NEWN New Energy Systems Grp..

SHENZHEN, China, Aug. 14, 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."

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.

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

SOURCE New Energy Systems Group