Yangtze Telecom Corp.
TSX VENTURE : SMS

Yangtze Telecom Corp.

June 12, 2008 19:52 ET

Yangtze Telecom Announces First Quarter 2008 Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 12, 2008) - Yangtze Telecom Corp. (TSX VENTURE:SMS) today reported its financial results for the first quarter ended March 31, 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 March 31, 2008 was $9,996,000, consisting of $9,981,000 of sales from HCVAS and $15,000 from NBC. There was no comparative sales in 1Q 2007 for both companies, since HCVAS was acquired in December 2007 and NBC was still in the startup phase in early 2007. The revenue of HCVAS was all derived from software licenses for the biometric fingerprint car security system.

The cost of sales for HCVAS was about 84% of gross revenue which included 82.5% of revenue sharing with the software developer and software amortization of $103,000. The selling, general and administration expenses for the three months period ended March 31, 2008 amounted to $972,000, of which $734,000 represented accrued warranty expenses and distribution channel development costs. 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 $1,512,000, HCVAS recorded a profit for the quarter of $2,168,000, before minority interest, and $2,059,000, net of minority interest.

The cost of sales of NBC was $101,000, consisting of $19,000 in amortization of intangible assets - licenses, $12,000 in cost of set-top boxes, $5,000 in operating expenses and an amortization expense of $65,000 for TV broadcast equipment. The G & A expenses for the quarter were $58,000, compared with the quarterly average for 2007 of $66,000. The Mongolian wireless digital TV operations incurred a loss of $144,000 for 2008.

The G & A expenses for the Yangtze Vancouver head office were $190,000 for the quarter, compared with a quarterly average of $181,000 for 2007. The slight increase was largely accounted for by higher filing fees arising from the initial share issuance with respect to the HCVAS acquisition.

The net profit for the Company in the first quarter of 2008 was $1,726,000, net of minority interest, a significant improvement from the net loss of $1,683,000 in 2007. The balance in the accumulated "other comprehensive gain/loss", a component of shareholders' equity, changed from a loss of $465,000 at year end of 2007 to a gain of $198,000 as at March 31, 2008, representing an unrealized gain of $663,000 from the impact during the quarter of the depreciation in Canadian dollars from 7.391 to 6.8213 against the Company's RMB denominated fixed assets and equity. The earnings per share for the 1st quarter in 2008 were 3.8 cents, compared with a loss of 0.5 cent for the same period in 2007.

"We are very pleased that the Company reported a significant turnaround in profitability in the first full quarter since the acquisition of HCVAS," said Kevin He, CEO of Yangtze Telecom. "We will continue to review and improve our existing businesses while remaining vigilant about acquisition opportunities of leading businesses that offer unique growth potential in China."

Yangtze Telecom's 2008 first 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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