Yangtze Telecom Corp.

Yangtze Telecom Corp.

May 02, 2008 06:11 ET

Yangtze Telecom Announces Fiscal 2007 Annual Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 2, 2008) - Yangtze Telecom Corp. (TSX VENTURE:SMS) today reported its financial results for the fourth quarter and twelve months ended December 31, 2007. During the year, the Company operated through three subsidiaries in China - 95%-owned Hunchun VAS Technology Company Ltd.(HCVAS), wholly-owned Wuhan Chengxi Information Technology Company Ltd. ("ChengXi") and 65%-owned China United Telecom Technology Company ("UTT"); and one subsidiary in Mongolia - NBC Co. Ltd. The Company acquired HCVAS with an effective date of December 1, 2007, and disposed of its equity interests in UTT and Chengxi as of December 31, 2007. The revenues and expenses of UTT and Chengxi have been removed from the results of operations for the year ended 2007 and are presented separately as discontinued operations. All dollar amounts are in Canadian dollars unless otherwise noted.

Revenue for the year ended December 31, 2007 was $1,531,000, consisting of $1,455,000 from sales of HCVAS since December 1, 2007 and $76,000 from sales of NBC since April 1, 2007. The revenue of HCVAS was from the sale of software licenses for the biometric fingerprint car security system ("BFS"), while NBC revenue was from sale of wireless digital TV subscription services in Ulan Bator, including set-top boxes.

The cost of sales for HCVAS was 82.5% of revenue in accordance with the governing agreement with the software developer, plus a monthly amortization of the software. This revenue sharing percentage is subject to re-negotiation every six months at a rate no higher than the prevailing rate depending on the cumulative licensing revenue from the software sales. The G & A expenses for the month amounted to $110,000. HCVAS is located in the Northeast region of China, which is a region that attracts private enterprises through offers of certain government incentives including rebates of value added taxes and profit tax exemptions. Including a tax rebate of $204,000, HCVAS recorded a profit for the month of December, before minority interest, of $326,000.

The cost of sales of NBC were about $357,000, consisting of $44,000 in amortization of intangible assets - licenses, $88,000 in costs of set-top boxes and $29,000 in operating expenses and amortization expense of $196,000 for TV broadcast equipment. Compared with startup expenses of $296,000 for 2006, the G & A expenses for the year were $265,000, which included non-cash amortization expenses of $37,000 for fixed assets and write off of leasehold improvements. The Mongolian wireless digital TV operations incurred a loss of $563,000 for 2007.

The G&A expenses for Yangtze Vancouver office were $724,000, excluding the TV assets amortization of $196,000, compared with $609,000 for 2006. The increase of $115,000 was largely accounted for by an across the board increase in expenses - travelling, transfer agent and filing fees, and professional fees, most of which was the result of the acquisition of HCVAS. The net loss for the year 2007 was $1,683,000, net of minority interest, a decrease from $2,185,000 in 2006. Included in the loss for the year was $706,000 from net losses from discontinued operations.

As at December 31, 2007, the financial condition of the company showed marked improvement following the acquisition of HCVAS on December 1, 2007. The ratio of current assets, $7,618,000, over current liabilities, $1,782,000, was 4.27 at 2007 year-end compared with 1.35 ($1,446,000 over $1,066,000) at 2006 year-end. The improvement in liquidity is largely explained by the non-brokered private placement of 5,890,000 shares at $0.17 per share for proceeds of $1,001,300. The increased availability of resources following the HCVAS acquisition should help alleviate the immediate pressure on the working capital of NBC.

"We are pleased to report that the completion of the annual audit report also marked the end of a long process in the acquisition of HCVAS, which required the audited net asset value of HCVAS on December 1, 2007 to complete the filing documentation," said Kevin He, CEO of Yangtze Telecom. "We now look forward to being able to update our shareholders on the progress of the BFS business, which to this date has been performing as planned. Most importantly, the Company is in the early stage of developing a mobile value-added service business targeted at large corporate users by utilizing its proprietary Push-to-talk (PTT) over Cellular (PoC) technology in partnership with telco operators. The Company is in the process of establishing an operations centre in Beijing for the PTT business."

Yangtze Telecom's 2007 annual report and Management's Discussion and Analysis are accessible on the Company's web site (www.yangtzetelecom.com) and on SEDAR (www.sedar.com).

About Yangtze Telecom Corp.

Yangtze Telecom Corp. conducts its business via two operating subsidiaries - NBC Co. Ltd. based in Ulaanbaatar, Mongolia and Hunchun VAS Technology Company Ltd. based in Jilin, China. NBC operates a wireless digital TV network and offers TV subscription service in Ulaanbaatar. HCVAS licenses technologies in biometric fingerprint car security system and Push-to-talk (PTT) handsets.

For further information on Yangtze Telecom Corp., please visit the Company's web site at www.yangtzetelecom.com.

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