,111 2,066,869
Deferred warrant expense (19,060) --
Accumulated other comprehensive income 983,362 204,985
Statutory reserves 1,252,323 776,491
Retained earnings 479,709 1,598,410
Total Shareholders' Equity 11,350,705 4,678,015
Total Liabilities and Shareholders'
Equity $ 19,818,907 $ 10,255,797
Long-E International, Inc. and Subsidiaries
AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 2007 and 2006
December 31, December 31,
2007 2006
Cash flows from operating activities
Net Income (loss) $ (642,869) $ 858,472
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation and amortization 671,313 380,488
Loss on disposal of fixed asset -- 335,803
Amortization of debt discount 490,692 500,000
Amortization of CCG warrants 57,182 --
Gain on extinguishment of debts -- (40,991)
Registration rights penalty 1,450,600 --
Change in operating assets and
liabilities:
(Increase) decrease in assets:
Due from related parties (173,277) 137,951
VAT tax recoverable 35,333 (21,314)
Trade Receivables, net (1,977,573) (1,362,862)
Short-term loans receivable (2,241,277) --
Deposit and other receivables (597,355) (177,166)
Inventories, net (479,590) (1,190,889)
(Decrease) increase in liabilities:
Accounts payable and accrued
liabilities 1,086,561 971,618
Other tax payable 142,933 995,376
Corporate income tax payable 104,683 39,769
Net cash provided by (used in)
operating activities (2,072,644) 1,426,255
Cash flows from investing activities:
Purchase of plant and equipment (1,562,486) (540,316)
Proceeds from disposal of fixed assets -- 251
Land use right deposit (1,133,270) --
Purchase of intangibles (5,840) (109,246)
Net cash used in investing activities (2,701,596) (649,311)
Cash flows from financing activities:
Proceeds from bank loans 1,633,117 --
Proceeds from loans from individuals 30,847 83,776
Repayment of bank loans (630,273) (376,913)
Repayment of short-term government
loans (102,823) --
Repayment of government loans (164,517) --
Repayment of loans from individuals (155,505) (404,309)
Proceeds from related party advances (14,975) 331,766
Issuance of convertible promissory
notes 5,353,000 500,000
Receipts of notes receivable -- 10,000
Common shares issued for cash -- 959,088
Net cash provided by financing
activities 5,948,871 1,103,408
Effect of exchange rate changes on
cash 227,299 23,291
Net increase in cash 1,401,930 1,903,643
Cash, beginning of year 2,313,080 409,437
Cash, end of year $ 3,715,010 $ 2,313,080
Supplemental disclosure information:
Interest expense paid $ 57,286 $ 97,318
Income taxes paid $ 194,594 $ 274,235
Non-cash financing and investing
activities:
Conversion of bridge loan to equity $ -- $ 500,000
Warrants issued for services $ 76,242 $ --
Issuance of convertible notes for
registration rights penalty $ 1,127,000 $ --
Long-E International, Inc. and Subsidiaries
RECONCILIATION OF NON-GAAP INCOME
For the Years Ended December 31,
2007 2006
Net Income Diluted EPS Net Income Diluted EPS
Adjusted amount $1,355,605 $0.04 $1,358,472 $0.07
Adjustments
Amortization of debt
discount 490,692 0.02 500,000 0.03
Amortization of warrants 57,182 0.00 -- --
Registration rights
penalty expense 1,450,600 0.04 -- --
Amount per consolidated
statement of operations $(642,869) $(0.02) $858,472 $0.04
