Telehop Communications Reports Year End and Fourth Quarter 2008 Financial Results

    TORONTO, April 15 /CNW/ - Telehop Communications Inc. (TSXV-HOP) today
released its financial results for the year ending December 31, 2008 reporting
revenue of $16,384,290 compared to revenue of $17,983,269 for 2007. The net
loss for the year was $1,355,554 or $0.10 per share, compared to net earnings
of $172,748 or $0.01 per share for 2007. Revenue for the fourth quarter 2008
was $3,776,759 compared to $4,215,981 for the same period in 2007. The net
loss for the fourth quarter was $573,951 or $0.04 per share compared to a loss
of $281,777 or $0.01 per share for the same period in 2007. We completed the
year with working capital of $2,284,772 which includes cash of $1,273,585.  
"During fiscal 2008 we dealt with the potential sale of our Company and an
unsolicited take over bid, which contributed to the increase in expenses and
had a negative impact on operations for the year," said Hersh Spiegelman
President and CEO of Telehop. "However, we also completed a strategic review
of our operations producing a number of very key strategic initiatives which
we believe will be instrumental in allowing us to return to profitability."

    Our key strategic initiatives are :

    (1) Continuing with Telehop HomePhone (VoIP)

    With industry trends pointing to the migration of customers to VoIP
    services, we introduced our new flagship product, the Telehop HomePhone,
    and late in the fourth quarter we commenced a comprehensive multi-media
    marketing campaign. To support the anticipated growth we added staff to
    our help desks and expanded our product management and marketing teams.

    (2) Targeting High Growth Niche Markets

    We are focusing our core lines of long distance services on communities
    where we have a loyal customer base and where trends indicate growing
    consumer demand for the type of services we offer. In particular, we are
    concentrating on the ethnic, student and snowbird segments of the market
    where high quality, convenience and attractive pricing are key decision
    making factors. As we move into 2009 to effectively target these markets
    we have bolstered our marketing capability and implemented new marketing
    campaigns. We plan to broaden our product offering to include more
    bundled services.

    (3) Growing new Affiliations

    We are working with Associations, Charities, etc. to grow a group of
    affiliates who will partner with us to assist in marketing our products.
    We have seen initial success in this area which we are carrying forward
    into 2009.

    (4) Growing Long Distance Customer Base

    Through a more innovative marketing program, including direct marketing
    and telemarketing, we are focused on converting customers from casual
    calling to paid subscriptions. To better respond to the demand for
    affordable long distance services among our customers in ethnic
    communities, we are forming alliances in international markets, such as
    India and the Philippines, with the goal of further reducing our rates.

    (5) Strengthening the Management Team

    Over the past year, we have broadened and deepened the capabilities of
    our senior management team and our Board of Directors, an undertaking
    which we felt essential to move forward with our new strategic direction.

    Annual financial summary -

    -  Revenue for 2008 was $16,384,290 compared to revenue of $17,983,269
       for 2007 a reduction of $1,598,979 or 9% attributable to a reduction
       in our retail long-distance business of $522,910 and a reduction in
       our wholesale long-distance business of $1,076,069.
    -  Gross margin as a percentage of revenue for 2008 was 37.4% compared to
       41.3% for 2007. The 3.9% reduction is a result of the competitive
       nature of our industry. We reduced rates in certain markets and lines
       of business to remain competitive and at the same time were not able
       to reduce our costs.
    -  Operating expenses increased from $7,245,221 in 2007 by $1,004,817 or
       14% to $8,250,038 in 2008. The majority of the increase occurred in
       general and administration expenses and is a result of increased costs
       associated with a number of corporate matters and an increase in bad
       debts expense.
    -  The end result, of a reduction in revenue with lower gross margins and
       an increase in operating expenses, is that we recorded a net loss for
       2008 of $1,335,554 compared to net income of $172,748 for 2007.

    Quarterly financial summary -

    -  Revenue for fourth quarter 2008 was $3,776,759 compared to revenue of
       $4,215,981 for 2007 a reduction of $439,222 or 10% attributable
       predominately to a reduction in our retail long-distance business. At
       the outset of the fourth quarter as the Canadian economy deteriated we
       tightened our credit policy which contributed to a reduction in
       revenue. We view our subscribers as a valuable asset and we are
       actively marketing new services, as well as our long distance
       subscription services, to those with an established credit history. We
       are marketing our newest product, Telehop HomePhone (VoIP), to these
       subscribers. We believe the HomePhone has the potential to generate
       significant revenue.
    -  Gross margin as a percentage of revenue for 2008 was 36.3% compared to
       42.7% for 2007 a reduction of 6.7% and is the result of the
       competitive nature of our industry.
    -  Operating expenses were fairly consistent increasing slightly from
       $2,255,176 in 2007 to $2,335,879 in 2008. For the first quarter 2009
       we expect our expenses to be lower as
       -  During the fourth quarter 2008 we incurred additional expenses of a
          non-recurring nature which pertained to corporate matters and due
          to the deteriating credit position in our subscriber services we
          increased our bad debt expense.
       -  We have initiated a number of cost reduction programs.
    -  We completed the year with $1,273,585 of cash a reduction of $270,900
       for the fourth quarter. We have $821,409 of taxes receivable which we
       expect to collect by carrying back our loss to previous taxable years
       and collecting the taxes paid.

            Cautionary Note Regarding Forward-looking Statements.

    Certain statements in this news release may constitute "forward-looking"
statements which involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. When used in this news release, such statements
use such words as "may", "will", "expect", "believe", "plan", "intend", "are
confident" and other similar terminology.
    These statements reflect current expectations regarding future events and
operating performance and speak only as of the date of this news release.
Forward-looking statements involve significant risks and uncertainties, should
not be read as guarantees of future performance or results, and will not
necessarily be accurate indications of whether or not such results will be
achieved. A number of factors could cause actual results to differ materially
from the results discussed in the forward-looking statements, including, but
not limited to, the factors discussed under "Risk and Risk Management" in the
company's Management Discussion and Analysis filed on SEDAR. Although the
forward-looking statements contained in this news release are based upon what
management of the Company believes are reasonable assumptions, the company
cannot assure investors that actual results will be consistent with these
forward looking statements. These forward-looking statements are made as of
the date of this news release, and the company assumes no obligation to update
or revise them to reflect new events or circumstances.

                         Telehop Communications Inc.

         Selected Financial Information - Consolidated Balance Sheets

                                                Dec. 31, 2008  Dec. 31, 2007

      Cash and cash equivalents                   $ 1,273,585    $ 2,882,305
      Accounts receivable (net of allowance
       for doubtful accounts of Nil in 2008;
       $74,648 in 2007)                             2,373,500      2,875,202
      Income taxes recoverable                        821,409        291,495
      Prepaid expenses and deposits                   156,994         88,246

                                                    4,625,488      6,137,248

    PROPERTY AND EQUIPMENT                            576,154        769,346

    INTANGIBLE ASSETS                                 161,234        267,454

                                                  $ 5,362,876    $ 7,174,048

      Accounts payable and accrued liabilities    $ 2,324,190    $ 2,565,416
      Dividend payable                                      -        267,270
      Obligations under capital lease                  16,526         15,253
                                                    2,340,716      2,847,939

    FUTURE INCOME TAXES                                38,678         32,284
    OBLIGATIONS UNDER CAPITAL LEASE                    28,921         47,185
                                                    2,408,315      2,927,408

    SHARE CAPITAL                                   1,555,644      1,527,177
    CONTRIBUTED SURPLUS                                55,497         40,489
    RETAINED EARNINGS                               1,343,420      2,678,974
                                                    2,954,561      4,246,640

                                                  $ 5,362,876    $ 7,174,048

                           Telehop Communications Inc.
      Selected Financial Information - Consolidated Statement of Operations

                                                                    for the
                                for the year ending     three months ending

                                 Dec. 31,     Dec. 31,   Dec. 31,    Dec. 31,
                                    2008         2007       2008        2007
    ------------------------------------- ------------ ---------- -----------

    OPERATING REVENUES        16,384,290   17,983,269  3,776,759   4,215,981
    Telecommunications costs  10,257,246   10,554,593  2,403,930   2,416,281
    ------------------------------------- ------------ ---------- -----------
    GROSS MARGIN               6,127,044    7,428,676  1,372,829   1,799,700
    ------------------------------------- ------------ ---------- -----------

    General and
     administration            4,260,064    3,220,896  1,218,449     988,900
    Marketing and selling      2,493,450    2,580,811    670,360     743,728
    Development and
     technical support         1,034,913      952,495    345,632     403,116
    Amortization                 419,609      461,798    100,613     115,160
    Write-down of intangible
     assets                       39,354            -          -           -
    Interest                       2,648       29,221        825       4,272
    ------------------------------------- ------------ ---------- -----------
                               8,250,038    7,245,221  2,335,879   2,255,176
    ------------------------------------- ------------ ---------- -----------

    OPERATING INCOME (LOSS)   (2,122,994)     183,455   (963,050)   (455,476)
    Other income                  69,653      165,077     10,006      35,786
    ------------------------------------- ------------ ---------- -----------

     INCOME TAXES             (2,053,341)     348,532   (953,044)   (419,690)
    Income taxes (recovery)     (717,787)     175,784   (379,093)   (137,913)
    ------------------------------------- ------------ ---------- -----------

    NET INCOME (LOSS)         (1,335,554)     172,748   (573,951)   (281,777)
    Other comprehensive
     income                            -            -
    ------------------------------------- ------------ ---------- -----------
     INCOME (LOSS)            (1,335,554)     172,748   (573,951)   (281,777)
    ------------------------------------- ------------ ---------- -----------

    EARNINGS (LOSS) PER SHARE      (0.10)        0.01      (0.04)      (0.01)
    ------------------------------------- ------------ ---------- -----------
    ------------------------------------- ------------ ---------- -----------

     PER SHARE                     (0.10)        0.01      (0.04)      (0.01)
    ------------------------------------- ------------ ---------- -----------
    ------------------------------------- ------------ ---------- -----------

                         Telehop Communications Inc.
                       Selected Financial Information -
                     Consolidated Statement of Cash Flows

                                                  year ending    year ending
                                                Dec. 31, 2008  Dec. 31, 2007
                                                -------------- --------------
      Net income (loss) for the year              $(1,335,554)   $   172,748
      Adjustments for non-cash items:
        Amortization expense                          419,609        461,798
        Write-down of intangible assets                39,354
        Future income tax provision                     6,394        (36,766)
        Stock-based compensation                       26,747        (49,063)
                                                     (843,450)       548,717

      Changes in working capital items:
        Accounts receivable                           501,702        444,157
        Prepaid expenses and deposits                 (68,748)       148,635
        Accounts payable and accrued liabilities     (241,226)      (328,239)
        Income taxes recoverable                     (529,914)      (478,805)

      Cash provided (used) by operating
       activities                                  (1,181,636)       334,465

        Acquisitions of property and equipment        (90,680)      (211,987)
        Acquisition of intangible assets              (68,870)       (52,635)

      Cash used by investing activities              (159,550)      (264,622)

        Capital lease payments                        (16,991)        (3,667)
        Dividend paid                                (267,270)      (127,035)
        Buy back of company shares                       (773)             -
        Issuance of common shares                      17,500        164,500

      Cash used by financing activities              (267,534)        33,798

    INCREASE (DECREASE) IN CASH POSITION           (1,608,720)       103,641

    CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR    2,882,305      2,778,664

    CASH AND CASH EQUIVALENTS, END OF YEAR        $ 1,273,585    $ 2,882,305

For further information:

For further information: Company Contact: Mr. Hersh Spiegelman,
President and CEO, (416) 494-4490,

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Telehop Communications Inc.

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