Axesstel Announces Second Quarter 2006 Results; Revenue of $22.8 Million More than Doubles First Quarter 2006 Revenue; Achieved Record Revenue from Broadband Modem Sales of $5.9 Million.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) today announced results for the second quarter and six months ended June 30, 2006. Financial Results Revenues for the second quarter of 2006 were $22.8 million, compared to revenues of $10.5 million in the first quarter of 2006, reflecting increases in contributions from 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. and broadband modems. This also compares to revenues of $37.0 million in the year ago quarter, during which one customer accounted for 60 percent of revenues. Gross margins for the second quarter were $2.6 million, or 11 percent of revenue, compared to $269,000, or three percent of revenue, last quarter, and $4.5 million, or 12 percent of revenue, from the year ago quarter. The company reported net loss of $3.6 million, or $0.16 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, including a $1.3 million impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge from the closing of the Korean manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. and an $830,000 charge for change of control provisions. This compares with a net loss of $3.4 million, or $0.15 per share, in the first quarter 2006, and net income of $300,000, or $0.01 per diluted share, in the second quarter 2005. "Looking at the second quarter of 2006, we are pleased we more than doubled first quarter revenues, reaching $22.8 million of revenue," commented Marv Tseu, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Axesstel. "This increase reflects strong performance from new customers and countries, and new product introductions. Latin America, where we have expanded our presence to 23 customers, contributed record revenue of $14.3 million. Also, growing acceptance of our new broadband modems contributed $5.9 million in revenue this quarter, compared to a prior quarterly high of $2.7 million in revenue. Additionally, higher revenues, cost reduction programs and mix shifts toward higher margin data products contributed to our higher gross margin as a percent of revenues this quarter to approximately 11 percent. However, due to a one-time impairment charge from the closing of the Korean manufacturing operations and a charge for change of control provisions, total operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. increased compared to first quarter and negatively impacted operating and net income by $2.1 million." For the six months ended June 30, 2006, the company reported revenues of $33.3 million and net loss of $7.0 million, or $0.31 per diluted share. The cash and cash equivalents balance was $5.8 million at June 30, 2006. "We are continuing to make changes that are designed to improve the business for better financial performance. To best service our customers and drive our revenue growth, we will localize lo·cal·ize v. lo·cal·ized, lo·cal·iz·ing, lo·cal·iz·es v.tr. 1. To make local: decentralize and localize political authority. 2. our sales force closer to our customers. We continue to broaden our customer base and product offerings to further diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. our revenue base. During the quarter, we launched a new product line of 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. phones and a new line 3G 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 gateways. We achieved customer wins in Bangladesh, Guatemala, India, Venezuela and Vietnam, to name a few. We also expanded sales of our 450 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. product into Indonesia, the Philippines and Romania," added Tseu. "We believe we will be able to continue our revenue growth in the third quarter of 2006. Our current backlog of orders for shipment this quarter is robust, and we can envision revenues that approach $30 million with potentially breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations performance on operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. . Naturally, operating income profitability is highly dependent on product and customer mix. We also anticipate third quarter sales to reflect favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. seasonality from Latin American customers who traditionally purchase in advance of the holiday season. Looking further ahead, we are tentative about providing additional guidance as we have less visibility on customer demand beyond the third quarter. We do see seasonality effects from Latin America that is bolstering our performance in the third quarter, but we anticipate it will slow as operators work off their inventories during the holiday season. Our fourth quarter performance will be dependent upon our ability to improve product sales in Asia, which may offset the seasonal effects in Latin America," said Tseu. Recent Highlights Significant developments recently and in the second quarter 2006 include: --Appointed Marv Tseu chief executive officer and director on May 17th. --Began shipping the PG210 GSM Dual Band (850/1900 MegaHertz One million cycles per second. See MHz. MegaHertz - (MHz) Millions of cycles per second. The unit of frequency used to measure the clock rate of modern digital logic, including microprocessors. ) Fixed Wireless Desktop Phone to Telefonica Moviles Guatemala, the largest wireless service provider in Guatemala. --Launched a new line of 3G EV-DO wireless broadband gateways that provide wireless broadband data access, voice calling and fax capabilities in an easy-to-use, integrated desktop networking device. The EV-DO series serves multiple and dual spectrums (450 MHz, 800 MHz, 1900 MHz, 800/1900 MHz). --Exhibited the new line of 3G EV-DO gateways at CTIA (1) See CompTIA. (2) (Cellular Telecommunications & Internet Association, Washington, DC, www.ctia.org, www.wow-com.com) A membership organization founded in 1984 that is involved with regulatory and public affairs issues in the wireless industry. Wireless in Las Vegas Las Vegas (läs vā`gəs), city (1990 pop. 258,295), seat of Clark co., S Nev.; inc. 1911. It is the largest city in Nevada and the center of one of the fastest-growing urban areas in the United States. , 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. 450 Workshop in Hanoi, Vietnam and CommunicAsia 2006 in Singapore. --Received new purchase orders from Compania Anonima Nacional Telefonos de Venezuela (Cantv) and began shipping the D800 CDMA2000 1xEV-DO Fixed Wireless Broadband Modems and new L800 Fixed Wireless Desktop Phones based on CDMA2000 1X. --Received a purchase order for and began shipping D450C Fixed Wireless Broadband Modems and L450C Fixed Wireless Desktop Phones to OneCommerce, a systems integrator An individual or organization that builds systems from a variety of diverse components. With increasing complexity of technology, more customers want complete solutions to information problems, requiring hardware, software and networking expertise in a multivendor environment. with presence in the Philippines and other Asia Pacific countries. --Began shipping P450 Fixed Wireless Desktop Phones to EVN EVN Yerevan, Armenia (Airport Code) EVN Escape Velocity: Nova (computer game) EVN Energie Versorgung Niederösterreich AG EVN Eurovision News Exchange EVN Engineering Variation Notice EVN Every Voice Network Telecom, the largest CDMA fixed wireless operator in Vietnam. --Announced the award of a tender, in partnership with XL Telecom, from Bharat Sanchar Nigam Limited Bharat Sanchar Nigam Limited (known as BSNL) is a public sector communications company in India. It is the largest telecommunication company in India and the sixth largest in the world . (BSNL BSNL Bharat Sanchar Nigam Limited BSNL Biosecurity and Nanoscience Laboratory ), for over 350,000 low cost fixed wireless desktop phones, based on its L800 platform, and began shipping an initial purchase order. --Completed closure of the Korea manufacturing facility and reached agreement for the sale of substantially all the assets from the facility. --Entered into a two-year $15 million credit facility with Silicon Valley Bank. Conference Call Axesstel will host a conference call at 1:30 p.m. PT (4:30 p.m. ET) today to discuss its second quarter results. Participating in the call will be Marv Tseu, chief executive officer; 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: 1-800-795-1259. International callers should dial 00-1-785-832-2041. There is no pass code required for this call. If you are unable to participate in the call at this time, the webcast will be archived on the Axesstel website. In addition, a telephonic replay will be available on Tuesday, August 8, at 7:00 p.m. ET, through Thursday, August 10, at 11:59 p.m. ET. To access the replay, please dial 1-800-839-1192. International callers should dial 00-1-402-220-0402. There is no pass code required for this call. About Axesstel, Inc. Axesstel (AMEX:AFT) is a leader in the design, development and sale of fixed wireless voice and broadband data products. Axesstel's product portfolio includes fixed wireless desktop phones, public call office phones, voice/data terminals, broadband modems and 3G gateways for access to voice calling and high-speed data services. The company delivers innovative fixed wireless solutions to leading telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. 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 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 fixed wireless products in target markets; the possibility that networks that can support our broadband products 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; 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 dependence on a few significant 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 six months ended
June 30, July 1, June 30, July 1,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Net revenues $22,792,911 $36,969,554 $33,303,299 $65,980,009
Cost of goods sold 20,192,207 32,457,773 30,433,771 57,901,365
------------ ------------ ------------ ------------
Gross margin 2,600,704 4,511,781 2,869,528 8,078,644
Operating expenses:
Research and
development 1,241,739 1,376,946 2,547,116 2,731,512
Selling, general
and
administrative 3,944,439 2,969,361 6,668,326 5,794,786
Impairment of
assets 1,264,254 0 1,264,254 0
------------ ------------ ------------ ------------
Total
operating
expenses 6,450,432 4,346,307 10,479,696 8,526,298
------------ ------------ ------------ ------------
Operating
income
(loss) (3,849,728) 165,474 (7,610,168) (447,654)
Other income
(expense):
Interest and
other income 371,911 196,524 747,077 213,567
Interest and
other expense (108,537) (14,124) (137,437) (797,962)
------------ ------------ ------------ ------------
Total other income
(expense) 263,374 182,400 609,640 (584,395)
------------ ------------ ------------ ------------
Income (loss)
before provision
for income taxes (3,586,354) 347,874 (7,000,528) (1,032,049)
Provision for
income taxes - 19,742 - 29,037
------------ ------------ ------------ ------------
Net income (loss) (3,586,354) 328,132 (7,000,528) (1,061,086)
Earnings (loss) per
share:
Basic ($0.16) $0.01 ($0.31) ($0.06)
============ ============ ============ ============
Diluted ($0.16) $0.01 ($0.31) ($0.06)
============ ============ ============ ============
Weighted average
shares
outstanding:
Basic 22,650,672 22,069,581 22,617,964 17,970,929
============ ============ ============ ============
Diluted 22,650,672 23,286,613 22,617,964 17,970,929
============ ============ ============ ============
AXESSTEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
Current assets: June 30, December 31,
2006 2005
------------ ------------
Cash and cash equivalents $5,778,649 $9,161,502
Accounts receivable 18,073,500 13,696,081
Inventory 3,030,191 3,314,019
Assets held for sale 960,000 -
Prepayments and other current assets 1,268,770 1,749,139
------------ ------------
Total current assets 29,111,110 27,920,741
Property and equipment, net 1,917,189 3,709,351
Other assets:
License, net 3,255,492 3,674,592
Goodwill 385,564 385,564
Other, net 632,250 860,520
------------ ------------
Total other assets 4,273,306 4,920,676
------------ ------------
Total assets $35,301,605 $36,550,768
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
2006 2005
------------ ------------
Current liabilities:
Accounts payable $13,107,061 $8,610,622
Bank financing 4,707,083 7,239,000
Customer advances 1,128,004 -
Accrued royalties 1,161,481 569,561
Accrued warranties 634,000 558,400
Accrued expenses and other current
liabilities 2,592,358 1,611,910
------------ ------------
Total current liabilities 23,329,987 18,589,493
Long-term liabilities:
Other long-term liabilities 3,040,000 2,500,000
------------ ------------
Total long-term liabilities 3,040,000 2,500,000
Stockholders' equity 8,931,618 15,461,275
------------ ------------
Total liabilities and stockholders'
equity $35,301,605 $36,550,768
============ ============
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