Phonetime reports second quarter results

    Increases revenue 71% to $39.3 million; generates record net income of

    MISSISSAUGA, ON, Aug. 11 /CNW/ - Phonetime Inc. (TSX: PHD), a leading
supplier of international long distance telecommunication products and
services, announced today its financial results for the second quarter and
six months ended June 30, 2008. All figures are in Canadian currency.

    Highlights of the Second Quarter

    -   Sales were $39.3 million, an increase of 71% over $23.0 million in
        the second quarter of 2007.
    -   Gross profit was $5.2 million, up 100% over $2.6 million in Q2 2007.
    -   EBITDA (earnings before interest, taxes, depreciation, amortization
        and stock compensation expenses) was $1.9 million compared to
        $247,000 in the second quarter of 2007.
    -   Net income was $734,000 compared to a net loss of $473,000 in second
        quarter of 2007.
    -   Paid down $1.2 million of long-term debt and other loans payable
        related to the Symphony acquisition in the quarter.
    -   Launched a new point of presence in Los Angeles, enabling its US-
        based carrier customers to streamline connectivity to Philippines,
        Malaysia, Hong Kong and other Pacific Rim countries.
    -   Processed approximately 1.4 billion minutes of long-distance calls.


    "Our strong second quarter results provide further validation that our
strategy to diversify our operations, expand our wholesale activities
internationally, and prudently invest in network infrastructure is working,"
said Wayne Silver, President and CEO of Phonetime Inc. "Since the start of the
year, we have improved the key performance metrics of our Wholesale and Retail
Divisions, including sales, gross margins, net income, account receivables,
customer wins and call volumes. We expect this steady growth to continue for
the balance of 2008 based on the increasing demand for our telecommunications
services, particularly within emerging markets in Asia, Africa and South
America. We expect this trend to continue in Q3 as we have just completed our
most profitable month ever in July."

    Results for the Second Quarter

    Consolidated sales for the second quarter of 2008 were $39.3 million, up
71% over $23.0 million in the second quarter of 2007. For the six months ended
June 30, 2008, sales were $75.8 million, an increase of 71% when compared to
$44.4 million in the same period of 2007. The growth is attributable primarily
to higher sales volumes of the Company's Wholesale Division, which buys and
resells telecommunications long-distance services to telephone carriers around
the world using Phonetime's proprietary call trading platform. Phonetime also
generates revenues through its Retail Division, which provides pre-paid
calling cards and long-distance services to targeted ethnic consumer groups.
    Gross profit for the second quarter of 2008 was $5.2 million or 13.2% of
sales compared to $2.6 million or 11.3% of sales in the second quarter of
2007. The increase is due to higher sales experienced by both the Wholesale
and Retail Divisions.
    The net income for the second quarter of 2008 was $734,000 or $0.01 per
basic share compared to a net loss of $473,154 or $0.01 per basic share in the
second quarter of 2007. For the six months ended June 30, 2008, net income was
$1.4 million or $0.01 per basic share, compared to a net loss of $837,000 or
$0.01 per basic share for the same period in 2007. The improvement was
principally due to performance gains by the Company's Wholesale Division.
    In the second quarter of 2008, Phonetime had negative cash flow from
operations of $984,000 compared to negative cash flow from operations of
$1.7 million in the second quarter of 2007. The Company's closing bank balance
and net cash flow were negatively impacted by the quarter end coinciding with
the statutory banking holiday period. For the six months ended June 30, 2008,
cash flow from operations was $1.3 million compared to negative cash flow of
$2.2 million in the same period of 2007.

    Financial Highlights
    (000's except share data)

                                    Three Months Ended     Six Months Ended
                                    June 30,   June 30,   June 30,   June 30,
                                      2008       2007       2008       2007

    Sales                           $39,311    $23,030    $75,806    $44,378

    Gross profit                    $ 5,178    $ 2,567    $10,095    $ 5,340

    Gross profit percentage           13.2%      11.1%      13.3%      12.0%

    EBITDA                          $ 1,860    $   247    $ 3,688    $   812

    Net Income                      $   734    $  (473)   $ 1,353    $  (837)

    Cash flow from operating
     activities                     $  (984)   $(1,670)   $ 1,261    $ 2,184)
    Cash and cash equivalents       $(4,256)   $   998    $(4,256)   $   998
    Total long-term liabilities     $ 3,840    $   354    $ 3,840    $   354
    Weighted average number of
     common shares basic              106.7       94.6      106.7       94.6

    Phonetime will host a conference call on Tuesday, August 12 at 11:00 a.m.
(ET) to discuss its second quarter 2008 financial results. To access the
conference call by telephone, dial 416-915-5648 or 1-800-814-4853. Please
connect approximately 15 minutes prior to the beginning of the call to ensure
participation. The conference call will be archived for replay until Tuesday,
August 19, 2008 at midnight. To access the archived conference call, dial
416-640-1917 or 1-877-289-8525 and enter the reservation number 21280214
followed by the number sign.
    A live audio webcast of the conference call will be available at Please connect at least 15 minutes prior to the conference
call to ensure adequate time for any software download that may be required to
join the webcast. The webcast will be archived at the above web site for 30

    About Phonetime Inc.

    Established in 1994, Phonetime is a leading supplier of international
wholesale long distance telecommunications services to carriers of all sizes
around the globe. Phonetime also competitively markets a range of pre-paid and
subscription-based long distance products and services to individual consumers
and businesses across Canada. Phonetime has operations on six continents,
including facilities in Canada, Europe, Africa and South East Asia. In Canada,
Phonetime operates one of the country's largest private networks with
40 Points-of-Presence available locally to 85% of the population. Phonetime is
registered as a Class A International Carrier with the CRTC and whose stock is
publicly traded on the Toronto Stock Exchange (TSX: PHD). More information may
be found on the Company's website -

    Caution Regarding Forward Looking Information:

    This press release contains forward-looking statements within the meaning
of securities laws, including the "safe harbour" provisions of the Ontario
Securities Act and the United States Private Securities Litigation Reform Act
of 1995. Forward-looking information is often, but not always, identified by
the use of words such as "anticipate", "believe", "expect", "plan", "intend",
"forecast", "target", "project", "may", "will", "should", "could", "estimate",
"predict" or similar words suggesting future outcomes or language suggesting
an outlook.
    Forward-looking statements and information are based on current beliefs
as well as assumptions made by and information currently available to
Phonetime concerning anticipated financial performance, business prospects,
strategies and regulatory developments. Although management considers these
assumptions to be reasonable based on information currently available to it,
they may prove to be incorrect.
    By their very nature, forward-looking statements involve inherent risks
and uncertainties, both general and specific, and risks that predictions,
forecasts, projections and other forward-looking statements will not be
achieved. We caution readers not to place undue reliance on these statements
as a number of important factors could cause the actual results to differ
materially from the beliefs, plans, objectives, expectations and
anticipations, estimates and intentions expressed in such forward-looking
statements. These factors include, but are not limited to: incorrect
assessments of value when making acquisitions; increases in debt service
charges; fluctuations in foreign currency and exchange rates; inadequate
insurance coverage; changes in tax laws; and Phonetime's ability to access
external sources of debt and equity capital.
    The foregoing list of factors that may affect future results is not
exhaustive. When relying on our forward-looking statements to make decisions,
investors and others should carefully consider the foregoing factors and other
uncertainties and potential events. Furthermore, the forward-looking
statements contained in this press release are made as of the date of this
press release, and Phonetime does not undertake any obligation to up-date
publicly or to revise any of the included forward-looking statements, whether
as a result of new information, future events or otherwise. The
forward-looking statements contained in this press release are expressly
qualified by this cautionary statement.

For further information:

For further information: Wayne Silver, Phonetime, President & CEO, (905)
361-8304,; Rodney Franklin, Phonetime, Chairman & CFO,
(905) 361-8305,; Joe Racanelli, Equicom Group, (416)
815-0700 x 243,

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