**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 March 31, 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 May 14, 2008** |
|------------------------------------------------------------|--------|------------------------------------------------|
| **Common                Stock, $.001 par value per share** |   | **29,756,000****shares**                       |

----

**PART        I - FINANCIAL INFORMATION**

**Item      1.**
**Financial      Statements.**

**Orsus      Xelent Technologies, Inc.**

**Index      to Financial Statements**

|                                                                                                        | Page   |
|-------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                        |   |
|  Condensed Consolidated              Statements of Operations (Unaudited)                              | 2      |
|                                                                                                        |   |
|  Condensed Consolidated              Balance Sheets (Unaudited)                                        | 3      |
|                                                                                                        |   |
|  Condensed Consolidated              Statement of Cash Flows (Unaudited)                               | 4      |
|                                                                                                        |   |
|  Consolidated Statement              of              Changes in Stockholders’ Equity (Unaudited) | 5      |
|                                                                                                        |   |
|  Notes to Condensed              Consolidated Financial Statements                                     | 6      |

----

| **Orsus                      Xelent Technologies, Inc.****Condensed                      Consolidated Statements of Operations and Other Comprehensive                      Income**For                      the 3 months ended March 31, 2008 and 2007 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *(Dollars in thousands except                    share data                    and per share                    amounts)*                                                                                                                               |

|                                                               |   |       |   | **(Unaudited)**                                                   |   |
|--------------------------------------------------------------------|--------|------------|--------|-------------------------------------------------------------------|--------|
|                                                               |   |       |   | **Three                months ended****March                31,** |   |
|                                                               |   |       |   | **2008**                                                          |   | 2007 |   |
|                                                               |   | ***Note*** |   | ***US$’000***                                               |   | *US$’000* |   |
|                                                               |   |       |   |                                                              |   |   |   |
| **Operating                revenues - Net sales**                  |   |       |   |                                                              |   | **20,719** |   |   | 20,009 |   |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| Cost                of operating revenue                           |   |       |   |                                                              |   | **(17,501** | **)** |   | (16,341 | ) |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| Gross                income                                        |   |       |   |                                                              |   | **3,218** |   |   | 3,668 |   |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| **Operating                expenses:**                             |   |       |   |                                                              |   |   |   |   |   |   |
| Sales                and marketing                                 |   |       |   |                                                              |   | **(103** | **)** |   | (113 | ) |
| General                and administrative                          |   |       |   |                                                              |   | **(436** | **)** |   | (1,374 | ) |
| Research                and development                            |   |       |   |                                                              |   | **(115** | **)** |   | (53 | ) |
| Depreciation                                                       |   |       |   |                                                              |   | **(25** | **)** |   | (52 | ) |
| Allowance                for obsolete inventories                  |   |       |   |                                                              |   | **-** |   |   | (320 | ) |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| Total                operating expenses                            |   |       |   |                                                              |   | **(679** | **)** |   | (1,912 | ) |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| **Operating                income**                                |   |       |   |                                                              |   | **2,539** |   |   | 1,756 |   |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| **Other                income (expenses)**                         |   |       |   |                                                              |   |   |   |   |   |   |
| Interest                expense                                    |   |       |   |                                                              |   | **(238** | **)** |   | (127 | ) |
| Other                income, net                                   |   |       |   |                                                              |   | **164** |   |   | 2 |   |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| **Income                before income taxes**                      |   |       |   |                                                              |   | **2,465** |   |   | 1,631 |   |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| Income                taxes                                        |   |       | *3*    |                                                              |   | **(548** | **)** |   | (384 | ) |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| **Net                income**                                      |   |       |   |                                                              |   | **1,917** |   |   | 1,247 |   |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| **Other                comprehensive income**                      |   |       |   |                                                              |   |   |   |   |   |   |
| Foreign                currency translation adjustment             |   |       |   |                                                              |   | **1,466** |   |   | - |   |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| **Comprehensive                income**                            |   |       |   |                                                              |   | **3,383** |   |   | 1,247 |   |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| **Earnings                per share**                              |   |       | *2*    |                                                              |   |   |   |   |   |   |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| Basic                and diluted (US$)                             |   |       |   |                                                              |   | **6.44                cents** |   |   | 4.19                cents |   |
|                                                               |   |       |   |                                                              |   |   |   |   |   |   |
| Weighted                average number of common stock outstanding |   |       |   |                                                              |   | **29,756,000** |   |   | 29,756,000 |   |

----

| **Orsus                  Xelent Technologies, Inc.****Condensed                  Consolidated Balance Sheets**As                  of March 31, 2008 and December 31, 2007 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *(Dollars in thousands except share data                and per                share amounts)*                                                                            |

|                                                                                                                                    |   |       |   | **(Unaudited)**                                              |   |                                                |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------------------------------------------------------------|--------|-----------------------------------------------------|--------|
|                                                                                                                                    |   |       |   | **As                of****March                31,****2008** |   | As                ofDecember                31,2007 |   |
|                                                                                                                                    |   | ***Note*** |   | ***US$’000***                                          |   | *US$’000*                                     |   |
| **ASSETS**                                                                                                                              |   |       |   |                                                         |   |                                                |   |
| **Current                assets**                                                                                                       |   |       |   |                                                         |   |                                                |   |
| Cash                and cash equivalents                                                                                                |   |       |   |                                                         |   | **186**                                             |   |   | 2,928 |   |
| Accounts                receivable, net of allowance                                                                                    |   |       |   |                                                         |   | **73,860**                                          |   |   | 57,743 |   |
| Inventories,                net                                                                                                         |   |       |   |                                                         |   | **-**                                               |   |   | 4 |   |
| Trade                deposits paid, net                                                                                                 |   |       |   |                                                         |   | **2,360**                                           |   |   | 839 |   |
| Other                current assets                                                                                                     |   |       | *4*    |                                                         |   | **4,375**                                           |   |   | 4,196 |   |
| Pledged                deposit                                                                                                          |   |       | *6*    |                                                         |   | **1,256**                                           |   |   | 1,206 |   |
|                                                                                                                                    |   |       |   |                                                         |   |                                                |   |   |   |   |
| Total                current assets                                                                                                     |   |       |   |                                                         |   | **82,037**                                          |   |   | 66,916 |   |
|                                                                                                                                    |   |       |   |                                                         |   |                                                |   |   |   |   |
| Property,                plant and equipment, net                                                                                       |   |       | *5*    |                                                         |   | **305**                                             |   |   | 318 |   |
|                                                                                                                                    |   |       |   |                                                         |   |                                                |   |   |   |   |
| **Total                assets**                                                                                                         |   |       |   |                                                         |   | **82,342**                                          |   |   | 67,234 |   |
|                                                                                                                                    |   |       |   |                                                         |   |                                                |   |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                                                                           |   |       |   |                                                         |   |                                                |   |   |   |   |
|                                                                                                                                    |   |       |   |                                                         |   |                                                |   |   |   |   |
| **Current                liabilities**                                                                                                  |   |       |   |                                                         |   |                                                |   |   |   |   |
| Short-term                bank loans                                                                                                    |   |       | *6*    |                                                         |   | **9,541**                                           |   |   | 9,160 |   |
| Current                portion of mortgage loan                                                                                         |   |       | *7*    |                                                         |   | **66**                                              |   |   | 68 |   |
| Accounts                payable - Trade                                                                                                 |   |       |   |                                                         |   | **20,251**                                          |   |   | 10,854 |   |
| Accrued                expenses and other accrued liabilities                                                                           |   |       |   |                                                         |   | **9,062**                                           |   |   | 8,048 |   |
| Trade                deposits                received                                                                                   |   |       |   |                                                         |   | **1,913**                                           |   |   | 1,709 |   |
| Due                to directors                                                                                                         |   |       | *8*    |                                                         |   | **451**                                             |   |   | 323 |   |
| Provision                for warranty                                                                                                   |   |       |   |                                                         |   | **128**                                             |   |   | 123 |   |
| Tax                payables                                                                                                             |   |       |   |                                                         |   | **3,650**                                           |   |   | 3,047 |   |
|                                                                                                                                    |   |       |   |                                                         |   |                                                |   |   |   |   |
| Total                current liabilities                                                                                                |   |       |   |                                                         |   | **45,062**                                          |   |   | 33,332 |   |
|                                                                                                                                    |   |       |   |                                                         |   |                                                |   |   |   |   |
| **Non-current                liabilities**                                                                                              |   |       |   |                                                         |   |                                                |   |   |   |   |
| Mortgage                loan                                                                                                            |   |       | *7*    |                                                         |   | **-**                                               |   |   | 5 |   |
|                                                                                                                                    |   |       |   |                                                         |   |                                                |   |   |   |   |
| **Commitments                and contingencies**                                                                                        |   |       | *10*   |                                                         |   | **-**                                               |   |   | - |   |
|                                                                                                                                    |   |       |   |                                                         |   |                                                |   |   |   |   |
| **Stockholders’                equity**                                                                                           |   |       |   |                                                         |   |                                                |   |   |   |   |
| Preferred                stock, US$0.001 par value:Authorized:                10,000,000 shares, no shares issued                       |   |       |   |                                                         |   |                                                |   |   |   |   |
| Common                stock and paid-in capital, US$0.001 par value:Authorized:                100,000,000 shares                       |   |       |   |                                                         |   |                                                |   |   |   |   |
| Issued                and outstanding: 29,756,000 shares as of March 31, 2008 and as of                December                31, 2007 |   |       |   |                                                         |   | **30**                                              |   |   | 30 |   |
| Additional                paid-in capital                                                                                               |   |       |   |                                                         |   | **2,484**                                           |   |   | 2,484 |   |
| Dedicated                reserves                                                                                                       |   |       |   |                                                         |   | **1,042**                                           |   |   | 1,042 |   |
| Accumulated                other comprehensive income                                                                                   |   |       |   |                                                         |   | **4,372**                                           |   |   | 2,906 |   |
| Retained                earnings                                                                                                        |   |       |   |                                                         |   | **29,352**                                          |   |   | 27,435 |   |
|                                                                                                                                    |   |       |   |                                                         |   |                                                |   |   |   |   |
| Total                stockholders’ equity                                                                                         |   |       |   |                                                         |   | **37,280**                                          |   |   | 33,897 |   |
|                                                                                                                                    |   |       |   |                                                         |   |                                                |   |   |   |   |
| **Total                liabilities and stockholders’ equity**                                                                     |   |       |   |                                                         |   | **82,342**                                          |   |   | 67,234 |   |

----

| **Orsus                  Xelent Technologies, Inc.****Condensed                  Consolidated Statements of Cash Flows**For                  the 3 months ended March 31, 2008 and 2007 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *(Dollars in thousands except share              data              and per share amounts)*                                                                                              |

|                                                                                                        |   | **(Unaudited)**                                                   |        |
|-------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|-------------|
|                                                                                                        |   | **Three                months ended****March                31,** |        |
|                                                                                                        |   | **2008**                                                          |        | 2007 |   |
|                                                                                                        |   | ***US$’000***                                               |        | *US$’000* |   |
| **Cash                flows used in operating activities**                                                  |   |                                                              |        |   |   |
| **Net                income**                                                                               |   |                                                              | **1,917**   |   |   | 1,247 |   |
| Adjustments                to reconcile net income to net cash used in operating                activities: |   |                                                              |        |   |   |   |   |
| Depreciation                                                                                                |   |                                                              | **25**      |   |   | 52 |   |
| Allowance                for obsolete inventories                                                           |   |                                                              | **-**       |   |   | 320 |   |
| Allowance                for doubtful account                                                               |   |                                                              | **-**       |   |   | 1,341 |   |
| Changes                in assets and liabilities:                                                           |   |                                                              |        |   |   |   |   |
| Accounts                receivable -trade                                                                   |   |                                                              | **(13,717** | **)** |   | 475 |   |
| Inventories,                net                                                                             |   |                                                              | **4**       |   |   | 270 |   |
| Trade                deposits paid                                                                          |   |                                                              | **(1,486**  | **)** |   | (5,502 | ) |
| Other                current assets                                                                         |   |                                                              | **(5**      | **)** |   | (16 | ) |
| Pledged                deposit                                                                              |   |                                                              | **-**       |   |   | (126 | ) |
| Trade                deposits received                                                                      |   |                                                              | **133**     |   |   | 749 |   |
| Accounts                payable - trade                                                                     |   |                                                              | **8,946**   |   |   | (1,432 | ) |
| Due                to directors                                                                             |   |                                                              | **32**      |   |   | - |   |
| Accrued                expenses and other accrued liabilities                                               |   |                                                              | **677**     |   |   | 2,187 |   |
| Tax                payables                                                                                 |   |                                                              | **476**     |   |   | (910 | ) |
|                                                                                                        |   |                                                              |        |   |   |   |   |
| **Net                cash used in operating activities**                                                    |   |                                                              | **(2,998**  | **)** |   | (1,345 | ) |
|                                                                                                        |   |                                                              |        |   |   |   |   |
| **Cash                flows from investing activities**                                                     |   |                                                              |        |   |   |   |   |
| Purchase                of property, plant and equipment                                                    |   |                                                              | **-**       |   |   | (182 | ) |
| Loan                to third party                                                                          |   |                                                              | **-**       |   |   | 288 |   |
|                                                                                                        |   |                                                              |        |   |   |   |   |
| **Net                cash****from****investing activities**                                                 |   |                                                              | **-**       |   |   | 106 |   |
|                                                                                                        |   |                                                              |        |   |   |   |   |
| **Cash                flows from financing activities**                                                     |   |                                                              |        |   |   |   |   |
| Advance                from a director                                                                      |   |                                                              | **83**      |   |   | - |   |
| Proceeds                from short-term bank loan                                                           |   |                                                              | **2,563**   |   |   | - |   |
| Repayment                of short-term bank loans                                                           |   |                                                              | **(2,563**  | **)** |   | 2,303 |   |
| Repayment                of mortgage loan                                                                   |   |                                                              | **(10**     | **)** |   | - |   |
|                                                                                                        |   |                                                              |        |   |   |   |   |
| **Net                cash from financing activities**                                                       |   |                                                              | **73**      |   |   | 2,303 |   |
|                                                                                                        |   |                                                              |        |   |   |   |   |
| **Net                (decrease) increase in cash and cash equivalents**                                     |   |                                                              | **(2,925**  | **)** |   | 1,064 |   |
|                                                                                                        |   |                                                              |        |   |   |   |   |
| **Cash                and cash equivalents, beginning of the period**                                       |   |                                                              | **2,928**   |   |   | 2,421 |   |
|                                                                                                        |   |                                                              |        |   |   |   |   |
| Effect                on exchange rate changes                                                              |   |                                                              | **183**     |   |   | - |   |
|                                                                                                        |   |                                                              |        |   |   |   |   |
| **Cash                and cash equivalents, end of the period**                                             |   |                                                              | **186**     |   |   | 3,485 |   |
|                                                                                                        |   |                                                              |        |   |   |   |   |
| **Supplemental                disclosure of cash flow information:**                                        |   |                                                              |        |   |   |   |   |
| Interest                paid                                                                                |   |                                                              | **238**     |   |   | 127 |   |
| Interest                received                                                                            |   |                                                              | **38**      |   |   | - |   |
| Tax                paid                                                                                     |   |                                                              | **77**      |   |   | - |   |

----

| **Orsus                  Xelent Technologies, Inc.****Condensed                  Consolidated Statements of Changes in Stockholders’                  Equity** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *(Dollars in thousands except share              data              and per share amounts)*                                                                           |

|                                                        |   | **Common                stock issued** |           |            |   |                                 |   |                      |      |                                      |   |                     |   |
|-------------------------------------------------------------|--------|----------------------------------------|----------------|-----------------|--------|--------------------------------------|--------|---------------------------|-----------|-------------------------------------------|--------|--------------------------|--------|
|                                                        |   | **No.                of****shares**    |           |  Amount    |   | **Additional****paid-in****capital** |   | **Dedicated****reserves** |      | **Other****compre-****hensive****income** |   | **Retained****earnings** |   |  Total |   |
|                                                        |   |                                   |           | *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                                   |   |                                   | -              |            |   | -                                    |   |                      | -         |                                      |   | -                        |   |   | - |   |   | 1,917 |   |   | 1,917 |   |
|                                                        |   |                                   |           |            |   |                                 |   |                      |      |                                      |   |                     |   |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation adjustment      |   |                                   | -              |            |   | -                                    |   |                      | -         |                                      |   | -                        |   |   | 1,466 |   |   | - |   |   | 1,466 |   |
|                                                        |   |                                   |           |            |   |                                 |   |                      |      |                                      |   |                     |   |   |   |   |   |   |   |   |   |   |
| **Balance                as of March 31, 2008 (Unaudited)** |   |                                   | **29,756,000** |            |   | **30**                               |   |                      | **2,484** |                                      |   | **1,042**                |   |   | **4,372** |   |   | **29,352** |   |   | **37,280** |   |

----

| **Orsus                  Xelent Technologies, Inc.****Notes                    to Condensed Consolidated Financial Statements**For                    the three months ended March 31, 2007 and                    2008 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                    |

**1.**
**BASIS      OF PRESENTATION AND CONSOLIDATION**

**Basis      of presentation**

**Basis      of consolidation**

**2.**
**EARNINGS      PER SHARE**

**3.**
**INCOME      TAXES**

----

| **Orsus                  Xelent Technologies, Inc.****Notes                    to Condensed Consolidated Financial Statements**For                    the three months ended March 31, 2007 and                    2008 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                    |

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

----

| **Orsus                  Xelent Technologies, Inc.****Notes                    to Condensed Consolidated Financial Statements**For                    the three months ended March 31, 2007 and                    2008 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                    |

|                       |   | **(Unaudited)****Three                months ended****March                31,** |    |
|----------------------------|--------|----------------------------------------------------------------------------------|---------|
|                       |   | **2008**                                                                         |    | 2007 |   |
|                       |   | ***US$’000***                                                              |    | *US$’000* |   |
| Current                tax |   |                                                                             |    |   |   |
| Hong                Kong   |   |                                                                             | **228** |   |   | - |   |
| PRC                        |   |                                                                             | **320** |   |   | 384 |   |
|                       |   |                                                                             | **548** |   |   | 384 |   |

----

| **Orsus                  Xelent Technologies, Inc.****Notes                    to Condensed Consolidated Financial Statements**For                    the three months ended March 31, 2007 and                    2008 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                    |

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

|                                                                                                                 |   | **(Unaudited)****Three                  months ended****March                  31,** |      |
|----------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|-----------|
|                                                                                                                 |   | **2008**                                                                             |      | 2007 |   |
|                                                                                                                 |   |                                                                                 |      |   |   |
|                                                                                                                      |   | %                                                                                    |      |  *%* |   |
|                                                                                                                 |   |                                                                                 |      |   |   |
| Statutory                  rate - PRC                                                                                |   |                                                                                 | **24.0**  |   |   | 24.0 |   |
| Difference                  in tax rates in the countries that a subsidiary of the Company                  operates |   |                                                                                 | **(3.4**  | **)** |   | - |   |
| Tax                  exemption                                                                                       |   |                                                                                 | **(13.8** | **)** |   | (23.7 | ) |
| Non-deductible                  items                                                                                |   |                                                                                 | **15.4**  |   |   | 23.2 |   |
|                                                                                                                 |   |                                                                                 |      |   |   |   |   |
| Effective                  tax rate                                                                                  |   |                                                                                 | **22.2**  |   |   | 23.5 |   |

**4.**
**OTHER      CURRENT ASSETS**

**5.**
**PROPERTY,      PLANT AND EQUIPMENT, NET**

|                                    |   | **(Unaudited)**                                              |     |                                                |   |
|-----------------------------------------|--------|--------------------------------------------------------------|----------|-----------------------------------------------------|--------|
|                                    |   | **As                of****March                31,****2008** |     | As                ofDecember                31,2007 |   |
|                                    |   | ***US$’000***                                          |     | *US$’000*                                     |   |
|                                    |   |                                                         |     |                                                |   |
| Moulds                                  |   |                                                         | **4**    |                                                |   | 4 |   |
| Leasehold                improvements   |   |                                                         | **122**  |                                                |   | 123 |   |
| Plant                and machinery      |   |                                                         | **20**   |                                                |   | 19 |   |
| Office                equipment         |   |                                                         | **295**  |                                                |   | 284 |   |
| Motor                vehicles           |   |                                                         | **296**  |                                                |   | 284 |   |
|                                    |   |                                                         |     |                                                |   |   |   |
|                                    |   |                                                         | **737**  |                                                |   | 714 |   |
| Accumulated                depreciation |   |                                                         | **(432** | **)**                                               |   | (396 | ) |
|                                    |   |                                                         |     |                                                |   |   |   |
|                                    |   |                                                         | **305**  |                                                |   | 318 |   |

----

| **Orsus                  Xelent Technologies, Inc.****Notes                    to Condensed Consolidated Financial Statements**For                    the three months ended March 31, 2007 and                    2008 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                    |

**6.**
**SHORT-TERM      BANK LOANS**

**7.**
**MORTGAGE      LOAN**

|                               |   | **(Unaudited)**                                              |   |                                                |   |
|------------------------------------|--------|--------------------------------------------------------------|--------|-----------------------------------------------------|--------|
|                               |   | **As                of****March                31,****2008** |   | As                ofDecember                31,2007 |   |
|                               |   | ***US$’000***                                          |   | *US$’000*                                     |   |
|                               |   |                                                         |   |                                                |   |
| Current                portion     |   |                                                         | **66** |                                                |   | 68 |   |
| Non-current                portion |   |                                                         | **-**  |                                                |   | 5 |   |
|                               |   |                                                         |   |                                                |   |   |   |
|                               |   |                                                         | **66** |                                                |   | 73 |   |

**8.**
**RELATED      PARTY TRANSACTIONS**

**a.**
**Name      and relationship of related parties**

| **Related                party** | **Relationship                with the Company during the period ended March 31,                2008** |
|----------------------------------|--------------------------------------------------------------------------------------------------------|
|                             |                                                                                                   |
| Mr.                Wang Xin      | Director                and stockholder of the Company                                                 |
| Mr.                Liu Yu        | Director                and stockholder of the Company                                                 |

----

| **Orsus                  Xelent Technologies, Inc.****Notes                    to Condensed Consolidated Financial Statements**For                    the three months ended March 31, 2007 and                    2008 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                    |

|   | **b.** | **Summary                of related party balances** |
|--------|--------|------------------------------------------------------|

|                                                      |   |       |   | **(Unaudited)**                                              |   |                                                |   |
|-----------------------------------------------------------|--------|------------|--------|--------------------------------------------------------------|--------|-----------------------------------------------------|--------|
|                                                      |   |       |   | **As                of****March                31,****2008** |   | As                ofDecember                31,2007 |   |
|                                                      |   | ***Note*** |   | ***US$’000***                                          |   | *US$’000*                                     |   |
|                                                      |   |       |   |                                                         |   |                                                |   |
| **Due                to directors**                       |   |       |   |                                                         |   |                                                |   |
| Mr.                Wang Xin and Mr. Liu Yu                |   |       | *(i*   | *)*                                                          |   | **451**                                             |   |   | 323 |   |
|                                                      |   |       |   |                                                         |   |                                                |   |   |   |   |
| **Bank                loans guaranteed by a director**    |   |       |   |                                                         |   |                                                |   |   |   |   |
| Mr.                Liu Yu                                 |   |       | *6*    |                                                         |   | **9,541**                                           |   |   | 9,160 |   |
|                                                      |   |       |   |                                                         |   |                                                |   |   |   |   |
| **Mortgage                loan guaranteed by a director** |   |       |   |                                                         |   |                                                |   |   |   |   |
| Mr.                Wang Xin                               |   |       | *7*    |                                                         |   | **66**                                              |   |   | 73 |   |

**9.**
**SEGMENT      INFORMATION**

**10.**
**CONTINGENCIES**

*Tax      penalty*

----

| **Orsus                  Xelent Technologies, Inc.****Notes                    to Condensed Consolidated Financial Statements**For                    the three months ended March 31, 2007 and                    2008 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                    |

*Financial      guarantee contract*

**11.**
**SHARE      OPTION PLAN**

**12.          **
**RECENT          ACCOUNTING PRONOUNCEMENTS**

----

| **Orsus                  Xelent Technologies, Inc.****Notes                    to Condensed Consolidated Financial Statements**For                    the three months ended March 31, 2007 and                    2008 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                    |

----

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

**OVERVIEW**

----

----

**Business      Review**

| 1. |   | To                complete the acquisition of a manufacturing facility during the second                quarter in 2008 |
|----|--------|-------------------------------------------------------------------------------------------------------------------------|

| 2. | To                seek continuing growth of sales volume in                2008 |
|----|---------------------------------------------------------------------------------|

----

| 3. | To                develop and launch qualified 3G                products |
|----|---------------------------------------------------------------------------|

**CRITICAL      ACCOUNTING POLICIES AND MANAGEMENT ESTIMATES **

----

**RESULTS      OF OPERATIONS**

|                                                      |   | **Three                  months ended****March                  31, 2008** |      | **Three                  months ended****March                  31, 2007** |   | **Comparison** |   |
|-----------------------------------------------------------|--------|----------------------------------------------------------------------------|-----------|----------------------------------------------------------------------------|--------|----------------|--------|
|                                                      |   | **$000**                                                                   |      | **%                  of Revenue**                                          |   | **$000**       |   | **%                  of Revenue** |   | **$000** |   | **%** |   |
| Revenue                                                   |   |                                                                       | 20,719    |                                                                       |   | -              |   |   | 20,009 |   |   | - |   |   | 710 |   |   | 3.55 | % |
| Cost                  of sales                            |   |                                                                       | 17,501    |                                                                       |   | 84.47          | %      |   | 16,341 |   |   | 81.67 | % |   | 1,160 |   |   | 7.10 | % |
| Sales                  & marketing expenses           |   |                                                                       | 103       |                                                                       |   | 0.50           | %      |   | 113 |   |   | 0.56 | % |   | (10 | ) |   | (8.85 | %) |
| General                  & admin. expenses            |   |                                                                       | 436       |                                                                       |   | 2.10           | %      |   | 159 |   |   | 0.79 | % |   | 277 |   |   | 174.21 | % |
| R&D                  expenses                         |   |                                                                       | 115       |                                                                       |   | 0.56           | %      |   | 53 |   |   | 0.26 | % |   | 62 |   |   | 116.98 | % |
| Depreciation                                              |   |                                                                       | 25        |                                                                       |   | 0.12           | %      |   | 52 |   |   | 0.26 | % |   | (27 | ) |   | (51.92 | %) |
| Allowance                  for obsolete inventories       |   |                                                                       | -  |                                                                       |   | -              |   |   | 320 |   |   | 1.60 | % |   | (320 | ) |   | (100.00 | %) |
| Allowance                  for trading deposit receivable |   |                                                                       | -  |                                                                       |   | -              |   |   | 1,215 |   |   | 6.07 | % |   | (1,215 | ) |   | (100.00 | %) |
| Finance                  cost                             |   |                                                                       | 238       |                                                                       |   | 1.15           | %      |   | 127 |   |   | 0.63 | % |   | 111 |   |   | 87.40 | % |
| Other                  net income                         |   |                                                                       | 164       |                                                                       |   | 0.79           | %      |   | 2 |   |   | 0.01 | % |   | 162 |   |   | 8,100 | % |
| Pre-tax                  profit                           |   |                                                                       | 2,465     |                                                                       |   | 11.90          | %      |   | 1,631 |   |   | 8.15 | % |   | 834 |   |   | 51.13 | % |
| Income                  tax                               |   |                                                                       | 548       |                                                                       |   | 2.64           | %      |   | 384 |   |   | 1.92 | % |   | 164 |   |   | 42.71 | % |
| Profit                                                    |   |                                                                       | 1,917     |                                                                       |   | 9.25           | %      |   | 1,247 |   |   | 6.23 | % |   | 670 |   |   | 53.73 | % |

**Revenues**

----

**Products      Segment**

|   |   | **Three                  months ended March 31, 2008** |   |
|--------|--------|--------------------------------------------------------|--------|
|   |   | $000                                                   |   | %                  of Revenue |   |
| DX6018 |   |                                                   | 3,990  |   |   | 19.26 | % |
| DX7020 |   |                                                   | 1,459  |   |   | 7.04 | % |
| DX7026 |   |                                                   | 2,680  |   |   | 12.93 | % |
| DX7028 |   |                                                   | 2,740  |   |   | 13.22 | % |
| DX8020 |   |                                                   | 2,263  |   |   | 10.92 | % |
| DX8028 |   |                                                   | 2,335  |   |   | 11.27 | % |
| DX3020 |   |                                                   | 1,679  |   |   | 8.10 | % |
| DX6010 |   |                                                   | 1,263  |   |   | 6.10 | % |
| DX6028 |   |                                                   | 2,000  |   |   | 9.66 | % |
| LG2018 |   |                                                   | 310    |   |   | 1.50 | % |
| TOTAL  |   |                                                   | 20,719 |   |   | 100.00 | % |

***Customer      Segments***

----

**Other      net income**

**Operating      expenses**

|                                                      |   | **Three                  months ended March 31, 2008** |   | **Three                  months ended March 31, 2007** |   | **Comparison** |   |
|-----------------------------------------------------------|--------|--------------------------------------------------------|--------|--------------------------------------------------------|--------|----------------|--------|
|                                                      |   | $000                                                   |   | %                  of Revenue                          |   | $000           |   | %                  of Revenue |   | $000 |   | %  |   |
|                                                      |   |                                                   |   |                                                   |   |           |   |   |   |   |   |   |   |
| Sales                  & marketing expenses           |   |                                                   | 103    |                                                   |   | 0.50           | %      |   | 113 |   |   | 0.56 | % |   | (10 | ) |   | (8.85 | %) |
| General                  & Admin. expenses            |   |                                                   | 436    |                                                   |   | 2.10           | %      |   | 159 |   |   | 0.79 | % |   | 277 |   |   | 174.21 | % |
| R&D                  expenses                         |   |                                                   | 115    |                                                   |   | 0.56           | %      |   | 53 |   |   | 0.26 | % |   | 62 |   |   | 116.98 | % |
| Depreciation                                              |   |                                                   | 25     |                                                   |   | 0.12           | %      |   | 52 |   |   | 0.26 | % |   | (27 | ) |   | (51.92 | %) |
| Allowance                  for obsolete inventories       |   |                                                   | -      |                                                   |   | -              |   |   | 320 |   |   | 1.60 | % |   | (320 | ) |   | (100.00 | %) |
| Allowance                  for trading deposit receivable |   |                                                   | -      |                                                   |   | -              |   |   | 1,215 |   |   | 6.07 | % |   | (1,215 | ) |   | (100.00 | %) |
| Total                                                     |   |                                                   | 679    |                                                   |   | 3.28           | %      |   | 1,912 |   |   | 9.56 | % |   | (1,233 | ) |   | (64.49 | %) |

**Sales      and marketing expenses**

**R&D      expense**

----

**General      and administrative expenses**

**Gross      Profit and Gross Profit Margin**

|   | 1. | the                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 market, domestic brands usually focus on sales of low-price                products as a strategy to increase their market presence and secure                originally-owned distribution to create conditions for future development,                but this results in higher sales of low-margin products; |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Net      income**

**LIQUIDITY      AND SOURCE OF CAPITAL**

----

**CASH      FLOWS**

----

**CONTINGENT      LIABILITIES **

**OFF      BALANCE SHEET ARRANGEMENTS**

**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.**

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

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

**Item      5.**
**Other      Information.**

**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)                                                                                                                                                                                                                                                                                                       |
| 24.1                         | Power                of Attorney (included on signature page)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 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 *                                                                                                                                                                                                                                                                                                                                                                                                           |

----

**SIGNATURES**

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

----

----

**POWER          OF ATTORNEY**

| Signature                                   |   | Title                                                                                                    |   | Date                                  |
|---------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|--------|---------------------------------------|
| /s/                    Wang Xin             |   |                                                                                                     |   |                                  |
| Wang                    Xin                 |   | Chief                    Executive Officer (Principal Executive Officer) and                    Director |   | May                    15, 2008  |
|                                        |   |                                                                                                     |   |                                  |
| /s/                    Zhao Hongwei         |   |                                                                                                     |   |                                  |
| Zhao                    Hongwei             |   | Chief                    Financial Officer (Principal Accounting Officer)                                |   | May                    15, 2008  |
|                                        |   |                                                                                                     |   |                                  |
| /s/                    Liu Yu               |   |                                                                                                     |   |                                  |
| Liu                    Yu                   |   | Chairman                    of the Board of Directors                                                    |   | May                    15, 2008  |
|                                        |   |                                                                                                     |   |                                  |
| /s/                    Naizhong Che         |   |                                                                                                     |   |                                  |
| Naizhong                    Che        |   | Director                                                                                                 |   | May                    15, 2008  |
|                                        |   |                                                                                                     |   |                                  |
| /s/                    Peng Wang       |   |                                                                                                     |   |                                  |
| Peng                    Wang           |   | Director                                                                                                 |   | May                    15, 2008  |
|                                        |   |                                                                                                     |   |                                  |
| /s/                    Zhixiang Zhang  |   |                                                                                                     |   |                                  |
| Zhixiang                    Zhang      |   | Director                                                                                                 |   | May                    15, 2008  |
|                                        |   |                                                                                                     |   |                                  |
| /s/                    Gao Jian        |   |                                                                                                     |   |                                  |
| Gao                    Jian            |   | Director                                                                                                 |   | May                    15, 2008  |
|                                        |   |                                                                                                     |   |                                  |
| /s/                    Howard S. Barth      |   |                                                                                                     |   |                                  |
| Howard                    S. Barth          |   | Director                                                                                                 |   | May                    15, 2008  |

----

**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)                                                                                                                                                                                                                                                                                                       |
| 24.1                         | Power                of Attorney (included on signature page)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 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 *                                                                                                                                                                                                                                                                                                                                                                                                           |

----