Phonetime Announces Financial Results for 2011

TORONTO, 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 Operations

• Provides 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 at
	December 31,		December 31,		January 1,
	2011		2010		2010
	$		$		$
ASSETS
Current
Cash and cash equivalents	31		1,784		29
Accounts receivable, net	8,030		6,793		10,506
Prepaid expenses and deposits	151		62		410
Discontinued operations	-		-		4,386
Total current assets	8,212		8,639		15,331
Deferred tax assets	818		870		831
Property and equipment, net	388		842		1,570
Intangible assets, net	1,336		2,290		3,133
Goodwill	10,128		10,128		10,128
Discontinued operations	-		-		431
	20,882		22,769		31,424
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness	300		2,282		4,957
Accounts payable	3,939		6,475		5,193
Accrued liabilities	6,100		2,356		4,624
Income taxes payable	20		728		1,331
Current portion of other debts and capital leases	642		588		2,735
Discontinued operations	-		657		3,279
Total current liabilities	11,001		13,086		22,119
Other debts and capital leases	354		1,057		644
Deferred tax liabilities	459		869		1,193
Common share warrants derivatives	1		2,291		93
Discontinued operations	-		-		175
Total liabilities	11,815		17,303		24,224
Shareholders' equity
Common shares	13,072		12,960		12,354
Contributed surplus	2,482		2,369		2,167
Deficit	(6,487	)	(9,863	)	(7,321	)
Total shareholders' equity	9,067		5,466		7,200
	20,882		22,769		31,424

Phonetime Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
[amounts in thousands of US dollars, except per share information]
Years ended December 31
		2011		2010
		$		$
Revenue		120,835		138,861
Cost of revenue		112,616		130,138
Gross margin		8,219		8,723
Operating expenses		4,842		6,152
Income before the undernoted		3,377		2,571
Corporate expenses		841		2,269
Depreciation of property and equipment		517		760
Amortization of intangible assets		1,056		964
Stock-based compensation		113		202
Interest and debt costs		338		822
Mark to fair value of common share warrants		(2,290	)	(327	)
		575		4,690
Income (loss) before income taxes and discontinued operations		2,802		(2,119	)
Provision for (recovery of) income taxes
	Current	(180	)	103
	Deferred	(394	)	-
		(574	)	103
Income (loss) before discontinued operations		3,376		(2,222	)
Discontinued operations, net of tax of nil		-		(320	)
Net income (loss) and comprehensive income (loss) for the year		3,376		(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 operations
	Basic	0.02		(0.02	)
	Diluted	0.02		(0.02	)
Net loss per share from discontinued operations
	Basic and diluted	-		(0.00	)
Net earnings (loss) per share		0		0
	Basic	0.02		(0.02	)
	Diluted	0.02		(0.02	)
Weighted average number of common shares outstanding
- Basic and diluted		157,482,177		124,391,498

Phonetime Inc.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
[amounts in thousands of US dollars, except per share information]
	Common	Common	Contributed
	shares	shares	surplus	Deficit		Total
	#	$	$	$		$
Balance, As at January 1, 2010	112,971,424	12,354	2,167	(7,321	)	7,200
Net loss for the year	-	-	-	(2,542	)	(2,542	)
Issuance of common shares
Shares issued on acquisition of Modern Digital Communications Inc.	1,000,000	77	-	-		77
Shares issued from private placements	43,160,068	529	-	-		529
Stock-based compensation	-	-	202	-		202
Balance, As at December 31, 2010	157,131,492	12,960	2,369	(9,863	)	5,466
Net income for the year	-	-	-	3,376		3,376
Exercise of warrants	1,600,000	112	-	-		112
Stock-based compensation	-	-	113	-		113
Balance, As at December 31, 2011	158,731,492	13,072	2,482	(6,487	)	9,067

Phonetime Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[amounts in thousands of US dollars]
Years ended December 31
		2011		2010
		$		$
OPERATING ACTIVITIES
Income (loss) from continuing operations		3,376		(2,222	)
Net loss from discontinued operations		-		(320	)
		3,376		(2,542	)
Add (deduct) items not affecting cash
	Depreciation of property and equipment	517		760
	Amortization of intangible assets	1,056		964
	Stock-based compensation	113		195
	Deferred income taxes	(358	)	(363	)
	Mark to fair value of common share warrants	(2,290	)	2,198
	Discontinued operations	(657	)	(1,919	)
		1,757		(707	)
Changes in non-cash working capital balances related to operations
	Accounts receivable	(1,237	)	3,713
	Prepaid expenses and deposits	(89	)	348
	Accounts payable and accrued liabilities	1,208		(986	)
	Income taxes payable	(708	)	(603	)
	Discontinued operations	-		1,589
		(826	)	4,061
Cash provided by operating activities		931		3,354
INVESTING ACTIVITIES
Purchase of property and equipment and intangible assets		(165	)	(153	)
Discontinued operations		-		2,350
Cash provided by (used in) investing activities		(165	)	2,197
FINANCING ACTIVITIES
Issuance of share capital and warrants		112		613
Decrease 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	)	1,755
Cash, beginning of year		1,784		29
Cash, end of year		31		1,784