Hong Kong Highpower Technology Reports Third Quarter 2009 Financial Results

NEW YORK, NY and SHENZHEN, CHINA, Nov 12 (MARKET WIRE)
--
Hong Kong Highpower Technology, Inc. (NYSE Amex: HPJ), a leading
developer, manufacturer and marketer of nickel-metal hydride (Ni-MH) and
lithium-ion (Li-ion) rechargeable batteries and related products, today
announced financial results for the third quarter ended September 30,
2009.

Business Highlights

-- Earned net income of $0.18 per diluted share for third quarter 2009,
an 800% increase year-over-year, and 157% increase sequentially;
-- Generated gross margins of 25% on net sales of $21.1 million for third
quarter 2009, an 8% points increase year-over-year, and 5% points
improvement sequentially;
-- Gross profit up 49% year-over-year and 70% sequentially;
-- Debt-to-capital ratio remained healthy consistent with prior quarter;
-- Inventory reduced 36% from the year-ago quarter greatly decreasing
inventory carry exposure.

"Our business trends in the third quarter clearly show that the ill
effects of the global recession on our business are fading," said George
Pan, Chairman and Chief Executive Officer of Hong Kong Highpower
Technology. "We produced a substantial increase in both our net sales and
gross profit over the second quarter, which demonstrates that we are
poised to capture even greater rechargeable battery market share as the
economy continues to strengthen due to our ongoing customer relationships
and strong financial position.

"Recently, we also announced a significant new contract with Siemens
Gigaset Communications to supply rechargeable batteries for cordless
phones sold in Europe under the Gigaset brand. This contract represents a
significant new ODM relationship for the Company.

"The Company's lithium-ion battery products division, which was launched
in 2008, continues to grow. At the end of the third quarter, average
monthly production reached over 800,000 pieces, which is still well ahead
of our initial expectations.

"As we head into the fourth quarter, we believe 2009 will be a much
stronger year for us in terms of profitability and overall financial
performance," said Mr. Pan. "Our net income through the first nine months
is already double of where it stood for the comparable time frame in 2008.
This strong financial performance is mainly the result of the fading
effects of global economic recession on Hong Kong Highpower Technology's
business and better raw material cost management."

Third Quarter 2009 Financial Results

Net sales for the third quarter ended September 30, 2009 increased 2.8% to
$21.1 million, compared to $20.5 million for the third quarter ended
September 30, 2008. On a sequential basis, third quarter net sales
increased by 36.3% compared to $15.4 million for the second quarter of
2009. The year-over-year increase was largely due to an increase in the
number of battery units sold and was partially offset by a decrease in the
average selling price of our battery units.

Gross profit for the third quarter ended September 30, 2009 increased
48.7% to $5.2 million, compared to $3.5 million for the third quarter
ended September 30, 2008. On a sequential basis, third quarter gross
profit increased 69.9%, compared to $3.1 million for the second quarter
2009. Gross margin was 24.8% for the third quarter ended September 30,
2009, compared to 17% for the third quarter ended September 30, 2008, and
19.9% for the second quarter 2009. The increase in our gross profit is
primarily due to a decrease in the average per unit cost of goods sold
during the three months ended September 30, 2009 as compared to same
period in 2008.

Selling and distribution costs were $767,200 or 3.6% for the third quarter
ended September 30, 2009, compared to $800,000 or 3.9% for the comparable
period in 2008 and $580,000 or 3.8% for the second quarter 2009.

General and administrative expenses, including stock-based compensation,
were $1.5 million or 7% of net sales for the third quarter ended September
30, 2009, compared to $1.9 million, or 9.4% of net sales for the third
quarter 2008, and $1.0 million or 6.8% of net sales for the second quarter
2009.

During the three months ended September 30, 2009, the exchange rate of the
Renminbi ("RMB") to the U.S. Dollar ("USD") only decreased approximately
0.03% from the level at the end of June 30, 2009. There were no obvious
effects that resulted from the foreign current exchange rate.

The Company recorded a provision for income taxes of $529,200 for the
third quarter ended September 30, 2009, compared with provisions for
income taxes of $35,700 for the third quarter 2008 and $229,000 for the
second quarter 2009.

Net income for the third quarter of 2009 was $2.4 million, or $0.18 per
diluted share, based on 13.6 million weighted average shares outstanding.
This compares with third quarter 2008 net income of $289,400, or $0.02 per
diluted share, based on 13.6 million weighted average shares outstanding,
and second quarter 2009 net income of $969,000, or $0.07 per diluted
share, based on 13.8 million weighted average shares outstanding.

Balance Sheet

At September 30, 2009, Hong Kong Highpower Technology had cash and cash
equivalents and restricted cash totaling $11.7 million, total assets of
$52 million, working capital of $6.5 million and stockholders' equity of
$20.5 million. Bank credit facilities totaled $23.2 million at September
30, 2009, of which $16.7 million was available as unused credit.

Conference Call and Webcast

Management of Hong Kong Highpower Technology will host a conference call
today, Thursday, November 12, 2009 at 8:00 a.m. Pacific time/11:00 a.m.
Eastern time to discuss third quarter 2009 financial results and answer
questions.

Individuals interested in participating in the conference call may do so
by dialing 800-891-5765 from the U.S., or 702-696-4830 from outside the
U.S. Those interested in listening to the conference call live via the
Internet may do so by visiting the Investor Relations section of the
Company's Web site at www.haopengbattery.com or www.InvestorCalendar.com.

A telephone replay will be available for 48 hours following the conclusion
of the call by dialing 800-642-1687 from the U.S., or 706-645-9291 from
outside the U.S., and entering reservation code 40001543. A webcast replay
will be available for one year.

About Hong Kong Highpower Technology, Inc.

Hong Kong Highpower Technology develops, manufactures and markets
rechargeable nickel metal hydride (Ni-MH) and lithium-ion (Li-ion)
batteries and related products for use in a variety of electronic devices.
The majority of Hong Kong Highpower Technology's products are distributed
worldwide to markets in the United States, Europe, China, Hong Kong,
Southeast Asia and Taiwan. For more information, visit
www.haopengbattery.com.

To be added to the Company's email distribution for future news releases,
please send your request to HPJ@finprofiles.com. Company news can also be
found at http://ir.haopengbattery.com/en/introduce028.html.

Media and Investor Inquiries:
Henry H. Ngan
Chief Financial Officer
+1-917-887-0614
ir@highpowerbatteries.net

Financial Profiles, Inc.
Tricia Ross
(310) 277-4711
HPJ@finprofiles.com

Forward-Looking Statement

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. 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.

- financial tables to follow -

HONG KONG HIGHPOWER TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in US Dollars)

Three months ended Nine months ended
September 30, September 30,
------------------------ ------------------------
2009 2008 2009 2008
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
$ $ $ $

Net sales 21,056,149 20,473,472 47,811,438 57,326,510
Cost of sales (15,835,110) (16,961,664) (37,120,495) (47,731,537)
----------- ----------- ----------- -----------

Gross profit 5,221,039 3,511,808 10,690,943 9,594,973
Depreciation (50,120) (49,792) (169,309) (130,448)
Selling and
distribution costs (767,194) (799,666) (1,879,001) (1,761,386)
General and
administrative costs,
including stock-based
compensation (1,464,392) (1,915,367) (3,613,654) (4,256,468)
Loss on exchange rate
difference (6,813) (159,310) (62,402) (994,985)
----------- ----------- ----------- -----------

Income from operations 2,932,520 587,673 4,966,577 2,451,686
Change in fair value of
currency forwards (7,483) - (117,106) 29,102
Change in fair value of
warrants - (204,750) - (276,000)
Other income 289,843 101,179 378,432 325,833
Interest expenses (199,125) (159,063) (279,622) (559,830)
Other expenses (52,878) - (223,963) -
----------- ----------- ----------- -----------

Income before taxes 2,962,877 325,039 4,724,318 1,970,791
Income taxes (529,201) (35,683) (919,020) (266,861)
----------- ----------- ----------- -----------

Net income for the
period 2,433,676 289,356 3,805,298 1,703,930

Other comprehensive
income
- Foreign currency
translation gain (99,446) 109,161 392,618 857,900
----------- ----------- ----------- -----------

Comprehensive income 2,334,230 398,517 4,197,916 2,561,830
=========== =========== =========== ===========

Earnings per share of
common stock
- Basic 0.18 0.02 0.28 0.13
=========== =========== =========== ===========

- Diluted 0.18 0.02 0.28 0.13
=========== =========== =========== ===========

Weighted average number
of common stock
- Basic 13,562,597 13,562,596 13,621,466 13,088,737
=========== =========== =========== ===========

- Dilutive 13,612,097 13,615,096 13,673,966 13,108,644
=========== =========== =========== ===========

HONG KONG HIGHPOWER TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)

As of
---------------------------
September 30, December 31,
2009 2008
(Unaudited) (Audited)
$ $

ASSETS
Current Assets:
Cash and cash equivalents 7,203,175 4,175,780
Restricted cash 4,552,798 4,845,478
Accounts receivable 11,260,286 8,765,593
Notes receivable 400,876 429,815
Prepaid expenses and other receivables 4,191,720 1,732,709
Deferred charges - Stock-based compensation - 216,667
Inventories 10,437,454 11,208,697
------------- -------------

Total Current Assets 38,046,309 31,374,739
Deferred tax assets 137,400 104,556
Plant and equipment, net 9,962,416 7,778,477
Leasehold land, net 3,002,530 3,050,510
Intangible asset, net 862,500 900,000
Currency forward - 116,157
------------- -------------

TOTAL ASSETS 52,011,155 43,324,439
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Current Liabilities:
Non-trading foreign currency derivatives
liabilities 5,335 293,830
Accounts payable 15,152,492 8,306,123
Other payables and accrued liabilities 9,067,162 3,139,275
Income taxes payable 812,688 476,330
Bank borrowings 6,495,909 14,829,228
------------- -------------

Total Current Liabilities 31,533,586 27,044,786
------------- -------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock
Par value: US$0.0001
Authorized: 10,000,000 shares
Issued and outstanding: none

Common stock
Par value : US$0.0001
Authorized: 100,000,000 shares
Issued and outstanding: 2009 - 13,562,597
shares (2008 - 13,562,596 shares) 1,356 1,356
Additional paid-in capital 5,048,194 5,048,194
Accumulated other comprehensive income 1,987,709 1,595,091
Retained earnings 13,440,310 9,635,012
------------- -------------

TOTAL STOCKHOLDERS' EQUITY 20,477,569 16,279,653
------------- -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 52,011,155 43,324,439
============= =============

Media and Investor Inquiries:
Henry H. Ngan
Chief Financial Officer
+1-917-887-0614
Email Contact

Financial Profiles, Inc.
Tricia Ross
(310) 277-4711
Email Contact

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