-- The decline in international voice traffic due to the global
economic crisis.
Although management expects call volumes to increase as the economy
improves, the Company has pursued selling higher revenue per minute
routes while diversifying its core global VoIP business. During the
4th quarter the Company deployed a VoIP technology platform to
introduce new and enhanced VoIP services that includes fully hosted
IP/PBX services, IP trunking, call center applications, prepaid
services, and customized VoIP solutions for specialized applications.
With a current market value of nearly $500 billion, management believes
there is a significant market opportunity for ATSI's diversification
strategy.
-- The tightening of capital markets reduced the credit worthiness of
certain existing and prospective customers.
To minimize risk, the Company denied or reduced credit on certain
accounts resulting in a negative impact on revenue. To offset this
decline, the Company is vigorously pursuing new accounts and selling
additional services to its existing credit-worthy customers.
-- The market shift towards improved quality for global VoIP services
required the Company to hold its suppliers to a higher standard on
international routes.
The Company took action during the 3rd quarter to improve call quality
and the average call duration ("ACD") of calls processed on its
network. The action taken included eliminating underperforming
suppliers from its global network. The result is improved quality that
management believes will positively influence the business long-term
and favorably impact future revenues. In addition, the Company deployed
an automated least cost routing system during the year that prioritizes
routes based on profitability and blocks non-profitable routes. The
system will eliminate costly routing errors, increase productivity, and
maximize the profit potential for ATSI's global VoIP business.
Arthur L. Smith, CEO of ATSI, stated, "The decline in U.S. and World
economies made FY2009 a particularly challenging year for our team. We
took the corrective action necessary to overcome the difficulties we faced
including streamlining operations and cutting expenses. We also launched
new enhanced VoIP services and implemented the changes necessary to build a
more consistent, stable and reliable global network. In May 2009, we
provisioned our first account on our enhanced services platform consisting
of a VoIP network to 154 cities for a Fortune 500 company. In addition, we
recently provisioned several other corporate accounts and completed
interoperability testing with 2 top-tier global carriers. We are
positioning ATSI as an outsourced VoIP technology enabler, marketing these
new and synergistic services to other carriers and to enterprise customers
through established channel partners. We look forward to the future with
confidence and believe our new products combined with the actions taken to
improve our core VoIP service will benefit our business plan in FY2010."
Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with generally
accepted accounting principals, or GAAP, ATSI uses non-GAAP measures of
operating income (loss), net income (loss) and income (loss) per share,
which are adjustments from results based on GAAP to exclude non-cash
expenses, including non-cash stock-based compensation in accordance with
SFAS 123R. ATSI's management believes the non-GAAP financial information
provided in this release is useful to investors' understanding and
assessment of ATSI's on-going core operations and prospects for the future.
The presentation of this non-GAAP financial information is not intended to
be considered in isolation or as a substitute for results prepared in
accordance with GAAP. Management uses both GAAP and non-GAAP information in
evaluating and operating business internally and as such deemed it
important to provide all this information to investors.
Net income before non-cash items is not a term defined by generally
accepted accounting principles (GAAP) and may not be comparable to other
similarly titled measurements used by other companies. Such non-GAAP
measures should be considered in addition to, and not as a substitute for,
performance measures calculated in accordance with GAAP. The accompanying
table includes a detailed reconciliation of net loss reported in accordance
with GAAP to net loss before non-cash items.
ATSI Communications, Inc. operates through its wholly owned subsidiary,
Digerati Networks, Inc. Digerati Networks is a premier global VoIP carrier
serving rapidly expanding markets in Asia, Europe, the Middle East, and
Latin America, with an emphasis on Mexico. Through Digerati's partnerships
with established foreign carriers and network operators, interconnection
and service agreements, and a NextPoint powered VoIP network, ATSI believes
it has clear advantages over its competition. ATSI also owns a minority
interest of a subsidiary in Mexico, ATSI Comunicaciones, S.A. de C.V.,
which operates under a 30-year government issued telecommunications
license.
The information in this news release includes certain forward-looking
statements that are based upon management's expectations and assumptions
about certain risks and uncertainties that can affect future events.
Although management believes these assumptions and expectations to be
reasonable on the date of this news release, these risks and uncertainties
may cause actual events to differ material from managements those contained
in this news release. The risks and uncertainties include, but are not
limited to, continuing as a going concern, availability and cost of our
present vendors and suppliers, and absence of any change in government
regulations or other costs associated with data transmission over the
Internet or termination of transmissions in foreign countries.
ATSI COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Years ended July 31,
2009 2008
---------- ----------
OPERATING REVENUES:
VoIP services $ 19,891 $ 41,961
---------- ----------
Total operating revenues 19,891 41,961
---------- ----------
OPERATING EXPENSES:
Cost of services (exclusive of depreciation
and amortization) 18,533 38,884
Selling, general and administrative expense
(exclusive of legal and professional fees) 2,157 2,400
Legal and professional fees 353 352
Bad debt expense 2 (27)
Depreciation and amortization expense 152 160
---------- ----------
Total operating expenses 21,197 41,769
---------- ----------
OPERATING INCOME (LOSS) (1,306) 192
---------- ----------
OTHER INCOME (EXPENSE):
Gain on early extinguishment of debt 108 41
Loss attributed to noncontrolling interest (114) -
Investment loss - (16)
Interest income (expense) (196) (105)
---------- ----------
Total other income (expense), net (202) (80)
---------- ----------
NET INCOME (LOSS) (1,508) 112
---------- ----------
LESS: PREFERRED DIVIDEND - (12)
ADD: REVERSAL OF PREVIOUSLY RECORDED PREFERRED
DIVIDEND - 340
---------- ----------
NET INCOME (LOSS) TO COMMON STOCKHOLDERS $ (1,508) $ 440
========== ==========
BASIC INCOME (LOSS) PER SHARE TO COMMON
STOCKHOLDERS $ (0.04) $ 0.01
========== ==========
DILUTED INCOME (LOSS) PER SHARE TO COMMON
STOCKHOLDERS $ (0.04) $ 0.01
========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 40,043,303 39,143,748
DILUTED COMMON SHARES OUTSTANDING 40,043,303 39,197,319
NET INCOME (LOSS) TO COMMON STOCKHOLDERS, as
reported: $ (1,508) $ 440
---------- ----------
EXCLUDING NON-CASH ITEMS:
ADD:
Non-cash issuance of common stock and
warrants for services - 77
Non-cash stock-based compensation, employees 389 695
Bad debt expense (recovery) 2 (27)
Depreciation and amortization 152 160
Investment loss - 16
Loss attributed to noncontrolling interest 114 -
Interest expense 196 105
MINUS:
Gain on early extinguishment of debt 108 41
Preferred dividend - 328
NET INCOME (LOSS) TO COMMON STOCKHOLDERS
---------- ----------
EXCLUDING NON-CASH ITEMS: $ (763) $ 1,097
========== ==========
Contact Information: Contact: Jack Eversull The Eversull Group 972-378-7917 or 972-571-1624 972-378-7981 (fax) E-mail: Web Site: www.atsi.net