Second Quarter 2010 Highlights -- Revenue reached $0.7 million, up 29.3% from $0.5 million for the same period last year -- Gross profit increased 49.9% to $0.5 million from $0.3 million for the same period last year -- Gross margin increased to 73.3% from 63.2% -- Operating loss was $0.8 million, compared to a loss of $0.2 million for the same period last year -- Net loss from continuing operations was $0.9 million, or approximately ($0.01) per diluted share, compared to a net income from continuing operations of $13.5 million, or $0.10 per diluted share, for the second quarter 2009. Excluding the non-cash impact of the change in fair value of derivative financial instruments, adjusted net loss from continuing operations was $0.8 million, compared with an adjusted net loss of $0.2 million, for the second quarter of 2009 (*)
"During the second quarter, we saw a year over year increase in revenue and gross margin due to higher connection fees from a new industrial customer," said Mr. Yangkan Chong, Chief Executive Officer. "We continued to prepare for future growth by enhancing our business development activities and working with outside consultants and new staff to help strengthen our internal controls. We are optimistic that we will be well prepared to manage the larger scale of our business following the completion of our pending acquisitions."
Second Quarter 2010 Results
For the second quarter ended
Gross profit was
Operating expenses were
The Company's second quarter 2010 and second quarter 2009 financial
statements include the non-cash impact from the change in fair value of
derivative financial instruments of
Net loss from continuing operations was
In
Net loss attributable to common shareholders was
(*) See table at the end of this press release for a reconciliation of income from continuing operations to exclude the non-cash impact from the change in fair value of derivative financial instruments and for a reconciliation of net income attributable to common shareholders to exclude the non-cash impact from the change in fair value of derivative financial instruments.
First Half 2010 Results
For the six months ended
Gross profit was
Net loss from continuing operations was
Net loss attributable to common shareholders was
Financial Condition
As of
Business Outlook
China New Energy primarily operates in the northeastern cities of
Mr. Chong concluded, "We continue to work on completing three pending
acquisitions -- Dadi Gas, Fuzhou Zhongran, and Lean Zhongran -- and are
confident they will close by year end. All of these acquisition targets are
located in under-penetrated, growing small- and medium-sized cities and
provide opportunities for us to enter into favorable franchise agreements with
local governments for long-term exclusive rights to develop the local natural
gas distribution network and to provide natural gas to the area. We are
excited about our business going forward and expect to capitalize on the
growing market for natural gas in
Use of Non-GAAP Financial Information
GAAP results for three and six month periods ended
About China New Energy Group Company
China New Energy Group Company ("China New Energy" or the "Company") is a
vertically integrated natural gas company engaged in the development of
natural gas distribution networks, and the distribution of natural gas to
residential, industrial, and commercial users in small and medium sized cities
in
Safe Harbor Statement
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, but are not limited to, the Company's ability to access natural gas for distribution, and ability to identify and develop operational locations under favorable terms, changes in natural gas pricing mechanism imposed by the Chinese government, changes in the regulatory environment and future national or regional economic and competitive conditions, and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
- FINANCIAL TABLES FOLLOW - CHINA NEW ENERGY GROUP COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 31, 2010 2009 ASSETS (Unaudited) CURRENT ASSETS Cash and cash equivalents $262,728 $2,672,884 Restricted cash 131,930 180,352 Accounts receivable, net of allowance for doubtful accounts of $231,550 and $- 4,555,133 4,619,232 Receivable from sale of a subsidiary 3,260,582 5,119,055 Inventories, net 286,595 271,104 Prepaid expenses 205,024 179,011 Deemed receivable from former shareholders of subsidiaries acquired for settlement of certain liabilities 1,384,073 1,983,782 Current assets held for sale 1,407,538 1,768,278 NET CURRENT ASSETS 11,493,603 16,793,698 Property, plant and equipment, net 10,039,454 8,000,069 Other receivables 1,940,197 2,091,092 Deposits for acquisitions of subsidiaries 1,222,946 197,696 Intangible assets, net 1,181,224 1,186,272 Deposits paid for acquisition of long-term assets 2,960,522 1,972,162 Goodwill 225,430 224,488 Non-current assets held for sale 9,970,525 9,760,345 TOTAL ASSETS $39,033,901 $40,225,822 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable $908,076 $614,642 Deposits receipt for disposal 734,365 -- Accruals and other payable 683,732 187,904 Acquisition consideration payable 1,538,654 1,651,888 Tax payable 621,980 1,323,815 Registration rights penalties payable 2,160,000 2,160,000 Related party payables 98,305 97,893 Dividends payable on preferred stock 503,515 509,381 Derivative financial instruments - warrants 6,476,070 6,768,106 Liabilities to be settled by former shareholders of subsidiaries acquired 1,384,073 1,983,782 Current liabilities held for sale 430,656 548,832 TOTAL CURRENT LIABILITIES 15,539,426 15,846,243 Commitments and contingencies (Note 23) Preferred Stock: 10,000,000 shares authorized, $0.001 par value Series A Convertible Preferred Stock: 2,098,918 and 2,098,918 shares issued and outstanding, liquidation preference of $10,137,774 and $10,137,774 as of June 30, 2010 and December 31, 2009 7,031,818 7,031,818 Series B Convertible Preferred Stock: 1,116,388 and 1,116,388 shares issued and outstanding, liquidation preference of $5,399,969 and $5,399,969 as of June 30, 2010 and December 31, 2009 2,153,307 2,153,307 CHINA NEW ENERGY'S STOCKHOLDERS' EQUITY Common Stock: 500,000,000 shares authorized, $0.001 par value, 105,395,032 and 101,788,199 shares issued and outstanding, respectively 105,395 101,788 Additional paid in capital 10,629,380 10,152,971 (Accumulated deficit)/ Retained earnings (98,061) 1,423,523 Statutory surplus reserve fund 1,746,890 1,746,890 Accumulated other comprehensive income 1,754,684 1,600,941 TOTAL CHINA NEW ENERGY'S STOCKHOLDERS' EQUITY 14,138,288 15,026,113 Non-controlling interest 171,062 168,341 TOTAL EQUITY 14,309,350 15,194,454 TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY $39,033,901 $40,225,822 CHINA NEW ENERGY GROUP COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - (UNAUDITED) For the three months ended For the six months ended June 30, June 30, 2010 2009 2010 2009 Revenues: Connection services $663,179 $505,106 $2,354,541 $651,858 Natural gas 28,452 29,610 46,902 42,243 691,631 534,716 2,401,443 694,101 Cost of Sales: Connection services 140,102 161,489 571,678 221,583 Natural gas 44,723 35,136 73,585 58,417 184,825 196,625 645,263 280,000 Gross Profit 506,806 338,091 1,756,180 414,101 Operating Expenses: General and administrative expenses 1,175,719 485,146 2,484,325 772,298 Selling expenses 81,969 48,541 151,636 86,602 Registration right liabilities -- -- -- 450,000 Total operating expenses 1,257,688 533,687 2,635,961 1,308,900 Operating (Loss) (750,882) (195,596) (879,781) (894,799) Other Income (Expenses): Change in fair value of derivative financial instruments - warrants (107,680) 13,688,558 292,036 1,976,044 Interest income 111 25 2,550 2,234 Interest expense (2,192) (2,401) (4,365) (3,010) Other income 12,561 -- 13,090 93 Total other income (expenses) (97,200) 13,686,182 303,311 1,975,361 (Loss) Income From continuing operations, Before Income Tax (848,082) 13,490,586 (576,470) 1,080,562 Income Tax 92,674 5,111 382,597 6,108 (Loss) Income From continuing operations, net of Income Tax (940,756) 13,485,475 (959,067) 1,074,454 Discontinued Operations: (Loss) Income from discontinued operations, net of income tax (16) 1,165,559 (85,646) 1,085,037 (Loss) Income from discontinued operations, net of Income Tax (16) 1,165,559 (85,646) 1,085,037 Net (Loss) Income (940,772) 14,651,034 (1,044,713) 2,159,491 Net Loss (Income) attributable to Non-controlling Interest (996) (14,052) (2,721) 6,903 Net (Loss) Income attributable to China New Energy Group (941,768) 14,636,982 (1,047,434) 2,166,394 Dividend on Preferred Stock (258,975) (2,342,807) (474,150) (2,477,807) Net (Loss) Income attributable to China New Energy Group Common Stockholders (1,200,743) 12,294,175 (1,521,584) (311,413) Other Comprehensive Income: Net (Loss) Income (940,772) 14,651,034 (1,044,713) 2,159,491 Foreign currency translation loss (147,358) (10,679) (152,539) (10,679) Comprehensive Income attributable to Non-controlling interest -- 5,026 -- 5,026 Comprehensive (loss) income $(1,088,130) $14,645,381 $(1,197,252) $2,153,838 (Loss) Income per share - Basic (Loss) Income from continuing operations $(0.01) $0.10 $(0.01) $(0.03) (Loss) Income from discontinued operations $(0.00) $0.01 $(0.00) $0.01 Total (loss) income per share $(0.01) $0.11 $(0.01) $(0.02) (Loss) Income per share - Diluted (Loss) Income from continuing $(0.01) $0.10 $(0.01) $(0.03) operations (Loss) Income from discontinued operations $(0.00) $0.01 $(0.00) $0.01 Total (loss) income per share $(0.01) $0.11 $(0.01) $(0.02) Weighted average common shares outstanding Basic 102,580,909 100,000,041 102,186,744 100,000,041 Diluted 227,672,021 144,433,653 227,340,954 142,264,680 CHINA NEW ENERGY GROUP COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED) For The Six Months Ended June 30, 2010 2009 Cash flows from operating activities: Net (loss) income $(1,044,713) $2,159,491 Net (income) loss from discontinued operations (85,646) 1,085,037 Net (loss) income from continuing operations $(959,067) $1,074,454 Adjustments to reconcile net (loss) income to net cash used in operating activities: Change in fair value of derivative financial instruments - warrants (292,036) (1,976,044) Registration rights penalties 450,000 -- Depreciation and amortization 169,590 88,702 Changes in operating assets and liabilities: Accounts receivable 83,183 (1,502,292) Other receivables 160,267 385,321 Inventories (14,297) 21,316 Prepayment (25,180) 211,701 Other current assets -- (72,372) Accounts payable 289,740 (446,848) Accruals and other payables 1,225,507 (21,764) Tax payable (704,689) (241,029) Cash used in operating activities - continuing operations (66,982) (2,028,855) Cash provided by operating activities - discontinued operations 171,811 (410,215) Net cash provided by (used in) operating activities 104,829 (2,439,070) Cash flows from investing activities Acquisition of property, plant and equipment (2,157,702) (664,429) Deposit paid for property, plant and equipment (976,326) (395,017) Deposits paid for acquisitions of (1,025,250) subsidiaries -- Payment made to acquire subsidiary - Chensheng -- (1,838,946) Proceeds from sale of subsidiary 1,872,782 -- Acquisition consideration payable (117,049) -- Distribution from discontinued operation 1,994 -- Cash used in investing activities-continuing operations (2,401,551) (2,898,392) Cash used in investing activities-discontinued operations (179,250) (1,849,891) Net cash used in investing activities (2,580,801) (4,748,283) Cash flows from financing activities Change from restricted cash 48,422 16,437 Issued preferred stock -- 4,752,140 Cash provided by financing activities-continuing operations 48,422 4,768,577 Cash provided by financing activities-discontinued operations -- 439,060 Net cash flows provided by financing activities 48,422 5,207,637 Effect of exchange rate changes in cash and cash equivalents 17,394 1,392 Net decrease in cash and cash equivalents (2,410,156) (1,978,324) Cash and cash equivalents - beginning of period 2,672,884 5,612,356 Cash and cash equivalents - end of period $262,728 $3,634,032 Supplemental disclosure of cash flow information: Cash paid for interest $4,365 $3,010 Cash paid for income tax $1,036,534 $372,556 Supplemental disclosure of non-cash investing and financing activities: Preferred stock dividends payable $474,150 $324,000 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Three Months Ended Six Months Ended June 30, June 30, Adjusted Net Income (Loss) and Diluted EPS From Continuing Operations 2010 2009 2010 2009 GAAP Net Income (Loss) from Continuing Operations (940,754) 13,485,475 (959,065) 1,074,454 Less: Change in fair value of derivative financial instruments (107,680) 13,688,558 292,036 1,976,044 - warrants Adjusted Amount Net Income from Continuing Operations ($833,074) ($203,083) ($1,251,101) ($901,590) Weighted average number of shares - Diluted 227,672,021 144,433,653 227,340,954 142,264,680 Adjusted Diluted EPS from Continuing Operations ($0.00) ($0.00) ($0.01) ($0.01) Three Months Ended Six Months Ended March 31, March 31, Adjusted Net Income (Loss) and Diluted EPS Attributable to Common Shareholders 2010 2009 2010 2009 GAAP Net Income (Loss) and Attributable to Common Shareholders (1,200,742) 12,294,175 ($1,521,583) ($311,413) Less: Change in fair value of derivative financial instruments - warrants (107,680) 13,688,558 292,036 1,976,044 Adjusted Amount ($1,093,062) ($1,394,383) ($1,813,619)($2,287,457) Weighted average number of shares - Diluted 227,672,021 144,433,653 227,340,954 142,264,680 Adjusted Diluted EPS Attributable to Common Shareholders ($0.00) ($0.01) ($0.01) ($0.02) For more information, please contact: Company Contact: Eric Yu, Chief Financial Officer Email: ericyu@cnegc.com Web: http://www.cnegc.com Investor Relations Contact: CCG Investor Relations Mr. Athan Dounis, Account Manager Phone: +1 (646) 213-1916 Email: athan.dounis@ccgir.com Mr. Crocker Coulson, President Phone: +1 (646) 213-1915 Email: crocker.coulson@ccgir.com Web: http://www.ccgirasia.com
SOURCE China New Energy Group Company