SGOCO Group, Ltd. Announces Financial Results for the Nine Month Period Ended September 30, 2012

16 Nov, 2012, 16:05 ET from SGOCO Group, Ltd.

BEIJING, Nov. 16, 2012 /PRNewswire/ -- SGOCO Group, Ltd. (Nasdaq: SGOC), ("SGOCO" or the "Company"), a company focused on product design and brand development in the Chinese flat panel display market, including computer monitors, TVs, and application specific products, today announced its unaudited operating results for the nine month period ended September 30, 2012 together with its unaudited operating results for the first two quarters.

Following the sale of its manufacturing assets in November 2011, SGOCO has been operating a "light-asset" business model with a concentration on building widely recognizable brands and developing innovative display products. The new business model outsources manufacturing and enhances the Company's flexibility in responding to rapid changes in technologies and market conditions. Without the need to invest in heavy manufacturing assets, SGOCO has strengthened its balance sheet. As of September 30, 2012, the Company's net book value per share was $4.30 with a cash position of $6.7 million.

Given the significant changes to SGOCO's business model and balance sheet in the last year, the Company considers year-over-year comparisons of financial results less relevant.

For the nine month period ended September 30, 2012, SGOCO's revenues were $103.3 million. During this period, 74% of sales were generated from the Company's own-brand products and 26% of sales were derived from OEM customers. During the transition to a "light-asset" business model, the Company has been reducing its lower-margin trading and OEM businesses. Therefore, our revenues were negatively impacted by significant reductions in our OEM and trading businesses in addition to general display market and credit conditions in China. The Company is responding to the intense competition in the Chinese display market by developing new markets, sales channels, brands and products with enhanced features, and business related services.

Gross profit for the nine month period ended September 30, 2012 was $7.6 million, or 7.3% of total revenues. Gross margin for the latest quarter was negatively impacted by increased fees charged by Chinese authorities for recycling imported monitors and price drops in smaller size monitors. SGOCO's long-term strategy is to continue to emphasize own-brand sales while boosting margins through the introduction of new personalized devices and multimedia systems and services to the Company's product portfolio.

Selling, general and administrative expenses for the nine month period ended September 30, 2012 were $4.6 million, or 4.5% of total revenues. During the period, the Company incurred approximately $2.7 million in third-party expenses including one-time expenses of over $1.6 million in professional fees related to the Company's Nasdaq trading halt as well as from a change in auditors.

Net income for the nine month period ended September 30, 2012 was $1.1 million, or 1.0% of revenues. Net income was negatively impacted by an approximately $0.7 million provision for interest accrued on a tax related to the sale of its manufacturing assets. Diluted EPS for the period was $0.06.

SGOCO reported strong liquidity ratios as of September 30, 2012. The Company's current ratio was 6.97 and the debt-to-equity ratio was 0.17. These strong ratios will support SGOCO as it completes its business model transformation focused on developing new personalized products and multimedia systems combined with related business services.

Mr. Burnette Or, Chairman and Chief Executive Officer of SGOCO, commented "We remain encouraged by the progress of our business transition and remain positive about our long-term strategy and profitability. Our new "light-asset" business model provides us with greater flexibility to adapt to challenging market conditions. The Company continues to operate free of debt, build its brand portfolio, and develop new display products. Our R&D team is developing higher-margin products including smart phones, tablet PCs, e-boards, all-in-ones (AIOs) and application specific products (ASPs) which are expected to become commercial ready within the next 1-2 years. The Company is also working on services that can be matched with these new products to further enhance their attractiveness and profitability. We are also using our U.S. office to examine opportunities to re-establish sales in North America, the largest consumer market. We anticipate our fourth quarter results will be stronger than the third quarter's."

Conference Call:

SGOCO's management will host a conference call at 8:30 am ET on Monday, November 19, 2012 to discuss these results as well as recent corporate developments. After opening remarks, there will be a question and answer period. Listeners may access the call by dialing 1-888-466-4462 or 1-719-325-2376. A webcast will also be available via http://public.viavid.com/index.php?id=102602 or http://viavid.com. A replay of the call will be available through November 30, 2012 by dialing 1-877-870-5176 or 1-858-384-5517 access code: 8448779.

2011 Annual Report:

SGOCO's 2011 annual report has been filed with the U.S. Securities and Exchange Commission and is available online at the Company's website (www.sgocogroup.com). Shareholders may request a printed copy of the 2011 annual report free of charge by contacting ir@sgoco.com or faxing +86-10-8587-0252.

About SGOCO Group, Ltd.

SGOCO Group, Ltd. is a technology company focused on product design and brand development in the Chinese flat panel display market, including computer monitors, TVs, and application specific products. The Company sells its products and services in the Chinese market and around the world.

For more information about SGOCO, please visit our investor relations website http://www.sgocogroup.com. Product information can be found at http://www.sgoco.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," "will," "intend," "plan," "estimate" or similar expressions, are "forward-looking statements". Forward-looking statements in this release include, without limitation, the effectiveness of the Company's multiple-brand, multiple channel strategy, the transitioning of its product focus, and the reasonableness of the increases in notes payable, and restricted cash. 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, requirements or changes adversely affecting the LCD and LED market in China; fluctuations in customer demand for LCD and LED products generally; our success in promoting our brand of LCD and LED products in China and elsewhere; our success in expanding our "SGOCO Image" program; our ability to maintain effective internal control over financial reporting; our success in manufacturing and distributing products under brands licensed from others; management of rapid growth; changes in government policy including policy regarding subsidies for purchase of consumer electronic products and local production of consumer goods in China; the fluctuations in sales of LCD and LED products in China; China's overall economic conditions and local market economic conditions; our ability to expand through strategic acquisitions and establishment of new locations; changing principles of generally accepted accounting principles; compliance with government regulations; legislation or regulatory environments; geopolitical events and other events and factors described in the "Key Information – Risk Factors" section in the Company's annual report on Form 20-F filed with the U.S. Securities and Exchange Commission on August 30, 2012. The Company assumes no obligation to update any of the information contained or referenced in this press release.

For investor and media inquiries, please contact:

SGOCO Group, Ltd. (China)

ICR, LLC

Bill Krolicki, VP of Finance

William Zima

Tel: +86-10-8587-0170 ext. 826        

Phone: +86-10-6583-7511

Email: ir@sgoco.com   

SGOCO Group Investor Relations Department

US: +1-646-328-2533

 

(Financial Tables on Following Pages)

 

SGOCO GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2012

 September 30,

 December 31,

2012

2011

 (USD)

 (USD)

(Unaudited)

ASSETS

CURRENT ASSETS

Cash

$

6,747,787

$

534,501

Restricted cash

253,335

-

Accounts receivable, trade

25,090,529

19,680,682

Other receivables and prepayments

960,484

756,763

Consideration receivable from Sale of Honesty Group

-

57,477,790

Notes receivable

3,664,554

-

Inventories

6,693,437

1,864,011

Advances to Honesty Group

26,429,418

-

Advances to suppliers

17,453,325

4,609,506

Other current assets

128,303

60,548

Total current assets

87,421,172

84,983,801

PLANT AND EQUIPMENT, NET

272,017

217,586

Total assets

$

87,693,189

$

85,201,387

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable, trade

$

3,851,944

$

4,608,600

Accrued liabilities

209,948

353,147

Notes payable

253,335

-

Short-term loan - shareholder

208,958

208,958

Other payables

456,569

343,883

Customer deposits

553,451

153,436

Taxes payable

7,005,750

5,552,293

Total current liabilities

12,539,955

11,220,317

OTHER LIABILITIES

Warrant derivative liability

17,740

92,966

Total other liabilities

17,740

92,966

Total liabilities

12,557,695

11,313,283

SHAREHOLDERS' EQUITY

Preferred stock, $0.001 par value, 1,000,000 shares authorized,

nil issued and outstanding as of September 30, 2012 and

December 31, 2011, respectively

-

-

Ordinary shares, $0.001 par value, 50,000,000 shares authorized,

17,465,356 and 17,258,356 issued and outstanding as of

September 30, 2012 and December 31, 2011, respectively

17,465

17,258

Additional paid-in-capital

24,828,448

24,555,415

Statutory reserves

54,031

54,031

Retained earnings

50,237,046

49,177,643

Accumulated other comprehensive income

(1,496)

83,757

Total shareholders' equity

75,135,494

73,888,104

Total liabilities and shareholders' equity

$

87,693,189

$

85,201,387

 

 

SGOCO GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

FOR SEPTEMBER 30, 2012 AND 2011 (UNAUDITED)

 Three Months Ended

 Nine Months Ended

 September 30,

 September 30,

2012

2011

2012

2011

 (USD)

 (USD)

 (USD)

 (USD)

REVENUES:

Revenues

$

26,047,267

$

71,565,279

$

103,271,709

$

244,121,724

Total revenues

26,047,267

71,565,279

103,271,709

244,121,724

COST OF GOODS SOLD:

Cost of goods sold

25,105,616

63,677,293

95,691,861

218,188,315

Total cost of goods sold

25,105,616

63,677,293

95,691,861

218,188,315

GROSS PROFIT    

941,651

7,887,986

7,579,848

25,933,409

OPERATING EXPENSES:

Selling expenses

212,290

647,930

459,509

1,134,426

General and administrative expenses

1,481,641

1,115,858

4,166,058

4,027,265

Total operating expenses

1,693,931

1,763,788

4,625,567

5,161,691

(LOSS) INCOME FROM OPERATIONS

(752,280)

6,124,198

2,954,281

20,771,718

OTHER INCOME (EXPENSES):

Interest income

1,338

170,397

2,961

231,202

Interest expense

(12,519)

(564,121)

(51,480)

(1,497,171)

Other income (expenses), net

(23,129)

(550,810)

(35,109)

(134,857)

Change in fair value of warrant derivative liability

27,249

741,641

75,226

873,986

Total other income (expenses), net

(7,061)

(202,893)

(8,402)

(526,840)

(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES

(759,341)

5,921,305

2,945,879

20,244,878

PROVISION FOR INCOME TAXES

331,089

683,743

1,886,476

2,726,468

NET (LOSS) INCOME

(1,090,430)

5,237,562

1,059,403

17,518,410

OTHER COMPREHENSIVE INCOME:

Foreign currency translation adjustment

(2,676)

697,619

(85,253)

2,082,582

COMPREHENSIVE (LOSS) INCOME

$

(1,093,106)

$

5,935,181

$

974,150

$

19,600,992

(LOSS) EARNINGS PER SHARE:

Basic

$

(0.06)

$

0.33

$

0.06

$

1.09

Diluted

$

(0.06)

$

0.33

$

0.06

$

1.09

WEIGHTED AVERAGE NUMBER OF COMMON SHARES:

Basic

17,059,860

16,032,343

17,059,860

16,077,451

Diluted

17,059,860

16,032,343

17,059,860

16,114,299

 

 

SGOCO GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 Nine  Months Ended

 September 30,

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

1,059,403

$

17,518,410

Adjustments to reconcile net income to cash provided by

(used in) operating activities:

Depreciation and amortization

48,927

1,410,897

Bad debt provision

-

77,017

Change in fair value of warrant derivative liability

(75,226)

(873,986)

Share-based compensation expenses

273,240

-

Change in operating assets and liabilities

Accounts receivable, trade

(5,555,976)

(491,185)

Accounts receivable - related parties

-

49,559

Other receivables

(209,323)

(343,138)

Notes receivable

(3,679,233)

-

Inventories

34,131,709

3,057,666

Advances to Honsty Group

(26,535,286)

-

Advances to suppliers

(12,924,417)

(93,534,354)

Other current assets

(68,230)

(332,828)

Change in operating liabilities

Accounts payables, trade

(730,542)

6,500,296

Accrued liabilities

(141,539)

74,626

Notes payable

254,350

41,567,751

Other payables

116,920

468,299

Customer deposits

402,588

6,473,017

Taxes payable

1,494,391

452,181

Net cash used in operating activities

(12,138,244)

(17,925,772)

CASH FLOWS FROM INVESTING ACTIVITIES:

Settlement of consideration received from disposal of subsidiaries

18,733,669

-

Purchase of equipment and construction-in-progress

(105,131)

(1,371,515)

Purchase of intangible assets

-

(1,566)

Net cash provided by (used in) investing activities

18,628,538

(1,373,081)

CASH FLOWS FROM FINANCING ACTIVITIES:

Increase in restricted cash

(254,349)

(22,293,466)

Bank overdraft

-

27,611

Proceeds from short-term loan

-

89,906,005

Payments on short-term loan

-

(66,550,397)

Proceeds from shareholder loan

-

(2,545,439)

Payments on repurchase of put option

-

(2,000,000)

Payments on repurchase of warrants

-

(512,158)

Shares issued for exercise of over-allotment related to secondary offering

-

373,242

Net cash used in financing activities

(254,349)

(3,594,602)

EFFECT OF EXCHANGE RATE ON CASH

(22,659)

3,046,527

INCREASE(DECREASE) IN CASH

6,213,286

(19,846,928)

CASH, beginning of period

534,501

23,493,805

CASH, end of period

$

6,747,787

$

3,646,877

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest

$

51,480

$

564,121

Cash paid for income taxes

$

431,594

$

934,554

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Settlement of consideration receivable – received in finished goods

$

38,992,268

$

-

 

 

SGOCO GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2012

 June 30,

 December 31,

2012

2011

 (USD)

 (USD)

(Unaudited)

ASSETS

CURRENT ASSETS

Cash

$

713,944

$

534,501

Restricted cash

318,788

-

Accounts receivable, trade

38,493,508

19,680,682

Other receivables and prepayments

815,990

756,763

Consideration receivable from Sale of Honesty Group

-

57,477,790

Notes receivable

94,863

-

Inventories

1,707,445

1,864,011

Advances to Honesty Group

21,896,826

-

Advances to suppliers

26,647,857

4,609,506

Other current assets

181,233

60,548

Total current assets

90,870,454

84,983,801

PLANT AND EQUIPMENT, NET

254,057

217,586

Total assets

$

91,124,511

$

85,201,387

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable, trade

$

4,470,910

$

4,608,600

Accrued liabilities

434,573

353,147

Notes payable

318,788

-

Short-term loan - shareholder

208,958

208,958

Other payables

1,018,926

343,883

Customer deposits

1,586,038

153,436

Taxes payable

6,812,729

5,552,293

Total current liabilities

14,850,922

11,220,317

OTHER LIABILITIES

Warrant derivative liability

44,989

92,966

Total other liabilities

44,989

92,966

Total liabilities

14,895,911

11,313,283

SHAREHOLDERS' EQUITY

Preferred stock, $0.001 par value, 1,000,000 shares authorized,

nil issued and outstanding as of June 30, 2012 and

December 31, 2011, respectively

-

-

Ordinary shares, $0.001 par value, 50,000,000 shares authorized,

17,465,356 and 17,258,356 issued and outstanding as of

June 30, 2012 and December 31, 2011, respectively

17,465

17,258

Additional paid-in-capital

24,828,448

24,555,415

Statutory reserves

54,031

54,031

Retained earnings

51,327,476

49,177,643

Accumulated other comprehensive income

1,180

83,757

Total shareholders' equity

76,228,600

73,888,104

Total liabilities and shareholders' equity

$

91,124,511

$

85,201,387

 

 

SGOCO GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

FOR JUNE 30, 2012 AND 2011 (UNAUDITED)

 Three Months Ended

 Six Months Ended

 June 30,

 June 30,

2012

2011

2012

2011

 (USD)

 (USD)

 (USD)

 (USD)

REVENUES:

Revenues

$

42,702,117

$

85,580,821

$

77,224,442

$

172,556,445

Total revenues

42,702,117

85,580,821

77,224,442

172,556,445

COST OF GOODS SOLD:

Cost of goods sold

38,745,777

74,834,917

70,586,245

154,511,022

Total cost of goods sold

38,745,777

74,834,917

70,586,245

154,511,022

GROSS PROFIT    

3,956,340

10,745,904

6,638,197

18,045,423

OPERATING EXPENSES:

Selling expenses

129,817

270,124

247,219

486,496

General and administrative expenses

1,772,241

1,548,481

2,684,417

2,911,407

Total operating expenses

1,902,058

1,818,605

2,931,636

3,397,903

INCOME FROM OPERATIONS

2,054,282

8,927,299

3,706,561

14,647,520

OTHER INCOME (EXPENSES):

Interest income

1,214

45,966

1,623

60,805

Interest expense

(24,406)

(536,898)

(38,961)

(933,050)

Other income (expenses), net

2,418

651,902

(11,980)

415,955

Change in fair value of warrant derivative liability

47,371

(596,040)

47,977

132,345

Total other income (expenses), net

26,597

(435,070)

(1,341)

(323,945)

INCOME BEFORE PROVISION FOR INCOME TAXES

2,080,879

8,492,229

3,705,220

14,323,575

PROVISION FOR INCOME TAXES

849,539

1,348,785

1,555,387

2,042,725

NET INCOME

1,231,340

7,143,444

2,149,833

12,280,850

OTHER COMPREHENSIVE INCOME:

Foreign currency translation adjustment

(10,694)

1,044,966

(82,577)

1,384,963

COMPREHENSIVE INCOME

$

1,220,646

$

8,188,410

$

2,067,256

$

13,665,813

EARNINGS PER SHARE:

Basic

$

0.07

$

0.45

$

0.12

$

0.76

Diluted

$

0.07

$

0.45

$

0.12

$

0.76

WEIGHTED AVERAGE NUMBER OF COMMON SHARES:

Basic

17,059,860

16,032,343

17,059,860

16,100,378

Diluted

17,059,860

16,032,343

17,059,860

16,216,126

 

 

SGOCO GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2012

 March 31,

 December 31,

2012

2011

 (USD)

 (USD)

(Unaudited)

ASSETS

CURRENT ASSETS

Cash

$

6,782,742

$

534,501

Restricted cash

65,122

-

Accounts receivable, trade

29,211,944

19,680,682

Other receivables and prepayments

365,713

756,763

Consideration receivable from Sale of Honesty Group

33,873,594

57,477,790

Inventories

4,396,592

1,864,011

Advances to Honesty Group

5,017,489

-

Advances to suppliers

7,913,646

4,609,506

Other current assets

18,164

60,548

Total current assets

87,645,006

84,983,801

PLANT AND EQUIPMENT, NET

270,314

217,586

Total assets

$

87,915,320

$

85,201,387

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable, trade

$

4,889,942

$

4,608,600

Accrued liabilities

335,129

353,147

Notes payable

65,122

-

Short-term loan - shareholder

208,958

208,958

Other payables

1,133,006

343,883

Customer deposits

113,498

153,436

Taxes payable

6,069,351

5,552,293

Total current liabilities

12,815,006

11,220,317

OTHER LIABILITIES

Warrant derivative liability

92,360

92,966

Total other liabilities

92,360

92,966

Total liabilities

12,907,366

11,313,283

SHAREHOLDERS' EQUITY

Preferred stock, $0.001 par value, 1,000,000 shares authorized,

nil issued and outstanding as of March 31, 2012 and

December 31, 2011, respectively

-

-

Ordinary shares, $0.001 par value, 50,000,000 shares authorized,

17,465,356 and 17,258,356 issued and outstanding as of

March 31, 2012 and December 31, 2011, respectively

17,465

17,258

Additional paid-in-capital

24,828,448

24,555,415

Statutory reserves

54,031

54,031

Retained earnings

50,096,136

49,177,643

Accumulated other comprehensive income

11,874

83,757

Total shareholders' equity

75,007,954

73,888,104

Total liabilities and shareholders' equity

$

87,915,320

$

85,201,387

 

 

SGOCO GROUP LTD. AND SUBSIDIARIES

CONDENSDED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

FOR MARCH 31, 2012 AND 2011 (UNAUDITED)

 Three Months Ended

 March 31,

2012

2011

 (USD)

 (USD)

REVENUES:

Revenues

$

34,522,325

$

86,975,624

Total revenues

34,522,325

86,975,624

COST OF GOODS SOLD:

Cost of goods sold

31,840,468

79,676,105

Total cost of goods sold

31,840,468

79,676,105

GROSS PROFIT    

2,681,857

7,299,519

OPERATING EXPENSES:

Selling expenses

117,402

216,372

General and administrative expenses

912,176

1,362,926

Total operating expenses

1,029,578

1,579,298

INCOME FROM OPERATIONS

1,652,279

5,720,221

OTHER INCOME (EXPENSES):

Interest income

409

14,840

Interest expense

(14,555)

(396,151)

Other income (expenses), net

(14,398)

(235,949)

Change in fair value of warrant derivative liability

606

728,384

Total other income (expenses), net

(27,938)

111,124

INCOME BEFORE PROVISION FOR INCOME TAXES

1,624,341

5,831,345

PROVISION FOR INCOME TAXES

705,848

693,939

NET INCOME

918,493

5,137,406

OTHER COMPREHENSIVE INCOME:

Foreign currency translation adjustment

(71,883)

339,998

COMPREHENSIVE INCOME

$

846,610

$

5,477,404

EARNINGS PER SHARE:

Basic

$

0.05

$

0.32

Diluted

$

0.05

$

0.32

WEIGHTED AVERAGE NUMBER OF COMMON SHARES:

Basic

17,053,036

16,169,170

Diluted

17,053,036

16,280,942

 

SOURCE SGOCO Group, Ltd.



RELATED LINKS

http://www.sgoco.com