Elephant Talk Communications Announces Second Quarter 2009 Financial Results

Share Name	Share Symbol	Market	Type
Elephant Talk Communication Corp. Delaware	AMEX:ETAK	AMEX	Common Stock

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Elephant Talk Communication Corp. Delaware (AMEX:ETAK)
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- Revenue in constant currency for Q2 2009 Increased 9.3% to $11.1 Million - Revenue for Q2 2009 compared to Q1 2009 Increased 15.7% SCHIPHOL, Netherlands, Aug. 20 /PRNewswire-FirstCall/ -- Elephant Talk Communications, Inc. (OTC:ETAK) (BULLETIN BOARD: ETAK) , an international telecom and multimedia content distributor specializing in carrier grade mobile enabling platforms, announced second quarter 2009 financial results and is providing a shareholder update. "Management is pleased with the strategic direction in which the Company is headed and with the strong top-line growth we experienced for the second quarter," stated, Steven van der Velden, CEO of Elephant Talk Communications. "During 2009 we have taken the necessary steps to ensure we are well positioned to establish ourselves as a market leader within the rapidly expanding international mobile/wireless software and services sector of the telecom industry. The focus going forward will be to acquire additional MVNO's contracts while leveraging ValidSoft's location based services technology in order to become the market leader in the international telecom arena. As we expand our market presence we will continue to grow our bottom line while allowing us to achieve our ultimate goal of increased shareholder value. " 2009 Operational Highlights Elephant Talk's strategic growth plan remains on target while it continues its progress as an international telecom operator and enabler to the multimedia industry, as well as, to capture added market share within the $30 + billion global bank fraud market by: -- Announced revenue guidance pertaining to contracts recently signed in the Netherlands and Spain in excess of $6 million in the 2nd half of 2009 and over $24 million in 2010. -- Completed a Joint Venture agreement with ValidSoft Limited, a provider of sub-second identity verification, fraud prevention and false positive reduction for Credit and debit card ATM and POS (Point of Sale) transactions. -- The agreement executed on June 17, 2009, shall remain in place for ten years. -- Revenues from ValidSoft are expected to become Elephant Talk's highest margin business. -- Expanded relationships with T-Mobile, Vizzavi Espana, a Vodafone Group Company and other major telecom operators, mobile virtual network operators, banks, and government agencies. -- The Company began the transition from fixed line service offerings into higher margin mobile/wireless software and service business. Second Quarter ended June 30, 2009 versus June 30, 2008 Revenue for the three months ended June 30, 2009 was $11,311,398, a decrease of $609,892 compared to $11,921,290 for the same period in 2008. The decrease in revenue for the 2009 period was primarily the result of the unfavorable impact of a $1,529,535 currency exchange translation effect arising from a lower USD/Euro exchange rate. Revenue in constant currency for the three months ended June 30, 2009 was $11,124,476, an increase of $941,905 or 9.3% compared to the same period in 2008. The increase in revenue was primarily attributable to the MVNO revenue that started in Q4 2008. On constant currency basis revenue for the three months ended June 30, 2009 increased $1,508,670 or 15.7% compared to the three months ended March 30, 2009. Our gross margin, representing net revenue less cost of service, for the second quarter 2009 increased to 6.1% of revenue compared to 3.0% of revenue for the first quarter of 2009. The increase in the gross margin was primarily attributable to the new, higher gross margin MVNO revenue stream. Revenue (in constant currency) ------------------------------------------------- Q2 - 2008 Q2 - 2009 increase % $10,182,571 $11,124,476 $941,905 9.3% Revenue (in constant currency) ------------------------------------------------- Q1 - 2009 Q2 - 2009 increase % $9,615,806 $11,124,476 $1,508,670 15.7% Gross Margin (in constant currency) ------------------------------------------------- Q1 - 2009 Q2 - 2009 increase % 3.0% 6.1% 3.1% 104.9% Cost of service for the three months ended June 30, 2009 was $10,632,204, a reduction of $941,420 compared to $11,573,624 for the same period in 2008. The decrease in cost of service was primarily the result of the favorable impact of a $1,480,725 currency exchange translation effect arising from a lower USD/Euro exchange rate. In constant currency, cost of service increased $560,489 or 5.7% compared to the same period in 2008 primarily as a result of higher levels of revenue. The improvement in gross margin was primarily due to the Company's new business in the MVNO/MVNE arena. Selling, general and administrative expense for the three months ended June 30, 2009 was $1,783,795, an increase of $119,291 compared to $1,664,504 for the same period in 2008. The Company's net loss of $2,686,687 for the three months ended June 30, 2009 was relatively unchanged compared to that of $2,682,693 for the same period 2008. Net Loss per share for the second quarter 2009 was $(0.05) compared to that of $(0.16) in the second quarter 2008 based on respectively 53.9 million and 16.7 million shares outstanding. Six Month Results Revenue for the six months ended June 30, 2009 was $20,740,282, a decrease of $2,938,288 compared to $23,678,570 for the six months ended June 30, 2008. The decrease in revenue for the 2009 period was primarily the result of the unfavorable impact of a $3,030,706 currency exchange translation effect arising from a lower USD/Euro exchange rate. In constant currency, total revenue for the six months ended June 30, 2009 was $20,740,282, an increase of $92,314 or 0.5% compared to the same period in 2008. The increase in revenue was primarily attributable to an increase in our MVNO revenue of $2,191,538 compared to $0 in the same period in 2008. Net Loss for the six month period ended June 30, 2009 was $4,830,905 a reduction of approximately $400,000 compared to $5,287,698 in the same period 2008. Net Loss per share for the six month period ended June 30, 2009 was $(0.09) compared to that of $(0.40) for the same period of 2008 based on respectively 52.7 million and 16.7 million shares outstanding. Mr. van der Velden continued, "Elephant Talk's premier infrastructure and strategic partnerships are now fully integrated. The Company has completed all of the necessary steps to position itself for large scale future growth. The focus going forward will be to acquire additional MVNO's contracts while leveraging ValidSoft's anti fraud technology in order to become the market leader in our sector of the international telecom arena. Elephant Talk is well equipped to obtain significant market share in Europe, the Middle East and Asia in the near future. These new markets will allow us to increase our market presence, while growing the bottom line and allow us to achieve our ultimate goal of increased shareholder value." About Elephant Talk Communications Elephant Talk Communications is positioning itself as an international telecom operator and enabler to the multimedia industry by facilitating the distribution of all forms of content as well as mobile and fixed telecom services to global telecommunications consumers. The Company provides traditional telecom services, media streaming, and distribution services primarily to the business-to-business (B2B) community within the telecommunications market where it has a presence. The Company's global footprint as a fully licensed carrier, supported by its propriety IN (Intelligent Network) and Billing/CRM (Client Relationship Management) Systems, has been designed to offer cutting-edge solutions to the increasingly competitive global multimedia industry. Elephant Talk's telecommunications platform eliminates the usual limitations caused by national borders, networks, devices or media and, therefore, enables its B2B customers to operate as independent telecom and multimedia distribution organizations. Elephant Talk is also a developer for mobile telecom and content distribution solutions; and, as a Mobile Virtual Network Enabler (MVNE), the company has positioned itself as the premier outsourcing partner for both Mobile Network Operators (MNO's) as well as for Mobile Virtual Network Operators (MVNO's). At the same time, Elephant Talk assists its MNO partners to more efficiently provide a broad range of sophisticated services to their own existing base of MVNO's. Elephant Talk is positioning itself as the preferred MVNE partner of the larger, global Mobile Operators and currently operates sophisticated networks in over a dozen markets in Europe, Asia Pacific, and the Middle East. The Company was ranked fifth on the Orange County 2008 Deloitte Technology Fast 50. For more information, visit: http://www.elephanttalk.com/. Forward-Looking Statements Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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; however, readers should review carefully reports or documents the Company files periodically with the Securities and Exchange Commission. Contact Elephant Talk Communications, Inc. Mr. Steven van der Velden Tel: + 31 20 653 59 16 E-mail: http://www.elephanttalk.com/ Or Alliance Advisors, LLC Mr. Thomas Walsh Tel: (212) 398-3487 E-mail: ELEPHANT TALK COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET June 30, December 31, 2009 2008 --------- ----------- Unaudited --------- ASSETS CURRENT ASSETS Cash and cash equivalents $575,770 $1,656,546 Restricted cash 191,822 191,209 Accounts receivable, net of allowance for doubtful accounts of $313,757 and $503,102 at June 30, 2009 and December 31, 2008 respectively 6,543,966 4,574,013 Prepaid expenses and other current assets 2,042,835 1,916,967 Total Current Assets 9,354,393 8,338,735 LONG TERM DEPOSITS 296,110 310,356 PROPERTY AND EQUIPMENT, NET 7,455,352 6,345,113 INTANGIBLE ASSETS, NET 4,189,831 4,461,869 ----------- ----------- TOTAL ASSETS $21,295,686 $19,456,073 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Overdraft $335,349 $322,903 Accounts payable and customer deposits 7,442,336 5,809,211 Deferred revenue 218,251 220,058 Accrued expenses and other payables 1,963,422 1,890,004 Shares to be issued - 619,057 Advances from third parties 202,935 274,762 Loans payable 881,070 881,035 Due to related parties 4,340,497 - --------- --- Total Current Liabilities 15,383,860 10,017,030 ---------- ---------- LONG TERM DEBT 418,792 402,425 MINORITY INTEREST 185,375 191,767 STOCKHOLDERS' EQUITY (DEFICIT) Common stock, no par value, 250,000,000 shares authorized, 54,471,209 issued and outstanding as of June 30, 2009 compared to 50,433,260 shares issued and outstanding as of December 31, 2008 54,424,137 52,933,209 Accumulated other comprehensive income 749,575 946,834 Accumulated deficit (49,866,053) (45,035,192) ----------- ----------- Total Stockholders' Equity (Deficit) 5,307,659 8,844,851 --------- --------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $21,295,686 $19,456,073 =========== =========== - - ELEPHANT TALK COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) For the Three Months For the Six Months ended ended June 30, June 30, 2009 2008 2009 2008 =========== =========== =========== =========== REVENUES $11,311,398 $11,921,290 $20,740,282 $23,678,570 COST AND OPERATING EXPENSES Cost of service 10,632,204 11,573,624 19,780,001 22,986,135 Selling, general and administrative expenses 1,783,795 1,664,504 3,246,943 3,421,503 Non cash compensation to officers, directors and employees 750,406 228,585 1,019,866 390,072 Depreciation and amortization of intangibles assets 707,763 751,725 1,337,945 1,426,181 ------- ------- --------- --------- Total cost and operating expenses 13,874,168 14,218,438 25,384,755 28,223,891 LOSS FROM OPERATIONS (2,562,770) (2,297,148) (4,644,473) (4,545,321) OTHER INCOME (EXPENSE) Interest income 12,237 20,710 22,307 36,463 Interest expense (136,154) (398,494) (207,939) (769,071) Other expenses - (7,761) - (8,969) --- ------ --- ------ Total other income (expense) (123,917) (385,545) (185,632) (741,577) LOSS BEFORE PROVISION FOR INCOME TAXES (2,686,687) (2,682,693) (4,830,105) (5,286,898) Provision for income taxes - - (800) (800) --- --- ---- ---- NET LOSS (2,686,687) (2,682,693) (4,830,905) (5,287,698) Net income (loss) attributable to noncontrolling interest (653) 30,232 (756) 59,249 ---- ------ ---- ------ NET LOSS (2,687,340) (2,652,461) (4,831,661) (5,228,449) OTHER COMPREHENSIVE (LOSS) INCOME Foreign currency translation gain (loss) 470,533 103,715 (197,259) 1,214,347 ------- ------- -------- --------- 470,533 103,715 (197,259) 1,214,347 COMPREHENSIVE LOSS $(2,216,807) $(2,548,746) $(5,028,920) $(4,014,102) =========== =========== =========== =========== Net loss per common share and equivalents -basic and diluted $(0.041) $(0.152) $(0.095) $(0.306) ======= ======= ======= ======= Weighted average shares outstanding during the period - basic and diluted 53,864,109 16,726,734 52,693,232 13,108,807 ========== ========== ========== ========== ELEPHANT TALK COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the six months periods ended June 30, 2009 2008 Unaudited Unaudited ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(4,831,661) $(5,228,449) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,337,945 1,426,181 Provision for doubtful accounts (178,090) -- Stock based compensation 868,616 390,072 Minority interest 756 (59,249) Amortization of Shares issued for Consultancy 151,250 4,514 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable (1,704,371) (975,575) (Increase) decrease in prepaid expenses, deposits and other assets (158,168) 10,427 Increase (decrease) in accounts payable, proceeds from related parties and customer deposits 1,565,246 982,368 Increase (decrease) in deferred revenue (1,807) -- Increase (decrease) in accrued expenses and other payables (112,870) 300,675 -------- ------- Net cash used in operating activities (3,063,154) (3,149,036) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (1,963,245) (489,102) Restricted cash 18 1,588 Loan to related party (345,895) -- -------- --- Net cash used in investing activities (2,309,122) (487,514) ---------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Bank overdraft 12,767 12,044 Placement fees - (462,867) Proceeds from bank loans - (38,011) Proceeds from sale of shares - 15,937 Proceeds from related parties 3,306,372 Loan from related party 4,340,497 -- --------- --- Net cash provided by financing activities 4,353,264 2,833,475 --------- --------- EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS (61,764) 182,331 NET DECREASE IN CASH AND CASH EQUIVALENTS (1,080,776) (620,744) CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 1,656,546 4,366,312 --------- --------- CASH AND CASH EQUIVALENTS, END OF THE PERIOD $575,770 $3,745,568 ======== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for interest $19,880 $35,968 ------- ------- For the six months periods ended June 30, 2009 2008 Unaudited Unaudited --------- --------- SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING & FINANCING ACTIVITIES: Shares issued to convert the notes payable to related parties and accrued interest $532,583 $7,939,171 Deemed Dividend as a result of loss on conversion of the above Note to related party -- 1,200,000 --- --------- DATASOURCE: Elephant Talk Communications, Inc. CONTACT: Mr. Steven van der Velden, +31-20-653-59-16, ; Mr. Thomas Walsh, Alliance Advisors, LLC, +1-212-398-3487, Web Site: http://elephanttalk.com/

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ETAK Elephant Talk Communication Corp. Delaware