SOURCE: Orsus Xelent Technologies, Inc.

May 23, 2006 12:11 ET

Orsus Xelent Technologies Reports First Quarter 2006 Results

Revenues up 458%, Gross Profit up 501%, Net Income $0.04 per Share vs. $0.00; Management Anticipates 50% Sequential Growth in Second Quarter

NEW YORK, NY -- (MARKET WIRE) -- May 23, 2006 -- Orsus Xelent Technologies, Inc. (OTCBB: ORXT), an emerging designer and manufacturer of award-winning mobile phones for the Asian market, reported today the company's financial results for the quarter ended March 31, 2006.

As compared to the same period a year ago:

--  Revenues for the first quarter were $8.4 million, representing an
    increase of 458% from $1.5 million in 2005. The increase is attributable to
    sales of new products launched during the final months of 2005. New CDMA-
    based phones contributed the most, climbing from $1.4 million for all of
    2005 to $5.2 million in this first quarter 2006 and representing 62% of
    total revenues.
--  Gross profit was $1.9 million, an increase of 501% from $312,000 in
    2005. Gross profit margin increased to 22.4% from 20.8% in 2005. The
    improvement in gross profit margin is due primarily to the introduction of
    new products that generally have higher profit margins, particularly new
    CDMA products, and other cost-saving measures.
--  Net income was $1.1 million or $0.04 per share, representing 14% of
    revenue. This compares to a near breakeven in 2005, with net income of
    $5,000 or 0.3% of revenue.
    
"This dramatic turn-around in comparative-quarter performance during a traditionally slow first quarter for the industry indicates we are on the right track for the year," said Xavier Xin Wang, Orsus Xelent's president and CEO. "And it shows our new CDMA phones are hitting the mark in terms of price, features, and performance."

The first quarter was highlighted by several major new product launches, including a new line of GSM handsets that offer high-quality design, cutting-edge features, and competitive pricing. New models include increasingly popular features like the ability to download and play MP3 music files, an integrated 1.3 mega pixel camera, MPEG-4, and video recording capabilities.

In addition to two new CDMA phones, the company also introduced a number of high-end phones with external memory card support, super-slim appearance, and PDA functions. The company's new top-end cellular phones feature a 2.8-inch, TFT LCD touch screen display with handwriting-recognition and finger print identification, combined with MPEG-4, GPRS, PDA, RFID and Wi-Fi functions.

"By introducing feature-rich mobile phones that are competitively priced, the company aims to substantially increase its share of the mobile phone market in the PRC, as well as more readily penetrate new markets in Southeast Asia," notes Wang. "In addition to meeting consumer demand for the latest features, size, and functionality, we believe our leading-edge products will allow us to capitalize on the tremendous growth trends in the Asian market."

According to industry analysts,

--  Worldwide mobile phone sales topped 800 million units in 2005, up 21%
    from 2004, and will soon exceed 1 billion.
--  191 million mobile phones were sold in Asia in 2005, up 16%, with a
    market value of $34.8 billion, making it the largest mobile phone market in
    the world.
--  Mobile phone subscribers in China exceeded a record 393 million in
    2005, up 15% from 2004.
--  While the PRC has the largest number of cellular phone users of any
    nation in world, the penetration rate in the PRC is still only about 30%.
--  China's mobile phone market is expected to reach 500 million
    subscribers, or $128 billion in industry-wide revenues, by 2007.
    
Second Quarter and FY2006 Guidance

During the second quarter of 2006, the company will continue its product diversification strategy, including the introduction of new CDMA phones. In anticipation of 3G carrier licensing and subsequent market demand to occur within the next twelve months, the company initiated development of 3G cellular products subsequent to the end of the first quarter. The company plans to address the growing popularity of multimedia cellular phones by introducing low to mid-priced phones with MP3 music and MPEG-4 functionality. The new MP3 cellular phones are expected to generate profits from both the domestic market and international markets during the second quarter.

Management anticipates these and other efforts will drive revenue growth, resulting in a revenue range of $13 to $15 million in second quarter 2006, and a corresponding increase in net income over the previous quarter in the range of $1.8 to $2.0 million, or $0.06-$0.07 per share. Management expects to end the year with revenues exceeding $60 million.

About Orsus Xelent Technologies

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 comprises the design of mobile phones, related digital circuits, and software development, and 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 like finger print recognition and touch-screen displays. Since the company's launch in 2004, it has established "Orsus" as a popular brand, selling more than 740,000 units and achieving 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 further information, please visit: 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.

                      Orsus Xelent Technologies, Inc.
              Condensed Consolidated Statements of Operations
                    Three months ended March 31, 2006

                                               (Unaudited)
                                            Three months ended
                                                 March 31,
                                         -------------------------
                                                2006         2005
                                             US$'000      US$'000

Operating revenues:                            8,367        1,500
                                         -----------   ----------

Operating expenses:
Cost of sales                                  6,493        1,188
Sales and marketing                              444          294
General and administrative                       189          262
Research and development                          81           34
Depreciation                                      25           26
                                         -----------   ----------

Total operating expenses                       7,232        1,804
                                         -----------   ----------

Operating income (loss)                        1,135         (304)
Interest expense                                   -          (21)
Other income, net                                  2          330
                                         -----------   ----------

Income before income taxes                     1,137            5
Income taxes                                       -            -
                                         -----------   ----------

Net income                                     1,137            5
                                         ===========   ==========

Earnings per share:

Basic                                    $      0.04   $        -
                                         ===========   ==========

Weighted average number of common stock
 outstanding                              29,756,000   29,756,000
                                         ===========   ==========


                      Orsus Xelent Technologies, Inc.
                   Condensed Consolidated Balance Sheet
                           As of March 31, 2006

                                                   As of        As of
                                                  March 31,   December 31,
                                                     2006         2005
                                                   US$'000      US$'000
                                                 (Unaudited)
ASSETS
Current assets
Cash and cash equivalents                                 888        2,974
Accounts receivable - Trade                            14,366       12,034
Inventories                                             4,452        4,460
Trade deposit paid                                     14,377       10,580
Advance to third party                                    707            0
Other current assets                                      262          182
                                                 ------------ ------------


Total current assets                                   35,052       30,230

Property, plant and equipment, net                        845          781
                                                 ------------ ------------


Total assets                                           35,897       31,011
                                                 ============ ============


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank loan                                      991            -
Accounts payable - Trade                                7,327        7,939
Accrued expenses and other accrued liabilities          2,599        2,238
Trade deposits received                                 8,519        5,432
Due to directors                                          320          320
Provision for warranty                                     44          122
Taxes payable                                              21           21
                                                 ------------ ------------


Total current liabilities                              19,821       16,072
                                                 ------------ ------------


Commitments and contingencies

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
 March 31,
2006 andas of December 31, 2005                            30           30
Additional paid-in capital                              2,484        2,484
Dedicated reserves                                      1,042        1,042
Other comprehensive income                                349          349
Retained earnings                                      12,171       11,034
                                                 ------------ ------------


Total stockholders' equity                             16,076       14,939
                                                 ------------ ------------


Total liabilities and stockholders' equity             35,897       31,011
                                                 ============ ============

Contact Information

  • Contact
    Orsus Xelent Technologies, Inc.
    Xavier Xin Wang
    President and CEO
    US: Tel 212-719-7535
    Fax 212-790-9594
    PRC: Tel 010-85653777
    Fax 010-85653666

    Investor Relations Contact
    Liolios Group, Inc.
    Ron Both
    (ron@liolios.com)
    Geoffrey Plank
    (geoffrey@liolios.com)
    Tel 949-574-3860
    Fax 949-574-3870