SGOCO Group, Ltd. Reports Unaudited Financial Results for the Fourth Quarter and Full Year 2012

 SGOCO Group, Ltd. Reports Unaudited Financial Results for the Fourth Quarter
                              and Full Year 2012

PR Newswire

BEIJING, April 19, 2013

BEIJING, April 19, 2013 /PRNewswire/ -- SGOCO Group, Ltd. (Nasdaq: SGOC),
("SGOCO" or the "Company"), a company focused on product design, distribution
and brand development in the Chinese flat-panel display market, today
announced its unaudited financial results for the fourth quarter and the full
year ended December 31, 2012.

Given the significant changes to SGOCO's business model and balance sheet
pursuant to the Sale of Honesty Group in the fourth quarter of prior year,
SGOCO considers year-over-year comparisons of financial results less relevant
and quarter-over-quarter results more relevant.

Q4 Financial Highlights

  oQuarterly revenues increased 143.5% to $63.4 million, as compared to $26.0
    million quarter-over-quarter
  oGross margin was 7.7%, as compared to 3.6% quarter-over-quarter
  oNet income was $3.2 million, as compared to a net loss of $1.1 million
    quarter-over-quarter
  oDiluted earnings per share were $0.19, as compared to a diluted loss per
    share of $0.06 quarter-over-quarter.

In the fourth quarter of 2012, total revenues increased by 143.5% to $63.4
million from $26.0 million quarter-over-quarter. Of the total revenues, the
revenues generated from SGOCO brand sales were $41.1 million, or 64.8% of
total revenues, as compared to $22.3 million, or 35.2% of total revenues
generated from OEM businesses.

As a percentage of total sales, overall gross margin for the fourth quarter of
2012 improved to 7.7% from 3.6% for the prior quarter. The gross margin for
SGOCO brand products improved to 7.9%, as compared to 4.8%
quarter-over-quarter.

Selling, General and Administrative ("SG&A") expenses for the fourth quarter
decreased $0.3 million, or 19.3% to $1.4 million from $1.7 million in the
prior quarter. As a percentage of total revenues, the SG&A expenses were 2.2%
and 6.5% for the fourth quarter and the prior quarter, respectively. The
significant percentage decrease in the SG&A expenses in the fourth quarter was
due to the payment of one-time professional fees to third parties for NASDAQ
listing-related services. The fees were largely incurred in or prior to the
third quarter of fiscal 2012.

Net income for the fourth quarter of 2012 was $3.2 million, or 5.0% of total
revenues, as compared to a loss of $1.1 million quarter-over-quarter. Diluted
earnings per share for the quarter were $0.19, as compared to a diluted loss
per share of $0.06 for the third quarter.

Operational Results for the Fiscal Year 2012

For the fiscal year 2012, SGOCO's total revenues were $166.7 million, as
compared to $313.1 million of the prior year. The year-over-year sales
decrease was primarily attributable to changed client mix, reduced sales
volumes, and decreased average selling price of our display products due to
increased competition in China's general display market.

During fiscal year 2012, 70.6% of sales were generated from SGOCO brand
products and 29.4% of sales were derived from non-SGOCO brand products and OEM
customers, which compared to 61.5% of sales generated from SGOCO brand
products and 38.5% of sales derived from non-SGOCO brand, OEM clients, and
other businesses in the prior fiscal year.

Cost of goods sold decreased by $125.2 million, or 44.8% from $279.4 million
to $154.2 million in fiscal year 2012. The decrease in the cost of goods sold
was mainly due to reduced sales volumes for our display products. After the
Sales of Honesty Group, our cost of goods sold consisted of the cost of
finished products purchased from outsourced manufacturers, including Honesty
Group and its subsidiaries. For fiscal year 2012, the amount of finished
products purchased from Honesty Group and its subsidiaries after the Sale of
Honesty Group was $119.3 million, or 77% of total purchases.

Gross profit in fiscal year 2012 was $12.5 million as compared to $33.7
million for the previous fiscal year. As a percentage of total revenues,
overall gross margin was 7.5% for the fiscal year 2012, as compared to 10.8%
for the prior fiscal year. Overall gross margin during 2012 was negatively
impacted by the increased fees charged by Chinese authorities for recycling
imported monitors, price decreases for monitors, and added costs for
outsourcing manufacturing as SGOCO does not own any manufacturing facility. 

In response to the intense competition in China's general display market,
SGOCO has transitioned into a "light-asset" business model that concentrates
on the development and distribution of its own SGOCO brands and licensed TCL
and Founder brands, which had 8.4% in gross margin as compared to 6.2% gross
margin for OEM products for the fiscal year of 2012. The Company also focuses
on selling more application-specific products with higher gross margins.

SG&A expenses for the fiscal year 2012 were $6.0 million, or 3.6% of total
revenues, as compared with $7.5 million, or 2.4% of total revenues for the
prior fiscal year. Included in the 2012 SG&A expenses was an approximately
$1.7 million one-time expense in professional fees in relation to SGOCO's
trading halt on Nasdaq and a change in auditors in 2012, which represented
approximately 1% of total revenues.

Net income for fiscal year 2012 was $4.2 million, as compared to $16.6 million
for the previous fiscal year. The net income margins were 2.5% and 5.3% for
the years ended December 31, 2012 and 2011, respectively. Diluted earnings per
share were reported at $0.25 for fiscal year 2012.

Balance Sheet and Cash Flow Highlights

As of December 31, 2012, the Company held $11.5 million in cash and cash
equivalents and $78.1 million in working capital. The current ratio was
reported at 3.86 as of December 31, 2012. The strong liquidity ratios will
continue to support SGOCO in the transition of its business model.

Total net cash inflow during fiscal year 2012 was $11.0 million, mainly
consisted of $18.6 million provided by investing activities, $6.2 million
provided by financing activities, offset by $13.8 million used in operating
activities.

For the fiscal year 2012, the average collection period ("ACP") was 87 days,
as compared to 44 days year-over-year. Inventory turnover was 9 days in 2012,
compared to 13 days for the prior fiscal year.

The longer payment terms SGOCO provided to its distributors was largely due to
the Company's efforts in retaining quality distributors in the face of
increased competition in China's general display market. The improvement in
inventory turnover stemmed from the Company's smaller position in inventory
after the Sale of Honesty Group and better coordination between its sales and
purchase departments after a revamping of its logistics system. The overall
conversion cycle for accounts receivable and inventory days in 2012 were 96
days, which is within our targeted 80 to 100 days conversion cycle.

Mr. Burnette Or, Chairman and Chief Executive Officer of SGOCO, commented: "We
are very pleased to report a solid financial and operational performance for
the fourth quarter and fiscal year 2012. In response to the increased
competition in China's rapid-changing display market, SGOCO chose to
transition from the manufacturing-focused business model to the R&D and
distribution-focused model, to develop and distribute its own-branded
products. We can see the benefits of moving upward in the value chain have
started to be reflected in our operational results during this quarter."

Outlook

Mr. Or concluded, "We believe that the operational improvements shown in the
fourth quarter of 2012 will continue in 2013, because we will allocate our
resources to develop further SGOCO brand products. These include
market-oriented, application-specific products customized for large industry
end-users. We believe the focused distribution of these higher-margin products
will create a foundation for establishing SGOCO as a leading supplier in
China's flat-panel display market for years to come. We will continue striving
to create long term value for our shareholders."

Conference Call

SGOCO's management will host a conference call at 8:30 a.m. Eastern Time/8:30
p.m. Beijing Time on Monday, April ^ 22, 2013.

Interested parties may access the call by dialing 1-877-941-1427 (US
Toll-free) or 1-480-629-9664 (International) or 400-120-0611 (China
Toll-free). The Conference call identification number is 4610046#.

A webcast will also be available via
http://public.viavid.com/index.php?id=103940.

A recording of the conference call will be accessible within 48 hours via
SGOCO's website at:
http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=recent&id=13

About  SGOCO Group, Ltd.

SGOCO Group, Ltd. is focused on product design, brand development and
distribution in the Chinese flat panel display market, including computer
monitors, TVs and application specific products. SGOCO sells its products and
services in the Chinese market and abroad. For more information about SGOCO,
please visit our investor relations website http://www.sgocogroup.com.

Safe Harbor and Informational Statement

This announcement 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. These statements are made under the "safe harbor"
provisions of the U.S. Private Securities Litigation Reform Act of 1995. 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 and
the transitioning of its product development and sales focus and to a
"light-asset" model, 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 ability to have effective internal control over financial
reporting; our success in designing and distributing products under brands
licensed from others; management of sales trend and client mix; possibility of
securing loans and other financing without efficient fixed assets as
collaterals; changes in government policy in China; the fluctuations and
competition in sales and sale prices 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/or risks outlined in SGOCO's filings
with the U.S. Securities and Exchange Commission, including its annual report
on Form 20-F and other filings. All information provided in this press release
and in the attachments is as of the date of the issuance, and SGOCO does not
undertake any obligation to update any forward-looking statement, except as
required under applicable law.

For investor and media inquiries, please contact:

SGOCO Group, Ltd.

Serena Wu
Investor Relations Manager
Tel: +86 (10) - 85870173 (China)
US: +1(646) - 5831616 (Voice mail)
Email:ir@sgoco.com



SGOCO GROUP, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31AND SEPTEMBER 30, 2012
(In thousands except share and per share data)
                                     Three Months Ended    Three Months Ended
                                     December 31, 2012     September 30, 2012
REVENUES:
Revenues                             63,429                26,047
Revenues - related parties           -                     -
Total revenues                       63,429                26,047
COST OF GOODS SOLD:
Cost of goods sold                   58,530                25,105
Cost of goods sold - related         -                     -
parties
Total cost of goods sold             58,530                25,105
GROSS PROFIT                         4,899                 942
OPERATING EXPENSES:
Selling expenses                     211                   212
General and administrative           1,156                 1,482
expenses
Total operating expenses             1,367                 1,694
INCOME FROM OPERATIONS               3,532                 (752)
OTHER INCOME (EXPENSES):
Interest income                      5                     1
Interest expense                     (9)                   (12)
Other income (expense), net          (94)                  (23)
Change in fair value of warrant      (0)                   27
derivative liability
Gain from disposal of subsidiaries   -                     -
Total other expenses, net            (98)                  (7)
INCOME (LOSS) BEFORE PROVISION FOR   3,434                 (759)
INCOME TAXES
PROVISION FOR INCOME TAXES           281                   331
NET INCOME                           3,153                 (1,090)
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation         26                    (3)
adjustment
Realization of foreign currency
translation gain relating to         -                     -
disposal of subsidiaries
COMPREHENSIVE INCOME (LOSS)          3,179                 (1,093)
EARNINGS (LOSS) PER SHARE:
Basic                                0.19                  (0.06)
Diluted                              0.19                  (0.06)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic                                17,058,726            17,059,860
Diluted                              17,058,726            17,059,860



SGOCO GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
(In thousands except share and per share data)
                                                          2012        2011        2010
REVENUES:
Revenues                                                  166,701     313,136     204,683
Revenues - related parties                                -           -           12,618
Total revenues                                            166,701     313,136     217,301
COST OF GOODS SOLD:
Cost of goods sold                                        154,221     279,399     174,316
Cost of goods sold - related parties                      -           -           10,286
Total cost of goods sold                                  154,221     279,399     184,602
GROSS PROFIT                                              12,480      33,737      32,699
OPERATING EXPENSES:
Selling expenses                                          670         1,706       700
General and administrative expenses                       5,322       5,779       6,443
Total operating expenses                                  5,992       7,485       7,143
INCOME FROM OPERATIONS                                    6,488       26,252      25,556
OTHER INCOME (EXPENSES):
Interest income                                           8           288         90
Interest expense                                          (61)        (2,074)     (1,021)
Other income (expense), net                               (130)       (248)       (892)
                                                                      
Change in fair value of warrant derivative liability      75                      (287)
                                                                      925
Gain from disposal of subsidiaries                              -     127         -
Total other expenses, net                                 (108)       (982)       (2,110)
INCOME BEFORE PROVISION FOR INCOME TAXES                  6,380       25,270      23,446
PROVISION FOR INCOME TAXES                                2,167       8,651       3,514
NET INCOME                                                4,213       16,619      19,932
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment                   (59)        84          1,772
Realization of foreign currency translation gain          
relating to disposal of subsidiaries                                  (3,815)     -
                                                          -
COMPREHENSIVE INCOME                                      4,154       12,888      21,704
EARNINGS PER SHARE:
Basic                                                     0.25        1.03        2.13
Diluted                                                   0.25        1.02        1.86
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic                                                     17,059,575  16,086,598  9,354,186
Diluted                                                   17,059,575  16,288,242  10,705,957



SGOCO GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2012 AND 2011
(In thousands except share and per share data)
                                                                                                        2012     2011
ASSETS
CURRENT ASSETS
Cash                                                                                                   11,548   535
Accounts receivable, net                                                                               59,355   19,680
Other receivables and prepayments                                                                      169      757
Consideration receivable from Sale of Honesty Group                                                    -        57,478
Inventories                                                                                            5,725    1,864
Advances to suppliers                                                                                   28,511   4,609
Other current assets                                                                                   78       60
Total current assets                                                                                    105,386  84,983
PLANT AND EQUIPMENT, NET                                                                                261      218
Total assets                                                                                            105,647  85,201
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term loan                                                                                         6,230    -
Accounts payable, trade                                                                                 12,038   4,609
Accrued liabilities                                                                                     156      353
Short-term loan - shareholder                                                                           209      209
Other payables                                                                                          379      344
Customer deposits                                                                                       1,155    153
Taxes payable                                                                                           7,147    5,552
Total current liabilities                                                                               27,314   11,220
OTHER LIABILITIES
Warrant derivative liability                                                                            18       93
Total liabilities                                                                                       27,332   11,313
Commitment and contingencies
SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value, 1,000,000 shares authorized, nil issued and outstanding as of        -        -
December 31, 2012 and December 31, 2011
Common stock, $0.001 par value, 50,000,000 shares authorized, 17,465,356 and 17,258,356 shares issued   17       17
and outstanding as of December 31, 2012 and 2011, respectively
Paid-in-capital                                                                                         24,828   24,555
Statutory reserves                                                                                      401      54
Retained earnings                                                                                       53,044   49,178
Accumulated other comprehensive income                                                                  25       84
Total shareholders' equity                                                                              78,315   73,888
Total liabilities and shareholder's equity                                                             105,647  85,201



SGOCO GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
(In thousands)
                                              2012      2011       2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                    4,213     16,619     19,932
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation                                  69        1,369      1,506
Amortization                                  -         91         105
Bad debt provision                            -         191        1,947
Change in fair value of warrant derivative    (75)      (925)      287
liability
Share-based compensation expenses             273       -          -
Gain from disposal of subsidiaries            -         (127)      -
Change in operating assets
Accounts receivable, trade                    (39,496)  (19,428)   (37,510)
Accounts receivable - related parties         -         50         (48)
Other receivables and prepayments             587       (7,988)    (262)
Inventories                                   34,557    1,160      (12,814)
Advances to suppliers                         (23,797)  (101,731)  (10,681)
Advances to suppliers-related party           -         -          9,027
Other current assets                          (16)      (12)       259
Change in operating liabilities
Accounts payable, trade                       7,390     31,772     27,638
Accrued liabilities                           (198)     390        (130)
Other payables                                34        9,789      (1,542)
Other payables - related parties              -         -          (235)
Customer deposits                             997       5,544      2,735
Customer deposits - related parties           -         -          (338)
Taxes payable                                 1,575     5,008      1,604
Net cash (used in) provided by operating      (13,887)  (58,228)   1,480
activities
CASH FLOWS
FROM INVESTING ACTIVITIES:
Proceeds from disposal of subsidiaries, net   18,734    (2,226)    -
of cash disposed of $3,440
Purchase of equipment and                     (106)     (1,021)    (3,564)
construction-in-progress
Purchase of intangible assets                 -         (2)        (6)
Proceeds from the disposal of plant and       -         2          -
equipment and intangible assets
Cash received from legal acquirer             -         -          6
Net cash provided by (used in) investing      18,628    (3,247)    (3,564)
activities



SGOCO GROUP, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010 - Continued
(In thousands)
                                                 2012    2011      2010
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase in restricted cash                      -       (19,413)  (731)
Proceeds from bank overdrafts                    -       7,304     10,350
Payments on bank overdrafts                      -       (7,539)   (9,618)
Notes payable                                    -       40,899    6,824
Proceeds from government                         -       -         1,163
Proceeds from short-term loan                    6,230   102,258   30,512
Payments on short-term loan                      -       (81,516)  (32,056)
Shareholder contribution                         -       -         367
Proceeds from shareholder loan                   -       -         2,545
Payments on shareholder loan                     -       (2,336)   -
Proceeds from recapitalization                   -       -         5,388
Payments of recapitalization cost                -       -         (666)
Repayments on shareholder promissory notes       -       -         (100)
Proceeds from shares issuance                    -       -         5,595
Payments of financing costs                      -       -         (300)
Payments on repurchase of shares pursuant to     -       (2,000)   -
Put Option
Payments on repurchase of warrants               -       (512)     -
Shares issued for exercise of over               -       373       -
allotment related to secondary offering
Net cash provided by (used in) financing         6,230   37,518    19,273
activities
EFFECT OF EXCHANGE RATE ON CASH                  42      998       497
INCREASE (DECREASE)                              11,013  (22,959)  17,686
IN CASH
CASH, beginning of year                          535     23,494    5,808
CASH, end of year                                11,548  535       23,494
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest                           61      2,074     1,021
Cash paid for income taxes                       575     4,051     1,986
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Settlement of consideration receivable –         38,397  8,925     -
received in finished goods
Settlement of consideration receivable offset
against
-Purchase deposits to Honesty Group         -       (1,772)   -
-Payable to Honesty Group                   -       10,156    -
Consideration receivable from the Sale of        -       57,478    -
Honesty Group

SOURCE SGOCO Group, Ltd.

Website: http://public.viavid.com/index.php?id=103940
Website:
http://www.sgocogroup.com/us/SGOC/irwebsite/index.php?mod=recent&id=13
Website: http://www.sgocogroup.com