Ezenia! Inc. Announces 2008 Third Quarter Financial Results

Nashua, N.H., November 12, 2008– Ezenia! Inc. (OTCBB: EZEN.OB), a leading market provider of real-time collaboration solutions for corporate and government networks, today reported financial results for its third quarter ended September 30, 2008.

Revenue was approximately $1.7 million for the third quarter of 2008 and $5.3 million for the nine months ended September 30, 2008, a decrease of 13.7% and 26.2% from the same periods ended September 30, 2007, respectively. The Company believes that the decline in revenue was primarily attributable to redirections of IT budget imposed by the Defense Information System Agency (DISA) to promote competing solutions selected for the Net-Centric Enterprise Services (NCES) programs, which has resulted in very few new purchases of InfoWorkSpace (IWS) and reductions in renewals from affected customers.

Operating results yielded losses of approximately $747,000 and $2.3 million for the third quarter and nine months ended September 30, 2008, compared to losses of $2.3 and $2.8 million for the same periods in 2007, respectively. Operating costs declined to approximately $1.8 million and $5.5 million for the corresponding periods ended September 30, 2008, compared to $2.1 million and $5.5 million for the same periods ended September 30, 2007, respectively.

Net losses were approximately $748,000, or ($0.05) per share, and $2.2 million, or ($0.15) per share, for the third quarter and nine months ended September 30, 2008, as compared to net losses of approximately $2.2 million, or ($0.15) per share, and $2.3 million, or ($0.16) per share, for the same periods in 2007, respectively. In the quarter ended September 30, 2007 a $1.4 million reserve against a contractual commitment to purchase software licenses from Microsoft was recorded.

The Company believes that, while there are potential opportunities for limited recovery and new sales in the existing Department of Defense (DOD) customer base, the redirection of budget funds and the promotion of competing solutions by DISA will continue to result in the reduction of renewals and elimination of new purchases of IWS by our customers, thereby creating losses within our core business. Coupled with the currently difficult economic conditions which lengthen the business development and sales activities on the commercial segment, the Company anticipates continued downward pressure on revenue and profitability for the foreseeable future. With the cash balance at $8.1M at the end of the third quarter, the Company has been taking significant actions to streamline its expense profile while endeavoring to preserve its continued investments in critical areas, including the continued enhancements of IWS and the development of new products


(In thousands, except for share and per share related data)


  September 30,2008 December 31,2007
Current Assets    
Cash and cash equivalents $ 8,100 $ 9,395
Accounts Receivable, less allowances of $28 at September 30, 2008 and $413 at December 31, 2007 503 2,479
Prepaid software licenses 1,540 1,417
Prepaid expenses and other current assets 218 292
Total current Assets 10,361 13,583
Deposits 15 15
Prepaid licenses, net of current portion 169
Capitalized software, net 18
Equipment and improvements, net 260 380
Total assets $ 10,636 $ 14,165
Liabilities and stockholders’ equity    
Current liabilities    
Accounts payable $ 352 $ 497
Accrued expenses 1,775 1,885
Accrued restructuring 210 215
Employee compensation and benefits 251 266
Deferred revenue 1,960 3,512
Total current liabilities 4,548 6,375
Deferred revenue, net of current portion 17
Stockholders’ equity    
Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued and outstanding
Common stock, $.01 par value, 40,000 shares authorized, 15,417,754 issued and 14,658,217 outstanding at September 30, 2008; 15,360,629 issued and 14,601,092 outstanding at December 31, 2007 154 154
Capital in excess of par value 65,370 64,870
Accumulated deficit (56,491) (54,306)
Treasury stock at cost, 759,537 shares at September 30, 2008 and December 31, 2007 (2,945) (2,945)
Total stockholders’ equity 6,088 7,773
Total liabilites and stockholders’ equity $ 10, 636 $ 14,165


(In thousands, except for share and per share related data)

  Three Months EndedSeptember 30, Nine Months EndedSeptember 30,
  2008 2007 2008 2007
Product revenue $ 1,680 $ 2,003 $ 5,211 $ 6,417
Product development revenue 65 19 82 751
Service revenue 2
  1,745 2,022 5,293 7,170
Cost of revenues    
Cost of product revenue 663 2,160 2,027 3,921
Cost of product development revenue 6 17 568
Cost of service revenue 2
  669 2,177 2,033 4,491
Gross profit (loss) 1,076 (155) 3,260 2,679
Operating expenses    
Research and development 533 603 1,598 1,695
Sales and marketing 565 568 1,658 1,425
General and administrative 497 761 1,748 1,928
Depreciation 45 40 165 108
Occupancy and other facilities related expenses 82 125 244 354
Restructuring charge 101 101
Total operating expenses 1,823 2,097 5,514 5,510
Loss from operations (747) (2,252) (2,254) (2,831)
Interest income, net 37 146 129 453
Other income (expense) (38) 10 (60) 32
  (1) 156 69 485
Net loss $ (748) $ (2,096) $ (2,185) $ (2,346)
Basic and diluted loss per share:        
Basic $ (0.05) $ (0.14) $ (0.15) $ (0.16)
Diluted $ (0.05) $ (0.14) $ (0.15) $ (0.16)
Weighted average common shares:        
Basic 14,608,696 14,686,234 14,641,891 14,680,141
Diluted 14,608,696 14,686,234 14,641,891 14,680,141

About Ezenia! Inc.

Ezenia! Inc. (OTC Bulletin Board: EZEN.OB), founded in 1991, is a leading provider of real-time collaboration solutions, bringing new and valuable levels of interaction and collaboration to corporate networks and the Internet. By integrating voice, video and data collaboration, the Company’s award-winning products enable groups to interact through a natural meeting experience regardless of geographic distance. Ezenia! products allow dispersed groups to work together in real-time using powerful capabilities such as instant messaging, white boarding, screen sharing and text chat. The ability to discuss projects, share information and modify documents allows users to significantly improve team communication and accelerate the decision-making process. More information about Ezenia! Inc. and its product offerings can be found at the company’s Web site,www.Ezenia.com.

Note to Investors Regarding Forward-Looking Statements

Statements included herein that are not historical facts may be considered forward-looking statements. You can identify these forward-looking statements by use of the words “expects,” “anticipates,” “estimates,” “believes,” “projects,” “intends,” “plans,” “will,” “may,” and similar words. Such forward-looking statements, including statements regarding our business and financial outlook, long-term strategy, improvements in our infrastructure, and proposed earnings per share growth targets, involve risks and uncertainties that could cause actual operating results to differ materially from those indicated by such forward-looking statements. These risks and uncertainties include the considerations that are discussed in the Company’s 2007 Annual Report on Form 10-K as amended for the year ended December 31, 2007, such as its dependence on the United States government as its largest customer, adverse changes in available funding and discretionary spending within the Department of Defense, its dependence on other major customers, the evolution of Ezenia!’s market, rapid technological change and competition within the collaborative software market, its reliance on third-party technology, protection of its propriety technology, acceptance of IWS in the commercial market, retention of key employees, stock price volatility, customer acceptance of Version 3.0 of InfoWorkSpace, its history of liquidity concerns and operating losses, and other considerations that are discussed further in such report. You should not place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company disclaims any obligation to update forward-looking statements after the date of such statements.


Ezenia! is a registered trademark of Ezenia! Inc., and the Ezenia! Logo and InfoWorkSpace are trademarks of Ezenia! Inc. Additional information on Ezenia! and its products is available at our website http://www.ezenia.com.

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