Vsource(R) Announces Results for Second Quarter Ending July 31, 2004

Vsource(R) Announces Results for Second Quarter Ending July 31,
2004 


LA JOLLA, Calif., Sept 10  /PRNewswire-FirstCall/ -- Vsource, Inc. (OTC:VSCE)
(BULLETIN BOARD: VSCE) , an innovative leader in providing customized global
business process outsourcing (BPO) services to clients worldwide, today
announced its financial results for its second quarter ending July 31, 2004.

Revenue for Q2 2004 totaled $4.06 million, compared to $4.83 million for Q2
2003, which amount included revenue of $0.3 million from Team America, Inc.,
which was subsequently written off as bad debt following Team America's Chapter
11 proceedings. The company reported a net loss available to common
shareholders of $5.27 million or $2.60 per basic share for Q2 2004.  Net loss
available to common shareholders during the period included a loss from
discontinued operations of $0.49 million and non-cash charges of $3.62 million
from deemed non-cash dividends to preferred shareholders. Excluding the deemed
dividend, Vsource's net loss was $1.65 million in Q2 2004, or $0.81 per basic
share in Q2 2004.  The company recorded a deemed dividend of $2.86 million in
Q2 2003, when it reported a net loss available to common shareholders of $4.55
million or $2.43 per basic share.

As announced previously, the company discontinued the non-profitable human
capital management solutions segment through the sale of Vsource (Texas), Inc.,
a wholly owned subsidiary which was primarily engaged in the segment. For Q2
2004, loss from discontinued operations totaled $0.49 million.

The company's earnings before interest, taxes, depreciation and amortization,
adjusted to exclude deemed non-cash dividends to preferred shareholders of
$3.62 million ("Adjusted EBITDA") was a loss of $1.04 million for Q2 2004,
compared with Adjusted EBITDA loss of $1.11 million, adjusted to exclude
non-cash stock compensation charges of $0.04 million and deemed non- cash
dividends to preferred shareholders of $2.86 million for Q2 2003. 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 at the end of Q2 2004 totaled $4.3 million,
compared to $1.3 million as of the end of the last fiscal year, showing the
addition of proceeds of approximately $9.5 million from the disposal of 39% of
the equity interest in Vsource Asia to Symphony House Berhad and other
investors in Q1 2004 and the cash used in operations in Q1 and Q2 2004.

Vsource Chairman and Chief Executive Officer, Phil Kelly commented, "In Q2
2004, we made substantial progress in building our base for recurring revenue
with the addition of several new multi-national clients and enjoyed continued
success in building on existing relationships through expanded contractual
services.  Specifically, during the quarter we added two new banking clients,
three new insurance clients, one new client in transportation services and
signed four new contracts with existing clients.  Implementation of each of
these contracts has begun and services will commence in Q3 and Q4 of this year,
depending on the contract."

Mr. Kelly continued: "In addition, last week we announced that we intend to
initiate an exchange offer to holders of our preferred stock which our board of
directors believes will simplify our cumbersome and complex capital structure
by greatly reducing, or even eliminating, Vsource's preferred stocks'
liquidation preference and removing the put right held by holders of our Series
4-A preferred stock, which issues we believe have created future financial
uncertainty that has deterred some prospective financing sources and clients. 
We have also learned that holders of preferred stock participating in the
exchange offer will be receiving a cash offer from Symphony House Berhad for
securities which they receive in the exchange offer.  I direct interested
persons to an information statement that we filed with the Securities and
Exchange Commission for further detail on these transactions."

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

                                                Three months ending July 31,
                                                       2004        2003

  Revenues                                           $4,064      $4,826
  Operating Expenses
      Cost of revenue                                 2,676       2,768
      Selling, general and administrative             2,779       3,726
      Amortization of stock-based compensation
       expense                                           --          38

          Total expenses                              5,455       6,532
  Operating loss                                     (1,391)     (1,706)
      Interest income, net                                4          10
      Minority interest in loss of a subsidiary         218          --
  Net loss from continuing operations before
   taxation                                         $(1,169)    $(1,696)
  Taxation                                                4          --
  Net loss from continuing operations after
   taxation                                         $(1,165)    $(1,696)

  Discontinued operations:
      Loss from discontinued operations (including
       loss on disposal of $162,000)                  $(486)         --

  Net loss                                          $(1,651)    $(1,696)
      Non-cash deemed dividend to preferred
       shareholders (1)                             $(3,623)    $(2,856)
  Net loss available to common shareholders         $(5,274)    $(4,552)

  Loss per share available to common shareholders:
      Basic loss per share from continuing
       operations                                    $(2.36)     $(2.43)
      Basic loss per share from discontinuing
       operations                                    $(0.24)        $--
                                                     $(2.60)     $(2.43)
  Weighted average number of common shares
   outstanding
      Basic                                           2,026       1,872
  Earnings before interest, taxes, depreciation &
   amortization excluding non-cash stock
   compensation expense (" Adjusted EBITDA") (2)    $(1,045)    $(1,110)
      Adjusted EBITDA margin (3)                     %(25.7)     %(23.0)

  (1) Non-cash deemed dividend for preferred shareholders associated with
      the exchange of Series 2-A convertible preferred stock and warrants
      for Series 4-A convertible preferred stock; and amortization of
      beneficial conversion feature and accretion of redemption value of
      Series 4-A convertible preferred stock

  (2) Reconciliation of Net loss to Adjusted EBITDA

                                                 Three months ended July 31,
                                                      2004        2003

      Net loss                                      $(1,651)    $(1,696)
      Add:

          Interest income, net                           (4)        (10)
          Depreciation and amortization                 606         558
          Amortization of stock-based compensation
           expense                                       --          38
          Taxes                                           4          --
      Adjusted EBITDA                               $(1,045)    $(1,110)

  (3) Adjusted EBITDA margin is Adjusted EBITDA
      divided by Revenues


                              Vsource, Inc.
                       Consolidated Balance Sheets
                              (in thousands)
                                                     July 31,   January 31,
                                                      2004         2004
  Assets
      Current assets:
          Cash                                       $4,279      $1,322
          Restricted cash                               329         473
          Accounts receivable, net                    1,933       1,062
          Inventories                                   160         207
          Prepaid expenses                              283         475
          Other current assets                        2,053       2,129
          Promissory note receivable                     46          --
          Current assets - discontinued operations       --         149

              Total current assets                    9,083       5,817

      Property and equipment, net                     3,420       4,348
      Restricted cash, non current                      599         599
      Non current assets - discontinued operations       --          70
  Total assets                                      $13,102     $10,834

  Liabilities, Preferred stock and Shareholders'
   deficit
      Current liabilities:
          Accounts payable                           $1,628      $2,256
          Accrued expenses                            3,233       5,090
          Advance from customers                        316         906
          Current liabilities - discontinued
           operations                                    --         298
              Total current liabilities               5,177       8,550

      Minority interest                               1,395          --
      Preferred stock                                25,909      18,875
      Shareholders' deficit                         (19,379)    (16,591)
  Total Liabilities, Preferred stock and
   Shareholders' deficit                            $13,102     $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-operating expenses and non-cash charges such as beneficial conversion
feature expense, stock-based compensation and depreciation and amortization.
Management reviews this form of measurement monthly.  Vsource has consistently
provided this measurement in previous releases and therefore has provided a
consistent basis for comparison between quarters, which the company believes is
useful to investors and other interested persons.

VSOURCE HAS FILED AN INFORMATION STATEMENT WITH THE SECURITIES AND EXCHANGE
COMMISSION, WHICH IS AVAILABLE FOR NO CHARGE AT THE SEC'S WEBSITE, WWW.SEC.GOV.
 VSOURCE ANTICIPATES THAT IT WILL BE FILING AN EXCHANGE OFFERING CIRCULAR NEXT
WEEK.  UPON FILING, THE EXCHANGE OFFERING CIRCULAR WILL ALSO BE AVAILABLE FOR
NO CHARGE AT THE SEC'S WEBSITE AT WWW.SEC.GOV.  THE EXCHANGE OFFER CIRCULAR
(INCLUDING THE INFORMATION STATEMENT, THE LETTER OF TRANSMITTAL AND OTHER OFFER
DOCUMENTS) CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE
ANY DECISION IS MADE WITH RESPECT TO THE EXCHANGE OFFER.

About Vsource

Vsource, Inc., headquartered in La Jolla, Calif., provides customized global
business process outsourcing (BPO) services to clients worldwide. Under Vsource
Client Outsourcing Solutions (COS), Vsource delivers superior BPO solutions to
Fortune 500 and Global 500 organizations.  Vsource COS include:  Human Resource
Solutions, Warranty Solutions, Sales Solutions, and Vsource Foundation
SolutionsTM, which include Customer Relationship Management (CRM), Financial
Services, Travel and Expense Claims, and Supply Chain Management (SCM). 
Vsource solutions are currently utilized by some of the world's most admired
companies, including: ABN-AMRO, Agilent Technologies, EMC2, FedEx, Network
Appliance, Haworth, and Gateway.  For more information, log on to: 
http://www.vsource.com/.

Forward Looking Statements:  Some of the statements in this release and other
oral and written statements made by us from time to time to the public
constitute forward-looking statements. These forward-looking statements are
based on management's current expectations or beliefs and are subject to a
number of factors and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements. These
forward-looking statements include, without limitation, statements with respect
to anticipated future operating and financial performance, introduction of
services and growth opportunities expected or anticipated to be realized by
management. Vsource disclaims any obligation to update or revise any
forward-looking statements based on the occurrence of future events, the
receipt of new information, or otherwise. Factors that could cause or
contribute to such differences include, but are not limited to, heavy reliance
on a small number of major clients, a potential requirement to redeem our
Series 4-A convertible preferred stock if we fail to meet certain conditions by
March 31, 2006, the new and unproven market for business process outsourcing
services internationally, long cycles for sales of our solutions, complexities
involved in implementing and integrating our services, fluctuations in revenues
and operating results, economic and infrastructure disruptions, dependence on a
small number of vendors and service providers, management of acquisitions,
litigation and competition. Other factors that may affect these statements are
identified in our previous filings with the Securities and Exchange Commission.

NOTE:  Vsource is a registered trademark of Vsource, Inc.  Vsource Foundation
Solutions is a trademark of Vsource, Inc.

Fortune, Fortune 500 and Global 500 are registered trademarks of Time Inc.
Vsource disclaims any proprietary interest in the marks and names of others.

  Vsource Media Relations Contact:
   Jim Higham
   Tel:  [phone]
   Fax:  [phone]
   

DATASOURCE: Vsource, Inc.



CONTACT:  Jim Higham of Vsource, Inc., [phone], or fax,

[phone], or 



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

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