HyperSpace(R) Communications Reports Third Quarter Results

HyperSpace(R) Communications Reports Third Quarter Results
In Other Events, IPO Raises $10 Million to Fund Product Rollouts and Launch
Aggressive Sales and Marketing Initiatives; Company Signs OEM Agreement,
Enhances HyperTunnel(TM) and Files Patent Application 


DENVER, Nov. 12  /PRNewswire-FirstCall/ -- HyperSpace(R) Communications, Inc.
(AMEX:HCOAMEX:HCO.WSAMEX:orAMEX:HCO_WS), a software provider of application
acceleration products, today reported financial results for its third quarter
and nine-month period ended September 30, 2004.

The Company reported a net loss attributable to common shareholders of $1.0
million, or $0.69 per basic and diluted share, on revenue of $119,200 for the
quarter versus a net loss attributable to common shareholders of $132,100, or
$0.10 per basic and diluted share, in the same quarter a year ago.

For the nine-month period ended September 30, 2004 the Company reported a net
loss attributable to common shareholders of $2.2 million, or a loss of $1.52
per basic and diluted share, on revenue of $325,600 as compared with a net loss
attributable to common shareholders of $1.0 million, or a loss of $0.74 per
basic and diluted share, on revenue of $740,700 in the same period last year.

Mark Endry, president and CEO, said the results were generally in line with
management's expectations as the Company is only now beginning to transition
from its opportunistic marketing strategy to a more focused approach with
adequate capital to ramp up.

"During the course of the past year we have been running the Company with
limited resources while at the same time focusing heavily on raising additional
capital during a lengthy IPO process," said Endry.  "Despite limited financial
resources and management's focus on the IPO, we have begun to penetrate the
international enterprise market, continuing to develop our products and win new
customers throughout the world.  With the October 6, 2004 closing of our IPO,
which raised approximately $10 million in gross proceeds, we are now positioned
to invest in the resources necessary to expand and formally launch the
marketing of our acceleration software solutions.  With the financing
activities behind us, we are now focusing our full time and attention on
achieving top line growth and steady progress toward profitability.

"Looking ahead, we will build on our technology, an impressive core product
portfolio, and a strong list of blue chip customers distributed throughout the
Americas, Europe and Asia," Endry added.  "We intend to deliver shareholder
value through a combination of organic growth and strategic acquisitions of
products and businesses.  On the organic side, we are leading with our core
products -- HyperWeb(TM) and HyperTunnel(TM) -- which speed up the delivery of
information over computer networks, including Internet, wireless, broadband,
private and dial-up networks.  On the acquisition front, we believe the
optimization and acceleration market may be ready for consolidation. 
Accordingly, we have begun evaluating and developing an acquisition strategy
designed to expand our product functionality, add to our global customer base
and provide additional distribution capabilities."

Endry said the post-IPO sales and marketing investments would involve the
following areas:

   *  Sales initiatives.  The Company is working to develop new sales
      channels, alliances and partnerships.  Its October 25, 2004
      announcement of an OEM agreement with Xaffire Inc.(R), a leader in Web
      application management solutions, is indicative of the quality
      opportunities to partner with industry leaders who understand and
      value HyperSpace's technology.  In addition, the Company is increasing
      its internal sales force and assigning direct sales staff to all named
      accounts.

   *  Marketing initiatives.  The Company has engaged BA&T as strategic
      marketing and public relations counsel, a company with a 42-year track
      record of helping leading technology companies increase their market
      presence.  In addition, the Company has hired Vendere Partners, a lead
      generation organization and is working with Integro to rebuild the
      HyperSpace web site to increase user-friendliness and functionality.
      Since inception, the web site has been a key component in advertising,
      demonstrating and delivering the Company's products to customers
      around the world.  Finally, management is engaging with technical
      industry analysts whose reports are widely read by current and
      prospective customers for the Company's products.  Industry analyst
      coverage is important not only in generating sales activity but in
      communicating the Company's acquisition strategy.



In other subsequent events since September 30, 2004, the Company announced on
October 7 a major enhancement of its HyperTunnel(TM) solution -- the addition
of Deterministic Networks' specialized driver to further improve
HyperTunnel's(TM) performance and reliability.  Also in October, HyperSpace
announced the publishing of patent applications covering technology used in
HyperTunnel(TM).  These applications potentially provide important competitive
protection.

About HyperSpace Communications

HyperSpace(R) is a Colorado-based software company specializing in data and
application acceleration.  HyperSpace develops, manufactures and markets,
worldwide, two software product lines: HyperWeb(TM) and HyperTunnel(TM).
HyperSpace products accelerate, optimize and secure web-based and client/server
applications and communications over narrowband and broadband wide area
networks and service provider networks, both wired and wireless. Virtually any
company can benefit from HyperSpace software to reduce telecommunication costs,
eliminate network servers and improve application performance resulting in
productivity gains.  The Company's products are used by customers across
industries and around the world including ABN AMRO, Deutsche Bank, British
Petroleum, PeopleSoft, Farmers Insurance, UBS PaineWebber, Dex Media, Hunter
Douglas, Nokia, Telecom Italia, Amway, BP, Dish Network, Alltel, TNT, and EDS
among others.

Cautionary Statement

Certain statements in this press release are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934.  These statements involve a number of
risks, uncertainties and other factors that could cause actual results,
performance or achievements of HyperSpace Communications to be materially
different from any future results, performance or achievements expressed or
implied by these forward-looking statements.  Other factors, which could
materially affect such forward-looking statements, can be found in HyperSpace
Communications' filings with the Securities and Exchange Commission, including
risk factors.  Investors, potential investors and other readers are urged to
consider these factors carefully in evaluating the forward-looking statements
and are cautioned not to place undue reliance on such forward-looking
statements.  The forward-looking statements made herein are only made as of the
date of this press release and HyperSpace Communications undertakes no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.

   Unaudited Statement of Operations

                          Three Months Ended       Nine Months Ended
                            September 30,             September 30,
                          2004         2003         2004         2003
   Revenues
    License and fees    $64,478     $198,104      $157,962     $606,109
    Service and other    54,743       52,235       167,643      134,547
   Total revenues       119,221      250,338       325,605      740,656
   Cost of revenue
    Amortization of
     capitalized
     software            30,488       53,520        91,465      160,559
    Customer support     52,134       39,113       120,278      103,945
    Research and
     development        227,441       12,793       451,138      117,326
   Total cost
    of revenues         310,063      105,426       662,881      381,830
   Operating expenses
    Sales and
     marketing          218,115       65,227       507,580      474,540
    General and
     administrative     335,606      158,126       910,919      655,755
   Total operating
    expenses            553,721      223,353     1,418,499    1,130,295
   Loss from
    operations         (744,563)     (78,441)   (1,755,775)    (771,469)
   Other (income)/
    expense
    Interest expense,
     net                266,015       54,781       803,658      197,309
    Other income         (1,137)      (1,075)        6,417      (14,142)
    Gain on settlement       --           --      (440,999)          --
   Total other
    (income)/expense    264,878       53,706       369,076      183,167
   Net loss         $(1,009,441)   $(132,148)  $(2,124,851)   $(954,636)
    Preferred
     dividends          $24,449          $--       $72,489          $--
   Net loss
    attributable to
    common
    shareholders    $(1,033,890)   $(132,148)  $(2,197,340)   $(954,636)
   Basic and
    diluted
    weighted average
    common shares
    outstanding       1,488,421    1,299,970     1,444,612    1,297,181
   Basic and
    diluted loss per
    common share         $(0.69)      $(0.10)       $(1.52)      $(0.74)


   Balance Sheet

                                              September 30,   December 31,
                                                  2004            2003
   Assets                                      (Unaudited)
   Current Assets
    Cash                                        $109,375        $27,429
    Accounts receivable, net of allowance
     for doubtful accounts of $3,391
     in 2004, $0 in 2005                         108,905        291,913
    Other current assets                          17,114         13,361
   Total current assets                          235,394        332,703
   Non-current assets
    Property and equipment, net                  126,075        127,806
    Capitalized software, net of accumulated
     amortization of $356,381 and 471,157        329,070        420,536
    Intangible asset, at cost                     31,530         31,530
   Deferred offering costs                     1,489,347             --
   Total non-current assets                    1,976,022        579,872
   Total assets                               $2,211,416       $912,575

   Liabilities and Shareholders' Deficit
   Current liabilities
    Accounts payable                          $1,452,814       $220,993
    Accrued compensation                         116,286        103,611
    Deferred revenue                             133,186        152,089
    Current portion of notes payable
     and debt                                  1,295,470      1,255,842
   Total current liabilities                   2,997,756      1,732,535
   Long-term liabilities
    Long-term portion of notes payable
     and debt                                    425,000             --
   Total long-term liabilities                   425,000             --
   Total liabilities                           3,422,756      1,732,535
   Commitments and contingencies
   Shareholders' deficit
   Series A Convertible Preferred Stock               --        926,250
   Common stock                                4,912,767      2,180,555
   Accumulated deficit                        (6,124,107)    (3,926,765)
   Total stockholders' deficit                (1,211,340)      (819,960)
   Total liabilities and equity               $2,211,416       $912,575


DATASOURCE: HyperSpace(R) Communications, Inc.



CONTACT:  John Yeros, Chairman, [phone], or Investor Relations,

Barbara Coy, [phone], , both of HyperSpace(R)

Communications, Inc.



Web site:  http://www.ehyperspace.com/ 

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