InPhonic Announces Record Financial Results for Second Quarter 2005 and Reaffirms Guidance

Share Name	Share Symbol	Market	Type
Inphonic (MM)	NASDAQ:INPC	NASDAQ	Common Stock

Inphonic (NASDAQ:INPC)
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InPhonic, Inc. (NASDAQ:INPC), a leading online seller of wireless services, today reported financial results for its second quarter ended June 30, 2005. Consolidated Financial Results -0- *T GAAP Results -- Revenues were $81.6 million for the second quarter 2005, compared to $50.1 million for the second quarter 2004, an increase of 63% year over year. -- Net loss attributable to common stockholders was $(1.7) million or $(0.05) per basic and diluted share for the second quarter 2005, a 74% improvement compared to a net loss attributable to common stockholders of $(6.5) million, or $(0.56) per basic and diluted share, for the second quarter 2004. -- The net loss attributable to common stockholders for the second quarter 2005 included stock-based compensation of $(2.8) million, loss on investment of $(0.2) million, and depreciation and amortization of $(2.1) million. The net loss attributable to common stockholders for the second quarter 2004 included stock-based compensation of $(2.7) million, loss on investment of $(0.2) million, and depreciation and amortization of $(1.4) million. -- General and administrative costs for the second quarter 2005 were $13.2 million, including stock-based compensation of $2.2 million. This compares to $11.9 million for the second quarter 2004, including stock-based compensation of $2.4 million. Sales and marketing costs for the second quarter 2005 were $20.6 million, including stock-based compensation of $0.6 million. This compares to $11.3 million for the second quarter 2004, including stock-based compensation of $0.3 million. Non-GAAP Results -- Revenues were $81.6 million for the second quarter 2005, compared with revenues of $49.1 million for the second quarter 2004 (excluding, for comparison purposes, the effects of the one-time recognition of $1.0 million in revenues in the second quarter 2004 that were previously deferred in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements), an increase of 66% year over year. -- Adjusted EBITDA for the second quarter 2005 was $6.9 million, compared to Adjusted EBITDA of $0.5 million for the second quarter 2004, an improvement of $6.4 million year over year. -- Adjusted Earnings before Taxes ("Adjusted EBT") for the second quarter 2005 were $5.4 million, or $0.13 per diluted share, reflecting an improvement of $6.0 million compared to Adjusted EBT of $(0.6) million, or $(0.02) per diluted share for the second quarter 2004. -- General and administrative costs for the second quarter 2005 were $9.4 million, excluding stock-based compensation of $2.2 million, settlement costs of $0.4 million and non-recurring expenses of $1.2 million, compared to general and administrative costs of $9.5 million, excluding stock-based compensation of $2.4 million, for the second quarter 2004. Sales and marketing costs for the second quarter 2005 were $19.1 million, excluding stock-based compensation of $0.6 million, settlement costs of $0.5 million and non-recurring costs of $0.4 million, compared to sales and marketing costs of $11.0 million, excluding stock-based compensation of $0.3 million, for the second quarter 2004. *T The components of Adjusted EBITDA, Adjusted EBT and Adjusted EBT per diluted share are discussed below under "Non-GAAP Financial Measures", and a reconciliation between GAAP and Non-GAAP results is shown immediately following the Unaudited Consolidated Statements of Cash Flows. "Our financial results reflect solid execution across our business," said David A. Steinberg, chairman and chief executive officer. "We remain focused on expanding our business and enhancing our value proposition to the carriers, our marketing partners and customers. After having achieved our first half 2005 goals, InPhonic is well positioned to execute on our business plan for the remainder of the year and beyond." -0- *T Operating Highlights -- Launched an online customer acquisition program for Sprint PCS, employing InPhonic's expansive online marketing channels and comprehensive e-commerce platform; -- Signed multi-year wholesale contract with Cingular Wireless, the nation's largest wireless provider, to resell wireless minutes and data services provisioned on the Cingular GSM nationwide network; -- Completed the integration of the A1 Wireless USA, Inc. acquisition; -- Acquired VMC Satellite, a leading satellite television activation company; -- Added Hawaii's largest telecommunications provider, Hawaiian Telecom, previously Verizon Hawaii, as MVNO client; -- Launched premium Accessories and Device Protection programs; -- Initiated VoIP communication service offering through Vonage Partnership. *T Business Outlook The following business outlook is based on current information and expectations as of August 4, 2005. InPhonic's business outlook as of today will be available on the Company's Investor Relations Web site throughout the current quarter. It is currently expected the outlook will not be updated until the release of InPhonic's next quarterly earnings announcement, notwithstanding subsequent developments; however, InPhonic may update the outlook or any portion thereof at any time. InPhonic is providing guidance for the third quarter 2005 and reaffirming guidance for the full year 2005. -0- *T Guidance Guidance Figures in millions, except Adjusted EBT Q3 2005 FY 2005 ---------------------------------------- Revenues $90.0-$92.0 $345.0-$355.0 Adjusted EBITDA $11.0-$12.0 $36.0-$37.0 Adjusted EBT, per share $0.24-$0.26 $0.75-$0.78 *T Forward-Looking Statements This press release contains forward-looking statements, including, without limitation, all statements related to future financial performance, plans to grow our business and build our brand. Words such as "expect," "anticipate" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon our current expectations. Forward-looking statements involve risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to our fluctuating operating results, seasonality in our business, our ability to acquire products on reasonable terms, our online business model, demand for our products, the strength of our brand, competition, our ability to fulfill orders and other risks detailed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the Year ended December 31, 2004 and our Quarterly Reports on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and InPhonic undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date hereof. Conference Call Company management will be holding a conference call to discuss its second quarter 2005 financial results Today, Thursday, August 4, 2005 after the close of the day's trading on the NASDAQ Stock Market. InPhonic will host a conference call, open to the general public, at 5:00 PM Eastern Time to discuss financial results and provide a Company update. The conference call can be accessed by the following: -0- *T -- 877-502-9272 (Domestic) or 913-981-5581 (International); passcode 1943863. -- The replay will be available through August 13, 2005 by dialing 888-203-1112 (Domestic) or 719-457-0820 (International); passcode 1943863. -- The Company will also audio Webcast the call. A link to the audio Webcast will be available on the Company's website at www.inphonic.com in the Investor Relations section. -- More call information and an audio archive following the call will be available on the Company's website at www.inphonic.com in the Investor Relations section. -- Individual investors can listen to the call at www.fulldisclosure.com , Thomson/CCBN's individual investor portal. -- Institutional investors can access the call via the password-protected event management site, www.streetevents.com. *T Non-GAAP Financial Measures To supplement the Company's unaudited consolidated financial statements, which are presented in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), InPhonic uses the following Non-GAAP measures of certain components of financial performance. Adjusted EBITDA -Earnings before interest, taxes, depreciation and amortization adjusted for stock-based compensation, loss on investments, restructuring costs, settlement costs and non-recurring expenses, which are defined as expenses that have been eliminated during the period that will not be incurred in future periods. The Company's calculation of Adjusted EBITDA for the first quarter 2005 did not incorporate the impact of settlement costs or non-recurring expenses. Adjusted EBT - Earnings excluding net interest and other expense (income), stock-based compensation, restructuring costs, loss on investments, depreciation and amortization related to acquisitions, settlement costs and non-recurring expenses, which are defined as expenses that have been eliminated during the period that will not be incurred in future periods. The Company's calculation of Adjusted EBT for the first quarter 2005 did not incorporate the impact of settlement costs or non-recurring expenses. Adjusted EBT per diluted share - per share value of Adjusted EBT on fully-diluted basis, does not include the impact of treasury stock. The Company believes that the presentation of Adjusted EBITDA, Adjusted EBT and Adjusted EBT per diluted share provides useful information to management and investors regarding certain additional financial and business trends relating to its financial condition and results of operations. The Company believes when U.S. GAAP net income and U.S. GAAP net income per share are viewed in conjunction with these Non-GAAP measures, investors are provided with a more meaningful understanding of the Company's ongoing operating performance. In addition, the Company's management uses these measures for reviewing the Company's financial results. These measures should be considered in addition to results prepared in accordance with U.S. GAAP, but should not be considered a substitute for, or superior to, GAAP results. The Company has reconciled Non-GAAP financial measures included in this press release to the nearest GAAP measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these Non-GAAP financial measures to their most directly comparable GAAP financial measure. About InPhonic Headquartered in Washington, D.C., InPhonic, Inc. (NASDAQ:INPC) is a leading online seller of wireless services and products. InPhonic sells these services and products, and provides world-class customer service through websites that it creates and manages for online businesses, national retailers, member-based organizations and associations under their own brands. InPhonic also operates Wirefly, a leading mobile phones and wireless plans comparison site that was awarded "Best of the Web" by Forbes magazine in 2004. InPhonic owns and operates Liberty Wireless, a leading MVNO and can deliver a full range of mobility solutions to enterprise clients through its Mobile Virtual Network Enablement (MVNE) platform. In 2004, InPhonic was selected #1 company of the year on the Inc. 500 - Inc. Magazine's list of the fastest-growing privately held companies in the United States. InPhonic was named T-Mobile's Internet Partner of the Year for 2004. For more information on the company, its products and services, visit the InPhonic Corporate website at www.inphonic.com. -0- *T INPHONIC, INC. & SUBSIDIARIES Unaudited Consolidated Statements of Operations (in thousands, except per share and share amounts) Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 2004 2005 2004 2005 ----------- ----------- ----------- ----------- Revenues: Activations and services $ 40,405 $ 61,266 $ 73,827 $ 118,508 Equipment 9,697 20,352 16,351 39,717 ----------- ----------- ----------- ----------- Total revenues 50,102 81,618 90,178 158,225 ----------- ----------- ----------- ----------- Cost of revenues, excluding depreciation and amortization: Activations and services 5,807 4,442 11,836 9,779 Equipment 22,289 42,642 39,236 82,738 ----------- ----------- ----------- ----------- Total cost of revenues 28,096 47,084 51,072 92,517 ----------- ----------- ----------- ----------- Operating expenses: General and administrative expenses, excluding depreciation and amortization 11,916 13,192 22,059 31,301 Sales and marketing expenses, excluding depreciation and amortization 11,317 20,619 21,337 39,026 Depreciation and amortization 1,425 2,142 3,034 3,919 Restructuring costs - 245 - 394 Loss on investment 150 228 150 228 ----------- ----------- ----------- ----------- Total operating expenses 24,808 36,426 46,580 74,868 ----------- ----------- ----------- ----------- Loss from operations (2,802) (1,892) (7,474) (9,160) ----------- ----------- ----------- ----------- Other income (expense): Interest income 69 545 134 1,027 Interest expense (191) (305) (368) (513) ----------- ----------- ----------- ----------- Total other income (expense) (122) 240 (234) 514 ----------- ----------- ----------- ----------- Net loss (2,924) (1,652) (7,708) (8,646) Preferred stock dividends and accretion to preferred redemption value (3,542) - (5,657) - ----------- ----------- ----------- ----------- Net loss attributable to common stockholders $ (6,466) $ (1,652) $ (13,365) $ (8,646) =========== =========== =========== =========== Basic and diluted net loss per share $ (0.56) $ (0.05) $ (1.16) $ (0.26) =========== =========== =========== =========== Basic and diluted weighted average shares outstanding 11,576,364 33,847,007 11,561,524 33,380,156 =========== =========== =========== =========== Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 2004 2005 2004 2005 ----------- ----------- ----------- ----------- Stock based compensation is allocated as follows: General and administrative $ 2,406 $ 2,225 $ 2,613 $ 8,586 Sales and marketing 302 567 320 1,210 ----------- ----------- ----------- ----------- Total stock based compensation $ 2,708 $ 2,792 $ 2,933 $ 9,796 ----------- ----------- ----------- ----------- INPHONIC, INC. & SUBSIDIARIES Unaudited Selected Segment Information (in thousands) Three Months Ended, Six Months Ended, June 30 June 30 2004 2005 2004 2005 ----------- ----------- ----------- ----------- Revenues: Wireless activations and services (a) $ 35,908 $ 73,396 $ 61,481 $ 138,927 MVNO services (b) 12,328 7,024 24,848 16,670 Data services 1,866 1,198 3,849 2,628 ----------- ----------- ----------- ----------- Total revenues 50,102 81,618 90,178 158,225 =========== =========== =========== =========== Cost of revenues, excluding depreciation and amortization: Wireless activations and services (a) $ 19,778 $ 41,719 $ 34,390 $ 80,668 MVNO services (b) 8,021 5,190 15,714 11,417 Data services 297 175 968 432 ----------- ----------- ----------- ----------- Total cost of revenues 28,096 47,084 51,072 92,517 =========== =========== =========== =========== (a) Wireless activations and services segment includes financial results of the Cellular Activations and Satellite Television units. (b) MVNO services segment includes financial results of the MVNO services and MVNE services units. INPHONIC, INC & SUBSIDIARIES Unaudited Consolidated Balance Sheets (in thousands, except share amounts) December 31, June 30, 2004 2005 ------------ ------------ Assets (unaudited) Current assets: Cash and cash equivalents $ 100,986 $ 65,260 Short-term investments - 17,860 Accounts receivable, net of allowance for doubtful accounts 19,039 39,667 Inventory, net 10,860 17,791 Prepaid expenses 11,434 1,475 Deferred costs and other current assets 2,391 2,561 ------------ ------------ Total current assets 144,710 144,614 Restricted cash and cash equivalents 500 500 Property and equipment, net 5,975 9,336 Goodwill 9,479 30,710 Intangible assets, net 1,490 15,978 Deposits and other assets 1,635 1,749 ------------ ------------ Total assets $ 163,789 $ 202,887 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 16,922 $ 24,298 Accrued expenses and other liabilities 23,502 34,873 Short-term capital leases 279 225 Deferred revenue 10,723 12,860 ------------ ------------ Total current liabilities 51,426 72,256 Long-term capital leases 261 168 ------------ ------------ Total liabilities $ 51,687 $ 72,424 ------------ ------------ Stockholders' equity: Common stock, $0.01 par value Authorized 200,000,000 shares at December 31, 2004 and June 30, 2005; issued and outstanding 32,252,573 and 35,097,657 shares at December 31, 2004 and June 30, 2005, respectively; $ 324 $ 352 Additional paid-in capital 238,241 265,220 Accumulated deficit (126,463) (135,109) ------------ ------------ Total stockholders' equity 112,102 130,463 ------------ ------------ Total liabilities and stockholders' equity $ 163,789 $ 202,887 ============ ============ INPHONIC, INC & SUBSIDIARIES Unaudited Consolidated Statements of Cash Flows (in thousands) Six Months Ended Three Months June 30, Ended June 30, 2004 2005 2005 ----------------------- -------------- (unaudited) (unaudited) (unaudited) Cash flows from operating activities: Net loss (7,708) (8,646) (1,652) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 3,034 3,919 2,142 Non-cash interest expense, net 25 324 162 Stock-based compensation 2,933 9,796 2,792 Write-off of investment 150 228 228 Changes in operating assets and liabilities, net of assets and liabilities received from business acquisition: Accounts receivable (1,428) (20,542) (10,567) Inventory (3,135) (4,106) (1,802) Prepaid expenses 256 (741) 575 Deferred costs and other assets (201) (275) 234 Accounts payable 7,368 7,376 3,989 Accrued expenses and other liabilities 1,016 3,655 5,264 Deferred revenue (667) 2,137 (1,566) ----------- ----------- -------------- Net cash provided by (used in) operating activities 1,643 (6,875) (201) Cash flows from investing activities: Net cash paid for acquisitions - (8,632) (5,777) Net cash paid for intangible assets - (2,439) (2,439) Note receivable from stockholder (30) - - Purchase of short-term investments - (17,860) (12,893) Capitalized expenditures, including internal capitalized labor (2,359) (6,026) (3,948) ----------- ----------- -------------- Net cash used in investing activities (2,389) (34,957) (25,057) Cash flows from financing activities: Principal repayments on debt (189) (146) (66) Net borrowings on line of credit 1,702 - - Proceeds from debt borrowings 2,250 - - Series D-4 dividends paid (92) - - Proceeds from exercise of warrants and options - 6,543 5,896 Costs of initial public offering - (291) (88) ----------- ----------- -------------- Net cash provided by financing activities 3,671 6,106 5,742 ----------- ----------- -------------- Net increase (decrease) in cash and cash equivalents 2,925 (35,726) (19,516) Cash and cash equivalents at December 31, 2003 and 2004 and March 31, 2005, respectively 29,048 100,986 84,776 ----------- ----------- -------------- Cash and cash equivalents at June 30, 2004 and 2005, respectively 31,973 65,260 65,260 =========== =========== ============== Supplemental disclosure of cash flows information: Cash paid during the quarter for: Interest 342 90 Supplemental disclosure of non- cash activities: Preferred stock dividends and accretion to redemption value (5,657) - Restricted stock issuance - 547 Issuance of common stock in business acquisitions - 9,238 Issuance of common stock in intangible asset purchase - 1,721 Issuance of common stock warrants for debt fees 816 - Issuance of common stock to settle a liability 50 - Release of funds in escrow related to acquisitions - 10,700 INPHONIC, INC & SUBSIDIARIES Reconciliation of non-GAAP measures to the nearest comparable GAAP measures (Unaudited, in millions) Non-GAAP financial metrics: Three months ended June 30, 2004 ---------------------------------- Non- GAAP Actual Adjustments Results --------- ----------- ---------- Revenues $ 50.1 $ (1.0)(a)$ 49.1 Cost of Revenues $ (28.1) $ (28.1) General and Administrative Expenses $ (11.9) $ 2.4 (d)$ (9.5) Sales and Marketing Expenses $ (11.3) $ 0.3 (d)$ (11.0) Three months ended June 30, 2005 ---------------------------------- Non- GAAP Actual Adjustments Results --------- ----------- ---------- Revenues $ 81.6 $ - $ 81.6 Cost of Revenues (47.1) 0.9 (c) (46.2) General and Administrative Expenses (13.2) 0.4 (b) (9.4) 1.2 (c) 2.2 (d) Sales and Marketing Expenses (20.6) 0.5 (b) (19.1) 0.4 (c) 0.6 (d) (a) One-time recognition of $1.0 million in revenues that were previously deferred in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements. (b) Adjustment to exclude settlement costs associated with the A1 Wireless USA acquisition incurred during the period, as these expenses are not expected to be incurred in future periods. These adjustments have been allocated between general and administrative and sales and marketing expenses. Included in settlement costs are vendor termination and settlement costs totaling $0.7 million associated with the A1 Wireless USA acquisition (allocated between general and administrative and sales and marketing expenses), and A1 Wireless USA acquisition relationship termination and settlement costs of $0.2 million (included in general and administrative expenses). (c) Adjustment to exclude non-recurring expenses that were eliminated in the current period and are not expected to be incurred in any future periods. Included in non-recurring expenses are costs related to the integration of A1 Wireless USA of $0.5 million (included in general and administrative expenses) which represent salaries and benefits paid to former A1 employees; outsourcing costs of $0.4 million (allocated between general and administrative and sales and marketing expenses), which represent costs incurred related to a terminated customer service vendor; elimination of product line costs of $0.9 million, incurred related to a now corrected, temporary rate plan matching discrepancy between our carrier offering and customer purchases resulting in excessive cost of sales; and employee costs of $0.8 million (allocated between general and administrative and sales and marketing expenses) related to salaries and benefits for employees terminated in the quarter as the Company increased operating efficiency. (d) Adjustment to exclude the impact of stock compensation on general and administrative and sales and marketing expenses. INPHONIC, INC & SUBSIDIARIES Reconciliation of non-GAAP measures to the nearest comparable GAAP measures (Unaudited, in millions) Adjusted EBITDA: Three-Months Ended ----------------------------- June 30, 2004 June 30, 2005 ------------- ------------- Net income (loss) $ (2.9) $ (1.7) Non-recurring revenue adjustment (1.0)(a) - Add Back: Net interest and other expense (income) 0.1 (0.2) Taxes - - Depreciation and amortization 1.4 2.1 Stock-based compensation 2.7 2.8 Restructuring costs - 0.2 (b) Loss on investment 0.2 0.2 Settlement costs - 0.9 (c) Non-recurring expenses - 2.6 (d) ------------- ------------- Adjusted EBITDA $ 0.5 $ 6.9 (a) One-time recognition of $1.0 million in revenues that were previously deferred in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements. (b) Restructuring costs related to the integration of A1 Wireless USA and the related restructuring of the Company's workforce of $0.2 million, including severance costs for employees terminated in Q1 2005 and trailing rental expenses for excess facilities that were terminated in Q1 2005. (c) In calculating Adjusted EBITDA, the Company adds back settlement costs associated with the A1 Wireless USA acquisition incurred during the period, as these expenses are not expected to be incurred in future periods. Included in settlement costs are vendor termination and settlement costs of $0.7 million associated with the A1 Wireless USA acquisition, and A1 Wireless USA relationship termination and settlement costs of $0.2 million. (d) In calculating Adjusted EBITDA, the Company adds back non-recurring expenses that were eliminated in the current period and are not expected to be incurred in any future periods. Included in non-recurring expenses are costs related to the integration of A1 Wireless USA of $0.5 million which represent salaries and benefits paid to former A1 employees; outsourcing costs of $0.4 million, which represent costs incurred related to a terminated customer service vendor; elimination of product line costs of $0.9 million, incurred related to a now corrected, temporary rate plan matching discrepancy between our carrier offering and customer purchases resulting in excessive cost of sales; and employee costs of $0.8 million related to salaries and benefits for employees terminated in the quarter as the Company increased operating efficiency. INPHONIC, INC & SUBSIDIARIES Reconciliation of non-GAAP measures to the nearest comparable GAAP measures (Unaudited, in millions except share and per share amounts) Adjusted EBT: Three-Months Ended ----------------------------- June 30, 2004 June 30, 2005 ------------- ------------- Net income (loss) $ (2.9) $ (1.7) Non-recurring revenue adjustment (1.0)(a) - Add Back: Taxes - - Net interest and other expense (income) 0.1 (0.2) Stock-based compensation 2.7 2.8 Restructuring costs - 0.2 (b) Loss on investment 0.2 0.2 Depreciation and amortization of acquisitions 0.3 0.6 Settlement costs 0.9 (c) Non-recurring expenses 2.6 (d) ------------ ------------ Adjusted EBT $ (0.6) $ 5.4 ============= ============= Adjusted EBT per share $ (0.02) $ 0.13 Basic Weighted Average Shares 11,576,364 33,847,007 Add: Diluted shares 19,435,002 7,453,574 Weighted Average Diluted Shares 31,011,366 41,300,581 Diluted shares used in per share calculation 31,011,366 41,300,581 Outstanding Common Shares at period end 35,097,657 Outstanding options and restricted stock at period end 6,167,789 Outstanding warrants at period end 942,380 (a) One-time recognition of $1.0 million in revenues that were previously deferred in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements. (b) Restructuring costs related to the integration of A1 Wireless USA and the related restructuring of the Company's workforce of $0.2 million, including severance costs for employees terminated in Q1 2005 and trailing rental expenses for excess facilities that were terminated in Q1 2005. (c) In calculating Adjusted EBT, the Company adds back settlement costs associated with the A1 Wireless USA acquisition incurred during the period, as these expenses are not expected to be incurred in future periods. Included in settlement costs are vendor termination and settlement costs of $0.7 million associated with the A1 Wireless USA acquisition, and A1 Wireless USA relationship termination and settlement costs of $0.2 million. (d) In calculating Adjusted EBT, the Company adds back non-recurring expenses that were eliminated in the current period and are not expected to be incurred in any future periods. Included in non-recurring expenses are costs related to the integration of A1 Wireless USA of $0.5 million which represent salaries and benefits paid to former A1 employees; outsourcing costs of $0.4 million, which represent costs incurred related to a terminated customer service vendor; elimination of product line costs of $0.9 million, incurred related to a now corrected, temporary rate plan matching discrepancy between our carrier offering and customer purchases resulting in excessive cost of sales; and employee costs of $0.8 million related to salaries and benefits for employees terminated in the quarter through increased operating efficiency. *T

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INPC Inphonic (MM)