Elephant Talk Reports Financial Results for the First Quarter Ended March 31, 2016

NEW YORK, May 17, 2016 /PRNewswire/ -- Elephant Talk Communications Corp. (NYSE MKT: ETAK) ("ET" or the "Company"), a provider of 'on-prem' and 'cloud-based' mobile network operator ("MNO") solutions, today announced its financial results for the first quarter ended March 31, 2016.

Hal Turner, Executive Chairman of the Board of ET, stated, "During the first quarter of 2016 we continued to focus on restructuring our operations to achieve profitability while providing great service and support for our customers. The expected results of this restructuring will be: greater revenue per employee, reflecting improved productivity and, essentially, a cash neutral operating position during the second quarter of 2016."

"The proposed divestiture of wholly owned subsidiary, ValidSoft was not consummated during the first quarter as expected," Mr. Turner commented. "While the divestiture of ValidSoft during the first quarter of 2016 would have streamlined the Company's restructuring and improved financial liquidity in the short term, we believe there is greater value to be realized in the future.  ValidSoft clearly has inherent value in excess of the contemplated sale price and we have taken steps to capture and highlight this value."

Mr. Turner continued, "In addition to reducing operating expenses and addressing our balance sheet, the Company has expanded its pipeline through new client relationships and expansion of its IP portfolio. Soon, we expect to be able to complete our restructuring and financing efforts. In anticipation, we are positioning the Company for revenue growth on a more operationally efficient platform.  This includes: (a) adding additional subscriber-based revenues organically and through consolidation; (b) deploying full cloud-based services of our proven MNO capabilities; and (c) full automation and integration of a security enhanced software service model with platform and infrastructure delivered as a service.  We are looking forward to moving back into a growth phase once we have completed the necessary restructuring and demonstrating the Company's full capability to provide relevant highly valued services in an expanding addressable market."

Operational Highlights:

• Significant operating expenditure reductions, include a 35 percent reduction in full-time equivalent headcount and a year-over-year 28 percent reduction in payroll-related expenses, net of restructuring costs;
• Executed a Software Authentication contract with a Global Technology and Solutions Provider in the United States;
• Executed Authentication Software Agreement with leading provider of a cloud-based security information and event management ("SIEM") solutions provider;
• Executed an Alliance Agreement with a Top 10 System Integrator in the United States;
• Expanded intellectual property portfolio as voice biometric-enrolment patent was granted;
• International patent granted for "SIM-free HLR migration";
• Developed and launched an innovative "Voice Bundling" solution for a large European operator; and
• Completed North American Cloud-based hosting infrastructure.

Financial Highlights for the First Quarter:

• Revenue for the first quarter 2016 totaled $3.3 million, compared with $5.0 million for the same period the year prior. The decrease was mainly attributable to a $1.6 million decrease in revenue due to the termination of the Iusacell contract, other decrease in mobile and security revenue and negative currency impact.
• Cost of service for the first quarter 2016 totaled $1.1 million compared with $1.9 million for the same period the prior year.
• General and Administrative expenses for the first quarter 2016 totaled $3.5 million compared with $3.0 million for the same period the prior year. Workforce reduction severance cost during the first quarter 2016 was $0.6 million. Excluding these restructuring charges, the General and Administrative expense decreased by 4% year-over-year. 
• Net loss for the 2016 first quarter totaled $4.3 million compared with $2.1 million for the same period the year prior mainly attributable to the absence of Iusacell revenue in 2016 and the impact of the restructuring charges in the first quarter of 2016.
• Total headcount as of March 31, 2016 was 195 compared with 253 as of December 31, of 2015, and 303 as of March 31, 2015.
• At the end of the first quarter 2016, revenue per employee was approximately $67 thousand, up from approximately $47 thousand at the end of the fourth quarter 2015.
• Workforce reduction expenses, primarily related to employee severances and asset write-offs totaled $0.6 million for the first quarter of 2016. For the period from November 30, 2015 to March 31, 2016, total workforce reduction expenses totaled $1.9 million.
• During the first quarter 2016, the Company consummated a private placement of approximately $2.2 million for working capital purposes. Total raised to date under this private placement offering totaled $3.5 million.

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About Elephant Talk Communications Corp.:
ET and its subsidiaries provide a fully managed 'single sign on and application access' Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS) application designed for communications services providers ("CSP") end-users, delivered over the web. SaaS are applications designed for end-users, delivered over the web. PaaS is a set of tools and services designed to make coding and deploying those applications quickly and efficiently. IaaS is the hardware and software solution that powers it all including servers, storage, networks and operating systems. The Company is comprised of an experienced sales team, architects, software developers, implementation specialists and an operations team who bring turnkey mobile solutions to the retail telecommunications industry. ET also provides software based authentication and voice-biometrics technology and services through its wholly owned subsidiary, ValidSoft UK Limited ("ValidSoft").

Please visit www.elephanttalk.com for more information.

About ValidSoft UK Ltd.:
ValidSoft, a subsidiary of Elephant Talk Communications Corp., secures transactions using personal authentication and device assurance. We enable our customers to enhance their security while improving their user experience, utilizing our multi-factor authentication platform, Voice Biometric engine and Device Trust technology, all of which may be used as 'stand-alone' or integrated into multi-vendor solutions. ValidSoft serves multiple clients across the financial services, government and enterprise sectors and is the only company to have been granted four European Privacy Seals, reflecting its commitment to strong data privacy. Visit: www.validsoft.com.

Forward-Looking Statements:
Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements with respect to Elephant Talk's plans and objectives, projections, expectations and intentions (including, without limitation, Elephant Talk's plans in regard to its ValidSoft subsidiary). These forward-looking statements are based on current expectations, estimates and projections about Elephant Talk's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of Elephant Talk may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by law, Elephant Talk also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from those projected or suggested in Elephant Talk's filings with the Securities and Exchange Commission, copies of which are available from the SEC or may be obtained upon request from Elephant Talk.

Investor Contact:
Capital Markets Group, LLC
Alan Sheinwald or Valter Pinto
PH: (914) 669-0222
[email protected]  
www.CapMarketsGroup.com

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SOURCE Elephant Talk Communications Corp.

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