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SGOCO Group, Ltd. Announces Record Revenue For 2011 First Quarter

For more information about SGOCO, please visit http://www.sgocogroup.com.

Safe Harbor and Informational Statement

This press release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, including, without limitation, those with respect to the objectives, plans and strategies of the Company set forth herein and those preceded by or that include the words "believe," "expect," "anticipate," "future," "intend," "plan," "estimate" or similar expressions, are "forward-looking statements". Forward-looking statements in this release include, without limitation, the Company’s continued success from its focus on its multiple-brand, multiple channel strategy, the Company’s ability to achieve its target of 1,000 SGOCO Image stores by the end of 2011, the future stabilization of general market prices for the Company’s products, the resumption of the declining trend for panel prices, and whether the repurchase and retirement of outstanding warrants will benefit shareholders in the long-term. Although the Company's management believes that such forward-looking statements are reasonable, it cannot guarantee that such expectations are, or will be, correct. These forward-looking statements involve a number of risks and uncertainties, which could cause the Company's future results to differ materially from those anticipated. These forward-looking statements can change as a result of many possible events or factors not all of which are known to the Company, which may include, without limitation, those events and factors described in the “Key Information – Risk Factors" section in the Company's most recently filed annual report on Form 20-F. The Company assumes no obligation to update any of the information contained or referenced in this press release.

 
 

SGOCO GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

FOR THREE MONTHS ENDED MARCH 31, 2011 AND 2010

(UNAUDITED)

             
2011 2010
REVENUES:
Revenues $ 86,975,624 $ 16,774,609
Revenues - related parties - 2,700,999

Total revenues

86,975,624 19,475,608
 
COST OF GOODS SOLD:
Cost of goods sold 79,676,105 14,203,671
Cost of goods sold - related parties - 2,138,087
Total cost of goods sold 79,676,105 16,341,758
 
GROSS PROFIT 7,299,519 3,133,850
 
OPERATING EXPENSES:
Selling expenses 216,372 79,215
General and administrative expenses 1,362,926 1,319,137
Total operating expenses 1,579,298 1,398,352
 
INCOME FROM OPERATIONS 5,720,221 1,735,498
 
OTHER INCOME (EXPENSES):
Interest income 14,840 22,845
Interest expense (396,151) (264,648)
Other income (expense), net (235,949) (166,426)
Change in fair value of warrant derivative liability 728,384 (478,540)
Total other income (expenses), net 111,124 (886,769)
 
INCOME BEFORE PROVISION FOR INCOME TAXES 5,831,345 848,729
 
PROVISION FOR INCOME TAXES 693,939 293,934
 
NET INCOME 5,137,406 554,795
 
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment 339,996 (2,503)
   
COMPREHENSIVE INCOME $ 5,477,402 $ 552,292
 
EARNINGS PER SHARE:
Basic $ 0.32 $ 0.06
Diluted $ 0.32 $ 0.06
 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic 16,169,170 8,717,008
Diluted 16,280,942 8,737,596
 
 

SGOCO GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2011 AND DECEMBER 31, 2010

ASSETS

        March 31,       December 31,
2011

(Unaudited)

2010
CURRENT ASSETS
Cash $ 15,347,387 $ 23,493,805
Restricted cash 17,668,531 6,537,086
Accounts receivable, trade 60,643,251 55,985,013
Accounts receivable - related parties - 49,559
Other receivables 3,563,688 429,864
Inventories 19,618,755 17,291,123
Advances to suppliers 57,725,627 23,312,312
Other current assets - 46,615

Total current assets

174,567,239 127,145,377
 
PLANT AND EQUIPMENT, NET 17,618,943 16,886,297
 
OTHER ASSETS
Intangible assets, net 8,615,210 8,589,215
Total other assets 8,615,210 8,589,215
 
Total assets $ 200,801,392 $ 152,620,889
 

LIABILITIES AND SHAREHOLDERS' EQUITY

 
CURRENT LIABILITIES
Accounts payable, trade $ 41,054,934 $ 31,958,430
Accrued liabilities 470,970 333,659
Bank overdraft 529,200 1,492,226
Notes payable 43,831,961 17,784,899
Short-term loan 36,727,548 26,864,059
Short-term loan - shareholder 2,109,392 2,545,439
Other payables 2,562,033 1,755,881
Customer deposits 5,351,475 3,278,269
Taxes payable 1,008,533 2,449,939
Total current liabilities 133,646,046 88,462,801
 
OTHER LIABILITIES
Warrant derivative liability 677,184 1,530,569
Put option derivative liability - 2,000,000
Total other liabilities 677,184 3,530,569
 
Total liabilities 134,323,230 91,993,370
 
COMMITMENT AND CONTINGENCIES
 
SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value, 1,000,000 shares authorized,
nil issued and outstanding as of March 31, 2011 and
December 31, 2010 - -
Common stock, $0.001 par value, 50,000,000 shares authorized,
17,258,356 and 17,428,089 issued and outstanding as of
March 31, 2011 and December 31, 2010 17,258 17,428
Paid-in-capital 24,555,414 24,182,003
Statutory reserves 4,074,142 3,560,838
Retained earnings 33,675,881 29,051,779
Accumulated other comprehensive income 4,155,467 3,815,471
Total shareholders' equity 66,478,162 60,627,519
 
Total liabilities and shareholders' equity $ 200,801,392 $ 152,620,889
 
 

SGOCO GROUP, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                     
Ordinary Shares Retained Earnings AccumulatedOtherComprehensiveIncome
       
Paid-in Statutory
Shares Par Value Capital Reserves Unrestricted Total
BALANCE, December 31, 2009 14,300,000 $ 14,300 $ 17,263,916 $ 1,286,942 $ 11,394,086 $ 2,043,408 $ 32,002,652
 
Shares issued for recapitalization 1,027,933 1,028 4,501,937 4,502,965
Shares placed in escrow 766,823 767 767
Shareholder contribution 366,780 366,780
Reclassification of warrants to derivative liabilities (1,094,950 ) (1,094,950 )
Reclassification of put options to derivative liabilities (2,000,000 ) (2,000,000 )
 
Net income 554,795 554,795
Adjustment for statutory reserve 225,032 (225,032 ) -
Foreign currency translation adjustment (2,503 ) (2,503 )
             
BALANCE, March 31, 2010 (Unaudited) 16,094,756   $ 16,095   $ 19,037,683   $ 1,511,974 $ 11,723,849   $ 2,040,905   $ 34,330,506  
 
Shares issued for secondary offering 1,333,333 1,333 5,293,062 5,294,395
Reclassification of warrants to derivative liabilities (148,742 ) (148,742 )
 
Net income 19,376,794 19,376,794
Adjustment for statutory reserve 2,048,864 (2,048,864 ) -
Foreign currency translation adjustment 1,774,566 1,774,566
             
BALANCE, December 31, 2010 17,428,089   $ 17,428   $ 24,182,003   $ 3,560,838 $ 29,051,779   $ 3,815,471   $ 60,627,519  
 
Shares issued for secondary offering 80,267 80 373,161 373,241
 
Shares repurchased (250,000 ) (250 ) 250 -
 
Net income 5,137,406 5,137,406
Adjustment for statutory reserve 513,304 (513,304 ) -
Foreign currency translation adjustment 339,996 339,996
             
BALANCE, March 31, 2011 (Unaudited) 17,258,356   $ 17,258   $ 24,555,414   $ 4,074,142 $ 33,675,881   $ 4,155,467   $ 66,478,162  
 
 

SGOCO GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THREE MONTHS ENDED MARCH 31, 2011 AND 2010

(UNAUDITED)

             
2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,137,406 $ 554,795
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Depreciation and amortization 410,269 254,290
Change in fair value of warrant derivative liability (728,384) 478,540
Change in operating assets and liabilities
Accounts receivables, trade (4,348,693) 6,010,971
Accounts receivables - related parties 49,657 (1,021,801)
Other receivables (3,273,446) (3,465)
Inventories (2,229,114) (2,804,757)
Advances to suppliers (34,177,948) (16,770,734)
Advances to suppliers-related parties - 1,275,697
Other current assets 46,707 (256,431)
Accounts payable, trade 8,898,697 3,160,719
Accrued liabilities 135,336 282,406
Notes payable 25,868,180 4,822,668
Other payables 856,681 30,874
Other payables - related parties - 2,742,309
Customer deposits 2,049,178 1,362,210
Customer deposits - related parties - (279,809)
Taxes payable (1,449,558) (763,589)
Net cash used in operating activities (2,755,032) (925,107)
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Long term prepayment - (66,872)
Purchase of equipments and construction-in-progress (932,747) (1,594,383)
Purchase of intangible assets (7,320) (89,493)
Cash received from legal acquirer - 5,913
Net cash used in investing activities (940,067) (1,744,835)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in restricted cash (11,060,588) (3,264,800)
Bank overdraft (967,712) 728,762
Proceeds from government - 733,250
Proceeds from short-term loan 23,862,082 11,792,912
Payments on short-term loan (14,172,137) (12,647,096)
Shareholder contribution - 366,780
Payments from shareholder loan (436,047) -
Proceeds from recapitalization - 5,388,083
Payments on repurchase of warrants (125,000) -
Payments on repurchase of put option (2,000,000) -
Proceeds from shares issuance 373,242 -
Payments of financing costs - (666,468)
Net cash (used in) provided by financing activities (4,526,160) 2,431,423
 
EFFECT OF EXCHANGE RATE ON CASH 74,841 (4,650)
 
DECREASE IN CASH (8,146,418) (243,169)
 
CASH, beginning of period 23,493,805 5,808,013
 
CASH, end of period $ 15,347,387 $ 5,564,844
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest expenses paid (net of amount capitalized) $ 396,151 $ 264,648
Income taxes paid $ 2,006,593 $ 331,700
 




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