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 $8.1M at the end of the third quarter, the Company has been taking significant actions to streamline its expense profile while endeavoring to preserve its continued investments in critical areas, including the continued enhancements of IWS and the development of new products
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share related data)
|September 30,2008||December 31,2007|
|Cash and cash equivalents||$ 8,100||$ 9,395|
|Accounts Receivable, less allowances of $28 at September 30, 2008 and $413 at December 31, 2007||503||2,479|
|Prepaid software licenses||1,540||1,417|
|Prepaid expenses and other current assets||218||292|
|Total current Assets||10,361||13,583|
|Prepaid licenses, net of current portion||–||169|
|Capitalized software, net||–||18|
|Equipment and improvements, net||260||380|
|Total assets||$ 10,636||$ 14,165|
|Liabilities and stockholders’ equity|
|Accounts payable||$ 352||$ 497|
|Employee compensation and benefits||251||266|
|Total current liabilities||4,548||6,375|
|Deferred revenue, net of current portion||–||17|
|Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued and outstanding||–||–|
|Common stock, $.01 par value, 40,000 shares authorized, 15,417,754 issued and 14,658,217 outstanding at September 30, 2008; 15,360,629 issued and 14,601,092 outstanding at December 31, 2007||154||154|
|Capital in excess of par value||65,370||64,870|
|Treasury stock at cost, 759,537 shares at September 30, 2008 and December 31, 2007||(2,945)||(2,945)|
|Total stockholders’ equity||6,088||7,773|
|Total liabilites and stockholders’ equity||$ 10, 636||$ 14,165|
(In thousands, except for share and per share related data)
|Three Months EndedSeptember 30,||Nine Months EndedSeptember 30,|
|Product revenue||$ 1,680||$ 2,003||$ 5,211||$ 6,417|
|Product development revenue||65||19||82||751|
|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|
|Gross profit (loss)||1,076||(155)||3,260||2,679|
|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|
|Occupancy and other facilities related expenses||82||125||244||354|
|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|
|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:|
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.