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Press release from Marketwire

Phonetime Announces Financial Results for 2011

Phonetime Reports Profit Net Income of $3.4 Million or $0.02 per share in 2011 compared to Net loss of $2.5 Million or ($0.02) per share in 2010

Wednesday, March 28, 2012

Phonetime Announces Financial Results for 201118:16 EDT Wednesday, March 28, 2012TORONTO, ONTARIO--(Marketwire - March 28, 2012) - Phonetime Inc. (TSX:PHD) announced today the financial results for its 2011 fiscal year. Net income was $3.4 Million, or $0.02 per share, compared to a Net loss of $2.5 Million, or a net loss of ($0.02) per share, in 2010. The Company is pleased to report a year over year improvement in Net income of $5.9 Million, or $0.04 per share. Management attributes this improvement to the Company's restructuring in 2010.Critical Success Factors for the 2010 restructuring:Strengthened board of directors and enhanced board supervision of operations Reduced the size of management and empowered remaining management to implement change Non-strategic operations were curtailed or liquidated Non-contributing revenues were eliminated A focus on strategic markets and branding with key business partners Investments were made in back office automation and to enhance operating processes Equity was issued at $0.07 to provide funding for the implementation of the restructuring Key Income Statement metrics for 2011:EBITDA(1) $2.5 Million compared to $0.3 Million in 2010 Net income of $3.3 Million compared to a Net loss of $2.5 Million in 2010 The $5.9 Million increase in Net income in 2011 is built up as follows: $2.2M improvement in operations $0.5M reduction in interest expense $0.7M reduction in income taxes expense $2.3M one-time non-cash gain upon expiry of 73 million common stock warrants $0.2M other non-cash items Key Balance sheet metrics as at December 31, 2011:Shareholder's equity of $9.1 Million compared to $5.5 Million on December 31, 2010 Bank debt of $0.3 Million compared to $5.0 Million on January 1, 2010 Unused available borrowings of $2.2 Million compared to Nil on January 1, 2010 Total assets of $21 Million compared to $31 Million on January 1, 2010 Total liabilities of $11.8 Million compared to $24.2 Million on January 1, 2010 Total debt of $1.3 Million compared to $8.4 Million on January 1, 2010 Working capital deficit of $2.8 Million compared to $6.8 Million on January 1, 2010 Phonetime OperationsProvides 8 billion minutes of communications annually Averages 60 million phone calls per month Powerful software-based Procurement Engine Experienced traders of minutes Seasoned management team Outlook for 2012"We expect EBITDA(1) to grow by 25% in 2012; while remaining cautious of heightened credit risk. We are reviewing business opportunities in growing traffic areas including SMS messaging, Mobile wallet and MVNO platforms. We are also looking at opportunities to consolidate traffic with competitors and partners. A Normal Course Issuer Bid has been put in place to allow the Company to acquire for cancellation common stock of the Company, at times when excess of supply of stock becomes available." said, Gary Clifford, Executive Chairman. "We are excited about our progress in 2011. Phonetime is back on track, and our seasoned management team is poised to take advantage of market opportunities brought about by the ongoing recession and the need for telecommunication providers to be more efficient and effective in the procurement of telecommunications traffic. Shortly, I intend to step back from management, and remain on as Chairman of the Board."The Company's annual audited consolidated financial statements have been filed on SEDAR.About Phonetime Inc.Established in 1994, Phonetime is a leading provider of international and domestic switched voice services to the world's telecommunication operators and voice service providers. Phonetime's customers and suppliers include, fixed line operators, mobile operators, retail and VoIP service providers, who buy and sell voice and IP telecommunications services. Phonetime has traders in Europe, Asia and the Americas using its proprietary trading platform with embedded intelligence, which includes profitability benchmarking, call routing, credit management, network quality visibility and loss prevention. As voice technology evolves Phonetime has commoditized its trading philosophy and along with its platform is positioned to emerge as a leading clearing house. Phonetime is a public company listed on the Toronto Stock Exchange (TSX).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.(1)EBITDA is non-GAAP financial measure. It is defined as Income from continuing operations excluding depreciation and amortization expense, stock based compensation, interest expense and mark to fair value of common stock warrants.Phonetime Inc.CONSOLIDATED STATEMENT OF FINANCIAL POSITION[amounts in thousands of US dollars]As atDecember 31,December 31,January 1,201120102010$$$ASSETSCurrentCash and cash equivalents311,78429Accounts receivable, net8,0306,79310,506Prepaid expenses and deposits15162410Discontinued operations--4,386Total current assets8,2128,63915,331Deferred tax assets818870831Property and equipment, net3888421,570Intangible assets, net1,3362,2903,133Goodwill10,12810,12810,128Discontinued operations--43120,88222,76931,424LIABILITIES AND SHAREHOLDERS' EQUITYCurrentBank indebtedness3002,2824,957Accounts payable3,9396,4755,193Accrued liabilities6,1002,3564,624Income taxes payable207281,331Current portion of other debts and capital leases6425882,735Discontinued operations-6573,279Total current liabilities11,00113,08622,119Other debts and capital leases3541,057644Deferred tax liabilities4598691,193Common share warrants derivatives12,29193Discontinued operations--175Total liabilities11,81517,30324,224Shareholders' equityCommon shares13,07212,96012,354Contributed surplus2,4822,3692,167Deficit(6,487)(9,863)(7,321)Total shareholders' equity9,0675,4667,20020,88222,76931,424Phonetime Inc.CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT[amounts in thousands of US dollars, except per share information]Years ended December 3120112010$$Revenue120,835138,861Cost of revenue112,616130,138Gross margin8,2198,723Operating expenses4,8426,152Income before the undernoted3,3772,571Corporate expenses8412,269Depreciation of property and equipment517760Amortization of intangible assets1,056964Stock-based compensation113202Interest and debt costs338822Mark to fair value of common share warrants(2,290)(327)5754,690Income (loss) before income taxes and discontinued operations2,802(2,119)Provision for (recovery of) income taxesCurrent(180)103Deferred(394)-(574)103Income (loss) before discontinued operations3,376(2,222)Discontinued operations, net of tax of nil-(320)Net income (loss) and comprehensive income (loss) for the year3,376(2,542)Deficit, beginning of year(9,863)(7,321)Deficit, end of year(6,487)(9,863)Net earnings (loss) per share from continuing operationsBasic0.02(0.02)Diluted0.02(0.02)Net loss per share from discontinued operationsBasic and diluted-(0.00)Net earnings (loss) per share00Basic0.02(0.02)Diluted0.02(0.02)Weighted average number of common shares outstanding- Basic and diluted157,482,177124,391,498Phonetime Inc.CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY[amounts in thousands of US dollars, except per share information]CommonCommonContributedsharessharessurplusDeficitTotal#$$$$Balance, As at January 1, 2010112,971,42412,3542,167(7,321)7,200Net loss for the year---(2,542)(2,542)Issuance of common sharesShares issued on acquisition of Modern Digital Communications Inc.1,000,00077--77Shares issued from private placements43,160,068529--529Stock-based compensation--202-202Balance, As at December 31, 2010157,131,49212,9602,369(9,863)5,466Net income for the year---3,3763,376Exercise of warrants1,600,000112--112Stock-based compensation--113-113Balance, As at December 31, 2011158,731,49213,0722,482(6,487)9,067Phonetime Inc.CONSOLIDATED STATEMENTS OF CASH FLOWS[amounts in thousands of US dollars]Years ended December 3120112010$$OPERATING ACTIVITIESIncome (loss) from continuing operations3,376(2,222)Net loss from discontinued operations-(320)3,376(2,542)Add (deduct) items not affecting cashDepreciation of property and equipment517760Amortization of intangible assets1,056964Stock-based compensation113195Deferred income taxes(358)(363)Mark to fair value of common share warrants(2,290)2,198Discontinued operations(657)(1,919)1,757(707)Changes in non-cash working capital balances related to operationsAccounts receivable(1,237)3,713Prepaid expenses and deposits(89)348Accounts payable and accrued liabilities1,208(986)Income taxes payable(708)(603)Discontinued operations-1,589(826)4,061Cash provided by operating activities9313,354INVESTING ACTIVITIESPurchase of property and equipment and intangible assets(165)(153)Discontinued operations-2,350Cash provided by (used in) investing activities(165)2,197FINANCING ACTIVITIESIssuance of share capital and warrants112613Decrease in bank indebtedness(1,982)(2,675)Repayment of other debts and capital leases, net of issuances(649)(1,734)Cash used in financing activities(2,519)(3,796)Net increase (decrease) in cash during the year(1,753)1,755Cash, beginning of year1,78429Cash, end of year311,784FOR FURTHER INFORMATION PLEASE CONTACT: Gary CliffordPhonetime Inc.Executive Chairman+416-418-9802gary@phonetime.comORMichael VazquezPhonetime Inc.President and COO+954-608-5058mike@phonetime.com