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BestNet Communications Announces Record Third Quarter Fiscal 2004
GRAND RAPIDS, Mich., Jul 15, 2004 /PRNewswire-FirstCall via COMTEX/ --
BestNet Communications Corporation (OTC Bulletin Board: BESC), a provider of patented and proprietary global communication solutions, today announces results for the third quarter fiscal 2004.

BestNet achieved record revenue for the third quarter fiscal 2004 totaling $557,000, an increase of 44% compared to the third quarter fiscal 2003. Gross margins improved substantially to 37% for the third quarter fiscal 2004 compared to 11% for the third quarter fiscal 2003 and 34% for the second quarter of fiscal 2004. BestNet believes it can maintain its current gross margins while concentrating on revenue growth.

Richard Bourke, Chairman and interim-CEO of BestNet Communications commented, "This quarter's record revenue marks our sixth consecutive record revenue quarter. We have seen 86% revenue growth in these six quarters, as well as substantially increasing our gross margins. In addition, we have reduced our SG&A expenses by 30% during the third quarter fiscal 2004 when compared with the third quarter fiscal 2003. Our continued growth is a result of sustained focus on providing our customers with outstanding quality and service, along with new and innovative products."

Mr. Bourke continued, "While we are pleased with our continued growth, we are committed to expanding our product offerings to emphasize seamless business-to-business solutions through our recently completed Application Program Interface (API). The next quarter will be marked by enhanced product capabilities, an expanded and improved global Internet identity, and a refocused marketing strategy. We appreciate the continued support of our shareholders in providing the capital necessary for these initiatives."

About BestNet

BestNet Communications is a global solutions provider of long distance; conference calling, ClicktoPhone and custom application-based communication services. BestNet's services are accessed worldwide via the Internet and wireless devices and are delivered using standard phone lines and equipment. This results in a cost effective high quality service for both businesses and consumers.

Under the brand name Bestnetcall(TM) ( www.bestnetcall.com ) the patented services offer subscribers premium quality calls and conference calling, at significantly lower rates. Calls and conference calls can also be launched via a desktop application or handheld devices including Palm(TM), Pocket PC(R) and Blackberry(TM) and used with any standard or wireless phone. In addition the company's new ClicktoPhone(TM) service ( www.ClicktoPhone.com ) enables clients to add secure and anonymous voice communication connectivity anywhere in the world to web sites, web banners, pictures, electronic documents, and customized e-mail calling buttons.


Contact BestNet at:
[e-mail]

This release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the "safe harbor" created thereby. These statements include the plans and objectives of management for future operations, including plans and objectives. The forward-looking statements herein are based on current expectations that involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond control of the company. Although the company believes that the assumptions underlying the forward-looking statements are reasonable, any one of the assumptions could be inaccurate and, therefore, can be no assurance that the forward-looking statements included in this release will prove to be accurate.



BESTNET COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS


ASSETS May 31, August 31,
2004 2003
(UNAUDITED)
Current Assets:

Cash and cash equivalents $66,527 $226,559
Accounts receivable, less allowance of
$1,630 and $1,368 85,908 74,360
Prepaid expenses and other current assets 46,813 49,080
Total current assets 199,248 349,999

Property and equipment, net of accumulated
depreciation of $3,622,578 and $3,142,251 484,945 909,713
License fee, net of accumulated amortization
of $6,348,950, and $5,312,368 3,325,818 4,362,400
Deposits and other assets 53,709 97,038

Total assets $4,063,720 $5,719,150

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Current Liabilities:
Capital lease obligations, current portion $4,550 $5,614
Convertible notes payable, net of discount
of $117,407 and $75,248 158,814 589,752
Note payable to related parties 160,000 --
Convertible note payable to related party,
net of discount of $15,164 and $0 10,835 --
Accounts payable and accrued expenses 264,897 290,535
Deferred revenue 11,013 15,734
Total current liabilities 610,109 901,635

Long-Term Liabilities:
Capital lease obligations, long-term portion 4,343 7,331
Total long-term liabilities 4,343 7,331

Total liabilities 614,452 908,966

Commitments and contingencies -- --

STOCKHOLDERS' EQUITY

Preferred stock, par value $.001 per share;
10,000,000 shares authorized; 3,763,593
and 3,563,593 shares issued and outstanding
at May 31, 2004 and August 31, 2003,
respectively 3,763 3,563
Common stock, par value $.001 per share;
100,000,000 shares authorized; 32,577,415
issued and 30,677,415 outstanding at
May 31, 2004; and 29,948,104 shares issued
and 28,048,104 shares outstanding at
August 31, 2003 32,577 29,948
Additional paid-in capital 35,742,175 34,273,690
Accumulated deficit (31,627,434) (28,585,017)
Common stock subscribed, underlying
common shares of 2,101,865 and 0 210,187 --

4,361,268 5,722,184
Less treasury stock, 1,900,000 common
shares, at cost (912,000) (912,000)

Total stockholders' equity 3,449,268 4,810,184

Total liabilities and stockholders' equity $4,063,720 $5,719,150


BESTNET COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MAY 31, 2004 AND MAY 31, 2003

2004 2003
(UNAUDITED) (UNAUDITED)

Revenues $557,322 $387,769

Expenses:
Cost of revenues (exclusive of depreciation
and amortization shown separately below) 348,478 346,181
General and administrative expenses 259,703 371,855
Depreciation and amortization 506,058 556,562
Total expenses 1,114,239 1,274,598

Loss from operations (556,917) (886,829)

Other income (expense):
Interest income 2 1,876
Interest and finance charges (213,266) (308,724)
Other income (expense) (3,292) (2,073)

Total other expense (216,556) (308,921)

Loss from operations $(773,473) $(1,195,750)

Preferred stock dividends 15,245 265,006

Loss available to common stockholders' $(788,718) $(1,460,756)

Loss per common share, basic and diluted $(.03) $(.06)

Weighted average number of shares
outstanding, basic and diluted 30,937,984 26,103,580


BESTNET COMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 31, 2004 AND MAY 31, 2003

2004 2003
(UNAUDITED) (UNAUDITED)
Operating activities:
Loss from operations $(773,473) $(1,195,750)

Adjustments to reconcile net loss to
net cash used in operating activities:

Depreciation and amortization 506,058 555,562
Non-cash transactions-interest expenses 189,254 298,002
Changes in assets and liabilities:
Accounts receivable (3,678) (13,274)
Prepaid expenses and other current assets 25,387 40,425
Deposits and other assets -- (18,733)
Accounts payable and accrued expenses (4,861) 35,672
Deferred revenue (4,916) 1,468

Net cash used in operating activities (66,229) (296,628)

Investing activities:
Purchase of property and equipment (18,841) (42,008)

Net cash used in investing activities (18,841) (42,008)

Financing activities:
Proceeds from issuance of notes payable 100,000 --
Repayment of notes payable (28,588) (21,425)
Increase in capital lease payable -- 15,704
Principal payments on capital lease
obligation (1,135) (1,361)
Proceeds from sale of units 60,000 816,620

Net cash provided by financing
activities 130,277 809,538

Net increase (decrease) in cash 45,207 470,902

Cash and cash equivalents, beginning
of period 21,320 136,522

Cash and cash equivalents, end of period $66,527 $607,424

SOURCE BestNet Communications Corporation

BestNet Communications Corporation, [phone],

[e-mail]


http://www.bestnetcom.com


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