SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
______________
FORM
10-Q
x
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the quarterly period ended March 31, 2009
¨
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the transition period from ______ to ______.
Commission
file number: 001-33456
ORSUS
XELENT TECHNOLOGIES, INC.
(Exact
name of registrant as specified in its charter)
Delaware
(State
of incorporation)
|
|
20-1198142
(I.R.S. Employer
Identification No.)
|
29
th
Floor,
Tower B, Chaowai MEN Office Building
26
Chaowai Street, Chaoyang Disc.
Beijing,
People’s Republic Of China 100020
(Address
of principal executive offices, including zip code)
86-10-85653777
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes
x
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).
Yes
¨
No
x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
|
Accelerated filer
¨
|
|
|
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
x
|
Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12-b2 of the Exchange Act).
Yes
¨
No
x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12-b2 of the Exchange Act).
Yes
¨
No
x
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
Class
|
|
Outstanding at May 20, 2009
|
Common Stock, $.001 par value per share
|
|
29,756,000 shares
|
PART
I – FINANCIAL INFORMATION
Item
1. Condensed
Consolidated Financial Statements
For
the three months ended March 31, 2009
Index
to Condensed Consolidated Financial Statements
|
Pages
|
|
|
|
|
Condensed
Consolidated Statements of Income and Other Comprehensive
Income
|
1
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
2
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows
|
3
|
|
|
|
|
Condensed
Consolidated Statements of Changes in Stockholders’ Equity
|
4
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
5 - 14
|
|
Orsus
Xelent Technologies, Inc.
Condensed
Consolidated Statements of Income and Other Comprehensive Income
For
the three months ended March 31, 2009 and 2008
(Dollars
in thousand except share data and per share amounts)
|
|
(Unaudited)
Three months ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
US$’000
|
|
|
US$’000
|
|
|
|
|
|
|
|
|
Operating
revenue - Net sales
|
|
|
19,724
|
|
|
|
20,719
|
|
|
|
|
|
|
|
|
|
|
Cost
of operating revenue
|
|
|
(16,632
|
)
|
|
|
(17,501
|
)
|
|
|
|
|
|
|
|
|
|
Gross
income
|
|
|
3,092
|
|
|
|
3,218
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
123
|
|
|
|
103
|
|
General
and administrative
|
|
|
266
|
|
|
|
436
|
|
Research
and development
|
|
|
17
|
|
|
|
115
|
|
Depreciation
|
|
|
23
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
429
|
|
|
|
679
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
2,663
|
|
|
|
2,539
|
|
|
|
|
|
|
|
|
|
|
Other
income (expenses)
|
|
|
|
|
|
|
|
|
Interest
expenses
|
|
|
(222
|
)
|
|
|
(238
|
)
|
Other
income, net
|
|
|
17
|
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
2,458
|
|
|
|
2,465
|
|
|
|
|
|
|
|
|
|
|
Income
taxes - Note 5
|
|
|
(323
|
)
|
|
|
(548
|
)
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
2,135
|
|
|
|
1,917
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
64
|
|
|
|
1,466
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
|
2,199
|
|
|
|
3,383
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share - Note 6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted (US$)
|
|
|
0.07
|
|
|
|
0.06
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common
|
|
|
|
|
|
|
|
|
stock outstanding
|
|
|
29,756,000
|
|
|
|
29,756,000
|
|
See
accompanying Notes to Condensed Consolidated Financial
Statements
Orsus
Xelent Technologies, Inc.
Condensed
Consolidated Balance Sheets
As
of March 31, 2009 and December 31, 2008
(Dollars
in thousand except share data and per share amounts)
|
|
As of
March 31,
2009
(Unaudited)
|
|
|
As of
December 31,
2008
(Audited)
|
|
ASSETS
|
|
US$’000
|
|
|
US$’000
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
52
|
|
|
|
102
|
|
Trade
accounts receivable - Note 7
|
|
|
86,726
|
|
|
|
82,076
|
|
Trade
deposits paid, net
|
|
|
335
|
|
|
|
8,441
|
|
Other
current assets
|
|
|
1,813
|
|
|
|
1,859
|
|
Pledged
deposit
|
|
|
1,288
|
|
|
|
1,287
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
90,214
|
|
|
|
93,765
|
|
Property,
plant and equipment, net - Note 9
|
|
|
218
|
|
|
|
241
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
|
90,432
|
|
|
|
94,006
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Short-term
bank loans - Note 10
|
|
|
9,378
|
|
|
|
9,484
|
|
Short-term
loan from a non-financial institution
|
|
|
-
|
|
|
|
57
|
|
Current
portion of mortgage loan
|
|
|
-
|
|
|
|
12
|
|
Trade
accounts payable
|
|
|
9,997
|
|
|
|
16,353
|
|
Accrued
expenses and other accrued liabilities
|
|
|
13,019
|
|
|
|
12,319
|
|
Trade
deposits received
|
|
|
1,935
|
|
|
|
1,934
|
|
Due
to directors - Note 11(b)
|
|
|
219
|
|
|
|
457
|
|
Tax
payable
|
|
|
5,284
|
|
|
|
4,989
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
39,832
|
|
|
|
45,605
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES - Note 15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock - US$0.001 par value: Authorized 100,000,000 shares;
|
|
|
|
|
|
|
|
|
none
issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock - US$0.001 per share : Authorized 100,000,000
shares;
|
|
|
|
|
|
|
|
|
issued
and outstanding 29,756,000 shares as of March 31, 2009
|
|
|
|
|
|
|
|
|
and
December 31, 2008
|
|
|
30
|
|
|
|
30
|
|
Additional
paid-in capital
|
|
|
3,209
|
|
|
|
3,209
|
|
Dedicated
reserves
|
|
|
1,042
|
|
|
|
1,042
|
|
Accumulated
other comprehensive income
|
|
|
5,453
|
|
|
|
5,389
|
|
Retained
earnings
|
|
|
40,866
|
|
|
|
38,731
|
|
|
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS’ EQUITY
|
|
|
50,600
|
|
|
|
48,401
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
90,432
|
|
|
|
94,006
|
|
See
accompanying Notes to Condensed Consolidated Financial Statements
Orsus
Xelent Technologies, Inc.
Condensed
Consolidated Statements of Cash Flows
For
the three months ended March 31, 2009 and 2008
(Dollars
in thousand except share data and per share amounts)
|
|
(Unaudited)
Three months ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
US$’000
|
|
|
US$’000
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
2,135
|
|
|
|
1,917
|
|
Adjustments
to reconcile net income to net cash provided by (used in)
|
|
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
23
|
|
|
|
25
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade
accounts receivable
|
|
|
(4,545
|
)
|
|
|
(13,717
|
)
|
Inventories
|
|
|
-
|
|
|
|
4
|
|
Trade
deposits paid
|
|
|
8,116
|
|
|
|
(1,486
|
)
|
Other
current assets
|
|
|
48
|
|
|
|
(5
|
)
|
Trade
accounts payable
|
|
|
(6,375
|
)
|
|
|
8,946
|
|
Accrued
expenses and other accrued liabilities
|
|
|
696
|
|
|
|
677
|
|
Trade
deposits received
|
|
|
-
|
|
|
|
133
|
|
Due
to directors
|
|
|
(250
|
)
|
|
|
32
|
|
Tax
payable
|
|
|
289
|
|
|
|
476
|
|
|
|
|
|
|
|
|
|
|
Net
cash flows provided by (used in) operating activities
|
|
|
137
|
|
|
|
(2,998
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance
from a director
|
|
|
-
|
|
|
|
83
|
|
New
loans from banks
|
|
|
2,512
|
|
|
|
2,563
|
|
Repayment
of loans from banks and a non-financial institution
|
|
|
(2,687
|
)
|
|
|
(2,563
|
)
|
Repayment
of mortgage loans
|
|
|
(12
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash flows (used in) provided by financing activities
|
|
|
(187
|
)
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
(50
|
)
|
|
|
(2,925
|
)
|
Effect
of foreign currency translation on cash and cash
equivalents
|
|
|
-
|
|
|
|
183
|
|
Cash
and cash equivalents, beginning of period
|
|
|
102
|
|
|
|
2,928
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
|
52
|
|
|
|
186
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure for cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
|
43
|
|
|
|
238
|
|
Interest
received
|
|
|
-
|
|
|
|
38
|
|
Income
taxes paid
|
|
|
34
|
|
|
|
77
|
|
See
accompanying Notes to Condensed Consolidated Financial Statements
Orsus
Xelent Technologies, Inc.
Condensed
Consolidated Statements of Changes in Stockholders’ Equity
For
the three months ended March 31, 2009 and 2008
(Dollars
in thousand except share data and per share amounts)
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock issued
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
No. of
|
|
|
|
|
|
paid-in
|
|
|
Dedicated
|
|
|
comprehensive
|
|
|
Retained
|
|
|
|
|
|
|
shares
|
|
|
Amount
|
|
|
capital
|
|
|
reserves
|
|
|
income
|
|
|
earnings
|
|
|
Total
|
|
|
|
|
|
|
US$’000
|
|
|
US$’000
|
|
|
US$’000
|
|
|
US$’000
|
|
|
US$’000
|
|
|
US$’000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2008
|
|
|
29,756,000
|
|
|
|
30
|
|
|
|
2,484
|
|
|
|
1,042
|
|
|
|
2,906
|
|
|
|
27,435
|
|
|
|
33,897
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,917
|
|
|
|
1,917
|
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,466
|
|
|
|
-
|
|
|
|
1,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of March
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,
2008 (Unaudited)
|
|
|
29,756,000
|
|
|
|
30
|
|
|
|
2,484
|
|
|
|
1,042
|
|
|
|
4,372
|
|
|
|
29,352
|
|
|
|
37,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2009
|
|
|
29,756,000
|
|
|
|
30
|
|
|
|
3,209
|
|
|
|
1,042
|
|
|
|
5,389
|
|
|
|
38,731
|
|
|
|
48,401
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,135
|
|
|
|
2,135
|
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
64
|
|
|
|
-
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of March
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,
2009 (Unaudited)
|
|
|
29,756,000
|
|
|
|
30
|
|
|
|
3,209
|
|
|
|
1,042
|
|
|
|
5,453
|
|
|
|
40,866
|
|
|
|
50,600
|
|
See
accompanying Notes to Condensed Consolidated Financial Statements
Orsus
Xelent Technologies, Inc.
Notes
to Condensed Consolidated Financial Statements
For the
three months ended March 31, 2009 and 2008
(Dollars
in thousands except share data and per share amounts)
Orsus
Xelent Technologies Inc. (“ORS” or the “Company”), formerly known as Universal
Flirts Corp., was organized under the laws of the State of Delaware on May 25,
2004.
Prior to
the reorganization with United First International Limited (“UFI”), a company
incorporated in the Hong Kong Special Administrative Region (“HK”) of the
People’s Republic of China (the “PRC”) on March 31, 2005, ORS was a development
stage company which had no operations or revenues. ORS exited the development
stage after the recapitalization.
Upon the
completion of the reorganization, ORS assumed the business operations of UFI as
primarily undertaken by its subsidiary, Beijing Orsus Xelent Technologies &
Trading Co., Limited (“BOXT”) (English translation for identification purpose
only), an enterprise incorporated in Beijing, the PRC that is engaged in the
business of design, retail and wholesale distribution of cellular
phones.
On July
14, 2005, Orsus Xelent Holdings (BVI) Limited (“OXHBVI”) was incorporated in the
British Virgin Islands (“BVI”) with issued capital of US$2. OXHBVI is 100% owned
by ORS and the principal activity of OXHBVI is investment holding. On July 22,
2005, Orsus Xelent Trading (HK) Company Limited (“OXTHK”) was incorporated in HK
with issued capital of Hong Kong dollar 100 (equivalent to US$13), a company
engaged in trading of cellular phone and accessories, and is 100% owned by
OXHBVI.
2.
|
Description
of business
|
The
Company is principally engaged in the business of designing, manufacturing and
distributing economically priced cellular phones for retails and wholesale
distribution. In February 2004, the Company registered “ORSUS” with
the State Administration for Industry and Commerce in the PRC as its trademark,
which is also known as “Orsus Cellular” within the industry. In
January 2007, the trademark “PROXLINK” was registered for the Company’s
specialized application mobile series.
3.
|
Summary
of significant accounting policies
|
The
accompanying unaudited condensed consolidated financial statements of the
Company and its subsidiaries have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission (the “SEC”) including the
instructions to Form 10-Q and Regulation S-X. Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles in the United States of America
(“U.S. GAAP”) have been condensed or omitted from these statements pursuant to
such rules and regulation and, accordingly, they do not include all the
information and notes necessary for comprehensive consolidated financial
statements and should be read in conjunction with the Company’s audited
consolidated financial statements for the year ended December 31, 2008 included
in the Company’s Annual Report on Form 10-K dated April 15, 2009.
The
preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses and the disclosure of contingent
assets and liabilities. Actual results and outcomes may differ from management’s
estimates and assumptions.
Orsus
Xelent Technologies, Inc.
Notes
to Condensed Consolidated Financial Statements
For the
three months ended March 31, 2009 and 2008
(Dollars
in thousands except share data and per share amounts)
3.
|
Summary
of significant accounting policies
(continued)
|
In the
opinion of the management, the accompanying condensed consolidated financial
statements include all adjustments, consisting only of normal recurring items,
necessary for their fair presentation in conformity with U.S.
GAAP. The results of the three-month periods presented do not
necessarily indicate the results that may be expected for the full
year.
Basis of
consolidation
The
financial statements include the accounts of the Company and its subsidiaries.
Intercompany transactions and balances have been eliminated.
Recently issued accounting
pronouncements
In March
2008, the FASB issued SFAS No. 161, “Disclosure about Derivative Instruments and
Hedging Activities – an amendment to FASB Statement No. 133”. SFAS 161 is
intended to improve financial standards for derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understanding their effects on an entity’s financial position, financial
performance, and cash flows. Entities are required to provide
enhanced disclosure about: (a) how and why an entity uses derivative
instruments; (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations; and (c) how
derivative instruments and related hedged items affect an entity financial
position, financial performance and cash flows. It is effective for
financial statements issued for fiscal years beginning after November 15, 2008,
with early adoption encouraged. The adoption of this statement has no
material effect on the Company’s consolidated financial statements.
In
December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51”. SFAS 160
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. The guidance is
effective for the fiscal year beginning after December 15, 2008. The adoption of
this statement has no material effect on the Company's financial
statements.
In
December 2007, the FASB issued SFAS No. 141 (Revised) “Business Combinations”.
SFAS No. 141 (Revised) establishes principles and requirements for how the
acquirer of a business recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree. The statement also provides guidance for recognizing
and measuring the goodwill acquired in the business combination and determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. The
guidance is effective for the fiscal year beginning after December 15, 2008. The
adoption of this statement has no material effect on the Company's financial
statements.
Orsus
Xelent Technologies, Inc.
Notes
to Condensed Consolidated Financial Statements
For the
three months ended March 31, 2009 and 2008
(Dollars
in thousands except share data and per share amounts)
3.
|
Summary
of significant accounting policies
(continued)
|
Recently issued accounting
pronouncements (continued)
In April
2009, the FASB issued three FASB Staff Positions (FSP’s) to provide additional
application guidance and enhance disclosures regarding fair value measurements
and impairments of securities. FSP FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly,” provides
guidelines for making fair value measurements more consistent with the
principles presented in SFAS No.157. FSP FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments,” enhances consistency in
financial reporting by increasing the frequency of fair value disclosures. FSP
FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary
Impairments,” provides additional guidance designed to create greater clarity
and consistency in accounting for and presenting impairment losses on
securities. These three FSP’s are effective for interim and annual periods
ending after June 15, 2009, with early adoption permitted for periods ending
after March 15, 2009. The management is in the process of evaluating
the impact these FSP’s will have on the Company’s financial statements upon
adoption.
The
Company is engaged principally in the design and trading of cellular phones
primarily to four dealers in the PRC. The Company buys certain major
materials from five major suppliers. In addition, the Company
subcontracts material purchasing and assembly works of cellular phones mainly to
five subcontracting factories. The Company’s policy is that the sole
agent arrangement gives the dealers more incentive to promote the Company’s
products and reduce the Company’s exposure to the distribution
market. On the other hand, the diversification of suppliers will
reduce the risk of increasing production cost.
|
(a)
|
During
the periods ended March 31, 2009 and 2008, the Company’s operating revenue
was solely derived from one customer. There was no trade deposit received
from that customer as of March 31, 2009 and December 31, 2008
respectively. Trade accounts receivables from that customer
were US$82,384 and US$77,740 as of March 31, 2009 and December 31, 2008
respectively.
|
Orsus
Xelent Technologies, Inc.
Notes
to Condensed Consolidated Financial Statements
For the
three months ended March 31, 2009 and 2008
(Dollars
in thousands except share data and per share amounts)
4.
|
Concentrations
(continued)
|
|
|
Suppliers
accounted for over 10% of the Company’s purchases are as
follows:
|
|
|
(Unaudited)
Three months ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
Supplier
A
|
|
|
56
|
|
|
|
-
|
|
Supplier
B
|
|
|
44
|
|
|
|
-
|
|
Supplier
C
|
|
|
-
|
|
|
|
33
|
|
Supplier
D
|
|
|
-
|
|
|
|
26
|
|
Supplier
E
|
|
|
-
|
|
|
|
22
|
|
Supplier
F
|
|
|
-
|
|
|
|
17
|
|
Gross
trade deposits paid to the above suppliers were US$3,406 and US$8,114 as of
March 31, 2009 and December 31, 2008 respectively. Trade payables
owed to the above suppliers were US$4,624 and US$6,961 as of March 31, 2009 and
December 31, 2008 respectively.
|
(c)
|
The
Company’s revenue for the period ended March 31, 2009 and 2008 were
derived from the PRC. Geographical information of the carrying
amount of long-lived assets is as
follows:
|
|
|
As of
March 31,
2009
(Unaudited)
|
|
|
As of
December 31,
2008
(Audited)
|
|
|
|
US$’000
|
|
|
US$’000
|
|
|
|
|
|
|
|
|
PRC
|
|
|
215
|
|
|
|
237
|
|
Hong
Kong
|
|
|
3
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total
long-lived assets
|
|
|
218
|
|
|
|
241
|
|
The
Company and its subsidiaries are subject to income taxes on an entity basis on
income arising in or derived from the tax jurisdictions in which they operate.
Provision for income and other related taxes have been provided in accordance
with the tax rates and laws in effect in the various countries of
operations.
No
provision for withholding or United States federal or state income taxes or tax
benefits on the undistributed earnings of the Company's subsidiaries has been
provided as the earnings of these subsidiaries, in the opinion of the
management, will be reinvested indefinitely.
Orsus
Xelent Technologies, Inc.
Notes
to Condensed Consolidated Financial Statements
For the
three months ended March 31, 2009 and 2008
(Dollars
in thousands except share data and per share amounts)
5.
|
Income
taxes (continued)
|
OXHBVI
was incorporated in the BVI and, under the current laws of the BVI, is not
subject to income taxes.
UFI and
OXTHK, both were incorporated in Hong Kong, had no assessable income for the
periods presented.
The
Company’s income is principally generated in the PRC by BOXT. Since BOXT is
registered as a wholly-owned foreign investment enterprise (“WOFE”), it is
subject to tax laws applicable to WOFE in the PRC and is fully exempt from the
PRC enterprise income tax (“EIT”) of 24% for two years commencing from fiscal
year 2005, followed by a 50% reduction for the next three years.
On March
16, 2007, a New Enterprise Income Tax Law (“NEITL”) was issued in the PRC. Prior
to the issuance of the NEITL, domestic enterprises (“DE”) and foreign invested
enterprises (“FIE”) in the PRC were taxed under different EIT laws. The NEITL
unifies the enterprise tax laws applicable to both DE and FIE commencing in
fiscal year beginning from January 1, 2008. The different EIT rates effective
from January 1, 2008 are as follows:
Unified
EIT rate effective January 1, 2008
|
|
|
25
|
%
|
Small
scale / low profit enterprises
|
|
|
20
|
%
|
New
/ hi-tech enterprises
|
|
|
15
|
%
|
By virtue
of the NEITL, BOXT was subject to the unified EIT rate of 25% with effect from
January 1, 2008. However, the 50% tax reduction, which has already been obtained
by BOXT under the old tax laws, can still be maintained and the remaining tax
holiday, which was commenced before 2008, can still be enjoyed by BOXT, until
the year to expiry at 2009.
Since
January 1, 2007, the Company is subject to the provisions of FIN 48, and has
analyzed its filing positions in all of the federal, state and foreign
jurisdictions where it is required to file income tax returns, as well as for
all open years for those jurisdictions. As of March 31, 2009 and December 31,
2008, the Company identified the following jurisdictions as “major” tax
jurisdictions, as defined, in which it was required to file income tax returns:
United States, Hong Kong and the PRC. Based on the evaluations noted above, the
Company has concluded that there are no significant uncertain tax positions
requiring recognition in its consolidated financial statements. Based on a
review of tax positions for all open years, no reserves for uncertain income tax
positions have been recorded pursuant to FIN 48 during the three months ended
March 31, 2009 and during the year ended December 31, 2008, and the Company does
not anticipate that it is reasonably possible that any material increase or
decrease in its unrecognized tax benefits will occur within the next twelve
months.
As of
March 31, 2009 and December 31, 2008, the Company had no unrecognized tax
benefits or accruals for the potential payment or interest and penalties. The
Company’s policy is to record interest and penalties in this connection as a
component of the provision for income tax expense. For the three months ended
March 31, 2009 and 2008, no interest or penalties were recorded.
Orsus
Xelent Technologies, Inc.
Notes
to Condensed Consolidated Financial Statements
For the
three months ended March 31, 2009 and 2008
(Dollars
in thousands except share data and per share amounts)
5.
|
Income
taxes (continued)
|
|
(a)
|
Income
tax expenses comprised the
following:
|
|
|
(Unaudited)
Three months ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
US$’000
|
|
|
US$’000
|
|
Current
tax
|
|
|
|
|
|
|
United
States
|
|
|
-
|
|
|
|
-
|
|
Hong
Kong
|
|
|
-
|
|
|
|
228
|
|
PRC
|
|
|
323
|
|
|
|
320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
323
|
|
|
|
548
|
|
(b) Reconciliation
from the expected statutory tax rate in the PRC of 25% (2008 : 24%) is as
follows:
|
|
(Unaudited)
Three months ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
Statutory
rate - the PRC
|
|
|
25.0
|
|
|
|
24.0
|
|
Difference
in tax rates in the country that the subsidiary of the Company
operates
|
|
|
-
|
|
|
|
(3.4
|
)
|
Tax
exempted items
|
|
|
(15.2
|
)
|
|
|
(13.8
|
)
|
Tax
non-deductible items
|
|
|
3.3
|
|
|
|
15.4
|
|
|
|
|
|
|
|
|
|
|
Effective
tax rate
|
|
|
13.1
|
|
|
|
22.2
|
|
During
the three months ended March 31, 2009 and 2008, the aggregate amounts of benefit
from tax holiday were US$323 and US$320 respectively and the respective
effective on earnings per share effect was US$0.01 and US$0.01
respectively.
Note:
The per share amounts mentioned in this note are in dollar amount.
Basic
earnings per share is computed based upon the net income for the periods
presented and on the weighted average number of shares of common stock
outstanding during each period.
The
calculation of diluted earnings per share is based on net income for the periods
presented and on the weighted average number of shares of common stock
outstanding during each period and adjusted for the effects of all dilutive
potential shares of common stock outstanding during the period.
614,000
shares of stock options outstanding during the three months ended and as of
March 31, 2009 have not been included in the computation of diluted earnings per
share for the current reporting period since to do so would have an
anti-dilutive effect. During the three months ended March 31, 2008,
the Company did not have any dilutive instrument. Accordingly, the
basic and diluted earnings per share for both periods are the same.
Orsus
Xelent Technologies, Inc.
Notes
to Condensed Consolidated Financial Statements
For the
three months ended March 31, 2009 and 2008
(Dollars
in thousands except share data and per share amounts)
7.
|
Trade
accounts receivable
|
Included
in trade accounts receivable as of March 31, 2009 was a balance of US$82,384 due
from Beijing Xingwang Shidai Commerce Co., Ltd. (“Xingwang”). On
December 25, 2008, Xingwang entered into an irrevocable Credit Guarantee
Contract (the “Guarantee Contract”) with Zhong Hui Guarantee Corporation, a
third-party guarantee company licensed by the PRC government (“Zhonghui”), and
BOXT whereby Zhonghui agrees to guarantee up to Renminbi (“RMB”) 300 million
(equivalent to US$43,824), for the principal debt, interest, fine, damages
arising out of breach of contract, and costs incurred for realizing those legal
rights including but not limited to legal proceeding fees, attorney fees and
travel expenses arising out of the distributor agreement signed between BOXT and
Xingwang. The Guarantee Contract was effective as of December 25, 2008 and
provides a guarantee of all of the accounts receivable that are or may become
outstanding from Xingwang to the Company from January 1, 2009 through December
31, 2009. Such accounts receivable are guaranteed for a period of two years from
the date it is due.
Other
current assets included an amount of other receivable with a balance of US$1,731
which was related to the deposit paid for the potential acquisition of Hebei
Leimeng Times Telecommunication Equipment Co. Ltd. The potential
acquisition was terminated during the year ended December 31, 2008.
9.
|
Property,
plant and equipment, net
|
Property,
plant and equipment are summarized as follows:
|
|
As of
March 31,
2009
(Unaudited)
|
|
|
As of
December 31,
2008
(Audited)
|
|
|
|
US$’000
|
|
|
US$’000
|
|
|
|
|
|
|
|
|
Moulds
|
|
|
4
|
|
|
|
4
|
|
Leasehold
improvements
|
|
|
131
|
|
|
|
131
|
|
Plant
and machinery
|
|
|
20
|
|
|
|
20
|
|
Office
equipment
|
|
|
303
|
|
|
|
303
|
|
Motor
vehicles
|
|
|
303
|
|
|
|
303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
761
|
|
|
|
761
|
|
Accumulated
depreciation
|
|
|
(543
|
)
|
|
|
(520
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
218
|
|
|
|
241
|
|
Orsus
Xelent Technologies, Inc.
Notes
to Condensed Consolidated Financial Statements
For the
three months ended March 31, 2009 and 2008
(Dollars
in thousands except share data and per share amounts)
10.
|
Short-term
bank loans
|
All bank
loans are secured by personal guarantee provided by the director, Mr. Liu Yu.
Bank loan amounted to US$6,866 as of March 31, 2009 and US$6,857 as of December
31, 2008 is further secured by a pledged deposit of US$1,288 as of March 31,
2009 and US$1,287 as of December 31, 2008 and guarantee provided by a guaranty
company. Remaining bank loan of US$2,512 as of March 31, 2009 and US$2,627 as of
December 31, 2008 is further secured by co-guarantees provided by two third
party companies and a major customer of the Company. All bank loans are
repayable within one year and bear interest ranging from 6.372% to 10.080% per
annum.
11.
|
Related
party transactions
|
|
(a)
|
Name
and relationship of related parties
|
Related party
|
|
Relationship
|
|
|
|
Mr.
Liu Yu
|
|
Director
and stockholder of the Company
|
Mr.
Wang Xin
|
|
Stockholder
and former director of the
Company
|
|
(b)
|
Summary
of related party balances
|
|
|
As of
March 31,
2009
(Unaudited)
|
|
|
As of
December 31,
2008
(Audited)
|
|
|
|
US$’000
|
|
|
US$’000
|
|
Due
to directors
|
|
|
|
|
|
|
Mr.
Liu Yu
|
|
|
219
|
|
|
|
219
|
|
Mr.
Wang Xin (resigned on March 27, 2009)
|
|
|
-
|
|
|
|
238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
219
|
|
|
|
457
|
|
|
|
|
|
|
|
|
|
|
Bank
loans guaranteed by Mr. Liu Yu
|
|
|
9,378
|
|
|
|
9,484
|
|
As of
March 31, 2009, the amount due to Mr. Wang Xin was US$250 which was included in
“Accrued expenses and other accrued liabilities” under current
liabilities.
The
amounts due to directors are unsecured, interest-free and repayable on
demand.
As
stipulated by the PRC regulations, the Company maintains a defined contribution
retirement plan for all of its employees who are residents of the
PRC. All retired PRC employees of the Company are entitled to an
annual pension equivalent to their basic annual salary upon
retirement. The Company contributed to a state sponsored retirement
plan approximately 20% of the basic salary of its PRC employees and has no
further obligations for the actual pension payments or post-retirement benefits
beyond the annual contributions. The state sponsored retirement plan
is responsible for the entire pension obligation payable to all
employees. The pension expenses were US$22 and US$8 for the three
months ended March 31, 2009 and 2008 respectively.
Orsus
Xelent Technologies, Inc.
Notes
to Condensed Consolidated Financial Statements
For the
three months ended March 31, 2009 and 2008
(Dollars
in thousands except share data and per share amounts)
On March
27, 2008, a stock option plan of “2007 Omnibus Long-Term Incentive Plan” (the
“Plan”) was approved by the board of directors. The purpose of the Plan is to
promote the long-term performance goals and general prosperity of the Company.
The Plan, which provides for the grant of stock options, stock appreciation
rights, restricted stock, restricted stock units, unrestricted stock
and cash awards, is designed to help the Company and its subsidiaries and
affiliates attract and retain senior officers for positions of substantial
responsibility and to provide for non-employee directors and key employees with
an additional motivation and incentive to improve the business results and
contribute to the success of the Company.
On April
2, 2008, stock options to subscribe total of 614,000 shares were granted to
certain directors, senior officers and other key employees of the Company at an
exercise price of US$2.26 per share. The options granted are exercisable from
July 2, 2008.
In
accordance with the terms of the share-based payment arrangement, the
aforementioned options were vested at the date of grant. A summary of
the share option plan activity during the period ended March 31, 2009 is
presented as below:
|
|
Number of
share options
|
|
|
|
|
|
As
of January 1, 2009
|
|
|
614,000
|
|
Granted
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
Cancelled/lapsed
|
|
|
-
|
|
|
|
|
|
|
As
of March 31, 2009
|
|
|
614,000
|
|
According
to a valuation report dated August 1, 2008 issued by an independent professional
valuer, the fair value of these options was US$725, which was estimated on the
date of grant using Binomial Lattice option pricing model. Where relevant, the
expected life used in the model has been adjusted based on management’s best
estimate for the effects of transferability, exercise restrictions and
behavioral consideration. Compensation expense is charged to income as the
benefit was fully vested at the date of grant. Key assumptions included in the
estimation are as follows:
Expected
dividend yield
|
|
|
-
|
|
Expected
stock price volatility
|
|
|
85.07
|
%
|
Risk
free interest risk
|
|
|
3.61
|
%
|
Expected
life of share options
|
|
10 Years
|
|
During
the three-month periods ended March 31, 2009 and 2008, all revenue of the
Company is derived from its business of designing for retail and wholesale
distribution cellular phones. Accordingly, no financial information by business
segment is presented.
The
Company operates in the PRC and all its revenue and operating profit are from
the PRC. Accordingly, no geographical analysis is presented.
Orsus
Xelent Technologies, Inc.
Notes
to Condensed Consolidated Financial Statements
For the
three months ended March 31, 2009 and 2008
(Dollars
in thousands except share data and per share amounts)
15.
|
Commitments
and contingencies
|
|
(a)
|
Operating
lease commitments
|
As of
March 31, 2009 and December 31, 2008, the Company had non-cancelable operating
leases for it office premises, under which the expected rental payment due
within the next year was US$39 and US$53 respectively.
Tax
penalty
In
accordance with the PRC’s tax regulations, BOXT’s sales are subject to a 17% of
value added tax (“VAT”) upon the issuance of VAT invoices to customers. BOXT
follows the practice of reporting its revenue for VAT purposes when invoices are
issued. As of March 31, 2009 and December 31, 2008, there were sales amounted to
approximately US$194,291 and US$175,834 respectively for which VAT invoices have
not yet been issued.
Furthermore,
BOXT reports its revenue for PRC EIT purposes when VAT invoices are issued
instead of when goods are delivered. All unbilled revenue will become taxable
when invoices are issued.
The above
practice is not in strict compliance with the relevant PRC laws and regulations
in respect of VAT and EIT. Despite the fact that BOXT has made full
provision on VAT and EIT including any estimated surcharge in the condensed
consolidated financial statements, BOXT may be subject to a penalty for the
deferred reporting of the above tax obligations. The exact amount of
penalty cannot be estimated with any reasonable degree of
certainty. The board of directors considers it is more likely than
not that the penalty will not be imposed.
Financial guarantee
contract
On June
20, 2007, BOXT entered into a guarantee contract for three years to June 16,
2010 to serve as guarantor of a bank loan amounting to approximately US$17,530
(equivalent to RMB120,000) to an independent third-party, CECT-Chinacom
Communications Co., Ltd. (“CECT”), from Beijing Rural Bank to provide CECT with
capital for equipment purchases. Under the guarantee contract, BOXT shall
perform all obligations of CECT under the loan contract if CECT fails to perform
its obligations as set forth in the loan contract, including, but not limited
to, ceasing production, going out of business, dissolving the business, having
its business license withdrawn and filing for bankruptcy.
According
to a valuation report dated March 20, 2009 issued by an independent professional
valuer, the fair value of the undiscounted maximum potential amount of future
payments as of December 31, 2008, which was estimated by the independent
professional valuer, that BOXT could be required to make under the guarantee
contract was amounted to approximately US$470, equivalent to approximately
RMB3,216. The Company’s management assessed that the fair value of
the undiscounted maximum potential amount of future payments as of March 31,
2009 did not materially differ from that as of December 31, 2008.
Item
2.
|
Management
Discussion and Analysis of Financial Conditions and Results of
Operations
|
The
following is management's discussion and analysis of certain significant factors
which have affected our financial position and operating results during the
periods included in the accompanying consolidated financial statements, as well
as information relating to the plans of our current management. This report
includes forward-looking statements. Generally, the words "believes,"
"anticipates," "may," "will," "should," "expect," "intend," "estimate,"
"continue," and similar expressions or the negative thereof or comparable
terminology are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, including the matters set forth
in this report or other reports or documents we file with the Securities and
Exchange Commission from time to time, which could cause actual results or
outcomes to differ materially from those projected. Undue reliance should not be
placed on these forward-looking statements which speak only as of the date
hereof. We undertake no obligation to update these forward-looking
statements.
The
following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto and other
financial information contained elsewhere in this Form 10-Q.
OVERVIEW
The Company was organized under
the laws of the State of Delaware in May 2004 under the name “Universal Flirts
Corp.” On June 1, 2004, the Company acquired all the issued and outstanding
shares of Universal Flirts, Inc., a New York corporation, from its sole
shareholder, Darrel Lerner, in consideration for the issuance of 8,500,000
shares of the Company’s common stock to Mr. Lerner pursuant to a stock exchange
agreement between Universal Flirts Inc. and the Company. Pursuant to the stock
exchange transaction, Universal Flirts Inc. became a wholly-owned subsidiary of
the Company.
Pursuant to a Stock Transfer Agreement
dated March 29, 2005, the Company transferred all of the common stock of
Universal Flirts, Inc. to Mr. Darrell Lerner in exchange for the cancellation of
28,200,000 shares of the Company’s common stock. Immediately following the
cancellation, the Company had 14,756,000 shares of its common stock
outstanding.
On March 31, 2005, Universal Flirts
Corp. completed a stock exchange transaction with the stockholders of United
First International Limited (“
UFIL
”), a company
incorporated under the laws of Hong Kong. The exchange was consummated under the
laws of the State of Delaware and pursuant to the terms of the Securities
Exchange Agreement dated as of March 31, 2005 (“
Exchange Agreement
”). In
connection with its acquisition of UFIL, the Company authorized a 4-1 forward
split of its common stock.
Pursuant to the Exchange Agreement,
Universal Flirts Corp. issued 15,000,000 shares of its common stock, par value
$0.001 per share, to the stockholders of UFIL, representing approximately 50.41%
of the Company’s issued and outstanding common stock, in exchange for the
20,000,000 outstanding shares of UFIL and a cash payment of $50,000 from UFIL.
Immediately after giving effect to the exchange, the Company had 29,756,000
shares of its common stock outstanding. Pursuant to this exchange, UFIL became a
wholly-owned subsidiary of the Company and most of the Company’s business
operations are now conducted through UFIL’s wholly-owned subsidiary, Beijing
Orsus Xelent Technology & Trading Company Limited (“
Xelent
”).
On April 19, 2005, the Company,
formerly known as Universal Flirts Corp., changed its list name to Orsus Xelent
Technologies, Inc.
In July, 2005, a wholly owned
subsidiary of Orsus Xelent Trading (HK) Company Limited (“
OXHK
”), was incorporated
under the laws of Hong Kong. This subsidiary is engaged in the trading of
cellular phones and accessories with overseas customers. In September 2005, OXHK
commenced its Hong Kong operations to sell and distribute our cellular phone
products and technical support services to customers outside the People’s
Republic of China (“
PRC
”).
The business operations of UFIL are
conducted through its wholly-owned subsidiary, Xelent, also known as “Orsus
Cellular” within the cellular phone industry. Xelent sells its handsets and
total solutions, including economically priced and fully-loaded cell phones for
both Global System for Mobile communications (“
GSM
”) and Code Division
Multiple Access (“
CDMA
”) platforms, to a
diverse base of customers and dealers, such as ordinary users, tailored
operators, and specialized users from all fields of business and government.
Most of our mobile phone models are either designed by us for both our exclusive
distribution and joint sales under established co-brands, or developed in
conjunction with outside design firms. In February 2004, Xelent registered
“ORSUS” with the PRC State Administration for Industry and Commerce as its
product trademark.
Many of Xelent’s cellular phone
products are equipped with industry cutting-edge features such as 1.8 to
2.8-inch CSTN, TFT or QVGA dual-color display; capacity to record videos lasting
one minute up to four hours; 300K to 3 million pixel photography; MP3, MPEG4 and
U disk support; dual stereo speakers; e-mail messaging; multimedia messaging; 40
to 64 ring tone storage; slim bar-phone and flip-phone technology; and
innovative ultra-thin lightweight design.
Xelent has provided its handsets to
many different types of consumers in the market for GSM mobiles devices. At
present, the GSM mobile devices constitute a significant percentage of the sales
and profit of the Company. In addition, Xelent has emphasized the development of
specialized application mobile terminals in accordance with market changes and
popular features. The Company has established itself in the specialized
application field and made great efforts in its marketing since entering the
field in September 2006. Based on its evaluation of the market and the
engagement proposals received from its major customers, the Company began to
produce GSM model X180 in large volumes starting in April 2007, thereby taking
advantage of the opportunity to win establish a presence in the specialized
application mobile terminal market.
In April 2007, the Company’s common
shares were approved for listing on NYSE Amex (formerly known as the American
Stock Exchange) and began trading on NYSE Amex on May 10, 2007 under the ticker
symbol “ORS”. The Company's CUSIP Number is
68749U106.
Business
Review
Although global economic turmoil still
exists, thus far in 2009, China has begun to experience economic recovery in
many industrial sectors, such as railway construction, highway construction and
many other large infrastructure projects. However, recovery in consumer goods
industries has grown at a much lower rate than the above-mentioned
industrial sectors. The first quarter of 2009 should have been “peak season” for
consumer goods industries because consumers typically spend more at New Year’s
Day and Spring Festival, two important celebrations which occur in this
quarter. Despite the gradual improvement in the Chinese economy, the
cell phone market remains grim, as sales volume in the first quarter
declined by 11% as compared to the same period last year. However,
positively, first quarter sales volume grew by approximately
10% compared to the previous quarter ended December 31, 2008. During
the first quarter, sales of CDMA handsets increased very rapidly in the PRC
cell phone market. In contrast, sales of GSM handsets grew at a much lower
rate.
The Company sold 266,000 cell
phone units during the first quarter of 2009. For the three months ended
March 31, 2009, the Company generated revenue of $19,724,000, representing
a decrease of 4.80% as compared to $20,719,000 for the same period in 2008,
but still better position than the entire cell phone market, in which sales
declined by 11% during the same period, as recently reported by Sino
Market Research Limited. Meanwhile, the Company achieved a gross profit
margin of 15.68%, an increase of 0.15% as compared to 15.53% earned a year
earlier. The Company believes this increase is mainly attributable to
its appropriate products strategy and its successful handling of the
telecom carriers market. The Company continued to supply feature-rich,
economically-priced, mid-level and low-end products – a different
strategy than that of foreign brands, which tend to have higher
costs and higher output prices. 62% of the products the
Company sold in this quarter were priced below RMB1,000 (approximately
$150). This has led to a decrease of $126,000 or 3.92% in the
Company’s gross margin, from $3,218,000 earned in the three months
ended March 31, 2008, to $3,092,000 for the three months ended March 31,
2009. Net income increased at a slower pace than it did in the previous
year.
The Company believes there are
four main influences on the current state of the cell phone market in the
PRC. First, the reorganization of domestic telecommunication
operators has created a lag in market demand. In particular, the market
demand for high-margin products was much lower than expected, because the
telecom operators applied some
preferential service packages to low-priced cell phones in order
to safeguard improvement in their customer base and
control costs while dealing with the fiercer competition. Second, the major
force driving current cell phone sales in the PRC is rural customers, a majority
of whom tend to favor less expensive, lower-end products. This strength is
expected to grow continually as the PRC government further implements
its national policies to bring more home appliances to rural households. Third,
it is unknown when the far-reaching
international financial crisis will hit its bottom and the
PRC’s economic stimulus programs have mainly focused on infrastructure
projects, rather than the consumer demand. Fourth, cell phones are gradually
shifting from hi-tech products to fast-moving consumer goods,
which, inevitably, will shape cell phone prices in a trend to
decrease in the near future.
The Company is aware that the cell
phone market in the PRC may continue to experience some difficulty in the early
part of 2009, but it still projects that the industry will be in a better
position in 2009 because (a) the reorganization of PRC telecom carriers is
projected to lead to market development, and (b) new 3G technology is likely to
encourage market demand. With these projections in mind, the Company
will continue to employ the following three operating strategies going
forward:
|
1.
|
Safeguard
our traditional sales channels and explore the possibility of selling more
GSM cell phones in traditional markets. The Company will use
its key ability to create telephone models that respond precisely to
market opportunities to target customer
needs.
|
|
2.
|
Launch
our own 3G products while telecom carriers are promoting the commercial
use of 3G. Based on the relationships we have already built with the
telecom carriers, we believe the Company will be able to establish a
beneficial market share in this new era of telecom
industry.
|
|
3.
|
Expand
our industrial structure by consummating certain acquisitions using funds
obtained from the capital markets in order to enhance our business
foundation and long-term
development.
|
In
summary, the Company predicts at least some growth in both sales revenues and
net income during the fiscal year ending December 31, 2009.
CRITICAL
ACCOUNTING POLICIES AND MANAGEMENT ESTIMATES
Our
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our estimates based on historical experience and
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
RESULTS
OF OPERATIONS
The
following table summarizes our operating results for the three months ended
March 31, 2009 and March 31, 2008, respectively:
|
|
Three months ended
March 31, 2009
|
|
|
Three months ended
March 31, 2008
|
|
|
Comparison
|
|
|
|
$000
|
|
|
% of Revenue
|
|
|
$000
|
|
|
% of Revenue
|
|
|
$000
|
|
|
%
|
|
Revenue
|
|
|
19,724
|
|
|
|
-
|
|
|
|
20,719
|
|
|
|
-
|
|
|
|
(995
|
)
|
|
|
(4.80
|
)%
|
Cost
of sales
|
|
|
16,632
|
|
|
|
84.32
|
%
|
|
|
17,501
|
|
|
|
84.46
|
%
|
|
|
(869
|
)
|
|
|
(4.97
|
)%
|
Sales
& marketing expenses
|
|
|
123
|
|
|
|
0.62
|
%
|
|
|
103
|
|
|
|
0.50
|
%
|
|
|
20
|
|
|
|
19.42
|
%
|
General
& admin. expenses
|
|
|
266
|
|
|
|
1.35
|
%
|
|
|
436
|
|
|
|
2.10
|
%
|
|
|
(170
|
)
|
|
|
(38.99
|
)%
|
R&D
expenses
|
|
|
17
|
|
|
|
0.09
|
%
|
|
|
115
|
|
|
|
0.55
|
%
|
|
|
(98
|
)
|
|
|
(85.22
|
)%
|
Depreciation
|
|
|
23
|
|
|
|
0.12
|
%
|
|
|
25
|
|
|
|
0.12
|
%
|
|
|
(2
|
)
|
|
|
(8.00
|
)%
|
Allowance
for obsolete inventories
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Finance
cost
|
|
|
222
|
|
|
|
1.13
|
%
|
|
|
238
|
|
|
|
1.15
|
%
|
|
|
(16
|
)
|
|
|
(6.72
|
)%
|
Other
net income
|
|
|
17
|
|
|
|
0.09
|
%
|
|
|
164
|
|
|
|
0.79
|
%
|
|
|
(147
|
)
|
|
|
(89.63
|
)%
|
Pre-tax
profit
|
|
|
2,458
|
|
|
|
12.46
|
%
|
|
|
2,465
|
|
|
|
11.90
|
%
|
|
|
(7
|
)
|
|
|
(0.28
|
)%
|
Income
tax
|
|
|
323
|
|
|
|
1.64
|
%
|
|
|
548
|
|
|
|
2.64
|
%
|
|
|
(225
|
)
|
|
|
(41.06
|
)%
|
Profit
|
|
|
2,135
|
|
|
|
10.82
|
%
|
|
|
1,917
|
|
|
|
9.25
|
%
|
|
|
218
|
|
|
|
11.37
|
%
|
Revenues
Our
revenues were $19,724,000 for the three months ended March 31, 2009,
representing a decrease of 4.80% compared to $20,719,000 for the same period of
2008.
As stated
in Business Review above, despite the global economic turmoil, we believe
China's economy has began to improve gradually. However, it seems that the
economy has mainly focused on large-scale projects instead of the consumer goods
markets, as they have experienced a much slower recovery. In the Chinese cell
phone market, sales volume has fallen by 11% as compared to the same period last
year. During this quarter, the Company has continued to undertake its sales
strategy of supplying feature-rich, low-priced, mid-level and low-end products.
It has also put great efforts into developing new products tailored for telecom
operators and expanding its sales channels beyond the enhanced traditional
market in which products were traded at prices less than RMB1,000, or
approximately $150. These strategies resulted in a positive trend in the
Company’s sales revenue during the first quarter of 2009.
Products
Segment
During
the three months ended March 31, 2009, we had only one CDMA cell phone model,
which generated revenues of $6,792,000:
|
·
|
T303 (MP3/MP4,
Extended Standby), supplied by Beijing Shitong Changcheng Network
Technologies Co, Ltd. (
“
Shitong
Changcheng
”
)
|
During
the three months ended March 31, 2009, sales of GSM products accounted for
$12,935,000 of total revenue. Our GSM models include:
|
·
|
X555
(Extended Standby, Touch Screen, MP3/MP4, Radio), supplied by Shitong
Changcheng;
|
|
·
|
X600
(Dual Simcards Simul-Standby, MP3/MP4, Touch Screen, Mega Pixel, Double
Speakers, Radio, Bluetooth), supplied by Beijing Tianhongbo Communication
Equipment Co, Ltd. (“ Tianhongbo”);
and
|
|
·
|
X610
(Dual Simcards Simul-Standby, MP3/MP4, Touch Screen, Mega Pixel, Double
Speakers, Radio, Bluetooth), supplied by
Tianhongbo.
|
These GSM
products generated revenues of $1,947,000, $5,430,000, and $5,555,000,
respectively.
For the
three months ended March 31, 2009, the Company’s revenues were primarily
attributable to the following products:
|
|
Three months ended March 31, 2009
|
|
|
|
$’000
|
|
|
% of revenue
|
|
X555
|
|
|
1,947
|
|
|
|
9.87
|
%
|
T303
|
|
|
6,792
|
|
|
|
34.44
|
%
|
X600
|
|
|
5,430
|
|
|
|
27.53
|
%
|
X610
|
|
|
5,555
|
|
|
|
28.16
|
%
|
Total
|
|
|
19,724
|
|
|
|
100.00
|
%
|
For the
three months ended March 31, 2009, the total revenues of the Company were
$19,724,000, representing a decrease of 4.80% as compared to $20,719,000 in the
same period of 2008. Faced with the global economic recession, China’s consumer
goods markets have woken up unexpectedly slower. We therefore focused on our
mid-level and low end products priced less than RMB1,000, or approximately $150,
to rural markets and prefectures or county cities. Such sales accounted for
approximately 62% of our total revenue in the first quarter. At the same time,
we have tried persistently to develop new products for telecom operators and to
improve the sales of high-margin products.
Customer
Segments
For the
three months ended March 31, 2009, our revenues were derived entirely from sales
to Beijing Xingwang Shidai Tech & Trading Co., Ltd. (“XWSD”), in the
aggregate amount of $19,724,000. XWSD has been our most important customer for a
long period of time. It is one of the largest distributors and dealers in
mainland China and has sales networks in major cities across the
PRC.
|
|
Three months ended March 31, 2009
|
|
|
|
$
’000
|
|
|
% of revenue
|
|
Beijing
Xingwang Shidai Tech & Trading Co., Ltd.
|
|
|
19,724
|
|
|
|
100.00
|
%
|
Total
|
|
|
19,724
|
|
|
|
100.00
|
%
|
Other
net income
For the
three months ended March 31, 2009, other net income accounted for $17,000, or
0.09% of the total revenues. It was mainly comprised of reversals of doubtful
accounts allowance.
Operating
expenses
Our
operating expenses include sales and marketing, general and administrative
expenses, research and development (“R&D”), depreciation, allowance for
obsolete inventories, and allowance for doubtful accounts.
For the
three months ended March 31, 2009, our operating expenses were $429,000. The
following table provides a breakdown of operating expenses for that period,
together with a comparison against the corresponding amounts from the same
period in 2008:
|
|
Three months ended
March 31, 2009
|
|
|
Three months ended
March 31, 2008
|
|
|
Comparison
|
|
|
|
$’000
|
|
|
% of revenue
|
|
|
$’000
|
|
|
% of revenue
|
|
|
$’000
|
|
|
%
|
|
Sales
& marketing
|
|
|
123
|
|
|
|
0.62
|
%
|
|
|
103
|
|
|
|
0.50
|
%
|
|
|
20
|
|
|
|
19.42
|
%
|
General
& admin
|
|
|
266
|
|
|
|
1.35
|
%
|
|
|
436
|
|
|
|
2.10
|
%
|
|
|
(170
|
)
|
|
|
(38.99
|
)%
|
R&D
|
|
|
17
|
|
|
|
0.09
|
%
|
|
|
115
|
|
|
|
0.55
|
%
|
|
|
(98
|
)
|
|
|
(85.22
|
)%
|
Depreciation
|
|
|
23
|
|
|
|
0.12
|
%
|
|
|
25
|
|
|
|
0.12
|
%
|
|
|
(2
|
)
|
|
|
(8.00
|
)%
|
Allowance
for obsolete inventories
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
429
|
|
|
|
2.18
|
%
|
|
|
679
|
|
|
|
3.27
|
%
|
|
|
(250
|
)
|
|
|
(36.82
|
)%
|
Sales
and marketing expenses
Sales and
marketing expenses mainly represent payments made to sales personnel and
transportation costs. For the three months ended March 31, 2009, sales and
marketing expenses were $123,000, or 0.62% of revenues, representing a $20,000
increase compared with the numbers for the corresponding period in
2008.
R&D
expenses
For the
three months ended March 31, 2009, R&D expenses were $17,000, or 0.09% of
revenues, representing decreases of $98,000 or 85.22%, respectively, compared
with the numbers for the corresponding period in 2008. The significant decrease
in R&D expenses was because the Company focused on more regular R&D
initiatives and did not launch full R&D projects on development of new
products during the quarter. This decision was considered prudent in light of
the potential impact from the pending telecom industrial reorganization in the
PRC..
General
and administrative expenses
General
and administrative expenses primarily consists of compensation for personnel,
depreciation, travel expenses, rental, materials expenses related to ordinary
administration and fees for professional services.
For the
three months ended March 31, 2009, total general and administrative expenses
were $266,000, or 1.35% of total revenues, representing decreases of $170,000,
or 38.99% as compared to $436,000, or 2.10%, of the total revenues for the
corresponding period of 2008. The sharp decrease in general and administrative
expenses was primarily attributable to structural adjustment, internal
management control and costs reduction. In addition, a couple of holidays were
observed in this quarter so that some of our employees were able to take their
holidays or annual vacations. In sequence, it has caused a reduction in our
office expenses during the holiday week.
Gross
Profit and Gross Profit Margin
For the
three months ended March 31, 2009, gross profit was $3,092,000, representing a
decrease of $126,000 from gross profit earned a year earlier. During
this period, to cope with the global financial crisis and the increasing
competition in the Chinese cell phone market, many manufacturers were involved
in price wars, clearance sales and capital recalls, regardless of the
losses they might suffer from in the short term. As a result, normal selling
prices of products were unstable and products’ gross profits dropped
severely. Even so, the Company’s gross profit margin for the period increased to
15.68% as compared to 15.53% for the same period of 2008.
The
increase in gross profit margin is attributable to:
|
1.
|
Intensified competition in the
domestic market and a decline in the gross margin of products sold during
the period.
|
|
When
competing with foreign brands in the domestic market, domestic brands
usually focus on sales of low-priced products as a strategy to increase
their market presence and secure originally-owned distribution to create
conditions for future development.
|
|
2.
|
The pending structural
adjustment of Chinese telecomm
operators.
|
|
For
the three months ended March 31, 2009, although we received few bulk
orders on high-margin customized products from the telecomm operators
sector, we did develop and supply our customized phone model T303 to meet
their needs. T303 products have contributed approximately 50% of our sales
volume and 34.44% of our revenue in the quarterly financial results. At a
very reasonable price, T303 products were sold in such a large quantity
that they indeed boosted the Company’s overall gross margin for this
quarter.
|
Under the
guidance of its previously planned products strategy, the Company will be
focused on broadening sales channels for high-profit customized products and
enhancing the existing customer base and sales channel in the traditional
market. To maintain a sustainable growth in gross margin, the Company is
planning to extend its product development in line with telecom operators’
requirements.
Net
income
For the
three months ended March 31, 2009, our net income was $2,135,000 or a net profit
margin of 10.82%. This is an increase of $218,000, or 11.37%, as
compared to net income of $1,917,000, representing a net profit margin of 9.25%,
earned in the same period of 2008. Operating expenses declined
significantly as the Company undertook the structural adjustment, the internal
management control and cost reduction control during this reporting period. In
the end, the Company achieved minor change in revenues and substantial
improvement in net profits.
This
growth in net profit indicates the Company’s guidelines and policies were well
implemented and have started to create positive responses in the first quarter
of 2009. We will continue to strengthen our internal management system, to build
solid relationships with suppliers and customers, and to expand the potential
market in all aspects. In particular, much emphasis will be placed on developing
and broadening the 3G market so that the Company will continue to see growth in
its financial results for the whole year.
LIQUIDITY
AND SOURCES OF CAPITAL
We
generally finance our operations from cash flow generated internally and
short-term financing from domestic banks in China.
As of
March 31, 2009, we had current assets of $90,214,000. Current assets are mainly
comprised of accounts receivable of $86,726,000, trade deposits paid of
$335,000, cash and cash equivalents of $52,000 and other current assets of
$1,831,000.
As of
March 31, 2009, our current liabilities were $39,832,000 and included accounts
payable of $9,997,000, trade deposits received of $1,935,000, short-term loans
of $9,378,000, accrued expenses and other accrued liabilities of $13,019,000,
tax payables of $5,284,000 and amounts due to directors of
$219,000.
We offer
two different trading terms to our customers: cash-on-delivery or credit terms
of 45-120 days. As of March 31, 2009, our accounts receivable had
increased by $4,650,000 to $86,726,000, as compared to $82,076,000 on December
31, 2008. The increase in accounts receivable were mainly due to these factors:
the Company's sales increase led to an increase in accounts receivable; the
distributors’ business expansion led to a reduction in their liquidity. We will
pay close attention to the liquidity progress of our distributors. As previously
disclosed, in order to reduce the risks of default, we have limited terms of
credit to our major distributor in the Master Distributor Agreement and have
asked the third-party surety company to guarantee the accounts receivable due
from this major distributor. For additional information, please see the
Company’s Current Report on Form 8-K dated August 20, 2008.
As of
March 31, 2009, our trade deposits paid were $335,000, which represented a
decrease of $8,106,000 as compared with $8,441,000 as of December 31, 2008. The
decrease was primarily because the Company was reimbursed certain prepaid trade
deposits as it shortened the goods delivery terms with suppliers.
As of
March 31, 2009, our other current assets were $1,831,000, which represented a
decrease of $46,000, as compared to $1,859,000 as of December 31, 2008. The
“other current assets” are mainly composed of prepaid deposits to acquire a
manufacturing facility in the amount of $1,688,000. The decrease of other
current assets was mainly attributable to the recovery of partial prepaid
deposits after we withdrew from a previous letter of intent to acquire the
manufacturing facility.
As of
March 31, 2009, our accounts payable were $9,997,000, which represents a
decrease of $6,356,000, or 38.87%, as compared to $16,353,000 as of December 31,
2008. This decrease is primarily due to the Company requesting that suppliers
shorten their goods delivery terms, in our effort to balance the Company's
operating capital and supplies of goods during the first
quarter.
As of
March 31, 2009, accrued expenses and liabilities were $13,019,000, representing
an increase of $700,000 or 5.68%, compared to figures as of December 31, 2008.
The increase was due to an outstanding tax of $249,000 caused by the time
difference between USGAAP and PRCGAAP while determining the value-added tax
(“VAT”).
During
this quarter, we made no allowance for warranty problems because, during this
period, after-sale services for newly-launched products were undertaken by OEM
factories, rather than the Company. Therefore, allowances were not made
accordingly for these after-sale services.
As of
March 31, 2009, tax payable was $5,284,000, representing an increase of $295,000
or 5.91%, compared to the number as of December 31, 2008. The
increase was mainly due to provision of PRC income tax at the rate of
12%.
As of
March 31, 2009, cash and bank balances were mainly denominated in Renminbi
(“RMB”). Our revenue and expenses, assets and liabilities are mainly denominated
in RMB and U.S. Dollars (“USD”). Our Company operations are mainly denominated
in RMB. During the accounting period, RMB currency is quoted officially against
USD currency according to a floating exchange rate. However, the appreciation of
the RMB against USD did not create currency exchange risk for the Company
because we had few USD in stock.
It seems
that the global financial crisis has made it difficult for companies to raise
capital through equity financing. In order to ensure its liquidity, the Company
will attempt to recover accounts receivable due from customers and to raise
funds, as necessary, through loans from Chinese domestic banks.
CASH
FLOWS
As of
March 31, 2009, we had cash and cash equivalents of $52,000. This represented a
decrease of $50,000 when compared with $102,000 as of December 31, 2008. During
the first quarter, the Company experienced a fast moving cash flow in order to
ensure a desirable level of goods supplies. We made timely payments to suppliers
in order to shorten goods supply terms, so that we could effectively deal with
the fierce competition in the cell phone market.
As of
March 31, 2009, our aggregate short term loans were $9,378,000, which were
comprised of $2,513,000 from Huaxia Bank and $6,865,000 from Beijing Rural Bank.
There was a change of RMB 800,000 ($117,000) in the aggregate amount of short
term loans if it is reflected in RMB.
Our
gearing ratio, calculated as total debts over total assets, was 44.05% as of
March 31, 2009. This represents a slight increase over the 48.51%
gearing ratio as of December 31, 2008.
CONTINGENT
LIABILITIES
On June
20, 2007, we entered into a guarantee contract to serve as guarantor of a loan
in the amount of RMB 120,000,000, or approximately $17,530,000,
to CECT-Chinacom
Communications Co., Ltd. (“CECT-Chinacom”) from Beijing Rural Bank to provide
CECT-Chinacom with capital for equipment purchases between June 20, 2006 and
June 16, 2010. Under the guarantee contract, we shall perform all obligations of
CECT-Chinacom under the Loan Contract if CECT-Chinacom fails to perform its
obligations as set forth in the Loan Contract. Failing to perform
could include, but is not limited to, the following: ceasing production, going
out of business, dissolving the business, having its business license withdrawn,
or filing for bankruptcy.
OFF
BALANCE SHEET ARRANGEMENTS
As of March 31, 2009, we had no
off-balance sheet arrangements.
Item 3.
|
Quantitative
and Qualitative Disclosures About Market
Risk.
|
Market
risk is the sensitivity of income to changes in interest rates, foreign
exchanges, commodity prices, equity prices and other market-driven rates or
prices. The Company, in the normal course of doing business, is exposed to
market risk through changes in interest rates with respect to bank loans.
Aggregate bank loans as of March 31, 2009, were $9,378,000. The interest rate
for the three months ended March 31, 2009 was charged at 6.372% to 10.080% per
annum.
Item
4.
|
Controls
and Procedures.
|
The Company maintains disclosure
controls and procedures that are designed to ensure that information required to
be disclosed in our reports filed pursuant to the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules, regulations and related forms, and
that such information is accumulated and communicated to our principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
The Company, under the supervision of
our chief executive officer and chief financial officer, carried out an
evaluation of the effectiveness of the design and operation of its disclosure
controls and procedures as of the balance sheet date. Based upon that
evaluation, management, including our chief executive officer and chief
financial officer, concluded that the Company’s disclosure controls and
procedures were effective in alerting management in a timely manner to
information relating to the Company required to be disclosed in this
report.
During the three month period ended
March 31, 2009, there were no changes in our internal controls over financial
reporting that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.
PART
II – OTHER INFORMATION
Item
1.
|
Legal
Proceedings.
|
We are
party to certain litigation/arbitration with regards to amounts payable to
suppliers for
which
the Company was not satisfied with the quality and timing of the goods
supplied. However, the amount in question is not material to the Company
and we believe that such litigation/arbitration will not have a material adverse
effect on us or our business and that we will be able to resolve these issues
through further business negotiations.
Not
required.
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
(a) None.
(b) Not
applicable.
(c) None.
Item
3.
|
Defaults
Upon Senior Securities.
|
None.
Item
4.
|
Submission
of Matters to a Vote of Security
Holders.
|
None.
Item
5.
|
Other
Information.
|
(a) None.
(b) There
were no material changes to the procedures by which security holders may
recommend nominees to the registrant's board of directors during the fiscal
quarter ended March 31, 2009.
The
following exhibits, which are numbered in accordance with Item 601 of
Regulation S-K, are filed herewith or, as noted, incorporated by reference
herein:
Exhibit Number
|
Exhibit Description
|
|
|
3.1
|
Certificate
of Incorporation of Orsus Xelent Technologies, Inc. (incorporated by
reference from Exhibit 3.1 to the Registration Statement on Form SB-2
filed with the Securities and Exchange Commission on July 28, 2004 as
amended by that Plan of Merger and Agreement of Merger attached as Exhibit
2.1 to the Current Report on Form 8-K filed with the SEC on April 20,
2005)
|
3.2
|
Amended
and Restated Bylaws of the Registrant (incorporated by reference from
Exhibit 3.2 to the Current Report on Form 8-K filed with the Securities
and Exchange Commission on February 7, 2007, as amended by the Current
Report on Form 8-K filed with the SEC on March 5, 2007)
|
4.1
|
Specimen
Certificate of Common Stock (incorporated by reference to Exhibit 4.1 to
Amendment 2 to the Registration Statement on Form SB-2/A filed with the
Securities and Exchange Commission on October 19,
2004)
|
Exhibit
Number
|
Exhibit
Description
|
|
|
10.1
|
Contract
of Suretyship, dated June 20, 2007, between Yayuncun Branch of Beijing
Rural Commercial Bank and Beijing Orsus Xelent Technology & Trading
Company Limited (incorporated by reference from Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 12, 2007)
|
10.2
|
X180
Mobile Terminal Purchase Contract, dated May 31, 2007, among Unicom
Huasheng Telecommunication Technology Co., Ltd., Dalian Daxian
Distribution Company and Beijing Orsus Xelent Technology & Trading
Company Limited (incorporated by reference from Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 6, 2007)
|
10.3
|
2007
Omnibus Long-Term Incentive Plan (incorporated by reference from Exhibit
10.1 to the Current Report on Form 8-K filed with the Securities and
Exchange Commission on January 11, 2008)
|
10.4
|
Master
Distributor Agreement, dated as of August 7, 2008, by and between Beijing
Orsus Xelent Technology & Trading Company Limited and Beijing Xingwang
Shidai Commerce Co., Ltd. (incorporated by reference from Exhibit 10.1 to
the Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 20, 2008)
|
31.1
|
Certification
of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act
of 2002 *
|
31.2
|
Certification
of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act
of 2002 *
|
32.1
|
Certification
of Principal Executive Officer under Section 906 of the Sarbanes-Oxley Act
of 2002 *
|
32.2
|
Certification
of Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act
of 2002 *
|
* Filed
herewith
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
ORSUS
XELENT TECHNOLOGIES, INC.
|
|
|
|
|
By:
|
/s/
Guoji
Liu
|
|
|
Guoji
Liu
|
|
|
Chief
Executive Officer
|
|
|
|
|
By:
|
/s/ Zhao Hongwei
|
|
|
Zhao
Hongwei
|
|
|
Chief
Financial Officer
|
DATED: May
20, 2009
INDEX
TO EXHIBITS
Exhibit Number
|
Exhibit Description
|
3.1
|
Certificate
of Incorporation of Orsus Xelent Technologies, Inc. (incorporated by
reference from Exhibit 3.1 to the Registration Statement on Form SB-2
filed with the Securities and Exchange Commission on July 28, 2004 as
amended by that Plan of Merger and Agreement of Merger attached as Exhibit
2.1 to the Current Report on Form 8-K filed with the SEC on April 20,
2005)
|
3.2
|
Amended
and Restated Bylaws of the Registrant (incorporated by reference from
Exhibit 3.2 to the Current Report on Form 8-K filed with the Securities
and Exchange Commission on February 7, 2007, as amended by the Current
Report on Form 8-K filed with the SEC on March 5, 2007)
|
4.1
|
Specimen
Certificate of Common Stock (incorporated by reference to Exhibit 4.1 to
Amendment 2 to the Registration Statement on Form SB-2/A filed with the
Securities and Exchange Commission on October 19, 2004)
|
10.1
|
Contract
of Suretyship, dated June 20, 2007, between Yayuncun Branch of Beijing
Rural Commercial Bank and Beijing Orsus Xelent Technology & Trading
Company Limited (incorporated by reference from Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 12, 2007)
|
10.2
|
X180
Mobile Terminal Purchase Contract, dated May 31, 2007, among Unicom
Huasheng Telecommunication Technology Co., Ltd., Dalian Daxian
Distribution Company and Beijing Orsus Xelent Technology & Trading
Company Limited (incorporated by reference from Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 6, 2007)
|
10.3
|
2007
Omnibus Long-Term Incentive Plan (incorporated by reference from Exhibit
10.1 to the Current Report on Form 8-K filed with the Securities and
Exchange Commission on January 11, 2008)
|
10.4
|
Master
Distributor Agreement, dated as of August 7, 2008, by and between Beijing
Orsus Xelent Technology & Trading Company Limited and Beijing Xingwang
Shidai Commerce Co., Ltd. (incorporated by reference from Exhibit 10.1 to
the Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 20, 2008)
|
31.1
|
Certification
of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act
of 2002 *
|
31.2
|
Certification
of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act
of 2002 *
|
32.1
|
Certification
of Principal Executive Officer under Section 906 of the Sarbanes-Oxley Act
of 2002 *
|
32.2
|
Certification
of Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act
of 2002 *
|
* Filed
herewith
Orsus Xelent Technolgies New Common Stock (AMEX:ORS)
Historical Stock Chart
From Jun 2024 to Jul 2024
Orsus Xelent Technolgies New Common Stock (AMEX:ORS)
Historical Stock Chart
From Jul 2023 to Jul 2024