ACE*COMM REPORTS IMPROVED RESULTS FOR THE FOURTH QUARTER AND FISCAL YEAR 2005

Corporate Highlights for the Period:

  $20 million in annual revenues; a 46 % increase over previous fiscal year

  Strong backlog increasing from $12 million at June 30, 2004 to over $23 million at June 30, 2005

  Fourth quarter revenues increased 71% over last year

  Net income of $337 thousand for the fourth quarter

  Multi-million dollar network data collection contract in Southeast Asia

  5 New NetPlus® customers, including public utility, Fortune 1000, and transportation verticals

  Acquisition of 2helix network asset recovery and revenue optimization businesses

  Awarded estimated $20 million U.S. Air Force contract for global deployment of our Telecom Management Systems

Gaithersburg, MD – August 23, 2005 - ACE*COMM Corporation (NASDAQ:ACEC), a global provider of network business intelligence and advanced operations support systems (OSS) solutions, today reported financial results for the fourth quarter and fiscal year 2005, both ending June 30, 2005.

Revenues for the fourth quarter 2005 totaled $6.8 million compared to $4.0 million for the same quarter in fiscal year 2004. Net income for the quarter was $0.3 million, or $0.02 per fully diluted share, compared to a net loss of $2.0 million, or $0.15 per fully diluted share for the same quarter a year ago. For the year ended June 30, 2005, the Company recorded revenues of $20.0 million, compared to $13.7 million for fiscal year 2004. The Company had a net loss and loss per fully diluted share of $6.5 million and $0.44, respectively, compared to a net loss and loss per fully diluted share of $5.9 million and $0.49 for fiscal year 2004. Approximately $5.1 million of the fiscal 2005 loss consisted of a one-time expense for in-process research and development related to the acquisition of 2helix. In fiscal 2004, we expensed $1.2 million for in process research and development expenses related to the purchase of assets of Intasys. When these expenses are excluded, the net loss decreased from $4.7 million in fiscal 2004 to $1.3 million in fiscal 2005.

“The fourth quarter results signal financial improvement in our target markets that should support further revenue growth for the Company,” said George T. Jimenez, CEO of ACE*COMM. “Overall results improved solidly in most categories. We increased annual revenues by 46 percent and backlog by over 90 percent over the previous year.”

Continued Mr. Jimenez: “During the past fiscal year, we continued to build on our large base of industry-leading customers in both the carrier and enterprise sectors. We gained a number of new customers globally including the Bangladesh Telegraph & Telephone Board (BTTB), Vivodi – a next-generation service provider in Greece, Telecom Malaysia, Saudi Aramco, a Tennessee-based public power utility, a US Army base, and a major US airport, and we signed our first US government customer as an approved SBC vendor. We conducted asset recovery and revenue assurance pilot projects with Telewest Communications and CYTA in Europe to establish the potential for projects with both carriers, and we expanded our business engagement with Level 3 Communications, Telecom Egypt, and VSNL in India. As previously announced, we were selected to provide our NetPlus® telecommunications management system (TMS) under a US Air Force contract for a global TMS deployment program that is expected to generate revenue in excess of $20 million for the Company over its multi-year lifespan.”

“Our strong revenue growth, quarterly net income, and revenue mix all demonstrate effective execution of our business strategy outlined last year at this time,” said Steve Delmar, CFO of ACE*COMM. “We added a total of $6.3 million in new revenues for the year. These were comprised almost equally of organic growth and growth by acquisition. Our move to international markets to offset sluggish domestic markets clearly paid off. International market revenues made up 65 percent of our total revenues, as opposed to 44 percent for the previous fiscal year. Additionally, firm order backlog increased from $12.1 million at the beginning of the fiscal year to over $23.1 million by year end. We are further encouraged by the number of new business opportunities that have developed from customer interaction during the fourth quarter.”

Concluded Mr. Jimenez: “During the year we added new product capabilities to our core offerings to enhance our product portfolio and services capabilities with new vertical market solutions. We intend to continue to build out our technology offerings, broaden our market penetration, and add major new customers. We will work to improve our financial liquidity, and more tightly integrate our business lines and operations. Our goal is to be the highest-value provider of network business intelligence and profit enhancing solutions to operators and large private networks worldwide.”

ACE*COMM will host an earnings teleconference call this evening, August 23, 2005 at 5:30 pm, Eastern Standard Time, to discuss the fourth quarter fiscal year 2005 results. To participate, please call 866-814-8476. When prompted, enter the ACE*COMM reservation number 758524. Internet users can hear a simultaneous live Webcast of the teleconference at http://acecomm.com or http://www.fulldisclosure.com. A taped replay of the call will be made available from the ACE*COMM Corporate Web Site after 8:30 pm, on August 23, 2005.

About ACE*COMM
ACE*COMM is a global provider of network business intelligence and advanced operations support systems (OSS) solutions for telecom service providers and enterprises. ACE*COMM’s solutions are applicable to a range of legacy through next-generation networks that include wired, wireless, voice, data, multimedia, and Internet communications networks. These solutions provide the analytical tools required to extract knowledge from operating networks—knowledge customers use for asset recovery and revenue assurance, cost reduction, improved operational efficiency, acceleration of time-to-market for new services, and more effective customer care.

For over 20 years, ACE*COMM technology has been effectively deployed for more than 300 customers, spanning over 4000 installations in 70 countries worldwide. ACE*COMM-installed products are currently enabling the success of customers and partners such as Alcatel, AT&T, Cisco, General Dynamics, IBM, Level 3 Communications, Marconi, Motorola, Northrop Grumman, Siemens, and Unisys. Headquartered in the Washington, DC area, ACE*COMM has corporate offices in Australia, Canada, China, and the UK. ACE*COMM is a registered ISO 9001 quality standard company. For more information, visit www.acecomm.com.

ACE*COMM, NetPlus, the ACE*COMM logo, and N*VISION are registered trademarks, and Convergent Mediation and Parent Patrol are trademarks of ACE*COMM Corporation.

Except for historical information, the matters discussed in this news release include forward-looking statements that are subject to certain risks and uncertainties that could cause the actual results to differ materially from those projected, including, but not limited to: the failure of anticipated demand to materialise, delays or cancellations of orders due to various factors, including business and economic conditions in the U.S. and foreign countries; industry-wide slowdowns, any limitations on customers’ financial resources, the continued convergence of voice and data networks, the continuing success of the Company’s strategic alliances for product development and marketing, customer purchasing and budgetary patterns or lack thereof; pricing pressures and the impact of competitive products; the timely development and acceptance of new products; the Company’s ability to adequately support its operations, and other risks detailed from time to time in the Company’s Report on Form 10-Q and other reports filed with the Securities Exchange Commission.

1

ACE*COMM CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share amounts)

                 
    June 30,
    2005   2004
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 2,683     $ 2,881  
Accounts receivable, net
    4,870       4,246  
Inventories, net
    532       573  
Deferred contract costs
    85       571  
Prepaid expenses and other
    601       257  
 
               
Total current assets
    8,771       8,528  
Property and equipment, net
    636       592  
Goodwill
    1,681        
Acquired intangibles, net
    2,001       907  
Other non-current assets
    478       304  
Total assets
  $ 13,567     $ 10,331  
 
               
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Borrowings
  $ 2,332     $ 545  
Accounts payable
    1,379       591  
Accrued expenses
    1,940       1,484  
Accrued compensation
    1,013       724  
Deferred revenue
    1,454       1,519  
 
               
Total current liabilities
    8,118       4,863  
Long-term notes payable
    72        
 
               
Total liabilities
    8,190       4,863  
 
               
Commitments and contingencies
               
Stockholders’ equity:
               
Preferred stock, $.01 par value, 5,000,000 shares authorized, none
               
issued and outstanding
               
Common stock, $.01 par value, 45,000,000 shares authorized,
               
16,694,330 and 13,761,182 shares issued and outstanding
    167       138  
Additional paid-in capital
    34,808       28,475  
Other comprehensive loss
    (32 )     (41 )
Accumulated deficit
    (29,566 )     (23,104 )
Total stockholders’ equity
    5,377       5,468  
 
               
Total liabilities and stockholders’ equity
  $ 13,567     $ 10,331  
 
               

2

ACE*COMM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

                                 
    For the three months ended   For the year ended
    June 30,   June 30,
    2005   2004   2005   2004
Revenue
                               
Licenses and hardware
  $ 3,523     $ 1,267     $ 8,734     $ 6,387  
Services
    3,242       2,684       11,227       7,284  
 
                               
Total revenue
    6,765       3,951       19,961       13,671  
Cost of licenses and hardware
    1,036       952       3,276       2,976  
Cost of services
    1,802       1,497       5,673       4,865  
 
                               
Total cost of revenue
    2,838       2,449       8,949       7,841  
 
                               
Gross profit
    3,927       1,502       11,012       5,830  
Selling, general, and administrative
    2,607       2,885       9,774       9,304  
Research and development
    949       605       2,694       1,226  
In process research and development
                5,118       1,160  
 
                               
Income (loss) from operations
    371       (1,988 )     (6,574 )     (5,860 )
Interest expense
    32       7       53       32  
Gain from settlement of debt obligation
                228        
Income (loss) before income taxes
    339       (1,995 )     (6,399 )     (5,892 )
Provision for income taxes
    2       6       63       6  
 
                               
Net income (loss)
  $ 337     $ (2,001 )   $ (6,462 )   $ (5,898 )
 
                               
Basic net income (loss) per share
  $ 0.02     $ (0.15 )   $ (0.44 )   $ (0.49 )
 
                               
Diluted net income (loss) per share
  $ 0.02     $ (0.15 )   $ (0.44 )   $ (0.49 )
 
                               
Shares used in computing net loss per share:
                               
Basic
    16,694       13,761       14,555       12,068  
 
                               
Diluted
    17,067       13,761       14,555       12,068  
 
                               

3


The following information was filed by Ace Comm Corp on Tuesday, August 23, 2005 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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