T S Telecom Ltd. - June 30, 2007 first quarter financial results



    Canadian Venture Exchange: TOM

    TORONTO, Sept. 5 /CNW/ - T S Telecom Ltd. (the "Company") and its
Subsidiary Companies (collectively referred to as the "Group") reported a net
loss of approximately $0.713 million for the three months period ended June
30, 2007. As at June 30, 2007, the Group had approximately $0.161 million or
$0.007 per share of cash.

    Financial Highlights

    
      For the three months ended June 30,                  2007       2006
      (in thousands of Canadian dollars except loss           $          $
      per share amounts)

      Gross sales                                           570        435
      Gross profit                                          297        126
      (Loss) before tax & non-controlling interest       (1,263)      (707)
      Net (loss) for the period                            (713)      (428)
      (Loss) per share - basic                            (0.03)     (0.02)
    

    RESULTS OF OPERATIONS

    Sales were approximately $0.6 million for the three months ended June 30,
2007 compared with sales of approximately $0.4 million for the same period of
last year.
    Our gross margin was 52% for the three months ended June 30, 2007 as
compared to a gross profit margin of 29% for the corresponding period in 2006
as a major component of turnover was composed of service income.
    The general and administrative expenses slightly increased by 9%,
compared with the corresponding period of last year, primarily due to the
increase in wages & benefits and office expenses.
    During the three months period, research and development costs decreased
by $20,000 as compared to the same period of last year. The amount was
directly towards the development of power monitoring system.
    The increase in interest costs was attributable to the extra interest
charges on a new short term loan of HK$2,000,000 (equivalent to approximately
$272,000) obtained on April 16, 2007.
    The Group posted a net loss of approximately $0.713 million for the three
months ended June 30, 2007, which was 67% higher than the net loss incurred
for the same period of last year. The increase in the net loss was mainly
attributable to the certain non-cash charges of provision of inventories
obsolescence of $0.3 million, provision of doubtful debts of $0.1 million.

    CASH FLOW ANALYSIS

    As at June 30, 2007, the Group had approximately $0.2 million or $0.01
per share of cash, compared to $0.4 million or $0.02 per share of cash as of
March 31, 2007. The decrease in cash was mainly due to the operating losses
incurred during the quarter of $1.3 million.
    Cash used in operating activities for the three months ended June 30,
2007 were approximately $424,000 and resulted primarily from the net loss
before non-controlling interest of $1,270,000 as compared to net loss of
$707,000 million for the corresponding period of last year.
    No cash was provided by (used in) investing activities for the three
months ended June 30, 2007 as compared to the cash outflow of $11,000 for the
corresponding period of last year.
    Cash provided by financing activities for the three months ended June 30,
2007 were approximately $44,000 as compared to the cash provided of
approximately $612,000 for the corresponding period of last year. The net cash
inflow was primarily due to the new short term loan of HK$2,000,000
(equivalent to approximately $272,000) obtained on April 16, 2007.

    ANALYSIS OF FINANCIAL CONDITION

    Accounts receivable slightly increased from $597,000 as of March 31, 2007
to $628,000 as of June 30, 2007.
    Property and equipment decreased by $0.1 million from $0.8 million at
March 31, 2007. The decrease was primarily attributable to amortization of
properties and office equipment of our China headquarters in Shenzhen during
the quarter.
    Inventories decreased by $104,000 from approximately $719,000 at March
31, 2007 to approximately $615,000 as of June 30, 2007. The decrease in
inventories was primary related to the provision of inventories obsolescence.
    Accounts payable and accrued liabilities increased from $2.6 million at
March 31, 2007 to $3.3 million as of June 30, 2007 in line with the higher
level of activities during the quarter.

    LIQUIDITY, FINANCIAL RE

SOURCES AND CAPITAL STRUCTURE As at June 30, 2007, the Group had approximately $0.161 million of cash. The cash balance decreased from $0.376 million as of March 31, 2007 was mainly due to the current period loss position. As at June 30, 2007, the Group had net current liabilities of approximately $2.2 million. Most of the trading transactions, assets and liabilities of the Group were denominated in Hong Kong dollars and Renminbi. The Group adopted a conservative treasury policy with almost all bank deposits being kept in Hong Kong dollars, or in the local currencies of the operating subsidiaries to minimize exposure to foreign exchange risks. As at June 30, 2007 the Group had no foreign exchange contracts, interest or currency swaps or other financial derivatives for hedging purposes. Financial Instruments As at June 30, 2007, the Group has no financial instruments nor any foreign currency investments held for hedging purposes. Contingent Liabilities The Group neither has material contingent liabilities nor legal proceedings against the Group as of June 30, 2007. First Quarter Event There were no events or items that have had a material impact on the Group's financial condition, cash flows or results of operations during the Group's first quarter of the fiscal year ended March 31, 2008. Subsequent Events The subsidiary of the Company, T S Telecom Technologies Limited ("TST Technologies") entered into an agreement on January 22, 2007 with Mr. Lau See Hoi ("Mr. Lau"), who is the chairman and chief executive officer of the Company, under which TST Technologies had conditionally agreed to sell and Mr. Lau had conditionally agreed to purchase the Company's interests in the entire issued share capital of and the advances to a group of companies (the "Disposal Group"), after completion of a corporation restructuring, at a total consideration of HK$3 million (the "Transaction"). This Transaction was approved by the independent shareholders of TST Technologies at an extraordinary general meeting held on 5 March 2007 and was completed on August 20, 2007. On August 27, 2007, the sale of the Company's 168,960,000 common shares ("Sale Shares") of T S Telecom Technologies Limited to Gold City Assets Holdings Ltd ("Gold City") for a total consideration of HK$5,000,000 (approximately CAD$724,638), which was approved by its shareholders at Special Meeting of Shareholders held on August 23, 2007, was completed in Hong Kong in accordance with the provisions of the Agreement. The Sale Shares represent approximately 49.90 per cent of the issued share capital of TST Technologies Limited. BUSINESS REVIEW AND PROSPECTS Segment Information Business from telecommunications products accounts for 100% of the turnover of the Group for the three months period ended June 30, 2007. There was no sale of gas turbine generator and bio-technology product during the quarter. Telecommunications Products During the quarter, the Group continued to encounter pressure from customers demanding for concession in contract terms including lower pricing and longer payment period, causing the Group to take a longer time to close and sign contracts. It is quite clear that the business environment of the telecom monitoring equipment industry in China had become more unfavorable and competitive. The subsidiary, T S Telecom Technologies Limited (TST Technologies), of the Group has conditionally agreed to dispose of the subsidiaries engaging in the assembly, distribution and integration of telecommunications products which have been operating at a loss for the past few years and are not expected to generate any profit in the near future. To avoid duplication and accumulation of marketing costs by using multiple sales vehicle and further depletion of the Group's resources in telecom manufacturing, the Directors (including the independent non-executive directors) of TST Technologies consider it is best for the Group to dispose of those loss-making subsidiaries to Mr. Lau See Hoi and concentrate their effort on telecom trading businesses. The Company has conditionally agreed to dispose of the loss-making subsidiaries to Mr. Lau See Hoi. The transaction was completed on August 20, 2007. Gas Turbine Generators During the quarter, there is no sale of gas turbine generator, even though the Group continued to implement aggressive marketing strategies to promote the sale of gas turbine generators in the telecom, petroleum and other industries. The Company has conditionally agreed to dispose of the loss-making subsidiaries to Mr. Lau See Hoi. The transaction was completed on August 20, 2007. Bio-technology Products During the quarter, there was an insignificant amount of sale of biotechnology products, even though the Group has been heavily promoting the products in the PRC and North American market. The Company has conditionally agreed to dispose of the loss-making subsidiary to Mr. Lau See Hoi. The transaction was completed on August 20, 2007. IMPACT ON INFLATION Impact on inflation in the current quarter remains substantially unchanged as disclosed in the annual report for the fiscal year ended March 31, 2007. RISK AND UNCERTAINTIES The Company is subject to the same risk factors and uncertainties as disclosed in the annual report for the fiscal year ended March 31, 2007. OUTSTANDING SHARE DATA As at June 30, 2007, the Company has total issued and outstanding shares of 21,990,005. During the period, no option had been granted or exercised under the Stock Option Plan as at June 30, 2007. The TSX Venture Exchange has neither approved nor disapproved the information contained herein.

For further information:

For further information: Cindy Lau, Director of T S Telecom Ltd., at
(905) 470-2282

Organization Profile

T S TELECOM LTD.

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