RECENT DEVELOPMENTS
Shareholder Information Update – May 25th 1999
OVERVIEW
February 1999 to April 1999
We promised real company growth this year, and we are making excellent progress in delivering on that promise. Operational and financial performance have clearly exceeded all expectations.
The company's management has continuously refined the definition of our core business model over the years to the current simple yet powerful criterion:
“Interactive Telesis searches out and enters specific niche market opportunities where ITI's customized IVR services and technologies can lead the company to become the ‘de facto standard' and provide long-term, automated solutions.”
In keeping with this business model, Interactive Telesis has added two potent new business services applications, Third Party Verification and Customer Care Surveys.
Additionally, ITI's rapid growth is being fueled by profitable business relationships with some of North America's largest telecommunication companies. Revenues from our Frontier ConferTech and AT&T's conference call Record and Replay relationships continue to lead the way to our record financial success.
Recent high-profile additions to our Survey and Enhanced Services Division, such as Bell Atlantic's CPNI application, are laying the foundation for sustained expansion of ITI's business prospects.
ITI's management remains confident its current rate of growth will continue in the last fiscal quarter of 1999 and actually accelerate throughout the next fiscal year.
FINANCIAL HIGHLIGHTS
Interactive Telesis is pleased to announce its best financial results arising from its third quarter operations for FY 1999. The revenue increases of 66% over the previous quarter and 151% over the same quarter of the previous fiscal year continue to sharply increase the upward trend begun in 1998, resulting in our first year-to-date profits.
We have included a copy of our company's unaudited April 30th, 1999, third quarter financial statements with this report. Please note the Comparative Information Table and Charts, which reflect some informative trend indicators.
Audited financial statements are produced for our fiscal year-end, July 31st, 1999. It is our intent to provide these statements for all our shareholders and other interested parties within 90 days after our fiscal year-end.
We report a healthy profit of slightly more than $230,000 for the third quarter ending April 30th, 1999. This quarter's profit represents approximately $.0077 per share, significantly greater than anticipated due to higher than expected revenues from our premier Record & Replay clients, Frontier ConferTech and AT&T.
We also report a year-to-date profit for the first time in company history of just over $90,000. This is significantly better than expected and is directly attributable to increasing revenues and strong operating margins. With first and second quarter losses of less than $107,000 and $33,000 respectively, and a third quarter profit of over $230,000, our profit for the year is approximately $.003 per share.
It is advantageous to remember that as overall revenues continue to trend upwards, our excellent operating margins can provide a payback of development costs in as little as 90 to 120 days.
Since we intend to enjoy and extend the dynamic growth we have experienced recently, a significant reinvestment of cashflow into the development of custom products such as Third Party Verification, Customer Care Survey services, and cross-platform bridging solutions and technologies for TeleSURVEY customers, is required. While this is likely to temper profits over the next four to eight quarters of significant customer growth, the excellent margins of ITI's cashflow generating services will assert themselves increasingly over this term, resulting in steadily improving bottom-line profits.
With continued revenue strength over the next quarter and the continued careful and prudent cashflow control already demonstrated by the company's management, the stage is solidly set for achieving our financial target of having our first profitable year.
OSMI
In development by ITI's Information Technologies department, a powerful new group of proprietary Internet-based information management technologies called “On Line Session Management Interface” (OSMI) is a key part of ITI's new Internet Services Suite. OSMI is a series of totally customizable, on-line reporting, data and management technologies that help ITI clients manage every aspect of incoming survey and call results data.
Harnessing the power of the Internet, this new service gives ITI's clients unprecedented levels of control and customized information management capabilities. OSMI allows the data results of virtually any of ITI's IVR services to be seen and managed by ITI clients in real-time over the Internet. The two key advantages to OSMI are the cost savings and speed with which our clients receive live data results directly from their target survey or IVR audience. Surveys that used to take up to six months for data collation and interpretation now happen almost instantly.
FULLY REPORTING STATUS
The management of ITI would like to thank you, our shareholders, for supporting the company's commitment to achieve fully reporting status this year with the filing of our "Form 10".
In an April, 1999, news release, Interactive Telesis announced its schedule for becoming a fully reporting issuer and the appointment its new auditors, the international accounting firm, Pannell Kerr Forster (PKF).PKF have been retained to audit the Company's financial statements for the period ending July 31st, 1999, and to review the Company's audited financial statements for the period ending July 31st, 1998, to ensure compliance with US Generally Accepted Accounting Principles (US GAAP). This audit and review will be prepared to comply with the SEC's new rule requiring OTC companies to report under the Securities Act of 1934.
In a process begun earlier this year, ITI will file application with the SEC by October 1999, to become a fully reporting issuer. ITI must wait until October as a result of an SEC requirement to include the last two operating years of audited financial statements (July 31, 1999, and July 31, 1998) with the filing of this Form 10 process.
''This is yet another step forward for Interactive Telesis as we progress in our efforts to develop and improve our corporate reporting and governance systems, by utilizing the services of an internationally recognized firm,'' explained Donald E. Cameron, President and CEO of Interactive Telesis. ''The announcement further illustrates the Company's commitment toward its long-term growth strategy and is an important step in our progress to becoming eligible for a NASDAQ listing within the next two years.''
These steps further the Company's goal to consistently advance its status and visibility among its shareholders and the investing public.
InvestorREACHTM
InvestorREACH is an automated shareholder communication service that allows public companies to disseminate corporate news quickly, conveniently and cost effectively by toll free telephone and fax, 24 hours a day. InvestorREACH has experienced a growth rate of over 35% in this past year.
Recent additions to ITI's growing client base are:
Mutual of New York - (NYSE: MONY) Mutual of New York (MONY) went live in this quarter on the InvestorREACH service. One of the largest insurance companies in the world, MONY went through with a de-mutualization process in late 1998. Certain policy owners became shareholders, and Mutual of New York is now a public company with over one million shareholders. MONY has become the largest single InvestorREACH client account for ITI.
SouthTrust Corporation – (NASDAQ: SOTR) SouthTrust Corporation, a member of the FORTUNE 500, is a $38 billion financial institution operating banks with 611 offices in Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee and Texas.
General Magic, Inc. – (NASDAQ: GMGC) General Magic, Inc. is a technology company in the voice and agent technologies business. Voice agents monitor and act on Web content on an individual's behalf to help busy people get things done on the World Wide Web.
Record and Replay
ITI President Don Cameron and Vice President of Sales Michael Hutchison continue to lead the development of high-level relationships with AT&T management.
AT&T Executive Conferencing Division - January, 1999, revenue for the AT&T Executive Conferencing division that we have now served for over a year, was up over 30% from the same period in 1998.
AT&T Corporate Division - We are hopeful of moving forward with the five conferencing centers, although the issue there is one of their integrating the services we provide into their automated billing system. We have now demonstrated the capabilities of the new Internet Record and Replay service and the original IVR-based Record and Replay to the corporate division. We anticipate further positive developments in this relationship in upcoming months.
MCI Conferencing Division - We remain on extended standby to commence IRR for MCI's Instant Replay Plus teleconferencing service while the firm completes an extended re-organization in connection with its recent merger with WorldCom.
Frontier ConferTech - Since going live providing record and replay services (RR) as well as Internet Record & Replay (IRR) to Frontier in December, 1998, our business volumes and relationship with Frontier have gone from strength to strength. Our attempted news release announcing ITI's relationship with Frontier ConferTech was pulled at Frontier's request. Unknowingly, we had broken a Frontier Company policy by naming some of their clientele. Despite our mistake, the relationship remains excellent. We have agreed to their request not to issue a news release, especially in light of their recent buyout.
International Interest - The rave reviews we have received due to the high quality of our services for Frontier ConferTech and AT&T, have resulted in referrals to several major telecom companies. British Telecom has expressed interest in our providing Record and Replay services to them. Don Cameron and Mike Hutchison will be at a major telecom trade show in Europe in mid June to meet with British Telecom and other prospective Record and Replay clients and to explore the feasibility of providing international services in Europe.
We are in the process of developing business relationships with several other major conferencing companies to help us achieve our goal of a dominant market position for the record and replay industry. We will keep you posted on our progress.
Prepaid Phone Cards - TeleSURVEY TM Application
TeleSURVEYTM is an inventive application of ITI's capabilities that walks callers through a short survey when they call to activate their phone card and is being enthusiastically received by major providers of phone cards in the United States.
ITI has already provided its TeleSURVEY application to Ameritech, Southern New England Bell and GTE. These three companies alone have the ability to generate millions of dollars in revenue for ITI based on the favorable results of their initial tests. These companies are now reselling this service to their respective calling card clientele. We expect this to be MarketREACH's fastest growing application in 1999.
MCI Prepaid Division - We are pleased to announce that a service agreement between ITI and MCI's prepaid division has been signed. MCI has now connected their communication lines to our equipment in San Diego. They are launching our prepaid survey business this month and we expect to start our first application for them in June.
They expect our survey services to increase their revenue by 30% in the coming year, is quite a statement from an organization like MCI Prepaid since they already deal in the millions of prepaid phone cards. When we recall that MCI did 9 million phone cards in 1998 for their client Pepsi, we can see good reason that this will develop into one of our most significant relationships and revenue streams.
Ameritech Prepaid - Recent developments indicate an earnest level of interest on the part of Ameritech who are able to work with us now that we have resolved certain communication issues with their platform provider, Quest Telecom. Ameritech has the ability to create as high a volume of business with ITI as the MCI Prepaid division.
Discussions are under way for ITI to put two large applications up for test and delivery. We anticipate a satisfying and mutually rewarding relationship with Ameritech Prepaid.
AT&T Prepaid - Successful completion of our recent testing with this division has resulted in their request for us to propose the provision of our services for two applications.
Quest - Quest provides communication platforms for a variety of major RBOC's (Regional Bell Operating Companies) including Ameritech and Southern New England Bell. Quest can refer an enormous volume of TeleSurvey business to ITI.
Consumer Proprietary Network Information (CPNI) Consent Surveys
CPNI legislation is a part of the Telecommunications Act of 1996 that was further clarified by order of the FCC early in 1998. CPNI requires telecom companies to gain their customers' approval before marketing certain other products and services to these customers. Two important purposes of the CPNI legislation are the protection of customer privacy and prevention of unreasonable competitive advantage over new telecom market entrants by incumbent carriers.
ITI's solutions assist telecom companies in meeting CPNI requirements by providing strong recorded authentication and verification of customer wishes and permissions and, very importantly, solid indications of a customer's understanding of the CPNI permission process. This helps to prevent consumer misunderstandings and complaints as well as to forge stronger relationships between the Telecom Company and its customers.
ITI's CPNI services can be customized to fit each client's circumstance with enhanced IVR technologies. High volume digital call and IVR recording, several levels of digital and human verification, and effective reporting technologies over the Internet are available to serve the unique needs of each ITI client.
ITI's high performance track record in CPNI permission-conversion rates surpasses traditional methods by as much as 50%, thus winning the serious attention of several major telecom companies.
Bell Atlantic - Our first multi-million dollar CPNI TeleSurvey contract with Bell Atlantic went live in April 1999. The contract calls for ITI to provide CPNI TeleSurvey services over what is expected to be a 2-3-year period with a volume to support a multi-million dollar net income over that timeframe.
Perhaps the greatest benefit of this contract is the great positioning and instant legitimacy its confers upon ITI as the CPNI-expert company with the best solutions for every phone company's CPNI requirements.We are also in discussions with AT&T, Sprint and Qwest regarding CPNI applications.
Third Party Verification (TPV)
ITI has added Third Party Verification services to its high performance IVR services.
TPV was designed initially to serve the long-distance telephone business where third party verification of customer carrier changes is mandated by government legislation. Several large telecom companies are considering our TPV service as a superior alternative to traditional live operators. There is also a lucrative opportunity providing digital recording playback-on-demand for those call centers providing live operator TPV services. TPV is a new niche market with the potential of becoming a high volume long-term revenue stream for the company. ITI clients benefit with higher close rates, low costs, no storage requirements or systems personnel, and unlimited expansion adaptability.
TPV, used primarily in the long distance telecommunications industry, independently confirms a customer's desire to switch from one long distance carrier to another. It is a powerful tool in preventing the unauthorised switching known as “slamming,” a major concern in the very competitive long-distance calling industry where carriers hurry to maintain or increase their market share.
In addition to the telecommunications industry, ITI's TPV services are ready to serve the needs of any company utilizing telemarketing where customer orders or purchases require verification. As de-regulation hits the utilities, ITI's TPV services can help prevent consumer complaints. TPV services are useful to stock brokerages, mortgage companies, collection agencies, multi-level marketing firms and other businesses and industries where high volume telemarketing and teleservices may benefit from independent third party verification.
Customer Care Surveys (CCS)
ITI's new automated Customer Care Survey (CCS) service went into development recently. It is designed to initially serve the needs of a major mutual fund company. ITI has solved several unique technical challenges while developing an automated random survey technology to follow customer calls to agents. The service will have a broad spectrum of applications throughout the finance and other industries requiring customer- intensive communications industries when developed.
Questions or Comments
If you have any questions or comments in regard to Interactive Telesis Inc. and/or this information update please call JJ Jeffrey at our Investor Relations toll free number 1- 888-546-2957.
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