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Guangzhou Global Telecom Reports Q3 Result

2007-11-21 17:01 1333


GUANGZHOU, China, Nov. 21 /Xinhua-PRNewswire/ -- Guangzhou Global Telecom Inc. (OTC Bullion Board: GZGT), a mobile phone handset and pre-paid calling card distributor and mobile handset value-added services provider in the PRC, announced that the company reported revenue of $6.4 million in the third quarter of 2007, representing a 1,728% increase compared to the same period of 2006. The revenue during the nine months ended September 30, 2007 was 15 million, representing 116% increase compared to the same period of 2006.

The gross profit increased from $125,473 during the three months ended September 30, 2006 to $403,156 in the same period of 2007. The increase of gross profit is mainly resulted from increase in revenue. Meanwhile, the gross margin dropped from 35% during the three months ended September 30, 2006 to 6% for the same period of 2007. The decrease is mainly due to the reason that China Mobile Guangzhou Branch changed its sales model which left thinner margin for agencies but took certain marketing function itself. In addition, certain rebate for the previous periods of 2006 was received and recorded in the three months ended September 30, 2006. Therefore, the gross margin in 2006 is comparatively high.

Selling, general and administrative expenses were $295,261 during the three month period ended September 30, 2007 as compared to $105,792 for the same period ended in 2006, an increase of $189,469 or 179%. This increase is mainly due to the interruption of two months’ operation during the three months ended September 30, 2006.

Operating income recorded $165,792 during the nine months ended September 30, 2007, as compared to $164,603 during the same period of 2006. The slight increase in operating income is mainly due to the increase of revenue, while certain expenses related to expansion into other cities absorbed certain income from normal operations.

Other expenses were $487,556 during the nine months ended September 30, 2007, which mainly included the non-recurring financing cost of $376,000 related to the convertible debt and the continuing interest expenses of $110,607. The financing cost included investment banker fee, lawyer fee, due diligence fee, etc. The interest expenses of $110,607 included interest of convertible debt, amortization of discount on the convertible debt, amortization of the fair value of granting financial instruments.

Net loss recorded $400,982 during the nine months ended September 30, 2007, as compared to gain of $128,367 during the same period of 2006. The decrease of net profit is mainly due to the other expenses relating to the convertible debt.

“The 1,728 percent increase in sales is a symbol of our aggressive development in our business. With the fund we raised in the earlier of August, we were able to expand our business into other provinces to achieve more aggressive targets. As of September 30, 2007, we have successfully expanded our operations in Zhengzhou, Wuhan, Beijing and Macau. We will enhance the operation there and expand into other cities as more as possible,” said Li Yankuan, President and CEO of Guangzhou Global Telecom.

About Guangzhou Global Telecom

Guangzhou Global Telecom, Inc. is a national mobile phone handset and pre-paid calling card distributor and provider of mobile handset value-added services. Maintaining cooperative relationships with China Telecom, China Mobile and China Unicom, the Company seeks to become the largest sales and distribution center of mobile phones, mobile phone parts and prepaid mobile phone cards in China. GTL plans to introduce new software and services through an expanded network of regional and neighborhood service centers, shops and virtual stores. For details, please visit our website at http://www.guangzhouglobaltelecom.com .

Safe Harbor Statement

Certain of the statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People’s Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.

For more information, please contact:

Paul Yates

Aero Financial, Inc.

Tel: +1-858-481-8022

Email: pyates@aero-financial.com

Source: Guangzhou Global Telecom, Inc.
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