SOURCE: Infosmart Group, Inc.

November 15, 2007 14:17 ET

Infosmart Group Announces Record Third Quarter 2007 Financial Results and Financial Guidance

HONG KONG--(Marketwire - November 15, 2007) - Infosmart Group, Inc. (OTCBB: IFSG)

--  3rd Quarter 2007 Record Revenues of $25.6 million, an increase of 239%
    from 3Q06
--  3rd Quarter Record Net Income of $3.4 million vs. a loss in 3Q06
--  Revenues for the nine months ended September 30, 2007 increased 163%
    to $52.9 million with net income of $7.3 million
--  Provides $10 million in net income guidance for 2007
    

Infosmart Group, Inc. ("Infosmart" or the "Company") (OTCBB: IFSG), Hong Kong and Brazil's leading recordable digital versatile disc ("DVDR") manufacturer, announced today the Company's financial results for the third quarter of 2007 which ended September 30, 2007.

Net sales for the third quarter were a record, and totaled $25.6 million, an increase of $18.1 million or 239 percent, compared to $7.6 million for the three months ended September 30, 2006. The Company experienced strong growth in all of its core geographic markets while further expanding its product portfolio of storage media products to include Flash memory cards.

Gross profit increased 134% to $4.6 million from the $2.2 million reported for the three months ended September 30, 2006. Gross margins were 17.9 percent compared to 28.5 percent. Margins were impacted by reduced selling prices of the Company's Flash memory products to broaden the base of distributors in both the China/Hong Kong and Brazilian markets.

Operating Income was $3.4 million, a 119% increase from $1.5 million reported during the third quarter of 2006. Operating margins for the third quarter of 2007 and 2006 were 13.1 percent compared to 20.5 percent, respectively.

Net income for the three months ended September 30, 2007 totaled $3.4 million compared to a net loss of $3.8 million for the same period in 2006. Earnings per diluted share were $0.02 compared to a loss of ($0.03) utilizing 143 million and 137 million shares respectively. Income taxes were $606,000 and $260,000, respectively, representing an effective tax rate of 14.8 percent and 22.1 percent.

The 2007 third quarter included $833,000 in other income while the third quarter of 2006 included $2.75 million in expenses related to the company's merger with a public entity, in addition to a $2.3 million Series B preferred redeemed dividend. Total non-cash charges and non-recurring charges for the third quarter of 2006 were $4,666,738.

"We are pleased with our operating results for the third quarter and year to date," commented Mr. Parker Seto, President and CEO of Infosmart Group, Inc. "We successfully integrated our Brazilian operations and moved into full production while also increasing sales in all of our other major geographic markets. By utilizing our strong distribution channels in Brazil, we have also successfully test marketed new complementary products, such as Flash memory, as we look to diversify our portfolio to complement growth and further leverage our favorable tax and operating agreement with the State of Bahia in Brazil."

"Under the State of Bahia's investment incentive program, our Brazilian subsidiary, Discobras, has been granted a reduction in the Value Added Tax ("VAT") it is required to pay for products, and pays only 2.28%, as compared to VAT of 12% in Salvador, or 18% in São Paulo. The Company also benefits from an incentive program for foreign investment which exempts Discobras from paying Brazil's ICMS taxes on raw materials it imports for production in Brazil, in addition to the elimination of tariffs which equal 70 to 100 percent of the cost of imported discs. This tax exemption and the VAT reduction will last through June 2016," Mr. Seto went on to say.

Nine Months Financial Results

Net sales for the nine months ended September 30, 2007 increased 163% to $52.9 million compared to $20.1 million for the same period in 2006. The increase in revenue resulted from further growth in the Brazilian, Australian, and Asian markets, which accounted for 94%, or $50 million, of total sales for the first nine months of 2007. Specifically, sales in Asia increased 658% to $28.5 million, 198% to $13 million in Brazil, while in Australia sales increased 124% to $8.4 million. Additionally, the Company has diversified their product base into other non-diskette storage media, including Flash products.

Gross profit increased 112% to $11.5 million for the nine month period from $5.6 million during the same period in 2006. Gross margins were 21.7 percent compared to 28.0 percent.

Operating Income was $7.9 million compared to $4.1 million, representing operating margins of 14.8 percent and 20.4 percent for the first nine months of 2007 and 2006.

Net income for the nine months ended September 30, 2007 totaled $7.3 million, compared to a net loss of $1.8 million for the same period in 2006. Other income contributed $1.4 million in the third quarter of 2007 while professional expenses related to the company's merger with a public company were $2.7 million and the Series B preferred deemed dividend were $2.3 million. Earnings per diluted share were $0.05 compared to a loss of ($0.02) utilizing 143 million diluted shares and 137 million diluted shares respectively.

From a balance sheet perspective, the Company maintained a current ratio slightly above 1 with $24.7 million in current assets and $24.1 million in current liabilities. Accounts receivable increased to $22.2 million as a function of the increase in sales and the expansion of our distribution channel. Most customers with good credit ratings are provided payment terms of up to ninety days with a 50 percent deposit. Total short- and long-term debt was approximately $9.6 million. Total stockholders' equity increased 49% to $24.7 million on September 30, 2007 from the $16.6 million reported on December 30, 2006.

2007 Financial Guidance

The company is providing financial guidance for the 2007 fiscal year ending December 31, 2007 of $10 million in net income. This implies that fourth quarter net income will be at least $2.8 million.

The Company anticipates full contribution from its 20 manufacturing lines in Brazil during the fourth quarter, which currently produces approximately 170,000 discs per day, or 5 million per month. Currently, Brazil consumes approximately 55 million discs per month and nearly 90 percent of the product is imported, thus providing a large opportunity going forward.

Mr. Seto concluded, "Looking forward, our goal is to further expand our production capabilities for both DVD and Flash memory products during 2008. Additionally, as High Definition (HD) DVD begins to proliferate we have the ability to upgrade our 29 manufacturing lines in Hong Kong in a timely manner as market demand dictates."

Third Quarter 2007 Financial Results Conference Call

The conference call will take place at 8:30 a.m. EST on Friday, November 16, 2007. Anyone interested in participating should call 1-866-225-8729 if calling within the United States or 1-480-293-1744 if calling internationally approximately 5 to 10 minutes prior to 8:30 a.m. There will be a playback available until November 23, 2007. To listen to the playback, please call 1-800-406-7325 if calling within the United States or 1-303-590-3030 if calling internationally. Please use the pass code 3804731 for the replay.

This call is being webcast by ViaVid Broadcasting and can be accessed at ViaVid's website at www.viavid.net, where the webcast can be accessed through December 16, 2007.

About Infosmart Group, Inc.

Infosmart operates state-of-the-art DVDR and storage media production facilities in Hong Kong and Brazil and is preparing to manufacture Flash card memory, a kind of new writable storage devices, with maximum flexibility to upgrade its production capacity to include production of High-Density (HD) Disk market. In addition, the Company is one of the largest manufacturers of DVDR discs in Brazil and all of South America. Flash memory devices will be the storage media of choice for years to come, whether the Company is being able to manufacture HD-DVDR for mature markets or traditional DVDR for developing markets. No other storage media available rivals its combination of high capacity, low cost and exceptional portability as Infosmart's current product mix.

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements, as defined in the Securities Reform Act of 1995 (the "Reform Act"). The safe harbor for forward-looking statements provided to companies by the Reform Act does not apply to Infosmart Group, Inc. (the "Company"). However, actual events or results may differ from the Company's expectations on a negative or positive basis and are subject to a number of known and unknown risks and uncertainties including, but not limited to, competition with larger companies, development of and demand for a new technology, risks associated with a startup company, risks associated with international transactions, general economic conditions, availability of funds for capital expenditure by customers, availability of timely financing, cash flow, timely delivery by suppliers, ability to produce our DVDRs and their components, ability to maintain quality control, collection-related risks from international transactions, or the Company's ability to manage growth. Other risk factors attributable to the Company's business may affect the actual results achieved by the Company including those that are found in the Company's Annual Report on Form 10-KSB filed with the SEC on April 2, 2007, and subsequent Quarterly Reports on Form 10-QSB and subsequent Current Reports filed on Form 8-K that will be included with or prior to the filing of the Company's next Quarterly or Annual Report.

INFOSMART GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 and 2006
(Unaudited)
(Stated in US Dollars)


                            Three months ended        Nine months ended
                               September 30,            September 30,
                         -----------------------  ------------------------
                             2007        2006         2007         2006

Net sales                $25,615,603  $7,560,552  $52,922,049  $20,122,556

Cost of sales            (21,041,992) (5,405,277) (41,461,818) (14,487,445)
                         -----------  ----------  -----------  -----------

Gross profit               4,573,611   2,155,275   11,460,231    5,635,111

Administrative expenses   (1,035,288)   (447,487)  (3,220,967)  (1,134,465)

Selling and distributing
 costs                      (142,983)   (158,081)    (384,032)    (396,195)
                         -----------  ----------  -----------  -----------

Income from operations     3,395,340   1,549,707    7,855,232    4,104,451

Professional expenses
 related to restructuring
 and Share Exchange                -  (2,753,390)           -   (2,753,390)

Other income - note 5        833,843     159,767    1,413,542      331,017

Interest expenses           (144,480)   (132,279)    (478,920)    (407,765)
                         -----------  ----------  -----------  -----------

Income before income
 taxes                     4,084,703  (1,176,195)   8,789,854    1,274,313

Income taxes - note 6       (606,662)   (261,176)  (1,109,839)    (698,271)
                         -----------  ----------  -----------  -----------

Net income                 3,478,041  (1,437,371)   7,680,015      576,042

Minority interest              2,252           -        7,276            -
                         -----------  ----------  -----------  -----------

Net income before
 dividend                  3,480,293  (1,437,371)   7,687,291      576,042

Series B preferred
 dividend                   (114,045)    (66,978)    (364,168)     (66,978)

Series B preferred deemed
 dividend                          -  (2,297,157)           -   (2,297,157)
                         -----------  ----------  -----------  -----------

Net income applicable to
 common shareholders       3,366,248  (3,801,506)   7,323,123   (1,788,093)
                         ===========  ==========  ===========  ===========

Earning per share - note 13

   - basic               $      0.02  $    (0.03) $      0.05  $     (0.02)
                         ===========  ==========  ===========  ===========

   - dilutive            $      0.02  $    (0.03) $      0.05  $     (0.02)
                         ===========  ==========  ===========  ===========

Weighted average shares
 outstanding

   - basic               142,294,295           1  142,294,295            1
                         ===========  ==========  ===========  ===========

   - dilutive            142,964,178           1  142,964,178            1
                         ===========  ==========  ===========  ===========



INFOSMART GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2007 AND DECEMBER 31, 2006
(Stated in US Dollars)


                                                          As of
                                              -----------------------------
                                              September 30,   December 31,
                                                  2007           2006
                                               (Unaudited)     (Audited)

ASSETS
   Current assets
      Cash and cash equivalents               $      597,203 $      206,258
      Restricted cash                                191,507        552,193
      Trade receivables (net of allowance for
       doubtful accounts of $Nil for 2007 and
       2006)                                      22,195,098      6,171,366
      Prepaid expenses and other receivables
       - note 8                                      374,970        269,477
      Inventories (net of allowance of $Nil
       for 2007 and 2006) - note 9                 1,359,443      1,058,039
      Due from related parties                         5,607              -
                                              -------------- --------------

   Total current assets                           24,723,828      8,257,333
   Deferred tax assets - note 6                       43,336        459,823
   Plant and equipment, net - note 10             32,080,028     33,911,540
   Intangible assets                               1,883,442      2,092,809
                                              -------------- --------------

TOTAL ASSETS                                  $   58,730,634 $   44,721,505
                                              ============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
   Current liabilities
      Trade payables                          $   10,261,658 $    2,926,078
      Other payables and accrued liabilities
       - note 11                                   6,036,988      8,756,675
      Income tax payable                             979,085        363,645
      Current portion of bank borrowings -
       note 12                                     5,067,652      3,503,654
      Finance lease payable                           17,488              -
      Current portion of other loans               1,691,098      1,268,044
      Dividends payable - Series B                     9,455              -
                                              -------------- --------------

   Total current liabilities                      24,063,424     16,818,096
   Non-current portion of bank borrowings -
    note 12                                        2,793,133      2,893,927
   Non-current portion of other loans              1,518,917      1,884,202
   Non-current portion of finance lease
    payable                                                -              -
   Advance from a related party                      933,092        927,991
   Deferred tax liabilities - note 6               2,808,096      3,001,360
                                              -------------- --------------

TOTAL LIABILITIES                             $   32,116,662 $   25,525,576
                                              -------------- --------------

Series B Redeemable Convertible Preferred
 Stock: No par value - note 15
      Authorized 1,800,000 shares; Issued and
       outstanding:
      2007 - 669,883 shares and 2006 -
       911,974.54 shares                      $   1,896,533  $    2,581,926
                                              -------------  --------------

STOCKHOLDERS' EQUITY
   Common stock: No par value - note 15
   Authorized: 300,000,000 shares; Issued and
    outstanding:
   2007 - 142,294,295.96 shares and 2006
    - 135,801,426.44 shares                       2,206,294       1,520,901
   Preferred stock: No par value
      Authorized 7,000,000 shares; Issued and
       outstanding:
      2007 and 2006 - nil shares                          -               -
   Series A Convertible Preferred Stock: No
    par value
      Authorized 1,200,000 shares; Issued and
       outstanding:
      2007 and 2006 - nil shares                          -               -
   Additional paid-in capital - note 15           8,118,664       8,118,664
   Accumulated other comprehensive income           (13,177)         19,237
   Dividend                                        (364,168)              -
   Minority interests                                47,459               -
   Retained earnings                             14,722,367       6,955,201
                                              -------------  --------------

TOTAL STOCKHOLDERS' EQUITY                       24,717,439      16,614,003
                                              -------------  --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $  58,730,634  $   44,721,505
                                              =============  ==============

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