GUANGZHOU, China, June 6 /Xinhua-PRNewswire/ -- Guangzhou Global Telecom Inc. (OTC Bulletin Board: GZGT), a mobile phone handset, pre-paid calling card distributor and provider of value-added mobile services in the PRC, reported $7,672,427 in 1Q revenues as compared to $3,762,418 during the same period ended in 2007, representing an increase of $3,910,009 or 104%.
The significant increase in revenue is primarily contributed by the foundation work laid in 2007 which saw the Company expand in other parts of China with new branches being set up. The increase in revenue is extremely important as it means the Company has not only cemented its market share, but also enlarged its customer base and network simultaneously. At a time when the mobile industry is restructuring, an expanded presence puts the Company in good stead to capitalize on any first-hand opportunities. The first three months of 2008 added more than 20 million subscribers, based on government data. This growth figure is the main driver behind the Company's rapid expansion in China.
The gross profit increased from $113,159 during the three months ended March 31, 2007 to $684,643 in the same period of 2008. The increase of gross profit is mainly generated from the increase in revenue. Meanwhile, the gross margin saw a marked improvement from 3% during the quarter ended March 31, 2007 to 9% in this 1Q of FY 2008. Following changes in the sales model of China Mobile Guangzhou from the first quarter of 2007, the management responded by adopting several initiatives in expanding our sales segments and regions to eliminate this effect.
General and administrative expenses were $705,723 as compared to $73,053 for the same period ended in 2007, an increase of $632,670. The increase resulted mainly from an expansion in network operations, increased travelling and administrative expenses recorded in this quarter due to additional set-ups of sales representative-offices to handle a growing customer base, and a one-time incentive bonus payment.
Operating loss of $187,546 was recorded during the three months ended March 31, 2008, as compared to a gain of $15,437 during the same period of 2007. The loss was mainly due to the one-off incentive payment.
Interest expenses were $169,629 during the three months ended March 31, 2008, which mainly included the interest payment of convertible debt and fund-raising costs related to the second installment of convertible debt financing.
Net loss was recorded at $416,757 during the three months ended March 31, 2008, as compared to net profit of $12,414 during the same period of 2007. The loss was mainly due to a non-recurring payment and convertible debt interest expenses recorded during this quarter.
"All our efforts and capital investments towards building and exploring new market regions and sales channels have finally begun to reap rewards. Our 2Q results will validate this. China is the biggest mobile market with 583.5 million users at the end of April, exceeding the combined populations of US and Japan. To conclude, China has a 1.3 billion potential mobile users market and this translates into our potential too," commented an enthusiastic CEO Miss Li Yankuan.
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.
