Phonetime Inc.
OTC Bulletin Board : PHOEF

Phonetime Inc.

August 30, 2007 08:00 ET

Phonetime Reports Half Year Revenue of $44.4 Million

Company Records New Sales Record with 371% Jump in Q2. Company Restates Q1 Financials

MISSISSAUGA, ONTARIO--(Marketwire - Aug. 30, 2007) - Phonetime Inc. (TSX VENTURE:PHD)(OTCBB:PHOEF), announced today that in the second quarter of 2007, ended June 30th, it recorded the highest revenue of any single quarter in its 12 year history as sales exceeded $23.0 Million. This was a 371% increase over the same quarter of 2006. In the first six months of 2007, the Company generated $44.4 million in sales, $34.9 million more than in the same period of the prior year, as wholesale services continued its rapid growth from a standing start late in the fourth quarter of 2006.

In the first half of 2007, the Company experienced an operating profit of nearly $345,000. Net Profit was adversely affected by the strength of the Canadian Dollar, which contributed to foreign exchange losses as most of the Company's business and bank deposits are kept in $US funds. Together with the increase in non-operating expenses, which were $848,000 higher than in 2006, these losses resulted in a year-to-date loss of $837,000. These non-operating expenses included amortization ($641,000), stock-based compensation ($525,000) totalling $1.17 million which had no impact on cash flow.

Phonetime's increase in sales is attributable to the substantial growth of its new wholesale division, Phonetime Network, and the continued growth of the retail revenue from its Call Select subsidiary. In the first half of 2007, Gross Profit Margin was 11.1% vs. 38.2% in the first six months of 2006. This decreased margin was anticipated due to the lower margins generated by the Company's wholesale services. In absolute dollars, Phonetime's Gross Profit of $4.93 million in the six month period represents an increase of 36.8% over its Gross Profit of $3.60 million in the first half of 2006.

At the end of the second quarter 2007, the Company's Current Ratio improved relative to the end of 2006, to 1.95:1 from 1.92:1, as the Company continued its practice of closely managing its balance sheet. At the end of Q2 2007, Phonetime had $7.6 million in cash, cash equivalents, short term investments, and current accounts receivable as well as two unused credit facilities of US$3.0 million and CDN$250,000. With these assets and its strong balance sheet, Phonetime is well positioned to continue its expansion from both internally generated growth and acquisitions.

Wayne Silver, Phonetime's President & C.E.O. stated, "In the first half of 2007, we generated nearly 70% more revenue than we achieved during the whole previous year. Furthermore, on a pure operations basis, despite all our start up costs, foreign exchange loss and non-cash items, the Company still generated an operating profit. We are proud of the early success of our wholesale programs and we anticipate that our momentum will carry through the balance of this year".

The Company also announced it had restated its financial results and MD&A for the first quarter of 2007. The restatement of the results was due to an understatement of Accounts Payable. The financial results and MD&A's for both fiscal quarters can be found on


Established in 1994, Phonetime is a leading Canadian supplier of International Long Distance telecommunication services for individual consumers and businesses as well as wholesale long distance call delivery to large and small domestic and international carriers. Phonetime Inc. is publicly traded, listed on the Toronto Venture Exchange (TSX VENTURE:PHD). Licensed in Canada as a Class A International Carrier by the CRTC, Phonetime operates one of the largest and most advanced private telecommunications networks in Canada. In Canada, Phonetime has 40 Points-of-Presence covering most metropolitan areas, effectively offering on-net service to approximately 85% of Canada's population. Phonetime also has connections in 140 countries around the world, facilities in London, England and Frankfurt, Germany and administrative offices in Miami, Florida.

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.

The TSX Venture Exchange has neither approved nor disapproved the contents of the press release.

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