Highpower International (HPJ) 8-K Highpower International Reports Financial Results

Exhibit 99.1 

Highpower International Reports Financial Results

For the Second Quarter And Six Months Ended June 30, 2015

Company to Hold Conference Call on August 10, 2015 at 10:00 a.m. Eastern Time / 7:00 a.m. Pacific Time

SAN FRANCISCO, USA and SHENZHEN, CHINA – August 10, 2015 - Highpower International, Inc. (NASDAQ: HPJ), a developer, manufacturer, and marketer of lithium and nickel-metal hydride (Ni-MH) rechargeable batteries, and a battery management systems and battery recycling provider, today announced its financial results for the second quarter and six months ended June 30, 2015.

2015 Second Quarter Operating and Financial Highlights (all results are compared to prior year period)

· Net sales were $38.6 million, an increase of 1.3% from $38.1 million.

· Lithium battery net sales increased 26.0% to $22.1 million from $17.5 million. Nickel-metal hydride (Ni-MH) net sales decreased 17.6% to $15.8 million from $19.2 million.

· Gross margin was 22.2% compared to 20.3%.

· EBITDA was $3.3 million, an increase of 36.6% from $2.4 million; Adjusted EBITDA improved to $3.5 million, compared to $2.8 million.

· Net income attributable to the Company was $1.9 million, or $0.12 per diluted share, an increase of 129.8% from net income of $0.8 million, or $0.05 per diluted share; non-GAAP net income attributable to the Company was $2.1 million, or $0.13 per diluted share, compared to $1.3 million, or $0.08 per diluted share.

· Received Best Design Award at the 5th China International Energy Storage Conference and Exhibition.

· Awarded 100 KWh energy storage project from China Southern Power Grid.

· Selected by Seiko for wearable battery solutions.

· Granted U.S. patent for new safety technology, with a total of 149 patents.

Management Commentary

Mr. George Pan, Chairman and CEO of Highpower International, commented, "Revenue growth of lithium battery products was driven by continuous global demand for mobile devices as well as the electric bus market in China, offset by a more challenging environment for nickel-metal hydride business. We continue to leverage the flexibility of our operations to take advantage of these trends in the marketplace, and our ability to manufacture lithium battery products to a wide variety of customers largely drove our double-digit increases for the quarter. This led to overall top-line improvement despite lower Ni-MH sales as a result of commodity-driven pricing pressures. We have made progress towards further improving the Company's profitability through lean manufacturing, and delivered improved gross and operating margins. We also plan to commercialize portable energy storage systems in the international market by the end of year, and to channel all of our attention on positioning Highpower for sustainable and profitable growth.”

2015 Second Quarter Financial Review

Net Sales

Net sales for the second quarter ended June 30, 2015 were $38.6 million compared to $38.1 million for the same period in 2014. The 1.3% increase in net sales compared to the same period in 2014 was mainly due to a $4.6 million improvement in net sales of Lithium batteries, offset by a decline of $3.4 million in sales of Ni-MH batteries and $0.7 million in sales of new material business.

Net sales for the six months ended June 30, 2015 were $70.8 million, an increase of 5.2% compared to $67.3 million for the same prior year period. This increase was attributable to an increase of $8.0 million in sales of Lithium batteries, offset by a $4.1 million decrease in net sales of Ni-MH batteries and $0.4 million decrease in new material business.

Gross Profit

For the second quarter ended June 30, 2015, the Company’s gross profit was $8.6 million, an increase of 10.8% from $7.7 million for the same period in 2014.

For the six months ended June 30, 2015,the Company’s gross profit was $14.1 million, an increase of 3.4% from $13.7 millionfor the same period in 2014.

Gross Margin

Gross margin was 22.2% for the second quarter ended June 30, 2015, compared to 20.3% for the same period in 2014. This increase was attributed to a decrease in the average price of battery materials (nickel) and higher sales of lithium batteries, offset by a negative gross profit from new materials as it ramps up operations.

Gross margin for the six months ended June 30, 2015 was 20.0%, as compared with 20.3% for the same period in 2014. The decrease was due to decrease in the average selling price of products.

Net sales, cost of sales, and gross profit by segment is set out as follows:

	Three months ended June 30,								Six months ended June 30,
	2015			2014					2015			2014
	(Unaudited)			(Unaudited)					(Unaudited)			(Unaudited)
	$			$		Changes in %			$			$		Changes in %
Net sales
Ni-MH Batteries		15,775,426			19,153,435		-17.6	%		30,534,896			34,640,938		-11.9	%
Lithium Batteries		22,066,302			17,511,963		26.0	%		38,886,930			30,902,207		25.8	%
New Materials		794,073			1,469,238		-46.0	%		1,351,623			1,751,805		-22.8	%
Total		38,635,801			38,134,636		1.3	%		70,773,449			67,294,950		5.2	%
Cost of Sales
Ni-MH Batteries		11,850,483			15,224,391		-22.2	%		23,565,936			27,514,189		-14.3	%
Lithium Batteries		17,307,091			13,877,599		24.7	%		31,640,483			24,580,425		28.7	%
New Materials		914,467			1,303,155		-29.8	%		1,447,556			1,539,900		-6.0	%
Total		30,072,041			30,405,145		-1.1	%		56,653,975			53,634,514		5.6	%
Gross Profit
Ni-MH Batteries		3,924,943			3,929,044		-0.1	%		6,968,960			7,126,749		-2.2	%
Lithium Batteries		4,759,211			3,634,364		31.0	%		7,246,447			6,321,782		14.6	%
New Materials		(120,394	)		166,083		-172.5	%		(95,933	)		211,905		-145.3	%
Total		8,563,760			7,729,491		10.8	%		14,119,474			13,660,436		3.4	%

2

Net sales by geography is set out as follows:

	Three months ended						Six months ended
	June 30,						June 30,
	2015			2014			2015			2014
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net sales
China Mainland		49.9	%		52.2	%		47.1	%		51.2	%
Asia, others		30.1	%		22.8	%		31.2	%		21.2	%
Europe		14.9	%		18.5	%		16.3	%		20.0	%
North America		4.6	%		5.9	%		4.7	%		6.8	%
Others		0.5	%		0.6	%		0.7	%		0.8	%
Total:		100.0	%		100.0	%		100.0	%		100.0	%

Research and Development (R&D)

R&D expenses were $2.0 million, or 5.2% of net sales, for both the second quarter ended June 30, 2015 and for the same period in 2014.

For the six months ended June 30, 2015, R&D expenses were $3.7 million, or 5.2% of net sales, compared to $3.8 million, or 5.6% of net sales, for the same period in 2014.

Selling & Distribution

Selling and distribution expenses were $1.6 million, or 4.1% of net sales, for the second quarter ended June 30, 2015, compared to $1.6 million, or 4.2% of net sales, for the same period in 2014.

For the six months ended June 30, 2015, selling and distribution expenses were $3.4 million, or 4.8% of the net sales, compared to $3.1 million, or 4.6% of net sales, for the same period in 2014.

General & Administrative

General and administrative expenses were $3.4 million, or 8.9% of net sales, for the second quarter ended June 30, 2015, compared to $3.3 million, or 8.7% of net sales, for the same period in 2014.

For the six months ended June 30, 2015, general and administrative expenses were $6.4 million, or 9.1% of net sales, compared to $6.9 million, or 10.2% of net sales, for the same period in 2014.

Net Income

For the second quarter of 2015, net income attributable to the Company was $1.9 million, or $0.12 per diluted share based on 15.4 million weighted average diluted shares outstanding, compared to net income of $0.8 million, or $0.05 per diluted share based on 15.3 million weighted average diluted shares outstanding. Non-GAAP net income attributable to the Company was $2.1 million, or $0.13 per diluted share, compared to a non-GAAP net income of $1.3 million, or $0.08 per diluted share, in the prior year period.

For the six months ended June 30, 2015, net income attributable to the Company was $1.7 million, or $0.12 per diluted share based on 15.5 million weighted average diluted shares outstanding, compared to net loss of $0.1 million, or $0.01 per diluted share based on 14.4 million weighted average diluted shares outstanding. Non-GAAP net income attributable to the Company was $1.7 million, or $0.11 per diluted share, compared to a non-GAAP net income of $0.7 million, or $0.05 per diluted share, in the prior year period.

EBITDA

EBITDA for the second quarter ended June 30, 2015 improved to $3.3 million from $2.4 million in the prior year period. EBITDA for first half of 2015 increased 67.6% to $4.5 million from $2.7 million for the six months ended June 30, 2014.

3

A table reconciling EBITDA, a non-GAAP (Generally Accepted Accounting Principles) financial measure, to the appropriate GAAP measure is included with the Company’s financial information below.

Balance Sheet Highlights

($ in millions, except per share data)	June 30,		December 31,
	2015		2014
	(Unaudited)
	$		$
Cash and Cash Equivalents	$	3.7	$	14.6
Restricted cash	$	12.8	$	15.4
Total Current Assets	$	84.0	$	89.2
Total Assets	$	142.4	$	146.2
Total Current Liabilities	$	97.0	$	101.4
Total Liabilities	$	98.6	$	104.4
Shareholders’ Equity	$	43.8	$	41.8
Total Liabilities and Shareholders’ Equity	$	142.4	$	146.2
Book Value Per Share	$	2.90	$	2.77

Outlook for 2015

Based on current expectations for global demand in the rechargeable battery market in 2015 and the continued trends toward mobile power sources, higher-value energy storage systems and transportation products, the Company is reaffirming its 2015 guidance of revenues to be between $160 million to $170 million, and non-GAAP net income of between $5.0 million and $6.0 million, and net income of between $4.0 million and $5.0 million.

Conference Call Details

The Company announced that it will discuss financial results in a conference call on August 10, 2015 at 10:00 a.m. Eastern Time / 7:00 a.m. Pacific time to discuss these results.

The dial-in numbers are:

Live Participant Dial In (Toll Free):	877-407-3108
Live Participant Dial In (International):	201-493-6797

To listen to the live webcast, please go to atwww.highpowertech.com and click on the conference call link, or go to:http://highpowertech.equisolvewebcast.com/q2-2015. This webcast will be archived and accessible through the Company’s website for approximately 30 days following the call. The Company will also have an accompanying slide presentation available in PDF format on its homepage prior to the conference call.

About Highpower International, Inc.

Highpower International was founded in 2001 and produces high-quality Nickel-Metal Hydride (Ni-MH) and lithium-based rechargeable batteries used in a wide range of applications such as electric buses, bikes, energy storage systems, power tools, medical equipment, digital and electronic devices, personal care products, and lighting, etc. Highpower’s target customers are Fortune 500 companies and top 10 companies in each vertical segment. With advanced manufacturing facilities located in Shenzhen, Huizhou, and Ganzhou of China, Highpower is committed to clean technology, not only in the products it makes, but also in the processes of production. The majority of Highpower International's products are distributed to worldwide markets mainly in the United States, Europe, China and Southeast Asia.

4

Use of Non-GAAP Measures

The Company has supplemented its reported GAAP (generally accepted accounting principles) financial information with non-GAAP measures. EBITDA was derived by taking earnings before interest expense (net), taxes, depreciation and amortization. Adjusted EBITDA and Non-GAAP (adjusted) net income or (loss) exclude stock-based compensation expense. Adjusted EBITDA, as defined above, may not be similar to Adjusted EBITDA measures used by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. The Company believes these non-GAAP measures are useful to investors as they provide a basis for evaluating the Company's operating results in the ordinary course of its operations.

These non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with, and not in lieu of, the corresponding GAAP measures. These non-GAAP financial measures are reconciled in the accompanying tables to the most directly comparable measures as reported in accordance with GAAP.

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995 that are not historical facts. These statements  can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “project,” “plan,” “seek,” “intend,” or “anticipate” or the negative thereof or comparable terminology, and include discussions of strategy, and statements about industry trends and the Company's future performance, operations and products. Such statements involve known and unknown risks, uncertainties and other factors that could cause the Company's actual results to differ materially from the results expressed or implied by such statements, including, without limitation, fluctuations in the cost of raw materials; our dependence on, or inability to attract additional, major customers for a significant portion of our net sales; our ability to increase manufacturing capabilities to satisfy orders from new customers; our ability to maintain increased margins; our dependence on the growth in demand for portable electronic devices and energy storage systems and transportation products and the success of manufacturers of the end applications that use our battery products; our responsiveness to competitive market conditions; our ability to successfully manufacture our products in the time frame and amounts expected; the market acceptance of our battery products, including our lithium products; our ability to successfully develop products for and penetrate the electric transportation market; our ability to successfully commercialize portable energy storage systems in the international market by the end of year and our ability to continue R&D development to keep up with technological changes. For a discussion of these and other risks and uncertainties see "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's public filings with the SEC. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this press release.

CONTACT:

Highpower International, Inc.

Henry Sun

CFO

+86-755-8968-6521

ir@highpowertech.com

INVESTOR RELATIONS:

The Equity Group Inc.

In China

Katherine Yao, Senior Associate

+86-10-6587-6435

kyao@equityny.com

In U.S.

Adam Prior, Senior Vice President

+1 (212) 836-9606

aprior@equityny.com

5

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Stated in US Dollars except Number of Shares)

	Three months ended						Six months ended
	June 30,						June 30,
	2015			2014			2015			2014
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
	$			$			$			$
Net sales		38,635,801			38,134,636			70,773,449			67,294,950
Cost of sales		(30,072,041	)		(30,405,145	)		(56,653,975	)		(53,634,514	)
Gross profit		8,563,760			7,729,491			14,119,474			13,660,436
Research and development expenses		(1,997,494	)		(1,976,965	)		(3,671,618	)		(3,788,917	)
Selling and distribution expenses		(1,597,564	)		(1,587,726	)		(3,396,286	)		(3,124,886	)
General and administrative expenses		(3,423,770	)		(3,312,296	)		(6,448,521	)		(6,883,576	)
Foreign currency translation gain		73,546			247,102			443,857			349,695
Gain (loss) on derivative instruments		-			21,147			-			(116,134	)
Total operating expenses		(6,945,282	)		(6,608,738	)		(13,072,568	)		(13,563,818	)
Income from operations		1,618,478			1,120,753			1,046,906			96,618
Gain on change of fair value of warrant liability		84,833			74,548			431,132			74,548
Other income		357,055			361,954			587,147			903,374
Interest expenses		(275,476	)		(474,162	)		(544,118	)		(1,069,543	)
Income before taxes		1,784,890			1,083,093			1,521,067			4,997
Income taxes benefit (expenses)		(18,840	)		(281,364	)		76,416			(189,213	)
Net income (loss)		1,766,050			801,729			1,597,483			(184,216	)
Less: net loss attributable to non-controlling interest		(101,074	)		(10,769	)		(146,283	)		(61,565	)
Net income (loss) attributable to the Company		1,867,124			812,498			1,743,766			(122,651	)
Comprehensive income (loss)
Net income (loss)		1,766,050			801,729			1,597,483			(184,216	)
Foreign currency translation income (loss)		206,027			(19,936	)		1,266			(361,122	)
Comprehensive income (loss)		1,972,077			781,793			1,598,749			(545,338	)
Less: comprehensive loss attributable to non-controlling interest		(95,376	)		(11,294	)		(144,549	)		(72,727	)
Comprehensive income (loss) attributable to the Company		2,067,453			793,087			1,743,298			(472,611	)
Income (loss) per share of common stock attributable to the Company
- Basic		0.12			0.05			0.12			(0.01	)
- Diluted		0.12			0.05			0.11			(0.01	)
Weighted average number of common stock outstanding
- Basic		15,094,979			14,853,219			15,091,639			14,415,662
- Diluted		15,441,576			15,277,743			15,469,274			14,415,662

6

HIGHPOWER INTERNATIONAL, INC.AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars except Number of Shares)

	June 30,		December 31,
	2015		2014
	(Unaudited)
	$		$
ASSETS
Current Assets:
Cash and cash equivalents		3,739,259		14,611,892
Restricted cash		12,826,121		15,396,827
Accounts receivable, net		33,148,160		32,316,607
Notes receivable		2,271,470		621,110
Prepayments		5,587,678		3,283,520
Other receivables		712,666		665,828
Inventories		25,699,805		22,268,069
Total Current Assets		83,985,159		89,163,853
Property, plant and equipment, net		51,729,322		50,437,718
Land use right, net		4,263,472		4,305,317
Intangible asset, net		575,000		600,000
Deferred tax assets		1,880,410		1,647,184
		142,433,363		146,154,072
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable		43,126,718		44,562,647
Deferred income		1,890,464		1,887,409
Short-term loan		9,147,609		15,195,040
Notes payable		33,259,448		29,903,248
Other payables and accrued liabilities		6,222,543		5,896,547
Income taxes payable		1,396,467		1,968,656
Current portion of long-term loan		1,962,420		1,959,248
Total Current Liabilities		97,005,669		101,372,795
Warrant Liability		636,542		1,067,674
Long-term loan		981,209		1,959,247
TOTAL LIABILITIES		98,623,420		104,399,716
EQUITY
Stockholders’ equity
Preferred stock
(Par value: $0.0001, Authorized: 10,000,000 shares, Issued and outstanding: none)		-		-
Common stock
(Par value: $0.0001, Authorized: 100,000,000 shares, 15,101,679 shares issued and outstanding at June 30, 2015 and 15,084,746 shares issued and outstanding at December 31, 2014)		1,510		1,508
Additional paid-in capital		10,987,266		10,530,430
Statutory and other reserves		3,611,501		3,611,501
Retained earnings		22,418,787		20,675,021
Accumulated other comprehensive income		5,628,189		5,628,657
Total equity for the Company’s stockholders		42,647,253		40,447,117
Non-controlling interest		1,162,690		1,307,239
TOTAL EQUITY		43,809,943		41,754,356
TOTAL LIABILITIES AND EQUITY		142,433,363		146,154,072

7

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

	Six months ended June 30,
	2015			2014
	(Unaudited)			(Unaudited)
	$			$
Cash flows from operating activities
Net income (loss)		1,597,483			(184,216	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		2,535,695			2,053,486
Allowance for doubtful accounts		896			266
Loss on disposal of property, plant and equipment		79,692			151,237
Gain on derivative instruments		-			130,948
Deferred income tax		(230,050	)		(549,140	)
Share based payment		412,304			916,244
Gain on change of fair value of warrant liability		(431,132	)		(74,548	)
Changes in operating assets and liabilities:
Accounts receivable		(787,672	)		159,094
Notes receivable		(1,645,051	)		(1,560,871	)
Prepayments		(2,292,844	)		(1,200,028	)
Other receivable		(45,640	)		253,843
Inventories		(3,386,818	)		(1,086,899	)
Accounts payable		(1,503,555	)		6,887,622
Deferred income		-			1,009,295
Other payables and accrued liabilities		315,942			(2,175,844	)
Income taxes payable		(573,875	)		88,688
Net cash flows (used in) provided by operating activities		(5,954,625	)		4,819,177
Cash flows from investing activities
Acquisition of plant and equipment		(4,047,717	)		(3,503,027	)
Net cash flows used in investing activities		(4,047,717	)		(3,503,027	)
Cash flows from financing activities
Proceeds from short-term bank loans		-			9,611,198
Repayment of short-term bank loans		(6,062,248	)		(14,367,008	)
Repayment of long-term bank loans		(978,649	)		(976,737	)
Proceeds from notes payable		30,931,015			21,753,902
Repayment of notes payable		(27,631,861	)		(25,195,047	)
Proceeds from exercise of employee options		44,534			-
Proceeds from issuance of capital stock, net		-			4,633,164
Change in restricted cash		2,588,730			8,316,169
Net cash flows (used in) provided by financing activities		(1,108,479	)		3,775,641
Effect of foreign currency translation on cash and cash equivalents		238,188			(244,829	)
Net (decrease) increase in cash and cash equivalents		(10,872,633	)		4,846,962
Cash and cash equivalents - beginning of period		14,611,892			7,973,459
Cash and cash equivalents - end of period		3,739,259			12,820,421
Supplemental disclosures for cash flow information:
Cash paid for:
Income taxes		727,509			649,665
Interest expenses		615,363			1,061,904
Non-cash transactions
Accounts payable for construction in progress		-			794,356
Offset of deferred income and property, plant and equipment		-			669,668

8

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Stated in US Dollars)

Reconciliation of Net Income to EBITDA

	Three months ended				Six months ended
	June 30,				June 30,
	2015		2014		2015			2014
	(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)
	$		$		$			$
Net income (loss) attributable to the Company		1,876,124		812,498		1,743,766			(122,651	)
Non-GAAP Net Income (1)		2,073,234		1,253,248		1,724,938			719,045
Interest expenses, net		110,262		270,351		342,832			592,500
Income tax expenses		18,840		281,364		(76,416	)		189,213
Depreciation and Amortization		1,289,652		1,041,685		2,535,695			2,053,486
EBITDA		3,285,878		2,405,898		4,545,877			2,712,548
Non-GAAP EBITDA(2)		3,491,988		2,846,648		4,527,049			3,554,244

(1) See table below for reconciliation of net income (loss) attributable to the Company to Non-GAAP net income attributable to the Company.

(2) Excludes share-based compensation expense and gain on change of fair value of warrant liability as set forth in the following table.

9

HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Stated in US Dollars except Number of Shares)

Reconciliation of Net Income (Loss) Attributable to the Company to Non-GAAP Net Income Attributable to the Company

	Three months ended						Six months ended
	June 30,						June 30,
	2015			2014			2015			2014
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
	$			$			$			$
Net income (loss) attributable to the Company		1,867,124			812,498			1,743,766			(122,651	)
Stock-based compensation expense		290,943			515,298			412,304			916,244
Gain on change of fair value of warrant liability		(84,833	)		(74,548	)		(431,132	)		(74,548	)
Non-GAAP net income attributable to the Company		2,073,234			1,253,248			1,724,938			719,045
Basic net income (loss) per share of common stock attributable to the Company		0.12			0.05			0.12			(0.01	)
Stock-based compensation expense		0.02			0.03			0.03			0.06
Gain on change of fair value of warrant liability		-			-			(0.03	)		-
Non-GAAP income per share of common stock attributable to the Company		0.14			0.08			0.12			0.05
Diluted net income (loss) per share of common stock attributable to the Company		0.12			0.05			0.11			(0.01	)
Stock-based compensation expense		0.02			0.03			0.03			0.06
Gain on change of fair value of warrant liability		(0.01	)		-			(0.03	)		-
Non-GAAP income per share of common stock attributable to the Company		0.13			0.08			0.11			0.05
Weighted average number of common shares outstanding
-Basic		15,094,979			14,853,219			15,091,639			14,415,662
-Diluted		15,441,576			15,277,743			15,469,274			14,415,662

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