Yangtze Telecom Announces Second Quarter 2008 Financial Results
Yangtze Telecom Corp. (TSX VENTURE:SMS) today reported its financial results for the second quarter ended June 30, 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 June 30, 2008 was $3,061,000, consisting of $3,030,000 of sales from HCVAS and $31,000 of sales from NBC. The comparative sales with the same quarter in 2007 for NBC was $15,000 and for HCVAS, nil as HCVAS was acquired in December 2007. The revenue of HCVAS was all derived from sale of software licenses for the biometric fingerprint car security system.
The cost of sales for HCVAS was about 92% of gross revenue which included 82.5% of revenue sharing with the software developer and software amortization of $295,000 compared with $103,000 in the last quarter. The higher amortization expense was a result of allocating the value of shares earned in the HCVAS acquisition to the proprietary software. The selling, general and administration expenses for the quarter ended June 30, 2008 amounted to $344,680, compared with $972,000 for the last quarter, largely a result of much lower warranty expenses - $213,000 vs. $733,000. 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 $426,000, HCVAS recorded a profit for the quarter, before minority interest, of $312,000 and after minority interest, $296,000.
The cost of sales of NBC was $126,000, consisting of $20,000 in amortization of intangible assets - licenses, $41,000 in cost of set-top boxes and an amortization expense of $65,000 for TV broadcast equipment owned by the Company. The gross margin for NBC starting with the second quarter will be lower than before as it embarked on a promotion campaign to accumulate subscribers. The G&A expenses for the quarter were $56,000, consistent with $58,000 recorded in the last quarter. The Mongolian wireless digital TV operations incurred a loss of $152,000 for 2Q 2008, compared with $143,000 for the first quarter.
The G&A expenses for the Yangtze Vancouver head office were $225,000 for the quarter, compared with a quarterly average of $181,000 for 2007. The increase was largely accounted for by higher professional fees than was accrued for.
The net loss for the Company in the second quarter of 2008 was $80,000, net of minority interest, a significant improvement from the net loss of $342,000 in 2Q 2007. The balance in the “Accumulated other comprehensive gain/loss” account, a component of the shareholders’ equity, changed from a gain of $198,000 at last quarter end to a gain of $319,000 as at June 30, 2008, representing an unrealized gain of $121,000 from the impact during the quarter of the depreciation in Canadian dollars against the Company’s RMB denominated fixed assets and equity. The loss per share for the second quarter in 2008 was 0.2 cents, compared with a loss of 0.7 cent for the same period in 2007.
“The new subsidiary, HCVAS, continues to contribute to the financial results of the Company, but its reliance on a single large customer has caused some serious concern in view of the rapid build-up of its accounts receivable, “said Kevin He, CEO of Yangtze Telecom. “While we have obtained a letter of undertaking from the customer to pledge U.S. marketable securities of sufficient value, we will continue to review our options with respect to this customer or this acquisition, particularly in the context of other opportunities that may become available to the Company. Whatever conclusion we may reach, the management is focused on building a solid business for the Company.”
Yangtze Telecom’s 2008 second 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.
SOURCE: www.pr-canada.net
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