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<SEC-DOCUMENT>0001144204-05-001301.txt : 20050114
<SEC-HEADER>0001144204-05-001301.hdr.sgml : 20050114
<ACCEPTANCE-DATETIME>20050114165517
ACCESSION NUMBER:		0001144204-05-001301
CONFORMED SUBMISSION TYPE:	S-1/A
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20050114
DATE AS OF CHANGE:		20050114

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ACCERIS COMMUNICATIONS INC
		CENTRAL INDEX KEY:			0000849145
		STANDARD INDUSTRIAL CLASSIFICATION:	TELEGRAPH & OTHER MESSAGE COMMUNICATIONS [4822]
		IRS NUMBER:				592291344
		STATE OF INCORPORATION:			FL
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		S-1/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-120512
		FILM NUMBER:		05531220

	BUSINESS ADDRESS:	
		STREET 1:		9775 BUSINESSPARK AVENUE
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92131
		BUSINESS PHONE:		8585475700

	MAIL ADDRESS:	
		STREET 1:		1001 BRINTON ROAD
		CITY:			PITTSBURGH
		STATE:			PA
		ZIP:			15221

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	I LINK INC
		DATE OF NAME CHANGE:	19971020

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	MEDCROSS INC
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-1/A
<SEQUENCE>1
<FILENAME>v011103_s1a.htm
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As filed with the Securities and Exchange Commission on January 14, 2005.


<DIV align="right" style="font-size: 10pt">Registration No.&nbsp;333-120512 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</DIV>




<HR size="4" noshade color="#000000" style="margin-top: -5px">
<HR size="1" noshade color="#000000" style="margin-top: -10px">





<P align="center" style="font-size: 14pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>

<P align="center" style="font-size: 18pt"><B>FORM S-1</B>



<P align="center" style="font-size: 12pt"><B>PRE-EFFECTIVE AMENDMENT NO. 1 TO<br>
REGISTRATION STATEMENT<BR>
UNDER<BR>
THE SECURITIES ACT OF 1933</B>



<P align="center" style="font-size: 24pt"><B>ACCERIS COMMUNICATIONS INC.</B>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Florida
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4822
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">59-2291344</TD>
</TR>

<TR style="font-size: 1px">
    <TD align="center" valign="top"><HR size="1" noshade>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><HR size="1" noshade>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><HR size="1" noshade>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or other jurisdiction of
</TD>
    <TD>&nbsp;</TD>

    <TD align="center" valign="top">(Primary Standard Industrial
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer Identification</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Classification Code Number)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Number)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">Acceris Communications Inc.<BR>
9775 Business Park Avenue<BR>
San Diego, CA 92131<BR>
(858)&nbsp;547-5700<BR>
(Address, including zip code, and telephone number, including<BR>
area code, of registrant&#146;s principal executive offices)



<P align="center" style="font-size: 10pt">James J. Meenan<BR>
Chairman of the Board<BR>
Acceris Communications Inc.<BR>
9775 Business Park Avenue<BR>
San Diego, CA 92131<BR>
(858)&nbsp;547-5700<BR>
(Name, address, including zip code, and telephone number,<BR>
including area code, of agent for service)



<P align="center" style="font-size: 10pt">Copies to:<BR>
Ralph V. DeMartino, Esq.<BR>
Dilworth Paxson LLP<BR>
1818 N Street N.W., Suite&nbsp;400<BR>
Washington, DC 20036<BR>
(202)&nbsp;452-0900<BR>
Facsimile: (202)&nbsp;452-0930


<P align="left" style="font-size: 10pt">APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.


<P align="left" style="font-size: 10pt">If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule&nbsp;415 under the Securities Act of
1933 check the following box. &#091;X&#093;


<P align="left" style="font-size: 10pt">If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. &#091;&nbsp;&nbsp;&nbsp;&#093;


<P align="left" style="font-size: 10pt">If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. &#091;&nbsp;&nbsp;&nbsp;&#093;.


<P align="left" style="font-size: 10pt">If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. &#091;&nbsp;&nbsp;&nbsp;&#093;


<P align="left" style="font-size: 10pt">If delivery of the prospectus is expected to be made pursuant to Rule&nbsp;434,
please check the following box. &#091;&nbsp;&nbsp;&nbsp;&#093;



<P align="center" style="font-size: 10pt">
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>CALCULATION OF REGISTRATION FEE</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Proposed Maximum</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Proposed Maximum</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Title of Each Class of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Offering Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Aggregate</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Securities to be Registered</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>be Registered(1)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per Unit</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Offering Price</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Registration Fee(4)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Common Stock, $0.01 par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,681,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">0.88</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,000,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">633.50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Common Stock, $0.01 par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">1.20</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,200,000.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">152.04</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Common Stock, $0.01 par value (4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,681,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Totals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">785.54</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>This registration statement includes 5,681,818 shares of common stock
(the Note Shares) issuable upon conversion of the Secured Convertible Term
Note, subject to adjustment, and up to 1&nbsp;million shares of common stock
(the Warrant Shares) issuable upon exercise of the Common Stock Purchase
Warrants, issued to and held by Laurus Master Fund Ltd. Pursuant to Rule
416, there are also being registered such indeterminable additional
securities as may be issued as a result of the anti-dilution provisions
contained in the Note and Warrants, together with such additional shares
as may be issued because of interest payable in stock, future dividends,
stock distributions, stock splits or similar capital adjustments.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on the conversion price of the Secured Convertible Term Note,
pursuant to Rule 457(g) (1)&nbsp;under the Securities Act of 1933, as amended.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on the proposed maximum exercise price of the Common Stock Purchase
Warrants pursuant to Rule&nbsp;457(g)(1) under the Securities Act of 1933, as
amended.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Represents the Note Shares and the Warrant Shares which may be resold by
the holder thereof. Pursuant to Rule 457(f) (5)&nbsp;no additional fee is
therefore payable.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:3%; font-size: 10pt"><B>THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION </B><B>8(a)</B><B> OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION </B><B>8(a)</B><B>, MAY DETERMINE.</B>


<P align="center" style="font-size: 10pt">2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt"><B>THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.</B>




<P align="center" style="font-size: 10pt"><B>PROSPECTUS</B>




<P align="center" style="font-size: 24pt"><B>ACCERIS COMMUNICATIONS INC.</B>



<P align="center" style="font-size: 10pt">6,681,818 shares of Common Stock




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus relates to our prospective issuance of 5,681,818 shares of
common stock, the Note Shares, upon conversion of principal and/or interest
pursuant to a Secured Convertible Term Note, or Note, and up to one million
shares, the Warrant Shares, issuable upon exercise of outstanding Common Stock
Purchase Warrants or Warrants, and the resale of such shares by the Selling
Holder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is traded on the Over-The-Counter Bulletin Board (OTC-BB)
under the symbol &#147;ACRS.0B.&#148; On January 3, 2005, the reported closing
transaction price of our common stock was $0.60 per share. The address of our
principal executive offices is 9775 Business Park Avenue, San Diego, CA 92131,
and our telephone number is (858)&nbsp;547-5700.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investing in our common stock involves a high degree of risk. You should
consider carefully the </B><B><I>&#147;Risk Factors&#148; </I></B><B>beginning on page 2 of this prospectus
before purchasing any common stock offered. </B>In deciding whether to purchase
shares of common stock offered or, if you are the holder of the Note or the
Warrants, in deciding whether to convert the Note or exercise the Warrants, you
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with any different information.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.</B>



<P align="center" style="font-size: 10pt"><B>The date of this prospectus is January 13, 2005.</B>


<P align="center" style="font-size: 10pt">
<P align="center" style="font-size: 10pt">
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>TABLE OF CONTENTS</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="94%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Page</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">SUMMARY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">RISK FACTORS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">RECENT DEVELOPMENTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">SELECTED CONSOLIDATED FINANCIAL DATA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">USE OF PROCEEDS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">BUSINESS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">MANAGEMENT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">SELLING HOLDER</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">PLAN OF DISTRIBUTION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">CAPITAL STOCK</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">SHARES AVAILABLE FOR FUTURE SALE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">EXPERTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">CHANGES IN REGISTRANT&#146;S CERTIFYING ACCOUNTANT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">LEGAL MATTERS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">HOW TO OBTAIN ADDITIONAL INFORMATION</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">INDEX TO FINANCIAL STATEMENTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-1</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Acceris has not authorized anyone to give any information or make any
representation about the offering that differs from, or adds to, the
information in this prospectus or the documents that are publicly filed with
the Securities and Exchange Commission. Therefore, if anyone does give you
different or additional information, you should not rely on it. The delivery of
this prospectus does not mean that there have not been any changes in Acceris&#146;
condition since the date of this prospectus. If you are in a jurisdiction where
it is unlawful to offer to purchase or exercise the securities offered by this
prospectus, or if you are a person to whom it is unlawful to direct such
activities, then the offer presented by this prospectus does not extend to you.


<P align="left" style="font-size: 10pt">This prospectus speaks only as of its date except where it indicates that
another date applies. Documents that are incorporated by reference in this
prospectus speak only as of their date, except where they specify that other
dates apply. The information in this prospectus may not be complete and may be
changed. Neither Acceris nor the Selling Holder may sell and the Selling
Holder may not exercise the Common Stock Purchase Warrants or convert the Note
until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to purchase or
exercise these securities and it is not soliciting an offer to purchase or
exercise these securities in any state where the purchase or exercise is not
permitted.



<P align="center" style="font-size: 10pt">
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<DIV align="left">
<A name="101"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SUMMARY</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This summary presents selected information from this prospectus. You
should carefully read this entire prospectus and the documents to which the
prospectus refers in order to understand this offering. See &#147;How to Obtain
Additional Information.&#148; All amounts disclosed in $000&#146;s, except for share and
per share information, unless otherwise indicated.


<P align="left" style="font-size: 10pt"><B>Company Overview</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a broad-based communications company, servicing residential, small
and medium-sized businesses and corporate accounts in the United States. We
provide a range of products from local dial tone, domestic and international
long-distance voice services to fully managed, integrated data and enhanced
services. We are a US facilities-based carrier with points of presence in 30
major US cities. Our voice network features 11 voice switches and nationwide
Feature Group D access. Our data network consists of 17 Nortel Passports that
have recently been upgraded to support multi-protocol label switching. Finally,
we have relationships with multiple tier I and tier II providers in the U.S.
and abroad.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently manage our Company through two business segments. Our
Telecommunications segment offers a broad selection of voice and data
telecommunications products and services to residential and commercial
customers through a network of independent agents, primarily via multi-level
marketing (&#147;MLM&#148;) and commercial agent programs. Our Technologies segment
offers a proven network convergence solution for voice and data in Voice over
Internet Protocol (&#147;VoIP&#148;) communications technology and holds two foundational
patents in the VoIP space (U.S. Patent Nos. 6,243,373 and 6,438,124, together
the &#147;VoIP Patents&#148;). We are pursuing efforts to license the technology
supported by our patents to carriers and equipment manufacturers and suppliers
in the Internet Protocol (&#147;IP&#148;) telephony market.</p>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has been organized through the assembly, from 2001 to 2003, of bankrupt and
financially distressed assets. Several reorganizations have occurred during this time and
additional reorganizations may be required in the future as the Company deploys strategies
to maximize operational efficiencies and to achieve an appropriate capital structure.
These are considered necessary elements of the value creation strategy of the Company.


<P align="left" style="font-size: 10pt"><B>The Securities Offered</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus relates to the issuance and sale by the Company and the
resale by the Selling Holder of up to:



<P align="left" style="margin-left:3%; font-size: 10pt">&#149; 5,681,818 shares of our common stock issuable to the Selling Holder
upon conversion of principal and interest payable pursuant to the Secured
Convertible Term Note; and



<P align="left" style="margin-left:3%; font-size: 10pt">&#149; 1,000,000 shares of our common stock issuable upon exercise of Common
Stock Purchase Warrants held by the Selling Holder.


<P align="left" style="font-size: 10pt"><B>Risk Factors</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The purchase of Acceris&#146; common stock involves a high degree of risk. You
should convert the Note or exercise your Warrants or purchase our securities
only if you can afford a complete loss of your investment. See &#147;Risk Factors.&#148;</B>
We have not authorized anyone to give you information or to make any
representation other than those contained in this prospectus.


<P align="left" style="font-size: 10pt"><B>Use of Proceeds</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect to use any proceeds from the exercise of the Warrants primarily
for working capital and general corporate purposes. The Company will not
receive any of the proceeds from the sale of shares by the Selling Holder. See
&#147;Selling Holder.&#148;

<DIV align="left">
<A name="102"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>RISK FACTORS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Investing in our common stock involves a high degree of risk. You should
carefully consider the following risks and all other information contained in
our public filings before making an investment decision about our common stock.
While the risks described below are the ones we believe are most important for
you to consider, these risks are not the only ones that we face. If any of the
following risks actually occurs, our business, operating results or financial
condition could suffer, the market value of our common stock could decline and
you could lose all or part of your investment.</I>


<P align="center" style="font-size: 10pt">2
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<P align="center" style="font-size: 10pt"><B>Risks Related to our Business</B>


<P align="left" style="font-size: 10pt"><B>The telecommunications business is
in transition and we are considering our strategic alternatives</B>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company targets revenue growth by broadening our product offerings. In 2004 the addition
of a local and long distance bundled offering targeted at consumer customers was expected
to provide revenue expansion, while the Company continued its strategy of allowing
attrition of lower revenue 10-10-xxx customers. The objective of this strategy was to
allow the Company to increase the average monthly revenue per customer, resulting in a
greater contribution per customer providing greater operating leverage of the
business&#146;s fixed cost base. The Company launched a local and long distance bundled
offering early in 2004 and the product soon gained acceptance in five states: New Jersey,
New York, Pennsylvania, Massachusetts and Florida. By mid-year 2004, regulatory
uncertainty initially created by a court decision created a lack of clarity regarding the
ongoing profitability/existence of UNE-P. Some felt that everything would soon settle and
that things would continue as they existed prior to the court decision, while others felt
that a new business model would exist but that uncertainty existed surrounding the
economics of any such business model, while others felt that changes were occurring that
would change telecommunications forever in the United States in a negative manner for
companies like Acceris. Long distance carrier AT&amp;T announced its decision to exit the
local residential market. In response to these legal and regulatory developments, the
Company made the decision to put its geographic expansion plans on hold, while continuing
to market to existing states. Of the approximately 350,000 customers that the Company has,
approximately 15,000 are affected by UNE-P. On the cost side of the business, we continued
our integration initiatives and resized the organization for our revised revenue
expectations. Additionally, we began to assess whether we should expand through strategic
acquisitions to take advantage of economies of scale or whether we should attempt to
divest some or all of our telecommunications operations. The expansion of operations
through strategic acquisitions would require substantial additional capital which may not
be available to us. The Company has hired a third party advisor to assist management in
considering its strategic options.

<P align="left" style="font-size: 10pt"><B>We are dependent upon outside
financing to meet our ongoing capital requirements.</B>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have incurred substantial operating losses and negative cash flows from operations since
inception and have a net capital deficiency and negative working capital. We have
historically financed our operations through related party debt with our controlling
stockholder, Counsel Corporation (&#147;Counsel&#148;), and through a revolving credit
facility with an outside party. In 2003, we completed a debt restructuring pursuant to
which approximately $40,700 of existing debt was converted into common equity. Given the
significant amount of capital deficiency, we may need to complete further debt
restructurings, which may have an adverse affect on all common stockholders. The credit
facility with the asset based lender matures on June 30, 2005. The Company is seeking to
locate a replacement credit facility. There is no certainty that we will be able to do so
or that we can do so on favorable terms.

<P align="left" style="font-size: 10pt"><B>We may need to settle
the convertible notes in cash</B>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion
of existing convertible notes is primarily at the option of the holders. Should the
holders of the Company&#146;s notes decide not to convert or should other conditions not
be met regarding stock price, the Company may be required to deliver cash to settle
amounts due in respect of interest, amortization payments and/or principal at various
times in the future. The Company&#146;s independent accountants have given the Company a
going concern qualification in each of 2002 and 2003, and a similar reference is expected
on the Company&#146;s 2004 independent accountants&#146; reports. Additionally, the Keep
Well from Counsel Corporation expires on June 30, 2005 and is not expected to be extended.
Finally, the working capital credit facility provided by the asset based lender expires on
June 30, 2005 and management is working to replace this credit facility on favorable
terms. Should management&#146;s plans to improve operations, replace the existing asset
based lender or otherwise not occur on a timely basis or on favorable terms, sufficient
cash flows may not be available to meet the obligations of the Company as they become due.

<P align="left" style="font-size: 10pt"><B>We are primarily dependent upon an
ongoing commitment from Counsel to fund, through long-term intercompany advances or equity
contributions, all of our capital investment, working capital or other operational cash
requirements through June 30, 2005.</B>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
Counsel did convert approximately $40,700 of its debt into 13,428,492 shares of our common
stock on November 30, 2003, thereby remaining our single largest stockholder, there
remains significant debt to Counsel of approximately $50,000 as of December 31, 2004,
which is partially subject to an accelerated maturity in certain circumstances, including
but not limited to capital raise and the sale of the securities in other enterprises that
we own. The remaining debt matures on January 31, 2006, and the commitment from Counsel to
fund us terminates on June 30, 2005. We do not expect that Counsel will extend its
commitment beyond June 30, 2005. Should Counsel be unable or unwilling to meet its
commitment to provide us financial support as and if necessary, and in the event cash flow
from operations is insufficient to cover the maturing debt as it becomes due, we would be
required to restructure our debt with Counsel and/or further extend payments of principal
or interest or find alternative funding to replace the related party debt and funding
commitment. There can be no assurance that we will be able to do so. If we are not, we may
have to evaluate opportunities to sell assets or obtain alternative financing with terms
that are not favorable to us. Even if we were able to do so, such restructuring may be
done on terms and conditions that are not favorable to us. See &#147;Certain Relationships
and Related Transactions.&#148;

<P align="left" style="font-size: 10pt"><B>Our assets serve as collateral
under several facilities. If we were to default on any of these loans, the secured lenders
could foreclose on our assets. In that event, we would be unable to continue our
operations as they are presently conducted</B>.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
asset-based lender has first priority over all the assets and a pledge of shares of the
Company&#146;s common stock owned by the controlling shareholder of the Company. The
asset-based facility provides the Company advances based on outstanding billings, subject
to certain restrictions. This facility matures on June 30, 2005. The Company expects to
replace this senior lender in 2005. There can be no certainty that we will be successful
in our efforts. If we are not, we may have to evaluate opportunities to sell assets with
terms that are not favorable to us. Even if we were able to do so, such restructuring may
be done on terms and conditions that are not favorable to us.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October 2004 we entered into a Securities Purchase Agreement with Laurus Master Fund, Ltd.
pursuant to the terms of a secured convertible term note in the principal amount of
$5,000. The note is collateralized by a blanket security interest in our assets and a
pledge of the stock of certain of our subsidiaries, and is subordinate to our asset-based
lender. Our assets also secure approximately $16,000 of convertible debt as of December
31, 2004 to Counsel under the Senior Convertible Loan and Security Agreement entered into
in March, 2001. The shares of one of our subsidiaries secure approximately $27,000 of debt
to Counsel pursuant to various other loan agreements. All Counsel debt is subordinate in
favor of our asset-based lender and Laurus Master Fund, Ltd. If we should default under
the repayment provisions of the secured facilities, the secured lenders could seek to
foreclose on our primary assets in an effort to seek repayment under the notes. If a
secured lender was successful, we would be unable to conduct our business as it is
presently conducted and our ability to generate revenues and fund our ongoing operations
would be materially adversely affected.


<P align="left" style="font-size: 10pt"><B>Our operations are dependent on leased telecommunications lines.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use other companies to provide data communications capacity via leased
  telecommunications lines and services to and from geographic areas that are not
  covered by our own network. MCI, Verizon, AT&#038;T, Global Crossing, Qwest, Bell
  South, other regional and international companies provide significant portions of the leased
  telecommunications lines and services that we use. If any of these suppliers
  were unable or unwilling to provide or expand their current levels of service
  to us in the future, the services we offer our subscribers would be affected.
  Although leased telecommunications lines are available from several alternative
  suppliers, we might not be able to obtain substitute services from other
  providers at reasonable or comparable prices or in a timely fashion.
  Significant interruptions of our telecommunications



<P align="center" style="font-size: 10pt">3
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">services might occur in the future, and we might not be able to provide the
level of service we currently offer. Changes in tariffs, regulations, or
policies by any of our telecommunications providers might limit or eliminate
our ability to continue to offer long-distance or local dial tone service on
commercially reasonable or profitable terms.


<P align="left" style="font-size: 10pt"><B>We are dependent upon the services of others for billing, collection and
network services.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We utilize the services of certain competitive local exchange carriers
(&#147;CLECs&#148;) to bill and collect from customers for a significant portion of our
revenues. If the CLECs were unwilling or unable to provide such services in the
future, we would be required to significantly enhance our billing and
collection capabilities in a short amount of time and our collection experience
could be adversely affected during this transition period. If the CLECs were
unable to remit payments received from their customers relating to our
billings, our operations and cash position could be adversely affected.
Management believes we have strong business relationships with the CLECs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We depend on certain large telecommunications carriers to provide network
services for significant portions of our telecommunications traffic. If these
carriers were unwilling or unable to provide such services in the future, our
ability to provide services to customers would be adversely affected and we
might not be able to obtain similar services from alternative carriers on a
timely basis. Management believes we have strong business relationships with
our important carriers.

<P align="left" style="font-size: 10pt"><B>We are a growing company that must attract new subscribers and minimize the
rate of customer attrition in an industry with larger and better capitalized
competitors.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a growing business that faces several challenges, especially when
compared to larger companies in the same business, including:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a small management team</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limited capital and financial resources</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our small size</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a small market share</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All these factors might make us unable to compete with larger, older,
better capitalized businesses.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to increase our subscribers, we must be able to replace
terminating subscribers and attract new subscribers. However, the sales and
marketing expenses and other subscriber costs associated with attracting new
subscribers are substantial. Our ability to improve or maintain operating
margins will depend on our ability to retain and attract new subscribers. While
we continue to invest resources in the telecommunications infrastructure,
customer support resources, sales and marketing expenses and subscriber
acquisition costs, our future efforts might not improve subscriber retention or
acquisition.


<P align="left" style="font-size: 10pt"><B>We may not be able to utilize income tax loss carry forwards.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restrictions in our ability to utilize income tax loss carry forwards have
occurred in the past due to the application of certain changes in ownership tax
rules in the United States. There is no certainty that the application of these
rules may not reoccur, resulting in further restrictions on our income tax loss
carry forwards existing at a particular time. Any such additional limitations
could require us to pay income taxes in the future and record an income tax
expense to the extent of such liability. We could be liable for income taxes
on an overall basis while having unutilized tax loss carry forwards since these
losses may be applicable to one jurisdiction and/or particular line of business
while earnings may be applicable to a different jurisdiction and/or line of
business. Additionally, income tax loss carry forwards may expire before we
have the ability to utilize such losses in a particular jurisdiction and there
is no certainty that current income tax rates will remain in effect at the time
when we have the opportunity to utilize reported tax loss carry forwards.

<P align="left" style="font-size: 10pt"><B>Acquisition of companies, products or technologies may result in disruptions in
business and diversion of management attention, adversely impacting our
business, results of operations and financial condition, and making period to
period comparisons difficult.</B>



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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisitions of complementary companies, products or technologies which we
have recently made, or which we may make in the future, will require the
assimilation of the operations, products and personnel of the acquired
businesses and the training and motivation of these individuals. Acquisitions
may therefore cause disruptions in operations and divert management&#146;s attention
from day to day operations, which could impair our relationships with current
employees, customers and strategic partners. Although we currently have no
understandings, commitments or agreements with respect to any additional
acquisitions, any such acquisitions may be accompanied by the risks commonly
encountered in such transactions. We may also have to, or choose to, incur debt
or issue equity securities to pay for any future acquisitions. The issuance of
equity securities for an acquisition could be substantially dilutive to our
stockholders&#146; holdings. In addition, our profitability may suffer because of
such acquisition-related costs or amortization costs for tangible and
intangible assets. Our inability to address such risks or to fulfill
expectations regarding revenues from acquired businesses, products and
technologies could have a material adverse effect on our business, operating
results and financial condition. We have completed several acquisitions over
the past three years and may complete acquisitions in the future, which makes
it difficult to compare our financial results on a period to period basis.

<P align="left" style="font-size: 10pt"><B>We must be able to develop and implement an expansion strategy and manage our
growth.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability to develop and implement an expansion strategy, manage the
same and respond to growth will be critical to our success. To accomplish our
growth strategy, we will be required to invest additional capital and resources
and expand our geographic markets. We cannot assure you that we will be
successful in developing, implementing or managing any such growth strategies.
If we are successful in our growth strategy, there will be additional demands
on our customer support, marketing, administrative and other resources. There
can be no assurance we will be able to manage expanding operations effectively
or that we will be able to maintain or accelerate our rate of growth.

<P align="left" style="font-size: 10pt"><B>We face risks inherent in new product and service offerings as well as new
markets.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time we introduce new products and services or expand our
previous product and service offerings to our existing and target markets. For
instance, in the fourth quarter of 2003 we announced the introduction of local
exchange service under the terms of the Unbundled Network Element Platform
authorized by the 1996 Act. Our prospects must therefore be considered in light
of the risks, expenses, problems and delays inherent in establishing new lines
of business in a rapidly changing industry. Although we believe we can
successfully differentiate our product and service offerings from others in the
marketplace, we must be able to compete against other companies who may already
be established in the marketplace and have greater resources. There can be no
assurance we will be successful in adding products or services or expanding
into new markets or that our administrative, operational, infrastructure and
financial resources and systems will be adequate to accommodate such offerings
or expansion.

<P align="left" style="font-size: 10pt"><B>We are dependent upon the services of independent agents.</B>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our market penetration primarily reflects the marketing, sales and
customer service activities of our independent agents, who market our products
and services on a commission basis. The use of these agents exposes us to
significant risks, including the fact that we depend on the continued
viability, loyalty and financial stability of our agents. Our future success
depends in large part on our ability to recruit, maintain and motivate our
agents. We are subject to competition in the recruiting of agents from other
organizations that use agents to market their products and services, including
those that market telecommunications services. Because of the number of factors
that affect the recruiting, performance and viability of our agents and our
relationship with our agents, we cannot predict when or to what extent we will
be able to continue to recruit, maintain and motivate agents effectively, nor
can we predict the difficulties or costs associated with terminating any of our
agency relationships.


<P align="left" style="font-size: 10pt"><B>We are reliant on our
billing solutions. </B>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
rely on three billing solutions to bill customers. If those technologies fail to operate
as expected, there is a risk that revenue could be lost or that customers could be billed
incorrectly. Our billing systems are dependent on data feeds from switch sites across the
United States. Should those switches fail to capture or retain such data there is a risk
that revenue could be lost or that customers could be billed incorrectly.

<P align="left" style="font-size: 10pt"><B>Our principal stockholder has
voting control over us and certain of our executive officers are employees and
stockholders of Counsel.</B>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the date of this prospectus, Counsel owns over 90% of our outstanding common stock. As
a result, Counsel controls all matters requiring approval by the stockholders including
the election of the Board of Directors and significant corporate transactions. Our Board
of Directors establishes corporate policies and has the sole authority to nominate and
elect our officers to carry out those policies. Our Chief Executive Officer, our
President, Chief Financial Officer and Corporate Secretary are all employees of Counsel
Corporation, and other than the Chief Executive Officer they do not have direct employment
agreements with Acceris. Services in respect of Counsel staff working at Acceris are paid
for pursuant to a management services agreement that exists between Counsel and Acceris.
The control by Counsel could delay or prevent a change in control of Acceris, impede a
merger, consolidation, takeover or other business combination involving us and discourage
a potential acquirer from making a tender offer or otherwise attempting to obtain control
of us. Other stockholders therefore will have limited participation in our affairs. The
eight member board of directors has four members independent of Counsel, including the
Chairman. The board established an independent committee of the board in 2004 to consider
recommendations of the Company&#146;s management for potential merger and acquisitions
activities.





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<P align="left" style="font-size: 10pt"><B>Our future performance relies on attracting and retaining key employees.</B>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have certain employees that we consider to be key. Many of these
employees are involved in executing the strategy that will impact our planned
results. If these key employees cease to be employed with us, planned results
could be delayed or might not materialize. We mitigate this risk through the
use of employment contracts, the formalization of our strategy and business
plans and by ensuring the existence of timely knowledge exchange and
collaboration.

<P align="left" style="font-size: 10pt"><B>Our Board of Directors may issue additional shares of preferred stock without
stockholder approval.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Articles of Incorporation, as amended, authorize the issuance of up to
10,000,000 shares of preferred stock, $10.00 par value per share. The Board of
Directors is authorized to determine the rights and preferences of any
additional series or class of preferred stock. The Board of Directors may,
without stockholder approval, issue shares of preferred stock with dividend,
liquidation, conversion, voting or other rights which are senior to our shares
of common stock or which could adversely affect the voting power or other
rights of the existing holders of outstanding shares of preferred stock or
common stock. The issuance of additional shares of preferred stock may also
hamper or discourage an acquisition or change in control of Acceris.


<P align="left" style="font-size: 10pt"><B>We are subject to litigation.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are, from time to time, involved in various claims, legal proceedings
and complaints arising in the ordinary course of business. Details of
insignificant matters have not been disclosed in this document. Set out below
are the significant litigation matters facing us at this time:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;16, 2004, certain of our shareholders (the &#147;Plaintiffs&#148;) filed a
putative derivative complaint in the Superior Court of the State of California
in and for the County of San Diego, (the &#147;Complaint&#148;) against us, WorldxChange
Corporation, Counsel Communications LLC, and Counsel Corporation as well as
certain of our present and former officers and directors, some of whom also are
or were directors and/or officers of the other corporate defendants
(collectively, the &#147;Defendants&#148;). The Complaint alleges, inter alia, that the
Defendants, in their respective roles as our controlling shareholder and
directors and officers, committed breaches of the fiduciary duties of care,
loyalty and good faith and were unjustly enriched, and that the individual
Defendants committed waste of corporate assets, abuse of control and gross
mismanagement. The Plaintiffs seek compensatory damages, restitution,
disgorgement of allegedly unlawful profits, benefits and other compensation,
attorneys&#146; fees and expenses in connection with the Complaint. The Company
believes that these claims in their entirety are without merit and intends to
vigorously defend this action. There is no assurance that this matter will be
resolved in the Company&#146;s favor and an unfavorable outcome of this matter could
have a material adverse impact on its business, results of operations,
financial position or liquidity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris and several of Acceris&#146; current and former executives and board
members were named in a securities action filed in the Superior Court of the
State of California in and for the County of San Diego on April&nbsp;16, 2004, in
which the plaintiffs made claims nearly identical to those set forth in the
derivative suit above. We believe that these claims in their entirety are
without merit and intend to vigorously defend this action. There is no
assurance that this matter will be resolved in our favor and an unfavorable
outcome of this matter could have a material adverse impact on our business,
results of operations, financial position or liquidity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Company&#146;s efforts to enforce its patent rights,
Acceris Communications Technologies Inc. filed a patent infringement lawsuit
against ITXC Corp. (&#147;ITXC&#148;) in the United States District Court of the District
of New Jersey on April&nbsp;14, 2004. The complaint alleges that ITXC&#146;s Voice over
Internet Protocol (&#147;VoIP&#148;) services and systems infringe the Company&#146;s U.S.
Patent No.&nbsp;6,243,373, entitled &#147;Method and Apparatus for Implementing a
Computer Network/Internet Telephone System.&#148; On May&nbsp;7, 2004, ITXC filed a
lawsuit against Acceris Communications Technologies Inc., and the Company, in
the United States District Court for the District of New Jersey for
infringement of five ITXC patents relating to VoIP technology, directed
generally to the transmission of telephone calls over the


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<P align="left" style="font-size: 10pt">Internet and the completion of telephone calls by switching them off the
Internet and onto a public switched telephone network. The Company believes
that the allegations contained in ITXC&#146;s complaint are, in their entirety,
without merit and the Company intends to provide a vigorous defense to ITXC&#146;s
claims. There is no assurance that this matter will be resolved in the
Company&#146;s favor and an unfavorable outcome of this matter could have a material
adverse impact on its business, results of operations, financial position or
liquidity.


<P align="left" style="font-size: 10pt"><B>We may be required to make cash payments to dissenting stockholders</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At our Adjourned Meeting of Stockholders held on December&nbsp;30, 2003, our
stockholders approved an amendment to our Articles of Incorporation, deleting
Article&nbsp;VI thereof (regarding liquidations, reorganizations, mergers and the
like). Stockholders who were entitled to vote at the meeting and advised us in
writing, prior to the vote on the amendment, that they dissented and intended
to demand payment for their shares if the amendment was effectuated, were
entitled to exercise their appraisal rights and obtain payment in cash for
their shares under Sections&nbsp;607.1301 &#150; 607.1333 of the Florida Business
Corporation Act, provided their shares were not voted in favor of the
amendment. In January&nbsp;2004, appraisal notices in compliance with Florida
corporate statutes were sent to all stockholders who had advised us of their
intention to exercise their appraisal rights. The appraisal notices included
our estimate of fair value of our shares, being $4.00 per share on a post-split
basis. These stockholders had until February&nbsp;29, 2004 to return their completed
appraisal notices along with certificates for the shares for which they were
exercising their appraisal rights. Approximately 33 stockholders holding
approximately 74,000 shares of our stock returned completed appraisal notices
by February&nbsp;29, 2004. A stockholder of 20 shares notified us of his acceptance
of our offer of $4.00 per share, while the stockholders of the remaining shares
did not accept our offer. Subject to the qualification that we may not make any
payment to a stockholder seeking appraisal rights if, at the time of payment,
our total assets are less than our total liabilities, stockholders who accepted
our offer to purchase their shares at the estimated fair value will be paid for
their shares within 90&nbsp;days of our receipt of a duly executed appraisal notice.
If we should be required to make any payments to dissenting stockholders,
Counsel will fund any such amounts through the purchase of shares of our common
stock. Stockholders who did not accept our offer were required to indicate
their own estimate of fair value, and if we do not agree with such estimates,
the parties are required to go to court for an appraisal proceeding on an
individual basis, in order to establish fair value for the shares in question.
Because Acceris did not agree with the estimates submitted by most of the
dissenting shareholders, Acceris has sought a judicial determination of the
fair value of the common stock held by the dissenting stockholders. On June&nbsp;24,
2004, Acceris filed suit against the dissenting shareholders seeking a
declaratory judgment, appraisal and other relief in the Circuit Court for the
17<SUP>th</SUP> Judicial District in Broward County, Florida. There is no assurance that
this matter will be resolved in the Company&#146;s favor and an unfavorable outcome
of this matter could have a material adverse impact on our business, results of
operations, financial position or liquidity.


<P align="left" style="font-size: 10pt"><B>We may be unable to maintain adequate insurance coverage.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We participate under the Counsel Corporation director and officer
insurance policy and maintain insurance that includes liability coverage to
protect us from claims made against us. Recent events have made liability
insurance more expensive while at the same time reducing the scope of coverage.
Our ability to maintain adequate insurance coverage at a reasonable cost may be
impacted by market conditions beyond our control.

<P align="left" style="font-size: 10pt"><B>We have not declared any dividends on our common stock to date and have no
intention of doing so in the foreseeable future.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The payment of cash dividends on our common stock rests within the
discretion of our Board of Directors and will depend, among other things, upon
our earnings, unencumbered cash, capital requirements and our financial
condition, as well as other relevant factors. Payments of dividends on our
outstanding shares of preferred stock must be paid prior to the payment of
dividends on our common stock. We do not anticipate making any cash
distributions on the common stock in the foreseeable future and investors in
our common stock cannot rely on dividend income therefrom. Further, the terms
of our operating subsidiary&#146;s revolving line of credit restricts the
distribution to or the declaration or payment of dividends. In addition, in
connection with the issuance of the Note to the Selling Holder, the Company
agreed that it would not, without Laurus consent, for so long as 25% of the
initial $5,000 principal amount of the Note is outstanding, declare or pay any
dividends, other than dividends to its parent, Counsel, or any of its
wholly-owned subsidiaries without the prior written consent of the Selling
Holder.


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<P align="left" style="font-size: 10pt"><B>We may fail to adequately protect our proprietary technology and processes,
which would allow competitors to take advantage of our development efforts.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included
in the Company&#146;s patent portfolio are United States patents No.&nbsp;6,243,373 and No.&nbsp;6,438,124. The value of
these patents has yet to be determined. If we fail to obtain or maintain
adequate protections, we may not be able to prevent third parties from using
our proprietary rights. Any currently pending or future patent applications may
not result in issued patents. In addition, any issued patents may not have
priority over any patent applications of others or may not contain claims
sufficiently broad to protect us against third parties with similar
technologies, products or processes. We also rely upon trade secrets,
proprietary know-how and continuing technological innovation to remain
competitive. We protect this information with reasonable security measures,
including the use of confidentiality agreements with our employees, consultants
and corporate collaborators. It is possible that these individuals will breach
these agreements and that any remedies for a breach will be insufficient to
allow us to recover our costs. Furthermore, our trade secrets, know-how and
other technology may otherwise become known or be independently discovered by
our competitors.


<P align="left" style="font-size: 10pt"><B>Reports of our independent accountants have been qualified and make reference to
the going concern risk.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In each of their audit reports for the years ended December&nbsp;31, 2003 and
2002, the independent registered public accounting firm has made reference to
the uncertainty of our ability to continue as a going concern. The independent auditors&rsquo; report will contain a similar uncertainty about our ability to continue as a going concern for the year ended December 31, 2004. Before
considering making an investment in us, you should carefully review the
aforementioned accountants&rsquo; reports and the discussion contained in the Management
Discussion and Analysis and Results of Operations section of this prospectus,
in consultation with your financial and other advisors.


<P align="left" style="font-size: 10pt"><B>Our internal disclosure controls may not reduce to a relatively low level the
risk that a material error in our financial statements may go undetected.</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Certifying Officers are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e)
and 15d-15(e)) for Acceris. Accordingly, the Certifying Officers designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under their supervision, to ensure that material
information relating to Acceris, including our consolidated subsidiaries, is
made known to the Certifying Officers by others within those entities. We
regularly evaluate the effectiveness of disclosure controls and procedures and
report our conclusions about the effectiveness of the disclosure controls
quarterly on our Form 10-Q and annually on our Form 10-K. In completing such
reporting we disclose, as appropriate, any significant change in our internal
control over financial reporting that occurred during our most recent fiscal
period that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting. This disclosure, based
on our most recent evaluation of our disclosure controls and procedures, is
made to our independent accountants and the audit committee of our Board of Directors (or
persons performing the equivalent functions). All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect our ability
to record, process, summarize and report financial information on a timely basis are reported in
our public filings. Additionally, any fraud, whether or not material, that
involves management or other employees who have a significant role in our
internal control over financial reporting is reported on such filings as
applicable.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over the last two years, the Certifying Officers have reported four
separate events of control deficiencies, constituting material weaknesses.
Control deficiencies were last reported in the second quarter of 2004. Since
that time, the Certifying Officers have reported that the disclosure controls
and procedures are effective. We have undertaken specific measures to cure or
mitigate the ineffective controls and procedures identified in our prior
filings. Such measures include making significant systems, process and control
changes and we have implemented new technologies to achieve an effective system
of controls and procedures as of the quarter ended September&nbsp;30, 2004 and
through the date of this prospectus. The details of the four control
deficiencies are detailed in the following filings:


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    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Form&nbsp;10-Q for the quarter ended September&nbsp;30, 2002, as amended;</TD>
</TR>

</TABLE>


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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Form&nbsp;10-K for the year ended December&nbsp;31, 2002, as amended;</TD>
</TR>

</TABLE>


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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Form&nbsp;10-Q for the quarter ended September&nbsp;30, 2003,
as amended;</TD>
</TR>

</TABLE>
<p>
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Form&nbsp;10-K for the year ended December&nbsp;31, 2003, as
amended; and</TD>
</TR>

</TABLE>

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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Form&nbsp;10-Q for the quarter ended June&nbsp;30, 2004.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While management is responsible for ensuring an effective control
environment and has taken steps to ensure that the internal control environment
remains free of significant deficiencies and/or material weaknesses, the
inherent nature of our business and rapidly changing environment may affect
management&#146;s ability to be successful with this initiative.

<P align="left" style="font-size: 10pt"><B>The Company is in the process of assessing the appropriate accounting for a
newly issued convertible note</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The instrument which is the subject of this prospectus is a multi-element
financial instrument in the form of a convertible note (the &#147;Note&#148; or
&#147;Instrument&#148;) with detachable warrants and a series of derivative rights. The
accounting for this Instrument is complex, requires detailed research and analysis. This
Instrument also contains contingent elements which may remain unresolved for a
number of future reporting periods due to their dependence upon future events.
Management is assessing the accounting implications of this Instrument at this
time, including its effect on existing instruments in place at the Company. At
the filing of this document, management has not made a determination on the
appropriate application of the accounting standards in the circumstance. This transaction
occurred during the fourth quarter of 2004.
Management will make a determination in conjunction with the reporting of its
results for the year ended December 31, 2004. Users are encouraged to obtain expert
investment and accounting
advice when reaching a conclusion on the implications of this Instrument for
the Company. This Note will invoke the anti-dilution provisions of existing
instruments in place at the Company, the effect of which may ultimately lead to
the granting of additional shares to the holders of those instruments.



<P align="center" style="font-size: 10pt"><B>Risks Related to our Industry</B>


<P align="left" style="font-size: 10pt"><B>The telecommunications industry in which we operate is subject to government
regulation.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The telecommunications industry is subject to government regulation at
federal, state and local levels. Any change in current government regulation
regarding telecommunications pricing, system access, consumer protection or
other relevant legislation could have a material impact on our results of
operations. Most of our current operations are subject to regulation by the
Federal Communications Commission under the Communications Act of 1934. In
addition, certain of our operations are subject to regulation by state public
utility or public service commissions. Changes in the regulation of, or the
enactment of changes in interpretation of, legislation affecting us could
damage our operations and lower the price of our common stock. See the section
below entitled &#147;Government Regulation&#148; for further discussion of the regulatory
environment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Telecommunications Act of 1996,
among other things, allows the Regional Bell Operating
Companies (&#147;RBOC&#148;) and others to enter the long-distance business. Entry of the
RBOCs or other entities, such as electric utilities and cable television
companies, into the long-distance business may have a negative impact on our
business or our customers. We anticipate that some of these entrants will prove
to be strong competitors because they are better capitalized, already have
substantial customer bases, and enjoy cost advantages relating to local telecom
lines and access charges. This could adversely impact the results of our
operations, which could have a negative effect on the price of our common
stock. In addition, the 1996 Act provides that state proceedings may in certain
instances determine access charges we are required to pay to the local exchange
carriers. If these proceedings occur, rates could increase which could lead to
a loss of customers, weaker operating results and the lowering of the price of
our common stock.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recent legislation in the United States (including the Sarbanes-Oxley Act
of 2002) is increasing the scope and cost of work provided to us by our
independent accountants and legal advisors.
There is a risk that we will incur significant costs in the
future to comply with legislative requirements or rules, pronouncements and
guidelines by regulatory bodies, including the cost of restating previously
reported financial results, thereby reducing profitability.


<P align="left" style="font-size: 10pt"><B>We must continue to have up to date technology and be attentive to general
economic trends to compete in the communications services industry.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market for telecommunications services is extremely competitive. To be
competitive and meet changing customer requirements, we must be attentive to
rapidly changing technology, evolving industry standards, emerging competition
and frequent new software and service introductions.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our ability to compete successfully will depend upon a
number of factors including, but not limited to:



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    <TD>the pricing policies of our competitors and suppliers;</TD>
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    <TD width="1%">&nbsp;</TD>
    <TD>the capacity, reliability, availability and security of our real-time network;</TD>
</TR>

</TABLE>


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    <TD width="1%">&nbsp;</TD>
    <TD>the public&#146;s recognition of our name and products;</TD>
</TR>

</TABLE>


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    <TD>the timing of our introductions of new products and services;</TD>
</TR>

</TABLE>


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    <TD width="1%">&nbsp;</TD>
    <TD>our ease of access to and navigation of the Internet or other types of data communication networks;</TD>
</TR>

</TABLE>


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    <TD width="1%">&nbsp;</TD>
    <TD>our ability in the future to support existing and emerging industry standards;</TD>
</TR>

</TABLE>


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    <TD width="1%">&nbsp;</TD>
    <TD>our ability to balance network demand with the fixed expenses
associated with network capacity; and</TD>
</TR>

</TABLE>


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    <TD width="1%">&nbsp;</TD>
    <TD>our ability to deal with trends toward increasing wireless and
decreasing wire line usage;</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many companies offer business communications services and compete with us
at some level. These range from large telecommunications carriers such as AT&#038;T,
MCI/WorldCom and Sprint, to smaller, regional resellers of telephone line
access. These companies, as well as others, including manufacturers of hardware
and software used in the business communications industry, could in the future
develop products and services that may directly compete with ours. These
entities are far better capitalized than us and enjoy a significant market
share in their industry segments. These entities also enjoy certain competitive
advantages such as extensive nationwide networks, name recognition, operating
histories and substantial advertising resources.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our technology related service revenues are derived from the licensing of
our proprietary technology. New technologies may emerge that would make our
product offering obsolete. This would require the pursuit of technological
advances, which may require substantial time and expense and may not succeed in
adapting our technology offering to new or alternate technologies. In addition,
there may be other companies attempting to introduce products similar to those
we offer or plan to offer for the transmission of information over the
Internet. We might not be able to successfully compete with these market
participants.


<P align="left" style="font-size: 10pt"><B>The telecommunications market is volatile.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the last several years, the telecommunications industry has been
very volatile as a result of over capacity, which has led to price erosion and
bankruptcies. If we cannot control subscriber and customer attrition through
maintaining competitive services and pricing, revenue could decrease
significantly. Likewise, by maintaining competitive pricing policies, the
revenue per minute we earn may decrease significantly. Both scenarios could
result in us not meeting growth and profitability targets.

<P align="left" style="font-size: 10pt"><B>Terrorist attacks or acts of war may seriously harm our business.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Terrorist attacks or acts of war may cause damage or disruption to our
operations, employees, facilities and our customers, which could significantly
impact our revenues, costs and expenses, and financial condition. The terrorist
attacks that took place in the United States on September&nbsp;11, 2001 were
unprecedented events that have created many economic and political
uncertainties, some of which may have a material adverse effect on our
business, results of operations, and financial condition. The potential for
future terrorist attacks, the national and international responses to terrorist
attacks and other acts of war or hostility have created many economic and
political uncertainties, which could also have a material adverse effect on our
business, results of operations and financial condition in ways that management
currently cannot predict.


<P align="left" style="font-size: 10pt"><B>Natural Disasters or massive failure of public and private services may seriously harm our business.</B>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natural disasters and/or the massive failure of public and private services may cause damage or disruption to our
operations, employees, facilities and our customers, which could significantly impact our revenues, costs and expenses,
and financial condition.  The tsunami in Asia and the blackout of power in the eastern United States are recent examples
that have created displacement.  These types of events may have a material adverse effect on our business, results of
operations, and financial condition in ways that management currently cannot predict.


<P align="center" style="font-size: 10pt"><B>Risks Related to the Offering</B>


<P align="left" style="font-size: 10pt"><B>There is a limited public trading market for our common stock; the market price
of our common stock has been volatile and could experience substantial
fluctuations.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is currently quoted on the OTC-BB and there is a limited
public trading market for the common stock. Without an active trading market,
there can be no assurance of any liquidity or resale value of the common


<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">stock. In addition, the market price of our common stock has been, and may
continue to be, volatile. Such price fluctuations may be affected by general
market price movements or by reasons unrelated to our operating performance or
prospects such as, among other things, announcements concerning us or our
competitors, technological innovations, government regulations, and litigation
concerning proprietary rights or other matters. In addition, in recent years,
the stock market in general, and the market for telecommunications companies in
particular, have experienced significant price and volume fluctuations. This
volatility has affected the market prices of securities issued by many
companies and it may adversely affect the price of our common stock.


<P align="left" style="font-size: 10pt"><B>We may conduct future offerings of our common stock and preferred stock and pay
debt obligations with our common and preferred stock which may diminish our
investors&#146; pro rata ownership and depress our stock price.</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We reserve the right to make future offers and sales, either public or
private, of our securities including shares of our preferred stock, common
stock or securities convertible into common stock at prices differing from the
price of the common stock offered herein. We have a significant amount of
debt outstanding, including over $16,000 of convertible debt to
Counsel as of December&nbsp;31, 2004, convertible into over 3,200,000 shares of our
common stock (subject to the effects of anti-dilution, including the effect of the Laurus convertible note) and the $5,000 secured
convertible note held by the Selling Holder convertible into approximately 5,700,000
shares of common stock, including the impact of the exercise of 100% of the Warrants. There can be no assurance that we will be able to
successfully complete any such future offerings. In the event that any such
future sales of securities are effected or we use our common or preferred stock
to pay principal or interest on our first debt obligations, an Investor&#146;s pro
rata ownership interest in us may be reduced to the extent of any such
issuances and, to the extent that any such sales are effected at consideration
which is less than that paid by the Investor, the Investor may experience
dilution and a diminution in market price of the common stock.


<P align="left" style="font-size: 10pt"><B>Provisions in our Articles of Incorporation, as amended, could prevent or delay
stockholders&#146; attempts to replace or remove current management.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Articles of Incorporation, as amended, provide for staggered terms for
the members of our Board of Directors. The Board of Directors is divided into
three staggered classes, and each director serves a term of three years. At
each annual stockholders&#146; meeting only those directors comprising one of the
three classes will have completed their term and stand for re-election or
replacement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The use of a staggered Board of Directors and the ability to issue &#147;blank
check&#148; preferred stock are traditional anti-takeover measures. These
provisions may be beneficial to our management and the Board of Directors in a
hostile tender offer, and may have an adverse impact on stockholders who may
want to participate in such a tender offer, or who may want to replace some or
all of the members of the Board of Directors.

<P align="left" style="font-size: 10pt"><B>We are subject to reporting requirements that are currently evolving and, once
established, could substantially increase our operating expenses and divert our
management&#146;s attention from the operation of our business.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to a variety of rules and regulations of federal and state
governmental and other entities charged with the protection of investors and
the oversight of companies whose securities are publicly traded. These
entities have recently issued new requirements and regulations and are
currently developing additional regulations and requirements in response to
recent laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002.
As certain rules are not yet finalized, we do not know the level of resources
we will have to commit in order to be in compliance. Our compliance with
current and proposed rules is likely to require the commitment of significant
financial and managerial resources. As a result, management&#146;s attention might
be diverted from other business concerns, which could negatively affect our
business.


<P align="center" style="font-size: 10pt">11
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="103"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>RECENT DEVELOPMENTS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2004, the Company entered into a Securities Purchase Agreement
(the &#147;Agreement&#148;) for the sale by the Company to Laurus Master Funds, Ltd. (the
&#147;Selling Holder&#148;), an independent third party, of a convertible term note (the
&#147;Note&#148;) in the principal amount of $5,000 due October&nbsp;14, 2007. The Note
provides that the principal amount outstanding bears interest at the prime rate
as published in the Wall Street Journal plus 3% (but not less than 7% per
annum) decreasing by 2% (but not less than 0%) for every 25% increase in the
Market Price (as defined therein) above the fixed conversion price following
the effective date of the registration statement covering the Common Stock
issuable upon conversion of the Note. Should the Company default under the
agreement and fail to remedy the default on a timely basis, interest under the
note will increase by 2% per month and the note may become immediately due
inclusive of a 20% premium to the then outstanding principal. Interest is
payable monthly in arrears, commencing November&nbsp;1, 2004. Principal is payable
at the rate of approximately $147 per month commencing January&nbsp;1, 2005, in cash
or registered common stock. Payment amounts will be converted into stock if
(i)&nbsp;the average closing price for five trading days immediately preceding the
repayment date is at least 100% of the Fixed Conversion Price, (ii)&nbsp;the amount
of the conversion does not exceed 25% of the aggregate dollar trading volume
for the 22-day trading period immediately preceding the repayment date, (iii)&nbsp;a
registration statement is effective covering the issued shares and (iv)&nbsp;no
Event of Default exists and is continuing. In the event the monthly payment
must be paid in cash, then the Company shall pay 102% of the amount due in
cash. The Company has the right to prepay the Note, in whole or in part, at
any time by giving seven business days written notice and paying 120% of the
outstanding principal amount of the Note. The holder may convert the Note, in
whole or in part, into shares of Common Stock at any time upon one business
day&#146;s prior written notice. The Note is convertible into shares of the
Company&#146;s common stock at a fixed conversion price of $0.88 per share of common
stock (105% of the average closing price for the 30 trading days prior to the
issuance of the Note) not to exceed, however, 4.99% of the outstanding shares
of common stock of the Company (including issuable shares from the exercise of
the warrants, payments of interest, or any other shares owned).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to a Master Security Agreement, the Company granted a blanket
lien on all its property and that of certain of its subsidiaries to secure
repayment of the obligation and, pursuant to a Stock Pledge Agreement, Counsel
Communications, LLC and Counsel Corporation (US)&nbsp;pledged the shares of the
Company held by it as further security. In addition, Acceris Communications
Technologies, Inc., Acceris Communications Corp., Counsel Corporation and
Counsel Communications LLC and Counsel Corporation (US)&nbsp;jointly and severally
guaranteed the obligations to the lender. The Company paid a closing fee of
3.9% of the aggregate principal amount of the Note or $195 and reimbursed the
Selling Holder for its expenses in connection with the transaction in the
aggregate amount of $31. So long as 25% of principal amount of the Note is
outstanding, the Company agreed that it will not pay dividends on its common
stock, among other things.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Company issued its Common Stock Purchase Warrant (the
&#147;Warrant&#148;) to the Selling Holder, entitling the Selling Holder to purchase up
to one million shares of common stock, subject to adjustment. The Warrant
entitles the Selling Holder to purchase the stock at any time up to the earlier
of (i)&nbsp;October&nbsp;13, 2009 or (ii)&nbsp;the date on which the average closing price for
any consecutive ten trading dates shall equal or exceed 15 times the Exercise
Price. The Exercise Price shall equal $1.00 per share as to the first 250,000
shares, $1.08 per share for the next 250,000 shares and $1.20 per share for the
remaining 500,000 shares, or 125%, 135% and 150% of the average closing price
for ten trading days immediately prior to the date of the Warrant,
respectively, not to exceed, however, 4.99% of the outstanding shares of common
stock of the Company (including issuable shares from the conversion of the Note
and any other shares owned). The Company agreed, pursuant to a registration
rights agreement, to file, within 30&nbsp;days, a registration statement under the
Securities Act of 1933, as amended, to register the shares issuable upon
conversion of the Note as well as those issuable pursuant to the Warrant.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also entered into a registration rights agreement with Laurus. Under
this agreement, we are obligated to file a registration statement covering
common stock that may be received upon conversion of the term note, as well as
the common stock underlying the stock warrants within 30&nbsp;days of closing. If
the Registration Statement is not filed within the 30&nbsp;day period, or declared
effective within 120&nbsp;days of the closing, we will pay a penalty of 1.5% of the
offering proceeds per month in penalties until such default is cured, on a
pro-rated daily basis.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company targets revenue growth by
broadening our product offerings. In 2004 the addition of a local and long distance
bundled offering targeted at consumer customers was expected to provide revenue expansion,
while the Company continued its strategy of allowing attrition of lower revenue 10-10-xxx
customers. The objective of this strategy was to allow the Company to increase the average
monthly revenue per customer, resulting in a greater contribution per customer providing
greater operating leverage of the business&#146;s fixed cost base. The Company launched a
local and long distance bundled offering early in 2004 and the product soon gained
acceptance in five states: New Jersey, New York, Pennsylvania, Massachusetts and Florida.
By mid-year 2004, regulatory uncertainty initially created by a court decision created a
lack of clarity regarding the ongoing profitability/existence of UNE-P. Some felt that
everything would soon settle and that things would continue as they existed prior to the
court decision, while others felt that a new business model would exist but that
uncertainty existed surrounding the economics of any such business model, while others
felt that changes were occurring that would change telecommunications forever in the
United States in a negative manner for companies like Acceris. Long distance carrier
AT&amp;T announced its decision to exit the local residential market. In response to these
legal and regulatory developments, the Company made the decision to put its geographic
expansion plans on hold, while continuing to market to existing states. Of the
approximately 350,000 customers that the Company has, approximately 15,000 are affected by
UNE-P. On the cost side of the business, we continued our integration initiatives and
resized the organization for our revised revenue expectations. Additionally, we began to
assess whether we should expand through strategic acquisitions to take advantage of
economies of scale or whether we should attempt to divest some or all of our
telecommunications operations. The expansion of operations through strategic acquisitions
would require substantial additional capital which may not be available to us. The Company
has hired a third party advisor to assist management in considering its strategic options.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s working capital
credit facility with its asset based lender matures on June 30, 2005. Management is in
discussions with several institutions to replace the existing asset based lender. There is
no assurance that management will be able to replace the current asset based lender on a
timely basis or that the current asset based lender can be replaced on favorable terms.
The Company has experienced a contraction in its borrowing base with its asset based
lender throughout 2004 because of the attrition of 10-10-xxx customers and its entry into the local-long distance business, an area
not covered by its existing loan agreement. Additionally, the Company has continued to
increase its direct billed customer revenue as a percentage of total revenue, instead of
utilizing the services of local exchange carriers. Direct billings provide a lower level
of borrowings to the Company compared to equivalent dollar sales made through the local
exchange carrier. As management continues to grow its direct billing component of billings
and as the Company continues to attract additional local and long distance bundled
customers with its current asset based lender it expects that borrowings available to the
Company under this existing facility will decline. In December 2003, the loan balance was
approximately $12,000 under this credit facility with no additional borrowings being
available. In December 2004, the loan balance was approximately $5,000 with no additional
borrowings being available.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The maturity date of Counsel
Corporation&#146;s debt was recently extended to January 31, 2006. Additionally, Counsel
Corporation&#146;s Keep Well agreement, wherein Counsel has committed to fund the cash
flow requirements of Acceris, expires on June 30, 2005. We do not expect that Counsel will
extend this arrangement at this time. Additionally, Counsel and Acceris entered into a management services agreement in respect of 2004 and 2005. The Company
expects the cost of these services to be $280 in 2004. Under the imputed method, the Company recorded an expense related to conferral of a benefit in 2003 of $130.
No conferral of benefit will be recorded in 2004 due to the existence of a market value contract between the parties.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company allowed its option to
acquire a portion of the residual interest in its VoIP patent portfolio to expire in the
fourth quarter of 2004. Additionally, the Company resolved network disputes with several
carriers in the fourth quarter relating to services provided which will result in a
reduction in network expense in the fourth quarter.


<P align="center" style="font-size: 10pt">12
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="104"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SELECTED CONSOLIDATED FINANCIAL DATA</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following selected consolidated financial information was derived from
the audited and unaudited consolidated financial statements and notes thereto.
The information set forth below is not necessarily indicative of the results of
future operations and should be read in conjunction with the Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations and
the Consolidated Financial Statements and Notes thereto included elsewhere in
this prospectus. All amounts below are in thousands, except share and per share
amounts.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="46%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Nine Months Ended<BR>
Sept 30,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Statement of Operations Data :</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">85,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">133,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88,532</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Marketing services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Technology licensing and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">540</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,072</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications network expense
(exclusive of depreciation below)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,461</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Marketing services costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling, general, administrative and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,828</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,908</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,877</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,299</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(17,486</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,514</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21,952</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,530</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19,904</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,227</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,856</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,639</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,023</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,053</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,168</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22,342</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,153</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25,975</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,330</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31,957</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,395</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income (loss)&nbsp;from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,317</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,599</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,522</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(24,659</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(25,752</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(44,497</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(27,838</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(31,428</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(16,291</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from continuing operations applicable to
common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(31,269</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(16,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(10,759</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(15,330</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(31,957</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(16,291</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income (loss)&nbsp;per common share &#151; basic and
diluted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(29.21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12.60</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.63</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.56</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.85</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income (loss)&nbsp;from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7.95</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.73</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net loss per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(31.37</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(20.55</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5.90</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.78</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.48</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.84</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Balance Sheet Data</B>:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Working capital deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,319</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(30,061</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(40,812</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(17,244</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(26,576</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(22,092</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Furniture, fixtures, equipment and software, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,285</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,422</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,614</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,171</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total long-term obligations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Related party</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,946</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Third party</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">687</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders&#146; deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,050</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(28,839</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(36,998</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57,816</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(42,953</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(58,190</TD>
    <TD nowrap>)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">13
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>Significant Acquisitions and Dispositions</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;17, 2001, the Company acquired WebToTel and its subsidiaries
(including Nexbell) in a stock for stock transaction. However, as WebToTel
(which was a subsidiary of Counsel) and Acceris were under common control as of
March&nbsp;1, 2001 (the date Counsel obtained its ownership in Acceris), the Company
has accounted for the acquisition using the pooling-of-interests method of
accounting as of March&nbsp;1, 2001. Accordingly, the financial results of WebToTel
and its subsidiaries (including Nexbell which was sold in December&nbsp;2001) are
included herein subsequent to March&nbsp;1, 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;4, 2001, Acceris purchased certain assets of WorldxChange Communications, Inc.
(&#147;WorldxChange&#148;), a debtor in a bankruptcy proceeding.
WorldxChange was a
facilities-based telecommunications carrier that provided international and
domestic long-distance service to residential and commercial customers.
WorldxChange&#146;s operations are part of the Retail segment.


<P align="left" style="font-size: 10pt">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;6, 2002, Acceris entered into an agreement,
which closed on
May&nbsp;1, 2003, to sell substantially all of the assets of I-Link Communications,


Inc. (&#147;ILC&#148;). The sale included the physical assets required to operate
Acceris&#146; nationwide network using its patented Voice over Internet Protocol
technology (constituting the core business of ILC) and a license in perpetuity
to use Acceris&#146; proprietary software platform. Additionally, Acceris sold its
customer base that was serviced by ILC. Pursuant to Statement of Financial
Accounting Standards No.&nbsp;144, <I>Accounting for the Impairment or Disposal of
Long-Lived Assets</I>, operating results of ILC have been reclassified in the years
from 1999 to 2002 to discontinued operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;10, 2002, Acceris completed the purchase of the Enterprise and
Agent business of RSL.COM USA, Inc. (&#147;RSL&#148;). The acquisition included the
Enterprise business assets used by RSL to provide long-distance voice and data
services, including frame relay, to small and medium size businesses and the
Agent business assets used to provide long-distance and other voice services to
small businesses and the consumer/residential market, together with the
existing customer base of the Enterprise and Agent business. The Agent business
is included in the Retail segment while the Enterprise business is included in
the Enterprise segment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;28, 2003, the Company completed the purchase of all of the
outstanding stock of Transpoint. The acquisition provided the Company with
further penetration into the commercial agent channel, as well as a larger
residential customer base.



<P align="left" style="font-size: 10pt"><B>Business Reorganizations</B>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2003, we continued to
consolidate functions across Acceris. We are focused on streamlining our internal
processes, eliminating duplicate efforts of staff serving similar roles in multiple
locations, and making the integration of additional companies into our operations more
cost effective and less risky. Upon the acquisition of RSL.COM USA, Inc. and disposition
of the I-Link Communications, Inc. business in December&nbsp;2002, we were organized into
three operating segments, Retail, Enterprise and Technologies, which primarily
distinguished themselves by the product offerings available. In the first quarter of 2004,
we changed the structure of our internal organization and the method upon which we
evaluate our performance, and management began to evaluate our business as two divisions
consisting of Telecommunications and Technologies. In August&nbsp;2004, the Company
implemented a resizing of the organization targeted at reducing its operating costs. The
cost cutting reflects the continued efficiencies created by the ongoing integration of the
Company&#146;s operations, related to its four acquisitions over the last three years. As
a result of the resizing, the Company&#146;s work force was reduced by approximately
20&nbsp;percent. The reduction affected staff in the San Diego, Pittsburgh and Somerset
facilities.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has been organized
through the assembly, from 2001 to 2003, of bankrupt and financially distressed assets.
Reorganizations have occurred to maximize the operational efficiencies and to improve the
capital structure of the Company, and will continue to be a necessary element of the value
creation strategy as the Company continues to optimize its operations and capital
structure.


<P align="left" style="font-size: 10pt"><B>2003 Reverse Stock Split</B>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;26, 2003, Acceris stockholders approved a 1-for-20 reverse
stock split. Accordingly, the earnings per share for years prior to 2003 have
been restated to reflect the reverse split. All references to share numbers
reflect the reverse stock split unless otherwise noted. In connection with the
reverse stock split, the par value of the Company&#146;s common stock changed from
$0.007 to $0.01.


<P align="left" style="font-size: 10pt"><B>Adoption of Significant Accounting Pronouncements</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003, Acceris adopted Statement of Financial Accounting Standards No.
145, <I>Rescission of FASB Statements No.&nbsp;4, 44, and 64, Amendment of FASB
Statement No.&nbsp;13, and Technical Corrections as of April&nbsp;2002 </I>(&#147;SFAS 145&#148;). SFAS
145 requires the modification of the Company&#146;s 2001 financial statement to
reclassify the previously reported gain on debt extinguishment from
extraordinary item to discontinued operations.


<P align="center" style="font-size: 10pt">14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2003, the Financial Accounting Standards Board (&#147;FASB&#148;) issued SFAS
No.&nbsp;150, <I>Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity </I>(&#147;SFAS 150&#148;). SFAS 150 establishes standards for
the classification and measurement of certain financial instruments with
characteristics of both liabilities and equity. It requires the classification
of a financial instrument that is within its scope as a liability (or an asset
in some circumstances). SFAS 150 is effective for financial instruments entered
into or modified after May&nbsp;31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June&nbsp;15, 2003. The
Company adopted SFAS 150 on July&nbsp;1, 2003 and the adoption did not have any
effect on the Company&#146;s financial position or results of operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2003, the FASB issued SFAS No.&nbsp;149, <I>Amendment of Statement 133 on
Derivative Instruments and Hedging Activities</I>. This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No.&nbsp;133, Accounting for Derivative Instruments and Hedging
Activities. This Statement is effective for contracts entered into or modified
after June&nbsp;30, 2003, except as stated below and for hedging relationships
designated after June&nbsp;30, 2003 and did not have any effect on the Company&#146;s
financial position or results of operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2003, the Securities and Exchange Commissions (&#147;SEC&#148;) issued
Staff Accounting Bulletin No.&nbsp;104, <I>Revenue Recognition </I>(&#147;SAB 104&#148;), which
supersedes portions of SAB 101. The primary purpose of SAB 104 is to rescind
accounting guidance contained in SAB 101 related to multiple element revenue
arrangements, which was superseded as a result of the issuance of the FASB&#146;s
Emerging Issues Task Force Issue No.&nbsp;00-21, <I>Accounting for Revenue Arrangements
with Multiple Deliverables </I>(&#147;EITF 00-21&#148;). While the wording of SAB 104
changed to reflect the issuance of EITF 00-21, the revenue recognition
principles of SAB 101 remain largely unchanged by the issuance of SAB 104. The
adoption of SAB 104 did not have a material impact on the Company&#146;s financial
position or results of operations.


<P align="left" style="font-size: 10pt"><B>Significant Risks and Material Uncertainties</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are significant risks and material uncertainties that exist in
Acceris&#146; business model and environment that may cause the data reflected
herein to not be indicative of the Company&#146;s future financial condition. These
risks and uncertainties include, but are not limited to, those presented in this document.


<DIV align="left">
<A name="105"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>USE OF PROCEEDS</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will receive a maximum of $1,120 from the exercise of the 1,000,000
Warrants held by the Selling Holder assuming all of the Warrants are exercised
at their current exercise price per share. We will receive no proceeds from
the sale by the Selling Holder of any of the shares of common stock issued upon
exercise of the Warrants or upon conversion of the Note. The maximum amount that may be received on the exercise of the Warrants may be reduced due to the ability of the holder to utilize a cashless exercise for up to 50% of the Warrants.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect to use any proceeds received for various corporate purposes,
including working capital, generally depending, however, on our needs for
capital at the time any of the Warrants are exercised.

<DIV align="left">
<A name="106"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS<BR>
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>



<P align="left" style="font-size: 10pt"><B>Forward-Looking Information</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>This report contains certain &#147;forward-looking statements&#148; within the
meaning of Section&nbsp;27A of the Securities Act of 1933, as amended, Section&nbsp;21E
of the Exchange Act, as amended, and information relating to Acceris that are
based on management&#146;s exercise of business judgment as well as assumptions made
by and information currently available to management. When used in this
document, the words &#147;may&#148;, &#147;will&#148;, &#147;anticipate&#148;, &#147;believe&#148;, &#147;estimate&#148;,
&#147;expect&#148;, &#147;intend&#148; 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 below under
&#147;Risk Factors&#148;. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, our actual
results could differ materially</I>


<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt"><I>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</I>.




<P align="left" style="font-size: 10pt"><B>Restatement</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements of the Company have been restated in
each reporting period from the fourth quarter of 2002 through to the first
quarter of 2004 to record additional deemed interest expense for beneficial
conversion features (&#147;BCF&#148;) embedded in certain of the Company&#146;s indebtedness
as required by Emerging Issues Task Force Issue No.&nbsp;00-27 (&#147;EITF 00-27&#148;) as
more fully outlined in Note 3 to the Company&#146;s audited financial statements
included elsewhere in this prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;20, 2004, management of the Company concluded that the
accounting principles as set forth in EITF 00-27, regarding BCF, had not been
properly applied in current and prior periods to its convertible debentures
issued under a March&nbsp;2001 loan agreement for which the Company had previously
determined BCF of $1,100. The initial determination of the BCF in 2001 at the
respective issue dates of such debt was correct. However, adjustments to the
conversion price and the number of conversion shares were made under the
debentures&#146; anti-dilution provisions. The various anti-dilution events and
their respective impacts on the number of shares and the conversion price were
disclosed in the Company&#146;s previous public filings. However, the principles
under EITF 00-27 also require a redetermination of the BCF at each date an
anti-dilution event occurred. This redetermination was not completed in prior
reporting periods. Additionally, the accumulation of unpaid interest costs
which are required by the debt terms to be added to principal and which are
payable at maturity on these same convertible debentures has been deemed to be
interest paid in kind (&#147;PIK&#148;); such interest also contains a conversion
feature, and the payment of such interest in the form of PIK interest is
non-discretionary requiring the determination of BCF in the PIK interest. This
determination was not made by the Company in its prior reportings.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s management concluded that a restatement was required and
brought these matters for consideration before the Audit Committee and the full
Board of Directors of the Company. Having considered the circumstances
underlying the accounting errors and their effects upon the Company&#146;s prior
filings, and having discussed these matters with the Company&#146;s management, the
Audit Committee concluded that the previously issued financial statements
should not be relied upon and approved and authorized the Company&#146;s management
to amend certain previously filed public reports to reflect deemed interest
expense from such BCF.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the error affects 2001, 2002 and 2003, the $23 cumulative effect
on earnings through the third quarter of 2002 was recorded in the fourth
quarter of 2002 as a charge to interest expense. Therefore, the correction is
an increase in deemed interest expense and net loss, in all reporting periods
from the fourth quarter of 2002 through the first quarter of 2004, and a
reduction in reported liabilities and stockholders&#146; deficit in all reporting
periods from the fourth quarter of 2002 through the first quarter of 2004. The
effect of these errors is detailed, by reporting period, below. The restatement
had no effect on loss from discontinued operations or net loss per share from
discontinued operations. Such amended filings were completed on October&nbsp;26,
2004.


<P align="center" style="font-size: 10pt">16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Effect of the restatements on the consolidated statements of operations</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(per share information reported on a post 20:1 stock consolidation basis
for all periods shown. Stock consolidation enacted in the fourth quarter of
2003).</B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three months</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec. 31, 2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Sept. 30, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec. 31, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31, 2004</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income (loss)&nbsp;as
previously reported on Form
10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,117</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(14,895</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,713</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,257</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,456</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">594</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Correction of EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(301</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(902</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,089</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,337</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,779</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,801</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss as currently reported
on revised Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,418</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(15,797</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,802</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,594</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,235</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,207</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income (loss)&nbsp;per share as
previously reported on Form
10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.92</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.55</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.64</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.56</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.44</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.03</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss per share as
currently reported on revised
Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.96</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.71</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.82</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.79</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="41%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>

    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As at</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec. 31, 2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Sept. 30, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec. 31, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31, 2004</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Notes payable to a related party:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As previously reported on Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">33,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,060</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Correction of EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,109</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,364</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,437</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,265</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,356</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,834</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As currently reported on revised Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,226</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Additional paid-in capital:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As previously reported on Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,618</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">171,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,192</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Correction of EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,043</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As currently reported on revised Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">135,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">136,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">136,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">136,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">182,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,235</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Accumulated deficit</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As previously reported on Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(194,301</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(209,196</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(212,909</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(216,166</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(220,622</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(220,028</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Correction of EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(301</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,203</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,292</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,629</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,408</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,209</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As currently reported on revised Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(194,602</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(210,399</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(215,201</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(219,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(226,030</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(227,237</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Stockholders&#146; equity (deficit):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As previously reported on Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(63,925</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(78,820</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(82,468</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(85,725</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(49,309</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(47,292</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Correction of EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,834</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As currently reported on revised Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(57,816</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(73,456</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(78,031</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(82,460</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(42,953</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(42,458</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>Overview and Recent Developments</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a broad-based communications company, servicing residential, small
and medium-sized businesses and corporate accounts in the United States. We
provide a range of products from local dial tone, domestic and international
long-distance voice services to fully managed, integrated data and enhanced
services. We are a US facilities-based carrier with points of presence in 30
major US cities. Our voice network features 11 voice switches and nationwide
Feature Group D access. Our data network consists of 17 Nortel Passports that
have recently been upgraded to support multi-protocol label switching. Finally,
we have relationships with multiple tier I and tier II providers in the U.S.
and abroad.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently manage our Company through two business segments. Our
Telecommunications segment offers a broad selection of voice and data
telecommunications products and services to residential and commercial
customers through a network of independent agents, primarily via multi-level
marketing (&#147;MLM&#148;) and commercial agent programs. Our Technologies segment
offers a proven network convergence solution for voice and data in Voice over
Internet Protocol (&#147;VoIP&#148;) communications technology and holds two foundational
patents in the VoIP space (U.S. Patent Nos. 6,243,373 and 6,438,124, together
the &#147;VoIP Patents&#148;). We are pursuing efforts to license the technology
supported by our patents to carriers and equipment manufacturers and suppliers
in IP telephony market. Revenue in this segment declined to $540 in 2004 from $2,164 in 2003.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company targets revenue growth by
broadening our product offerings. In 2004 the addition of a local and long distance
bundled offering targeted at consumer customers was expected to provide revenue expansion,
while the Company continued its strategy of allowing attrition of lower revenue 10-10-xxx
customers. The objective of this strategy was to allow the Company to increase the average
monthly revenue per customer, resulting in a greater contribution per customer providing
greater operating leverage of the business&#146;s fixed cost base. The Company launched a
local and long distance bundled offering early in 2004 and the product soon gained
acceptance in five states: New Jersey, New York, Pennsylvania, Massachusetts and Florida.
By mid-year 2004, regulatory uncertainty initially created by a court decision created a
lack of clarity regarding the ongoing profitability/existence of UNE-P. Some felt that
everything would soon settle and that things would continue as they existed prior to the
court decision, while others felt that a new business model would exist but that
uncertainty existed surrounding the economics of any such business model, while others
felt that changes were occurring that would change telecommunications forever in the
United States in a negative manner for companies like Acceris. Long distance carrier
AT&amp;T announced its decision to exit the local residential market. In response to these
legal and regulatory developments, the Company made the decision to put its UNE-P
geographic expansion plans on hold, while continuing to market UNE-P to existing states.
Of the approximately 350,000 customers that the Company has, approximately 15,000 are
affected by UNE-P. On the cost side of the business, we continued our integration
initiatives and resized the organization for our revised revenue expectations.
Additionally, we began to assess whether we should expand through strategic acquisitions
to take advantage of economies of scale or whether we should attempt to divest some or all
of our telecommunications operations. The expansion of operations through strategic
acquisitions would require substantial additional capital which may not be available to
us. The Company has hired a third party advisor to assist management in considering its
strategic options.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s working capital
credit facility with its asset based lender matures on June 30, 2005. Management is in
discussions with several institutions to replace the existing asset based lender. There is
no assurance that management will be able to replace the current asset based lender on a
timely basis or that the current asset based lender can be replaced on favorable terms.
The Company has experienced a contraction in its borrowing base with its asset based
lender throughout 2004 because of the attrition of 10-10-xxx customers and its entry into the local-long distance business, an area
not covered by its existing loan agreement. Additionally, the Company has continued to
increase its direct billed customer revenue as a percentage of total revenue, instead of
utilizing the services of local exchange carriers. Direct billings provide a lower level
of borrowings to the Company compared to equivalent dollar sales made through the local
exchange carrier. As management continues to grow its direct billing component of billings
and as the Company continues to attract additional local and long distance bundled
customers with its current asset based lender it expects that borrowings available to the
Company under this existing facility will decline. In December 2003, the loan balance was
approximately $12,000 under this credit facility with no additional borrowings being
available. In December 2004, the loan balance was approximately $5,000 with no additional
borrowings being available.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The maturity date of Counsel
Corporation&#146;s debt was recently extended to January 31, 2006. Additionally, Counsel
Corporation&#146;s Keep Well agreement, wherein Counsel has committed to fund the cash
flow requirements of Acceris, expires on June 30, 2005. We do not expect that Counsel will
extend this arrangement at this time. Additionally, Counsel and Acceris entered into a
management services agreement in respect of 2004 and 2005. The Company expects the cost of
these services to be $280 in 2004. Under the imputed method, the Company recorded an
expense related to conferral of a benefit in 2003 of $130. No conferral of benefit will be
recorded in 2004 due to the existence of a market value contract between the parties.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has allowed its option to
acquire a portion of the residual interest in its VoIP patent portfolio to expire in the
fourth quarter of 2004. Additionally, the Company resolved network disputes with several
carriers in the fourth quarter relating to services provided that will result in the
reduction of network expense in the fourth quarter of 2004.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris has been built through the
acquisition of predecessor businesses, which have been and are continuing to be
integrated, consolidated and reorganized, in order to maximize operational efficiencies
and to achieve an appropriate capital structure to ensure the long term sustainability of
the Company. These predecessor businesses are organized into two segments:
Telecommunications and Technologies. Telecommunications has been assembled through the
acquisition of certain assets of WorldxChange Communications, Inc.
(&#147;WorldxChange&#148;) in 2001 and certain assets of RSL.COM USA, Inc.
(&#147;RSL&#148;) in 2002. Added to this was the acquisition of the assets of Transpoint
Communications, LLC and the membership interest of Local Telecom Holdings, Inc.,
(collectively, &#147;Transpoint&#148;), which closed in 2003.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our development and transition is articulated below:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Telecommunications:</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WorldxChange was a facilities-based telecommunications carrier providing
international and domestic long-distance service to retail customers. At the
time we purchased the business, WorldxChange consisted primarily of a
dial-around product that allowed a customer to make a call from any phone by
dialing a 10-10-XXX prefix. Since the acquisition, we have commenced offering a
1&#043; product (1&#043; products are those with which a customer directly dials a
long-distance number from their telephone by dialing 1-area code-phone number)
and have also begun to offer local communications products to our residential
and small business customers. The local dial tone service is being provided
under the terms of the Unbundled Network Element Platform authorized by the
Telecommunications Act of 1996 and was available in New York and New Jersey in
the first quarter of 2004, and has since expanded to Pennsylvania,
Massachusetts and Florida. Historically, WorldxChange marketed its services
through consumer mass marketing techniques, including direct mail and direct
response television and radio. In 2002, we revamped our channel strategy by
de-emphasizing the direct mail channel and devoting our efforts to pursuing
more profitable methods of attracting and retaining customers. We now use
commercial agents as well as a network of independent commission agents
recruited through an MLM program to attract and retain
new customers. In 2004 we launched the Acceris Communications Inc. Platinum
Agent Program which awards warrants to certain of our agents based on
performance criteria as a means to attract and incentivize existing and new
independent agents. In December&nbsp;2002, we completed the purchase of certain
assets of RSL from a bankruptcy proceeding. The purchase included the assets
used by RSL to provide long-distance voice and data services, including frame
relay, to their commercial customers and the assets used to provide
long-distance and other voice services to small businesses and the
consumer/residential market, which they referred to as their Agent business.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2003, we completed the purchase of Transpoint. The purchase of
Transpoint provided us with further penetration into the commercial agent
channel and a larger commercial customer base.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Telecommunications segment offers a broad range of voice and data
products and services to residential, small office/home office and small-medium
sized enterprises, and corporate accounts through a network of MLM agents,
commercial agents, affinity groups and outbound telemarketing. Our customers
are serviced through direct sales and support teams who offer fully managed and
fully integrated voice and data solutions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have capitalized upon a unique synthesis of marketing and network
capabilities. Through the strength of our agent network we are adding new
customers each month, many of them with a strong international usage component.
Due to our favorable cost structure and network optimization, we offer
competitive rates to selected international regions. We continue to experience
customer attrition particularly with our 10-10-XXX customer base which we have
not marketed directly since 2002. We have also seen the average revenue per
user decline. The Company&#146;s domestic telephone network continues to operate at
well below available capacity leading to cost inefficiencies. We attribute this
to increased cellular penetration and deregulation in various countries which
have lower rates per month in those markets. This is most evident in India in
2004. Additionally, regulatory uncertainty exists in the domestic telephone
markets due to recent court decisions. Future regulatory changes may penalize
or benefit the current operations of the business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We differentiate ourselves to our residential customers by offering
attractively priced bundles of international minutes, both on a stand alone
basis and as part of a local dial tone &#043; long-distance package to preferred
destinations, and by specialized customer service, which includes in-language
customer support. By using this targeted strategy, we have acquired a
substantial number of ethnic users whose monthly spending on telecommunications
services is generally higher than that of the average retail customer. These
subscribers also tend to exhibit higher brand loyalty, resulting in lower
customer turnover (&#147;churn&#148;) than average retail consumers for our type of
products.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our proprietary technology enables us to offer unbundled value-added
services such as voicemail, unified messaging and on-the-fly conferencing at a
low cost, creating another competitive advantage when targeting retail
customers. These features distinguish us from mass-market providers that
typically offer higher priced, &#147;one-size-fits-all&#148; national and international
rate plans.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our direct sales force focuses on multi-location customers with limited
information technology resources. By taking a consultative approach to network
solutions and providing in-depth analysis of our customers&#146; business needs and
operating environments, we are able to design and deliver competitively priced
and customized voice and data solutions. Our commercial customers also benefit
from our relationships with multiple providers, which ensures superior service
with respect to network redundancy, cost and supplier risk. We are able to
offer strong customer service due to easy access to information and to our
engineering, technical and administrative staffs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our voice network features 11 voice switches and nationwide Feature Group
D access, which enables low cost call origination. Our data network consists of
17 Nortel Passports that have recently been upgraded to support multi-protocol
label switching. Finally, we have relationships with multiple tier I and tier
II providers in the U.S. and abroad.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Technologies</I></B><I>:</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1994, we began operating as an Internet service provider and quickly
identified that the emerging IP environment was a promising basis for enhanced
service delivery. We soon turned to designing and building an IP
telecommunications platform consisting of our proprietary software, hardware
and leased telecommunications lines. The goal was to create a platform with the
quality and reliability necessary for voice transmission.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1997, we started offering enhanced services over a mixed
IP-and-circuit-switched network platform. These services offered a blend of
traditional and enhanced communication services and combined the inherent cost
advantages of the IP-based network with the reliability of the existing public
switched telephone network (&#147;PSTN&#148;). Our suite of services included a one
number &#147;follow me&#148; service, long-distance calling, unified messaging,
conference calling, message broadcasting and web-based interface to manage
messages and maintain personal account settings.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August&nbsp;1997, we acquired MiBridge Inc. (&#147;Mibridge&#148;), a communications
technology company engaged in the design, development, integration and
marketing of a range of software telecommunications products that support


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<P align="left" style="font-size: 10pt">multimedia communications over the PSTN, LANs and IP networks. Historically,
MiBridge concentrated its development efforts on compression systems such as
Voice over Internet Protocol (&#147;VoIP&#148;). As part of Acceris, MiBridge continued
to develop patent-pending technologies combining sophisticated compression
capabilities with IP telephony technology. The acquisition of MiBridge
permitted us to accelerate the development and deployment of IP technology
across our network platform.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1998, we first deployed our real-time IP communications network
platform. With this new platform, all core operating functions such as
switching, routing, and media control, became software-driven. This new
platform represented the first nationwide, commercially viable VoIP platform of
its kind. Following the launch of our software-defined VoIP platform in 1998,
we continued to refine and enhance the platform to make it even more efficient
and capable for our partners and customers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2000, we transitioned our direct-sales marketing program to
Big Planet, whereupon they became one of our wholesale customers. The
transition of the network marketing sales channel to Big Planet allowed us to
focus on the expansion of our VoIP platform and the development and deployment
of new enhanced services and products, while at the same time maintaining
existing channels for retail sales.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2001, we acquired WebToTel and Nexbell, both previously
subsidiaries of Counsel, in a stock-for-stock transaction. We sold Nexbell to a
third party in December&nbsp;2001 (see Notes 9 and 13 to the Consolidated Financial
Statements included in Item&nbsp;15 hereof).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;6, 2002, we entered into a definitive purchase and sale
agreement to sell substantially all of the assets and customer base of I-Link
Communications, Inc. (&#147;ILC&#148;) to Buyers United, Inc., which closed on May&nbsp;1,
2003. The sale included the physical assets required to operate our nationwide
network using our patented VoIP technology (constituting the core business of
the ILC business) and a fully paid non-exclusive perpetual license to our
proprietary software-based network convergence solution for voice and data. The
sale of the ILC business removed essentially all operations that did not
pertain to our proprietary software-based convergence solution for voice and
data. This sale marked the final stage of the transformation of our
Technologies operations into a business based principally on the licensing of
our proprietary software.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company owns a number of patents, including United States patents
No.&nbsp;6,243,373 and No.&nbsp;6,438,124. The Company utilizes
the technology supported by the two named patents in providing our proprietary software
solutions. We believe that we hold the foundational patents for VoIP in our
VoIP Patents. To date, we have licensed portions of that technology to third
parties on a non-exclusive basis. In addition, we also have several patent
applications pending before the United States Patent and Trademark
Office and other such authorities
internationally.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Today, our Technologies segment offers a proven network convergence
solution for the deployment of IP-based voice and data services over a single
network. We have over nine years of experience developing VoIP technologies.
Our proprietary soft-switch solution enables existing telecom service providers
to reduce telecommunications costs and permits new communications service
providers to enter the enhanced communications market with limited capital
investment. In addition, we own patents and utilize the technology
supported by those patents in providing our proprietary software solutions.
We are pursuing opportunities to leverage our
patents through a focused licensing strategy that targets carriers, equipment
vendors and customers who are deploying IP for phone-to-phone communication. Revenue in this segment declined to $540 in 2004 from $2,164 in 2003.



<P align="left" style="font-size: 10pt"><B>Liquidity and Capital Resources</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has incurred substantial operating losses and negative cash
flows from operations since inception. At September&nbsp;30, 2004 the Company had a
stockholders&#146; deficit of $58,190 ($42,953 &#150; December&nbsp;31, 2003), negative
working capital of $22,092 ($26,576 &#150; December&nbsp;31, 2003), amounts due to its
controlling shareholder of $45,946 ($28,717 &#150; December&nbsp;31, 2003) and $7,265
($12,127 &#150; December&nbsp;31, 2003) are owing under its revolving credit facility
(included in working capital). There are no additional borrowings available
under the revolving credit facility at September&nbsp;30, 2004.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The related party debt is owed to the Company&#146;s controlling shareholder,
Counsel Corporation (collectively with all its subsidiaries &#147;Counsel&#148;) and is
due at January&nbsp;31, 2006, subject to certain contingent acceleration clauses
linked to



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<P align="left" style="font-size: 10pt">the raising of capital. The Company has a funding commitment from Counsel to
fund, through long-term intercompany advances or equity contributions, all
capital investment, working capital or other operational cash requirements (the
&#147;Keep Well&#148;) through June&nbsp;30, 2005. During the first nine months of 2004,
Counsel advanced the Company $11,702 under the Keep Well, and converted $3,084
of accrued interest into principal. In October&nbsp;2004, Counsel agreed to
subordinate all of its debt in the Company in favor of both the third party
revolving credit facility and the newly issued third party convertible term
note (discussed below). Under the subordination agreements, Counsel further
agreed to guarantee the Company&#146;s revolving credit facility and convertible
term note and to pledge all of its shares owned in the Company as security for
the related debts.




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The revolving credit facility is provided by an asset based lender. The
asset based lender is secured by a first lien on all of the assets of Acceris.
Borrowings under the facility are based on various advance rates of the
accounts receivable base subject to certain reductions and covenants. Amounts
available under the asset based facility are subject to change based upon the
level of receivables and other related factors, such as the aging of accounts,
customer concentrations, etc. The facility matures on June&nbsp;30, 2005. The
Company is looking to replace the existing facility prior to maturity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August&nbsp;2004, the Company implemented a resizing of the organization
targeted at reducing its operating costs. The cost cutting reflects the
continued efficiencies created by the ongoing integration of the Company&#146;s
operations, related to its four acquisitions over the last three years. As a
result of the resizing, the Company&#146;s work force was reduced by approximately
20&nbsp;percent. The reduction affected staff in the San Diego, Pittsburgh and
Somerset facilities. Management has recorded approximately $400 in expenses
related to the August 2004 restructuring, of which $326 was
paid in the third quarter of 2004, recorded in selling, general and
administration expense.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2004, the Company entered into a Securities Purchase Agreement
(the &#147;Agreement&#148;) for the sale by the Company of a convertible term note (the
&#147;Note&#148;) in the principal amount of $5,000 due October&nbsp;14, 2007. The Note
provides that the principal amount outstanding bears interest at the prime rate
as published in the Wall Street Journal plus 3% (but not less than 7% per
annum) decreasing by 2% (but not less than 0%) for every 25% increase in the
Market Price (as defined therein) above the fixed conversion price following
the effective date of the registration statement covering the Common Stock
issuable upon conversion of the Note. Should the Company default under the
agreement and fail to remedy the default on a timely basis, interest under the
note will increase by 2% per month and the note may become immediately due
inclusive of a 20% premium to the then outstanding principal. Interest is
payable monthly in arrears, commencing November&nbsp;1, 2004. Principal is payable
at the rate of approximately $147 per month commencing January&nbsp;1, 2005, in cash
or registered common stock. Payment amounts will be converted into stock if
(i)&nbsp;the average closing price for five trading days immediately preceding the
repayment date is at least 100% of the Fixed Conversion Price, (ii)&nbsp;the amount
of the conversion does not exceed 25% of the aggregate dollar trading volume
for the 22-day trading period immediately preceding the repayment date, (iii)&nbsp;a
registration statement is effective covering the issued shares and (iv)&nbsp;no
Event of Default exists and is continuing. In the event the monthly payment
must be paid in cash, then the Company shall pay 102% of the amount due in
cash. The Company has the right to prepay the Note, in whole or in part, at
any time by giving seven business days written notice and paying 120% of the
outstanding principal amount of the Note. The holder may convert the Note, in
whole or in part, into shares of Common Stock at any time upon one business
day&#146;s prior written notice. The Note is convertible into shares of the
Company&#146;s common stock at a fixed conversion price of $0.88 per share of common
stock (105% of the average closing price for the 30 trading days prior to the
issuance of the Note) not to exceed, however, 4.99% of the outstanding shares
of common stock, of the Company (including issuable shares from the exercise of
the warrants, payments of interest, or any other shares owned).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company did not generate net cash flow from operating activities in 2004. During 2004, the
Company was funded primarily by increases in related party debt, by the proceeds from the
sale of its shares of Buyers United Inc. and by the October financing noted above.
Additional funds will be required by the Company to operate the business throughout 2005.
Such funds are expected to be derived from proceeds from additional third party fund
raises which may take the form of debt, equity or a hybrid instrument, or from the
proceeds on the sale of assets or from advances under the Keep Well. Use of funds from
such arrangements may include such uses as funding operations, improving working capital,
repaying obligations of the business and funding future merger and acquisition activities.
There can be no assurance that the Company&#146;s capital raising efforts will be
successful or can occur on favorable terms to existing security or debt holders.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
continues to be no assurance that the Company will be able to improve its cash flow from
operations in 2005, obtain additional third party financing, extend, repay or refinance
its debt with Counsel, its asset based lender or the holder of the October 2004 Note on
favorable terms. The Company does not expect to receive an extension of its funding
commitment from Counsel under the Keep Well or its asset based lender beyond their
respective maturity dates. Management is undertaking initiatives to address the maturing
debt situation and the negative cash flows at the Company. There can be no certainty that
management will be successful with its initiatives. This circumstance raises substantial
doubt about the Company&#146;s ability to continue as a going concern. The accompanying
condensed consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability of assets and liquidation of liabilities
that may result from this uncertainty.



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<P align="left" style="font-size: 10pt"><I>Cash Position</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents as of September&nbsp;30, 2004 were $1,348 compared to
$2,033 at December&nbsp;31, 2003 ($3,620 &#150; 2002).


<P align="left" style="font-size: 10pt"><I>Cash flows from operating activities </I>- 2004&nbsp;year to date September&nbsp;30<SUP>th</SUP>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our working capital deficit decreased to $22,092 as of September&nbsp;30, 2004,
from $26,576 as of December&nbsp;31, 2003. The decrease in our working capital
deficit is primarily related to the decrease in our revolving credit facility
of $4,862 due to payments made to our asset based lender during the first nine
months of the year, and the decrease in our unearned revenue of $4,708 since
December&nbsp;31, 2003 due principally to the recognition of revenue as cash
receipts associated with our non-recurring network service offering became
unencumbered. This was partially offset by a decrease in our accounts
receivable of $3,658 during the first nine months of 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash used by operating activities during the nine months ended September
30, 2004 was $7,222 as compared to $2,295 during the same period in 2003. The
net increase in cash used in 2004 was primarily due to a $13,711 change in
unearned revenue offset by a $8,902 decrease in net loss to $16,291 for the
first nine months of 2004 from a net loss of $25,193 for the same period in
2003.


<P align="left" style="font-size: 10pt"><I>Cash flow from operating activities &#151; </I>2003



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our working capital deficit increased to $26,576 as of December&nbsp;31, 2003, from
$17,244 as of December&nbsp;31, 2002. The increase in our working capital deficit is
primarily related to (1)&nbsp;the $4,720 increase in our deferred revenues from
December&nbsp;31, 2002 to 2003 due to our network service offering, (2)&nbsp;the increase
to our asset-backed credit facility of $3,041 from December&nbsp;31, 2002 to 2003
due to new borrowings in 2003, (3)&nbsp;the increase in accounts payable of $3,165
from December&nbsp;31, 2002 to 2003 and (4)&nbsp;partially offset by the increase in our
current assets of $2,058 due to the reclassification of our investment in the
preferred stock of Buyers United, Inc. (&#147;BUI&#148;) from long term to current as of
December&nbsp;31, 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash used by operating activities during 2003 was $8,315 as compared to
$4,871 during 2002. The net increase in cash used in 2003 was primarily due to
the increase in 2003 of $5,944 in our accounts receivable resulting from the
acquisition of RSL.COM USA, Inc. (&#147;RSL&#148;) at the end of 2002 and Transpoint in
2003 compared to an increase in 2002 of $1,269, the existence of an impairment
of long-lived assets in 2002 of $3,609, the receipt in 2003 of $1,100 in stock
as consideration for one of our technology licenses and offset by an increase
in deferred revenue of $4,720 in 2003 compared to a decrease of $1,643 in 2002.
The change in deferred revenue is related to our network service offering which
we ceased in July&nbsp;2003. Cash used in operating activities during 2001 was
$29,283. The decrease from 2001 to 2002 is primarily due to a decrease in our
net loss which resulted from improved operating performance by our Retail
segment in 2002 as compared to 2001 and continued downsizing of Acceris&#146;
network and development operations.


<P align="left" style="font-size: 10pt"><I>Cash flows from investing activities </I>- 2004&nbsp;year to date September&nbsp;30<SUP>th</SUP>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by investing activities during the nine months ended
September&nbsp;30, 2004 was $2,911 as compared to net cash used of $1,327 for the
same period in 2003. In the first nine months of 2004, net cash provided by
investing activities relates to $3,581 in proceeds received from the sale of
common stock in BUI received as consideration for the sale of the I-Link
Communications, Inc. operations in May&nbsp;2003, offset by the purchase of
equipment in the amount of $670.


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<P align="left" style="font-size: 10pt"><I>Cash utilized in investing activities &#151; </I>2003



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities in 2003 was $1,827 as compared to
net cash used of $9,233 in 2002 and $15,410 in 2001. In 2003, cash used by
investing activities relates to the purchase of equipment in the amount of
$2,036 and a payment of $100 for the purchase of US Patent No.&nbsp;6,243,373. This
was offset by cash received from the sale of assets in the amount of $160. The
decrease from 2002 to 2003 relates primarily to the purchase of RSL in 2002 for
approximately $8,276. The purchase of Transpoint in 2003 was accomplished by
converting trade payables due to Acceris (which were paid over time by Acceris
on behalf of Transpoint) into equity of Transpoint in accordance with the
purchase agreement. The payment of trade payables by Acceris on behalf of
Transpoint has been accounted for in cash flows from operating activities in
2002 and 2003 and amounted to approximately $2,882 paid from the period July
2002 through July&nbsp;2003. Also in 2002, we acquired $1,649 in furniture,
fixtures, equipment and software as we expanded our operations and continued to
improve our network in order to reduce its overall operating cost, offset by
proceeds of $692 on the sale of a building.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2001, cash used by investing activities was primarily due to the
$13,447 purchase of WorldxChange Communications, Inc. assets and the purchase
of approximately $1,963 of furniture, fixtures, equipment and software.


<P align="left" style="font-size: 10pt"><I>Cash flows from financing activities </I>- 2004&nbsp;year to date September&nbsp;30<SUP>th</SUP>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financing activities provided net cash of $3,626 during the nine months
ended September&nbsp;30, 2004 as compared to $3,678 for the same period in 2003. The
decrease from 2003 to 2004 is due primarily to repayment of $4,862 on our
revolving credit facility during the first nine months of 2004, as opposed to
receipt of $4,832 during the same period in 2003, repayment of a note payable
of $1,104 in the second quarter of 2004 as final settlement of the acquisition
of certain assets of RSL, scheduled lease and note payable payments of $2,104,
offset by the receipt of $11,702 in funding from Counsel in the first three
quarters of 2004, compared to receiving $650 from Counsel during the same
period in 2003.


<P align="left" style="font-size: 10pt"><I>Cash provided by financing activities &#151; </I>2003



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financing activities provided net cash of $8,555 in 2003 as compared to
cash provided of $13,061 in 2002 and $47,200 in 2001. The decrease from 2002 to
2003 primarily relates to the fact that in 2003 we received $7,896 in funding
from Counsel, which included cash to fund ongoing operations and continue the
reorganization of the business, while in 2002 we received $16,823 in funding
from Counsel (offset by principal repayments of $3,000 during 2002). The cash
received from Counsel in 2002 was primarily for the purchase of certain assets
of RSL and to fund operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2001, Counsel provided advances of $43,920 (offset by principal
repayments of $2,500) to fund the purchase of WorldxChange Communications, Inc.
and general operating costs. Additionally, we made net borrowings from our
revolving line of credit of $6,996.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Contractual Obligations</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have various commitments in addition to our debt. The following table
summarizes our contractual obligations at December&nbsp;31, 2003:

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    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>Payment due by period</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Less than 1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>More than</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Contractual Obligations</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>year</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1-3 years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>3-5 years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>5 years</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long term debt obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">43,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating leases for office space and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">296</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Purchase commitments for telecommunications
services (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>From time to time, Acceris has various agreements with national
carriers to lease local access spans and to purchase carrier
services. The agreements include minimum usage commitments with
termination penalties up to 100% of the remaining commitment. At
December&nbsp;31, 2003 all of our minimum usage commitments have been met.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Consolidated Results of Operations</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have provided consolidated and segmented reporting on an annual and
rolling quarter basis as we believe that this is an appropriate way to review
the financial results of the business. The following consolidated discussion
and analysis should be read in conjunction with results by segment below.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Key selected financial data for the three and nine months ended September
30, 2004 and 2003 are as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>September 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">101,364</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Technology licensing and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,099</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,463</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications network expense (exclusive
of depreciation expense on telecommunications
network assets of $1,222 and $1,012 for the
three months ended September&nbsp;30, 2004 and
2003, respectively, and $3,861 and $3,098 for
the nine months ended September&nbsp;30, 2004 and
2003, respectively, included in depreciation
and amortization below)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,073</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,141</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,822</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,772</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,577</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total operating costs and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,531</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,462</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,227</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,849</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income (expense):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,562</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,398</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,583</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,707</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,415&#096;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total other income (expense)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,336</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,345</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,168</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,651</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,867</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,807</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,395</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25,500</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gain from discontinued operations (net of $0 tax)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">307</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,867</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,594</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(16,291</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(25,193</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">24
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt"><I>Three-Month Period Ended September&nbsp;30, 2004 Compared to Three-Month Period
Ended September&nbsp;30, 2003</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to more fully understand the comparison of the results of
continuing operations for the three months ended September&nbsp;30, 2004 as compared
to the same period in 2003, it is important to note the following significant
changes in our operations that occurred:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In November&nbsp;2002, we began to sell a network service offering
obtained from a new supplier. The sale of that product ceased
in late July&nbsp;2003. Revenue from this offering is recognized
using the unencumbered cash method. In the third quarter of
2004, $161 was recognized in revenue compared to $3,079 in
the same quarter of 2003. Expenses associated with this
offering were recorded when incurred. In the third quarter of
2004 the Company recorded a cost of $nil in
telecommunications network costs compared to incurring a cost
of $807 during the same period in 2003. The cessation of this
product offering did not qualify as discontinued operations
under generally accepted accounting principles.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In January&nbsp;2004, the Company commenced offering local dial
tone services via the Unbundled Network Element Platform. The
Company now offers these services in five states and the
Company had approximately 24,000 local customers, at the end
of September&nbsp;2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In August&nbsp;2004, the Company implemented a resizing of the
organization targeted at reducing its operating costs. The
cost cutting reflects the continued efficiencies created by
the ongoing integration of the Company&#146;s operations, related
to its four acquisitions over the last three years. As a
result of the resizing, the Company&#146;s work force was reduced
by approximately 20&nbsp;percent. The reduction affected staff in
the San Diego, Pittsburgh and Somerset facilities.
Management has recorded approximately $400 in expenses
related to the August 2004 restructuring, of
which $326 was paid in the third quarter of 2004, recorded in
selling, general and administration expense.</TD>
</TR>


</TABLE>


<P align="left" style="font-size: 10pt"><I>Revenues</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Telecommunications services revenue decreased $4,694 to $27,229 in the
third quarter of 2004 as compared to $31,923 during the same period in 2003
(excluding revenues from our network service offering of $161 and $3,079,
respectively). The primary reasons for the decrease related to:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our 10-10-XXX customer base is 125,000 at September&nbsp;30, 2004
representing a 39.5% decline from September&nbsp;2003. The customer
attrition is a result of our decision to not directly market
10-10-XXX services since 2002. We have also seen the dial around
monthly average revenue per user (&#147;ARPU&#148;) decline from $22.07 to
$19.15, in the same period. We attribute this to increased
cellular penetration and deregulation in various countries which
have lower rates per month in those markets and due to greater
competition from 1&#043; and local bundled offerings.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The 1&#043; customer base is 164,000, representing a 2.5% decline in
subscribers from September&nbsp;2003. ARPU declined 4.2% from $24.17
to $23.15 in the same period. Management attributes the decline
in customer base to our decision to lead our sales offering with
a local bundle versus a 1&#043; offering. ARPU has declined primarily
due to continued price compression in the long distance business,
and as a result of the continued migration of people to greater
cellular usage.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our enterprise customer base was 238 (2003 &#150; 236) customers at
the end of September&nbsp;2004. Our top ten customers account for
19.5% of all direct sales billings. Included in the third quarter
of 2004 is $1,400 of direct sales revenue from one customer who
has subsequently moved to another carrier.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our local bundled customers increased to 24,000 as at September
30, 2004, while ARPU was $37.62. The Company commenced offering
a local bundle in five states (NY, NJ, FL, PA, and MA) during
2004 under the Unbundled Network Element Platform. Local bundled
customers are expected to have a longer life and higher ARPU than
the Company&#146;s existing 10-10-XXX and 1&#043; customers.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">25
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>See supplemental, statistical and financial data disclosed herein.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technology licensing and related services revenue was $nil in the third
quarter of 2004 as compared to $1,049 in the third quarter of 2003. The
revenue in 2003 relates to two contracts. The first contract was with
AccessLine and was entered into in the first quarter of 2003 for which
acceptance was obtained in the second quarter. The contract involved both
technology licensing and provision of services. We recognized $449 in revenue
from this contract in the third quarter of 2003. The second contract was
entered into with a Japanese company in the third quarter of 2003 when
delivery, acceptance and payment were all completed resulting in the
recognition of $600 during the third quarter of 2003.


<P align="left" style="font-size: 10pt"><I>Operating costs and expenses</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Telecommunications network expense was $15,349 in the three months ended
September&nbsp;30, 2004 as compared to $19,266 during the same period in 2003
(excluding costs associated with our network service offering of $nil and $807,
respectively).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Telecommunications services margins (telecommunications services revenues
less telecommunications network expenses) continue to fluctuate significantly
from period to period, and are expected to continue to fluctuate significantly
for the foreseeable future. Predicting whether margins will increase or decline
is difficult to estimate with certainty. Factors that have affected and
continue to affect margins include:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Differences in attributes associated with the various long-distance
programs in place at the Company. The effectiveness of each offering
can change margins significantly from period to period. Some factors
that affect the effectiveness of any program include the ongoing
deregulation of phone services in various countries where customer
traffic terminates, actions and reactions by competitors to market
pricing, the trend toward bundled service offerings and the increasing
level of wireline to cellular connections. In addition, changes in
customer traffic patterns also increase and decrease our margins.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our frame relay network and voice network. Each network has a
significant fixed cost element and a minor variable per minute cost of
traffic carried element; significant fluctuations in the number of
minutes carried from month to month can significantly affect the
margin percentage from period to period. Management has reduced the
fixed network monthly costs by approximately $84 per month by
September&nbsp;2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Changes in contribution rates to the Universal Service Fund (&#147;USF&#148;)
and other regulatory changes associated with the fund. Such changes
include increases and decreases in contribution rates, changes in the
method of determining assessments, changes in the definition of
assessable revenue, and the limitation that USF contributions
collected from customers can no longer exceed contributions.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our selling, general, administrative and other (&#147;S,G&#038;A&#148;) expense was
$13,992 in the three months ended September&nbsp;30, 2004 as compared to $13,981
during the same period of 2003. The significant changes in S,G&#038;A expense are as
follows:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Compensation expense decreased from approximately $5,700 in the three
months ended September&nbsp;30, 2003 to approximately $5,500 in the three
months ended September&nbsp;30, 2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Residual third party commissions decreased from approximately $3,800
in the three months ended September&nbsp;30, 2003 to approximately $2,300 in
the three months ended September&nbsp;30, 2004. The decrease was a direct
result of lower revenues in 2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Telemarketing costs increased from approximately $100 in the three
months ended September&nbsp;30, 2003 to approximately $600 in the three
months ended September&nbsp;30, 2004. The Company incurred higher
telemarketing costs relating to our entry into the local dial tone
business throughout 2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Billings and collections expenses decreased from approximately $2,400
in the three months ended September&nbsp;30, 2003 to approximately $1,600 in
the three months ended September&nbsp;30, 2004, due to a reduction of
revenue.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">26
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Marketing and advertising expenses increased from approximately $200
in the three months ended September&nbsp;30, 2003 to approximately $300 in
the three months ended September&nbsp;30, 2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Accounting and tax expenses increased from approximately $300 in the
three months ended September&nbsp;30, 2003 to approximately $600 in the three
months ended September&nbsp;30, 2004, primarily related to costs related to
completing a restatement of accounts.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Legal and regulatory expenses increased from approximately $200 in
the three months ended September&nbsp;30, 2003 to approximately $1,100 in the
three months ended September&nbsp;30, 2004. In 2004, management have incurred
additional legal costs relating to the legal proceedings relating to
various litigation matters including the direct and derivative actions,
and its patent enforcement strategy.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Facilities expenses remained consistent at $1,300 in the three months
ended September&nbsp;30, 2003 and September&nbsp;30, 2004, respectively.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Restructuring costs, related to an August 2004 restructuring, of approximately $400,
of which $326 was paid in
the three months ended September&nbsp;30, 2004, compared to none in 2003.
 The cost cutting reflects the continued efficiencies
created by the ongoing integration of the Company&#146;s operations, related
to its four acquisitions over the last three years. As a result of the
resizing, the Company&#146;s work force was reduced by approximately 20
percent. The reduction affected staff in the San Diego, Pittsburgh and
Somerset facilities. </TD>
</TR>


</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Included in three months ended September&nbsp;30, 2003 are Integration
expenses of approximately $200 compared to none in 2004 relating to the
2002 acquisition of certain assets of the estate of RSL.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The provision for doubtful accounts was $941 in the three months ended
September&nbsp;30, 2004 as compared to $1,466 for the same period of 2003. The
provision for doubtful accounts as a percent of revenue, excluding revenue from
our network service offering, was approximately 3.4% for the three months ended
September&nbsp;30, 2004, versus approximately 4.2% for the three months ended
September&nbsp;30, 2003. Management has been taking steps to bring the bad debt
provision more into line with the Company&#146;s historical averages by tightening
the credit granting process.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s research and development program incurred costs of $119 in
the third quarter of 2004. This program is expected to allow the Company to
provide enhanced telecommunication services to its customer base in the near
term. The Company did not carry out any research and development work in 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization was $1,520 in the three months ended
September&nbsp;30, 2004 compared to $1,993 during the same period of 2003.


<P align="left" style="font-size: 10pt"><I>Other income (expense)</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense totaled $2,562 in the third quarter of 2004, of which
$1,855 is pursuant to related party debt, compared to the third quarter of
2003, when $3,066 of the interest expense of $3,398 was pursuant to related
party debt. Included in the interest expense for the third quarter of 2004 is
BCF of $688, compared to $1,393 for the same period in 2003. Third party
interest is lower in the third quarter of 2004 compared to the same period in
2003, due to lower average outstanding balance on the asset based facility
partially offset by an increase in interest expense on regulatory amounts
owing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest and other income was $226 for the third quarter of 2004 compared
to $53 during the third quarter of 2003. During the third quarter of 2004, $204
of other income relates to the estate of WorldxChange Telecommunication, Inc.&#146;s
(&#147;Estate&#148;) agreement to offset an unrecorded receivable of the Company against
a legal obligation to the Estate relating to the 2001 acquisition of the
WorldxChange Communications, Inc. (&#147;WorldxChange&#148;) business
from bankruptcy.


<P align="center" style="font-size: 10pt">27
</DIV>

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<P align="left" style="font-size: 10pt"><I>Discontinued Operations</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the third quarter of 2004, there was no gain or loss from discontinued
operations recorded, compared to the $213 gain reported in the third quarter of
2003 related to the sale of the I-Link Communications, Inc. business.


<P align="left" style="font-size: 10pt"><I>Segment Profitability</I>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the quarter ended September&nbsp;30, 2004, our Telecommunications segment
realized an operating segment loss of $3,745, while our Technologies segment
recorded an operating segment loss of $336. We anticipate that through revenue
growth and continued control of expenses, both segments will report operating
income by the end of 2005. The measures of operating segment loss discussed
above exclude $2,786 of net expenses that are not allocated to a specific
segment. These consist primarily of selling, general and administrative costs,
as well as $2,509 of interest expense, net of a $204 gain on discharge of
obligation.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Nine-Month Period Ended September&nbsp;30, 2004 Compared to Nine-Month Period
Ended September&nbsp;30, 2003</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to more fully understand the comparison of the results of
continuing operations for the nine months ended September&nbsp;30, 2004 as compared
to the same period in 2003, it is important to note the following significant
changes in our operations that occurred:


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    <TD width="1%">&nbsp;</TD>
    <TD>In July&nbsp;2003, we completed the acquisition of Transpoint. The
operations of Transpoint have been included in the statement of
operations for the nine months ended September&nbsp;30, 2004. However,
there were no such operations in the same period of 2003.</TD>
</TR>


</TABLE>


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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

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    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In November&nbsp;2002, we began to sell a network service offering obtained
from a new supplier. The sale of that product ceased in late July
2003. Revenue from this offering is recognized using the unencumbered
cash method. In the first nine months of 2004, $6,714 was recognized
in revenue compared to $7,221 in the same period of 2003. Expenses
associated with this offering were recorded when incurred. In the
first nine month of 2004 the Company recorded a recovery of $203 in
telecommunications network costs compared to incurring a cost of
$9,177 during the same period in 2003. The cessation of this product
offering does not qualify as discontinued operations under generally
accepted accounting principles.</TD>
</TR>

</TABLE>


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    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In January&nbsp;2004, the Company commenced offering local dial tone
services via the Unbundled Network Element-Platform. By September&nbsp;30,
2004 services were being offered in five states and the Company had
approximately local 24,000 local customers.</TD>
</TR>

</TABLE>


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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


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    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In August&nbsp;2004, the Company implemented a resizing of the organization
targeted at reducing its operating costs. The cost cutting reflects
the continued efficiencies created by the ongoing integration of the
Company&#146;s operations, related to its four acquisitions over the last
three years. As a result of the resizing, the Company&#146;s work force
was reduced by approximately 20&nbsp;percent. The reduction affected staff
in the San Diego, Pittsburgh and Somerset facilities. Management has
recorded approximately $400 in expenses related to the August 2004
restructuring, of which $326 was paid in the third
quarter of 2004, recorded in selling, general and administration
expense.</TD>
</TR>


</TABLE>


<P align="left" style="font-size: 10pt"><I>Revenues</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Telecommunications services revenue decreased $12,325 to $81,818 in the
nine month period ended September&nbsp;30, 2004 as compared to $94,143 in the same
period during 2003 (excluding revenues from our network service offering). The
primary reasons for the decrease related to:


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    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our 10-10-XXX customer base is 125,000 at September&nbsp;30, 2004
representing a 39.5% decline from September&nbsp;2003. The customer
attrition is a result of our decision to not directly market 10-10-XXX
services since 2002. We have also seen the dial around monthly
average revenue per user (&#147;ARPU&#148;) decline from $22.07 to $19.15, in
the same period. We attribute this to increased cellular penetration
and deregulation in various countries which have lower rates per month
in those markets and due to greater competition from 1&#043; and local
bundled offerings.</TD>
</TR>

</TABLE>

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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The 1&#043; customer base is 164,000, representing a 2.5% decline in
subscribers from September&nbsp;2003. ARPU declined 4.2% from $24.17 to
$23.15 in the same period. Management attributes the decline in
customer base to our decision to lead our sales offering with a local
bundle versus a 1&#043; offering. ARPU has declined primarily due to
continued price compression in the long distance business, and as a
result of the continued migration of people to greater cellular usage.</TD>
</TR>

</TABLE>


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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our enterprise customer base was 238 customers at the end of September
2004. Our top ten customers account for 19.5% of all direct sales
billings. Included in the nine months ended September&nbsp;30, 2004 is
$2,800 of direct sales revenue from one customer who has subsequently
moved to another carrier.</TD>
</TABLE>

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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our local bundled customers increased to 24,000 as at September&nbsp;30,
2004, while ARPU was $37.62. The Company commenced offering a local
bundle in five states (NY, NJ, FL, PA, and MA) during 2004 under the
Unbundled Network Element-Platform. Local bundled customers are
expected to have a longer life and higher ARPU than the Company&#146;s
existing 10-10-XXX and 1&#043; customers.</TD>
</TR>

</TABLE>



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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>See supplemental, statistical and financial data disclosed herein.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technology licensing and related services revenue was $540 in the first
nine months of 2004 as compared to $2,099 in the same period of 2003. In the
first nine months of 2003, the Company recorded revenue from two contracts:
the AccessLine contract and a contract with a Japanese company. The revenue in
2004 relates to a contract that was entered into with a Japanese company in the
third quarter of 2003. Under the terms of the contract, we earned $540 based on
the receipt of funds related to the delivery of product in 2003. The Company
has no continuing obligation related to this contract. Technology licensing
revenues are project-based and, as such, these revenues will vary from period
to period based on timing and size of technology licensing projects and
payments.


<P align="left" style="font-size: 10pt"><I>Operating costs and expenses</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Telecommunications network expense was $47,664 in the nine months ended
September&nbsp;30, 2004 as compared to $57,964 during the same period in 2003
(excluding costs associated with our network service offering of ($203) and
$9,177, respectively).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Telecommunications services margins (telecommunications services revenues
less telecommunications network expenses) continue to fluctuate significantly
from period to period, and are expected to continue to fluctuate significantly
for the foreseeable future. Predicting whether margins will increase or decline
is difficult to estimate with certainty. Factors that have affected and
continue to affect margins include:


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    <TD width="1%">&nbsp;</TD>
    <TD>Differences in attributes associated with the various long-distance
programs in place at the Company. The effectiveness of each offering
can change margins significantly from period to period. Some factors
that affect the effectiveness of any program include the ongoing
deregulation of phone services in various countries where customer
traffic terminates, actions and reactions by competitors to market
pricing, the trend toward bundled service offerings and the increasing
level of wireline to cellular connections. In addition, changes in
customer traffic patterns also increase and decrease our margins.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our frame relay network and voice network. Each network has a
significant fixed cost element and a minor variable per minute cost of
traffic carried element; significant fluctuations in the number of
minutes carried from month to month can significantly affect the
margin percentage from period to period. Management has reduced the
fixed network monthly costs by approximately $84 per month by
September&nbsp;2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Changes in contribution rates to the Universal Service Fund (&#147;USF&#148;)
and other regulatory changes associated with the fund. Such changes
include increases and decreases in contribution rates, changes in the
method of determining assessments, changes in the definition of
assessable revenue, and the limitation that USF contributions
collected from customers can no longer exceed contributions.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our selling, general, administrative and other expense was $42,828 in the
nine months ended September&nbsp;30, 2004 as compared to $42,822 during the same
period of 2003. The significant changes in S,G&#038;A expense are as follows:


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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Compensation expense decreased from approximately $20,800 in the nine
months ended September&nbsp;30, 2003 to approximately $19,100 in the nine
months ended September&nbsp;30, 2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Residual third party commissions decreased from approximately $8,700
in the nine months ended September&nbsp;30, 2003 to approximately $6,700 in
the nine months ended September&nbsp;30, 2004. The decrease was a direct
result of lower revenues in 2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Telemarketing costs increased from approximately $500 in the nine
months ended September&nbsp;30, 2003 to approximately $1,600 in the nine
months ended September&nbsp;30, 2004. The Company incurred higher
telemarketing costs relating to our entry into the local dial tone
business throughout 2004.</TD>
</TR>

</TABLE>


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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Billings and collections expenses decreased from approximately $5,600
in the nine months ended September&nbsp;30, 2003 to approximately $5,000 in
the nine months ended September&nbsp;30, 2004, relating to reduction in
revenue in the respective periods.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Marketing and advertising expenses increased from approximately $600
in the nine months ended September&nbsp;30, 2003 to approximately $900 in the
nine months ended September&nbsp;30, 2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Accounting and tax expenses increased from approximately $1,000 in
the nine months ended September&nbsp;30, 2003 to approximately $1,500 in the
nine months ended September&nbsp;30, 2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Legal and regulatory expenses increased from approximately $600 in
the nine months ended September&nbsp;30, 2003 to approximately $2,700 in the
nine months ended September&nbsp;30, 2004. In 2004, management have incurred
additional legal costs relating to the legal proceedings relating to
various litigation matters including the direct and derivative actions,
and its patent enforcement strategy.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Facilities expenses increased from approximately $3,500 in the nine
months ended September&nbsp;30, 2003 to approximately $3,900 in the nine
months ended September&nbsp;30, 2004. The increase in facilities expense is
due to the opening of the New Jersey office in early 2004.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Restructuring costs, related to an August 2004 restructuring, of approximately $400, of which $326 was paid in
the nine months ended September&nbsp;30, 2004, compared to none in 2003.
The cost cutting reflects the continued efficiencies
created by the ongoing integration of the Company&#146;s operations, related
to its four acquisitions over the last three years. As a result of the
resizing, the Company&#146;s work force was reduced by approximately 20
percent. The reduction affected staff in the San Diego, Pittsburgh and
Somerset facilities.</TD>
</TR>


</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Included in nine months ended September&nbsp;30, 2003 are integration
expenses of approximately $700 compared to none in 2004, relating to the
2002 acquisition of certain assets of the estate of RSL.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The provision for doubtful accounts was $3,908 in the nine months ended
September&nbsp;30, 2004 as compared to $3,772 for the same period of 2003. The
provision for doubtful accounts as a percent of revenue, excluding revenue from
our network service offering, was approximately 4.4% for the nine months ended
September&nbsp;30, 2004, versus approximately 3.7% for the nine months ended
September&nbsp;30, 2003. Management is taking steps to bring the bad debt provision
more into line with the Company&#146;s historical averages by tightening the credit
granting process.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company commenced a research and development program incurring costs
of $225 in the first nine months of 2004. This program is expected to allow the
Company to provide enhanced telecommunication services to its customer base in
the near term. The Company did not carry out any research and development work
in 2003.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization was $4,877 in the nine months ended
September&nbsp;30, 2004 compared to $5,577 during the same period of 2003.


<P align="left" style="font-size: 10pt"><I>Other income (expense)</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense totaled $8,583 in the nine months ended September&nbsp;30,
2004, of which $6,384 is pursuant to related party debt, compared to the same
period in 2003, when $8,632 of the interest expense of $9,707 was pursuant to
related party debt. Included in the interest expense for the nine months ended
September&nbsp;30, 2004 is BCF of $3,240, compared to $2,589 for the same period in
2003. Third party interest is lower in the first nine months of 2004 compared
to the same period in 2003, due to lower average outstanding balance on the
asset based facility partially offset by an increase in interest expense on
regulatory amounts owing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest and other income increased $2,359 to $2,415 for the nine months
ended September&nbsp;30, 2004 from $56 during the same period of 2003. The increase
is primarily due to a gain of $767 related to the discharge of certain
obligations associated with our former participation with a consortium of
owners in an indefeasible right of usage, a gain of $1,376 from our sale of
shares of Buyers United, Inc. common stock in the first six months of 2004 and
$204 gain in third quarter 2004 on the estate of WorldxChange
Telecommunications, Inc.&#146;s (&#147;Estate&#148;) agreement to offset an unrecorded
receivable of the Company against a legal obligation to the Estate relating to
the 2001 acquisition of the WorldxChange Communications, Inc. (&#147;WorldxChange&#148;)
business from bankruptcy.


<P align="left" style="font-size: 10pt"><I>Discontinued Operations</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first nine months of 2004, we recorded a gain from discontinued
operations of $104 related to the sale of our I-Link Communications, Inc.
(&#147;ILC&#148;) operations to Buyers United, Inc. (&#147;BUI&#148;) entered into in December
2002. The sale closed on May&nbsp;1, 2003. Contingent shares (10,714) of BUI stock
were earned during the three months ended March&nbsp;31, 2004, with a value of $104.
In the first nine months of 2003, we recorded a gain from discontinued
operations of $307 related to the sale of the ILC business.


<P align="left" style="font-size: 10pt"><B>Segment Profitability</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the nine months ended September&nbsp;30, 2004, our Telecommunications
segment realized an operating segment loss of $8,536, while our Technologies
segment recorded an operating segment loss of $744. We anticipate that through
revenue growth and continued control of expenses, both segments will report
operating income by the end of 2005. The measures of operating segment income
and loss discussed above exclude $7,115 of net income and expenses that are not
allocated to a specific segment. These consist primarily of selling, general
and administrative costs, as well as $8,282 of interest expense, net of a
$1,376 gain on the sale of our holdings in BUI common stock and a gain of $971
recognized on the discharge of an obligation.



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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Key selected financial data for the three years ended December&nbsp;31, 2003, 2002
and 2001 are as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Percent Change</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003 vs 2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002 vs 2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
</TR>

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<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">133,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">85,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">57</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">70</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Technology licensing and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(50</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications network expense (exclusive
of depreciation shown below)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling, general, administrative and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="right">5,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(40</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(33</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total operating costs and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19,904</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,530</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21,952</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(66</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income (expense):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,269</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,195</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,693</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Interest and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">388</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Gain on sale of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total other income (expense)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,053</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,023</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31,957</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,330</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25,975</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(41</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from discontinued operations, net of $0 tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,522</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(104</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(32</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(31,428</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(27,838</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(44,497</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(37</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B><I>2003 Compared to 2002</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When considering the review of the results of continuing operations for
2003 compared to 2002, it is important to note the following significant
changes in our operations that occurred in 2003 and 2002. Namely:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In July&nbsp;2003, we acquired Transpoint. The operations of
Transpoint from July&nbsp;28, 2003 to December&nbsp;31, 2003 have been included
in the statement of operations for 2003. However, there were no such
operations in 2002.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On December&nbsp;10, 2002, we purchased the assets of RSL.COM USA,
Inc. (&#147;RSL&#148;), including the assumption of certain liabilities. The
RSL operations from January&nbsp;1, 2003 to December&nbsp;31, 2003 have been
included in the statement of operations for the entire fiscal year.
In 2002, the operations of RSL were included for the period December
10, 2002 to December&nbsp;31, 2002.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On December&nbsp;6, 2002, we entered into an agreement to sell
substantially all of the assets and customer base of I-Link
Communications, Inc. (&#147;ILC&#148;). The sale closed on May&nbsp;1, 2003. As a
result of the agreement, the operational results related to ILC have
been reclassified as discontinued operations in the current and prior
years and accordingly are not included in the following analysis of
continuing operations for 2003 or 2002.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">32
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In November&nbsp;2002, we began to sell a network service offering
provided by a new supplier. The sale of that service offering ceased
in late July&nbsp;2003. While this product has been discontinued, revenue
is recognized as cash receipts become unencumbered.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Revenues</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increase in Telecommunications services revenue to $133,765 in 2003
from $85,252 in 2002 is primarily related to the following events:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;2002, we acquired certain assets of RSL from a
bankruptcy proceeding. The acquisition has been accounted for under
the purchase method of accounting and accordingly, revenue subsequent
to the acquisition has been included in our revenue. There is a full
year of RSL revenue included in 2003, versus less than one month in
2002. The operations of RSL provided approximately $15,300 in
Telecommunications revenues in 2003, compared to approximately $2,500
for December&nbsp;2002. Additionally, the operations of Transpoint which
began in July provided approximately $2,055 in Telecommunications
revenue during 2003, which was not present in 2002.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We have continued to experience a decline in revenue from
10-10-XXX dial around services and from a related direct mail program
launched in 2001 and curtailed in early 2002. In 2003, revenues from
our dial around product were approximately $54,900 versus
approximately $66,800 in 2002.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We have experienced growth in our revenue from customers
acquiring 1&#043; services through our growing commercial, ethnic and
multi-level marketing (&#147;MLM&#148;) channels on which we began to focus in
early 2002. Revenues from our 1&#043; product were approximately $44,400
in 2003 versus approximately $15,791 in 2002.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We launched a network service offering in 2002, which we
curtailed in July&nbsp;2003. We recognized revenues of approximately
$7,629 in 2003 as cash receipts became unencumbered, compared to
recognizing no revenues in 2002. At December&nbsp;31, 2003, $4,621 in cash
receipts remain encumbered and are accounted for as deferred revenues
on our balance sheet.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Although we continued to experience price erosion in 2003 in a
very competitive long-distance market, our customer and traffic
growth is outpacing this compression. The increase in number of
subscribers from 279,532 at December&nbsp;31, 2002 to 354,248 at December
31, 2003, coupled with the increase in traffic per user has driven
the remainder of our increase in revenue, year-over-year. In 2003, we
recognized approximately $97,756 of domestic and international long
distance revenues (including monthly recurring charges and Universal
Service Fund (&#147;USF&#148;) fees) on approximately 907,000,000 minutes,
resulting in a blended rate of approximately $0.11 per minute. In
2002, we recognized approximately $82,466 of domestic and
international long distance revenues on approximately 680,480,000
minutes, resulting in a blended rate of approximately $0.12 per
minute.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technology licensing and development revenues decreased $673 to $2,164 in
2003 from $2,837 in 2002. The decrease was related to having revenue from two
contracts outstanding in 2003 compared to three in 2002. Technology licensing
revenues are project-based and, as such, these revenues will vary from year to
year based on the timing and size of the projects and related payments.


<P align="left" style="font-size: 10pt"><B>Operating costs and expenses</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The changes in operating costs and expenses are primarily related to the
following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Telecommunications network expense &#150; The $35,070 increase
relates primarily to the inclusion of a full year of the operations
of the RSL assets in 2003 as opposed to less than one month in 2002.
In 2003, the operations of RSL&#146;s Enterprise business incurred
approximately $15,279 in telecommunications network expense versus
approximately $1,190 in December of 2002. The inclusion of a full
year of activity for the Agent business of RSL, resulted in an
increase of approximately $8,734. Additionally, we recognized an
increase of approximately $7,112 in telecommunications network
expense associated with our network service offering in 2003 over
2002.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">33
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Selling, general, administrative and other (&#147;SG&#038;A&#148;) &#150; The
$24,249 increase relates primarily to the inclusion of a full year of
the operations of RSL in 2003 as opposed to less than one month in
2002. In 2003, the operations of RSL&#146;s Enterprise business incurred
approximately $10,378 in SG&#038;A versus approximately $810 in December
of 2002. The inclusion of a full year of activity for the Agent
business of RSL combined with our existing Retail segment resulted in
an increase in SG&#038;A from 2002 to 2003 of approximately $13,471.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Provision for doubtful accounts &#150;The $561 decrease is primarily
due to lower bad debt experience levels for our direct billed
customers because of Company&#146;s implementation of a dedicated
collection team in 2003. The provision for doubtful accounts as a
percentage of total revenue was 4.0% in 2003 compared to 6.8% in
2002. This percentage decrease was also due to the revenue from our
network service offering being recognized on an unencumbered cash
receipts method, which was $7,629 in 2003 and none in 2002.
Additionally, in 2003 we recognized $25,615, versus $1,547 in 2002 in
revenues from our Enterprise segment. The revenues for our Enterprise
segment have a significantly lower bad debt experience than our
Retail revenues.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Depreciation and amortization &#150; The increase relates
primarily to tangible and intangible assets acquired pursuant to
the RSL and Transpoint acquisitions. Depreciation and amortization
on the assets purchased from RSL was approximately $1,800 for all
of 2003, which was present for less than one month in 2002.
Additionally, the intangible assets associated with the Transpoint
purchase incurred additional amortization of approximately $245
during 2003, which was not present in 2002. The remainder of the
increase is associated with depreciation on the purchase of new
furniture, fixtures, equipment and software during the year.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Research and development costs (&#147;R&#038;D&#148;) &#150; We ceased our R&#038;D
activities in 2002. We resumed investing in R&#038;D in the second quarter
of 2004.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Other income (expense)</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The changes in other income (expense)&nbsp;are primarily related to the
following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest expense &#151; The $5,074 increase in interest expense
primarily relates to interest on amounts owed to Counsel and on
amounts owed on our asset-based facility. The increase year over year
relates primarily to higher average outstanding loan amounts to both
Counsel and our asset-based lender. The balance of our revolving
credit facility was $12,127 and $9,086 at December&nbsp;31, 2003 and 2002,
respectively. This facility had an average interest rate of 6% during
both years. The increased average loan balance created additional
interest expense year-over-year of approximately $154. Counsel
advanced us an additional $7,896 during 2003, which created
additional interest expense from 2002 to 2003 of approximately $69.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In November&nbsp;2003, $40,673 of Counsel debt was converted into
equity. The Counsel debt carried an interest rate of 10%, therefore
the conversion led to approximately $4,000 in annual interest
savings. Such savings were reduced by increases in
debt.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other income &#151; The $821 increase to other income is primarily
related to the discharge of obligations from two settlement
agreements completed during 2003 with network carriers, which totaled
$1,141. In 2002, other income represents approximately $200 in income
recorded when we were informed that we had funds on deposit with
vendors that we had not known previously existed</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>2002 Compared to 2001</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When considering the results of continuing operations for 2002 compared to
2001, it is important to note the following significant changes in our
operations that occurred in 2002 and 2001, namely:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On June&nbsp;4, 2001, we completed the purchase of WorldxChange
Communications, Inc. (&#147;WorldxChange&#148;), which offered a dial-around
telecommunications product. We did not offer a comparable product
prior to June&nbsp;4, 2001.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">34
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On December&nbsp;10, 2002, we purchased the assets of RSL.COM USA,
Inc. (&#147;RSL&#148;), including the assumption of certain liabilities. RSL
offers voice services to residential and small business customers
through an indirect sales channel. RSL also offers voice and data
solutions to small and medium size enterprise customers through a
direct sales channel. The RSL operations from December&nbsp;11, 2002 to
December&nbsp;31, 2002 have been included in the statement of operations
for 2002.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On December&nbsp;6, 2002, we entered into an agreement to sell
substantially all of the assets and customer base of I-Link
Communications, Inc. (&#147;ILC&#148;). The sale closed in the second quarter
of 2003. As a result of the agreement, the operational results
related to ILC have been reclassified as discontinued operations in
2002 and 2001 and accordingly are not included in the following
analysis of continuing operations.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Revenues</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increase in Telecommunications services revenue of $34,963 to $85,252
in 2002 from $50,289 in 2001 was primarily related to the following events:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In June&nbsp;2001, we acquired the long-distance operations of
WorldxChange from bankruptcy. The purchase was accounted for under
the purchase method of accounting. Accordingly, revenue in 2001 was
limited to revenue from the date of acquisition in June&nbsp;2001 through
the end of 2001 (approximately seven months) compared to twelve
months of operations in 2002. The revenues from WorldxChange
accounted for approximately $82,752 in 2002 and all of the
Telecommunications revenues in 2001.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;2002, we acquired the assets of the Agent and the
Enterprise Direct business of RSL from bankruptcy. The acquisition
was accounted for under the purchase method of accounting and
accordingly, revenue of approximately $2,500 was recognized
subsequent to the acquisition, which was not present in 2001.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary reason for the decrease of $2,860 in revenues for the
Technology segment to $2,837 in 2002 from $5,697 in 2001 was due to the
reduction in revenue recorded relating to a two-year licensing agreement which
ended in May&nbsp;2002. In 2002, we recorded revenue of approximately $1,667 on this
contract, compared to approximately $5,000 in 2001.


<P align="left" style="font-size: 10pt"><B>Operating costs and expenses</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The changes in operating costs and expenses are primarily related to the
following:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Telecommunications network expense &#150; The $15,390 increase
related primarily to the inclusion of a full year of the operations
of WorldxChange in 2002 as opposed to only seven months in 2001. On
an annualized basis, telecommunications network expense decreased
from 2001 to 2002. The decrease on an annualized basis correlated
with a 14% increase in telecommunications services revenue margin
(telecommunications services revenue less telecommunications network
expense) in 2002 over 2001, primarily relating to improved network
efficiency derived from reductions in operating costs and
efficiencies relating to more scaled utilization of our network.
Further, in 2002, we expensed approximately $2,000 of network service
offering costs for which no revenue was recognized. This expense was
not present in 2001.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Selling, general and administrative expense &#150; The $2,225
increase related primarily to the inclusion of a full year of the
operations of WorldxChange in 2002 compared to only seven months in
2001. This increase included $7,124 from our Retail segment and $777
from our Enterprise segment. The overall increase was partially
offset by a decrease of $5,676 in advertising costs associated with
the curtailment of a direct advertising program in the first quarter
of 2002 that commenced in 2001.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Provision for doubtful accounts &#150; The $3,138 increase related
primarily to the inclusion of a full year of operations of
WorldxChange in 2002 compared to only seven months in 2001.
Additionally, in</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">35
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2002, we experienced a shift in channels resulting in more direct
billing of customers, which incurs a larger percentage of
uncollectible accounts.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Depreciation and amortization &#150; The $2,139 decline in
depreciation and amortization was related to the decrease in
amortization on our intangible assets of $2,350, as certain
intangible assets associated with the purchase of WorldxChange became
fully amortized. This decrease was partially offset by a full year of
depreciation and amortization on the acquired tangible assets of
WorldxChange and the acquired tangible and intangible assets of RSL.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>R&#038;D &#150; Over the past several years
we have consolidated our research operations and curtailed research
and development activities in order to concentrate our financial
resources on sales and marketing of existing products. With the sale
of the I-Link Communications, Inc. business in December&nbsp;2002, we
stopped our research and development activities, as evidenced by no
expenses being incurred in 2003. R&#038;D activity was resumed commencing
in the second quarter of 2004.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Other income (expense)</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Overall the $3,777 increase in expense was directly related to interest
expense on our increased debt from loans from Counsel (necessary to fund our
continued cash operating requirements and acquisitions) of approximately
$3,052, interest expense on our revolving credit facility which originated in
December&nbsp;2001 of approximately $447 and the inclusion of interest from
WorldxChange capital leases for twelve months in 2002 as compared to seven
months in 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income in 2002 was primarily related to WorldxChange, who in the
fourth quarter was informed that it had funds on deposit with certain carriers
that it had not previously known existed. Upon verification of such deposits,
we recorded the asset and recognized other income of approximately $200. We did
not have similar transactions in 2001. The other changes from year to year
relate to various items which do not recur from year to year and a decrease in
interest earned in 2002 compared to 2001 which corresponds to the decrease in
average cash balances on hand during the respective years and the reduction in
interest rates during the same periods.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2001, we sold our subsidiary Nexbell to an unrelated party.
The sale was a sale of Nexbell&#146;s stock and accordingly the assets and
liabilities of Nexbell were assumed by the purchaser with no further financial
obligation on our part. At the time of the sale, the liabilities exceeded the
assets of Nexbell and accordingly, we have recorded a gain on sale of
subsidiary in the amount of approximately $589 (the amount by which the
liabilities of Nexbell exceeded its assets).


<P align="center" style="font-size: 10pt">36
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Quarterly Analysis &#150; 2003
Compared to 2002</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management believes that the most appropriate way to analyze Acceris is to
examine the changes in the business quarter over quarter. Accordingly, we have
presented the consolidated and segmented viewpoint on this basis.

<DIV align="center">
<TABLE style="font-size: 6pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="18%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Full Year</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>(audited)</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q1</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q2</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q3</B></TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q4</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q1</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q2</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q3</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q4</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Revenues:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Retail</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,289</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">83,705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">100,521</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Enterprise</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,615</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Network service offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,629</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Technologies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,164</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,929</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating costs and
expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications
network expense
(exclusive of
depreciation shown
below)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,899</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Network service offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling, general,
administrative and
other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,700</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,264</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for doubtful
accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="right">5,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,438</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation and
amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,125</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total operating
costs and
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155,833</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(340</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(246</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(851</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,093</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,607</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,780</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,462</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,055</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21,952</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,530</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19,904</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income (expense):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,061</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,777</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,184</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,915</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,394</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,398</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,562</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,693</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,195</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,269</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,216</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gain on sale of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total other
income (expense)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,164</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,051</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,625</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,960</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,913</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,393</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,345</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,402</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,023</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,053</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from continuing
operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,504</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,297</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,476</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,053</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,520</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,807</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,457</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25,975</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,330</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31,957</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gain (loss)&nbsp;from
discontinued operations,
net of $0 tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,099</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,581</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,463</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,365</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(277</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,522</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">529</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5,603</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,878</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,939</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,418</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(15,797</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,802</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,594</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,235</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(44,497</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(27,838</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(31,428</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>Revenues</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Retail revenue grew in 2003 over 2002 due primarily to the
inclusion of the Agent business of RSL.COM USA, Inc. (&#147;RSL&#148;), which
we acquired on December&nbsp;10, 2002. In the Retail market we experienced
an increase in the volume of business, based on approximately
907,000,000 minutes carried over our network and over lines we lease
from third parties during 2003 versus approximately 680,400,000 in
2002. Additionally, our number of customers grew from approximately
279,532 at December&nbsp;31, 2002 to approximately 354,248 at the end of
2003. However, the average blended rate</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">37
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>per minute (including domestic and international calls) declined
throughout 2003, from approximately $0.12 per minute in 2002 to
approximately $0.11 per minute in 2003. The ratio of international
long-distance business to domestic long-distance continued at an
approximately 65:35 ratio for 2002 and 2003.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Enterprise revenues grew in 2003 due primarily to the inclusion
of the Enterprise business of RSL, which was acquired on December&nbsp;10,
2002. In 2003, the Enterprise business provided $25,615 in revenues,
compared to $1,547 in 2002.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Network service offering &#151; We introduced a product in November
2002 which we ceased offering in July&nbsp;2003. We recognized revenues of
approximately $7,629 in 2003 as cash receipts became unencumbered and
recognized no such revenue in 2002. Beginning in the second quarter
of 2003, amounts collected from this offering were considered
unencumbered and recognized as revenue. At December&nbsp;31, 2003, $4,621
in cash receipts remains encumbered and is accounted for as deferred
revenues on our balance sheet. We anticipate that the remainder of
these receipts will become unencumbered and recognized as revenue in
2004.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Technologies revenue is made up of several project-based
contracts. Revenue in this business is volatile between reporting
periods. In 2003, revenue reported is from two contracts and totals
$2,164 in 2003, compared to $2,837 from three contracts in 2002.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Telecommunications network expense</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Costs grew in 2003 over 2002 in line with the level of revenue,
due to increased traffic on our network and on the lines we lease
from third parties. The increase in volume is directly related to the
inclusion of a full year of activity for the Agent business of RSL,
which resulted in an increase in telecommunications network expense
of approximately $8,734. Additionally, we recognized an increase of
approximately $7,112 in telecommunications network expense associated
with our network service offering in 2003 over 2002.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our networks continued to operate in 2003 below 50%
utilization, which is consistent with 2002. The operation of the
network has many fixed cost elements and changes in network
utilization affect the Telecommunications division&#146;s operating loss.
</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We acquire telecommunications services from a number of
carriers and pricing obtained from those carriers affects
Telecommunications&#146; operating loss.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We are subject to telecommunications taxes, and the calculation
and mandated contribution rates change from time to time which
affects our costs from period to period.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The destination of customers&#146; long-distance calls, particularly
international calls, affects the Telecommunications network expense
and overall profitability.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Operating costs and expenses</B></TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Selling, general and administrative expense (&#147;SG&#038;A&#148;) &#150; Costs
increased primarily due to the acquisition of certain assets of RSL
in December&nbsp;2002 and the acquisition of Transpoint in July&nbsp;2003.
Throughout 2003, we have been integrating these two businesses, as
well as WorldxChange Communications, Inc., and have been developing
an infrastructure that allowed us to enter the local business. As our
integration continues, we expect SG&#038;A as a percent of revenue to
decline during 2004. The inclusion of a full year of activity for the
Agent business of RSL combined with our existing Retail segment
resulted in an increase in SG&#038;A from 2002 to 2003 of approximately
$13,343, while the inclusion of a full year of activity of the
Enterprise business of RSL accounted for an increase of approximately
$9,568.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">38
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Provision for doubtful accounts &#150; Improvement as a percent of
revenue from 6.8% in 2002 to 4.0% in 2003 has occurred due to
improved credit and collection processes and due to the use of the
unencumbered cash receipts method of revenue recognition for our
network service offering. We recognized approximately $7,629 in
revenue during 2003 associated with this product which, due to the
unencumbered cash method of accounting, experiences significantly
less bad debt.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Research and development (&#147;R&#038;D&#148;) &#150; We ceased our R&#038;D activities
in 2002. We resumed investing in R&#038;D in the second quarter of 2004.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Depreciation and amortization &#150; Pursuant to the acquisition of
RSL and Transpoint we acquired certain tangible and intangible
assets, which are being amortized over one to five years.
Depreciation and amortization on the assets purchased from RSL was
approximately $1,800 for all of 2003, which was present for less than
one month in 2002. Additionally, the intangible assets associated
with the Transpoint purchase accumulated additional amortization of
approximately $245 during 2003, which was not present in 2002. The
remainder of the increase is associated with depreciation on new
furniture, fixtures, equipment and software purchased during the
year.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Supplemental Statistical and Financial Data</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following data is provided for additional information about our
operations. It should be read in conjunction with the quarterly segment
analysis provided herein. All amounts below are unaudited.


<P align="center" style="font-size: 10pt">39
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">










<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>2004</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>(In millions of dollars, except where indicated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q1</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q2</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q3</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q4</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q1</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q2</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q3</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Gross revenues &#151; product mix</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Domestic long-distance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px">International long-distance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.5</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Local dial tone</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.7</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px">MRC/USF<SUP>(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Dedicated voice</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Direct sales revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Total telecommunications revenue</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>30.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>31.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>32.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>31.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>28.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>26.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>27.3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Network service offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Technology licensing and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Total revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>30.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>37.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>36.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>32.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>35.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>26.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>27.4</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Telecommunications revenue by customer type:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Dial-around</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">1&#043;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Local dial tone</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Direct sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Total telecommunications revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>30.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>31.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>32.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>31.9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>28.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>26.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>27.3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Gross
revenue&#151;product mix(%):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Domestic long-distance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">25.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">24.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">23.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">23.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">22.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">21.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">19.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">International long-distance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">42.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">45.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">47.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">47.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">45.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">43.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">38.4</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Local dial tone</DIV></TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">9.8</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">MRC/USF<SUP>(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">9.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">10.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">10.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.5</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Dedicated voice</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Direct sales revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">23.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">21.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">18.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">18.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">19.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">19.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">21.4</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD nowrap>%</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Total telecommunications revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD nowrap><B>%</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Gross
revenues&#151;product mix(minutes)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>







<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Domestic long-distance<SUP>(5)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,236,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,798,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134,198,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,880,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,293,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134,649,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,065,320</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">

<TD><DIV style="margin-left:10px; text-indent:-10px">International
long-distance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">83,191,655</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">93,896,850</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">98,873,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">98,978,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">91,288,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">83,923,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">79,458,519</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Dedicated voice</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,571,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,772,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,364,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,653,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,653,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,374,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,751,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Active Retail Subscribers (in number of people):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><U>Dial-around
<SUP>(2)</SUP></U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Beginning of Period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,857</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Adds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,582</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Churn</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(83,268</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(98,389</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(108,874</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(77,608</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(74,865</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(65,568</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(51,237</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">End of Period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,202</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><U>Local
dial tone</U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Beginning of Period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,359</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Adds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,772</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Churn</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(217</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,029</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,512</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">End of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,619</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><U>1&#043;<SUP>(5)</SUP></U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Beginning of Period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,162</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Adds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,574</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Churn</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(44,758</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(43,450</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(50,208</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(32,028</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21,067</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20,778</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31,795</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">End of Period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,941</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Total subscribers (End of Period)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>365,226</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>389,673</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>375,179</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>354,248</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>333,073</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>325,378</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>312,762</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><U>Direct
sales <SUP>(6)</SUP></U></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Active Customer Base</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total top 10 billing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,130</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Avg
monthly revenue per user (active subscriptions) in absolute
dollars:<SUP>(4)</SUP></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Dial-around</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19.15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Local dial tone</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37.62</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">1&#043;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">24.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">24.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23.15</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><SUP>1</SUP> MRC/USF represents &#147;Monthly Recurring Charges&#148; and &#147;Universal Service Fund&#148;
fees charged to the customers.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><SUP>2</SUP> &#147;Dial- around&#148; refers to a product which allows a customer to make a call
from any phone by dialing a 10-10-XXX prefix.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><SUP>3</SUP> &#147; 1 &#043;&#148; refers to a product which allows a retail customer to directly make a
long- distance call from their own phone by dialing &#147; 1&#148; plus the destination
number.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><SUP>4</SUP> Average monthly revenues per user is calculated as the revenues of the
quarter divided by the number of users at the end divided by 3 to get monthly
amount.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><SUP>5</SUP> Includes Local Product Line Bulk/Package Rate Domestic Minutes</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">40
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><SUP>6</SUP> Represents Number of Parent Customers with Revenues greater than $0 in each
calendar month.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Segmented Analysis</B>



<P align="left" style="font-size: 10pt"><B><I>Telecommunications
&#150; Retail &#150; 2003 Compared to 2002</I></B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="17%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Full Year</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(audited)</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q1</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q2</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q3</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q4</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q1</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q2</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q3</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q4</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Retail</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">83,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">100,521</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Network service
offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,629</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating costs and
expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications network
expense
(exclusive of
depreciation
shown below)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,624</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Network service
offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling,
general,
administrative
and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,941</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation and
amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,883</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total
operating
costs and
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,085</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(269</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,980</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,751</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(635</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,416</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,603</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,792</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,405</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other
income (expense),
net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,168</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(926</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(574</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(255</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(632</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(852</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(673</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(259</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,923</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,416</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Segment loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,437</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(585</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(458</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,235</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,383</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,487</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,089</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,862</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,715</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(17,821</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>Revenues</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retail revenues increased $24,444 to $108,150 for 2003 as compared to
$83,706 for 2002. The increase was primarily due to:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>incremental revenue of approximately $14,855 associated with
growth in the subscriber base primarily due to the December&nbsp;2002
acquisition of the Agent business of RSL.COM USA, Inc. (&#147;RSL&#148;) and
the July&nbsp;2003 acquisition of Transpoint.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>revenues of $7,629 representing actual cash collections from
our network service offering that have been finalized during the
first nine months of 2003 from billings prior to December&nbsp;31, 2003.
Revenue from this product is accounted for when the actual cash
collections to be retained by the Company are finalized. There was no
comparable source of revenue in 2002.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Operating costs and expenses</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retail&#146;s telecommunications network expense and network service offering
expense for 2003 and 2002 totaled $70,731 and $48,974, respectively. The
increase in 2003 over 2002 relates primarily to:


<P align="center" style="font-size: 10pt">41
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>inclusion of approximately $10,095 in network expenses
associated with growth in the subscriber base primarily due to the
December&nbsp;2002 acquisition of the Agent business of RSL and the July
2003 acquisition of Transpoint.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>inclusion of network expenses of $9,107 related to the sale of
a network service offering in 2003 versus $1,995 in 2002.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retail&#146;s selling, general and administrative expense was $47,941 in 2003,
up from $34,468 in 2002. The increase in 2003 over 2002 primarily relates to:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an increase in personnel costs of approximately $2,800 from
2002 to 2003 primarily relating to the increase in number of
employees,</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an increase of $9,650 in billing and collection charges and
outside agent commissions when compared to 2002 relating primarily to
the increase in Retail revenue,</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an increase in professional fees in 2003 of approximately
$4,020 compared to 2002 and</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>partially offset by a decrease of $1,463 in advertising costs
from 2002 to 2003, which decrease relates to the curtailment of a
direct advertising program in the first quarter of 2002.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter of 2003, we negotiated and received a concession from
one new significant supplier of a network product. We negotiated a reduction in
costs payable to the supplier of approximately $4,463 of which $2,999 was
recovered in the first quarter by reduction of commissions otherwise payable to
the supplier. During the second quarter of 2003 we recovered an additional
$1,150 by reduction of commissions otherwise payable. The balance of
approximately $314 was recovered in the third quarter by withholding
commissions that would otherwise be payable to the supplier.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retail&#146;s depreciation and amortization was $4,883 in 2003 compared to
$4,056 in 2002. The increase in 2003 over 2002 primarily relates to the
inclusion of the Agent business of RSL (acquired in December&nbsp;2002) and the
Transpoint business (acquired in July&nbsp;2003) for which there was no comparable
expense in the same period of 2002. Assets subject to depreciation and
amortization totaling approximately $7,673 were acquired in connection with
these purchases.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retail&#146;s interest and other expense was $2,416 in 2003 compared to $2,923
in 2002. The decrease in 2003 over 2002 primarily relates to a decrease of $519
in amortization of debt discount related to the value of warrants issued to
Counsel in 2002 which did not recur in 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Retail business approaches the market through the multi-level
marketing (&#147;MLM&#148;) ethnic and commercial agent channels.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our commercial agent channel will continue to focus on providing the
highest levels of service at the most competitive price, helping our agent
customers become more successful. In 2004, we launched a loyalty program to
reward those agents who increase their business with us with warrants to
purchase common stock.



<P align="center" style="font-size: 10pt">42

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B><I>Telecommunications
&#150; Enterprise &#150; 2003 Compared to 2002</I></B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002 (1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Full Year</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(audited)</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q4</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q1</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q2</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q3</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q4</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Revenues:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Enterprise</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,615</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Operating costs and
expenses:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications network
expense
(exclusive of
depreciation
shown below)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,944</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,279</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling,
general,
administrative
and other</DIV></TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,793</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,378</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation and
amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,241</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total
operating
costs and
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,898</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(611</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,188</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(478</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(141</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(476</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(611</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,283</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other
income (expense),
net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(89</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(90</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(89</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(292</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Segment loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(629</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,277</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(568</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(230</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(500</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(629</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,575</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">This segment commenced with the December&nbsp;2002 acquisition of the
Enterprise business of RSL.COM USA, Inc. (&#147;RSL&#148;).</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Revenues</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues from Enterprise in 2003 came from the Enterprise business of RSL,
which we acquired in December&nbsp;2002. Accordingly, the Enterprise segment had no
revenues in the first eleven months of 2002. Revenues of $25,615 have been
included in 2003, compared to $1,547 in 2002.


<P align="left" style="font-size: 10pt">Operating costs and expenses



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Enterprise accounted for $15,279 of the total network expense
in 2003, compared to $1,190 in 2002, as Enterprise was only a part of
operations for less than one month during 2002.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Enterprise accounted for $9,568 of our overall increase in
selling, general, administrative and other expense in 2003.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Enterprise recorded $2,241 in depreciation and amortization in 2003.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Enterprise recorded $292 in interest and other expense (net of other income) in 2003.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Enterprise channel is targeted at medium-sized companies where we can
be more competitive on level of service and price. We believe our customer
service is second to none as clients are assigned a dedicated Acceris
representative responsible for ensuring the customer&#146;s needs are met. We have
also established relationships with all major telecommunications carriers, and
are thus able to design a fully managed system for our customers utilizing a
combination of carriers that best suits their objectives.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following our acquisition of the Enterprise business of RSL, we continue
to deliver the high level of service that RSL has historically brought to the
market place, which has been the hallmark of its reputation. The revenue
decline experienced during the year was due to the loss of several customers
who made the decision to change providers while the business was in a
bankruptcy proceeding as well as normal turnover. Following the acquisition, we
started to implement customer attraction strategies in this business, which has
a lengthy sales cycle. This strategy involved putting a new sales team in
place.



<P align="center" style="font-size: 10pt">43
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<P align="left" style="font-size: 10pt"><B><I>Technologies &#150; 2003 Compared to 2002</I></B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Full Year</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(audited)</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q1</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q2</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q3</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q4</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q1</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q2</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q3</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Q4</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Technology</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,164</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling, general,
administrative and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(63</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total operating costs and
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(188</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(73</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(155</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,014</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other income
(expense), net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Segment income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(188</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(73</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(155</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,014</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Revenues</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technologies is the segment responsible for licensing and related services
revenue. Technologies had revenues of $2,164 in 2003 as compared to $2,837 in
2002. The revenues in 2003 relate to two contracts. The first contract was
entered into in the first quarter of 2003 for which acceptance was obtained in
the second quarter. The contract involves both technology licensing and the
provision of services. Revenues from the contract are being recognized over the
service period starting with acceptance in the second quarter and will continue
during the period of our continued involvement. During 2003 we recognized
$1,563 in revenue from this customer. The second contract was entered into with
a Japanese company in the third quarter of 2003 when delivery, acceptance and
payment were all completed resulting in the recognition of $600 during the
third quarter of 2003. The contract allows for additional future revenues of up
to $1,250, contingent upon future events including the issuance of patents in
Japan consistent with our existing United States patents. Subsequent to year
end, the Company recognized approximately $750 in revenues pursuant to a cash
receipt in March&nbsp;2004. If and when the future events occur, the Company will
recognize the additional revenues. The Company has no continuing obligation
related to this contract. Revenues in 2002 related to three contracts no longer
in effect in 2003. Technology licensing revenues are project-based and, as
such, these revenues will vary from period to period based on timing and size
of technology licensing projects and payments.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technologies&#146; selling, general and administrative expense was $1,150 in
2003 as compared to $1,850 in 2002. The decrease is directly related to a
decrease in research and development in 2002 to 2003 of approximately $1,399.
Offsetting this decrease was an increase associated with our addition of
employees to this division in 2003, principally a president and an independent
sales agent.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technologies recorded no depreciation expense in 2003 and minimal
depreciation in 2002.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One of our most exciting developments in 2003 was the acquisition of a
second patent related to Voice over Internet Protocol (&#147;VoIP&#148;). Utilizing our
patented technology, VoIP enables telecommunications customers to originate a
phone call on a traditional handset, transmit any part of that call via the
Internet, and then terminate the call over the traditional telephone network.
This new patent acquisition combined with our existing Acceris patent, creates
an international patent portfolio covering the basic process and technology
that enables VoIP communications, and transforms Acceris into a major
participant in the provision of VoIP solutions. Going forward, we intend to
aggressively pursue recognition of our intellectual property in the marketplace
through a focused licensing program.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue and contributions from this business to date have been based on
the sales and deployments of our VoIP solutions, which will continue. The
timing and sizing of various projects will result in a continued pattern of
mixed quarterly results.


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<A name="107"></A>
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<P align="center" style="font-size: 10pt"><B>BUSINESS</B>



<P align="left" style="font-size: 10pt"><B>Overview</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a broad-based communications company, servicing residential, small
and medium-sized businesses and corporate accounts in the United States. We
provide a range of products from local dial tone, domestic and international
long-distance voice services to fully managed, integrated data and enhanced
services. We are a US facilities-based carrier with points of presence in 30
major US cities. Our voice network features 11 voice switches and nationwide
Feature Group D access. Our data network consists of 17 Nortel Passports that
have recently been upgraded to support multi-protocol label switching.
Finally, we have relationships with multiple tier I and tier II providers in
the U.S. and abroad.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company targets revenue growth by broadening our product offerings. In 2004 the addition
of a local and long distance bundled offering targeted at consumer customers was expected
to provide revenue expansion, while the Company continued its strategy of allowing
attrition of lower revenue 10-10-xxx customers. The objective of this strategy was to
allow the Company to increase the average monthly revenue per customer, resulting in a
greater contribution per customer providing greater operating leverage of the
business&#146;s fixed cost base. The Company launched a local and long distance bundled
offering early in 2004 and the product soon gained acceptance in five states: New Jersey,
New York, Pennsylvania, Massachusetts and Florida. By mid-year 2004, regulatory
uncertainty initially created by a court decision created a lack of clarity regarding the
ongoing profitability/existence of UNE-P. Some felt that everything would soon settle and
that things would continue as they existed prior to the court decision, while others felt
that a new business model would exist but that uncertainty existed surrounding the
economics of any such business model, while others felt that changes were occurring that
would change telecommunications forever in the United States in a negative manner for
companies like Acceris. Long distance carrier AT&amp;T announced its decision to exit the
local residential market. In response to these legal and regulatory developments, the
Company made the decision to put its geographic expansion plans on hold, while continuing
to market to existing states. Of the approximately 350,000 customers that the Company has,
approximately 15,000 are affected by UNE-P. On the cost side of the business, we continued
our integration initiatives and resized the organization for our revised revenue
expectations. Additionally, we began to assess whether we should expand through strategic
acquisitions to take advantage of economies of scale or whether we should attempt to sell
some or all of our telecommunications operations. Of course, the expansion of operations
through strategic acquisitions would require substantial additional capital which may not
be available to us. The Company has hired a third party advisor to assist management in
considering its strategic options.


<P align="left" style="font-size: 10pt"><B>History and Development of the Business</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated in Florida in 1983 under the name MedCross, Inc.,
which was changed to I-Link Incorporated in 1997, and to Acceris Communications
Inc. in 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been growing through the acquisition of predecessor businesses,
which have been and are continuing to be integrated, consolidated and
reorganized. These predecessor businesses are organized into two categories:
Telecommunications and Technologies. Telecommunications has been assembled
through the acquisition from bankruptcy of certain assets of WorldxChange
Communications, Inc. (&#147;WorldxChange&#148;) in June&nbsp;2001 and certain assets of RSL.COM U.S.A., Inc. (&#147;RSL&#148;) in December&nbsp;2002. Added to these was the acquisition
of the purchased assets of Transpoint Communications, LLC and purchased
membership interest in Local Telecom Holdings, LLC (collectively, &#147;Transpoint&#148;)
in July&nbsp;2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;1, 2001, we became a majority-owned subsidiary of Counsel
Communications, LLC, an indirect wholly-owned subsidiary of Counsel
Corporation, (collectively, &#147;Counsel&#148;). Since taking a controlling position,
Counsel had advanced us, up to September&nbsp;30, 2004, approximately $90,700,
consisting of notes, equity, accrued interest and other advances (net of
approximately $6,400 in repayments to Counsel.) Of this amount, approximately
$22,500 was utilized to complete the WorldxChange and RSL
acquisitions, $40,700
was converted to equity, and the remaining approximately $21,100 has been used
directly in operations, principally to fund the building of our
Telecommunications and Technologies segments.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our development and transition has been as follows:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Telecommunications</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WorldxChange was a facilities-based telecommunications carrier providing
international and domestic long-distance service to retail customers. At the
time we purchased the business, WorldxChange consisted primarily of a
dial-around product that allowed a customer to make a call from any phone by
dialing a 10-10-XXX prefix. Since the acquisition, we have commenced offering a
1&#043; product (1&#043; products are those with which a customer directly dials a
long-distance number from their telephone by dialing 1-area code-phone number)
and have also begun to offer local communications products to our residential
and small business customers. The local dial tone service is being provided
under the terms of the Unbundled Network Element Platform authorized by the
Telecommunications Act of 1996 and was available in New York and New Jersey in
the first quarter of 2004, and has since expanded to Pennsylvania,
Massachusetts and Florida. Historically, WorldxChange marketed its services
through consumer mass marketing techniques, including direct mail and direct
response television and radio. In 2002, we revamped our channel strategy by
de-emphasizing the direct mail channel and devoting our efforts to pursuing
more profitable methods of attracting and retaining customers. We now use
commercial agents as well as a network of independent commission agents
recruited through a multi-level marketing (&#147;MLM&#148;) program to attract and retain
new customers. In 2004 we launched the Acceris Communications Inc. Platinum
Agent Program which awards warrants to certain of our agents based on
performance criteria as a means to attract and incentivize existing and new
independent agents. In December&nbsp;2002, we completed the purchase of certain
assets of RSL from a bankruptcy proceeding. The purchase included the assets
used by RSL to provide long-distance voice and data services, including frame
relay, to their commercial customers and the assets used to provide
long-distance and other voice services to small businesses and the
consumer/residential market, which they referred to as their Agent business.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2003, we completed the purchase of Transpoint. The purchase of
Transpoint provided us with further penetration into the commercial agent
channel and a larger commercial customer base.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Telecommunications segment offers a broad range of voice and data
products and services to residential, small office/home office and small-medium
sized enterprises, and corporate accounts through a network of MLM agents,
commercial agents, affinity groups and outbound telemarketing. Our customers
are serviced through direct sales and support teams who offer fully managed and
fully integrated voice and data solutions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have capitalized upon a unique synthesis of marketing and network
capabilities. Through the strength of our agent network we are adding new
customers each month, many of them with a strong international usage component.
Due to our favorable cost structure and network optimization, we offer
competitive rates to selected international regions. We continue to experience
customer attrition particularly with our 10-10-XXX customer base which we have
not marketed directly since 2002. We have also seen the average revenue per
user decline. The Company&#146;s domestic telephone network continues to operate at
well below available capacity leading to cost inefficiencies. We attribute this
to increased cellular penetration and deregulation in various countries which
have lower rates per month in those markets. This is most evident in India in
2004. Additionally, regulatory uncertainty exists in the domestic telephone
markets due to recent court decisions. Future regulatory changes may penalize
or benefit the current operations of the business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We differentiate ourselves to our residential customers by offering
attractively priced bundles of international minutes, both on a stand alone
basis and as part of a local dial tone &#043; long-distance package to preferred
destinations, and by specialized customer service, which includes in-language
customer support. By using this targeted strategy, we have acquired a
substantial number of ethnic users whose monthly spending on telecommunications
services is generally higher than that of the average retail customer. These
subscribers also tend to exhibit higher brand loyalty, resulting in lower
customer turnover (churn)&nbsp;than average retail consumers for our type of
products.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our proprietary technology enables us to offer unbundled value-added
services such as voicemail, unified messaging and on-the-fly conferencing at a
low cost, creating another competitive advantage when targeting retail
customers. These features distinguish us from mass-market providers that
typically offer higher priced, &#147;one-size-fits-all&#148; national and international
rate plans. We are in the process of productizing and deploying this
technology.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our direct sales force focuses on multi-location customers with limited
information technology (&#147;IT&#148;) resources. By taking a consultative approach to
network solutions and providing in-depth analysis of our customers&#146; business
needs and operating environments, we are able to design and deliver
competitively priced and customized voice and data solutions. Our commercial
customers also benefit from our relationships with multiple providers, which
ensures superior service with respect to network redundancy, cost and supplier
risk. We are able to offer strong customer service due to easy access to
information and to our engineering, technical and administrative staffs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our voice network features 11 voice switches and nationwide Feature Group
D access, which enables low cost call origination. Our data network consists of
17 Nortel Passports that have recently been upgraded to support multi-protocol
label switching. Finally, we have relationships with multiple tier I and tier
II providers in the U.S. and abroad.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Technologies</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1994, Technologies began operating as an Internet service provider and
quickly identified that the emerging IP environment was a promising basis for
enhanced service delivery. We soon turned to designing and building an IP
telecommunications platform consisting of our proprietary software, hardware
and leased telecommunications lines. The goal was to create a platform with the
quality and reliability necessary for voice transmission. By 1996, we released
our first IP-based service called &#147;Fax-4-Less,&#148; which provided users with an
efficient and cost-effective way to distribute facsimile information.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1997, Technologies started offering enhanced services over a mixed
IP-and-circuit-switched network platform. These services offered a blend of
traditional and enhanced communication services and combined the inherent cost
advantages of an IP-based network with the reliability of the existing public
switched telephone network (&#147;PSTN&#148;). The suite of services included a one
number &#147;follow me&#148; service, long-distance calling, unified messaging,
conference calling, message broadcasting and a web-based interface to manage
messages and maintain personal account settings.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August&nbsp;1997, Technologies acquired MiBridge Inc. (&#147;Mibridge&#148;), a New
Jersey-based communications technology company engaged in the design,
development, integration and marketing of a range of software
telecommunications products that supported multimedia communications over the
PSTN, LAN and IP networks. Historically, MiBridge concentrated its development
efforts on compression systems such as Voice over Internet Protocol (&#147;VoIP&#148;).
As part of Acceris, MiBridge continued to develop patent-pending technologies
which combined sophisticated compression capabilities with IP telephony
technology. The acquisition of MiBridge permitted us to accelerate the
development and deployment of IP technology across our network platform.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1998, Technologies deployed its real-time IP communications network
platform. With this new platform, all core operating functions such as
switching, routing and media control became software-driven. This new platform
represented the first nationwide, commercially viable VoIP platform of its
kind. Following the launch of its software-defined VoIP platform in 1998,
Technologies continued to refine and enhance the platform to make it even more
efficient and capable for its partners and customers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2000, Technologies transitioned its direct-sales marketing
program to Big Planet, Inc. (&#147;Big Planet&#148;), a subsidiary of Nu Skin
Enterprises, Inc., whereupon Big Planet became one of our wholesale customers.
The transition of the network marketing sales channel to Big Planet allowed us
to focus on the expansion of our VoIP platform and the development and
deployment of new enhanced services and products, while at the same time
maintaining existing channels for retail sales.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2001, we acquired WebToTel, Inc. (&#147;WebToTel&#148;) and Nexbell
Communications, Inc. (&#147;Nexbell&#148;), both previously subsidiaries of Counsel, in a
stock-for-stock transaction. Nexbell was sold to a third party in December
2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;6, 2002, we entered into a definitive purchase and sale
agreement to sell substantially all of the assets and customer base of I-Link
Communications, Inc. (&#147;ILC&#148;), our wholly-owned subsidiary, to Buyers United,
Inc. The sale closed on May&nbsp;1, 2003. The sale included the physical assets
required to operate our nationwide network using our patented VoIP technology
(constituting the core business of ILC) and a fully paid non-exclusive
perpetual license to its proprietary software-based network convergence
solution for voice and data. The sale of the ILC business removed essentially
all of Technologies&#146; operations that did not pertain to our proprietary
software-based convergence solution for voice and data. This sale marked the
final stage of the transformation of Technologies&#146; operations into a business
based principally on the licensing of its proprietary software.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company owns a number of patents, including United States patents
No.&nbsp;6,243,373 and No.&nbsp;6,438,124.
The Company utilizes the technology supported by the two named patents in providing its
proprietary software solutions. We believe that we hold the foundational
patents for VoIP in our VoIP Patents. To date, we have licensed portions of
that technology to third parties on a non-exclusive basis. In addition, we also
have several patent applications pending before the United States
Patent and Trademark Office and other such
authorities internationally.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Today, our Technologies segment offers a proven network convergence
solution for the deployment of IP-based voice and data services over a single
network. We have over nine years of experience developing VoIP technologies.
Our proprietary soft-switch solution enables existing telecom service providers
to reduce telecommunications costs and permits new communications service
providers to enter the enhanced communications market with limited capital
investment. In addition, we own patents and utilize the technology
supported by those patents in providing our proprietary software solutions. We are pursuing opportunities to leverage our
patents through a focused licensing strategy that targets carriers, equipment
vendors and customers who are deploying IP for phone-to-phone communication.


<P align="left" style="font-size: 10pt"><B>Business Strategy</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business strategy is to build a large, profitable base of residential,
small and medium sized business and enterprise accounts that purchase bundled
telecom services. As part of our strategy, we have consolidated our high
quality communications networks and restructured our operations in order to
leverage our infrastructure across branded sales channels.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To achieve our goals, through both organic and acquisition growth we plan
to:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Penetrate our distribution channels: </I>Our distribution channels, which we
have built over the last three years, continue to grow and mature. Our recently
launched Platinum Agent Program rewards agents for substantial and persistent
production. Under this program, selected agents who meet specified performance
objectives are eligible to receive stock purchase warrants. The equity
incentives offered under this program are expected to increase both the number
of commercial agents and the revenue contribution per commercial agent. The
program also helps to ensure that the objectives of our agents and the Company
are aligned.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Expand our product portfolio: </I>We have recently expanded our product set to
include local dial tone in order to extend the average life and monthly average
revenues of current and future customers. We are currently delivering local
dial tone services to customers via the Unbundled Network Element Platform. In
addition, we intend to roll-out Voice over Internet Protocol (&#147;VoIP&#148;) and
related services to our residential, small-medium sized enterprises and
enterprise customers beginning in the later part of 2004 and continuing into
2005. Products will include an IP origination service with enhanced features
such as one number capability, find me/follow me, and on the fly conferencing,
and VoIP offerings for the small office- home office, small and medium business
market and enterprise segments that offer robust voice and data communications
features such as call management, personal agent functionality and
collaboration services. We intend to utilize our technologies, applications
and engineered solutions expertise to continue to grow in the VoIP arena.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Enter new geographic markets: </I>In first quarter of 2004, we launched our
local &#043; long-distance bundled product set in New York and New Jersey. In the
second quarter of 2004, we entered the Pennsylvania, Massachusetts and Florida
markets. We currently offer stand alone long-distance services nationwide in
the US.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>License
our intellectual property: </I>We have a number of issued patents and
pending patent applications, which we utilize to provide our proprietary
solutions. We believe that we hold the foundational patents for the manner in
which a significant portion of VoIP traffic is routed in the marketplace today.
We have licensed portions of our technology to third parties on a non-exclusive
basis. We plan to further monetize our intellectual property by offering
licenses to service providers, equipment companies and end-users who are
deploying VoIP networks for phone-to-phone communications.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Leverage our existing scalable infrastructure: </I>We have created a network
and back office infrastructure that satisfies the needs of our existing
customers and that will support additional revenue growth without significant
incremental capital investment. We continue to reduce our network costs and are
completing the consolidation of duplicate back office functions. Our
information technology strategy is expected to ensure efficiency and integrity
internally by eliminating redundant costs and mitigating strategic risks. We
expect to make significant incremental capital investments pursuant to our
expanded product portfolio outlined above, in addition to the base level of
annual capital investment necessary to keep our infrastructure efficient and
maintained.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
an alternative to organic and acquisition growth, we may determine that value maximization
is achieved by combining or selling some or all of our assets to third parties. We believe
that consolidation in our segment of the telecommunications and technology business is an
important element of long term success and sustainability. The Company has hired a third
party advisor to assist management in considering its strategic options.

<P align="left" style="font-size: 10pt"><B>Business Reorganizations</B>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2003, we continued to consolidate functions across Acceris. We are focused on streamlining
our internal processes, eliminating duplicate efforts of staff serving similar roles in
multiple locations, and making the integration of additional companies into our operations
more cost effective and less risky. Upon the acquisition of RSL.COM USA, Inc. and
disposition of the I-Link Communications, Inc. business in December&nbsp;2002, we were
organized into three operating segments, Retail, Enterprise and Technologies, which
primarily distinguished themselves by the product offerings available. In the first
quarter of 2004, we changed the structure of our internal organization and the method upon
which we evaluate our performance, and management began to evaluate our business as two
divisions consisting of Telecommunications and Technologies. In August&nbsp;2004, the
Company implemented a resizing of the organization targeted at reducing its operating
costs. The cost cutting reflects the continued efficiencies created by the ongoing
integration of the Company&#146;s operations, related to its four acquisitions over the
last three years. As a result of the resizing, the Company&#146;s work force was reduced
by approximately 20&nbsp;percent. The reduction affected staff in the San Diego,
Pittsburgh and Somerset facilities.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has been organized through the assembly, from 2001 to 2003, of bankrupt and
financially distressed assets. Reorganizations have occurred to maximize the operational
efficiencies and to improve the capital structure of the Company, and will continue to be
a necessary element of the value creation strategy as the Company continues to optimize
its operations and capital structure.


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<P align="left" style="font-size: 10pt"><B>Overview of Products</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer business and residential consumers a broad suite of voice and
data telecommunications products and services, including local dial tone,
long-distance (1&#043; or 10-10-XXX dial-around) and international calling services.
Our various business segments operate in both regulated and non-regulated
environments.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal and state governing authorities regulate our local and
long-distance services. For our long-distance business, we are regulated as a
non-dominant interexchange carrier (&#147;IXC&#148;). Federal and state authorities have
been reducing their regulatory requirements as the industry faces robust
competition. For our local exchange services, we are regulated as a competitive
local exchange carrier.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, we offer a variety of enhanced services, including an open
API that enables development of a variety of voice applications using its
patented Voice over Internet Protocol software as well as data services.


<P align="left" style="font-size: 10pt"><B>Industry</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, the communications services industry has transmitted voice
and data over separate networks using different technologies. Traditional
carriers have typically built telephone networks based on circuit switching
technology, which establishes and maintains a dedicated path for each telephone
call until the call is terminated.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The communications services industry continues to evolve, both
domestically and internationally, providing significant opportunities and risks
to the participants in these markets. Factors that have been driving this
change include:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>entry of new competitors and investment of substantial capital in
existing and new services resulting in significant price competition</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>technological advances resulting in a proliferation of new services
and products and rapid increases in network capacity</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Telecommunications Act of 1996 (the &#147;1996 Act&#148;)</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>growing deregulation of communications services markets in the United
States and in selected countries around the world</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voice over Internet Protocol (&#147;VoIP&#148;) is a technology that can replace
services provided by the traditional telephone network. This type of data
network is more efficient than a dedicated circuit network because the data
network is not restricted by the one-call, one-line limitation of a traditional
telephone network. This improved efficiency creates cost savings that can be
either passed on to the consumer in the form of lower rates or retained by the
VoIP provider.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The VoIP industry has grown dramatically from the early days of calls made
through personal computers. According to a research study from Insight Research
Corporation, VoIP-based services is projected to grow significantly through
2007, representing a growth opportunity for VoIP service providers.


<P align="left" style="font-size: 10pt"><B>Competition</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Competition in the telecommunications industry is based upon pricing,
customer service, billing services and perceived quality. We compete against
numerous telecommunications companies that offer essentially the same services
as we do. Many of our competitors, including the incumbent local exchange
carriers (&#147;ILECs&#148;), are substantially larger and have greater financial,
technical and marketing resources. Our success will depend upon our continued
ability to provide high quality, high value services at prices competitive
with, or lower than, those charged by our competitors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The ILECs and the major carriers, including SBC, Verizon, BellSouth, AT&#038;T,
Sprint Corporation and MCI/Worldcom, Inc., have targeted price plans at
residential and small business customers &#151; our primary target market &#151; with
significantly simplified rate structures and with bundles of local services
with long-distance, which may lower overall local and long-distance prices.
Competition is also fierce for the commercial customers that we serve. This


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<P align="left" style="font-size: 10pt">market was typically dominated by AT&#038;T, Sprint and MCI (national
long-distance carriers) but now offers additional growth opportunities for the
incumbent local exchange companies as they are able to service multi-location
customers with offices located outside of their local calling area.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pricing pressure has existed for several years in the telecommunications
industry and is expected to continue, and this is coupled with the introduction
of new technologies, such as Voice over Internet Protocol, which seek to
provide voice communications at a cost below that of traditional
circuit-switched service. In addition, wireless carriers have marketed their
services as an alternative to traditional long-distance and local services,
further increasing competition and consumer choice. Reductions in prices
charged by competitors may have a material adverse effect on us. Cable
companies have entered the telecommunications business, and this development
may increase the competition faced by the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The ILECs are well-capitalized, well-known companies that have the
capacity to &#147;bundle&#148; other services, such as local and wireless telephone
services and high speed Internet access, with long- distance telephone
services. The ILECs&#146; name recognition in their existing markets, the
established relationships that they have with their existing local service
customers, their ability to take advantage of those relationships, and the
possibility that interpretations of the 1996 Act may be favorable to the ILECs,
also make it more difficult for us to compete with them.


<P align="left" style="font-size: 10pt"><B>Government Regulation</B>



<P align="left" style="font-size: 10pt"><I>Telecommunications industry</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The telecommunications industry is subject to government regulation at
federal, state and local levels. Any change in current government regulation
regarding telecommunications pricing, system access, consumer protection or
other relevant legislation could have a material impact on our results of
operations. Most of our current operations are subject to regulation by the
Federal Communications Commission (&#147;FCC&#148;) under the Communications Act of 1934.
In addition, certain of our operations are subject to regulation by state
public utility or public service commissions. Changes in, or changes in
interpretation of, legislation affecting us could damage our operations and
lower the price of our common stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 1996 Act, among other things, allows the Regional Bell Operating
Companies (&#147;RBOC&#148;) and others to enter the long-distance business. Entry of the
RBOCs or other entities, such as electric utilities and cable television
companies, into the long-distance business may have a negative impact on our
business or our customers. We anticipate that some of these entrants will prove
to be strong competitors because they are better capitalized, already have
substantial customer bases, and enjoy cost advantages relating to local telecom
lines and access charges. In addition, the 1996 Act provides that state
proceedings may in certain instances determine access charges we are required
to pay to the local exchange carriers. If these proceedings occur, rates could
increase which could lead to a loss of customers, weaker operating results and
the lowering of the price of our common stock.


<P align="left" style="font-size: 10pt"><I>Overview of Federal Regulation</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a carrier offering telecommunications services to the public, we are
subject to the provisions of the Communications Act of 1934, as amended, and
FCC regulations issued thereunder. These regulations require us, among other
things, to offer our regulated services to the public on a non-discriminatory
basis at just and reasonable rates. We are subject to FCC requirements that we
obtain prior FCC approval for transactions that would cause a transfer of
control of one or more regulated subsidiaries. Such approval requirements may
delay, prevent or deter transactions that could result in a transfer of control
of our company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>International Service Regulation. </I>We possess authority from the FCC,
granted pursuant to Section&nbsp;214 of the Communications Act of 1934, to provide
international telecommunications service. The FCC has streamlined regulation of
competitive international services and has removed certain restrictions against
providing certain services. Presently, the FCC is considering a number of
international service issues that may further alter the regulatory regime
applicable to us. For instance, the FCC is considering revisions to the rules
regarding the rates that international carriers like us pay for termination of
calls to mobile phones located abroad.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to FCC rules, we have cancelled our international and domestic
FCC tariffs and replaced them with a general service agreement and price lists.
As required by FCC rules, we have posted these materials on our Internet web


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<P align="left" style="font-size: 10pt">site. The &#147;detariffing&#148; of our services has given us greater pricing
flexibility for our services, but we are not entitled to the legal protection
provided by the &#147;filed rate doctrine,&#148; which generally provides protections to
carriers from legal actions by customers that challenge the terms and
conditions of service.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interstate Service Regulation. </I>As an inter-exchange carrier (&#147;IXC&#148;), our
interstate telecommunications services are regulated by the FCC. While we are
not required to obtain FCC approval to begin or expand our interstate
operations, we are required to obtain FCC approvals for certain transactions
that would affect our ownership or the services we provide. Additionally, we
must file various reports and pay certain fees and assessments. We are subject
to the FCC&#146;s complaint jurisdiction and must contribute to the federal
Universal Service Fund (&#147;USF&#148;). We must also comply with the Communications
Assistance for Law Enforcement Act (&#147;CALEA&#148;), and certain FCC regulations which
require telecommunications common carriers to modify their networks to allow
law enforcement authorities to perform electronic surveillance.


<P align="left" style="font-size: 10pt"><I>Overview of State Regulation</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through certain of our subsidiaries, we are authorized to provide
intrastate interexchange telecommunications services and, in certain states,
are authorized to provide competitive local exchange services by virtue of
certificates granted by state public service commissions. Our regulated
subsidiaries must comply with state laws applicable to all similarly certified
carriers including the regulation of services, payment of regulatory fees and
preparation and submission of reports. The adoption of new regulations or
changes to existing regulations may adversely affect our ability to provide
telecommunications services. Consumers may file complaints against us at the
public service commissions. The certificates of authority we hold can be
generally conditioned, modified, cancelled, terminated or revoked by state
public service commissions. Further, many states require prior approval or

notification for certain stock or asset transactions, or in some states, for
the issuance of securities, debts, guarantees or other financial transactions.
Such approvals can delay or prevent certain transactions.


<P align="left" style="font-size: 10pt"><I>Overview of Ongoing Policy Issues</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Local Service</I>. Through the 1996 Act, Congress sought to establish a
competitive and deregulated national policy framework for advanced
telecommunications and information technologies. To date, local exchange
competition has not progressed to a point where significant regulatory
intervention is no longer required. Regulators believed that a &#147;hands-off&#148;
policy would drive local exchange service into an adequately competitive
market, but there continues to be a strong need for policy issue clarification
and construction. Some policy changes have been addressed through the court
system, not the regulatory system. For instance, the FCC has attempted several
times to develop a list of Unbundled Network Elements (&#147;UNEs&#148;) which are
portions of the Incumbent Local Exchange Carrier (&#147;ILEC&#148;) networks and services
that must be sold separately to competitors. On several occasions, the courts
have rejected the FCC&#146;s approach to defining UNEs. The FCC&#146;s most recent
attempt to develop rules, the Triennial Review Order, was vacated by the U.S.
Circuit Court of Appeals in Washington D.C. on March&nbsp;4, 2004. The Court&#146;s
ruling went into effect on June&nbsp;16, 2004. In response, several competitive
carriers filed appeals with the U.S. Supreme Court, to seek a stay and review
of the U.S. Circuit Court&#146;s ruling. Those requests for appeal have been denied.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
August 20, 2004, the FCC issued&nbsp;interim UNE rules to replace those vacated by the DC
Circuit Court as well as a Notice of Proposed Rulemaking (&#147;NPRM&#148;) seeking
comments on new UNE rules. On December 15, 2004 the FCC adopted new rules governing access
to UNEs. These rules will replace those rules adopted in the August 2003 <I>Triennial
Review Order </I>(&#147;TRO&#148;) which the D.C. Circuit vacated and/or remanded to the
FCC in <I>USTA II </I>on March 2, 2004. The rules the FCC adopted also replace the interim
rules. In particular, the FCC determined that ILECs are no longer obligated to offer
unbundled switching for mass market customers, and thus no longer required to offer UNE-P,
after a transition period. The FCC raised the threshold for eliminating dedicated
interoffice transport, preserved DS-1 UNE loops except in a small number of ILEC wire
centers, declined to apply EEL criteria to stand-alone loops, and chose to continue to
permit conversions of special access to UNEs. The FCC decided that UNEs would not be
available for the exclusive provision of long distance or CMRS service. The FCC
consequently did not apply EEL eligibility criteria to stand-alone loops. The FCC adopted
a one-year transition period for embedded DS-1 and DS-3 loops and transport and mass
market UNE-P. Dark fiber loops and transport will have an 18-month transition period. This
transition period will commence with the effective date of the new rules. Upon the
effective date, CLECs will not be able to order new UNEs for which they are not eligible
under the new rules. During the transition period and with respect to existing/embedded
customers only, ILECs may increase prices for discontinued DS-1, DS-3, and dark fiber
loops to the higher of 115% of the rate the requesting carrier paid on June 15, 2004, or
115% of the rate the state commission has established or establishes, if any, between June
16, 2004 and the effective date of the FCC&#146;s order. For UNE-P, ILECs may during the
transition period charge the higher of the rate at which the requesting carrier leased
UNE-P on June 15, 2004, plus one dollar, or the rate the state commission establishes, if
any, between June 16, 2004, and the effective date of the FCC&#146;s Order, plus one dollar.
While the Company believes that the new FCC rules may adversely affect its ability to
obtain access to local facilities on the same basis as under the Interim rules and or
prior to the USTA II decision, a definitive statement on the impact of the new rules cannot be made until the FCC has released its Order on the new UNE-P rules. It is expected
that the FCC will release its detailed Order regarding these new rules in early January
2005 and they will become effective thirty days after publication in the Federal Register.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Universal Service Fund</I>. In 1997, the FCC issued an order implementing
Section&nbsp;254 of the 1996 Act, regarding the preservation of universal telephone
service. Section&nbsp;254 and related regulations require all interstate and certain
international telecommunications carriers to contribute toward the USF, a fund
that provides subsidies for the provision of service to schools and libraries,
rural health care providers, low income consumers and consumers in high cost
areas.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Quarterly, the Universal Service Administrative Company (&#147;USAC&#148;), which
oversees the USF, reviews the need for program funding and determines the
applicable USF contribution percentage that interstate telecommunications
carriers must contribute. While carriers are permitted to pass through the USF
charges to consumers, the FCC has strictly limited amounts passed through to
consumers in excess of a carrier&#146;s determined contribution percentage. In December 2004 the applicable USF contribution percentage was raised to 10.7%. Throughout 2004 the rate was in the 9% range and in early 2003 the rate was 7.3%.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As discussed below, the industry is moving from traditional
circuit-switched telephone service to digitized IP-based communications. It is
possible that this trend could threaten the amount of revenues USAC can collect
through the USF system, and that the resulting revenue shortfall could prevent
the system from meeting its funding demands. Separately from the FCC&#146;s inquiry
into the regulation of IP-based voice service, the FCC could exercise its so
called &#147;permissive authority&#148; under the 1996 Act and assess USF contribution on
Voice over Internet Protocol (&#147;VoIP&#148;) providers. To date, only some VoIP
providers contribute to the USF. If VoIP providers were exempted from USF
contributions, telecommunications carriers would likely pay significantly
higher USF contributions; conversely, if VoIP providers were required to
contribute, traditional telecommunications carriers would contribute less. In
addition to the FCC, Congress is considering this issue. Current Congressional
debates are divided over whether IP-based telephony service providers should be
required to contribute to the USF. A decision to require VoIP providers to
contribute to the USF may adversely affect our provision of VoIP services.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>VoIP Notice of Proposed Rule&nbsp;Making. </I>In March&nbsp;2004, the FCC issued the
VoIP Notice of Proposed Rulemaking to solicit comments on many aspects of the
regulatory treatment of VoIP services (the &#147;VoIP NPRM&#148;). The FCC continues to
consider the possibility of regulating access to IP-based services, but has not
yet decided on the appropriate level of regulatory intervention for IP-based
service applications. Should the FCC rule that our software-based solution for
VoIP deployment, and other similar service applications should be regulated,
our VoIP services may be adversely affected.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Further, the VoIP NPRM will likely address the applicability of access
charges to VoIP services. Access charges provide compensation to local exchange
carriers for traffic that originates or terminates on their networks. Certain
LECs have argued that certain types of VoIP carriers provide the same basic
functionality as traditional telephone service carriers, in that they carry a
customer&#146;s call from an origination point to a termination destination. Any
ruling or decision from the FCC requiring VoIP carriers to pay access charges
to ILECs for local loop use may adversely affect our VoIP services.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The VoIP NPRM is also expected to address the extent to which CALEA will
be applicable to VoIP services. Recently, in a separate proceeding, the Federal
Bureau of Investigation and other federal agencies have asked the FCC to
clarify that VoIP is a telecommunications service, for the purpose of
subjecting VoIP to CALEA&#146;s wiretapping requirements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Broadband Deployment. </I>Broadband refers to any platform capable of
providing high bandwidth-intensive content and advanced telecommunications
capability. The FCC&#146;s stated goal for broadband services is to establish
regulatory policies that promote competition, innovation and investment in
broadband services and facilities. Broadband technologies encompass evolving
high-speed digital technologies that offer integrated access to voice,
high-speed data, video-on-demand or interactive delivery services. The FCC is
seeking to 1) encourage the ubiquitous availability of broadband access to the
Internet, 2) promote competition across different platforms for broadband
services, 3) ensure that broadband services exist in a minimal regulatory
environment that promotes investment and innovation and 4) develop an
analytical framework that is consistent, to the extent possible, across
multiple platforms. The FCC has opened several inquiries to determine how to
promote the availability of advanced telecommunications capability with the
goal of removing barriers to deployment, encouraging competition and promoting
broadband infrastructure investment. For instance, the FCC is considering the
appropriate regulatory requirements for ILEC provision of domestic broadband
telecommunications services. The FCC&#146;s concern is whether the application of
traditional common carrier regulations to ILEC-provided broadband
telecommunications services is appropriate. On October&nbsp;14, 2004, the FCC
adopted an Order


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<P align="left" style="font-size: 10pt">concluding that fiber-to-the-curb (&#147;FTTC&#148;) loops shall be treated in the
same manner as fiber-to-the-home (&#147;FTTH&#148;) loops. Accordingly, ILECs will not
be required to offer FTTC to competitors as UNEs. The FCC defined FTTC as &#147;a
local loop consisting of fiber optic cable connecting to a copper distribution
plant that is not more than 500 feet from the customer&#146;s premises or, in the
case of predominantly residential multiple dwelling units (&#147;MDU&#146;s&#148;), not more
than 500 feet from the MDU&#146;s.&#148; The FCC also clarified that ILECs are not
required to build TDM capabilities into new packetized transmission facilities
or add them to facilities where they never existed. Under other existing
regulations, ILECs are treated as dominant carriers absent a specific finding
to the contrary for a particular market and, as dominant carriers, shall still
be subject to numerous regulations, such as tariff filing and pricing
requirements.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;7, 2002, the FCC released its third biennial report on the
availability of broadband, in which it concluded that broadband is being
deployed in a reasonable and timely manner. The report showed that the advanced
telecommunications services market continues to grow and that the availability
of and subscribership to high-speed services increased significantly since the
last report. Additionally, the report noted that investment in infrastructure
for advanced telecommunications remains strong. The data in the report is
gathered largely from standardized information from providers of advanced
telecommunications capability including wireline telephone companies, cable
providers, wireless providers, satellite providers, and any other
facilities-based providers of 250 or more high-speed service lines (or wireless
channels) in a given state.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Internet Service Regulation</I>. The demand for high-speed Internet access has
increased significantly over the past several years as consumers increase their
Internet use. The FCC is active in reviewing the need for regulatory oversight
of Internet services and to date has advocated less regulation and more
market-based competition for broadband providers. The FCC&#146;s stated policy is to
promote the continued development of the Internet and other interactive
computer-based communications services. We cannot be certain that the FCC will
continue to take a deregulatory approach to the Internet. Should the FCC
increase regulatory oversight of Internet services, our costs could increase
for providing those services.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recent legislation in the United States (including the Sarbanes-Oxley Act
of 2002) is increasing the scope and cost of work provided to us by our
independent accountants and legal advisors. Many guidelines have not yet been
finalized and there is a risk that we will incur significant costs in the
future to comply with legislative requirements or rules, pronouncements and
guidelines by regulatory bodies, including the cost of restating previously
reported financial results, thereby reducing profitability.



<P align="left" style="font-size: 10pt"><B>Employees</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September&nbsp;30, 2004, we had approximately 274 employees with whom we
feel we have a good relationship. We are not subject to any collective
bargaining agreements.


<P align="left" style="font-size: 10pt"><B>Properties</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company rents approximately 31,000 square feet of office space in San
Diego, California under commercial leases which terminate on May&nbsp;31, 2005 and
April&nbsp;30, 2006. The rental fee is approximately $35 per month. The Company uses
this space primarily for its sales and marketing team, certain network
resources and certain administrative staff.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company rents approximately 46,000 square feet of office space in
Pittsburgh, Pennsylvania under a lease expiring on June&nbsp;30, 2005, at a cost of
approximately $54 per month. The Company uses this space primarily for its
network operations center, administrative staff and other employees.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company rents approximately 12,000 square feet of office space in
Somerset, New Jersey under a lease expiring September&nbsp;30, 2008, at a cost of
approximately $11 per month. The Company uses this space to operate its local
service offering as well as for certain of its information technology and other
employees.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company also leases several other co-location facilities throughout
the United States to house its network equipment, as well some additional
office space. Such spaces vary in size and length of term. The total combined
square footage of the spaces under these agreements is no greater than 29,000
square feet at a cost of approximately $95 per month.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company expects to reduce its square footage in New Jersey in the
fourth quarter of 2004.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company owns a number of issued patents and utilizes the technology supported
by those patents in providing its products and services. It has also licensed
certain portions of that technology to third parties on a non-exclusive basis.
In December&nbsp;2003, Acceris purchased US Patent No.&nbsp;6,243,373, including a
corresponding foreign patent and related international patent applications. In
August&nbsp;2002, Acceris&#146; voice Internet transmission system patent was issued (US
Patent No.&nbsp;6,438,124) and in October&nbsp;2004 an equivalent Chinese Patent No.
ZL97192954.8 was issued by the State Intellectual Property Office of the
Peoples Republic of China. This patent, together with US Patent No.&nbsp;6,243,373
and its related patent applications comprise our Voice over Internet Protocol
(&#147;VoIP&#148;) Patents and form an international patent portfolio that covers the
basic process and technology that enables VoIP communications as it is used in
the market today. As part of its patent portfolio, Acceris has two
additional IP patents, US Patent Nos.
5,898,675 and 5,754,534 issued in 1999 and 1998, respectively, which are
related to the delivery of high quality conference calls with compressed
signals. Together, these patented technologies have been successfully deployed
and commercially proven in a nationwide IP network and in Acceris&#146; unified
messaging service, API and software licensing businesses. Acceris plans to
further leverage these patents as it packages an IP solution for the growing
Enterprise segment. While the Company is using the technology supported by the
VoIP Patents in its business, it is also investigating whether and to what
extent the VoIP Patents may be able to be licensed to third parties. The
Company also has several patent applications that are currently pending before
USPTO.


<P align="left" style="font-size: 10pt"><B>Legal Proceedings</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are, from time to time, involved in various claims, legal proceedings
and complaints arising in the ordinary course of business. Details of
insignificant matters have not been disclosed in this document. Set out below
are the significant litigation matters facing us at this time:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Derivative Action</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;16, 2004, certain of our shareholders (the &#147;Plaintiffs&#148;) filed a
putative derivative complaint in the Superior Court of the State of California
in and for the County of San Diego, (the &#147;Complaint&#148;) against us, WorldxChange
Corporation, Counsel Communications LLC, and Counsel Corporation as well as
certain of our present and former officers and directors, some of whom also are
or were directors and/or officers of the other corporate defendants
(collectively, the &#147;Defendants&#148;). The Complaint alleges, inter alia, that the
Defendants, in their respective roles as our controlling shareholder and
directors and officers, committed breaches of the fiduciary duties of care,
loyalty and good faith and were unjustly enriched, and that the individual
Defendants committed waste of corporate assets, abuse of control and gross
mismanagement. The Plaintiffs seek compensatory damages, restitution,
disgorgement of allegedly unlawful profits, benefits and other compensation,
attorneys&#146; fees and expenses in connection with the Complaint. The Company
believes that these claims in their entirety are without merit and intends to
vigorously defend this action. There is no assurance that this matter will be
resolved in the Company&#146;s favor and an unfavorable outcome of this matter could
have a material adverse impact on its business, results of operations,
financial position or liquidity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris and several of Acceris&#146; current and former executives and board
members were named in a securities action filed in the Superior Court of the
State of California in and for the County of San Diego on April&nbsp;16, 2004, in
which the plaintiffs made claims nearly identical to those set forth in the
derivative suit above. We believe that these claims in their entirety are
without merit and intend to vigorously defend this action. There is no
assurance that this matter will be resolved in our favor and an unfavorable
outcome of this matter could have a material adverse impact on our business,
results of operations, financial position or liquidity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Patent Enforcement Action</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with our efforts to enforce our patent rights, Acceris
Communications Technologies Inc., our wholly-owned subsidiary, filed a patent
infringement lawsuit against ITXC Corp. (&#147;ITXC&#148;) in the United States District
Court of the District of New Jersey on April&nbsp;14, 2004. The complaint alleges
that ITXC&#146;s Voice over Internet Protocol (&#147;VoIP&#148;) services and systems infringe
our U.S. Patent No.&nbsp;6,243,373, entitled &#147;Method and Apparatus for Implementing
a Computer Network/Internet Telephone System.&#148; On May&nbsp;7, 2004, ITXC filed a
lawsuit against Acceris Communications Technologies Inc., and us, in the United
States District Court for the District of New Jersey for infringement of five
ITXC patents relating to VoIP technology, directed generally to the
transmission of telephone calls over the Internet and the completion of
telephone calls by switching them off the Internet and onto a public switched
telephone network. We strongly believe that the allegations contained in the
ITXC complaint are, in their


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<P align="left" style="font-size: 10pt">entirety, without merit and we intend to provide a vigorous defense to the ITXC
claims. There is no assurance that this matter will be resolved in the
Company&#146;s favor and an unfavorable outcome of this matter could have a material
adverse impact on its business, results of operations, financial position or
liquidity.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Appraisal Proceedings</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At our Adjourned Meeting of Stockholders held on December&nbsp;30, 2003, our
stockholders approved an amendment to our Articles of Incorporation, deleting
Article&nbsp;VI thereof (regarding liquidations, reorganizations, mergers and the
like). Stockholders who were entitled to vote at the meeting and advised us in
writing prior to the vote on the amendment, that they dissented and intended to
demand payment for their shares if the amendment was effectuated, were entitled
to exercise their appraisal rights and obtain payment in cash for their shares
under Sections&nbsp;607.1301 &#150; 607.1333 of the Florida Business Corporation Act,
provided their shares were not voted in favor of the amendment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2004, appraisal notices in compliance with Florida corporate
statutes were sent to all stockholders who had advised us of their intention to
exercise their appraisal rights. The appraisal notices included our estimate of
fair value of our shares, at $4.00 per share on a post-split basis. These
stockholders had until February&nbsp;29, 2004 to return their completed appraisal
notices along with certificates for the shares for which they were exercising
their appraisal rights. Approximately 33 stockholders holding approximately
74,000 shares of our stock have returned completed appraisal notices by
February&nbsp;29, 2004. A stockholder of 20 shares notified us of his acceptance of
our offer of $4.00 per share, while the stockholders of the remaining shares
did not accept our offer. Subject to the qualification that we may not make any
payment to a stockholder seeking appraisal rights if, at the time of payment,
our total assets are less than our total liabilities, stockholders who accepted
our offer to purchase their shares at the estimated fair value will be paid for
their shares within 90&nbsp;days of our receipt of a duly executed appraisal notice.
If we should be required to make any payments to dissenting stockholders,
Counsel will fund any such amounts through the purchase of shares of our common
stock. Stockholders who did not accept our offer were required to indicate
their own estimate of fair value, and if we do not agree with such estimates,
the parties are required to go to court for an appraisal proceeding on an
individual basis,  in order to  establish  fair value for the shares in question.
Because Acceris did not agree with the estimates submitted by most of the
dissenting shareholders, Acceris has sought a judicial determination of the
fair value of the common stock held by the dissenting stockholders. On June
24, 2004, Acceris filed suit against the dissenting shareholders seeking a
declaratory judgment, appraisal and other relief in the Circuit Court for the
17<SUP>th</SUP> Judicial District in Broward County, Florida. There is no assurance that
this matter will be resolved in the Company&#146;s favor and an unfavorable outcome

of this matter could have a material adverse impact on our business, results of
operations, financial position or liquidity.

<DIV align="left">
<A name="108"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>MANAGEMENT</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris&#146; Articles of Incorporation, as amended, provide that the Board of
Directors shall be divided into three classes, and that the total number of
directors shall not be less than five and not more than nine. Each director
shall serve a term of three years. As of the date hereof, the Board of
Directors consists of eight members: two Class&nbsp;I directors (Messrs.&nbsp;Shimer
 and Tanki), three Class&nbsp;II directors (Messrs.&nbsp;Toh, Heaton, and
Silber) and three Class&nbsp;III directors (Messrs.&nbsp;Lomicka and Meenan, and Ms.
Murumets). The following table sets forth the names, ages and positions with
Acceris of the persons who currently serve as our directors and executive
officers. There are no family relationships between any present executive
officers and directors.


<P align="center" style="font-size: 10pt">55
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="27%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Name</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Age (1)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Title</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">James J. Meenan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">61</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board</TD>
</TR>


<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Allan C. Silber
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Chief Executive Officer</TD>
</TR>


<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kelly D. Murumets
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and President</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Frank J. Tanki
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">64</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hal B. Heaton
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">53</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Henry Y.L. Toh
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Samuel L. Shimer
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">William H. Lomicka
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">67</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Stephen A. Weintraub
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">57</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President and Secretary</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gary M. Clifford
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">35</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President of Finance and Chief Financial Officer</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">James G. Ducay
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Chief Operating Officer</TD>
</TR>


<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kenneth L. Hilton
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">52</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President, Sales and Marketing</TD>
</TR>


<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">David B. Silverman
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">40</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President and General Counsel</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">As of December&nbsp;30, 2004.</TD>
</TR>


</TABLE>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below are descriptions of the backgrounds of the executive
officers and directors of the Company and their principal occupations for the
past five years.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>James J. Meenan</B>, Chairman of the Board since October&nbsp;2004. Mr.&nbsp;Meenan was
appointed by the Board of Directors as a Class&nbsp;III Director on May&nbsp;11, 2004.
Mr.&nbsp;Meenan has over 35&nbsp;years of telecommunications expertise, having joined
AT&#038;T in 1966 and rising in the organization to hold various executive financial
and operational roles. He became President and Chief Executive Officer of AT&#038;T
Canada in 1995, and over the next 6&nbsp;years, he helped shape the Canadian
telecommunications industry through devising strategic alliances, partnerships
and mergers and acquisitions for AT&#038;T Canada. Since retiring from AT&#038;T Canada
in 2001, Mr.&nbsp;Meenan has worked as an advisor to entrepreneurial companies and
currently serves as a director for several boards in both the United States and
Canada, including Custom Direct Income Fund, an income trust in the check
printing business traded on the Toronto Stock Exchange and Nextair, Inc., a
software development company specializing in wireless enabling middleware
traded on the Toronto Stock Exchange. Mr.&nbsp;Meenan earned a Masters in
Management Science from the Stevens Institute of Technology in New Jersey.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Allan C. Silber</B>, Director and Chief Executive Officer. Mr.&nbsp;Silber was
elected to the Board of Directors as a Class&nbsp;II director in September&nbsp;2001 and
appointed as Chairman of the Board in November&nbsp;2001 a position he held until
October, 2004. Mr.&nbsp;Silber is the chairman and CEO of Counsel Corporation,
which he founded in 1979. Mr.&nbsp;Silber attended McMaster University and received
a Bachelor of Science degree from the University of Toronto.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Kelly D. Murumets</B>, Director and President. Ms.&nbsp;Murumets became a Class&nbsp;III
director in February&nbsp;2003. Ms.&nbsp;Murumets joined Counsel Corporation as Executive
Vice President in February&nbsp;2002 and was appointed President of Acceris in
November&nbsp;2003. Prior to joining Counsel and Acceris, Ms.&nbsp;Murumets was a Vice
President with Managerial Design where she was a valued advisor to clients
throughout North America giving leaders the insight and guidance required to
implement change, achieve results and improve profitability. Ms.&nbsp;Murumets
received her BA from Bishop&#146;s University, her MBA from the University of
Western Ontario&#146;s Ivey School of Business and her MSW from Wilfrid Laurier
University, where she was the recipient of the Gold Medal and Governor
General&#146;s Award.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Frank J. Tanki</B>, Director. Mr.&nbsp;Tanki was appointed by the Board of
Directors as a Class&nbsp;I Director on June&nbsp;9, 2004 to fill a new board position
created by the Board of Directors. Mr.&nbsp;Tanki has over 35&nbsp;years of public
accounting experience, having joined Coopers &#038; Lybrand LLP (now
PricewaterhouseCoopers LLP) in 1962, where he became a partner in 1972 and
retired in 1998. During his career, Mr.&nbsp;Tanki has served major, multinational
companies in industries including telecommunications products and services,
technology, consumer goods, engineering and construction, and real estate
development. Mr.&nbsp;Tanki earned a Bachelor of Business Administration degree
from the City College of the City University of New York.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Hal B. Heaton</B>, Director. Dr.&nbsp;Heaton was appointed by the Board of
Directors as a Class&nbsp;II director on June&nbsp;14, 2000 to fill a board vacancy. From
1982 to present he has been a professor of Finance at Brigham Young University
and


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<P align="left" style="font-size: 10pt">between 1988 and 1990 was a visiting professor of Finance at Harvard
University. Dr.&nbsp;Heaton is a director of MITY Enterprises, Inc., a publicly
traded manufacturer of furniture in Orem, Utah. Dr.&nbsp;Heaton holds a Bachelor&#146;s
degree in Computer Science/Mathematics and a Master&#146;s in Business
Administration from Brigham Young University, as well as a Master&#146;s degree in
Economics and a Ph.D. in Finance from Stanford University.




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Henry Y.L. Toh</B>, Director. The Board of Directors elected Mr. Toh as a Class II director and as Vice Chairman of
the Board of Directors in April 1992. Mr. Toh became President of Acceris in May 1993, Acting Chief Financial Officer in
September 1995 and Chairman of the Board in May 1996, and served as such through September 1996. Mr. Toh serves as a
director of: National Auto Credit, Inc. (previously an originator of sub-prime automobile financing that is transitioning
into new lines of business) since December 1998; Teletouch Communications, Inc., a retail provider of Internet, cellular
and paging services, beginning in November 2001; Isolagen, Inc., a biotechnology company, since 2003; Crown Financial
Group, Inc., a publicly traded registered broker-dealer, since March 2004; and Vaso Active Pharmaceuticals Inc., a
development stage company formed for the purpose of marketing and distributing over the counter pharmaceuticals, since
August 2004. He has also served as a director of Four M International Inc., a private investment firm, since 1992. He is
a graduate of Rice University.




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Samuel L. Shimer</B>, Director. Mr.&nbsp;Shimer was appointed by the Board of
Directors as a Class&nbsp;I director on April&nbsp;15, 2001 to fill a board vacancy and
was appointed Senior Vice President, Mergers &#038; Acquisitions and Business
Development on February&nbsp;12, 2003. From 1997 to February&nbsp;2003 he was employed by
Counsel Corporation, serving as a Managing Director since 1998. From 1991 to
1997, Mr.&nbsp;Shimer worked at two merchant banking funds affiliated with Lazard
Fr&#232;res &#038; Co., Center Partners and Corporate Partners, ultimately serving as a
Principal. Mr.&nbsp;Shimer earned a Bachelor of Science in Economics degree from The
Wharton School of the University of Pennsylvania, and a Master&#146;s of Business
Administration degree from Harvard Business School. Mr.&nbsp;Shimer terminated his
employment with the Company on February&nbsp;27, 2004 to join Whitney &#038; Co., an
asset management company. He remains a member of the Board.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>William H. Lomicka</B>, Director. Mr.&nbsp;Lomicka was appointed by the Board of
Directors as a Class&nbsp;III director on March&nbsp;23, 2004 to fill a board vacancy
left by the resignation of Mr.&nbsp;Albert Reichmann. Mr.&nbsp;Lomicka has been a
director of Counsel since June&nbsp;26, 2002. Mr.&nbsp;Lomicka is Chairman of Coulter
Ridge Capital, Inc. a private investment firm, a position he has held since
1999. Between 1989 and 1999 he was President of Mayfair Capital, Inc., a
private investment firm. Mr.&nbsp;Lomicka is a director of Pomeroy IT Solutions and
is also on the board of advisors of Valley Ventures, an Arizona venture capital
fund. Mr.&nbsp;Lomicka is a graduate of the College of Wooster in Wooster, Ohio, and
has a Master&#146;s of Business Administration degree from the Wharton School of the
University of Pennsylvania. Mr.&nbsp;Lomicka is also a director of Counsel
Corporation, the parent company of Acceris.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Stephen A. Weintraub</B>, Senior Vice President and Secretary. Mr.&nbsp;Weintraub
was elected as a Class&nbsp;I director on November&nbsp;26, 2003, pursuant to a vote of
the Company&#146;s stockholder and served as a director until June&nbsp;15, 2004. Mr.
Weintraub joined Counsel in June&nbsp;1983 as Vice President, Finance and Chief
Financial Officer. He has been and is an officer and director of various
Counsel subsidiaries. He has been Secretary of Counsel since 1987 and Senior
Vice President since 1989. From 1980 to 1983 he was Secretary-Treasurer of
Pinetree Development Co. Limited, a private real estate developer and investor.
From 1975 to 1980 he was Treasurer and CFO of Unicorp Financial Corporation, a
public financial management and holding company. Mr.&nbsp;Weintraub received a
Bachelor&#146;s degree in Commerce from the University of Toronto in 1969, qualified
as a Chartered Accountant with Clarkson, Gordon (now Ernst &#038; Young LLP) in 1972
and received his law degree (LL.B.) from Osgoode Hall Law School, York
University in 1975. Mr.&nbsp;Weintraub is a director of Counsel Corporation, the
parent company of Acceris.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Gary M. Clifford</B>, Vice President of Finance and Chief Financial Officer. Mr. Clifford
joined Counsel Corporation in November 2002 as, and presently is, its Chief Financial
Officer. From June 1998 to October 2002, Mr. Clifford has held various senior roles at
Leitch Technology Corporation in Finance, Operations and Corporate Development. From
February 1996 to June 1998, Mr. Clifford worked for NetStar Communications Inc. Mr.
Clifford is a Chartered Accountant, who articled with Coopers &amp; Lybrand (now
PricewaterhouseCoopers). Mr. Clifford serves as a board member of QuStream Corporation, a
Canadian private company in the high technology sector. A graduate of the University of
Toronto, with a Bachelor&#146;s degree in Management, he has also lectured at Ryerson
Polytechnic University in Toronto, Canada. Mr. Clifford was appointed as Vice President of
Finance of Acceris on December 6, 2002 and Chief Financial Officer on February 12, 2003.




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>James G. Ducay</B>, Executive Vice President and Chief Operating Officer. Mr.
Ducay was named Executive Vice President and Chief Operating Officer of Acceris
in October&nbsp;2003. From December&nbsp;2002 until October&nbsp;2003, Mr.&nbsp;Ducay served as
President of the Company&#146;s Enterprise business. Previously, from April&nbsp;2000 to
December&nbsp;2002, Mr.


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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">Ducay was Executive Vice President and Chief Operating
 Officer of RSL.COM
USA (&#147;RSL.COM&#148;) with responsibility for Marketing, Sales and Account Services,
Engineering and Operations and Information Technology. RSL.COM filed for
bankruptcy protection under Chapter&nbsp;11 in March&nbsp;2001.
Before joining RSL.COM,
Mr.&nbsp;Ducay was Vice President of Marketing and Sales for Ameritech Interactive
Media Services from February&nbsp;1998 to April&nbsp;2000 where he was responsible for
managing Ameritech&#146;s Internet products and related sales channels. He also
served as Managing Director and Vice President for Bell Atlantic/NYNEX. Mr.
Ducay has a Master&#146;s Degree in Engineering from the University of Illinois and
a Master&#146;s Degree in Business Administration from the University of Chicago.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Kenneth L. Hilton</B>, Executive Vice President, Sales and Marketing. Mr.
Hilton was named Executive Vice President, Sales and Marketing of Acceris in
October&nbsp;2003. Previously, he was appointed Chief Executive Officer of
WorldxChange Corporation in May&nbsp;2002. From June&nbsp;1999 to December&nbsp;2001, Mr.
Hilton served as the Chief Executive Officer of Handtech.com, an Internet-based
start-up company in Austin, TX that provided customized E-commerce storefronts,
supply chain management and back office services to value-added resellers.
Prior to Handtech.com, from October&nbsp;1995 to May&nbsp;1999, he was the Executive Vice
President of North American Consumer Sales for Excel Communications, where he
also served as the Chairman of the Board for Excel Canada. Prior to his 5&nbsp;years
at Excel, he ran North America operations for PageMart Wireless where he
launched the Canadian business and also served as the Chairman of the Canadian
Board. Prior to PageMart, Mr.&nbsp;Hilton held numerous sales and management
positions with IBM. His 14-year career with IBM included sales, sales
management, branch management and regional management positions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>David B. Silverman</B>, Senior Vice President and General Counsel. Mr.
Silverman was named Senior Vice President and General Counsel of Acceris in
April&nbsp;2004. From April&nbsp;2000 to April&nbsp;2004, Mr.&nbsp;Silverman served as Corporate
Counsel, Director of Legal Affairs of XO Communications, Inc., a
telecommunications company in Reston, VA providing communications services for
small and growing businesses, larger enterprises and carriers. Prior to XO
Communications, Inc., from September&nbsp;1997 to April&nbsp;2000, he was an associate
attorney at the law firm of Wiley Rein and Fielding, located in Washington, DC.
Mr.&nbsp;Silverman received his B.S. in Journalism from the University of Kansas
and his J.D. from Northwestern University School of Law.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each officer of Acceris is appointed by the Board of Directors and holds
his/her office at the pleasure and direction of the Board of Directors or until
such time of his/her resignation or death.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris and several of Acceris&#146; current and former executives and board
members were named in a securities action filed in the Superior Court of the
State of California in and for the County of San Diego on April&nbsp;16, 2004, in
which the plaintiffs made claims nearly identical to those set forth in the
derivative suit above. The Company believes that these claims in their
entirety are without merit and intends to vigorously defend this action. There
is no assurance that this matter will be resolved in the Company&#146;s favor and an
unfavorable outcome of this matter could have a material adverse impact on its
business, results of operations, financial position or liquidity. See
&#147;Business&#151;Legal Proceedings.&#148;


<P align="left" style="font-size: 10pt"><B>The Board of Directors</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors oversees the business affairs of the Company and
monitors the performance of management. The Board of Directors held 5 meetings
during the fiscal year ended December&nbsp;31, 2003. No incumbent director attended
less than 75% of the Board meetings during 2003. The Board of Directors has
designated two standing committees: the Audit Committee and the Compensation
Committee. We do not have a nominating or a corporate governance committee or
any committees serving similar functions. However, corporate governance
functions are included in the Audit Committee Charter.


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<P align="left" style="font-size: 10pt"><B>Committees of the Board of Directors</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit Committee</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee is responsible for making recommendations to the Board
of Directors concerning the selection and engagement of independent accountants
and for reviewing the scope of the annual audit, audit fees, results of the
audit and auditor independence. The Audit Committee also reviews and discusses
with management and the Board of Directors such matters as accounting policies,
internal accounting controls and procedures for preparation of financial
statements. Its membership is currently comprised of Mr.&nbsp;Tanki (chairman)&nbsp;and
Messrs.&nbsp;Heaton and Toh. The Audit Committee held six meetings during the last
fiscal year. On June&nbsp;9, 2000, the Board of Directors approved Acceris&#146; Audit
Committee Charter, which was subsequently revised and amended on July&nbsp;10, 2001
and again on February&nbsp;12, 2003 in order to incorporate certain updates in light
of the most recent regulatory developments, including the Sarbanes-Oxley Act of
2002. A copy of the current Audit Committee Charter was attached to the
Company&#146;s Definitive Proxy Statement sent to stockholders in October&nbsp;2003 in
connection with the 2003 Annual Meeting of Stockholders.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Compensation Committee</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee reviews and approves the compensation for
executive employees. Its membership is currently comprised of Messrs.&nbsp;Heaton,
Toh and Meenan. The Compensation Committee held one meeting during the last
fiscal year.


<P align="left" style="font-size: 10pt"><B>Audit Committee Financial Expert</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has determined that Mr.&nbsp;Henry Y.L. Toh and Mr.
Frank J. Tanki, members of the Audit Committee, are each an audit committee
financial expert as defined by Item 401(h) of Regulation&nbsp;S-K under the Exchange
Act and is independent within the meaning of Item&nbsp;7(d)(3)(iv) of Schedule&nbsp;14A
under the Exchange Act.


<P align="left" style="font-size: 10pt"><B>Code of Ethics</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris has adopted a code of ethics that applies to its principal
executive, financial and accounting officers. The Acceris Communications Inc.
Code of Conduct (the &#147;Code&#148;) was filed as an exhibit to our Form 10-K for the
fiscal year ended December&nbsp;31, 2003. A copy of the Code can also be found on
the Company&#146;s website at <U>http://www.acceris.com</U> (follow Corporate
Governance link to Governance Documents tab). The Company intends to satisfy
the disclosure requirements under Item&nbsp;10 of Form 8-K regarding any amendments
to, or waivers from, a provision of the Code that applies to its principal
executive, financial and accounting officers by posting such information on its
website at the website address set forth above.

<DIV align="left">
<A name="109"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL<BR>
HOLDERS AND MANAGEMENT</B>





<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information regarding the ownership of our
common stock as of January 3, 2005 by: (i)&nbsp;each director or nominee for
director; (ii)&nbsp;each of the Named Officers in the Summary Compensation Table;
(iii)&nbsp;all executive officers and directors of the Company as a group; and (iv)
all those known by us to be beneficial owners of more than five percent of our
common stock. As of the date hereof, there are 19,237,141 shares of common
stock and 619 shares of Series&nbsp;N Preferred stock issued and outstanding.




<P align="center" style="font-size: 10pt">59
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="65%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percentage</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Name and Address of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of Common Stock</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Beneficial Owner (1)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Beneficially Owned</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Beneficially Owned(2)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">James J. Meenan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allan C. Silber</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Kelly D. Murumets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Frank J. Tanki</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Hal B. Heaton</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7,948</TD>
    <TD nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Henry Y.L. Toh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">18,575</TD>
    <TD nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">William H. Lomicka</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stephen A. Weintraub</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>(8)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Samuel L. Shimer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>(9)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gary M. Clifford</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>(10)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>


<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">James G. Ducay</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>


<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Kenneth L. Hilton</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>


<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Barbara Jamaleddin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>


<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">David B. Silverman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>


<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gary J. Wasserson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>(12)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Bobby Vannoy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>(13)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Counsel Corporation and subsidiaries
40 King Street West
Scotia Plaza, Suite&nbsp;3200
Toronto, Ontario M5H3Y2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">20,773,444</TD>
    <TD nowrap>(14)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">92</TD>
    <TD nowrap>%</TD>
</TR>


<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">All Executive Officers and Directors as
a Group (15 people)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>





<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">*</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Indicates less than one percent</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Unless otherwise noted, all listed shares of common stock are owned of record by each person or entity named as beneficial
owner and that person or entity has sole voting and dispositive power with respect to the shares of common stock owned by
each of them. All addresses are c/o Acceris Communications Inc. unless otherwise indicated.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">As to each person or entity named as beneficial owners, that person&#146;s or entity&#146;s percentage of ownership is determined
based on the assumption that any options or convertible securities held by such person or entity which are exercisable or
convertible within 60&nbsp;days have been exercised or converted, as the case may be.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>


<TR valign="top">
    <TD width="1%" nowrap align="right">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Silber is Chairman, Chief Executive Officer and President of Counsel, and a
          beneficial owner of approximately 4,710,376 shares or 9.9% of the outstanding
          stock of Counsel. In March 2001, following the acquisition of control of Acceris
          by Counsel, Mr. Silber became Chairman and Director of Acceris. Mr. Silber was
          appointed Chief Executive Officer and Interim President of Acceris in December
          2002 and served as such until November 2003 when the Board appointed Ms.
          Murumets to succeed Mr. Silber. Mr. Silber was succeeded as Chairman of the
          Board by Mr. James Meenan in October 2004. Mr. Silber remains a director and
          Chief Executive Officer of Acceris. Mr. Silber disclaims beneficial ownership of
          the shares of Acceris&#146; common stock beneficially owned by Counsel.</TD>
</TR>


<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(4)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Ms.&nbsp;Murumets is Executive Vice President of Counsel and a beneficial owner of approximately 280,000 shares in Counsel,
which represents less than 1% beneficial ownership of Counsel. At the December&nbsp;6, 2002 meeting of the Board of Directors
of Acceris, Ms.&nbsp;Murumets was appointed to the office of Executive Vice President of Acceris. At the February&nbsp;12, 2003
meeting of the Board of Directors of Acceris, Ms.&nbsp;Murumets was appointed a director of Acceris. At the November&nbsp;26, 2003
meeting of the Board of Directors of Acceris, Ms.&nbsp;Murumets was appointed President of Acceris. Ms.&nbsp;Murumets disclaims
beneficial ownership of the shares of Acceris&#146; common stock beneficially owned by Counsel.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(5)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Represents shares of common stock issuable within 60&nbsp;days of the date hereof pursuant to options.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">60
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(6)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Represents shares of common stock issuable pursuant to options. Does not include shares held of record by Four M
International, Ltd., of which Mr.&nbsp;Toh is a director. Mr.&nbsp;Toh disclaims any beneficial ownership of such shares.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(7)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Lomicka is a director of Counsel and a beneficial owner of approximately 70,000 shares in Counsel, which represents
less than 1% beneficial ownership of Counsel. Mr.&nbsp;Lomicka disclaims beneficial ownership of the shares of Acceris&#146; common
stock beneficially owned by Counsel.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(8)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Weintraub is Senior Vice President and Secretary of Counsel and a beneficial owner of approximately 306,102 shares in
Counsel, which represents less than 1% beneficial ownership of Counsel. At the December&nbsp;6, 2002 meeting of the Board of
Directors of Acceris, Mr.&nbsp;Weintraub was appointed to the office of Senior Vice President and Secretary of Acceris. Mr.
Weintraub disclaims beneficial ownership of the shares of Acceris&#146; common stock beneficially owned by Counsel.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(9)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Shimer is not an employee of Acceris; however he is a member of the Board of Directors. He was previously a managing
director of Counsel. He is a beneficial owner of approximately 819,011 shares in Counsel, which represents 1.7% beneficial
ownership of Counsel.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(10)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Clifford is the Chief Financial Officer of Counsel and a beneficial owner of approximately 50,000 shares in Counsel,
which represents less than 1% beneficial ownership of Counsel. At the December&nbsp;6, 2002 meeting of the Board of Directors
of Acceris, Mr.&nbsp;Clifford was appointed Vice President of Finance of Acceris. At the February&nbsp;16, 2003 meeting of the Board
of Directors of Acceris, Mr.&nbsp;Clifford was appointed Chief Financial Officer of Acceris. Mr.&nbsp;Clifford disclaims beneficial
ownership of the shares of Acceris&#146; common stock beneficially owned by Counsel.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>


<TR valign="top">
    <TD width="1%" nowrap align="right">(11)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Ms.&nbsp;Jamaleddin is not an employee of Acceris as of the date hereof and does not beneficially own any shares of Acceris&#146;
common stock.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(12)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Wasserson is not an employee or director of Acceris. He was previously a managing director of Counsel and currently is
a beneficial owner of approximately 330,000 shares in Counsel, which represents less than 1% beneficial ownership of
Counsel.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(13)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Vannoy is not an employee of Acceris at as of the date hereof, and does not beneficially own any shares of Acceris&#146;
common stock.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(14)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 3,098,303 shares of Acceris&#146; common stock issued upon conversion of Series&nbsp;M and N redeemable preferred stock in
March&nbsp;2001 which were obtained from Winter Harbor LLC (&#147;Winter Harbor&#148;) on March&nbsp;7, 2001, based on information included in
a Schedule&nbsp;13D filed by Counsel on March&nbsp;13, 2001 and amended by Counsel and filed with the Securities and Exchange
Commission on May&nbsp;2, 2001. Also includes 3,256,175 shares of common stock issuable upon conversion of a convertible
promissory note in the principal amount (and including accrued interest) of approximately $16,346 as of September&nbsp;30, 2004,
at the conversion price of $5.02 per share, under the terms of the Senior Convertible Loan and Security Agreement, dated
March&nbsp;1, 2001, as amended on May&nbsp;8, 2001 (Loan Agreement). Also includes 871,724 shares issued on April&nbsp;17, 2001 to Counsel
under the terms of the Agreement and Plan of Merger, dated April&nbsp;17, 2001. Also includes 8,681,096 shares of common stock
issued in connection with the Amended Debt Restructuring conversion of a certain convertible promissory note on November
30, 2003. Also includes approximately 4,747,396 shares of common stock issued in connection with the conversion of a
certain convertible promissory note on November&nbsp;30, 2003. Also includes 118,750 shares received from Winter Harbor which
were previously held in escrow in accordance with the terms and provisions of a certain Securities Purchase Agreement by
and between Counsel and Winter Harbor dated March&nbsp;1, 2001, and released to Counsel in accordance with the terms and
provisions of certain release agreement between Counsel and Winter Harbor dated August&nbsp;29, 2003.</TD>
</TR>


</TABLE>


<P align="center" style="font-size: 10pt">61
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left">
<A name="110"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SELLING HOLDER</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have set forth in the following table information relative to the
Selling Holder as of November 15, 2004. We calculated beneficial ownership
based on Securities and Exchange Commission requirements, and the information
we included regarding beneficial ownership is not necessarily indicative of
beneficial ownership for any other purpose. Unless otherwise indicated below,
each person identified in the table has sole voting and investment power with
respect to all shares it beneficially owns.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not know when or in what amounts the Selling Holder may offer for
sale the shares described in this prospectus. The Selling Holder may decide not
to sell all or any of the shares that this prospectus covers. Because the
Selling Holder may offer all or some of the shares pursuant to this offering,
and because there are currently no agreements, arrangements or understandings
with respect to the sale of any of the shares that the Selling Holder will hold
after completion of the offering, we cannot estimate the number of the shares
that the Selling Holder will hold after completion of the offering. However,
for purposes of this table, we have assumed that, after completion of the
offering, the Selling Holder will hold none of the securities that this
prospectus covers.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Beneficially</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Note Shares and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Shares Beneficially</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Owned Prior to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Warrant Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Owned After the</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>the Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Being Offered (1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Offering (2)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Address</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B></B></TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD><B>of Selling Holder</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Laurus Master Fund, Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,681,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">c/o M&#038;C Corporate Services
Limited
P.O. Box 309 GT
Ugland House
George Town
South Church Street
Grand Cayman, Cayman Islands</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>





<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Assumes the conversion in full of the outstanding Note to the extent of a
maximum of 4.99% of the Company&#146;s outstanding shares and issuance of an
aggregate of 5,681,818 Note Shares and exercise of the entirety of the
outstanding Warrants held by the Selling Holder and issuance of 1,000,000
Warrant Shares to the Selling Holder. Does not reflect shares that may be
issued from time to time to the Selling Holder upon conversion of monthly
payments of $147 together with accrued and unpaid interest and any
other amounts then owing under the Note, the Securities Purchase Agreement
and related agreements. See &#147;Recent Developments.&#148;</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Assumes the sale of the entirety of the Note Shares and the Warrant Shares.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="111"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>PLAN OF DISTRIBUTION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Selling Holder has advised us that it may, from time to time, offer
and sell the shares issuable pursuant to the Notes and Warrants included in
this prospectus. As used herein, the term &#147;Selling Holder&#148; includes pledgees,
donees, transferees or other successors in interest selling shares that they
acquired after the date of this prospectus from the Selling Holder as a pledge,
gift or other non-sale related transfer. To the extent required, we may amend
and supplement this prospectus from time to time to describe a specific plan of
distribution.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Selling Holder has advised us that it will act independently in making
decisions with respect to the timing, manner, and size of each sale. The
Selling Holder has advised us that it may make these sales at prices and under
terms then prevailing or at prices related to the then current market price.
The Selling Holder has advised us that it may also make sales in negotiated
transactions, including pursuant to one or more of the following methods:


<P align="center" style="font-size: 10pt">62
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ordinary brokerage transactions and transactions in which the broker
solicits purchasers;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an over-the-counter distribution in accordance with the rules of the OTC-BB; and</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in privately negotiated transactions.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with distributions of the shares or otherwise, the Selling Holder has advised us that it may:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of
the shares in the course of hedging the positions they assume;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>sell the shares short and redeliver the shares to close out such short
positions;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>enter into option or other transactions with broker-dealers or
other financial institutions which require the delivery to them of
 shares that this prospectus offers, which they may in turn resell;
and</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pledge shares to a broker-dealer or other financial
institution, which, upon a default, they may in turn resell.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Selling Holder may sell any shares that qualify for sale
pursuant to Rule&nbsp;144, rather than pursuant to this prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In effecting sales, broker-dealers or agents that the Selling Holder
engages may arrange for other broker-dealers to participate. Broker-dealers or
agents may receive commissions, discounts or concessions from the Selling
Holder, in amounts that the parties may negotiate immediately prior to the
sale.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In offering shares that this prospectus covers, the Selling Holder, and
any broker-dealers and any other participating broker-dealers who execute sales
for the Selling Holder, may qualify as &#147;underwriters&#148; within the meaning of the
Securities Act in connection with these sales. Any profits that the Selling
Holder realizes, and the compensation that it pays to any broker-dealer, may
qualify as underwriting discounts and commissions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to comply with the securities laws of some states, the Selling
Holder must sell the shares in those states only through registered or licensed
brokers or dealers. In addition, in some states the Selling Holder must sell
the shares only if we have registered or qualified those shares for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and the Selling Holder complies with the exemption.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have advised the Selling Holder that the anti-manipulation rules of
Regulation&nbsp;M under the Exchange Act may apply to sales of shares in the market
and to the activities of the Selling Holder and its affiliates. In addition, we
will make copies of this prospectus available to the Selling Holder for the
purpose of satisfying the prospectus delivery requirements of the Securities
Act. The Selling Holder may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against liabilities, including
liabilities arising under the Securities Act.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the time the Selling Holder makes a particular offer of shares we will,
if required, distribute a prospectus supplement that will set forth:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of shares that the Selling Holder is offering;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the terms of the offering, including the name of any underwriter, dealer or agent;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the purchase price paid by any underwriter;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any discount, commission and other underwriter compensation;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">63
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any discount, commission or concession allowed or reallowed or paid to any dealer; and</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the proposed selling price to the public.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed to indemnify the Selling Holder against claims and losses
due to material misstatements or omissions made by the Company (and not by the
Selling Holder) in this prospectus. The Selling Holder has agreed to indemnify
us against claims and losses due to material misstatements or omissions made by
it.

<DIV align="left">
<A name="112"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the aggregate cash compensation paid for
services rendered during the last three years by each person serving as our
Chief Executive Officer during the last year and our other most highly
compensated executive officers during the year ended December&nbsp;31, 2003 whose
compensation was in excess of $100 (&#147;Named Officers&#148;).

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>Annual Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Long-Term Compensation</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(in absolute dollars)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Awards</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Payouts</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Restricted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Annual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>LTIP</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>All Other</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Name and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Awards</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Payouts</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Compensation</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Principal Position(8)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Salary($)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Bonus($)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>($)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>($)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options (#)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>($)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>($)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allan Silber(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Chief Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Kenneth L. Hilton (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">275,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">55,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Executive Vice President,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Sales and Marketing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
  <TD><DIV style="margin-left:10px; text-indent:-10px">Barbara Jamaleddin (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">211,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">67,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
<TD><DIV style="margin-left:10px; text-indent:-10px">Senior Vice President of</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Network Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">James G. Ducay (4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">275,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Executive Vice President,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Chief Operating Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Bobby Vannoy (5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">211,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">57,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Senior Vice President of</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

    <TD><DIV style="margin-left:10px; text-indent:-10px">Business Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gary Wasserson (6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">420,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">President (Acceris</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

    <TD><DIV style="margin-left:10px; text-indent:-10px">Communications Technologies, Inc.)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Samuel N. Shimer (7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">276,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Senior Vice President,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mergers and Acquisitions and Business
Development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>





<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Silber was appointed interim Chief Executive Officer and President of Acceris as of December&nbsp;19, 2002. In November&nbsp;2003, Kelly D. Murumets was appointed President. Mr.&nbsp;Silber is entitled to an annual salary of
$275,000 and a discretionary bonus equal to 100% of his base salary. For 2003, no bonus was awarded. Mr.&nbsp;Silber elected to assign his salary payable at December&nbsp;31, 2003 of $275,000 to Counsel. This amount is
recorded as a liability to Counsel in the financial statements of Acceris at December&nbsp;31, 2003.</TD>
</TR>


<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Hilton became the Executive Vice President, Sales and Marketing, of Acceris on January&nbsp;1, 2003.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Ms.&nbsp;Jamaleddin became a Senior Vice
President of WorldxChange on June&nbsp;4, 2001. Ms.&nbsp;Jamaleddin&#146;s employment with the Company ceased as of June&nbsp;3, 2004.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>


<TR valign="top">
    <TD width="1%" nowrap align="right">(4)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Ducay became the President of the Enterprise segment of Acceris on December&nbsp;10, 2002. In 2003, Mr. Ducay became the Chief Operating Officer for Acceris.</TD>
</TR>


<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(5)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Vannoy became a Senior Vice President of WorldxChange on June&nbsp;4, 2001. Mr.&nbsp;Vannoy resigned from the Company in March&nbsp;2004.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">64
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(6)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Wasserson became the President of Acceris Communications Technologies, Inc, a wholly owned subsidiary of the Company, in December&nbsp;2002 and served as such until December&nbsp;31, 2003. Mr.&nbsp;Wasserson&#146;s employment with
the Company ceased as of December&nbsp;31, 2003. </TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(7)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Mr.&nbsp;Shimer became the Senior Vice President, Mergers and Acquisitions and Business Development beginning January&nbsp;1, 2003. Prior to 2003, Mr.&nbsp;Shimer was an employee of Counsel and was not paid a salary by Acceris.
In February&nbsp;2004, Mr.&nbsp;Shimer resigned from employment with the Company, but remains a member of the Board of Directors.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>


<TR valign="top">
    <TD width="1%" nowrap align="right">(8)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">     Ms.&nbsp;Kelly Murumets (Director and President), Mr. Gary Clifford (Vice President of
          Finance and Chief Financial Officer), and Mr. Stephen Weintraub (Senior Vice
          President and Corporate Secretary) did not receive any compensation from Acceris
          in 2003 and prior periods related to services provided to the Company. On
          December 31, 2004, Acceris Communications Inc. (the &#147;Company&#148;) entered
          into a certain management services agreement (the &#147;Agreement&#148;) with
          Counsel Corporation, the Company&#146;s majority shareholder, and its
          wholly-owned subsidiaries (collectively, &#147;Counsel&#148;). Under the terms
          of the Agreement, the Company agreed to make payment to Counsel for the past and
          future services to be provided by Counsel personnel (excluding Allan C. Silber,
          Counsel&#146;s Chairman, President and Chief Executive Officer and the
          Company&#146;s Chief Executive Officer) to the Company for each of 2004 and
          2005. The basis for such services charged will be an allocation, on a cost
          basis, based on time incurred, of the base compensation paid by Counsel to those
          employees providing services to the Company. For the nine months ended September
          30, 2004, the cost of such services was approximately $190,000 and is expected
          to total approximately $280,000 for the year ended December 31, 2004. Services
          for 2005 will be determined on the same basis. For each fiscal quarter, Counsel
          will provide the details of the charge for services by individual, including
          respective compensation and their time allocated to the Company. The foregoing
          fees for 2004 and 2005 are due and payable within 30 days following the
          respective year ends, subject to applicable restrictions. Any unpaid fee amounts
          will bear interest at 10% per annum commencing on the day after such year end.<BR><BR>

In the event of a change of control,
merger or similar event of the Company, all amounts owing, including fees incurred up to
the date of the event, will become due and payable immediately upon the occurrence of such
event. The Agreement does not guarantee the personal services of any specific individual
at the Company throughout the term of the agreement and the Company will have to enter
into a separate personal services arrangement with such individual should their specific
services be required. The Company&#146;s Board of Directors approved the Agreement on
December 23, 2004.
</TD>
</TR>


</TABLE>



<P align="left" style="font-size: 10pt"><B>Option Grants in Last Fiscal Year (2003)</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows information about stock option grants to the
Named Officers during fiscal 2003. These options are included in the Summary
Compensation Table above. These gains are calculated assuming annual compound
stock price appreciation of 5% and 10% from the date the option was originally
granted to the end of the option term. The 5% and 10% assumed annual compound
rates of stock price appreciation are required by Securities and Exchange
Commission rules, and are not the Company&#146;s estimate or projection of future
stock prices.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information concerning grants of stock
options to each of the Named Officers during 2003:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>Individual Grants</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Potential Realizable Value at<BR>Assumed</B><BR><B>Annual Rates Of Stock Price</B><BR><B>Appreciation for Option Term</B><BR><B>(in absolute dollars)</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of Options</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Granted to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Employees in</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Base Price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Name</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Granted (#)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fiscal Year</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>($/share)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Expiration Date</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>5% ($)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>10% ($)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Kenneth L. Hilton</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">11.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">December 20, 2013</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">283,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">717,184</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Barbara Jamaleddin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">December 20, 2013</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">56,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">143,437</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">James G. Ducay</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">December 20, 2013</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">283,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">717,184</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Bobby Vannoy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">December 20, 2013</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">56,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">143,437</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allan C. Silber</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gary Wasserson</DIV></TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Samuel N. Shimer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows information about the value realized on option
exercises for each of the Named Officers during fiscal 2003, and the value of
their unexercised options at the end of fiscal 2003. Value realized, or gain,
is measured as the difference between the exercise price and market value or
the price at which the shares were sold on the date of exercise.


<P align="center" style="font-size: 10pt">65
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Number of Securities Underlying Unexercised</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Value of Unexercised In-the-Money</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Options at Fiscal Year-End (#)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Options at Fiscal Year-End ($)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Acquired on</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Value Realized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Name</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise (#)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>($)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Exercisable/Unexercisable</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Exercisable/Unexercisable (1)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allan C. Silber</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Kenneth L. Hilton</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Barbara Jamaleddin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">James G. Ducay</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Bobby Vannoy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gary Wasserson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Samuel N. Shimer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">/</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">None of the unexercised options above are in the money, based on the
closing price of the Company&#146;s common stock on December&nbsp;31, 2003, which was
$2.18 per share.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt"><B>Director Compensation (all amounts in absolute dollars)</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each year subsequent to 2002 until June&nbsp;2004, all directors then serving
who were not employed by Acceris or Counsel other than in their capacity as
directors received an option to purchase 1,000 shares of common stock and for
each committee on which the director serves, an option to purchase 250 shares
of common stock. The directors were also eligible to receive options under our
stock option plans at the discretion of the Board of Directors. No
discretionary stock options were awarded to directors during 2003. In addition,
each independent director was compensated $1,000 for each in-person board
meeting attended and $500 for each telephonic board meeting attended. During
2003, Messrs.&nbsp;Heaton and Walter received $18,000 and $7,000, respectively, in
connection with the services that they rendered and $1,181 and $10,330,
respectively, for reimbursement of expenses paid to attend various meetings.
Commencing in June&nbsp;2004 Board members who are not employed by Counsel or
Acceris receive a $20,000 per year cash retainer, $1,000 per meeting attended
in person or by telephone and a grant of stock options to purchase 10,000
shares of common stock each year. In addition, the chairman of the Audit
Committee receives a cash retainer of $10,000 per year, audit committee members
who are not the chair receive a cash retainer of $5,000 per year and other
committee chairpersons receive an annual cash retainer of $2,000 per annum.

<P align="left" style="font-size: 10pt"><B>Employment Contracts and Termination of Employment and Change-in-Control
Arrangements (all amounts in absolute dollars)</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Kenneth L. Hilton Employment Contract. </I>Acceris and Kenneth L. Hilton
entered into an employment agreement pursuant to which Mr.&nbsp;Hilton became the
Executive Vice President, Sales and Marketing, of Acceris, effective January&nbsp;1,
2003. Mr.&nbsp;Hilton&#146;s annual salary is $275,000, and he is eligible for a
discretionary bonus of up to 100% of his annual salary in an amount to be
determined pursuant to a performance management system, based on performance
criteria established at the beginning of each fiscal year. Additionally, in
June&nbsp;2002, the Company made a relocation loan of $100,000 to Mr.&nbsp;Hilton. The
loan is due on the earlier of August&nbsp;1, 2005 or upon sale of Mr.&nbsp;Hilton&#146;s
former residence. Commencing October&nbsp;1, 2004, monthly payments of the accrued
interest, as calculated beginning September&nbsp;1, 2004, are required.
Additionally, no amount in respect of Mr.&nbsp;Hilton&#146;s bonus, or any termination or
severance payment, shall be paid to him while any of the loan remains
outstanding.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>James G. Ducay Employment Contract. </I>Acceris and James G. Ducay each
entered into an employment agreement, which became effective on January&nbsp;1,
2004. Mr.&nbsp;Ducay&#146;s annual salary is $275,000, and he is eligible for a
discretionary bonus in an amount to be determined by the Board of Directors up
to 100% of his annual salary in an amount to be determined pursuant to a
performance management system, based on performance criteria established at the
beginning of each fiscal year.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>David B. Silverman Employment Contract. </I>Acceris and David B. Silverman
entered into an employment agreement, effective April&nbsp;4, 2004, pursuant to
which Mr.&nbsp;Silverman became the Senior Vice President and General


<P align="center" style="font-size: 10pt">66
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">Counsel of Acceris. Mr.&nbsp;Silverman&#146;s annual salary is $190,000, and he is
eligible for a discretionary bonus of up to 60% of his annual salary in an
amount to be determined pursuant to a performance management system, based on
performance criteria established at the beginning of each fiscal year.




<P align="left" style="font-size: 10pt"><B>Stock Option Plans</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2003, the Company has several stock-based employee
compensation plans. All share amounts disclosed below reflect the effect of the
1-for-20 reverse stock split which was approved by the stockholders on November
26, 2003.


<P align="left" style="font-size: 10pt"><B>Securities Authorized for Issuance Under Equity Compensation Plans</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, as of December&nbsp;31, 2003 information with
respect to equity compensation plans (including individual compensation
arrangements) under which the Company&#146;s securities are authorized for issuance.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of securities</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>remaining available for</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of Securities to be</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercise price of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>future issuance under</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>issued upon exercise of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>equity compensation plans</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>outstanding options,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>options, warrants</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(excluding securities</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Plan Category</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>warrants and rights</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and rights</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>reflected in column (a))</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(a)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(b)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(c)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Equity compensation plans approved by security holders:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2003 Stock Option and Appreciation Rights Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,372,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">628,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">1997 Recruitment Stock Option Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">288,942</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">1995 Directors Stock Option and Appreciation Rights Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">1995 Employee Stock Option and Appreciation Rights Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,037</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Director Stock Option Plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Equity compensation plans not approved by security holders:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Issuance of non-qualified options to employees and outside
consultants (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">366,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,807,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">931,979</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">For a description of the material terms of these options, see Note 18 in the Company&#146;s audited financial statements included elsewhere in this
prospectus.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Does not include the Acceris Communications Inc. Platinum Agent Program (the &#147;Agent Warrant Program&#148;), which awards warrants to certain of the
Company&#146;s agents based on performance criteria. This program did not commence until 2004, and as of the date of this filing, warrants to purchase
approximately 600,000 shares of common stock have been issued under the Agent Warrant Program. Warrants to purchase up to 1,000,000 shares are
available for issuance under the Agent Warrant Program.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Director Stock Option Plan</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Director Stock Option Plan authorizes the grant of stock
options to directors of the Company. Options granted under the Director Stock
Option Plan are non-qualified stock options exercisable at a price equal to the
fair market value per share of common stock on the date of any such grant.
Options granted under the Director Stock Option Plan are exercisable not less
than six months or more than ten years after the date of grant. As of December
31, 2003, options for the purchase of 233 shares of common stock at prices
ranging from $17.50 to $77.50 per share were outstanding, all of which are
exercisable. In connection with the adoption of the 1995 Director Plan, the
Board of Directors authorized the termination of future grants of options under
the Director Stock Option Plan; however,


<P align="center" style="font-size: 10pt">67
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">outstanding options will continue to be governed by the terms thereof until
exercise or expiration of such options. In 2003, no options were exercised or
expired.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>1995 Director Stock Option and Appreciation Rights Plan</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 1995 Director Stock Option and Appreciation Rights Plan (the &#147;1995
Director Plan&#148;) provides for the issuance of incentive stock options,
non-qualified stock options and stock appreciation rights (&#147;SARs&#148;) to directors
of the Company up to 12,500 shares of common stock (subject to adjustment in
the event of stock dividends, stock splits, and other similar events). The 1995
Director Plan also provides for the grant of non-qualified options on a
discretionary basis to each member of the Board of Directors then serving to
purchase 500 shares of common stock at an exercise price equal to the fair
market value per share of the common stock on that date. Each option is
immediately exercisable for a period of ten years from the date of grant. The
Company has 9,500 shares of common stock reserved for issuance under the 1995
Director Plan. As of December&nbsp;31, 2003, options to purchase 8,500 shares of
common stock at prices ranging from $20.00 to $25.00 per share are outstanding
and exercisable. No options were granted or exercised under this plan in 2003,
2002 or 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>1995 Employee Stock Option and Appreciation Rights Plan</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 1995 Employee Stock Option and Appreciation Rights Plan (the &#147;1995
Employee Plan&#148;) provides for the issuance of incentive stock options,
non-qualified stock options, and SARs. Directors of the Company are not
eligible to participate in the 1995 Employee Plan. The 1995 Employee Plan
provides for the grant of stock options which qualify as incentive stock
options under Section&nbsp;422 of the Internal Revenue Code, to be issued to
officers who are employees and other employees, as well as non-qualified
options to be issued to officers, employees and consultants. In addition, SARs
may be granted in conjunction with the grant of incentive and non-qualified
options. The 1995 Employee Plan provides for the grant of incentive options,
non-qualified options and SARs of up to 20,000 shares of common stock (subject
to adjustment in the event of stock dividends, stock splits, and other similar
events). To the extent that an incentive option or non-qualified option is not
exercised within the period of exercisability specified therein, it will expire
as to the then unexercisable portion. If any incentive option, non-qualified
option or SAR terminates prior to exercise thereof and during the duration of
the 1995 Employee Plan, the shares of common stock as to which such option or
right was not exercised will become available under the 1995 Employee Plan for
the grant of additional options or rights to any eligible employee. The shares
of common stock subject to the 1995 Employee Plan may be made available from
either authorized but unissued shares, treasury shares or both. The Company has
20,000 shares of common stock reserved for issuance under the 1995 Employee
Plan. As of December&nbsp;31, 2003, there were no options outstanding under the 1995
Employee Plan. During 2003, 2002 and 2001, options to purchase 6,763, 500 and
1,875, respectively, of common stock were forfeited or expired. No options were
granted or exercised in 2003 under the 1995 Employee Plan.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>1997 Recruitment Stock Option Plan</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2000, the stockholders of the Company approved an amendment of
the 1997 Recruitment Stock Option Plan (the &#147;1997 Plan&#148;) which provides for the
issuance of incentive stock options, non-qualified stock options and SARs up to
an aggregate of 370,000 shares of common stock (subject to adjustment in the
event of stock dividends, stock splits, and other similar events). The price at
which shares of common stock covered by the option can be purchased is
determined by the Company&#146;s Board of Directors; however, in all instances the
exercise price is never less than the fair market value of the Company&#146;s common
stock on the date the option is granted.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, there were options to purchase 60,480 shares of
the Company&#146;s common stock outstanding under the 1997 Plan. The outstanding
options vest over three years at exercise prices of $1.40 to $127.50 per share.
Options issued under the 1997 Plan must be exercised within ten years of grant
and can only be exercised while the option holder is an employee of the
Company. The Company has not awarded any SARs under the 1997 Plan. During 2003,
2002 and 2001, options to purchase 45,067, 42,968 and 130,022 shares of common
stock, respectively, were forfeited or expired. There were no exercises during
2003.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>2000 Employee Stock Purchase Plan</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2000, the stockholders of Acceris approved adoption of Acceris&#146;
2000 Employee Stock Purchase Plan which plan provides for the purchase and
issuance of common stock to all eligible employees (the &#147;Stock Purchase Plan&#148;).
The purpose of the Stock Purchase Plan is to induce all eligible employees of
Acceris (or any of its subsidiaries) who have been employees for at least three
months to encourage stock ownership of Acceris by acquiring or increasing their
proprietary interest in Acceris. The Stock Purchase Plan is designed to
encourage employees to remain in the employ of Acceris. It is the intention of
Acceris to have the Stock Purchase Plan qualify as an &#147;employee stock purchase
plan&#148; within the meaning of Section&nbsp;423 of the Internal Revenue Code, as
amended to issue shares of common stock to all eligible employees of Acceris
(or any of Acceris&#146; subsidiaries) who have been employees for at least three
months. The Stock Purchase Plan provides for the purchase of common stock in
the aggregate, up to 125,000 shares of common stock. As of December&nbsp;31, 2003,
2,900 shares of common stock had been purchased under the Stock Purchase Plan.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>2003 Stock Option and Appreciation Rights Plan</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2003, the stockholders of the Company approved the 2003 Stock
Option and Appreciation Rights Plan (the &#147;2003 Plan&#148;) which provides for the
issuance of incentive stock options, non-qualified stock options and SARs up to
an aggregate of 2,000,000 shares of common stock (subject to adjustment in the
event of stock dividends, stock splits, and other similar events). The price at
which shares of common stock covered by the option can be purchased is
determined by the Company&#146;s Board of Directors or its committee; however, in
the case of incentive stock options the exercise price shall not be less than
the fair market value of the Company&#146;s common stock on the date the option is
granted. There were stock options granted for 1,372,000 (and outstanding at
December&nbsp;31, 2003) under the 2003 Plan in 2003. The outstanding options vest
over four years at an exercise price of $3.00 per share. No SARs have been
issued under the 2003 Plan.


<P align="left" style="font-size: 10pt"><B>Compensation Committee Interlocks and Insider Participation</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Toh was formerly an officer of the Company, as described above. No
Compensation Committee members or other directors served as a member of the
compensation committee of another entity, whose executive officers served as a
director of Acceris.

<DIV align="left">
<A name="113"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>



<P align="left" style="font-size: 10pt"><B>Transactions with Management and Others</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Executive Compensation &#150; Employment Contracts&#148; above for descriptions
of the terms of employment, consulting and other agreements between the Company
and certain officers, directors and other related parties.


<P align="left" style="font-size: 10pt"><B>Transactions with Counsel</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Initial Acquisition of Acceris and Senior Convertible Loan</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;1, 2001, Acceris entered into a Senior Convertible Loan and
Security Agreement, (the &#147;Senior Loan Agreement&#148;) with Counsel. Pursuant to the
terms and provisions of the Senior Loan Agreement, Counsel agreed to make
periodic loans to Acceris in the aggregate principal amount not to exceed
$10,000, which was subsequently increased to $12,000 through amendment on May
8, 2001. Advances against the Senior Loan Agreement were structured as a 3-year
convertible note with interest at 9% per annum, compounded quarterly. Counsel
initially could convert the loan into shares of common stock of Acceris at a
conversion price of $11.20 per common share. The terms of the Senior Loan
Agreement also provide that at any time after September&nbsp;1, 2002, the
outstanding debt including accrued interest will automatically be converted
into common stock using the then current conversion rate, on the first date
that is the twentieth consecutive trading day that the common stock has closed
at a price per share that is equal to or greater than


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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">$20.00 per share. The Senior Loan Agreement also provides that the conversion
price is in certain cases subject to adjustment and includes traditional
anti-dilution protection for the lender and is subject to certain events of
default, which may accelerate the repayment of principal plus accrued interest.
Total proceeds available to the Company were $12,000, less debt issuance costs
of $600, amortized over three years. The Senior Loan Agreement
has been amended several times and the maturity date of the loan plus accrued
interest has been extended to January&nbsp;31, 2006. As a result of the application
of the anti-dilution provisions of the Senior Loan Agreement, the conversion
price has been adjusted to $5.02 per common share. As of September&nbsp;30, 2004,
the total outstanding debt under the Note (including principal and accrued
interest) was $16,346 which is convertible into approximately 3,256,175 shares
of common stock<I>.</I>

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the above Senior Loan Agreement, Acceris granted
Counsel a security interest in all of Acceris&#146; assets owned at the time of
execution of the Senior Loan Agreement or subsequently acquired, including but
not limited to Acceris&#146; accounts receivable, intangibles, inventory, equipment,
books and records, and negotiable instruments held by the Company
(collectively, the &#147;Collateral&#148;). Counsel agreed to subordinate its loan and security
interest to that of the Selling Holder in connection with the Senior
Convertible Loan.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the foregoing agreements, Acceris and Counsel executed a
Securities Support Agreement, dated March&nbsp;1, 2001 (the &#147;Support Agreement&#148;) for
the purpose of providing certain representations and commitments by Acceris to
Counsel, including demand registration rights for common stock issuable upon
conversion of the related loan. Counsel relied on these representations and
commitments in its decision to enter a separate agreement (the &#147;Securities
Purchase Agreement&#148;) with Winter Harbor and First Media L.P., a limited
partnership and the parent company of Winter Harbor (collectively the &#147;Winter
Harbor Parties&#148;), Counsel agreed to purchase from the Winter Harbor Parties all
of their equity securities in Acceris, including shares of Class&nbsp;M and Class&nbsp;N
preferred stock of Acceris, beneficially owned by the Winter Harbor Parties for
aggregate consideration of $5,000 in cash.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;7, 2001, as part of the agreements discussed above, Counsel
converted all of the Class&nbsp;M and N convertible preferred stock it obtained from
Winter Harbor into 3,098,303 shares of Acceris&#146; common stock. The Class&nbsp;N
shares were converted at $25.00 per common share and Class&nbsp;M at $11.20 per
common share, in accordance with their respective conversion rights. Pursuant
to the Securities Purchase Agreement, certain shares of common stock owned by
the Winter Harbor Parties were held in escrow pending resolution of certain
events.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Support Agreement of March&nbsp;1, 2001, Acceris also agreed to
engage appropriate advisors and proceed to take all steps necessary to merge
Nexbell Communications, Inc. (a subsidiary of Counsel) into Acceris. The merger
was completed on April&nbsp;17, 2001 and Counsel received 871,724 shares of common
stock in Acceris as consideration.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Assignment of Winter Harbor Common Stock and Debt Interests</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the terms of a settlement between Counsel and the Winter
Harbor Parties effective August&nbsp;29, 2003, the Winter Harbor Parties
relinquished their right to 118,750 shares of the common stock of Acceris to
Counsel. These shares were released from escrow and delivered to Counsel.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Winter Harbor Parties further assigned to Counsel all of their rights
with respect to a note payable by Acceris of $1,999 drawn down pursuant to a
Letter of Credit issued November&nbsp;3, 1998 to secure certain obligations of
Acceris together with any accrued interest thereon. The assigned amount
together with accrued interest amounted to $2,577 on August&nbsp;29, 2003. As a
result of the settlement and assignment, Acceris entered into a new loan
agreement with Counsel the terms of which provide that from August&nbsp;29, 2003 the
loan balance of $2,577 shall bear interest at 10% per annum compounded
quarterly with the aggregate balance of principal and accrued interest payable
on maturity of the loan on January&nbsp;31, 2006. This loan agreement was
subsequently amended and restated to increase the principal of the loan by a
further $100 for funding provided by Counsel to enable Acceris to acquire a
Voice over Internet Protocol patent in December&nbsp;2003 and to allow for the
making of further periodic advances thereunder at Counsel&#146;s discretion. The
loan amount has been further increased by $3,464 at September&nbsp;30, 2004
representing operating advances from Counsel to Acceris in the period since the
initial acquisition of the Acceris common stock by Counsel in March&nbsp;2001. There
are no conversion features associated with this loan. As of September&nbsp;30,
2004, the total outstanding debt under the Note (including principal and
accrued interest) was $6,642. Counsel agreed to subordinate its loan to that of the Selling Holder.



<P align="center" style="font-size: 10pt">70
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Loan and Security Agreement and Amended Debt Restructuring</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;6, 2001, Acceris and Counsel entered into a Loan and Security
Agreement (the &#147;Loan Agreement&#148;). Any funds advanced to Acceris between June&nbsp;6,
2001 and April&nbsp;15, 2002, (not to exceed $10,000) were governed by the Loan
Agreement and due on June&nbsp;6, 2002. The loan was secured by all of the assets of
Acceris. As of December&nbsp;31, 2001, advances under this loan agreement totaled
$10,000. On June&nbsp;27, 2002 the Loan Agreement was amended to an amount of
$24,307, which included additional capital advances from Counsel to Acceris
made from December&nbsp;31, 2001 through June&nbsp;6, 2002. The amended agreement also
further provided for additional advances as needed to Acceris, which advances
totaled $2,087 through December&nbsp;31, 2002 and $650 through November&nbsp;30, 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;25, 2002 Acceris and Counsel entered into a Debt Restructuring
Agreement (&#147;Debt Restructuring Agreement&#148;) which was amended on October&nbsp;15,
2002 pursuant to an Amended and Restated Debt Restructuring Agreement (&#147;Amended
Agreement&#148;). The Amended Agreement included the following terms:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="right">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Principal ($24,307) and associated accrued interest ($2,284), as of
October&nbsp;15, 2002, under the Loan Agreement, as amended, would be
exchanged for common stock of Acceris at $3.77 per share (representing
the average closing price of Acceris&#146; common stock during May&nbsp;2002).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="right">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Funding provided by Counsel pursuant to the Loan Agreement, as
amended, ($2,087) and associated accrued interest ($1,996) from
October&nbsp;15, 2002 to December&nbsp;31, 2002, would be exchanged for common
stock of Acceris at $3.77 per share (representing the average closing
price of Acceris&#146; common stock during May&nbsp;2002).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="right">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Counsel would advance to Acceris all amounts paid or payable by
Acceris to its stockholders that exercised their dissenters&#146; rights in
connection with the transactions subject to the debt restructuring
transactions and advance the amount of the annual premium to renew the
existing directors and officers&#146; insurance coverage through November
2003.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="right">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Counsel would reimburse Acceris for all costs, fees and expenses, in
connection with the Debt Restructuring Agreement and the Amended
Agreement and transactions contemplated thereby including all expenses
incurred and yet to be incurred, including the Special Committee&#146;s
costs to negotiate these agreements and costs related to obtaining
stockholder approval. During 2003 and 2002, Counsel reimbursed Acceris
$132 and $499, respectively, for certain reimbursable expenses, which
have been recorded as additional paid-in capital.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="right">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The issuance of common stock by Acceris pursuant to this Agreement
would result in a weighted average conversion price adjustment
pursuant to the provisions of the March&nbsp;1, 2001 Loan Agreement.
Whereas the conversion price for the March&nbsp;1, 2001 Loan Agreement had
initially been $11.20, the new conversion price would be adjusted as a
result of the anti-dilution provisions of the Senior Loan Agreement.
At December&nbsp;31, 2004, the conversion price was $5.02 per common
share.</TD>
</TR>


</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective November&nbsp;30, 2003, 8,681,096 shares of common stock were issued
to Counsel in settlement of the underlying debt and accrued interest totaling
$32,721 on the date of the conversion.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Convertible
Promissory Note to Fund RSL.COM USA, Inc. (&#147;RSL&#148;) Acquisition</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the acquisition of certain assets of RSL in December
2002, Acceris issued a $7,500 convertible note payable (the &#147;Convertible Note&#148;)
to Counsel, bearing interest at 10% per annum compounded quarterly which, as
amended, matured on June&nbsp;30, 2005. The Convertible Note was convertible into
common stock of Acceris at a conversion rate of $1.68 per share. Effective
November&nbsp;30, 2003 Counsel exercised its right to convert the Convertible Note
plus accrued interest to that date totaling $7,952 into common stock of
Acceris. This resulted in the issuance of 4,747,396 shares of Acceris common
stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Collateralized Promissory Note and Loan Agreement</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the fourth quarter of 2003, Counsel advanced the sum of $5,600 to
Acceris evidenced by a promissory note effective October&nbsp;1, 2003. In January
2004 Acceris and Counsel entered into a loan agreement and an amended and



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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">restated promissory note pursuant to which an additional $2,000 was loaned to
Acceris and pursuant to which additional periodic loans may be made from time
to time (collectively and as amended, the &#147;Promissory Note&#148;). The Promissory
Note matures on January&nbsp;31, 2006 and accrues interest at 10% per annum
compounded quarterly from the date funds are advanced. The Promissory Note was
collateralized by certain shares of Series&nbsp;B Convertible Preferred Stock (the
&#147;Preferred Stock&#148;) of Buyers United, Inc. (a third party), which were held by
Acceris. In the event of the sale of the Preferred Stock (or the common stock
to which the Preferred Stock was convertible) by Acceris or an equity
investment or investments in Acceris by a third party through the capital
markets and subject to certain limitations, the terms of the Promissory Note
stated that the maturity date of the Promissory Note would accelerate to the
date 10 calendar days following either such event. The preferred stock was
sold during the first six months of 2004, and Counsel waived its right to
accelerate the maturity date. Counsel agreed to subordinate its loan and security
interest to that of the Selling Holder in connection with the issuance of the
Promissory Note. There are no conversion features associated with the
Promissory Note. As of the date of this prospectus, Counsel has provided an
aggregate of $9,784 of funds in 2004 pursuant to this loan agreement and the
outstanding balance at September&nbsp;30, 2004 (including principal and accrued
interest) was $16,263.




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Secured Loan to Acceris</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To fund the acquisition of the WorldxChange Communications, Inc. assets
purchased and liabilities assumed by Acceris, on June&nbsp;4, 2001 Counsel provided
a loan (the &#147;Initial Loan&#148;) to Acceris in the aggregate amount of $15,000. The
loan was subordinated to a revolving credit facility with Foothill Capital
Corporation (&#147;Foothill&#148;), was collateralized by all the assets of the Company
and, as amended, had a maturity date of June&nbsp;30, 2005. On October&nbsp;1, 2003 Counsel assigned
the balance owed in connection with the Initial Loan of $9,743 including
accrued interest (&#147;the Assigned Loan&#148;) to Acceris in exchange for a new loan
bearing interest at 10% per annum compounded quarterly maturing on January&nbsp;31,
2006 (&#147;the New Loan&#148;). Consistent with the terms of the Initial Loan, subject
to certain conditions, the New Loan provides for certain mandatory prepayments
upon written notice from Counsel including an event resulting in the issuance
of new shares by Acceris to a party unrelated to Counsel where the funds are
not used for an approved expanded business plan or where Acceris has sold
material assets in excess of cash proceeds of $1,000. Pursuant to a Stock
Pledge Agreement as amended, the New Loan is secured by the common stock held
by Acceris in its subsidiary subject to the priority security interests of
Foothill, the Company&#146;s asset-based lender. Counsel agreed to subordinate its
loan and security interest to that of the Selling Holder in connection with the issuance
of the Note. There are no conversion features associated with the New Loan.
As of September&nbsp;30, 2004, the total outstanding debt under the New Loan
(including principal and accrued interest) was $10,755.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Counsel Keep Well</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of Counsel&#146;s purchase of Winter Harbor&#146;s security holdings in
Acceris, Counsel became the single largest stockholder of the Company. In
addition to the above transactions, Counsel has committed to fund, through
long-term inter company advances or equity contribution, all capital
investment, working capital or other operational cash requirements of Acceris
through June&nbsp;30, 2005 (the &#147;Keep Well&#148;). Any default and loan repayment
accelerator provisions with respect to the above loan agreements are subject to
funding by Counsel pursuant to the terms of the Keep Well.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Counsel Guarantee, Subordination and Stock Pledge</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October of 2004, as one of the conditions for a third party financing
with the Selling Holder in the amount of $5,000 provided to the Company,
Counsel agreed to subordinate all of its debt owed by the Company, and to
subrogate all of its related security interest in favor of both the Selling
Holder and Foothill, the existing asset-based lender of the Company. Counsel
further agreed to guarantee the Company&#146;s debts to Foothill and to the Selling
Holder and to pledge all of its shares owned in Acceris as security for
the related debts.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Counsel Management Services</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December 31, 2004, Acceris Communications Inc. (the &#147;Company&#148;) entered into a
certain management services agreement (the &#147;Agreement&#148;) with Counsel
Corporation, the Company&#146;s majority shareholder, and its wholly-owned subsidiaries
(collectively, &#147;Counsel&#148;). Under the terms of the Agreement, the Company agreed
to make payment to Counsel for the past and future services to be provided by Counsel
personnel (excluding Allan C. Silber, Counsel&#146;s Chairman, President and Chief
Executive Officer and the Company&#146;s Chief Executive Officer) to the Company for each
of 2004 and 2005. The basis for such services charged will be an allocation, on a cost
basis, based on time incurred, of the base compensation paid by Counsel to those employees
providing services to the Company. For the nine months ended September 30, 2004, the cost
of such services was approximately $190,000 and is expected to total approximately
$280,000 for the year ended December 31, 2004. Services for 2005 will be determined on the
same basis. For each fiscal quarter, Counsel will provide the details of the charge for
services by individual, including respective compensation and their time allocated to the
Company. The foregoing fees for 2004 and 2005 are due and payable within 30 days following
the respective year ends, subject to applicable restrictions. Any unpaid fee amounts will
bear interest at 10% per annum commencing on the day after such year end.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of a change of control, merger or similar event of the Company, all amounts
owing, including fees incurred up to the date of the event, will become due and payable
immediately upon the occurrence of such event. The Agreement does not guarantee the
personal services of any specific individual at the Company throughout the term of the
agreement and the Company will have to enter into a separate personal services arrangement
with such individual should their specific services be required. The Company&#146;s Board
of Directors approved the Agreement on December 23, 2004.



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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="114"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>CAPITAL STOCK</B>



<P align="left" style="font-size: 10pt"><B>Common Stock</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris is currently authorized to issue 300,000,000 shares of common
stock, par value $.01 per share. As of January&nbsp;3, 2005 there were 19,237,141
shares of common stock issued and outstanding and approximately 900 holders of
record of the common stock, and approximately 9,700 beneficial owners. The
holders of common stock:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>have one vote for each share held, which may be voted on each matter submitted to the stockholders of Acceris;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>have equal ratable rights to dividends , as and if declared by the Board of Directors;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>are entitled to share on a pro rata basis in all of the assets of Acceris available for distribution to holders of common
stock upon liquidation, dissolution or winding up of the affairs of Acceris; and</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>do not have preemptive, subscription or conversion rights, or redemption or sinking fund provisions applicable to the
common stock.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to any payment of dividends to the holders of common stock, all
accrued and unpaid dividends on any outstanding shares of preferred stock must
be paid. We anticipate that, for the foreseeable future, we will retain
earnings, if any, to finance the operations of our businesses. The payment of
dividends in the future will depend upon, among other things, the capital
requirements and the operating and financial conditions of Acceris. The Loan
and Security Agreement with Foothill Capital Corporation restricts the ability
of one of the Company&#146;s subsidiaries from making distributions or declaring or
paying any dividends to the Company. In connection with the issuance of the
Note to the Selling Holder, the Company agreed that it would not, for so long
as 25% of the initial principal amount of the Note is outstanding, declare or
pay any dividends, other than dividends to its parent, Counsel, or any of its
wholly-owned subsidiaries without the prior written consent of the Selling
Holder.


<P align="left" style="font-size: 10pt"><B>Preferred Stock</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Articles of Incorporation authorize the issuance of up to 10,000,000
shares of preferred stock, $10.00 par value per share. The Board of Directors
is authorized to issue shares of preferred stock at various times in one or
more series and, subject to the limitations contained in the Articles of
Incorporation and any limitations prescribed by law, to establish and designate
a series and to fix the number of shares and the conversion rights, voting
rights and terms of redemption and liquidation preferences. New issuances of
shares of preferred stock with voting rights can affect the voting rights of
the holders of outstanding shares of preferred stock and common stock by
increasing the number of outstanding shares having voting rights, and by the
creation of class or series voting rights. Furthermore, additional issuances
of shares of preferred stock with conversion rights can have the effect of
increasing the number of shares of common stock outstanding up to the amount of
common stock authorized by the Articles of Incorporation and can also, in some
circumstances, have the effect of delaying or preventing a change in control of
Acceris or otherwise adversely affect the rights of holders of outstanding
shares of preferred stock and common stock. To the extent permitted by the
Articles of Incorporation, a series of preferred stock may have preferences
over the common stock (and other series of preferred stock) with respect to
dividends and liquidation rights.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Class&nbsp;N Preferred Stock</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Class&nbsp;N preferred stock will be paid dividends on an as-converted
basis equal to Acceris common stock, when and if common stock dividends are
paid. The Series&nbsp;N preferred stock is senior in all rights to other preferred
stock of Acceris and has a liquidation preference of $613 per share as of
December&nbsp;31, 2003. Each share of the Series&nbsp;N preferred stock can be converted
into 40 shares of common stock at any time at a conversion price of $25.00 per
share. The Series&nbsp;N preferred stock will vote with the common stock on an
as-converted basis on all matters which are submitted to a vote of the
stockholders, except if Florida law or the Company&#146;s Articles of Incorporation
or By-laws direct otherwise. As of the date hereof there are 619 shares of
Class&nbsp;N preferred stock outstanding.


<P align="left" style="font-size: 10pt"><B>Anti-Takeover Measures</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris&#146; articles of incorporation and bylaws contain provisions that
could discourage potential takeover attempts and prevent shareholders from
changing Acceris&#146; management. The articles of incorporation provide for a
Board of Directors with three separate classes. Vacancies on the Board of
Directors are filled by a majority of the remaining directors then in office.


<P align="center" style="font-size: 10pt">73
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The bylaws provide that all stockholder proposals must be presented to
Acceris in order to determine if they will be proposed for vote at a special or
annual meeting of stockholders. To accomplish this, the stockholder must
provide the Board of Directors or the Company&#146;s Secretary with written notice
of the stockholder&#146;s intent to present a proposal for action at the upcoming
meeting of stockholders. This written notice must be provided to the Board of
Directors or the Company&#146;s Secretary no later than the close of business on the
fifth day following the date on which notice of the scheduled upcoming meeting
is first given to the stockholders by the Company. The stockholder&#146;s written
notice shall include:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the name and address of the proposing stockholder;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of voting securities he or she holds of record and which he or she holds beneficially;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the text of the proposal to be presented at the meeting; and</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a statement in support of the proposal.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any stockholder may make any other proposal at an annual meeting or
special meeting of stockholders which may be discussed and considered, but
unless the proposal follows the procedure discussed above, the proposal shall
be postponed for action at an adjourned, special, or annual meeting of the
stockholders taking place sixty days or more thereafter.


<P align="left" style="font-size: 10pt"><B>Transfer Agent</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;American Stock Transfer &#038; Trust Company, New York, New York is the
Registrar and Transfer Agent for Acceris&#146; common stock and preferred stock.

<DIV align="left">
<A name="115"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SHARES AVAILABLE FOR FUTURE SALE</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurance that a significant public market for the common
stock will be sustained after this offering. Sales of substantial amounts of
common stock in the public market after this offering, or the possibility of
such sales occurring, could adversely affect prevailing market prices for the
common stock or our future ability to raise capital through an offering of
equity securities. The sale of shares pursuant to this prospectus, and mere
awareness of the existence of this prospectus could materially and adversely
affect our stock price or impair our ability to obtain capital through the
issuance of equity securities.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September&nbsp;30, 2004, we have issued the following outstanding
convertible securities:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Counsel debt convertible into 3,256,175 shares of common stock;</TD>
</TR>


</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Employee options exercisable for approximately 1,753,500 shares
of common stock with an exercise price ranging from $0.79 per share
to $127.50 per share;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Warrants to purchase 600,000 shares of common stock as of June
30, 2004, with an exercise price of $3.50 per share;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Warrants to purchase up to 1,000,000 shares of common stock at
an exercise price of $1.20 per share, subject to adjustment, held by
the Selling Holder and Convertible Term Note held by the Selling
Holder which Note is convertible into 5,681,818 shares of common
stock;</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Preferred shares convertible into 24,760 shares of common
stock, at $25 per share.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The perception that these instruments may be exercised for, or converted
into, common stock that then could be sold into the public market could
adversely affect the market price of our common stock. In addition, we have
entered into registration rights agreements with the Selling Holder and with
Counsel to include their shares of common stock in registration statements for
securities filed by Acceris under the Securities Act of 1933, as amended and to
register approximately 2.6&nbsp;million shares held by Winter Harbor upon its
demand. In connection with the issuance of the Note, however, Counsel waived
its right to include its shares herein. However, awareness of the existence of
these registration rights could lead to a perception that sales of the shares
subject to the registration rights could occur, which could materially and
adversely affect our stock price or could impair our ability to obtain capital
through sales of equity securities. In addition, shares we have issued in
private transactions over the past two years will become eligible for sale


<P align="center" style="font-size: 10pt">74
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">in the public market under Rule&nbsp;144 without restriction assuming such
shares are not held by an affiliate of the Company.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Rule&nbsp;144, a stockholder who owns restricted shares that have been
outstanding for at least one year is entitled to sell, within any three-month
period, a number of restricted shares that does not exceed the greater of: (i)
1% of the then outstanding shares of common stock, or approximately 192,371
shares as of October&nbsp;30, 2004; and (ii)&nbsp;an amount equal to the average weekly
trading volume in the common stock during the four calendar weeks preceding the
sale.

<DIV align="left">
<A name="116"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</B>



<P align="left" style="font-size: 10pt"><B>Price Range of Common Stock</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares of Acceris&#146; common stock, $0.01 par value per share, are traded on
the OTC Bulletin Board (&#147;OTC-BB&#148;) under the symbol ACRS.OB.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the high and low prices for the Company&#146;s
common stock for the period as quoted on the OTC-BB from January&nbsp;1, 2002
through December&nbsp;31, 2004 (adjusted for a 1-for-20 reverse stock split that
was approved on November&nbsp;26, 2003) based on interdealer quotations, without
retail markup, markdown, commissions or adjustments and may not represent
actual transactions:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Quarter Ended</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>High</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Low</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">March&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.40</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">June&nbsp;30, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.60</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">September&nbsp;30, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.80</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">March&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">June&nbsp;30, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">September&nbsp;30, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">March&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.12</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">June&nbsp;30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">September&nbsp;30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.75</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.52</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;3, 2005, the closing price for a share of the Company&#146;s common
stock was $0.60.



<P align="left" style="font-size: 10pt"><B>Holders</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of October&nbsp;30, 2004, the Company had approximately 900 stockholders of
common stock of record and there were approximately 9,700 beneficial owners of
the Company&#146;s common stock.


<P align="left" style="font-size: 10pt"><B>Dividends</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To date, the Company has not paid dividends on its common stock nor does
it anticipate that it will pay dividends in the foreseeable future. As of the
date of this prospectus, the Company does not have any preferred stock
outstanding which has any preferential dividends. The Loan and Security
Agreement with Foothill Capital Corporation restricts the ability of one of the
Company&#146;s subsidiaries from making distributions or declaring or paying any
dividends to the Company. In connection with the issuance of the Note to the
Selling Holder, the Company agreed that it would not, for so long as 25% of the
initial principal amount of the Note is outstanding, declare or pay any
dividends, other than dividends to its parent, Counsel, or any of its
wholly-owned subsidiaries without the prior written consent of the Selling
Holder.


<P align="left" style="font-size: 10pt"><B>Dissenters&#146; Appraisal Rights</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the Company&#146;s Adjourned Meeting of Stockholders held on December&nbsp;30,
2003, stockholders of the Company approved an amendment to the Company&#146;s
Articles of Incorporation, deleting Article&nbsp;VI thereof (regarding


<P align="center" style="font-size: 10pt">75
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">liquidations, reorganizations, mergers and the like). Stockholders who
were entitled to vote at the meeting and advised the Company in writing prior
to the vote on the amendment, that they dissented and intended to demand
payment for their shares if the amendment was effectuated, were entitled to
exercise their appraisal rights and obtain payment in cash for their shares
under Sections&nbsp;607.1301 &#150; 607.1333 of the Florida Business Corporation Act,
provided their shares were not voted in favor of the amendment.


<P align="left" style="font-size: 10pt">In January&nbsp;2004, appraisal notices in compliance with Florida corporate
statutes were sent to all stockholders who had advised the Company of their
intention to exercise their appraisal rights. The appraisal notices included
the Company&#146;s estimate of fair value of the Company&#146;s shares, at $4.00 per
share on a post-split basis. These stockholders had until February&nbsp;29, 2004 to
return their completed appraisal notices along with certificates for the shares
for which they were exercising their appraisal rights. Approximately 33
stockholders holding approximately 74,000 shares of the Company&#146;s stock have
returned completed appraisal notices by February&nbsp;29, 2004. A stockholder of 20
shares notified the Company of his acceptance of the Company&#146;s offer of $4.00
per share, while the stockholders of the remaining shares did not accept the
Company&#146;s offer. Subject to the qualification that the Company may not make any
payment to a stockholder seeking appraisal rights if, at the time of payment,
the Company&#146;s total assets are less than its total liabilities, stockholders
who accepted the Company&#146;s offer to purchase their shares at the estimated fair
value will be paid for their shares within 90&nbsp;days of the Company&#146;s receipt of
a duly executed appraisal notice. If the Company should be required to make any
payments to dissenting stockholders, Counsel will fund any such amounts through
the purchase of shares of the Company&#146;s common stock. Stockholders who did not
accept the Company&#146;s offer were required to indicate their own estimate of fair
value, and if the Company does not agree with such estimates, the parties are
required to go to court for an appraisal proceeding on an individual basis,
in order to establish fair value for the shares in question. Because Acceris
did not agree with the estimates submitted by most of the dissenting
shareholders, Acceris has sought a judicial determination of the fair value of
the common stock held by the dissenting stockholders. On June&nbsp;24, 2004,
Acceris filed suit against the dissenting shareholders seeking a declaratory
judgment, appraisal and other relief in the Circuit Court for the 17<SUP>th</SUP> Judicial
District in Broward County, Florida. There is no assurance that this matter
will be resolved in the Company&#146;s favor and an unfavorable outcome of this
matter could have a material adverse impact on our business, results of
operations, financial position or liquidity.


<DIV align="left">
<A name="117"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION<BR>
FOR SECURITIES ACT LIABILITIES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Articles of Incorporation of Acceris require it to indemnify its
officers, directors, employees and agents against certain liabilities incurred
by them in those capacities if they acted in good faith and reasonably believed
their conduct was in the best interests of Acceris or not opposed to it.
Acceris also required to indemnify a person who is or was a director, officer,
employee or agent of Acceris and who was successful, on the merits or
otherwise, in defense of any proceeding to which he was a party, against
reasonable expenses, which include attorneys&#146; fees, incurred by him or her in
connection with the proceeding.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Acceris under the provisions discussed in the previous paragraph, or otherwise,
Acceris has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in that
Act and is, therefore, unenforceable.

<DIV align="left">
<A name="118"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>EXPERTS</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
financial statements of Acceris Communications Inc. as of
December&nbsp;31, 2003 and 2002, and for each of the three years in the period ended
December 31, 2003, included in this
Prospectus have been so included in reliance
on the report (which contains an explanatory paragraph relating to the
Company&#146;s ability to continue as a going concern as described in Note 4 to the
financial statements) of PricewaterhouseCoopers LLP, independent registered
public accounting firm, given on the authority of PricewaterhouseCoopers LLP as
experts in auditing and accounting.



<P align="center" style="font-size: 10pt">76
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="119"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>CHANGES IN REGISTRANT&#146;S CERTIFYING ACCOUNTANT</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As reported on Current Report on Form 8-K, filed May&nbsp;11, 2004, on May&nbsp;4,
2004, PricewaterhouseCoopers LLP (&#147;PwC&#148;), the independent auditor for the
Company, communicated to Company management that PwC would decline to stand for
re-election. PwC confirmed this communication in a letter submitted to the
Company dated May&nbsp;5, 2004, stating that PwC&#146;s client-auditor relationship with
the Company would cease upon completion of services related to the issuance by
the Company of the condensed consolidated financial statements as of and for
the quarter ended March&nbsp;31, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The PwC audit reports on the consolidated financial statements of the
Company and subsidiaries as of and for the fiscal years ended December&nbsp;31, 2003
and 2002, did not contain any adverse opinion or disclaimer of opinion; nor
were they qualified or modified as to uncertainty, audit scope, or accounting
principles, except as follows:



<P align="left" style="margin-left:3%; font-size: 10pt">PwC&#146;s report on the consolidated financial statements of the Company and
subsidiaries as of and for the years ended at December&nbsp;31, 2003 and 2002,
contained a separate paragraph stating as follows: &#147;The accompanying
consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from
operations and has a stockholders&#146; deficit. These matters raise
substantial doubt about the Company&#146;s ability to continue as a going
concern. Management&#146;s plans in regard to these matters are also described
in Note 2. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with its audits of the Company&#146;s financial statements as of
December&nbsp;31, 2003 and 2002, and for the years then ended, and through May&nbsp;4,
2004<SUP>1</SUP>:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;the Company did not have any disagreements with PwC on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
PwC, would have caused it to make a reference to the subject matter of the
disagreements in connection with its reports, and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;except as noted in the succeeding paragraph, there were no
&#147;reportable events&#148; requiring disclosure pursuant to Item&nbsp;304(a)(1)(v) of
Regulation&nbsp;S-K (as used herein, the term &#147;reportable event&#148; means any of the
items listed in paragraphs (a)(1)(v)(A)-(D) of Item&nbsp;304 of Regulation&nbsp;S-K):



<P align="left" style="margin-left:3%; font-size: 10pt">On three occasions, the Company&#146;s Chief Executive Officer and Chief
Financial Officer, having conducted an evaluation of the Company&#146;s
internal controls and procedures, concluded that the Company&#146;s controls
and procedures were not effective to record, process, summarize and report
information to be disclosed by the Company in its reports to be filed or
submitted under the Securities Exchange Act of 1934, as amended, within
the time periods specified by the U.S. Securities and Exchange Commission.



<P align="left" style="margin-left:3%; font-size: 10pt">Specifically, in the Company&#146;s Form 10-Q for the quarter ended September
30, 2002, management reported a deficiency in the Company&#146;s disclosure
controls and procedures; in the Company&#146;s Form 10-K for the year ended
December&nbsp;31, 2002, management reported three material weaknesses in the
Company&#146;s internal controls; and in the Company&#146;s Form 10-Q for the
quarter ended September&nbsp;30, 2003, management reported a significant
deficiency in the Company&#146;s internal controls. The Company&#146;s previous
public filings that describe these matters are incorporated by reference
into this prospectus and are as follows:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="7%" nowrap align="right">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Paragraphs 3-4 of Item&nbsp;4. Controls and Procedures,
Part&nbsp;I of the Company&#146;s Quarterly Report on Form 10-Q for the
period ended September&nbsp;30, 2002, filed on November&nbsp;19, 2002</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="7%" nowrap align="right">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Paragraphs 2-6 of Item&nbsp;14. Controls and Procedures,
Part&nbsp;IV of the Company&#146;s Amended Annual Report on Form 10-K/A#2
for the period ended December&nbsp;31, 2002, filed on October&nbsp;15,
2003, and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="7%" nowrap align="right">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Paragraphs 1-4 of Item&nbsp;4. Controls and Procedures,
Part&nbsp;I of the Company&#146;s Quarterly Report on Form 10-Q for the
period ended September&nbsp;30, 2003, filed on November&nbsp;19, 2003.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">77
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
reported on Current Report on Form 8-K filed on May&nbsp;19, 2004, on May&nbsp;15, 2004,
the Audit Committee of the Board of Directors of the Company authorized the
Audit Committee Chairman to appoint BDO Seidman, LLP (&#147;BDO&#148;) to serve as the
Company&#146;s independent auditors for the current fiscal year, which ends on
December&nbsp;31, 2004. The appointment of BDO as the Company&#146;s independent
auditors occurred on May&nbsp;17, 2004 and was effective immediately. BDO will
audit and report on the Company&#146;s consolidated balance sheet as of December&nbsp;31,
2004 and the consolidated statement of operations, stockholders&#146; equity and
cash flows for the same fiscal period. BDO has performed reviews of the
unaudited condensed consolidated quarterly financial statements included in the
Company&#146;s quarterly reports on Form 10-Q which reviews have to date included
financial quarters ending June&nbsp;30, 2004 and September&nbsp;30, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During each of the Company&#146;s two most recent fiscal years and through May
17, 2004, (a)&nbsp;Acceris had not engaged BDO as either the principal accountant to
audit the Company&#146;s financial statements, or as an independent accountant to
audit a significant subsidiary of the Company and on whom the principal
accountant is expected to express reliance in its report; and (b)&nbsp;Acceris or
someone on its behalf did not consult BDO with respect to (i)&nbsp;either: the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
the Company&#146;s financial statements, or (ii)&nbsp;any other matter that was either
the subject of a disagreement or a reportable event as set forth in Items
304(a)(1)(iv) and (v)&nbsp;of Regulation&nbsp;S-K.

<P align="left" style="font-size: 10pt"><HR align="left" size="1" noshade width="25%">


<P align="left" style="font-size: 10pt"><SUP>1</SUP> As reported on Current Report on
Form 8-K filed on September&nbsp;29, 2004, the
Company announced a restatement of its financial results from the fourth
quarter of 2002 through to the first quarter of 2004 pursuant to an accounting
error which is detailed
in Note 2 to the condensed financial
statements for the three and nine months ended September 30, 2004,
attached to this report. In conjunction with
the above-noted error, the Company&#146;s certifying officers concluded that this
error constituted a material deficiency in control for each affected
period,
as reported in the Current Report on Form 10-K, as amended, for the years
ended December 31, 2002 and 2003, and the Current Report on Form
10-Q, as amended,
for the quarters ended September 30, 2002, March 31, June 30 and
September 30, 2003, and March 31, 2004.


<DIV align="left">
<A name="120"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>LEGAL MATTERS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dilworth Paxson LLP, Washington D.C, has passed on the validity of the
shares of common stock offered hereby.

<DIV align="left">
<A name="121"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>HOW TO OBTAIN ADDITIONAL INFORMATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file annual and quarterly reports, proxy statements, and other
information with the Securities and Exchange Commission (&#147;SEC&#148;). You may read
and copy any document we have filed with the SEC in its public reference room
at 450 Fifth Street N.W. Washington, D.C. 20549. You may obtain information on
the operation of the public reference room by calling the SEC at
1-800-432-0330. The SEC maintains a World Wide Web site on the Internet at
<I>http://www.sec.gov </I>that contains reports, proxy and information statements, and
other information regarding companies, including those that Acceris files
electronically with the SEC.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus is part of a registration statement we have filed with the
SEC relating to an offer of our common stock described in this prospectus. As
permitted by the SEC rules, this prospectus does not contain all of the
information contained in the registration, accompanying exhibits and schedules
we file with the SEC. You may refer to the registration, the exhibits and
schedules for more information about our Company and our common stock. The
registration statement, exhibits, and schedules are also available at the SEC&#146;s
public reference rooms or through its EDGAR database on the Internet.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should rely only on the information contained or incorporated by
reference in this prospectus. Acceris has not authorized anyone to provide you
with information that is different from what is contained in this prospectus.
You should not assume that the information contained in this prospectus is
accurate as of any date other than the date set forth on the front cover of
this prospectus.


<P align="center" style="font-size: 10pt">78
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="122"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>INDEX TO FINANCIAL STATEMENTS</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="95%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Report of Independent Registered Public Accounting Firm</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>F-2</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Consolidated Balance Sheets as of December&nbsp;31, 2003 and 2002</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>F-3</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Consolidated Statements of Operations for the years ended December&nbsp;31, 2003, 2002 and 2001</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>F-4</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Consolidated Statements of Changes in Stockholders&#146; Deficit for the years ended December&nbsp;31, 2003, 2002 and 2001</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>F-6</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Consolidated Statements of Cash Flows for the years ended December&nbsp;31, 2003, 2002 and 2001</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>F-7</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Notes to Consolidated Financial Statements</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>F-9</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Condensed Consolidated Balance Sheets as of September&nbsp;30, 2004 and December&nbsp;31, 2003</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>F-34</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Condensed
Consolidated Statements of Operations for the three months ended
September&nbsp;30, 2004 and 2003 and the nine months ended September&nbsp;30, 2004 and 2003</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>F-35</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Condensed Consolidated Statements of Cash Flows for the nine months ended September&nbsp;30, 2004 and 2003</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>F-36</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Notes to Unaudited Condensed Consolidated Financial Statements</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>F-38</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">F-1
</DIV>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="123"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>Report of Independent Registered Public Accounting Firm</B>



<P align="left" style="font-size: 10pt">To the Board of Directors and Stockholders of<BR>
Acceris Communications Inc.:


<P align="left" style="font-size: 10pt">In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Acceris Communications Inc. and its subsidiaries at December&nbsp;31,
2003 and 2002, and the results of their operations and their cash flows for
each of the three years in the period ended December&nbsp;31, 2003 in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.



<P align="left" style="font-size: 10pt">The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Company has suffered recurring
losses and negative cash flows from operations and has a net capital
deficiency. These matters raise substantial doubt about the Company&#146;s ability
to continue as a going concern. Management&#146;s plans in regard to these matters
are also described in Note 2. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.


<P align="left" style="font-size: 10pt">As explained in Note 3 to the consolidated financial statements, the Company
has restated its financial statements for the year ended December&nbsp;31, 2003.


<P align="left" style="font-size: 10pt"><U>/s/&nbsp;PricewaterhouseCoopers LLP</U><BR>
PricewaterhouseCoopers LLP


<P align="left" style="font-size: 10pt">San Diego, California<BR>
April&nbsp;14, 2004, except for Note 3 as to<BR>
&nbsp;&nbsp;&nbsp;which the date is September&nbsp;28, 2004



<P align="center" style="font-size: 10pt">F-2


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>




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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="124"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>ACCERIS COMMUNICATIONS INC. AND SUBSIDIARIES<BR>
CONSOLIDATED BALANCE SHEETS<BR>
as of December&nbsp;31, 2003 and 2002</B><BR>
(in thousands, except share amounts)


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD align="center"><DIV style="margin-left:10px; text-indent:-10px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,620</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts receivable, less allowance for doubtful
accounts of $1,764 and $1,704 as of December&nbsp;31,
2003 and 2002, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,924</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Investments in convertible preferred and common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,064</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net assets of discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,608</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Furniture, fixtures, equipment and software, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,479</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,574</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net assets of discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,350</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,262</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">39,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41,446</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-10px">LIABILITIES AND STOCKHOLDERS&#146; DEFICIT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Unearned revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">958</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Revolving credit facility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,086</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Current portion of notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,987</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Current portion of obligations under capital leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,714</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net liabilities of discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Notes payable, less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,033</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Obligations under capital leases, less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,146</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Notes
payable to a related party, net of unamortized beneficial
conversion features</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,231</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,262</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commitments and contingencies (Notes 12 and 16)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders&#146; deficit:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Preferred stock, $10.00 par value, authorized
10,000,000 shares, issued and outstanding 619 and
769 as of December&nbsp;31, 2003 and 2002, respectively;
liquidation preference of $613 and $761 at December
31, 2003 and 2002, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Common stock, $0.01 par value, authorized
300,000,000 shares, issued and outstanding
19,262,095 and 5,827,477 at December&nbsp;31, 2003 and
2002, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">182,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,721</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(226,030</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(194,602</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total stockholders&#146; deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(42,953</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57,816</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total
liabilities and stockholders&#146; deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">39,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41,446</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these consolidated financial statements



<P align="center" style="font-size: 10pt">F-3

<P><HR noshade size="4">

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="125"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>ACCERIS COMMUNICATIONS INC. AND SUBSIDIARIES<BR>
CONSOLIDATED STATEMENTS OF OPERATIONS<BR>
for the years ended December&nbsp;31, 2003, 2002 and 2001<BR>
(in thousands)</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">133,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">85,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,289</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Technology licensing and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,697</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,986</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications network expense (exclusive of
depreciation shown below)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,546</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling, general, administrative and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,790</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,861</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,332</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,409</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total operating costs and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,938</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19,904</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,530</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21,952</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income (expense):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,269</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,195</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,693</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gain on sale of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">589</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,053</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,023</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31,957</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,330</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25,975</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gain (loss)&nbsp;from discontinued operations (net of $0 tax):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,522</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(31,428</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(27,838</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(44,497</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these consolidated financial statements



<P align="center" style="font-size: 10pt">F-4

<P><HR noshade size="4">

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>ACCERIS COMMUNICATIONS INC. AND SUBSIDIARIES<BR>
CONSOLIDATED STATEMENTS OF OPERATIONS, continued<BR>
for the years ended December&nbsp;31, 2003, 2002 and 2001<BR>
(in thousands)</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>(in thousands, except per share amounts)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Calculation of net loss per common share:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(31,957</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(15,330</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(25,975</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cumulative preferred stock dividends not paid in current year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Dividends accrued and paid on Class&nbsp;M redeemable preferred stock.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(269</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net effect on retained earnings of redemption and reissuance of
Class&nbsp;M and N preferred stock, including beneficial conversion
features</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,512</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Loss from continuing operations applicable to common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(31,957</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(15,330</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(10,759</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Basic and diluted weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,959</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss per common share &#150; basic and diluted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.56</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.63</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.17</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gain (loss)&nbsp;from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.73</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net loss per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.48</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.78</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5.90</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these consolidated financial statements



<P align="center" style="font-size: 10pt">F-5

<P><HR noshade size="4">


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>ACCERIS COMMUNICATIONS INC. AND SUBSIDIARIES</B>


<DIV align="left">
<A name="126"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS&#146; DEFICIT <BR>

for the years ended December&nbsp;31, 2003, 2002 and 2001</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(in thousands, except share amounts)(1)</B></DIV>


<DIV align="center">
    <TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
      <!-- Begin Table Head -->
      <TR valign="bottom">
        <TD width="52%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
      </TR>
      <TR style="font-size: 8pt" valign="bottom">
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="7"><B>Preferred stock</B></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="7"><B>Common stock</B></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
      </TR>
      <TR style="font-size: 8pt" valign="bottom">
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="7"><HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="7"><HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>Additional paid-</B></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>Accumulated</B></TD>
      </TR>
      <TR style="font-size: 8pt" valign="bottom">
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>Shares</B> <HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>Amount</B> <HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>Shares</B> <HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>Amount</B> <HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>in capital</B> <HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>deficit</B> <HR size="1" noshade></TD>
      </TR>

      <TR style="font-size: 8pt" valign="bottom">
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="7"><B></B></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="7"><B></B></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>(as restated) </B></TD>
      </TR>
      <!-- End Table Head -->
      <!-- Begin Table Body -->

      <TR style="font-size: 8pt" valign="bottom">
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Balance at December&nbsp;31,
            2000</B></DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">24,435</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">244</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">1,406,825</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">14</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">106,805</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">$</TD>
        <TD align="right">(135,902</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Conversion of convertible
            debt and accrued interest into Class&nbsp;M mezzanine preferred stock
            and common warrants</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">6,378</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Common stock issued
            and accumulated deficit acquired as a result of WebToTel acquisition
            and conversion of notes payable</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">872,717</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">9</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">11,935</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,246</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Stock issued - employee
            stock purchase plan</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">1,726</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">15</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Repurchase of Class&nbsp;N
            preferred stock</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(14,404</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(144</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(14,164</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Net contribution
            from repurchase / settlement with stockholders of Class&nbsp;M and
            N preferred stock</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(5,000</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">30,292</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Contingent beneficial
            conversion feature on Class&nbsp;N preferred stock</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">9,780</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(9,780</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Issuance of common
            shares to related party to repurchase warrants outstanding</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">250,000</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">2</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(2</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Reussuance and conversion
            of Class&nbsp;M redeemable preferred stock into common stock</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">2,522,142</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">25</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">4,025</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Reussuance and conversion
            of Class&nbsp;N preferred stock into common stock</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">576,158</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">6</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">944</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Beneficial conversion
            feature on the reissuance of Class&nbsp;M and N preferred stock</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">5,000</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(5,000</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Other conversions
            of Class&nbsp;N preferred stock into common stock</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(13</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">457</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Warrants issued in
            connection with notes payable to related party</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">2,170</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Beneficial conversion
            feature on certain convertible notes payable to related party</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">1,092</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Conversion of Class&nbsp;C
            preferred stock into common stock</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(9,249</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(92</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">170,751</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">2</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">91</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Dividend on Class&nbsp;C
            preferred stock paid in the form of common stock</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">26,701</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">631</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(631</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(44,497</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Balance at December&nbsp;31,
            2001</B></DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">769</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">7</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">5,827,477</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">58</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">129,700</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(166,764</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Beneficial conversion
            feature on certain convertible notes payable to related party</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">6,522</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><div align="right">&#151;</div></TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Acceris costs paid
            by majority stockholder</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">499</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><div align="right">&#151;</div></TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(27,838</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Balance at December&nbsp;31,
            2002</B></DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">769</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">7</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">5,827,477</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">58</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">136,721</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(194,602</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Conversion of related
            party debt to common stock</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">13,428,618</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">134</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">40,539</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Conversion of Class&nbsp;C
            preferred stock to common stock</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(150</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">6,000</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">1</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>


      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Beneficial conversion feature on
certain convertible notes payable to related party</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">5,354</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>



      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Acceris costs paid
            by majority stockholder</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">132</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Management expense
            from majority stockholder</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><div align="right">&#151;</div></TD>
        <TD><div align="right"></div></TD>
        <TD><div align="right"></div></TD>
        <TD><div align="right"></div></TD>
        <TD><div align="right">&#151;</div></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">130</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><div align="right">&#151;</div></TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Issuance of options
            to purchase common stock to non-employee</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><div align="right">&#151;</div></TD>
        <TD><div align="right"></div></TD>
        <TD><div align="right"></div></TD>
        <TD><div align="right"></div></TD>
        <TD><div align="right">&#151;</div></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">2</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><div align="right">&#151;</div></TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD><div align="right">&#151;</div></TD>
        <TD><div align="right"></div></TD>
        <TD><div align="right"></div></TD>
        <TD><div align="right"></div></TD>
        <TD><div align="right">&#151;</div></TD>
        <TD><div align="right"></div></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(31,428</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD>
          <DIV style="margin-left:10px; text-indent:-10px"><B>Balance at December&nbsp;31,
            2003</B></DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">619</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">6</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">19,262,095</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">192</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">182,879</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right" nowrap>$</TD>
        <TD align="right">(226,030</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="4" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="4" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="4" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="4" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="4" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="4" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <!-- End Table Body -->
    </TABLE>
</DIV>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All amounts shown as if the reverse stock split described more fully in
Note 5 below had occurred on January&nbsp;1, 2001.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">The accompanying notes are
an integral part of these consolidated financial statements




<P align="center" style="font-size: 10pt">F-6

<P><HR noshade size="4">

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>ACCERIS COMMUNICATIONS INC. AND SUBSIDIARIES</B>


<DIV align="left">
<A name="127"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
for the years ended December&nbsp;31, 2003, 2002 and 2001<br>(in thousands)</B></DIV>
<p>

<DIV align="center">
    <TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
      <!-- Begin Table Head -->
      <TR valign="bottom">
        <TD width="70%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
      </TR>
      <TR style="font-size: 8pt" valign="bottom">
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>2003</B> <HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>2002</B> <HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>2001</B> <HR size="1" noshade></TD>
      </TR>
      <TR style="font-size: 8pt" valign="bottom">
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>(as restated)</B> </TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>(as restated)</B> </TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3">&nbsp;</TD>
      </TR>

      <!-- End Table Head -->
      <!-- Begin Table Body -->
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from operating
            activities:</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Net loss</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">$</TD>
        <TD align="right">(31,428</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">$</TD>
        <TD align="right">(27,838</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">$</TD>
        <TD align="right">(44,497</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Adjustments to reconcile
            net loss to net cash used in operating activities:</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation and
            amortization</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">7,125</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">8,135</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">10,167</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Provision for doubtful
            accounts</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">5,438</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">6,110</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">4,067</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Decrease in allowance for impairment of net assets of discontinued
          operations</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(169</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Impairment of long-lived
            assets</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD nowrap></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">3,609</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">8,040</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Amortization of discount
            and debt issuance costs on notes payable and capital leases</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">6,052</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">1,765</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">1,518</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Stock received on
            sale of technology license</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,100</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Accrued interest
            added to loan principal</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">5,667</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">3,651</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">1,267</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Expense associated
            with stock options issued to non-employee for services</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">2</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Loss on disposal
            of assets</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">266</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Gain on settlement
            of note payable</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,141</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,093</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Management expense
            to controlling shareholder</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">130</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Gain on sale of subsidiary</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(589</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)&nbsp;from
            changes in operating assets and liabilities, net of effects of acquisitions:</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Accounts receivable</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(5,944</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,269</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(4,528</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Other assets</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,003</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,164</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,127</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Net assets and liabilities
            of discontinued operations</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">750</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Accounts payable,
            accrued liabilities and interest payable</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">2,586</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">3,507</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">12,058</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Unearned revenue</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">4,720</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,643</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(14,566</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash used in
            operating activities</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(8,315</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(4,871</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(29,283</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from investing
            activities:</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Purchases of furniture,
            fixtures, equipment and software</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(2,036</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,649</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,963</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Purchase of patent</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(100</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Business acquisitions,
            net of acquisition costs and cash acquired </DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">149</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(8,276</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(13,447</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Cash received from
            sale of assets</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">160</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">692</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash used in
            investing activities</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,827</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(9,233</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(15,410</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from financing
            activities:</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from issuance
            of notes payable to a related party</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">7,896</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">16,823</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">43,920</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Payment of notes
            payable to related party</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(3,000</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(2,500</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from revolving
            credit facility, net</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">3,041</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">2,089</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">6,996</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Payment of capital
            lease obligations</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(2,514</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(2,544</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,052</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Acceris costs paid
            by majority stockholder</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">132</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">498</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Payment of long-term
            debt</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(805</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(180</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from exercise
            of stock options and warrants and issuances under stock purchase plan</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">16</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash provided
            by financing activities</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">8,555</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">13,061</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">47,200</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)&nbsp;in
            cash and cash equivalents</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,587</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(1,043</TD>
        <TD nowrap>)</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">2,507</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents
            at beginning of year</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">3,620</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">4,663</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">2,156</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents
            at end of year</DIV></TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">2,033</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">3,620</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">4,663</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="4" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="4" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="4" noshade> &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <!-- End Table Body -->
    </TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these consolidated financial statements




<P align="center" style="font-size: 10pt">F-7

<P><HR noshade size="4">
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>ACCERIS COMMUNICATIONS INC. AND SUBSIDIARIES<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)<BR>
for the years ended December&nbsp;31, 2003, 2002 and 2001<br>
(in thousands)
</B>
<P>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Supplemental schedule of non-cash investing and financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">RSL acquisition costs financed through note payable to seller</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Warrants issued in connection with notes payable to related party</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,170</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Conversion of notes payable to a related party and associated accrued
interest to Class&nbsp;M redeemable preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,305</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Reclassification of Class&nbsp;M redeemable preferred stock from Mezzanine</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,040</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Conversion of notes payable to a related party and associated accrued
interest to common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">40,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,327</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Preferred stock received in exchange for assets of discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Assets included in the purchase price of Transpoint acquisition, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Stock options issued for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Notes payable incurred for the purchase of software and software licenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Equipment acquired under capital lease obligations and note payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,888</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Supplemental cash flow information:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Taxes paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,270</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these consolidated financial statements





<P align="center" style="font-size: 10pt">F-8

<P><HR noshade size="4">
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>ACCERIS COMMUNICATIONS INC.</B>


<DIV align="left">
<A name="128"></A>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
For the Year ended December 31, 2003<BR>
(amounts in thousands, except where specifically indicated and share amounts)</DIV>


<P align="left" style="font-size: 10pt"><B>Note 1 &#150; Description of Business and Principles of Consolidation</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements include the accounts of Acceris
Communications Inc. (formerly I-Link Incorporated) and its wholly-owned subsidiaries WorldxChange
Communications Corp. (&#147;WorldxChange&#148;), I-Link
Communications Inc., (&#147;ILC&#148;),
which is included in discontinued operations; the Enterprise and Agent business
of RSL COM USA Inc., (&#147;RSL&#148;), which the Company purchased in December, 2002 and
Transpoint Communications, LLC (&#147;Transpoint&#148;), which the Company purchased in
July&nbsp;2003 (see Note 9). These entities combined are referred to as &#147;Acceris&#148;
or the &#147;Company&#148; in these consolidated financial statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the past six years, Acceris has developed and marketed enhanced
communications products and services utilizing its own private intranet and
both owned and leased network switching and transmission facilities. The
communications products and services are delivered through Acceris&#146; proprietary
technologies. Enhanced communications products and services were marketed
through master agent and other wholesale distributor arrangements with licensed
long-distance carriers. The Company developed and licensed communications
applications products and software that support multimedia communications
(voice, fax and audio) over the public switched network, local area networks
and the Internet.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
June&nbsp;2001, Acceris, through its subsidiary WorldxChange, purchased
certain assets and assumed certain liabilities of WorldxChange Communications,
Inc. from a bankruptcy proceeding. WorldxChange was a facilities-based
telecommunications carrier that provided international and domestic
long-distance service to retail customers. Telecommunications services
provided by WorldXChange consisted primarily of a dial-around product, which
allowed a customer to make a call from any phone by dialing a 10-10-XXX prefix.
Since the acquisition, the Company has commenced offering a 1&#043; product (1&#043;
products are those with which a customer directly dials a long-distance number
from their telephone by dialing 1-area code-phone number). WorldxChange has
also begun to offer local communications products to its residential and small
business customers. The service will be provided under the terms of the
Unbundled Network Element Platform (&#147;UNE-P&#148;) authorized by the
Telecommunications Act of 1996 and will be available in New York and New Jersey
initially, expanding to other markets throughout the United States.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2002, Acceris, through its subsidiary WorldxChange, completed
the purchase of certain assets of RSL (see Note 9). The acquisition included the assets used by
RSL to provide long-distance voice and data services, including frame relay, to
small and medium size businesses (&#147;Enterprise&#148; business), and the assets used to
provide long-distance and other voice services to small businesses and the
consumer/residential market (&#147;Agent&#148; business).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2003, Acceris completed the sale of its domestic
Voice-over-Internet-Protocol (&#147;VoIP&#148;) network business, which represented the
core business of its subsidiary ILC along with a fully paid license to use its
patented technology, to Buyers United, Inc. (&#147;BUI&#148;). This allowed the Company
to focus on the licensing of its technology and the pursuit of a patent
enforcement strategy.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2003, Acceris acquired US Patent No.&nbsp;6,243,373. The
acquisition of this patent combined with the Company&#146;s US Patent No.&nbsp;6,438,124
form the foundational patents for VoIP communication.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2003, Acceris, through its subsidiary WorldxChange, completed the
purchase of all the outstanding shares of Transpoint (see Note 9). The acquisition allowed the Company to
increase its penetration in the commercial agent channel.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All significant intercompany accounts and transactions have been
eliminated in consolidation.

<P align="left" style="font-size: 10pt"><B>Note &#150; 2 Liquidity and Capital Resources</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has incurred
substantial operating losses and negative cash
flows from operations since inception and had a stockholders&#146; deficit of
$42,953 and negative working capital of $26,576 at December&nbsp;31, 2003. The
Company continued to finance its operations during 2003 through related party
debt with an outstanding balance of $28,717 and a revolving credit facility
with an outstanding balance of $12,127 as of December&nbsp;31, 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December&nbsp;31, 2003, the Company has debt of $28,717 owed to its
controlling stockholder, Counsel Corporation (collectively with all of
its subsidiaries, &#147;Counsel&#148;), which matures on June&nbsp;30, 2005 (subject to
certain contingent acceleration clauses). This debt is supplemented by an
agreement from Counsel to fund through long-term inter-company advances or
equity contributions, all capital investment, working capital or other
operational cash requirements of the Company (the &#147;Keep Well&#148;). During 2003,
Counsel advanced the Company approximately $7,896 under its Keep Well and
converted accrued interest of $5,070 into principal.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2003, Counsel acquired a debt which the Company owed to Winter
Harbor LLC (&#147;Winter Harbor&#148;) of $1,999 and converted $40,673 of its convertible
debt into common stock of the Company. These events significantly reduced the
Company&#146;s liabilities.


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<P align="center" style="font-size: 10pt">F-9


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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The majority of the Company&#146;s debt matures on June&nbsp;30, 2005. This includes
amounts due on its three-year asset-based credit facility, under which it owed
$12,127 at December&nbsp;31, 2003 and $28,717 owed to Counsel (plus additional
interest accrued prior to June&nbsp;2005).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, management intends to raise capital to support the growth
strategy of the business. Use of funds from such offering(s) will be detailed
at the time and may include such uses as to fund operations, improve working
capital, repay obligations of the business and to fund future acquisition
activities. There can be no assurance that the Company&#146;s capital raising efforts will be successful.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is no assurance that the Company will be able to improve its cash
flow from operations, obtain additional third party financing, extend, repay or
refinance its debt with Counsel or its asset-based lender on acceptable terms,
or obtain an extension of the existing funding commitment from Counsel or its
asset-based lender beyond June&nbsp;30, 2005, should it be required. If the Company
is unable to accomplish the above, it may need to evaluate opportunities to
sell assets or obtain alternative financing with terms that are not favorable
to the Company. These matters raise substantial doubt about the
Company&#146;s ability to continue as a going concern. The
accompanying consolidated financial statements do not include any
adjustments to reflect the possible future effects on the
recoverability of assets and liquidation of liabilities that may
result from this uncertainty.


<P align="left" style="font-size: 10pt"><B>Note 3 &#150; Restatement</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements as of December&nbsp;31, 2002
and for the year then ended have been restated on the Company&#146;s
Annual Report on Form 10-K/A#3  from
those previously issued to record additional deemed interest expense for
beneficial conversion features (&#147;BCF&#148;) embedded in certain
of the Company&#146;s indebtedness as required by Emerging Issues Task Force Issue No.&nbsp;00-27 (&#147;EITF
00-27&#148;). The restatement had no effect on
loss from discontinued operations or net loss per share from discontinued
operations. The restatement increased the net loss for the year ended December
31, 2002 by $301, or $0.05 per share.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying consolidated financial statements as of December&nbsp;31, 2003 and
for the year then ended have also been restated from those previously issued to
record additional deemed interest expense for
BCF embedded in certain
of the Company&#146;s indebtedness as required by EITF 00-27. The restatement had no effect on loss from discontinued operations
or net loss per share from discontinued operations. The restatement increased
the net loss for the year ended December&nbsp;31, 2003 by $5,107 or $0.73 per share.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;20, 2004, management of the Company concluded that the accounting
principles as set forth in EITF 00-27, regarding BCF, had not been properly applied in current and prior
periods to its convertible debentures issued under a March&nbsp;2001 loan agreement
for which the Company had previously determined BCF of $1,100. The
initial determination of the BCF in 2001 at the respective issue dates of such
debt was correct. However, adjustments to the conversion price and the number
of conversion shares were made under the debentures&#146; anti-dilution provisions.
The various anti-dilution events and their respective impacts on the number of
shares and the conversion price were disclosed in the Company&#146;s previous public
filings. However, the principles under EITF 00-27 also require a
redetermination of the BCF at each date an anti-dilution event occurred. This
redetermination was not completed in prior reporting periods. Additionally, the
accumulation of unpaid interest costs which are required by the debt terms to
be added to principal and which are payable at maturity on these same
convertible debentures has been deemed to be interest paid in kind (&#147;PIK&#148;);
such interest also contains a conversion feature, and the payment of such
interest in the form of PIK interest is non-discretionary requiring the
determination of a BCF in the PIK interest. This determination was not made by
the Company in its prior reportings.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s management has now concluded that a restatement is required and
has brought these matters for consideration before the Audit Committee and the
full Board of Directors of the Company. Having considered the circumstances
underlying the accounting errors and their effects upon the Company&#146;s prior
filings, and having discussed these matters with the Company&#146;s management, the
Audit Committee concluded that the previously issued financial statements
should not be relied upon and approved and authorized the Company&#146;s management
to amend certain previously filed public reports to reflect deemed interest
expense from such BCF.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
the error affects 2001, 2002 and 2003, the $23 cumulative effect on
earnings through the third quarter of 2002 was recorded in the fourth
quarter of 2002 as a charge to interest expense. Therefore, the correction is an increase in deemed interest expense and net loss, in all
reporting periods from the fourth quarter of 2002 through the first quarter of
2004, and a reduction in reported liabilities and stockholders&#146; deficit in all
reporting periods from the fourth quarter of 2002 through the first quarter of
2004. The effect of these errors is detailed, by reporting period, below. The
restatement had no
effect on loss from discontinued operations or net loss per share from
discontinued operations.


<P align="center" style="font-size: 10pt">F-10
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt"><B>Effect of the restatements on the consolidated statements of operations<BR>
(per share information reported on a post 20:1 stock consolidation basis for all periods shown. Stock consolidation enacted in the fourth quarter of 2003)</B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="31%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>Three months</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>Dec. 31, 2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>March 31, 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>June 30, 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>Sept. 30, 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>Dec. 31, 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid gray"><B>March 31, 2004</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(unaudited)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income (loss)&nbsp;as previously reported
on Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,117</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(14,895</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,713</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,257</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,456</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">594</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Correction of EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(301</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(902</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,089</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,337</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,779</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,801</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss as currently reported on
revised Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(11,418</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(15,797</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(4,802</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(4,594</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(6,235</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(1,207</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income (loss)&nbsp;per share as previously
reported on Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.92</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.55</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.64</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.56</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.44</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.03</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss per share as currently
reported on revised Form&nbsp;10-K or
10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.96</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.71</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.82</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.79</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>Effect of the restatements on the consolidated balance sheets</B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="border-bottom: 1px solid gray"><b>As at</b></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="border-bottom: 1px solid gray"><b>As at</b></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="border-bottom: 1px solid gray"><b>As at</b></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="border-bottom: 1px solid gray"><b>As at</b></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="border-bottom: 1px solid gray"><b>As at</b></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="border-bottom: 1px solid gray"><b>As at</b></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="border-bottom: 1px solid gray"><b>Dec. 31, 2002</b></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="border-bottom: 1px solid gray"><b>March 31, 2003</b></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="border-bottom: 1px solid gray"><b>June 30, 2003</b></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="border-bottom: 1px solid gray"><b>Sept. 30, 2003</b></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="border-bottom: 1px solid gray"><b>Dec. 31, 2003</b></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" style="border-bottom: 1px solid gray"><b>March 31, 2004</b></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">(unaudited)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Notes payable to a related party:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As previously reported on
Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">33,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41,060</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Correction of EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,109</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,364</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,437</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,265</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,356</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,834</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As currently reported on
revised Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right"><HR size="1" noshade>23,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right"><HR size="1" noshade>25,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right"><HR size="1" noshade>26,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right"><HR size="1" noshade>30,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right"><HR size="1" noshade>28,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right"><HR size="1" noshade>36,226</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Additional paid-in capital:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As previously reported on
Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">171,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">171,192</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Correction of EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,043</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As  currently reported on
revised Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right"><HR size="1" noshade>135,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right"><HR size="1" noshade>136,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right"><HR size="1" noshade>136,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right"><HR size="1" noshade>136,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right"><HR size="1" noshade>182,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right"><HR size="1" noshade>183,235</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Accumulated deficit</B>
<BR>As previously reported on
Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(194,301</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(209,196</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(212,909</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(216,166</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(220,622</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(220,028</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Correction of EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(301</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,203</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,292</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,629</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,408</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,209</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As currently reported on
revised Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(194,602</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(210,399</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(215,201</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(219,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(226,030</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(227,237</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Stockholders&#146; equity (deficit):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As previously reported on
Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(63,925</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(78,820</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(82,468</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(85,725</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(49,309</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(47,292</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Correction of EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,834</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As currently reported on
revised Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(57,816</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(73,456</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(78,031</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(82,460</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(42,953</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right"><HR size="1" noshade>(42,458</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-11
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt"><B>Note 4 &#150; Summary of Significant Accounting Policies</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Revenue recognition</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue is recognized when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, the Company&#146;s price to
the customer is fixed and determinable, and collection of the resulting
receivable is reasonably assured. Revenue is derived from telecommunications
usage based on minutes of use. Revenue derived from usage is recognized as
services are provided, based on agreed upon usage rates. Revenue is recorded
net of estimated customer credits and billing errors, which are recorded at the
same time the corresponding revenue is recognized. Revenues from billings for
services rendered where collectibility is not assured are recognized when the
final cash collections to be retained by the Company are finalized.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues for the Company&#146;s network service offering, which it began to
sell in November&nbsp;2002 and subsequently ceased selling in July&nbsp;2003, are
accounted for using the unencumbered cash method. The Company determined that
collectibility of the amounts billed to customers was not reasonably assured at
the time of billing. Under its agreements with the Local Exchange Carriers
(&#147;LECs&#148;), cash collections remitted to the Company are subject to adjustment,
generally over several months. Accordingly, the Company recognizes revenue
when the actual cash collections to be retained by the Company are finalized
and unencumbered. There is no further billing of customers for the network
service offering subsequent to the program&#146;s termination. At December&nbsp;31,
2003, the Company had approximately $4,621 in cash receipts that were still
subject to adjustment by the LECs and therefore encumbered. This amount is
included in deferred revenue at December&nbsp;31, 2003. The Company expects that a
portion of these amounts will become unencumbered during 2004, and will record
revenues at such time that the Company finalizes cash collection amounts with
the LECs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue from the sale of software licenses is recognized when a
non-cancelable agreement is in force, the license fee is fixed or determinable,
acceptance has occurred, and collectibility is reasonably assured. Maintenance
and support revenues are recognized ratably over the term of the related
agreements. When a license of Acceris technology requires continued support or
involvement of Acceris, contract revenues are spread over the period of the
required support or involvement. In the event that collectibility is in
question, revenue (deferred or recognized) is recorded only to the extent of
cash receipts.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Use of estimates</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant
estimates include revenue recognition (see above), accruals for
telecommunications network cost, the allowance for doubtful accounts, purchase
accounting (including the ultimate recoverability of intangibles and other
long-lived assets), valuation of deferred tax assets and contingencies
surrounding litigation. These policies have the potential to have a more
significant impact on our financial statements, either because of the
significance of the financial statement item to which they relate, or because
they require judgment and estimation due to the uncertainty involved in
measuring, at a specific point in time, events which are continuous in nature.




<P align="center" style="font-size: 10pt">F-12
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Costs associated with carrying telecommunications traffic over our network
and over the Company&#146;s leased lines are expensed when incurred, based on invoices received
from the service providers. If invoices are not available in a timely fashion,
estimates are utilized to accrue for these telecommunications network costs.
These estimates are based on the understanding of variable and fixed costs in
the Company&#146;s service agreements with these vendors in conjunction with the traffic
volumes that has passed over the network and circuits provisioned at the
contracted rates. Traffic volumes for a period are calculated from information
received through the Company&#146;s network switches. From time to
time, the Company has disputes
with its vendors relating to telecommunications network services. In
the event of such disputes, the Company records an expense based on
its understanding of the agreement with that particular vendor, traffic
information received from its network switches and other factors.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowances for doubtful accounts are maintained for estimated losses
resulting from the failure of customers to make required payments on their
accounts. The Company evaluates its provision for doubtful accounts at least quarterly
based on various factors, including the financial condition and payment history
of major customers and an overall review of collections experience on other
accounts and economic factors or events expected to affect its future
collections experience. Due to the large number of customers that the
Company serves, it
is impractical to review the creditworthiness of each of its customers,
although a credit review is performed for larger carrier and retail business
customers. The Company considers a number of factors in determining the proper level of
the allowance, including historical collection experience, current economic
trends, the aging of the accounts receivable portfolio and changes in the
creditworthiness of its customers.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company accounts for intangible assets in accordance with Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;141, <I>Business Combinations</I> (&#147;SFAS 141&#148;) and
SFAS No.&nbsp;142, <I>Goodwill and Other Intangible Assets</I> (&#147;SFAS 142&#148;). All
business combinations are accounted for using the purchase method and goodwill
and intangible assets with indefinite useful lives are not amortized, but are
tested for impairment at least annually. Intangible assets are intially recorded based on estimates of fair value at the time of the acquisition


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company
assesses the fair value of its segments for goodwill
impairment based upon a discounted cash flow methodology. If the
carrying amount of the segment assets exceed the estimated fair value
determined through the discounted cash flow analysis, goodwill impairment may
be present. The Company would measure the goodwill impairment loss based upon
the fair value of the underlying assets and liabilities of the segment,
including any unrecognized intangible assets and estimate the implied fair
value of goodwill. An impairment loss would be recognized to the extent that a
reporting unit&#146;s recorded goodwill exceeded the implied fair value of goodwill.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company
performed its annual impairment test in the fourth quarters of
2003 and 2002. No impairment was present upon performing these tests.
We cannot predict the occurrence of certain events that might adversely
affect the reported value of goodwill. Such events may include, but are not
limited to, strategic decisions made in response to economic and competitive
conditions, the impact of the economic environment on its customer
base or a material negative change in its relationships with significant
customers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regularly,
the Company evaluates whether events or circumstances have occurred that
indicate the carrying value of its other amortizable intangible assets may not
be recoverable. When factors indicate the asset may not be
recoverable, the Company
compares the related future net cash flows to the carrying value of the asset to
determine if impairment exists. If the expected future net cash flows are less
than carrying value, impairment is recognized to the extent that the carrying
value exceeds the fair value of the asset.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company performs a valuation on its deferred tax asset, which has been generated
by a history of net operating loss carryforwards, at least annually, and
determine the necessity for a valuation allowance. The Company
evaluates which portion,
if any, will more likely than not be realized by offsetting future taxable
income. The determination of that allowance includes a projection of
its
future taxable income, as well as consideration of any limitations that may
exist on its use of its net operating loss or credit carryforwards.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company is involved from time to time in various legal matters arising out of
its operations in the normal course of business. On a case by case
basis, the Company
evaluates the likelihood of possible outcomes for this litigation. Based on
this evaluation, the Company determines whether a liability is appropriate.
If the likelihood of a negative outcome is probable, and the amount
is estimable, the Company accounts for the liability in the current period.
A change in the circumstances surrounding any current litigation could have a material impact on the financial statements.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Cash and cash equivalents</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. The Company maintains
its cash and cash equivalents primarily with financial institutions in
California and Pennsylvania. These accounts may from time to time exceed
federally insured limits. The Company has not experienced any losses on such
accounts.

<P align="center" style="font-size: 10pt">F-13
</DIV>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Provision for doubtful accounts</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company evaluates the collectibility of its receivables at least
quarterly, based upon various factors including the financial condition and
payment history of major customers, and overall review of collections
experience on other accounts and economic factors or events expected to affect
the Company&#146;s future collections experience. Due to the large number of
customers that the Company serves, it is impractical to review the
creditworthiness of each of its customers, although a credit review is
performed for larger carrier and retail business customers. The Company
considers a number of factors in determining the proper level of the allowance,
including historical collection experience, current economic trends, the aging
of the accounts receivable portfolio and changes in the creditworthiness of its
customers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Furniture, fixtures, equipment and software</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furniture, fixtures, equipment and software are stated at cost.
Depreciation is calculated using the straight-line method over the following
estimated useful lives:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Telecommunications network equipment
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;3-5 years</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Furniture, fixtures and office equipment
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3-10 years</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Software and information systems
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3 years</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-lived assets that are to be disposed of by sale are carried at the
lower of book value or estimated net realizable value less costs to sell.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Betterments and renewals that extend the life of the assets are
capitalized. Other repairs and maintenance charges are expensed as incurred.
The cost and related accumulated depreciation applicable to assets retired are
removed from the accounts and the gain or loss on disposition is recognized in
operations. The Company regularly evaluates whether events or circumstances
have occurred that indicate the carrying value of its furniture, fixtures,
equipment and software may not be recoverable. When factors indicate the asset
may not be recoverable, the Company compares the related future net cash flows
to the carrying value of the asset to determine if impairment exists. If the
expected future net cash flows are less than the carrying value, impairment is
recognized to the extent that the carrying value exceeds the fair value of the
asset.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investments</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends and realized gains and losses on securities are included in
other income in the consolidated statements of operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company holds investments in two
companies. These investments are accounted for under the cost method, as the
securities or the underlying common stock are not readily marketable and the
Company&#146;s ownership interests do not allow it to exercise significant influence
over these entities. The Company monitors these investments for impairment by
considering current factors including economic environment, market conditions
and operational performance and other specific factors relating to the business
underlying the investment, and will record impairments in carrying values when
necessary. The fair value of the securities are estimated using the best
available information as of the evaluation date, including the quoted market
prices of comparable public companies, market price of the common stock
underlying the preferred stock, recent financing rounds of the investee and
other investee specific information.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Intangible assets</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;1, 2002, the Company accounts for intangible assets in
accordance with SFAS No.&nbsp;141,
<I>Business Combinations</I> (&#147;SFAS 141&#148;) and SFAS No.&nbsp;142, <I>Goodwill and Other
Intangible Assets</I> (&#147;SFAS 142&#148;). The adoption of SFAS 141 and 142 did not
materially impact the results of operations or financial condition of the
Company. All business combinations are accounted for using the purchase method
and goodwill and intangible assets with indefinite useful lives are not
amortized, but are tested for impairment at least annually.

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company regularly evaluates whether events or circumstances have
occurred that indicate the carrying value of its intangible assets may not be recoverable. When factors indicate the asset may not be
recoverable, the Company compares the related future net cash flows to the
carrying value of the asset to determine if impairment exists. If the expected
future net cash flows are less than carrying value, impairment is recognized to
the extent that the carrying value exceeds the fair value of the asset. The
Company recorded a charge of approximately $8,040 in 2001, representing the
remaining balance of the goodwill associated with the WebToTel acquisition.
Amortization of intangible assets is calculated using the straight-line method
over the following periods:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="84%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Enterprise customer contracts and relationships
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">60 months</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Retail customer contracts and relationships
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">12 months</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Agent relationships
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">36 months</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Acquired patents
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">60 months</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Agent contracts
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">12 months</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">F-14
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Advertising costs</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising production costs are expensed the first time the advertisement
is run. Media (television and print) placement costs are expensed in the month
the advertising appears. The Company incurred $127, $1,590 and $7,270 in
advertising costs in the years ended December&nbsp;31, 2003, 2002 and 2001,
respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Research and development costs</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company expenses internal research and development costs, which
primarily consist of salaries, when they are incurred.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Computer software costs</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company capitalizes qualified costs associated with developing
computer software for internal use. Such costs are amortized over the expected
useful life, usually three years. During 2003, the Company capitalized
approximately $128 in costs associated with the development and installation of
a new billing system to launch a local product offering. No such costs were
capitalized during 2002 or 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Concentrations of credit risk</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s retail telecommunications subscribers are primarily
residential and small business subscribers in the United States. The Company&#146;s
customers are generally concentrated in the areas of highest population in the
United States, more specifically California, Florida, New York, Texas and
Illinois. No single customer accounted for over 10% of revenues in 2003 or
2002. The only customer that accounted for over 10% of revenues for 2001 was
Red Cube International AG (&#147;Red Cube&#148;), which accounted for approximately 18%
of revenues. The Company performs ongoing credit evaluations of its larger
carrier and retail business customers but generally does not require collateral
to support customer receivables.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Concentration of third party service providers</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris utilizes the services of certain Competitive Local Exchange
Carriers (&#147;CLECs&#148;) to bill and collect from customers. A significant portion
of revenues in the years ended December&nbsp;31, 2003, 2002 and 2001 were derived
from customers billed by CLECs. If the CLECs were unwilling or unable to
provide such services in the future, the Company would be required to
significantly enhance its billing and collection capabilities in a short amount
of time and its collection experience could be adversely affected during this
transition period.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company depends on certain large telecommunications carriers to
provide network services for significant portions of the Company&#146;s
telecommunications traffic. If these carriers were unwilling or unable to
provide such services in the future, the Company&#146;s ability to provide services
to its customers would be adversely affected and the Company might not be able
to obtain similar services from alternative carriers on a timely basis.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Income taxes</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company records deferred taxes in accordance with SFAS No.&nbsp;109, <I>Accounting for Income Taxes </I>(&#147;SFAS 109&#148;). The statement
requires recognition of deferred tax assets and liabilities for temporary
differences between the tax bases of assets and liabilities and the amounts at
which they are carried in the financial statements, based upon the enacted tax
rates in effect for the year in which the differences are expected to reverse.
The Company establishes a valuation allowance when necessary to reduce deferred
tax assets to the amount expected to be realized. The determination of that
allowance includes a projection of the Company&#146;s future taxable income, as well
as consideration of any limitations that may exist on the Company&#146;s use of its
net operating loss or credit carryforwards.


 <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Stock-based compensation</B>

  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31,
    2003, the Company has several stock-based compensation plans, which are described
    more fully in Note 18. The Company accounts for those plans under the recognition
    and measurement principles of Accounting Principles Board Opinion No.&nbsp;25,
    <I>Accounting for Stock Issued to Employees</I>, and related Interpretations
    (collectively, &#147;APB 25&#148;). Stock-based employee compensation cost
    is not reflected in net loss, as all options granted under those plans had
    an exercise price equal to the market value of the underlying common stock
    on the date of grant. In accordance with FASB SFAS No.&nbsp;123, <I>Accounting
    for Stock-Based Compensation </I>(&#147;SFAS 123&#148;), as amended by FASB
    SFAS No.&nbsp;148, <em>Accounting for Stock-Based Compensation &#150; Transition
    and Disclosure,</em> see below for a tabular presentation of the pro forma
    stock-based compensation cost, net loss and loss per share as if the fair
    value-based method of expense recognition and measurement prescribed by SFAS
    123 had been applied to all employee options. Options granted to non-employees
    (excluding non-employee members of the Company&#146;s Board of Directors)
    are recognized and measured using the fair value-based method prescribed by
    SFAS 123.


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
<P align="center" style="font-size: 10pt">F-15

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">
  <DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Year ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>


<TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade><BR></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
        <TD align="right">(31,428</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(27,838</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(44,497</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deduct:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total compensation cost
            determined under fair value based method for all awards, net of $0
            tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(92</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,300</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,933</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Pro forma net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
        <TD align="right">(31,520</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(29,138</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(47,430</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic and diluted &#150; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
        <TD align="right">(4.48</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.78</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5.90</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic and diluted &#150; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
        <TD align="right">(4.50</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5.00</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6.49</TD>
    <TD nowrap>)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fair
    value of each option grant is estimated on the date of the grant using the
    Black-Scholes option pricing model with the following weighted average assumptions:
    expected volatility of 98%, 150% and 120% in 2003, 2002 and 2001, respectively,
    risk free rates ranging from 2.76% to 3.00%, 2.02% to 4.40% and 3.17% to 6.62%
    in 2003, 2002 and 2001, respectively, expected lives of 4&nbsp;years in 2003
    and 3&nbsp;years in 2002 and 2001, and dividend yield of zero for each year.
  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Segment reporting</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company reports its segment information based upon the internal
organization that is used by management for making operating decisions and
assessing the Company&#146;s performance. In late 2002, Acceris was reorganized
into three operating segments, Retail, Enterprise and Technologies. These
segments were previously referred to as Acceris Communications Partners,
Acceris Communications Solutions and Acceris Technologies, respectively. See
Note 19 for a more detailed discussion of the segments.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Reclassifications</B>


  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
    balances in the consolidated financial statements as of and for the years
    ended December&nbsp;31, 2002 and 2001 have been reclassified to conform to
    current year presentation. These changes had no effect on previously reported
    net loss, total assets, liabilities or stockholders&#146; deficit. In 2003,
    the Company adopted SFAS No.&nbsp;145, <em>Rescission of FASB Statements No.&nbsp;4,
    44, and 64, Amendment of FASB Statement No.&nbsp;13, and Technical Corrections
    as of April&nbsp;2002</em> (&#147;SFAS 145&#148;). SFAS 145 requires the modification
    of the Company&#146;s 2001 financial statement to reclassify the previously
    reported gain on debt extinguishment from an extraordinary item to discontinued
    operations.
  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Recent accounting pronouncements</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2003, the FASB issued SFAS No.&nbsp;150, <I>Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity</I>
(&#147;SFAS 150&#148;). SFAS 150 establishes standards for the classification and
measurement of certain financial instruments with characteristics of both
liabilities and equity. It requires the classification of a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). SFAS 150 is effective for financial instruments entered into or
modified after May&nbsp;31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June&nbsp;15, 2003. The Company adopted SFAS
150 on July&nbsp;1, 2003 and the adoption did not have any effect on the Company&#146;s
financial position or results of operations.

  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2003,
    the FASB issued SFAS No.&nbsp;149, <I>Amendment of Statement 133 on Derivative
    Instruments and Hedging </I>Activities (&#147;SFAS 149&#148;). This Statement
    amends and clarifies financial accounting and reporting for derivative instruments,
    including certain derivative instruments embedded in other contracts (collectively
    referred to as derivatives) and for hedging activities under SFAS No.&nbsp;133,
    <em>Accounting for Derivative Instruments and Hedging Activities.</em> This
    Statement is effective for contracts entered into or modified after June&nbsp;30,
    2003, except as stated below and for hedging relationships designated after
    June&nbsp;30, 2003 and did not have any effect on the Company&#146;s financial
    position or results of operations.
  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2003,
    the Securities and Exchange Commissions (the &#147;SEC&#148;) issued Staff
    Accounting Bulletin (&#147;SAB&#148;) No.&nbsp;104, <I>Revenue Recognition
    </I>(&#147;SAB 104&#148;)<I>, </I>which supersedes portions of SAB 101. The
    primary purpose of SAB 104 is to rescind accounting guidance contained in
    SAB 101 related to multiple element revenue arrangements, which was superseded
    as a result of the issuance of the FASB's Emerging Issues Task Force Issue
    No. 00-21, <em>Accounting for Revenue Arrangements with Multiple Deliverables</em> (&quot;EITF
    00-21&quot;). While the wording of SAB 104 changed to reflect the issuance of
    EITF 00-21, the revenue recognition principles of SAB 101 remain largely unchanged
    by the issuance of SAB 104. The adoption of SAB 104 did not have a material
    impact on the Company&#146;s financial position or results of operations.



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
<P align="center" style="font-size: 10pt">F-16


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Note 5 &#150; Net Loss per Share and Reverse Stock Split</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic earnings per share is computed based on the weighted average number
of common shares outstanding during the period. Options, warrants, convertible
preferred stock and convertible debt are included in the calculation of diluted
earnings per share, except when their effect would be anti-dilutive. As the
Company had a net loss from continuing operations for 2003, 2002 and 2001,
basic and diluted loss per share are the same.


  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;6,
    2002, the Board of Directors approved a 1-for-20 reverse split of Acceris&#146;
    common stock (the &#147;Stock Split&#148;). The stockholders&#146; of Acceris
    approved the Stock Split by stockholder vote on November&nbsp;26, 2003.  In connection with the
    Stock Split the par value of the common stock was changed from $0.007 to $0.01 per share.
    The Stock Split reduced the shares of common stock outstanding by 365,977,409 shares. The basic and diluted
    net loss per common share and all other share amounts in these financial statements
    are presented as if the reverse stock split had occurred on January&nbsp;1,
    2001. Contemporaneous with the Stock Split, Counsel exercised its right to
    convert certain debt instruments into shares of the Company&#146;s common
    stock. As a result of the conversion, the Company issued to Counsel 13,428,492
    shares of common stock on a post-split basis.
  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2003,
    150 shares of the Company&#146;s Class&nbsp;N preferred stock held by an unrelated
    third party were converted into 6,000 shares of common stock.
  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The basic and diluted net loss per common share for the year ended
December&nbsp;31, 2001 includes a net increase to retained earnings of approximately
$30,292 attributable to the redemption on March&nbsp;1, 2001 of the Class&nbsp;M
redeemable preferred stock and all Class&nbsp;N preferred stock owned by Winter
Harbor, including redemption of the beneficial conversion feature related to
such preferred stock. In addition, there was a charge to retained earnings in
2001 of approximately $9,780 representing a contingent beneficial conversion
feature on the Class&nbsp;N preferred stock resulting from the reset of the
conversion price. The basic and diluted net loss per common share in 2001 also
reflects a $5,000 charge to retained earnings for the beneficial conversion
feature related to the reissuance on March&nbsp;1, 2001 of the Class&nbsp;M and Class&nbsp;N
preferred stock to Counsel. The net effect of these transactions was a
benefit included in the net loss per common share of approximately $15,512 for
the year ended December&nbsp;31, 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;6, 2001, all outstanding shares of the Company&#146;s Class&nbsp;C
preferred stock automatically converted into shares of common stock according
to the terms of the designation of the Class&nbsp;C preferred stock. Accordingly,
9,249 shares of Class&nbsp;C preferred stock were converted into 170,751 shares of
common stock. In addition to the conversion of the preferred stock, the
Company was obligated to pay dividends declared but unpaid and other dividends
not paid on the preferred stock through the conversion date. Accordingly,
dividends in the amount of approximately $630 were satisfied through the
issuance of 26,701 shares of common stock.


  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Potential
    common shares that were not included in the computation of diluted earnings
    per share because they would have been anti-dilutive are as follows as of December&nbsp;31:
  <DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Assumed conversion of Class&nbsp;N preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,760</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Assumed conversion of convertible debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,486,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,272,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,142,625</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Assumed exercise of options and warrants to
purchase shares of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,807,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,258,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,401,673</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,318,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,561,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,575,058</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt"><B>Note 6 &#150; Investments</B>


<P align="left" style="font-size: 10pt">The Company&#146;s investments as of December&nbsp;31, 2003 consist of convertible
preferred stock and common stock holdings in one company and convertible
preferred stock holdings in another. The first investment is in BUI which
investment was consideration received related to the sale of the ILC business. This
investment has been recorded at its estimated fair value as of the closing date
of the sale of ILC. The carrying value of the investment as of closing
(May&nbsp;1, 2003) was $1,624 and as of December&nbsp;31, 2003 was $2,058 due to
additional shares of common stock received subsequent to May&nbsp;1, 2003 as
earn-out shares (see Note 7). Subsequent to December&nbsp;31, 2003, but prior to
the issuance of the Company&#146;s financial statements, the Company converted its
preferred stock into shares of common stock of BUI and sold a portion of the
common stock in a private placement (see Note 21). Accordingly, this
investment in shares of preferred and common stock is classified as a current asset at
December&nbsp;31, 2003.


<P align="left" style="font-size: 10pt">The second investment in convertible preferred stock is in Accessline
Communications Corporation. This stock was received as consideration for a
licensing agreement (reflected in technology licensing and related services
revenues) in the second quarter of 2003, the estimated fair value of which was
determined to be $1,100.






<P align="center" style="font-size: 10pt">F-17
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Note 7 &#150; Discontinued Operations</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;6, 2002, the Company entered into an agreement to sell
substantially all of the assets and customer base of ILC to BUI. The sale
includes the physical assets required to operate Acceris&#146; nationwide network
using its patented VoIP technology (constituting the core business of ILC) and
a license in perpetuity to use Acceris&#146; proprietary software platform. The sale
closed on May&nbsp;1, 2003 and provided for a post closing cash settlement between
the parties. The sale price consisted of 300,000 shares of Series&nbsp;B convertible
preferred stock (8% dividend) of BUI, subject to adjustment in certain
circumstances, of which 75,000 shares are subject to an earn-out provision
(contingent consideration) based on future events related to ILC&#146;s single
largest customer. The earn-out takes place on a monthly basis over a
fourteen-month period which began January&nbsp;2003. The Company recognizes the
value of the earn-out shares as additional sales proceeds when and if earned.
During the year ending December&nbsp;31, 2003, 64,286 shares of the contingent
consideration were earned and are included as a component of gain (loss)&nbsp;from
discontinued operations. The fair value of the 225,000 shares (non-contingent
consideration to be received) of Buyers United convertible preferred stock was
determined to be $1,350 as of December&nbsp;31, 2002. As of December&nbsp;31, 2003, the
combined fair value of the original shares (225,000) and the shares earned from
the contingent consideration (64,286 shares) was determined to be $1,916. The
value of the shares earned from the contingent consideration is included in the
calculation of gain from discontinued operation for the year ended December&nbsp;31,
2003. As additional contingent consideration is earned, it is recorded as a
gain from discontinued operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon closing of the sale, BUI assumed all operational losses since
December&nbsp;6, 2002. Accordingly, the gain of $529 for the year ended December
31, 2003, includes the increase in the sales price for the losses incurred
since December&nbsp;6, 2002. In the year ended December&nbsp;31, 2002, the Company
recorded a loss from discontinued operations related to ILC of $12,508.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net assets and liabilities of the discontinued operations are as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="78%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Furniture, fixtures equipment and software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,667</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Impairment charge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,587</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
        <TD><div align="right">(</div></TD>
    <TD align="right">841</TD>
        <TD><div align="left">)</div></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net assets (liabilities)&nbsp;of discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues of the discontinued operation were $2,108, $7,806 and $26,624 in
2003, 2002 and 2001, respectively.


<P align="left" style="font-size: 10pt"><B>Note 8 &#150; Composition of Certain Financial Statements Captions</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furniture, fixtures, equipment and software consisted of the following at
December&nbsp;31:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="73%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Telecommunications network equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,361</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Furniture, fixtures and office equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,059</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,939</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Building /leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Software and information systems</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,815</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less accumulated depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,063</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,336</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,479</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included
in telecommunications network equipment is $9,739 in assets
acquired under capital leases at December&nbsp;31, 2003 and 2002. Accumulated
amortization on these leased assets was $6,382 and $3,930 at December&nbsp;31, 2003
and 2002, respectively.




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<P align="center" style="font-size: 10pt">F-18
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities consisted of the following at
December&nbsp;31:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,017</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Telecommunications and related costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,866</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Regulatory fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,124</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,107</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>Note 9 &#150; Acquisitions</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Acquisition of WebToTel</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;17, 2001, the Company completed its acquisition of WebToTel, Inc.
(&#147;WebToTel&#148;) and Nexbell Communications, Inc. (&#147;Nexbell&#148;), both previously
subsidiaries of Counsel for 872,717 shares of the Company&#146;s common stock issued
to Counsel. The acquisition of WebToTel was accounted for similar to a
pooling-of-interests using Counsel&#146;s book values of the WebToTel assets and
liabilities, effective March&nbsp;1, 2001, the earliest date that all three entities
were under common control of Counsel.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nexbell was sold to a third party in December&nbsp;2001. The sale was a sale
of Nexbell&#146;s common stock and accordingly the assets and liabilities of Nexbell
were assumed by the purchaser with no further financial obligation to the
Company. At the time of the sale, the liabilities exceeded the assets of
Nexbell and accordingly a gain on sale of subsidiary in the amount of $589 (the
amount by which the liabilities of Nexbell exceeded the assets) was recorded.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Purchase of certain assets and assumption of certain liabilities of
WorldxChange Communications, Inc.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;4, 2001, Acceris purchased certain assets and assumed certain
liabilities of WorldxChange Communications, Inc. (the &#147;Debtor&#148;) from a
bankruptcy proceeding, creating WorldxChange. The purchased assets included
all of the assets employed in the Debtor&#146;s operations in the United States and
consisted of the Debtor&#146;s equipment, inventory, retail long-distance business,
accounts receivable, deposits, licenses, permits, authorizations, software
programs and related technology. On June&nbsp;4, 2001, the Debtor transferred the
purchased assets to WorldxChange in exchange for $13,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To fund the acquisition of the assets and provide working capital, Counsel
agreed to provide a collateralized loan to Acceris in the aggregate amount of
$15,000 (of which $13,000 was used for the purchase) as more fully described in
Note 15.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purchase price was allocated to the fair values of assets acquired and
liabilities assumed as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts receivable and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12,387</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Furniture, fixtures, equipment and other long term assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,580</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,062</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Obligations under capital leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,224</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net cash paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,681</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also, in connection with the acquisition, WorldxChange agreed to pay $727
to a supplier for services rendered prior to the acquisition to continue
services with that vendor. The Company also incurred $681 of transaction costs
related to the purchase.


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<P align="center" style="font-size: 10pt">F-19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Purchase of the Enterprise and Agent business of RSL COM USA Inc</B>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;10, 2002, Acceris through its subsidiary, WorldxChange,
completed the purchase of the Enterprise and Agent business of RSL COM USA
Inc., (previously defined as &#147;RSL&#148;). The purchase of RSL was to advance the
Company&#146;s commercial agent business, to increase network utilization and to
provide an entry into the management of information technology services for
enterprise clients. Acceris paid a purchase price of $7,500 in cash, which was
financed by a loan from Counsel to Acceris and assumed a non-interest bearing
note for $1,000 which matures on March&nbsp;31, 2004. The purchase contract
provided for additional purchase consideration to be paid contingent on the
achievement of certain revenue levels by the Enterprise business during 2003. At
December&nbsp;31, 2003, the Company has accrued an obligation of approximately $123
in connection with this earn out provision. The Company also incurred $1,014
of transaction costs related to the purchase. The $123 contingent payout
resulted in an adjustment to the furniture, fixtures and equipment and
intangible assets included in the purchase price at December&nbsp;31, 2003. The
Company does not expect any further adjustments to the purchase price, as the
contingency period has ended.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The allocation of fair values of assets acquired and liabilities assumed
is as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="83%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts receivable and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,444</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Furniture, fixtures and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,307</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,444</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,558</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,637</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Components of the acquired intangible assets are as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="74%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortization Period</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets subject to amortization:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Customer contracts and relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">60 months</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Agent relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">36 months</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Agent contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">12 months</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Purchase of Transpoint Holdings, LLC.</B>


  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2002,
    the Company agreed to purchase certain assets and related liabilities of Transpoint
    Communications, LLC (previously defined as &#147;Transpoint&#148;) and Local
    Telecom Holdings, LLC (&#147;Local Telecom&#148;). The acquisition closed
    on July&nbsp;28, 2003. As of the closing date, the Company had an asset (which
    had been included in other assets) from Local Telecom of $2,836 that represented
    uncollected revenues from Local Telecom prior to the closing plus costs and
    expenses paid for Local Telecom, less collections on accounts receivable of
    Local Telecom. At closing, the $2,836 was applied as part of the total purchase
    price of $2,882. The intent of this acquisition was primarily to increase
    the Company&#146;s agent relationships in the Company&#146;s commercial agent
    business, increase its customer base and improve network utilization.
  <P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The final allocation of the purchase price to the fair values of assets
acquired and liabilities assumed is summarized below. The allocation of the
preliminary purchase has changed since September&nbsp;30, 2003 based on completion
of a valuation analysis.

<DIV align="center">
    <TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
      <!-- Begin Table Head -->
      <TR valign="bottom">
        <TD width="87%">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
      </TR>
      <!-- End Table Head -->
      <!-- Begin Table Body -->
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts receivable
            and other current assets</DIV></TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">685</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Furniture, fixtures,
            and equipment</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">5</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">1,917</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Goodwill</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">947</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts payable
            and accrued liabilities</DIV></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(672</TD>
        <TD nowrap>)</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="1" noshade>
          &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">2,882</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR style="font-size: 1px">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"><HR size="4" noshade>
          &nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <!-- End Table Body -->
    </TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">F-20
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Components of the acquired intangible assets are as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortization Period</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Customer contracts and relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">60 months</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Agent relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">36 months</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pro forma results of operations for the years ended December&nbsp;31, 2003 and
2002 as if the acquisitions of certain assets of RSL and Transpoint had been completed as of the
beginning of each year presented are shown below. The pro forma results do not
include any anticipated cost savings or other effects of the planned
integration of the operations, and are not necessarily indicative of the
results which would have occurred if the business combination had occurred on
the dates indicated, or which may result in the future.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Year ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">140,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">148,404</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(32,999</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(20,915</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(32,470</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(33,424</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss per share from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.71</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3.59</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.63</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5.74</TD>
    <TD nowrap>)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt"><B>Note 10 &#150; Intangible Assets and Goodwill</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets consisted of the following at December&nbsp;31:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortization</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>period</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cost</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>amortization</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets subject to amortization:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Customer contracts and relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">12 - 60 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(510</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,496</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Agent relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">36 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(415</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,701</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Agent contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">12 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(242</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Patents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">60 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total intangible assets and goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,167</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,417</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>December 31, 2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortization</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>period</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cost</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>amortization</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets subject to amortization:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Customer contracts and relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">60 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,766</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Agent relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">36 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">588</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">573</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Agent contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">12 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total intangible assets and goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(50</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,747</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aggregate amortization expense of intangibles for the years ended December
31, 2003, 2002 and 2001 was $1,117 , $937 and $3,287 respectively.


<P align="center" style="font-size: 10pt">F-21
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt"><B>Note 11 &#150; Debt</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debt, the carrying value of which approximates market, consists of the
following at December&nbsp;31:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Note payable to a network service provider, interest at 10.0%, $23 per month</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">394</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Note payable to a network service provider, interest at 7.0%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">747</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Note payable, Winter Harbor LLC, interest at prime plus 9.0%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,999</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Note payable, RSL estate, 10.0% imputed interest, due March&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">881</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Note payable to equipment supplier 7.0%, $11 per month until December&nbsp;2005,
then $16 per month thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Note payable to equipment supplier, 12.5%, $6 per month until October&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revolving credit facility, greater of 6% or prime rate plus 1.75%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,086</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Notes payable to Counsel, interest at 10.0%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,350</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Note payable to Counsel and convertible to common stock, interest at 9.0%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,162</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Notes payable convertible to common stock, interest at 10.0%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,718</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,337</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,381</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,073</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long-term debt, less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">54,264</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company was discharged of obligations amounting to $1,141 owed to a
network service provider. The discharge of these obligations is reported as
interest and other income in the accompanying consolidated statements of
operations for the year ended December&nbsp;31, 2003.

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Counsel acquired a liability of the Company that it owed to Winter Harbor
LLC. Counsel replaced the loan with a 10% loan maturing on June&nbsp;30, 2005. See
Note 15 below for further discussion.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The maturity date of the revolving credit facility has been extended from
December&nbsp;2004 to June&nbsp;2005. The asset-based lender has first priority over
all the assets and shares of common stock of WorldxChange. The asset-based
facility provides the Company advances based on outstanding billings at rates
of 65% on direct billings and 85% of other receivables of WorldxChange, subject
to certain restrictions. The facility has certain covenants with which the
Company is in compliance at December&nbsp;31, 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Counsel has a priority interest in the assets of Acceris and its
subsidiaries, with the exception of the assets of WorldxChange, wherein Counsel
has subordinated its position in favor of the priority interest of the
asset-based lender. The amounts owed to Counsel pursuant to its various notes
payable mature on June&nbsp;30, 2005, with the exception of $5,600 of these notes,
which is subject to certain acceleration provisions triggered by events
including the sale of certain investments which Acceris holds at December&nbsp;31,
2003 or a cash raise in the capital markets.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the fourth quarter of 2003, Counsel exercised its conversion rights,
and converted $40,673 of notes payable into shares of common stock of the
Company. Pursuant to this conversion, Counsel received 13,428,492 shares of
common stock, increasing its ownership in Acceris from 70% to approximately
91%.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For further discussion of notes payable and other transactions with
Counsel, see Note 15, below.


<P align="left" style="font-size: 10pt"><B>Note 12 &#150; Commitments</B>


<P align="center" style="font-size: 10pt">F-22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agreements classified as operating leases have terms ranging from one to
six years. The Company&#146;s rental expense, which is recognized on a straight
line basis, for operating leases was approximately $2,148, $4,547, and $13,547
for 2003, 2002 and 2001, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future minimum rental payments required under non-cancelable capital and
operating leases with initial or remaining terms in excess of one year consist
of the following at December&nbsp;31, 2003:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="74%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Operating</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Leases</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Leases</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Year ended December&nbsp;31:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,373</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,998</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,265</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">774</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">2008 and beyond</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">637</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total minimum payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,047</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less amount representing interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(267</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Present value of net minimum lease payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,715</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long-term obligations under capital leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, Acceris has various agreements with national carriers
to lease local access spans and to purchase carrier services. The agreements
include minimum usage commitments with termination penalties up to 100% of the
remaining commitment. At December&nbsp;31, 2003 all of the Company&#146;s minimum usage
commitments have been met.


<P align="left" style="font-size: 10pt"><B>Note 13 &#150; Gain on Extinguishment of Debt</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the third quarter of 2001, Nexbell was in default on two leases and
at the time of settlement Nexbell was liable for $1,273. The debt was settled
during the fourth quarter of 2001 for a one-time payment of $180 and
accordingly the Company recorded a gain in the amount of $1,093. In accordance
with SFAS 145, the Company has reclassified this gain to be included in the
results from discontinued operations for the year ended December&nbsp;31, 2001.
Originally, the amount was recorded as an extraordinary gain.

<P align="left" style="font-size: 10pt"><B>Note 14 &#150; Income Taxes</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company recognized no income tax benefit from its losses in 2003, 2002
and 2001. The reported benefit from income taxes varies from the amount that
would be provided by applying the statutory U.S. Federal income tax rate to the
loss from continuing operations before taxes for the following reasons:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</b></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Expected federal statutory tax benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(10,865</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5,212</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(8,831</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (reduction)&nbsp;in taxes resulting from:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">State income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(728</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(430</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(506</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Foreign loss not subject to domestic tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Non-deductible interest on certain notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">357</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Non-deductible goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,096</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Change in valuation allowance
attributable to continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,457</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,807</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-23

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">The change in the valuation allowance, including discontinued operations, was
$6,076, $9,523 and $14,356 for the years ended 2003, 2002 and 2001
respectively.


<P align="left" style="font-size: 10pt">At December&nbsp;31, 2003, the Company had total net operating loss carryforwards
for federal income tax purposes of approximately $157,000. These net operating
loss carryforwards expire between 2006 and 2023.


<P align="left" style="font-size: 10pt">The Company&#146;s utilization of approximately $154,000 of its available net
operating loss carryforwards against future taxable income is restricted
pursuant to the &#147;change in ownership&#148; rules in Section&nbsp;382 of the Internal
Revenue Code. These rules in general provide that an ownership change occurs
when the percentage shareholdings of 5% direct or indirect shareholders of a
loss corporation have in aggregate increased by more than 50&nbsp;percentage points
during the immediately preceding three years.


<P align="left" style="font-size: 10pt">Restrictions in net operating loss carryforwards occurred in 2001 as a result
of the acquisition of the Company by Counsel. Further restrictions likely have
occurred as a result of subsequent changes in the share ownership and capital
structure of the Company and Counsel. Net operating loss carryforwards arising
prior to such a &#147;change in ownership&#148; would be available for usage against
future taxable income subject to an annual usage limitation of approximately
$6,000 per annum until 2008 and thereafter $1,550 per annum respectively.


<P align="left" style="font-size: 10pt">Due to the expiration of the Company&#146;s net operating loss carryforwards and the
above possible usage restrictions, it is most likely that only $53,000 of the
total $157,000 of net operating loss carryforwards otherwise available will be
able to be utilized against future taxable income.


<P align="left" style="font-size: 10pt">The Company also has net operating loss carryforwards for state income tax
purposes in those states where it has conducted business. Available state tax
loss carryforwards however may differ substantially by jurisdiction and in
general are subject to the same or similar restrictions as to expiry and usage
described above. The Company is subject to state income tax in multiple
jurisdictions.


<P align="left" style="font-size: 10pt">The components of the deferred tax asset and liability of continuing and
discontinued operations as of December&nbsp;31, 2003 and 2002 are as follows:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Tax net operating loss carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">58,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">51,690</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Acquired in-process research and development and intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,435</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Amortization of deferred compensation on stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,933</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Reserve for loss on disposal of discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">304</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Reserve for accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">659</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accrued officers wages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accrued vacation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accrued interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Unearned revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,924</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,708</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(68,034</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(61,958</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total deferred tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total deferred tax liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net deferred tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">As the Company has not generated taxable income from its communications
services in the past, a valuation allowance has been provided at December&nbsp;31,
2003 and 2002 to reduce the total deferred tax asset to nil, the amount
considered more likely than not to be realized. The
change in the valuation allowance in the year is due primarily to an increase
in the Company&#146;s net operating loss carryforwards.




<P align="left" style="font-size: 10pt"><B>Note 15 &#150; Transactions with Significant Owners</B>



<P align="left" style="font-size: 10pt"><B>Transactions with Counsel:</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Initial Acquisition of Acceris and Senior Convertible Loan</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;1, 2001, Acceris entered into a Senior Convertible Loan and
Security Agreement, (the &#147;Senior Loan Agreement&#148;) with Counsel. Pursuant to
the terms and provisions of the Senior Loan Agreement, Counsel agreed to make
periodic loans to Acceris in the aggregate principal amount not to exceed
$10,000, which was subsequently increased to $12,000 through amendment on May
8, 2001. Advances against the Senior Loan Agreement were structured as a 3-year
convertible note with interest at 9% per annum, compounded quarterly. Counsel
initially could convert the loan into shares of common stock of Acceris at a
conversion price of $11.20 per common share. The terms of the Senior Loan
Agreement also provide that at any time after September&nbsp;1, 2002, the
outstanding debt including accrued interest would automatically be converted
into common stock using the then current conversion rate, on the first date
that is the twentieth consecutive trading day that the common stock has closed
at a price per share that is equal to or greater than $20.00 per share. The
Senior Loan Agreement also provides that the conversion price is in certain
cases subject to adjustment and includes traditional anti-dilution protection
for the lender and is subject to certain events of default, which could
accelerate the repayment of principal plus accrued interest. Total proceeds
available to the Company were $12,000, less debt issuance costs of $600, which
are being amortized over three years. The Senior Loan Agreement has been
amended several times and the maturity date of the loan plus accrued interest
has been extended to June&nbsp;30, 2005. As a result of the application of the
anti-dilution provisions of the Senior Loan Agreement, the conversion price has
been adjusted to $6.15 per common share. As of December&nbsp;31, 2003, the total
outstanding debt under the Note (including principal and accrued interest) was
$15,291 which is convertible into 2,486,299 shares of common stock<I>.</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the above Senior Loan Agreement, Acceris granted
Counsel a security interest in all of Acceris&#146; assets owned at the time of
execution of the Senior Loan Agreement or subsequently acquired, including but
not limited to Acceris&#146; accounts receivable, intangibles, inventory, equipment,
books and records, and negotiable instruments held by the Company
(collectively, the &#147;Collateral&#148;). The Senior Loan Agreement also includes
demand registration rights for common stock issuable upon conversion of the
related loan.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the foregoing agreements, Acceris and Counsel executed a
Securities Support Agreement, dated March&nbsp;1, 2001 (the &#147;Support Agreement&#148;) for
the purpose of providing certain representations and commitments by Acceris to
Counsel. Counsel relied on these representations and commitments in its
decision to enter a separate agreement (the &#147;Securities Purchase Agreement&#148;)
with Winter Harbor and First Media L.P., a limited partnership and the parent
company of Winter Harbor (collectively the &#147;Winter Harbor Parties&#148;), Counsel
agreed to purchase from the Winter Harbor Parties all of their equity
securities in Acceris, including shares of Class&nbsp;M and Class&nbsp;N preferred stock
of Acceris, beneficially owned by the Winter Harbor Parties for aggregate
consideration of $5,000 in cash.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;7, 2001, as part of the agreements discussed above, Counsel
converted all of the Class&nbsp;M and N convertible preferred stock it obtained from
Winter Harbor into 3,098,303 shares of Acceris&#146; common stock. The Class&nbsp;N
shares were converted at $25.00 per common share and Class&nbsp;M at $11.20 per
common share, in accordance with their respective conversion rights. Pursuant
to the Securities Purchase Agreement, certain shares of common stock owned by
the Winter Harbor Parties were held in escrow pending resolution of certain
events.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Support Agreement of March&nbsp;1, 2001, Acceris also agreed to
engage appropriate advisors and proceed to take all steps necessary to merge
Nexbell Communications, Inc. (a subsidiary of Counsel) into Acceris. The
merger was completed on April&nbsp;17, 2001 and Counsel received 871,724 shares of
common stock in Acceris as consideration.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Assignment of Winter Harbor Common Stock and Debt Interests</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the terms of a settlement agreed between Counsel and the
Winter Harbor Parties effective August&nbsp;29, 2003, the Winter Harbor Parties
relinquished their right to 118,750 shares of the common stock of Acceris to
Counsel. These shares were released from escrow and delivered to Counsel.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Winter Harbor Parties further assigned to Counsel all of their rights
with respect to a note payable by Acceris of $1,999 drawn down pursuant to a
Letter of Credit issued November&nbsp;3, 1998 to secure certain obligations of
Acceris together with any accrued interest thereon. The assigned amount
together with accrued interest amounted to $2,577 on August&nbsp;29, 2003. As a
result of the settlement and assignment, Acceris entered into a new loan
agreement with Counsel the terms of which provide that from August&nbsp;29, 2003 the
loan balance of $2,577 shall bear interest at 10% per annum compounded
quarterly with the aggregate balance of principal and accrued interest payable
on maturity of the loan on June&nbsp;30, 2005. This loan agreement was subsequently
amended and restated to increase the principal of the loan by a further $100
for funding provided by Counsel to enable Acceris to acquire a VoIP patent in
December&nbsp;2003 and to allow for the making of further periodic advances
thereunder at Counsel&#146;s discretion. The loan amount has been further increased
by $1,546 at December&nbsp;31, 2003 representing operating advances from Counsel to  Acceris in the period since the initial
acquisition of the Acceris common stock by Counsel in March&nbsp;2001, which had
previously been recorded as an intercompany payable to Counsel. As of
December&nbsp;31, 2003, the total outstanding debt under the Note (including
principal and accrued interest) was $4,311.

<P align="center" style="font-size: 10pt">F-25

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Loan and Security Agreement and Amended Debt Restructuring</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;6, 2001, Acceris and Counsel entered into a Loan and Security
Agreement (the &#147;Loan Agreement&#148;). Any funds advanced to Acceris between June
6, 2001 and April&nbsp;15, 2002, (not to exceed $10,000) were governed by the Loan
Agreement and due on June&nbsp;6, 2002. The loan was secured by all of the assets
of Acceris. As of December&nbsp;31, 2001, advances under this loan agreement totaled
$10,000. On June&nbsp;27, 2002 the Loan Agreement was amended to an amount of
$24,307, which included additional capital advances from Counsel to Acceris
made from December&nbsp;31, 2001 through June&nbsp;6, 2002. The amended agreement also
further provided for additional advances as needed to Acceris, which advances
totaled $2,087 through December&nbsp;31, 2002 and $650 through November&nbsp;30, 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;25, 2002, Acceris and Counsel entered into a Debt Restructuring
Agreement (&#147;Debt Restructuring Agreement&#148;), which was amended on October&nbsp;15,
2002 pursuant to an Amended and Restated Debt Restructuring Agreement (&#147;Amended
Agreement&#148;). The Amended Agreement included the following terms:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Principal ($24,307) and associated accrued interest ($2,284), as of
October&nbsp;15, 2002, under the Loan Agreement, as amended, would be
exchanged for common stock of Acceris at $3.77 per share (representing
the average closing price of Acceris&#146; common stock during May&nbsp;2002).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Funding provided by Counsel pursuant to the Loan Agreement, as
amended, ($2,087) and associated accrued interest ($1,996) from October
15, 2002 to December&nbsp;31, 2002, would be exchanged for common stock of
Acceris at $3.77 per share (representing the average closing price of
Acceris&#146; common stock during May&nbsp;2002).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Counsel would advance to Acceris all amounts paid or payable by
Acceris to its stockholders that exercised their dissenters&#146; rights in
connection with the transactions subject to the debt restructuring
transactions and the amount of the annual premium to renew the existing
directors and officers&#146; insurance coverage through November&nbsp;2003.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Counsel would reimburse Acceris for all costs, fees and expenses, in
connection with the Debt Restructuring Agreement and the Amended
Agreement and transactions contemplated thereby including all expenses
incurred and yet to be incurred, including the Special Committee&#146;s costs
to negotiate these agreements and costs related to obtaining stockholder
approval. During 2003 and 2002, Counsel reimbursed Acceris $132 and
$499, respectively, for certain reimbursable expenses, which have been
recorded as additional paid-in capital.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The issuance of common stock by Acceris pursuant to this Agreement
would result in a weighted average conversion price adjustment pursuant
to the provisions of the March&nbsp;1, 2002 Loan Agreement. Whereas the
conversion price for the March&nbsp;1, 2002 Loan Agreement had initially been
$11.20, the new conversion price would be adjusted as a result of the
anti-dilution provisions of the Senior Loan Agreement. At December&nbsp;31,
2003, the new conversion price is $6.15 per common share<I>.</I></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective November&nbsp;30, 2003, 8,681,096 shares of common stock were issued
to Counsel in settlement of the underlying debt and accrued interest.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Convertible Promissory Note to Fund RSL Acquisition</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the acquisition of RSL in December&nbsp;2002, Acceris issued
a $7,500 convertible note payable (&#147;the Convertible Note&#148;) to Counsel, bearing
interest at 10% per annum compounded quarterly which matured on March&nbsp;1, 2004.
The Convertible Note was convertible into common stock of Acceris at a
conversion rate of $1.68 per share. On November&nbsp;30, 2003, Counsel exercised
its right to convert the Convertible Note plus accrued interest to that date
totaling $7,952 into common stock of Acceris. This resulted in the issuance of
4,747,396 shares of Acceris common stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Collateralized Promissory Note and Loan Agreement</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the third quarter of 2003, Counsel advanced the sum of $5,600 to
Acceris evidenced by a promissory note effective October&nbsp;1, 2003. In January
2004, Acceris and Counsel entered into a loan agreement and an amended and
restated promissory note pursuant to which an additional $2,000 was loaned to
Acceris and pursuant to which additional periodic loans may be made from time
to time (collectively and as amended, the &#147;Promissory Note&#148;). The Promissory
Note matures on June&nbsp;30, 2005 and accrues interest at 10% per annum compounded
quarterly from the date funds are advanced. The Promissory Note is
collateralized by certain shares of Series&nbsp;B Convertible Preferred Stock (the
&#147;Preferred Stock&#148;) of Buyers United, Inc. (a third party), which are held by
Acceris. In the event of the sale of the Preferred Stock (or the common stock
to which the Preferred Stock is convertible) by Acceris or an equity investment
or investments in Acceris by a third party through the capital markets and
subject to certain limitations, the maturity date of the Promissory Note will
accelerate to the date 10 calendar days following either such event. As of the
date of this filing, subsequent to year end, Counsel has provided an aggregate
of $4,050 of funds in 2004 pursuant to this loan agreement. There are no
conversion features associated with the Promissory Note.


<P align="center" style="font-size: 10pt">F-26
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Secured Loan to Acceris</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To fund the acquisition of the assets purchased and liabilities assumed by
WorldxChange, on June&nbsp;4, 2001 Counsel provided a loan (&#147;the Initial Loan&#148;) to
WorldxChange in the aggregate amount of $15,000. The loan was subordinated to
a revolving credit facility with Foothill Capital Corporation (&#147;Foothill&#148;) and
was collateralized against all assets of WorldxChange.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;1, 2003, Counsel assigned the balance owing in connection with
this loan of $9,743 including accrued interest (&#147;the Assigned Loan&#148;) to Acceris
in exchange for a new loan bearing interest at 10% per annum compounded
quarterly maturing on June&nbsp;30, 2005 (&#147;the New Loan&#148;). Consistent with the terms
of the Initial Loan, subject to certain conditions, the New Loan provides for
certain mandatory prepayments upon written notice from Counsel including an
event resulting in the issuance of new shares by Acceris to a party
unrelated to Counsel where the funds are not used for an approved expanded
business plan or where Acceris has sold material assets in excess of cash
proceeds of $1,000. Pursuant to a Stock Pledge Agreement as amended, the New
Loan is secured by the common stock held by Acceris in WorldxChange subject to
the priority security interests of Foothill, the Company&#146;s asset-based lender.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Counsel Keep Well</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of Counsel&#146;s purchase of Winter Harbor&#146;s security holdings in
Acceris, Counsel became the single largest stockholder of the Company. In
addition to the above transactions, Counsel has committed to fund, through
long-term inter company advances or equity contribution, all capital
investment, working capital or other operational cash requirements of Acceris
through June&nbsp;30, 2005 (&#147;the Keep Well&#148;). By virtue of the Keep Well any default
and loan repayment accelerator provisions in respect of the above loans
agreements are also indirectly subject to funding by Counsel under the terms of
the Keep Well.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Accounting treatment of Counsel and Winter Harbor transactions</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The repurchase on March&nbsp;1, 2001 by Acceris of Winter Harbor&#146;s 1,677,000
warrants for 250,000 common shares was recorded at market value of the common
stock issued in the exchange amounting to $3,750. The repurchase was accounted
for similar to the repurchase of treasury stock. Accordingly, common stock and
additional paid in capital was increased by $3,750 which was offset by a charge
to additional paid in capital of $3,715 to reflect the warrant repurchase. The
net effect of this transaction was the recording of additional par value of $35
for the 250,000 shares issued during the year ended December&nbsp;31, 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As the conversion price for Class&nbsp;M preferred stock had dropped to $25 per
share (from its original conversion price of $55.60), an amount reflecting the
increase in the beneficial conversion feature was recorded in connection with
the March&nbsp;1, 2001 transaction as an increase in additional paid in capital and
a charge to accumulated deficit for $9,780. The purchase and sale of the Class
M and Class&nbsp;N preferred stock between Winter Harbor and Counsel, as described
above, have been imputed in Acceris&#146; financial statements as if the
transactions had been effected through Acceris as a repurchase of the preferred
stock from Winter Harbor and a reissuance to Counsel. Accordingly, the
transaction was considered a repurchase of Winter Harbor&#146;s Class&nbsp;M and N
preferred stock in exchange for $5,000. The difference between the carrying
value of the Class&nbsp;M and N preferred stock and the $5,000 paid was recorded as
an adjustment to retained earnings reflected in the form of a $30,292
contribution from settlement of these transactions between stockholders and has
been reflected as such in the statement of changes in stockholders&#146; deficit for
the year ended December&nbsp;31, 2001. In addition, the transaction considered that
Acceris resold the Class&nbsp;M and N preferred stock to Counsel for $5,000
(Counsel&#146;s payment to Winter Harbor). However, since the conversion price on
the Class&nbsp;M shares was below the market price on the day the transaction
closed, a beneficial conversion feature was recorded as the difference between
the market price of the common shares and the conversion price per share
multiplied by the number of common shares into which the Class&nbsp;M and Class&nbsp;N
could convert. This amount was limited to the proceeds.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has also recorded a beneficial conversion feature (debt
discount) in the aggregate amount of $12,856 on the convertible debt funded by Counsel
that was received through June&nbsp;30, 2001. The amount of the initial discount, if
applicable, is calculated as the difference between the initial conversion
price ($11.20) and the market price of the common stock (if higher than the
conversion price on the date funds are drawn on the loan), multiplied by the
number of shares of common stock into which the note can be converted. Further debt discounts have been recorded resulting from dilutionary adjustments to the
conversion price from the issuance of new convertible securities. Additionally, the
accumulation of unpaid interest costs on the convertible debt is deemed to be interest paid
in kind (&#147;PIK&#148;) containing a conversion feature which once assessed as PIK interest
requires the determination of a debt discount. The beneficial conversion feature is being amortized over the life of the convertible note.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Counsel
Management Services</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Chief Executive Officer (&#147;CEO&#148;) of Acceris is an employee
of Counsel. As CEO, he is entitled to an annual salary of $275 and a
discretionary bonus equal to 100% of his base salary. For 2003, no
bonus was awarded. The CEO has elected to assign his salary payable
at December&nbsp;31, 2003 of $275 to Counsel. This amount is recorded
as a liability to Counsel in the accompanying Consolidated Balance
Sheets. Counsel also provides other management services to
Acceris through time spent by Counsel executives serving roles at Acceris.
Accordingly, Acceris has valued the services of these other employees at
approximately $130 for the year ended December&nbsp;31, 2003. The expense has been
reflected in selling, general, administrative and other expense for the year ended December 31, 2003, offset by an increase to additional paid-in capital.


<P align="left" style="font-size: 10pt"><B>Note 16 &#150; Legal Proceedings</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is involved in various legal matters arising out of its
operations in the normal course of business, none of which matters are
expected, individually or in the aggregate, to have a material adverse effect
on the Company.


<P align="center" style="font-size: 10pt">F-27
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Note 17 &#150; Class&nbsp;N Preferred Stock</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;23, 1999, the Company completed its offering of 20,000 shares of
Class&nbsp;N preferred stock. The offering was fully subscribed through cash
subscriptions and the Company exercised its rights to exchange notes payable to
Winter Harbor of $8,000 and $4,000, plus accrued interest. In total the
Company received $7,281 in cash (before expenses of $487) and exchanged $12,719
in debt and accrued interest. The Class&nbsp;N conversion price was initially set
at $2.78 per share. The conversion rate was adjusted to $29.60 per share as of
December&nbsp;31, 2000 and $25.00 per share in January&nbsp;2001 based on 110% of the
average trading price for any 20&nbsp;day period following the date that Class&nbsp;N
preferred stock is first issued subject to a floor of $25.00. The Class&nbsp;N
preferred stock votes with the common stock on an as converted basis and is
senior to all other preferred stock of the Company. Dividends, if any, will be
paid on an as converted basis equal to common stock dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2003, holders of the Class&nbsp;N preferred stock converted 150 of those
shares into 6,000 shares of common stock. As of December&nbsp;31, 2003 and 2002,
there were 619 and 769 shares of Class&nbsp;N preferred stock outstanding,
respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2003 and 2002, of the 10,000,000 shares of preferred stock
authorized, 9,486,500 remain undesignated and unissued.


<P align="left" style="font-size: 10pt"><B>Note 18 &#150; Stock-Based Compensation Plans</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2003, the Company&#146;s stockholders approved a 1-for-20 reverse
stock split. Accordingly, all information presented below has been adjusted to
reflect the reverse split.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>2003 Stock Option and Appreciation Rights Plan</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2003, the stockholders of the Company approved the 2003 Stock
Option and Appreciation Rights Plan (the &#147;2003 Plan&#148;) which provides for the
issuance of incentive stock options, non-qualified stock options and stock
appreciation rights (&#147;SARs&#148;) up to an aggregate of 2,000,000 shares of common
stock (subject to adjustment in the event of stock dividends, stock splits, and
other similar events). The price at which shares of common stock covered by
the option can be purchased is determined by the Company&#146;s Board of Directors
or its committee; however, in the case of incentive stock options the exercise
price shall not be less than the fair market value of the Company&#146;s common
stock on the date the option is granted. There were 1,372,000 options granted
(and outstanding at December&nbsp;31, 2003) under the 2003 Plan in 2003. The
outstanding options vest over four years at exercise prices of $3.00 per share.  No SARs have been issued under the 2003 Plan.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>1997 Recruitment Stock Option Plan </U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2000, the stockholders of the Company approved an amendment of
the 1997 Recruitment Stock Option Plan (the &#147;1997 Plan&#148;)which provides for the issuance of
incentive stock options, non-qualified stock options and SARs up to an
aggregate of 370,000 shares of common stock (subject to adjustment in the event
of stock dividends, stock splits, and other similar events). The price at
which shares of common stock covered by the option can be purchased is
determined by the Company&#146;s Board of Directors; however, in all instances the
exercise price is never less than the fair market value of the Company&#146;s common
stock on the date the option is granted.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, there were options to purchase 60,480 shares of
the Company&#146;s common stock outstanding under the 1997 Plan. The outstanding options vest over
three years at exercise prices ranging from $1.40 to $127.50 per share.
Options issued under the 1997 Plan must be exercised within ten years of grant and
can only be exercised while the option holder is an employee of the Company.
The Company has not awarded any SARs under the 1997 Plan. During 2003, 2002 and
2001, options to purchase 45,067, 42,968 and 130,022 shares of common stock,
respectively, were forfeited or expired. There were no exercises during 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Director Stock Option Plan</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Director Stock Option Plan authorizes the grant of stock
options to directors of the Company. Options granted under the Plan are
non-qualified stock options exercisable at a price equal to the fair market
value per share of common stock on the date of any such grant. Options granted
under the Plan are exercisable not less than six months or more than ten years
after the date of grant.




<P align="center" style="font-size: 10pt">F-28
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, options for the purchase of 233 shares of common
stock at prices ranging from $17.50 to $77.50 per share were outstanding, all
of which are exercisable. In connection with the adoption of the 1995 Director
Plan, the Board of Directors authorized the
termination of future grants of options under the plan; however, outstanding
options granted under the plan will continue to be governed by the terms
thereof until exercise or expiration of such options. In 2003, no options were
exercised or expired.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>1995 Director Stock Option and Appreciation Rights Plan</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 1995 Director Stock Option and Appreciation Rights Plan (the &#147;1995
Director Plan&#148;) provides for the issuance of incentive options, non-qualified
options and SARs to directors of the Company up to 12,500 shares of common
stock (subject to adjustment in the event of stock dividends, stock splits, and
other similar events).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 1995 Director Plan also provides for the grant of non-qualified
options on a discretionary basis to each member of the Board of Directors then
serving to purchase 500 shares of common stock at an exercise price equal to
the fair market value per share of the common stock on that date. Each option
is immediately exercisable for a period of ten years from the date of grant.
The Company has 9,500 shares of common stock reserved for issuance under the
1995 Director Plan. As of December&nbsp;31, 2003, options to purchase 8,500 shares
of common stock at prices ranging from $20.00 to $25.00 per share are
outstanding and exercisable. No options were granted or exercised under this
plan in 2003, 2002 or 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>1995 Employee Stock Option and Appreciation Rights Plan</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 1995 Employee Stock Option and Appreciation Rights Plan (the &#147;1995
Employee Plan&#148;) provides for the issuance of incentive options, non-qualified
options, and SARs. Directors of the Company are not eligible to participate in
the 1995 Employee Plan. The 1995 Employee Plan provides for the grant of stock
options which qualify as incentive stock options under Section&nbsp;422 of the
Internal Revenue Code, to be issued to officers who are employees and other
employees, as well as non-qualified options to be issued to officers, employees
and consultants. In addition, SARs may be granted in conjunction with the
grant of incentive options and non-qualified options.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 1995 Employee Plan provides for the grant of incentive options,
non-qualified options and SARs of up to 20,000 shares of common stock (subject
to adjustment in the event of stock dividends, stock splits, and other similar
events). To the extent that an incentive option or non-qualified option is not
exercised within the period of exercisability specified therein, it will expire
as to the then unexercisable portion. If any incentive option, non-qualified
option or SAR terminates prior to exercise thereof and during the duration of
the 1995 Employee Plan, the shares of common stock as to which such option or
right was not exercised will become available under the 1995 Employee Plan for
the grant of additional options or rights to any eligible employee. The shares
of common stock subject to the 1995 Employee Plan may be made available from
either authorized but unissued shares, treasury shares or both. The Company
has 20,000 shares of common stock reserved for issuance under the 1995 Employee
Plan. As of December&nbsp;31, 2003, there were no options outstanding under the
1995 Employee Plan. During 2003, 2002 and 2001, options to purchase 6,763, 500
and 1,875, respectively, of common stock were forfeited or expired. No options
were granted or exercised in 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Other warrants and options</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1996, the Company approved the issuance of 87,500 options to executives
of the Company, as part of their employment agreements, and 3,200 options to a
consultant. The options expire in 2006 and have an option price of $78.00. No
options expired, were exercised or forfeited during 2003. As of December&nbsp;31,
2003, there remained 78,200 options outstanding.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 1997, the Company issued options to purchase 60,500 shares of
common stock (10,500 of which were issued under the 1997 recruitment stock
option plan) to consultants at exercise prices ranging from $97.50 to $168.75
(repriced to $78.00 on December&nbsp;13, 1998), which was based on the closing price
of the stock at the grant date. No options expired, were exercised or
forfeited during 2003. The remaining options must be exercised within ten
years of the grant date. As of December&nbsp;31, 2003 there remained 44,500 options
outstanding.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 1997, the Company issued non-qualified options to purchase 114,750
shares of common stock to certain executive employees. The options must be
exercised within ten years of the grant date and have an exercise price of
$78.00. There were no options forfeited in 2003, 2002 or 2001. No options
expired or were exercised during 2003. As of December&nbsp;31, 2003 there remained
105,915 options outstanding.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 1998, the Company issued non-qualified options to purchase 46,750
shares of common stock to certain executive employees at exercise prices
ranging from $51.26 to $62.50, which price was based on the closing price of
the stock at the grant date. The options must be exercised within ten years of
the grant date. No options expired, were exercised or forfeited during 2003.
As of December&nbsp;31, 2003 there remained 40,470 options outstanding.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 1999, the Company issued non-qualified options to purchase 32,750
shares of common stock to certain executive employees at exercise prices
ranging from $50.00 to 71.26, which price was based on the closing price of the
stock at the grant date. The options must be exercised within ten years of the
grant date. No options were exercised during 2003 or 2002. During 2001, 2,500
of these options were forfeited. During 2000, options to purchase 11,500
shares of common stock were exercised. As of December&nbsp;31, 2003, there remained
18,750 options outstanding.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 1999, the Company issued non-qualified options to purchase 10,000
shares of common stock to a consultant at an exercise price
of $60.00, which was based on the closing price of the stock at the grant
date. The fair value of the options issued was recorded as deferred
compensation of $300,000 to be amortized over the expected period the services
were to be provided. As of December&nbsp;31, 2003 there remained 10,000 options
outstanding.


<P align="center" style="font-size: 10pt">F-29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2000, the Company issued non-qualified options to purchase 129,250
shares of common stock to certain executive employees at exercise prices
ranging from $55.00 to $127.50, which price was based on the closing price of
the stock at the grant date. The options must be exercised within ten years of
the grant date. During 2001, 60,417 of these options were forfeited. As of
December&nbsp;31, 2003, there remained 68,833 options outstanding.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2000 the Company obtained approval from its stockholders to
establish the 2000 Employee Stock Purchase Plan. This plan allows all eligible
employees of the Company to have payroll withholding of 1 to 15&nbsp;percent of
their wages. The amounts withheld during a calendar quarter are then used to
purchase common stock at a 15&nbsp;percent discount off the lower of the closing
sale price of the Company&#146;s stock on the first or last day of each quarter.
This plan was approved by the Board of Directors, subject to stockholder
approval, and was effective beginning the third quarter of 2000. The Company
issued 1,726 shares to employees based upon payroll withholdings during 2001,
respectively. There were no issuances in 2002 or 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the changes in common stock options for the
common stock option plans described above:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and Warrants</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Warrants</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Warrants</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Outstanding at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,258,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,401,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">45.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,267,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">51.40</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,377,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,025,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(828,246</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(130,271</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(82,159</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68.60</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(17,689</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,809,396</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.40</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Outstanding at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,807,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,258,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,401,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">45.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Options and warrants exercisable
at year end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">435,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,256,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,354,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Weighted-average fair value of
options
and warrants granted during
the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes information about fixed stock options and
warrants outstanding at December&nbsp;31, 2003:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="32%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Warrants</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>at December</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exercise price</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Outstanding</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Life (years)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>31, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">$&nbsp;&nbsp;1.40 to $&nbsp;&nbsp;&nbsp;&nbsp;3.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,381,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.98</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">$&nbsp;&nbsp;5.40 to $&nbsp;&nbsp;25.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.68</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">$42.50 to $&nbsp;&nbsp;71.26</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">$77.50 to $127.50</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79.22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,807,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">435,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">66.05</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>Note 19 &#150; Segment of Business Reporting</B>


<P align="left" style="font-size: 10pt">The Company&#146;s reportable segments are as follows:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Enterprise &#150; is comprised of the enterprise business of RSL which was
acquired in December&nbsp;2002. This segment offers voice and data
solutions to enterprise customers through an in-house sales force.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Retail &#150; includes operations of WorldxChange (began operations in June
2001 and was formerly reported as the dial-around segment) and the
agent and residential business of RSL which was acquired in December
2002. This segment offers a dial around telecommunications product
and a 1&#043; product through two channels, namely, multi-level marketing
(MLM)&nbsp;and commercial agents.</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Technologies &#150; is the former technology licensing and development
segment, which segment offers a fully developed network convergence
solution for voice and data. The Company licenses certain developed
technology to third party users.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">F-30
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no material inter-segment revenues. The Company&#146;s business is
conducted principally in the U.S.; foreign operations are not significant.
The table below presents information about net loss and segment assets used by
the Company as of and for the three years ended December&nbsp;31, 2003.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>For the Year ended December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Reportable</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Enterprise</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Retail</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Technologies</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Segments</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues from external customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
        <TD align="right">108,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
        <TD align="right">2,164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">135,929</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,710</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Depreciation and amortization expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,124</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Segment income (loss)&nbsp;from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,575</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
        <TD align="right">(17,821</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD align="right">1,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19,382</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other significant non-cash items:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,438</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Expenditures for long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Segment assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,669</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>For the Year ended December 31, 2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Reportable</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Enterprise</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Retail</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Technologies</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Segments</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues from external customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">83,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88,090</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">357</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,298</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Depreciation and amortization expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Segment income (loss)&nbsp;from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(629</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,715</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,368</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other significant non-cash items:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,999</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Expenditures for long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,849</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Segment assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,623</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>For the Year ended December 31, 2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Reportable</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Retail</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Technologies</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Segments</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues from external customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">55,986</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,499</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Depreciation and amortization expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,412</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Segment income (loss)&nbsp;from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,927</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,316</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other significant non-cash items:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,861</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Expenditures for long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,805</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Segment assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,343</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-31
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">The following table reconciles reportable segment information to the
consolidated financial statements of the Company:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total interest and other income for reportable segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Unallocated interest revenue from corporate accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total interest expense for reportable segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,499</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Unallocated interest expense from related party debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,556</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other unallocated interest expense from corporate debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">638</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,693</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total depreciation and amortization for reportable segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,412</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Unallocated amortization expense from intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,608</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other unallocated depreciation from corporate assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,389</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,409</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total segment loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(19,382</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,368</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,316</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Unallocated non-cash amounts in consolidated net loss:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Amortization of discount on notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(676</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(560</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(253</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gain on sale of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">589</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other income (primarily gain on extinguishment of debt)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Amortization of deferred compensation on stock options issued for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Amortization of intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,608</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other corporate expenses (primarily corporate level interest, general and
administrative expenses)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,119</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,402</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,387</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(31,957</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(15,330</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(25,975</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total amortization of deferred compensation for reportable segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Unallocated amortization of deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Expenditures for segment long-lived assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,805</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other unallocated expenditures for corporate assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,274</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">16,079</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Segment assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">32,343</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets not allocated to segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,331</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets not allocated to segments*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,106</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">39,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">46,780</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">*</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Other assets not allocated to segments includes assets associated with
segments reported in previous periods which are no longer classified as
reportable segments, primarily assets of and related to the discontinued
operations of ILC (former telecommunications services segment).</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt">F-32
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt"><B>Note 20 &#150; Subsequent Event</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsequent to December 31, 2003, the Company received confirmation that certain
indefeasible rights of usage (&#147;IRUs&#148;) acquired by the Company have been
reclaimed by the IRU consortium, which is the group that owns and operates the
cable. As a result, the Company has been discharged of approximately $775 of
obligations payable to the consortium existing at December&nbsp;31, 2003. The
Company expects to record the discharge of this obligation as other income for
the three months ending March&nbsp;31, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsequent to December 31, 2003, the Company has converted its preferred stock in
BUI to shares of common stock. In a private placement, the Company sold 50% of
the shares of common stock for approximately $1,600, which proceeds will be
used to fund operations, capital expenditures and to improve working capital.
The Company will record a gain of approximately $566 in the first quarter of
2004 relating to the sale of these shares. The Company intends to sell the
remainder of these shares during 2004. These shares are shown as a current
asset at December&nbsp;31, 2003.


<P align="center" style="font-size: 10pt">F-33
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">











<P align="center" style="font-size: 10pt"><B>ACCERIS COMMUNICATIONS INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt"><B>CONDENSED CONSOLIDATED BALANCE SHEETS</B>


<DIV align="center" style="font-size: 10pt"><B>(unaudited)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>(In thousands of dollars, except share and per share amounts)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="3"><B>(as restated)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD align="center"><DIV style="margin-left:50px; text-indent:-10px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,033</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts receivable, less allowance for doubtful accounts
of $2,267 and $1,764 at September&nbsp;30, 2004 and December
31, 2003, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,018</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Investment in preferred and common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,058</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,202</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,311</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Furniture, fixtures, equipment and software, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,483</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,297</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Investment in preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">743</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">39,054</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD align="center"><DIV style="margin-left:50px; text-indent:-10px">LIABILITIES AND STOCKHOLDERS&#146; DEFICIT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,113</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Unearned revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,678</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Revolving credit facility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,127</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Current portion of notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,254</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Current portion of obligations under capital leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,715</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,887</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Notes payable, less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">772</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Obligations under capital leases, less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,631</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Notes payable to a related party, net of unamortized
beneficial conversion features</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,717</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,007</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commitments and contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders&#146; deficit:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Preferred stock, $10.00 par value, authorized 10,000,000
shares, issued and outstanding 619 at September&nbsp;30, 2004
and December&nbsp;31, 2003, liquidation preference of $613 at
September&nbsp;30, 2004 and December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>


      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>



      <TR valign="bottom">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Common
stock, $0.01 par value, authorized 300,000,000 shares, issued and
outstanding 19,237,101 at September 30, 2004 and 19,262,101 at
December&nbsp;31, 2003</DIV></TD>
        <TD>&nbsp;</TD>
        <TD align="right"></TD>
        <TD align="right">192</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"></TD>
        <TD align="right">192</TD>
        <TD>&nbsp;</TD>
      </TR>

      <TR valign="bottom" style="background: #eeeeee">

<TD><DIV style="margin-left:20px; text-indent:-10px">Additional
paid-in capital</DIV></TD>
        <TD>&nbsp;</TD>
        <TD align="right"></TD>
        <TD align="right">183,954</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right"></TD>
        <TD align="right">182,879</TD>
        <TD>&nbsp;</TD>
      </TR>

      <TR valign="bottom">

<TD><DIV style="margin-left:20px; text-indent:-10px">Accumulated
deficit</DIV></TD>
        <TD>&nbsp;</TD>
        <TD align="right"></TD>
        <TD align="right">(242,342</TD>
        <TD align="left">)</TD>
        <TD>&nbsp;</TD>
        <TD align="right"></TD>
        <TD align="right">(226,030</TD>
        <TD align="left">)</TD>
      </TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Total
stockholders&#146; deficit</DIV></TD>
        <TD>&nbsp;</TD>
        <TD align="right"></TD>
        <TD align="right">(58,190</TD>
        <TD align="left">)</TD>
        <TD>&nbsp;</TD>
        <TD align="right"></TD>
        <TD align="right">(42,953</TD>
        <TD align="left">)</TD>
      </TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

      <TR valign="bottom">
        <TD><DIV style="margin-left:30px; text-indent:-10px">Total
liabilities and stockholders&#146; deficit</DIV></TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">27,614</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">39,054</TD>
        <TD align="left"></TD>
      </TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">The accompanying notes are
an integral part of these condensed consolidated financial statements

<P align="center" style="font-size: 10pt">F-34
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>ACCERIS COMMUNICATIONS INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt"><B>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</B>


<DIV align="center" style="font-size: 10pt"><B>(unaudited)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>September 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>(In thousands of dollars, except per share amounts)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">101,364</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Technology licensing and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,099</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,463</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Telecommunications network expense (exclusive of
depreciation expense on telecommunications network
assets of $1,222 and $1,012 for the three months
ended September&nbsp;30, 2004 and 2003, respectively,
and $3,861 and $3,098 for the nine months ended
September&nbsp;30, 2004 and 2003, respectively,
included in depreciation and amortization below)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,141</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,822</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,772</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,577</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total operating costs and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,531</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,462</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,227</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,849</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income (expense):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,562</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,398</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,583</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,707</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest and other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total other income (expense)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,336</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,345</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,168</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,651</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,867</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,807</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,395</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25,500</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gain from discontinued operations (net of $0 tax)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">307</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,867</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,594</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(16,291</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(25,193</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Basic and diluted weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,834</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss per common share &#150; basic and diluted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.36</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.83</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.85</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.37</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gain from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net loss per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.36</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.79</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.84</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.32</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these condensed consolidated financial statements



<P align="center" style="font-size: 10pt">F-35
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>ACCERIS COMMUNICATIONS INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt"><B>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</B>


<DIV align="center" style="font-size: 10pt"><B>(unaudited)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>(In thousands of dollars)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="3"><B>(as restated)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(16,291</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(25,193</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Adjustments to reconcile net loss to net cash used in operating
activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,577</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,772</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Amortization of discount on notes payable to related party</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,905</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Accrued interest added to loan principal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,230</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Gain on sale of investment in common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,376</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Gain on discharge of obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(971</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Decrease in allowance for impairment of net assets of discontinued
operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(148</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(169</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Expense associated with stock options issued to non-employee for
services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Settlement of note payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(394</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Management benefit conferred by controlling shareholder</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Stock received as payment on technology licensing agreement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,100</TD>
    <TD nowrap>)</TD>
</TR>


<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,416</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,372</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Increase
(decrease)&nbsp;from changes in operating assets and liabilities, net
of business acquisition:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(250</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,650</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Net assets and liabilities of discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">884</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(680</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Unearned revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,708</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,003</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,520</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Net cash used in operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,222</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,295</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from investing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Purchases of furniture, fixtures, equipment and software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(670</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,636</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash acquired in business acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash received from sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash received from sale of investments in common stock, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Net cash provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,327</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from issuance of notes payable to related party</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">650</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from (repayment of) revolving credit facility, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,862</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,832</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Payment of capital lease and note payable obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,104</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,868</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Payment of note payable to RSL Estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,104</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Purchase and retirement of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Costs paid by controlling shareholder</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,678</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(685</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,620</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,676</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-36
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
    <TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
      <!-- Begin Table Head -->
      <TR valign="bottom">
        <TD width="78%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="4%">&nbsp;</TD>
      </TR>
      <TR style="font-size: 8pt" valign="bottom">
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="7"><B>Nine Months Ended</B></TD>
      </TR>
      <TR style="font-size: 8pt" valign="bottom">
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="7"><B>September 30,</B> <HR size="1" noshade></TD>
      </TR>
      <TR style="font-size: 8pt" valign="bottom">
        <TD nowrap align="left"><B>(In thousands of dollars)</B> <HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>2004</B> <HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
        <TD nowrap align="center" colspan="3"><B>2003</B> <HR size="1" noshade></TD>
      </TR>
      <TR style="font-size: 8pt" valign="bottom">
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="center" colspan="3"><B>(as restated)</B></TD>
      </TR>
      <!-- End Table Head -->
      <!-- Begin Table Body -->
      <TR valign="bottom">
        <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Supplemental schedule
            of non-cash investing and financing activities:</B></DIV></TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Preferred stock received
            in exchange for assets of discontinued operations</DIV></TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD colspan="2" align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">1,691</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Notes payable incurred
            for the purchase of software and software licenses</DIV></TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD colspan="2" align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">921</TD>
        <TD>&nbsp;</TD>
      </TR>
      <TR valign="bottom" style="background: #eeeeee">
        <TD><DIV style="margin-left:20px; text-indent:-10px">Other assets included
            in purchase price of Transpoint acquisition</DIV></TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD colspan="2" align="right">&#151;</TD>
        <TD>&nbsp;</TD>
        <TD align="right">$</TD>
        <TD align="right">2,836</TD>
        <TD>&nbsp;</TD>
      </TR>
      <!-- End Table Body -->
    </TABLE>
</DIV>



<P align="center" style="font-size: 10pt">The accompanying notes are an integral part of these condensed consolidated financial statements



<P align="center" style="font-size: 10pt">F-37
</DIV>



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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>ACCERIS COMMUNICATIONS INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt"><B>NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004<BR>
(in thousands, except share and per share data)</B>



<P align="left" style="font-size: 10pt"><B>Note 1</B>&nbsp;<B>&#150;</B>&nbsp;<B>Description of Business and Principles of Consolidation</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The unaudited condensed consolidated financial statements include the
accounts of Acceris Communications Inc. (formerly I-Link Incorporated) and its
wholly owned subsidiaries Acceris Communications Corp. (&#147;ACC,&#148; formerly
WorldxChange Corp.); I-Link Communications Inc., (&#147;ILC&#148;), which is
substantially included in discontinued operations; Transpoint Holdings
Corporation, which includes the purchased assets of Transpoint Communications,
LLC and the purchased membership interest in Local Telecom Holdings, LLC
(collectively, &#147;Transpoint&#148;), which the Company purchased in July&nbsp;2003; and
Acceris Communications Technologies, Inc. These entities combined are referred
to as &#147;Acceris&#148; or the &#147;Company&#148; in these unaudited condensed consolidated
financial statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a broad-based communications company, servicing residential, small
and medium-sized businesses and corporate accounts in the United States. We
provide a range of products from local dial tone, domestic and international
long-distance voice services to fully managed, integrated data and enhanced
services. We are a US facilities-based carrier with points of presence in 30
major US cities. Our voice network features 11 voice switches and nationwide
Feature Group D (&#147;FGD&#148;) access. Our data network consists of 17 Nortel
Passports that have recently been upgraded to support multi-protocol label
switching (&#147;MPLS&#148;). Finally, we have relationships with multiple tier I and
tier II providers in the U.S. and abroad.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently manage our Company through two business segments. Our
Telecommunications segment offers a broad selection of voice and data
telecommunications products and services to residential and commercial
customers through a network of independent agents, primarily via multi-level
marketing (&#147;MLM&#148;) and commercial agent programs. Our Technologies segment
offers a proven network convergence solution for voice and data in Voice over
Internet Protocol (&#147;VoIP&#148;) communications technology and holds two foundational
patents in the VoIP space (U.S. Patent Nos. 6,243,373 and 6,438,124, together
the &#147;VoIP Patents&#148;). We are pursuing efforts to license the technology
supported by our patents to carriers and equipment manufacturers and suppliers
in the IP telephony market.


<P align="left" style="font-size: 10pt"><I>Telecommunications</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Telecommunications segment offers a broad range of voice and data
products and services to residential, small office/home office (&#147;SOHO&#148;) and
small-medium sized enterprises (&#147;SME&#148;), and corporate accounts through a
network of MLM agents, commercial agents, affinity groups and outbound
telemarketing. Our customers are serviced through direct sales and support
teams who offer fully managed and fully integrated voice and data solutions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have capitalized upon a unique synthesis of marketing and network
capabilities. Through the strength of our agent network we are adding new
customers each month, many of them with a strong international usage component.
Due to our favorable cost structure and network optimization, we offer
competitive rates to selected international regions. We continue to experience
customer attrition particularly with our 10-10-XXX customer base which we have
not marketed directly since 2002. We have also seen the average revenue per
user (&#147;ARPU&#148;) decline. The Company&#146;s domestic telephone network continues to
operate at well below available capacity leading to cost inefficiencies. We
attribute this to increased cellular penetration and deregulation in various
countries which have lower rates per month in those markets. This is most
evident in India in 2004. Additionally, regulatory uncertainty exists in the
domestic telephone markets due to recent court decisions. Future regulatory
changes may penalize or benefit the current operations of the business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We differentiate ourselves to our residential customers by offering
attractively priced bundles of international minutes, both on a stand alone
basis and as part of a local dial tone &#043; long-distance package to


<P align="center" style="font-size: 10pt">F-38
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">preferred destinations, and by specialized customer service, which includes
in-language customer support. By using this targeted strategy, we have acquired
a substantial number of ethnic users whose monthly spending on
telecommunications services is generally higher than that of the average retail
customer.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our proprietary technology enables us to offer unbundled value-added
services such as voicemail, unified messaging and on-the-fly conferencing at a
low cost, creating another competitive advantage when targeting retail
customers. These features distinguish us from mass-market providers that
typically offer higher priced, &#147;one-size-fits-all&#148; national and international
rate plans. We are in the process of productizing and deploying this
technology.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our direct sales force focuses on multi-location customers with limited
information technology (&#147;IT&#148;) resources. By taking a consultative approach to
network solutions and providing in-depth analysis of our customers&#146; business
needs and operating environments, we are able to design and deliver
competitively priced and customized voice and data solutions. Our commercial
customers also benefit from our relationships with multiple providers, which
ensures superior service with respect to network redundancy, cost and supplier
risk. We are able to offer strong customer service due to easy access to
information and to our engineering, technical and administrative staffs.


<P align="left" style="font-size: 10pt"><I>Technologies</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Technologies segment offers a proven network convergence solution for
the deployment of IP-based voice and data services over a single network. We
have over nine years of experience developing VoIP technologies. Our
proprietary soft-switch solution both enables existing telecom service
providers to reduce telecommunications costs and permits new communications
service providers to enter the enhanced communications market with limited
investment. In addition, we have a patent portfolio that includes two VoIP
patents (the &#147;VoIP Patents&#148;) which we believe are foundational VoIP patents for
communications over traditional telecommunication networks. We are pursuing
opportunities to leverage our patents through a focused licensing strategy that
targets carriers, equipment vendors and customers who are deploying IP for
phone-to-phone communication.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All significant intercompany accounts and transactions have been
eliminated upon consolidation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management believes that the unaudited interim data includes all
adjustments necessary for a
fair presentation. The December&nbsp;31, 2003, condensed consolidated balance sheet
as restated herein is derived from audited consolidated financial statements, but
does not include all disclosures required by accounting principles generally
accepted in the United States of America. The condensed consolidated financial
statements should be read in conjunction with the Company&#146;s
audited financial statements included elsewhere in this prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern and, accordingly, do
not include any adjustments that might result from the outcome from this
uncertainty. The independent registered public accounting firm&#146;s report on the
consolidated financial statements included in the Company&#146;s annual report on
Form 10-K/A#1 for the year ended December&nbsp;31, 2003 contained an explanatory
paragraph regarding the Company&#146;s ability to continue as a going concern.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The results of operations for the three and nine month periods ended
September&nbsp;30, 2004 are not necessarily indicative of those to be expected for
the entire year ending December&nbsp;31, 2004.


<P align="left" style="font-size: 10pt"><B>Note 2</B>&nbsp;<B>&#150;</B>&nbsp;<B>Restatement</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements of the Company have been restated in
each reporting period from the fourth quarter of 2002 through to the first
quarter of 2004 to record additional deemed interest for beneficial conversion
features (&#147;BCF&#148;) embedded in certain of the Company&#146;s indebtedness as required
by Emerging Issues Task Force Issue No.&nbsp;00-27 (&#147;EITF 00-27&#148;). The restated
numbers are included in the year to date results as presented in the
accompanying consolidated financial statements and comparative figures.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;20, 2004, management of the Company concluded that the
accounting principles as set forth in EITF 00-27, regarding BCF, had not been
properly applied in current and prior periods to its convertible debentures
issued in a March&nbsp;2001 loan agreement for which the Company had previously
determined BCF of $1,100. The initial determination of the BCF in 2001 at the
respective issue dates of such debt was correct. However, adjustments to the
conversion price and the number of conversion shares


<P align="center" style="font-size: 10pt">F-39
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">were made under the debentures&#146; anti-dilution provisions. The various
anti-dilution events and their respective impacts on the number of shares and
the conversion price were disclosed in the Company&#146;s previous public filings.
However, the principles under EITF 00-27 also require a redetermination of the
BCF at each date an anti-dilution event occurred. This redetermination was not
completed in prior reporting periods. Additionally, the accumulation of unpaid
interest costs which are required by the debt terms to be added to principal
and which are payable at maturity on these same convertible debentures has been
deemed to be interest paid in kind (&#147;PIK&#148;); such interest also contains a
conversion feature, and payment of such interest in the form of PIK interest is
non-discretionary requiring the determination of BCF in the PIK interest. This
determination was not made by the Company in its prior reportings.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s management then concluded that a restatement was required
and brought these matters for consideration before the Audit Committee and the
full Board of Directors of the Company. Having considered the circumstances
underlying the accounting errors and their effects upon the Company&#146;s prior
filings, and having discussed the matter with the Company&#146;s management, the
Audit Committee concluded that the previously issued financial statements
should not be relied upon and approved and authorized the Company&#146;s management
to amend certain previously filed public reports to reflect deemed interest
expense from such BCF. The refilings were completed on October&nbsp;26, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the error affects 2001, 2002 and 2003, the $23 cumulative effect
on earnings through the third quarter of 2002 was recorded in the fourth
quarter of 2002 as a charge to interest expense. Therefore, the correction is
an increase in deemed interest expense and net loss, in all reporting periods
from the fourth quarter of 2002 through the first quarter of 2004, and a
reduction in reported liabilities and stockholders&#146; deficit in all reporting
periods from the fourth quarter of 2002 through the first quarter of 2004. The
effect of these errors is detailed, by reporting period, below. The restatement
had no effect on loss from discontinued operations or net loss per share from
discontinued operations.


<P align="left" style="font-size: 10pt"><B>Effect of the restatements on the consolidated statements of operations</B>


<P align="left" style="font-size: 10pt"><B>(per share information reported on a post 20:1 stock consolidation basis for
all periods shown. Stock consolidation enacted in the fourth quarter of 2003)</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three months</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec. 31, 2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Sept. 30, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec. 31, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31, 2004</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income (loss)
as previously
reported on Form
10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,117</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(14,895</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,713</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,257</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,456</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">594</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Correction of EITF
00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(301</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(902</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,089</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,337</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,779</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,801</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss as
currently reported
on revised Form
10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(11,418</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(15,797</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,802</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,594</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,235</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,207</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income (loss)
per share as
previously reported
on Form&nbsp;10-K or
10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.92</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.55</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.64</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.56</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.44</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.03</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss per share
as currently
reported on revised
Form&nbsp;10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1.96</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2.71</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.82</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.79</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-40
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt"><B>Effect of the restatements on the consolidated balance sheets</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As at</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec. 31, 2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Sept. 30, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec. 31, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31, 2004</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(unaudited)</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Notes payable to a
related party:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As previously
reported on Form
10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">33,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41,060</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Correction of
EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,109</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,364</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,437</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,265</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,356</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,834</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As currently
reported on
revised Form&nbsp;10-K
or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,226</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Additional paid-in
capital:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As previously
reported on Form
10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">171,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">171,192</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Correction of
EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,043</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As currently
reported on
revised Form&nbsp;10-K
or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">135,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">136,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">136,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">136,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">182,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">183,235</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Accumulated deficit</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As previously
reported on Form
10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(194,301</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(209,196</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(212,909</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(216,166</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(220,622</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(220,028</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Correction of
EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(301</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,203</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,292</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,629</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,408</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,209</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As currently
reported on
revised Form&nbsp;10-K
or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(194,602</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(210,399</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(215,201</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(219,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(226,030</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(227,237</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Stockholders&#146;
equity (deficit):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As previously
reported on Form
10-K or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(63,925</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(78,820</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(82,468</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(85,725</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(49,309</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(47,292</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Correction of
EITF 00-27 errors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,834</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As currently
reported on
revised Form&nbsp;10-K
or 10-Q</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(57,816</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(73,456</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(78,031</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(82,460</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(42,953</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(42,458</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>





<P align="center" style="font-size: 10pt">F-41
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Note 3</B>&nbsp;<B>&#150;</B>&nbsp;<B>Summary of Significant Accounting Policies</B>



<P align="left" style="font-size: 10pt"><B>Net loss per share</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic earnings per share is computed based on the weighted average number
of Acceris common shares outstanding during the period. Options, warrants,
convertible preferred stock and convertible debt are included in the
calculation of diluted earnings per share, except when their effect would be
anti-dilutive. As the Company has a net loss for the three and nine month
periods ended September&nbsp;30, 2003 and 2004, basic and diluted loss per share are
the same.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Potential common shares that were not included in the computation of
diluted earnings per share because they would have been anti-dilutive are as
follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Assumed conversion of Series&nbsp;N preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,760</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Assumed conversion of convertible debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,657,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,587,550</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Assumed exercise of options and warrants to
purchase shares of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,353,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">436,650</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,036,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,048,960</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>Investments</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends and realized gains and losses on securities are included in
other income in the condensed consolidated statements of operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company holds an investment in convertible preferred stock of
AccessLine Communications Corporation (&#147;AccessLine&#148;). The convertible preferred
stock is accounted for under the cost method, as the preferred securities are
not readily marketable and the Company&#146;s ownership interests do not allow it to
exercise significant influence over this entity. As of September&nbsp;30, 2004 and
December&nbsp;31, 2003, the carrying value of the preferred stock was $1,100. The
Company monitors this investment for impairment annually by considering current
factors including economic environment, market conditions and operational
performance and other specific factors relating to the business underlying the
investment, and will record impairments in carrying values when necessary. The
fair value of the security is estimated using the best available information as
of the evaluation date, including the quoted market prices of comparable public
companies, market price of the common stock underlying the preferred stock,
recent financing rounds of the investee and other investee specific
information. See Note 6 for further discussion of the Company&#146;s investment in
AccessLine convertible preferred stock.


<P align="left" style="font-size: 10pt"><B>Concentrations</B>



<P align="left" style="font-size: 10pt"><I>Concentrations of risk with third party providers:</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris utilizes the services of certain local exchange carriers (&#147;LECs&#148;)
to bill and collect from customers for a significant portion of its revenues.
If the LECs were unable or unwilling to provide such services in the future,
the Company would be required to significantly enhance its billing and
collection capabilities in a short amount of time and its collection experience
may be adversely affected during this transition period. If the LECs were
unable to remit payments received from their customers relating to Acceris
billings, the Company&#146;s operations and cash position may be adversely affected.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company depends on certain large telecommunications carriers to
provide network services for significant portions of the Company&#146;s
telecommunications traffic. If these carriers were unwilling or unable to
provide such services in the future, the Company&#146;s ability to provide services
to its customers may be adversely affected and the Company might not be able to
obtain similar services from alternative carriers on a timely basis or on terms
favorable to the Company.


<P align="left" style="font-size: 10pt"><I>Concentrations of credit risk</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s retail telecommunications subscribers are primarily
residential and small business subscribers in the United States. The Company&#146;s
customers are generally concentrated in the areas of


<P align="center" style="font-size: 10pt">F-42
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">highest population in the United States, more specifically California, Florida,
New York, Texas and Illinois. No single customer accounted for over 10% of
revenues in the three and nine month periods ending September&nbsp;30, 2004 or 2003.
The Company monitors credit worthiness of its larger carrier and retail
business customers.


<P align="left" style="font-size: 10pt"><B>Use of estimates</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.


<P align="left" style="font-size: 10pt"><B>Stock-based compensation</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At September&nbsp;30, 2004, the Company had several stock-based compensation
plans, which are described more fully in Note 18 to the audited consolidated
financial statements contained in our most recently filed Form 10-K/A#1. The
Company accounts for those plans under the recognition and measurement
principles of Accounting Principles Board Opinion No.&nbsp;25, <I>Accounting for Stock
Issued to Employees</I>, and related Interpretations (collectively, &#147;APB 25&#148;).
Stock-based employee compensation cost is not reflected in net loss, as all
options granted under those plans had an exercise price equal to or in excess
of the market value of the underlying common stock on the date of grant. In
accordance with SFAS No.&nbsp;123, <I>Accounting for Stock-Based Compensation </I>(&#147;SFAS
123&#148;), as amended by SFAS No.&nbsp;148, <I>Accounting for Stock-Based Compensation &#150;
Transition and Disclosure, </I>see below for a tabular presentation of the pro
forma stock-based compensation cost, net loss and loss per share as if the fair
value-based method of expense recognition and measurement prescribed by SFAS
123 had been applied to all employee options. Options granted to non-employees
(excluding non-employee members of the Company&#146;s Board of Directors),
consultants and marketing agents are recognized and measured using the fair
value-based method prescribed by SFAS 123.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="32%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended September 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nine Months Ended September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,867</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,594</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(16,291</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(25,193</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deduct:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Employee
stock-based
compensation cost
determined under
the fair
value-based
method for all
awards, net of $0
tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(116</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(454</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(54</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Pro forma net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,983</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,612</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(16,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(25,247</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loss per share,
basic and diluted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.36</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.79</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.84</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.32</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.36</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.79</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.87</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4.33</TD>
    <TD nowrap>)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>Note 4</B>&nbsp;<B>&#150;</B>&nbsp;<B>Liquidity and Capital Resources</B>.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has incurred substantial operating losses and negative cash
flows from operations since inception. At September&nbsp;30, 2004 the Company had a
stockholders&#146; deficit of $58,190 ($42,953 &#150; December&nbsp;31, 2003), negative
working capital of $22,092 ($26,576 &#150; December&nbsp;31, 2003), amounts due to its
controlling shareholder of $45,946 ($28,717 &#150; December&nbsp;31, 2003) and $7,265
($12,127 &#150;

December&nbsp;31, 2003) are owing under its revolving credit facility (included in
working capital). There are no additional borrowings available under the
revolving credit facility at September&nbsp;30, 2004.


<P align="center" style="font-size: 10pt">F-43
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The related party debt is owed to the Company&#146;s controlling shareholder,
Counsel Corporation (collectively with all its subsidiaries &#147;Counsel&#148;) and is
due at December&nbsp;31, 2005, subject to certain contingent acceleration clauses
linked to the raising of capital. The Company has a funding commitment from
Counsel to fund, through long-term intercompany advances or equity
contributions, all capital investment, working capital or other operational
cash requirements (the &#147;Keep Well&#148;) through June&nbsp;30, 2005. During the first
nine months of 2004, Counsel advanced the Company $11,702 under the Keep Well,
and converted $3,084 of accrued interest into principal. In October&nbsp;2004,
Counsel agreed to subordinate all of its debt in the Company in favor of both
the existing third party revolving credit facility and the newly issued third
party convertible term note (discussed below). Under the subordination
agreements, Counsel further agreed to guarantee the Company&#146;s revolving credit
facility and convertible term note and to pledge all of its shares owned in the
Company as security for the related debts.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The revolving credit facility is provided by an asset based lender. The
asset based lender is secured by a first lien on all of the assets of Acceris.
Borrowings under the facility are based on various advance rates of the
accounts receivable base subject to certain reductions and covenants. Amounts
available under the asset based facility are subject to change based upon the
level of receivables and other related factors, such as the aging of accounts,
customer concentrations, etc. The facility
matures on June&nbsp;30, 2005. The Company is looking to extend the term of the
facility beyond its current maturity date, or to replace the facility prior to
maturity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August&nbsp;2004, the Company implemented a resizing of the organization
targeted at reducing its operating costs. The cost cutting reflects the
continued efficiencies created by the ongoing integration of the Company&#146;s
operations, related to its four acquisitions over the last three years. As a
result of the resizing, the Company&#146;s work force was reduced by approximately
20&nbsp;percent. The reduction affected staff in the San Diego, Pittsburgh and
Somerset facilities. Management has recorded approximately $400 in expenses
related  to the August 2004 restructuring, of which
$326 was paid in the third quarter of 2004, recorded in selling, general and administration expense and anticipates that it
will record expenses, in the fourth quarter, of $1,000 to $1,500 related to
anticipated exit of facilities and the removal of assets from
production.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2004, the Company entered into a Securities Purchase Agreement
(the &#147;Agreement&#148;) for the sale by the Company of a Convertible Term Note (the
&#147;Note&#148;) in the principal amount of $5,000 due October&nbsp;14, 2007. The Note
provides that the principal amount outstanding bears interest at the prime rate
as published in the Wall Street Journal plus 3% (but not less than 7% per
annum) decreasing by 2% (but not less than 0%) for every 25% increase in the
Market Price (as defined therein) above the fixed conversion price following
the effective date of the registration statement covering the Common Stock
issuable upon conversion of the Note. Should the Company default under the
agreement and fail to remedy the default on a timely basis, interest under the
note will increase by 2% per month and the note may become immediately due
inclusive of a 20% premium to the then outstanding principal. Interest is
payable monthly in arrears, commencing November&nbsp;1, 2004. Principal is payable
at the rate of approximately $147 per month commencing January&nbsp;1, 2005, in cash
or registered common stock. Payment amounts will be converted into stock if
(i)&nbsp;the average closing price for five trading days immediately preceding the
repayment date is at least 100% of the Fixed Conversion Price, (ii)&nbsp;the amount
of the conversion does not exceed 25% of the aggregate dollar trading volume
for the 22-day trading period immediately preceding the repayment date, (iii)&nbsp;a
registration statement is effective covering the issued shares and (iv)&nbsp;no
Event of Default exists and is continuing. In the event the monthly payment
must be paid in cash, then the Company shall pay 102% of the amount due in
cash. The Company has the right to prepay the Note, in whole or in part, at
any time by giving seven business days written notice and paying 120% of the
outstanding principal amount of the Note. The holder may convert the Note, in
whole or in part, into shares of Common Stock at any time upon one business
day&#146;s prior written notice. The Note is convertible into shares of the
Company&#146;s common stock at an initial fixed conversion price of $0.88 per share
of common stock (105% of the average closing price for the 30 trading days
prior to the issuance of the Note) not to exceed,
however, 4.99% of the outstanding shares of common stock, of the Company
(including issuable shares from the exercise of the warrants, payments of
interest, or any other shares owned).


<P align="center" style="font-size: 10pt">F-44
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company did not generate net cash flow from operating activities in 2004. During 2004, the
Company was funded primarily by increases in related party debt, by the proceeds from the
sale of its shares of Buyers United Inc. (&#147;BUI&#148;), and by the October financing
noted above. Additional funds will be required by the Company to operate the business
throughout 2005. Such funds are expected to be derived from proceeds from additional third
party fund raises which may take the form of debt, equity or a hybrid instrument, or from
the proceeds on the sale of assets or from advances under the Keep Well. Use of funds from
such arrangements may include such uses as funding operations, improving working capital,
repaying obligations of the business and funding future merger and acquisition activities.
There can be no assurance that the Company&#146;s capital raising efforts will be
successful or can occur on favorable terms to existing security or debt holders.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There continues to be no assurance that the Company will be able to
improve its cash flow from operations, obtain additional third party financing,
extend, repay or refinance its debt with Counsel, its asset based lender or the
holder of the October&nbsp;2004 Note on favorable terms, or obtain an extension of
the existing funding commitment from Counsel or its asset based lender beyond
their respective maturity dates. This circumstance raises substantial doubt
about the Company&#146;s ability to continue as a going concern. The accompanying
condensed consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability of assets and
liquidation of liabilities that may result from this uncertainty.


<P align="left" style="font-size: 10pt"><B>Note 5</B>&nbsp;<B>&#150;</B>&nbsp;<B>Composition of Certain Financial Statements Captions</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furniture, fixtures, equipment and software consisted of the following:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30, 2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31, 2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Telecommunications network equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,196</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Furniture, fixtures and office equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,059</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Building /leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">305</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Software and information systems</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,986</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,546</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less accumulated depreciation and
amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,923</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,063</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total furniture, fixtures,
            equipment and software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,483</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included in telecommunications network equipment was $9,752 and $9,739 in
assets acquired under capital leases at September&nbsp;30, 2004 and December&nbsp;31,
2003, respectively. Accumulated amortization on these leased assets was $8,164
and $6,382 at September&nbsp;30, 2004 and December&nbsp;31, 2003, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets consisted of the following:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>September 30, 2004</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortization</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>period</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cost</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>amortization</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets subject to amortization:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Customer contracts and relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">12 - 60 months</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(961</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,045</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Agent relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">36 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(944</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,172</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Agent contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">12 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(242</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Patents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">60 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>
          &nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>
          &nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>
          &nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,162</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,302</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total intangible assets and goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,162</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,422</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-45
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortization</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>period</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cost</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>amortization</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Intangible assets subject to amortization:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Customer contracts and relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">12 - 60 months</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(510</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,496</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Agent relationships</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">36 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(415</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,701</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Agent contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">12 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(242</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Patents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">60 months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,167</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,297</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total intangible assets and goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,167</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,417</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization expense for the three months ended September&nbsp;30, 2004 and
2003 was $298 and $583, respectively. Amortization expense for the nine months
ended September&nbsp;30, 2004 and 2003 was $995 and $980, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities consisted of the following:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,370</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Telecommunications and related accruals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,840</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Regulatory fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,790</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>Note 6</B>&nbsp;<B>&#150;</B>&nbsp;<B>Investments</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to June&nbsp;21, 2004, the Company held an investment in the common stock
of BUI, which investment was acquired as consideration received related to the
sale of the operations of ILC. At the time of the sale of the ILC business, the
purchase price consideration paid by BUI was in the form of convertible
preferred stock, with additional shares of preferred stock received
subsequently based on contingent earn out provisions in the purchase agreement.
In addition, common stock dividends were earned on the preferred stock holding.
On March&nbsp;16, 2004, the Company converted its preferred stock into 1,500,000
shares of BUI common stock, and sold 750,000 shares at $2.30 per share in a
private placement transaction. This sale resulted in a gain of approximately
$565, which is included in interest and other income in the three months ended
March&nbsp;31, 2004 and was based on specific identification of the securities sold
and their related cost basis. Through several open market transactions during
the three months ended June&nbsp;30, 2004, the Company sold the remaining 808,546 of
these shares, resulting in a gain of approximately $811. These gains are
included in other income in the accompanying condensed consolidated statements
of operations for the three and nine months ended September&nbsp;30, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s investments as of September&nbsp;30, 2004 consist of convertible
preferred stock in AccessLine. This stock was received as consideration for a
licensing agreement in the second quarter of 2003 and was reflected in
technology licensing and development revenues for that quarter, at its carrying
value of $1,100.


<P align="left" style="font-size: 10pt"><B>Note 7</B>&nbsp;<B>&#150;</B>&nbsp;<B>Network Service Offering</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company, through its Telecommunications segment (see Note 16 for
further discussion of the Company&#146;s segments), began to sell a network service
offering in November&nbsp;2002. The Company ceased
selling this network service offering in July 2003. Revenues for the
Company&#146;s network service offering


<P align="center" style="font-size: 10pt">F-46
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">are accounted for using the unencumbered cash receipt
method. The Company determined that collectibility of the amounts billed to
customers was not reasonably assured at the time of billing. Under its
agreements with the LECs, cash collections remitted to the Company are subject
to adjustment, generally over several months. Accordingly, the Company
recognizes revenue when the actual cash collections to be retained by the
Company are finalized and unencumbered. There was no further billing of
customers for the network service offering subsequent to the program&#146;s
termination. During the three and nine months ended September&nbsp;30, 2004, the
Company recognized $161 and $6,714, respectively, as non-recurring revenue from
prior-year sales of this service offering as prior period cash collections were
finalized.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2004, the Company had not paid the service provider
approximately $519 which was previously reserved pursuant to services provided
in July&nbsp;2003, which were expensed as a telecommunications cost in the third
quarter of 2003. During the second quarter of 2004, a settlement was reached
with the service provider whereby the Company paid approximately $300 to the
service provider, rendering all parties free and clear of all future
obligations under the program. The discharge of the remaining $219 obligation
is included as an offset to telecommunications expense in the accompanying
condensed consolidated statements of operations for the nine months ended
September&nbsp;30, 2004.


<P align="left" style="font-size: 10pt"><B>Note 8</B>&nbsp;<B>&#150;</B>&nbsp;<B>Discharge of Obligation</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter of 2004, the Company was discharged of an obligation
totaling $767 owed to a consortium of owners of a certain telecommunications asset, to which the Company previously held an indefeasible right
of usage. The discharge of the obligation is included in interest and other income in the accompanying condensed consolidated statements of operations
for the nine months ended September 30, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the third quarter of 2004, the Company entered into a settlement agreement with the estate of WorldxChange Communications, Inc. ("Estate"), which resulted in the offset of a receivable of the Company with an obligation of the Company to the Estate.  The effect was an increase of $204 in other income in the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the fourth quarter of 2004, the Company settled, with various network carriers, billings
related to prior periods for services provided. The Company is currently assessing the
measurement of the settlements on the accounts. The reduction in obligations is expected
to be recorded as a reduction in network expense for 2004.


<P align="left" style="font-size: 10pt"><B>Note 9</B>&nbsp;<B>&#150;</B>&nbsp;<B>Patent Residual Option</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the fourth quarter of 2003, Acceris acquired Patent No.&nbsp;6,243,373 from
a third party. Consideration provided was $100 plus a 35% residual
payable to the third party relating to the net proceeds from future licensing
and or enforcement actions from the combined Acceris VoIP Patents (i.e. Patent
No.&nbsp;6,243,373 and 6,438,124). Net proceeds are defined as amounts collected
from third parties net of the direct costs associated with putting the
licensing or enforcement in place and related collection costs. At the time of
closing, Acceris was granted the right to decrease the residual payable from
35% to 30% on or before June&nbsp;30, 2004 for an additional payment of $614 and,
based upon exercising the right to decrease the residual from 35% to 30%,
Acceris would have the additional right to decrease its residual payable from
30% to 15% for an additional $5,000. In the second quarter, Acceris was granted
an extension through July&nbsp;31, 2004 of its right to decrease the residual from
35% to 30% for no additional consideration by the arms length party. Acceris
was subsequently granted additional extensions of its right to decrease
its residual from 35% to 30% through November&nbsp;30, 2004 for no additional
consideration. The additional right to decrease the residual from 30% to 15%,
which is preconditioned on the decrease of residual from 35% to 30%, remained in
full force and effect. The Company has allowed these rights to lapse, unexercised, as of December 31, 2004.



<P align="left" style="font-size: 10pt"><B>Note 10</B>&nbsp;<B>&#150;</B>&nbsp;<B>Discontinued Operations</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;6, 2002, the Company entered into an agreement to sell
substantially all of the assets and customer base of ILC to BUI. The sale
included the physical assets required to operate Acceris&#146; nationwide network
using its patented VoIP technology (constituting the core business of ILC) and
a non-exclusive license in perpetuity to use Acceris&#146; proprietary software
platform. The sale closed on May&nbsp;1, 2003 and provided for a post closing cash
settlement between the parties. The sale price consisted of 300,000 shares
of Series&nbsp;B convertible preferred stock (8% dividend) of BUI, subject to
adjustment in certain


<P align="center" style="font-size: 10pt">F-47
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">circumstances, of which 75,000 shares were subject to an
earn-out provision (contingent consideration). The fair value of the 225,000
shares (non-contingent consideration) of BUI convertible preferred stock was
determined to be $1,350 as of December&nbsp;31, 2002. The earn-out took place on a
monthly basis over a fourteen-month period, which began January&nbsp;2003. The
Company recognized the value of the earn-out shares as additional sales
proceeds when earned. During the year ended December&nbsp;31, 2003, 64,286 shares of
the contingent consideration with a fair value of $566 were earned and included
as a component of gain (loss)&nbsp;from discontinued operations. As of December&nbsp;31,
2003, the combined fair value of the 225,000 original shares and the 64,286
shares earned from the contingent consideration was determined to be $1,916.
See Note 6 for a discussion of the disposition of these shares in the nine
months ended September&nbsp;30, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter of 2004, the Company recorded a gain from
discontinued operations of $104. This gain was due to the receipt in January
2004 of the remaining 10,714 shares of common stock as contingent
consideration, which is recorded as additional gain from discontinued
operations. Upon closing of the sale, BUI assumed all operational losses
subsequent to December&nbsp;2002. Accordingly, the gains of $213 and $307 for the
three and nine months ended September&nbsp;30, 2003, respectively, include the
increase in the sales price for the losses incurred after December&nbsp;6, 2002.


<P align="left" style="font-size: 10pt"><B>Note 11</B>&nbsp;<B>&#150;</B>&nbsp;<B>Income Taxes</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company recognized no income tax benefit from the losses generated in
the nine months ended September&nbsp;30, 2004 and 2003 because of the uncertainty
surrounding the realization of the related deferred tax asset. Pursuant to
Section&nbsp;382 of the Internal Revenue Code, annual usage of the Company&#146;s net
operating loss carryforwards is limited to approximately $6,700 per annum until
2008 and thereafter $1,700 per annum as a result of previous cumulative changes
of ownership resulting in a change of control of the Company. These rules in
general provide that an ownership change occurs when the percentage
shareholdings of 5% direct or indirect shareholders of a loss corporation have
in aggregate increased by more than 50&nbsp;percentage points during the immediately
preceding three years. Restrictions in net operating loss carry forwards
occurred in 2001 as a result of the acquisition of the Company by Counsel.
Further restrictions likely have occurred as a result of subsequent changes in
the share ownership and capital structure of the Company and Counsel. There is
no certainty that the application of these rules may not reoccur resulting in
further restrictions on the Company&#146;s income tax loss carry forwards existing
at a particular time. Any such additional limitations could require the Company
to pay income taxes in the future and record an income tax expense to the
extent of such liability.


<P align="left" style="font-size: 10pt"><B>Note 12</B>&nbsp;<B>&#150;</B>&nbsp;<B>Related Party Transactions</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the nine months ended September&nbsp;30, 2004, Counsel, Acceris&#146;
controlling shareholder, advanced $11,702 and converted $3,084 of interest
payable to principal. All loans from Counsel mature on January&nbsp;31, 2006 and
accrue interest at rates ranging from 9% to 10%, with interest compounding
quarterly and some of the loans are subject to an accelerated maturity in
certain circumstances. At September&nbsp;30, 2004, no events resulting in
accelerated maturity had occurred. The Keep Well from Counsel expires on June
30, 2005 and provides a commitment to fund through long-term intercompany
advances or equity contributions, all capital investment, working capital or
other operational cash requirements of the Company.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chief Executive Officer (&#147;CEO&#148;) of Acceris is an employee of Counsel.
As CEO of Acceris, he is entitled to an annual salary of $275 and a
discretionary bonus of up to 100% of the base salary. Such compensation is
expensed and paid by Acceris.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Counsel provided additional management services through Acceris&#146;
President, Chief Financial Officer, Corporate Secretary, and from time to time
corporate finance staff who are also employees of Counsel. No contractual
arrangement exists for these services so the contribution of these individuals
are considered as a conferred benefit by the controlling shareholder resulting
in the recording of an expense of $198 for the nine months ended September&nbsp;30,
2004. This expense is included in selling, general and administrative expenses
and results in an increase in paid-in capital.





<P align="center" style="font-size: 10pt">F-48
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



 <P align="left" style="font-size: 10pt"><B>Note 13 &#150; Commitments and
Contingencies</B>
<P align="left" style="font-size: 10pt"><I>Legal Proceedings</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;16, 2004, certain shareholders of the Company (the &#147;Plaintiffs&#148;)
filed a putative derivative complaint in the Superior Court of the State of
California in and for the County of San Diego, (the &#147;Complaint&#148;) against the
Company, WorldxChange Corporation (sic), Counsel Communications LLC, and
Counsel Corporation as well as certain present and former officers and
directors of the Company, some of whom also are or were directors and/or
officers of the other corporate defendants (collectively, the &#147;Defendants&#148;).
The Complaint alleges, inter alia, that the Defendants, in their respective
roles as controlling shareholder and directors and officers of the Company
committed breaches of the fiduciary duties of care, loyalty and good faith and
were unjustly enriched, and that the individual Defendants committed waste of
corporate assets, abuse of control and gross mismanagement. The Plaintiffs seek
compensatory damages, restitution, disgorgement of allegedly unlawful profits,
benefits and other compensation, attorneys&#146; fees and expenses in connection
with the Complaint. The Company believes that these claims in their entirety
are without merit and intends to vigorously defend this action. There is no
assurance that this matter will be resolved in the Company&#146;s favor and an
unfavorable outcome of this matter could have a material adverse impact on its
business, results of operations, financial position or liquidity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris and several of Acceris&#146; current and former executives and board
members were named in a securities action filed in the Superior Court of the
State of California in and for the County of San Diego on April&nbsp;16, 2004, in
which the plaintiffs made claims nearly identical to those set forth in the
derivative suit above. The Company believes that these claims in their entirety
are without merit and intends to vigorously defend this action. There is no
assurance that this matter will be resolved in the Company&#146;s favor and an
unfavorable outcome of this matter could have a material adverse impact on its
business, results of operations, financial position or liquidity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Company&#146;s efforts to enforce its patent rights,
Acceris Communications Technologies Inc. filed a patent infringement lawsuit
against ITXC Corp. (&#147;ITXC&#148;) in the United States District Court of the District
of New Jersey on April&nbsp;14, 2004. The complaint alleges that ITXC&#146;s VoIP
services and systems infringe the Company&#146;s U.S. Patent No.&nbsp;6,243,373, entitled
&#147;Method and Apparatus for Implementing a Computer Network/Internet Telephone
System.&#148; On May&nbsp;7, 2004, ITXC filed a lawsuit against Acceris Communications
Technologies Inc., and the Company, in the United States District Court for the
District of New Jersey for infringement of five ITXC patents relating to VoIP
technology, directed generally to the transmission of telephone calls over the
Internet and the completion of telephone calls by switching them off the
Internet and onto a public switched telephone network. The Company believes
that the allegations contained in ITXC&#146;s complaint are, in their entirety,
without merit and the Company intends to provide a vigorous defense to ITXC&#146;s
claims. There is no assurance that this matter will be resolved in the
Company&#146;s favor and an unfavorable outcome of this matter could have a material
adverse impact on its business, results of operations, financial position or
liquidity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At our Adjourned Meeting of Stockholders held on December&nbsp;30, 2003, our
stockholders approved an amendment to our Articles of Incorporation, deleting
Article&nbsp;VI thereof (regarding liquidations, reorganizations, mergers and the
like). Stockholders who were entitled to vote at the meeting and advised us in
writing, prior to the vote on the amendment, that they dissented and intended
to demand payment for their shares if the amendment was effectuated, were
entitled to exercise their appraisal rights and obtain payment in cash for
their shares under Sections&nbsp;607.1301 &#150; 607.1333 of the Florida Business
Corporation Act, provided their shares were not voted in favor of the
amendment. In January&nbsp;2004, appraisal notices in compliance with Florida
corporate statutes were sent to all stockholders who had advised us of their
intention to exercise their appraisal rights. The appraisal notices included
our estimate of fair value of our shares, being $4.00 per share on a post-split
basis. These stockholders had until February&nbsp;29, 2004 to return their completed
appraisal notices along with certificates for the shares for which they were
exercising their appraisal rights. Approximately 33 stockholders holding
approximately 74,000 shares of our stock returned completed appraisal notices
by February&nbsp;29, 2004. A stockholder of 20 shares notified us of his acceptance
of our offer of $4.00 per share, while the stockholders of the remaining shares
did not accept our offer. Subject to the qualification that we may not make any
payment to a stockholder seeking appraisal rights if,
at the time of payment, our total assets are less than our total liabilities,
stockholders who accepted our


<P align="center" style="font-size: 10pt">F-49
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">offer to purchase their shares at the estimated
fair value will be paid for their shares within 90&nbsp;days of our receipt of a
duly executed appraisal notice. If we should be required to make any payments
to dissenting stockholders, Counsel will fund any such amounts through the
purchase of shares of our common stock. Stockholders who did not accept our
offer were required to indicate their own estimate of fair value, and if we do
not agree with such estimates, the parties are required to go to court for an
appraisal proceeding on a individual basis in order to  establish  fair  value.
Because Acceris did not agree with the estimates submitted by most of the
dissenting shareholders, Acceris has sought a judicial determination of the
fair value of the common stock held by the dissenting stockholders. On June&nbsp;24,
2004, Acceris filed suit against the dissenting shareholders seeking a
declaratory judgment, appraisal and other relief in the Circuit Court for the
17th Judicial District in Broward County, Florida. There is no assurance that
this matter will be resolved in the Company&#146;s favor and an unfavorable outcome
of this matter could have a material adverse impact on our business, results of
operations, financial position or liquidity.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is involved in various other legal matters arising out of its
operations in the normal course of business, none of which are expected,
individually or in the aggregate, to have a material adverse effect on the
Company.


<P align="left" style="font-size: 10pt"><B>Note 14</B>&nbsp;<B>&#150;</B>&nbsp;<B>Agent Warrant Program</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the first quarter of 2004, the Company launched the Acceris
Communications Inc. Platinum Agent Program (the &#147;Agent Warrant Program&#148;), which
provides for the issuance of warrants to purchase up to 1,000,000 shares of the
Company&#146;s common stock to independent agents who participate in the Agent
Warrant Program. The Agent Warrant Program was established to encourage and
reward consistent, substantial and persistent production by selected commercial
agents serving the Company&#146;s domestic markets and to strengthen the Company&#146;s
relationships with these agents by granting long-term incentives in the form of
the warrants to purchase the Company&#146;s common stock at current price levels.
The Agent Warrant Program is administered by the Compensation Committee of the
Board of Directors of the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Participants in the Agent Warrant Program will be granted warrants upon
commencement, the vesting of which is based on maintaining certain revenue
levels for a period of 24&nbsp;months. The grants are classified into tiers based on
commissionable revenue levels, the vesting period of which begins upon the
achievement of certain commissionable revenue levels during the eighteen month
period beginning February&nbsp;1, 2004. Vesting of the warrants within each tier
occurs 50% after 12&nbsp;months and 100% after 24&nbsp;months, dependent on the agent
maintaining the associated commissionable revenue levels for the entire period
of vesting.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September&nbsp;30, 2004, 600,000 warrants have been issued under the
Agent Warrant Program, none of which have met the requirements to begin
vesting. The warrants issued under the plan are accounted for under the
provisions of the FASB&#146;s Emerging Issue Task Force&#146;s (&#147;EITF&#148;) Issue No.&nbsp;96-18,
<I>Accounting for Equity Instruments That are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services </I>(&#147;EITF 96-18&#148;).
Accordingly, the Company will recognize an expense associated with these
warrants over the vesting period based on the then current fair market value of
the warrants calculated at each reporting period. At such time as the vesting
for any warrants begins, the expense will be included in selling, general and
administrative expense. As the vesting period has not commenced for any of the
warrants issued prior to September&nbsp;30, 2004, no expense has been recognized in
the accompanying condensed consolidated statements of operations for the three
and nine months ended September&nbsp;30, 2004.


<P align="left" style="font-size: 10pt"><B>Note 15</B>&nbsp;<B>&#150;</B>&nbsp;<B>Subsequent Event</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2004, the Company entered into an agreement for the sale by the
Company of a Convertible Term Note in the principal amount of $5,000 due
October&nbsp;14, 2007. The Note provides that the principal amount outstanding
bears interest at the prime rate as published in the Wall Street Journal plus
3% (but not less than 7% per annum) decreasing by 2% (but not less than 0%) for
every 25% increase in the Market Price (as defined therein) above the fixed
conversion price following the effective date of the
registration statement covering the Common Stock issuable upon
conversion of the Note. Should the Company default under the agreement and fail to remedy
the default on a timely basis, interest under the note will increase by 2% per
month and the note may become immediately due inclusive of a 20% premium to the
then outstanding principal. Interest is payable monthly in arrears, commencing
November&nbsp;1, 2004. Principal is payable at the rate of approximately $147 per
month commencing January&nbsp;1, 2005, in cash or registered common stock. Payment
amounts will be converted into stock if (i)&nbsp;the average closing price for five
trading days immediately preceding the repayment date is at least 100% of the
Fixed Conversion Price, (ii)&nbsp;the amount of the conversion does not exceed 25%
of the aggregate dollar trading volume for the 22-day trading period
immediately preceding the repayment date, (iii)&nbsp;a registration statement is
effective covering the issued shares and (iv)&nbsp;no Event of Default exists and is
continuing. In the event the monthly payment must be paid in cash, then the
Company shall pay 102% of the amount due in cash. The Company has the right to
prepay the Note, in whole or in part, at any time by giving seven business days
written notice and paying 120% of the outstanding principal amount of the Note.
The holder may convert the Note, in whole or in part, into shares of Common
Stock at any time upon one business day&#146;s prior written notice. The Note is
convertible into shares of the Company&#146;s common stock at a fixed
conversion price of $0.88 per share of common stock (105% of the average
closing price for the 30 trading days prior to the issuance of the Note) not to
exceed, however, 4.99% of the outstanding shares of common stock, of the
Company (including issuable shares from the exercise of the warrants, payments
of interest, or any other shares owned).

<P align="center" style="font-size: 10pt">F-50
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to a Master Security Agreement, the Company granted a blanket lien on all its property and that
of certain of its subsidiaries to secure repayment of the obligation and, pursuant to a Stock Pledge Agreement, Counsel
Communications, LLC and Counsel Corporation (US) pledged the shares of the Company held by it as
further security. In addition, Acceris Communications Technologies, Inc., Acceris Communications Corp., Counsel Corporation and Counsel Communications LLC and Counsel Corporation (US) jointly and severally guaranteed the obligations to the Lender. The Company paid a closing fee of 3.9% of the aggregate principal amount of the Note or $195 and reimbursed
the Purchaser for its expenses in connection with the transaction in the aggregate amount of $31. So long as 25%
of principal amount of the Note is outstanding, the Company agreed that it will not pay dividends on its Common Stock, among other things.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the Company issued its Common Stock Purchase Warrant
(the &#147;Warrant&#148;) to the Purchaser,
 entitling the Purchaser to purchase up to one million shares of common stock, subject to adjustment.
The Warrant entitles the Purchaser to purchase the stock through the earlier of (i) October 13, 2009
 or (ii) the date on which the average closing price for any consecutive ten trading dates shall equal
or exceed 15 times the Exercise Price. The Exercise Price shall equal $1.00 per share as to the first
250,000 shares, $1.08 per share for the next 250,000 shares and $1.20 per share for the remaining
 500,000 shares, or 125%, 135% and 150% of the average closing price for ten trading days immediately
prior to the date of the Warrant, respectively. The Company agreed, pursuant to a Registration Rights Agreement, to file, within 30 days, a registration statement under the Securities Act of 1933, as amended, to register the shares issuable upon conversion of the Note as well as those issuable pursuant to the Warrant.

<P align="left" style="font-size: 10pt"><B>Note 16</B>&nbsp;<B>&#150;</B>&nbsp;<B>Segment Reporting</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter of 2004, the Company changed the structure of its
internal organization and the method upon which it evaluates its performance.
Previously, the Company had three segments consisting of Enterprise, Retail and
Technologies, which primarily distinguished themselves by the product offerings
available. In the first quarter of 2004, management began to evaluate the
Company as two divisions consisting of Telecommunications and Technologies. The
Company uses the information available by division to evaluate management and
Company performance and to make decisions regarding the allocation of Company
assets. Telecommunications includes the operations of the assets and
liabilities purchased from WorldxChange in June&nbsp;2001 and the Agent and
Enterprise businesses of RSL.Com Inc. (&#147;RSL&#148;), which were acquired in December
2002. This segment offers a dial around telecommunications product, a 1&#043;
product and a local dial tone bundled offering through MLM, commercial agents
and telemarketing channels. This segment also offers voice and data solutions
to business customers through an in-house sales force. The Technologies segment
offers a fully developed network convergence solution for voice and data and
licenses its technology to third party users. Prior period amounts have been
restated to conform to this presentation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no material inter-segment revenues. The Company&#146;s business is
conducted principally in the U.S.; foreign operations are not significant. The
table below presents information about the segments of the Company as of and
for the three and nine months ended September&nbsp;30, 2004.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>For the three months</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>For the nine months</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>ended September 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>ended September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(as restated)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><I>Revenues from external customers:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Telecommunications</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">101,364</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Technologies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,099</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total revenues from external customers for
reportable segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">89,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">103,463</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><I>Segment income (loss):</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Telecommunications</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(2,319</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(8,536</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(17,034</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Technologies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(336</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(744</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,169</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total segment income (loss)&nbsp;for reportable segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,081</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,552</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,280</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,865</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Unallocated amounts in consolidated net loss:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Amortization of discount on notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(170</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(104</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(502</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gain on discharge of obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gain on sale of investment in common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Corporate interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,509</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,466</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,282</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,781</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other corporate expenses, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(481</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(619</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,076</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,352</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Consolidated net loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,867</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,807</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(16,395</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(25,500</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>





<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-51
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>PART II</B>



<P align="left" style="font-size: 10pt"><B>Information Not Required in Prospectus</B>



<P align="left" style="font-size: 10pt"><B>Item&nbsp;13. Other Expenses of Issuance and Distribution.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The estimated expenses payable by us in connection with the offering
described in this registration statement will be as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">SEC Registration Fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">786</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Printing and engraving expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Legal fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounting fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Miscellaneous</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,214</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">TOTAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">85,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>Item&nbsp;14. Indemnification of Directors and Officers.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;607.0850 of the Florida Business Corporation Act empowers a
corporation to indemnify any person who was or is a party to a proceeding by
reason of the fact that he was or is an officer, director, employee or agent of
the corporation against liability incurred in connection with such proceeding.
Such person must have acted in good faith and in a manner reasonably believed
to be in or not opposed to, the best interests of the corporation. With respect
to any criminal proceeding, such person must have had no reasonable cause to
believe his conduct was unlawful. Any such indemnification may only be made
upon a determination by the corporation that such indemnification is proper
because the person met the applicable standard of conduct.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Florida Business Corporation Act provides further that the
indemnification permitted thereunder is not exclusive; provided, however,
indemnification is not permitted to be made on behalf of any such person if a
judgment or final adjudication establishes (i)&nbsp;a violation of the criminal law
unless such person had reasonable cause to believe his conduct was lawful or no
reasonable cause to believe his conduct was unlawful; (ii)&nbsp;such person derived
an improper personal benefit from the transaction; (iii)&nbsp;as to any director
such proceeding arose from an unlawful distribution under Section&nbsp;607.0834; or
(iv)&nbsp;willful misconduct or a conscious disregard for the best interests of the
corporation in a proceeding by the corporation or a shareholder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris&#146; Bylaws provide that Acceris shall indemnify any such person to
the fullest extent provided by law and empowers Acceris to purchase and
maintain insurance on behalf of any such person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceris previously entered into indemnification agreements with certain
officers and directors of I-Link for indemnification against expenses
(including attorneys&#146; fees, through all proceedings, trials, and appeals),
judgments, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending, or contemplated action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, arising
from any actual or alleged breach of duty, neglect, effort, or other action
taken or omitted, solely in the capacity as an officer and/or a director of
Acceris; provided that no indemnification will be made in respect of any acts
or omissions (a)&nbsp;involving gross negligence or willful misconduct, (b)
involving libel or slander, or (c)&nbsp;based upon or attributable to gaining,
directly or indirectly, any profit or advantage to which he was not legally
entitled.


<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT MAY
BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING I-LINK PURSUANT TO
THE FOREGOING PROVISIONS, I-LINK HAS BEEN INFORMED THAT IN THE OPINION OF THE
SECURITIES AND EXCHANGE COMMISSION, SUCH INDEMNIFICATION IS AGAINST PUBLIC
POLICY AS EXPRESSED IN THE SECURITIES ACT AND IS THEREFORE UNENFORCEABLE.


<P align="center" style="font-size: 10pt">II-1
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><B>Item&nbsp;15. Recent Sales of Unregistered Securities.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the past three years, we sold the following securities without
registration under the Securities Act:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the Company&#146;s acquisition of RSL.COM USA, Inc. in
December&nbsp;2002, the Company issued a $7,500 convertible note (the &#147;Convertible
Note&#148;) payable to Counsel, bearing interest at 10% per annum, compounded
quarterly, which matured on March&nbsp;1, 2004. The Convertible Note was
convertible into common stock of Acceris at a conversion rate of $1.68 per
share. On November&nbsp;30, 2003, Counsel exercised its right to convert the
Convertible Note plus accrued interest to that date totaling $7,952 into
4,747,396 shares of common stock of Acceris. No cash consideration was
received in the transaction. The Company relied on an exemption from
registration under Section&nbsp;4(2) of the Securities Exchange Act of 1933.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;30, 2003, pursuant to an Amended Debt Restructuring Agreement
with Counsel, Counsel exercised its right to convert approximately $32,721 of
notes payable into 8,681,096 shares of the Company&#146;s common stock at a
conversion rate of approximately $3.77 per share. No cash consideration was
received in the transaction. The Company relied on an exemption from
registration under Section&nbsp;4(2) of the Securities Exchange Act of 1933 as a
transaction by an issuer not involving a public offering.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has from time to time granted, pursuant to exemptions from
registration under Section&nbsp;4(2) of the Securities Act, options under our stock
option plans as follows:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;26, 2003, the stockholders of the Company approved the 2003
Stock Option and Appreciation Rights Plan (the &#147;2003 Plan&#148;), which provides for
the issuance of incentive stock options, non-qualified stock options and stock
appreciation rights (&#147;SARs&#148;) up to an aggregate of 2,000,000 shares of common
stock (subject to adjustment in the event of stock dividends, stock splits, and
other similar events). There were 1,372,000 options granted (and outstanding
at December&nbsp;31, 2003) under the 2003 Plan in 2003. The Company relied on an
exemption from registration under Section&nbsp;4(2) of the Securities Act as a
transaction by an issuer not involving a public offering.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the three months and nine months ending September&nbsp;30, 2004,
approximately 101,500 and 243,600 options, respectively, were issued to
employees under the 2003 Plan. These options are issued with exercise prices
that equal or exceed fair value on the date of the grant and vest over a 4-year
period subject to the grantee&#146;s continued employment with the Company. The
Company relied on an exemption from registration under Section&nbsp;4(2) of the
Securities Act of 1933 as a transaction by an issuer not involving a public
offering.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, during the nine months ended September&nbsp;30, 2004,
approximately 600,000 warrants have been issued to a limited number of
participants under the Acceris Communications Inc. Platinum Agent Program at an
exercise price of $3.50 per share. The Company relied on an exemption from
registration under Regulation&nbsp;D under the Securities Act of 1933.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;14, 2004, the Company entered into a Securities Purchase
Agreement (the &#147;Agreement&#148;) for the sale by the Company to Laurus Master Funds,
Ltd. thereof (the &#147;Selling Holder&#148;) of a Convertible Term Note (the &#147;Note&#148;) in
the principal amount of $5,000 due October&nbsp;14, 2007. Principal is payable at
the rate of approximately $147 per month commencing January&nbsp;1, 2005, in cash or
registered common stock. Payment amounts will be converted into stock if (i)
the average closing price for five trading days immediately preceding the
repayment date is at least 100% of the Fixed Conversion Price, (ii)&nbsp;the amount
of the conversion does not exceed 25% of the aggregate dollar trading volume
for the 22-day trading period immediately preceding the repayment date, (iii)&nbsp;a
registration statement is effective covering the issued shares and (iv)&nbsp;no
Event of Default exists and is continuing. In the event the monthly payment
must be paid in cash, then the Company shall pay 102% of the amount due in
cash. The Company has the right to prepay the Note, in whole or in part, at any
time by giving seven business days written notice and paying 120% of the
outstanding principal amount of the Note. The Selling Holder may convert the
Note, in whole or in part, into shares of common stock at any time upon one
business day&#146;s prior written notice. The Note is convertible into shares of the
Company&#146;s common stock at a fixed conversion price of $0.88 per share of common
stock (105% of the average closing price for the 30 trading days prior to the
issuance of the Note) not to exceed, however, 4.99% of the outstanding shares
of common stock of the Company (including issuable shares from the exercise of
the warrants and any other shares owned).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Company issued its Common Stock Purchase Warrant (the
&#147;Warrant&#148;) to the Selling Holder, entitling the Selling Holder to purchase up
to one million shares of common stock, subject to adjustment. The Warrant
entitles the Selling Holder to purchase the stock through the earlier of (i)
October&nbsp;13, 2009 or (ii)&nbsp;the date on which the


<P align="center" style="font-size: 10pt">II-2
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">average closing price for any
consecutive ten trading dates shall equal or exceed 15 times the Exercise
Price. The Exercise Price shall equal $1.00 per share as to the first 250,000
shares, $1.08 per share for the next 250,000 shares and $1.20 per share for the
remaining 500,000 shares, or 125%, 135% and 150% of the average closing price
for ten trading days immediately prior to the date of the Warrant,
respectively, not to exceed, however, 4.99% of the outstanding shares of common
stock of the Company (including issuable shares from the conversion of the Note
and any other shares owned). The Company agreed, pursuant to a registration
rights agreement, to file, within 30&nbsp;days, a registration statement under the
Securities Act, to register the shares issuable upon conversion of the Note as
well as those issuable pursuant to the Warrant.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the transaction, the Company relied upon the exemption
from registration provided by Section&nbsp;4(2) of the Securities Act for
transactions by an issuer not involving a public offering insofar as the
Selling Holder is an accredited, sophisticated investor purchasing the
securities for its own account and not with a view towards or for resale in
connection with their distribution.


<P align="left" style="font-size: 10pt"><B>Item&nbsp;16. Exhibits and Financial Statement Schedules.</B>



<P align="left" style="font-size: 10pt">(a)&nbsp;The following exhibits are filed as part of this Registration Statement:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Title of Exhibit</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1(i)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Articles of Incorporation. (1)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bylaws as amended (2)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement by and between Acceris and Winter Harbor, LLC
dated as of September&nbsp;30, 1997. (3)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Registration Rights Agreement by and between Acceris and
Winter Harbor, LLC dated as of January&nbsp;15, 1999, amending Registration Rights
Agreement dated October&nbsp;10, 1997. (4)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Stockholders Agreement by and among Acceris, Winter Harbor, LLC and
certain holders of Acceris&#146; securities (Exhibit&nbsp;D to the Purchase Agreement).
(3)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Warrant Agreement by and between MedCross, Inc. and Winter Harbor, LLC
(Exhibit&nbsp;F to the Purchase Agreement). (3)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Convertible Loan and Security Agreement by and between Acceris and
Counsel Communications LLC, dated March&nbsp;1, 2001. (5)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loan Note by and between Counsel Communications LLC and Acceris dated as of
March&nbsp;1, 2001. (5)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Agreement by and between Acceris, MiBridge Inc and Counsel
Communications, LLC., dated March&nbsp;1, 2001. (5)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Dilworth Paxson LLP (included herewith)</TD>
</TR>


<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1997 Recruitment Stock Option Plan. (6)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2001 Stock Option and Appreciation Rights Plan. (7)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2003 Stock Option and Appreciation Rights Plan. (8)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement by and between Acceris and Winter Harbor, LLC, dated April&nbsp;14, 1998.
(9)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">II-3
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Title of Exhibit</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pledge Agreement by and between Acceris and Winter Harbor, LLC, dated April
14, 1998. (9)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Agreement by and among certain of Acceris&#146; subsidiaries and Winter
Harbor, LLC, dated April&nbsp;14, 1998. (9)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Promissory Notes issued to Winter Harbor, LLC. (9)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warrant to purchase 250,000 shares of Acceris&#146; common stock issued to JNC,
dated June&nbsp;30, 1998. (9)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warrant to purchase 100,000 shares of Acceris&#146; common stock issued to JNC,
dated July&nbsp;28, 1998. (9)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loan Agreement by and between Acceris and Winter Harbor, LLC, dated as of
January&nbsp;15, 1999. (4)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to Loan Agreement by and between Acceris and Winter Harbor,
LLC, dated March&nbsp;4, 1999. (4)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Promissory Note in principal amount of $8,000,000 executed by Acceris in favor
of Winter Harbor, LLC, dated November&nbsp;10, 1998. (4)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Series&nbsp;K Warrant Agreement by and between Acceris and Winter Harbor, LLC and
form of Series&nbsp;K Warrant, dated as of January&nbsp;15, 1999. (4)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement by and between Acceris and Winter Harbor, LLC, dated as of January
15, 1999. (4)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to Security Agreement dated as of January&nbsp;15, 1999, by and
among Acceris, five of its wholly-owned subsidiaries and Winter Harbor, LLC,
amending Security Agreement dated April&nbsp;14, 1997. (4)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to Pledge Agreement dated as of January&nbsp;15, 1999, by and among
Acceris and Winter Harbor, LLC, amending Pledge Agreement dated April&nbsp;14,
1997. (4)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Series&nbsp;D, E, F, G, H, I and J Warrant Agreement dated as of January&nbsp;15, 1999
by and between Acceris and Winter Harbor, LLC, and related forms of warrant
certificates. (4)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Employment Agreement with Helen Seltzer, dated January&nbsp;3,
2002. (10)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Wholesale Service Provider and Distribution Agreement between Acceris
and Big Planet, Inc., dated February&nbsp;1, 2000. (11)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.19
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Cooperation and Framework Agreement between Acceris and CyberOffice
International AG, dated May&nbsp;8, 2000. (12)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.20
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Revenue Sharing Agreement between Acceris and Red Cube International
AG (formerly known as CyberOffice International AG.) dated June&nbsp;30, 2000. (12)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Letter dated June&nbsp;30, 2000, clarifying a Cooperation and Framework
Agreement issue. (12)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">II-4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Title of Exhibit</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.22
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loan and Security Agreement by and among WorldxChange Corp. and Foothill
Capital Corporation, dated December&nbsp;10, 2001. (13)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment agreement with James Ducay, dated January&nbsp;1, 2004. (14)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.24*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment agreement with Kenneth Hilton, dated May&nbsp;1, 2002. (15)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.25
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Asset Purchase Agreement by and between Counsel Springwell
Communications LLC and RSL COM U.S.A. Inc. (16)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.26
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Amendment No.&nbsp;1 to Asset Purchase Agreement between Counsel Springwell
Communications LLC and RSL U.S.A., Inc. (16)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.27
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Debt Restructuring Agreement, dated October&nbsp;15, 2002. (15)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.28
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Asset Purchase Agreement between Buyer&#146;s United Inc., I-Link
Communications Inc., and Acceris, dated December&nbsp;6, 2002. (15)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.29
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Acceris Convertible Promissory Note for $7,500,000 between Acceris and Counsel
Corporation (US)&nbsp;dated December&nbsp;10, 2002. (15)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.30
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warrant Exchange Agreement by and between Winter Harbor, LLC and Acceris dated
as of March&nbsp;1, 2001. (5)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.31
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Support Agreement by and between Counsel Communications, LLC and
Acceris dated as of March&nbsp;1, 2001. (5)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.32
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Promissory note dated as of August&nbsp;29, 2003, for $2,577,070 issued to Counsel
Corporation. (14)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.33
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Promissory note dated March&nbsp;10, 2004 for $1,546,532 issued to Counsel
Corporation (US). (14)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.34
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loan Agreement dated as of January&nbsp;26, 2004 between Acceris and Counsel
Corporation. (14)</TD>

</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.35
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loan Agreement dated as of October&nbsp;1, 2003, between Acceris and Counsel
Corporation (US). (14)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.36
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Stock Pledge Agreement dated as of January&nbsp;30, 2004
between Acceris and Counsel Corporation (US). (14)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.37
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Secured Promissory Note dated as of October&nbsp;1, 2003, for
$9,743,479 issued to Counsel Corporation (US). (14)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.38
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Promissory Note dated January&nbsp;26, 2004 for $7,600,000
issued to Counsel Corporation. (14)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">II-5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Title of Exhibit</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.39
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Loan Agreement dated as of January&nbsp;30, 2004 between
Acceris and Counsel Corporation (US). (14)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.40
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amendment to Senior Convertible Loan and Security Agreement dated as of
November&nbsp;1, 2003 between Acceris and Counsel Corporation. (14)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.41
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Stock Pledge Agreement dated January&nbsp;26, 2004 between
Acceris and Counsel. (17)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.42
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Promissory Note for $917,095 dated March&nbsp;31, 2004 between Acceris and Counsel
Corporation (US). (17)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.43
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Promissory Note for $2,050,000 dated March&nbsp;12, 2004 between Acceris and
Counsel Corporation. (17)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.44
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$1&nbsp;million Note dated May&nbsp;26, 2004. (18)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.45
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$248,020 Promissory Note dated June&nbsp;30, 2004. (18)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.46
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$3.2&nbsp;million Promissory Note dated June&nbsp;30, 2004. (18)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.47
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to Loan Agreement dated October&nbsp;1, 2003. (18)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.48
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fourth Amendment to Senior Convertible Loan and security Agreement dated March
1, 2001. (19)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.49
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to Amended and Restated Loan Agreement dated January&nbsp;30, 2004.
(18)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.50
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to Loan Agreement dated January&nbsp;26, 2004. (18)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.51
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Promissory Note ($2.05&nbsp;million). (18)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.52
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Promissory Note ($7.6&nbsp;million). (18)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.53
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement dated as of October&nbsp;14, 2004. (19)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.54
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secured Convertible Term Note dated October&nbsp;14, 2004. (19)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.55
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Master Security Agreement dated October&nbsp;14, 2004 by the Company, Acceris
Communications Technologies, Inc. and Acceris Communications Corp. (19)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.56
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement dated as of October&nbsp;14, 2004. (19)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.57
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Common Stock Purchase Warrant issued October&nbsp;14, 2004. (19)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.58
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stock Pledge Agreement dated as of October&nbsp;14, 2004. (19)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.59
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guaranty dated as of October&nbsp;14, 2004. (19)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.60*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement with David
Silverman (previously filed)</TD>
</TR>


<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.61*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement with Kenneth
Hilton, as amended (previously filed)</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">II-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Title of Exhibit</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.62*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Counsel Management Agreement. (20)</TD>
</TR>


<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Acceris Communications Inc. Code of Conduct. (14)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">List of subsidiaries. (14)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Independent Registered Certified Public Accounting Firm (included
herewith)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Dilworth Paxson LLP. (included
in Exhibit 5.1)</TD>
</TR>



<!-- End Table Body -->
</TABLE>
</DIV>




<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">*</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Indicates a management contract or compensatory plan required
to be filed as an exhibit.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Annual Report on Form 10-K for
the year ended December&nbsp;31, 1998, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Quarterly Report on Form 10-Q
for the period ended September&nbsp;30, 1998, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Current Report on Form 8-K,
dated September&nbsp;30, 1997, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(4)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Current Report on Form 8-K
filed on March&nbsp;23, 1999, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(5)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Current Report on Form 8-K
filed on March&nbsp;16, 2001, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(6)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Annual Report on Form 10-KSB
for the year ended December&nbsp;31, 1996, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(7)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Quarterly Report on Form 10-Q
for the period ended September&nbsp;30, 2001, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(8)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Definitive Proxy Statement for
the November&nbsp;26, 2003 annual stockholder meeting.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(9)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Quarterly Report on Form 10-Q
for the period ended June&nbsp;30, 1998, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(10)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Quarterly Report on Form 10-Q
for the period ended March&nbsp;31, 2002, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(11)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Quarterly Report on Form 10-Q
for the period ended March&nbsp;31, 2000, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(12)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Quarterly Report on Form 10-Q
for the period ended June&nbsp;30, 2000, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(13)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Annual Report on Form 10-K
for the year ended December&nbsp;31, 2001, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(14)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Annual Report on Form 10-K/A#1
for the year ended December&nbsp;31, 2003.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(15)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Annual Report on Form 10-K/A#3
for the year ended December&nbsp;31, 2002, file number 0-17973.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">II-7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(16)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Current Report on Form 8-K
filed on December&nbsp;26, 2002, file number 0-17973.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(17)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Quarterly Report on Form 10-Q for
the period ended March&nbsp;31, 2004.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(18)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Current Report on Form 8-K filed on
July&nbsp;19, 2004.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(19)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Current Report on Form 8-K filed on
October&nbsp;20, 2004.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>


<TR valign="top">
    <TD width="1%" nowrap align="right">(20)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Incorporated by reference to our Current Report on Form 8-K filed on
January&nbsp;6, 2005.</TD>
</TR>


</TABLE>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Not applicable</TD>
</TR>


</TABLE>

<P align="center" style="font-size: 10pt">II-8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>


<P align="left" style="font-size: 10pt"><B>Item&nbsp;17. Undertakings.</B>




<P align="left" style="font-size: 10pt">(a)&nbsp;The undersigned registrant hereby undertakes:




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">ii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than 20&nbsp;percent change in the maximum aggregate
offering price set forth in the &#147;Calculation of Registration
Fee&#148; table in the effective registration statement;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">iii.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.</TD>
</TR>



</TABLE>

<P align="center" style="font-size: 10pt">II-9
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>


<P align="center" style="font-size: 10pt"><B>SIGNATURES</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to its registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on the 14th day of January, 2005.



<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="3">ACCERIS COMMUNICATIONS INC.<BR>
(Registrant)<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">                  /s/ Allan C. Silber
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD>Allan C. Silber&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD>Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt"><B>POWER OF ATTORNEY</B>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Allan C. Silber and Gary M. Clifford, or either
of them, his true and lawful attorney-in-fact, with full power of substitution
and resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments including post-effective amendments
to this registration statement, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact or his substitute, each acting alone, may lawfully do or cause
to be done by virtue thereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<DIV align="CENTER">

<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ James J. Meenan*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board of Directors
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;14, 2005</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">James J. Meenan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Allan C. Silber
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Chief Executive Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;14, 2005</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Allan C. Silber</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Gary M. Clifford
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer and VP of</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;14, 2005</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Finance
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"></TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gary M. Clifford</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Kelly D. Murumets*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and President
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;14, 2005</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kelly Murumets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/
Frank J. Tanki*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;14, 2005</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"></TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Frank J. Tanki</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Hal B. Heaton*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;14, 2005</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hal B. Heaton</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ William H. Lomicka*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;14, 2005</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">William H. Lomicka</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>

</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->

<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="CENTER">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Date</B></TD>
</TR>

<TR><TD><DIV>&nbsp;</DIV></TD></TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Henry Y. L. Toh*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;14, 2005</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Henry Y.L. Toh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Samuel L. Shimer*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;14, 2005</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><HR size="1" noshade>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Samuel L. Shimer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>


</DIV>

<P align="center" style="font-size: 10pt"></P>

<TABLE width="35%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
  <!-- Begin Table Head -->
  <!-- End Table Head -->
  <!-- Begin Table Body -->
  <TR valign="bottom">
    <TD align="left" valign="top">*By:&nbsp;&nbsp;&nbsp;</TD>
    <TD width="100%" align="left" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
      /s/ Gary M. Clifford
    </DIV></TD>
    </TR>
  <TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="100%" align="left" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
        <HR size="1" noshade>
    </DIV></TD>
    </TR>
  <TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="100%" align="left" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
      Gary M. Clifford
    </DIV></TD>
    </TR>
  <TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD width="100%" align="left" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
      Attorney-in-fact&nbsp;
    </DIV></TD>
    </TR>
  <!-- End Table Body -->
</TABLE>

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="center" style="font-size: 10pt"><B>EXHIBIT INDEX</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Title of Exhibit</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Dilworth Paxson LLP</TD>
</TR>


<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Independent Registered Certified Public Accounting Firm.</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Dilworth Paxson LLP (included in Exhibit 5.1)</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.1
<SEQUENCE>2
<FILENAME>v011103_ex5-1.htm
<TEXT>
<HTML><HEAD>
<TITLE>
</TITLE>
</HEAD>
<BODY id=38><DIV><BR>
<TABLE id=FIRSTHDR width="100%" border=0>
<TR>
<TD vAlign=bottom width="100%" colSpan=3>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><STRONG>Exhibit 5.1 - Opinion of Dilworth Paxson LLP</STRONG></FONT></DIV></TD></TR></TABLE>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman, serif"><STRONG>Dilworth Paxson LLP</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">1818 N Street, N.W., Suite 400</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Washington, DC 20036</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">January 14, 2005</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Board of Directors</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Acceris Communications, Inc.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">9775 Business Park Avenue</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">San Diego, CA 92131</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Re:</FONT><FONT id=TAB2 style="COLOR: black; LETTER-SPACING: 27pt">&nbsp;&nbsp;</FONT><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><U>Registration Statement on Form S-1</U></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Gentlemen:</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">We have acted as securities counsel to Acceris Communications, Inc., a Florida corporation (the &#147;Company&#148;), in connection with the preparation and filing by the Company of a registration statement on Form S-1, File No. 333-120512 (the &#147;Registration Statement&#148;) under the Securities Act of 1933, as amended (the &#147;Securities Act&#148;) relating to (a) the issuance by the Company of up to 5,681,818 shares of Common Stock, $0.01 par value (the &#147;Common Stock&#148;), subject to adjustment, issuable upon conversion of the Secured Convertible Term Note (the &#147;Note&#148;) and (b) the issuance by the Company of up to 1&nbsp;million shares of Common Stock, subject to adjustment, issuable upon exercise of the Common Stock Purchase Warrants (the &#147;Warrants&#148;) issued by the Company to
and held by Laurus Master Fund Ltd. (all of such shares of Common Stock, including those shares to be issued by the Company pursuant to anti-dilution provisions and future dividends, stock distributions, stock splits or similar capital adjustments contained in or contemplated in the Note and Warrants, being hereafter referred to as the &#147;Shares&#148;) and (c) the resale by the holder thereof of the Shares.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">We have examined the Articles of Incorporation, as amended, and By-Laws of the Company, the minutes of various meetings and consents of the Board of Directors of the Company, originals or copies of all such records of the Company, Securities Purchase Agreement between the Company and Laurus, the Note, the Warrants, certificates of public officials, certificates of officers and representatives of the Company and others, the opinion of Legal and Compliance, LLC, a copy of which opinion is appended hereto, and such other agreements, documents, certificates, records, authorizations, proceedings, statutes and judicial decisions as we have deemed necessary to form the basis of the opinion expressed below. In such examination, we have assumed the genuineness of all signatures, the authenticity of
all documents submitted to us as originals and the conformity to originals of all documents submitted to us as copies thereof. As to various questions of fact material to such opinion, we have relied upon statements and certificates of officers and representatives of the Company and others.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV><BR>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Board of Directors</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Acceris Communications, Inc.<BR>January 14, 2005<BR>Page 2</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;&nbsp;&nbsp;</DIV></TD></TR></TABLE><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">In connection with the preparation of this opinion, we have reviewed such questions of law as we have deemed necessary. We do not herein give any opinion with respect to the laws of any jurisdiction other than the general laws of the United States of America, the federal securities laws and the Florida Business Corporation Act. Except as otherwise provided herein, we have assumed that, insofar as the laws of another jurisdiction may be applicable to any matters to which this opinion may relate, such laws are identical to the Florida Business Corporation Act; however, we express no opinion as to the extent to which the laws of the state of Florida or such other jurisdiction may apply.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Based upon and in reliance upon the foregoing, we are of the opinion that the Shares have been duly authorized and reserved for issuance and, when issued in accordance with the terms of the Note and the Warrants, as the case may be, such Shares will be validly issued, fully paid and nonassessable.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">We hereby consent to be named in the Registration Statement and the prospectus contained therein as attorneys who have passed upon legal matters in connection with the offering of the securities described therein under the caption &#147;Legal Matters.&#148; We further consent to your filing a copy of this opinion as an exhibit to the Registration Statement.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 252pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">DILWORTH PAXSON LLP</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 252pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 252pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 252pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">By:_</FONT><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><U>/s/ Ralph V. De Martino</U></FONT><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">____________</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 288pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Ralph V. De Martino, a Principal</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 288pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 288pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;</DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 14pt; FONT-FAMILY: Times New Roman, serif"><STRONG>Legal &amp; Compliance, LLC</STRONG></FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">330 Clematis Street, Suite 217</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">West Palm Beach, FL 33401</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=center><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">January 14, 2005</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Dilworth Paxson LLP</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">1818 N Street, N.W., Suite 400</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Washington, DC 20036</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Re: Shares of Acceris Communications, Inc.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Gentlemen:</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">We have acted as special corporate counsel to Dilworth Paxson, LLP with respect to Florida corporate law matters. Dilworth Paxson serves as securities counsel to Acceris Communications, Inc., a Florida corporation (the &#147;Company&#148;), in connection with the preparation and filing by the Company of a registration statement on Form S-1, File No. 333-120512 (the &#147;Registration Statement&#148;) under the Securities Act of 1933, as amended (the &#147;Securities Act&#148;) relating to (a) the issuance by the Company of up to 5,681,818 shares of Common Stock, $0.01 par value (the &#147;Common Stock&#148;), subject to adjustment, issuable upon conversion of the Secured Convertible Term Note (the &#147;Note&#148;) and (b) the issuance by the Company of up to 1&nbsp;million shares of Common Stock,
subject to adjustment, issuable upon exercise of the Common Stock Purchase Warrants (the &#147;Warrants&#148;) issued by the Company to and held by Laurus Master Fund Ltd. (all of such shares of Common Stock, including those shares to be issued by the Company pursuant to anti-dilution provisions and future dividends, stock distributions, stock splits or similar capital adjustments contained in or contemplated in the Note and Warrants, being hereafter referred to as the &#147;Shares&#148;) and (c) the resale by the holder thereof of the Shares.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">We have examined the Articles of Incorporation, as amended, and By-Laws of the Company, the minutes of various meetings and consents of the Board of Directors of the Company, originals or copies of all such records of the Company, Securities Purchase Agreement between the Company and Laurus, the Note, the Warrants, certificates of public officials, certificates of officers and representatives of the Company and others, and such other agreements, documents, certificates, records, authorizations, proceedings, statutes and judicial decisions as we have deemed necessary to form the basis of the opinion expressed below. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to originals of all documents
submitted to us as copies thereof. As to various questions of fact material to such opinion, we have relied upon statements and certificates of officers and representatives of the Company and others.</FONT></DIV>
<DIV><BR></DIV>
<DIV>
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<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Dilworth Paxson LLP<BR>January 14, 2005</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>Page 2</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left>&nbsp;&nbsp;</DIV></TD></TR></TABLE></DIV>
<DIV>&nbsp;</DIV>
<DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">In connection with the preparation of this opinion, we have reviewed such questions of law as we have deemed necessary. We do not herein give any opinion with respect to the laws of any jurisdiction other than the general laws of the United States of America, the federal securities laws and the Florida Business Corporation Act. Except as otherwise provided herein, we have assumed that, insofar as the laws of another jurisdiction may be applicable to any matters to which this opinion may relate, such laws are identical to the Florida Business Corporation Act; however, we express no opinion as to the extent to which the laws of the state of Florida or such other jurisdiction may apply.</FONT></DIV></DIV>
<DIV><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Based upon the foregoing, we are of the opinion that the Shares have been duly authorized and reserved for issuance and, when issued in accordance with the terms of the Note and the Warrants, as the case may be, such Shares will be validly issued, fully paid and nonassessable.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">We hereby consent, to the extent required, to be named in the Registration Statement and the prospectus contained therein as attorneys who have passed upon legal matters in connection with the offering of the securities described therein under the caption &#147;Legal Matters.&#148; We further consent to your inclusion of this opinion with the exhibits to the Registration Statement.</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=justify>&nbsp;</DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 252pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 252pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><BR></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 252pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">By:</FONT><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif"><U>/s/ Laura E. Anthony</U></FONT><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">_______________</FONT></DIV>
<DIV style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align=left><FONT id=TAB1 style="MARGIN-LEFT: 36pt"></FONT><FONT id=TAB1 style="MARGIN-LEFT: 36pt"></FONT><FONT id=TAB1 style="MARGIN-LEFT: 36pt"></FONT><FONT id=TAB1 style="MARGIN-LEFT: 36pt"></FONT><FONT id=TAB1 style="MARGIN-LEFT: 36pt"></FONT><FONT id=TAB1 style="MARGIN-LEFT: 36pt"></FONT><FONT id=TAB1 style="MARGIN-LEFT: 36pt"></FONT><FONT id=TAB1 style="MARGIN-LEFT: 36pt"></FONT><FONT style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, serif">Laura E. Anthony</FONT></DIV>
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<TYPE>EX-23.1
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<P align="left" style="font-size: 10pt"><B>Exhibit 23.1 - Consent
of Independent Registered Certified Public Accounting Firm</B>

<P align="center" style="font-size: 10pt"><B>CONSENT OF INDEPENDENT
ACCOUNTANTS</B>

<P align="left" style="font-size: 10pt">We hereby consent to the use
in this Registration Statement on Form S-1 of our reports dated April
14, 2004, except for Note 3 as to which the date is September 28,
2004 relating to the financial statements
of Acceris Communications, Inc., which appear in such
Registration Statement. We also consent to the references to us under
the heading &#147;Experts&#148; in such Registration Statement.

<P align="left" style="font-size: 10pt"><U>/s/&nbsp;PricewaterhouseCoopers LLP</U><BR>
&nbsp;&nbsp;<BR>
PricewaterhouseCoopers LLP<BR>
San Diego, California<BR>
January 13, 2005



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