UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2006
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______ to ______.
Commission file number: 000-117718
ORSUS XELENT TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 20-11998142
(State of incorporation) (I.R.S. Employer Identification No.)
12th Floor, Tower B, Chaowai MEN Office Building
26 Chaowai Street, Chaoyang Disc.
Beijing, People's Republic Of
China 100020 (Address of principal
executive offices, including zip code)
86-10-85653777
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Indicate by check mark whether the registrant is a shell Registrant (as defined
in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 14, 2006
- --------------------------------------- ------------------------------
Common Stock, $.001 par value per share 29,756,000 shares
PART I --- FINANCIAL INFORMATION
Item 1. Financial Statements.
Orsus Xelent Technologies, Inc.
Condensed Consolidated Statements of Operations
=======================================================================================================
(Unaudited) (Unaudited)
Three months ended Six months ended
June 30, June 30,
-------------------------- --------------------------
2006 2005 2006 2005
Note US$'000 US$'000 US$'000 US$'000
Operating revenues: 17,009 1,940 25,376 3,440
----------- ----------- ----------- -----------
Operating expenses:
Cost of sales 14,670 1,711 21,163 2,899
Sales and marketing 342 407 786 701
General and administrative 500 307 689 569
Research and development 66 108 147 142
Depreciation 100 49 125 75
----------- ----------- ----------- -----------
Total operating expenses 15,678 2,582 22,910 4,386
----------- ----------- ----------- -----------
Operating profit/(loss) 1,331 (642) 2,466 (946)
Interest expense (29) (4) (29) (25)
Other income, net 3 122 5 452
----------- ----------- ----------- -----------
Income/(Loss) before income taxes 1,305 (524) 2,442 (519)
Income taxes 3 (160) -- (160) --
----------- ----------- ----------- -----------
Net income/(loss) 1,145 (524) 2,282 (519)
=========== =========== =========== ===========
Earnings/(Loss) per share: 2
Basic 0.04 (0.02) 0.08 (0.02)
=========== =========== =========== ===========
Weighted average number of common stock
outstanding 29,756,000 29,756,000 29,756,000 29,756,000
=========== =========== =========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- --------------------------------------------------------------------------------
Orsus Xelent Technologies, Inc.
Condensed Consolidated Balance Sheets
==========================================================================================
As of As of
June 30, December 31,
2006 2005
Note US$'000 US$'000
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents 349 2,974
Accounts receivable - Trade 20,141 12,034
Inventories 3,674 4,460
Trade deposits paid 8,054 10,580
Advance to third party 249 --
Other current assets 153 182
----------- -----------
Total current assets 32,620 30,230
Property, plant and equipment, net 806 781
----------- -----------
Total assets 33,426 31,011
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities 4
Short-term bank loans 2,477 --
Accounts payable - Trade 9,958 7,939
Accrued expenses and other accrued liabilities 2,943 2,238
Trade deposits received 260 5,432
Due to directors 5 320 320
Provision for warranty 66 122
Taxes payable 181 21
----------- -----------
Total current liabilities 16,205 16,072
----------- -----------
Commitments and contingencies
Stockholders' equity Preferred stock, US$0.001 par value:
Authorized: 100,000,000 shares, no shares issued
Common stock and paid-in capital, US$0.001 par value:
Authorized: 100,000,000 shares
Issued and outstanding: 29,756,000 shares as of June 30,
2006 and as of December 31, 2005 30 30
Additional paid-in capital 2,484 2,484
Dedicated reserves 1,042 1,042
Other comprehensive income 349 349
Retained earnings 13,316 11,034
----------- -----------
Total stockholders' equity 17,221 14,939
----------- -----------
Total liabilities and stockholders' equity 33,426 31,011
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- --------------------------------------------------------------------------------
Orsus Xelent Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
- ---------------------------------------------------------------------------------------------
(Unaudited)
Six months ended
June 30,
------------------
2006 2005
US$'000 US$'000
Cash flows from operating activities
Net income/(loss) 2,282 (519)
Adjustments to reconcile net income/(loss) to net cash used in operating
activities:
Depreciation 125 75
Changes in assets and liabilities:
Accounts receivable -trade (8,107) 2,592
Inventories, net 786 489
Trade deposits paid 2,526 376
Other current assets 29 (84)
Trade deposits received (5,172) (2,487)
Accounts payable - trade 2,019 (3,448)
Provision for warranty (56) (58)
Accrued expenses and other accrued liabilities 705 425
Provision for taxation 160 --
------- -------
Net cash used in operating activities (4,703) (2,639)
------- -------
Cash flows from investing activities
Purchase of property, plant and equipment (150) (468)
Repayment from a related company -- 3,319
Advance to a director -- (6)
Decrease in restricted cash -- 612
------- -------
Net cash (used in)/generated from investing activities (150) 3,457
------- -------
Cash flows generated from financing activities --
Borrowing from bank 2,477 --
Loan to third parties (249) --
------- -------
Net cash generated from financing activities 2,228 --
------- -------
Net (decrease)/increase in cash and cash equivalents (2,625) 818
Cash and cash equivalents, beginning of the period 2,974 224
------- -------
Cash and cash equivalents, end of the period 349 1,042
======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
- --------------------------------------------------------------------------------
Orsus Xelent Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. PREPARATION OF INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements as
of June 30, 2006 and 2005 have been prepared based upon Securities and
Exchange Commission ("SEC") rules that permit reduced disclosure for
interim periods and include, in the opinion of management, all adjustments
(consisting of normal recurring adjustments and reclassifications)
necessary to present fairly the financial position, results of operations
and cash flows for the periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America ("USA") have been condensed or
omitted. These condensed consolidated financial statements should be read
in conjunction with the audited financial statements and notes thereto
incorporated by reference in the Company's Form 10-KSB for the year ended
December 31, 2005 filed on April 3, 2006. The results of operations for the
six-month periods ended June 30, 2006 and 2005 are not necessarily
indicative of the operating results to be expected for the full year.
The condensed consolidated financial statements and accompanying notes are
presented in United States dollars and prepared in conformity with
accounting principles generally accepted in the USA ("USGAAP") which
requires management to make certain estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2. EARNINGS PER SHARE
Basic earnings per share is computed based upon the weighted average number
of shares of common stock outstanding during each period as restated as a
result of the reorganization and recapitalization. The 29,756,000 shares in
connection with the recapitalization were included in the computation of
earnings per share as if outstanding at the beginning of each period
presented.
The Company had no potential common stock instruments with a dilutive
effect for any period presented, therefore basic and diluted earnings per
share are the same.
3. INCOME TAXES
The Company is subject to income taxes on an entity basis on income arising
in or derived from the tax jurisdictions in which it operates. Provision
for income and other related taxes have been provided in accordance with
the tax rates and laws in effect in the various countries of operations.
No provision for withholding or United States federal or state income taxes
or tax benefits on the undistributed earnings and/or losses of the
Company's subsidiaries has been provided as the earnings of these
subsidiaries, in the opinion of the management, will be reinvested
indefinitely. Determination of the amount of unrecognized deferred taxes on
these earnings is not practical, however, unrecognized foreign tax credits
would be available to reduce a portion of the tax liability.
- --------------------------------------------------------------------------------
Orsus Xelent Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
- --------------------------------------------------------------------------------
3. INCOME TAXES (CONTINUED)
United First International Limited was incorporated in Hong Kong and has no
assessable profit for the periods presented. Orsus Xeleent Trading (HK)
Limited ("OXTHK") was also incorporated in Hong Kong and Hong Kong Profits
Tax has been provided at the rate of 17.5% on OXTHK's estimated assessable
profits for the period. Since Beijing Orsus Xelent Technologies & Trading
Co., Limited has registered as a wholly-owned foreign investment enterprise
("WOFIE"), it is subject to tax laws applicable to WOFIE in the PRC and is
fully exempt from the PRC enterprise income tax of 24% for two years
followed by a 50% reduction for the next three years, commencing with
fiscal year 2005.
Reconciliation from the expected statutory tax rate in PRC of 24%(2005:
24%) is as follows:
(Unaudited)
Six months ended
June 30,
------ ------
2006 2005
% %
Statutory rate 24.0 24.0
Tax exemption (15.7) --
Tax losses 0.6 (24.0)
------ ------
-- --
====== ======
4. SHORT-TERM BANK LOANS
The bank loans are repayable on January 29, 2007 and March 16, 2007 and are
interest-bearing at an interest rate of 6.696% - 7.02% per annum. The bank
loan amounting to USD991,000 was collateralized by personal guarantee of a
director, Mr. Liu Yu, and other unrelated corporations and the remaining
balance was unsecured.
5. RELATED PARTY TRANSACTIONS
a. Name and relationship of related parties
Related party Relationship with the Company as at June 30, 2006
------------- -------------------------------------------------
Mr. Wang Xin Director and stockholder of the Company
Mr. Liu Yu Director and stockholder of the Company
Mr. Wang Zhibin Director and stockholder of the Company
- --------------------------------------------------------------------------------
Orsus Xelent Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
- --------------------------------------------------------------------------------
5. RELATED PARTY TRANSACTIONS (CONTINUED)
b. Summary of related party balance
As of As of
June 30, December 31,
2006 2005
Note US$'000 US$'000
(Unandited)
Due to directors
Mr. Wang Xin, Mr. Liu Yu and Mr. Wang Zhibin (i) 320 320
============ ============
Bank loan collateralized by personal guarantee
of adirector
Mr. Liu Yu 991 --
============ ============
Note:
-----
(i) The amounts are unsecured, interest-free and repayable on demand.
- --------------------------------------------------------------------------------
Item 2. Managements' Discussion and Analysis or Plan of Operations
The following is management's discussion and analysis of certain
significant factors which have affected our financial position and operating
results during the periods included in the accompanying consolidated financial
statements, as well as information relating to the plans of our current
management. This report includes forward-looking statements. Generally, the
words "believes," "anticipates," "may," "will," "should," "expect," "intend,"
"estimate," "continue," and similar expressions or the negative thereof or
comparable terminology are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, including the matters
set forth in this report or other reports or documents we file with the
Securities and Exchange Commission from time to time, which could cause actual
results or outcomes to differ materially from those projected. Undue reliance
should not be placed on these forward-looking statements which speak only as of
the date hereof. We undertake no obligation to update these forward-looking
statements.
The following discussion and analysis should be read in conjunction with
our consolidated financial statements and the related notes thereto and other
financial information contained elsewhere in this Form 10-Q.
OVERVIEW
The Company was organized under the laws of State of Delaware in May 2004,
under the name of "Universal Flirts Corp.". On June 1, 2004, the Company
acquired all the issued and outstanding shares of Universal Flirts Inc., a New
York corporation, from Darrel Lerner, the sole shareholder, in consideration for
the issuance of 8,500,000 shares of the Company's common stock to Mr. Lerner
pursuant to a stock exchange agreement between Universal Flirts Inc. and the
Company. Pursuant to the purchase and share exchange transaction, Universal
Flirts Inc. became the wholly-owned subsidiary of the Company.
Pursuant to Stock Transfer Agreement dated March 29, 2005, the Company
transferred all of the common stock of Universal Flirts, Inc. to Mr. Darrell
Lerner in exchange for the cancellation of 28,200,000 shares of the Company's
common stock. Immediately, the Company had 14,756,000 shares of its common stock
outstanding.
On March 31, 2005, Universal Flirts Corp. completed a stock exchange
transaction with the stockholders of United First International Limited, a
company incorporated under the laws of Hong Kong ("UFIL"). The exchange was
consummated under the laws of State of Delaware and pursuant to the terms of
Exchange Agreement dated effective as of March 31, 2005. In connection with its
acquisition of UFIL, the Company also authorized a 4-1 forward split of its
common stock.
Pursuant to the Exchange Agreement, Universal Flirts Corp. issued
15,000,000 shares of its common stock, $0.001 par value, to the stockholders of
UFIL, representing approximately 50.41% of the Company's issued and outstanding
common stock, in exchange for 20,000,000 outstanding shares of UFIL and cash
payment of $50,000 from UFIL. Immediately after giving effect to the exchange,
the Company had 29,756,000 shares of its common stock outstanding. Pursuant to
the exchange, UFIL became a wholly-owned subsidiary of the Company and most of
the Company's business operations are now conducted through UFIL's wholly-owned
subsidiary, Beijing Orsus Xelent Technology & Trading Company Limited
("Xelent").
On April 19, 2005, the Company, formerly known as Universal Flirts Corp.,
changed its list name to Orsus Xelent Technologies, Inc. The Company's OTC
Bulletin Board symbol is ORXT and its CUSIP Number is 68749U106.
In July, 2005,a wholly owned subsidiary, namely Orsus Xelent Trading (HK)
Company Limited ("OXHK") was incorporated in Hong Kong. This subsidiary is
engaged in the trading of cellular phones and accessories with overseas
customers. In September 2005, OXHK commenced its Hong Kong operations to sell
and distribute our cellular phone products and technical support services to
customers outside the People's Republic of China (the "PRC").
The business operation of UFIL are conducted through its wholly-owned
subsidiary, Xelent, which is also commonly called "Orsus Cellular" within the
cellular phone industry . Xelent has been engaged since May 2003 in the business
of designing for retail and wholesale distribution economically priced cellular
phones. In February 2004, Xelent registered "ORSUS" with the PRC State
Administration for Industry and Commerce as its product trademark. The cellular
phone products produced by Xelent are customarily equipped with leading features
including 1.8-inch to 2.2-inch CSTN or TFT dual-color display, 1 to 120-minute
video recording, 300K to 3 million pixel photography, MP3, MPEG4 and U disk
support, dual stereo speakers, e-mail messaging, multimedia messaging, 40 to 64
ring tone storage, slim bar-phone & flip-phone technology and ultra thin
innovative lightweight design. Xelent sold approximately 240,000 cellular phones
in the PRC in 2005.
According to a research conducted by the PRC Ministry of Information
Industry, new cellular phone users in the PRC increased by 58 million in 2005,
with total consumers reaching 393 million during that year. Currently, the PRC
has the largest number of cellular phone users in the world. The penetration
rate for cellular phones in the PRC was approximately 30% in 2005. The number of
cellular phone users is expected to reach 500 million by the year-end 2007. The
cellular phone market in the PRC is expected to reach $120 billion by the year
end of 2006 according to the PRC Ministry of Information Industry.
On February 26, 2006, the TDS-CDMA technology standard was officially
announced as the 3G (Third Generation) technology standard in the PRC. Xelent is
planning to introduce into the market a series of advanced cellular phones
incorporating the new 3G technology by the end of calendar year 2006.
BUSINESS REVIEW
The respective market shares of domestic PRC cellular phone manufacturers
decreased in the first quarter of 2006. The primary cause of this decrease was
increased competition among domestic and overseas manufacturers. Advancements in
technology prompted foreign cellular phone manufacturers to speed up the rollout
of new products. Also, foreign cellular phone manufacturers offered price
reductions to promote and clear their inventories of older products. This
increase in competition was compounded by the continuing proliferation of
counterfeit and "black market" cell phones in the PRC, which impacted sales of
cellular phone products by legitimate manufacturers such as Xelent.
By the second quarter of 2006, most of the domestic PRC cellular phone
manufacturers had adjusted to the increased competition by improving the quality
of the products and accelerating the pace of new product rollouts. These
manufacturers are creating better efficiency by introducing products designed
for the local market and better using their supply chain. As a result, they have
adapted to the rapidly changing market in the PRC and regained in the second
quarter of 2006 some of the market share they lost in the first quarter.
Additionally, they are beginning to make a stronger move into the overseas
market to broaden their sales and increase their revenues.
It is anticipated that both the domestic and multinational cellular phones
manufacturers will begin to launch their own 3G mobile products into the PRC
market by the end of 2006. We have commenced the development of our own 3G
cellular phone products, which are based in part on our 2G and 2.5G cellular
technologies and our 3G solutions provided to chip providers for TDS-CDMA, WCDMA
and CDMA2000 technologies. These products will include a 3G PCBA (which is a 3G
technologies development platform) and 3G cellular phone incorporating the
technology in the 3G PCBA. We expect to introduce these products by the end of
2006. We are planning to join the TDS-CDMA Industry League later in 2006, which
is expected to increase the chances of our receiving a 3G manufacturer's license
from the PRC government in 2007.
Due to the changes in the Chinese Wireless market, we adopted a new
strategy in the first half of 2006 to directly develop products for the mobile
telephone carriers in China. Because of the requirements of the mobile telephone
carriers, this resulted in the expansion in the sales volume of CDMA products.
In the second quarter, our sales grew 80% as compared to the first quarter. In
the second quarter, our mid-level and low-end products, with the functions such
as MP3, MEPG4, camera and support outer storage card strongly influenced the
cellular phone market in the PRC. Demand for our cellular phone products has
increased as a result of the correct positioning of our products for the market
as will as the overall reduction in the GSM charges of PRC telecommunication
providers, which caused an increase in the number of new cellular phone
subscribers.
In the oversea market, domestic PRC cellular phone manufacturers have a
significant competitive advantage. Our investment in R&D is beginning to pay
off. In addition, as the cellular phone industry matures, our supply and
production chain has become more efficient. As a result of low production costs
in the PRC, quick response to changing market conditions and better price and
quality, the domestic PRC cellular phone products are at a competitive edge in
the international market, particularly in South Asia, Africa, the Middle East
and South America. 50% of our revenues in the second quarter of 2006 were
generated from the overseas customers and were a significant contribution to our
growth in the revenues in the quarter.
The following table summarizes our operation result for the six months
ended June 30, 2006 and 2005, respectively:
- ---------------------------- --------------------------- --------------------------- ----------------------
Six months ended June 30, Six months ended June 30, Comparison
2006 2005
- ---------------------------- --------------------------- --------------------------- ----------------------
$' 000 % of revenue $' 000 % of revenue $'000 %
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Revenues 25,376 100.00% 3,440 100.00%ii 21,936 637.67%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Cost of sales 21,163 83.40% 2,899 84.27% 18,264 630.01%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Sales & Marketing expenses 786 3.10% 701 20.38% 85 12.13%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
General & Admin expenses 689 2.72% 569 16.54% 120 21.09%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
R&D expenses 147 0.58% 142 4.13% 5 3.52%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Depreciation & Amortization 125 0.49% 75 2.18% 50 66.67%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Interest expenses 29 0.11% 25 0.73% 4 16.00%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Other income, net 5 0.02% 452 13.14% -447 -98.89%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Income (loss) before tax 2,442 9.62% (519) -15.09% 2,961 570.52%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Income taxes 160 0.63% 0 0.00% 160 0.00%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Net income (loss) 2,282 8.99% (519) -15.09% 2,801 539.69%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
The following table summarizes our operation result for the Three months
ended June 30, 2006 and 2005, respectively:
- ---------------------------- --------------------------- --------------------------- ----------------------
Three months ended June 30, Three months ended June 30, Comparison
2006 2005
- ---------------------------- --------------------------- --------------------------- ----------------------
$' 000 % of revenue $' 000 % of revenue $'000 %
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Revenues 17,009 100.00% 1,940 100.00% 15,069 776.75%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Cost of sales 14,670 86.25% 1,711 88.20% 12,959 757.39%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Sales & Marketing expenses 342 2.02% 407 20.98% -65 -15.97%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
General & Admin expenses 500 2.94% 307 15.82% 193 62.87%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
R&D expenses 66 0.39% 108 5.57% -42 -38.89%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Depreciation & Amortization 100 0.59% 49 2.53% 51 104.08%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Interest expenses 29 0.17% 4 0.21% 25 625.00%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Other income, net 3 0.02% 122 6.29% -119 -97.54%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Income (loss) before tax 1,305 7.67% (524) 27.01% 1,829 349.05%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Income taxes 160 0.94% 0.00% 160 0.00%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Net income (loss) 1,145 6.73% (524) -27.01% 1,669 318.51%
- ---------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
CRITICAL ACCOUNTING POLICIES AND MANAGEMENT ESTIMATES
Our discussion and analysis on our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates based on historical
experience and various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
RESULTS OF OPERATION
Revenues
Our revenues were $25,376,000 for the six months ended June 30, 2006,
representing a sharp increase of 637.67% as compared to the same period in 2005,
and $17,009,000 for the three months ended June 2006, represent a sharp increase
of 776.75% as compared to the same period in 2005. After going through a
reformation environment in the cellular phone market in the first half year of
2005, we adjusted our business model, our market position and strategy, improved
our technologies and the quality of products, in terms of function and
appearance. We believe that we are not in a much better position to deal with
the rapidly changing and competitive market for cellular phone products and that
we are better prepared to take advantage of a rejuvenated cellular phone market
which has resulted from the reduction in the monthly fee charged by
telecommunication providers in this quarter.
Our mid-level and low-end products come with a number of attractive
features, such as MP3, MPEG4, video recording and outer card storage. In
addition to those features, our high-end products contain PDA, GPRS and office
software function, special industry applications and other attractive features
and functions. The appearance of all our products are in line with the latest
trends, including being ultra slim and containing a wide use of metals, and they
seem to be just what the market wants at this time.
We are finding success in developing the overseas market for our cellular
phone products. This is evidenced by the fact that 50% of our total revenues in
the second quarter of 2006 were attributable to our overseas market, and 32% of
our total revenues in the first half of 2006.
Products Segment
- ----------------
- ----------------------------- --------------------------------------------------
Six months ended June 30, 2006
--------------------------------------------------
$'000 % of revenue
- ----------------------------- --------------------------- ----------------------
X5 6,157 24.26%
- ----------------------------- --------------------------- ----------------------
TDA6028 2,250 8.87%
- ----------------------------- --------------------------- ----------------------
X188 (9900) 2,504 9.87%
- ----------------------------- --------------------------- ----------------------
X5+ 2,011 7.93%
- ----------------------------- --------------------------- ----------------------
X3 1,800 7.09%
- ----------------------------- --------------------------- ----------------------
C100 1,887 7.43%
- ----------------------------- --------------------------- ----------------------
C109 2,446 9.64%
- ----------------------------- --------------------------- ----------------------
X718 1,667 6.57%
- ----------------------------- --------------------------- ----------------------
Others 4,654 18.34%
- ----------------------------- --------------------------- ----------------------
The total revenues for the first half of 2006 amounted to $25,376,000, of
which the sale of GSM products in the first half of 2006 accounted for
$18,794,000, or 74.06%, of our total income. A large part of the revenues
generated during the second quarter of 2006 were attributable to the reduction
in the monthly fee charged by the PRC telecommunications providers and sales
orders generated by overseas customers. The GSM products included X5
($6,157,000), X188 ($2,504,000), X5+ (2,011,000), X3 ($1,887,000) and X718
($1,667,000). The sales of CDMA products accounted for $6,582,000, or 25.94%, of
total revenues. The CDMA products was mainly sold in the first quarter of this
year, which included C109 ($2,446,000), TDA6028 ($2,250,000), C100 ($1,887,000).
All of our products are purchased from three suppliers, namely Tian Feng Ju
Yuan Technology Company Limited, Fu Song Technology & Development Company
Limited and China Electronic Apparatus Company. The trading products included X5
(ultra thin with MP3, MP4, Camera, T-Flash Card), X188 (Low-end product with
MP3, MEPG4, MINI SD support functions), X5+ (ultra thin, MP3, MEPG4, Camera,
T-Flash Card), TDA6028 (a high-end cellular phone with PDA, GPRS, 2.8-inch TFT
LCD handwriting touch screen, finger print identification, MPEG4, extended
scanner, RFID and WIFI functions), X718 (a cellular phone with MPEG4, external
memory card support function in a super-slim case) and D9000 (a low-end product
with PDA function). Additionally, the CDMA products C100 and C109 were developed
through the cooperation with Dalian Daxian Communication Company Limited. Sales
of CDMA products in the second quarter of 2006 generated revenues of $1,374,000
as compared with no sales of CDMA products in the second quarter of 2005.
The increase of the revenue is attributed to: (1 ) the launch of our
ultra-thin, slim bar models which are currently in demand by the market; (2) our
continuing development of overseas customers with domestic PRC cellular phone
products with reasonable quality and low costs; and (3) a wide variety of
cellular phone products that meet different levels consumer demands.
Customers Segment
- -----------------
- ------------------------------------------------- ------------------------------
Six months ended June 30, 2006
------------------------------
$'000 % of revenue
- ------------------------------------------------- ----------- ------------------
Beijing Xingwang Shidai Tech & Trading Co., Ltd. 8,795 34.66%
- ------------------------------------------------- ----------- ------------------
CEC Cellular Limited 8,265 32.57%
- ------------------------------------------------- ----------- ------------------
Singapore ST 6,124 24.13%
- ------------------------------------------------- ----------- ------------------
Singapore CEO 2,000 7.88%
- ------------------------------------------------- ----------- ------------------
Our revenues were primarily derived from two major domestic customers. For
the six months ended June 30, 2006, our revenues generated from Beijing Xingwang
Shidai Tech & Trading Co., Ltd. ("XWSD") and CEC Cellular Limited ("CECM") were
$8,795,000 and $8,265,000, respectively. These two major domestic customers
aggregated to account for $17,060,000, or 67.23%, of total revenue. Both XWSD
and CECM are distributors and dealers in Mainland China, and their sales
networks cover most of the major cities in the PRC. Due to an outstanding
balance of Hebei Mascot Communication Equipment Co., Ltd ("MASCOT") over our
credit limit, we have terminated the business with MASCOT until the repayment of
the outstanding balance. In the overseas market, we have secured two new
Singapore customers, which are ST Electronics (Info-Software Systems) Pte Ltd.
and Chartered Electro-Optics Pte Ltd. The revenues attributed from these two
companies were $8,124,000, or 32.01%, of the total revenue. Although the profit
margin of the overseas sales are generally lower than the domestic sales, we
still believe the development of overseas customers is necessary for our further
development in order to broaden our customer base. We anticipate that our
overseas business will continue to develop steadily in the future, especially
since our products have a competitive advantage in term of quality and price..
Other net income
For the six months ended June 30, 2006, other net income was $5,000, or
0.02%, of the total revenue. This constituted a 98.89% reduction from the
$452,000 of other net income in the same period of last year, this reduction was
attributable to the fact that no toll free income was earned from cooperative
partners in 2006 because our cooperative partners changed their toll free
policy.
Operating expenses
For the six months ended June 30, 2006, our operating expenses amounting to
$22,910,000, which was and increase of 422.34% as compared with the same period
in 2005. This increase was mainly due to the substantial increase in revenue for
the period. A proportional amount of the costs we incurred related to the
increase in revenue. The operating expenses mainly includes sales and marketing
expenses, general and administrative expenses and R & D expenses and
depreciation were shown as follows:
- ------------------------ --------------------------- -------------------------- ----------------------
Six months ended June 30, Six months ended June 30, Comparison
2006 2005
- ------------------------ --------------------------- -------------------------- ----------------------
$'000 % of revenue $'000 % of revenue $'000 %
- ------------------------ ---------- ---------------- --------- ---------------- ---------- -----------
Cost of sales 21,163 83.40% 2,899 84.27% 18,264 630.01%
- ------------------------ ---------- ---------------- --------- ---------------- ---------- -----------
Sales & marketing exp. 786 3.10% 701 20.38% 85 12.13%
- ------------------------ ---------- ---------------- --------- ---------------- ---------- -----------
General & admin. exp. 689 2.71% 569 16.54% 120 21.09%
- ------------------------ ---------- ---------------- --------- ---------------- ---------- -----------
R&D 147 0.58% 142 4.13% 5 3.52%
- ------------------------ ---------- ---------------- --------- ---------------- ---------- -----------
Depreciation 125 0.49% 75 2.18% 50 66.67%
- ------------------------ ---------- ---------------- --------- ---------------- ---------- -----------
Total 22,910 ii 4,386 ii 18,524 422.34%
- ------------------------ ---------- ---------------- --------- ---------------- ---------- -----------
For the three months ended June 30, 2006, the operating expenses increased
507.20%, caused by the substantial increase in revenue, as compared to the
second quarter of 2005.
- ------------------------- --------------------------- --------------------------- ----------------------
Three months ended June 30, Three months ended June 30, Comparison
2006 2005
- ------------------------- --------------------------- --------------------------- ----------------------
$'000 % of revenue $'000 % of revenue $'000 %
- ------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Cost of sales 14,670 86.25% 1,711 88.20% 12,959 757.39%
- ------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Sales & marketing. exp. 342 2.01% 407 20.98% -65 -15.97%
- ------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
General & admin. exp. 500 2.94% 307 15.82% 193 62.87%
- ------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
R&D 66 0.39% 108 5.57% -42 -38.89%
- ------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Depreciation 100 0.59% 49 2.53% 51 104.08%
- ------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Total 15,678 2,582 13,096 507.20%
- ------------------------- ---------- ---------------- ---------- ---------------- ---------- -----------
Cost of sales
- -------------
For the six months ended June 30, 2006, our cost of sales was $21,163,000,
or 83.40%, of revenue. When compared to 84.27% for the corresponding period in
2005, this was a decrease of 0.87%. For the three months ended June 30, 2006,
our cost of sales increased to $14,670,000 from $1,711,000 in the second quarter
of 2005. In the second quarter of this year, there was a provision for slow
moving stock amounting to $142,000. Other than the factor of provision for
stock, the percentage of cost of sales to total revenues dropped to 85.41% in
the second quarter of 2006, which amounted to a 7.81% increase when comparing to
77.60% in the first quarter of 2006. The increase in Cost of Sales as a
percentage for the comparable period was caused by an increase in overseas sales
which carry smaller or lower margins as compared to our domestic Chinese sales.
This is caused because overseas sales have no after market sale or warranty
service provisions.
Sales and marketing expenses
- ----------------------------
Sales and marketing expenses mainly represent payments made to sales
personnel, cost of provision for after-sales services, and marketing and
transportation costs.
For the six months ended June 30, 2006, sales and marketing expenses were
$786,000, or 3.10%, of the total revenues, as compared to $701,000, or 20.38%,
of total revenues for the corresponding period in 2005, the sales and marketing
expenses had an increase of 12.13% for the six months ended June 2006. This
constituted a decrease of 17.28% as compared to the corresponding period in
2005. This decrease was due to the sharp increase in our total revenues of
637.67%. A large portion of sales and marketing expenses were fixed expenses,
such as payments made to sales personnel, which did not fluctuate in relation to
our revenues. For the three months ended June 30, 2006, sales and marketing
expenses were reduced to $342,000 from $407,000, representing a 15.97% decrease.
In the second quarter of 2006, we laid off some redundant staff as a result of
the changes in our business strategies. The reduction in the payments made to
personnel was slightly offset by increased marketing expenses for the overseas
sales incurred in the second quarter of 2006.
R&D expenses
- ------------
Our R&D expenses were $147,000 for the six months ended June 30, 2006,
which represents 0.58% of total revenue as compared with $142,000 and 4.13%
respectively in the same period of 2005. This decrease of 3.52% is due in
substantial part to an increase in our sales revenues in 2006. In fact there
have been no material changes in the total amount of the R&D expenses incurred
in both 2006 and 2005.
General and administrative expenses
- -----------------------------------
General and administrative expenses primarily consist of compensation for
personnel, depreciation, travel expenses, rental, materials expenses related to
ordinary administration and fees for professional services.
For the three months ended June 30, 2006, general and administrative
expenses increased to $500,000 from $307,000 in the same period of last year.
Included in general and administrative expenses in the second quarter of 2006,
was a provision for doubtful accounts amounting to $310,000, due primarily to
the uncertainty of long outstanding account receivables and trade deposits.
Except for the provision for doubtful accounts, the general and administrative
expenses were $190,000, which represented a 38.11% decrease as compared to the
second quarter of 2005. The decrease in the expenses was mainly due to the fact
that we laid off redundant personnel. Since the second half year of 2005, we
have adjusted our business strategy, and this resulted in the redundant
personnel. We incurred some one-time compensation expenses as a result, while
the ordinary staff costs, including the wages and insurance for personnel,
decreased in relation to the decrease in the numbers of staff.
For the six months ended June 30, 2006, general and administrative expenses
were $689,000, or 2.72%, of total revenues, as compared to $569,000, or 16.54%,
of total revenues for the corresponding period in 2005. General and
administrative expenses increased by $120,000 due mainly to the provision for
doubtful accounts amounting to $310,000. If the provision for doubtful accounts
is excluded, the ordinary general and administrative expenses were $379,000, or
a decrease of 33.39% as compared to the same period in 2005. This decline in
expenses was mainly due to personnel layoffs.
Gross profit and gross profit margin
For the three months ended June 30, 2006, our gross profit was $2,339,000,
which represented an 900% increase as compared to the gross profit of $229,000
in the same period in 2005. Our gross profit margin for the reporting period
increased from 11.80% in 2005 to 13.75% in 2006. Included in the cost of sales
in 2006 was a provision for slowing moving inventory amounting to $142,000.
Other than the factors of provision for slow moving inventory, the gross profit
margin would have been 14.59% in the second quarter of 2006. For the six months
ended June 30, 2006, our gross profit was $4,213,000, representing an 700%
increase as compared to $541,000 in the same period in 2005. Our gross profit
margin for the first half of 2006 increased to 16.60% from 15.73% in 2005.
Except for the provision for slowing moving stock amounting to $142,000, the
gross profit margin would have been 17.16% in the first half of 2006. This
slight increase in the gross profit margin was caused by economies of scale
because of the large increase in revenue and cost of sales. We were able to
create efficiencies and to decrease component costs with suppliers because of
the large increases in purchases to meet the increased demand in 2006 as
compared to 2005.
Except for the effect of the provision for slow moving inventory, the gross
profit margin would have been 14.59% in the second quarter of 2006, as compared
to 22.40% in the first quarter of 2006, representing a 7.81% decline. The
decline in our gross profit margin is attributable to:
1. The gross profit of overseas trade being relatively low. We have continued
to develop our overseas customers since the second quarter of 2006, and the
overseas sales accounted for more than 50% of the total sales in the second
quarter of 2006. At the beginning stage of the development of overseas
customers, the price of our products was designed to be very favorable and
attractive to our customers, Also, there is no more after sales and
warranty service meaning the margin of the overseas sales generally was
lower than domestic sales;
2. The gross profit margin of trade sales is relatively low, ranging from 12%
to 16%, and is continuing to decline as a result of competitive factors;
and
3. More low-end products at low gross profit margin were sold out in domestic
market.
Net income
For the three months ended June 30, 2006, our net income was $1,145,000, as
compared with net loss of $524,000 in the same period of 2005. For the six
months ended June 30, 2006, our net income was $2,282,000, or 8.99%, of revenue
as compared with a net loss of $519,000 for the corresponding period in 2005.
The improvement in our net profit is due primarily to the fact that we have been
successful in overcoming a difficult operating environment in the first half
year of 2005. In the second quarter of 2006, provisions for doubtful accounts
and slow moving inventory amounted to $452,000 in the aggregate. Except for
these provisions, our ordinary net income was 2,734,000, or 10.77%, of the net
income for the six months period and 1,597,000, or 9.39%, of net income in the
second quarter of 2006. The growth of sales and the development in oversea
customers played an important part in the increase in our net income.
Although our net income has increased in this quarter, the increase is
still slightly below our expectation. The reason, even excluding the provisions
to doubtful debts and inventories amounting to $452,000 in the aggregate, is
mainly due to the increase in marketing expenses incurred in connection with the
development of our overseas marketing operation in this quarter. We believe the
development of an overseas market will be beneficial to us in long-term and we
expect that marketing expenses incurred in developing that market will continue
to increase during the remainder of 2006.
We expect that the competition in the cellular phone market will be remain
intense in the PRC for the foreseeable furture. Fortunately, as a result in the
change of our business strategy, we anticipate that the market will move towards
healthier development and a more favorable environment for domestic legitimate
manufacturers such as Xelent. In the future, we will continue to develop our
overseas operations with the objective of establishing a more diversified
revenue base, fostering closer cooperation with telecommunication providers and
making an determined effort top collect our long outstanding trade receivables
and trade deposits and reduce our inventory level.
LIQUIDITY AND SOURCE OF CAPITAL
We generally finance our operations from cash flow generated internally.
As of June 30, 2006, we had current assets of $32,620,000. Current assets
are mainly comprised of inventory of $3,674,000, accounts receivable of
$20,141,000, trade deposits and other receivables aggregated of $8,054,000,
other current assets of $402,000, and restricted cash, cash and cash equivalents
of $349,000. Current liabilities included accounts payable of $9,958,000, trade
deposit received of $260,000, other accrued expenses and accrued liabilities of
$2,943,000, short-term bank loan of $2,477,000, amounts due to directors of
$320,000, provision for warranty of $66,000 and tax payable of $181,000.
We offer two different trading terms to our customers, i.e.
cash-on-delivery and on credit term within 90 days. As of June 30, 2006, our
accounts receivable was $17,009,000 and grew to 67.37%, as compared to
$12,034,000 as of December 31, 2005, which was caused by the substantial
increase in revenue for the comparable period. As of June 30, 2006, these
receivables all remain within our approved credit terms. We have taken steps to
control credit extended to our major customers and we review their outstanding
balances regularly. To reduce further risk exposure, we may in the future
terminate our supply of products to those customers if the credit limit is
reached.
As of June 30, 2006, our inventories were $3,674,000, representing a
decrease of 17.62%, as compared to $4,460,000 as of December 31, 2005.This
decrease was due in large part to our use of old materials during the production
of our older models, particularly in the overseas market. In addition, our newly
developed products do not require us to carry larger inventories because the
component parts are readily available. We have critically and regularly
evaluated our inventory and a provision for slow-moving inventory was made. A
total of $518,000 was made in the first half of 2006 as a provision for slow
moving inventory, of which $142,000 was made in the second quarter of 2006.
As of June 30, 2006, our cash and bank balances were mainly denominated in
Renminbi ("RMB") and Hong Kong Dollar. Our revenue and expenses, assets and
liabilities are mainly denominated in RMB. Our activities, assets and
liabilities are mainly denominated in Renminbi, any further possible inflation
of Renminbi would be beneficial to us. We consider that the exposure to exchange
fluctuations is relatively low and therefore we have not engaged in any hedging
activity.
CASH FLOWS
As of June 30, 2006, we have the cash and cash equivalents of $349,000 as
compared to $2,974,000 as of December 31, 2005, representing a decrease of
$2,625,000, or 88.26%. This decrease is mainly due to $8,107,000 increase in the
account receivables resulting from the growth in the revenues in the second
quarter of 2006. Additional current capital will be required for the development
of new business, such as overseas customers.
Our gearing ratio, calculated as total debts over total assets, was 48.48%
as of June 30, 2006, as compared to 51.83% as of December 31, 2005.
CONTINGENT LIABILITIES
As of June 30, 2006, we had not entered into any guarantee contracts nor
non-disclosed contracts which will affect stockholders' equity or share
structure.
OFF BALANCE SHEET ARRANGEMENTS
As of June 30, 2006, we had no off balance sheet arrangements.
CONTRACTUAL COMMITMENTS
We are obligated to make future payments under various contracts, including
purchase and operating leases. The Company does not have any long-term debt or
capital lease obligations. The following table summarized the Company's
contractual obligations at June 30, 2006, reported by maturity of obligation.
Payments due by period
-----------------------------------------------------
Total Less than 1-3 years 3-5 years More than
Contractual Obligations 1 year 5 years
- -------------------------------- --------- --------- --------- --------- ---------
$ '000 $ '000 $ '000 $ '000 $ '000
Long-term Debt Obligations
2,477 2,477 -- -- --
Capital Lease Obligations
-- -- -- -- --
Operating Lease Obligations
42 37 5 -- --
Purchase Obligations
124 124 -- --
Other long-term liabilities reflected on the
registrant's balance sheet under GAAP -- -- -- -- --
--------- --------- --------- --------- ---------
Total
2,643 2,638 5 -- --
========= ========= ========= ========= =========
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk is the sensitivity of income to changes in interest rates,
foreign exchanges, commodity prices, equity prices and other market-driven rates
or prices. We are not presently engaged in and, if a suitable business target is
not identified by us prior to the prescribed liquidation date of the trust fund,
we may not engage in, any substantive commercial business. Accordingly, we are
not and, until such time as we consummate a business combination, we will not
be, exposed to risks associated with foreign exchange rates, commodity prices,
equity prices or other market-driven rates or prices. The net proceeds of our
initial public offering held in the trust fund have been invested only in money
market funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act of 1940. Given our limited risk in our exposure to money
market funds, we do not view the interest rate risk to be significant.
The Company considers Renminbi as its functional currency as a substantial
portion of the Company's business activities are based in Renminbi. However, the
Company has chosen the United States dollar as its reporting currency.
Transactions in currencies other than the functional currency during the
period are translated into the functional currency at the applicable rates of
exchange prevailing at the time of the transactions. Monetary assets and
liabilities denominated in currencies other than functional currency are
translated into functional currency at the applicable rates of exchange in
effect at the balance sheet date. Exchange gains and losses are recorded in the
combined statements of operations.
For translation of financial statements into the reporting currency, assets
and liabilities are translated at the exchange rate at the balance sheet date,
equity accounts are translated at historical exchange rates, and revenues,
expenses, gains and losses are translated at the weighted average rates of
exchange prevailing during the period.
Translation adjustments, when material resulting from this process are
recorded in accumulated other comprehensive income (loss) within stockholders'
equity.
Item 4. Controls and Procedures.
The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in our reports filed
pursuant to the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules, regulations and related forms, and that such information is
accumulated and communicated to our principal executive officer and principal
financial officer, as appropriate, to allow timely decisions regarding required
disclosure.
The Company, under the supervision of our chief executive officer and chief
financial officer, carried out an evaluation of the effectiveness of the design
and operation of its disclosure controls and procedures as of the balance sheet
date. Based upon that evaluation, management, including our chief executive
officer and chief financial officer, concluded that the Company's disclosure
controls and procedures were effective in alerting it in a timely manner to
information relating to the Company required to be disclosed in this report.
During the period, there were no significant changes in our internal
controls over financial reporting that have materially affected, or are
reasonably likely to materially affect our internal controls over financial
reporting.
PART II --- OTHER INFORMATION
Item 1. Legal Proceedings.
There is no litigation pending or threatened against the Registrant, other
than certain legal proceedings arising in the ordinary course of business, none
of which are expected to have a material impact on the Registrant's financial
condition, operating results or liquidity.
Item 1A. Risk Factors.
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) None.
(b) None.
(c) None.
Item 3. Defaults Upon Senior Securities.
(a) None.
(b) None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Exhibits.
Exhibits:
---------
31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(Chief Executive Officer).
31.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(Chief Accounting Officer).
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Chief Executive Officer).
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Chief Accounting Officer).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ORSUS XELENT TECHNOLOGIES, INC.
By: /s/ Wang Xin
----------------------------
Wang Xin
Chief Executive Officer
DATED: August 21, 2006
Exhibit
Number Description of Document
- ------------ -----------------------------------------------------------------
31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief
Executive Officer). *
31.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief
Accounting Officer). *
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief
Executive Officer). *
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief
Accounting Officer). *
- ---------------------
* filed herewith