**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      DC 20549**

**______________**

**FORM      10-Q**

| **x** | **QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|-------|------------------------------------------------------------------------------------------------------------------------------------------|

**For      the quarterly period ended September 30, 2008**

| **o** | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------|

**For      the transition period from ______ to ______.**

**Commission      file number: 001-33456**

**ORSUS      XELENT TECHNOLOGIES, INC. **

| **Delaware**(State                of incorporation)  |   | **20-1198142**** **(I.R.S.                Employer Identification No.) |
|-----------------------------------------------------------|--------|-----------------------------------------------------------------------------|

**12**
**th**

**      Floor, Tower B, Chaowai MEN Office Building**

**26      Chaowai Street, Chaoyang Disc.**

**Beijing,      People’s Republic Of China 100020**

**86-10-85653777**

**Indicate      by check mark whether the registrant: (1) has filed all reports required to      be      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during      the      preceding 12 months (or for such shorter period that the registrant was required      to file such reports), and (2) has been subject to such filing requirements      for      the past 90 days.**

**Yes x        **
**No      o**

**Indicate      by check mark whether the registrant is a large accelerated filer, an      accelerated filer, a non-accelerated filer, or a smaller reporting company.      See      the definitions of “large accelerated filer,” “accelerated filer” and “smaller      reporting company” in Rule 12b-2 of the Exchange Act.**

| **Large                accelerated filer o**                                                                 | **Accelerated                filer o**         |
|--------------------------------------------------------------------------------------------------------------|------------------------------------------------|
|                                                                                                         |                                           |
| **Non-accelerated                filer o (Do not check if                a smaller reporting company)** | **Smaller                reporting company x** |

**Indicate      by check mark whether the registrant is an accelerated filer (as defined in      Rule      12-b2 of the Exchange Act).**

**Yes      o  **
**No x**

**Indicate      by check mark whether the registrant is a shell company (as defined in Rule      12-b2 of the Exchange Act).**

**Yes o        **
**No      x**

**Indicate      the number of shares outstanding of each of the issuer’s classes of common      stock, as of the latest practicable date.**

| **Class**                                                  |   | **Outstanding                at November 19, 2008** |
|------------------------------------------------------------|--------|-----------------------------------------------------|
| **Common                Stock, $.001 par value per share** |   | **29,756,000                shares**                |

----

**PART      I - FINANCIAL INFORMATION**

| **Item              1.** | **Condensed                Consolidated Financial Statements**** ** |
|--------------------------|--------------------------------------------------------------------------|

**Three      and nine months ended September 30, 2008**

**Index      to Condensed Consolidated Financial Statements**

|                                                                                      |   | Pages  |                  |
|-------------------------------------------------------------------------------------------|--------|--------|-----------------------|
|                                                                                      |   |   |                  |
| Condensed                Consolidated Statements of Income and Comprehensive Income       |   |   | 1                     |   |
|                                                                                      |   |   |                  |   |
| Condensed                Consolidated Balance Sheets                                      |   |   | 2                     |   |
|                                                                                      |   |   |                  |   |
| Condensed                Consolidated Statements of Cash Flows                            |   |   | 3                     |   |
|                                                                                      |   |   |                  |   |
| Condensed                Consolidated Statements of Changes in Stockholders’ Equity |   |   | 4                     |   |
|                                                                                      |   |   |                  |   |
| Notes                to Condensed Consolidated Financial Statements                       |   |   | 5                - 13 |   |

----

**Orsus      Xelent Technologies, Inc.**

**Condensed      Consolidated Statements of Income and Comprehensive Income**

**For      the three and nine months ended September 30, 2008 and      2007**

**(Dollars      in thousand except share data and per share amounts)**

|                                                   |   | **(Unaudited)****Three                months ended****September                30,** |           | **(Unaudited)****Nine                months ended****September                30,** |   |
|--------------------------------------------------------|--------|--------------------------------------------------------------------------------------|----------------|-------------------------------------------------------------------------------------|--------|
|                                                   |   | **2008**                                                                             |           | 2007                                                                                |   | **2008** |   | 2007 |   |
|                                                   |   | ***US$’000***                                                                  |           | *US$’000*                                                                     |   | ***US$’000*** |   | *US$’000* |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |
| Operating                revenue - Net sales           |   |                                                                                 | **29,240**     |                                                                                |   | 22,046 |   |   | **78,853** |   |   | 58,411 |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Cost                of operating revenue               |   |                                                                                 | **(25,073**    | **)**                                                                               |   | (18,064 | ) |   | **(68,302** | **)** |   | (47,586 | ) |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Gross                income                            |   |                                                                                 | **4,167**      |                                                                                |   | 3,982 |   |   | **10,551** |   |   | 10,825 |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Operating                expenses:                     |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Sales                and marketing                     |   |                                                                                 | **128**        |                                                                                |   | 142 |   |   | **353** |   |   | 389 |   |
| General                and administrative              |   |                                                                                 | **228**        |                                                                                |   | 262 |   |   | **1,799** |   |   | 2,250 |   |
| Research                and development                |   |                                                                                 | **250**        |                                                                                |   | 23 |   |   | **391** |   |   | 319 |   |
| Depreciation                                           |   |                                                                                 | **23**         |                                                                                |   | 26 |   |   | **72** |   |   | 113 |   |
| Allowance                for obsolete inventories      |   |                                                                                 | **-**          |                                                                                |   | 108 |   |   | **-** |   |   | 700 |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                                                                 | **629**        |                                                                                |   | 561 |   |   | **2,615** |   |   | 3,771 |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Operating                income                        |   |                                                                                 | **3,538**      |                                                                                |   | 3,421 |   |   | **7,936** |   |   | 7,054 |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Other                income (expenses)                 |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Interest                expenses                       |   |                                                                                 | **(255**       | **)**                                                                               |   | (443 | ) |   | **(733** | **)** |   | (747 | ) |
| Other                income, net                       |   |                                                                                 | **87**         |                                                                                |   | 14 |   |   | **465** |   |   | 21 |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Income                before income taxes              |   |                                                                                 | **3,370**      |                                                                                |   | 2,992 |   |   | **7,668** |   |   | 6,328 |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Income                taxes - Note 4                   |   |                                                                                 | **(445**       | **)**                                                                               |   | (422 | ) |   | **(1,320** | **)** |   | (1,062 | ) |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Net                income                              |   |                                                                                 | **2,925**      |                                                                                |   | 2,570 |   |   | **6,348** |   |   | 5,266 |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Other                comprehensive (loss) income       |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation adjustment |   |                                                                                 | **(36**        | **)**                                                                               |   | - |   |   | **1,480** |   |   | - |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Comprehensive                income                    |   |                                                                                 | **2,889**      |                                                                                |   | 2,570 |   |   | **7,828** |   |   | 5,266 |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Earnings                per share - Note 5             |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Basic                and diluted (US$)                 |   |                                                                                 | **0.10**       |                                                                                |   | 0.09 |   |   | **0.21** |   |   | 0.18 |   |
|                                                   |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| Weighted                average number of common       |   |                                                                                 |           |                                                                                |   |   |   |   |   |   |   |   |   |
| stock                outstanding                       |   |                                                                                 | **29,756,000** |                                                                                |   | 29,756,000 |   |   | **29,756,000** |   |   | 29,756,000 |   |

----

**Orsus      Xelent Technologies, Inc.**

**Condensed      Consolidated Balance Sheets**

**As      of September 30, 2008 and December 31, 2007**

**(Dollars      in thousand except share data and per share amounts)**

|                                                                                             |   | **As                of****September                30,****2008****(Unaudited)** |       | As                ofDecember                31,2007 |   |
|--------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|------------|-----------------------------------------------------|--------|
| **ASSETS**                                                                                       |   | ***US$’000***                                                             |       | *US$’000*                                     |   |
|                                                                                             |   |                                                                            |       |                                                |   |
| Current                assets                                                                    |   |                                                                            |       |                                                |   |
| Cash                and cash equivalents                                                         |   |                                                                            | **924**    |                                                |   | 2,928 |   |
| Trade                accounts receivable, net of allowance - Note 6                              |   |                                                                            | **78,743** |                                                |   | 57,743 |   |
| Inventories,                net                                                                  |   |                                                                            | **-**      |                                                |   | 4 |   |
| Trade                deposits paid, net                                                          |   |                                                                            | **6,353**  |                                                |   | 839 |   |
| Other                current assets                                                              |   |                                                                            | **1,831**  |                                                |   | 4,196 |   |
| Pledged                deposit                                                                   |   |                                                                            | **1,256**  |                                                |   | 1,206 |   |
|                                                                                             |   |                                                                            |       |                                                |   |   |   |
| Total                current assets                                                              |   |                                                                            | **89,107** |                                                |   | 66,916 |   |
| Property,                plant and equipment, net - Note 7                                       |   |                                                                            | **254**    |                                                |   | 318 |   |
|                                                                                             |   |                                                                            |       |                                                |   |   |   |
| **TOTAL                ASSETS**                                                                  |   |                                                                            | **89,361** |                                                |   | 67,234 |   |
|                                                                                             |   |                                                                            |       |                                                |   |   |   |
| **LIABILITIES**                                                                                  |   |                                                                            |       |                                                |   |   |   |
|                                                                                             |   |                                                                            |       |                                                |   |   |   |
| Current                liabilities                                                               |   |                                                                            |       |                                                |   |   |   |
| Short-term                bank loans - Note 8                                                    |   |                                                                            | **9,256**  |                                                |   | 9,160 |   |
| Short-term                loan from a non-financial institution - Note 9                         |   |                                                                            | **57**     |                                                |   | - |   |
| Current                portion of mortgage loan - Note 10                                        |   |                                                                            | **23**     |                                                |   | 68 |   |
| Trade                accounts payable                                                            |   |                                                                            | **20,048** |                                                |   | 10,854 |   |
| Accrued                expenses and other accrued liabilities                                    |   |                                                                            | **10,681** |                                                |   | 8,048 |   |
| Trade                deposits received                                                           |   |                                                                            | **1,908**  |                                                |   | 1,709 |   |
| Due                to directors - Note 11(b)                                                     |   |                                                                            | **458**    |                                                |   | 323 |   |
| Provision                for warranty                                                            |   |                                                                            | **85**     |                                                |   | 123 |   |
| Tax                payable                                                                       |   |                                                                            | **4,395**  |                                                |   | 3,047 |   |
|                                                                                             |   |                                                                            |       |                                                |   |   |   |
| Total                current liabilities                                                         |   |                                                                            | **46,911** |                                                |   | 33,332 |   |
|                                                                                             |   |                                                                            |       |                                                |   |   |   |
| Non-current                liability                                                             |   |                                                                            |       |                                                |   |   |   |
| Mortgage                loan - Note 10                                                           |   |                                                                            | **-**      |                                                |   | 5 |   |
|                                                                                             |   |                                                                            |       |                                                |   |   |   |
| **COMMITMENT                AND CONTINGENCIES****- Note 14**                                     |   |                                                                            | **-**      |                                                |   | - |   |
|                                                                                             |   |                                                                            |       |                                                |   |   |   |
| **STOCKHOLDERS’                EQUITY**                                                    |   |                                                                            |       |                                                |   |   |   |
|                                                                                             |   |                                                                            |       |                                                |   |   |   |
| Preferred                stock - US$0.001 par value: Authorized 100,000,000 shares;              |   |                                                                            |       |                                                |   |   |   |
| none                issued and outstanding                                                       |   |                                                                            | **-**      |                                                |   | - |   |
| Common                stock - US$0.001 per share : Authorized 100,000,000                shares; |   |                                                                            |       |                                                |   |   |   |
| issued                and outstanding 29,756,000 shares as of September 30, 2008                 |   |                                                                            |       |                                                |   |   |   |
| and                as of December 31, 2007                                                       |   |                                                                            | **30**     |                                                |   | 30 |   |
| Additional                paid-in capital                                                        |   |                                                                            | **3,209**  |                                                |   | 2,484 |   |
| Dedicated                reserves                                                                |   |                                                                            | **1,042**  |                                                |   | 1,042 |   |
| Accumulated                other comprehensive income                                            |   |                                                                            | **4,386**  |                                                |   | 2,906 |   |
| Retained                earnings                                                                 |   |                                                                            | **33,783** |                                                |   | 27,435 |   |
|                                                                                             |   |                                                                            |       |                                                |   |   |   |
| **TOTAL                STOCKHOLDERS’ EQUITY**                                              |   |                                                                            | **42,450** |                                                |   | 33,897 |   |
|                                                                                             |   |                                                                            |       |                                                |   |   |   |
| **TOTAL                LIABILITIES AND STOCKHOLDERS’ EQUITY**                              |   |                                                                            | **89,361** |                                                |   | 67,234 |   |

----

**Orsus      Xelent Technologies, Inc.**

**Condensed      Consolidated Statements of Cash Flows**

**For      the nine months ended September 30, 2008 and 2007**

**(Dollars      in thousand except share data and per share amounts)**

|                                                                                              |   |  **(Unaudited)****Nine                months****ended                September 30** |        |
|---------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|-------------|
|                                                                                              |   |  **2008**                                                                           |        | 2007 |   |
|                                                                                              |   |  ***US$’000***                                                                |        | *US$’000* |   |
| **Cash                flows from operating activities**                                           |   |                                                                                |        |   |   |
| Net                income                                                                         |   |                                                                                     | **6,348**   |   |   | 5,266 |   |
| Adjustments                to reconcile net income to net cash used by                            |   |                                                                                     |        |   |   |   |   |
| operating                activities:                                                              |   |                                                                                     |        |   |   |   |   |
| Depreciation                                                                                      |   |                                                                                     | **72**      |   |   | 113 |   |
| Allowance                for obsolete inventories                                                 |   |                                                                                     | **-**       |   |   | 700 |   |
| Allowance                for doubtful accounts                                                    |   |                                                                                     | **-**       |   |   | 1,487 |   |
| Compensation                costs for stock options granted                                       |   |                                                                                     | **725**     |   |   | - |   |
| Changes                in assets and liabilities:                                                 |   |                                                                                     |        |   |   |   |   |
| Trade                accounts receivable                                                          |   |                                                                                     | **(18,202** | **)** |   | (15,086 | ) |
| Inventories                                                                                       |   |                                                                                     | **4**       |   |   | 526 |   |
| Trade                deposits paid                                                                |   |                                                                                     | **(5,362**  | **)** |   | (2,249 | ) |
| Other                current assets                                                               |   |                                                                                     | **2,636**   |   |   | (20 | ) |
| Trade                accounts payable                                                             |   |                                                                                     | **8,582**   |   |   | 2,796 |   |
| Accrued                expenses and other accrued liabilities                                     |   |                                                                                     | **1,610**   |   |   | 2,166 |   |
| Trade                deposits received                                                            |   |                                                                                     | **162**     |   |   | 749 |   |
| Due                to directors                                                                   |   |                                                                                     | **125**     |   |   | (132 | ) |
| Due                to a stockholder                                                               |   |                                                                                     | **-**       |   |   | 132 |   |
| Provision                for warranty                                                             |   |                                                                                     | **(38**     | **)** |   | 62 |   |
| Tax                payable                                                                        |   |                                                                                     | **1,178**   |   |   | 1,056 |   |
|                                                                                              |   |                                                                                     |        |   |   |   |   |
| Net                cash flows used by operating activities                                        |   |                                                                                     | **(2,160**  | **)** |   | (2,434 | ) |
|                                                                                              |   |                                                                                     |        |   |   |   |   |
| **Cash                flows from investing activities**                                           |   |                                                                                     |        |   |   |   |   |
| Purchase                of property, plant and equipment                                          |   |                                                                                     | **-**       |   |   | (186 | ) |
| Advances                from directors                                                            |   |                                                                                     | **-**       |   |   | 127 |   |
| Repayment                of loans to third parties                                                |   |                                                                                     | **-**       |   |   | 288 |   |
|                                                                                              |   |                                                                                     |        |   |   |   |   |
| Net                cash flows provided by investing activities                                    |   |                                                                                     | **-**       |   |   | 229 |   |
|                                                                                              |   |                                                                                     |        |   |   |   |   |
| **Cash                flows from financing activities**                                           |   |                                                                                     |        |   |   |   |   |
| New                loans from banks and a financial institution                                   |   |                                                                                     | **9,114**   |   |   | 4,861 |   |
| Repayment                of bank loans                                                            |   |                                                                                     | **(9,033**  | **)** |   | (2,558 | ) |
|                                                                                              |   |                                                                                     |        |   |   |   |   |
| Net                cash flows provided by financing activities                                    |   |                                                                                     | **81**      |   |   | 2,303 |   |
|                                                                                              |   |                                                                                     |        |   |   |   |   |
| Net                change in cash and cash equivalents                                            |   |                                                                                     | **(2,079**  | **)** |   | 98 |   |
| Effect                of foreign currency translation on cash and cash                equivalents |   |                                                                                     | **75**      |   |   | - |   |
| Cash                and cash equivalents, beginning of period                                     |   |                                                                                     | **2,928**   |   |   | 2,421 |   |
|                                                                                              |   |                                                                                     |        |   |   |   |   |
| Cash                and cash equivalents, end of period                                           |   |                                                                                     | **924**     |   |   | 2,519 |   |
|                                                                                              |   |                                                                                     |        |   |   |   |   |
| **Supplemental                disclosure for cash flow information**                              |   |                                                                                     |        |   |   |   |   |
| Interest                paid                                                                      |   |                                                                                     | **756**     |   |   | 496 |   |
| Income                taxes paid                                                                  |   |                                                                                     | **515**     |   |   | 4 |   |

----

**Orsus      Xelent Technologies, Inc.**

**Condensed      Consolidated Statements of Changes in Stockholders’ equity**

**For      the nine months ended September 30, 2008**

**(Dollars      in thousand except share data and per share amounts)**

|                                                                                  |   |                                          |           | ***Additional***    |   |                |   | ***Other***         |      |                |   |                |   |
|---------------------------------------------------------------------------------------|--------|------------------------------------------|----------------|---------------------|--------|---------------------|--------|---------------------|-----------|---------------------|--------|---------------------|--------|
|                                                                                  |   | ***Common                stock issued*** |           | ***paid-in***       |   | ***Dedicated***     |   | ***comprehensive*** |      | ***Retained***      |   |                |   |
|                                                                                  |   | ***No.                of***              |           | ***Amount***        |   | ***capital***       |   | ***reserves***      |      | ***income***        |   | ***earnings***      |   | ***Total*** |   |
|                                                                                  |   | ***shares***                             |           | ***US$’000*** |   | ***US$’000*** |   | ***US$’000*** |      | ***US$’000*** |   | ***US$’000*** |   | ***US$’000*** |   |
|                                                                                  |   |                                     |           |                |   |                |   |                |      |                |   |                |   |   |   |
| Balance                as of January 1, 2007                                          |   |                                     | 29,756,000     |                |   | 30                  |   |                | 2,484     |                |   | 1,042               |   |   | 975 |   |   | 17,752 |   |   | 22,283 |   |
| Net                income                                                             |   |                                     | -              |                |   | -                   |   |                | -         |                |   | -                   |   |   | - |   |   | 9,683 |   |   | 9,683 |   |
| Foreign                currency translation                                           |   |                                     |           |                |   |                |   |                |      |                |   |                |   |   |   |   |   |   |   |   |   |   |
| adjustment                                                                            |   |                                     | -              |                |   | -                   |   |                | -         |                |   | -                   |   |   | 1,931 |   |   | - |   |   | 1,931 |   |
|                                                                                  |   |                                     |           |                |   |                |   |                |      |                |   |                |   |   |   |   |   |   |   |   |   |   |
| Balance                as of January 1, 2008                                          |   |                                     | 29,756,000     |                |   | 30                  |   |                | 2,484     |                |   | 1,042               |   |   | 2,906 |   |   | 27,435 |   |   | 33,897 |   |
| Net                income                                                             |   |                                     |           |                |   |                |   |                |      |                |   |                |   |   |   |   |   | 6,348 |   |   | 6,348 |   |
| Compensation                costs for stock                                           |   |                                     |           |                |   |                |   |                |      |                |   |                |   |   |   |   |   |   |   |   |   |   |
| options                granted                                                        |   |                                     | -              |                |   | -                   |   |                | 725       |                |   | -                   |   |   | - |   |   | - |   |   | 725 |   |
| Foreign                currency translation                                           |   |                                     |           |                |   |                |   |                |      |                |   |                |   |   |   |   |   |   |   |   |   |   |
| adjustment                                                                            |   |                                     | -              |                |   | -                   |   |                | -         |                |   | -                   |   |   | 1,480 |   |   | - |   |   | 1,480 |   |
|                                                                                  |   |                                     |           |                |   |                |   |                |      |                |   |                |   |   |   |   |   |   |   |   |   |   |
| **Balance                  as of September****30,                  2008 (Unaudited)** |   |                                     | **29,756,000** |                |   | **30**              |   |                | **3,209** |                |   | **1,042**           |   |   | **4,386** |   |   | **33,783** |   |   | **42,450** |   |

----

**Orsus      Xelent Technologies, Inc.**

**Notes        to Consolidated Financial Statements**

----

*(Dollars        in thousands except share data and per share amounts)*

| **1.** | **Corporate                information** |
|--------|------------------------------------------|

| **2.** | **Basis                of presentation** |
|--------|------------------------------------------|

----

**Orsus      Xelent Technologies, Inc.**

**Notes          to Consolidated Financial Statements**

----

*(Dollars          in thousands except share data and per share          amounts)*

| **3.** | **Summary                    of significant accounting                    policies** |
|--------|--------------------------------------------------------------------------------------|

----

**Orsus        Xelent Technologies, Inc.**

**Notes            to Consolidated Financial Statements**

----

*(Dollars            in thousands except share data and per share            amounts)*

| **4.** | **Income              taxes** |
|--------|-------------------------------|

| Unified                EIT rate effective January 1, 2008 |   |   | 25 | % |
|-----------------------------------------------------------|--------|--------|----|---|
| Small                scale / low profit enterprises       |   |   | 20 | % |
| New                / hi-tech enterprises                  |   |   | 15 | % |

----

**Orsus          Xelent Technologies, Inc.**

**Notes              to Consolidated Financial Statements**

----

*(Dollars              in thousands except share data and per share              amounts)*

| **4.** | **Income                taxes (continued)** |
|--------|---------------------------------------------|

|   | (a) | Income                tax expenses comprised the                following: |
|--------|-----|----------------------------------------------------------------------------|

|                         |   |  **(Unaudited)****Nine                months****ended                September 30** |      |
|------------------------------|--------|------------------------------------------------------------------------------------------|-----------|
|                         |   |  **2008**                                                                           |      | 2007 |   |
|                         |   |  ***US$’000***                                                                |      | *US$’000* |   |
| Current                tax   |   |                                                                                |      |   |   |
| United                States |   |                                                                                     | **-**     |   |   | - |   |
| Hong                Kong     |   |                                                                                     | **238**   |   |   | - |   |
| PRC                          |   |                                                                                     | **1,082** |   |   | 1,062 |   |
|                         |   |                                                                                     |      |   |   |   |   |
|                         |   |                                                                                     | **1,320** |   |   | 1,062 |   |

|   | (b) | Reconciliation                from the expected statutory tax rate in the PRC of 25% (2007 : 24%)                is as                follows: |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------|

|                                            |   |  **(Unaudited)****Nine                months****ended                September 30** |      |
|-------------------------------------------------|--------|------------------------------------------------------------------------------------------|-----------|
|                                            |   |  **2008**                                                                           |      | 2007 |   |
|                                            |   | %                                                                                        |      | % |   |
|                                            |   |                                                                                |      |   |   |
| Statutory                rate - the PRC         |   |                                                                                     | **25.0**  |   |   | 24.0 |   |
| Under-provision                for prior period |   |                                                                                     | **3.1**   |   |   | - |   |
| Tax                exempted items               |   |                                                                                     | **(14.1** | **)** |   | (12.8 | ) |
| Tax                non-deductible items         |   |                                                                                     | **3.2**   |   |   | 5.5 |   |
|                                            |   |                                                                                     |      |   |   |   |   |
| Effective                tax rate               |   |                                                                                     | **17.2**  |   |   | 16.7 |   |

----

**Orsus          Xelent Technologies, Inc.**

**Notes              to Consolidated Financial Statements**

----

*(Dollars              in thousands except share data and per share              amounts)*

| **5.** | **Earnings per                share** |
|--------|---------------------------------------|

| **6.** | **Trade                accounts receivable, net of                allowance** |
|--------|-------------------------------------------------------------------------------|

| **7.** | **Property,                plant and equipment, net** |
|--------|-------------------------------------------------------|

|                                      |   | **As                  of****September                  30,2008****(Unaudited)**  |     | As                  ofDecember                  31,2007  |   |
|-------------------------------------------|--------|---------------------------------------------------------------------------------------|----------|---------------------------------------------------------------|--------|
|                                      |   | ***US$’000***                                                                   |     | *US$’000*                                               |   |
| Moulds                                    |   |                                                                                  | **4**    |                                                          |   | 4 |   |
| Leasehold                  improvements   |   |                                                                                  | **128**  |                                                          |   | 128 |   |
| Plant                  and machinery      |   |                                                                                  | **19**   |                                                          |   | 19 |   |
| Office                  equipment         |   |                                                                                  | **280**  |                                                          |   | 296 |   |
| Motor                  vehicles           |   |                                                                                  | **296**  |                                                          |   | 296 |   |
|                                      |   |                                                                                  |          |                                                          |   |  |   |
|                                      |   |                                                                                  | **727**  |                                                          |   | 743 |   |
| Accumulated                  depreciation |   |                                                                                  | **(473** | **)**                                                         |   | (425 | ) |
|                                      |   |                                                                                  |          |                                                          |   |  |   |
|                                      |   |                                                                                  | **254**  |                                                          |   | 318 |   |

----

**Orsus          Xelent Technologies, Inc.**

**Notes              to Consolidated Financial Statements**

----

*(Dollars              in thousands except share data and per share              amounts)*

| **7.** | **Property,                plant and equipment, net                (continued)** |
|--------|----------------------------------------------------------------------------------|

| **8.** | **Short-term                bank loans** |
|--------|------------------------------------------|

| **9.** | **Short-term                loan from a non-financial                institution** |
|--------|------------------------------------------------------------------------------------|

| **10.** | **Mortgage                loan** |
|---------|----------------------------------|

|                                 |   | **As                  of****September                  30,****2008****(Unaudited)**  |   | As                  ofDecember                  31,2007  |   |
|--------------------------------------|--------|-------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                 |   | ***US$’000***                                                                       |   | *US$’000*                                               |   |
|                                 |   |                                                                                      |   |                                                          |   |
| Current                  portion     |   |                                                                                      | **23** |                                                          |   | 68 |   |
| Non-current                  portion |   |                                                                                      | **-**  |                                                          |   | 5 |   |
|                                 |   |                                                                                      |        |                                                          |   |  |   |
|                                 |   |                                                                                      | **23** |                                                          |   | 73 |   |

----

**Orsus            Xelent Technologies, Inc.**

**Notes                to Consolidated Financial Statements**

----

*(Dollars                in thousands except share data and per share amounts)*

| **11.** | **Related                party transactions** |
|---------|-----------------------------------------------|

|  | (a) | Name                and relationship of related parties |
|--|-----|---------------------------------------------------------|

| **Related                party** | **Relationship**                                       |
|----------------------------------|--------------------------------------------------------|
|                             |                                                   |
| Mr.                Wang Xin      | Director                and stockholder of the Company |
| Mr.                Liu Yu        | Director                and stockholder of the Company |

|  | (b) | Summary                of related party balances |
|--|-----|--------------------------------------------------|

|                                                    |   | **As                of****September                30,****2008****(Unaudited)** |      | As                of December                31,2007 |   |
|---------------------------------------------------------|--------|---------------------------------------------------------------------------------|-----------|------------------------------------------------------|--------|
|                                                    |   | ***US$’000***                                                             |      | *US$’000*                                      |   |
| Due                to directors                         |   |                                                                            |      |                                                 |   |
| Mr.                Wang Xin and Mr. Liu Yu              |   |                                                                            | **458**   |                                                 |   | 323 |   |
|                                                    |   |                                                                            |      |                                                 |   |   |   |
| Bank                loans guaranteed by Mr. Liu Yu      |   |                                                                            | **9,256** |                                                 |   | 9,160 |   |
|                                                    |   |                                                                            |      |                                                 |   |   |   |
| Mortgage                loan guaranteed by Mr. Wang Xin |   |                                                                            | **23**    |                                                 |   | 73 |   |

| **12.** | **Stock                options** |
|---------|----------------------------------|

|                                        |   | **Number                of share options** |        |
|---------------------------------------------|--------|--------------------------------------------|-------------|
| As                of January 1, 2008        |   | -                                          |        |
| Granted                                     |   |                                       | 614,000     |   |
| Exercised                                   |   |                                       | -           |   |
| Cancelled/lapsed                            |   |                                       | -           |   |
| **As                of September 30, 2008** |   |                                       | **614,000** |   |

----

**Orsus        Xelent Technologies, Inc.**

**Notes            to Consolidated Financial Statements**

----

*(Dollars            in thousands except share data and per share amounts)*

| **12.** | **Stock                options (continued)** |
|---------|----------------------------------------------|

| Expected                dividend yield         |   |   | -                       |   |
|------------------------------------------------|--------|--------|-------------------------|--------|
| Expected                stock price volatility |   |   | 85.07                   | %      |
| Risk                free interest risk         |   |   | 3.61                    | %      |
| Expected                life of share options  |   |   | 10                Years |

| **13.** | **Segment                information** |
|---------|----------------------------------------|

| **14.** | **Contingencies** |
|---------|-------------------|

----

**Orsus        Xelent Technologies, Inc.**

**Notes            to Consolidated Financial Statements**

----

*(Dollars            in thousands except share data and per share amounts)*

| **14.** | **Contingencies                (continued)** |
|---------|----------------------------------------------|

----

| **Item              2.** | **Management                Discussion and Analysis of Financial Conditions and Results of                Operations** |
|--------------------------|------------------------------------------------------------------------------------------------------------------------|

**OVERVIEW**

----

**Business      Review**

----

----

**CRITICAL      ACCOUNTING POLICIES AND MANAGEMENT ESTIMATES **

**RESULTS      OF OPERATIONS**

|                                                       | **Nine                  months ended****September                  30, 2008** | **Nine                  months ended****September                  30, 2007** | **Comparison** |
|------------------------------------------------------------|-------------------------------------------------------------------------------|-------------------------------------------------------------------------------|----------------|
|                                                       | **$000**                                                                      | **%                  of Revenue**                                             | **$000**       | **%                  of Revenue** | **$000** | **%** |
| Revenue                                                    | 78,853                                                                        | -                                                                             | 58,411         | - | 20,442 | 35.00% |
| Cost                  of sales                             | 68,302                                                                        | 86.62%                                                                        | 47,586         | 81.47% | 20,716 | 43.53% |
| Sales                  & marketing expenses            | 353                                                                           | 0.45%                                                                         | 389            | 0.67% | (36) | (9.25%) |
| General                  & admin. expenses             | 1,799                                                                         | 2.28%                                                                         | 763       | 1.31% | 1,036 | 135.78% |
| R&D                  expenses                          | 391                                                                           | 0.50%                                                                         | 319            | 0.55% | 72 | 22.57% |
| Depreciation                                               | 72                                                                            | 0.09%                                                                         | 113            | 0.19% | (41) | (36.28%) |
| Allowance                  for obsolete inventories        | -                                                                             | -                                                                             | 700            | 1.20% | (700) | (100.00%) |
| Allowance                  for trading deposit receivable* | -                                                                             | -                                                                             | 1,487          | 2.55% | (1,487) | (100.00%) |
| Finance                  cost                              | 733                                                                           | 0.93%                                                                         | 747            | 1.28% | (14) | 1.87% |
| Other                  net income                          | 465                                                                           | 0.59%                                                                         | 21             | 0.04% | 444 | 2,114.29% |
| Pre-tax                  profit                            | 7,668                                                                         | 9.72%                                                                         | 6,328          | 10.83% | 1,340 | 21.18% |
| Income                  tax                                | 1,320                                                                         | 1.67%                                                                         | 1,062          | 1.82% | 258 | 24.29% |
| Profit                                                     | 6,348                                                                         | 8.05%                                                                         | 5,266          | 9.02% | 1,082 | 20.55% |

----

|                                                       | **Three                  months ended****September                  30, 2008**  | **Three                  months ended****September                  30, 2007**  | **Comparison**  |
|------------------------------------------------------------|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|----------------------|
|                                                       | **$000**                                                                        | **%                  of Revenue**                                               | **$000**        | **%                  of Revenue**  | **$000**  | **%**  |
| Revenue                                                    | 29,240                                                                               | -                                                                                    | 22,046               | - | 7,194 | 32.63% |
| Cost                  of sales                             | 25,073                                                                               | 85.75%                                                                               | 18,064               | 81.94% | 7,009 | 38.80% |
| Sales                  & marketing expenses            | 128                                                                                  | 0.44%                                                                                | 142                  | 0.64% | (14) | (9.86%) |
| General                  & admin. expenses             | 228                                                                                  | 0.78%                                                                                | 184             | 0.83% | 44 | 23.91% |
| R&D                  expenses                          | 250                                                                                  | 0.85%                                                                                | 23                   | 0.10% | 227 | 986.96% |
| Depreciation                                               | 23                                                                                   | 0.08%                                                                                | 26                   | 0.12% | (3) | (11.54%) |
| Allowance                  for obsolete inventories        | -                                                                                    | -                                                                                    | 108                  | 0.49% | (108) | (100.00%) |
| Allowance                  for trading deposit receivable* | -                                                                                    | -                                                                                    | 78                   | 0.35% | (78) | (100.00%) |
| Finance                  cost                              | 255                                                                                  | 0.87%                                                                                | 443                  | 2.01% | (188) | (42.44%) |
| Other                  net income                          | 87                                                                                   | 0.30%                                                                                | 14                   | 0.06% | 73 | 521.43% |
| Pre-tax                  profit                            | 3,370                                                                                | 11.53%                                                                               | 2,992                | 13.57% | 378 | 12.63% |
| Income                  tax                                | 445                                                                                  | 1.52%                                                                                | 422                  | 1.91% | 23 | 5.45% |
| Profit                                                     | 2,925                                                                                | 10.00%                                                                               | 2,570                | 11.66% | 355 | 13.81% |

**Revenues**

----

**Products      Segment**

|                       | **Nine                  months ended September 30, 2008**  |
|----------------------------|-----------------------------------------------------------------|
|                       | **$’000**                                            | **%                  of revenue**  |
| DX5020                     | 6,909                                                           | 8.76% |
| C106                       | 2,251                                                           | 2.85% |
| G588                       | 1,965                                                           | 2.49% |
| DX6018                     | 10,077                                                          | 12.78% |
| DX5030                     | 9,529                                                           | 12.09% |
| DX7020                     | 8,692                                                           | 11.02% |
| DX8028                     | 5,050                                                           | 6.41% |
| DX5028                     | 5,003                                                           | 6.35% |
| DX8020                     | 4,621                                                           | 5.86% |
| DX5026                     | 4,407                                                           | 5.59% |
| DX5010                     | 3,287                                                           | 4.17% |
| DX7028                     | 2,740                                                           | 3.47% |
| LM6688                     | 2,710                                                           | 3.44% |
| DX7026                     | 2,680                                                           | 3.40% |
| PLAM                  T680 | 2,144                                                           | 2.72% |
| DX6028                     | 2,001                                                           | 2.54% |
| DX3020                     | 1,679                                                           | 2.13% |
| DX6030                     | 1,382                                                           | 1.75% |
| DX6038                     | 1,310                                                           | 1.66% |
| DX6010                     | 1,263                                                           | 1.60% |
| LG2018                     | 310                                                             | 0.39% |
| TREO680                    | 129                                                             | 0.16% |
| Others*                    | (1,286)                                                         | (1.63%) |
| **Total**                  | 78,853                                                          | 100.00% |

|   | · | DX5020                (CDMA, GPS, Touch Pad, Web Browsing), provided by Hongyuan Kangda                Trading                Co., Ltd.(“HYKD”); |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | C106                (Ultra Low-end CDMA), provided by Daxian Technologies Inc.(“DX”); and |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | G588                (Dual Simcards Simul-Standby, Windows Mobile, 1.3 Mega Pixel Camera,                Bluetooth, MP3, MP4), provided by China Electronic Appliance Company                (“CEAC”). |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | LM6688                (Dual Simcards Simul-Standby, Dual Cameras, Extended Standby, High-quality                Music Player), supplied by Tianjin Communication Broadcast Group                (“TCB”); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | DX6018                (Dual Simcards Mono-Standby, 300K Pixel Camera, Bluetooth, Dual Speakers,                MP3. MP4), supplied by Holley Communications Co., Ltd                (“HCC”); |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | DX7020                (Dual                Simcards Simul-Standby, 2.8+TP, 300K Pixel Camera,                Dual Speakers), supplied by HCC; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | DX8028                (Mono-Chip, Dual Simcards Simul-Standby, 1.8+TP, 300K Pixel Camera,                MP3,                MP4, Colorful Pad Lamp, Dual Speakers), supplied by HYKD; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | DX5010                (EDGE, GPS, Touch Pad, Web Browsing, IPTV), supplied by                HYKD. |
|--------|--------|----------------------------------------------------------------------------------------------------|

|   | · | DX5030                (Dual Simcards Simul-Standby, Windows Mobile, 2 Mega Pixel Camera,                Bluetooth, MP3, MP4), supplied by                HYKD; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | DX5028(Dual                Simcards Simul-Standby, Samsung SC32442 Chip, 2.8 QVGA TFT, EDGE                , 2 Mega                Pixel Camera ), supplied by Huayi Jiacheng Technologies Co., Ltd.(“HYJT”); |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | DX8020                (Dual Simcards Simul-Standby, Mono-chip, 1.8+TP, 300K Pixel Camera,                Dual                Speakers, MP3, MP4, Color Pad Lamp), supplied by                HYKD; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | DX5026                (Dual Simcards Mono-Standby, Samsung SC32442 Chip, 2.8 QVGA TFT,                EDGE+CDMA, 2 Mega Pixel Camera), supplied by HYJT;                and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | DX7028                (Dual Simcards Simul-Standby, 2.8+TP, 300K Pixel Camera, Dual Speakers),                supplied by CEAC. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|                       | **Three                  months ended September 30, 2008** |
|----------------------------|------------------------------------------------------------|
|                       | **$’000**                                            | **%                  of revenue** |
| C106                       | 2,251                                                      | 7.70% |
| G588                       | 1,965                                                      | 6.72% |
| DX5020                     | 864                                                        | 2.95% |
| DX5030                     | 9,529                                                      | 32.59% |
| DX5028                     | 5,003                                                      | 17.11% |
| DX5026                     | 4,407                                                      | 15.07% |
| DX7020                     | 3,365                                                      | 11.51% |
| PLAM                  T680 | 2,144                                                      | 7.33% |
| TREO680                    | 129                                                        | 0.44% |
| Others*                    | (417)                                                      | (1.42%) |
| Total                      | 29,240                                                     | 100.00% |

----

**Customer      Segments**

|                                                                        | **Nine                  months ended September 30, 2008**  |
|-----------------------------------------------------------------------------|-----------------------------------------------------------------|
|                                                                        | **$’000**                                            | **%                  of revenue**  |
| Beijing                  Xingwang Shidai Tech & Trading Co., Ltd.       | 72,364                                                          | 91.77% |
| Tianjin                  Communications Broadcast Company                   | 4,109                                                           | 5.21% |
| Zhongjie                  Communications Co., Ltd.                          | 2,251                                                           | 2.86% |
| Beijing                  Yangtze Fantai Communications Technology Co., Ltd. | 129                                                             | 0.16% |
| **Total**                                                                   | **78,853**                                                      | **100.00%** |

**Other      net income**

----

**Operating      expenses**

|                                                       | **Nine                  months ended****September                  30, 2008** | **Nine                  months ended****September                  30, 2007** | **Comparison**  |
|------------------------------------------------------------|-------------------------------------------------------------------------------|-------------------------------------------------------------------------------|-----------------|
|                                                       | **$’000**                                                               | **%                  of revenue**                                             | **$’000** | **%                  of revenue** | **$’000** | **%** |
| Sales                  & marketing                     | 353                                                                           | 0.45%                                                                         | 389             | 0.67% | (36) | (9.25%) |
| General                  & admin                       | 1,799                                                                         | 2.28%                                                                         | 763        | 1.31% | 1,036  | 135.78% |
| R&D                                                    | 391                                                                           | 0.50%                                                                         | 319             | 0.55% | 72 | 22.57% |
| Depreciation                                               | 72                                                                            | 0.09%                                                                         | 113             | 0.19% | (41) | (36.28%) |
| Allowance                  for obsolete inventories        | -                                                                             | -                                                                             | 700             | 1.20% | (700) | (100.00%) |
| Allowance                  for trading deposit receivable* | -                                                                             | -                                                                             | 1,487           | 2.55% | (1,487) | (100.00%) |
| Total                                                      | 2,615                                                                         | 3.32%                                                                         | 3,771           | 6.46% | (1,156) | (30.65%) |

|                                                       | **Three                  months ended****September                  30, 2008** | **Three                  months ended****September                  30, 2007** | **Comparison** |
|------------------------------------------------------------|--------------------------------------------------------------------------------|--------------------------------------------------------------------------------|----------------|
|                                                       | $’000                                                                    | $%                  of revenue                                                 | $’000    | %                  of revenue | $’000 | % |
| Sales                  & marketing                     | 128                                                                            | 0.44%                                                                          | 142            | 0.64% | (14) | (9.86%) |
| General                  & admin                       | 228                                                                            | 0.78%                                                                          | 184       | 0.83% | 44 | 23.91% |
| R&D                                                    | 250                                                                            | 0.85%                                                                          | 23             | 0.10% | 227 | 986.96% |
| Depreciation                                               | 23                                                                             | 0.08%                                                                          | 26             | 0.12% | (3) | (11.54%) |
| Allowance                  for obsolete inventories        | -                                                                              | -                                                                              | 108            | 0.49% | (108) | (100.00%) |
| Allowance                  for trading deposit receivable* | -                                                                              | -                                                                              | 78             | 0.35% | (78) | (100.00%) |
| Total                                                      | 629                                                                            | 2.15%                                                                          | 561            | 2.54% | 68 | 12.12% |

----

**Sales        and marketing expenses**

**R&D      expenses**

**General      and administrative expenses**

**Gross      Profit and Gross Profit Margin**

----

|   | 1. | *Intensified                competition in the domestic market and a decline in the gross margin                of                products sold during the period.*  |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   | When                competing with foreign brands in the domestic market, domestic brands                usually focus on sales of low-priced products as a strategy to increase                their market presence and secure originally-owned distribution to                create                conditions for future development. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 2. | *The                pending structural adjustment of Chinese telecomm                operators.* |
|--|----|--------------------------------------------------------------------------------------------------|

|   |   | For                the three quarters ended September 30, 2008, we received no high-margin                customized orders from the telecomm operators sector. The sector                is so                focused on restructuring that we received from them only a small                order for                ultra low-end CDMA cell phones from the subsidiary company of China                Telecom. The gross margin for these phones was very thin. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Net      income**

**LIQUIDITY      AND SOURCES OF CAPITAL**

----

----

**CASH      FLOWS**

**CONTINGENT      LIABILITIES **

** **

**OFF      BALANCE SHEET ARRANGEMENTS**

----

**CONTRACTUAL      COMMITMENTS**

|                                       |   | **Payments due by period** |   |
|--------------------------------------------|--------|-------------------------------------------|--------|
| **Contractual Obligations**           |   | **Total**                                 |   | **Less than****1 year** |   | **1-3 years** |   | **3-5 years** |   | **More than****5 years** |   |
|                                       |   | $                                         | 000    |   | $ | 000 |   | $ | 000 |   | $ | 000 |   | $ | 000 |   |
|                                       |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                Lease Obligations |   |                                      | 35     |   |   | 35 |   |   | - |   |   | - |   |   | - |   |
| Purchase                Obligations        |   |                                      | 7,406  |   |   | 7,406 |   |   | - |   |   | - |   |   | - |   |
|                                       |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                      |   |                                      | 7,441  |   |   | 7,441 |   |   | - |   |   | - |   |   | - |   |

| **Item              3.** | **Quantitative                and Qualitative Disclosures About Market                Risk.** |
|--------------------------|-----------------------------------------------------------------------------------------------|

| **Item              4.** | **Controls                and Procedures.** |
|--------------------------|---------------------------------------------|

----

**PART      II - OTHER INFORMATION**

| **Item              1.** | **Legal                Proceedings.** |
|--------------------------|---------------------------------------|

** **

| **Item              1A.** | **Risk                Factors.** |
|---------------------------|----------------------------------|

| **Item              2.** | **Unregistered                Sales of Equity Securities and Use of                Proceeds.** |
|--------------------------|------------------------------------------------------------------------------------------------|

|  | (a) | None. |
|--|-----|-------|

|  | (b) | Not                applicable. |
|--|-----|--------------------------------|

|  | (c) | None. |
|--|-----|-------|

| **Item              3.** | **Defaults                Upon Senior Securities.** |
|--------------------------|-----------------------------------------------------|

| **Item              4.** | **Submission                of Matters to a Vote of Security                Holders.** |
|--------------------------|----------------------------------------------------------------------------------------|

| **Item              5.** | **Other                Information.** |
|--------------------------|---------------------------------------|

|  | (a) | None. |
|--|-----|-------|

----

| **Item              6.** | **Exhibits.** |
|--------------------------|---------------|

| **Exhibit                Number** |   | **Exhibit                Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 3.1                               |   | Certificate                of Incorporation of Orsus Xelent Technologies, Inc. (incorporated                by                reference from Exhibit 3.1 to the Registration Statement on Form                SB-2                filed with the Securities and Exchange Commission on July 28, 2004                as                amended by that Plan of Merger and Agreement of Merger attached as                Exhibit                2.1 to the Current Report on Form 8-K filed with the SEC on April                20,                2005) |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 3.2                               |   | Amended                and Restated Bylaws of the Registrant (incorporated by reference                from                Exhibit 3.2 to the Current Report on Form 8-K filed with the Securities                and Exchange Commission on February 7, 2007, as amended by the Current                Report on Form 8-K filed with the SEC on March 5, 2007)                                                                                                                                                                                          |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.1                               |   | Specimen                Certificate of Common Stock (incorporated by reference to Exhibit                4.1 to                Amendment 2 to the Registration Statement on Form SB-2/A filed with                the                Securities and Exchange Commission on October 19, 2004)                                                                                                                                                                                                                                                             |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.1                              |   | Contract                of Suretyship, dated June 20, 2007, between Yayuncun Branch of Beijing                Rural Commercial Bank and Beijing Orsus Xelent Technology & Trading                Company Limited (incorporated by reference from Exhibit 10.1 to the                Current Report on Form 8-K filed with the Securities and Exchange                Commission on September 12, 2007)                                                                                                                                               |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.2                              |   | X180                Mobile Terminal Purchase Contract, dated May 31, 2007, among Unicom                Huasheng Telecommunication Technology Co., Ltd., Dalian Daxian                Distribution Company and Beijing Orsus Xelent Technology & Trading                Company Limited (incorporated by reference from Exhibit 10.1 to the                Current Report on Form 8-K filed with the Securities and Exchange                Commission on June 6, 2007)                                                                               |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.3                              |   | 2007                Omnibus Long-Term Incentive Plan (incorporated by reference from                Exhibit                10.1 to the Current Report on Form 8-K filed with the Securities                and                Exchange Commission on January 11, 2008)                                                                                                                                                                                                                                                                                   |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 14.1                              |   | Code                of Business Conduct and Ethics (incorporated by reference from Exhibit                14                to the Current Report on Form 8-K filed with the Securities and Exchange                Commission on February 7, 2007)                                                                                                                                                                                                                                                                                                      |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 31.1                              |   | Certification                of Principal Executive Officer under Section 302 of the Sarbanes-Oxley                Act                of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                          |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 31.2                              |   | Certification                of Principal Financial Officer under Section 302 of the Sarbanes-Oxley                Act                of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                          |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 32.1                              |   | Certification                of Principal Executive Officer under Section 906 of the Sarbanes-Oxley                Act                of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                          |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 32.2                              |   | Certification                of Principal Financial Officer under Section 906 of the Sarbanes-Oxley                Act                of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                          |

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**SIGNATURES**

|   | **ORSUS                XELENT TECHNOLOGIES, INC.** |
|--------|----------------------------------------------------|
|   |                                               |   |   |
|   |                                               |   |   |
|   | By:                                           |  /s/                Wang Xin |   |
|   |                                               | Wang                Xin |   |
|   |                                               | Chief                Executive Officer |   |
|   |                                               |   |   |
|   |                                               |   |   |
|   | By:                                           |  /s/                Zhao Hongwei |   |
|   |                                               | Zhao                Hongwei |   |
|   |                                               | Chief                Financial Officer |   |

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**INDEX      TO EXHIBITS**

| **Exhibit                Number** |   | **Exhibit                Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 3.1                               |   | Certificate                of Incorporation of Orsus Xelent Technologies, Inc. (incorporated                by                reference from Exhibit 3.1 to the Registration Statement on Form                SB-2                filed with the Securities and Exchange Commission on July 28, 2004                as                amended by that Plan of Merger and Agreement of Merger attached as                Exhibit                2.1 to the Current Report on Form 8-K filed with the SEC on April                20,                2005) |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 3.2                               |   | Amended                and Restated Bylaws of the Registrant (incorporated by reference                from                Exhibit 3.2 to the Current Report on Form 8-K filed with the Securities                and Exchange Commission on February 7, 2007, as amended by the Current                Report on Form 8-K filed with the SEC on March 5, 2007)                                                                                                                                                                                          |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.1                               |   | Specimen                Certificate of Common Stock (incorporated by reference to Exhibit                4.1 to                Amendment 2 to the Registration Statement on Form SB-2/A filed with                the                Securities and Exchange Commission on October 19, 2004)                                                                                                                                                                                                                                                             |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.1                              |   | Contract                of Suretyship, dated June 20, 2007, between Yayuncun Branch of Beijing                Rural Commercial Bank and Beijing Orsus Xelent Technology & Trading                Company Limited (incorporated by reference from Exhibit 10.1 to the                Current Report on Form 8-K filed with the Securities and Exchange                Commission on September 12, 2007)                                                                                                                                               |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.2                              |   | X180                Mobile Terminal Purchase Contract, dated May 31, 2007, among Unicom                Huasheng Telecommunication Technology Co., Ltd., Dalian Daxian                Distribution Company and Beijing Orsus Xelent Technology & Trading                Company Limited (incorporated by reference from Exhibit 10.1 to the                Current Report on Form 8-K filed with the Securities and Exchange                Commission on June 6, 2007)                                                                               |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.3                              |   | 2007                Omnibus Long-Term Incentive Plan (incorporated by reference from                Exhibit                10.1 to the Current Report on Form 8-K filed with the Securities                and                Exchange Commission on January 11, 2008)                                                                                                                                                                                                                                                                                   |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 14.1                              |   | Code                of Business Conduct and Ethics (incorporated by reference from Exhibit                14                to the Current Report on Form 8-K filed with the Securities and Exchange                Commission on February 7, 2007)                                                                                                                                                                                                                                                                                                      |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 31.1                              |   | Certification                of Principal Executive Officer under Section 302 of the Sarbanes-Oxley                Act                of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                          |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 31.2                              |   | Certification                of Principal Financial Officer under Section 302 of the Sarbanes-Oxley                Act                of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                          |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 32.1                              |   | Certification                of Principal Executive Officer under Section 906 of the Sarbanes-Oxley                Act                of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                          |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 32.2                              |   | Certification                of Principal Financial Officer under Section 906 of the Sarbanes-Oxley                Act                of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                          |

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