Orsus Xelent Announces 2011 Second Quarter and First Half Results

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NEW YORK, NY--(Marketwire -08/22/11)- Orsus Xelent Technologies, Inc.   ("Orsus" or the "Company") (AMEX: ORS - News), a designer and distributor of award-winning mobile phones for the Asian market, today reported results for the second quarter and six month periods ended June 30, 2011.

  • Sales in the quarter declined from $6.47 million a year earlier to $4.64 million, and for the first half in 2011 were $8.56 million compared with $14.06 million in the first six months of 2010.   
  • A net loss incurred in the 2011 quarter widened to $2.88 million from $248,000 in the same period a year ago.   Through the first six months of 2011, the Company reported net income of $29.15 million or $11.78 per share, on 2.52 million shares outstanding, compared with a net loss in the first half of 2010 of $702,000.   The year over year increase in the six month period was due to a reversal of an allowance for bad debt resulting from a renewal of a third party guarantee on accounts receivable.   
  • Shareholder's equity of $25.17 million at June 30, 2011, compared with a negative net worth at the same time last year of $4.5 million.

The Company noted that the gross profit margin through the first six months of the year increased 1.34% to 8.96% from 7.62%, and to 8.4% in the second quarter compared with 7.35% in the second quarter last year.   This was a consequence of adjusting the sales prices for key products in line with the sales strategy management established at the start of the year.   At the same time, other key objectives of the strategy were not achieved, as the Company's low priced products were still priced too high to attract support from telecom operators, and sales of higher priced products were weak as new sales channels could not be established to foster sales growth.

The Company reported other key factors which contributed to lower net income in the second quarter were a newly accrued bad debt allowance for accounts receivable not covered by guarantee contracts, as well as additional interest penalties accrued on outstanding loans.

With respect to guarantees on the Company's very substantial accounts receivable, (the latter reached $100.36 million at June 30, 2011), on August 19, 2011 the guarantee contract signed on March 30, 2011 was again renewed.   The guarantee amount for receivables from Xingwang, the Company's primary distributor, also was increased from RMB 500 million to not more than RMB 650 million.

Going Concern and Cash Problems

Mr.   Guoji Liu, CEO of the Company, stated, "As our accounts receivable have continued to grow, our major problem is our weak cash flow which has resulted in a serious going concern issue.   Our working capital is not sufficient to support the operation of the Company and raises doubt about our ability to continue as a going concern."

He added, "Recoverability of a major portion of our assets amounts is dependent upon the continued operation of the Company which, in turn, is dependent on the Company's ability to raise additional capital and secure financing.   As such, we continue to explore, among other things, a strategic merger possibility and an offering and sale of equity.   In the latter regard, on August 12th we filed a shelf registration statement with the Securities and Exchange Commission, which, if approved, would give us flexibility with respect to the possible sale of a variety of corporate equity and debt securities with an aggregate price of $6 million."

Mr.   Liu also reported that the Company is continuing to follow procedures with respect to remaining listed on the NYSE Amex, but can provide no assurance that it will be successful.

Product Strategy

"If the Company is successful in achieving its financing goals, it will be positioned to pursue more vigorously a shift in its product and marketing strategy," Mr.   Liu added.   He said this includes focusing on marketing in new regions such as Africa, while expanding in the Company's traditional domestic market with products that more closely meet the needs of the telecom operators.

"In summary," Mr.   Liu concluded, "we face a substantial challenge, but continue to believe it is possible to achieve healthy development with the solutions we have designed, and are working hard to accomplish this."

SEE ATTACHED TABLE

About Orsus Xelent Technologies, Inc.

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 encompasses the design of mobile phones, related digital circuits, and software development, and it is a recognized pioneer in mobile phone integration technology.   Since the Company's launch in 2004, it has established "Orsus" as a popular brand.

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.   and Subsidiaries Consolidated Statements of Income and Comprehensive Income (In thousands, except number of shares and per share data) (Unaudited) Three months ended Six months ended June June 30, 30, ---------------------- ---------------------- 2011 2010 2011 2010 ---------- ---------- ---------- ---------- Net sales $ 4,642 $ 6,473 $ 8,556 $ 14,064 Cost of sales 4,252 5,997 7,789 12,992 ---------- ---------- ---------- ---------- Gross profit 390 476 767 1,072 ---------- ---------- ---------- ---------- Operating expenses: Selling expenses 6 21 12 62 General and administrative expenses 722 115 746 142 Research and development expenses - 4 - 9 Depreciation and amortization 5 7 10 15 Allowance for doubtful accounts - - - (251) ---------- ---------- ---------- ---------- Total Operating Expenses 733 147 768 (23) ---------- ---------- ---------- ---------- Income from operations (343) 329 (1) 1,095 Other income/(expenses) Interest expense (341) (577) (674) (790) Other (expenses)/income, net (2,195) - 29,827 (1,252) ---------- ---------- ---------- ---------- (Loss)/income before income tax expense (2,879) (248) 29,152 (947) Income tax (expenses)/benefit Current tax expense - - - - Deferred taxes benefit - - - 245 ---------- ---------- ---------- ---------- Net (loss)/income (2,879) (248) 29,152 (702) Other comprehensive income Foreign currency translation adjustment 496 183 559 191 ---------- ---------- ---------- ---------- Comprehensive (loss)/income $ (2,383) $ (65) $ 29,711 $ (511) ---------- ---------- ---------- ---------- (Loss)/earnings per share: Basic and diluted $ (0.945) $ (0.026) $ 11.784 $ (0.206) ---------- ---------- ---------- ---------- Weighted average number of common shares outstanding - basic and diluted 2,521,341 2,479,667 2,521,341 2,479,667 ---------- ---------- ---------- ---------- 
Contact:


Contact:
PRC:
Orsus Xelent Technologies, Inc.
Guoji Liu
CEO
Tel: 010-861085653777

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