omniture

New Energy Systems Group Reports Second quarter 2012 Financial Results

2012-08-15 04:30 1267

SHENZHEN, China, August 15, 2012 /PRNewswire-Asia-FirstCall/ -- New Energy Systems Group (NYSE Amex: NEWN) ("New Energy" or the "Company"), a vertically integrated original design manufacturer and distributor of Anytone® and MeePower® branded consumer backup power systems for mobile devices and solar panels and related solar application products to service municipal power applications, today announced financial results for the second quarter ended June 30, 2012.

Mr. Jack Yu, Chairman of New Energy stated, "We took additional actions we deemed necessary to make New Energy more focused and efficient. Since we divested our battery components business in the fourth quarter of last year, we have focused all of our efforts on growing the consumer products and solar businesses. This comprehensive transformation includes developing new products, expanding our distribution channels and consolidating our fixed overhead. While this will take several quarters to gain traction, we believe this is the right strategy to pursue in order to maximize shareholder value."

For the Three Months Ended June 30,


2012

2011

CHANGE

Net Sales

$3.6 million

$11.1 million

-68%

Gross Profit

$0.3 million

$4.0 million

-93%

Net Income (Loss) from Continued Operations

$(9.9) million

$1.8 million

N/A

Adjusted Net Income (Loss)* from Continued Operations

$(0.7) million

$2.5 million

N/A

GAAP EPS (Diluted) from Continued Operations

$(0.68)

$0.12

N/A

Adjusted EPS (Diluted)* from Continued Operations

$(0.05)

$0.17

N/A


*Adjusted net income and adjusted EPS exclude $0.2 million of non-cash stock-based compensation expenses and $0.5 million of amortization expenses during Q2 2012 and Q2 2011, respectively. Q2 2012 reported net income and EPS includes a $8.4 million non-cash goodwill and intangible assets impairment charge. Fully diluted shares on June 30, 2012 were 14.6 million versus 14.6 million on June 30,2011.

Revenues declined 68% year-over-year to $3.6 million due to lower demand for batteries in China and increased competition. Solar panel and related solar product sales were down 74% to $1.6 million due to the downturn pressure of the entire solar market and intense market competition.

Cost of sales decreased 54% to $3.3 million from $7.1 million in the second quarter of 2011 due to lower sales and production volumes. Gross profit in the second quarter of 2012 was $0.3 million compared to $4 million, a 93% decline compared to the same period last year.

Consolidated gross margin fell to 8% from 36% in the second quarter of 2011 as a result of higher raw materials and labor costs and a significant decrease in production and sales volumes. Gross margin improved sequentially from 4% in the first quarter of 2012.

Selling, general and administrative expenses ("SG&A") for the three months ended June 30, 2012 were $1.9 million compared to $1.5 million in the same period last year. The increase was primarily a result of higher labor costs and marketing expenses.

The Company incurred $0.2 million of non-cash stock-based compensation expenses and $0.5 million amortization expenses during the second three months of 2012 and 2011. New Energy recorded a non-cash goodwill and intangible assets impairment charge of $8.4 million in the second quarter of 2012 related to its Anytone and Kim Fai solar businesses. Excluding these expenses, operating loss was $0.7 million for the second quarter of 2012.

Net income from continuing operations was a net loss of $9.9 million compared to net income of $1.8 million in the second quarter of 2011. GAAP net loss per share was was $0.68 in the second quarter of 2012 compared to earnings per share of $0.12 in 2011. Non-GAAP adjusted net loss and net loss per share were $0.7 million and $0.05, respectively, in the second quarter of 2012.

For the Six Months Ended June 30,


2012

2011

CHANGE

Net Sales

$8.5 million

$23.6 million

-64%

Gross Profit

$0.5 million

$9.3 million

-94%

Net Income (Loss) from Continued Operations

$(11.5) million

$4.4 million

N/A

Adjusted Net Income (Loss)* from Continued Operations

$(1.7) million

$5.8 million

N/A

GAAP EPS (Diluted) from Continued Operations

$(0.79)

$0.30

N/A

Adjusted EPS (Diluted)* from Continued Operations

$(0.11)

$0.40

N/A


*Adjusted net income and adjusted EPS exclude $0.4 million and 0.3 million of non-cash stock-based compensation expenses and $1.0 million and 1.0 million of amortization expenses during Q2 2012 and Q2 2011, respectively. Q2 2012 reported net income and EPS includes a $8.4 million non-cash goodwill and intangible assets impairment charge. Fully diluted shares on June 30, 2012 were 14.6 million versus 14.6 million on June 30,2011.

Consolidated net sales for the six months ended June 30, 2012 were 8.5 million, a decrease of 64% compared to $23.6 million in the corresponding period in 2011. Sales of Anytone batteries and Kim Fai solar products were $4.9 million and $3.6 million, respectively, in the first half of 2012.

Cost of sales was $8.0 million, down 44% from $14.3 million in the first six months of 2011. Gross profit and gross margin were $0.5 million and 6%, respectively, in the six months ended June 30, 2012.

Selling, general and administrative expenses increased 22% to $4 million. Income from continuing operations was a net loss $11.5 million compared to a net income of $4.4 million in the same period a year ago.

Non-GAAP adjusted net loss and EPS were $1.7 million loss and $0.11 loss per share in the first six months of 2012, respectively. The weighted average diluted shares outstanding were 14.6 million.

Balance Sheet and Cash Flow Summary

As of June 30, 2012, cash and equivalents of the Company stood at $9.0 million, up from $4.5 million as of December 31, 2011. Working capital was approximately $22.3 million at June 30, 2012; accounts receivable was $4.2 million, compared to $6.6 million as of December 31, 2011. New Energy had cash outflows from operations of $0.1 million during the six months ended June 30, 2012 versus $6.6 million of inflows in the same period in 2011.

Business Update:

Effective on January 13, 2012, Kim Fai's business, including all the assets and liabilities, has been transferred into Shenzhen Anytone to maximize operations efficiency and save cost. All of Kim Fai's products have been sold under "Anytone" brand name.

Anytone signed an agreement with New Trent Corporation ("New Trent") to begin selling products in the U.S. starting in the second quarter of 2012. The agreement will initially focus on Anytone's mobile power products. The two parties expect this agreement to generate at least $1 million in sales during the first full year.

About New Energy Systems Group

New Energy Systems Group is a vertically integrated original design manufacturer and distributor of lithium ion batteries and backup power systems for mobile phones, laptops, digital cameras, MP3s and a variety of other portable electronics. The company's end-user consumer products are sold under the Anytone® brand in China, and the company has begun expanding its international sales efforts. The fast pace of new mobile device introductions in China combined with a growing middle class make it fertile ground for New Energy's end-user consumer products, as well as its high powered, light weight lithium ion batteries. In addition to historically strong organic growth, New Energy is expected to benefit from economies of scale, broader distribution, and higher production capacity and higher profit margins. Additional information about the company is available at: www.newenergysystemsgroup.com

Forward Looking Statements

This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary and affiliated companies. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (www.sec.gov). All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors other than as required under the securities laws. The Company does not assume a duty to update these forward-looking statements.

For more information, please contact:

COMPANY

New Energy Systems Group
Ken Lin, VP of Investor Relations
Tel: +1-917-573-0302
Email: klin1330@hotmail.com

INVESTOR RELATIONS

John Mattio, SVP
HC International, Inc.
Tel: US +1-212-301-7130
Email: john.mattio@mzgroup.us
Web: http://www.mz-ir.com

NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS




June 30, 2012 (Unaudited)


December 31,

2011

Current assets





Cash and equivalents


$

9,033,416


$

4,528,731

Accounts receivable



4,189,080



6,614,814

Inventory



749,766



1,661,515

Prepayments



116,687



554,375

Other receivables



8,763,242



13,550,209

Taxes receivable



236,070



217,106

Due from shareholders



283,259



284,337

Deferred compensation



696,475



686,979








Total current assets



24,067,995



28,098,066








Noncurrent assets







Property and equipment



374,306



208,271

Deferred compensation - noncurrent



85,993



423,493

Goodwill



37,180,588



39,888,807

Intangible assets, net



4,303,504



11,051,910








Total noncurrent assets



41,944,391



51,572,481








Total assets


$

66,012,386


$

79,670,547








Current liabilities







Accounts payable


$

833,868


$

2,837,889

Accrued expenses and other payables



928,371



818,452

Taxes payable



58,758



21,103








Total current liabilities



1,820,997



3,677,444








Deferred tax liability



2,505,439



2,764,571








Total Liabilities



4,326,436



6,442,015








Commitments and Contingencies














Stockholders' equity







Preferred stock, $.001 par value, 60,000,000 shares authorized, 0 shares issued and outstanding



-



-

Common stock, $.001 par value, 140,000,000 shares authorized, 14,591,731 and 14,571,731 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively



14,591



14,571

Additional paid in capital



74,298,859



74,255,585

Statutory reserves



2,410,573



2,410,573

Other comprehensive income



3,255,068



3,292,074

Accumulated deficit



(18,293,141)



(6,744,271)








Total stockholders' equity



61,685,950



73,228,532








Total liabilities and stockholders' equity


$

66,012,386


$

79,670,547

NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)




Six Months Ended June 30,


Three Months Ended June 30,




2012

2011

2012


2011




(Unaudited)


(Unaudited)


NET SALES










Battery


$

4,988,308


$

11,953,882


$

1,991,447


$

4,984,984


Solar panel



3,557,301



11,675,972



1,598,897



6,161,054


Total revenue



8,545,609



23,629,854



3,590,344



11,146,038
















COST OF SALES














Battery



4,639,514



5,745,805



1,763,945



2,466,610


Solar panel



3,390,119



8,553,509



1,527,426



4,676,631


Total cost of sales



8,029,633



14,299,314



3,291,371



7,143,241
















GROSS PROFIT



515,976



9,330,540



298,973



4,002,797
















OPERATING EXPENSE














Selling



718,733



597,973



323,378



276,110


General and administrative



3,242,307



2,656,014



1,576,709



1,273,582


Impairment of goodwill and intangible assets



8,420,096



-



8,420,096



-


Total operating expenses



12,381,136



3,253,987



10,320,183



1,549,692
















INCOME (LOSS) FROM OPERATIONS



(11,865,160)



6,076,553



(10,021,210)



2,453,105
















OTHER INCOME (EXPENSES)














Other expense (income)



(606)



2,324



(347)



(290)


Interest income



17,283



4,463



10,105



3,188


Total other income, net



16,677



6,787



9,758



2,898
















INCOME (LOSS) BEFORE INCOME TAXES



(11,848,483)



6,083,340



(10,011,452)



2,456,003
















INCOME TAX BENEFIT (EXPENSE)



299,613



(1,656,055)



114,884



(668,954)
















INCOME (LOSS) FROM CONTINUED OPERATIONS



(11,548,870)



4,427,285



(9,896,568)



1,787,049


INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX



-



4,180,143



-



1,359,824
















NET INCOME (LOSS)



(11,548,870)



8,607,428



(9,896,568)



3,146,873
















OTHER COMPREHENSIVE INCOME (LOSS)














Foreign currency translation



(37,006)



361,391



(46,839)



246,540
















COMPREHENSIVE INCOME (LOSS)


$

(11,585,876)


$

8,968,819


$

(9,943,407)


$

3,393,413
















WEIGHTED AVERAGE SHARES OUTSTANDING














Basic



14,573,599



14,294,318



14,575,467



14,302,039


Diluted



14,574,316



14,564,800



14,576,900



14,551,731
















NET INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS














Basic


$

(0.79)


$

0.31


$

(0.68)


$

0.12


Diluted


$

(0.79)


$

0.30


$

(0.68)


$

0.12
















NET INCOME (LOSS) PER SHARE FROM DISCONTINUING OPERATIONS











Basic


$

-


$

0.29


$

-


$

0.10


Diluted


$

-


$

0.29


$

-


$

0.09
















NET INCOME (LOSS) PER SHARE














Basic


$

(0.79)


$

0.60


$

(0.68)


$

0.22


Diluted


$

(0.79)


$

0.59


$

(0.68)


$

0.21


NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS




Six Months Ended June 30,



2012



2011



(Unaudited)







CASH FLOWS FROM OPERATING ACTIVITIES






Net income (loss)


$

(11,548,870)



$

8,607,428

Adjustments to reconcile net income (loss) to net cash








provided by operating activities:








Depreciation and amortization



1,059,493




1,544,712

Changes in deferred taxes



(259,132)




(337,440)

Deferred stock compensation



345,404




337,500

Stock options and warrant expense



25,894




20,038

Impairment of goodwill and intangible assets



8,420,096




-

(Increase) / decrease in current assets:








Accounts receivable



2,556,709




1,189,052

Inventory



907,956




(1,567,548)

Prepaid expenses, deposits and other receivables



436,984




(549,571)

Increase/(decrease) in current liabilities:








Accounts payable



(2,148,198)




(2,494,328)

Accrued expenses and other payables



110,571




(233,546)

Taxes payable



17,998




45,187









NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES



(75,095)




6,561,484









CASH FLOWS FROM INVESTING ACTIVITIES








Cash from sale of disposed subsidiaries



4,799,936




-

Acquisition of property and equipment



(190,253)




(12,964)









NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES



4,609,683




(12,964)









CASH FLOWS FROM FINANCING ACTIVITIES








Repayment of acquisition liability for subsidiaries



-




(6,757,273)

Cash from warrant exercise



-




87,500









NET CASH USED IN FINANCING ACTIVITIES



-




(6,669,773)









EFFECT OF EXCHANGE RATE CHANGE ON CASH AND EQUIVALENTS



(29,903)




302,182









NET INCREASE IN CASH AND EQUIVALENTS



4,504,685




180,929









CASH AND EQUIVALENTS, BEGINNING OF PERIOD



4,528,731




13,065,008









CASH AND EQUIVALENTS, END OF PERIOD


$

9,033,416



$

13,245,937









SUPPLEMENTAL DISCLOSURES:








Cash paid during the period for:








Income taxes


$

-



$

3,464,408

Interest


$

-



$

-

Source: New Energy Systems Group
collection