Vsource(R) Announces Results for Fiscal 2005

Vsource(R) Announces Results for Fiscal 2005 


LA JOLLA, Calif., May 12  /PRNewswire-FirstCall/ -- Vsource, Inc. (OTC:VSCE)
(BULLETIN BOARD: VSCE) , today announced its financial results for its fiscal
year ending January 31, 2005 ("Fiscal 2005").

From 2001 to 2004, the Company provided Fortune 500 and Global 500 companies
with customizable and comprehensive business process outsourcing (BPO)
solutions into and across the Asia-Pacific region.  As previously announced and
as a result of an exchange offer (the Exchange Offer) and related transactions
completed on November 22, 2004, the Company disposed of its ownership interest
in Vsource Asia Berhad, its former principal operating subsidiary, and
therefore no longer provides BPO services.  Since the completion of the
Exchange Offer, the Company's only active business operations consist of
limited consulting services.  Accordingly, the results of the BPO-related
operations conducted by Vsource Asia have been classified as discontinued.  In
Fiscal 2005 and through the Exchange Offer, Vsource Asia generated $13.9
million in revenues or approximately 96% of the Company's combined revenues. 
This release presents the Company's results from its limited consulting
services, and excludes revenues and expenses from the discontinued BPO-related
operations.

Revenue for fiscal 2005 totaled $0.254 million, compared to zero for the same
prior year period ("Fiscal 2004").  The Company reported a net profit available
to common shareholders of $37.4 million or $18.37 and $17.92 per basic and
diluted share respectively for fiscal 2005.  Net profit available to common
shareholders during Fiscal 2005 included credit arising on exchange of
preferred stock resulting from the Exchange Offer of $34.3 million, offset by
non-cash charges of $12.2 million from deemed non-cash dividends to preferred
shareholders.  The Company recorded deemed non-cash dividends to preferred
shareholders of $11.9 million for Fiscal 2004 when it reported a net loss
available to common shareholders of $23.2 million or $12.15 per basic share.

The Company's earnings before interest, taxes, depreciation and amortization,
adjusted to exclude non-cash expenses ("Adjusted EBITDA"), were a gain of $17.1
million for Fiscal 2005, compared with Adjusted EBITDA loss of $9.0 million,
adjusted to exclude non-cash stock-based compensation charges of $0.1 million,
for Fiscal 2004.  Adjusted EBITDA represents a non-GAAP (Generally Accepted
Accounting Principles) financial measure.  A table reconciling this measure to
the appropriate GAAP measure is included in the notes to the consolidated
financial statements included in this release.  Net cash as of January 31, 2005
totaled $1.1 million, compared to $0.3 million as of January 31, 2004.

As of March 31, 2005, the Company had approximately $0.5 million in cash, cash
equivalents and marketable securities and also had amounts owed to it from
Vsource Asia totaling $1.739 million.  These amounts relate to legacy
inter-company obligations when Vsource Asia was a subsidiary of the Company,
prior to the completion of the Exchange Offer in November 2004.  The Company is
in discussions with Vsource Asia and its parent Symphony House Berhad to
finalize payment arrangements in respect of this obligation.  Because of the
uncertainty of the full repayment of the Vsource Asia obligation, the Company
has made an estimated discount of $0.783 million against it and currently
values the asset at $0.956 million.

The Company intends to continue to consider a potential sale of the Company;
liquidation and distribution of remaining assets to shareholders; and potential
acquisition opportunities.  In respect of potential acquisitions, the Company
has not identified a specific industry on which it intends to focus; however,
drawing on the Company's BPO background, it may consider small- to medium-sized
business service companies in the United States, Europe and Japan that can
benefit from the "productivity arbitrage" derived from the migration of
operations involving high volume transaction processing to Asia and/or business
services companies operating in Asia.  In the case of a sale or acquisition,
the Company may pursue additional funding opportunities.  The Company has no
present arrangements or understandings with respect to the sale of the Company
or the acquisition of any specific business.

Investors should carefully review the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 2005 for a more detailed description of the
Company's financial results.

                              Vsource, Inc.
                    Consolidated Statements of Income
                  (in thousands, except per share data)

                                                         Fiscal year ended
                                                            January 31,
                                                          2005       2004

   Revenue                                                $254         $0
   Operating Expenses
     Cost of revenue                                       161          0
     Selling, general and administrative                 2,342      3,875
     Amortization of stock-based compensation expense        0         52
     Expenses related to terminated merger with
      TEAM America                                           0      1,467
       Total expenses                                    2,503      5,394

   Operating loss                                       (2,249)    (5,394)
     Other interest income                                   2         32
     Income tax expense                                     (5)         0
   Net loss from continuing operations
    after taxation                                     $(2,252)   $(5,362)
   Discontinued operations
     Income/(loss) from discontinued operations
      before taxation                                   17,491     (5,985)
     Income tax benefit/(expense)                            3        (22)
     Income/(loss) from discontinued operations
      after taxation                                    17,494     (6,007)
   Net income/(loss)                                    15,242    (11,369)
     Credit arising on exchange                         34,363          0
     Non-cash deemed dividend to
      preferred shareholders (1)                       (12,219)   (11,877)
   Net income/(loss) available to
    common shareholders                                $37,386   $(23,246)
   Basic earnings/(loss) per share available to
    common shareholders
     Continuing operations                               $9.77     $(9.01)
     Discontinued operations                             $8.60     $(3.14)
     Total                                              $18.37    $(12.15)
   Weighted average number of
    common shares outstanding
     Basic (2)                                       2,035,434  1,913,807
   Diluted earnings/(loss) per share available
    to common shareholders
     Continuing operations                               $9.53       $n/a
     Discontinued operations                             $8.39       $n/a
     Total                                              $17.92       $n/a
   Weighted average number of
    common shares outstanding
     Diluted                                         2,086,659        n/a
   Earnings before interest, taxes, depreciation
    & amortization excluding non-cash stock
    compensation expense (3)                           $17,130    $(8,998)

   (1)  Non-cash deemed dividend for preferred shareholders associated with
        the amortization of beneficial conversion feature and accretion of
        redemption value of Series 4-A convertible preferred stock
   (2)  Excludes common shares outstanding on an "as converted basis"
        totaling 51,225 in aggregate associated with preferred stock,
        warrants and vested employee options outstanding
   (3)  Reconciliation of Net income/(loss) to Adjusted EBITDA



                                                      Twelve months ended
                                                           January 31,
                                                       2005         2004

        Net income/(loss)                            $15,242     $(11,369)
        Add:
          Other interest expense/(income)                  3          (33)
          Depreciation and amortization                1,883        2,288
          Amortization of stock-based
           compensation expense                            0           94
          Provision for income tax                         2           22
          Adjusted EBITDA                            $17,130      $(8,998)



                              Vsource, Inc.
                       Consolidated Balance Sheets
                              (in thousands)

                                                  January 31,   January 31,
                                                     2005          2004
   Assets
     Current assets:
       Cash                                         $1,064          $330
       Receivable from related party                   956             0
       Restricted cash                                 258           275
       Prepaid expenses                                308           103
       Current assets                                   88           394
       Current assets - discontinued operations          0         4,715
         Total current assets                        2,674         5,817
     Property and equipment, net                        40            80
     Restricted cash, non-current                        0           250
     Non current assets - discontinued operations        0         4,687
   Total assets                                     $2,714       $10,834

   Liabilities, Preferred stock and
    Shareholders' equity/(deficit)
     Current liabilities:
       Accounts payable                               $497          $202
       Accrued expenses                                262         1,529
       Staff accruals                                   20           737
       Current liabilities - discontinued operations     0         6,082
         Total current liabilities                     779         8,550
       Preferred stock                                 191        18,875
       Shareholders' equity / (deficit)              1,744       (16,591)
   Total Liabilities, Preferred stock and
    Shareholders' equity/(deficit)                  $2,714       $10,834



  Non-GAAP Financial Measures


This release contains non-GAAP financial measures.  Pursuant to the
requirements of Regulation G, Vsource has provided reconciliation within this
release of the non-GAAP financial measures to the most directly comparable GAAP
financial measures.  Adjusted EBITDA has been presented in this release in
order to assist in the analysis of the operating profitability of the company
because the company believes this form of measurement eliminates the effects of
non-cash charges such as beneficial conversion feature expense, stock-based
compensation and depreciation and amortization.  Management reviews this form
of measurement monthly.

Forward Looking Statements

This release contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, Section 21E of the Securities
Exchange Act of 1934, as amended, and the Private Securities Litigation Reform
Act of 1995, including, among others (i) prospective business opportunities and
(ii) our potential strategies for redirecting and financing our business. 
Forward-looking statements are statements other than historical information or
statements of current condition.  These statements involve risks and
uncertainties that cannot be predicted or quantified, and consequently, actual
results may differ materially from those expressed or implied by such
forward-looking statements.  Such risks and uncertainties include the factors
detailed in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission.  These statements speak as of the date of this
release, and the Company undertakes no obligation to update these statements in
light of future events or otherwise. 

DATASOURCE: Vsource, Inc.



CONTACT:  Jim Higham, Vice President and General Counsel of Vsource,

Inc., [phone], 

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