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Hong Kong Highpower Technology, Inc. (NASDAQ: HPJ), a developer, manufacturer and marketer of nickel-metal hydride (Ni-MH) and lithium-ion (Li-ion) batteries and related products, today announced financial results for the second quarter ended June 30, 2010.

Financial and Business Highlights

"Our business trends in the second quarter clearly indicate that the overall level of demand for our battery products remains healthy," said Mr. George Pan, Chairman and Chief Executive Officer of Hong Kong Highpower Technology. "Our ability to deliver strong second quarter results in the face of a slow and gradual macro economic recovery signifies that we are taking the right steps and executing well on our strategy to be a leading, profitable, eco-friendly focused, world battery player."

Mr. Henry Ngan, Chief Financial Officer of Hong Kong Highpower Technology, added, "We produced another solid quarter of results. We are now six months through FY 2010, and our sales and profitability are tracking well ahead of 2009 levels. Therefore, we remain optimistic that we can achieve greater levels of sales and profitability in FY 2010 in comparison to last year's full year results."

Second Quarter 2010 Financial Results

Net sales for the second quarter ended June 30, 2010 totaled $28.9 million, a year-over-year increase of 88% compared with $15.4 million for the second quarter ended June 30, 2009. The increase in sales for the second quarter was primarily due to increased orders from customers and contribution from the New Material business started in the first quarter 2010.

Second quarter 2010 gross profit increased 76% to $5.4 million, compared with $3.1 million for the second quarter 2009. Gross margin was 18.6% for the second quarter 2010, compared with 19.9% for the second quarter 2009. The increase year-over-year in gross profit for the second quarter 2010 was primarily due to growth in volume of units sold.

Selling and distribution costs were $1.1 million for the second quarter 2010, compared with $0.6 million for the comparable period in 2009. The increase in selling and distribution costs is mainly related to the expansion of our salesforce.

General and administrative expenses, including stock-based compensation, were $2.2 million or 7.5% of net sales for the second quarter 2010, compared to $1.0 million, or 6.8% of net sales for the second quarter 2009.

The Company reported a loss on the exchange rate difference between the U.S. Dollar ("USD") and the Renminbi ("RMB") of $130,000 for the second quarter ended June 30, 2010. This compares with losses on the exchange rate difference of $23,000 for the second quarter 2009.

The Company recorded a provision for income taxes of $360,600 for the second quarter 2010, compared with provisions for income taxes of $228,800 for the second quarter 2009.

Net income for the second quarter of 2010 was $1.6 million or $0.12 per diluted share, based on 13.7 million weighted average shares outstanding. This compares with second quarter 2009 net income of $969,000, or $0.07 per diluted share, based on 13.8 million weighted average shares outstanding, which resulted in an increase in diluted EPS of 71% year-over-year.

Balance Sheet

At June 30, 2010, Hong Kong Highpower Technology had cash and cash equivalents and restricted cash totaling $10.2 million, total assets of $65.5 million, working capital of $8.2 million and stockholders' equity of $24.3 million. Bank credit facilities totaled $35.0 million at June 30, 2010, of which $18.8 million was available as unused credit.

Conference Call and Webcast

Management of Hong Kong Highpower Technology will host a conference call today, Thursday, August 12, 2010 at 8:00 a.m. Pacific time/11:00 a.m. Eastern time to discuss second quarter 2010 financial results and answer questions.

Individuals interested in participating in the conference call may do so by dialing 888-799-5026 from the U.S., or 973-409-9693 from outside the U.S. and referencing the reservation code 92195662. 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 ( or ( .

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 73021825. 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 ( .

To be added to the Company's email distribution for future news releases, please send your request to ( . Company news can also be found at ( .

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 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Stated in US Dollars) Three months ended June 30, ---------------------------- 2010 2009 (Unaudited) (Unaudited) $ $ Net sales 28,978,114 15,445,484 Cost of sales (23,578,703) (12,371,676) ------------- ------------- Gross profit 5,399,411 3,073,808 Depreciation (69,719) (68,075) Selling and distributing costs (1,110,448) (580,458) General and administrative costs, including stock-based compensation (2,168,103) (1,046,340) Loss on exchange rate difference (130,130) (22,865) ------------- ------------- Income from operations 1,921,011 1,356,070 Change in fair value of currency forwards - (21,510) Other income 126,026 21,774 Interest expenses (101,111) (39,377) Other expenses - (119,549) ------------- ------------- Income before taxes 1,945,926 1,197,408 Income taxes (360,579) (228,752) ------------- ------------- Net income for the period 1,585,347 968,656 Earnings per share of common stock - Basic 0.12 0.07 - Diluted 0.12 0.07 Weighted average number of common stock - Basic 13,582,106 13,762,217 - Diluted 13,732,096 13,812,547

HONG KONG HIGHPOWER TECHNOLOGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Stated in US Dollars) As of -------------------------- June 30, December 31, 2010 2009 (Unaudited) (Audited) $ $ ASSETS Current Assets: Cash and cash equivalents 3,548,525 2,967,586 Restricted cash 6,683,776 5,478,418 Accounts receivable 18,888,393 14,896,503 Notes receivable 860,786 596,795 Prepaid expenses and other receivables 4,345,588 2,366,734 Inventories 15,017,272 10,633,566 ------------ ------------ Total Current Assets 49,344,340 36,939,602 Plant and equipment, net 12,118,022 10,284,873 Leasehold land, net 2,987,656 3,019,509 Intangible asset, net 825,000 850,000 Investment securities 52,725 52,732 Investment in an associate 142,515 - ------------ ------------ TOTAL ASSETS 65,470,258 51,146,716 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Current Liabilities: Non-trading foreign currency derivatives liabilities 11,039 11,041 Accounts payable 19,969,317 10,738,714 Other payables and accrued liabilities 4,456,429 3,563,308 Income taxes payable 589,804 876,739 Bank borrowings 16,151,634 14,787,714 ------------ ------------ Total Current Liabilities 41,178,223 29,977,516 ------------ ------------ COMMITMENTS AND CONTINGENCIES 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 Issued and outstanding: 2010 - 13,582,106 shares (2009 - 13,582,106 shares) 1,358 1,358 Additional paid-in capital 5,155,864 5,065,426 Accumulated other comprehensive income 1,890,208 2,023,858 Retained earnings 17,244,605 14,078,558 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 24,292,035 21,169,200 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 65,470,258 51,146,716