Sgoco Group (SGOC) research, news, and more from GeoInvesting

Company description

Sun, 25 Jul 2010 04:00:00 GMT

SGOCO Technology, Ltd. is a leading branded designer, manufacturer and distributor of LCD consumer electronics including LCD PC monitors, LCD TV and application-specific products. SGOCO is dedicated to providing high quality, branded electronics at affordable prices for Chinese consumers.

Comments & Business Outlook

Fri, 19 Apr 2013 04:00:00 GMT

Fourth Quarter 2012 Financial Results

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.
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.

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."

Comments & Business Outlook

Wed, 26 Dec 2012 05:00:00 GMT

Update on Growth Initiatives

The Company is transitioning to a "light-asset" business model. The Company is implementing several strategic initiatives that are expected to drive and contribute to its revenue and profit growth over the next 12-24 months:

1). Diversify Product Portfolio: SGOCO is expanding its existing flat-panel display product lines to include e-boards and smart phones. The Company is also in the stage of researching application specific products (ASPs) and integrated solution products.

2). Broaden Customer Base: SGOCO continues to expand into the US flat-panel display market through its US subsidiary, SGO Corp., in addition to its core Chinese domestic customer base.

3). Increase Brand Portfolio: SGOCO intends to further enhance its brand portfolio of five flat-panel display brands by signing licensing agreements with new brand owners.

4). Resource Optimization: SGOCO plans to continue its efforts to reduce costs and increase resource optimization to better serve customers and improve overall efficiency in the areas of management, sales, brand and product development. The change in the Company's business model from a "heavy asset" model to a "light asset" model is expected to shift the sales and distribution model from its current distributor-focus to a more diversified model including direct sales to the industry end-customers with its tailor-made ASP products. It is also anticipated the Company will change its sales and distribution team to meet its customers' evolving needs.

Mr. Burnette Or, Chairman and Chief Executive Officer of SGOCO, commented "We believe implementing the preceding initiatives – multi-products, multi-channels, multi-brands and resource optimization – will establish SGOCO as a leading innovator of flat-panel display products for years to come. We expect to build a new sales team focusing on higher-margin products, including ASP integrated-solution sales. We believe implementing the latest technological innovations and developing more sophisticated flat-panel display products will further increase our market recognition domestically and internationally. That should result in greater revenue and profit growth in 2013 and beyond."

Investor Alert

Tue, 11 Sep 2012 04:00:00 GMT

BEIJING, September 11, 2012 /PRNewswire-FirstCall/ -- 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 LCD/LED monitors, TVs, and application specific products, today made the following disclosure.

SGOCO is listed on The Nasdaq Capital Market. It traded there until Nasdaq halted trading on May 16, 2012 and requested information from SGOCO.

In early January of 2012, SGOCO's former auditor, Grant Thornton China, a member of Grant Thornton International ("Grant Thornton"), received an anonymous, whistleblower letter regarding SGOCO. It contained many allegations, including alleged contradictory securities filing with regulators and double-booking of sales.

Initially, SGOCO's management investigated these allegations. Subsequently, the investigation included work by Grant Thornton and a third-party investigative company. Finally, the investigation was placed in the control of SGOCO'S Audit Committee, which retained Greenberg Traurig, LLP to assist.

One allegation was that SGOCO made filings with securities regulators in China that contained materially different information than what SGOCO filed in the United States with the Securities and Exchange Commission. The independent investigation demonstrated that allegation was false.

Another allegation was that double-booking of sales occurred. The implication was that double-booking of sales occurred frequently during 2009, 2010 and 2011. The independent investigation demonstrated that allegation was completely false for 2009 and 2010.

In addition, there was no double-booking of sales in 2011, except for one such error.

That error was not material regarding earnings, because there was a corresponding double-entry of about the same amount in costs. Consequently, earnings were not materially impacted. This error had been corrected by management of SGOCO immediately upon detection.

In June of 2012, while the Audit Committee was continuing its investigation, SGOCO retained Crowe Horwath (HK) CPA Limited ("Crowe Horwath") as its auditor. Its prior auditor, Grant Thornton, resigned on May 14, 2012. There were no disagreements between Grant Thornton and SGOCO on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

On August 30, 2012, Crowe Horwath provided its audit report on SGOCO's financial statements for the year ended December 31, 2011. SGOCO then filed its Annual Report on August 30, 2012.

SGOCO's management has identified that several internal controls over financial reporting were not effective as of December 31, 2011. But, that does not prevent an audit from being conducted. It also does not prevent an audit report from being issued to SGOCO that is part of an Annual Report that complies with Listing Rule 5250(c)(1).

Nasdaq has determined that SGOCO is in compliance with Listing Rule 5250(c)(1). On September 5, 2012, Nasdaq delivered a letter to SGOCO confirming that. Rule 5250(c)(1) requires compliance with the Securities and Exchange Commission's rule regarding filing annual reports.

SGOCO is committed to improving those internal controls over financial reporting. It has retained a firm that specializes in improving internal controls regarding financial matters. This internal control specialist will work with SGOCO's management, the Audit Committee and outside legal counsel to coordinate efforts to improve the effectiveness of the internal controls over financial reporting.

SGOCO also plans to increase the overall ability of its financial personnel regarding internal controls over financial reporting. This will involve several steps, including additional education for some executives, hiring some new executives and, when needed, replacing a few executives.

NEW YORK, Sept. 11, 2012 (GLOBE NEWSWIRE) -- The NASDAQ Stock Market (Nasdaq:NDAQ) announced today that trading in SGOCO Group Ltd. (Nasdaq:SGOC) is scheduled to resume on Tuesday, September 11, 2012 at 9:00 a.m., Eastern Time. Trading in the company's stock was halted on Wednesday, May 16, 2012 at 10:55:28 a.m. Eastern Time.

Comments & Business Outlook

Fri, 31 Aug 2012 04:00:00 GMT

BEIJING, August 31, 2012 /PRNewswire-Asia/ -- SGOCO Group, Ltd. and its wholly-owned subsidiaries ("SGOCO" or the "Company") (Nasdaq: SGOC), a company focused on product design and brand development in the Chinese flat panel display market, including LCD/LED monitors, TVs, and application specific products, today announced financial results for the fiscal year ended December 31, 2011.

SGOCO achieved record revenues for 2011. Revenues for the year ended December 31, 2011 grew$95.8 million, or 44%, to $313.1 million compared with $217.3 million for 2010. The growth in revenues came from the addition of several large customers as well as increased sales from existing customers. The Company had five customers in 2011 whose sales each exceeded $20 million, up from two customers in 2010 each with sales in excess of $20 million.

The majority of the Company's revenue growth was derived from the China market. SGOCO's Chinasales increased 48.5% to $276.3 million. In 2011, the Company established a subsidiary in the US to explore greater sales opportunities in North and South America.

Full year 2011 gross profit was $33.7 million, or 10.8% of revenue, compared with $32.7 million, or 15.0% in the prior year period. Margin compression occurred in both the Company's branded and OEM business segments and was a result of increased competition and softening demand. The Company saw increased pricing pressure in the Chinese market that was partially in response to the general slowdown in the European monitor market. The lack of demand in Europe drove competitors to maintain unit volume by pushing product into the Chinese market resulting in lower unit prices. The Company's results were further challenged in the second half of 2011 when severe flooding in Thailand created a shortage of computer components. This shortage negatively affected retail sales at Chinese stores specializing in custom-made computers where many of SGOCO's monitors are sold.

Selling, general and administrative expenses for 2011 were $7.5 million, or 2.4% of total revenue compared with $7.1 million, or 3.3% of total revenue, from the prior year period. The majority of the increase came from selling expenses as sales commissions, transportation costs and customs duties were higher than 2010. The Company realized savings in general and administrative expenses in the fourth quarter as professional service fees associated with the Company's 2010 Nasdaq listing did not recur.

Net income for 2011 declined 16.6% to $16.6 million, or $1.02 per diluted share, compared with $19.9 million, or $1.86 per diluted share, in the prior year period. A one-time $5.4 million provision related to the sale of the Company's manufacturing assets adversely impacted net income for 2011. Since certain earn-out milestones were met, shares held in escrow were no longer subject to forfeiture and thus diluted earnings per share was calculated using a weighted average number of ordinary shares outstanding of 16,288,242 for 2011 compared with 10,705,957 for 2010.

The Company's sale of its manufacturing subsidiary, Honesty Group, in the 2011 fourth quarter for $76.0 million in total consideration eliminated SGOCO's bank debt and resulted in a substantial improvement in the Company's liquidity ratios. The Company's current ratio rose to 7.6 on December 31, 2011, from 1.4 at the end of 2010. The Company's debt-to-equity ratio dropped to 0.15 as of December 31, 2011 from 1.52 as of December 31, 2010. As of December 31, 2011 the outstanding balance of the payment owed to SGOCO for the sale of Honesty Group was $57.5 million. The consideration was paid in full by the end of May 2012.

Auditor trail

Tue, 12 Jun 2012 04:00:00 GMT

BEIJING, June 12, 2012 /PRNewswire-Asia/ -- SGOCO Group, Ltd. (NASDAQ: SGOC), (the "Company" or "SGOCO"), a company focused on building its own brands and retail distribution network in the Chinese flat panel display market, including LCD/LED monitors, TVs, and application specific products, today announced the appointment of Crowe Horwath (HK) CPA Limited ("Crowe Horwath") as the Company's independent registered public accounting firm to perform independent audit services for the year ended December 31, 2011.

Mr. Burnette Or, President and CEO of SGOCO commented, "We are pleased to announce the hiring of Crowe Horwath as our new independent auditor. They will commence work on the audit of our consolidated financial statements for the 2011 fiscal year, which we hope will be completed as quickly as possible."

Investor Alert

Mon, 04 Jun 2012 04:00:00 GMT

BEIJING, June 4, 2012 /PRNewswire-Asia/ -- SGOCO Group, Ltd. (Nasdaq: SGOC), a company focused on building its own brands and retail distribution network in the Chinese flat panel display market, including monitors, TVs, and application specific products, today announced that it received a letter from The Nasdaq Stock Market indicating that as a result of the Company's failure to timely file its Form 20-F for the year ended December 31, 2011, the Company no longer complies with the Nasdaq requirements for continued listing set forth in Nasdaq Marketplace Rule 5250(c)(1), which requires the timely filing of periodic reports.

The Nasdaq Staff has exercised its discretionary authority under Nasdaq Marketplace Rule 5101 and requested the Company to submit its plan to regain compliance by June 12, 2012. The Nasdaq Marketplace Rules provide that the Staff can grant the Company an extension of up to 180 calendar days from the filing's due date to regain compliance. After submission and review of the plan, the Nasdaq Staff will determine whether or not to grant any additional time to file its Form 20-F and regain compliance as permitted under The Nasdaq Marketplace Rules or issue a Staff delist letter.

The Company plans to present its plan of compliance to Nasdaq and request continued listing pending the completion of the plan.

Investor Alert

Mon, 21 May 2012 04:00:00 GMT

BEIJING, May 21, 2012 /PRNewswire-Asia/ -- SGOCO Group, Ltd. (NASDAQ: SGOC), (the "Company" or "SGOCO"), a company focused on building its own brands and retail distribution network in the Chinese flat panel display market, including LCD/LED monitors, TVs, and application specific products, today announced that its independent auditor, Grant Thornton, the China member firm of Grant Thornton International, has resigned as of May 14, 2012.

SGOCO and members of the Audit Committee of the Board of Directors have been meeting with other qualified independent auditing firms to replace Grant Thornton and will announce the new independent auditor once one is engaged.

As a result of Grant Thornton's resignation, the Company has missed the May 15, 2012 filing deadline for its 2011 annual report on Form 20-F. SGOCO will work diligently with its new auditor to complete the audit of its financial statements for the year 2011 and file its annual report on Form 20-F as soon as practicable.

As a result of the Form 20-F filing delay, Nasdaq halted trading of the Company's ordinary shares. SGOCO is working with its advisors to have Nasdaq resume trading.

SGOCO remains fully operational, continues to make strides with its current business plan and believes its existing and future growth initiatives will maximize SGOCO's performance in 2012 and beyond.

Research

Thu, 12 Apr 2012 04:00:00 GMT

Our premium research emailed to our members on 4/12/2012

Sgoco Group (NASDAQ:SGOC) shares are strong, maybe in anticipation of the closing of the sale of its assets mentioned in its November 16, 2011 announcement. Based on the press release, the deal is slated to be completed by the end of March and translates into a stock price of about $4.40 per share.

“The Company entered into an Agreement for Sale and Purchase (“SPA”) with the Buyer pursuant to which it sold all of the outstanding capital shares of Honesty Group (“Sale Shares”) for cash consideration of US$76 million. The transfer of the Sale Shares was effective on November 15, 2011. The cash consideration will be paid in installments over the next four months. Payment of the cash consideration is secured by a pledge of the Sale Shares and the Group’s cash, accounts receivable and advances to suppliers. In the event that the Buyer does not make the installment payments, SGOCO will have the right to take back ownership of the Sale Shares or force the Buyer to liquidate the Group’s cash, accounts receivable and advances to suppliers to have sufficient funds to make the payments to the Seller.”

While we can’t verify the transaction has taken place, our OTGDD has confirmed that SGOC does in fact own a big piece of land, which may justify the price of the SPA transaction on Nov. 16, 2011. Based on the Nov. 16, 2011 announcement, SGOC should have already received a USD 76 million as cash consideration. We are waiting for SGOC to issue an update regarding this transaction.

To be among the first to receive alerts like this, subscribe to our premium service!

Resolution of Legal Issues

Thu, 12 Apr 2012 04:00:00 GMT

BEIJING, CHINA, February 28, 2012 – SGOCO Group, Ltd. (“SGOCO,” or the “Company”) (Nasdaq: SGOC), a company focused on building its own brands and retail distribution network in the Chinese flat panel display market, including LCD/LED monitors, TVs, and application specific products, today announced that the Company has received a letter from Nasdaq, notifying that the Company is no longer deficient in the Minimum Market Value of Publicly Held Shares (MVPHS) requirement as originally reported by the Company on February 3, 2012.

Investor Alert

Tue, 28 Feb 2012 05:00:00 GMT

BEIJING, Feb. 28, 2012 /PRNewswire-Asia/ -- SGOCO Group, Ltd. ("SGOCO," or the "Company") (Nasdaq: SGOC), a company focused on building its own brands and retail distribution network in the Chinese flat panel display market, including LCD/LED monitors, TVs, and application specific products, today announced that the Company has received a letter from Nasdaq, notifying that the Company is no longer deficient in the Minimum Market Value of Publicly Held Shares (MVPHS) requirement as originally reported by the Company on February 3, 2012.

Investor Alert

Mon, 06 Feb 2012 05:00:00 GMT

BEIJING, February 4, 2012 /PRNewswire-Asia/ -- SGOCO Group, Ltd. ("SGOCO," or the "Company") (Nasdaq: SGOC), a company focused on building its own brands and retail distribution network in the Chinese flat panel display market, including LCD/LED monitors, TVs, and application specific products, today announced that the Company received a letter from the Listing Qualification Staff of the NASDAQ Stock Market LLC (the "Staff"), on January 30, 2012 indicating that the Company is not in compliance with the Minimum Market Value of Publicly Held Shares (MVPHS) of $5,000,000.

The Listing Rules (the "Rules") require listed securities to maintain a MVPHS of $5,000,000. MVPHS is calculated by multiplying the publicly held shares, which is the total outstanding shares less the shares held by officers, directors and beneficial owners of 10% or more of the outstanding shares, by the closing bid price. If a NASDAQ-listed company trades below the applicable MVPHS requirement for 30 consecutive business days, it will be notified of the deficiency. Based upon the Staff's review, the Company no longer meets this requirement. However, the Rules provide the Company with a compliance period of 180 calendar days in which to regain compliance with this requirement.

Comments & Business Outlook

Tue, 15 Nov 2011 05:00:00 GMT

Third Quarter 2011 Results

Revenue for the third quarter of 2011 was $71.6 million, unchanged from the third quarter of 2010.
Net income for the third quarter of 2011 was $5.2 million, a decrease of 30.5%, compared to $7.5 million recorded for the same period last year.
Diluted EPS was $0.33 in the third quarter of 2011, compared to $0.79 in the third quarter of 2010.

As certain customers worked through excess inventory positions, sales of the Company's own brands decreased by 1.9% to $48.2 million in the third quarter of 2011 compared to the third quarter of 2010. To increase factory utilization, the Company increased OEM sales by 7.5% to $21.9 million thereby reducing average fixed costs.

Working Capital

During the first nine months of 2011, the Company saw large increases in notes payable, advances to suppliers and restricted cash. SGOCO uses notes payable to pay bills and make advances to suppliers. From December 31, 2010 to September 30, 2011 SGOCO increased its advances to suppliers by $93.5 million. The increase was a response to a tightening in the panel supply market as well as an expected increase in duties on imported panels. SGOCO believed this action was necessary to meet potential peak season customer demand in the fourth quarter and during the coming Chinese New Year.

The banks guaranteeing the notes payable require a security deposit from SGOCO of restricted cash which continues to earn interest for the Company. From December 31, 2010 to September 30, 2011, notes payable increased by $41.6 million and restricted cash increased during the same period by $22.3 million for a net increase of $19.3 million. The Company considers these increases to be in a reasonable range considering the current market conditions.

Warrant Repurchases

In the third quarter, SGOCO repurchased and retired a total of 100,000 of its publicly-traded warrants in a private transaction, for an aggregate purchase price of $40,000 (or $0.40 per warrant). All of the terms of the remaining 0.6 million publicly-traded warrants remain the same. Additionally, the Company in private transactions, repurchased and retired a total of 21,332 of the warrants issued to its underwriters in the December 2010 offering for an aggregate purchase price of $10,666 (or $0.50 per warrant). All of the terms of the remaining 13,571 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.

Maximization of Shareholder Value

Tue, 15 Nov 2011 05:00:00 GMT

BEIJING, November 16, 2011 /PRNewswire-Asia/ -- SGOCO Group, Ltd. (NASDAQ: SGOC), (the "Company" or "SGOCO"), a company focused on building its own brands and retail distribution network in the Chinese flat panel display market, including LCD/LED monitors, TVs, and application specific products, today announced the sale of 100% of the shares of its Hong-Kong-based subsidiary, Honesty Group Holdings Ltd. ("Honesty Group") to Apex Flourish Group Limited (the "Buyer"), a BVI company, for US$76.0 million. Honesty Group and its subsidiaries (the "Group") represented SGOCO's core manufacturing facility along with the land, buildings and production equipment.

Mr. Or, President and Chief Executive Officer of SGOCO commented, "We believe the sale of our manufacturing facility is the right step for SGOCO's long-term growth and development. This transaction helps transition our company from a heavy asset business model to a lighter asset model with greater flexibility and scalability."

The Company entered into an Agreement for Sale and Purchase ("SPA") with the Buyer pursuant to which it sold all of the outstanding capital shares of Honesty Group ("Sale Shares") for cash consideration of US$76 million. The transfer of the Sale Shares was effective on November 15, 2011. The cash consideration will be paid in installments over the next four months. Payment of the cash consideration is secured by a pledge of the Sale Shares and the Group's cash, accounts receivable and advances to suppliers. In the event that the Buyer does not make the installment payments, SGOCO will have the right to take back ownership of the Sale Shares or force the Buyer to liquidate the Group's cash, accounts receivable and advances to suppliers to have sufficient funds to make the payments to the Seller.

With the sale of the manufacturing facility, the Company does not anticipate a material adverse impact to SGOCO's revenues. In the near term, the Company anticipates gross margin will be lower as a percent of sales as products will be sourced from Honesty Group, partially offset by reductions in depreciation, interest and general and administration costs. As a result, the Company anticipates that net profit margin as a percent of sales will be lower than recent reporting periods. In the future, gross margins may be higher if outsourcing production to other manufacturers proves more cost effective.

Comments & Business Outlook

Mon, 15 Aug 2011 04:00:00 GMT

Financial Highlights Second Quarter 2011 vs. Second Quarter 2010:

Total revenues increased by 100% to $85.6 million, compared to $42.9 million;
Gross profit increased by 68% to $10.7 million, compared to $6.4 million;
Gross margin was 12.6%, compared to 15.0%;
Operating income increased by 69% to $8.9 million, compared to $5.3 million;
Net income increased by 87% to $7.1 million, compared to $3.8 million; and,
Fully diluted EPS was $0.45, compared to $0.40.

Financial Highlights First Half 2011 vs. First Half 2010:

Total revenues increased by 177% to $172.6 million, compared to $62.3 million;
Gross profit increased by 89% to $18.0 million, compared to $9.5 million;
Gross margin was 10.5%, compared to 15.3%;
Operating income increased by 109% to $14.6 million, compared to $7.0 million;
Net income increased by 180% to $12.3 million, compared to $4.4 million;
Fully diluted EPS was $0.76, compared to $0.48; and,
The number of SGOCO Image retail partners on June 30, 2011 was 705, compared to 364 a year earlier.

2011 Second Quarter Overview

SGOCO continued to show strong year-on-year growth into the second quarter of 2011. The high quality of SGOCO brands continues to distinguish it from low-end competitors in the marketplace. With continued strong demand from customers and the addition of monitor and TV production capacity over the past year, the Company was able to achieve significantly higher revenues. The Company believes its strategy of multiple brands and multiple channels continues to effectively penetrate the market.

CFO Trail

Fri, 05 Aug 2011 04:00:00 GMT

BEIJING--(BUSINESS WIRE)--SGOCO Group, Ltd. (NASDAQ: SGOC), (the “Company” or “SGOCO”), a company focused on building its own brands and retail distribution network in the Chinese flat panel display market, including monitors, TVs, and application specific products, today announced that David Xu has been appointed Chief Financial Officer and Head of its Beijing Office.

David Xu’s career in finance and accounting spans nearly 20 years in both Asia and North America. His experience includes leading finance and risk management positions with some of the world’s best-known organizations such as General Electric and Yum! Brands. His nearly 10 years in GE includes Six Sigma Black Belt experience leading large scale strategic projects. He most recently served as CFO of China Maple Leaf Educational Systems and prior to that, he was CFO of the World Bank IFC/CUNA Mutual Insurance joint venture company. Mr. Xu has also acted as an independent financial reporting consultant advising clients including Manulife Financial, Zurich Financial Services and TD Bank Financial Group. Mr. Xu holds an MBA in Corporate Finance from University of Illinois at Chicago and a Bachelor’s in English and American Literature from Beijing Normal University.

“David brings the CFO expertise and hands-on experience in risk management and financial reporting of Fortune 500 companies," said Mr. Or, SGOCO’s President and CEO. "His strong combination of skills and experience will be an important addition to our executive management team and will support his success as CFO of SGOCO, a financially solid, fast-growing, marketing-driven company with multiple channels, multiple brands, and with a strong focus on retail distribution."

Comments & Business Outlook

Wed, 29 Jun 2011 04:00:00 GMT

First Quarter Results:

Total revenues increased by 347% to $87.0 million, compared to $19.5 million;
Gross profit increased by 133% to $7.3 million, compared to $3.1 million;
Gross margin was 8.4%, compared to 16.1%;
Operating income increased by 230% to $5.7 million, compared to $1.7 million;
Net income increased by 826% to $5.1 million compared to $0.6 million;
Fully diluted EPS was $0.32, compared to $0.06

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.

Liquidity Requirements

Mon, 06 Jun 2011 04:00:00 GMT

We have been making these types of credit arrangements since our inception and expect to be able to renew these facilities in the future. Based on our current expectations, we believe the amounts available to us from our credit facilities will be sufficient to fund our operations during the next twelve months. The foregoing assumes that we are able to renew these facilities when they expire, that our accounts receivables are converted to cash on a timely basis and that we do not encounter any unforeseen costs or expenses.

Investor Alert

Mon, 06 Jun 2011 04:00:00 GMT

One of Honesty Group’s subsidiaries, Guanwei, has registered capital of $11,880,000. As of December 31, 2010, $3,130,000 had been invested by Honesty Group in Guanwei. According to an agreement reached with the local government agency, the Jinjiang Bureau of China’s State Administration of Industry and Commerce, or SAIC, the remaining registered capital of $8,750,000 for Guanwei must be contributed by the end of 2011. The SAIC provided Honesty Group with this additional time to make the registered capital payments because Honesty Group is in the process of investing in infrastructure in the region through its investment in the Guanke Technology Park. If Honesty Group is unable to make the registered capital payments during 2011, it believes it will be able to reach agreement with the SAIC to further defer its obligation to pay the remaining registered capital, provided that the SAIC believes Honesty Group is progressing with the timetable for making its infrastructure investments in the Technology Park. If it fails to reach such an agreement for deferral, Honesty Group would have an obligation to fund Guanwei or to apply for a reduction in the remaining registered capital, which may not be granted. If Honesty Group fails to contribute the registered capital, it may be penalized with fines of 5 – 15% over the amount of unpaid capital, and, in certain cases, the business license for Guanwei may be revoked, which may result in its inability to conduct business in China. If Honesty Group is required to fund the remaining registered capital in full, SGOCO or Honesty Group will need to raise external financing, for which they have no commitments.

Comments & Business Outlook

Fri, 29 Apr 2011 04:00:00 GMT

2010 Year End Results:

Total revenue increased 220.2% to $217.3 million, compared to $67.9 million;

75% of sales were of SGOCO brand products compared to 79%;

Gross margin was 15.1%, compared to 14.9%;

Operating income increased 180.7% to $25.6 million, compared to $9.1 million;

Net income increased 178.4% to $19.9 million, compared to $7.2 million;

Diluted earnings per share grew 121.0% to $1.86, compared to $0.84*;

"2010 was a year of substantial growth, with record revenue and net income. The increase in revenue was primarily due to the addition of new customers, increased sales from existing customers, and an improved economic environment which also supported strong growth in exports. "

"While our growth strategy is aimed at expanding our geographic distribution network in China targeting mainly tier 3 and tier 4 cities, we are open to opportunistic export orders. In terms of products, geographic markets and financial strength, we are well-positioned to continue to achieve near and long-term growth."

Comments & Business Outlook

Fri, 19 Nov 2010 05:00:00 GMT

Third Quarter 2010 vs. Third Quarter 2009

Total revenue increased by 295.0% to $71.7 million, compared to $18.2 million;

Gross margin was 13.6%, compared to 24.4%;

Operating income increased by 114.5% to $8.9 million, compared to $4.2 million;

Net income increased by 113.2% to $7.5 million compared to $3.5 million.

Fully diluted EPS was $0.79, as compared to $0.42.

Non-GAAP(1) diluted EPS, which excludes changes in fair value related to warrant derivative liability, was $0.77 up from $0.42.

"2010 has been a year of transformation as SGOCO became a public company. We have taken several steps to strengthen our position and take advantage of new business opportunities in the Chinese emerging markets. We are thrilled with the performance and strength of our business. The $71.7 million in revenue for the quarter and over $7.5 million in net income, both represent all-time records for SGOCO," said Mr. Or, CEO and President of SGOCO.

"We sold more in the three months ending September 30, 2010 than we did in the entire first six months of 2010.We have increased the number of SGOCO Club partners to 403 stores as of September 30, 2010. This is a proven record of our capability to capitalize on the growth opportunities in the markets. As we remain committed to our strategy of multiple brands and multiple channels, we expect more exciting developments for the remainder of the year," added Mr. Or.

Deal Flow

Fri, 19 Nov 2010 05:00:00 GMT

We are selling 1,333,333 of our ordinary shares. Our ordinary shares are quoted on the OTC Bulletin Board under the symbol “SGTLF.” We have applied to list our ordinary shares on the NASDAQ Global Market under the symbol “SGOC.”

Share Structure

Fri, 19 Nov 2010 05:00:00 GMT

Please note that SGOCO has warrants with an excercise price of $8.00. $5.00 had been the original excercise price.

SPAC Activity

Mon, 15 Mar 2010 04:00:00 GMT

On March 11, 2010, the shareholders of Hambrecht Asia Acquisition Corp. approved the proposed acquisition. In addition, at the meeting, warrant holders approved the amendment to the warrant agreement to increase the exercise price per share of the warrants from $5.00 to $8.00 and to extend by one year the exercise period and to provide for the redemption of the publicly-held warrants, at the option of the holder, for $0.50 per share upon the closing of the acquisition.

SPAC Activity

Wed, 10 Mar 2010 05:00:00 GMT

Hambrecht Asia Acquisition is set to vote on a business combination proposal with the Chinese subsidiaries of Honesty Group: SGOCO Technology Ltd

Company Snap Shot:

The company designs and manufactures SGOCO brand LCD products in China
SGOCO currently sells its products via multiple channels including computer stores, distributors and specialty retailers, but is focused on developing a more vertically integrated Direct Store Delivery system, via a strategy referred to as SGOCO Clubs.
SGOCO currently sells products from two primary branded product lines: SGOCO, which includes high-quality, feature rich LCD products, and Edge 10, a unique line of products currently aimed at the educational marketplace in the U.K.
The principal objective of the Target’s management is for SGOCO to be a leading developer and manufacturer of LCD products and to create a network of SGOCO Clubs in Tier 2, Tier 3 and Tier 4 cities in China to distribute its products. The strategy is to capitalize on SGOCO’s operating strengths, which include a product development program; in-house manufacturing capability; value priced, feature rich products marketed under brands the Target controls; an attractive compensation plan for SGOCO Club members; a scalable business model; and an experienced management team.
Profitable and strong growth since founding in 2006. Strong revenue and profit growth continued in 2009 despite world economic downturn.
Focusing primarily on consumer markets in Tier 2, Tier 3 and Tier 4 cities in China, SGOCO has benefited from the strong economic growth and has been consistently profitable in operating results over the past three years, demonstrated by strong revenue, earnings, and cash flow performance. In 2009, SGOCO’s total sales value has reached $67.9 million, representing a 3-year compound annual growth rate, or CAGR, of 154.3%. SGOCO plans to continue focusing its market penetration in these areas using its brand value strategy offering quality consumer electronic products at affordable pricings with highest customer satisfaction standards.

Post Merger Share Calculation:(Max dilution scenario)

4,239,300 : Pre merger outstanding shares
4,239,300 : Existing Warrants
1,555,000: Management warrants
8,500,000 : Newly issued shares of Common Stock )

GeoTeam® best effort calculation of total post reverse merger outstanding shares assuming full conversions: 18,532,600

Note: The share count can diverge from this amount for several reasons

Decrease as a result of a warrant amendment that gives warrant holders the option to have their warrants redeemed for $0.50.
Decrease if shares have to be redeemed from no-vote shareholders in order to increase the chances of the approval of the proposed merger.
Increase if the company must seek financing, post merger.

Also, keep in mind that the treasury method is normally applied to calculate fully diluted shares outstanding. This would decrease the share calculation assumption.

Financial Snap Shot:

	2011 Target	2010 Target	Full Year 2009	Full Year 2008	Full Year 2007
GAAP Revenue	n/a	n/a	$67.9 million	$43.8 million	$10.5 million
Non-GAAP Net Income	$20.0 million	$15.0 million	$7.2 million	$5.2 million	$485.0 thousand
Non-GAAP EPS ^a	$0.85	$0.81	$0.39	n/a	n/a
Tax Rate	TBA	TBA	12.5%	0.0%	0.0%
GeoCalculated Fully Diluted Shares ^b	23,532,600	18,532,600	18,532,600	n/a	n/a
P/E	9.10	9.54	19.90	n/a	n/a

^a EPS figures were not provided by the company. Non-GAAP EPS Figures exclude certain non-operating gains and losses as well as certain non-cash items. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information . For a more complete explanation of the company's definition of non-GAAP please refer to its financial press releases. The GeoTeam® non-GAAP figures may, from time to time, differ from company supplied figures.

^b Note that the company used 13,799,125 shares for its 2009 EPS calculation of $0.52 as it did not factor in any warrant assumption. 2011 share count increase due to incentive shares earned if the company achieves net income targets.

The potential of the warrant strategy we had highlighted has drastically changed due to a proposed amendment to increase the exercise price to $8.00.

Source: SEC Form 6K (February 18, 2010)

We asked Drexion for his take on this deal. Recall, he was very instrumental in helping GeoReaders profit from the CCME warrant arbitrage:

Read through it... So-So terms...

12.7M shares outstanding after the transaction (assuming no liquidation in acquisition vote).
4.24M warrants -- Let us ignore this for now
1.55M management warrants -- Let us ignore this for now

Earn outs:

5M if management makes 15M net income in 2010
800k if management makes 20M net income in 2010 (or 5.8M if they make 2011 but not 2010 numbers).

Even ignoring the warrants, if they make 15M in 2010 their share count will go up to 17.7M.

15/17.7 = $0.847 EPS -- Shares hit in 2011 though, so official 2010 EPS would be 15/12.7 = 1.18.

At the strike of $8 and $0.50 warrant price, that means the break even is roughly P/E of 10X the first EPS above and 7.2X the 'official 2010' EPS.

If they make 2011's earn-out of 20M they get another 800k shares. 20/18.5 = $1.08 EPS -- shares hit in 2012 though, so official 2011 EPS would be 20/17.7 = $1.13

At the strike of $8 and $0.50 warrant price, that means the break even is roughly P/E of 7.9X the first EPS above and 7.5X the 'official 2011' EPS.

Note that the 'official eps' actually went DOWN for 2011 versus 2010, even though net income went from 15M to 20M.

Also note that this does not take into account the 6M warrants which would make the situation worse.

There is one further complication: All warrant holders that do not explicitly choose to keep their shares, will have their warrants redeemed for $0.50 after the acquisition. So if we bought warrants tomorrow, what happens to them? Its too late to vote... Would we buy tomorrow and then suddenly have them be redeemed for $0.50 in a few days?

Financial Target Agreements

Wed, 10 Mar 2010 05:00:00 GMT

5,800,000 newly issued SPAC Shares, will to be held in an escrow account by an affiliate of Honesty Group’s Hong Kong counsel, and delivered to the former shareholders of

Honesty Group if the Combined Company meets certain net income targets contained in the Share Exchange Agreement. The 5,800,000 escrowed SPAC Shares will be delivered to the former shareholders of Honesty Group in 2011 and 2012 as follows:

5,000,000 SPAC Shares will be released from escrow if the Combined Company reports income from existing operations of US $15 million for the fiscal year ended December 31, 2010, excluding costs associated with the transactions contemplated by the Share Exchange Agreement.
800,000 SPAC Shares released from escrow if the Combined Company reports income from existing operations of US $20 million for the fiscal year ended December 31, 2011.

In the event the First Earn-Out Milestone is not met but the Second Earn-Out Milestone is met, all 5,800,000 escrowed SPAC Shares will be released. If neither earn-out milestone is met, then the 5,800,000 escrowed SPAC Shares will be delivered to the Combined Company for cancellation and returned to the status of authorized but unissued SPAC Shares. The Sponsors have also agreed to escrow 311,696 of their shares to be released, if the Target meets the First or Second Earn-Out Milestones.

Source: SEC Form 6K (February 18, 2010)

Liquidity Requirements

Wed, 10 Mar 2010 05:00:00 GMT

At the end of 2009, Honesty Group had $1.5 million remaining under its $7.4 million multi-year technology and manufacturing grant from Jinjiang City. Honesty Group also had $36.2 million in approved credit lines with its various banks. Because of our record of growth, profitability, and technology-based manufacturing, management is confident that the Jinjiang City government and its banking group will continue to support us with needed capital resources in the future.

Two of Honesty Group’s subsidiaries, Guanwei and Guancheng, were formed on June 22, 2007, with registered capital of $11,880,000 and $7,800,000. However, only $3,130,000 and $2,259,970 had been invested by Honesty Group as of December 31, 2009. According to an agreement reached with the local government, the remaining registered capital of $8,750,000 and $5,540,000 must be contributed by the end of 2010. However, Honesty Group believes that as long as the Target does not begin construction on the land held by those two subsidiaries, Honesty Group should be able to reach agreement with the governmental authority to further defer completing its obligation to inject the remaining registered capital. If it fails to reach such an agreement, the Combined Company would have an obligation to fund these two subsidiaries, which would limit the resources available for other working capital purposes.

Source: SEC Form 6K (February 18, 2010)

SPAC Activity

Tue, 17 Nov 2009 05:00:00 GMT

The GeoTeam® is monitoring the warrants of Hambrecht Asia Acquisition Corp. (OTCBB:HMAQF) and CS China Acquisition Corp. (OTCBB:CSAQF). Both companies have entered into business combination agreements with Asian firms.

We are hoping that the respective warrants will provide similar arbitrage opportunities as TMI and HOL warrants have thus far.

Investors need to be aware of possible amendments that could negatively effect the value of the warrants. One common example is an amendment to increase the warrant exercise price. Also, the arbitrage strategy fails if shareholders do not ultimately approve a business combination within a certain allotted time.

See research note for TMI arbitrage strategy
See research note for HOL arbitrage strategy

Hambrecht Asia Acquisition Details

We have emailed Hambrecht Asia Acquisition Corp. requesting information on its proposed business combination.

Underlying Symbol- HMAQF
Warrant Symbol- HMAWF

Possible arbitrage strategy if shareholders approve the proposed business combination

Data to be considered:

Current Price of Common Stock: $7.73
Current Ask Price of Warrants: $0.55 (warrants have a wide bid/ask spread)
Strike price of Warrants: $5.00
Implied intrinsic value of warrants: $7.73 - $5.00= $2.73

Strategy

Buy the warrants at current price of $0.55.
If the business combination is completed and the warrants become exercisable then the warrants should approach the implied intrinsic value.
Profit = (New Value of Warrant, Properly Priced) minus $0.55.

CS China Acquisition Details

Underlying Symbol- AERCF
Warrant Symbol- AERLF

Target Firm- Asia Gaming & Resort Limited, (See Release)

Asia Gaming is an investment holding company. The principal business activities of its wholly owned subsidiaries are to hold Profit Agreements with VIP Room gaming promoter companies and to receive 100% of the profit streams from the Promoters. The Promoters currently participate in the promotion of two major luxury VIP gaming facilities in Macau, China, the largest gaming market in the world.

See incentive financial targets.

Possible arbitrage strategy if shareholders approve the proposed business combination

Data to be considered:

Current Price of Common Stock: $5.70
Current Ask Price of Warrants: $0.44 (warrants have a wide bid/ask spread)
Strike price of Warrants: $5.00
Implied intrinsic value of warrants: $5.70 - $5.00= $0.70

Strategy

Buy the warrants at current price of $0.44
If the business combination is completed and the warrants become exercisable then the warrants should approach the implied intrinsic value.
Profit = (New Value of Warrant, Properly Priced) minus $0.44