UNITED STATES SECURITIES and EXCHANGE COMMISSION Washington, D.C
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ 000-30061 ( Commission file No.) ELEPHANT TALK COMMUNICATIONS CORP. (Exact name of registrant as specified in its charter) DELAWARE 95 -4557538 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Cross Rock Place Executive Suites No. 102 3600 NW 138 th St., Oklahoma City, OK 73134 USA (Address of principal executive offices)(Zip Code) + 1 (405) 301-6774 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.00001 par value per NYSE MKT LLC share (Title of Class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (17 CFR 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non -accelerated filer Smaller reporting company (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes No The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 28, 2013, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $59 million based on the closing sale price of the Company’s common stock on such date of U.S. $0.59 per share, as reported by the NYSE MKT LLC. State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of February 28, 2014, there were 141,201,742 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Certain information contained in the Proxy Statement for the 2014 Annual Meeting of Stockholders of the registrant is incorporated by reference into Part III of this Form 10-K. Elephant Talk Communications Corp. Form 10-K For the fiscal year ended December 31, 2013 TABLE OF CONTENTS Note on Forward -Looking Statements Explanatory Note PART I Item 1. Description of Business. 4 Item 1A. Risk Factors. 12 Item 1B. Unresolved Staff Comments. 22 Item 2. Description of Property. 22 Item 3. Legal Proceedings. 23 Item 4. Mine Safety Disclosure. 23 PART II Item 5. Market for Common Equity and Related Stockholder Matters. 23 Item 6. Selected Financial Data. 25 Item 7. Management ’s Discussion and Analysis of Financial Condition and Results of Operations. 26 Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 38 Item 8. Financial Statements. 39 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. 73 Item 9A. Controls and Procedures. 74 Item 9B. Other Information. 77 PART III Item 10. Directors, Executive Officers and Corporate Governance. 77 Item 11. Executive Compensation. 77 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 77 Item 13. Certain Relationships and Related Transactions, and Director Independence. 77 Item 14. Principal Accountant Fees and Services. 77 PART IV Item 15. Exhibits, Financial Statement Schedules. 78 2 FORWARD LOOKING STATEMENTS This Report, including the documents incorporated by reference in this Report, includes forward-looking statements. We have based these forward- looking statements on our current expectations and projections about future events. Our actual results may differ materially from those discussed herein, or implied by, these forward-looking statements. Forward-looking statements are generally identified by words such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “plan,” “project,” “should,” “will,” “would” and other similar expressions. In addition, any statements that refer to expectations or other characterizations of future events or circumstances are forward-looking statements. The statements that contain these or similar words should be read carefully because these statements discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other “forward-looking” information. Elephant Talk Communications Corp., believes that it is important to communicate our future expectations to our stockholders. However, there may be events in the future that we are not able to accurately predict or control. Forward-looking statements included in this Report or our other filings with the SEC include, but are not necessarily limited to, those relating to: • risks and uncertainties associated with the integration of the assets and operations we have acquired and may acquire in the future; • our possible inability to raise or generate additional funds that will be necessary to continue and expand our operations; • our potential lack of revenue growth; • our potential inability to regain compliance with the listing standards of the NYSE MKT LLC (“the Exchange”); • our potential inability to continue as a going concern; • our potential inability to add new products and services that will be necessary to generate increased sales; • our potential lack of cash flows; • our potential loss of key personnel; • the availability of qualified personnel; • international, national regional and local economic political changes; • general economic and market conditions; • increases in operating expenses associated with the growth of our operations; • the possibility of telecommunications rate changes and technological changes; • the potential for increased competition; and 3 • other unanticipated factors. The foregoing does not represent an exhaustive list of risks. Please see “Risk Factors” for additional risks which could adversely impact our business and financial performance. Moreover, new risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this Report are based on information available to us on the date of this Report. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this Report. AVAILABLE INFORMATION We maintain a corporate website with the address www.elephanttalk.com . We intend to use our website as a regular means of disclosing material non- public information and for complying with disclosure obligations under Regulation FD promulgated by the Securities and Exchange Commission (the “SEC”). Such disclosures will be included on the website under the heading “News” and “Investors – Press Releases”. Accordingly, investors should monitor such portions of the website, in addition to following the Company’s press releases, SEC filings and public conference calls and the webcasts. We are not incorporating information contained in the website by reference into this Annual Report on Form 10-K. We make available, free of charge, through the website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to these reports as soon as reasonably practicable after electronically filing such material with, or furnishing such material to, the SEC. Materials filed with the SEC can be read and copies made at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the Public Reference Room. The SEC also maintains a website, www.sec.gov containing the reports, proxy and other information filed with the SEC. PART I Item 1. Business Business overview As a mobile S oftware Defined Network Architecture (Software DNA™) vendor Elephant Talk Communications Corp. and its subsidiaries (also referred to as “Elephant Talk”, “ET” and “the Company”) provide a one stop solution for a full suite of mobile, fixed and convergent telecommunications software services.