Unassociated Document

SGOCO started 2011 on a very strong note with record revenues of $87.0 million. Compared to the first quarter of 2010, revenues were up 347% and compared to the fourth quarter of 2010, revenues rose 4.5%. The SGOCO brands continue to gain recognition in the marketplace based on their high quality. The strong growth was the result of increased customer demand for the Company’s products and expanded production capacity. The Company believes its success stems from its continued focus on its multiple-brand, multiple channel strategy. With the addition of POVIZON and No.10, SGOCO now has 6 brands in its portfolio. The Company continues to target 1,000 SGOCO Image stores by the end of 2011.

Revenue for the first quarter of 2011 was $87.0 million, an increase of 347% from $19.5 million in the first quarter of 2010. As SGOCO’s reputation for high quality products has grown, the Company has seen increasing orders from customers. Sales of the Company’s own brands increased by 225% in the first quarter of 2011 compared to the first quarter of 2010. The trend toward greater sales was also aided by the increased number of SGOCO Image stores with 665 stores as of March 31, 2011 compared to 206 stores as of March 31, 2010. SGOCO’s own brands represented 54% of total revenues. To meet the increased market demand for the Company’s products, the Company operated with expanded production capacity in the first quarter of 2011 compared with the first quarter of 2010. Aiming to improve factory utilization and reduce idle capacity, SGOCO added new OEM customers. OEM revenues accounted for 30% of total revenues in the first quarter of 2011. The remaining 16% of the Company’s revenues are made up of Company produced components and outsourced items such as LED products, network products, and control systems.

With the increase in revenues, SGOCO’s gross profit for the first quarter of 2011 increased 133% to $7.3 million from $3.1 million for the first quarter of 2010. The gross margin as a percent of sales was 8.4% in the first quarter of 2011, compared to 16.1% in the first quarter of 2010 with the decline due to downward pressure on product prices, increased sales of lower margin OEM products and the growth of low margin component and outsourced item revenues. If general market prices stabilize and panel prices resume their declining trend, the Company expects gross margin improvement.

Since the close of the first quarter, the Company repurchased and retired a total of 867,177 of its publicly-traded warrants in private transactions, for an aggregate purchase price of $320,610.16 (or $0.37 per warrant). All of the terms of the remaining 0.7 million publicly-traded warrants remain the same. Additionally, the Company, in private transactions, repurchased and retired a total of 31,764 of the warrants issued to its underwriters in the December 2010 offering for an aggregate purchase price of $15,882 (or $0.50 per warrant). All of the terms of the remaining 34,903 warrants issued to its underwriters in the December 2010 offering remain the same. The Company believes that the repurchase and retirement of these warrants benefit shareholders in the long-term as it eliminates the dilution that would have occurred in the event these warrants were exercised.

The Company will hold a conference call for investors tomorrow, Wednesday, June 29, 2011, at 10:00 a.m. ET. Interested parties may participate in the call by dialing (201) 493-6749; please call in 10 minutes before the conference call is scheduled to begin and ask for the SGOCO conference call. After opening remarks, there will be a question and answer period. The conference call will also be broadcast live over the Internet. To listen to the live call, please go to www.sgocogroup.com, click on the Investor Relations section, then to the Event Calendar where the conference call is posted. Please go to the website 15 minutes early to download and install any necessary audio software. If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days. We suggest listeners use Microsoft Explorer as their browser.

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.

	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

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

	Ordinary Shares									Retained Earnings					Accumulated
															Other
							Paid-in			Statutory					Comprehensive
	Shares			Par Value			Capital			Reserves		Unrestricted			Income			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

	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