Axesstel Announces Fourth Quarter and Year-End 2005 Results; 2005 Revenues Increase 51 Percent Compared to 2004.SAN DIEGO San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. -- Axesstel, Inc. (AMEX AMEX See: American Stock Exchange :AFT), a leader in the design and development of fixed wireless voice and broadband data products, today announced results for the fourth quarter and year ended December 31, 2005. "We delivered on our key strategic goals for 2005--broadening our product offerings, expanding our geographic reach and customer base, and increasing revenues by 51 percent year-over-year," said Mike Kwon, chairman and chief executive officer of Axesstel. "While expanding our manufacturing capacity in China via our partner Wistron NeWeb, we reduced our overall manufacturing costs. Looking forward in 2006, we are focusing on continued sales growth in multiple geographic regions and have made some recent customer announcements in support of this goal." Fourth Quarter 2005 Results Revenues for the fourth quarter of 2005 were $11.8 million, compared to revenues of $28.2 million in the year ago period. Gross margin for the fourth quarter of 2005 was $705,000 or 6.0 percent of revenues, compared to $2.4 million, or 8.4 percent of revenues, for the same period last year, as sales volume declined and caused the under-utilization of the production facility. The company reported a net loss of $4.6 million, compared to a net loss of $3.2 million in the year ago quarter. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. in the fourth quarter 2005 included a total of $1.2 million for severance costs, bad debt reserves and increased license fees. Fourth quarter 2005 loss per share was $0.21 compared to a loss of $0.30 for the fourth quarter of 2004. "Fourth quarter 2005 revenues were impacted by product introduction and acceptance testing (programming) acceptance testing - Formal testing conducted to determine whether a system satisfies its acceptance criteria and thus whether the customer should accept the system. at our largest customer," Kwon continued. "In early December, we began shipments of products to this customer. We also made initial shipments to a new customer in Indonesia, which we believe is the second largest fixed wireless market in the world. Lastly, we continued development of our EV-DO (EVolution-Data Only) A 3G high-speed digital data service provided by cellular carriers worldwide that use the CDMA technology, including Verizon and Sprint in the U.S. EV-DO works on EV-DO cellphones as well as laptops and portable devices that have EV-DO modems. wireless broadband High-speed wireless transmission of data. What is "high" speed is always a changing number. Wireless systems are typically slower than land-based, wireline networks. In the past, wireless broadband started at 250 Kbps, whereas land-based broadband was generally considered to start at T1 modems and, in January, we received orders for those modems from multiple customers in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. ." Year ended December 31, 2005 Revenues for the year ended December 31, 2005 were $94.7 million, representing 51 percent growth compared to last year. Net loss for the year was $10.2 million, or a loss of $0.51 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to a net loss of $8.3 million, or a loss of $0.91 per diluted share, in the same period a year ago. "Our goal remains to be the premier fixed wireless provider in multiple rapidly growing markets around the world. About 4.5 billion people are not connected to phone service, and our fixed wireless solutions enable telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. operators to provide quick, easy and affordable access to quality voice and high-speed data services. Our strategy is to bring to market superior fixed wireless product offerings for voice and high-speed data based on CDMA (Code Division Multiple Access) A method for transmitting simultaneous signals over a shared portion of the spectrum. The foremost application of CDMA is the digital cellular phone technology from QUALCOMM that operates in the 800 MHz band and 1.9 GHz PCS band. and GSM (Global System for Mobile Communications) A digital cellular phone technology based on TDMA that is the predominant system in Europe, but also used worldwide. Developed in the 1980s, GSM was first deployed in seven European countries in 1992. technologies. "We are continuing to invest in product development to increase our addressable Reachable. When something is addressable, it can be identified and manipulated independently of its surroundings. For example, screen pixels and RAM memory are addressable. Each of the screen's picture elements can be individually turned on and off, and each of the memory's bytes can be market and increase customer opportunities. The upgrade to EV-DO Rev. A, which enables data speeds up to 3.1 megabits per second (unit) megabits per second - (Mbps, Mb/s) Millions of bits per second. A unit of data rate. 1 Mb/s = 1,000,000 bits per second (not 1,048,576). E.g. Ethernet can carry 10 Mbps. , promises to open new market opportunities for convergence with VoIP and for expanding our addressable market in many regions. Similarly, we have made significant investments in Wi-Fi and expect to be updating you further on these developments in upcoming months," added Kwon. Significant developments recently and in the fourth quarter 2005 include: --In February, introduced MV200 Series Fixed Wireless Broadband Modems for 800 MHz (MegaHertZ) One million cycles per second. It is used to measure the transmission speed of electronic devices, including channels, buses and the computer's internal clock. A one-megahertz clock (1 MHz) means some number of bits (16, 32, 64, etc. , 1900 MHz and 800/1900 MHz, which seamlessly combines wireless wide area networking, circuit switch cellular voice and analog fax technology to provide wireless broadband data access, voice calling and fax capabilities all in one easy-to-use, plug-and-play desktop networking device --In January, received purchase orders totaling $5.1 million from five operators in Latin America and the Caribbean for D800 and D1900 EV-DO Fixed Wireless Broadband Modems --In November: --Received a multi-million dollar purchase order for multiple CDMA-based wireless phones from Tata Teleservices Tata Teleservices Limited (TTSL) is part of the Tata Group of Companies, an Indian Conglomerate. It runs the brand name Tata Indicom in India in various telecom circles of India. The company forms part of the Tata Group's prescence in the Telecommunication Industry in India, along with Limited --Signed a distribution agreement for our full product portfolio with Mibron Technology, a leading telecommunication telecommunication Communication between parties at a distance from one another. Modern telecommunication systems—capable of transmitting telephone, fax, data, radio, or television signals—can transmit large volumes of information over long distances. distributor in Europe and the Commonwealth of Independent States Commonwealth of Independent States (CIS), community of independent nations established by a treaty signed at Minsk, Belarus, on Dec. 8, 1991, by the heads of state of Russia, Belarus, and Ukraine. Between Dec. 8 and Dec. Region --The CDMA Certification Forum CDMA Certification Forum (CCF) is an international nonprofit partnership between CDMA operators and CDMA device vendors to establish and maintain a core global device certification process that helps improve quality through consistent interoperability, conformance and certified See certification. the L800 and P830 CDMA2000(R) 1X Fixed Wireless Desktop Phones for commercial availability --Launched two new fixed wireless desktop phone product lines - the L800 and L1900 aimed at first time home phone users and the P830 and P1930 for subscribers demanding greater voice calling and multi-media functionality --Marked entrance into the fixed wireless Global System for Mobile communications (communications) Global System for Mobile Communications - (GSM, originally "Groupe de travail Sp?ciale pour les services Mobiles") One of the major standards for digital cellular communications, in use in over 60 countries and serving over one billion subscribers. (GSM) to address the rapidly expanding consumer market in Asia, Africa, Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. , Latin America, and the Middle East (EMEA (Europe, Middle East, Africa) Refers to that region of the world. For example, one might see products packaged differently for the UK, EMEA and Asia Pacific markets. ) --In October: --Supplied D1900 Wireless Broadband Modems to Hamilton Telecommunications, an Internet services provider in Nebraska, enabling Hamilton's geographic footprint expansion --Received "Exporter of the Year" award from San Diego World Trade Center --During the quarter, appointed Scott Fox Scott Fox (born 28 June 1987 from Airdrie, Scotland) is a footballer who currently plays in the Celtic youth team. He has been a part of the Scottish under-19 national football team, in the U-19 European Championships. , Osmo A. Hautanen, Roland A. Van der Meer Van der Meer is a Dutch surname that simply means the phrase 'from the lake' in English. Many years ago, descendants would have lived from a lake in the Netherlands which is how the name first originated. , and Bryan B. Min to the board of directors Financial Guidance While management is not providing detailed financial guidance, the company does anticipate growth in revenues in 2006 compared to 2005 and expenses to grow less than revenues in 2006. The company will continue to report on significant customer developments as they occur. Conference Call Axesstel will host a conference call at 1:30 p.m. PT (4:30 p.m. ET) to discuss its fourth quarter and year-end 2005 results. Participating in the call will be Mike Kwon, chairman and chief executive officer, Clark Hickock, chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , and Patrick Gray, senior vice president finance and corporate controller. The call is being webcast and can be accessed from the "Investor Relations Investor relations The process by which the corporation communicates with its investors. " section of the company's website at http://www.axesstel.com. If you do not have internet access See how to access the Internet. , please dial the following number five to ten minutes prior to the scheduled conference call time: 1-800-895-1085. International callers should dial 00-1-785-424-1055. There is no pass code required for this call. If you are unable to participate in the call at this time, a replay will be available on Tuesday, February 28 at 7:00 p.m. ET, through Friday, March 3 at 11:59 p.m. ET. To access the replay, please dial 1-800-283-4593. International callers should dial 00-1-402-220-0872. There is no pass code required for this call. About Axesstel, Inc. Axesstel (AMEX:AFT) is a leader in the design, development and sales of fixed wireless voice and broadband data products. Axesstel's product portfolio includes fixed wireless desktop phones, public call office phones, voice/data terminals and broadband modems for access to voice calling and high-speed data services. Axesstel delivers innovative fixed wireless solutions to leading telecommunications operators and distributors worldwide. Axesstel is headquartered in San Diego, California “San Diego” redirects here. For other uses, see San Diego (disambiguation). San Diego is a coastal Southern California city located in the southwestern corner of the continental United States. As of 2006, the city has a population of 1,256,951. with a research and development center and manufacturing facilities in Seoul, South Korea. For more information on Axesstel, visit www.axesstel.com. (C) 2006 Axesstel, Inc. All rights reserved. The Axesstel logo is a trademark of Axesstel, Inc. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: With the exception of historical information, the statements set forth above include forward-looking statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc revenues, margins and profitability as well as anticipated cost reductions, manufacturing efficiencies, expected product introductions, and potential customers and markets which may affect future results and future viability. Axesstel wishes to caution readers that actual results could differ materially from those suggested by the forward-looking statements due to risks and uncertainties and a number of important factors. Those factors include, but are not limited to, the risk of delays in the adoption of new technologies in developing markets; the lack of continued acceptance or growth of CDMA technology in target markets; the possibility that networks that can support our CDMA EV-DO and EV-DV (EVolution-Data Voice) Part of the third generation of high-speed data enhancements to the CDMA cellphone technology. See CDMA2000 for more details. broadband modems will not be widely deployed; competition for contracts with our large telecommunication carrier customers; the risks of dependence on a limited number of those customers; the requirement for end users to accept our products and technologies; our dependence on limited or sole source suppliers; the possibility of unforeseen manufacturing difficulties including those associated with Axesstel manufacturing its own products; the risk that the implementation of the new manufacturing facilities or moving outsourced manufacturing to China will not provide cost reductions, improve efficiencies, or expedite ex·pe·dite tr.v. ex·pe·dit·ed, ex·pe·dit·ing, ex·pe·dites 1. To speed up the progress of; accelerate. 2. product introductions; and other risk factors and information contained in Axesstel's filings with the Securities and Exchange Commission, such as the rapidly changing nature of technology, evolving industry standards, and frequent introductions of new products and enhancements by competitors; the competitive nature of the markets for Axesstel's products; Axesstel's need to gain market acceptance for its products; Axesstel's need to attract and retain skilled personnel; potential intellectual property-related litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , and Axesstel's primary dependence on one large customer. All forward-looking statements are qualified in their entirety by this cautionary statement, and Axesstel undertakes no obligation to revise or update this press release to reflect events or circumstances occurring after this press release.
AXESSTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended For the year ended
December 31, December 31, December 31, December 31,
2005 2004 2005 2004
------------ ------------ ------------- ------------
Revenues $11,787,057 $28,192,544 $94,665,711 $62,564,602
Cost of goods sold 11,081,761 25,821,591 84,414,640 55,849,162
------------ ------------ ------------- ------------
Gross margin 705,296 2,370,953 10,251,071 6,715,440
Operating expenses:
Research and
development 1,339,205 1,374,115 5,511,719 4,245,278
Selling,
general and
administrative 4,001,032 2,377,233 12,415,808 8,420,422
Litigation
settlement - - - 1,740,000
------------ ------------ ------------- ------------
Total
operating
expenses 5,340,237 3,751,348 17,927,527 14,405,700
------------ ------------ ------------- ------------
Operating
loss (4,634,941) (1,380,395) (7,676,456) (7,690,260)
Other income
(expense):
Interest and
other income 78,982 3,367 420,409 11,379
Interest and
other expense (84,212) (411,450) (896,945) (894,171)
------------ ------------ ------------- ------------
Total other income
(expense) (5,230) (408,083) (476,536) (882,792)
------------ ------------ ------------- ------------
Loss before income
tax provision
(benefit) (4,640,171) (1,788,478) (8,152,992) (8,573,052)
Income tax
provision
(benefit) 1,430 1,456,174 2,048,182 (302,694)
------------ ------------ ------------- ------------
Net loss ($4,641,601) ($3,244,652) ($10,201,174) ($8,270,358)
============ ============ ============= ============
Loss per share:
Basic ($0.21) ($0.30) ($0.51) ($0.91)
============ ============ ============= ============
Diluted ($0.21) ($0.30) ($0.51) ($0.91)
============ ============ ============= ============
Weighted average
shares outstanding:
Basic 22,468,589 10,902,095 20,182,856 9,123,084
============ ============ ============= ============
Diluted 22,468,589 10,902,095 20,182,856 9,123,084
============ ============ ============= ============
AXESSTEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
Current assets: December 31, December 31,
2005 2004
------------ ------------
Cash and cash equivalents $9,423,518 $7,525,259
Accounts receivable 13,696,081 8,776,340
Inventory 3,314,019 -
Deferred tax assets - 640,000
Deferred offering expenses - 974,833
Prepayments and other current assets 1,487,123 929,712
-------------- ------------
Total current assets 27,920,741 18,846,144
Property and equipment, net 3,709,351 1,878,831
Other assets:
Deferred tax assets - 1,260,000
License, net 3,674,592 1,971,121
Goodwill 385,564 385,564
Other, net 860,520 648,932
------------ ------------
Total other assets 4,920,676 4,265,617
-------------- ------------
Total assets $36,550,768 $24,990,592
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, December 31,
2005 2004
------------ ------------
Current liabilities:
Accounts payable $1,127,280 $599,095
Due to Wistron NeWeb, a related party 7,483,342 13,623,474
Bank financing 7,239,000 -
Current portion of long-term debt - 1,140,000
Customer advances - 135,300
Accrued litigation settlement - 958,000
Accrued royalties 569,561 1,364,246
Accrued warranties 558,400 183,000
Accrued expenses and other current
liabilities 1,611,910 1,234,951
-------------- ------------
Total current
liabilities 18,589,493 19,238,066
Long-term liabilities:
Note payable - 250,000
Long-term debt - 2,379,000
Other long-term liabilities 2,500,000 -
------------ ------------
Total long-term
liabilities 2,500,000 2,629,000
Stockholders' equity 15,461,275 3,123,526
-------------- ------------
Total liabilities and
stockholders' equity $36,550,768 $24,990,592
============== ============
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