Delaware
|
20-1198142
|
|
(State
of incorporation)
|
(I.R.S. Employer
Identification No.)
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨ (Do
not check if a smaller reporting company)
|
Smaller
reporting company x
|
Class
|
Outstanding
at May 24, 2010
|
|
Common
Stock, US$.001 par value per share
|
29,756,000
shares
|
Page
|
||
Part
I: Financial Information
|
1
|
|
Item
1 -Financial Statements
|
1
|
|
Consolidated
Balance Sheets
|
1
|
|
Consolidated
Statements of Operations and Comprehensive Income
|
2
|
|
Consolidated
Statements of Cash Flows
|
3
|
|
Notes
to Consolidated Financial Statements
|
4
|
|
Item
2 - Management’s Discussion and Analysis of Financial Condition and
Results of Operations
|
15
|
|
Item
3 - Quantitative and Qualitative Disclosures about Market
Risk
|
21
|
|
Item
4T - Controls and Procedures
|
21
|
|
Part
II. Other Information
|
22
|
|
Item
1 - Legal Proceedings
|
22
|
|
Item
1A - Risk Factors
|
22
|
|
Item
2 - Unregistered Sales of Equity Securities and Use of
Proceeds
|
22
|
|
Item
3 - Defaults Upon Senior Securities
|
22
|
|
Item
4 – Removed and Reserved
|
22
|
|
Item
5 – Other Information
|
22
|
|
Item
6 - Exhibits
|
22
|
|
Signatures
|
24
|
Item
1.
|
Financial
Statements
|
March 31,
2010
|
December 31,2009
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ | 10 | $ | 374 | ||||
Restricted
cash
|
4 | 4 | ||||||
Notes
Receivable
|
- | 2,779 | ||||||
Accounts
receivable
|
85,370 | 81,130 | ||||||
Trade
deposit paid, net
|
6,658 | 5,875 | ||||||
Other
current assets, net
|
28 | 29 | ||||||
Pledged
deposit
|
1,290 | 1,290 | ||||||
Total
current assets
|
93,360 | 91,481 | ||||||
Property,
plant and equipment, net
|
170 | 178 | ||||||
Deferred
tax asset
|
4,341 | 4,095 | ||||||
$ | 97,871 | $ | 95,754 | |||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities
|
||||||||
Short-term
bank loans
|
$ | 9,391 | $ | 9,390 | ||||
Short-term
loan payable
|
307 | 307 | ||||||
Accounts
payable
|
7,669 | 7,652 | ||||||
Accrued
expenses and other accrued liabilities
|
3,616 | 3,413 | ||||||
Trade
deposits received
|
1,883 | 1,884 | ||||||
Due
to shareholders
|
620 | 611 | ||||||
Income
taxes payable
|
5,871 | 5,870 | ||||||
Other
taxes payable
|
22,502 | 21,423 | ||||||
Liabilities
for possible settlement to accounts payable
|
4,182 | 2,928 | ||||||
Total
current liabilities
|
56,041 | 53,478 | ||||||
Stockholders’
equity
|
||||||||
Preferred
stock, par value US$0.001; authorized 100,000,000 shares; none
issued
|
- | - | ||||||
Common
stock, par value US$0.001; authorized 100,000,000
shares; Issued and
outstanding 29,756,000 shares as of March 31, 2010 and December 31,
2009
|
30 | 30 | ||||||
Additional
paid-in capital
|
3,209 | 3,209 | ||||||
Unappropriate
retained earnings
|
1,042 | 1,042 | ||||||
Appropriated
retained earnings
|
31,909 | 32,363 | ||||||
Accumulated
other comprehensive income
|
5,640 | 5,632 | ||||||
Total
stockholders’ equity
|
41,830 | 42,276 | ||||||
$ | 97,871 | $ | 95,754 |
Three months ended March 31,
|
||||||||
2010
|
2009
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Net
sales
|
$ | 7,591 | 19,724 | |||||
Cost
of sales
|
6,995 | 16,632 | ||||||
Gross
profit
|
596 | 3,092 | ||||||
Operating
expenses:
|
||||||||
Selling
expenses
|
41 | 123 | ||||||
General
and administrative expenses
|
27 | 266 | ||||||
Research
and development expenses
|
5 | 17 | ||||||
Depreciation
and amortization
|
8 | 23 | ||||||
Allowance
for doubtful accounts
|
(251 | ) | - | |||||
Income
from operations
|
766 | 2,663 | ||||||
Other
income/(expenses)
|
||||||||
Interest
expense
|
(213 | ) | (222 | ) | ||||
Other
(expenses)/income, net
|
(1,252 | ) | 17 | |||||
(Loss)/income
before income tax expense
|
(699 | ) | 2,458 | |||||
Income
tax (expenses)/benefit
|
||||||||
Current
tax expense
|
- | (323 | ) | |||||
Deferred
taxes benefit
|
245 | - | ||||||
Net
(loss)/income
|
(454 | ) | 2,135 | |||||
Other
comprehensive income
|
||||||||
Foreign
currency translation adjustment
|
8 | 64 | ||||||
Comprehensive
(loss)/income
|
$ | (446 | ) | 2,199 | ||||
(Loss)/Earnings
per share:
|
||||||||
Basic
and diluted
|
$ | (0.02 | ) | $ | 0.07 | |||
Weighted
average number of common shares outstanding – basic and
diluted
|
29,756,000 | 29,756,000 |
Three
months ended March 31,
|
||||||||
2010
|
2009
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
(loss)/income
|
$ | (454 | ) | $ | 2,135 | |||
Adjustments
to reconcile net (loss)/income to net cash used in operating
activities:
|
||||||||
Deferred
tax
|
(245 | ) | - | |||||
Depreciation
and amortization
|
8 | 23 | ||||||
Loss
due to liability for possible settlement to accounts
payable
|
1,253 | - | ||||||
Changes
in assets and liabilities:
|
||||||||
Accounts
receivable
|
(4,227 | ) | (4,545 | ) | ||||
Note
receivable
|
2,779 | - | ||||||
Trade
deposits paid, net
|
(783 | ) | 8,116 | |||||
Other
current assets, net
|
- | 48 | ||||||
Accounts
payables
|
17 | (6,375 | ) | |||||
Accrued
expenses, other accrued liabilities and other tax payable
|
1,287 | 696 | ||||||
Due
to shareholders
|
- | (250 | ) | |||||
Income
tax payable
|
- | 289 | ||||||
Net
cash flows (used in)/provided by operating activities
|
(365 | ) | 137 | |||||
Cash
flows from financing activities
|
||||||||
Proceeds
from banks and other loans
|
- | 2,512 | ||||||
Repayment
of bank loans
|
- | (2,687 | ) | |||||
Repayment
of mortgage loans
|
- | (12 | ) | |||||
Net
cash flows used in financing activities
|
- | (187 | ) | |||||
Net
change in cash and cash equivalents
|
(365 | ) | (50 | ) | ||||
Effect
of foreign exchange rate changes on cash and cash
equivalent
|
1 | - | ||||||
Cash
and cash equivalent - beginning of period
|
374 | 102 | ||||||
Cash
and cash equivalent - end of period
|
$ | 10 | $ | 52 | ||||
Supplemental
disclosure for cash flow information
|
||||||||
Interest
paid
|
$ | - | $ | 43 | ||||
Income
taxes paid
|
$ | - | $ | 34 |
1.
|
ORGANIZATION
|
2.
|
DESCRIPTION
OF BUSINESS
|
3.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
4.
|
RESTRICTED
CASH
|
5.
|
ACCOUNTS
RECEIVABLE
|
6.
|
TRADE
DEPOSIT PAID, NET
|
March 31, 2010
|
December 31, 2009
|
|||||||
(US$’000)
|
(US$’000)
|
|||||||
(Unaudited)
|
||||||||
Trade
deposit paid
|
$ | 6,787 | $ | 6,004 | ||||
Less:
allowance for doubtful accounts
|
(129 | ) | (129 | ) | ||||
Total
|
$ | 6,658 | $ | 5,875 |
7.
|
OTHER
CURRENT ASSETS, NET
|
March
31, 2010
|
December 31, 2009
|
|||||||
(US$’000)
|
(US$’000)
|
|||||||
(Unaudited)
|
||||||||
Other
current assets
|
$ | 1,815 | $ | 1,816 | ||||
Less:
allowance for doubtful accounts
|
(1,787 | ) | (1,787 | ) | ||||
Total
|
$ | 28 | $ | 29 |
8.
|
PLEDGED
DEPOSIT
|
9.
|
PROPERTY,
PLANT AND EQUIPMENT, NET
|
March 31, 2010
|
December 31,
2009
|
|||||||
US$’000
|
US$’000
|
|||||||
(Unaudited)
|
||||||||
Moulds
|
4 | 4 | ||||||
Leasehold
improvements
|
131 | 131 | ||||||
Office
equipment
|
323 | 323 | ||||||
Motor
vehicles
|
303 | 303 | ||||||
761 | 761 | |||||||
Less:
Accumulated depreciation
|
(591 | ) | (583 | ) | ||||
170 | 178 |
10.
|
SHORT-TERM
BANK LOANS
|
At March 31,
2010
|
|
Amount
(RMB’000)
|
|
Annual
interest rate
|
|
Term
|
Guarantee provided by
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Loan
from Beijing Rural
Commercial
Bank
|
47,000
(US$6,875)
|
10.08%
|
From
September 28, 2008 to September 27, 2009
|
Director
Liu Yu; A guarantee company; pledged deposit of
US$1,290
|
||||
Loan
from Huaxia Bank
|
17,200
(US$2,516)
|
6.3720%
|
From
February 20,2009 to February 20, 2010
|
Director
Liu Yu; Two third party companies; Distributor
Xingwang.
|
||||
Total
|
64,200
(US$9,391)
|
At December 31,
2009
|
|
Amount
(RMB’000)
|
|
Annual
interest rate
|
|
Term
|
Guarantee provided by
|
||
Loan
from Beijing Rural Commercial Bank
|
47,000
(US$6,874)
|
|
10.08%
|
From
September 28, 2008 to September 27, 2009
|
Director
Liu Yu; A guarantee company; pledged deposit of
US$1,290
|
||||
Loan
from Huaxia Bank
|
17,200
(US$2,516)
|
6.3720%
|
From
February 20, 2009 to February 20, 2010
|
Director
Liu Yu; Two third party companies; Distributor
Xingwang.
|
|||||
Total
|
64,200
(US$9,390)
|
11.
|
SHORT-TERM
LOAN FROM A NON-FINANCIAL
INSTITUTION
|
12.
|
AMOUNT
DUE TO SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS
|
(a)
|
Name
and relationship of
shareholders
|
Related party
|
Relationship
|
|
Mr.
Liu Yu
|
Director
and shareholder of the Company
|
|
Mr.
Wang Xin
|
Shareholder
and former director of the Company (Resigned on March 27,
2009)
|
(b)
|
Summary
of balances due to shareholders and related party
transactions
|
March 31, 2010
|
December 31, 2009
|
|||||||
US$’000
|
US$’000
|
|||||||
(Unaudited)
|
||||||||
Due
to shareholders
|
||||||||
Mr.
Liu Yu
|
411 | 402 | ||||||
Mr.
Wang Xin
|
209 | 209 | ||||||
620 | 611 | |||||||
Bank
loans guaranteed by Mr. Liu Yu
|
9,391 | 9,390 |
13.
|
COMMITMENTS
AND CONTINGENCIES
|
(a)
|
Operating
lease commitments
|
(b)
|
Contingencies
|
14.
|
UNAPPROPRIATED
RETAINED EARNINGS
|
15.
|
STOCK
OPTIONS
|
Expected
dividend yield
|
- | |||
Expected
stock price volatility
|
85.07 | % | ||
Risk
free interest risk
|
3.61 | % | ||
Expected
life of share options
|
10 Years
|
Number of
share options
|
||||
(Unaudited)
|
||||
As
of January 1, 2010
|
614,000 | |||
Granted
|
- | |||
Exercised
|
- | |||
Cancelled/lapsed
|
- | |||
As
of March 31, 2010
|
614,000 |
16.
|
LIABILITIES
FOR POSSIBLE SETTLEMENT FOR ACCOUNTS
PAYABLE
|
17.
|
PENSION
COSTS
|
18.
|
INCOME
TAXES
|
19.
|
(LOSS)/EARNINGS
PER SHARE
|
Three months ended March 31,
|
||||||||
2010
|
2009
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Numerator
used in basic net income per share:
|
||||||||
Net
(loss)/income
|
(454 | ) | 2,135 | |||||
Shares
(denominator):
|
||||||||
Weighted
average common shares outstanding
|
29,756,000 | 29,756,000 | ||||||
Plus:
weighted average incremental shares from assumed exercise of
options
|
- | - | ||||||
Weighted
average common shares outstanding used in computing diluted net
income per common share
|
29,756,000 | 29,756,000 | ||||||
(Loss)/Earnings
per common share-basic and diluted
|
$ | (0.02 | ) | $ | 0.07 |
20.
|
CONCENTRATIONS
AND CREDIT RISKS
|
|
(a)
|
During
the three months ended March 31, 2010 and 2009, the Company’s operating
revenue was mainly derived from two distributors. For three months ended
March 31, 2010 and 2009, 82.4% and 100%, respectively, of total revenue
was derived from our largest distributor Xingwang. There was no trade
deposit received from Xingwang as of March 31, 2010 and 2009. Accounts
receivable from Xingwang were US$78,296 and US$75,616 as of March 31, 2010
and December 31, 2009, respectively. As mentioned in note 5, “Accounts
Receivable”, in year 2008, a guarantee company provided a guarantee up to
US$43,829 (RMB300 million) for the accounts receivable from Xingwang for
two years from the date they are due. The agreement has been renewed
and re-signed as of January 20, 2010, and the guaranteed period was
extended to the year ended December 31,
2010.
|
|
(b)
|
Suppliers
accounting for over 10% of the Company’s purchases are as
follows:
|
|
The three months ended March 31,
|
||||||
2010
|
2009
|
||||||
%
|
%
|
||||||
(Unaudited)
|
(Unaudited)
|
||||||
Supplier
A
|
82 | 56 | |||||
Supplier
B
|
18 | 44 | |||||
100 | 100 |
|
(c)
|
The
Company’s revenue for the three months ended March 31, 2010 and 2009,
respectively, were all derived from the PRC. Geographical information of
the carrying amount of long-lived assets is as
follows:
|
March 31,
2010
|
December
31,2009
|
|||||||
US$’000
|
US$’000
|
|||||||
(Unaudited)
|
|
|||||||
PRC
|
168 | 176 | ||||||
Hong
Kong
|
2 | 2 | ||||||
Total
long-lived assets
|
170 | 178 |
21.
|
SUBSEQUENT
EVENTS
|
|
1.
|
Safeguard
our traditional sales channels and explore the possibility of selling more
GSM cell phones in traditional markets. The Company will use
its key ability to create telephone models that respond precisely to
market opportunities to target customer
needs.
|
|
2.
|
Launch
our own 3G products while telecom carriers are promoting the commercial
use of 3G. Based on the relationships we have already built with the
telecom carriers, we believe the Company will be able to establish a
beneficial market share in this new era of the telecom
industry.
|
|
3.
|
Expand
our industrial structure by consummating certain acquisitions using funds
obtained from the capital markets in order to enhance our business
foundation and long-term
development.
|
Three months ended
|
Three months ended
|
|||||||||||||||||||||||
March 31, 2010
|
March 31, 2009
|
Comparison
|
||||||||||||||||||||||
(US$000)
|
% of
Revenue
|
(US$000)
|
% of
Revenue
|
(US$000)
|
%
|
|||||||||||||||||||
Net
sales
|
7,591 | 100.00 | % | 19,724 | 100.00 | % | (12,133 | ) | (61.51 | )% | ||||||||||||||
Cost
of sales
|
6,995 | 92.15 | % | 16,632 | 84.32 | % | (9,637 | ) | (57.94 | )% | ||||||||||||||
Sales
expenses
|
41 | 0.54 | % | 123 | 0.62 | % | (82 | ) | (66.67 | )% | ||||||||||||||
General
& administrative expenses
|
27 | 0.36 | % | 266 | 1.35 | % | (239 | ) | (89.85 | )% | ||||||||||||||
Research
and development expenses
|
5 | 0.07 | % | 17 | 0.09 | % | (12 | ) | (70.59 | )% | ||||||||||||||
Depreciation
and amortization
|
8 | 0.11 | % | 23 | 0.12 | % | (15 | ) | (65.22 | )% | ||||||||||||||
Allowance
for doubtful accounts
|
(251 | ) | (3.31 | )% | - | - | (251 | ) | 100.00 | % | ||||||||||||||
Interest
expenses
|
(213 | ) | (2.81 | )% | (222 | ) | (1.13 | )% | 9 | 4.05 | % | |||||||||||||
Other
(expenses)/income, net
|
(1,252 | ) | (16.50 | )% | 17 | 0.09 | % | (1,269 | ) | 7466.06 | % | |||||||||||||
Income
before income tax expense
|
(699 | ) | (9.21 | )% | 2,458 | 12.46 | % | (3,157 | ) | (128.45 | )% | |||||||||||||
Current
tax expense
|
- | - | (323 | ) | (1.64 | )% | 323 | (100.00 | )% | |||||||||||||||
Deferred
taxes benefit
|
245 | 3.23 | % | - | - | 245 | 100.00 | % | ||||||||||||||||
Net
(loss)/income
|
(454 | ) | (5.98 | )% | 2,135 | 10.82 | % | (2,589 | ) | (121.27 | )% |
Cellular
phones model
|
Three months ended March 31, 2010
|
|||||||
Amount
(US$’000)
|
% of total revenue
|
|||||||
DX796
|
5,376 | 70.82 | % | |||||
LM7100B
|
1,333 | 17.56 | % | |||||
DX5388
|
882 | 11.62 | % | |||||
Total
|
7,591 | 100.00 | % |
|
Three months ended March 31, 2010
|
|||||||
Amount
(US$’000)
|
% of total revenue
|
|||||||
Beijing
Xingwang Shidai Tech & Trading Co., Ltd.
|
6,258 | 82.44 | % | |||||
Tianjin
Tongguang
|
1,333 | 17.56 | % | |||||
Total
|
7,591 | 100.00 | % |
Item
1.
|
Legal
Proceedings.
|
Item
1A.
|
Risk
Factors.
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
Item
3.
|
Defaults
Upon Senior Securities.
|
Item
4.
|
Removed
and Reserved.
|
Item
5.
|
Other
Information.
|
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
|
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)
|
|
10.2
|
Master
Distributor Agreement, dated as of August 7, 2008, by and between Beijing
Orsus Xelent Technology & Trading Company Limited and Beijing Xingwang
Shidai Commerce Co., Ltd. (incorporated by reference from Exhibit 10.1 to
the Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 20, 2008)
|
|
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/ Guoji Liu
|
|
Guoji
Liu
|
||
Chief
Executive Officer
|
||
By:
|
/s/ Hua Chen
|
|
Hua
Chen
|
||
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
|
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)
|
|
10.2
|
Master
Distributor Agreement, dated as of August 7, 2008, by and between Beijing
Orsus Xelent Technology & Trading Company Limited and Beijing Xingwang
Shidai Commerce Co., Ltd. (incorporated by reference from Exhibit 10.1 to
the Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 20, 2008)
|
|
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
*
|