Phonetime Inc.
TSX : PHD

Phonetime Inc.

November 16, 2010 08:15 ET

Financial Results for the Three and Nine Months Ended September 30, 2010 Proposed Private Placement of $700,000 of Units

PICKERING, ONTARIO--(Marketwire - Nov. 16, 2010) - Phonetime Inc. (TSX:PHD) announced its financial results for the three and nine months ended September 30, 2010.

  Three months ended     Nine months ended  
($000's of CDN dollars, except for per share information) September 30, September 30,     September 30, September 30,  
    2010 2009     2010 2009  
     
Revenue $ 34,873   $ 36,678   $ 114,301   $ 106,489  
Cost of sales $ 31,431   $ 34,100   $ 105,852   $ 96,453  
  $ 3,442   $ 2,578   $ 8,449   $ 10,036  
    9.9 %   7.0 %   7.4 %   9.4 %
     
Operating expenses (note 13) $ 1,755   $ 3,042   $ 6,815   $ 9,087  
                         
Income before undernoted $ 1,687   $ (464 ) $ 1,634   $ 949  
     
     
Depreciation $ 69   $ 125   $ 507   $ 289  
Amortization $ 226   $ 271   $ 728   $ 794  
Interest and debt costs (note 10) $ 260   $ 174   $ 713   $ 481  
Stock Based Compensation $ 27   $ 93   $ 166   $ 312  
Stock issued for services $ -   $ 125   $ -   $ 125  
  $ 582   $ 788   $ 2,114   $ 2,001  
     
Net income before taxes and discontinued operations $ 1,105   $ (1,252 ) $ (480 ) $ (1,052 )
     
Income taxes - current $ 69   $ 162   $ 421   $ 476  
Income taxes - future income tax $ (95 ) $ (71 ) $ (221 ) $ (216 )
Income taxes - other $ -   $ -   $ 302   $ -  
  $ (27 ) $ 91   $ 502   $ 260  
     
Net Income before discontinued operations $ 1,132   $ (1,343 ) $ (982 ) $ (1,312 )
     
Discontinued operations (net of tax of Nil) (note 7) $ (991 ) $ 86   $ 481   $ 581  
     
Net and comprehensive income (loss) $ 2,123   $ (1,429 ) $ (1,462 ) $ (1,893 )
                 
     
  Three months ended Nine months ended
    September 30,   September 30,     September 30, September 30,
    2010   2009     2010     2009  
Net income (loss) per share                        
  Basic $ 0.02 $ (0.01 ) $ (0.01 ) $   (0.02 )
  Diluted $ 0.02 $ (0.01 ) $ (0.01 ) $   (0.02 )
             
Balance sheet metrics   September 30,     December 31,  
(000's of Cdn dollars - unaudited)   2010     2010  
             
Total Assets $ 27,100   $ 34,520  
Total Equity $ 10,197   $ 9,007  
Total Receivables $ 9,902   $ 11,999  
Total Debt $ 4,287   $ 8,718  
Working Capital $ (3,532 ) $ (7,516 )
Accounts Receivable to bank debt coverage (AR/bank debt)   4.2   $ 2.3  
Debt to Equity ratio   0.42     0.97  
Average Days Sales outstanding   26     28  
Average Days Payables outstanding   28     28  

Early in 2010, Phonetime's management made the difficult decision to focus on its largest value creation opportunity for shareholders and to exit all other opportunities. Below is management's summary progress report:

Objective Action
   
Increase equity Added $3 Million equity in 2010
   
Reduce liabilities Paid liabilities down by $8 Million in 2010
   
Refinance debt Extended senior debt facility through March 2011
  Extended junior subordinated debt through 2013
  Paid off suborinated debt and capital leases in 2010
   
Exit non-strategic assets Completed (August 30th, 2010)
   
Maintain revenue levels for 2010 Achieved
   
Right size staff Staff reduced to 50 from 138 in December 2009
   
Restore profitability in 2010 Margins of $3.4 million in Q3 – 2010
  EBITDA of $1.7 million in Q3 – 2010
  Net Income of $1.1 million in Q3 - 2010
   
Strengthen board of Directors New slate of directors put in place in August 2010

"In the Fourth quarter of 2010, we expect we will add to our success by replicating the efforts and results of the Third quarter." said Gary Clifford, Chairman and CEO. "2011 should see a return to revenue growth and sustained profitability. Thank you for your support as we continue to transform our company."

A complete set of third quarter financial statements and Management Discussion and Analysis can be found on www.sedar.com. Investors are cautioned to read all public filings of any Company before making an investment decision.

Equity Financing

Phonetime also announced today a proposal to raise $700,000 of equity financing by way of a private placement at $0.07 per Unit. Each unit is comprised of one common share and one warrant to acquire four-tenths (0.4) of a common share. The sole subscriber is a Capital Pool Company which is listed on the TSX Venture Exchange and is associated with Phonetime's Chairman and CEO. The transaction is expected to close in the fourth quarter, and will be subject to approval of the subscriber's disinterested shareholders and to regulatory approval.

About Phonetime Inc.

Phonetime handles the procurement and completion of long distance services for the largest and smallest telecommunications providers around the world. Phonetime is a best in class provider of outsourced telecommunication services. Phonetime's common shares are traded on the Toronto Stock Exchange under the symbol PHD. More information can be found at the Company's website, www.phonetime.com.

Caution Regarding Forward Looking Information:

This press release contains forward-looking statements, which may be identified by words like "expects", "anticipates", "plans", "intends", "indicates" or similar expressions. These statements are not a guarantee of future performance and are inherently subject to risks and uncertainties.

Phonetime's actual results could differ materially from those currently anticipated due to a number of factors set forth in reports and other documents filed by the Company with Canadian securities regulatory authorities from time to time. See www.sedar.com which contains all securities files.

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