MISSISSAUGA, ON,
Financial Highlights
Income Statement Three month period ended Nine month period ended
metrics September 30 September 30
---------------- 2009 2008 2009 2008
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Revenue $ 44,406,164 $ 39,204,183 $128,262,495 $115,010,915
Gross Margin $ 5,194,888 $ 5,551,575 $ 16,092,216 $ 15,646,836
Operating Income
(loss)* $ 960,788 $ 1,887,539 $ 2,823,834 $ 5,571,861
Net Income $ 31,473 $ 751,102 $ 515,055 $ 2,103,906
Cash flow metrics
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From (Used in)
Operating
Activities $ (421,177) $ 1,801,944 $ 368,413 $ 3,191,400
From (Used in)
Investing
Activities $ (188,276) $ 13,142 $ (454,828) $ (223,528)
Used in
Financing
Activities $ (274,088) $ (890,475) $ (2,264,764) $ (4,374,689)
Earnings per
share
- fully diluted $ 0.000 $ 0.01 $ 0.005 $ 0.02
Common shares
outstanding
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Basic 108,908,925 107,988,092 108,298,409 107,548,676
Fully diluted 109,178,639 123,122,382 108,568,124 131,484,429
* Operating Income is a non-GAAP financial measure, please see
reconciliation to Net Income at the end of the press release.
Consolidated revenue for the third quarter ended
Operating income (a non-GAAP measure) was
Net Income for the three months ended
Cash flow from operating activities was a net outflow of
Working Capital deficit was
In
In the quarter ended
As a result of the above impasse, the Company has undertaken to seek a replacement to its Senior Lending facility and is also seeking an alternative to the current anticipated Subordinated Lender. The Company expects that it will be able to restructure its debts by the end of the first quarter 2010. There is no certainty that this restructuring can occur or that it can occur on favourable terms.
As at
Operational Highlights
- Completed a private placement, generating gross proceeds of
$560,000.
- Renegotiated the terms of its subordinated debentures, in
particular reducing the payments to US$95,000 per month from US
$176,667 per month and extending the maturity by twelve months.
- The Wholesale Division processed 1.26 billion minutes of
international long-distance calls, up 23% from 1.02 billion for Q3
2008.
- The number of carriers served by the Wholesale Division increased
to 800.
- The number of Consumer Division customers grew to 130,000.
Highlights Subsequent to Quarter-end
- Announced a number of changes to the Company's Board of Directors
designed to enhance independent direction and corporate
governance, including the appointment of Gary Clifford as
Chairman.
Company Outlook
In the coming periods, Phonetime expects to:
- Refinance its debt and or raise equity in the near term to
continue to implement its growth strategy (Phonetime's growth has
been financed over the past couple of years via debt, much of the
debt was short to mid-term in nature and has been maturing on the
Company);
- Continue to increase customer and supplier penetration in Asia and
Eastern Europe;
- Continue its organic growth strategy for the Consumer Division;
- Educate the capital markets on the business success to date and
market opportunity available to the Wholesale Division with
Console;
- Continue to execute on revenue and margin growth while containing
overheads; and
- Continue to development and modify internal controls to keep pace
with the changing business dynamics.
Phonetime will host a conference call to discuss its 2009 third quarter financial results on
To access the conference call by telephone, dial 416-644-3422 or 1-877-974-0445. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until
A live audio webcast of the conference call will be available at www.phonetime.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above web site for 30 days.
Phonetime will file its consolidated financial statements for the third quarter 2009 and related management's discussion and analysis with securities regulatory authorities within the applicable timelines. The material will be available through SEDAR at www.sedar.com and the Company's website, www.phonetime.com.
About Phonetime Inc.
Established in 1994, Phonetime is a leading supplier of international wholesale and retail long distance telecommunications services with network facilities in
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.
Readers are cautioned that non-GAAP measures do not have standardized meanings prescribed by GAAP. Operating income has no standardized meaning prescribed by Canadian GAAP and is considered a non-GAAP measure. Operating income is earnings before misappropriation of funds, stock compensation costs, interest, taxes, depreciation and amortization. This measure may not be comparable to similar measures presented by other issuers. This measure is described and presented herein in order to provide shareholders and potential investors with additional information regarding the Company's liquidity and ability to generate funds to finance its operations.
The reconciliation of Operating income (a non-GAAP financial measure) to Net income is as follows:
Three month period ended Nine month period ended
September 30 September 30
2009 2008 2009 2008
-------------------------------------------------------
Operating income $ 961 $ 1,883 $ 2,824 $ 5,572
Misappropriation
of funds - - - 228
Stock based
compensation 271 216 552 568
Amortization 284 242 715 715
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Earnings before
the undernoted 406 1,425 1,557 4,061
Financing costs 174 251 481 800
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Income before
income taxes 232 1,174 1,076 3,261
Income taxes 201 423 561 1,157
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Net income $ 31 $ 751 $ 515 $ 2,104
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The Consolidated financial results over the past eight quarters are
summarized below. Management believe that reviewing the business on a rolling
quarter basis is an appropriate way of analysing the business.
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For the Quarters Ended (unaudited)
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($ thousands) Q3 2009 Q2 2009 Q1 2009 Q4 2008
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Revenue 44,406 $ 41,280 $ 42,576 $ 42,156
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Cost of sales 39,211 36,218 36,740 37,426
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Gross margin -
in $s 5,195 5,062 5,836 4,730
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Gross margin -
in % 11.7% 12.3% 13.7% 11.2%
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Expenses
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Salaries and
benefits 2,124 2,163 2,299 2,459
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Sales and marketing 696 713 1,118 832
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General and
administrative 1,692 1,273 1,381 1,514
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Loss(gain) on foreign
exchange (277) 263 (177) 957
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Total operating costs 4,235 3,886 4,621 5,762
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Operating income(1) 961 650 1,215 (1,032)
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Misappropriation of
funds - - - 9
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Stock-based
compensation 271 104 179 148
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Amortization 284 176 254 254
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Financing costs 174 147 160 222
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Income taxes 201 (24) 384 23
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Net income (loss) $ 31 $ 247 $ 236 $ (1,688)
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For the Quarters Ended (unaudited)
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($ thousands) Q3 2008 Q2 2008 Q1 2008 Q4 2007
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Revenue $ 39,204 $ 39,311 $ 36,496 $ 29,643
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Cost of sales 33,652 34,132 31,580 25,169
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Gross margin -
in $s 5,552 5,179 4,916 4,474
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Gross margin -
in % 14.2% 13.2% 13.5% 15.1%
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Expenses
-------------------------------------------------------------------------
Salaries and
benefits 2,668 2,125 1,979 1,981
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Sales and marketing 295 173 179 253
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General and
administrative 834 996 1,023 1,692
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Loss(gain) on foreign
exchange (128) 29 (99) 15
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Total operating costs 3,669 3,323 3,082 3,941
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Operating income(1) 1,883 1,856 1,834 533
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Misappropriation of
funds - 85 143 260
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Stock-based
compensation 216 142 210 353
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Amortization 242 244 230 113
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Financing costs 251 267 282 26
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Income taxes 423 384 350 (112)
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Net income (loss) $ 751 $ 734 $ 619 $ (107)
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(1) Non-GAAP financial measure - see the cautionary statement.
PHONETIME INC.
CONSOLIDATE BALANCE SHEETS
AT SEPTEMBER 30, 2009
September 30, December 31,
2009 2008
(Unaudited) (Audited)
ASSETS
Current assets
Short-term investment $ 29,219 $ 29,219
Accounts receivable 14,289,931 13,881,509
Inventories 121,248 61,707
Prepaid expenses and deposits 297,961 376,398
Future income tax assets 67,000 67,000
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14,805,359 14,415,833
Future income tax assets 834,669 905,423
Property and equipment 2,321,917 1,990,611
Goodwill and other intangible assets 15,550,112 15,525,255
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$ 33,512,057 $ 32,837,122
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 5,065,153 $ 2,713,974
Accounts payable and accrued liabilities 8,815,799 10,062,890
Customer deposits 63,402 75,791
Income taxes payable 1,579,636 1,100,983
Loan from related party 200,000 -
Short-term loan 250,000 -
Current portion of long-term debt 477,670 1,530,453
Current portion of loan payable 184,745 262,949
Current portion of capital lease obligations 565,094 454,605
Current portion of subordinated debentures 978,100 2,322,723
Deferred items 368,666 515,109
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18,548,265 19,039,477
Long-term portion of deferred items 27,716 44,345
Loan payable - 141,888
Capital lease obligations 365,942 268,412
Subordinated debentures 853,349 1,253,345
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19,795,272 20,747,467
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Commitments and contingencies
Shareholders' equity
Share capital 15,310,594 14,761,752
Warrants 136,158 -
Contributed surplus 2,616,880 2,189,805
Deficit (4,346,847) (4,861,902)
13,716,785 12,089,655
$ 33,512,057 32,837,122
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PHONETIME INC.
Consolidated Statements of Income and
Comprehensive Income and Deficit
Three months ended Nine months ended
September 30 September 30 September 30 September 30
2009 2008 2009 2008
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(Not reviewed)
Sales $ 44,406,164 $ 39,204,183 $128,262,495 $115,010,915
Cost of sales 39,211,276 33,652,608 112,170,279 99,364,079
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5,194,888 5,551,575 16,092,216 15,646,836
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Operating expenses 4,510,731 3,796,237 13,458,993 10,272,855
Loss (gain) on
foreign exchange (276,621) (128,201) (190,611) (197,880)
Stock based
compensation 270,457 216,406 552,075 567,851
Amortization
of property
and equipment 248,780 216,170 627,674 638,272
Amortization of
intangible assets 35,404 25,669 86,743 77,008
Interest paid
financing costs 134,884 149,682 258,868 434,091
Non-cash
financing costs 38,460 101,616 222,207 365,907
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4,962,095 4,377,579 15,015,949 12,158,104
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Income before the
undernoted and
income taxes 232,793 1,173,996 1,076,267 3,488,732
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Costs due to
misappropriation
of funds - - - 228,120
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Income before
income taxes 232,793 1,173,996 1,076,267 3,260,612
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Income tax expense
Current 176,781 193,623 490,458 339,546
Future
income taxes 24,539 229,271 70,754 817,160
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201,320 422,894 561,212 1,156,706
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Net income and
comprehensive
income 31,473 751,102 515,055 2,103,906
Deficit, beginning
of period (4,378,320) (3,925,408) (4,861,902) (5,278,212)
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Deficit, end
of period $ (4,346,847) $ (3,174,306) $ (4,346,847) $ (3,174,306)
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Earnings
per share
Basic earnings
per share $ 0.00 $ 0.01 $ 0.005 $ 0.02
Diluted earnings
per share $ 0.00 $ 0.01 $ 0.005 $ 0.02
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For further information: Wayne Silver, Phonetime, President & CEO, (905) 361-8304, [email protected]; Gary M. Clifford, Phonetime, Chairman, (416) 418-9802, [email protected]; Joe Racanelli, Equicom Group, (416) 815-0700 x 243, [email protected]
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