Phonetime Inc.
TSX : PHD

Phonetime Inc.

September 01, 2010 08:00 ET

Phonetime Disposes of Consumer Customer Base and Obtains Shareholder Approval of Proposed Private Placement of Units

To convert up to $2.3 million of outstanding debt to equity and raise up to $200,000 in cash

PICKERING, ONTARIO--(Marketwire - Sept. 1, 2010) - Phonetime Inc. (TSX:PHD) announced today that it has completed the disposition of its Retail customer base in a series of transactions. In addition, the Company has obtained minority shareholder approval to convert up to $2.3 million of outstanding inside shareholder debt to equity units and raise up to $200,000 in cash.

Consumer business disposition

The Company expects to realize approximately $5.6 Million of proceeds from the disposition of the Consumer businesses together with the collection of receivables. Funds from these transactions will be used to reduce bank debt to $2,500,000, pay off the Company's Subordinated debt and accumulated interest of $825,000, and improve working capital. In conjunction with these transactions, the Company has also been relieved of approximately $5.8 million in future commitments, and has resolved its contract dispute with its former CEO.

Minority Shareholder approval of proposed issuance of up to $2.5 Million in Units to Insiders: $2.3 million in exchange for existing shareholder debt and $200,000 for cash.

At the Annual and Special Meeting of Shareholders held on August 31st, 2010 (the "AGM") the minority shareholders voted in favor of allowing insider shareholders to convert up to $2,300,000 of debt into equity units and acquire additional equity units for up to $200,000 in cash. Each equity unit has a subscription price of $0.07, and is comprised of one common share, plus a six month $0.07 warrant and a 12 month $0.09 warrant.

With the closing of the sale of its Retail business the Company has a single focus in the Network Services business, and once the debt to equity conversion is completed the Company's debt will have been reduced to $3.5 million ($2.5 Million to senior lender and $1.0 Million to Shareholders) from $7.8 million at December 31, 2009. The Company has also significantly reduced its employee base and believes that it can profitably scale its revenue with its current staffing of 45 employees (2009 - 138 employees).

Other Shareholders matters

At the AGM, the Shareholders also:

  • Elected Salil Munjal, Jonathan Martin, Vedat Kalkuz, Ali Guven Kivilcim and Gary Clifford to serve as directors of the Company; and
  • Appointed Ernst & Young LLP as the Company's new auditor.

"We are pleased with the progress being made under our restructuring plan, and believe that our single business focus will significantly enhance our prospects for success", said Gary Clifford, Chairman and Interim CEO. "The ongoing support of our shareholders, employees, suppliers and customers has and continues to be exceptional. We have strengthened our balance sheet and our board of directors, and we continue to improve our business and corporate governance practices."

About Phonetime Inc.

Phonetime is an international telecommunications Network carrier. Phonetime provides long-distance services to major telephone carriers around the world. Phonetime's common shares trade 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.

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