Ezenia! Inc. Announces 2008 Fourth Quarter Financial Results

Nashua , N.H., March 12, 2009 – Ezenia! Inc. (OTCBB: EZEN.OB), a leading market provider of real-time collaboration solutions for corporate and government networks, today reported its financial results for the fourth quarter and fiscal year ended December 31, 2008.

For the fourth quarter of 2008, the Company generated revenue of approximately $1.4 million, a 22.2% decrease from approximately $1.8 million for the fourth quarter of 2007. The quarterly loss from operations was approximately ($872,000) or ($0.06) per share, as compared to approximately ($1.6) million in quarterly losses from operations, or ($0.11) per share, a year ago. Operating expenses declined to approximately $1.7 million from approximately $2.6 million for 2007, due to reduced headcount, the closing of the Colorado facility, and reduced legal and professional charges. Net quarterly loss was approximately ($884,000) or ($0.06) per share, as compared to a net loss of approximately ($2.2) million, or ($0.15) per share, a year ago, which included an income tax expense of $711,000 related to an increase in the valuation allowance for deferred tax assets recorded in prior years.

For the year ended December 31, 2008, revenue was approximately $6.7 million, a 25.6% decrease from approximately $9.0 million for the year ended December 31, 2007. The reported loss from operations in 2008 was approximately ($3.1) million or ($0.21) per share, as compared to loss from operations in 2007 of approximately ($4.4) million, or ($0.30) per share, which included a $1.4 million charge to reserve for an excess third party license purchase commitment. For 2008, the net annual loss was approximately ($3.1) million, or ($0.21) per share, compared to a net annual loss in 2007 of approximately ($4.5) million, or ($0.31) per share. Cash and cash equivalents at year end 2008 were approximately $6.8 million, a $2.6 million decrease from year end 2007. Operating expenses declined to approximately $7.2 million from approximately $8.1 million for 2007, due to reduced headcount, the closing of the Colorado facility, and reduced legal and professional charges.

Management expects market conditions to remain uncertain into 2009; however, the recent reorganization and subsequent changes in the sales organization will increase the Company’s focus on the Department of Defense and intelligence agency opportunities while it continues its objective to diversify into the commercial sector. In addition, we continue to work closely with our strategic resellers and system integrators to ensure we are well positioned for upcoming opportunities. “Consolidation activities made during the course of 2008 will benefit Ezenia this year in terms of expense control,” noted Khoa Nguyen, Ezenia’s Chairman and Chief Executive Officer. “Our primary objective is to return to profitability by growing the top line and continuing vigilance on expense control,” concluded Mr. Nguyen.

Ezenia! Inc.
CONDENSED Consolidated Balance Sheets
(In thousands)
(Unaudited)

  December 31,
  2008 2007
Assets    
Current assets    
Cash and cash equivalents $ 6,774 $ 9,395
Accounts receivable, less allowances of $28 at December 31, 2008 and $413 at December 31, 2007 771 2,479
Prepaid software licenses 1,125 1,417
Prepaid expenses and other current assets 186 292
Total current assets 8,856 13,583
Deposits 15 15
Prepaid licenses, net of current portion 169
Capitalized software, net 18
Equipment and improvements, net 243 380
Total assets $ 9,114 $ 14,165
     
Liabilities and stockholders’ equity    
Current liabilities    
Accounts payable $ 257 $ 497
Accrued expenses 1,674 1,885
Employee compensation and benefits
Accrued restructuring charges
150
287
266
215
Deferred revenue 1,326 3,512
Total current liabilities 3,694 6,375
Deferred revenue, net of current portion 17
     
Commitments and contingencies (Note 5)    
     
Stockholders’ equity:    
Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued and outstanding
Common stock, $.01 par value; 40,000,000 shares authorized; 15,417,754 issued and 14,658,217 outstanding in 2008; 15,360,629 issued and 14,601,092 outstanding in 2007 154 154
Capital in excess of par value 65,586 64,870
Accumulated deficit (57,375) (54,306)
Treasury stock; 759,537 shares at cost in 2008 and 2007 (2,945) (2,945)
  5,420 7,773
Total liabilities and stockholders’ equity $ 9,114 $ 14,165

Ezenia! Inc.
CONDENSED Consolidated Statements of OPERATIONS
(In thousands, except for share and per share related data)
(Unaudited)

  For the Three Months
Ended December 31,
For the Twelve Months
Ended December 31,
  2008 2007 2008 2007
Revenues        
Product and service revenue $ 1,390 $ 1,819 $ 6,683 $ 8,988
         
Cost of revenues        
Cost of product and service revenue 542 824 2,575 5,315
Gross profit 848 995 4,108 3,673
         
Operating expenses        
Research and development 486 681 2,084 2,361
Sales and marketing 366 582 2,024 2,021
General and administrative 660 897 2,408 2,802
Depreciation 17 59 182 191
Occupancy and other facilities related expenses
Restructuring charge
73
118
139
215
317
219
493
215
Total operating expenses 1,720 2,573 7,234 8,083
         
Loss from operations (872) (1,579) (3,126) (4,410)
         
         
Other income (expense)        
Interest income 26 91 155 545
Other income (expense) (38) (2) (98) 29
  (12) 89 57 574
         
Loss before income taxes (884) (1,490) (3,069) (3,836)
Provision for income taxes (711) (711)
         
Net loss $ (884) $ 2,201) $ 3,069) $(4,547)
         
Basic and diluted net earnings (loss) per share:        
Basic $ (0.06) $ (0.15) $ (0.21) $ (0.31)
Diluted $ (0.06) $ (0.15) $ (0.21) $ (0.31)

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.

Note:

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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