Avotus

March 11, 2005 12:28 ET

Avotus Announces 2004 Financial Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: AVOTUS

TSX VENTURE SYMBOL: AVS

MARCH 11, 2005 - 12:28 ET

Avotus Announces 2004 Financial Results

MISSISSAUGA, ONTARIO--(CCNMatthews - March 11, 2005) -

Avotus® Corporation (the "Company") (TSX VENTURE:AVS) today announced
its financial results for the three-month period and year-ended December
31, 2004. Note that all results are reported in Canadian dollars unless
otherwise indicated. A table showing a summary of results in United
States dollars is attached.

For the fourth quarter of 2004 revenue was $7.7 million compared to $7.9
million for the same period last year. EBITDA(1) was $497,000 as
compared to an EBITDA loss of ($97,000) for the same period in 2003. Net
income for the quarter was $121,000 or $0.00 per share compared to a net
loss of ($1.8 million) or ($0.11) per share in the same period in 2003.

For the year-ended December 31, 2004 revenue was $30.7 million compared
to $32.8 million for the same period last year. EBITDA was $241,000
compared to EBITDA of $441,000 for the same period in 2003. Net loss for
the year was ($1.5 million) or ($0.10) per share compared to a net loss
of ($24.5 million) or ($1.55) per share in 2003. In accordance with
Canadian GAAP, because the Company was in a loss position, the loss per
share figures do not take into account the effect of any conversion of
preferred shares, options and warrants into common shares.

The 6% decline in revenue for 2004 compared to the corresponding prior
year was in part the result of the Company's planned shift in revenue
mix away from software licenses, where revenue is recognized upon
shipping and billing, and toward Avotus hosted and managed solutions,
where the customer pays on a monthly basis. The Company expects this
shift in revenue mix to continue as it focuses on building its backlog
of subscription-type business moving forward. In addition, approximately
$1.3 million of the decrease in revenue in 2004 over the prior year was
due to the strong Canadian dollar as more than 50% of the Company's
revenues are U.S. dollar denominated and the Canadian dollar appreciated
by approximately 8% during 2004.

Included in the net loss and EBITDA for 2004 is $1.0 million in expenses
related to the adoption on January 1, 2004 of the new accounting
standard requiring expensing of all stock-based compensation to
employees. There was no stock-based compensation expense recorded in
2003. Also included in the net loss and EBITDA for 2004 was: a $418,000
gain from the sale of an investment; $200,000 in equity income resulting
from the Company's 49% share of the earnings of ARTools® from the date
of acquisition on September 30, 2004 to December 31, 2004; and, $550,000
of revenue recorded in the fourth quarter and received by the Company in
2002 relating to the expiration on December 31, 2004 of an agreement to
deliver software and or services on or before this date.

Included in the net loss for 2003 is a goodwill impairment charge of
$18.6 million, interest accretion on convertible debentures of $2.3
million and $2.4 million of income tax, accrued interest and penalties
in respect of income tax assessments relating to income tax returns for
the 1995, 1997 and 1998 taxation years.

Key accomplishments in the fourth quarter for Avotus included the
following:

-- Selection of Avotus by a major international technology company to
provide Avotus Intelligent Communications Management™ (ICM) Expense
Management through an outsourced managed service contract. The four-year
contract, the largest contract in Avotus history, is valued at US$4.5
million and enables the customer to manage its voice, data and wireless
communications expenses and assets in 30 countries;

-- Contract expansion with a leading multi-national financial
management and advisory company based in New York to include
communications Usage Management. Previously awarded for Avotus ICM
Expense Management, the three-year renewable contract has been expanded
to support traditional voice and VoIP (Voice over Internet Protocol)
communications usage management for up to 50,000 employees worldwide.
The expansion adds US$500,000 to the contract value; and

-- Generation of savings in excess of US$14.0 million for five
customers through use of the Company's ARTools WebAuction™ technology.

"2004 was a year of strategic transition for Avotus," stated Fred Lizza,
president and CEO of Avotus. "We made two significant acquisitions that
strongly position Avotus in the rapidly emerging communications expense
management TEM market, we re-built our sales and partnering functions to
better capitalize on these new opportunities, and we focused our product
development activities to extend our competitive advantage. We look
forward to seeing the results of these efforts in 2005 and beyond."

Our key priorities for 2005 include: winning additional communications
expense management contracts, obtaining incremental funding to finance
our transition to a managed service-based business model and to address
our debt maturities and other balance sheet requirements, and continuing
to expand the ICM solution," added Lizza.

Avotus' consolidated financial statements for the year-ended December
31, 2004 will be available on April 30, 2005 at www.Avotus.com.

About Avotus

Avotus is the leader for groundbreaking technology-based communications
expense management (TEM) solutions. The company has a 20-year history of
empowering companies of all sizes to gain lasting control over their
complete worldwide communication environment through the effective
management of their voice, data and converged communications spend. Only
Avotus brings together e-procurement, expense, service, and usage
management into a fully integrated solution. Avotus provides dramatic
and verifiable cost savings of as much as 50% of an enterprise's current
communications spend and a triple digit in-year ROI. Combining
technology, automation, communications experts, and industry best
practices, Avotus solutions make it possible to not only realize
significant spend reduction but to continuously verify and permanently
implement all cost and process improvements. Avotus offers the widest,
deepest and most flexible solution set available including an onsite
enterprise implementation, a hosted ASP model, and a completely
outsourced value-added managed solution.

For more information about Avotus expense management solutions,
customer, and partners, visit www.avotus.com.

Note (1). EBITDA - earnings before interest, taxes, depreciation and
amortization.

Certain information contained in this news release is forward-looking
and is subject to unknown risks and uncertainties. The actual results,
performance or achievements of the Company may differ materially from
the results, performance or achievements of the Company expressed or
implied by such forward-looking statements. For further information,
please visit the Company's website at www.Avotus.com and its filings
with SEDAR available through www.sedar.com.

The TSX Venture Exchange has neither approved nor disapproved the
contents of this press release.

Avotus is a registered trademark and Intelligent Communications
Management is a trademark of Avotus Corporation. ARTools is a registered
trademark and WebAuction is a trademark of Applied Research
Technologies. All other trademarks are the property of their respective
owners.



Below is the condensed Consolidated Statement of Operations for
the period ended December 31, 2004 in CDN (000's $)

Canadian (000's $) Canadian (000's $)
Three Months Ended Year Ended
----------------------- -----------------------
31-Dec-04 31-Dec-03 31-Dec-04 31-Dec-03
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------------------- -----------------------

Revenue $7,744 $7,943 $30,716 $32,766

Costs of goods and
services 2,369 2,399 9,820 9,613
----------- ----------- ----------- -----------

Gross Profit 5,375 5,544 20,896 23,153

Operating expenses 5,078 5,641 21,273 22,712
----------- ----------- ----------- -----------

297 (97) (377) 441

Equity in income of
investee company 200 - 200 -

Other income - - 418 -
----------- ----------- ----------- -----------

Earnings (loss) before
the undernoted
(EBITDA) (1) 497 (97) 241 441

Interest and Bank
Charges 210 1,098 609 3,903
Depreciation &
Amortization &
Goodwill Impairment 363 302 1,274 19,597
----------- ----------- ----------- -----------

Loss before income
taxes (76) (1,497) (1,642) (23,059)

Income tax recovery
(expense) 197 (273) 115 (1,440)
----------- ----------- ----------- -----------

Net income (loss) for
the period $121 $(1,770) $(1,527) $(24,499)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Basic earnings (loss)
per share $0.01 $(0.11) $(0.10) $(1.55)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Diluted earnings
(loss) per share $0.00 $(0.11) $(0.10) $(1.55)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------


Below is the condensed Consolidated Statement of Operations
for the period ended December 31, 2004 in US (000's $) (2)

US (000's $) US (000's $)
Three Months Ended Year Ended
----------------------- -----------------------
31-Dec-04 31-Dec-03 31-Dec-04 31-Dec-03
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------

Revenue $6,443 $6,126 $25,554 $25,273

Costs of goods and
services 1,971 1,850 8,170 7,415
----------- ----------- ----------- -----------

Gross Profit 4,472 4,276 17,384 17,858

Operating expenses 4,225 4,351 17,698 17,518
----------- ----------- ----------- -----------

247 (75) (314) 340

Equity in income of
investee company 166 - 166 -

Other income - - 348 -
----------- ----------- ----------- -----------

Earnings (loss) before
the undernoted
(EBITDA) (1) 413 (75) 200 340

Interest and Bank
Charges 175 847 507 3,010
Depreciation &
Amortization &
Goodwill Impairment 302 233 1,060 15,115
----------- ----------- ----------- -----------

Loss before income
taxes (63) (1,155) (1,366) (17,786)

Income tax recovery
(expense) 164 (211) 96 (1,111)
----------- ----------- ----------- -----------

Net income (loss) for
the period $101 $(1,365) $(1,270) $(18,896)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Basic earnings (loss)
per share $0.01 $(0.08) $(0.08) $(1.20)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Diluted earnings
(loss) per share $0.00 $(0.08) $(0.08) $(1.20)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Note 1 The Company has provided EBITDA (earnings before interest,
taxes, depreciation and amortization) information to supplement
its GAAP (generally accepted accounting principles) financial
information as the Company believes that it is a useful measure of
operating performance. EBITDA does not have any standardized
meaning prescribed by GAAP and is not necessarily comparable to
similar measures presented to other issuers. EBTIDA is not a
measure of operating performance or profitability under GAAP.

Note 2 The year end CDN vs. USD exchange rate for 2004 was $0.83 and
for 2003 was $0.77.


-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Investor relations information contact:
    Avotus Corporation: Leslie Haddow
    Investor Relations
    (905) 568-6918
    (905) 890-9707 (FAX)
    Leslie.Haddow@Avotus.com
    or
    Public relations contact:
    Soucy Communications Group: Sandy McLaughlin
    162 Great Rd. Acton, MA 01720
    (978) 266-1700
    SMcLaughlin@scg-pr.com
    The TSX Venture Exchange has neither approved nor disapproved the
    contents of this press release.