ARTM filed their 2nd qtr 10-QSB on 2/11/00. The following is their comments regarding the income statement:
Results of Operations
Quarter Ended December 31, 1999 Compared to Quarter Ended December 31, 1998.
Revenues for the quarter ended December 31, 1999 increased to $6,021,528, or 45%, from $4,152,601 during quarter ended December 31, 1998. The increase in revenue resulted primarily from growth in the volume of calls by subscribers using the Company's basic 1 Plus and 800 long-distance service. The Company has purchased new accounts and has increased the size of its customer base through the use of outside telemarketers. The Company increased its market share in large call volume areas, and has concentrated additional marketing resources on international calling, which has higher profit margins than in the U.S. domestic long distance market, and which is not currently being directly affected by the intense pricing competition which exists in the domestic calling market during the 1999 quarter. The Company is been better able to control subscriber attrition ratios, which it attributes to better and more cost-effective service to its customers.
Costs of sales was $4,746,570, or 78.8% of total revenues, for the quarter ended December 31, 1999, compared to $2,925,874, 70.5% of total revenues, for the same period in the prior year. Cost of sales is comprised principally of the costs the Company pays to the long distance service providers whose long distance networks the Company uses for its customers calls. The increased cost was due primarily to the increased revenues. The increase as a percentage of total revenues principally reflects the effects of price competition, which narrows the spreads between the price at which the Company bills its customers for long distance calls and the price that the Company pays for access to the long distance calling networks owned by the carriers. The Company expects to see the margins on customer revenues from U.S. domestic calls continue to decrease as a result of continued pricing competition.
Selling expenses for the quarter ended December 31, 1999 increased to $222,912, or 159%, from $86,059 during quarter ended December 31, 1998. The increase in selling expenses was a result of telemarketing campaigns. The Company increased its telemarketing campaigns and maintained the overall size of its customer base. The size of the Company's customer base is materially affected by price competition, which the Company believes is the principal factor that affects the Company's customer attrition rates marketing campaigns by competitors can have a significant effect on the attrition rate that the Company experiences from time to time. The Company attempts to stage its marketing campaigns to at least match new customer accounts with anticipated attrition rates. However, unanticipated increases in the attrition rate can have a significant effect on the Company's revenues and expense levels during any financial reporting period. The Company will generally respond to an increase in the attrition rate by increasing its telemarketing campaigns, which will increase selling expenses during the period which the campaign occurs. An increase in the attrition rate will also have an adverse effect on revenues because, when the increase in the attrition rate occurs, the Company ceases to receive any revenue from those customers who switched to another long distance carrier. Until those customers are replaced through telemarketing campaigns or otherwise, the revenues that had been associated with their accounts will not be received. Consequently, the effects of pricing competition can cause material variations in the Company results of operations from period to period, and make it unlikely that the Company will be able to sustain the level of earnings achieved during recent quarterly periods.
General and administrative expenses for quarter ended December 31, 1999 increased 12% to $266,117 from $234,018 during quarter ended December 31, 1998. The increase resulted from the Company increasing its customer service staffing to provide better services to its customers. The Company has maintained the number of its customer service representatives to provide bi-lingual assistance to non-English speaking customers. The Local Exchange Carriers (LEC) have been continually increasing the costs of wholesale traffic through its long distance switching, and the Company anticipates that this trend will continue.
Interest expense for the quarter ended December 31, 1999 increased to $23,870 from $13,500 during quarter ended December 31, 1998. The increase in interest expense was a result of an increase in debt outstanding, which was incurred in connection with the Company's acquisitions of AMEP, PTNM and EMED common stock in October and November of 1999. The acquisitions were funded through securing outside financing from First Star Financial.
Net earnings for the quarter ended December 31, 1999 were $699,266, or $.05 per diluted share, compared to $895,618, or $.06 per diluted share during quarter ended December 31, 1998.
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