Ealixir, Inc.

What they do

Flint Telecom Group operates through subsidiaries including Cable and Voice Corporation, Phone House, Inc., Flint Prepaid, Inc., and Digital Phone Solutions, Inc. The company distributes prepaid calling cards, broadband equipment, and enhanced IP telephony solutions. It sells through a network of over 90 private distributors and more than 10,000 retail outlets in the U.S.

Revenue drivers

• Prepaid calling products — Sold through Phone House and Flint Prepaid, these regionalized calling cards target immigrant customers calling international destinations. The prepaid segment grew in the six months ended December 31, 2010, contributing to overall revenue growth.
• Equipment sales — Cable and Voice Corporation distributes cable modems, adapters, and other customer premise equipment to cable, telecom, and enterprise customers. This segment also showed growth in the recent period.
• Enhanced IP telephony — Digital Phone Solutions provides hosted VoIP services to small and medium enterprises, including billing, customer care, and advanced features like voicemail-to-email. Its relative size is not broken out.

Recent performance

For the three months ended December 31, 2010, revenues increased 7% to $4,423,909 compared to $4,134,368 in the prior-year period. Gross margin fell to 4.1% from 10.2% due to product mix and loss of higher-margin prepaid destinations. The company reported a net loss of $2,221,663, or $0.10 per share, an improvement from a $10,053,978 loss in the same quarter last year. For the six months ended December 31, 2010, revenues rose 2% to $8,860,669, while the net loss was $4,311,246.

Strategy

Management's objectives are to improve operations, reduce reliance on external financing, and position the company for growth in existing markets and new areas such as mobile payments and remittances. The company continues to target acquisitions to enhance profitability from sustainable, higher-margin revenue streams. It has been actively seeking additional external financing and strategic partnerships. Cost rationalization efforts have reduced operating expenses, with a focus on the prepaid telecom segment.

Risks

• Legal proceedings — A judgment was entered against the company for $72,852 plus interest, and AT&T seeks an automatic judgment of $440,672 plus interest, attorney's fees, and costs.
• Liquidity concerns — The company had a net loss of $4,311,246 for the six months ended December 31, 2010, and management has been actively seeking additional external financing to fund operations.
• Gross margin pressure — Gross margin fell to 4.1% in the three months ended December 31, 2010 due to a changing product mix and loss of higher-margin prepaid destinations.
• History of restructuring — The company shut down four subsidiaries in fiscal 2010 and recorded a one-time impairment charge of $12,215,200, indicating challenges in integrating acquisitions.

Outlook

Management states that it continues to focus on growing the prepaid telecom segment and has been seeking additional external financing and strategic partnerships. The company also aims to position itself for growth in mobile payments and remittances. However, the forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.