-- The decline in international voice traffic due to the global economic
crisis. Although the Company and its industry peers have experienced
decreased call volume from multiple immigrant communities calling their
country of origin, the largest impact for ATSI has been on voice traffic
between the United States and Mexico. Specifically, workers returning to
Mexico due to a weak U.S. economy have caused a significant decrease in
call volume.
-- The tightening of capital markets has reduced the credit worthiness of
certain existing and prospective customers. To minimize risk, the Company
has denied or reduced credit, and in some cases, suspended service to these
accounts resulting in a negative impact on revenue.
-- A market shift towards improved quality that requires the Company to
hold its suppliers to a higher standard on international routes. The
Company is taking actions to improve quality by eliminating underperforming
vendors from its global routing. This initiative that is expected to
produce long term benefits has added to the negative impact on call volume
and revenue.
Arthur L. Smith, CEO of ATSI, stated, "We were able to increase our gross
margin during the second fiscal quarter when compared to the same period
for the previous year despite the continued decline in global economic
conditions. This increase is attributable to system enhancements that have
allowed us to automate key routing functions and the Company's initiative
to improve quality. The anticipated result will be a more consistent,
stable, and reliable global network that will appeal to top tier carriers."
Mr. Smith added, "Considering the challenges facing the U.S. and World
economies, we took the necessary steps in the first half of the year to cut
costs by reducing headcount and are evaluating other cost cutting measures
to be implemented during the 3rd quarter. Our cash position remains
strong, we have an exceptional track record of performance as evidenced by
Deloitte's ranking ATSI 383 in the '2008 Technology Fast 500' for fastest
growing companies in North America, and we have built a solid business
positioned for success. We are confident in our ability to endure these
difficult times and return to a growth mode as the global economy
improves."
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 ongoing 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)
Three months ended
January 31,
2009 2008
---------- ----------
OPERATING REVENUES:
VoIP services $ 5,454 $ 10,309
---------- ----------
Total operating revenues 5,454 10,309
---------- ----------
OPERATING EXPENSES:
Cost of services (exclusive of depreciation and
amortization, shown below) 4,984 9,544
Selling, general and administrative expense
(exclusive of legal and professional fees) 529 538
Legal and professional fees 102 65
Bad debt expense 21 21
Depreciation and amortization expense 42 38
---------- ----------
Total operating expenses 5,678 10,206
---------- ----------
OPERATING INCOME (LOSS) (224) 103
---------- ----------
OTHER INCOME (EXPENSE):
Gain on early extinguishment of debt - -
Investment loss (12) -
Interest income (expense) (59) (24)
---------- ----------
Total other income (expense), net (71) (24)
---------- ----------
NET INCOME (LOSS) (295) 79
---------- ----------
LESS: PREFERRED DIVIDEND - -
ADD: REVERSAL OF PREVIOUSLY RECORDED PREFERRED
DIVIDEND - -
---------- ----------
NET INCOME (LOSS) TO COMMON STOCKHOLDERS $ (295) $ 79
========== ==========
BASIC INCOME (LOSS) PER SHARE TO COMMON
STOCKHOLDERS $ (0.01) $ 0.00
========== ==========
DILUTED INCOME (LOSS) PER SHARE TO COMMON
STOCKHOLDERS $ (0.01) $ 0.00
========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 39,938,001 39,134,394
DILUTED COMMON SHARES OUTSTANDING 39,938,001 39,522,972
---------- ----------
NET INCOME (LOSS) TO COMMON STOCKHOLDERS, as
reported: $ (295) $ 79
---------- ----------
EXCLUDING NON-CASH ITEMS:
ADD:
Non-cash issuance of common stock and warrants
for services - 10
Non-cash stock-based compensation, employees 67 85
Bad debt expense (recovery) 21 21
Depreciation and amortization 42 38
Investment loss 12 -
Interest expense 59 24
MINUS:
Gain on early extinguishment of debt - -
Preferred dividend - -
NET INCOME (LOSS) TO COMMON STOCKHOLDERS
---------- ----------
EXCLUDING NON-CASH ITEMS: $ (94) $ 257
---------- ----------
Contact Information: Contact: Jack Eversull The Eversull Group 972-378-7917 972-378-7981 (fax) E-mail: Web Site: www.atsi.net