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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