SGOCO Group, Ltd. Announces Financial Results for the Nine Month Period Ended September 30, 2012
SGOCO Group, Ltd. Announces Financial Results for the Nine Month Period Ended
September 30, 2012
PR Newswire
BEIJING, Nov. 16, 2012
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 - 57,477,790
Honesty Group
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, 17,465 17,258
2011, respectively
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 $ 87,693,189 $ 85,201,387
shareholders' equity
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 25,105,616 63,677,293 95,691,861 218,188,315
goods sold
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 1,481,641 1,115,858 4,166,058 4,027,265
expenses
Total operating 1,693,931 1,763,788 4,625,567 5,161,691
expenses
(LOSS) INCOME FROM (752,280) 6,124,198 2,954,281 20,771,718
OPERATIONS
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 (23,129) (550,810) (35,109) (134,857)
(expenses), net
Change in fair value
of warrant derivative 27,249 741,641 75,226 873,986
liability
Total other
income (7,061) (202,893) (8,402) (526,840)
(expenses), net
(LOSS) INCOME BEFORE
PROVISION FOR INCOME (759,341) 5,921,305 2,945,879 20,244,878
TAXES
PROVISION FOR INCOME 331,089 683,743 1,886,476 2,726,468
TAXES
NET (LOSS) INCOME (1,090,430) 5,237,562 1,059,403 17,518,410
OTHER COMPREHENSIVE
INCOME:
Foreign currency (2,676) 697,619 (85,253) 2,082,582
translation adjustment
COMPREHENSIVE (LOSS) $ (1,093,106) $ 5,935,181 $ 974,150 $ 19,600,992
INCOME
(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 (75,226) (873,986)
derivative liability
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 (12,138,244) (17,925,772)
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Settlement of consideration received from 18,733,669 -
disposal of subsidiaries
Purchase of equipment and (105,131) (1,371,515)
construction-in-progress
Purchase of intangible assets - (1,566)
Net cash provided by (used in) 18,628,538 (1,373,081)
investing activities
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 - 373,242
related to secondary offering
Net cash used in financing (254,349) (3,594,602)
activities
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 – $ 38,992,268 $ -
received in finished goods
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 - 57,477,790
Group
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, 17,465 17,258
respectively
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 $ 91,124,511 $ 85,201,387
shareholders' equity
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 38,745,777 74,834,917 70,586,245 154,511,022
sold
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 1,772,241 1,548,481 2,684,417 2,911,407
administrative expenses
Total operating 1,902,058 1,818,605 2,931,636 3,397,903
expenses
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), 2,418 651,902 (11,980) 415,955
net
Change in fair value of
warrant derivative 47,371 (596,040) 47,977 132,345
liability
Total other income 26,597 (435,070) (1,341) (323,945)
(expenses), net
INCOME BEFORE PROVISION 2,080,879 8,492,229 3,705,220 14,323,575
FOR INCOME TAXES
PROVISION FOR INCOME 849,539 1,348,785 1,555,387 2,042,725
TAXES
NET INCOME 1,231,340 7,143,444 2,149,833 12,280,850
OTHER COMPREHENSIVE
INCOME:
Foreign currency (10,694) 1,044,966 (82,577) 1,384,963
translation adjustment
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 33,873,594 57,477,790
Group
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, 17,465 17,258
respectively
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 $ 87,915,320 $ 85,201,387
shareholders' equity
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 606 728,384
liability
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.
Website: http://www.sgoco.com
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