Orsus Xelent Technologies, Inc. (AMEX: ORS), a designer and
manufacturer of award-winning mobile phones for the Asian market,
today announced that revenues in its second quarter ended June 30,
2008 grew nearly 77% to $28,894,000 compared with $16,356,000 in
the same period last year. The Company said that, pending a clearer
picture of the still ongoing major changes occurring in the Chinese
telecom industry, as previously reported it switched its strategic
focus before the start of the year to expanding its share of the
traditional domestic cell phone market, and further strengthening
its product visibility with ordinary consumers by focusing on sales
of its feature rich, lower cost traditional mobile phones. It said
the extent of its success thus far is reflected in the sale of a
record 568,000 cell phone units in the first six months of 2008,
which nearly equaled the total number of phones sold in all of
2007. Concomitantly, revenues in the first six months of 2008
reached a record $49,613,000, an increase of 36.43% over the
comparable period in 2007.
The Company said that its decision to focus on expanding the
sales of lower end traditional phones required a temporary
sacrifice in gross margins, which in the 2008 second quarter were
10.96% as compared with 19.41% in the same period last year. This
was a key factor in the limited, approximately 4% advance in net
income in the second quarter to $1,506,000, as compared with net
income of $1,449,000 in the same period last year. At the same
time, through the first six months of 2008, net income grew
approximately 27% to $3,423,000, compared with $2,696,000 in the
2007 first half. Further, according to the Company, the gain in the
period would have been closer to 50% except for the required
inclusion in the 2008 first half results of amortization costs for
stock option grants to employees totaling $725,000. This, according
to the Company, was a reflection of the fair value of options using
a Binomial Lattice model and principles of SFAS No. 123R.
Share-based compensation expenses were on a non-cash and
non-operating basis and have been accounted for in General and
Administrative Expenses for the quarter.
Earnings per share in the 2008 second quarter were 5.06�,
compared with 4.87� in the same period last year. For the six
months period, earnings per share grew nearly 27% to 11.50�,
compared with 9.06� in the first half of 2007.
The Company said it was extremely pleased with the results in
the period, especially given the still unclear industry environment
which limited its opportunity to build sales of higher end, higher
margin customized products, which is a key component of the
Company's growth strategy. The Company expects this situation will
improve in the second half and positively affect margins, together
with the anticipated acquisition of a manufacturing facility. At
the same time, the Company said it has expanded its market share
and demonstrated its ability to swiftly and successfully respond to
a changed environment.
The Company noted further that the dramatic ramp up in sales not
only was a reflection of its strong marketing skills, but also its
ability to quickly develop successful products that capture
consumer attention in a highly competitive environment. As such,
during the quarter, the traditional phones the Company designed and
sold, were equipped with numerous industry leading features, such
as dual simcards and functional multi-media, as well as compelling
new designs and colors, despite their lower prices. Going forward,
upon successful completion of the announced plan to acquire a
manufacturing facility, management believes the Company will be
positioned even more strongly to respond quickly and flexibly to
changing market and consumer demands.
Planned Acquisition of Manufacturing Facility
After the end of the quarter, the Company announced it signed a
Letter of Intent to acquire 60% of Dalian Daxian Investment
Development Co. LTD. (DDID) for approximately $14 million, after
terminating all discussions with Lemon Times, which it had
previously sought to acquire. If the acquisition is successfully
completed, the Company would obtain what it believes is an
outstanding, well located manufacturing facility with which it
could fulfill its goal of higher margin, internal product
production. According to the Company, discussions with DDID remain
on track and as key milestones in the process are achieved, it will
provide updates on its progress.
3G-TD-SCDMA Market
Particularly upon successful acquisition of a manufacturing
facility, the Company remains very positive about becoming a
competitive participant in the new 3G-TD-SCDMA market, which it
believes will offer significant new growth opportunities when it is
fully opened up and coverage of this new domestic market is
extended to additional cities and provinces across the country.
Strong Growth Outlook
Looking ahead, the Company is confident with its previously
issued guidance for 2008, of an anticipated increase in full year
sales of more than 30% to between $120 million and $130 million,
and growth in full year net income to between $14.5 million and
$15.5 million, a gain of more than 50%, contingent upon completion
of its planned manufacturing acquisition.
Conference Call Invitation
The Company will host a conference call to discuss its second
quarter results for the period ended June 30, 2008 and its FY
outlook on Thursday, August 21, 2008 at 8:00 a.m. EDT.
Interested participants should call 1-800-762-8795 when calling
within the United States or 1-480-629-9572 when calling
internationally. Please ask for the Orsus Xelent Conference Call,
Pass Code 3912200. There will be a playback available until
08/28/2008. To listen to the playback, please call 1-800-406-7325
when calling within the United States or 1-303-590-3030 when
calling internationally. Use the Pass Code 3912200 for the
replay.
This call is being webcast by ViaVid Broadcasting and can be
accessed by clicking on this link
http://viavid.net/dce.aspx?sid=0000554E or at ViaVid's website at
www.viavid.net. The webcast can be accessed through August 21,
2009.
-TABLES ATTACHED-
Orsus Xelent Technologies, Inc.
Condensed Consolidated Statements of Operations and Other Comprehensive
Income
For the 6 months ended June 30, 2008 and 2007,
(Dollars in thousands except share data and per share amounts)
(Unaudited) (Unaudited)
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2008 2007 2008 2007
Note US$'000 US$'000 US$'000 US$'000
Operating revenue -
Net sales 28,894 16,356 49,613 36,365
---------- ---------- ---------- ----------
Cost of operating
revenue (25,728) (13,181) (43,229) (29,522)
---------- ---------- ---------- ----------
Gross income 3,166 3,175 6,384 6,843
---------- ---------- ---------- ----------
Operating expenses:
---------- ---------- ---------- ----------
Sales and marketing (122) (134) (225) (247)
General and
administrative (1,135) (614) (1,571) (1,988)
Research and
development (26) (243) (141) (296)
Depreciation (24) (35) (49) (87)
Allowance for
obsolete
inventories - (272) - (592)
---------- ---------- ---------- ----------
Total operating
expenses (1,307) (1,298) (1,986) (3,210)
---------- ---------- ---------- ----------
----
Operating income 1,859 1,877 4,398 3,633
----
----
Other income
(expenses)
Interest
expense (240) (177) (478) (304)
----
Other income, net 214 5 378 7
---- ---------- ---------- ---------- ----------
----
Income before income
taxes 1,833 1,705 4,298 3,336
----
Income taxes (327) (256) (875) (640)
---------- ---------- ---------- ----------
----
Net income 1,506 1,449 3,423 2,696
Other comprehensive
income
Foreign
currency translation
adjustment 50 - 1,516 -
---------- ---------- ---------- ----------
Comprehensive income 1,556 1,449 4,939 2,696
========== ========== ========== ==========
Earnings per share:
Basic and diluted
(US$) 5.06cents 4.87cents 11.50cents 9.06cents
========== ========== ========== ==========
Weighted average
number of common
stock outstanding 29,756,000 29,756,000 29,756,000 29,756,000
========== ========== ========== ==========
Orsus Xelent Technologies, Inc.
Condensed Consolidated Balance Sheets
As of June 30, 2008 and December 31, 2007
(Dollars in thousands except share data and per share amounts)
As of As of
June December
30, 2008 31, 2007
Note US$?000 US$?000
------------ ------------
ASSETS (Unaudited)
Current assets
Cash and cash equivalents 1,558 2,928
Accounts receivable, net of
allowance 72,241 57,743
Inventories, net - 4
Trade deposit paid, net 9,428 839
Other current assets 4 4,448 4,196
Pledged deposit 6 1,256 1,206
------------ ------------
Total current assets 88,931 66,916
Property, plant and equipment,
net 5 281 318
------------ ------------
Total assets 89,212 67,234
============ ============
------------ ------------
LIABILITIES AND STOCKHOLDERS?
EQUITY
------------ ------------
Current liabilities
---- ------------ ------------
Short-term bank loans 6 9,541 9,160
----
Short-term loan from a
non-financial institution 7 57 -
----
Current portion of mortgage
loan 8 45 68
----
Accounts payable - Trade 24,026 10,854
----
Accrued expenses and other
accrued liabilities 9,564 8,048
----
Trade deposits received 1,907 1,709
----
Due to directors 9 408 323
----
Provision for warranty 128 123
Tax payables 3,975 3,047
------------ ------------
Total current liabilities 49,651 33,332
------------ ------------
Non-current
liabilities
Mortgage loan 8 - 5
------------ ------------
------------ ------------
Commitments and contingencies 11 - -
------------ ------------
------------ ------------
Stockholders? equity ------------ ------------
Preferred stock, US$0.001 par
value:
Authorized: 100,000,000 shares,
no shares issued - -
------------ ------------
Common stock and paid-in
capital, US$0.001 par value:
Authorized: 100,000,000 shares
Issued and outstanding:
29,756,000 shares as of June
30, 2008 and as of December
31, 2007 12 30 30
------------ ------------
Additional paid-in capital 3,209 2,484
------------ ------------
Dedicated reserves 1,042 1,042
------------ ------------
Accumulated other
comprehensive income 4,422 2,906
------------ ------------
Retained earnings 30,858 27,435
------------ ------------
------------ ------------
Total stockholders? equity 39,561 33,897
------------ ------------
------------ ------------
Total liabilities and
stockholders? equity 89,212 67,234
============ ============
About Orsus Xelent Technologies, Inc.
Incorporated in the State of Delaware and headquartered in
Beijing, China, Orsus Xelent Technologies, Inc. is an emerging
designer and manufacturer of award-winning mobile phones for the
Asian market, primarily the People's Republic of China (PRC). The
Company's business encompasses the design of mobile phones, related
digital circuits, and software development, and it is a recognized
pioneer in mobile phone integration technology. It introduced the
region's first wristwatch-style cellular phone, and it continues to
break new ground with state-of-the-art phones that include advanced
features such as finger print recognition and touch-screen
displays. Increasingly, the Company is focused on developing and
marketing, under its Proxlink trademark, special application mobile
phones for specialized users in a wide variety of professions in
business and government. Since the Company's launch in 2004, it has
established "Orsus" as a popular brand and achieved a significant
share of the world's largest mobile phone market. It maintains more
than 179 service call centers across the PRC, with additional
offices in Shanghai, Hong Kong, Shenzhen, and Tianjin. For more
information, please visit the Company's web site:
www.orsus-xelent.com.
Information Regarding Forward-Looking Statements
Except for historical information contained herein, the
statements in this Press Release are forward-looking statements
that are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements involve known and unknown risks and uncertainties, which
may cause our actual results in future periods to differ materially
from forecasted results. These risks and uncertainties include,
among other things, product demand, market competition, and risks
inherent in our operations. These and other risks are described in
our filings with the Securities and Exchange Commission.
Contact: Orsus Xelent Technologies, Inc. Xavier Xin Wang
President & CEO PRC: Tel 010-85653777 Fax 010-85653666 US:
Investors: Tel: 212-402-7838 Fax: 212-425-6951 Press: Tel:
212-425-5700 Fax: 212-425-6951
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