CommerceTel Announces Record First Quarter 2012 Financial Results

SAN DIEGO, CA--(Marketwire - May 22, 2012) - CommerceTel Corporation (OTCBB: MFON), an award-winning provider of proprietary mobile marketing technologies and solutions, announced today record revenue, gross profit and reduced operating losses for the three month period ending March 31, 2012.

• Q1, 2012 revenue increased to $1,013,206 from $140,638 in Q1, 2011, a 620% increase.
• Q1, 2012 gross profit increased 962% to $645,437, vs. $60,801 in Q1 2011.
• Gross margins for Q1, 2012 increased to 63.7% from 43.2% in 2011.

First Quarter 2012 Financial Results

Revenues for the three months ended March 31, 2012 were $1,013,206, an increase of $872,568, or 620.4% compared to the three months ended March 31, 2011.

Cost of goods sold was $367,769 in the first quarter of 2012 compared to $79,837 in the first quarter of 2011, with a gross margin profit of $645,437 in the first quarter of 2012 compared to a gross profit of $60,801 in the same period a year ago. The increase in gross profit as a percentage of revenue is due to the three acquired operating segments which generated higher gross margins and allowed for greater leverage of fixed expenses. Increased volume of SMS traffic also allowed for a reduction of more than 50% in per-message costs beginning in January 2012. These costs are expected to continue to decrease significantly in 2012 as pricing synergies are obtained by consolidating the operations of the acquired companies.

Operating expenses for the first quarter of 2012 were $1,579,663, consisting of approximately $312,873 in selling expenses and approximately $951,986 million in general and administrative expenses. Operating expenses include $250,532 in share-based compensation. Operating loss was $934,226 in the three months ended March 31, 2012 compared to an operating loss of $775,866 in the corresponding period a year ago.

Net Loss for the three months ended March 31, 2012 and March 31, 2011 were $1,692,240 and $1,311,518 respectively. The increase of $380,722 or 29.0% can mostly be attributed to the increased depreciation and amortization of $152,581 and interest expense of $252,770. Excluding non-cash charges, including stock compensation and changes in the fair market value of derivatives, non-GAAP adjusted net loss was $395,748 in the first quarter of 2012 compared to an adjusted net loss of $429,220 in the same period of 2011. The weighted average shares outstanding increased from 17.7 million a year ago to 22.8 million in the first quarter of 2012.

Balance Sheet and Cash Flows

The Company had $240 of cash at March 31, 2012 compared to $396 at year end December 31, 2011. Total accounts receivable increased from $243,846 in 2011 to $227,259 in 2012. Total notes payable outstanding were $2,116,212 at March 31, 2012 compared to $1,825,714 at December 31, 2011.

For period ending March 31, 2012 the Company had $328,347 in cash outflow from operations, up from $325,836 for the same period in 2011.

Financial Summary

	Q1 2012	Q1 2011	Chg.
Net Revenues	$1,013,206	$ 140,638	620%
Gross Profits	$ 645,437	$ 60,801	64%
GAAP Net Income (loss)	($1,692,240)	($1,311,518)	-29%
Adjusted Net Income (loss)	($395,748)(1)	($429,062)	8%
GAAP EPS (Diluted)	($0.07)	($0.07)	--
Adjusted EPS (Diluted)	($0.017) (1)	($0.024)	28%
Diluted Shares O/S	22,797,641	17,711,048	29%

(1) Please see non-GAAP reconciliation table below

Non-GAAP reconciliations:
		Q1 2012		Q1 2011
GAAP Net Income (Loss)		($1,692,240)		($1,311,518)
Depreciation and amortization		$154,617		$2,037
Change in FMV of derivatives		$460,487		$430,402
Non-cash stock comp expenses		$383,861		$344,609
Gain on contingent considerations		($60,650)		--
Interest expense, net		$358,178		$105,408
Non-GAAP adjusted net income		($395,747)		($429,062)
Weighted avg. diluted shares		22,797,641		17,711,048
Non-GAAP adjusted EPS		($0.017)		($0.024)

About CommerceTel:

CommerceTel is an award-winning provider of proprietary mobile marketing technologies and the inventor of C4, a unique, enterprise-grade platform empowering brands to engage mobile consumers via multiple channels. The only system of its kind, C4 is a cloud-based solution providing broad mobile communications and extensive CRM features. It is integrated with multiple tier-one PSTN/ IP carriers and micropayment processing facilities as well as with carrier premium SMS billing systems. Customers include CNN, Disney, Sony Pictures, AT&T, Verizon, USA Network, numerous professional sports franchises, the Golf Channel, and NBC Universal. For further information visit www.commercetel.com or follow us on Twitter @CommerceTelinc.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: adjusted net income and adjusted EPS. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our "recurring core business operating results." We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. We believe these non-GAAP financial measures are useful to investors because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

Cautionary Statement Regarding Forward-Looking Information

This press release may contain certain "forward-looking statements" relating to the business of CommerceTel Corporation, and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding the impact of the proceeds from the private placement on the Company's short term business and operations, the general ability of the Company to achieve its commercial objectives, including the ability of the Company to sustain growth; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf months are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

CommerceTel Corporation
Consolidated Balance Sheets
				March 31,				December 31,
				2012				2011
				(Unaudited)				(Audited)
Current assets
	Cash			$	240			$	396
	Accounts receivable, net of allowance for doubtful accounts of $54,973 and $18,050, respectively				227,259				243,846
	Other current assets				304,889				15,924
Total current assets					532,388				260,166
Equipment, net					24,213				25,316
Goodwill					3,002,070				3,002,070
Intangible assets, net					968,507				1,116,506
Other assets					45,178				197,046
		TOTAL ASSETS		$	4,572,356			$	4,601,104
Current liabilities
	Accounts payable			$	1,068,414			$	842,777
	Accrued interest				172,166				130,426
	Accrued and deferred personnel compensation				343,768				237,691
	Deferred revenue - related party				167,000				200,000
	Deferred revenue and customer deposits				136,437				126,525
	Convertible notes payable, net of discount				1,476,370				1,002,730
	Notes payable, net of discount				614,842				736,270
	Cash payment obligation, net of discount				25,000				86,714
	Derivative liabilities				2,305,175				1,573,859
	Other current liabilities				289,447				245,227
	Earn-out payable				2,597,587				-
Total current liabilities					9,196,206				5,182,219
Non-current liabilities
	Long term accounts payable				-				125,846
	Earn-out payable				-				2,658,238
Total non-current liabilities					-				2,784,084
Total liabilities					9,196,206				7,966,303
Stockholders' equity (deficit)
	Common stock, $0.001 par value; 150,000,000 shares authorized; 22,904,308 and 22,754,308 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively				22,904				22,754
	Common stock liability				87,000				-
	Additional paid-in capital				21,445,728				21,099,289
	Accumulated deficit				(26,179,482	)			(24,487,242	)
Total stockholders' equity (deficit)					(4,623,850	)			(3,365,199	)
		TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)		$	4,572,356			$	4,601,104

CommerceTel Corporation
Consolidated Statements of Operations
(Unaudited)
			Three months ended March 31,
			2012				2011
							(Restated)
Revenues
	Revenues		$	1,013,206			$	140,638
	Cost of revenues			367,769				79,837
Gross margin				645,437				60,801
Operating expenses
	General & administrative			951,987				624,214
	Sales & marketing			312,873				63,925
	Engineering, research, & development			160,186				146,491
	Depreciation & amortization			154,617				2,037
Total operating expenses				1,579,663				836,667
Loss from operations				(934,226	)			(775,866	)
Other income/(expense)
	Interest income			-				158
	Interest expense, net			(358,178	)			(105,408	)
	Change in fair market value of derivative liabilities			(460,487	)			(430,402	)
	Gain on adjustment in contingent consideration			60,651				-
Total other income/(expense)				(758,014	)			(535,652	)
Loss before income taxes				(1,692,240	)			(1,311,518	)
	Income tax expense			-				-
Net loss			$	(1,692,240	)		$	(1,311,518	)
Net loss per share - basic and diluted			$	(0.07	)		$	(0.07	)
Weighted average number of shares during the period - basic and diluted				22,797,641				17,711,048

CommerceTel Corporation
Consolidated Statements of Cash Flows
(Unaudited)
				Three months ended March 31,
				2012				2011
								(restated)
OPERATING ACTIVITIES
	Net loss			$	(1,692,240	)		$	(1,311,518	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Bad debt expense			46,384				-
		Common stock for services			270,000				-
		Stock-based compensation			113,861				344,609
		Depreciation and amortization expense			154,617				2,037
		Gain on adjustment in contingent consideration			(60,651	)			-
		Change in fair market value of derivative liabilities			460,487				430,402
		Amortization of deferred financing costs			35,154				-
		Amortization of note discounts			277,349				78,810
	Increase (decrease) in cash resulting from changes in:
		Accounts receivable			(29,797	)			(1,011	)
		Other current assets			(324,119	)			(23,680	)
		Other assets			2,939				-
		Accounts payable			225,637				81,364
		Accrued interest			41,740				26,598
		Accrued and deferred personnel compensation			106,077				(6,356	)
		Deferred revenue and customer deposits			(23,088	)			53,359
		Long term accounts payable			23,083				-
		Other liabilities			44,220				(450	)
Net cash used in operating activities					(328,347	)			(325,836	)
INVESTING ACTIVITIES
	Purchases of equipment				(5,515	)			(2,412	)
	Acquisition of intangible assets				-				(60,000	)
Net cash used in investing activities					(5,515	)			(62,412	)
FINANCING ACTIVITIES
	Proceeds from issuance of notes payable				585,100				10,000
	Payments on notes payable				(188,894	)			-
	Payments on cash payment obligation				(62,500	)			-
	Proceeds from issuance of common stock and warrants				-				210,000
Net cash provided by financing activities					333,706				220,000
Net change in cash					(156	)			(168,248	)
Cash at beginning of period					396				373,439
Cash at end of period				$	240			$	205,191
Supplemental disclosures:
Cash paid during period for :
	Interest			$	4,835			$	-
Non cash investing and financing activities:
Debt discount				$	320,557			$	4,299
Adjustment to derivative liability due to debt repayment				$	49,728			$	-
Common stock issued for patents and trademarks				$	-			$	50,000