Yangtze Telecom Corp.

Yangtze Telecom Corp.

November 28, 2008 17:27 ET

Yangtze Telecom Announces Third Quarter 2008 Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 28, 2008) - Yangtze Telecom Corp. (TSX VENTURE:SMS) today reported its financial results for the third quarter ended September 30, 2008. During the quarter, the Company operated through a subsidiary in China - 95%-owned Hunchun VAS Technology Company Ltd. (HCVAS) and a subsidiary in Mongolia - NBC Co. Ltd. (NBC). All dollar amounts are in Canadian dollars unless otherwise noted.

Revenue for the quarter ended September 30, 2008 was $1,338,000, consisting of $1,274,000 of sales from HCVAS and $64,000 from NBC. The comparative sales revenue for the same quarter in 2007 for NBC was $39,000 and HCVAS, nil as HCVAS was acquired in December 2007. The revenue of HCVAS was all derived from sale of software licenses for the biometric fingerprint car security system.

The cost of sales for HCVAS was about 110% of gross revenue in the current quarter which included 82.5% of revenue sharing with the software developer and software amortization of $311,000, compared with $295,000 in the last quarter. The negative margin in the current quarter was a result of lower sales volume relative to the fixed component in the cost of sales. The selling, general and administration expenses for the quarter ended September 30, 2008 amounted to $172,000 compared with $344,000 for the last quarter, largely a result of much lower warranty expenses - $54,000 vs. $213,000. HCVAS is located in the Northeast region of China, which attracts private enterprises through certain government incentives including rebates of value added taxes and profit tax exemptions. Including a tax rebate of $181,000, HCVAS recorded a loss for the quarter, before minority interest, of $116,000 and after minority interest, a loss of $110,000.

The cost of sales for NBC was $134,000, consisting of $21,000 in amortization of intangible assets - licenses, $48,000 in cost of set-top boxes and an amortization expense of $65,000 for TV broadcast equipment. The G & A expenses for the quarter were $83,000, compared with $56,000 recorded in the last quarter, reflecting higher level of sales and marketing activities. The Mongolian wireless digital TV operations incurred a loss of $155,000 for the third quarter, compared with $152,000 for the second quarter.

The G&A expenses for the Yangtze Vancouver head office were $135,000 for the quarter, compared with a quarterly average of $181,000 for 2007. The decrease was largely accounted for by lower salary and travel expenses.

The net loss for the Company, net of minority interest, in the third quarter of 2008 was $400,000 (including total non-cash amortization expenses of $407,000) compared with a net loss of $362,000 in 3Q 2007. The balance in the "Accumulated other comprehensive gain/loss" account, a component of shareholders' equity, changed from a credit of $319,000 at last quarter end to a credit of $692,000 as at September 30, 2008, representing an unrealized gain of $373,000 from the impact during the quarter of the depreciation in Canadian dollar against the Company's RMB denominated fixed assets and equity. This reduces the Comprehensive loss for the quarter to $27,000 or 0.7 cents per share, comparable to the loss of 1 cent per share recorded for the same period in 2007.

The cash balance of the Company as at September 30, 2008 was $51,000 compared with $565,000 as at December 31, 2007. The Company is reviewing the option of selling its equity interest in the Mongolian wireless digital TV operations as a way of addressing its liquidity problem. Meanwhile, the Company is also seeking temporary funding through banks in China, but the location of the assets being in Mongolia proves to be a hurdle that needs to be overcome.

"The focus of our business going forward is to develop Push-to-talk (PTT) mobile service with telecom operators in China," said Chunqiu Wu, the new director of Yangtze Telecom and CEO of HCVAS, "PTT service, i.e. enabling one-to-one or one-to-many communication through the push of a button on a cellular phone without incurring billable airtime, has been popular in North America among business users for quite some time. It has never been introduced in China in a significant way, although there are wide ranging applications in the China market. We are pleased to report that we have just commenced technical testing in Jilin and Guangdong provinces with the local mobile operators."

Yangtze Telecom's 2008 third quarter financial statements 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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