Nevada
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74-2849995
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(State or Other Jurisdiction
of
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(I.R.S.
Employer
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Incorporation or
Organization)
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Identification
No.)
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3201 Cherry
Ridge
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||
Building
C, Suite 300
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San Antonio,
Texas
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78230
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(Address of Principal Executive
Offices)
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(Zip
Code)
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Large accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer ¨
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Smaller reporting Company x
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Page
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PART
I. FINANCIAL INFORMATION
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Item
1. Financial Statements
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||
Consolidated
Balance Sheets as of October 31, 2009 and July 31, 2009
(unaudited)
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2
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Consolidated
Statements of Operations for the Three Months Ended October 31, 2009 and
2008 (unaudited)
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3
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Consolidated
Statement of Changes in Stockholders’ Deficit for the
Three Months Ended October 31, 2009 (unaudited)
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4
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Consolidated
Statements of Cash Flows for the Three Months Ended October 31, 2009 and
2008 (unaudited)
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5
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Notes
to Consolidated Financial Statements (unaudited)
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6
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Item
2. Management’s Discussions and Analysis of Financial Condition and
Results of Operations
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8
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Item
3. Quantitative and qualitative disclosures about market
risk
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11
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Item
4. Controls and Procedures
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11
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PART
II. OTHER INFORMATION
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Item
6. Exhibits
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11
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October 31,
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July 31,
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|||||||
2009
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2009
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|||||||
ASSETS
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||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
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$ | 305 | $ | 637 | ||||
Certificates
of deposit
|
61 | 325 | ||||||
Accounts
receivable, net of allowance for bad debt of $10 and $10,
respectively
|
617 | 337 | ||||||
Prepaid
& other current assets
|
84 | 77 | ||||||
Total
current assets
|
1,067 | 1,376 | ||||||
LONG-TERM
ASSETS:
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||||||||
Intangible
Assets, net of amortization of $20 and $16, respectively
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130 | 134 | ||||||
PROPERTY
AND EQUIPMENT
|
809 | 794 | ||||||
Less
- accumulated depreciation
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(616 | ) | (576 | ) | ||||
Net
property and equipment
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193 | 218 | ||||||
Total
assets
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$ | 1,390 | $ | 1,728 | ||||
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
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$ | 698 | $ | 585 | ||||
Accrued
liabilities
|
98 | 192 | ||||||
Notes
payable, net of unamortized discount of $21 and $33,
respectively
|
712 | 1,173 | ||||||
Derivative
liability
|
85 | - | ||||||
Total
current liabilities
|
1,593 | 1,950 | ||||||
LONG-TERM
LIABILITIES:
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||||||||
Notes
payable
|
649 | 291 | ||||||
Derivative
liability
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- | 85 | ||||||
Other
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8 | 3 | ||||||
Total
long-term liabilities
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657 | 379 | ||||||
Total
liabilities
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2,250 | 2,329 | ||||||
STOCKHOLDERS'
EQUITY DEFICIT:
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||||||||
Preferred
stock, 16,063,000 shares authorized, none issued
and outstanding
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- | - | ||||||
Common stock, $0.001 par value,
150,000,000 shares authorized, 45,504,120 and 45,504,120 shares issued and
outstanding, respectively
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46 | 46 | ||||||
Additional paid in
capital
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73,267 | 73,253 | ||||||
Noncontrolling
interest
|
(138 | ) | (114 | ) | ||||
Accumulated
deficit
|
(74,036 | ) | (73,787 | ) | ||||
Other
comprehensive income
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1 | 1 | ||||||
Total
stockholders' deficit
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(860 | ) | (601 | ) | ||||
Total
liabilities and stockholders' deficit
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$ | 1,390 | $ | 1,728 |
Three months ended October 31,
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||||||||
2009
|
2008
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|||||||
OPERATING
REVENUES:
|
||||||||
VoIP
services
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$ | 4,985 | $ | 7,136 | ||||
Total
operating revenues
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4,985 | 7,136 | ||||||
OPERATING
EXPENSES:
|
||||||||
Cost
of services (exclusive of depreciation and amortization)
|
4,705 | 6,566 | ||||||
Selling,
general and administrative expense (exclusive of legal and professional
fees)
|
368 | 533 | ||||||
Legal
and professional fees
|
98 | 67 | ||||||
Bad
debt expense
|
- | (20 | ) | |||||
Depreciation
and amortization expense
|
44 | 43 | ||||||
Total
operating expenses
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5,215 | 7,189 | ||||||
OPERATING
LOSS
|
(230 | ) | (53 | ) | ||||
OTHER
INCOME (EXPENSE):
|
||||||||
Gain
on early extinguishment of debt
|
- | 108 | ||||||
Investment
loss
|
- | (14 | ) | |||||
Interest
expense
|
(43 | ) | (34 | ) | ||||
Total
other expense
|
(43 | ) | 60 | |||||
NET
INCOME (LOSS)
|
(273 | ) | 7 | |||||
Net
loss applicable to noncontrolling interest
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24 | - | ||||||
NET
INCOME (LOSS) TO COMMON STOCKHOLDERS
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$ | (249 | ) | $ | 7 | |||
BASIC
INCOME (LOSS) PER SHARE TO COMMON STOCKHOLDERS
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$ | (0.01 | ) | $ | 0.00 | |||
DILUTED
INCOME (LOSS) PER SHARE TO COMMON STOCKHOLDERS
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$ | (0.01 | ) | $ | 0.00 | |||
WEIGHTED
AVERAGE BASIC COMMON SHARES OUTSTANDING
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45,504,120 | 39,677,598 | ||||||
WEIGHTED
AVERAGE DILUTED COMMON SHARES OUTSTANDING
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45,504,120 | 40,265,098 |
Additional
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||||||||||||||||||||||||||||
Common
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Paid-in
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Noncontrolling
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Accumulated
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Other Comp.
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||||||||||||||||||||||||
Shares
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Par
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Capital
|
interest
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Deficit
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Income/Loss
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Totals
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||||||||||||||||||||||
BALANCE,
July 31, 2009
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45,504,120 | 46 | $ | 73,253 | $ | (114 | ) | $ | (73,787 | ) | $ | 1 | $ | (601 | ) | |||||||||||||
Stock
option expense
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14 | 14 | ||||||||||||||||||||||||||
Net
loss
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(24 | ) | (249 | ) | (273 | ) | ||||||||||||||||||||||
BALANCE,
October 31, 2009
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45,504,120 | 46 | $ | 73,267 | $ | (138 | ) | $ | (74,036 | ) | 1 | $ | (860 | ) |
Three months ended October 31,
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||||||||
2009
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2008
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|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
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||||||||
NET
INCOME (LOSS)
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$ | (273 | ) | $ | 7 | |||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||
Investment
loss
|
- | 14 | ||||||
Gain
on early extinguishment of debt
|
- | (108 | ) | |||||
Depreciation
and amortization
|
44 | 43 | ||||||
Issuance
of stock grants and options, employees for services
|
14 | 62 | ||||||
Provisions
(recovery) for losses on accounts receivables
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- | (20 | ) | |||||
Amortization
of debt discount
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12 | 11 | ||||||
Changes
in operating assets and liabilities:
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||||||||
Accounts
receivable
|
(280 | ) | 538 | |||||
Prepaid
expenses and other
|
(7 | ) | (77 | ) | ||||
Accounts
payable
|
115 | (832 | ) | |||||
Wells
Fargo Factoring Collateral
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- | 23 | ||||||
Accrued
liabilities
|
(33 | ) | 28 | |||||
Net
cash used in by operating activities
|
(408 | ) | (311 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
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||||||||
Investment
in certificates of deposit
|
264 | (3 | ) | |||||
Note
receivable, related party
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- | (70 | ) | |||||
Purchases
of property & equipment
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(15 | ) | (62 | ) | ||||
Net
cash provided by / ( used in) investing activities
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249 | (135 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
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||||||||
Payments
on notes payable
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(172 | ) | (156 | ) | ||||
Acquisition
of common stock
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- | (44 | ) | |||||
Proceeds
from Notes payables
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- | 1,275 | ||||||
Principal
payments on capital lease obligation
|
(1 | ) | (1 | ) | ||||
Net
cash (used in) / provided by financing activities
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(173 | ) | 1,074 | |||||
DECREASE
IN CASH
|
(332 | ) | 628 | |||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
637 | 1,338 | ||||||
CASH
AND CASH EQUIVALENTS, end of period
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$ | 305 | $ | 1,966 | ||||
SUPPLEMENTAL
DISCLOSURES:
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||||||||
Cash
paid for interest
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$ | 25 | $ | 20 | ||||
Cash
paid for income tax
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- | - | ||||||
NON-CASH INVESTING
AND FINANCING TRANSACTIONS
|
||||||||
Issuance
of common stock for conversion of debt
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$ | - | $ | 172 |
October 31,
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July 31,
|
|||||||
2009
|
2009
|
|||||||
Note
payable to Alfonso Torres, payable upon maturity, bearing interest of
6.00% per annum, maturing January 31, 2011, unsecured.
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517 | 460 | ||||||
Note
payable to Wells Fargo bank payable in monthly installments, bearing
interest at 7.25% per annum, maturing July 25, 2010,
collateralized by ATSI's certificates of deposit.
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54 | 72 | ||||||
Note
payable to ATVF, Scott Crist, Roderick Ciaccio & Vencore Solutions,
payable in monthly installments, bearing interest at 10.00% per annum,
maturing
September 10, 2010, collateralized by ATSI's accounts receivables (other
than accounts factored with Wells Fargo), $100,000 certificate
of deposit with Wells Fargo and ATSI's ownership in ATSICOM. Additionally,
we issued 425,000 warrants to the note holders, at an exercise
price
per warrant of $0.19. The
warrants have the following “Put” and “Call” rights: Put
right. From and after
the second anniversary of the notes payable, the holder shall have the right to
request from ATSI, upon five (5) Business days’ prior notice, to acquire
from the holders the warrants at a price $0.39 per warrant.
Call
right. At
any time any warrants are outstanding, if the last sale price of ATSI’s
common stock is greater than $.80 per share for ten (10)
consecutive trading days, ATSI
shall be entitled to require the purchaser to exercise the warrants and
pay the exercise price therefore upon five (5) business days’ written
notice. Net of unamortized discount of $21 and $33,
respectively
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496 | 604 | ||||||
Note
payable to San Antonio National Bank payable in monthly installments,
bearing interest at 8.00% per annum, maturing October 25, 2011,
collateralized by ATSI's assets.
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294 | 328 | ||||||
Total
outstanding debt long-term debt
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1,361 | 1,464 | ||||||
Current
portion of long-term debt
|
(712 | ) | (1,173 | ) | ||||
Long-term
debt, net of current portion
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$ | 649 | $ | 291 | ||||
Payments on long-term debt of ATSI are due as
follows:
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||||||||
(in
thousands)
|
||||||||
Fiscal
2010
|
$ | 712 | ||||||
Fiscal
2011
|
649 | |||||||
Total
payments
|
$ | 1,361 |
Three
months ended October 31,
|
||||||||||||||||
2009
|
2008
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Variances
|
%
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|||||||||||||
OPERATING
REVENUES:
|
||||||||||||||||
VoIP
services
|
$ | 4,985 | $ | 7,136 | $ | (2,151 | ) | -30 | % | |||||||
Total
operating revenues
|
4,985 | 7,136 | (2,151 | ) | -30 | % | ||||||||||
Cost
of services (exclusive of depreciation and amortization, shown
below)
|
4,705 | 6,566 | (1,861 | ) | -28 | % | ||||||||||
GROSS
MARGIN
|
280 | 570 | (290 | ) | -51 | % | ||||||||||
Selling,
general and administrative expense (exclusive of legal and professional
fees)
|
368 | 533 | (165 | ) | -31 | % | ||||||||||
Legal
and professional fees
|
98 | 67 | 31 | 46 | % | |||||||||||
Bad
debt expense
|
- | (20 | ) | 20 | -100 | % | ||||||||||
Depreciation
and amortization expense
|
44 | 43 | 1 | 2 | % | |||||||||||
OPERATING
LOSS
|
(230 | ) | (53 | ) | (177 | ) | 334 | % | ||||||||
OTHER
INCOME (EXPENSE):
|
||||||||||||||||
Gain
on early extinguishment of debt
|
- | 108 | (108 | ) | -100 | % | ||||||||||
Minority
Interest
|
- | (14 | ) | 14 | -100 | % | ||||||||||
Interest
income (expense)
|
(43 | ) | (34 | ) | (9 | ) | 26 | % | ||||||||
Total
other income (expense), net
|
(43 | ) | 60 | (103 | ) | -172 | % | |||||||||
NET
INCOME (LOSS)
|
(273 | ) | 7 | (280 | ) | -4000 | % | |||||||||
Net
loss applicable to noncontrolling interest
|
24 | - | 24 | 100 | % | |||||||||||
NET
INCOME (LOSS) TO COMMON STOCKHOLDERS
|
(249 | ) | 7 | (256 | ) | -3657 | % |
Number
|
Description
|
|
10.1
|
Promissory note payable and
security agreement with ATV Texas Ventures III, LP. dated November 11,
2009 in the principal amount of $100,000.
|
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31.1
|
Certification
of our President and Chief Executive Officer, under Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of our Corporate Controller and Principal Financial Officer, under Section
302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of our President and Chief Executive Officer, under Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
32.2
|
|
Certification
of our Corporate Controller and Principal Financial Officer, under Section
906 of the Sarbanes-Oxley Act of
2002.
|
ATSI COMMUNICATIONS,
INC.
|
||
(Registrant)
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||
Date:
December 10, 2009
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By:
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/s/ Arthur L. Smith
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Name:
|
Arthur
L. Smith
|
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Title:
|
President
and
|
|
Chief
Executive Officer
|
||
Date:
December 10, 2009
|
By:
|
/s/ Antonio Estrada Jr.
|
Name:
|
Antonio
Estrada Jr.
|
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Title:
|
Sr.
VP of Finance & Corporate Controller (Principal Accounting and
Principal Financial
Officer)
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Number
|
Description
|
|
10.1
|
Promissory note
payable and security
agreement with ATV Texas Ventures III, LP. dated November 11, 2009 in the principal amount of
$100,000.
|
|
31.1
|
Certification
of our President and Chief Executive Officer, under Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of our Corporate Controller and Principal Financial Officer, under Section
302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of our President and Chief Executive Officer, under Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification
of our Corporate Controller and Principal Financial Officer, under Section
906 of the Sarbanes-Oxley Act of
2002.
|