PARETEUM Corp - FORM 8-K - April 1, 2015

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported) April 1, 2015

 

ELEPHANT TALK COMMUNICATIONS CORP.

(Exact name of registrant as specified in Charter)

 

Delaware   000-030061   95-4557538
         
(State or other jurisdiction of
incorporation)		   (Commission File Number)   (IRS Employer
Identification No.)

   

100 Park Avenue

New York, NY 10017

 

(Address of Principal Executive Offices) (Zip Code)

 

Registrant's telephone number, including area code: +31.20.653.5916

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 
 

 

Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review

 

On March 27, 2015, the Audit Committee of the Board of Directors of Elephant Talk Communications Corp. (the “Company”), concurred with and approved management’s recommendation, that the following financial statements should no longer be relied upon due to material errors in such financial statements in the application of revenue recognition policies related to accounting for multiple element arrangements and should be restated:

 

·The Company’s unaudited financial statements included in the Quarterly Reports on Form 10-Q for each of the first three quarters in the fiscal year ended 2014;

 

·The Company’s audited financial statements for the year ended December 31, 2013, and

 

·The Company’s unaudited financial statements included in the Quarterly Reports on Form 10-Q for each of the first three quarters in the fiscal year ended 2013.

 

The Company’s Management and the Audit Committee Chair discussed the matters related to the restatements with Squar, Milner, Peterson, Miranda & Williamson, LLP, the Company’s independent registered public accounting firm, and matters relating to the restatement of the financial statements included in the Annual report on Form 10-K for the fiscal 2013 year with BDO USA, LLP, the Company’s prior independent registered public accounting firm. The Company is including certain restated financial statements and financial information with respect to such periods in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014 to be filed with the Commission on or about the date of this Current Report on Form 8-K.

 

The restated financial statements reflect that the Company overstated amounts of revenues recognized in those periods identified above due to inadequate controls over inadequate controls over the lack of competency of accounting staff regarding the application of accounting for multiple element arrangements and the proper monitoring and review of new arrangements entered into by the company. In accordance with ASC 250-10-S99-2, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (ASC 250), the Company recorded an adjustment to decrease revenue by $3,375,457 to $19,451,804 from $22,827,261 (previously reported) and increased the net loss to $25,507,072, from $22,131,165 (previously reported) for the year ended December 31, 2013. The related adjustment also increased deferred revenue by $2,493,425 to $2,636,156 and increased the accumulated deficit to $228,767,379 from $225,391,922 (previously reported) at December 31, 2013.

 

The following tables set forth the corrections to individual affected line items in the consolidated balance sheet, stockholders’ equity section of the consolidated balance sheet as of December 31, 2013 and the consolidated statement of operations for fiscal year ended December 31, 2013. 

 

2
 

 

ELEPHANT TALK COMMUNICATION CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS AT DECEMBER 31, 2013

 

   December 31,   December 31,   December 31, 
   2013   2013   2013 
   As previously
reported		   Restatement
adjustments		   Restated 
ASSETS               
                
CURRENT ASSETS               
                
Cash and cash equivalents  $1,252,315   $-   $1,252,315 
Restricted cash   191,600    -    191,600 
Accounts receivable, net of an allowance for doubtful accounts of $7,693 at December 31, 2013   5,976,879    (882,032)   5,094,847 
Prepaid expenses and other current assets   2,254,213    -    2,254,213 
Total current assets   9,675,007    (882,032)   8,792,975 
                
NON-CURRENT ASSETS               
                
OTHER ASSETS   1,412,408    -    1,412,408 
                
PROPERTY AND EQUIPMENT, NET   19,786,122    -    19,786,122 
                
INTANGIBLE ASSETS, NET   8,670,677    -    8,670,677 
                
GOODWILL   3,773,226    -    3,773,226 
                
   $43,317,440   $(882,032)  $42,435,408 
                
LIABILITIES AND STOCKHOLDERS' EQUITY               
                
CURRENT LIABILITIES               
Overdraft  $391,436   $-   $391,436 
Accounts payable and customer deposits   2,586,662    -    2,586,662 
Obligations under capital leases (current portion)   1,302,838    -    1,302,838 
Deferred Revenue   142,731    129,036    271,767 
Accrued expenses and other payables   4,961,303    -    4,961,303 
Loans payable   962,654    -    962,654 
10% Related Party Loan (net of Debt Discount of $1,719,585 at December 31, 2013)   1,033,719    -    1,033,719 
Total current liabilities   11,381,343    129,036    11,510,379 
                
LONG TERM LIABILITIES               
10% 3rd Party Loan (net of Debt Discount of  $726,695 at December, 2013)   4,779,913    -    4,779,913 
Warrant liabilities   1,973,534    -    1,973,534 
Non-current portion of obligation under capital leases   845,529    -    845,529 
Non-current portion of deferred revenue   -    2,364,389    2,364,389 
Loan from joint venture partner   602,047    -    602,047 
Total long term liabilities   8,201,023    2,364,389    10,565,412 
                
Total liabilities   19,582,366    2,493,425    22,075,791 
                
STOCKHOLDERS' EQUITY               
Preferred Stock $0.00001 par value, 50,000,000 shares authorized, 0 issued and outstanding   -    -    - 
Common Stock $0.00001 par value, 250,000,000 shares authorized,  140,466,801 shares issued and outstanding as of December 31, 2013   248,712,321    -    248,712,321 
Accumulated other comprehensive income (loss)   269,869    -    269,869 
Accumulated deficit   (225,391,922)   (3,375,457)   (228,767,379)
Elephant Talk Communications, Corp. stockholders' equity   23,590,268    (3,375,457)   20,214,811 
                
NON-CONTROLLING INTEREST   144,806    -    144,806 
Total stockholders' equity   23,735,074    (3,375,457)   20,359,617 
                
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $43,317,440   $(882,032)  $42,435,408 

 

3
 

 

ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

FOR THE YEAR ENDED DECEMBER 31, 2013

 

   Year end December 31, 2013 
   As previously
reported		   Restatement
adjustments		   Reclassifications   Restated 
                 
REVENUES  $22,827,261   $(3,375,457)  $-   $19,451,804 
                     
COST AND OPERATING EXPENSES                    
Cost of service   7,149,153    -    2,240,144    9,389,297 
Product development   -    -    6,091,484    6,091,484 
Sales and marketing   -    -    3,139,015    3,139,015 
General and administrative   26,533,283    -    (11,470,643)   15,062,640 
Depreciation and amortization of intangibles assets   6,601,246    -    -    6,601,246 
Total cost and operating expenses   40,283,682         -    40,283,682 
                     
LOSS FROM OPERATIONS   (17,456,421)   (3,375,457)   -    (20,831,878)
                     
OTHER INCOME (EXPENSE)                    
Interest income   103,627    -    -    103,627 
Interest expense   (1,064,999)   -    -    (1,064,999)
Interest expense  related to debt discount and conversion feature   (2,069,649)   -    -    (2,069,649)
Change in fair value of conversion feature   232,267    -    -    232,267 
Changes in fair value of warrant liabilities   479,322    -    -    479,322 
Gain / (Loss) on Extinguishment of Debt   (2,005,100)   -    -    (2,005,100)
Other income & (expense), net   (302,112)   -    -    (302,112)
Amortization of deferred financing costs   (248,851)   -    -    (248,851)
Total other income (expense)   (4,875,495)   -    -    (4,875,495)
                     
LOSS BEFORE (BENEFIT) PROVISION FOR INCOME TAXES   (22,331,916)   (3,375,457)   -    (25,707,373)
(Benefit) / provision for income taxes   (200,301)             (200,301)
NET LOSS   (22,131,615)   (3,375,457)   -    (25,507,072)
                     
OTHER COMPREHENSIVE (LOSS) INCOME                    
Foreign currency translation gain (loss)   1,001,959    -    -    1,001,959 
COMPREHENSIVE LOSS  $(21,129,656)  $(3,375,457)  $-   $(24,505,113)
                     
Net loss per common share and equivalents - basic and diluted  $(0.18)  $-   $-   $(0.20)
                     
Weighted average shares outstanding during the period - basic and diluted   126,259,634    -    -    126,259,634 

 

The following tables set forth the corrections to the quarterly consolidated balance sheets for the first three quarterly periods of the fiscal year ended December 31, 2013.

 

4
 

 

ELEPHANT TALK COMMUNICATION CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS AT MARCH 31, 2013

 

   March 31,       March 31, 
   2013   Change   2013 
   (UNAUDITED)       Restated 
ASSETS               
                
CURRENT ASSETS               
                
Cash and cash equivalents  $570,579   $-   $570,579.00 
Restricted cash   664,679         664,679 
Accounts receivable, net of an allowance for doubtful accounts of $558,438 at March 31, 2013   4,502,499    -    4,502,499 
Prepaid expenses and other current assets   2,342,762         2,342,762 
Total current assets   8,080,519    -    8,080,519 
                
OTHER ASSETS   898,001    -    898,001 
                
PROPERTY AND EQUIPMENT, NET   12,674,383    -    12,674,383 
                
INTANGIBLE ASSETS, NET   9,495,999    -    9,495,999 
                
GOODWILL   3,330,438    -    3,330,438 
                
TOTAL ASSETS  $34,479,340   $-   $34,479,340 
                
LIABILITIES AND STOCKHOLDERS' EQUITY               
                
CURRENT LIABILITIES               
Overdraft  $359,017   $-   $359,017 
Accounts payable and customer deposits   5,738,518    -    5,738,518 
Deferred Revenue   281,536    -    281,536 
Accrued expenses and other payables   4,149,966    -    4,149,966 
8% Convertible Note   4,701,714    -    4,701,714 
Loans payable   961,525    -    961,525 
Total current liabilities   16,192,276    -    16,192,276 
                
LONG TERM LIABILITIES               
8% Convertible Note   1,083,932    -    1,083,932 
Conversion feature   451,779    -    451,779 
Non-current portion of deferred revenue   -    356,386    356,386 
Loan from joint venture partner   567,100    -    567,100 
Total long term liabilities   2,102,811    356,386    2,459,197 
                
Total liabilities   18,295,087    356,386    18,651,473 
                
STOCKHOLDERS' EQUITY               
Preferred Stock $0.00001 par value, 50,000,000 shares authorized, 0 issued and outstanding   -    -    - 
Common stock, no par value, 250,000,000 shares authorized, 113,369,656 issued and outstanding  as of March 31, 2013   225,902,751    -    225,902,751 
Accumulated other comprehensive income (loss)   (1,493,852)   -    (1,493,852)
Accumulated deficit   (208,398,230)   (356,386)   (208,754,616)
Elephant Talk Communications, Corp. stockholders' equity   16,010,669    (356,386)   15,654,283 
                
NON-CONTROLLING INTEREST   173,584    -    173,584 
Total stockholders' equity   16,184,253    (356,386)   15,827,867 
         -      
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $34,479,340   $-   $34,479,340 

 

5
 

 

ELEPHANT TALK COMMUNICATION CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS AT JUNE 30, 2013

 

   June 30,       June 30, 
   2013   Change   2013 
   (restated)       Restated 
ASSETS               
                
CURRENT ASSETS               
                
Cash and cash equivalents  $2,979,673   $-   $2,979,673 
Restricted cash   483,120    -    483,120 
Accounts receivable, net of allowance for doubtful accounts of $486,591 at June 30, 2013   3,408,278    (542,527)   2,865,751 
Prepaid expenses and other current assets   2,194,320    -    2,194,320 
Total current assets   9,065,391    (542,527)   8,522,864 
                
OTHER ASSETS   621,182    -    621,182 
                
PROPERTY AND EQUIPMENT, NET   17,065,123    -    17,065,123 
                
INTANGIBLE ASSETS, NET   9,966,563    -    9,966,563 
                
GOODWILL   3,381,418    -    3,381,418 
                
TOTAL ASSETS  $40,099,677   $(542,527)  $39,557,150 
                
LIABILITIES AND STOCKHOLDERS' EQUITY               
                
CURRENT LIABILITIES               
Overdraft  $369,859   $-   $369,859 
Accounts payable and customer deposits   4,809,726    -    4,809,726 
Deferred Revenue   482,381    -    482,381 
Accrued expenses and other payables   6,566,324    -    6,566,324 
Loans payable   962,418    -    962,418 
12% Related Party Loan   975,763    -    975,763 
Total current liabilities   14,166,471    -    14,166,471 
                
LONG TERM LIABILITIES               
Warrant liabilities   5,291,351    -    5,291,351 
Trade note payable   869,450    -    869,450 
Non-current portion of deferred revenue   -    1,243,755    1,243,755 
Loan from joint venture partner   578,518    -    578,518 
Total long term liabilities   6,739,319    1,243,755    7,983,074 
                
Total liabilities   20,905,790    1,243,755    22,149,545 
                
STOCKHOLDERS' EQUITY               
Preferred Stock $0.00001 par value, 50,000,000 shares authorized, 0 issued and outstanding   -    -    - 
Common stock, no par value, 250,000,000 shares authorized, 133,139,900  issued and outstanding  as of June 30, 2013   236,377,879    -    236,377,879 
Accumulated other comprehensive loss   (1,266,977)   -    (1,266,977)
Accumulated deficit   (216,090,791)   (1,786,282)   (217,877,073)
Elephant Talk Communications Corp. stockholders' equity   19,020,111    (1,786,282)   17,233,829 
                
NON-CONTROLLING INTEREST   173,776    -    173,776 
Total stockholders' equity   19,193,887    (1,786,282)   17,407,605 
                
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $40,099,677   $(542,527)  $39,557,150 

 

6
 

 

ELEPHANT TALK COMMUNICATION CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS AT SEPTEMBER 30, 2013

 

   September 30,       September 30, 
   2013   Change   2013 
   (UNAUDITED)       Restated 
ASSETS               
                
CURRENT ASSETS               
                
Cash and cash equivalents  $6,085,215   $-   $6,085,215 
Restricted cash   495,983    -    495,983 
Accounts receivable, net of allowance for doubtful accounts of $25,225 and $559,120 at September 30, 2013   4,173,398    (978,579)   3,194,819 
Prepaid expenses and other current assets   2,531,602    -    2,531,602 
Total current assets   13,286,198    (978,579)   12,307,619 
                
NON-CURRENT ASSETS               
                
OTHER ASSETS   1,382,857    -    1,382,857 
                
PROPERTY AND EQUIPMENT, NET   18,663,407    -    18,663,407 
                
INTANGIBLE ASSETS, NET   9,412,581    -    9,412,581 
                
GOODWILL   3,707,903    -    3,707,903 
                
TOTAL ASSETS  $46,452,946   $(978,579)  $45,474,367 
                
LIABILITIES AND STOCKHOLDERS' EQUITY               
                
CURRENT LIABILITIES               
Overdraft  $380,550   $-   $380,550 
Accounts payable and customer deposits   4,905,101    -    4,905,101 
Deferred Revenue   428,473    -    428,473 
Accrued expenses and other payables   5,816,271    -    5,816,271 
Loans payable   962,418    -    962,418 
10% Related Party  Loan (net of Debt Discount of $2,385,206)   267,393    -    267,393 
Total current liabilities   12,760,206    -    12,760,206 
               
LONG TERM LIABILITIES              
10% 3rd Party Loan (net of Debt Discount of $827,421)   4,477,780    -    4,477,780 
Warrant liabilities   4,116,480    -    4,116,480 
Trade note payable   593,903    -    593,903 
Non-current portion of deferred revenue   -    1,888,891    1,888,891 
Loan from joint venture partner   590,165    -    590,165 
Total long term liabilities   9,778,328    1,888,891    11,667,219 
                
Total liabilities   22,538,534    1,888,891    24,427,425 
                
Commitments and Contingencies               
STOCKHOLDERS' EQUITY               
Preferred Stock $0.00001 par value, 50,000,000 shares authorized, 0 issued and outstanding   -    -    - 
Common stock, .00001 par value, 250,000,000 shares authorized, 134,440,221 issued and outstanding  as of September 30, 2013   243,294,324    -    243,294,324 
Accumulated other comprehensive income (loss)   (242,647)   -    (242,647)
Accumulated deficit   (219,316,384)   (2,867,470)   (222,183,854)
Elephant Talk Communications, Corp. stockholders' equity   23,735,293    (2,867,470)   20,867,823 
                
NON-CONTROLLING INTEREST   179,119    -    179,119 
Total stockholders' equity   23,914,412    (2,867,470)   21,046,942 
                
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $46,452,946   $(978,579)  $45,474,367 

 

The following tables set forth the correction to quarterly consolidated balance sheets for the first three quarterly periods of the fiscal year ended December 31, 2014

 

7
 

 

ELEPHANT TALK COMMUNICATION CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS AT MARCH 31, 2014

 

   March 31,       March 31, 
   2014       2014 
   (UNAUDITED)   Change   Restated 
ASSETS               
                
CURRENT ASSETS               
                
Cash and cash equivalents  $3,918,046   $-   $3,918,046 
Restricted cash   192,161    -    192,161 
Accounts receivable, net of allowance for doubtful accounts of $11,307 at March 31, 2014   6,262,041    (1,228,374)   5,033,667 
Prepaid expenses and other current assets   2,147,686    -    2,147,686 
Total current assets   12,519,934    (1,228,374)   11,291,560 
                
NON-CURRENT ASSETS               
                
OTHER ASSETS   1,357,728    -    1,357,728 
                
PROPERTY AND EQUIPMENT, NET   19,954,703    -    19,954,703 
                
INTANGIBLE ASSETS, NET   7,903,149    -    7,903,149 
                
GOODWILL   3,769,199    -    3,769,199 
                
TOTAL ASSETS  $45,504,713   $(1,228,374)  $44,276,339 
                
LIABILITIES AND STOCKHOLDERS' EQUITY               
                
CURRENT LIABILITIES               
Overdraft  $402,234   $-   $402,234 
Accounts payable and customer deposits   2,419,325    -    2,419,325 
Obligations under capital leases (current portion)   1,348,705    -    1,348,705 
Deferred revenue   203,623    468,256    671,879 
Accrued expenses and other payables   5,936,989    -    5,936,989 
Loans payable   962,269    -    962,269 
10% Related Party Loan (net of Debt Discount of $937,814 at March 31, 2014   1,812,506    -    1,812,506 
Total current liabilities   13,085,651    468,256    13,553,907 
                
LONG TERM LIABILITIES               
10% 3rd Party Loan (net of Debt Discount of $623,726 at March 31, 2014)   4,876,914    -    4,876,914 
Warrant liabilities   2,183,806    -    2,183,806 
Non-current portion of obligation under capital leases   465,954    -    465,954 
Non-current portion of deferred revenue   -    2,774,415    2,774,415 
Loan from joint venture partner   614,169    -    614,169 
Total long term liabilities   8,140,843    2,774,415    10,915,258 
                
Total liabilities   21,226,494    3,242,671    24,469,165 
                
Commitments and Contingencies               
STOCKHOLDERS' EQUITY               
Preferred Stock $0.00001 par value, 50,000,000 shares authorized, 0 issued and outstanding   -    -    - 
Common Stock $0.00001 par value, 250,000,000 shares authorized, 146,364,577 issued and outstanding  as of March 31, 2014   253,383,860    -    253,383,860 
Accumulated other comprehensive income   267,650    -    267,650 
Accumulated deficit   (229,518,039)   (4,471,045)   (233,989,084)
Elephant Talk Communications, Corp. stockholders' equity   24,133,471    (4,471,045)   19,662,426 
                
NON-CONTROLLING INTEREST   144,748    -    144,748 
Total stockholders' equity   24,278,219    (4,471,045)   19,807,174 
                
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $45,504,713   $(1,228,374)  $44,276,339 

 

8
 

 

ELEPHANT TALK COMMUNICATION CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS AT JUNE 30, 2014

 

   June 30,       June 30, 
   2014       2014 
   (UNAUDITED)   Change   Restated 
ASSETS               
                
CURRENT ASSETS               
                
Cash and cash equivalents  $829,388   $-   $829,388 
Restricted cash   191,703    -    191,703 
Accounts receivable, net of allowance for doubtful accounts of $29,547 and $7,693 at June 30, 2014   8,223,963    (1,299,207)   6,924,756 
Prepaid expenses and other current assets   2,619,882    -    2,619,882 
Total current assets   11,864,936    (1,299,207)   10,565,729 
                
NON-CURRENT ASSETS               
                
OTHER ASSETS   1,288,246    -    1,288,246 
                
PROPERTY AND EQUIPMENT, NET   20,711,832    -    20,711,832 
                
INTANGIBLE ASSETS, NET   7,122,940    -    7,122,940 
                
GOODWILL   3,740,646    -    3,740,646 
                
TOTAL ASSETS  $44,728,600   $(1,299,207)  $43,429,393 
                
LIABILITIES AND STOCKHOLDERS' EQUITY               
                
CURRENT LIABILITIES               
Overdraft  $413,958   $-   $413,958 
Accounts payable and customer deposits   2,305,933    -    2,305,933 
Obligations under capital leases (current portion)   1,898,346    -    1,898,346 
Deferred revenue   163,848    468,256    632,104 
Accrued expenses and other payables   6,592,945    -    6,592,945 
Loans payable   963,051    -    963,051 
Total current liabilities   12,338,081    468,256    12,806,337 
                
LONG TERM LIABILITIES               
10% 3rd Party Loan (net of Debt Discount of $518,463 at June 30, 2014)   4,940,798    -    4,940,798 
10% Related Party Loan (net of Debt Discount of $17,786 at June 30, 2014)   2,711,844    -    2,711,844 
Warrant liabilities   2,144,858    -    2,144,858 
Non-current portion of obligation under capital leases   487,728    -    487,728 
Non-current portion of deferred revenue   -    4,542,910    4,542,910 
Loan from joint venture partner   626,534    -    626,534 
Total long term liabilities   10,911,762    4,542,910    15,454,672 
                
Total liabilities   23,249,843    5,011,166    28,261,009 
                
Commitments and Contingencies               
STOCKHOLDERS' EQUITY               
Preferred Stock $0.00001 par value, 50,000,000 shares authorized, 0 issued and outstanding   -    -    - 
Common Stock $0.00001 par value, 250,000,000 shares authorized, 146,525,302 issued and outstanding  as of June 30, 2014 (unaudited)   255,328,306    -    255,328,306 
Accumulated other comprehensive income   121,636    -    121,636 
Accumulated deficit   (234,115,159)   (6,310,373)   (240,425,532)
Elephant Talk Communications, Corp. stockholders' equity   21,334,783    (6,310,373)   15,024,410 
                
NON-CONTROLLING INTEREST   143,974    -    143,974 
Total stockholders' equity   21,478,757    (6,310,373)   15,168,384 
                
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $44,728,600   $(1,299,207)  $43,429,393 

 

9
 

 

ELEPHANT TALK COMMUNICATION CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS AT SEPTEMBER 30, 2014

 

   September 30,       September 30, 
   2014       2014 
   (UNAUDITED)   Change   Restated 
ASSETS               
                
CURRENT ASSETS               
                
Cash and cash equivalents  $1,176,650   $-   $1,176,650 
Restricted cash   169,536    -    169,536 
Accounts receivable, net of an allowance for doubtful accounts of $0 at September 30, 2014   6,754,447    (907,023)   5,847,424 
Prepaid expenses and other current assets   2,319,310    -    2,319,310 
 Total current assets   10,419,943    (907,023)   9,512,920 
                
NON-CURRENT ASSETS               
                
OTHER ASSETS   1,093,977    -    1,093,977 
                
PROPERTY AND EQUIPMENT, NET   19,603,707    -    19,603,707 
                
INTANGIBLE ASSETS, NET   6,000,884    -    6,000,884 
                
GOODWILL   3,490,242    -    3,490,242 
                
TOTAL ASSETS  $40,608,753   $(907,023)  $39,701,730 
                
LIABILITIES AND STOCKHOLDERS' EQUITY               
                
CURRENT LIABILITIES               
Overdraft  $425,144   $-   $425,144 
Accounts payable and customer deposits   2,063,304    -    2,063,304 
Obligations under capital leases (current portion)   1,828,083    -    1,828,083 
Deferred Revenue   127,456    468,256    595,712 
Accrued expenses and other payables   5,804,999    -    5,804,999 
Loans payable   961,550    -    961,550 
Total current liabilities   11,210,536    468,256    11,678,792 
                
LONG TERM LIABILITIES               
2013 10% 3rd Party Loan (net of Debt Discount of  $410,853 at September 30, 2014)   4,663,227    -    4,663,227 
Warrant liabilities   2,248,169    -    2,248,169 
Non-current portion of obligation under capital leases   261,912    -    261,912 
Non-current portion of deferred revenue   -    7,788,843    7,788,843 
Total long term liabilities   7,173,308    7,788,843    14,962,151 
                
Total liabilities   18,383,844    8,257,099    26,640,943 
                
Commitments and Contingencies               
STOCKHOLDERS' EQUITY               
Preferred Stock $0.00001 par value, 50,000,000 shares authorized, 0 issued and outstanding   -    -    - 
Common Stock $0.00001 par value, 250,000,000 shares authorized, 151,312,189  issued and outstanding  as of September 30, 2014   260,616,570    -    260,616,570 
Accumulated other comprehensive income (loss)   (2,003,871)   -    (2,003,871)
Accumulated deficit   (236,521,852)   (9,164,122)   (245,685,974)
Elephant Talk Communications, Corp. stockholders' equity   22,090,847    (9,164,122)   12,926,725 
                
NON-CONTROLLING INTEREST   134,062    -    134,062 
Total stockholders' equity   22,224,909    (9,164,122)   13,060,787 
                
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $40,608,753   $(907,023)  $39,701,730 

 

The following tables set forth the correction to the quarterly consolidated statement of comprehensive loss for the quarterly periods for the fiscal year 2013 and the reclassifications of certain operating expenses to conform to the current years reporting format.

 

10
 

 

ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 31, 2013

 

   March 31, 2013             
   (unaudited)  

Restatement

adjustments

   Re- classifications   Restated 
                 
REVENUES  $6,596,500   $(356,386)  $-   $6,240,114 
                     
COST AND OPERATING EXPENSES                    
Cost of service   3,548,277    -    412,526    3,960,803 
Product development   -    -    1,349,623    1,349,623 
Sales and marketing   -    -    722,952    722,952 
General and administrative   5,907,974    -    (2,485,101)   3,422,873 
Depreciation and amortization   1,319,988    -    -    1,319,988 
Total cost and operating expenses   10,776,239    -    -    10,776,239 
                     
LOSS FROM OPERATIONS   (4,179,739)   (356,386)   -    (4,536,125)
                     
OTHER INCOME (EXPENSE)                    
Interest income   33,721    -    -    33,721 
Interest expense   (223,752)   -    -    (223,752)
Interest expense  related to debt discount and conversion feature   (558,028)   -    -    (558,028)
Change in fair value of conversion feature   (139,792)   -    -    (139,792)
Amortization of deferred financing costs   (70,332)   -    -    (70,332)
Total other income (expense)   (958,183)   -    -    (958,183)
                     
LOSS BEFORE PROVISION FOR INCOME TAXES   (5,137,922)   (356,386)   -    (5,494,308)
Provision for income taxes   -    -    -    - 
NET LOSS   (5,137,922)   (356,386)   -    (5,494,308)
                     
OTHER COMPREHENSIVE (LOSS) INCOME                    
Foreign currency translation gain (loss)   (761,762)   -    -    (761,762)
    (761,762)   -    -    (761,762)
                     
COMPREHENSIVE LOSS  $(5,899,684)   (356,386)  $-   $(6,256,070)
                     
Net loss per common share and equivalents - basic and diluted  $(0.05)   -   $-   $(0.05)
                     
Weighted average shares outstanding during the period - basic and diluted   112,748,951    -    -    112,748,951 

 

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ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS PERIOD ENDED JUNE 30, 2013

 

   For the Three Months             
   Period ended             
   June 30, 2013  

Restatement

adjustments

   Re- classifications   Restated 
                 
REVENUES  $4,994,145   $(1,429,896)  $-   $3,564,249 
                     
COST AND OPERATING EXPENSES                    
Cost of service   1,465,517    -    679,382    2,144,899 
Product development   -    -    1,819,480    1,819,480 
Sales and marketing   -    -    882,418    882,418 
General and administrative   7,472,772    -    (3,381,280)   4,091,492 
Depreciation and amortization   1,836,231    -    -    1,836,231 
Total cost and operating expenses   10,774,520    -    -    10,774,520 
                     
LOSS FROM OPERATIONS   (5,780,375)   (1,429,896)   -    (7,210,271)
                     
OTHER INCOME (EXPENSE)                    
Interest income   21,527    -    -    21,527 
Interest expense   (208,144)   -    -    (208,144)
Interest expense  related to debt discount and conversion feature   (502,972)   -    -    (502,972)
Change in fair value of conversion feature   372,059    -    -    372,059 
Changes in fair value of warrant liabilities   346,016    -    -    346,016 
Loss on Extinguishment of Debt   (1,938,597)   -    -    (1,938,597)
Amortization of deferred financing costs   (2,075)   -    -    (2,075)
Total other income (expense)   (1,912,186)   -    -    (1,912,186)
                     
LOSS BEFORE PROVISION FOR INCOME TAXES   (7,692,561)   (1,429,896)   -    (9,122,457)
Provision for income taxes   -    -    -    - 
NET LOSS   (7,692,561)   (1,429,896)   -    (9,122,457)
    -              - 
OTHER COMPREHENSIVE (LOSS) INCOME                    
Foreign currency translation loss   (534,887)   -    -    (534,887)
    (534,887)   -    -    (534,887)
                     
COMPREHENSIVE LOSS  $(8,227,448)  $(1,429,896)  $-   $(9,657,344)
                     
Net loss per common share and equivalents - basic and diluted  $(0.06)  $-   $-   $(0.08)
                     
Weighted average shares outstanding during the period - basic and diluted   118,686,598    -    -    118,686,598 

  

12
 

 

ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS PERIOD ENDED SEPTEMBER 30, 2013

 

   For the Three Months             
   Period ended             
   September 30, 2013   Restatement
adjustments		   Re- classifications   Restated 
                 
REVENUES  $5,204,982   $(1,081,188)  $-   $4,123,794 
                     
COST AND OPERATING EXPENSES                    
Cost of service   1,080,174    -    468,402    1,548,576 
Product development   -    -    1,354,105    1,354,105 
Sales and marketing   -    -    623,644    623,644 
General and administrative   5,442,869    -    (2,446,151)   2,996,718 
Depreciation and amortization   1,543,687    -    -    1,543,687 
Total cost and operating expenses   8,066,730    -    -    8,066,730 
                     
LOSS FROM OPERATIONS   (2,861,748)   (1,081,188)   -    (3,942,936)
                     
OTHER INCOME (EXPENSE)                    
Interest income   33,773    -    -    33,773 
Interest expense   (181,074)   -    -    (181,074)
Interest expense  related to debt discount and conversion feature   (259,795)   -    -    (259,795)
Loss on Extinguishment of Debt   (44,506)   -    -    (44,506)
Changes in fair value of warrant liabilities   173,333    -    -    173,333 
Amortization of deferred financing costs   (44,076)   -    -    (44,076)
Total other income (expense)   (322,345)   -    -    (322,345)
                     
LOSS BEFORE PROVISION FOR INCOME TAXES   (3,184,093)   (1,081,188)   -    (4,265,281)
Provision for income taxes   41,500    -    -    41,500 
                     
NET LOSS   (3,225,593)   (1,081,188)   -    (4,306,781)
                     
OTHER COMPREHENSIVE (LOSS) INCOME                    
Foreign currency translation gain (loss)   489,443    -    -    489,443 
    489,443    -    -    489,443 
                     
COMPREHENSIVE LOSS  $(2,736,150)  $(1,081,188)  $-   $(3,817,338)
                     
Net loss per common share and equivalents - basic and diluted  $(0.02)  $-   $-   $(0.03)
                     
Weighted average shares outstanding during the period - basic and diluted   134,440,221    -    -    134,440,221 

 

The following tables set forth the correction to quarterly consolidated statements of comprehensive loss for the quarterly periods for the fiscal year 2014 and the reclassifications of certain operating expenses to conform to the current years reporting format.

 

13
 

  

ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 31, 2014

 

   March 31, 2014   Restatement
adjustments		   Re- classifications   Restated 
                 
REVENUES  $6,479,853   $(1,095,588)  $-   $5,384,265 
                     
COST AND OPERATING EXPENSES                    
Cost of service   983,464    -    652,508    1,635,972 
Product development   -    -    1,711,817    1,711,817 
Sales and marketing   -    -    563,835    563,835 
General and administrative   5,976,107    -    (2,928,159)   3,047,948 
Depreciation and amortization   2,008,214    -    -    2,008,214 
Total cost and operating expenses   8,967,785    -    -    8,967,785 
                     
LOSS FROM OPERATIONS   (2,487,932)   (1,095,588)   -    (3,583,520)
                     
OTHER INCOME (EXPENSE)                    
Interest income   27,611    -    -    27,611 
Interest expense   (301,944)   -    -    (301,944)
Interest expense related to Debt Discount and Conversion Feature   (884,740)   -    -    (884,740)
Change in fair value of warrant liabilities   (210,272)   -    -    (210,272)
Loss on extinguishment of debt   (426)   -    -    (426)
Other income and (expense)   3,390    -    -    3,390 
Amortization of deferred financing costs   (136,367)   -    -    (136,367)
Total other income (expense)   (1,502,748)   -    -    (1,502,748)
                     
LOSS BEFORE PROVISION FOR INCOME TAXES   (3,990,680)   (1,095,588)   -    (5,086,268)
Provision for income taxes   (135,437)   -    -    (135,437)
NET LOSS   (4,126,117)   (1,095,588)   -    (5,221,705)
                     
OTHER COMPREHENSIVE (LOSS) INCOME                    
Foreign currency translation (loss)   (2,219)   -    -    (2,219)
                     
COMPREHENSIVE LOSS  $(4,128,336)   (1,095,588)  $-   $(5,223,924)
                     
Net loss per common share and equivalents - basic and diluted  $(0.03)   -   $-   $(0.04)
                     
Weighted average shares outstanding during the period - basic and diluted   141,752,128    -    -    141,752,128 

  

14
 

 

ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS PERIOD ENDED JUNE 30, 2014

 

   For the three month             
   period ended             
   June 30, 2014   Restatement
adjustments		   Re- classifications   Restated 
                 
REVENUES  $6,911,768    (1,839,328)  $-   $5,072,440 
                     
COST AND OPERATING EXPENSES                    
Cost of service   828,581    -    1,020,106    1,848,687 
Product development   -    -    2,280,532    2,280,532 
Sales and marketing   -    -    664,807    664,807 
General and administrative   7,432,784    -    (3,965,446)   3,467,338 
Depreciation and amortization   1,928,392    -    -    1,928,392 
Total cost and operating expenses   10,189,757    -    -    10,189,757 
                     
LOSS FROM OPERATIONS   (3,277,989)   (1,839,328)   -    (5,117,317)
                     
OTHER INCOME (EXPENSE)                    
Interest income   29,545    -    -    29,545 
Interest expense   (333,214)   -    -    (333,214)
Interest expense  related to debt discount and conversion feature   (1,025,292)   -    -    (1,025,292)
Changes in fair value of warrant liabilities   38,948    -    -    38,948 
Other income and (expense), net   68,008    -    -    68,008 
Amortization of deferred financing costs   (113,090)   -    -    (113,090)
Total other income (expense)   (1,335,095)   -    -    (1,335,095)
                     
LOSS BEFORE (BENEFIT) PROVISION FOR INCOME TAXES   (4,613,084)   (1,839,328)   -    (6,452,412)
Provision (benefit) for income taxes   (2,209)   -    -    (2,209)
NET LOSS   (4,610,875)   (1,839,328)   -    (6,450,203)
                     
OTHER COMPREHENSIVE (LOSS) INCOME                    
Foreign currency translation loss   (148,233)   -    -    (148,233)
COMPREHENSIVE LOSS  $(4,759,108)   (1,839,328)  $-   $(6,598,436)
                     
Net loss per common share and equivalents - basic and diluted  $(0.03)   -   $-   $(0.04)
                     
Weighted average shares outstanding during the period - basic and diluted   146,482,547    -    -    146,482,547 

 

15
 

 

ELEPHANT TALK COMMUNICATIONS CORP. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS PERIOD ENDED SEPTEMBER 30, 2014

 

   For the three month             
   period ended             
   September 30, 2014   Restatement
adjustments		   Re- classifications   Restated 
                 
REVENUES  $7,298,988   $(2,853,749)  $-   $4,445,239 
                     
COST AND OPERATING EXPENSES                    
Cost of service (exclusive of depreciation and amortization shown separately below)   848,771    -    716,283    1,565,054 
Product development   -    -    1,707,102    1,707,102 
Sales and marketing   -    -    555,519    555,519 
General and administrative   6,227,147    -    (2,978,904)   3,248,243 
Depreciation and amortization   1,900,251    -    -    1,900,251 
Total cost and operating expenses   8,976,169    -    -    8,976,169 
                     
LOSS FROM OPERATIONS   (1,677,181)   (2,853,749)   -    (4,530,930)
                     
OTHER INCOME (EXPENSE)                    
Interest income   36,684    -    -    36,684 
Interest expense   (260,295)   -    -    (260,295)
Interest expense  related to debt discount and conversion feature   (1,287,717)   -    -    (1,287,717)
Changes in fair value of warrant liabilities   (103,311)   -    -    (103,311)
Gain / (Loss) on Extinguishment of Debt   626,534    -    -    626,534 
Other income & (expense), net   301,199    -    -    301,199 
Amortization of deferred financing costs   (73,789)   -    -    (73,789)
Total other income (expense)   (760,695)   -    -    (760,695)
                     
LOSS BEFORE (BENEFIT) PROVISION FOR INCOME TAXES   (2,437,876)   (2,853,749)   -    (5,291,625)
(Benefit) / provision for income taxes   (44,938)   -    -    (44,938)
NET LOSS   (2,392,938)   (2,853,749)   -    (5,246,687)
                     
OTHER COMPREHENSIVE (LOSS) INCOME                    
Foreign currency translation gain (loss)   (2,273,740)   -    -    (2,273,740)
COMPREHENSIVE LOSS  $(4,666,678)  $(2,853,749)  $-   $(7,520,427)
                     
Net loss per common share and equivalents - basic and diluted  $(0.02)  $-   $-   $(0.04)
                     
Weighted average shares outstanding during the period - basic and diluted   149,468,618    -    -    149,468,618 

 

All earnings press releases and similar prior communications issued by the Company as well as other prior statements made by or on behalf of the Company relating to financial reporting or results of operations of the above periods should not be relied upon. Additionally, BDO’s opinion on the consolidated financial statements for the year ended December 31, 2013, as well as BDO’s adverse opinion on the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2013 should no longer be relied upon.

 

Cautionary Statement Regarding Forward Looking Information

 

This report includes “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These statements include statements about our plans, strategies, financial performance, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, our actual results, performance or achievements may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by the Company and our management team, are inherently uncertain. A description of the risks and uncertainties can be found in the reports and other documents filed with the U.S. Securities and Exchange Commission. The Company cautions readers not to rely on these forward-looking statements. The Company undertakes no obligation to update any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 Dated: April 1, 2015

 

 ELEPHANT TALK COMMUNICATIONS CORP.  
       
  By:   /s/ Alex Vermeulen  
  Alex Vermeulen  
  General Counsel  

 

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PARETEUM Corp Reports