NEW ENERGY SYSTEMS GROUP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - April 5, 2012

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8-K - NEW ENERGY SYSTEMS GROUP FORM 8-K - NEW ENERGY SYSTEMS GROUPform8k.htm
Exhibit 99.1
 
 
New Energy Systems Group Reports Fourth Quarter 2011 Financial Results
 
 
SHENZHEN, China, April 2, 2012 -- 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 full year ended December 31, 2011.
 
Mr. Jack Yu, Chairman of New Energy stated, "We had a challenging year in several subsidiaries, including E’Jenie and NewPower which was one of the reasons we decided to divest of those business lines by selling them off last year. The weak of entire market forced other companies in 3C related products industry to seek more profitable products such as mobile power devices. This resulted in a significant increase in the number of competitors for Anytone® products, including a few large competitors with greater scale than Anytone and several opportunists who counterfeited some of our faster moving products.   We have lost some orders as a result of these conditions, resulting in reduced sales starting near the end of second quarter. We also made a strategic decision to selectively reduce prices of several Anytone products in order combat some of the counterfeit products.”
 
Mr. Yu continued, “We expect to stabilize margins by introducing new, innovative products that carry higher margins and designed to service the fast-growing smart phone and tablet market in China. In addition, we have started to identify areas within our selling, general and administrative expenses where we can become more efficient.  We are, and will be committed to growing our distribution base by attending international trade shows and the many domestic, electronic trade shows in Hong Kong and China.”
 
   
For the 12 Months Ended December 31
  
 
FY 2011
FY 2010
CHANGE
  
Net Sales
$51.5 million
$45.6 million
+12.9%
  
Gross Profit
$11.7 million
$12.9 million
-8.7%
  
Net Income (Loss) from Continuing Ops
($3.8) million
$5.2 million
-172.5%
  
Adjusted Net Income from Continuing Ops *
$ 6.5 million
$ 8.8 million
-26.8%
  
EPS from Continuing Ops (Diluted)
($0.26)
$0.40
-164.9%
  
Adjusted EPS from Continuing Ops (Diluted)*
$0.45
$0.68
-34.4%
  
*Adjusted net income and adjusted EPS from continuing operations exclude $0.8 million of non-cash stock-based compensation expenses during twelve months end of December 31, 2011, $2.0 million of amortization expenses and a $7.4 million impairment of goodwill.
  
 
Total net revenue increased 12.9% in 2011 to $51.5 million. Battery sales decreased 26.4% year-over-year to $31.3 million. The Kim Fai acquisition, which closed on November 10, 2010, added approximately $20.2 million of net revenue for 2011 compared to $3.1 million in 2010.
 
Gross profit decreased 8.7% to $11.7 million, with gross margin of 22.8% compared to 28.2% in the comparable period.
 
Selling, general and administrative expenses were $6.8 million compared to $5.4 million a year ago. Operating loss for the twelve months ending December 31, 2011 was $2.5 million compared to operating income of $7.4 million during 2010 due to a $7.4 million non-cash goodwill impairment charge incurred in 2011.
 
Reported net loss and earnings per diluted share from continuing operations were $3.8 million and $0.26, respectively. Non-GAAP adjusted net income from continuing operations, excluding non-cash expenses and impairment of goodwill and losses related to businesses sold in the fourth quarter of 2011, was $6.5 million and adjusted EPS were $0.45 in 2011.
 
 
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Balance Sheet and Cash Flow Summary
 
As of December 31, 2011, cash and equivalents of the Company stood at $4.5 million, compared to $13.1 million as of December 31, 2010. Working capital was approximately $19.4 million as of December 31, 2011. Accounts receivable was $6.6 million, compared to $11.2 million as of December 31, 2010. The Company had $0.6 million of loans outstanding at December 31, 2011.
 
New Energy generated $1.8 million of cash flow from operations ended December 31, 2011 versus $21.5 million in the same period a year ago. The Company completed the sale of its E’Jenie and NewPower businesses in the fourth quarter of 2011 for approximately $13.5 million in cash and forgiveness of $24.2 million of debt the Company owed to E’Jenie. As of February 28, 2012, the Company received $3.6 million of the proceeds.
 
Conference Call
 
 
Date: Monday, April 2, 2012  
Time:  9:00 a.m. Eastern Time, US.  
Conference Line Dial-In (U.S.): 1-877-317-6776  
International Dial-In: 1-412-317-6776  
Conference ID: “New Energy Systems Group”  
Webcast link: http://webcast.mz-ir.com/publico.aspx?codplataforma=3684  
 
Please dial in at least 10 minutes before the call to ensure timely participation. A playback will be available through April 9, 2012. To listen, please call 1-877-344-7529 within the United States or 1-412-317-0088 if calling internationally. Utilize the pass code 4385382 for the replay.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link, http://webcast.mz-ir.com/publico.aspx?codplataforma=3684, where the webcast can be accessed through November April 2, 2013.
 
Capital Market Update
 
In February 2012, two separate securities class action complaints were filed in the U.S. District Court for the Southern District of New York against the Company and certain of its current and former officers and directors.  The complaints allege that the Company issued materially false and misleading statements and omitted to state material facts that rendered its affirmative statements misleading as they related to the Company’s financial performance, business prospects, and financial condition, and that the defendants failed to prevent such statements from being issued or corrected, during a putative class period between April 15, 2010 and November 14, 2011. The complaints seek, among other relief, compensatory damages and attorneys’ fees.   The Company believes it is likely that a consolidated amended complaint will be filed after the Court determines the Lead Plaintiff and lead counsel for the litigation.  The Company has not yet responded to the complaint, but the Company believes that the complaints have no merit and intends to vigorously defend against them.  While certain legal defense costs may be later reimbursed by the Company’s insurance carrier, no reasonable estimate of any impact of the outcome of the litigation or related legal fees on the financial statements can be made as of the date of this statement.
 
 
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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 consumer products sold for back-up power needs, New Energy Systems Group also manufactures and sells Kim Fai solar panels for a wide variety of applications for the municipality markets in China and for export. 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
  
MZ Group
  
Tel: US +1-212-301-7130
  
Email: john.mattio@mzgroup.us
  
Web: http://www.mz-ir.com
  
   

 
 
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NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
  
  
December 31, 2011
    
December 31, 2010 (Restated)
  
             
Current assets
            
Cash and equivalents
  
$
4,528,731
    
$
13,065,008
  
Accounts receivable
    
6,614,814
      
11,192,150
  
Inventory
    
1,661,515
      
2,420,009
  
Prepayments
    
554,375
      
-
  
Other receivables
    
14,121,556
      
47,249
  
Tax receivable
    
217,106
      
-
  
Due from shareholders
    
284,337
      
270,522
  
Deferred compensation
    
686,979
      
675,000
  
                 
        Total current assets
    
28,669,413
      
27,669,938
  
                 
Noncurrent assets
                
Plant, property & equipment, net
    
208,271
      
1,134,029
  
Deferred compensation - noncurrent
    
423,493
      
1,098,493
  
Goodwill
    
39,888,807
      
60,555,607
  
Intangible assets, net
    
11,051,910
      
19,969,021
  
                 
        Total noncurrent assets
    
51,572,481
      
82,757,150
  
                 
Total assets
  
$
80,241,894
    
$
110,427,088
  
                 
Current liabilities
                
Accounts payable
  
$
2,837,889
    
$
6,655,592
  
Accrued expenses and other payables
    
818,452
      
1,127,133
  
Payable for Kimfai acquisition
    
-
      
6,325,985
  
Taxes payable
    
21,103
      
1,553,206
  
Loan payable to related party
    
571,347
      
543,585
  
                 
Total current liabilities
    
4,248,791
      
16,205,501
  
                 
Deferred tax liability
    
2,764,571
      
4,798,822
  
                 
Total Liabilities
    
7,013,362
      
21,004,323
  
                 
Commitments and Contingencies
                
                 
Stockholders' equity
                
Preferred stock, $.001 par value, 60,000,000 shares authorized, 0 and 2,553,030 shares issued and outstanding as of December 31, 2011 and 2010, respectively
    
-
      
2,553
  
Common stock, $.001 par value, 140,000,000 shares authorized, 14,571,731 and 14,278,928 shares issued and outstanding as of December 31, 2011 and 2010, respectively
    
14,571
      
14,279
  
Additional paid in capital
    
74,255,585
      
74,040,307
  
Statutory reserves
    
2,410,573
      
2,323,603
  
Other comprehensive income
    
3,292,074
      
1,834,341
  
Retained earnings (Accumulated deficit)
    
(6,744,271
)
    
11,207,682
  
                 
Total stockholders' equity
    
73,228,532
      
89,422,765
  
                 
Total liabilities and stockholders' equity
  
$
80,241,894
    
$
110,427,088
  
                 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
4
 
 
 NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

   
Year Ended December 31,
  
   
2011
    
2010
  
NET SALES
            
Battery
  
$
31,287,667
    
$
42,521,276
  
Solar panel
    
20,226,157
      
3,089,012
  
  Total revenue
    
51,513,824
      
45,610,288
  
                 
COST OF SALES
                
Battery
    
23,192,329
      
30,655,533
  
Solar panel
    
16,585,630
      
2,104,528
  
  Total cost of sales
    
39,777,959
      
32,760,061
  
                 
GROSS PROFIT
    
11,735,865
      
12,850,227
  
                 
OPERATING EXPENSE
                
Selling
    
1,284,063
      
217,707
  
General and administrative
    
5,549,007
      
5,243,203
  
Goodwill impairment
    
7,405,344
      
-
  
  Total operating expenses
    
14,238,414
      
5,460,910
  
                 
INCOME (LOSS) FROM OPERATIONS
    
(2,502,549
)
    
7,389,317
  
                 
OTHER INCOME (EXPENSES)
                
Other expense
    
(21,259
)
    
(862
)
Interest income
    
17,689
      
11,206
  
  Total other income (expenses), net
    
(3,570
)
    
10,344
  
                 
INCOME (LOSS) BEFORE INCOME TAXES
    
(2,506,119
)
    
7,399,661
  
                 
PROVISION FOR INCOME TAXES
    
(1,267,087
)
    
(2,195,807
)
                 
INCOME (LOSS) FROM CONTINUED OPERATIONS
    
(3,773,206
)
    
5,203,854
  
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (INCLUDING GAIN ON DISPOSAL OF DISCONTINUED ENTITIES OF $292,067, NET OF TAX
    
(14,091,777
)
    
9,116,659
  
NET INCOME (LOSS)
    
(17,864,983
)
    
14,320,513
  
                 
OTHER COMPREHENSIVE INCOME
                
     Foreign currency translation
    
1,457,733
      
608,355
  
                 
COMPREHENSIVE INCOME (LOSS)
  
$
(16,407,250
)
  
$
14,928,868
  
                 
WEIGHTED AVERAGE SHARES OUTSTANDING
          
Basic
    
14,425,069
      
12,191,008
  
Diluted
    
14,425,069
      
12,933,231
  
                 
                 
NET INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS
                
       Basic
    
(0.26
)
    
0.43
  
       Diluted
    
(0.26
)
    
0.43
  
                 
                 
NET INCOME (LOSS) PER SHARE FROM DISCONTIUNING OPERATIONS
                
       Basic
    
(0.98
)
    
0.75
  
       Diluted
    
(0.98
)
    
0.70
  
                 
NET EARNINGS (LOSS) PER SHARE
                
Basic
  
$
(1.24
)
  
$
1.17
  
Diluted
  
$
(1.24
)
  
$
1.11
  
                 
The company held 125,203 anti dilutive preferred shares during 2011
                

The accompanying notes are an integral part of these consolidated financial statements.
 
 
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NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES
        
                         CONSOLIDATED STATEMENTS OF CASH FLOWS
            
   
Year Ended December 31,
  
   
2011
    
2010 (Restated)
  
             
CASH FLOWS FROM OPERATING ACTIVITIES
            
Net income (loss)
  
$
(17,864,983
)
  
$
14,320,513
  
Adjustments to reconcile net income (loss) to net cash
          
provided by operating activities:
                
   Depreciation and amortization
    
2,978,993
      
3,043,808
  
   Changes in deferred taxes
    
(671,317
)
    
(597,768
)
   Deferred stock compensation
    
675,621
      
675,000
  
   Loss on disposal of fixed assets
    
-
      
1,534
  
   Gain from disposal of subsidiaries
    
(292,067
)
    
-
  
   Stock and warrants expense
    
112,917
      
1,003,504
  
   Impairment of goodwill of NewPower and Anytone
    
21,711,882
      
-
  
(Increase) / decrease in current assets:
                
   Accounts receivable
    
2,540,164
      
3,505,551
  
   Inventory
    
351,473
      
(1,321,906
)
   Prepaid expenses, deposits and other receivables
    
(1,097,396
)
    
613,733
  
Increase/(decrease) in current liabilities:
                
   Accounts payable
    
(3,304,019
)
    
(812,732
)
   Accrued expenses and other payables
    
(247,897
)
    
479,787
  
   Taxes payable
    
(3,052,482
)
    
609,513
  
                 
NET CASH PROVIDED BY OPERATING ACTIVITIES
    
1,840,889
      
21,520,537
  
                 
CASH FLOWS FROM INVESTING ACTIVITIES
                
   Cash of disposed subsidiaries
    
(4,033,445
)
    
-
  
   Cash acquired in acquisition
    
-
      
705,514
  
   Proceeds from sale of property and equipment
    
-
      
2,370
  
   Investment into subsidiary
    
-
      
(6,529,286
)
   Acquisition of property and equipment
    
(97,883
)
    
(154,936
)
                 
NET CASH USED IN INVESTING ACTIVITIES
    
(4,131,328
)
    
(5,976,338
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES
                
   Repayment of acquisition liability for subsidiaries
    
(6,843,376
)
    
(5,000,000
)
   Cash proceeds from warrant exercise
    
87,500
      
-
  
   Repayment to related party
    
-
      
(1,373,809
)
                 
NET CASH USED IN FINANCING ACTIVITIES
    
(6,755,876
)
    
(6,373,809
)
                 
EFFECT OF EXCHANGE RATE CHANGE ON CASH & EQUIVALENTS
    
510,038
      
242,628
  
                 
NET INCREASE (DECREASE) IN CASH & EQUIVALENTS
    
(8,536,277
)
    
9,413,018
  
                 
CASH & EQUIVALENTS, BEGINNING OF YEAR
    
13,065,008
      
3,651,990
  
                 
CASH & EQUIVALENTS, END OF YEAR
  
$
4,528,731
    
$
13,065,008
  
                 
SUPPLEMENTAL DISCLOSURES:
                
Cash paid during the period for:
                
     Income taxes
  
$
4,798,558
    
$
4,534,300
  
     Interest
  
$
-
    
$
-
  
                 
 
The accompanying notes are an integral part of these consolidated financial statements.

 
 
 
 
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NEW ENERGY SYSTEMS GROUP Reports