Canadian Venture Exchange: TOM
TORONTO, March 1 /CNW/ - T S Telecom Ltd. (the "Company") and its
Subsidiary Companies (collectively referred to as the "Group" reported a net
loss of approximately $0.98 million for the nine months period ended December
31, 2006. As at December 31, 2006, the Group had approximately $1.04 million
or $0.05 per share of cash.
For the nine months ended December 31, 2006 2005
(in thousands of Canadian dollars except loss $ $
Gross sales 2,918 2,121
Gross income 1,346 690
Loss before tax & non-controlling interest (1,683) (2,365)
Net loss for the period (981) (1,524)
Loss per share - basic (0.04) (0.07)
RESULTS OF OPERATIONS
Sales were approximately $2.92 million for the nine months ended
December 31, 2006 compared with sales of approximately $2.12 million for the
same period of last year.
Our gross margin was 46% for the nine months period as compared to a
gross profit margin of 33% for the corresponding period in 2005.
During the nine months period, the Group continued to control general and
administrative expenses. The general and administrative expenses successfully
reduced by 12%, as compared with the corresponding period of last year.
The increase in interest costs was because of the interest charges on an
installment bank loan, a short-term loan from a finance company and a
short-term bank loan. The Group posted a net loss of approximately $0.98
million for the nine months period ended December 31, 2006, which was 36%
lower from the net loss incurred for the same period of last year. The
reduction of the net loss was mainly attributable to the dilution gain on
placement of new shares of our subsidiary, T S Telecom Technologies Limited on
June 12, 2006, the receipt of dividend from our associated company, the gain
on disposal of properties, together with the increase in gross margin.
CASH FLOW ANALYSIS
As at December 31, 2006, the Group had approximately $1.04 million or
$0.05 per share of cash, compared to $0.24 million or $0.01 per share of cash
as of September 30, 2006 and $0.513 million or $0.02 per share of cash as of
March 31, 2006. The change in cash for the three months and nine months ended
December 31, 2006 mainly due to the cash inflows provided by a short-term loan
from a finance company of approximately $150,000 denominated in Hong Kong
dollars and a short-term bank loan of approximately $418,000 denominated in
Renminbi, which were used in operating activities. The short-term loan is
personally guaranteed by Mr. Lau See Hoi, the Chairman, President and Chief
Executive Officer of the Company, which is repayable on May 14, 2007 and
charged at a fixed interest rate of 24% per annum. The short-term bank loan is
secured by the Group's real estate properties in Shenzhen, which is repayable
on November 16, 2007 and bears fixed interest rate of 6.723% per annum.
Cash provided by (used in) operating activities for the three months and
nine months ended December 31, 2006 were approximately $237,000 and
approximately ($722,000), respectively and resulted primarily from the net
loss before non-controlling interest of $0.61 million and $1.70 million as
compared to net loss of $0.92 million and $2.38 million for the corresponding
periods of last year.
Cash provided by investing activities for the three months and nine
months ended December 31, 2006 amounted to approximately $87,000 and $778,000
respectively as compared to the cash used in investing activities for the
three months and nine months ended December 31, 2005 were approximately
$16,000 and $46,000 for the corresponding periods of last year. The cash
inflow was related to the proceeds from disposal of properties.
Cash provided by financing activities for the three months and nine
months ended December 31, 2006 were approximately $555,000 and approximately
$457,000 respectively as compared to approximately $562,000 and $1,013,000
respectively for the corresponding periods of last year. The increase was
mainly due to the short-term loan from a finance company of approximately
$150,000 and the short-term bank loan of approximately $418,000 obtained
during the third quarter of 2006.
ANALYSIS OF FINANCIAL CONDITION
Current and long-term accounts receivable reduced from $1,026,000 as of
March 31, 2006 to $843,000 as of December 31, 2006. The reduction in accounts
receivable is mainly due to the provision of doubtful debts and bad debts
Property and equipment decreased by $0.39 million from $1.10 million at
March 31, 2006 primarily attributable to the amortization of properties and
office equipment and the disposal of our office and staff quarters of our
China headquarters in Shenzhen, China.
Inventories decreased by $115,000 from approximately $470,000 at
March 31, 2006 to approximately $355,000 as of December 31, 2006. The decrease
in inventories was primarily related to the provision for inventories
obsolescence for the quarter.
Accounts payable and accrued liabilities increased by $891,000 in line
with the increase in trading activities during the period.
LIQUIDITY, FINANCIAL RE
SOURCES AND CAPITAL STRUCTURE
As at December 31, 2006, the Group had approximately $1.04 million of
cash. The cash balance increased from $0.513 million as of March 31, 2006 was
mainly due to the procurement of short-term loan from a finance company and
the short-term bank loan to finance the Group's daily operations.
As at December 31, 2006, the Group had net current liabilities of
approximately $1.79 million. The Group has considered disposing its office
properties located in the PRC, raising additional bank loans and equity
capital to finance its future operations.
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 December 31, 2006, the
Group had no foreign exchange contracts, interest or currency swaps or other
financial derivatives for hedging purposes.
For the nine months period ended December 31, 2006, a subsidiary of the
Company, T S Telecom Technologies Limited, allotted and issued 56,400,000 new
Placing Shares on June 12, 2006 to not fewer than six independent investors to
raise additional capital and received a gross proceeds of approximately $0.839
As at December 31, 2006, the Group has no financial instruments nor any
foreign currency investments held for hedging purposes.
The Group neither has material contingent liabilities nor legal
proceedings against the Group as of December 31, 2006.
Third 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 third quarter of the fiscal year ended March 31, 2007.
On 22nd January 2007, a principal subsidiary of the Company, T S Telecom
Technologies Limited ("TSTT") (as Vendor) and Mr. Lau See Hoi (as Purchaser)
entered into a Sale and Purchase Agreement pursuant to which TSTT has
conditionally agreed to dispose of and Purchaser has conditionally agreed to
acquire the entire issued share capital of (a) T S Telecom (B.V.I.) Ltd. and
its subsidiaries comprised T S International Company Limited, TSTT (Canada)
Ltd., T S International Ltd., T S Electric and Power Co., Ltd., T S Telecom
(Shenzhen) Co., Ltd., Ying Zhi Xun Telecom Equipment (Shenzhen) Co., Ltd., and
(b) T S Bio-Medical (B.V.I.) Ltd. and its subsidiaries comprised T S
Bio-Technology Ltd. and T S Bio-Technology (Wuhan) Co., Ltd. (as Disposal
Group) and the Advances to Disposal Group upon completion of the Corporate
Restructuring for a cash consideration of approximately $450,000. Save as
disclosed above, no subsequent events have occurred after December 31, 2006,
that may have a significant effect, on the assets and liabilities or future
operations of the Group. This transaction remains to be approved at a
shareholder meeting on March 5, 2007.
BUSINESS REVIEW AND PROSPECTS
Sales from the telecommunications products, the biotechnology products
and others accounted for 97.3%, 0.2% and 2.5% respectively of the turnover of
the Group for the nine months period ended December 31, 2006. There was no
sale of gas turbine generator during the nine months period.
During the nine months period, the Group continued to encounter pressure
from customers demanding for concession of contract terms including lower
pricing and longer payment period, causing the Group to take a longer time
required to close and sign contracts. It is quite clear that the business
environment of the telecom monitoring equipment industry of China has become
more unfavorable and competitive. Our subsidiary, T S Telecom Technologies
Limited ("TSTT") 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 is 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 TSTT 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.
Gas Turbine Generators
During the nine months period, 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. TSTT has conditionally agreed to dispose of this business to
Mr. Lau See Hoi.
During the nine months period, there is tiny sale of biotechnology
products, even though the Group made efforts to promote the products in the
PRC and North American market. TSTT has conditionally agreed to dispose of
this business to Mr. Lau See Hoi.
IMPACT ON INFLATION
Impact on inflation remains substantially unchanged as disclosed in the
annual report for the fiscal year ended March 31, 2006.
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, 2006.
OUTSTANDING SHARE DATA
As at December 31, 2006, 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 December 31, 2006.
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