SOURCE: Orsus Xelent Technologies, Inc.

November 15, 2007 08:30 ET

Orsus Xelent Announces Third Quarter Results

Achieves Higher Than Planned Net Income on Lower Than Projected Record Revenues; Revenue Growth Over Nine Months Was 27.25%; Sees Strong Fourth Quarter but Revises Full Year Outlook

NEW YORK, NY--(Marketwire - November 15, 2007) - Orsus Xelent Technologies, Inc. (AMEX: ORS), a designer and manufacturer of award-winning mobile phones for the Asian market, today reported net income for its third quarter ending September 30, 2007 of $2,570,000 or $0.09 per share, stemming from continuing sales of higher margin mobile phones and a focus on cost containment. The company also reported that the gain in pre-tax net income in the period was 26% reflecting the fact that in the third quarter last year the company was not required to pay income taxes.

For the first nine months of 2007, the company said net income grew 13.30% to $5,266,000, compared to $4,648,000 in the same period last year. On a pre-tax basis, the company reported growth in net income through the first nine months of 2007 of 31.61%.

Revenues in the third quarter reached a record $22,046,000, which was approximately 34% higher than the preceding second quarter of 2007. Through the first nine months of the year, the company reported a gain in revenues of 27.25%, which grew to $58,411,000 from $45,901,000 in the first nine months of 2006.

The company noted that a key factor underlying the continuing growth in sales and profits was the success of two key strategies implemented at the start of the year. First, was its decision to set up cooperative relationships with key suppliers and telecom operators. It also decided to shift from mass distribution of lower priced products to mid-level and high end products, with significantly higher margins, including the special application phones for which it has begun to develop sales this year. At the same time, the company has not neglected its traditional markets, as reflected in the 55% contribution to revenues from traditional headset products in the third quarter.

The company's actual revenues in the third quarter were $2 million below the prior guidance for the period. With respect to the October 4, 2007 press release which contained the revenue projection for the 2007 third quarter, the Company explained that its intent in the release was to disclose an anticipated 20% increase in third quarter revenues compared with the second quarter of 2007, on which basis results in the third quarter actually have exceeded the projection. However, due to a miscommunication between the Company and its investor relations firm, the comparison made in the release was with the third quarter of 2006. Further, the company did not become cognizant of this discrepancy until the process for reporting actual nine month and third quarter results was underway.

Commenting on these results, Mr. Xavier Wang, president and CEO of ORSUS XELENT, stated, "We are pleased with seeing the continuing positive results of the implementation of our strategy shift this year, which led to net profits in the third quarter nearly equaling the combined results of the first two quarters of the year. We are addressing the error regarding the prior guidance with a tightening of our internal procedures, in particular, for developing and issuing projections, a process which I intend to personally supervise."

Full Year Outlook

He added, "With this in mind, we have determined that it would be prudent for us to be as conservative as possible with respect to projecting results for the remainder of the year. Consequently, while we anticipate closing the year with a strong fourth quarter, marked by further contributions to sales and profits from our GSM, CDMA and specialized applications handsets, we are revising our full year guidance from estimated revenue growth of over 30%, to revenue growth in a range of 20% to 30% ahead of results in 2006."

"Additionally," Mr. Wang said, "with an eye toward further improving our profitability, we are moving toward shifting from OEM to independent production of our own-brand mobile phones, and by year end are intending to enter into an agreement regarding our previously announced planned acquisition of "Lemon Times" with consummation of the acquisition subject to our proper audit and due diligence of the target company."

Other Key Events In The Quarter

--  In August, Orsus announced it signed a letter of intent to acquire for
    cash and stock a majority of a Hebei Province headset designer and
    manufacturer, the "Lemon Times," with a 5,000 square meter electronics
    factory on 64,000 square meters of land.  With two complete SMT product
    lines and four EOL product lines and ISO 9000 Quality Management System
    Certification, ORS believes the operation will allow it to achieve internal
    production capacity of more than one million self branded and OEM units
    annually.  It expects to realize the full benefits and cost savings of this
    production in 2008 and to be in a much stronger position to successfully
    participate in China's 3G market.
    
--  In September, Orsus said it expected to begin delivery of an initial
    order for 488 units of its Proxlink X180 specialized application law
    enforcement mobile terminals to Hebei-BAIC employees in two cities.  This
    represented the initial implementation of the Letter of Intent signed
    earlier in the year with the SAIC Hebei Province.  It is expected that over
    the next several months, more than 10,000 law enforcement officials will
    become users of this advanced product which utilizes the China Unicom CDMA
    1X wireless data network.
    

About Orsus Xelent Technologies, Inc.

Incorporated in the State of Delaware and headquartered in Beijing, China, Orsus Xelent Technologies, Inc. is an emerging designer and manufacturer of award-winning mobile phones for the Asian market, primarily the People's Republic of China (PRC). The Company's business encompasses the design of mobile phones, related digital circuits, and software development, and it is a recognized pioneer in mobile phone integration technology. It introduced the region's first wristwatch-style cellular phone, and it continues to break new ground with state-of-the-art phones that include advanced features such as finger print recognition and touch-screen displays. Increasingly, the Company is focused on developing and marketing, under its Proxlink trademark, special application mobile phones for specialized users in a wide variety of professions in business and government. Since the Company's launch in 2004, it has established "Orsus" as a popular brand and achieved a significant share of the world's largest mobile phone market. It maintains more than 179 service call centers across the PRC, with additional offices in New York, 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.

        Condensed Consolidated Statements of Operations (Unaudited)
      For the three and nine months ended September 30, 2006 and 2007


                                (Unaudited)              (Unaudited)
                             Three months ended       Nine months ended
                                September 30,           September 30,
                            ----------------------  ----------------------
                               2007        2006        2007        2006
                              US$000      US$000      US$000      US$000

Revenues                        22,046      20,525      58,411      45,901
                            ----------  ----------  ----------  ----------

Cost of revenue                 18,064      16,716      47,586      37,879
                            ----------  ----------  ----------  ----------

Gross income                     3,982       3,809      10,825       8,022

Operating expenses:
 Sales and marketing               142         140         389         926
 General and administrative        262       1,194       2,250       1,883
 Research and development           23          40         319         187
 Depreciation                       26          24         113         149
 Allowance for obsolete
  inventories                      108           -         700           -
                            ----------  ----------  ----------  ----------

 Total operating expenses          561       1,398       3,771       3,145
                            ----------  ----------  ----------  ----------

Operating income                 3,421       2,411       7,054       4,877

Finance costs                     (443)        (41)       (747)        (70)
Other income                        14          (4)         21           1
                            ----------  ----------  ----------  ----------

Income before income taxes       2,992       2,366       6,328       4,808

Income taxes                      (422)          -      (1,062)       (160)
                            ----------  ----------  ----------  ----------

Net income                       2,570       2,366       5,266       4,648

Other comprehensive income           -           -           -           -
                            ----------  ----------  ----------  ----------

                                 2,570       2,366       5,266       4,648
                            ==========  ==========  ==========  ==========

Earnings per share:

Basic and diluted                 0.09        0.08        0.18        0.16
                            ==========  ==========  ==========  ==========

Weighted average shares
 outstanding                29,756,000  29,756,000  29,756,000  29,756,000
                            ==========  ==========  ==========  ==========



            Condensed Consolidated Balance Sheets (Unaudited)
              As of December 31, 2006 and September 30, 2007



                                                      As            As
                                                 of September   of December
                                                   30, 2007      31, 2006
ASSETS                                              US$000        US$000
Current assets
 Cash and cash equivalents                               2,519        2,421
 Accounts receivable, net of allowance for
  doubtful accounts of US$Nil (2006: US$230,000)        46,741       31,425
 Inventories, net                                            4        1,230
 Trade deposit paid, net                                 9,521        8,989
 Advance to third party                                      -          288
 Other current assets                                      106           86
 Pledged deposit                                         1,128        1,128
                                                  ------------ ------------

 Total current assets                                   60,019       45,567

Property, plant and equipment, net                         393          320
                                                  ------------ ------------

Total assets                                            60,412       45,887
                                                  ============ ============

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
 Short-term bank loans                                   8,571        6,268
 Accounts payable                                       13,760       10,964
 Accrued expenses and other accrued liabilities          6,610        4,444
 Trade deposits received                                 1,000          251
 Due to directors                                          325          330
 Due to a stockholder                                      132            -
 Provision for warranty                                    115           53
 Tax payables                                            2,350        1,294
                                                  ------------ ------------

 Total current liabilities                              32,863       23,604
                                                  ------------ ------------

Stockholders’ equity
Preferred stock, US$0.001 par value:
  Authorized: 100,000,000 shares, no shares issued           -            -
Common stock and paid-in capital, US$0.001
 par value:
  Authorized: 100,000,000 shares
  Issued and outstanding: 29,756,000 shares as of
   September 30, 2007 and as of December 31, 2006           30           30
Additional paid-in capital                               2,484        2,484
Dedicated reserves                                       1,042        1,042
Other comprehensive income                                 975          975
Retained earnings                                       23,018       17,752
                                                  ------------ ------------

Total stockholders’ equity                              27,549       22,283
                                                  ------------ ------------

Total liabilities and stockholders’ equity              60,412       45,887
                                                  ============ ============

Contact Information

  • Contact:

    Orsus Xelent Technologies, Inc.
    Xavier Xin Wang
    President & CEO

    PRC:
    Tel 010-85653777
    Fax 010-85653666

    US:
    Investors and Press
    Tel: 212 425 5700
    Fax: 212 425 6951