x
|
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Nevada
(State
or Other Jurisdiction of Incorporation or Organization)
|
74-2849995
(IRS
Employer Identification No.)
|
|
3201
Cherry Ridge, Building C, Suite 300
San
Antonio, Texas
(Address
of Principal Executive Offices)
|
78230
(Zip
Code)
|
Page | ||
PART
I
|
||
Item
1. Description of Business
|
3
|
|
Overview
|
3
|
|
History
|
4
|
|
Recent
Developments
|
4
|
|
Services
and Products
|
4
|
|
Carrier
Services
|
4
|
|
Network
Services
|
5
|
|
Communication
Services
|
5
|
|
Voice
over Internet Protocol Network
|
5
|
|
Strategy
and Competitive Conditions
|
7
|
|
Government
Regulations/ Concession License
|
9
|
|
Suppliers
|
13
|
|
Employees
|
13
|
|
Risk
Factors
|
13
|
|
Item
2. Description of Properties
|
15
|
|
Item
3. Legal Proceedings
|
16
|
|
Item
4. Submission of Matters to a Vote of Security Holders
|
16
|
|
PART
II
|
||
Item
5. Market for Registrant’s Common Equity and Related Stockholder
Matters
|
16
|
|
Item
6. Management’s Discussion and Analysis or Plan of
Operations
|
18
|
|
Item
7. Financial Statements and Supplementary Data
|
26
|
|
Item
8. Changes in and Disagreements with Accountants on Accounting and
Financial
Disclosures
|
45
|
|
Item
8A.Controls and Procedures
|
45
|
|
PART
III
|
||
Item
9. Directors, Executive Officers, Promoters and Control Persons,
Compliance with
Section 16(A) of the Exchange Act
|
45
|
|
Item
10. Executive Compensation
|
47
|
|
Item
11. Security Ownership of Certain Beneficial Owners and
Management
|
51
|
|
Item
12. Certain Relationships and Related Transactions
|
52
|
|
Item
13. Exhibits and Reports on Form 8-K
|
52
|
|
Item
14. Principal Accountant Fees and Services
|
55
|
·
|
We
expanded our NexTone Intelliconnect™
System by adding 1000 ports of capacity to our Multiprotocol Session
Exchange (“MSX”) and Session Border Controller (“SBC”). This
network expansion has allowed us to route our traffic more efficiently,
improve our call processing, monitor quality of service and support
our
growth in our core business. In addition, the NexTone™ technology has
allowed us to be more competitive and to improve margins in our
international VoIP carrier services.
|
·
|
We
entered into a $1 Million accounts receivable financing agreement
and a
$250,000 note payable with CCA Financial Services, Inc. This financing
arrangement provided us with access to capital to fund our growth
initiatives and allowed us to service top tier customers that required
extended payment terms.
|
·
|
Integration
of Voice and Data:
VoIP networks allow for the integration and transmission of voice,
data,
and images using the same network equipment.
|
·
|
Simplification:
An
integrated infrastructure that supports all forms of communication
allows
more standardization, a smaller equipment complement, and less equipment
management.
|
·
|
Network
Efficiency:
The integration of voice and data fills up the data communication
channels
efficiently, thus providing bandwidth consolidation and reduction
of the
costs associated with idle bandwidth. The sharing of equipment and
operations costs across both data and voice users can also improve
network
efficiency since excess bandwidth on one network can be used by the
other,
thereby creating economies of scale for voice (especially given the
rapid
growth in data traffic). An integrated infrastructure that supports
all
forms of communication allows more standardization and reduces the
total
equipment complement. This combined infrastructure can support dynamic
bandwidth optimization and a fault tolerant design. The differences
between the traffic patterns of voice and data offer further opportunities
for significant efficiency improvements.
|
·
|
Co-existence
with traditional communication mediums: IP
telephony can be used in conjunction with existing PSTN switches,
leased
and dial-up lines, PBXs and other customer premise equipment (CPE),
enterprise LANs, and Internet connections. IP telephony applications
can
be implemented through dedicated gateways, which in turn can be based
on
open standards platforms for reliability and scalability.
|
·
|
Cost
reduction:
Under the VoIP network, the connection is directly to the Internet
backbone and as a result the telephony access charges and settlement
fees
are avoided.
|
·
|
the
rapid growth of the Latino segment of the United States population
|
·
|
Mexico’s
status as the top calling partner with the United States
|
·
|
increase
in trade and travel between Latin America and the United States
|
·
|
the
build-out of local networks and corresponding increase in the number
of
telephones in homes and businesses in Latin countries
|
·
|
proliferation
of communications devices such as faxes, mobile phones, pagers, and
personal computers
|
·
|
declining
rates for services as a result of increased competition.
|
·
|
Maintain
approximately $10 million in registered and subscribed capital.
|
·
|
Install
and operate a network in Mexico. The Mexican government must approve
the
operating plan before it is implemented and any future changes to
the
operating plan.
|
·
|
Continuously
develop and conduct training programs for its staff.
|
·
|
Designate
an individual responsible for the technical functions to operate
the
concession.
|
·
|
Provide
continuous and efficient services at all times to its customers.
|
·
|
Establish
a complaint center and correction facilities center and report to
the
Mexican Government on a monthly basis the complaints received and
the
actions taken to resolve the problems.
|
·
|
Invoice
its customer only tariffs rates that have been approved by the Mexican
government.
|
·
|
Provide
audited financial statements on a yearly basis that includes a detailed
description of the fixed assets utilized in the network and accounting
reporting by region and location of where the services are being
provided.
|
·
|
Provide
quarterly reports and updates on the expansion of the network in
Mexico
and a description of the training programs and research and development
programs.
|
·
|
Provide
statistic reports of traffic, switching capacity and other parameters
in
the network.
|
·
|
Post
a bond/insurance policy for approximately $500,000 payable to the
Mexican
Federal Treasury Department in the event the concession is revoked
for
failure to perform any of the
requirements.
|
·
|
Many
of our customers are not obligated to route a minimum amount of traffic
over our system and the amount of traffic we handle may decline if
our
customers elect to route traffic over systems they operate or systems
operated by other providers;
|
·
|
increased
competition from other telecommunication service providers or from
service
companies in related fields that offer telecommunication services
may
adversely affect the amount we can charge for traffic routed over
our
system;
|
·
|
we
may be required to reduce our charges for routing traffic to maintain
high
utilization of our equipment;
|
·
|
the
termination fees, connection fees and other charges from our
suppliers;
|
·
|
fraudulently
sent or received traffic for which we are obligated to pay but which
we
are unable to bill to any customer;
|
·
|
changes
in call volume among the countries to which we complete calls;
|
·
|
technical
difficulties or failures of our network systems or third party delays
in
expansion or provisioning system components;
and
|
·
|
our
ability to manage our traffic on a constant basis so that routes
are
profitable.
|
·
|
perceptions
that the quality of voice transmitted over the Internet is low;
|
·
|
perceptions
that VoIP is unreliable;
|
·
|
our
inability to deliver traffic over the Internet with significant cost
advantages;
|
·
|
development
by our customers of their own capacity on routes served by us; and
|
·
|
an
increase in termination costs of international calls.
|
·
|
unexpected
changes in tariffs, trade barriers and regulatory requirements relating
to
Internet access or VoIP;
|
·
|
economic
weakness, including inflation, or political instability in particular
foreign economies and markets;
|
·
|
difficulty
in collecting accounts receivable;
|
·
|
tax,
consumer protection, telecommunications, and other laws;
|
·
|
foreign
currency fluctuations, which could result in increased operating
expenses
and reduced revenues; and
|
·
|
unreliable
government power to protect our rights;
|
·
|
user
privacy;
|
·
|
pricing
controls and termination costs;
|
·
|
characteristics
and quality of products and services;
|
·
|
qualification
to do business;
|
·
|
consumer
protection;
|
·
|
cross-border
commerce, including laws that would impose tariffs, duties and other
import restrictions;
|
·
|
copyright,
trademark and patent infringement; and
|
·
|
claims
based on the nature and content of Internet materials, including
defamation, negligence and the failure to meet necessary obligations.
|
ITEM5. |
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY
SECURITIES.
|
Fiscal
2006
|
High
|
Low
|
|||||
First Quarter
|
$
|
0.44
|
$
|
0.14
|
|||
Second
Quarter
|
$
|
0.43
|
$
|
0.21
|
|||
Third
Quarter
|
$
|
0.51
|
$
|
0.25
|
|||
Fourth
Quarter
|
$
|
0.39
|
$
|
0.19
|
|||
Fiscal
2007
|
High
|
Low
|
|||||
First Quarter
|
$
|
0.19
|
$
|
0.34
|
|||
Second
Quarter
|
$
|
0.22
|
$
|
0.36
|
|||
Third
Quarter
|
$
|
0.19
|
$
|
0.34
|
|||
Fourth
Quarter
|
$
|
0.23
|
$
|
0.24
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options,
Warrants
and Rights
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and
Rights
|
Number
of Securities Remaining Available for Future Issuance Under Equity
Compensation Plans
|
|
Equity
Compensation plans approved by security holders
|
-0-
|
N/A
|
-0-
|
Equity
Compensation Plans not approved by security
holders
|
5,699,000
|
$.17
|
821,000
|
Total
|
5,699,000
|
$.17
|
821,000
|
Years
ended July 31,
|
|||||||||||||
2007
|
2006
|
Variances
|
%
|
||||||||||
OPERATING
REVENUES:
|
|||||||||||||
Carrier
services
|
$
|
31,562
|
$
|
14,549
|
$
|
17,013
|
117
|
%
|
|||||
Communication
services
|
113
|
125
|
(12
|
)
|
-10
|
%
|
|||||||
Network
services
|
17
|
22
|
(5
|
)
|
-23
|
%
|
|||||||
Total
operating revenues
|
31,692
|
14,696
|
16,996
|
116
|
%
|
||||||||
Cost
of services (exclusive of depreciation and amortization, shown
below)
|
29,521
|
13,869
|
15,652
|
113
|
%
|
||||||||
GROSS
MARGIN
|
2,171
|
827
|
1,344
|
163
|
%
|
||||||||
Selling,
general and administrative expense (exclusive of legal and professional
fees)
|
1,625
|
1,138
|
487
|
43
|
%
|
||||||||
Legal
and professional fees
|
258
|
195
|
63
|
32
|
%
|
||||||||
Bad
debt expense
|
98
|
-
|
98
|
-100
|
%
|
||||||||
Depreciation
and amortization expense
|
99
|
92
|
7
|
8
|
%
|
||||||||
OPERATING
INCOME (LOSS)
|
91
|
(598
|
)
|
689
|
115
|
%
|
|||||||
OTHER
INCOME (EXPENSE):
|
|||||||||||||
Loss
on derivative instrument liabilities
|
-
|
(6
|
)
|
6
|
100
|
%
|
|||||||
Debt
forgiveness income
|
-
|
50
|
(50
|
)
|
-100
|
%
|
|||||||
Interest
expense
|
(348
|
)
|
(151
|
)
|
(197
|
)
|
-130
|
%
|
|||||
Total
other income (expense), net
|
(348
|
)
|
(107
|
)
|
(241
|
)
|
-225
|
%
|
|||||
|
|||||||||||||
NET
(LOSS) FROM CONTINUING OPERATIONS
|
(257
|
)
|
(705
|
)
|
448
|
64
|
%
|
||||||
DISCONTINUED
OPERATIONS
|
|||||||||||||
Gain
on disposal of discontinued operations
|
-
|
1,652
|
(1,652
|
)
|
-100
|
%
|
|||||||
NET
INCOME FROM DISCONTINUED OPERATIONS
|
-
|
1,652
|
(1,652
|
)
|
-100
|
%
|
|||||||
NET
INCOME (LOSS)
|
$
|
(257
|
)
|
$
|
947
|
$
|
(1,204
|
)
|
-127
|
%
|
|||
LESS:
PREFERRED DIVIDEND
|
(56
|
)
|
(959
|
)
|
903
|
94
|
%
|
||||||
ADD:
REVERSAL OF PREVIOUSLY RECORDED PREFERRED DIVIDEND
|
828
|
-
|
828
|
100
|
%
|
||||||||
NET
INCOME (LOSS) TO COMMON STOCKHOLDERS
|
$
|
515
|
$
|
(12
|
)
|
$
|
527
|
4392
|
%
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
27
|
Consolidated
Balance Sheets for the Years Ended July 31, 2007 and 2006
|
28
|
Consolidated
Statements of Operations for the Years Ended July 31, 2007 and
2006
|
29
|
Consolidated
Statements of Comprehensive Income (loss) for the Years Ended July
31,
2007 and 2006
|
30
|
Consolidated
Statement of Changes in Stockholders’ Deficit for the Years Ended July 31,
2007 and 2006
|
31
|
Consolidated
Statements of Cash Flows for the Years Ended July 31, 2007 and
2006
|
32
|
Notes
to Consolidated Financial Statements
|
33
|
PART
1. FINANCIAL INFORMATION
|
|||||||
ITEM
1. FINANCIAL STATEMENTS
|
|||||||
ATSI
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
|||||||
CONSOLIDATED
BALANCE SHEETS
|
|||||||
(In
thousands, except per share amounts)
|
|||||||
July
31,
|
July
31,
|
||||||
2007
|
2006
|
||||||
ASSETS
|
|||||||
CURRENT
ASSETS:
|
|||||||
Cash
and cash equivalents
|
$
|
1,050
|
$
|
36
|
|||
Accounts
receivable, net of allowance for bad debt of $98 and $0,
respectively
|
866
|
621
|
|||||
Note
receivable
|
50
|
-
|
|||||
Prepaid
& other current assets
|
94
|
33
|
|||||
Total
current assets
|
2,060
|
690
|
|||||
LONG-TERM
ASSETS:
|
|||||||
Certificates
of deposit
|
306
|
-
|
|||||
PROPERTY
AND EQUIPMENT
|
499
|
284
|
|||||
Less
- accumulated depreciation
|
(281
|
)
|
(182
|
)
|
|||
Net
property and equipment
|
218
|
102
|
|||||
Total
assets
|
$
|
2,584
|
$
|
792
|
|||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Accounts
payable
|
$
|
1,071
|
$
|
676
|
|||
Accounts
payable, related parties
|
-
|
42
|
|||||
Line
of credit, CSI Business Finance
|
-
|
150
|
|||||
Accrued
liabilities
|
516
|
2,389
|
|||||
Current
portion of obligation under capital leases
|
3
|
3
|
|||||
Notes
payable
|
818
|
50
|
|||||
Notes
payable, related party
|
-
|
106
|
|||||
Convertible
debentures
|
76
|
74
|
|||||
Total
current liabilities
|
2,484
|
3,490
|
|||||
LONG-TERM
LIABILITIES:
|
|||||||
Notes
payable
|
177
|
500
|
|||||
Convertible
debentures
|
158
|
234
|
|||||
Obligation
under capital leases, less current portion
|
3
|
6
|
|||||
Other
|
4
|
4
|
|||||
Total
long-term liabilities
|
342
|
744
|
|||||
Total
liabilities
|
2,826
|
4,234
|
|||||
STOCKHOLDERS'
DEFICIT:
|
|||||||
Series
A Cumulative Convertible Preferred Stock, $0.001, 50,000 shares
authorized, 0 and 2,750 shares issued
and outstanding
|
-
|
-
|
|||||
Series
D Cumulative Preferred Stock, 3,000 shares authorized, 742 shares
issued
and outstanding
|
1
|
1
|
|||||
Series
E Cumulative Preferred Stock, 10,000 shares authorized, 1,170
shares
issued and outstanding
|
1
|
1
|
|||||
Series
H Convertible Preferred Stock, $0.001, 16,000,000 shares authorized,
0 and
11,802,353 shares issued
and outstanding, respectively
|
-
|
12
|
|||||
Common
stock, $0.001 par value, 150,000,000 shares authorized, 37,620,513
and
16,44,768 shares
|
|||||||
issued
and outstanding, respectively
|
38
|
16
|
|||||
Additional
paid in capital
|
72,222
|
68,775
|
|||||
Accumulated
deficit
|
(72,505
|
)
|
(72,248
|
)
|
|||
Other
comprehensive income
|
1
|
1
|
|||||
Total
stockholders' deficit
|
(242
|
)
|
(3,442
|
)
|
|||
Total
liabilities and stockholders' deficit
|
$
|
2,584
|
$
|
792
|
|||
See
accompanying summary of accounting policies and notes to financial
statements.
|
ATSI
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
|||||||
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|||||||
(In
thousands, except per share amounts)
|
|||||||
Years
ended July 31,
|
|||||||
2007
|
2006
|
||||||
OPERATING
REVENUES:
|
|||||||
Carrier
services
|
$
|
31,562
|
$
|
14,549
|
|||
Communication
services
|
113
|
125
|
|||||
Network
services
|
17
|
22
|
|||||
Total
operating revenues
|
31,692
|
14,696
|
|||||
OPERATING
EXPENSES:
|
|||||||
Cost
of services (exclusive of depreciation and amortization, shown
below)
|
29,521
|
13,869
|
|||||
Selling,
general and administrative expense (exclusive of legal and professional
fees)
|
1,625
|
1,138
|
|||||
Legal
and professional fees
|
258
|
195
|
|||||
Bad
debt expense
|
98
|
-
|
|||||
Depreciation
and amortization expense
|
99
|
92
|
|||||
Total
operating expenses
|
31,601
|
15,294
|
|||||
OPERATING
INCOME (LOSS)
|
91
|
(598
|
)
|
||||
OTHER
INCOME (EXPENSE):
|
|||||||
Loss
on derivative instrument liabilities
|
-
|
(6
|
)
|
||||
Debt
forgiveness income
|
-
|
50
|
|||||
Interest
expense
|
(348
|
)
|
(151
|
)
|
|||
Total
other income (expense), net
|
(348
|
)
|
(107
|
)
|
|||
NET
(LOSS) FROM CONTINUING OPERATIONS
|
(257
|
)
|
(705
|
)
|
|||
DISCONTINUED
OPERATIONS
|
|||||||
Gain
on disposal of discontinued operations
|
-
|
1,652
|
|||||
NET
INCOME FROM DISCONTINUED OPERATIONS
|
-
|
1,652
|
|||||
NET
INCOME (LOSS)
|
$
|
(257
|
)
|
$
|
947
|
||
LESS:
PREFERRED DIVIDEND
|
(56
|
)
|
(959
|
)
|
|||
ADD:
REVERSAL OF PREVIOUSLY RECORDED PREFERRED DIVIDEND
|
828
|
-
|
|||||
NET
INCOME (LOSS) TO COMMON STOCKHOLDERS
|
$
|
515
|
$
|
(12
|
)
|
||
BASIC
INCOME (LOSS) PER SHARE:
|
|||||||
From
continuing operations
|
$
|
0.02
|
|
$
|
(0.12
|
)
|
|
From
discontinued operations
|
$
|
-
|
$
|
0.12
|
|||
Total
|
$
|
0.02
|
|
$
|
0.00
|
||
DILUTED
INCOME (LOSS) PER SHARE
|
|||||||
From
continuing operations
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
|
From
discontinued operations
|
$
|
-
|
$
|
0.05
|
|||
Total
|
$
|
(0.01
|
)
|
$
|
0.03
|
||
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING
|
27,908,044
|
13,516,342
|
|||||
DILUTED
COMMON SHARES OUTSTANDING
|
28,049,739
|
31,287,366
|
See
accompanying summary of accounting policies and notes to financial
statements.
|
ATSI
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
|||||||
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|||||||
(In
thousands, except per share amounts)
|
|||||||
Years
ended July 31,
|
|||||||
2007
|
2006
|
||||||
(Restated)
|
|||||||
Net
income (loss) to common stockholders
|
$
|
515
|
$
|
(12
|
)
|
||
Foreign
currency translation adjustment
|
-
|
(501
|
)
|
||||
Comprehensive
income (loss) to common stockholders
|
$
|
515
|
$
|
(513
|
)
|
||
See
accompanying summary of accounting policies and notes to financial
statements.
|
Additional |
Other
|
||||||||||||||||||||||||||||||||||||||||||
|
Preferred
(A)
|
Preferred
(D)
|
Preferred
(E)
|
Preferred
(H)
|
Common
|
Paid-in
|
Retained
|
Comp.
|
|||||||||||||||||||||||||||||||||||
|
Shares
|
Par
|
Shares
|
Par
|
Shares
|
Par
|
Shares
|
Par
|
Shares
|
Par
|
Capital
|
(Deficit)
|
Income/Loss
|
Totals
|
|||||||||||||||||||||||||||||
BALANCE,
JULY 31, 2005
|
3,750
|
|
—
|
—
|
|
—
|
—
|
|
—
|
13,912,300
|
|
14
|
10,396,892
|
|
10
|
$
|
66,741
|
$
|
(73,195
|
)
|
$
|
502
|
$
|
(5,928
|
)
|
||||||||||||||||||
Shares
issued for services
|
549,456
|
1
|
127
|
128
|
|||||||||||||||||||||||||||||||||||||||
Shares
issued to purchase assets
|
180,272
|
-
|
58
|
58
|
|||||||||||||||||||||||||||||||||||||||
Shares
issued for P/S conversion
|
(1,000
|
)
|
—
|
(2,309,880
|
)
|
(2
|
)
|
2,959,731
|
3
|
167
|
168
|
||||||||||||||||||||||||||||||||
Shares
issued for debt conversion
|
200,000
|
-
|
866,386
|
1
|
255
|
256
|
|||||||||||||||||||||||||||||||||||||
Reclass
of Series D from debt
|
742
|
1
|
740
|
740
|
|||||||||||||||||||||||||||||||||||||||
Reclass
of Series E from debt
|
1,170
|
1
|
1,169
|
1,170
|
|||||||||||||||||||||||||||||||||||||||
Exercise
of warrants
|
366,666
|
-
|
54
|
54
|
|||||||||||||||||||||||||||||||||||||||
Warrant
expense
|
49
|
49
|
|||||||||||||||||||||||||||||||||||||||||
Preferred
stock dividend
|
(959
|
)
|
(959
|
)
|
|||||||||||||||||||||||||||||||||||||||
Shares
issued for services, employees
|
1,125,000
|
1
|
179
|
180
|
|||||||||||||||||||||||||||||||||||||||
Derivative
instruments (income) expense
|
82
|
82
|
|||||||||||||||||||||||||||||||||||||||||
Beneficial
conversion feature
|
26
|
26
|
|||||||||||||||||||||||||||||||||||||||||
Stock
option expense
|
87
|
87
|
|||||||||||||||||||||||||||||||||||||||||
Other
comp. income/loss
|
(501
|
)
|
(501
|
)
|
|||||||||||||||||||||||||||||||||||||||
Net
income
|
947
|
947
|
|||||||||||||||||||||||||||||||||||||||||
BALANCE,
JULY 31, 2006
|
2,750
|
|
—
|
742
|
|
1
|
1,170
|
1
|
|
11,802,420
|
12
|
|
16,444,403
|
|
16
|
$
|
68,775
|
$
|
(72,248
|
)
|
$
|
1
|
$
|
(3,442
|
)
|
||||||||||||||||||
Shares
issued for Services
|
1,475,062
|
1
|
333
|
334
|
|||||||||||||||||||||||||||||||||||||||
Common
shares issued for Preferred Stock Conversion
|
(2,750
|
)
|
—
|
(11,802,420
|
)
|
(12
|
)
|
16,261,847
|
16
|
1,137
|
1,141
|
||||||||||||||||||||||||||||||||
Exercise
of warrants
|
150,000
|
2
|
35
|
37
|
|||||||||||||||||||||||||||||||||||||||
Dividends
declared
|
(56
|
)
|
(56
|
)
|
|||||||||||||||||||||||||||||||||||||||
Reversal
of previously recorded preferred dividend
|
828
|
828
|
|||||||||||||||||||||||||||||||||||||||||
Stock
option expense
|
267
|
267
|
|||||||||||||||||||||||||||||||||||||||||
Proceeds
from exercise of options
|
100,000
|
1
|
16
|
17
|
|||||||||||||||||||||||||||||||||||||||
Beneficial
Conversion Feature, private placement
|
144
|
144
|
|||||||||||||||||||||||||||||||||||||||||
Shares
issued for conversion of notes payable
|
3,189,201
|
2
|
743
|
745
|
|||||||||||||||||||||||||||||||||||||||
Net
(Loss)
|
(257
|
)
|
(257
|
)
|
|||||||||||||||||||||||||||||||||||||||
BALANCE,
JULY 31, 2007
|
|
—
|
|
—
|
742
|
|
1
|
1,170
|
|
1
|
—
|
|
—
|
|
37,620,513
|
|
38
|
$
|
72,222
|
$
|
(72,505
|
)
|
$
|
1
|
$
|
(242
|
)
|
ATSI
COMMUNICATIONS, INC. AND SUBSIDIARIES
|
|||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|||||||
(In
thousands, except per share amounts)
|
|||||||
Years
ended July 31,
|
|||||||
2007
|
|
2006
|
|||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
NET
INCOME (LOSS)
|
$
|
(257
|
)
|
$
|
947
|
||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
|||||||
Gain
in disposal of investment
|
-
|
(1,652
|
)
|
||||
Debt
forgiveness income
|
-
|
-
|
|||||
Depreciation
and amortization
|
99
|
92
|
|||||
Issuance
of stock grants and options, employees for services
|
473
|
267
|
|||||
Issuance
of common stock and warrants for services
|
129
|
176
|
|||||
Provisions
for losses on accounts receivables
|
98
|
-
|
|||||
Loss
on derivative instrument liabilities
|
-
|
6
|
|||||
Amortization
of debt discount
|
152
|
-
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(343
|
)
|
(451
|
)
|
|||
Prepaid
expenses and other
|
(61
|
)
|
10
|
||||
Accounts
payable
|
174
|
101
|
|||||
Accounts
payable - related parties
|
15
|
43
|
|||||
Accrued
liabilities
|
83
|
157
|
|||||
Net
cash provided by / used in operating activities
|
562
|
(304
|
)
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Investment
in certificates of deposit
|
(306
|
)
|
(4
|
)
|
|||
Note
receivable
|
(50
|
)
|
-
|
||||
Purchases
of property & equipment
|
(145
|
)
|
-
|
||||
Net
cash used in investing activities
|
(501
|
)
|
(4
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Proceeds
from notes payable, related party
|
-
|
120
|
|||||
Payments
on notes payable, related party
|
(106
|
)
|
(30
|
)
|
|||
Proceeds
from notes payable
|
550
|
50
|
|||||
Payments
on notes payable
|
(104
|
)
|
-
|
||||
Payments
on advances from shareholders
|
(148
|
)
|
-
|
||||
Proceeds
from advances from shareholders
|
713
|
-
|
|||||
Proceeds
from line of credit, net
|
-
|
124
|
|||||
Proceeds
from the exercise of stock options
|
16
|
||||||
Proceeds
from the exercise of warrants
|
35
|
54
|
|||||
Principal
payments on capital lease obligation
|
(3
|
)
|
(3
|
)
|
|||
Net
cash provided by financing activities
|
953
|
315
|
|||||
INCREASE
IN CASH
|
1,014
|
7
|
|||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
36
|
29
|
|||||
CASH
AND CASH EQUIVALENTS, end of period
|
$
|
1,050
|
$
|
36
|
|||
SUPPLEMENTAL
DISCLOSURES:
|
|||||||
Cash
paid for interest
|
$
|
77
|
$
|
24
|
|||
Cash
paid for income tax
|
-
|
-
|
|||||
NON-CASH
INVESTING AND FINANCING TRANSACTIONS
|
|||||||
Issuance
of common stock for conversion of debt
|
$
|
688
|
$
|
256
|
|||
Issuance
of common stock for accounts payable
|
58
|
-
|
|||||
Issuance
of common stock for purchase of fixed & intangible
assets
|
-
|
58
|
|||||
Conversion
of preferred stock to common stock
|
1,141
|
167
|
|||||
Discount
for beneficial conversion feature on convertible debt
|
144
|
26
|
|||||
Fair
value of derivatives transferred to equity
|
-
|
82
|
|||||
Reclass
preferred stock from debt to equity
|
-
|
1,912
|
|||||
Preferred
stock dividends
|
56
|
959
|
|||||
Reversal
of previously recorded preferred stock dividend
|
(828
|
)
|
-
|
||||
See
accompanying summary of accounting policies and notes to financial
statements.
|
Twelve
months ended July 31,
|
|||||||
2007
|
2006
|
||||||
Net
income (loss) to common
|
|||||||
shareholders,
as reported
|
$
|
515,000
|
$
|
(12,000
|
)
|
||
Add:
|
stock based compensation determined | ||||||
under intrinsic value based method |
-
|
-
|
|||||
Less:
|
stock based compensation determined | ||||||
under fair value based method |
-
|
(281,499
|
)
|
||||
Pro forma net income (loss) to common stockholders |
$
|
515,000
|
$
|
(293,499
|
)
|
||
Basic
net income (loss) per common share:
|
|||||||
As reported |
$
|
0.02
|
|
$
|
0.00
|
||
Pro forma |
$
|
0.02
|
|
$
|
(0.02
|
)
|
|
Diluted
net income (loss) per common share:
|
|||||||
As reported |
$
|
(0.01
|
)
|
$
|
0.03
|
||
Pro forma |
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
For
the Years Ended July 31,
|
|||||||
2007
|
2006
|
||||||
Expected
dividends yield
|
0.00
|
%
|
0.00
|
%
|
|||
Expected
stock price volatility
|
80
|
%
|
50
|
%
|
|||
Risk-free
interest rate
|
4.51
|
%
|
4.39
|
%
|
|||
Expected
life of options
|
7
years
|
10
years
|
Useful
lives
|
2007
|
2006
|
||||||||
Telecom
equipment & software
|
1-5
years
|
$
|
499
|
$
|
284
|
|||||
Less:
accumulated depreciation
|
(281
|
)
|
(182
|
)
|
||||||
Net-property
and equipment
|
$
|
218
|
$
|
102
|
1)
|
$50,000
on July 13, 2007;
|
2)
|
$25,000
on August 13, 2007;
|
3)
|
$25,000
on September 13, 2007;
|
4)
|
$25,000
on October 13, 2007; and
|
5)
|
$25,000
on November 13, 2007.
|
FY2008
|
$
|
47,439
|
||
FY2009
|
48,199
|
|||
FY2010
|
49,100
|
|||
FY2011
|
49,250
|
-
|
495,062
shares of common stock valued at $128,920 for its placement agent
fees and
legal and consulting services rendered by various
individuals.
|
-
|
980,000
shares of common stock to its employees and directors for services
rendered. ATSI recorded compensation expense of $205,800 in its statement
of operations for the aggregate market value of the stock at the
date of
issuance.
|
-
|
16,149,938
shares of common stock in connection with the conversion and redemption
of
11,802,420 shares of Series H Preferred Stock and accrued premium
common
shares.
|
-
|
111,909
shares of common stock in connection with the conversion of 2,750
shares
of Series A Preferred Stock and accrued dividend.
|
-
|
150,000
shares of common stock upon exercise of outstanding warrants for
aggregate
proceeds of $34,500.
|
- |
100,000
shares of common stock upon exercise of outstanding stock options
by an
employee for $16,000.
|
-
|
66,226
shares of common stock to Richard Benkendorf as a payment of $15,226
under
a settlement agreement.
|
-
|
137,412
shares of common stock to John Fleming as a payment of $42,600 under
a
settlement agreement.
|
-
|
2,566,482
shares of common stock in connection with the conversion of various
notes
payable in the principal amount of $564,600 and accrued interest
of
$10,292.
|
-
|
419,081
shares of common stock valued at $113,152 in connection with the
annual
payment on the “New Debentures” dated June 1, 2006.
|