YP CORP. ANNOUNCES SECOND FISCAL QUARTER 2005 RESULTS
 
Reports Positive Growth in Revenues, Solid Return to Profitability and an Increasing Customer Base

(Mesa , AZ ) - May 17, 2005
 
YP Corp. (OTCBB: YPNT), a leading provider of nationwide Internet Yellow Pages and related services, today reported quarter over quarter increases in its customer base, net revenue, net income and cash for its second fiscal quarter, ended March 31, 2005.

Net revenue for the quarter ended March 31, 2005 was $6,444,609. This is an increase of approximately 4.1% over net revenue of $6,190,155 for the prior quarter. Operating income for the quarter was $383,806, an increase of $619,265 from an operating loss of $235,459 in the quarter ended December 31, 2004. Operating margins for the current quarter were 6.0% as compared to an operating margin deficit of 3.8% in the prior quarter. Net income for the quarter ended March 31, 2005 was $298,280, or $0.01 per share on a diluted basis.

Results from operations for the second fiscal quarter were an incremental improvement over the first quarter, demonstrating results from the positive focus the Company has placed on the resolution of many of the billing issues it had experienced over the past year. The Company continues to keep the focus on its reconfirmation program. This is having a positive impact as the Company’s paying customer base increased to 105,000, which is more than a 10.5% increase since December 31, 2004. This focused effort, management’s expense control plan and the continued migration of customers to Automated Clearing House (“ACH”) billing, resulted in an increase in cash and cash equivalents to $8,201,559 from $6,155,684 at December 31, 2004 and from $3,576,529 at September 30, 2004.

“We have confronted and addressed significant challenges over the past 12 months and I believe YP Corp. is now headed in a sustainable positive direction,” said Peter J. Bergmann, YP Corp.’s president and chief executive officer. “I am pleased with the stage of the turnaround we are at and expect we will continue to gain momentum in the quarters that follow.”

“We have grown our customer base in the last quarter and our team has created new marketing initiatives, which are helping to attract additional new customers. Moreover, our National sales effort is beginning to take off, which we believe will become an additional revenue stream for us,” added Mr. Bergmann.

As a result of the billing issues that began in the second half of fiscal 2004, the Company focused its efforts and has migrated over 50% of its advertisers from billing through Local Exchange Carriers (“LECs”) on their local telephone bill to ACH billings, which automatically debits the advertisers’ checking accounts. While the Company believes that ACH billing is a more desirable billing method because it is less expensive, has a faster collection time, and presents minimal dilution to revenue, the process of converting advertisers from LEC billing to ACH has been time-consuming, labor-intensive, and has resulted in missed billings and customer cancellations.

 
“The ACH billing allows us to have healthy cash flow. YP Corp. is in a positive cash growth position and has paid a $0.01 cash dividend for five consecutive quarters,” added W. Chris Broquist, YP Corp.’s chief financial officer. “At the end of the quarter, we had cash and cash equivalents of $8,201,559 and had generated cash from operations this past quarter of $2,766,501.”

"Now that we have stabilized the Company and have it back on a growth path, it is an opportune time to explore the strategic options we announced in October, 2004,” concluded Mr. Bergmann. “We have been working with Jefferies & Company, Inc., our financial advisors, and are now ready to explore strategic alternatives to enhance shareholder value.”

Financial statements for the periods ended March 31, 2005 are set forth below, as well as in the Company’s Form 10-Q, which was filed with the Securities Exchange Commission on May 16, 2005.
 
About YP Corp.
YP Corp., a leading provider of Internet-based Yellow Pages services, offers an Internet Advertising Package™ (“IAP”) that includes a Mini-WebPage™ and Preferred Listing through its Yellow Pages web site at www.YP.Com. The Company 's web site contains listings for approximately 17 million businesses in the United States.
 
YP Corp. also provides an array of other Internet services that complement its Yellow Pages web site, including an Internet Dial-Up Package™ (dial-up Internet access) and QuickSite™ (web site design & hosting services).
 
YP Corp. is a longstanding member, exhibitor and sponsor of the two major Yellow Pages trade associations - Yellow Page Integrated Media Association (YPIMA), the major trade association of Yellow Pages publishers throughout the world, and the Association of Directory Publishers (ADP), which mostly represents independent Yellow Pages publishers. YP Corp. is based in Mesa, AZ and Las Vegas, NV. For more information, visit the web site at www.YP.Com.
 
Forward-looking Disclaimer
This press release may include statements that constitute "forward-looking statements," which are often characterized by the terms "may," "believes," "projects," "expects," or "anticipates," and do not reflect historical facts. Forward-looking statements involve risks, uncertainties and other factors that may cause actual results, performance or achievements of YP Corp. and its subsidiary to be materially different from those expressed or implied by such forward-looking statements. Specific forward-looking statements contained in this press release include, but are not limited to, (i) the Company’s belief that it has returned to a growth mode in its financial performance and results of operations; (ii) the Company’s belief that its National sales efforts will create an additional revenue stream; and (iii) the continued success of the Company’s efforts to address the challenges it faced during fiscal 2004, particularly with respect to its billing and collections issues.
 
 
Factors that may affect forward-looking statements and the Company 's business generally include but are not limited to (i) the risk factors and cautionary statements made in the Company 's Quarterly Report on Form 10-QSB for the second fiscal quarter ended March 31, 2005; and (ii) other factors that YP Corp. is currently unable to identify or quantify, but may exist in the future.
 
Forward-looking statements speak only as of the date the statement was made. YP Corp. does not undertake and specifically declines any obligation to update any forward-looking statements.
 
FINANCIAL TABLES FOLLOW
 
 
YP CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

   
March 31,
  
September 30,
  
   
2005
  
2004
  
   
(unaudited)
      
           
Assets
          
           
Cash and equivalents
  
$
8,201,559
  
$
3,576,529
  
Accounts receivable, net of allowance for doubtful accounts of $1,273,045
              
and $3,400,575
    
6,271,276
   
8,362,283
 
Prepaid expenses and other current assets
    
1,180,870
   
822,919
 
Income tax refund receivable
    
-
   
1,239,436
 
Deferred tax asset
    
-
   
352,379
 
Total current assets
    
15,653,705
   
14,353,546
 
Accounts receivable, long term portion, net of allowance
              
for doubtful accounts of $85,523 and $269,662
    
1,836,596
   
2,075,334
 
Customer acquisition costs, net of accumulated amortization of $3,977,694
              
and $5,096,669
    
2,980,972
   
4,482,173
 
Property and equipment, net
    
579,468
   
725,936
 
Deposits and other assets
    
60,919
   
239,060
 
Intangible assets, net of accumulated amortization of $2,849,428 and $2,446,403
    
3,139,018
   
3,326,274
 
Advances to affiliates
    
4,052,834
   
3,894,862
 
Total assets
  
$
28,303,512
  
$
29,097,185
  
               
Liabilities and Stockholders' Equity
              
               
Accounts payable
  
$
584,211
  
$
1,210,364
  
Accrued liabilities
    
413,416
   
542,481
 
Income taxes payable
    
243,497
   
-
 
Deferred tax liability
    
14,988
   
-
 
Notes payable- current portion
    
115,868
   
115,868
 
Total current liabilities
    
1,371,980
   
1,868,713
 
Deferred income taxes
    
408,220
   
1,116,314
 
Total liabilities
    
1,780,200
   
2,985,027
 
Commitments and contingencies
    
-
   
-
 
Series E convertible preferred stock, $.001 par value, 200,000 shares authorized,
              
127,840 and 128,340 issued and outstanding, liquidation preference $38,202
    
10,866
   
10,909
 
Common stock, $.001 par value, 100,000,000 shares authorized,
              
50,254,294 and 50,071,302 issued and outstanding
   
50,254
   
50,071
 
Paid in capital
    
10,131,250
   
11,375,384
 
Deferred stock compensation
    
(3,965,108
)
  
(5,742,814
)
Retained earnings
    
20,296,050
   
20,418,608
 
Total stockholders' equity
    
26,523,312
   
26,112,158
 
               
Total liabilities and stockholders' equity
  
$
28,303,512
  
$
29,097,185
  
 
See accompanying notes to consolidated financial statements.
 
 
YP CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

   
Three Months Ended March 31,
 
Six Months Ended March 31,
 
   
2005
  
2004
  
2005
  
2004
  
                   
Net revenues
  
$
6,444,609
  
$
16,367,853
  
$
12,634,764
  
$
30,207,820
  
Cost of services
    
860,933
   
6,600,782
   
1,995,517
   
11,482,984
 
Gross profit
    
5,583,676
   
9,767,071
   
10,639,247
   
18,724,836
 
                           
Operating expenses:
                          
General and administrative expenses
    
3,181,644
   
3,107,522
   
6,566,495
   
5,871,265
 
Sales and marketing expenses
    
1,720,034
   
1,445,965
   
3,330,527
   
2,736,345
 
Depreciation and amortization
    
298,192
   
199,719
   
593,879
   
395,912
 
Total operating expenses
    
5,199,870
   
4,753,206
   
10,490,901
   
9,003,522
 
Operating income
    
383,806
   
5,013,865
   
148,346
   
9,721,314
 
Other income (expense):
                          
Interest expense and other financing costs
    
(4,447
)
  
(3,795
)
  
(8,610
)
  
(7,667
)
Interest income
    
91,650
   
82,340
   
176,762
   
157,365
 
Other income
    
21,088
   
71,395
   
107,453
   
346,153
 
Total other income (expense)
    
108,291
   
149,940
   
275,605
   
495,851
 
                           
Income before income taxes and cumulative
                          
effect of accounting change
    
492,097
   
5,163,805
   
423,951
   
10,217,165
 
Income tax benefit (provision)
   
(193,817
)
  
(1,815,206
)
  
(176,447
)
  
(3,583,881
)
Income before cumulative effect of
                         
accounting change
    
298,280
   
3,348,599
   
247,504
   
6,633,284
 
Cumulative effect of accounting change (net of
                         
income taxes of $53,764 in 2004)
    
-
   
-
   
99,848
   
-
 
Net income
 
$
298,280
  
$
3,348,599
  
$
347,352
  
$
6,633,284
  
                           
Net income per common share:
                          
Basic:
                          
Income applicable to common stock before cumulative effect of accounting change
  
$
0.01
  
$
0.07
  
$
0.01
  
$
0.14
  
Cumulative effect of accounting change
  
$
-
  
$
-
  
$
0.00
  
$
-
  
Net income applicable to common stock
  
$
0.01
  
$
0.07
  
$
0.01
  
$
0.14
  
                           
Diluted:
                          
Income applicable to common stock before cumulative effect of accounting change
  
$
0.01
  
$
0.07
  
$
0.01
  
$
0.14
  
Cumulative effect of accounting change
  
$
-
  
$
-
  
$
0.00
  
$
-
  
Net income applicable to common stock
  
$
0.01
  
$
0.07
  
$
0.01
  
$
0.14
  
                           
Weighted average common shares outstanding:
                          
Basic
    
46,749,794
   
46,946,458
   
46,749,544
   
46,904,402
 
Diluted
    
46,825,577
   
48,145,140
   
46,901,954
   
47,640,118
 

See accompanying notes to consolidated financial statements.
 

YP CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

   
Six Months Ended March 31,
 
   
2005
  
2004
  
CASH FLOWS FROM OPERATING ACTIVITIES:
          
Net income
 
$
347,352
  
$
6,633,284
  
Adjustments to reconcile net income to net cash
              
provided by operating activities:
              
Depreciation and amortization
   
593,878
   
395,912
 
Amortization of deferred stock compensation
   
567,599
   
503,071
 
Issuance of common stock as compensation for services
   
119,500
   
-
 
Cumulative effect of accounting change
    
(99,848
)
  
-
 
Deferred income taxes
   
(394,491
)
  
37,962
 
Loss on disposal of equipment
   
-
   
36,932
 
Provision for uncollectible accounts
   
(16,220
)
  
-
 
Changes in assets and liabilities:
              
Accounts receivable
   
2,345,965
   
(5,801,351
)
Customer acquisition costs
    
1,501,201
   
(502,547
)
Prepaid and other current assets
    
(357,951
)
  
(152,539
)
Deposits and other assets
    
178,141
   
35,000
 
Accounts payable
    
(626,153
)
  
394,051
 
Accrued liabilities
    
(129,065
)
  
(72,743
)
Income taxes payable
    
1,482,933
   
1,466,113
 
Advances to affiliates (accrued interest)
    
(157,972
)
  
-
 
               
Net cash provided by operating activities
    
5,354,869
   
2,973,145
 
               
               
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Advances made to affiliates and related parties
    
-
   
(2,725,000
)
Expenditures for intangible assets
    
(215,767
)
  
-
 
Purchases of equipment
    
(44,387
)
  
(384,991
)
               
Net cash used for investing activities
    
(260,154
)
  
(3,109,991
)
               
               
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Series E preferred stock dividends
    
(960
)
  
-
 
Common stock dividends
    
(468,950
)
  
-
 
Proceeds from conversion of preferred stock
    
225
   
-
 
               
Net cash used for financing activities
    
(469,685
)
  
-
 
               
               
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
4,625,030
   
(136,846
)
               
CASH AND CASH EQUIVALENTS, beginning of period
    
3,576,529
   
2,378,848
 
               
               
CASH AND CASH EQUIVALENTS, end of period
  
$
8,201,559
  
$
2,242,002
  
 
YP Corp. Contact
Roger Bedier
YP Corp Investor Relations
Phone 480-325-4339
rogerb@ypcorp.com