CHINA SUN GROUP HIGH TECH CO 
By DALIAN, China, Jan. 13, 2011 /PRNewswire-Asia-FirstCall/ -- China Sun Group High-Tech Co. (OTC Bulletin Board: CSGH) ("China Sun Group" or the "Company"), a vertically integrated supplier of raw materials for rechargeable Lithium-ion (Li-ion) batteries in China, today reported fiscal 2011 Q2 financial results.
Fiscal Q2 Highlights
-- Q2 revenue was $12.6 million, increasing 25.0% year-over-year.
-- Q2 gross profit was $4.1 million increasing 34.3% year-over-year.
-- Q2 net income was $0.9 million, or $0.02 per diluted share.
-- Q2 non-GAAP net income, excluding share-based consultancy fees, was $2.7
million, or $0.05 per diluted share, increasing 35.0% year-over-year.
"China Sun Group's Q2 performance was strongly driven by an increase in customer demand for our products, primarily our new higher margin product, lithium iron phosphate," commented China Sun Group's Chief Executive Officer, Mr. Guosheng Fu. "During the quarter, we signed a contract to supply 470 tons of lithium iron phosphate (LIP) to Henan Huanyu Sai Er New Energy Technology Co., Ltd. during calendar 2011. We believe that we will continue to see significant opportunity for our new LIP product in the quarters ahead given the rapid development of China's electric vehicle industry, and we are confident that we have the right strategy and operating systems in place to meet the growing demand for LIP."
Fiscal Q2 Results
For the three months ended November 30, 2010, total revenue was $12.6 million, an increase of 25.0% year over year. The increase in revenue was primarily attributable to increased customer demand resulting in an increase in sales volume.
Q2 tons sold 2010 2009
Cobaltosic oxide 297 274
Lithium iron phosphate 180 37
Six months ended
November 30, 2010 tons Six Months ended
sold November 30, 2009
Cobaltosic oxide 585 507
Lithium iron
phosphate 313 37
Gross profit in Q2 was $4.1 million, an increase of 34.3% year-over-year. The increase in gross profit was primarily due to increased sales of LIP as well as an increase in overall sales volume.
Sales and marketing expenses in Q2 were $37,447, an increase of 25.5% year-over-year. The increase was mainly due to an increase in sales.
General and administrative expenses in Q2 were $2.2 million, an increase of 694.1% year-over-year. The increase was primarily attributable to the payment of share-based consultancy fees of $1.8 million incurred during the quarter in connection with the issuance of 2,050,000 shares of common stock to certain consultants for advisory and professional services at the fair value of $0.87 per share.
Income from operations in Q2 was $1.8 million, a decrease of 33.1% year-over-year. This decrease resulted primarily from the payment of share-based consultancy fees of $1.8 million incurred during the quarter. Excluding share-based consultancy fees, income from operations was $3.6 million, an increase of 33.0% year-over-year.
Net income in Q2 was $0.9 million, or $0.02 per diluted share, compared with net income of $2.0 million, or $0.04 per diluted share for the corresponding period in 2009. Non-GAAP net income excluding share-based consultancy fees was $2.7 million ($0.05 per diluted share) an increase of 35.0% year-over-year.
Six Months of Fiscal Year 2011 Results
For the six months ended November 30, 2010, total revenue was $24.4 million, an increase of 25.6% year-over-year. The increase in revenue is mainly attributable to contributions from the Company's LIP product, introduced in September 2009. Gross profit for the six months ended November 30, 2010 was $7.8 million, up 27.7% from $6.1 million for the six months ending November 30, 2009. The increase in gross profit was primarily due to increased sales of our higher profit margin LIP product, driven by strong customer demand. Net income for the six months ended November 30, 2010 was $3.4 million, a decrease of 17.4% as compared to the net income of $4.1 million for the corresponding period a year ago. The decrease was primarily attributable to the payment of share-based consultancy fees of $1.8 million during the six month period ended November 30, 2010. Excluding the share-based consultancy fees, non-GAAP adjusted net income for the six months ended November 30, 2010 was $5.2 million, or $0.10 per diluted share, an increase of 26.3%.
Financial Condition
As of November 30, 2010, cash and cash equivalents were $19.8 million, up 9.9% from $18.0 million on May 31, 2010. Accounts receivable were $5.4 million at the end of the quarter, compared to $2.8 million at the end of May 2010. The increase in cash and accounts receivable of approximately $2.5 million was primarily due to increased sales to customers. The Company had working capital of $23.9 million and a current ratio of 12.8. Stockholders' equity totaled $46.7 million, up from $40.5 million on May 31, 2010.
Net cash provided by operations was $1.4 million for the six months ended November 30, 2010, compared with net cash provided by operations of $4.8 million for the same period in 2009.
Business Outlook
China Sun had strong growth in the second quarter, primarily as a result of the new LIP supply agreement. China Sun expects to add two additional LIP production lines by the end of May 30, 2011, which will increase the Company's LIP production capacity. The Company reiterates its previous guidance of 2011 fiscal year revenues in the range of $56 million to $58 million, and non-GAAP adjusted net income to be in the range between $10 million and $11 million, excluding the cost of share-based consultancy fees.
Use of Non-GAAP Financial Measures
This press release contains non-GAAP financial measures that exclude the cost of share-based consultancy fees consisting of common stock issued to certain consultants for advisory and professional services. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of this item in this release. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.
About China Sun Group High-Tech Co.
China Sun Group High-Tech Co. ("China Sun Group") produces anode materials used in lithium ion batteries. Through its wholly-owned operating subsidiary, Dalian Xinyang High-Tech Development Co. Ltd ("DLX"), the Company primarily produces cobaltosic oxide and lithium cobalt oxide. According to the China Battery Industry Association, DLX has the second largest cobalt series production capacity in the People's Republic of China. Through its research and development division, DLX owns a proprietary series of nanometer technologies that supply state-of-the-art components for advanced lithium ion batteries. Leveraging its state-of-the-art technology, high-quality product line and scalable production capacity, the Company has recently diversified into the manufacture of LIP and plans to forward integrate to manufacture of power Li-ion batteries. For more information, visit http://www.china-sun.cn.
Safe Harbor Statement
The statements contained herein that are not historical facts are considered "forward-looking statements." Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. In particular, statements regarding the Company's expected growth in sales of LIP due to China's expanding new energy automobile industry are examples of such forward-looking statements. The forward-looking statements include risks and uncertainties, including, but not limited to, the effect of political, economic, and market conditions and geopolitical events; legislative and regulatory changes that affect our business; the availability of funds and working capital; the actions and initiatives of current and potential competitors; investor sentiment; and our reputation. We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events, which may cause actual results to differ from those expressed or implied by any forward-looking statements. The factors discussed herein are expressed from time to time in our filings with the Securities and Exchange Commission available at http://www.sec.gov.
Company Contact: Investor Relations Contact:
Mr. Guosheng Fu, Chief Executive
Officer Mr. Mark Collinson, Partner
China Sun Group High-Tech Co. CCG Investor Relations
Tel: 86 411 8288 9800/8289 2736
(China) Tel: 310-954-1343
Email: ir@china-sun.cn Email: mark.collinson@ccgir.com
Website: www.china-sun.cn Website: www.ccgirasia.com
FINANCIAL TABLES FOLLOW
CHINA SUN GROUP HIGH-TECH CO.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2010 AND 2009
(Currency expressed in United States Dollars ("US$"), except for
number of shares)
(Unaudited)
Three months ended
November 30,
------------------
2010 2009
---- ----
Revenues, net $12,639,828 $10,110,020
Cost of revenue (inclusive
of depreciation and
amortization) 8,568,216 7,078,731
--------- ---------
Gross profit 4,071,612 3,031,289
Operating expenses:
Sales and marketing 37,447 29,844
Research and development 32,514 25,598
General and administrative 2,195,429 276,478
-------- ------
Total operating expenses 2,265,390 331,920
INCOME FROM OPERATIONS 1,806,222 2,699,369
Other income:
Other income 44,432 -
Interest income 13,212 8,756
----- ----
INCOME BEFORE INCOME TAXES 1,863,866 2,708,125
Income tax expense (923,867) (690,442)
-------- --------
NET INCOME $939,999 $2,017,683
======== ==========
Other comprehensive income
(loss):
-Foreign currency
translation gain (loss) 944,317 64,313
------- ------
COMPREHENSIVE INCOME $1,884,316 $2,081,996
========== ==========
Net income per share -
Basic and diluted $0.02 $0.04
===== =====
Weighted average common
stock outstanding - Basic
and diluted 55,017,415 53,422,971
Six months ended
November 30,
----------------
2010 2009
---- ----
Revenues, net $24,393,287 $19,423,356
Cost of revenue (inclusive
of depreciation and
amortization) 16,614,672 13,333,297
---------- ----------
Gross profit 7,778,615 6,090,059
Operating expenses:
Sales and marketing 68,773 53,138
Research and development 53,447 51,173
General and administrative 2,595,814 518,156
-------- ------
Total operating expenses 2,718,034 622,467
INCOME FROM OPERATIONS 5,060,581 5,467,592
Other income:
Other income 44,432 -
Interest income 23,851 16,814
----- -----
INCOME BEFORE INCOME TAXES 5,128,864 5,484,406
Income tax expense (1,758,130) (1,403,380)
---------- ----------
NET INCOME $3,370,734 $4,081,026
========== ==========
Other comprehensive income
(loss):
-Foreign currency
translation gain (loss) 1,051,560 (10,960)
--------- -------
COMPREHENSIVE INCOME $4,422,294 $4,070,006
========== ==========
Net income per share -
Basic and diluted $0.06 $0.08
===== =====
Weighted average common
stock outstanding - Basic
and diluted 54,220,193 53,422,971
CHINA SUN GROUP HIGH-TECH CO.
GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF NOVEMBER 30, 2010 AND MAY 31, 2010
(Currency expressed in United States Dollars ("US$"), except for
number of shares)
November 30,
2010 May 31, 2010
------------ ------------
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $19,797,412 $18,017,266
Accounts receivable, trade 5,428,311 2,793,038
Inventories 420,938 1,218,336
Deposits and prepayments 330,765 3,049
Total current assets 25,977,426 22,031,689
Non-current assets:
Technical know-how, net 2,445,764 2,475,298
Property, plant and equipment, net 20,292,073 20,567,954
---------
TOTAL ASSETS $48,715,263 $45,074,941
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $412,207 $2,127,244
Income tax payable 612,670 1,488,619
Other payables and accrued liabilities 1,009,703 984,189
--------- ------
Total liabilities 2,034,580 4,600,052
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $0.001 par
value; 20,000,000 shares authorized; none
of shares issued and outstanding,
respectively - -
Common stock, $0.001 par value;
100,000,000 shares authorized; 55,472,971
shares and 53,422,971 shares issued and
outstanding, respectively 55,473 53,423
Additional paid-in capital 11,366,654 9,585,204
Accumulated other comprehensive income 4,094,904 3,043,344
Statutory reserve 2,277,365 2,277,365
Retained earnings 28,886,287 25,515,553
--------- ---------
Total stockholders' equity 46,680,683 40,474,889
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $48,715,263 $45,074,941
=========== ===========
CHINA SUN GROUP HIGH-TECH CO.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2010 AND 2009
(Currency expressed in United States Dollars ("US$"))
(Unaudited)
Six months ended
November 30,
----------------
2010 2009
---- ----
Cash flows from
operating activities:
Net income $3,370,734 $4,081,026
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation of
property, plant and
equipment 810,149 573,949
Amortization of
technical know-how 87,876 43,375
Shares issued for
services, non-cash 1,783,500 -
Changes in operating
assets and liabilities:
Accounts receivable,
trade (2,537,625) (86,566)
Inventories 816,781 1,264,253
Value-added tax
receivable - 417,912
Deposits and prepayments (323,736) (239,780)
Accounts payable, trade (1,745,030) (845,986)
Income tax payable (900,803) (55,746)
Other payables and
accrued liabilities 5,717 (376,042)
----- --------
1,367,563 4,776,395
Net cash provided by
operating activities
Cash flows from
investing activities:
Purchase of plant and
equipment (49,852) (1,297,941)
Addition of construction
in progress - (1,024,621)
(49,852) (2,322,562)
Net cash used in
investing activities
Effect of exchange rate
changes on cash and
cash equivalents 462,435 (1,815)
------- ------
NET CHANGE IN CASH AND
CASH EQUIVALENTS 1,780,146 2,452,018
CASH AND CASH
EQUIVALENTS, BEGINNING
OF PERIOD 18,017,266 9,209,953
---------- ---------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD $19,797,412 $11,661,971
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for income
taxes $2,658,933 $1,459,125
Cash paid for interest $ - $ -
== == == ==
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Transfer from
construction in
progress to property,
plant and equipment $ - $2,560,385
=== === ==========
SOURCE China Sun Group High-Tech Co., Ltd.
