8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 16, 2009

TELESTONE TECHNOLOGIES CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	001-32503	84-1111224
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification)

(Address of principal executive offices)

Floor 6, Saiou Plaza, No. 5 Haiying Road,

Fengtai Technology Park, Beijing, China 100070

Registrant’s telephone number, including area code (86)-10-8367-0505

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On November 12, 2009, Telestone Technologies Corporation (the “Company”) issued a press release announcing its results for the fiscal quarter ended September 30, 2009. The press release is attached as Exhibit 99.1 to this report on Form 8-K.

The information contained in this Current Report on Form 8-K and the exhibits attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information or such exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. The information set forth in or exhibits to this Form 8-K shall not be deemed an admission as to the materiality of any information in this report on Form 8-K that is required to be disclosed solely to satisfy the requirements of Regulation FD.

Item 7.01 Regulation FD Disclosure.

On November 13, 2009, the Company held an earnings conference in connection with its earnings for the fiscal quarter ended September 30, 2009. A copy of the earnings conference script is attached as Exhibit 99.2 to this report on Form 8-K.

The information contained in this Current Report on Form 8-K and the exhibits attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information or such exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. The information set forth in or exhibits to this Form 8-K shall not be deemed an admission as to the materiality of any information in this report on Form 8-K that is required to be disclosed solely to satisfy the requirements of Regulation FD.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

99.1	Press Release of the Company, dated November 12, 2009.
99.2	Earnings Conference Script of the Company, dated November 13, 2009.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	TELESTONE TECHNOLOGIES CORPORATION
Dated: November 16, 2009	By:	/s/ Han Daqing
	Name:	Han Daqing
	Title:	Chief Executive Officer

EX-99.1

Telestone Technologies Corporation Reports

Record Third Quarter 2009 Revenues and Earnings

·   Press Release

·   Source: Telestone Technologies Corporation

·   On 4:30 pm EST, Thursday November 12, 2009

BEIJING, Nov. 12 /PRNewswire-Asia-FirstCall/ -- Telestone Technologies Corporation ("Telestone" or the "Company") (Nasdaq: TSTC - - News), a leading developer and provider of wireless communication local access network solutions based in China, today announced the Company's third quarter financial results for the quarter ending September 30, 2009.

-- Third quarter 2009 revenues increased 124.7% to $18.9 millionyear-over-year; gross margins were 52.7%

-- Third quarter 2009 net income increased 281.8 % to $4.2 millionyear-over-year with net margins of 22.3%; EPS was $0.41 vs. $0.11 year-over-year

-- For the nine months ended September 30, 2009, revenues increased 86.1%to $38.9 million year-over-year; net income increased 96.8% to $7.4 million year-over-year; EPS was $0.71 versus $0.36 year-over-year

-- WFDS(TM) product represents about 20% of third quarter revenues

-- Accounts receivable decreased 19.6% to $59.2 million for the thirdquarter ended September 30, 2009, compared to $70.8 million for the second quarter ended June 30, 2009

-- Telestone reaffirms guidance of $70.0 million in revenues for 2009based on strong order bookings for the balance of the year.

SUMMARY FINANCIALS

Third Quarter 2009 Results
	Q3 2009		Q3 2008		CHANGE
Net Sales	$	18.9 million	$	8.4 million		+ 124.7	%
Gross Profit	$	8.9 million	$	3.9 million		+ 128.2	%
Net Income	$	4.2 million	$	1.1 million		+ 281.8	%
EPS (Fully Diluted)	$	0.41	$	0.11		+272.7	%

Nine Month 2009 Results
	First 9 months		First 9 months
	of 2009		of 2008		CHANGE
Net Sales	$	38.9 million	$	20.9 million		+86.1	%
Gross Profit	$	18.6 million	$	10.5 million		+77.1	%
Net Income	$	7.4 million	$	3.7 million		+100.0	%
EPS (Fully Diluted)	$	0.71	$	0.36		+97.2	%

Third Quarter Financial Results

Revenues for the third quarter ended September 30, 2009 increased 124.7% to $18.9 million compared to same period of 2008. Telestone revenues are a combination of equipment and service sales. Equipment sales, which totaled $11.1 million, are attributed to the Company's shipments of its proprietary 2G and 3G local wireless access network equipment, manufactured for specific customer site installations. Service revenue, which totaled $7.8 million, is a combination of billable system integration and installation charges by Telestone's project design and implementation engineers. Total revenue growth for the quarter was directly attributed to the Company's sales of 2G and 3G network installations throughout China. In addition, a growing contributor to the Company's revenues is its Wireless Fiber Option Distribution System(TM) (WFDS(TM)) which accounted for about 20% of Telestone's revenues for the quarter. WFDS(TM) systems provide "multi-play" capabilities for media, voice, fax, closed circuit TV, data and all three protocols of Chinese cellular signals over a fiber optic cable routed directly into an installation site. WFDS(TM) is a certified-technology by the three Chinese telecommunications companies; China Mobile, China Unicom and China Telecom, and was recently approved by the FCC of the United States in September of this year. The certification by FCC can allow installation of WFDS(TM) based systems in the U.S.

"We are very pleased with our third quarter results, which represents a record and key turning point for our business. We are also proud that our customer base in China, including the three major telecommunication suppliers, have accepted our WFDS(TM) technology as a viable market standard for 3G products," opened Han Daqing, CEO and Chairman of Telestone. "We anticipate WFDS(TM) installations will continue to accelerate as carriers come to prefer its functionality advantage over the traditional 3G network equipment. We anticipate this trend will continue throughout the balance of the year and into 2010 as we gain further market shares," stated Han.

Costs of goods sold were $10.0 million in the third quarter of 2009 which yielded gross profits of $8.9 million. Costs of goods are comprised of components used in the manufacturing of Telestone's 2G and 3G product line and installation costs of project management and labor costs at commercial and residential customer locations. Specifically, cost of equipment sales totaled $7.1 million, yielding gross margins of 36.0% while cost of services totaled $2.9 million, yielding gross margins of 62.8%. Blended gross margins were 47.2% compared to 46.9% for the third quarter of 2008.

Total operating expenses for the quarter were $3.3 million, or 18.0% of revenues. Third quarter operating expenses as a percentage of revenues decreased 9.20 percentage points compared to the same quarter in 2008. The decrease in percentage for operating expenses is primarily due to the fact that expenses are rather fixed in nature. As a result, operating income increased 223.6% to $5.5 million in the quarter compared to $1.7 million recorded in the third quarter of 2008. Telestone maintains a 24% effective income tax rate for the quarter. However the taxes paid in the third quarter were not only for the net income in the quarter, but also including taxes due in previous quarters. As a High and New Technology Enterprise in China, the Company expects its income tax rate to be 15% for a three-year period.

Net income for the third quarter ended September 30, 2009 increased 281.8% to $4.2 million compared to $1.1 million in the third quarter of 2008. Net income margins for the quarter were 22.5% compared to 13.3% recorded in the third quarter of 2008. Earnings per share were $0.41 on 10.4 million fully diluted shares issued and outstanding, an increase of 272% compared to $0.11 reported in the third quarter of 2008.

-2-

Nine-Month Financial Results

For the nine months ended September 30, 2009, revenues increased 86.1% to $38.9 million compared to $20.9 million reported for the same period of 2008. The China-based telecommunications companies' goals to upgrade more than 200 cities in China to a 3G network platform by the close of 2009 was one of the principal drivers of this growth. As announced in January of 2009, Beijing has allocated $41 billion as part of a telecommunications stimulus package to upgrade China's more than 700 million cellular subscribers to a 3G network platform by 2013. Though Telestone has agent relationships in 28 countries worldwide and plans to continue increasing this component of revenue streams, over 98% of the nine months in 2009 revenues are China-based.

"Given our visibility into new orders, we are confident that continued strong demand in China will enable us to meet our $70 million in revenue guidance for the year," confirmed Han Daqing. "With more than 900 million cell phone subscribers forecasted by 2013 in China, the requirement to upgrade the networks to 3G creates a tremendous opportunity for the telecom providers and is our first priority. Securing the U.S.-FCC approval for our WFDS(TM) technologies will enable us to begin both marketing and commercialization roll-out efforts in the Americas. While we recognize China will be the principal growth driver for our business in the immediate future, we are also excited about capitalizing on growth opportunities in international markets to drive incremental sales and further diversify our customer base."

Gross profits for the nine month period ended was $18.6 million, representing a 77.1% increase over $10.5 million for the same period of 2008. Gross margins for the first nine months of 2009 were 47.8% compared to 50.4% for the same period of 2008.

Net income for the nine months period was $7.4 million, a 100% increase over the same period of 2008. Earnings per share for the period were $0.71 compared to $0.36 for the same period of 2008.

Balance Sheet and Cash Flow Discussion

As of September 30, 2009, Telestone Technologies had cash and cash equivalents totaling $5.3 million compared to $7.9 million on December 31, 2008. The Company maintained a current ratio of 2.0 based on $75.0 million in current assets and $38.1 million in current liabilities with a working capital position of $36.9 million. On September 30, 2009, Telestone had $59.2 million in receivables compared to $70.8 million on June 30, 2009, a reduction of accounts receivable by 19.6%, while revenues grew significantly. The Company was able to reduce its days of sales by185 days to 405. However account receivables older than a year become long-term receivables which were $18.8 million as of the end of September 2009. Even with that included, the total DSO is still lower than that of the second quarter of 2009. We expect our DSO number to be around 360 by the end of the year. Included in accounts receivable and DSO are 10% of Telestone customers' contract value to provide warranty service on installations for a twenty-four months period, a value which per GAAP must remain on the Company's accounts receivable until paid in full. For the nine months period of 2009, the Company recorded zero (0) bad debts.

-3-

Stockholders' equity was $59.9 million as of September 30, 2009, a 14% increase compared to $52.4 million as of December 31, 2008.

Conference Call

To attend the call, please use the dial information below. When prompted, ask for the "Telestone Technologies Call" and/or be prepared to provide the conference ID.

Date:	November 13, 2009
Time:	10:00am ET
Conference Line Dial-In (U.S.):	1-877-941-8602
International Dial-In:	1-480-629-9811
Conference ID:	4182022

Please dial in at least 10-minutes before the call to ensure timely participation. A playback will be available through November 20th, 2009. To listen, please call 1-800-406-7325 within the United States or +1-303-590-3030 when calling internationally. Utilize the pass code 4182022 for the replay.

About Telestone Technologies Corporation

Telestone provides Local Access Network Solutions, products and engineering integration to telecom carriers. In terms of 2G technologies, Telestone is a main supplier in wireless access coverage infrastructure building for the GSM and CDMA network base on its RFPA technologies primarily in the PRC. The products; repeaters, line-amplifiers, antennas and radio accessories are all based on RFPA technologies. After intensive research on the demands of carriers in 3G technologies, based on its strong R&D capabilities in both wireless and Fiber-Optics, Telestone has invented its WFDS unification local access network solution and products which are highly welcomed by all telecom carriers and property owners. Telestone also provides services that include project design, project manufacturing, installation, maintenance and after-sales services. Telestone currently has approximately 1,200 employees.

For further information, please contact:

Company:

Ren Hu, Board Secretary

Tel:   +86-137-1872-8163

Email: arenhu@gmail.com

Investor Relations:

HC International Inc.

John Mattio

Tel:   +1-203-616-5144

Email: john.mattio@hcinternational.net

-4-

Appendix: Financial Statements of Telestone Technologies Corporation

Condensed Consolidated Balance Sheets

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

	(Unaudited)
	As of		As of
	September 30,		December 31,
	2009		2008
ASSETS	US$'000		US$'000
Current assets:
Cash and cash equivalents		5,288		7,866
Accounts receivable, net of allowance		59,208		62,136
Due from related parties		1,662		1,826
Inventories, at lower of cost or market		6,930		7,843
Prepayment		1,770		2,347
Other current assets		98		1,352
Total current assets		74,956		83,370
Long-term receivables		18,774		--
Goodwill		3,119		3,119
Property, equipments and software, net		1,162		1,050
		23,055		4,169
Total assets		98,011		87,539
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank loans		3,656		2,918
Accounts payable ¨C trade		15,338		11,776
Customer deposits for sales of equipment		1,232		739
Due to related parties		1,708		1,673
Taxes payable		6,700		6,805
Accrued expenses and other accrued liabilities		9,480		11,197
Total current liabilities		38,114		35,108
Commitments and contingencies		--		--
Stockholders' equity:
Preferred stock, US$0.001 par value, 10,000,000 shares authorized, no shares issued				--
Common stock and paid-in-capital, US$0.001 par value: Authorized - 100,000,000 shares as of September 30, 2009 and December 31, 2008				--
Issued and outstanding - 10,404,550 shares as of September 30, 2009 and
December 31, 2008		11		11
Additional paid-in capital		18,989		18,989
Dedicated reserves		4,513		3,787
Other comprehensive income		5,677		5,573
Retained earnings		30,707		24,071
Total stockholders' equity		59,897		52,431
Total liabilities and stockholders' equity		98,011		87,539

-5-

Condensed Consolidated Statements of Operations and Other Comprehensive Income

	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008
	US$'000			US$'000			US$'000			US$'000
Operating revenues:
Net sales of equipment		11,099			5,797			21,504			12,112
Service income		7,792			2,610			17,413			8,832
Total operating revenues		18,891			8,407			38,917			20,944
Cost of operating revenues:
Cost of net sales		(7,099	)		(3,586	)		(13,738	)		(7,116	)
Cost of service		(2,878	)		(879	)		(6,558	)		(3,281	)
Total cost of operating revenues		(9,977	)		(4,465	)		(20,296	)		(10,397	)
Gross income		8,914			3,942			18,621			10,547
Operating expenses:
Sales and marketing		2,007			1,430			6,035			4,028
General and administrative		1,182			571			2,503			1,824
Research and development		138			208			467			461
Depreciation and amortization		79			76			253			237
Total operating expenses		3,406			2,285			9,258			6,550
Operating income		5,508			1,657			9,363			3,997
Interest expense		(40	)		(112	)		(170	)		(255	)
Other income, net		83			(28	)		372			915
Income before income taxes		5,551			1,517			9,565			4,657
Income taxes		(1,308	)		(395	)		(2,203	)		(917	)
Net income		4,243			1,122			7,362			3,740
Other comprehensive income
Foreign currency translation adjustment		(27	)		26			104			1,515
Comprehensive income		4,216			1,148			7,466			5,255
Earnings per share:
Weighted average number of common stock outstanding
Basic		10,404			10,404			10,404			10,404
Dilutive effect of warrants		--			20			--			59
Diluted		10,404			10,424			10,404			10,463
Net income per share of common stock
Basic and diluted (US$)		0.41			0.11			0.71			0.36

-6-

Condensed Consolidated Statements of Changes in Stockholders' Equity

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

	Common stock
					Additional
	Number of				paid-in
	shares		Amount		capital
			US$'000		US$'000
Balance at January 1, 2009		10,404,550		11		18,989
Net income
Foreign currency translation adjustment
Transfer to dedicated reserves
Balance at September 30, 2009		10,404,550		11		18,989

			Other
			compre-
	Dedicated		hensive		Retained
	reserves		income		earnings			Total
	US$'000		US$'000		US$'000			US$'000
Balance at January 1, 2009		3,787		5,573		24,071			52,431
Net income						7,362			7,362
Foreign currency translation adjustment				104					104
Transfer to dedicated reserves		726				(726	)		--
Balance at September 30, 2009		4,513		5,677		30,707			59,897

-7-

Condensed Consolidated Statements of Cash Flows

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

	Nine months ended September 30,
	2009			2008
	US$'000			US$'000
Cash flows from operating activities
Net income		7,362			3,740
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss on disposal of property, plant and equipment (15)
Depreciation and amortization		253			237
Allowance for doubtful accounts		1,163			337
Changes in assets and liabilities:
Accounts receivable		(17,009	)		(8,349	)
Due from related parties		164			55
Inventories		913			881
Prepayment		577			(330	)
Other current assets		1253			(751	)
Accounts payable		3,562			1,693
Customer deposits for sales of equipment		493			(64	)
Due to related parties		35			(595	)
Taxes payable		(105	)		(66	)
Accrued expenses and other accrued liabilities		(1,718	)		3,335
Net cash used in operating activities		(3,057	)		108
Cash flows from investing activities
Purchase of property, plant and equipment		(366	)		(32	)
Proceeds from disposal of property, plant and equipment		--			49
Net cash used in investing activities		(366	)		17
Cash flows from financing activities
Repayment of short-term bank loans		(2,918	)		(2,142	)
Repayment of long-term loan from related parties		--			(27	)
Proceeds from new short-term bank loans raised		3,656			2,856
Net cash used in financing activities		738			687
Net increase (decrease) in cash and cash equivalents		(2,685	)		812
Cash and cash equivalents, beginning of the period		7,866			5,473
Effect on exchange rate changes		107			42
Cash and cash equivalents, end of the period		5,288			6,327
Supplemental disclosure of cash flows information
Interest received		7			23
Interest paid		(76	)		187
Tax paid		(2,587	)		54

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EX-99.2

Telestone Technologies, Corp. (NASDAQGlobal: TSTC)

Q32009 Earnings Call Script

November 13th  2009

10:00 AM ET

Conference Call Information:

Moderator/Speaker Dial-in Numbers:

TOLL-FREE   1-877-941-8414

TOLL/INTERNATIONAL   1-480-629-9806

Conference ID:  4182022

Call Length:  1 hour

Lines:  50

Conference Date:  11/13/2009

Conference Start Time: 10:00 am Eastern

Pre-record Message: No

Moderator: JOHN MATTIO

Topic:  Telestone Technologies, Inc. Conference Call

Call Type:  800 Q&A, 480 Q&A

Participant Dial-In Numbers:

TOLL-FREE    1-877-941-8602

TOLL/INTERNATIONAL   1-480-629-9811

Moderator/Speaker Dial-in Numbers:

TOLL-FREE   1-877-941-8414

TOLL/INTERNATIONAL   1-480-629-9806

Operator

Good day ladies and gentlemen and welcome to Telestone Technologies Corp. third quarter earnings conference call. My name is (Operator Name) and I will be your operator for today. At this time, all participants are in a listen only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions).

I would now like to turn the presentation over to your host for today's call, Mr. John Mattio from HC International, Investor Relations council for Telestone Technologies Corp.  Please proceed, John.

John Mattio

Good morning ladies and gentlemen.  I would like to welcome you to Telestone Technologies Corp. third quarter 2009 earnings call.

1

Joining us today from Telestone’s Beijing offices is the Company’s Chairman and Chief Operating Officer,  Mr. Han Daqing and Board Secretary, Mr. Ren Hu.   Mr. Han will start with an opening remark. Mr. Hu will then continue with Company’s review and comments on its third quarter earnings and year-to-date performance .  After the company presentation, the management team of Telestone will field questions.

I would like to remind our listeners that on this call management's prepared remarks contain forward-looking statements which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions.

Statements made on this conference call, which are not historical fact, constitute ``Forward-Looking Statements.'' Actual results may differ materially due to numerous important factors that are described in Telestone Technologies most recent report to the SEC on Form 10-Q, which may be revised or supplemented in subsequent reports to the SEC. Telestone Technologies does not intend or assume any obligation to update any forward-looking statement to reflect events or circumstances after the date of this conference call.

As a reminder, for those of you unable to listen to the entire call at this time, an audio replay of this call will be available for seven days from Viavid and a call transcript will be available as well.

Information about the audio replay is available in the press release issued on November 10th, and can also be obtained from HC International upon request.

Now I would like to introduce Mr. Han the Chairman and CEO of the company to give an overview of the quarter. Please Chairman Han.

Daqing Han

Thanks John.

And thanks to everyone who has come to our third quarter earnings conference call. With efforts from the entire Telestone team and under the favorable operating environment, the company continues to outperform our technology, market and financial goals. We had a record quarter in terms of revenue and net income. Our margins --are stable at our historical levels and our account receivable positions are improving. Most importantly our success with the investments in new technology is continuing. While we are applying and receiving patents on weekly basis, our WFDS technologies continue to gain market share. We are confident that Telestone will continue its success story and deliver superior returns to our investors. Thanks again for your support.

John Mattio

Thank you Chairman Han! At this time, I would like to let Mr. Ren Hu, Board Secretary of Telestone Technologies to take over.   Ren, the floor is yours.

2

Ren Hu

Thank you John.  I would like to welcome our shareholders, prospective shareholders and analysts who are joining us on the call today.     We are pleased to conduct this call with you after release of our Q3 2009 financials presented to the public after market close, yesterday, November 12, 2009.

Since we understand there is a number of concurrent earnings calls this week, we will get right into our third quarter and nine-month performance.    First, let  us provide you with a quick summary of our performance as of September 30th, 2009.

-   Our third quarter 2009 revenues increased 124.7% to $18.9 million year-over-year; gross margins were 47.2%.

-   Third quarter net income increased 281.8 % to $4.2 million year-over-year with net margins of 22.3%;  EPS was $0.41 vs. $0.11 year-over-year.

-   For the nine months ended September 30, 2009, our revenues increased 86.1% to $38.9 million year-over-year; net income increased 96.8% to $7.4 million year-over-year and our EPS was $0.71 versus $0.36 year-over-year.

-   Our Wireless Fiber Optic Distribution System, what we will refer to as “WFDS”  represents about 20% of third quarter revenues.

-   We are reaffirming guidance of $70.0 million in revenues for 2009 based on strong order bookings for the balance of the year.

Now, let me provide you some more color on our third quarter revenues which increased 124.7% to $18.9 million compared to same period of 2008.   Telestone revenues are a combination of equipment and service sales. Our equipment sales, which totaled $11.1 million, are attributed to the Company’s shipments of its proprietary 2G and 3G local wireless access network equipment, manufactured in our own factory for specific customer site installations  Our service revenue totaled $7.8 million and is a combination of billable system integration and installation charges by Telestone’s project design and implementation engineers.  Our total revenue growth for the quarter was directly attributed to the Company’s sales of 2G and 3G network installations throughout China.   We are also pleased to report, that a growing contributor to the Company’s revenues is its  WFDS™ product line  which accounted for about 20% of Telestone’s revenues for the quarter.  As a note, we were not marketing or selling WFDS™ in 2008.  WFDS was a product line we launched in 2009.

WFDS™ systems provide “multi-play” capabilities for media, voice, fax, closed circuit TV, data and all three protocols of Chinese cellular signals over a fiber optic cable routed directly into an installation site.    We are the only provider of the technologies that can accomplish these tasks with one system.  WFDS™ is a certified-technology by the three Chinese telecommunications companies; China Mobile, China Unicom and China Telecom, and was recently approved by the FCC of the United States in September of this year. The certification by FCC can allow installation of WFDS™ based systems in the U.S. and other countries in the Americas.

We anticipate WFDS™ installations will continue to accelerate as carriers prefer its functionality advantage over traditional network equipment.   We further anticipate this trend will continue throughout the balance of the year and into 2010 as we gain further market share.

3

Our costs of goods sold were $10.0 million in the third quarter of 2009 which yielded gross profits of $8.9 million. Our costs of goods are comprised of components used in the manufacturing of our 2G and 3G product line and installation costs of project management and labor costs at commercial and residential customer locations.  Specifically, cost of equipment sales totaled $7.1 million, yielding gross margins of 36.0% while cost of services totaled $2.9 million, yielding gross margins of 62.8%. Our blended gross margins were 47.2% compared to 46.9% for the third quarter of 2008.

Total operating expenses for the quarter were $3.3 million, or 18.0% of revenues.   Third quarter operating expenses as a percentage of revenues decreased 9.20 percentage points compared to the same quarter in 2008.    The decrease in the percentage of operating expenses is due to our  relatively fixed expenses.   As a result, operating income increased 223.6% to $5.5 million in the quarter compared to $1.7 million recorded in the third quarter of 2008.    As reported in our 10-Q, we maintain a 25% effective income tax rate for 2009. However taxes paid during the quarter are not necessarily on the same quarter’s net income.  We were certified as a  New and High Technology Enterprise in China this year.  We are  also in the process of applying for the associated reduction in income tax rate, from 25 % to 15% and will update investors on the results of our application once confirmed.

Our net income for the third quarter ended September 30, 2009 increased 281.8% to $4.2 million compared to $1.1 million in the third quarter of 2008.  Net income margin for the quarter was 22.5% compared to 13.3% recorded in the third quarter of 2008.  Earnings per share were $0.41 on 10.4 million fully diluted shares issued and outstanding, an increase of 272% compared to $0.11 reported in the third quarter of 2008.

For the nine months ended September 30, our revenues increased 86.1% to $38.9 million compared to $20.9 million reported for the same period of 2008.   The  China-based telecommunications companies’ goals to upgrade more than 200 cities in China to a 3G network platform by the close of 2009 was one of the principal drivers of this growth.    As announced in January of 2009, Beijing has allocated $41 billion as part of a telecommunications stimulus package to upgrade China’s more than 700 million cellular subscribers to a 3G network platform by 2011. Though we maintain agent relationships in 28 countries worldwide and we plan to continue increasing this component of revenue streams, over 98% of the revenues in the first nine months of 2009 are China-based -  a revenue segment we do not anticipate diminishing in the near future.  In short, we are confident that continued strong demand in China will enable us to meet our $70 million in revenue guidance for the year.  With more than 900 million Chinese cell phone subscribers forecasted by 2013, the requirement to upgrade the networks to 3G creates a tremendous opportunity for the telecom providers; this is our first priority.  Securing U.S.-FCC approval for our WFDS™ technologies will enable us to begin marketing and commercialization roll-out efforts in the Americas.  While we recognize China will be the principal growth driver for our business in the immediate future, we are also excited about capitalizing on growth opportunities in international markets to drive incremental sales and further diversify our customer base.

Gross profits for the nine month period ended was $18.6 million, representing a 77.1% increase over $10.5 million for the same period of 2008.  Gross margin for the first nine months of 2009 was 47.8% compared to 50.4% for the same period of 2008.

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Our net income for the nine months period was $7.4 million, a 100% increase over the same period of 2008.   Earnings per share for the period were $0.71 compared to $0.36 for the same period of 2008.

Now onto our balance sheet and cash flow discussion…..

As of September 30, 2009, we had cash and cash equivalents totaling $5.3 million compared to $7.9 million on December 31, 2008.   We maintained a current ratio of 2.0 based on $75.0 million in current assets and $38.1 million in current liabilities with a working capital position of $36.9 million.   On September 30, we had $59.2 million in account receivables compared to $70.8 million on June 30, 2009, a reduction of accounts receivable by 19.6%, while revenues grew significantly.    In consideration to the length of some accounts receivable, particularly those beyond one year, in our Q3 report we separated current accounts receivable  (less than 1 year) from long-term accounts receivable (greater than one year).  Due to the non-existent reserves we take for this long term receivable category, we anticipate full payment on our long term receivables.  Our long term receivables are categorized as our natural billing cycle of services which includes a 24-month warranty contract valued at 10% of our total project cost.   This 10% of contract value is held on our A/R for 24 months until paid in full as per GAAP reporting standards.

Based off of current A/R. the we were able to reduce its days sales outstanding by185 405 for the 12 month total period ended September 30, 2009  In consideration to the combination of accounts receivable and long-term accounts receivable, $78 million, our DSO was 529 days, a 12% reduction in 12 month DSO compared to our last reported quarter, June 302009.  We expect our DSO number to be near 360 days by the end of the year.   For the nine months period of 2009, the Company recorded zero (0) bad debts.

Stockholders’ equity was $59.9 million as of September 30, 2009, a 14% increase compared to $52.4 million as of December 31, 2008.

We would like to thank you for attending our Q3 earnings call.  Our Chairman, Mr. Han, and I will now be available to answer any question you have.

Operator

If any participant would like to ask a question, please press the star followed by the one on your telephone.  If you wish to cancel this request, please press the star followed by the two.  Your questions will be polled in the order they are received.  There will be a short pause while participants register for questions.  One moment please.

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Operator

If now further questions, I would like to pass the floor back to Ren.

Ren Hu

Again we’d like to thank everyone, all of our investors, shareholders, who joined us this morning for the call.  John Mattio, Matt Hayden and I are always available if you have questions.  Since we spend a most of our time in the US and I am based there, we are frequently available for meetings, conferences and will continue visit our shareholders in their offices frequently throughout the year and in the future.

We look forward to updating you in the next quarter, and I hope everyone has a great day.

Operator

Ladies and gentlemen, this concludes the TSTC Third Quarter 2009 Earnings Conference Call.  Thank you for participating, you may now disconnect.

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