Orsus Xelent Technologies, Inc. (AMEX: ORS), a designer and
manufacturer of award-winning mobile phones for the Asian market,
reported today that it achieved a 33% increase in revenues to
$29,240,000 in its third quarter ended September 30, 2008, and a
nearly 14% increase in net income to $2,925,000 compared with the
same period last year.
Through the first nine months of 2008, the Company said that
revenues grew 35% to $78,853,000 and net income increased 21% to
$6,348,000, compared with results for the same period in the prior
year.
Earnings per share in the third quarter of 2008 increased to
$0.10 compared with $0.09 in the prior year period and grew to
$0.21 in the first nine months of 2008, compared with $0.18 in the
first nine months of 2007.
The Company said that with the ongoing restructuring of the PRC
telecommunications market and the recent rapid deterioration in
economic and financing conditions, it has continued to focus on
maintaining market share. Its strategy has been to build sales of
its traditional, lower-priced, but highly competitive, products,
mainly in China's rural areas. Many of these highly cost effective
mobile phones include advanced features such as MP3, MDEG4, video
recording and outer card storage.
With this strategy, the Company saw a gross margin for the third
quarter of 14.25%, representing a decline of approximately 3.81%
from the gross margin for the third quarter of 2007. However, the
third quarter gross margin was slightly higher than the gross
margin of 13.38% for the nine month period ended September 30,
2008.
The Company further reported that it has maintained a focus on
cost containment. Excluding an allowance for trading deposit
receivable in 2007, G&A expenses for the third quarter and for
the first nine months of the year increased approximately 24% and
136%, respectively, as compared to the same periods in 2007.
However, this increase was due in large part to a non-cash expense
related to grants of employee stock options in the second quarter.
Additionally, sales and marketing expenses were more than 9% lower
in both periods, mainly reflecting a shifting of after-sales costs
and maintenance to the Company's OEM manufacturers.
While R&D expenditures were low through the first half of
2008, reflecting the uncertainties of the industry restructuring,
the Company increased these expenditures in the third quarter, as
it began to invest more heavily in new, higher margin 3G products
that it expects to launch when the industry environment
improves.
Dalian Daxian Acquisition
Earlier this year in July, the Company announced a Letter of
Intent to acquire a majority interest in Dalian Daxian Investment
Development Co. LTD ("DDID") that would allow it to build its
internal manufacturing capacity and improve its competitiveness
with faster turnaround of new products. In the current,
dramatically changed, financial environment, the Company said that
while, by mutual agreement, the Letter of Intent remains in place,
it has postponed the acquisition while seeking to secure financing
to complete the transaction. The Company said that, if necessary,
it may obtain a short-term lease on the facility in the
interim.
Finances
The Company said it also continues to focus on strengthening its
financial position. In the third quarter, decreased cash and cash
equivalents were just under $1 million partly because the Company
increased pre-payments to suppliers to ensure timely delivery of
products and maintenance of market share. At the same time,
accounts receivable increased from the prior quarter to
approximately $78.7 million, which the Company is actively seeking
to collect pursuant to the Master Distributor Agreement it
announced in late August. In this regard, the Company has asked the
third-party surety company to guarantee a percentage of the total
receivables (as described in the 8-K filed with the US Securities
and Exchange Commission in August 20, 2008). To further ensure
liquidity, the Company also is engaged in discussions to obtain
additional loans from PRC-based banks. As of the end of the
quarter, the Company reported that Stockholder's Equity had grown
to $42.5 million from $33.9 million at year end 2007, and weighted
average shares outstanding remained at 29,756,000.
Outlook
The company expects that its financial results for the 2008
fiscal year are likely to be somewhat stronger than the results
from 2007, but will not meet the previously set guidance. The
revised guidance for the full year of 2008 is that both revenue and
net income will grow at the same pace of between 15% and 20% as
compared to the figures in 2007.
Looking ahead, the Company said that in the third quarter, it
secured its first order this year for CDMA cell phones with China
Telecom. It also made its first delivery of this low-end product
and has several additional scheduled deliveries in the fourth
quarter. Meanwhile, the Company said a recent government agency
survey determined that, through September, the number of users of
mobile phones on China's 2G network had decreased by 9.4 million to
about 75 million. The Company believes that many of these users
will gradually upgrade to 2.5G phones in the coming years and
therefore will pay much attention to the market demand for regular
mobile phones.
The Company also said that some evidence is building that demand
for high-end mobile phones will increase in 2009. When the focus on
restructuring is diminished, the Company expects it will look for
some resumption of high-end customized orders. As previously noted,
the Company has sped up its 3G product development, with the
expectation of several new product launches in the year ahead.
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 fingerprint recognition and touch-screen displays.
The Company also 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.
Orsus Xelent Technologies, Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
For the three and nine months ended September 30, 2008 and 2007
(Unaudited)
(Stated in US Dollars)
(Unaudited) (Unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------------- ----------------------
2008 2007 2008 2007
US$'000 US$'000 US$'000 US$'000
Operating revenue - Net
sales 29,240 22,046 78,853 58,411
Cost of operating revenue (25,073) (18,064) (68,302) (47,586)
---------- ---------- ---------- ----------
Gross income 4,167 3,982 10,551 10,825
---------- ---------- ---------- ----------
Operating expenses:
Sales and marketing 128 142 353 389
General and
administrative 228 262 1,799 2,250
Research and development 250 23 391 319
Depreciation 23 26 72 113
Allowance for obsolete
inventories - 108 - 700
---------- ---------- ---------- ----------
629 561 2,615 3,771
---------- ---------- ---------- ----------
Operating income 3,538 3,421 7,936 7,054
Other income (expenses)
Interest expenses (255) (443) (733) (747)
Other income, net 87 14 465 21
---------- ---------- ---------- ----------
Income before income taxes 3,370 2,992 7,668 6,328
Income taxes (445) (422) (1,320) (1,062)
---------- ---------- ---------- ----------
Net income 2,925 2,570 6,348 5,266
Other comprehensive (loss)
income
Foreign currency
translation adjustment (36) - 1,480 -
---------- ---------- ---------- ----------
Comprehensive income 2,889 2,570 7,828 5,266
========== ========== ========== ==========
Earnings per share
Basic and diluted (US$) 0.10 0.09 0.21 0.18
========== ========== ========== ==========
Weighted average number
of common stock
outstanding 29,756,000 29,756,000 29,756,000 29,756,000
========== ========== ========== ==========
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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