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XFONE Announces Record Revenues for First Quarter 2005

XFONE, Inc. (OTC Bulletin Board: XFNE - News; "XFONE" or "the Company"), a provider of international voice and data communications services, today reported its first quarter financial results for the three months ended March 31, 2005.

Financial Highlights for the Three Months Ended March 31, 2005 Compared to the Three Months Ended March 31, 2004 Reflected in British Pounds (convenience translation into U.S. Dollars):

* Revenues increased 43.6% to (pound)3,312,934 (US$6,228,317) from (pound)2,307,215 (US$4,337,564).

* Due largely to expenses associated with the continued build-up of the Company's new 'XFONE 018' international long distance operations in Israel, net income declined to (pound)39,874 (US$76,957) from (pound)103,069 (US$193,770).

* Net Profit, excluding the Israeli "start up" losses, increased to approximately (pound)150,949 ($247,218).

* Diluted earnings per share were (pound)0.004 (US$0.007) compared to (pound)0.010 (US$0.019).

* The Company generated net cash from operations of (pound)25,244 ($47,458), up from net cash used in operations of (pound)192,475 ($361,853).

* Stockholder equity increased to approximately (pound)4.1 Million ($7.8 Million)

* Revenues generated by XFONE's UK-based subsidiary, Swiftnet, were (pound)2,253,639 ($4,236,841) for the three months ended March 31, 2005.

* XFONE USA, XFONE's U.S.-based subsidiary located in Jackson, Mississippi, contributed (pound)861,083 ($1,618,836) in revenues for the three months ended March 31, 2005.

* XFONE 018, the Company's new Israel-based subsidiary, produced (pound)198,210 ($372,635) in revenue during its first three full months in operation from January to March 2005.

* The Company has approximately (pound)3.5 Million ($6.5 Million) in cash and account receivables.

Guy Nissenson, Company President and Chief Executive Officer, stated, "The first quarter of 2005 represents a major milestone in the exciting growth of our Company, going from a local operator in London to having the first full quarter as a multi-national efficient Telecom Service provider with world class operations in the UK, the United States and Israel. XFONE started the year 2005 on a record pace, and we are very proud of the fact that we have once again set a new historical high in quarterly revenues. Each of our operating subsidiaries performed well in the first quarter. Our operations in the United Kingdom and in the United States each delivered strong results and achieved high and solid revenues and profits. After only three full months in operation, XFONE 018, our new long distance carrier business in Israel, is demonstrating very strong revenue growth and is presently ramping towards achieving positive cash flow ahead of our initial expectations.

"We are determined to continue implementing our business model that is based on aggressive growth that generates considerable profitability. We are confident that the exciting growth XFONE is experiencing will continue through the remainder of the year," concluded Mr. Nissenson.

XFONE, Inc. will also host a teleconference this afternoon beginning at 4:15 PM Eastern and invites all interested parties to join management in a discussion regarding the Company's financials, corporate progression and other meaningful developments. The conference call can be accessed in the U.S. by dialing toll free 1-800-218-0713. International callers can access the call by dialing 303-262-2140.


For those unable to participate at that time, a replay of the
teleconference can be accessed domestically by dialing 1-800-405-2236 and
entering the passcode 11029658# or, for international callers, please dial
303-590-3000 and enter the passcode 11029658#. The replay will be available
for 30 days.


XFONE, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET


March 31,
2005
March 31, December 31, Unaudited
2005 2004 (Convenience
Unaudited Audited translation into
(in Pounds) (in Pounds) U.S.$)

Current assets
Cash 643,048 797,097 $1,208,930
Accounts receivable, net 2,817,808 2,271,448 5,297,479
Prepaid expenses and
other receivables 538,167 693,524 1,011,754
Loan to shareholder 123,965 123,965 233,054

Total Current Assets 4,122,988 3,886,034 $7,751,217

Loan to shareholder 123,966 123,966 233,056

Investments 53,973 20,885 101,469

Fixed assets
Cost 2,296,695 1,516,854 4,317,787
Less - accumulated
depreciation (436,731) (261,561) (821,054)

Total fixed assets, net 1,859,964 1,255,293 3,496,733

Other Assets, net 2,379,060 57,106 4,472,633

Total assets 8,539,951 5,343,284 $16,055,108

Current liabilities
Notes payable -
current portion 578,493 72,041 $1,087,567
Trade payables 2,227,277 2,035,368 4,187,281
Other liabilities and
accrued expenses 670,435 224,032 1,260,418
Obligations under capital
leases - current portion 159,449 147,988 299,764


Total current liabilities 3,635,654 2,479,429 $6,835,030

Deferred taxes 311 52 585

Notes payable 666,031 509,867 1,252,139

Obligations under
capital lease 104,708 141,944 196,851


Total liabilities 4,406,704 3,131,292 $8,284,605

Guarantees, Commitments
& Liens
Shareholders' equity
Preferred stock - 50,000,000
shares authorized, none issued
Common stock:
25,000,000 shares authorised,
(pound).000532 par value;
6,220,871 issued and
outstanding 4,290 4,290 8,064
Foreign currency
translation adjustment (386) 1,210 (726)
Contributions in excess
of shares 3,252,910 1,373,556 6,115,471
Retained earnings 876,433 832,936 1,647,694

Total shareholders' equity 4,133,247 2,211,992 7,770,503

Total liabilities and
shareholders' equity 8,539,951 5,343,284 $16,055,108


XFONE, Inc. and Subsidiaries
STATEMENTS OF OPERATIONS


Three months
Ended
Three months Three months March 31,
Ended Ended 2005
March 31 March 31 Unaudited
2005 2004 (Convenience
Unaudited Unaudited translation
(in pounds) (in pounds) into U.S$)


Revenues 3,312,934 2,307,215 $6,228,317
Cost of revenues (2,274,071) (1,561,238) (4,275,254)
Gross profit 1,038,863 745,977 1,953,063

Operating expenses:
Research and development (5,000) (10,000) (9,400)
Marketing and selling (384,190) (367,207) (722,277)
General and administrative (638,258) (234,168) (1,199,925)

Total operating expenses (1,027,448) (611,375) (1,931,602)

Operating profit 11,415 134,602 21,461

Financing expenses - net (14,808) (10,846) (27,839)
Equity in income of
affiliated company 33,088 -- 62,205

Other income 2,332 5,313 4,384

Income before minority
interest and taxes 32,027 129,069 60,211

Minority Interest 30,920 -- 58,129

Income Before taxes 62,947 129,069 118,340

Taxes on income (19,450) (26,000) (36,566)

Net income 43,497 103,069 $81,774

Earnings Per Share:
Basic 0.007 0.020 $0.012

Diluted 0.004 0.010 $0.007


About XFONE, Inc.
A U.S.-domiciled corporation, XFONE is an international voice and data communications services provider with operations in the United Kingdom, the United States and Israel, and offers a wide range of services which include: international and long distance telephone services; prepaid calling cards; cellular services; VoIP services; reselling opportunities; and email and fax broadcasting services. The Company serves customers in 75 countries 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
Stephanie Noiseux, Elite Financial Communications Group
407-585-1080 or via email at steph@efcg.net




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