New Energy Systems Group Reports Third Quarter 2012 Financial

New Energy Systems Group Reports Third Quarter 2012 Financial Results 
Cash and cash Equivalents Improved to $10.3 Million, or $0.71 per
Share; Non-GAAP Adjusted Net Income and EPS of $0.8 Million and
$0.06, Respectively 
SHENZHEN, CHINA -- (Marketwire) -- 11/16/12 --  New Energy Systems
Group (NYSE MKT: NEWN) ("New Energy" or the "Company"), a vertically
integrated original design manufacturer and distributor of Anytone(R)
and MeePower(R)-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 third quarter ended September 30, 2012. 
Mr. Jack Yu, Chairman of New Energy, stated, "Over the past year,
other than operations, we have generated $5.7 million of cash from
selling non-core assets that were losing substantial amount of money.
With over $10 million of cash, no debt and valuable intellectual
property related to our Anytone consumer electronic and solar
businesses, we are looking for those strategies to stable and regrow
our shareholder value." 


 
                                                                            
                                                                            
----------------------------------------------------------------------------
For the Three Months Ended September 30,                                    
----------------------------------------------------------------------------
                                             2012           2011      CHANGE
----------------------------------------------------------------------------
Net Sales                                $3.6 million   $6.7 million   -46% 
----------------------------------------------------------------------------
Gross Profit                             $0.2 million   $1.2 million   -80% 
----------------------------------------------------------------------------
Net Income (Loss) from Continued        $(7.6) million ($0.5) million  N/A  
Operations                                                                  
----------------------------------------------------------------------------
Adjusted Net Income (Loss)* from         $0.8 million   $0.2 million  +455% 
Continued Operations         
                                               
----------------------------------------------------------------------------
GAAP EPS (Diluted) from Continued          $(0.52)        $(0.04)      N/A  
Operations                                                                  
----------------------------------------------------------------------------
Adjusted EPS (Diluted)* from Continued      $0.06          $0.01      +452% 
Operations                                                                  
----------------------------------------------------------------------------
                                                                            
*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 Q3 2012 and Q3 2011, respectively. Q3 2012 reported net income and   
EPS includes a $7.7 million non-cash goodwill and intangible assets         
impairment charge. Fully diluted shares on September 30, 2012 were 14.6     
million versus 14.6 million on September 30,2011.                           

 
Revenues declined 46% 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 62% to $1.9 million due to
the downturn pressure of the entire solar market and intense market
competition.  
Cost of sales decreased 38% to $3.4 million from $5.5 million in the
third quarter of 2011 due to lower sales and production volumes.
Gross profit in the third quarter of 2012 was $0.2 million compared
to $1.2 million, a 80% decline compared to the same period last year. 
Consolidated gross margin fell to 7% from 18% in the third quarter of
2011 as a result of higher raw materials and labor costs and a
significant decrease in production and sales volumes.  
Selling, general and administrative expenses ("SG&A") for the three
months ended September 30, 2012 were $1.8 million, essentially
unchanged from the same period last year.  
The Company incurred $0.2 million of non-cash stock-based
compensation expenses and $0.5 million amortization expenses during
the third quarter of 2012 and 2011. New Energy recorded a non-cash
goodwill and intangible assets impairment charge of $7.7 million in
the third quarter of 2012 related to its Anytone and Kim Fai solar
businesses. Excluding these expenses, operating income was $0.8
million for the third quarter of 2012. 
Net income from continuing operations was a net loss of $7.6 million
compared to a net loss of $0.5 million in the third quarter of 2011.
GAAP net loss per share was was $0.52 in the third quarter of 2012
compared to a net loss per share of $0.04 in 2011. Non-GAAP adjusted
net income and earnings per share were $0.8 million and $0.06,
respectively, in the third quarter of 2012.  


 
-----------------------------------------------------------------
-----------
For the Nine months Ended September 30,                                     
----------------------------------------------------------------------------
                                             2012           2011      CHANGE
----------------------------------------------------------------------------
Net Sales                               $12.2 million  $30.3 million   -60% 
----------------------------------------------------------------------------
Gross Profit                             $0.8 million  $10.5 million   -93% 
----------------------------------------------------------------------------
Net Income (Loss) from Continued                                            
Operations                             $(19.1) million  $3.9 million   N/A  
----------------------------------------------------------------------------
Adjusted Net Income (Loss)* from                                            
Continued Operations                    $(0.9) million  $5.9 million   N/A  
----------------------------------------------------------------------------
GAAP EPS (Diluted) from Continued                                           
Operations                                 $(1.31)         $0.27       N/A  
----------------------------------------------------------------------------
Adjusted EPS (Diluted)* from Continued                                      
Operations                                 $(0.06)         $0.41       N/A  
----------------------------------------------------------------------------
                                                                            
*Adjusted net income and adjusted EPS exclude $0.5 million and 0.5 million  
of non-cash stock-based compensation expenses and $1.6 million and $1.5     
million of amortization expenses during YTD 2012 and YTD 2011, respectively.
YTD 2012 reported net income and EPS includes a $16.1 million non-cash      
goodwill and intangible assets impairment charge. Fully diluted shares on   
September 30, 2012 were 14.6 million versus 14.5 million on September       
30,2011.                                                                    

 
Consolidated net sales for the nine months ended September 30, 2012
were $12.2 million, a decrease of 60% compared to $30.3 million in
the corresponding period in 2011. Sales of Anytone batteries and Kim
Fai solar products were $6.7 million and $5.5 million, respectively,
in the first nine months of 2012. 
Cost of sales was $11.4 million, down 42% from $19.8 million in the
first nine months of 2011. Gross profit and gross margin were $0.8
million and 6%, respectively, in the nine months ended September 30,
2012. 
Selling, general and administrative expenses increased 13% to $5.7
million. Loss from continuing operations was a net loss $21.1 million
compared to a net income of $5.5 million in the same period a year
ago. 
Non-GAAP adjusted net loss and EPS were $0.9 million loss and $0.06
loss per share in the first nine months of 2012, respectively. The
weighted average diluted shares outstanding were 14.6 million.  
Balance Sheet and Cash Flow Summary  
As of September 30, 2012, New Energy Systems Group had cash and
equivalents of approximately $10.3 million, up from $4.5 million as
of December 31, 2011. The Company received $5.7 million for sale of
disposed subsidiaries and generated $0.3 million of cash from
operations. 
Working capital was approximately $19.1 million at September 30,
2012; accounts receivable was $4.3 million compared to $6.6 million
as of December 31, 2011.  
Business Update:  
During the last quarter, through reduced sales prices of certain
products, continuing marketing efforts and exploration of other
potential market, the Company managed to control the loss brought by
piracy and counterfeit to our mobile power products. In addition to
searching for potential partners in the global market, the Company
also starts to sell its products directly on the large E-Commence
websites such as Amazon and eBay. Also, the Company plans to sell its
products directly from its official website to foreign customers in
the near future. Moreover, the Company will aggressively participate
in domestic and international trade shows for any potential business
opportunity, including the recent solar energy show in South Africa
and CES 2013 in Las Vegas. Finally, the Company has also developed
compatible mobile power products for the popular consumer electronic
products such as iPhone 5 and Galaxy S3. 
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(R) 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. 


 
                                                                            
                                                                            
                  NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES                 
                         CONSOLIDATED BALANCE SHEETS                        
                                               September 30,  December 31,  
                                                    2012           2011     
                                               -------------  ------------- 
                    ASSETS                      (Unaudited)                 
Current assets                                                              
Cash and equivalents                           $  10,349,517  $   4,528,731 
Accounts receivable                                4,253,457      6,614,814 
Inventory                                            479,829      1,661,515 
Prepayments                                           50,946        554,375 
Other receivables                                  5,520,000      5,520,000 
Taxes receivable                                           -        217,106 
Due from shareholders                                282,540        284,337 
Deferred compensation                                607,087        686,979 
                                                                            
  Total current assets                            21,543,376     20,067,857 
                                                                            
Noncurrent assets                                                           
Property and equipment, net                          330,465        208,271 
Other receivables                                  2,322,500      8,030,209 
Deferred compensation                                      -        423,493 
Goodwill                                          29,830,694     39,888,807 
Intangible assets, net                             3,412,640     11,051,910 
                                                                            
  Total noncurrent assets                         35,896,299     59,602,690 
                                                                            
TOTAL ASSETS                                   $  57,439,675  $  79,670,547 
                                                                            
      LIABILITIES AND STOCKHOLDERS' EQUITY                                  
                                                                            
Current liabilities                                                         
Accounts payable                               $   1,542,990  $   2,837,889 
Accrue
d expenses and other payables                  873,070        818,452 
Taxes payable                                         71,404         21,103 
                                                                            
  Total current liabilities                        2,487,464      3,677,444 
                                                                            
Deferred tax liability                               853,160      2,764,571 
                                                                            
TOTAL LIABILITIES                                  3,340,624      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, 14,631,731 and 14,571,731                               
 shares issued and outstanding at September                                 
 30, 2012 and December 31, 2011, respectively         14,631         14,571 
Additional paid in capital                        74,298,859     74,255,585 
Statutory reserves                                 2,410,573      2,410,573 
Other comprehensive income                         3,249,413      3,292,074 
Accumulated deficit                              (25,874,425)    (6,744,271)
                                                                            
TOTAL STOCKHOLDERS' EQUITY                        54,099,051     73,228,532 
                                                                            
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $  57,439,675  $  79,670,547 
                                                                            
The accompanying notes are an integral part of these consolidated financial 
statements.                                                                 
                                                                            
                                                                            
                                                                            
                                                                            
                  NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES                 
        CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS        
                                 (UNAUDITED)                                
                          Nine Months Ended          Three Months Ended     
                            September 30,               September 30,       
                     --------------------------  -------------------------- 
                         2012          2011          2012          2011     
                     ------------  ------------  ------------  ------------ 
                                                                            
NET SALES                                                                   
  Battery            $  6,687,091  $ 13,657,611  $  1,698,783  $  1,703,729 
  Solar panel           5,494,777    16,649,096     1,937,476     4,973,124 
    Total sales        12,181,868    30,306,707     3,636,259     6,676,853 
                                                                            
COST OF SALES                                                               
  Battery               6,191,309     6,546,438     1,551,795       800,633 
  Solar panel           5,235,908    13,220,831     1,845,789     4,667,322 
    Total cost of                                                           
     sales             11,427,217    19,767,269     3,397,584     5,467,955 
                                                                            
GROSS PROFIT              754,651    10,539,438       238,675     1,208,898 
                                                                            
OPERATING EXPENSE                                                           
  Selling                 892,253       881,257       173,520       283,284 
  General and                                                               
   administrative       4,839,943     4,197,889     1,597,636     1,541,875 
  Patent impairment     6,086,840             -     6,086,840             - 
  Goodwill                                                                  
   impairment          10,058,113             -     1,638,017             - 
    Total operating                                                         
     expenses          21,877,149     5,079,146     9,496,013     1,825,159 
                                                                            
INCOME (LOSS) FROM                                                          
 OPERATIONS           (21,122,498)    5,460,292    (9,257,338)     (616,261)
                                                                            
OTHER INCOME                                                                
 (EXPENSES)                                                                 
  Other expense                                                             
   (income)                  (810)        1,983          (204)         (341)
  Interest income          26,288        10,254         9,005         5,791 
    Total other                                                             
     income, net           25,478        12,237         8,801         5,450 
                                                                            
INCOME (LOSS) BEFORE                                                        
 INCOME TAXES         (21,097,020)    5,472,529    (9,248,537)     (610,811)
INCOME TAX BENEFIT                                                          
 (EXPENSE)              1,966,866    (1,570,786)    1,667,253        85,269 
                                                                            
INCOME (LOSS) FROM                                                          
 CONTINUING                                                                 
 OPERATIONS           (19,130,154)    3,901,743    (7,581,284)     (525,542)
LOSS FROM                                                                   
 DISCONTINUED                                                               
 OPERATIONS, NET OF                                                         
 TAX                            -   (12,147,523)            -   (16,327,666)
                                                                            
NET LOSS              (19,130,154)   (8,245,780)   (7,581,284)  (16,853,208)
                                                                            
 
OTHER COMPREHENSIVE                                                         
 INCOME (LOSS)                                                              
  Foreign currency                                                          
   translation           (278,743)      659,551      (241,737)      298,160 
                                                                            
COMPREHENSIVE LOSS   $(19,408,897) $ (7,586,229) $ (7,823,021) $(16,555,048)
                                                                            
WEIGHTED AVERAGE                                                            
 SHARES OUTSTANDING                                                         
  Basic                14,595,600    14,381,065    14,631,731    14,551,731 
  Diluted              14,595,600    14,548,462    14,631,731    14,551,731 
                                                                            
NET INCOME (LOSS)                                                           
 PER SHARE FROM                                                             
 CONTINUING                                                                 
 OPERATIONS                                                                 
  Basic              $      (1.31) $       0.27  $      (0.52) $      (0.04)
  Diluted            $      (1.31) $       0.27  $      (0.52) $      (0.04)
                                                                            
NET INCOME (LOSS) PER SHARE FROM                                            
 DISCONTINUED OPERATIONS                                                    
  Basic              $          -  $      (0.84) $          -  $      (1.12)
  Diluted            $          -  $      (0.83) $          -  $      (1.12)
                                                                            
NET INCOME (LOSS)                                                           
 PER SHARE                                                                  
  Basic              $      (1.31) $      (0.57) $      (0.52) $      (1.16)
  Diluted            $      (1.31) $      (0.57) $      (0.52) $      (1.16)
                                                                            
The accompanying notes are an integral part of these consolidated financial 
statements.                                                                 
                                                                            
                                                                            
                                                                            
                                                                            
                  NEW ENERGY SYSTEMS GROUP AND SUBSIDIARIES                 
                    CONSOLIDATED STATEMENTS OF CASH FLOWS                   
                                 (UNAUDITED)                                
                                            Nine Months Ended September 30, 
                                           -------------------------------- 
                                                 2012             2011      
                                           ---------------  --------------- 
                                                                            
CASH FLOWS FROM OPERATING ACTIVITIES                                        
  Net loss                                 $   (19,130,154) $    (8,245,780)
  Adjustments to reconcile net loss to net                                  
   cash provided by operating activities:                                   
    Depreciation and amortization                1,618,413        2,328,860 
    Changes in deferred taxes                   (1,911,410)        (509,557)
    Deferred stock compensation                    533,985          506,250 
    Stock options and warrant expense               29,534           33,828 
    Goodwill impairment                         10,058,113       13,564,691 
    Patent impairment                            6,086,840                - 
  (Increase) / decrease in current assets:                                  
    Accounts receivable                          2,477,524          755,306 
    Inventory                                    1,175,628       (1,177,906)
    Prepaid expenses, deposits and other                                    
     receivables                                   502,024         (868,679)
  Increase/(decrease) in current                                            
   liabilities:                                                             
    Accounts payable                            (1,430,992)      (1,736,844)
    Accrued expenses and other payables             55,738          193,518 
    Taxes payable                                  267,180       (1,969,979)
                                                                            
NET CASH PROVIDED BY OPERATING ACTIVITIES          332,423        2,873,708 
                                                                            
CASH FLOWS FROM INVESTING ACTIVITIES                                        
    Cash from sale of disposed                                              
     subsidiaries                                5,728,957                - 
    Acquisition of property and equipment         (189,964)         (84,771)
                                                                            
NET CASH PROVIDED BY (USED IN) INVESTING                                    
 ACTIVITIES                                      5,538,993          (84,771)
                                                                            
CASH FLOWS FROM FINANCING ACTIVITIES                                        
    Repayment of acquisition liability for                                  
     subsidiaries                                        -       (6,802,616)
    Cash from warrant exercise                           -           87,500 
                                                                            
NET CASH USED IN FINANCING ACTIVITIES                    -       (6,715,116)
                                                                            
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND                                  
 EQUIVALENTS                                       (50,630)         457,787 
                                                                            
NET INCREASE (DECREASE) IN CASH AND                                         
 EQUIVALENTS                                     5,820,786       (3,468,392)
                                                                            
CASH AND EQUIVALENTS, BEGINNING OF PERIOD        4,528,731       13,065,008 
                                                                            
CASH AND EQUIVALENTS, END OF PERIOD        $    10,349,517  $     9,596,616 
                                                                            
SUPPLEMENTAL DISCLOSURES:                                                   
  Cash paid during the period for:                                          
    Income taxes                           $             -  $     4,745,614 
    Interest                               $             -  $             - 
                                                                            
The accompanying notes are an integral part of these consolidated financial 
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.mzgroup.us 
 
 
Press spacebar to pause and continue. Press esc to stop.