x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
(State
of incorporation)
|
|
20-1198142
(I.R.S.
Employer Identification No.)
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o (Do not check if
a smaller reporting company)
|
Smaller
reporting company x
|
Class
|
Outstanding
at November 19, 2008
|
|
Common
Stock, $.001 par value per share
|
29,756,000
shares
|
Item 1. |
Condensed
Consolidated Financial Statements
|
Pages
|
||||
Condensed
Consolidated Statements of Income and Comprehensive Income
|
1
|
|||
Condensed
Consolidated Balance Sheets
|
2
|
|||
Condensed
Consolidated Statements of Cash Flows
|
3
|
|||
|
||||
Condensed
Consolidated Statements of Changes in Stockholders’ Equity
|
4
|
|||
Notes
to Condensed Consolidated Financial Statements
|
5
- 13
|
(Unaudited)
Three
months ended
September
30,
|
(Unaudited)
Nine
months ended
September
30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
US$’000
|
US$’000
|
US$’000
|
US$’000
|
||||||||||
Operating
revenue - Net sales
|
29,240
|
22,046
|
78,853
|
58,411
|
|||||||||
Cost
of operating revenue
|
(25,073
|
)
|
(18,064
|
)
|
(68,302
|
)
|
(47,586
|
)
|
|||||
Gross
income
|
4,167
|
3,982
|
10,551
|
10,825
|
|||||||||
Operating
expenses:
|
|||||||||||||
Sales
and marketing
|
128
|
142
|
353
|
389
|
|||||||||
General
and administrative
|
228
|
262
|
1,799
|
2,250
|
|||||||||
Research
and development
|
250
|
23
|
391
|
319
|
|||||||||
Depreciation
|
23
|
26
|
72
|
113
|
|||||||||
Allowance
for obsolete inventories
|
-
|
108
|
-
|
700
|
|||||||||
629
|
561
|
2,615
|
3,771
|
||||||||||
Operating
income
|
3,538
|
3,421
|
7,936
|
7,054
|
|||||||||
Other
income (expenses)
|
|||||||||||||
Interest
expenses
|
(255
|
)
|
(443
|
)
|
(733
|
)
|
(747
|
)
|
|||||
Other
income, net
|
87
|
14
|
465
|
21
|
|||||||||
Income
before income taxes
|
3,370
|
2,992
|
7,668
|
6,328
|
|||||||||
Income
taxes - Note 4
|
(445
|
)
|
(422
|
)
|
(1,320
|
)
|
(1,062
|
)
|
|||||
Net
income
|
2,925
|
2,570
|
6,348
|
5,266
|
|||||||||
Other
comprehensive (loss) income
|
|||||||||||||
Foreign
currency translation adjustment
|
(36
|
)
|
-
|
1,480
|
-
|
||||||||
Comprehensive
income
|
2,889
|
2,570
|
7,828
|
5,266
|
|||||||||
Earnings
per share - Note 5
|
|||||||||||||
Basic
and diluted (US$)
|
0.10
|
0.09
|
0.21
|
0.18
|
|||||||||
Weighted
average number of common
|
|||||||||||||
stock
outstanding
|
29,756,000
|
29,756,000
|
29,756,000
|
29,756,000
|
As
of
September
30,
2008
(Unaudited)
|
As
of
December
31,
2007
|
||||||
ASSETS
|
US$’000
|
US$’000
|
|||||
Current
assets
|
|||||||
Cash
and cash equivalents
|
924
|
2,928
|
|||||
Trade
accounts receivable, net of allowance - Note 6
|
78,743
|
57,743
|
|||||
Inventories,
net
|
-
|
4
|
|||||
Trade
deposits paid, net
|
6,353
|
839
|
|||||
Other
current assets
|
1,831
|
4,196
|
|||||
Pledged
deposit
|
1,256
|
1,206
|
|||||
Total
current assets
|
89,107
|
66,916
|
|||||
Property,
plant and equipment, net - Note 7
|
254
|
318
|
|||||
TOTAL
ASSETS
|
89,361
|
67,234
|
|||||
LIABILITIES
|
|||||||
Current
liabilities
|
|||||||
Short-term
bank loans - Note 8
|
9,256
|
9,160
|
|||||
Short-term
loan from a non-financial institution - Note 9
|
57
|
-
|
|||||
Current
portion of mortgage loan - Note 10
|
23
|
68
|
|||||
Trade
accounts payable
|
20,048
|
10,854
|
|||||
Accrued
expenses and other accrued liabilities
|
10,681
|
8,048
|
|||||
Trade
deposits received
|
1,908
|
1,709
|
|||||
Due
to directors - Note 11(b)
|
458
|
323
|
|||||
Provision
for warranty
|
85
|
123
|
|||||
Tax
payable
|
4,395
|
3,047
|
|||||
Total
current liabilities
|
46,911
|
33,332
|
|||||
Non-current
liability
|
|||||||
Mortgage
loan - Note 10
|
-
|
5
|
|||||
COMMITMENT
AND CONTINGENCIES - Note 14
|
-
|
-
|
|||||
STOCKHOLDERS’
EQUITY
|
|||||||
Preferred
stock - US$0.001 par value: Authorized 100,000,000 shares;
|
|||||||
none
issued and outstanding
|
-
|
-
|
|||||
Common
stock - US$0.001 per share : Authorized 100,000,000
shares;
|
|||||||
issued
and outstanding 29,756,000 shares as of September 30, 2008
|
|||||||
and
as of December 31, 2007
|
30
|
30
|
|||||
Additional
paid-in capital
|
3,209
|
2,484
|
|||||
Dedicated
reserves
|
1,042
|
1,042
|
|||||
Accumulated
other comprehensive income
|
4,386
|
2,906
|
|||||
Retained
earnings
|
33,783
|
27,435
|
|||||
TOTAL
STOCKHOLDERS’ EQUITY
|
42,450
|
33,897
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
89,361
|
67,234
|
(Unaudited)
Nine
months
ended
September 30
|
|||||||
2008
|
2007
|
||||||
US$’000
|
US$’000
|
||||||
Cash
flows from operating activities
|
|||||||
Net
income
|
6,348
|
5,266
|
|||||
Adjustments
to reconcile net income to net cash used by
|
|||||||
operating
activities:
|
|||||||
Depreciation
|
72
|
113
|
|||||
Allowance
for obsolete inventories
|
-
|
700
|
|||||
Allowance
for doubtful accounts
|
-
|
1,487
|
|||||
Compensation
costs for stock options granted
|
725
|
-
|
|||||
Changes
in assets and liabilities:
|
|||||||
Trade
accounts receivable
|
(18,202
|
)
|
(15,086
|
)
|
|||
Inventories
|
4
|
526
|
|||||
Trade
deposits paid
|
(5,362
|
)
|
(2,249
|
)
|
|||
Other
current assets
|
2,636
|
(20
|
)
|
||||
Trade
accounts payable
|
8,582
|
2,796
|
|||||
Accrued
expenses and other accrued liabilities
|
1,610
|
2,166
|
|||||
Trade
deposits received
|
162
|
749
|
|||||
Due
to directors
|
125
|
(132
|
)
|
||||
Due
to a stockholder
|
-
|
132
|
|||||
Provision
for warranty
|
(38
|
)
|
62
|
||||
Tax
payable
|
1,178
|
1,056
|
|||||
Net
cash flows used by operating activities
|
(2,160
|
)
|
(2,434
|
)
|
|||
Cash
flows from investing activities
|
|||||||
Purchase
of property, plant and equipment
|
-
|
(186
|
)
|
||||
Advances
from directors
|
-
|
127
|
|||||
Repayment
of loans to third parties
|
-
|
288
|
|||||
Net
cash flows provided by investing activities
|
-
|
229
|
|||||
Cash
flows from financing activities
|
|||||||
New
loans from banks and a financial institution
|
9,114
|
4,861
|
|||||
Repayment
of bank loans
|
(9,033
|
)
|
(2,558
|
)
|
|||
Net
cash flows provided by financing activities
|
81
|
2,303
|
|||||
Net
change in cash and cash equivalents
|
(2,079
|
)
|
98
|
||||
Effect
of foreign currency translation on cash and cash
equivalents
|
75
|
-
|
|||||
Cash
and cash equivalents, beginning of period
|
2,928
|
2,421
|
|||||
Cash
and cash equivalents, end of period
|
924
|
2,519
|
|||||
Supplemental
disclosure for cash flow information
|
|||||||
Interest
paid
|
756
|
496
|
|||||
Income
taxes paid
|
515
|
4
|
Additional
|
Other
|
|||||||||||||||||||||
Common
stock issued
|
paid-in
|
Dedicated
|
comprehensive
|
Retained
|
||||||||||||||||||
No.
of
|
Amount
|
capital
|
reserves
|
income
|
earnings
|
Total
|
||||||||||||||||
shares
|
US$’000
|
US$’000
|
US$’000
|
US$’000
|
US$’000
|
US$’000
|
||||||||||||||||
Balance
as of January 1, 2007
|
29,756,000
|
30
|
2,484
|
1,042
|
975
|
17,752
|
22,283
|
|||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
9,683
|
9,683
|
|||||||||||||||
Foreign
currency translation
|
||||||||||||||||||||||
adjustment
|
-
|
-
|
-
|
-
|
1,931
|
-
|
1,931
|
|||||||||||||||
Balance
as of January 1, 2008
|
29,756,000
|
30
|
2,484
|
1,042
|
2,906
|
27,435
|
33,897
|
|||||||||||||||
Net
income
|
6,348
|
6,348
|
||||||||||||||||||||
Compensation
costs for stock
|
||||||||||||||||||||||
options
granted
|
-
|
-
|
725
|
-
|
-
|
-
|
725
|
|||||||||||||||
Foreign
currency translation
|
||||||||||||||||||||||
adjustment
|
-
|
-
|
-
|
-
|
1,480
|
-
|
1,480
|
|||||||||||||||
Balance
as of September 30,
2008 (Unaudited)
|
29,756,000
|
30
|
3,209
|
1,042
|
4,386
|
33,783
|
42,450
|
1.
|
Corporate
information
|
2.
|
Basis
of presentation
|
3. |
Summary
of significant accounting
policies
|
4.
|
Income taxes |
Unified
EIT rate effective January 1, 2008
|
25
|
%
|
||
Small
scale / low profit enterprises
|
20
|
%
|
||
New
/ hi-tech enterprises
|
15
|
%
|
4.
|
Income taxes (continued) |
(a)
|
Income
tax expenses comprised the
following:
|
(Unaudited)
Nine
months
ended
September 30
|
|||||||
2008
|
2007
|
||||||
US$’000
|
US$’000
|
||||||
Current
tax
|
|||||||
United
States
|
-
|
-
|
|||||
Hong
Kong
|
238
|
-
|
|||||
PRC
|
1,082
|
1,062
|
|||||
1,320
|
1,062
|
(b)
|
Reconciliation
from the expected statutory tax rate in the PRC of 25% (2007 : 24%)
is as
follows:
|
(Unaudited)
Nine
months
ended
September 30
|
|||||||
2008
|
2007
|
||||||
% | % | ||||||
Statutory
rate - the PRC
|
25.0
|
24.0
|
|||||
Under-provision
for prior period
|
3.1
|
-
|
|||||
Tax
exempted items
|
(14.1
|
)
|
(12.8
|
)
|
|||
Tax
non-deductible items
|
3.2
|
5.5
|
|||||
Effective
tax rate
|
17.2
|
16.7
|
5.
|
Earnings per share |
6.
|
Trade
accounts receivable, net of
allowance
|
7.
|
Property,
plant and equipment, net
|
|
As
of
September
30,2008
(Unaudited)
|
As
of
December
31,2007
|
|||||
|
US$’000
|
US$’000
|
|||||
Moulds
|
4
|
4
|
|||||
Leasehold
improvements
|
128
|
128
|
|||||
Plant
and machinery
|
19
|
19
|
|||||
Office
equipment
|
280
|
296
|
|||||
Motor
vehicles
|
296
|
296
|
|||||
|
|||||||
|
727
|
743
|
|||||
Accumulated
depreciation
|
(473
|
)
|
(425
|
)
|
|||
|
|||||||
|
254
|
318
|
7.
|
Property, plant and equipment, net (continued) |
8.
|
Short-term
bank loans
|
9.
|
Short-term
loan from a non-financial
institution
|
10.
|
Mortgage
loan
|
|
As
of
September
30,
2008
(Unaudited)
|
As
of
December
31,
2007
|
|||||
|
US$’000
|
US$’000
|
|||||
|
|
|
|||||
Current
portion
|
23
|
68
|
|||||
Non-current
portion
|
-
|
5
|
|||||
|
|||||||
|
23
|
73
|
11. |
Related
party transactions
|
(a) |
Name
and relationship of related parties
|
Related
party
|
Relationship
|
Mr.
Wang Xin
|
Director
and stockholder of the Company
|
Mr.
Liu Yu
|
Director
and stockholder of the Company
|
(b) |
Summary
of related party balances
|
As
of
September
30,
2008
(Unaudited)
|
As
of
December
31,
2007
|
||||||
US$’000
|
US$’000
|
||||||
Due
to directors
|
|||||||
Mr.
Wang Xin and Mr. Liu Yu
|
458
|
323
|
|||||
Bank
loans guaranteed by Mr. Liu Yu
|
9,256
|
9,160
|
|||||
Mortgage
loan guaranteed by Mr. Wang Xin
|
23
|
73
|
12.
|
Stock
options
|
Number
of share options
|
||||
As
of January 1, 2008
|
-
|
|||
Granted
|
614,000
|
|||
Exercised
|
-
|
|||
Cancelled/lapsed
|
-
|
|||
As
of September 30, 2008
|
614,000
|
12. |
Stock
options (continued)
|
Expected
dividend yield
|
-
|
|||
Expected
stock price volatility
|
85.07
|
%
|
||
Risk
free interest risk
|
3.61
|
%
|
||
Expected
life of share options
|
10
Years
|
13.
|
Segment
information
|
14.
|
Contingencies
|
14. |
Contingencies
(continued)
|
Item 2. |
Management
Discussion and Analysis of Financial Conditions and Results of
Operations
|
|
Nine
months ended
September
30, 2008
|
Nine
months ended
September
30, 2007
|
Comparison
|
|||
|
$000
|
%
of Revenue
|
$000
|
%
of Revenue
|
$000
|
%
|
Revenue
|
78,853
|
-
|
58,411
|
-
|
20,442
|
35.00%
|
Cost
of sales
|
68,302
|
86.62%
|
47,586
|
81.47%
|
20,716
|
43.53%
|
Sales
& marketing expenses
|
353
|
0.45%
|
389
|
0.67%
|
(36)
|
(9.25%)
|
General
& admin. expenses
|
1,799
|
2.28%
|
763
|
1.31%
|
1,036
|
135.78%
|
R&D
expenses
|
391
|
0.50%
|
319
|
0.55%
|
72
|
22.57%
|
Depreciation
|
72
|
0.09%
|
113
|
0.19%
|
(41)
|
(36.28%)
|
Allowance
for obsolete inventories
|
-
|
-
|
700
|
1.20%
|
(700)
|
(100.00%)
|
Allowance
for trading deposit receivable*
|
-
|
-
|
1,487
|
2.55%
|
(1,487)
|
(100.00%)
|
Finance
cost
|
733
|
0.93%
|
747
|
1.28%
|
(14)
|
1.87%
|
Other
net income
|
465
|
0.59%
|
21
|
0.04%
|
444
|
2,114.29%
|
Pre-tax
profit
|
7,668
|
9.72%
|
6,328
|
10.83%
|
1,340
|
21.18%
|
Income
tax
|
1,320
|
1.67%
|
1,062
|
1.82%
|
258
|
24.29%
|
Profit
|
6,348
|
8.05%
|
5,266
|
9.02%
|
1,082
|
20.55%
|
|
Three
months ended
September
30, 2008
|
Three
months ended
September
30, 2007
|
Comparison
|
|||
|
$000
|
%
of Revenue
|
$000
|
%
of Revenue
|
$000
|
%
|
Revenue
|
29,240
|
-
|
22,046
|
-
|
7,194
|
32.63%
|
Cost
of sales
|
25,073
|
85.75%
|
18,064
|
81.94%
|
7,009
|
38.80%
|
Sales
& marketing expenses
|
128
|
0.44%
|
142
|
0.64%
|
(14)
|
(9.86%)
|
General
& admin. expenses
|
228
|
0.78%
|
184
|
0.83%
|
44
|
23.91%
|
R&D
expenses
|
250
|
0.85%
|
23
|
0.10%
|
227
|
986.96%
|
Depreciation
|
23
|
0.08%
|
26
|
0.12%
|
(3)
|
(11.54%)
|
Allowance
for obsolete inventories
|
-
|
-
|
108
|
0.49%
|
(108)
|
(100.00%)
|
Allowance
for trading deposit receivable*
|
-
|
-
|
78
|
0.35%
|
(78)
|
(100.00%)
|
Finance
cost
|
255
|
0.87%
|
443
|
2.01%
|
(188)
|
(42.44%)
|
Other
net income
|
87
|
0.30%
|
14
|
0.06%
|
73
|
521.43%
|
Pre-tax
profit
|
3,370
|
11.53%
|
2,992
|
13.57%
|
378
|
12.63%
|
Income
tax
|
445
|
1.52%
|
422
|
1.91%
|
23
|
5.45%
|
Profit
|
2,925
|
10.00%
|
2,570
|
11.66%
|
355
|
13.81%
|
|
Nine
months ended September 30, 2008
|
|
|
$’000
|
%
of revenue
|
DX5020
|
6,909
|
8.76%
|
C106
|
2,251
|
2.85%
|
G588
|
1,965
|
2.49%
|
DX6018
|
10,077
|
12.78%
|
DX5030
|
9,529
|
12.09%
|
DX7020
|
8,692
|
11.02%
|
DX8028
|
5,050
|
6.41%
|
DX5028
|
5,003
|
6.35%
|
DX8020
|
4,621
|
5.86%
|
DX5026
|
4,407
|
5.59%
|
DX5010
|
3,287
|
4.17%
|
DX7028
|
2,740
|
3.47%
|
LM6688
|
2,710
|
3.44%
|
DX7026
|
2,680
|
3.40%
|
PLAM
T680
|
2,144
|
2.72%
|
DX6028
|
2,001
|
2.54%
|
DX3020
|
1,679
|
2.13%
|
DX6030
|
1,382
|
1.75%
|
DX6038
|
1,310
|
1.66%
|
DX6010
|
1,263
|
1.60%
|
LG2018
|
310
|
0.39%
|
TREO680
|
129
|
0.16%
|
Others*
|
(1,286)
|
(1.63%)
|
Total
|
78,853
|
100.00%
|
·
|
DX5020
(CDMA, GPS, Touch Pad, Web Browsing), provided by Hongyuan Kangda
Trading
Co., Ltd.(“HYKD”);
|
·
|
C106
(Ultra Low-end CDMA), provided by Daxian Technologies Inc.(“DX”); and
|
·
|
G588
(Dual Simcards Simul-Standby, Windows Mobile, 1.3 Mega Pixel Camera,
Bluetooth, MP3, MP4), provided by China Electronic Appliance Company
(“CEAC”).
|
·
|
LM6688
(Dual Simcards Simul-Standby, Dual Cameras, Extended Standby, High-quality
Music Player), supplied by Tianjin Communication Broadcast Group
(“TCB”);
|
·
|
DX6018
(Dual Simcards Mono-Standby, 300K Pixel Camera, Bluetooth, Dual Speakers,
MP3. MP4), supplied by Holley Communications Co., Ltd
(“HCC”);
|
·
|
DX7020
(Dual
Simcards Simul-Standby, 2.8+TP, 300K Pixel Camera,
Dual Speakers), supplied by HCC;
|
·
|
DX8028
(Mono-Chip, Dual Simcards Simul-Standby, 1.8+TP, 300K Pixel Camera,
MP3,
MP4, Colorful Pad Lamp, Dual Speakers), supplied by HYKD;
|
·
|
DX5010
(EDGE, GPS, Touch Pad, Web Browsing, IPTV), supplied by
HYKD.
|
·
|
DX5030
(Dual Simcards Simul-Standby, Windows Mobile, 2 Mega Pixel Camera,
Bluetooth, MP3, MP4), supplied by
HYKD;
|
·
|
DX5028(Dual
Simcards Simul-Standby, Samsung SC32442 Chip, 2.8 QVGA TFT, EDGE
, 2 Mega
Pixel Camera ), supplied by Huayi Jiacheng Technologies Co., Ltd.(“HYJT”);
|
·
|
DX8020
(Dual Simcards Simul-Standby, Mono-chip, 1.8+TP, 300K Pixel Camera,
Dual
Speakers, MP3, MP4, Color Pad Lamp), supplied by
HYKD;
|
·
|
DX5026
(Dual Simcards Mono-Standby, Samsung SC32442 Chip, 2.8 QVGA TFT,
EDGE+CDMA, 2 Mega Pixel Camera), supplied by HYJT;
and
|
·
|
DX7028
(Dual Simcards Simul-Standby, 2.8+TP, 300K Pixel Camera, Dual Speakers),
supplied by CEAC.
|
|
Three
months ended September 30, 2008
|
|
|
$’000
|
%
of revenue
|
C106
|
2,251
|
7.70%
|
G588
|
1,965
|
6.72%
|
DX5020
|
864
|
2.95%
|
DX5030
|
9,529
|
32.59%
|
DX5028
|
5,003
|
17.11%
|
DX5026
|
4,407
|
15.07%
|
DX7020
|
3,365
|
11.51%
|
PLAM
T680
|
2,144
|
7.33%
|
TREO680
|
129
|
0.44%
|
Others*
|
(417)
|
(1.42%)
|
Total
|
29,240
|
100.00%
|
|
Nine
months ended September 30, 2008
|
|
|
$’000
|
%
of revenue
|
Beijing
Xingwang Shidai Tech & Trading Co., Ltd.
|
72,364
|
91.77%
|
Tianjin
Communications Broadcast Company
|
4,109
|
5.21%
|
Zhongjie
Communications Co., Ltd.
|
2,251
|
2.86%
|
Beijing
Yangtze Fantai Communications Technology Co., Ltd.
|
129
|
0.16%
|
Total
|
78,853
|
100.00%
|
|
Nine
months ended
September
30, 2008
|
Nine
months ended
September
30, 2007
|
Comparison
|
|||
|
$’000
|
%
of revenue
|
$’000
|
%
of revenue
|
$’000
|
%
|
Sales
& marketing
|
353
|
0.45%
|
389
|
0.67%
|
(36)
|
(9.25%)
|
General
& admin
|
1,799
|
2.28%
|
763
|
1.31%
|
1,036
|
135.78%
|
R&D
|
391
|
0.50%
|
319
|
0.55%
|
72
|
22.57%
|
Depreciation
|
72
|
0.09%
|
113
|
0.19%
|
(41)
|
(36.28%)
|
Allowance
for obsolete inventories
|
-
|
-
|
700
|
1.20%
|
(700)
|
(100.00%)
|
Allowance
for trading deposit receivable*
|
-
|
-
|
1,487
|
2.55%
|
(1,487)
|
(100.00%)
|
Total
|
2,615
|
3.32%
|
3,771
|
6.46%
|
(1,156)
|
(30.65%)
|
|
Three
months ended
September
30, 2008
|
Three
months ended
September
30, 2007
|
Comparison
|
|||
|
$’000
|
$%
of revenue
|
$’000
|
%
of revenue
|
$’000
|
%
|
Sales
& marketing
|
128
|
0.44%
|
142
|
0.64%
|
(14)
|
(9.86%)
|
General
& admin
|
228
|
0.78%
|
184
|
0.83%
|
44
|
23.91%
|
R&D
|
250
|
0.85%
|
23
|
0.10%
|
227
|
986.96%
|
Depreciation
|
23
|
0.08%
|
26
|
0.12%
|
(3)
|
(11.54%)
|
Allowance
for obsolete inventories
|
-
|
-
|
108
|
0.49%
|
(108)
|
(100.00%)
|
Allowance
for trading deposit receivable*
|
-
|
-
|
78
|
0.35%
|
(78)
|
(100.00%)
|
Total
|
629
|
2.15%
|
561
|
2.54%
|
68
|
12.12%
|
1.
|
Intensified
competition in the domestic market and a decline in the gross margin
of
products sold during the period.
|
When
competing with foreign brands in the domestic market, domestic brands
usually focus on sales of low-priced products as a strategy to increase
their market presence and secure originally-owned distribution to
create
conditions for future development.
|
2. |
The
pending structural adjustment of Chinese telecomm
operators.
|
For
the three quarters ended September 30, 2008, we received no high-margin
customized orders from the telecomm operators sector. The sector
is so
focused on restructuring that we received from them only a small
order for
ultra low-end CDMA cell phones from the subsidiary company of China
Telecom. The gross margin for these phones was very thin.
|
Payments due by period
|
||||||||||||||||
Contractual Obligations
|
Total
|
Less than
1 year
|
1-3 years
|
3-5 years
|
More than
5 years
|
|||||||||||
$
|
000
|
$
|
000
|
$
|
000
|
$
|
000
|
$
|
000
|
|||||||
Operating
Lease Obligations
|
35
|
35
|
-
|
-
|
-
|
|||||||||||
Purchase
Obligations
|
7,406
|
7,406
|
-
|
-
|
-
|
|||||||||||
Total
|
7,441
|
7,441
|
-
|
-
|
-
|
Item 3. |
Quantitative
and Qualitative Disclosures About Market
Risk.
|
Item 4. |
Controls
and Procedures.
|
Item 1. |
Legal
Proceedings.
|
Item 1A. |
Risk
Factors.
|
Item 2. |
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
(a) |
None.
|
(b) |
Not
applicable.
|
(c) |
None.
|
Item 3. |
Defaults
Upon Senior Securities.
|
Item 4. |
Submission
of Matters to a Vote of Security
Holders.
|
Item 5. |
Other
Information.
|
(a) |
None.
|
Item 6. |
Exhibits.
|
Exhibit
Number
|
Exhibit
Description
|
|
3.1
|
Certificate
of Incorporation of Orsus Xelent Technologies, Inc. (incorporated
by
reference from Exhibit 3.1 to the Registration Statement on Form
SB-2
filed with the Securities and Exchange Commission on July 28, 2004
as
amended by that Plan of Merger and Agreement of Merger attached as
Exhibit
2.1 to the Current Report on Form 8-K filed with the SEC on April
20,
2005)
|
|
3.2
|
Amended
and Restated Bylaws of the Registrant (incorporated by reference
from
Exhibit 3.2 to the Current Report on Form 8-K filed with the Securities
and Exchange Commission on February 7, 2007, as amended by the Current
Report on Form 8-K filed with the SEC on March 5, 2007)
|
|
4.1
|
Specimen
Certificate of Common Stock (incorporated by reference to Exhibit
4.1 to
Amendment 2 to the Registration Statement on Form SB-2/A filed with
the
Securities and Exchange Commission on October 19, 2004)
|
|
10.1
|
Contract
of Suretyship, dated June 20, 2007, between Yayuncun Branch of Beijing
Rural Commercial Bank and Beijing Orsus Xelent Technology & Trading
Company Limited (incorporated by reference from Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 12, 2007)
|
|
10.2
|
X180
Mobile Terminal Purchase Contract, dated May 31, 2007, among Unicom
Huasheng Telecommunication Technology Co., Ltd., Dalian Daxian
Distribution Company and Beijing Orsus Xelent Technology & Trading
Company Limited (incorporated by reference from Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 6, 2007)
|
|
10.3
|
2007
Omnibus Long-Term Incentive Plan (incorporated by reference from
Exhibit
10.1 to the Current Report on Form 8-K filed with the Securities
and
Exchange Commission on January 11, 2008)
|
|
14.1
|
Code
of Business Conduct and Ethics (incorporated by reference from Exhibit
14
to the Current Report on Form 8-K filed with the Securities and Exchange
Commission on February 7, 2007)
|
|
31.1
|
Certification
of Principal Executive Officer under Section 302 of the Sarbanes-Oxley
Act
of 2002 *
|
|
31.2
|
Certification
of Principal Financial Officer under Section 302 of the Sarbanes-Oxley
Act
of 2002 *
|
|
32.1
|
Certification
of Principal Executive Officer under Section 906 of the Sarbanes-Oxley
Act
of 2002 *
|
|
32.2
|
Certification
of Principal Financial Officer under Section 906 of the Sarbanes-Oxley
Act
of 2002 *
|
ORSUS
XELENT TECHNOLOGIES, INC.
|
|||
By:
|
/s/
Wang Xin
|
||
|
Wang
Xin
|
||
|
Chief
Executive Officer
|
||
By:
|
/s/
Zhao Hongwei
|
||
|
Zhao
Hongwei
|
||
|
Chief
Financial Officer
|
Exhibit
Number
|
Exhibit
Description
|
|
3.1
|
Certificate
of Incorporation of Orsus Xelent Technologies, Inc. (incorporated
by
reference from Exhibit 3.1 to the Registration Statement on Form
SB-2
filed with the Securities and Exchange Commission on July 28, 2004
as
amended by that Plan of Merger and Agreement of Merger attached as
Exhibit
2.1 to the Current Report on Form 8-K filed with the SEC on April
20,
2005)
|
|
3.2
|
Amended
and Restated Bylaws of the Registrant (incorporated by reference
from
Exhibit 3.2 to the Current Report on Form 8-K filed with the Securities
and Exchange Commission on February 7, 2007, as amended by the Current
Report on Form 8-K filed with the SEC on March 5, 2007)
|
|
4.1
|
Specimen
Certificate of Common Stock (incorporated by reference to Exhibit
4.1 to
Amendment 2 to the Registration Statement on Form SB-2/A filed with
the
Securities and Exchange Commission on October 19, 2004)
|
|
10.1
|
Contract
of Suretyship, dated June 20, 2007, between Yayuncun Branch of Beijing
Rural Commercial Bank and Beijing Orsus Xelent Technology & Trading
Company Limited (incorporated by reference from Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 12, 2007)
|
|
10.2
|
X180
Mobile Terminal Purchase Contract, dated May 31, 2007, among Unicom
Huasheng Telecommunication Technology Co., Ltd., Dalian Daxian
Distribution Company and Beijing Orsus Xelent Technology & Trading
Company Limited (incorporated by reference from Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 6, 2007)
|
|
10.3
|
2007
Omnibus Long-Term Incentive Plan (incorporated by reference from
Exhibit
10.1 to the Current Report on Form 8-K filed with the Securities
and
Exchange Commission on January 11, 2008)
|
|
14.1
|
Code
of Business Conduct and Ethics (incorporated by reference from Exhibit
14
to the Current Report on Form 8-K filed with the Securities and Exchange
Commission on February 7, 2007)
|
|
31.1
|
Certification
of Principal Executive Officer under Section 302 of the Sarbanes-Oxley
Act
of 2002 *
|
|
31.2
|
Certification
of Principal Financial Officer under Section 302 of the Sarbanes-Oxley
Act
of 2002 *
|
|
32.1
|
Certification
of Principal Executive Officer under Section 906 of the Sarbanes-Oxley
Act
of 2002 *
|
|
32.2
|
Certification
of Principal Financial Officer under Section 906 of the Sarbanes-Oxley
Act
of 2002 *
|