Acceris Communications Inc.

Acceris Communications Inc.

March 28, 2005 19:12 ET

Acceris Communications Reports Fiscal Year 2004 Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: ACCERIS COMMUNICATIONS INC.

OTC Bulletin Board SYMBOL: ACRS
TSX SYMBOL: CXS

MARCH 28, 2005 - 19:12 ET

Acceris Communications Reports Fiscal Year 2004 Results

PITTSBURGH, PENNSYLVANIA--(CCNMatthews - March 28, 2005) - Acceris
Communications Inc. (OTCBB:ACRS) today reported its financial results
for the year ended December 31, 2004.

For the year ended December 31, 2004, the Company's total operating
revenue was $113.1 million compared to $135.9 million in 2003. The
Company had a loss from continuing operations of $22.9 million compared
to a loss from continuing operations of $32.0 million for the year ended
December 31, 2004. The Company recorded a net loss of $22.8 million for
the year ended December 31, 2004 versus a net loss of $31.4 million for
the year ended December 31, 2003. The net loss per common share was
$1.18 in 2004 versus a net loss per common share of $4.48 in 2003.

Highlights of 2004:

- The Company reduced its loss from continuing operations in 2004
compared to 2003 through integration initiatives. The Company's
operations during 2004 were negatively impacted by the decision, in mid
2004, to halt geographic expansion of its local dial tone offering as a
direct result of regulatory uncertainty in the domestic markets. In
2005, the Company suspended efforts to acquire new local dial tone
customers, but will continue to service its existing local customers.
The Company may re-enter the market when it can enter into acceptable
wholesale agreements.

- Acceris' ongoing operating losses were funded in 2004 by Counsel
Corporation under its Keep Well agreement, from the proceeds on the sale
of shares held in Buyers United Inc. and from the issuance of a $5
million convertible three-year term note. Acceris will require
additional funding in 2005 to continue to execute on its business plan.
Counsel's Keep Well with Acceris expires on June 30, 2005 and is not
expected to be extended beyond its current maturity.

- Significant structural changes continue to occur in both the
International and US telecommunications markets. Based on the extent and
the pace of these changes, coupled with financial constraints, Acceris
has concluded that it should consider opportunities to merge or dispose
of its telecommunications operations.

- Acceris Communications Technologies was granted a patent by the State
Intellectual Property Office of the People's Republic of China for its
proprietary technology that enables Voice over Internet Protocol
("VoIP") communications. Acceris' international patent portfolio and
pending applications are founded on what Acceris believes to be seminal
patents in VoIP (US Patent no. 6243373 and US Patent no. 6438124).

- Using its patented technology and platform, Acceris launched an
enhanced services product that includes features such as
find-me/follow-me, on-the-fly conferencing, unified voicemail and
message distribution. Acceris plans to expand its offerings and utilize
its patented technology to offer a competitive VoIP solution to the
marketplace.

- Acceris Communications Technologies initiated litigation to protect
its VoIP patent rights while, at the same time, pursuing a licensing
program for its intellectual property.

- Acceris became involved in shareholder litigation in 2004, the details
of which are disclosed in the Form 10K filed with the Securities and
Exchange Commission. The Company believes that these claims are without
merit and intends to continue to vigorously defend these actions.

"Acceris' traditional long distance telephone business requires greater
scale to effectively compete. Given the significant changes that are
occurring in the industry, a merger or disposal of our
telecommunications business is a logical step. As well, Acceris must
focus its resources on deriving value from its significant investment in
VoIP technology. Acceris owns an international portfolio of VoIP
patents, has a history of providing VoIP networks and services, and has
built and developed its internal VoIP expertise. By doing so, we will be
in a better position to generate shareholder value." said Kelly
Murumets, President of Acceris Communications.

Please see the Company's Annual Report on Form 10-K for the year ended
December 31, 2004 filed with the SEC for further information.

About Acceris

Acceris is a broad based communications company serving residential,
small and medium-sized business and large enterprise customers in the
United States. A facilities-based carrier, it provides a range of
products including local dial tone and 1+ domestic and international
long distance voice services, as well as fully managed and fully
integrated data and enhanced services. Acceris offers its communications
products and services both directly and through a network of independent
agents, primarily via multi-level marketing and commercial agent
programs. Acceris also offers a proven network convergence solution for
voice and data in Voice over Internet Protocol ("VoIP") communications
technology and holds two foundational patents in the VoIP space. For
further information, please visit Acceris' website at www.acceris.com.

Forward-Looking Statements

This release contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act, as amended, that are based on
management's exercise of business judgment as well as assumptions made
by and information currently available to management. When used in this
document, the words "may," "will," "anticipate," "believe," "estimate,"
"expect," "intend" and words of similar import, are intended to identify
any forward-looking statements. You should not place undue reliance on
these forward-looking statements. These statements reflect our current
view of future events and are subject to certain risks and uncertainties
as noted in our securities and other regulatory filings. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, our actual results could differ materially
from those anticipated in these forward-looking statements. We undertake
no obligation and do not intend to update, revise or otherwise publicly
release any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the
occurrence of any unanticipated events. Although we believe that our
expectations are based on reasonable assumptions, we can give no
assurance that our expectations will materialize. Many factors could
cause actual results to differ materially from our forward-looking
statements.



ACCERIS COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS


(In thousands of dollars, except share December 31, December 31,
and per share amounts) 2004 2003
-------------------------------------- ------------ ------------

ASSETS

Current assets:
Cash and cash equivalents $ 458 $ 2,033
Accounts receivable, less allowance
for doubtful accounts of $2,163 and
$1,764 at December 31, 2004 and 2003,
respectively 13,079 18,018
Investment in preferred and common stock - 2,058
Other current assets 1,473 2,202
------------ ------------
Total current assets 15,010 24,311
Furniture, fixtures, equipment and
software, net 4,152 8,483
Other assets:
Intangible assets, net 1,404 3,297
Goodwill 1,120 1,120
Investment in preferred stock 1,100 1,100
Other assets 1,223 743
------------ ------------

Total assets $ 24,009 $ 39,054
------------ ------------
------------ ------------

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Revolving credit facility $ 4,725 $ 12,127
Accounts payable and accrued liabilities 27,309 29,113
Unearned revenue 959 5,678
Current portion of notes payable 1,928 1,254
Current portion of obligations under
capital leases 1,441 2,715
------------ ------------
Total current liabilities 36,362 50,887
Notes payable, less current portion 3,597 772
Obligations under capital leases, less
current portion - 1,631
Notes payable to a related party 46,015 28,717
------------ ------------
Total liabilities 85,974 82,007
------------ ------------

Stockholders' deficit:
Preferred stock, $10.00 par value,
authorized 10,000,000 shares, issued and
outstanding 618 and 619 Class N shares
at December 31, 2004 and 2003,
resepectively; liquidation preference of
$618 and $619 at December 31,2004 and
2003, respectively 6 6
Common stock, $0.01 par value, authorized
300,000,000 shares, issued and outstanding
19,237,135 and 19,262,095 at December 31,
2004 and 2003, respectively 192 192
Additional paid-in capital 186,671 182,879
Accumulated deficit (248,834) (226,030)
------------ ------------
Total stockholders' deficit (61,965) (42,953)
------------ ------------
Total liabilities and stockholders'
deficit $ 24,009 $ 39,054
------------ ------------
------------ ------------

The notes contained in our Annual Report on Form 10-K are an integral
part of these condensed consolidated financial statements



ACCERIS COMMUNICATIONS INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the Three and Twelve Months Ended December 31, 2004 and 2003

Three Months Ended Twelve Months Ended
December 31, December 31,
(In thousands of dollars, -------------------------------------------
except per share amounts) 2004 2003 2004 2003
------------------------- -------- --------- --------- ---------
(unaudited)(unaudited)
Revenues:
Telecommunications
services $ 24,063 $ 32,401 $ 112,595 $ 133,765
Technology licensing
and development -- 65 540 2,164
-------- -------- --------- ----------
Total revenues 24,063 32,466 113,135 135,929
-------- -------- --------- ----------
Operating costs and
expenses:
Telecommunications
network expense
(exclusive of
depreciation expense
on telecommunications
network assets of
$1,195 and $820 for
the three months ended
December 31, 2004 and
2003, respectively, and
$5,056 and $3,918 for
the twelve months ended
December 31, 2004 and
2003, respectively,
included in
depreciation and
amortization below) 12,606 18,866 60,067 86,006
Selling, general and
administrative 11,601 14,441 54,430 57,264
Provision for doubtful
accounts 1,321 1,666 5,229 5,438
Research and development 217 -- 442 --
Depreciation and
amortization 2,099 1,548 6,976 7,125
-------- -------- --------- ----------
Total operating costs
and expenses 27,844 36,521 127,144 155,833
-------- -------- --------- ----------
Operating loss (3,781) (4,055) (14,009) (19,904)
-------- -------- --------- ----------
Other income (expense):
Interest expense (2,768) (3,562) (11,349) (13,269)

Interest and other
income 57 1,160 2,471 1,216
-------- -------- --------- ----------
Total other income
(expense) (2,711) (2,402) (8,878) (12,053)
-------- -------- --------- ----------
Loss from continuing
operations (6,492) (6,457) (22,887) (31,957)

Gain from discontinued
operations (net of
$0 tax) -- 222 104 529
-------- -------- --------- ----------
Net loss $ (6,492) $ (6,235) $ (22,783) $ (31,428)
-------- -------- --------- ----------
-------- -------- --------- ----------

Basic and diluted
weighted average shares
outstanding 19,237 10,504 19,256 7,011

Net loss per common
share - basic and
diluted:
Loss from continuing
operations $ (0.34) $ (0.60) $ (1.19) $ (4.56)
Gain from discontinued
operations -- 0.01 0.01 0.08
-------- -------- --------- ----------
Net loss per common
share $ (0.34) $ (0.59) $ (1.18) $ (4.48)
-------- -------- --------- ----------
-------- -------- --------- ----------

The notes contained in our Annual Report on Form 10-K are an integral
part of these condensed consolidated financial statements



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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Acceris Communications Inc.
    Gary M. Clifford
    Chief Financial Officer and VP of Finance
    (416) 866-8170
    clifford@acceris.com
    or
    Acceris Communications Inc.
    Stephen A. Weintraub
    Senior Vice President & Secretary
    (416) 866-3058
    sweintraub@acceris.com