China VoIP & Digital Telecom Announces Completion of Convertible Debt Payments and Company's Financial Guidance for 2010

USA - English

• USA - English

JINAN, China, Aug. 31 /PRNewswire-Asia-FirstCall/ -- China VoIP & Digital Telecom (OTC Bulletin Board: CVDT), today announced the completion of all payments totaling $3 million for the termination of the $5 million convertible debt and more than 63 million of underlying warrants. The company also announced its 2010 revenue and net income guidance.

China VoIP & Digital Telecom recently released its second quarter results disclosing another substantial increase in revenues year over year as it continues its transition to the virtualization technology industry. The Company released revenues of $2,208,319 for the 6 months ended June 30, 2010 as compared to $285,410 for the same period ended June 30, 2009. This substantial increase in revenues continues to validate the Company's decision to focus its efforts on the Chinese server virtualization industry.

The Revenue for the three months ended June 30, 2010 increased 1,284% to $1,047,980, as compared to $75,745 million for the three months ended June 30, 2009. This increase was primarily driven by the virtualization projects implemented during the quarter. Gross margin for the second quarter 2010 was 35.9% compared to 25.8% in the same period of the prior year. Operating loss for the 2Q10 was $984,087 compared to $158,759 in the 2Q09. Higher operating loss was due to higher general and administrative expenses, which included a large amount of bad debt reserves associated with the increases in accounts receivable. As of June 30, 2010, the company had cash and cash equivalents of $1.0 million and no long-term debt.

Since January 2010, the Company's marketing strategy of aggressively penetrating new markets with its industry leading virtualization technology solutions has proven very successful. The Company has successfully signed contracts with clients in the Healthcare, Mining, Telecom, Infrastructure (roads and bridges), Aeronautical, Power Generation, Government and Automotive industries. Each of these industries represents tremendous growth potential for the Company as they are important components of the Chinese economy. CVDT's leading virtualization technology solutions have the potential to greatly change traditional IT infrastructures. Just as important, they can help their customers reduce costs and increase energy savings. These contracts provide the Company not only with software implementation revenues, but also recurring annual technical support revenues from service contracts.

In August 2010, China VoIP & Digital Telecom made the total payments of $3 million to an investor to terminate the $5 million of convertible debt it borrowed in 2007. Mr. Li Kunwu, Chairman and CEO of CVDT was very please with the termination of its convertible debt and the retirement of four classes of warrants (Series A, B, C and D). He said, "The termination of the convertible debt and more than 63 million of warrants associated with the debt helped our company significantly improve its capital structure. In the last two years, our financial statements were impacted by the fluctuations of the derivative liabilities related to the warrants based on our share price. Finally, we have a clean capital structure now. We can focus on enhancing our virtualization operations and preparing for the uplisting to a senior stock exchange in the future. We have sufficient cash for operations and no warrant derivatives and long-term debt on the balance sheet."

Mr. Li continued, "We believe we can deliver $15 million in revenue and $3.5 million in EBITDA for 2010 based on our virtualization pipeline and existing contracts. In the last couple of months, we have signed virtualization contracts with several high caliber multinationals including Canon Dalian Business Machines Inc., Huaneng Power International Inc., CITIC Group, and China Southern Power Grid. We expect to continue to penetrate these markets and maintain our leadership position."

Mr. Li Kunwu is also pleased with the Company's operating success. He said, "We are now eight months into our transition from a VoIP service provider to a server virtualization solution provider. During this short period of time, we have increased our revenues significantly over the previous year and successfully penetrated most of our strategic markets. Our marketing efforts should allow us to aggressively pursue additional customers within these markets to fuel our revenue growth. More importantly, our termination of the convertible debt, a complex financial instrument, should help us gain focus on the expansion of our virtualization operations. The progress we have made should be significant contributors to our company's growth. The last eight months have been a very exciting period for the Company and we are aggressively pursuing all opportunities available to us to continue our growth objectives."

Mr. Li concluded, "We will continue to strengthen the cooperation with world-class enterprises, research institutions and universities on cloud computing and virtualization, in order to provide the best and most financially rewarding products and services to our clients."

About China VoIP & Digital Telecom Inc.

China VoIP & Digital Telecom Inc. offers virtualization technology application in the People's Republic of China through its wholly owned subsidiary Jinan Yinquan Technology Co., Ltd and Beijing PowerUnique Technologies, Co., Ltd. Through the two subsidiaries, China VoIP & Digital Telecom is well positioned to take full advantage of the tremendous economic growth currently being experienced in China. The Company is currently marketing its integral virtualization solutions in China and at this time is in the testing stages of other Information Technology products. More information can be found at http://www.chinavoip-telecom.com .

Safe Harbor Statement

Certain of the statements made in this 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.

    CVDT Investor Contacts:

     Michelle Wong
     Tel:   +86-531-5558-5742
     Email: [email protected]

     Dina Ding
     Tel:   +1-203-252-7266
     Email: [email protected]

SOURCE China VoIP & Digital Telecom Inc.