SOURCE: Orsus Xelent Technologies, Inc.

August 22, 2006 08:00 ET

Orsus Xelent Technologies Reports Second Quarter 2006 Results

102% Sequential Revenue Growth; Net Income $0.04 per Share; Exports Expand

NEW YORK, NY -- (MARKET WIRE) -- August 22, 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 June 30, 2006.

Revenues for the second quarter were $17.0 million, representing an increase of 102% from $8.4 million in the previous quarter, and 795% from $1.9 million in the same quarter in 2005. This exceeded the range of $13-15 million forecasted in the company's first quarter earnings report. The increase is attributable primarily to the strong market acceptance of the company's new ultra-thin, slim bar models, and the increase of export sales to the Southeast Asian market that totaled approximately 50% of sales in the second quarter.

Net income was $1.2 million or $0.04 per basic share, up marginally from $1.1 million or $0.04 per basic share in the previous quarter, and up from a net loss of $0.5 million or $(0.02) per basic share in the same quarter in 2005. This fell below the range of $1.8 to $2.0 million, or $0.06 - $0.07 per basic share forecasted in the first quarter earnings report. This was primarily due to lower margins related to the expanding level of exports, the increased percentage of low-end products, and the provisions for the receivables, trade deposits and inventories amounting to $0.5 million.

"Despite increased competitive pressures from foreign cell phone manufactures, our continued dramatic turn-around in comparative-quarter performance reveals we are executing our growth plan effectively, and with the right products and product mix," said Xavier Xin Wang, Orsus Xelent's president and CEO. "Also this quarter we dramatically improved our international sales, with exports totaling approximately half of our revenues in the second quarter of 2006. CDMA sales were also up 80% from the first quarter."

Continued Wang, "While we were able to exceed our expectations for revenue growth in the second quarter, the strong increase in exports, combined with an increase of lower margin low-end phones and the provisions for receivables, trade deposit and inventories, resulted in only a slight growth in earnings. Unlike domestic sales, our exports currently do not include after-sales services and warrantees that provide greater margins. Also, as part of our export strategy that has driven this strong growth, we have provided more favorable terms to our new international customers that temporally reduce margins.

"As our export business gains momentum, we expect to see new revenue streams from a widening customer base adding to margin expansion in future quarters. We will continue to foster closer cooperation with telecommunication operators, make efforts to reduce our long outstanding trade receivables and trade deposits, and reduce our inventories levels. And by year-end, we anticipate the introduction of new products, including our next generation 3G mobile products.

"These factors, along with continued domestic sales growth and overall market expansion, should keep us well on track to reach our forecast of $60 million in revenues for 2006, and we believe profitability can be maintained at a steady growth in the coming twelve months."

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 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 the company's filings with the Securities and Exchange Commission and are included here by reference.

                         Orsus Xelent Technologies, Inc.
            Condensed Consolidated Statements of Operations


                                 (Unaudited)            (Unaudited)
                             Three months ended       Six months ended
                                   June 30,               June 30,
                           ----------------------  ----------------------
                                 2006        2005        2006        2005
                      Note    US$'000     US$'000     US$'000     US$'000

Operating revenues:            17,009       1,940      25,376       3,440
                           ----------  ----------  ----------  ----------

Operating expenses:
  Cost of sales                14,670       1,711      21,163       2,899
  Sales and marketing             342         407         786         701
  General and
   administrative                 500         307         689         569
  Research and
   development                     66         108         147         142
  Depreciation                    100          49         125          75
                           ----------  ----------  ----------  ----------
  Total operating
   expenses                    15,678       2,582      22,910       4,386
                           ----------  ----------  ----------  ----------

Operating profit/(loss)         1,331        (642)      2,466        (946)

Interest expense                  (29)         (4)        (29)        (25)
Other income, net                   3         122           5         452
                           ----------  ----------  ----------  ----------

Income/(Loss) before
 income taxes                   1,305        (524)      2,442        (519)

Income taxes           3         (160)       --          (160)       --
                           ----------  ----------  ----------  ----------

Net income/(loss)               1,145        (524)      2,282        (519)
                           ==========  ==========  ==========  ==========

Earnings/(Loss)
 per share:            2

Basic                            0.04       (0.02)       0.08       (0.02)
                           ==========  ==========  ==========  ==========

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


The accompanying notes to the condensed consolidated financial statements,
available in the company quarterly statement for the period ended June 30,
2006 as filed with the Securities and Exchange Commission, are an integral
part of these statements.



                         Orsus Xelent Technologies, Inc.
                   Condensed Consolidated Balance Sheets


                                                       As of         As of
                                                    June 30,  December 31,
                                                        2006          2005
                                         Note        US$'000       US$'000
                                                 (Unaudited)
ASSETS
Current assets
  Cash and cash equivalents                              349         2,974
  Accounts receivable - Trade                         20,141        12,034
  Inventories                                          3,674         4,460
  Trade deposits paid                                  8,054        10,580
  Advance to third party                                 249          --
  Other current assets                                   153           182
                                                 -----------   -----------

  Total current assets                                32,620        30,230

Property, plant and equipment, net                       806           781
                                                 -----------   -----------

Total assets                                          33,426        31,011
                                                 ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities                        4
  Short-term bank loans                                2,477          --
  Accounts payable - Trade                             9,958         7,939
  Accrued expenses and other accrued
   liabilities                                         2,943         2,238
  Trade deposits received                                260         5,432
  Due to directors                         5             320           320
  Provision for warranty                                  66           122
  Taxes payable                                          181            21
                                                 -----------   -----------

  Total current liabilities                           16,205        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 June 30, 2006 and as 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                                     13,316        11,034
                                                 -----------   -----------

Total stockholders' equity                            17,221        14,939
                                                 -----------   -----------

Total liabilities and stockholders' equity            33,426        31,011
                                                 ===========   ===========


The accompanying notes to the condensed consolidated financial statements,
available in the company quarterly statement for the period ended June 30,
2006 as filed with the Securities and Exchange Commission, are an integral
part of these statements.

Contact Information

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

    Investor Relations Contact
    Liolios Group, Inc.
    Tel 949-574-3860
    Fax 949-574-3870