Orsus Xelent Technologies, Inc. (NYSE Amex: ORS), a China-based
designer and manufacturer of award-winning mobile phones for the
Asian market, reported today it incurred a small loss in its first
quarter ended March 31, 2010, reflecting continuing difficult
market conditions, which led to a shrinkage in sales and gross
margins compared with the same period last year.
As reported by the Company, net sales in the 2010 first quarter
were $7,591,000 compared with $19,724,000 in the first quarter last
year, a decline of 61.51%. Gross margins in the first quarter this
year declined to 7.85% from 15.68% in the year ago period.
Consequently, as compared with net income of $2,135,000, or $0.07
per share, in the first quarter last year, in this year's first
quarter the Company reported a net loss of $(454,000) or $(0.02)
per share.
The Company attributed the decrease in 2010 first quarter sales
and gross profit primarily to a decline in the number of
anticipated large orders from major customers of its distributors
which resulted in the sale of 57,000 cell phone units, compared
with 266,000 cell phone units in the first quarter last year.
Further, following the industry trend, the Company's sales in the
period were primarily of its lower margin, lower and middle priced
phones, mainly to rural customers. Demand for the Company's GSM
phones declined, and the Company introduced only two new products
in the 2010 quarter. At the same time, competition in this market
has continued to increase, as China's telecom operators have
focused on protecting their rural market share ahead of the future
strengthening they anticipate in this market, as government
policies to improve the living standards of rural households are
applied.
Continuing To Pursue New Operating Strategy
Mr. Guoji Liu, CEO of the Company, stated, "Other factors
affecting the domestic cell phone market at present include the
lingering dampening effect of the global financial crisis on
consumer purchasing, and the reorganization of the domestic telecom
operators which continues to create a lag in market demand for
high-margin products in particular. In the period ahead, we see
this continuing to some extent, but still believe the industry will
be in an improved position as the year progresses. The
reorganization of industry carriers at some point should lead to
further market development, and the new 3G technology also should
begin to encourage buying activity." He stated further, "If these
improvements materialize, we do see the opportunity for improved
second half results through implementation of the operating
strategy we have previously announced."
According to the Company, the key elements of its operating
strategy going forward include:
-- Safeguarding traditional sales channels and selling more of its feature
rich GSM phones in traditional markets, while also exploiting the
Company's historic strength in creating telephone models that target
specific customer needs;
-- Launching the Company's own 3G products, and based on the strong
relationships it has developed with the telecom carriers, creating a
beneficial market share in this area;
-- Making selected acquisitions to strengthen the Company's foundation and
long term development with funds obtained from the capital markets.
Financials
The Company continued to operate with small amounts of cash
during the quarter, and saw a further small increase in accounts
receivable in the period to $85,370,000, which was its major
current asset as of March 31, 2010. The Company said it will
continue to pursue efforts in the second quarter to reduce aged
receivables, which have been accumulated almost entirely from its
largest distributor. As previously reported, on January 1, 2010,
the Company signed a new contract with a third party guarantee
company that guarantees all accounts receivable that are or may
become outstanding from the Company's largest distributor between
January 1, 2010 and December 31, 2010. Consequently, the Company
reported that no allowance for doubtful accounts was accrued in the
first quarter this year.
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.
SEE ATTACHED TABLE
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. and Subsidiaries
Consolidated Statements of Operation and Comprehensive Income
(In thousands, except number of shares and per share data)
Three months ended March 31,
------------------------------
2010 2009
-------------- --------------
(Unaudited) (Unaudited)
Net sales $ 7,591 19,724
Cost of sales 6,995 16,632
-------------- --------------
Gross profit 596 3,092
Operating expenses:
Selling expenses 41 123
General and administrative expenses 27 266
Research and development expenses 5 17
Depreciation and amortization 8 23
Allowance for doubtful accounts (251) -
-------------- --------------
Income from operations 766 2,663
Other income/(expenses)
Interest expense (213) (222)
Other (expenses)/income, net (1,252) 17
-------------- --------------
(Loss)/income before income tax expense (699) 2,458
Income tax (expenses)/benefit
Current tax expense - (323)
Deferred taxes benefit 245 -
-------------- --------------
Net (loss)/income (454) 2,135
Other comprehensive income
Foreign currency translation adjustment 8 64
-------------- --------------
Comprehensive (loss)/income $ (446) 2,199
============== ==============
(Loss)/Earnings per share:
Basic and diluted $ (0.02) $ 0.07
============== ==============
Weighted average number of common shares
outstanding - basic and diluted 29,756,000 29,756,000
============== ==============
Contacts: PRC: Orsus Xelent Technologies, Inc. Guoji Liu CEO
Tel: 010-85653777 Fax: 010-85653666 US: Ken Donenfeld Tel:
212-402-7838 Fax: 646-381-9727
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