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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2004
Or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission File Number 1-15687
ATSI COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 74-2849995
(STATE OR OTHER JURISDICTION IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
8600 WURZBACH ROAD, SUITE 700W
SAN ANTONIO, TEXAS 78240
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(210) 614-7240
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act) Yes No X
--- ---
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THERE WERE 143,751,700 SHARES OF COMMON STOCK OUTSTANDING AT JUNE 14, 2004.
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================================================================================
ATSI COMMUNICATIONS, INC.
AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED APRIL 30, 2004
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of July 31, 2003 and April 30, 2004 . . . . . . . . . . . 3
Consolidated Statements of Operations for the Three and Nine Months Ended April 30, 2003
and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended
April 30, 2003 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the Nine Months Ended April 30, 2003
and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . 19
Item 4. Control and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
April 30, July 31,
2004 2003
------------ ----------
ASSETS (unaudited)
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 102 $ 140
Accounts receivable 18 7
Note receivable-current portion - 187
Prepaid & other current assets 21 6
------------ ----------
Total Current Assets 141 340
------------ ----------
OTHER ASSETS, net
Note receivable 100 100
Investment in joint venture 624 663
------------ ----------
Total Assets $ 865 $ 1,103
============ ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------
CURRENT LIABILITIES:
Pre-petition liabilities of bankrupt subsidiaries, net of assets $ 12,354 $ 12,350
Accounts payable 427 356
Accrued liabilities 2,472 2,559
Notes payable 654 445
Convertible debentures 275 275
Series D cumulative preferred stock, 3,000 shares authorized, 742 shares issued and
outstanding. 1,126 1,093
Series E cumulative preferred stock, 10,000 shares authorized and 1,170 shares issued and
outstanding 1,257 1,209
Liabilities from discontinued operations, net of assets 1,152 1,152
------------ ----------
Total Current Liabilities 19,717 19,439
------------ ----------
LONG-TERM LIABILITIES:
Other 52 9
------------ ----------
Total Long-term Liabilities 52 9
------------ ----------
STOCKHOLDERS' DEFICIT:
- ---------------------
Preferred Stock, $0.001 par value, 10,000,000 shares authorized,
Series A cumulative convertible preferred stock, 50,000 shares authorized, 3,750 and 4,370 shares
issued and outstanding, respectively - -
Series F cumulative convertible preferred stock, 10,000 shares authorized, 0 and 7,260 shares
issued and outstanding, respectively - -
Series G cumulative convertible preferred stock, 42,000 shares authorized, 0 and 6,500 shares
issued and outstanding, respectively - -
Common stock, $0.001, 200,000,000 shares authorized, 143,751,700 and 103,638,690
issued and outstanding, respectively 144 104
Additional paid in capital 61,201 61,124
Accumulated deficit (80,751) (80,075)
Other comprehensive income 502 502
------------ ----------
Total Stockholders' Deficit (18,904) (18,345)
------------ ----------
Total Liabilities and Stockholders' Deficit $ 865 $ 1,103
============ ==========
The accompanying notes are an integral part of these consolidated financial statements
3
ATSI COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
Three months ended April 30, Nine months ended April 30,
----------------------------------- ---------------------------------
2004 2003 2004 2003
----------------- ---------------- ---------------- ---------------
OPERATING REVENUES:
Services
Carrier services $ 484 $ 0 $ 726 $ 6,532
Network services 77 70 161 377
----------------- ---------------- ---------------- ---------------
Total Operating Revenues 561 70 887 6,909
OPERATING EXPENSES:
Cost of services (exclusive of depreciation
and amortization, shown below) 501 86 768 6,211
Selling, general and administrative 216 310 644 3,652
Bad debt expense - 22 4 35
Depreciation and Amortization 6 363 6 1,212
----------------- ---------------- ---------------- ---------------
Total Operating Expenses 723 781 1,422 11,110
----------------- ---------------- ---------------- ---------------
OPERATING LOSS (162) (711) (535) (4,201)
OTHER INCOME (EXPENSE):
Other income (expense), net - - 1 (19)
Loss on an unconsolidated affiliate (25) - (85) -
Interest expense (29) (228) (82) (612)
Gain/(loss) from sale of assets 25 - 25 (28)
----------------- ---------------- ---------------- ---------------
Total Other Expense (29) (228) (141) (659)
LOSS FROM CONTINUING
OPERATIONS BEFORE INCOME TAX (191) (939) (676) (4,860)
NET LOSS FROM DISCONTINUED
OPERATIONS - (421) - (2,821)
----------------- ---------------- ---------------- ---------------
NET LOSS (191) (1,360) (676) (7,681)
LESS: PREFERRED DIVIDENDS (82) (91) (268) (278)
----------------- ---------------- ---------------- ---------------
NET LOSS TO COMMON STOCKHOLDERS ($273) ($1,451) ($944) ($7,959)
================= ================ ================ ===============
BASIC AND DILUTED LOSS PER SHARE ($0.00) ($0.01) ($0.01) ($0.08)
================= ================ ================ ===============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 117,466,210 103,639,000 108,180,636 101,136,180
================= ================ ================ ===============
The accompanying notes are an integral part of these consolidated financial statements.
4
ATSI COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(unaudited)
For the three months ended April 30, For the nine months ended April 30,
----------------------------------------- ----------------------------------------
2004 2003 2004 2003
------------------- -------------------- ------------------ --------------------
Net loss to common stockholders
Other comprehensive loss, net of tax: ($273) ($1,451) ($944) ($7,959)
Foreign currency translation adjustment - (134) - 669
------------------- -------------------- ------------------ --------------------
Comprehensive Loss to Common Stockholders ($273) ($1,585) ($944) ($7,290)
=================== ==================== ================== ====================
The accompanying notes are an integral part of these consolidated financial statements.
5
ATSI COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(unaudited)
Nine months ended April 30,
---------------------------------
2004 2003
---------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($676) ($7,681)
Adjustments to reconcile net loss
operating activities-
Impairment loss - 88
Depreciation and amortization 6 1,721
Gain on disposition of property & equipment - 33
Loss on an unconsolidated affiliate 85 -
Issuance of common stock for services 2 -
Issuance of warrants for services 30 -
Foreign currency loss - 656
Provision for losses on accounts receivable 4 106
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable (11) 783
(Increase) Decrease in prepaid expenses and other (21) 439
Increase in accounts payable 116 3,354
Increase in accrued liabilities 78 1,459
(Decrease) in deferred revenue - (108)
---------------- ---------------
Net Cash Used in/Provided by Operating Activities (387) 850
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property & equipment - (328)
Cash proceeds from sale of ATSICOM 187 -
Investment in joint Venture in ATSICOM (47) -
---------------- ---------------
Net Cash Provided By/Used in Investing Activities 140 (328)
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 215 25
Debt payments (6) -
Capital lease payments - (87)
Payment of expenses related to the issuance of preferred stock - (12)
Payment of expenses related to the issuance of common stock - (95)
---------------- ---------------
Net Cash Provided By/Used in Financing Activities 209 (169)
---------------- ---------------
NET (DECREASE) INCREASE IN CASH (38) 354
CASH AND CASH EQUIVALENTS, beginning of period 140 27
---------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 102 $ 381
================ ===============
The accompanying notes are an integral part of these consolidated financial statements.
6
ATSI COMMUNICATIONS, INC.
AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except per share amounts)
1. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of ATSI
Communications, Inc. have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the
Securities and Exchange Commission ("SEC"), and should be read in conjunction
with the audited financial statements and notes thereto contained in ATSI
Communications Inc. Annual Report filed with the SEC on Form 10-KA for the year
ended July 31, 2003. In the opinion of management, these interim financial
statements contain all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of
operations for the interim periods presented. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year. Notes to the financial statements, which would substantially
duplicate the disclosure contained in the audited financial statements for the
year ended July 31, 2003, as reported in the Form 10-KA, have been omitted.
2. PRE-PETITION LIABILITIES (NET OF ASSETS) OF THE BANKRUPT
SUBSIDIARIES
Our subsidiaries, American TeleSource International, Inc. (ATSI Texas) and
TeleSpan, Inc. (TeleSpan) filed for protection under Chapter 11 of the U.S.
Bankruptcy Code on February 4, 2003 and February 18, 2003 respectively. The
court ordered joint administration of both cases on April 9, 2003 and on May 14,
2003 the court converted the cases to Chapter 7. The two bankrupt subsidiaries
were our primary operating companies and they have ceased operations. These
bankruptcies did not include ATSI Communications, Inc., the reporting entity.
On July 2, 2003, the U.S. Bankruptcy Court handling the Chapter 7 cases for ATSI
Texas and TeleSpan approved the sale of two of their subsidiaries, ATSI de
Mexico S.A de C.V. (ATSI Mexico) and Servicios de Infraestructura S.A de C.V.
(SINFRA), to Latingroup Ventures, L.L.C. (LGV), a non-related party. Under the
purchase agreement LGV acquired all the communication centers and assumed all
related liabilities. Additionally, under the agreement, LGV acquired the
Comercializadora License owned by ATSI Mexico and the Teleport and Satellite
Network License and the 20-year Packet Switching Network license owned by
SINFRA. The Chapter 7 Bankruptcy Trustee received $17,500, which are all the
proceeds from the sale of these entities. The Chapter 7 Bankruptcy Trustee will
manage the designation of these funds for the benefit of the creditors of ATSI
Texas and TeleSpan. Upon liquidation of all the assets owned by ATSI Texas and
TeleSpan, the Chapter 7 Trustee will negotiate all claims with creditors.
The following represents the pre-petition liabilities (net of assets) in
the Chapter 7 case:
7
ATSI Texas and TeleSpan
Pre petition Liabilities, net of assets
(in thousands)
April 30, 2004 July 31, 2003
--------------- --------------
CURRENT LIABILITIES:
Accounts payable $ 7,496 $ 7,492
Accrued liabilities 2,015 2,015
Notes payable 636 636
Capital leases 2,207 2,207
--------------- --------------
Total current liabilities $ 12,354 $ 12,350
--------------- --------------
3. NOTES PAYABLE
We have borrowed a total of $262,500 from Recap Marketing & Consulting, LLP
and entered into a series of unsecured convertible promissory notes bearing
interest at the rate of 12% per annum, with the following maturity dates:
Origination Date Amount Maturity Date
----------------- -------- ------------------
October 14, 2003 $ 50,000 August 15, 2004
November 25, 2003 25,000 August 15, 2004
December 15, 2003 25,000 August 15, 2004
January 15, 2004 25,000 August 15, 2004
February 19, 2004 25,000 August 19, 2004
March 17, 2004 25,000 September 17, 2004
April 22, 2004 40,000 October 22, 2004
May 10, 2004 47,500 November 10, 2004
$262,500
========
4. WARRANTS
On October 13, 2003, we entered into consulting agreements with Recap
Marketing & Consulting, LLP that provide for the issuance of compensation
warrants to purchase a total of 3,000,000 shares of our common stock at prices
as indicated in the following table. These warrants have a life of (6) six
months from the issuance date and were recorded at their fair value of $29,656
when granted.
Common Exercise
Shares Price
--------- ---------
2,000,000 $ 0.01
500,000 $ 0.25
250,000 $ 0.50
250,000 $ 0.75
8
5. SUBSEQUENT EVENTS
On May 13, 2004 we filed a current report on Form 8-K announcing in Item 5,
the results from our 2004 Annual Shareholders meeting which was held in San
Antonio, Texas on Thursday, May 6, 2004. ATSI Shareholders approved the
reincorporation of the Company in the state of Nevada, re-elected Murray R. Nye
and Richard C. Benkendorf as Class B members of the Company's Board of
Directors, and ratified the selection of Malone & Bailey, PLLC as independent
public accountants for the fiscal year ending July 31, 2004. We also announced
the election of Michael G. Santry to fill a vacancy on the Board of Directors.
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SPECIAL NOTE: This Quarterly Report on Form 10-Q contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities and Exchange Act of 1934, as amended.
"Forward looking statements" are those statements that describe management's
beliefs and expectations about the future. We have identified forward-looking
statements by using words such as "anticipate," "believe," "could," "estimate,"
"may," "expect," and "intend." Although we believe these expectations are
reasonable, our operations involve a number of risks and uncertainties,
including those described in the Additional Risk Factors section of the Annual
Report Form 10-KA and other documents filed with the Securities and Exchange
Commission. Therefore, these types of statements may prove to be incorrect.
The following is a discussion of the consolidated financial condition and
results of operations of ATSI for the three and nine months ended April 30, 2003
and 2004. It should be read in conjunction with our Consolidated Financial
Statements, the Notes thereto and the other financial information included in
the amended annual report on Form 10-KA filed with the SEC on March 3, 2004.
GENERAL
ATSI was founded in 1993. We are an international carrier, serving the
rapidly expanding communications markets in and between Latin America and the
United States. Our mission is to connect the Americas with exceptional
communication services. Our strategy is to become a leading provider of
communication services to carriers and businesses in the U.S./Latin American
corridor through a high quality, 'next generation' Voice Over Internet Protocol
(VoIP) network established through our partnership with DialMex, LLC, a U.S.
based international telecommunications company. We operate two principal
business segments.
Carrier Services: We provide termination services to United States and
Latin American telecommunications companies who lack transmission
facilities, require additional capacity or do not have the regulatory
licenses to terminate traffic in Mexico. Typically these telecommunications
companies offer their services to the public for domestic and international
long distance services.
Network Services: We offer private communication links for multi-national
and Latin American corporations or enterprise customers who use a high
volume of telecommunications services to communicate with their U.S.
offices or businesses and need greater dependability than is available
through public networks. These services include data, voice and fax
transmission as well as Internet services between the customers multiple
international offices and branches.
We have incurred operating losses and deficiencies in operating cash flows
in each year since our inception in 1994 and expect our losses to continue
through July 31, 2004. Our operating losses were
9
$5,780,000, $8,259,000 and $4,850,000 for the years ending July 31, 2003, 2002
and 2001, respectively. We had an operating loss of $162,000, for the quarter
ended April 30, 2004 and operating loss of $535,000 for the nine-month period
ended April 30, 2004. Also we have a working capital deficit of $19,576,000, at
April 30, 2004. Due to such losses, the negative cash flows generated from our
operations, and our substantial working capital deficit, our auditor's opinion
on our financial statements as of July 31, 2003 calls attention to substantial
doubts about our ability to continue as a going concern. This means that there
is substantial doubt that we will be able to continue in business through the
end of our next fiscal year, July 31, 2004.
We have experienced difficulty in paying our vendors and lenders on time in
the past. On December 31, 2002 our carrier network capacity was idled and all
of the US employees were terminated. This means that we were not able to
generate revenues from carrier services during the second half of the fiscal
year ending July 31, 2003. During Fiscal year 2004 we were able to restart our
network and as of the nine-month period ended April 30, 2004 we have generated
approximately $726,000 in carrier services revenue. However, there can be no
assurance, that in the future, such revenue level will continue to be generated
from our customers. During the quarter ended April 30, 2004 we entered into
three short-term promissory notes for a total of $90,000. These funds have
allowed us to pay those operating and corporate expenses that were not covered
by our current cash inflows from operations, especially those expenses
associated with our quarterly review, preparation of the proxy materials and
annual shareholders meeting. We will continue to require additional funding
until the cash inflows from operations are sufficient to cover the monthly
operating expenses. However, there can be no assurance that we will be
successful in securing additional funding over the next twelve months.
RESULTS OF OPERATIONS
The following table sets forth certain items included in the Company's
results of operations in dollar amounts and as a percentage of total revenues
for the three and nine-month periods ended April 30, 2004 and 2003.
Three months ended April 30, Nine months Ended April 30,
------------------------------------- -------------------------------------
(Unaudited)
-----------
2004 2003 2004 2003
----------------- ------------------ ----------------- ------------------
$ % $ % $ % $ %
-------- ------- --------- ------- -------- ------- --------- -------
Operating revenues
- ------------------
Services
Carrier services $ 484 86% $ 0 0% $ 726 82% $ 6,532 95%
Network services 77 14% 70 100% 161 18% 377 5%
-------- ------- --------- ------- -------- ------- --------- -------
Total Operating Revenues 561 100% 70 100% 887 100% 6,909 100%
Cost of services (exclusive of depreciation
and amortization, shown below) 501 89% 86 123% 768 87% 6,211 90%
-------- ------- --------- ------- -------- ------- --------- -------
Gross Margin 60 11% (16) -23% 119 13% 698 10%
Selling, general and administrative
expense 216 39% 310 443% 644 73% 3,652 53%
Bad debt expense - 0% 22 31% 4 0% 35 1%
Depreciation and amortization 6 1% 363 519% 6 1% 1,212 18%
-------- ------- --------- ------- -------- ------- --------- -------
10
Operating loss (162) -29% (711) -1,016% (535) -60% (4,201) -61%
Other expense, net (29) -5% (228) -326% (141) -16% (659) -10%
-------- ------- --------- ------- -------- ------- --------- -------
Net Loss From Continuing Operations (191) -34% (939) -1,341% (676) -76% (4,860) -70%
Income From Discontinued
Operations - 0% (421) -601% - 0% (2,821) -41%
Net Loss (191) -34% (1,360) -1,943% (676) -76% (7,681) --111%
-------- ------- --------- ------- -------- ------- --------- -------
Less: preferred stock dividends (82) -15% (91) -130% (268) -30% (278) -4%
-------- ------- --------- ------- -------- ------- --------- -------
Net Loss to Applicable to
Common Shareholders ($273) -49% ($1,451) -2,073% ($944) -106% ($7,959) -115%
======== ========= ======== =========
THREE MONTHS ENDED APRIL 30, 2004 COMPARED TO THREE MONTHS ENDED APRIL 30, 2003
Operating revenues. Consolidated operating revenues increased 701% between
periods from $70,000 for the quarter ended April 30, 2003 to $561,000 for the
quarter ended April 30, 2004
Carrier services revenues increased approximately $484,000, or 100% from
the quarter ended April 30, 2003 to the quarter ended April 30, 2004. The
primary reason for the increase in revenue was as a result of the Company
restarting its carrier services business during Fiscal 2004. During the quarter
ended April 30, 2003 the Company's carrier network was idled and as a result no
revenue was generated during the 3rd quarter of Fiscal 2003.
Network services revenues increased from the previous period by
approximately $7,000, or 10% from the quarter ended April 30, 2003. The increase
in network services revenue is primarily due to the purchase and assignment of a
network services contract from American TeleSource International de Mexico S.A
de C.V. (ASTIMEX). Under the assignment and purchase agreement with ATSIMEX, we
acquired the remaining term of the contract, from February 2004 through June
2004. Under the assignment of this contract we will generate approximately
$22,000 per month in network services revenue for the remaining term of the
contract.
Cost of services. (exclusive of depreciation and amortization) The
consolidated cost of services increased by $415,000, or 483% from the quarter
ended April 2003 to the quarter ended April 2004. The increase in cost of
services is a direct result of the increase in carrier services revenue from the
quarter ended April 30, 2003 to the quarter ended April 30, 2004 and the
incurrence of the costs relating to providing these services. As mentioned
above, during the quarter ended April 30, 2003 the company's network was idled
and as a result minimal carrier services cost was incurred during the quarter.
During Fiscal year 2004 the company restarted its carrier services business, and
as a result we experienced a significant increase in revenue and an increase in
the related cost of services during the quarter ended April 30, 2004.
Selling, general and administrative (SG&A) expenses. SG&A expenses
decreased approximately by $94,000, or 30% from the quarter ended April 30, 2003
to the quarter ended April 30, 2004. The decrease was offset by approximately
$62,000 of professional fees recognized during the quarter ended April 30, 2004
associated with the quarter review, proxy printing and distribution and annual
shareholder meeting. The
11
decrease can mainly be attributed to recognition of approximately $56,000 in
professional fees associated with the audit, board fees and litigations during
the quarter ended April 30, 2003. Additionally, during the quarter ended April
30, 2003, the company incurred health, business insurance expense and rent
expense of approximately $20,000, $4,000 and $30,000, respectively.
Bad debt expense. Bad debt expense decreased by 100% or $22,000 from the
quarter ended April 30, 2003 to the quarter ended April 30, 2004. During the
quarter ended April 30, 2003 we recognized $22,000 in bad debt expense
associated with the write-off of network services customer receivables in
Central America. We did not experience any bad debt write offs during the
quarter ended April 30, 2004.
Depreciation and amortization. Depreciation and amortization decreased by
98% or $357,000 from the quarter ended April 30, 2003 to the quarter ended April
30, 2004. The decrease is attributed to the disposal of substantially all
capital equipment during Fiscal 2003. During the quarter ended April 30, 2004 we
amortized approximately $6,000 related to the purchase price associated with the
acquisition of the network services customer from ATSIMEX.
Operating loss. The Company's operating loss decreased approximately
$549,000 or 77% from the quarter ended April 2003 to the quarter ended April
2004. The decrease in operating loss is attributed to the decrease between
periods of SG&A by approximately $94,000, decrease in bad debt expense of
approximately $22,000 and the decrease in depreciation and amortization expense
of approximately $357,000. In addition to, the gross margin profit increase by
approximately $76,000 between the quarters ended April 30, 2003 and April 30,
2004.
Other expense. Other expense decreased approximately $199,000 between
quarters from $228,000 to $29,000. The decrease in other expense is attributed
to the decrease in interest expense of approximately $174,000 recognized during
the quarter ended April 30, 2003 associated with various capital leases. During
the quarter ended April 30, 2004 the Company did not have any capital leases,
thus we did not incur any interest expense associated with capital leases.
Loss from discontinued operations. Loss from discontinued operations
decreased by $421,000 between periods, from $421,000 for the quarter ended April
30, 2003 to $0 during the quarter ended April 30, 2004. During the quarter
ended April 30, 2003, we recognized loss from discontinued operations of
approximately $421,000 associated with Mexico Telco operations. The Mexico
Telco loss from discontinued operations during the quarter ended April 30, 2003
can mainly be attributed to the recognition of approximately $772,000 in
selling, general and administrative expenses and the recognition of $72,000 of
bad debt expense. Additionally, the Mexico Telco operations also recognized
$65,000 of depreciation and amortization and approximately $26,000 of interest
expense and foreign currency loss expense during the quarter ended April 30,
2003. These expenses were offset by the recognition of approximately $558,000
of gross profit margin from the Mexico Telco Operations.
Preferred stock dividends. Preferred Stock Dividends expense decreased by
approximately $9,000 between periods, from $91,000 for the quarter ended April
30, 2003 to $82,000 during the quarter ended April 30, 2004. During the quarter
ended April 30, 2004 we converted all Redeemable preferred Series F and Series G
shares to common. As a result of these conversions no dividends were incurred
during the month of April 2004 related to these securities.
Net loss to common stockholders. The net loss for the quarter ended April
30, 2004 decreased to $273,000 from $1,451,000 for the quarter ended April 30,
2003. The decrease in net loss to common stockholders was due primarily to the
decrease in SG&A expenses and depreciation expense of
12
approximately $94,000 and $357,000, respectively. Additionally, as mentioned
above, losses from discontinued operations and other expenses decreased from the
quarter ended April 30, 2003 to the quarter ended April 30, 2004 by
approximately $421,000 and $199,000, respectively.
NINE MONTHS ENDED APRIL 30, 2004 COMPARED TO NINE MONTHS ENDED APRIL 30, 2003
Operating revenues. Consolidated operating revenues decreased 87% between
periods from $6.9 million for the nine months ended April 30, 2003 to $887,000
for the nine months ended April 30, 2004.
Carrier services revenues decreased approximately $5.8 million, or 89% from
the nine months ended April 30, 2003 to the nine months ended April 30, 2004.
Our carrier traffic declined from approximately 95 million minutes during the
nine months ended April 30, 2003 to approximately 19.4 million minutes during
the nine months ended April 30, 2004. The decrease in revenue and carrier
traffic can mainly be attributed to the idling of our network during December
2002. We were able to restart our network during fiscal 2004 and during the
nine-month period ending April 30, 2004, we generated approximately $726,000 in
carrier services revenue.
Network services revenues decreased approximately 57% or $216,000 from the
nine-month period ended April 30, 2003 to the nine-month period ended April 30,
2004. During the nine-month period ended April 30, 2004 we provided network
services to one customer and generated approximately $11,115 in revenues from
this customer. Additionally, in February 2004, we purchased a network services
contract from American TeleSource International de Mexico S.A de C.V. (ATSIMEX).
Under the assignment and purchase agreement with ATSIMEX, we acquired the
remaining term of a network services contract, from February 2004 through June
2004. Under the assignment of this contract we will generate approximately
$22,000 per month in network services revenue for the remaining term of the
contract.
Cost of services. (exclusive of depreciation and amortization) The
consolidated cost of services decreased by approximately $5.4 million, or 88%
from the nine months ended April 30, 2003 to the nine months ended April 30,
2004. The decrease in cost of services is a direct result of the decrease in
carrier revenue and network services revenue. As mentioned above, we idled our
network in December 2002 and our carrier traffic declined from approximately 95
million minutes during the nine months ended April 30, 2003 to approximately
19.4 million minutes during the nine months ended April 30, 2004, thus reducing
our cost of services between periods.
Selling, general and administrative (SG&A) expenses. SG&A expenses
decreased approximately $3 million, or 82% from the nine months ended April 30,
2003 to the nine months ended April 30, 2004. The decrease was offset slightly
by approximately $142,000 of professional fees recognized during the nine months
ended April 30, 2004 associated with the quarter review, proxy preparation,
printing and distribution and annual shareholder meeting. The decrease can
mainly be attributed to the termination of all US employees during the quarter
ending January 31, 2003. The termination of these employees resulted in a
decrease in salaries and wages of approximately $195,000 per month or $1.8
million during the nine-month period. As a result of the termination of these
employees, during the nine months ended April 30, 2004, the company did not
incur health and business insurance expense of approximately $96,000 per month
or $864,000 during the nine-month period. Additionally, as a result of the
termination of all of the employees, we reduced our rent expense by
approximately $40,000 per month or $360,000 during the nine-month period.
Bad debt expense. Bad debt expense decreased by 89% or $31,000 from the
nine months ended April
13
30, 2003 to the nine months ended April 30, 2004. During the nine months ended
April 30, 2003 we recognized $35,000 in bad debt expense associated with the
write-off of network services customer receivables in Central America. During
the nine months ended April 30, 2004 we recognized $4,000 in bad debt expense
associated with the write-off of network services revenue related to a customer
that ceased operations.
Depreciation and amortization. Depreciation and amortization decreased by
99% or $1.2 million from the nine months ended April 30, 2003 to the nine months
ended April 30, 2004. The decrease is attributed to the disposal of
substantially all capital equipment during Fiscal 2003.
Operating loss. The Company's operating loss decreased approximately $3.7
million or 87% from the nine months ended April 30, 2003 to the nine months
ended April 30, 2004. The decrease in operating loss is attributed to the
decrease in SG&A by approximately $3 million, decreases in bad debt expense of
approximately $31,000 and the decrease in depreciation and amortization expense
of approximately $1.2 million and was partially offset by a reduction in gross
profits of $579,000.
Other expense, net. Other expense decreased approximately $518,000 or 79%
from the nine months ended April 30, 2003 to the nine months ended April 30,
2004. The decrease in other expense is attributed to the decrease in interest
expense of approximately $532,000 recognized during the nine months ended April
30, 2003 associated with various capital leases. During the nine months ended
April 30, 2004 the Company did not have any capital leases, thus we did not
incur any interest expense associated with capital leases.
Loss from discontinued operations. Loss from discontinued operations
decreased by $2.8 million between periods; from $2.8 million for the nine-month
period ended April 30, 2003 to $0 during the nine-month period ended April 30,
2004. During the nine-month period ended April 30, 2003, we recognized loss
from discontinued operations of approximately $2.8 million associated with
Mexico Telco operations. The Mexico Telco loss from discontinued operations
during the nine-months ended April 30, 2003 can mainly be attributed to the
recognition of approximately $3.2 million in selling, general and administrative
expenses and the recognition of $660,000 of foreign currency loss on exchange
rate related to the Mexico Telco operations. Additionally, the Mexico Telco
operations also recognized $510,000 of depreciation and amortization and
approximately $228,000 of interest expense and income tax expense during the
nine-month period ended April 30, 2003. These expenses were offset slightly by
the recognition of approximately $1.9 million of gross profit margin from the
Mexico Telco Operations.
Preferred stock dividends. Preferred Stock Dividends expense decreased by
approximately $10,000 between periods, from $278,000 for the nine months ended
April 30, 2003 to $268,000 during the nine months ended April 30, 2004. During
the quarter ended April 30, 2004 we converted all Redeemable preferred Series F
and Series G shares to common. As a result of these conversions, no dividends
were incurred during the month of April 2004 related to these securities, thus
resulting in a small decrease in Preferred Stock dividends expense during the
period.
Net loss to common stockholders. The net loss for the nine months ended
April 30, 2004 decreased to $944,000 from $8 million for the nine months ended
April 30, 2003. The decrease in net loss to common stockholders was due
primarily to the idling of our network and not incurring any fixed costs
associated with the leasing of satellite sites, connectivity fees and operating
a network site during the nine months ended April 30, 2004. During the nine
months ended April 30, 2003, we incurred approximately $625,000 of fixed costs.
Additionally, as mentioned above, SG&A expenses and loss from discontinued
operations decreased from the nine months ended April 30, 2003 to the nine
months ended April 30, 2004 by approximately $3 million and $2.8 million,
respectively. Also, there was a decrease in depreciation and amortization
expense
14
of approximately $1.2 million from the nine months ended April 30, 2003 to the
nine months ended April 30, 2004.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in / provided by operating activities: During the nine months
ended April 30, 2004, operations consumed approximately $387,000 in cash. This
cash consumed by operations is primarily due to operating losses of
approximately $676,000. The net loss was somewhat offset by the increase in
accounts payable of approximately $116,000, increase in accrued liabilities of
approximately $78,000 and the approximately $30,000 in proceeds from exercise of
warrants issued for services. The increase in accrued liabilities and accounts
payable is primarily due to the company recognizing approximately $67,000 in
interest expense associated with various notes and the accrual of professional
fees and board fees of approximately $25,000. Additionally, we recognized
approximately $30,000 in the issuance of warrants for services related to the
consulting agreements entered into with two individuals. Currently we are not
generating sufficient revenues from operations to cover our monthly operating
salaries and general and administrative expense. During the nine-month period
ending April 30, 2004 we have relied on the monthly payments of approximately
$20,750 from the sale of 51% of ATSI Comunicaciones S.A de C.V. (ATSICOM) to
Telemarketing S.A de C.V. (Telemarketing) to pay for our monthly SG&A expenses.
Subsequent to the quarter ended April 30, 2004 we were not able to meet our
total minutes requirement under the Share Purchase Agreement with Telemarketing
due to problems with Dialmex's network and ATSICOM's lack of interconnections
with other Mexican carriers. As a result we did not receive any payments from
Telemarketing during the month of May 2004. Currently we are in discussions with
Telemarketing to amend the payment agreement for the balance owed to us of
approximately $498,000. At this time we incur approximately $72,000 in SG&A
expenses per month, including corporate expenses associated with the quarter
reviews, proxy preparation and distribution and the annual shareholders meeting.
We expect this financial instability and lack of liquidity to continue during
the fiscal year 2004. As a result over the next twelve months we estimate
requiring additional funding of approximately $745,000 to compensate for the
deficiencies in cash inflows.
Cash provided by / used in investing activities: During the nine months
ended April 30, 2004, the Company received approximately $187,000 in payments
from the sale of 51% of ATSICOM. Additionally, during the nine months ended we
invested approximately $47,000 in ATSICOM. ATSICOM utilized these proceeds to
pay off payroll taxes and professional fees previously agreed upon the sale of
ATSICOM to Telemarketing.
Cash provided by / used in financing activities: During the nine months
ended April 30, 2004 we received approximately $215,000 for the issuance of debt
and warrant options. Additionally, during the nine-month period we made debt
payments of approximately $6,000 to one of our creditors.
Overall, the Company's net operating, investing and financing activities
during the nine months ended April 30, 2004 provided a decrease of approximately
$38,000 in cash balances. We intend to cover our monthly operating expenses
with our remaining available cash. However, as discussed previously we are also
dependent on the monthly cash payments from the sale of ATSICOM to cover monthly
operating expenses.
The Company's working capital deficit at April 30, 2004 was approximately
$19,576,000. This represents an increase of approximately $477,000 from our
working capital deficit at July 31, 2003. The increase is primarily attributed
to our deficiency of cash and the accrual of various professional services and
interest expense. The Company's working capital deficit at April 30, 2004
included approximately
15
$12,354,000 related to the pre-petition liabilities (net of assets), associated
with the Chapter 7 Bankruptcy cases, ATSI Texas and TeleSpan. The adjusted
Company's working capital deficit after exclusion of the pre-petition
liabilities is approximately $7,222,000.
The Company's current liabilities include approximately $12,354,000
associated with the pre-petition liabilities related to the two subsidiaries
under Chapter 7 Bankruptcy, ATSI Texas and TeleSpan. The pre-petition liability
balance is composed of the following major liabilities:
- approximately $3 million in debt owed to IBM Corporation related to a
capital lease;
- approximately $1.3 million debt to Northern Telecom, a subsidiary of
Nortel Networks, associated with some telecommunications equipment
acquired during fiscal year 2001;
- approximately $5.1 million in debt to various international and
domestic telecommunications carriers for services provided during
fiscal year 2002 and 2003;
- approximately $250,000 in property taxes to various taxing entities,
- approximately $550,000 to Universal Service Fund for telecommunication
taxes;
- approximately $250,000 in a note payable; and
- approximately $2.4 million associated with rent expense, salaries and
wages and professional services to various entities.
The Company's current obligations also include approximately $1,387,000
owed to the former owners of Grupo Intelcom, S.A. de C.V., the entity purchased
by the Company in July 2000 and through which the Company obtained its Mexican
long distance concession. Of this amount, $357,000 is included in notes payable
and the additional $1,030,000 is included in accrued liabilities.
The Company's current liabilities also include approximately $1.1 million
associated with the Series D Cumulative preferred stock. During the year ended
July 31, 2003, we received a redemption letter from the Series D holder
requesting the redemption of all the outstanding Series D preferred stock. As a
result the full redemption amount of approximately $942,000 and dividends of
approximately $184,000 were reclassified to current liabilities.
The Company's current liability includes approximately $1.3 million
associated with the Series E Cumulative preferred stock. During the fiscal year
ended July 31, 2003, the Company was de-listed from AMEX and according to the
terms of the Series E Cumulative preferred stock Certificate of Designation, if
the Company fails to maintain a listing on NASDAQ, NYSE or AMEX the Series E
preferred stockholder could request a mandatory redemption of the total
outstanding preferred stock. As of the date of this filing we have not received
such redemption notice.
On October 31, 2002 we filed a lawsuit in the Southern District Court of
New York against two financial institutions, Rose Glen Capital and Shaar Fund,
the holders of Series D and E Redeemable Preferred Stock, for what we believe to
be "Stock fraud and manipulation". These liabilities combined for a total of
approximately $2.4 million. Accounting rules dictate that these liabilities
remain in our books under Current Liabilities until the lawsuit is resolved in
the judicial system or otherwise. At this time we cannot predict the outcome or
the time frame for this to occur.
We also have approximately $1.2 million of current liabilities (net of
assets) associated to the discontinued operations of the retails services unit.
This balance is mainly composed of approximately $453,000 owed to the Mexican
taxing authorities related to a note assumed through the acquisition of Computel
and approximately $944,000 related to income taxes owed as of the quarter ending
October 31,
16
2003.
We believe that, based on our limited availability to capital resources and
our current cash balances, that these resources may not be available to support
our ongoing operations for the next twelve months or until we are able to
generate income from operations. These matters raise substantial doubt about
our ability to continue as a going concern. Our ability to continue as a going
concern is dependent upon the ongoing support of our stockholders and customers,
our ability to obtain capital resources to support operations and our ability to
successfully market our services.
In May 2003, the company entered into a Share Purchase Agreement with
Telemarketing de Mexico, S.A. de C.V. (Telemarketing) whereby we agreed to sell
Telemarketing 51% of our Mexican subsidiary, ATSI Comunicaciones, S.A. de C.V.
(ATSICOM). The agreement provides that there will be an initial payment of
$194,000 plus payment of approximately $200,000 of ATSICOM'S liabilities and the
remaining purchase price of $747,000 will be paid as follows:
- Beginning in May 2003 Telemarketing paid ATSI $20,750 per month for 12
months; and
- Beginning in May 2004, Telemarketing will pay ATSI $20,750 per month
for the next 24 months, contingent on ATSI generating 20,750,000
minutes of monthly traffic through ATSICOM's network. In the event the
Company does not reach the above-mentioned volume of monthly minutes,
the monthly payment will be adjusted based on the same percentage of
the shortfall in minutes, until Telemarketing pays the total purchase
price. On the other hand, if ATSI exceeds the volume of monthly
traffic, Telemarketing can make additional payments, without penalty.
As of the date of this filing we have been experiencing difficulties with
DialMex's network and ATSICOM has not been able to complete their
interconnection with other Mexican carriers, such as Telmex, required to process
domestic and international VoIP traffic. As previously mentioned, we have not
been able to generate the monthly minutes required under the Telemarketing
agreement. Consequently, we did not receive any payments from Telemarketing
during the month of May 2004. Currently we are in discussions with Telemarketing
to amend the payment agreement for the balance owed to us of approximately
$498,000. However, there can be no assurance that will be able to reach a
favorable agreement with Telemarketing in the near future.
Additionally, in June 2004, we acquired a VoIP soft-switch from NexTone
Communications, Inc. The acquisition of the NexTone soft-switch will allows us
to diversify our traffic and interconnect directly to foreign and US carriers,
thus eliminating our dependency on DialMex. We have interconnected our
soft-switch to DialMex's network and will continue to utilize DialMex on routes
to Mexico that meet our standards for cost and quality. The NexTone soft-switch,
which is capable of processing approximately 30 million minutes per month,
includes a network analysis and reporting system that provides a comprehensive
set of management tools to engineer and translate VoIP traffic routing tables.
We will be able to maximize our capacity by partitioning our soft-switch to
customers that lack their own network and billing capabilities.
There can be no assurance that the acquisition and operation of the NexTone
soft-switch will generate sufficient cash from operations to cover our monthly
operating expenses over the next twelve months. Additionally, there is no
assurance that we will be able to raise the additional capital from equity of
debt sources required to continue in operations.
MEXICAN FACILITIES-BASED LICENSE RISKS
17
We are substantially dependent upon the operations of ATSICOM, the holder
of the 30-year concession license (the "Concession") to install and operate a
public telecommunication network in Mexico, for the installation and operation
of a telecommunications network in Mexico. The Mexican government has (1)
authority to temporarily seize all assets related to the Concession in the event
of natural disaster, war, significant public disturbance and threats to internal
peace and for other reasons of economic or public order and (2) the statutory
right to expropriate the Concession and claim all related assets for public
interest reasons. Although Mexican law provides for compensation in connection
with losses and damages related to temporary seizure or expropriation, we cannot
assure you that the compensation will be adequate or timely.
Under the Concession, ATSICOM must meet the following requirements:
General requirements
- --------------------
- - Maintain approximately 10 million dollars in registered and subscribed
capital
- - Install and operate a network in Mexico, obtain approval of the operating
plan and any changes in it before implementation
- - Continuously develop and conduct training programs for its staff
- - Assign an individual responsible for the technical functions to operate the
concession
Concession services requirements
- --------------------------------
- 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
Tariff Requirements
- -------------------
- Invoice its customer's at tariffs rates that have been approved by the
Mexican government
Verification and Information requirements
- -----------------------------------------
- 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
Guarantee requirements
- ----------------------
- Maintain a bond/ insurance policy for approximately $500,000 dollars
payable in the event the Mexican government revokes the Concession
On May 23, 2003, the Company sold 51% of ATSICOM to Telemarketing. We
cannot assure you that we and our partner, Telemarketing, will be able to obtain
financing to finish the Mexican network; if we or our partners obtain financing
it will be in a timely manner or on favorable terms; or if
18
we or our partners will be able to comply with the Mexican concession's
conditions. If our partners or we fail to comply with the terms of the
concession, the Mexican government may terminate it without compensation to our
partners or us. A termination would prevent us from engaging in our proposed
business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodity Price Risk: Our carrier services and network services businesses
---------------------
rely on the availability and pricing of carrier and network capacity and are
subject to fluctuations in the cost of such capacity based on the availability
and demand. Customers select carrier services and network services based on
perceived price and reliability. As a result of these factors, these businesses
operate in an extremely price sensitive and volatile environment. While we have
been able to withstand these pricing volatilities, certain of our competitors
are much larger and better positioned, own some or all of their network capacity
and may not be as susceptible to fluctuations in price and availability. Our
ability to continue to operate in this environment may be dependent on our
ability to further reduce our costs of transporting these minutes and our
ability to obtain long-term contracts with the owners of transmission
facilities.
Equity Price Risk: Until such time as we are able to consistently produce
------------------
positive cash flows from operations, we will be dependent on our ability to
access debt and equity sources of capital. While recent history has shown us
capable of raising equity sources of capital; future equity financings and the
terms of those financings will be largely dependent on our stock price, our
operations and the future dilution to our shareholders.
ITEM 4. CONTROLS AND PROCEDURES
The Company has adopted and implemented disclosure controls and procedures
designed to provide reasonable assurance that all reportable information will be
recorded, processed, summarized and reported within the time period specified in
the SEC's rules and forms. The Company's President and Chief Executive Officer
and the Company's Controller and Principal Financial Officer have concluded that
these disclosures and procedures are effective at the reasonable assurance
level. Under the supervision and with the participation of the Company's
management, including the Company's President and Chief Executive Officer and
the Company's Controller and Principal Financial Officer, the Company has
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15(e) as of the end of
the quarter covered by this report. Based on that evaluation, the President and
Chief Executive Officer and the Controller and Principal Financial Officer have
concluded that these disclosure controls and procedures are effective as of the
end of the period covered by this report. There were no changes in the
Company's internal control over financial reporting during the quarter covered
by this report that have had a material affect or are reasonably likely to have
a material affect on internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 7, 2004, we filed a petition in the 150th Judicial District of
Bexar County, Texas against Inter-tel.net, Inc. and Vianet Communications, Inc.
D/B/A Inter-tel.net seeking declaratory relief that ATSI Communications, Inc. is
not bound by the Carrier Services Agreement between Vianet Communications, Inc.
and ATSI Texas. On February 27, 2004 the Bankruptcy Court allowed Vianet
Communications, Inc. to amend its claim against ATSI Texas that was pending in
the Bankruptcy of ATSI Texas and assert its claims
19
for breach of contract against the Company. The Bankruptcy Court then ordered
the lawsuit to be remanded back to state court for hearing. Additionally, on
February 27, 2004 Vianet Communications, Inc. filed a motion to abate and a
hearing was held on March 30, 2004. On April 13, 2004 Judge Martha Tanner
overruled and denied such motion. The Company is vigorously defending any claim
for liability in this matter and pursuing its claim for declaratory relief and
believes that any liability in this matter will not have a material adverse
effect on its financial condition or results of operations.
On December 30, 2003, the Company filed a cause of action in the 407th
Judicial District of Bexar County, Texas against James C. Cuevas, Raymond G.
Romero, Texas Workforce Commission, ATSI Communications, Inc. (Texas) and Martin
W. Seidler seeking judicial review on the decision issued by the Texas Workforce
Commission awarding a claim for unpaid wages against the Company. The Company
is vigorously pursuing its claim and believes that any liability in this matter
will not have a material adverse effect on its financial condition or results of
operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT
NUMBER
- ------
10.1 Management Service Agreement ATSI Communication and GoodCom Management, Ltd (Exhibit
10.1 to Quarterly Report on Form 10-Q for the quarter ended April 30, 2004 filed June 14, 2004)
10.2 Stock Purchase Agreement with GoodCom Management, Ltd. (Sale of Sistema de Telefonia
Computarizada) (English Translation) (Exhibit 10.2 to Quarterly Report on Form 10-Q for the
quarter ended April 30, 2004 filed June 14, 2004)
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. *
* Filed herewith
(b) The following Current Reports on Form 8-K were filed during the third
quarter of fiscal 2004.
None
20
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ATSI COMMUNICATIONS, INC.
(Registrant)
Date: June 14, 2004 By: /s/Arthur L. Smith
------------- ------------------
Name: Arthur L. Smith
Title: President and
Chief Executive Officer
Date: June 14, 2004 By: /s/Antonio Estrada
------------- ------------------
Name: Antonio Estrada
Title: Corporate Controller
(Principal Accounting and Financial
Officer)
21