Elephant Talk Communications Announces Strong Growth in Mobile and Security Solutions Revenues for Fiscal Year 2011

Marketwired

SCHIPHOL, THE NETHERLANDS--(Marketwire -04/02/12)- Elephant Talk Communications, Corp. (AMEX: ETAK - News) (www.elephanttalk.com), an international provider of business software and services to the telecommunications and financial services industries, today announced the results of operations for the fourth quarter and fiscal year ended December 31, 2011.

Commenting on the 2011 performance, Chairman and Chief Executive Officer, Steven van der Velden said, "The past year has been a period of significant operational achievements and transitional financial gains. We are pleased to have doubled our mobile and security solutions revenue during the 2011 fiscal year. In addition, the fourth quarter was an important period for the company as our higher margin mobile services division completed our largest migration ever by transferring over 600,000 users to our telecom platform in Spain. These new users provide us with monthly recurring revenue, which will continue to provide an increase in our high margin mobile revenue throughout 2012. Management believes that this significant influx of users coupled with new migrations, planned throughout 2012, will help us in reaching profitability. We recently expanded our geographic footprint in Germany through the acquisition of Ensercom that includes a 5-year contract with Telekom Deutschland. Throughout 2012 we anticipate our operations to grow and that we will be present or commencing in 8 countries with our mobile platform."

Mr. van der Velden continued, "Our recent partnership with Adeptra has already led to its first commercial contract award which is expected to go live in the month of April. We believe that this contract will serve as a turning point in our company and allow us to secure additional similar contracts through the pipeline we have assembled with Adeptra. In parallel, ValidSoft continues to focus on its key strategic plan of working with financial institutions around the world and we fully expect to monetize more of these relationships in 2012. Since we have acquired ValidSoft we have continued to dedicate substantial resources in expanding our Intellectual Property and when combined with our multiple European Privacy Seals, provides us with a significant competitive advantage today and positions us for future success."

Key Operational Highlights:

  • The company successfully completed a listing of its common stock on the NYSE Amex stock exchange.
  • A commercial and technology partnership was signed with Adeptra, the leader in auto-resolution technologies that spans the consumer lifecycle that will help retail banks to detect and prevent fraud worldwide.
    • This partnership provides financial organizations with best-in-class fraud detection and prevention functionality, as well as total control over their customer communications
  • A contract was signed with AirTouch Communications (OTC.BB: ATCH.OB - News) (www.airtouchinc.com) to provide a Carrier Grade Mobile Services Platform.
    • A Mobile Virtual Network Enabler (MVNE) Platform in the United States will be implemented that includes a Gateway Support Network (GGSN), IN Intelligent Networking Platform, a Customer Relationship Management platform (CRM), a Full Rating & Billing Platform and a STP/Signaling Platform for AirTouch to launch its services in the United States.
  • ValidSoft was nominated for Two SC Magazine Awards and voted a finalist in the category Best Secure Transaction Solution and Best Security Solution, Financial Services.
  • ValidSoft received its second European Privacy Seal certification for its anti-fraud solutions.
  • Based on the company's financial strength and increasing recurring monthly revenue the company successfully had the going concern statement removed in the 2011 financial report (10-K).

Conference Call Reminder
As a reminder, Elephant Talk Communications will host a Shareholder Update Conference Call on April 3, 2012 at 11:00 a.m. (EDT). Anyone interested in participating should dial 1-480-629-9760 approximately 5 to 10 minutes prior to 11:00 a.m. Participants should ask for the Elephant Talk Shareholder Update conference call. To listen to the playback please utilize the webcast by visiting the company's website at www.elephanttalk.com.

This call is being webcast by ViaVid Broadcasting and can be accessed at either Elephant Talk's website at www.elephanttalk.com or ViaVid's website at http://www.viavid.net. To access the webcast, you will need to have the Windows Media Player on your desktop. For the free download of the Media Player, please visit: http://www.microsoft.com/windows/windowsmedia/en/download/default.asp

Financial Results for the Fiscal Year Ended December 31, 2011

Revenue for the year ended December 31, 2011 was $32,232,981, a decrease of $4,935,370 or 13.28%, compared to $37,168,351 for the year ending December 31, 2010. The decrease in revenue was the result of the expected continued revenue decrease in our low margin legacy landline business by $7,886,899, which was partly off-set by the increase in revenues of our higher margin mobile and security solutions business of $2,951,530 (or 104.42%) compared to 2010.

Cost of Service for the year ended December 31, 2011 was $28,723,265, a decrease of $6,397,651 or 18.22%, compared to $35,120,916 for the year ended December 31, 2010. The decrease in cost of service was mainly caused by the decrease in revenues in our low margin legacy landline business. Cost of service as a percent of revenue was 89.1% and 94.5% for the years ended December 31, 2011 and 2010, respectively.

Despite the large decrease in total revenues, the Margin (Revenues minus Cost of Service) has increased by 71.4% following the growth in higher margin mobile and security solution business. The increase in our higher margin mobile and security solutions business is mainly due to the increasing revenues of already existing customers and a customer with a large consumer base with monthly recurring revenues coming on to our platform at the end of the 4th quarter 2011.

Selling, general and administrative ("SG&A") expense for the years ended December 31, 2011 and 2010 were $16,589,649 and $9,620,322, respectively. SG&A expenses increased by $6,969,327, or 72.44%, in 2011 compared to 2010. This was led by an increase of 32.3% in our staffing levels on December 31, 2011 compared to December 31, 2010, largely in sales and European hires, as well as by higher marketing and selling costs. The increases in staffing levels and higher marketing and selling costs are mainly related to expected future revenues.

Net Loss was $25,310,735 and $92,483,360 for the years ended December 31, 2011 and 2010 respectively. The improvement of $67,172,625 was primarily the result of high non-cash financing charges in 2010.

 
             ELEPHANT TALK COMMUNICATION CORP. AND SUBSIDIARIES

                        CONSOLIDATED BALANCE SHEETS

                      AS AT DECEMBER 31, 2011 AND 2010

                                                December 31,   December 31,
                                                    2011           2010
                                               -------------  -------------
ASSETS

CURRENT ASSETS

Cash and cash equivalents                      $   6,009,576  $   2,245,697
Restricted cash                                      190,844        190,312
Accounts receivable, net of an allowance for
 doubtful accounts of $436,546 and $119,044 at
 December 31, 2011 and December 31, 2010
 respectively                                      6,441,528      5,600,562
Prepaid expenses and other current assets          1,522,461      2,337,914
                                               -------------  -------------
  Total Current Assets                            14,164,409     10,374,485

FINANCIAL INVESTMENT IN JOINT VENTURE                323,708             --

NOTE RECEIVABLE                                      417,199             --

LONG TERM DEPOSITS                                   651,930        610,486

PROPERTY AND EQUIPMENT, NET                       13,315,687      8,452,588

INTANGIBLE ASSETS, NET                            12,784,199     16,253,587

GOODWILL                                           3,154,971      3,230,786

                                               -------------  -------------
TOTAL ASSETS                                   $  44,812,103  $  38,921,932
                                               =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Overdraft                                      $     312,236  $     356,738
Accounts payable and customer deposits             4,490,455      4,703,875
Deferred revenue                                     132,467             --
Accrued expenses and other payables                3,035,758      3,843,938
Loans payable                                        960,869        877,357
                                               -------------  -------------
  Total Current Liabilities                        8,931,785      9,781,908

LONG TERM LIABILITIES
Trade note payable                                   271,915             --
Loan from related party                              513,303        468,756
                                               -------------  -------------
  Total Long term Liabilities                        785,218        468,756

                                               -------------  -------------
  Total Liabilities                                9,717,003     10,250,664
                                               -------------  -------------


STOCKHOLDERS' EQUITY
Common stock, no par value, 250,000,000 shares
 authorized, 110,525,233 issued and outstanding
 as of December 31, 2011 compared to 88,660,848
 shares issued and outstanding as of December
 31, 2010                                        216,188,899    183,825,665
Accumulated other comprehensive income (loss)     (1,143,295)      (519,020)
Accumulated deficit                             (180,128,371)  (154,818,436)
                                               -------------  -------------
  Elephant Talk Communications Corp.
   Stockholders' Equity                           34,917,233     28,488,209
                                               -------------  -------------

NON-CONTROLLING INTEREST                             177,867        183,059
                                               -------------  -------------
  Total Stockholders' Equity                      35,095,100     28,671,268
                                               -------------  -------------

                                               -------------  -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $  44,812,103  $  38,921,932
                                               =============  =============

The accompanying notes are an integral part of these consolidated financial
                                 statements.


            ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES

        CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS

            FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

                                     2011           2010           2009
                                -------------  -------------  -------------
REVENUES                        $  32,232,981  $  37,168,351  $  43,650,957

COST AND OPERATING EXPENSES
Cost of service                    28,723,265     35,120,916     41,452,639
Selling, general and
 administrative expenses           16,589,649      9,620,322      7,958,933
Non-cash compensation to
 officers, directors and
 employees                          6,818,905      5,588,392      1,727,870
Depreciation and amortization
 of intangibles assets              5,254,708      5,312,469      3,051,461
Intangible assets impairment
 charge                               522,726             --             --
                                -------------  -------------  -------------
  Total cost and operating
   expenses                        57,909,253     55,642,099     54,190,903

LOSS FROM OPERATIONS              (25,676,272)   (18,473,748)   (10,539,946)

OTHER INCOME (EXPENSE)
Interest income                       106,721        239,713        160,535
Interest expense                     (201,184)    (1,802,804)      (938,627)
Other income                          460,000             --       (480,000)
Interest expense related to
 amortization of debt discount
 on promissory notes                       --    (21,094,104)    (4,369,183)
Change in fair value of warrant
 liabilities                               --    (48,107,969)      (538,382)
Amortization of deferred
 financing costs                           --     (3,238,602)      (591,710)
                                -------------  -------------  -------------
  Total other income (expense)        365,537    (74,003,766)    (6,757,367)

LOSS BEFORE PROVISION FOR
 INCOME TAXES                     (25,310,735)   (92,477,514)   (17,297,313)
Provision for income taxes                 --           (800)          (800)
                                -------------  -------------  -------------
NET LOSS BEFORE NONCONTROLLING
 INTEREST                         (25,310,735)   (92,478,314)   (17,298,113)
Net (loss) income attributable
 to non-controlling interest               --         (5,046)        (1,771)
                                -------------  -------------  -------------
NET LOSS                          (25,310,735)   (92,483,360)   (17,299,884)

OTHER COMPREHENSIVE (LOSS)
 INCOME
Foreign currency translation
 gain (loss) net of tax              (624,275)    (1,655,917)       190,063
                                -------------  -------------  -------------
                                     (624,275)    (1,655,917)       190,063

COMPREHENSIVE LOSS              $ (25,935,010) $ (94,139,277) $ (17,109,821)
                                =============  =============  =============

Net loss per common share and
 equivalents - basic and
 diluted                        $       (0.24) $       (1.31) $       (0.32)
                                =============  =============  =============

Weighted average shares
 outstanding during the period
 - basic and diluted              104,326,066     70,670,776     53,553,354
                                =============  =============  =============

The accompanying notes are an integral part of these consolidated financial
                                 statements.


            ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF CASH FLOWS

            FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

                                     2011           2010           2009
                                -------------  -------------  -------------

CASH FLOWS FROM OPERATING
 ACTIVITIES:
  Net loss                      $ (25,310,735) $ (92,483,360) $ (17,299,884)
  Adjustments to reconcile net
   loss to net cash used in
   operating activities:
    Depreciation and
     amortization                   5,254,708      5,312,469      3,051,461
    Provision for doubtful
     accounts                         318,443       (584,722)       220,156
    Stock based compensation        6,319,314      5,080,783      1,561,378
    Noncontrolling interest                --          5,046          1,771
    Amortization of Shares
     issued for Consultancy           499,591        507,609        162,501
    Change in fair value of
     warrant liabilities                   --     48,167,991        538,382
    Amortization of deferred
     financing costs                       --      3,238,602             --
    Interest expense relating
     to debt discount and
     conversion feature                    --     21,094,104      4,960,893
    Intangible assets
     impairment charge                522,726             --             --
  Changes in operating assets
   and liabilities:
    Decrease (increase) in
     accounts receivable           (1,372,719)      (238,523)      (628,082)
    Decrease (Increase) in
     prepaid expenses, deposits
     and other assets                 782,920        229,343        846,491
    Increase (decrease) in
     accounts payable, proceeds
     from related parties and
     customer deposits               (140,229)    (1,574,761)       602,179
    Increase (decrease) in
     deferred revenue                 142,309       (131,886)       (87,853)
    Increase (decrease) in
     accrued expenses and other
     payables                      (1,587,264)    (2,730,533)       740,770
                                -------------  -------------  -------------
  Net cash used in operating
   activities                     (14,570,936)   (14,107,838)    (5,329,837)
                                -------------  -------------  -------------

CASH FLOWS FROM INVESTING
 ACTIVITIES:
    Purchases of property and
     equipment                     (7,721,307)    (3,246,057)    (3,869,149)
    Restricted cash                        49             42            (93)
    Cash received from
     acquisition of subsidiary             --         58,253             --
    Payments for acquisition         (347,758)            --             --
    Loan to third party              (448,195)            --     (1,736,756)
                                -------------  -------------  -------------
  Net cash used in investing
   activities                      (8,517,211)    (3,187,762)    (5,605,998)
                                -------------  -------------  -------------

CASH FLOWS FROM FINANCING
 ACTIVITIES:
    Bank overdraft                         --         13,769         27,125
    Deferred financing costs               --       (205,326)    (1,495,674)
    Loan from related party QAT
     Bridge Loan                           --      2,518,220             --
    Loan from related party
     Bridge SPA                            --      2,885,000             --
    Proceeds from Private
     Placement Offering                    --     14,000,000             --
    Trade note payable                271,915             --             --
    Exercise of warrants &
     options                       26,808,067        502,621             --
    Placement & Solicitation
     fees                          (1,185,741)    (1,814,766)      (100,000)
    Proceeds from Convertible
     12% secured note                      --             --      5,568,000
    Proceeds from Convertible
     12% secured note - related
     parties                               --             --      6,765,015
    Loan from related party                --             --         34,736
                                -------------  -------------  -------------
  Net cash provided by
   financing activities            25,894,241     17,899,518     10,799,202
                                -------------  -------------  -------------

EFFECT OF EXCHANGE RATES ON
 CASH AND CASH EQUIVALENTS            957,785        183,879        (62,012)
NET INCREASE IN CASH AND CASH
 EQUIVALENTS                        3,763,879        787,797       (198,646)
CASH AND CASH EQUIVALENTS,
 BEGINNING OF THE PERIOD            2,245,697      1,457,900      1,656,546
                                -------------  -------------  -------------
CASH AND CASH EQUIVALENTS, END
 OF THE PERIOD                  $   6,009,576  $   2,245,697  $   1,457,900
                                =============  =============  =============

SUPPLEMENTAL DISCLOSURES OF
 CASH FLOW INFORMATION:

Cash paid during the period for
 interest                       $      39,560  $   1,295,298  $      21,965
                                -------------  -------------  -------------


SUPPLEMENTAL DISCLOSURES OF
 NON-CASH INVESTING & FINANCING
 ACTIVITIES:                             2011           2010
                                -------------  -------------  -------------
Shares issued to convert the
 notes payable and accrued
 interest                       $          --  $  15,461,715  $     532,583
Cash paid during the period for
 income taxes                   $          --  $         800  $         800
Increase in Share Capital due
 to Acquisitions and Non-cash
 Compensation                   $          --  $  14,899,393  $
Increase of Share Capital due
 to Exercise of Warrants and
 Conversion of Notes            $          --  $   9,457,044  $
Warrants issued to placement
 agents for services, treated
 as deferred financing costs               --      2,565,300
Warrants and derivative
 liabilities for issuance of
 12% Promissory Notes are
 considered as discount of the
 Promissory Notes               $          --  $          --  $  12,333,020
Warrants issued to placement
 agents for services, treated
 as deferred financing costs    $          --  $          --  $   2,129,313


About Elephant Talk Communications
Elephant Talk Communications Corp. (AMEX: ETAK - News), (www.elephanttalk.com) is an international provider of business software and services to the telecommunications and financial services industry. The company enables both mobile carriers and virtual operators to offer a full suite of products, delivery platforms, support services, superior industry expertise and high quality customer service without substantial upfront investments from clients. Elephant Talk provides global telecommunication companies, mobile network operators, banks, supermarkets, consumer product companies, media firms, and other businesses a full suite of products and services that enables them to fully provide telecom services as part of their business offerings. The company offers various dynamic products that include remote health care, credit card fraud prevention, mobile internet ID security, multi-country discounted phone services, loyalty management services, and a whole range of other emerging customized mobile services. For more information, visit (www.elephanttalk.com).

About ValidSoft
ValidSoft is a subsidiary of Elephant Talk Communications Corp. (AMEX: ETAK - News), (www.elephanttalk.com) and is a market leader in providing solutions to counter electronic fraud relating to card, the internet, and telephone channels. ValidSoft's solutions are at the cutting edge of the market and are used to verify the authenticity of both parties to a transaction (Mutual Authentication), and the integrity of the transaction itself (Transaction Verification) for the mass market, in a highly cost effective and secure manner, yet easy to use and intuitive. For more information, please visit (www.validsoft.com).

Forward-Looking Statements
Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements with respect to the Company's plans and objectives, projections, expectations and intentions. These forward-looking statements are based on current expectations, estimates and projections about the Company's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of the Company may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested is contained in the Company's filings with the Securities and Exchange Commission (SEC), copies of which are available from the SEC or may be obtained upon request from the Company.

Contact:
Contacts:
Elephant Talk Communications Corp.
Mr. Steven van der Velden
Tel: + 31 20 653 59 16
Email Contact
www.elephanttalk.com
Investors Relations:
Alliance Advisors, LLC
Thomas P. Walsh
Tel:+1 212-398-3486
Email Contact
ValidSoft:
Emmanuelle Filsjean
Tel: +44 (0)20 3170 8999
Email Contact
For UK and EU:
Fishburn Hedges
Zoe Gray or Haw-Yan Man
Tel: +44 (0)20 7839 4321
Email Contact

Rates

View Comments (0)