XFN Xfone Common Stock

- Revenue for nine months up 37% to approximately $17.4 million, LONDON, Nov. 14 /PRNewswire-FirstCall/ -- XFONE, Inc. (AMEX:XFN) ("XFONE" or "the Company"), an international diversified communications services company, today reported its third quarter financial results for the three and nine months ended September 30, 2005. Financial Highlights for the Three Months Ended September 30, 2005 Compared to the Three Months Ended September 30, 2004 Reflected in British Pounds (convenience translation into U.S. Dollars): - Revenues increased 26% to 3,419,183 pounds (US$6,012,634) from 2,704,934 pounds (US$4,756,626) - Gross profit margins on revenues increased to 32% compared to 26%. - Operating Profit increased to 73,479 pounds (US$129,214) from a loss of 105,440 pounds (US$185,890) on the third quarter of 2004. - Net loss increased from a loss of 72,879 pounds (US$128,158) for the three months ended September 30, 2004 to a loss of 118,803 pounds (US$208,915) for the three months ended September 30, 2005, primarily due to a one time loss of 181,055 pounds (US$318,385) related to the effects of Hurricane Katrina. - Net income, excluding the one time Hurricane Katrina effect, increased to approximately 62,252 pounds (US$109,470). - Losses per share were 0.017 pounds (US$0.030) compared to -0.010 pounds (-US$0.0176) on the third quarter of 2004. - Our Israeli "start up" subsidiary, Xfone 018 Ltd., achieved approximately breakeven EBITDA and a net loss of 21,490 pounds (US$37,790). Financial Highlights for the Nine Months Ended September 30, 2005 Compared to the Nine Months Ended September 30, 2004 Reflected in British Pounds (convenience translation into U.S. Dollars): - Revenues rose 37% to 9,912,515 pounds (US$17,431,158) from 7,244,644 pounds (US$12,739,706). - Gross profit margin on revenues improved to 33% of revenues, compared to 28% in 2004. - Operating Profit increased to 144,643 pounds (US$254,356) from 128,789 pounds (US$226,475). - Net income decreased from 101,049 pounds (US$177,695) for the nine months ended September 30, 2004 to a net loss of 15,469 pounds (US$27,202) for the Nine Months Ended September 30, 2005, due to the aforementioned continued investment in the build-up of the Company's Israeli-based international long distance carrier business and a one time loss of 181,055 pounds (US$318,385) related to the effects of Hurricane Katrina. - Net income, excluding the Israeli "start up" losses and Hurricane Katrina effects, increased to approximately 394,757 pounds (US$694,180). - Losses per share were 0.002 pounds (US$0.0035) compared to a diluted profit per share of 0.010 pounds (US$0.01758) for the nine months ended September 30, 2004. Commenting on the third quarter results, Guy Nissenson, President and Chief Executive Officer of XFONE, stated, "Sadly, the main event of this quarter was Hurricane Katrina which hit Louisiana and Mississippi. Our hopes and prayers are with the people who were devastated by this disaster. The storm hit at the heart of operations in Louisiana and Mississippi and although conditions were terrible, the staff continued to work to keep and restore communication in the hard-hit areas and helped the relief efforts. I'm extremely proud of our staff in Mississippi and the employees of I-55 in Louisiana for their dedication and courage throughout this crisis. We already feel the quick recovery of the economy in the region, we are confident in the future prosperity of this region and we are pleased that, with the I-55 acquisitions which still have to be consummated, the Louisiana-Mississippi area is becoming our most important market. Hurricane Katrina caused Xfone USA, our wholly owned US Subsidiary, losses in revenues and equipment and currently, with the exception of some areas in the Gulf Coast, our operations are completely back to normal." Continuing, Mr. Nissenson added, "We are pleased with the third quarter results achieving strong growth and higher profit margins. We are especially encouraged with our Israeli-based subsidiary, Xfone 018, which after 3 quarters of operations have already achieved a breakeven EBITDA. The Israeli operations are not far from reaching an overall profitability. We strongly believe that the I-55 transactions combined with the current trend in our UK, US and Israeli operations set the base for a successful 2006." XFONE, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEET September 30, December 31, September 30, 2005 2004 2005 pounds pounds Unaudited Convenience translation Unaudited Audited into U.S.$ Current assets Cash 1,598,897 797,097 $2,811,660 Accounts receivable, net 3,113,272 2,271,448 5,474,688 Prepaid expenses and other receivables 959,143 693,524 1,686,654 Loan to shareholder 123,965 123,965 217,992 Total Current Assets 5,795,277 3,886,034 $10,190,994 Loan to shareholder 123,966 123,966 217,994 Investments 64,728 20,885 113,824 Fixed assets Cost 2,460,478 1,516,854 4,326,751 Less - accumulated depreciation (446,574) (261,561) (785,300) Total fixed assets, net 2,013,904 1,255,293 3,541,451 Other Assets, net 2,523,958 57,106 4,438,380 Total assets 10,521,833 5,343,284 $18,502,643 Current liabilities Bank Credit and current portion of Note payables 415,336 72,041 $730,368 Trade payables 3,062,604 2,035,368 5,385,591 Other liabilities and accrued expenses 900,028 224,032 1,582,697 Obligations under capital leases - current portion 138,723 147,988 243,944 Total current liabilities 4,516,691 2,479,429 $7,942,600 Deferred taxes 35,942 52 63,204 Notes payable 546,000 509,867 960,140 Severance Pay 7,011 - 12,329 Obligations under capital lease 66,793 141,944 117,455 Convertible Notes 1,074,341 - 1,889,229 Total liabilities 6,246,778 3,131,292 $10,984,957 Shareholders' equity Common stock: 25,000,000 shares authorized, .000677 pounds par value; 6,887,671 issued and outstanding (December 31, 2004 - 6,220,871) 4,660 4,290 8,195 Foreign currency translation adjustment 134,850 1,210 237,134 Contributions in excess of shares 3,318,079 1,373,556 5,834,842 Retained earnings 817,467 832,936 1,437,515 Total shareholders' equity 4,275,056 2,211,992 7,517,686 Total liabilities and shareholders' equity 10,521,833 5,343,284 $18,502,643 XFONE, Inc. and Subsidiaries STATEMENTS OF OPERATIONS Three months Ended Nine months Ended September 30, September 30, 2005 2004 2005 2004 pounds pounds pounds pounds Unaudited Unaudited Unaudited Unaudited Revenues 3,419,183 2,704,934 9,912,515 7,244,644 Cost of revenues (2,326,743) (2,004,086) (6,662,272) (5,181,121) Gross profit 1,092,440 700,848 3,250,243 2,063,523 Operating expenses: Research and development (5,625) (13,890) (15,625) (33,890) Marketing and selling (334,742) (427,858) (991,802) (1,114,656) General and administrative (678,594) (364,540) (2,098,173) (786,188) Total operating expenses (1,018,961) (806,288) (3,105,600) (1,934,734) Operating profit (loss) 73,479 (105,440) 144,643 128,789 Financing expenses - net (26,928) (33,596) (68,203) (26,368) Equity in income of affiliated company (3,689) - 43,843 - Loss from Hurricane Katrina (181,055) - (181,055) - Other income 4,312 41,438 17,452 48,459 Income before minority interest and taxes (133,881) (97,598) (43,320) 150,880 Minority Interest 5,592 - 59,584 - Income Before taxes (128,288) (97,598) 16,265 150,880 Taxes on income 9,485 24,719 (31,734) (49,831) Net (loss) income (118,803) (72,879) (15,469) 101,049 (Loss) Earnings Per Share: Basic -0.017 -0.010 -0.002 0.020 Diluted -0.017 -0.010 -0.002 0.010 Convenience translation into US $ Three months Ended Nine months Ended September 30, September 30, 2005 2005 Unaudited Unaudited Revenues $6,012,634 $17,431,158 Cost of revenues (4,091,578) (11,715,605) Gross profit 1,921,056 5,715,553 Operating expenses: Research and development (9,892) (27,477) Marketing and selling (588,644) (1,744,084) General and administrative (1,193,307) (3,689,637) Total operating expenses (1,791,842) (5,461,197) Operating profit (loss) 129,214 254,356 Financing expenses - net (47,353) (119,935) Equity in income of affiliated company (6,487) 77,098 Loss from Hurricane Katrina (318,385) (318,385) Other income 7,583 30,689 Income before minority interest and taxes (235,428) (76,177) Minority Interest 9,834 104,779 Income Before taxes (225,594) 28,602 Taxes on income 16,679 (55,804) Net (loss) income ($208,915) ($27,202) (Loss) Earnings Per Share: Basic -$0.030 -$0.004 Diluted -$0.030 -$0.004 About XFONE, Inc. A U.S.-domiciled corporation, XFONE, Inc. is an international voice and data communications services provider with operations in the United Kingdom, the United States and Israel that offers a wide range of services, which include: local, long distance and international telephone services; prepaid and postpaid calling cards; cellular services; VoIP services; reselling opportunities; and email and fax broadcasting services. The Company serves customers across Europe, Australia, North America, South America, Asia and Africa. This press release contains forward-looking statements. The words or phrases "should," "would be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions are intended to identify "forward-looking statements." The Company's financial results reflected above should not be construed by any means as representative of the current or future value of its common stock. All information set forth in this press release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates and expectations. These statements are based on current estimates and projections, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include issues related to rapidly changing technology and evolving standards in the industries in which the Company and its subsidiaries operate; the ability to obtain sufficient funding to continue operations, maintain adequate cash flow, profitably exploit new business, and license and sign new agreements; the unpredictable nature of consumer preferences; and other factors set forth in the Company's most recently filed annual report and registration statement. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risks and uncertainties described in other documents that the Company files from time to time with the Securities and Exchange Commission. For More Information, Please Contact: XFONE, Inc. Alon Mualem, Chief Financial Officer, 011-972-39254446 or via email at DATASOURCE: XFONE, Inc. CONTACT: Alon Mualem, Chief Financial Officer of XFONE, Inc., 011-972-39254446, or Web site: http://www.xfone.com/

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