China Growth Stocks

[steeledge]

SGOC reinstated by NASDAQ. Investigations come up clean.
Could be a nice runner today.

BEIJING, Sept. 11, 2012 /PRNewswire-FirstCall/ -- SGOCO Group, Ltd. (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.