SAN ANTONIO, March 23, 2006 (PRIMEZONE) -- ATSI Communications, Inc. (OTCBB:ATSX) announced today that revenues for the three months ended January 31, 2006 totaled $2,947,000 and resulted in the sixth consecutive quarter of record revenues since the Company's reincorporation in May 2004. This is a 94% increase in revenues over the three months ended January 31, 2005. ATSI also reported that the Company achieved a major milestone during the quarter by producing positive cash flow from operations for the month of January 2006. Net loss before non-cash items for the three months ended January 31, 2006 was $35,000 vs. a net loss before non-cash items of $24,000 for the three months ended January 31, 2005.
In addition to the continued revenue growth, recent achievements and highlights for the quarter include:
-- The Company processed a record volume of 62 million VoIP minutes
of use ("MOU") during the quarter, resulting in over 12 million
calls through its NexTone powered VoIP network.
-- The formation of ATSI's new wholly owned subsidiary, Digerati
Networks, Inc., to showcase ATSI's growing VoIP business.
-- 82% improvement in gross profit for the three months ended January
31, 2006 vs. the three months ended January 31, 2005.
Arthur L. Smith, CEO of ATSI stated, "We met some key objectives during the quarter while continuing the growth trend in our core VoIP business. We controlled our expenses and achieved a pivotal goal of producing positive cash flow from operations in January. I am pleased to report that we continue to make progress and are on a record setting pace in the current quarter, having exceeded the $1 million mark in monthly revenues for February."
Including non-cash items, net loss applicable to common stockholders for the three months ended January 31, 2006 was $224,000 vs. a net income applicable to common stockholders of $868,000 for the three months ended January 31, 2005. The Company incurred $53,000 in non-cash expense for the quarter ended January 31, 2006 and $2,062,000 in non-cash income for the quarter ended January 31, 2005 associated with the accounting treatment of its derivative instruments. Additional non-cash items incurred during the quarter include interest, depreciation, amortization, and preferred dividend expense.
The Company has concluded a detailed analysis of the accounting treatment of its derivative instruments. The analysis conducted by consultants with a specialization in derivative accounting identified a convertible note, a convertible debenture, and warrants to purchase common stock as derivative instruments in ATSI's financial statements. Management concluded from the results of the analysis that the Company has a net income gain of $1.43 million from a reclassification of its derivative instruments, which should be recorded in its financial results for the fiscal year ended July 31, 2005 and the three months ended October 31, 2005. The gain in net income is the difference between the expense resulting from derivative accounting treatment and the expense originally recorded by ATSI with respect to the derivative instruments. This non-cash benefit will be reflected in restated financial results for the year ended July 31, 2005 and the three months ended October 31, 2005. Please refer to the Company's 10Q filed with the Securities and Exchange Commission for a complete explanation of the accounting treatment of its derivative instruments.
Net loss 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 two wholly owned subsidiaries, Digerati Networks, Inc. and Telefamilia Communications, Inc. Digerati Networks, Inc. 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 NexTone powered VoIP network, ATSI believes it has clear advantages over its competition. Telefamilia Communications provides specialized retail communication services that includes VoIP services to the high-growth Hispanic market in the United States. 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.
Except for the historical information contained herein, the matters discussed in this release include certain forward-looking statements, which are intended to be covered by the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We have identified forward-looking statements by using words such as "expect," "believe," "should," "may," "intend," and "anticipate" or words of similar import. Those statements include, but may not be limited to, all statements regarding our management's intent, belief and expectations, such as statements concerning our future and our operating and growth strategy. Although we believe our expectations are reasonable, our operations involve a number of risks and uncertainties, and these statements may turn out not to be true. These risks and uncertainties include the assumption that we will continue as a going business; our inability to predict or anticipate changes in regulations or the actions of domestic and foreign governments; and the continued availability of funds in amounts and on acceptable terms. More detailed information about ATSI Communications, Inc. is available in the Company's public filings with the Securities and Exchange Commission. We believe that the assumptions underlying the forward- looking statements included in this release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. All forward-looking statements made in this release are based on information presently available to our management. We assume no obligation to update any forward-looking statements, except as required by law.
ATSI COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
Three months ended Six months ended
January 31, January 31,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
OPERATING REVENUES:
Carrier services $ 2,942 $ 1,446 $ 5,257 $ 2,215
Network services 5 74 13 147
---------- ---------- ---------- ----------
Total operating revenues 2,947 1,520 5,270 2,362
OPERATING EXPENSES:
Cost of services
(exclusive of
depreciation and
amortization, shown
below) 2,769 1,422 5,009 2,194
Selling, general and
administrative 158 82 365 306
Legal and professional
fees 55 40 75 305
Non-cash issuance of
common stock and warrants
for services 66 591 80 591
Non-cash stock-based
compensation, employees -- 474 180 474
Bad debt -- 4 -- 4
Depreciation and
amortization 26 24 48 47
---------- ---------- ---------- ----------
Total operating expenses 3,074 2,637 5,757 3,921
---------- ---------- ---------- -----------
OPERATING (LOSS) (127) (1,117) (487) (1,559)
OTHER INCOME (EXPENSE):
Other Expense -- 4 -- 4
Derivative instrument
income (expense) (53) 2,062 (57) 1,178
Debt forgiveness income 38 -- 38 46
Interest expense (28) (43) (54) (77)
---------- ---------- ---------- ----------
Total other income
(expense), net (43) 2,023 (73) 1,565
NET LOSS FROM CONTINUING
OPERATIONS (170) 906 (560) 6
DISCONTINUED OPERATIONS
(NOTE 6)
Gain on disposal of
discontinued operations -- -- 1,652 --
---------- ---------- ---------- ----------
NET INCOME FROM
DISCONTINUED OPERATIONS -- -- 1,652 --
---------- ---------- ---------- ----------
NET INCOME (LOSS): ($170) $ 906 $ 1,092 $ 6
========== ========== ========== ==========
LESS: PREFERRED DIVIDENDS (54) (38) (95) (76)
---------- ---------- ---------- ----------
NET INCOME (LOSS) TO COMMON
STOCKHOLDERS ($224) $ 868 $ 997 ($70)
========== ========== ========== ==========
BASIC INCOME (LOSS) PER
SHARE ($0.02) $0.14 $0.08 ($0.01)
========== ========== ========== ==========
From continuing
operations ($0.02) $0.14 ($0.05) ($0.01)
From discontinued
operations $0.00 $0.00 $0.14 $0.00
DILUTED INCOME (LOSS)
PER SHARE ($0.01) ($0.03) $0.04 $0.00
========== ========== ========== ==========
From continuing
operations ($0.01) $0.04 ($0.02) $0.00
From discontinued
operations $0.00 $0.00 $0.06 $0.00
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 12,927,793 6,346,695 11,936,566 5,088,741
========== ========== ========== ==========
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NET INCOME (LOSS) TO
COMMON STOCKHOLDERS: ($224) $ 868 $ 997 ($70)
---------- ---------- ---------- ----------
EXCLUDING NON-CASH ITEMS:
-------------------------
Non-cash issuance of
common stock and
warrants for services 66 591 80 591
Non-cash stock-based
compensation,
employees -- 474 180 474
Bad debt -- 4 -- 4
Depreciation and
amortization 26 24 48 47
Other Expense -- 4 -- 4
Derivative instrument
income (expense) (53) 2,062 (57) 1,178
Debt forgiveness income 38 -- 38 460
Interest expense (28) (43) (54) (77)
Gain on disposal of
discontinued operations -- -- 1,652 --
Preferred dividends (54) (38) (95) (76)
NET INCOME (LOSS) TO
COMMON STOCKHOLDERS:
---------- ---------- ---------- ----------
EXCLUDING NON-CASH
ITEMS: ($35) ($24) ($179) ($443)
---------- ---------- ---------- ----------
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