Ezenia! Inc. Announces 2008 Second Quarter Financial Results

Nashua , N.H., August 7, 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 second quarter ended June 30, 2008.

 Revenue was approximately $1.7 million for the second quarter of 2008 and $3.5 million for the six months ended June 30, 2008, a decrease of 29.9% and 31.1% from the same periods ended June 30, 2007, respectively. The Company believes that the decline in revenue was primarily attributable to delays and reductions of purchases sponsored by the Defense Information System Agency (DISA) to support its Net-Centric Enterprise Services (NCES) programs, which began in 2006 and continue today, and, to a lesser extent, the impact of budgetary constraints within the Department of Defense (DOD).

Operating results yielded losses of approximately $920,000 for the second quarter and $1.5 million for the six months ended June 30, 2008, compared to losses of $446,000 and $579,000 for the same periods in 2007, respectively. Operating costs increased to approximately $2.0 million for the second quarter and $3.7 million for the first half of the year ended June 30, 2008, compared to $1.8 million and $3.4 million for the same periods ended June 30, 2007, respectively. These increases were primarily attributed to an increased number of employees in sales and in increased consulting expenses related to the Company’s marketing efforts.

 Net losses were approximately $883,000, or ($0.06) per share, for the second quarter and $1.4 million, or ($0.10) per share, for the first half of the year, ended June 30, 2008, as compared to net losses of approximately $266,000, or ($0.02) per share, and $250,000, or ($0.02) per share, for the same periods in 2007, respectively.

 The Company believes that there are potential opportunities for recovery and expansion in the existing customer base, in spite of the uncertain environment in the Defense segment, and new growth opportunities in the commercial segment. With a cash balance of approximately $8.9 million at the end of the second quarter 2008, the Company expects to continue to make investments, as needed, in its sales and marketing efforts, continue to enhance its current product, develop new products, and aggressively pursue business opportunities to grow its revenue and return to profitability.

Ezenia! Inc.

CONDENSED Consolidated Balance Sheets

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


  June 30,


Dec. 31,


Cash and cash equivalents $ 8,851 $ 9,395
Accounts receivable, less allowances of $397 at June 30, 2008 and $413 at December 31, 2007 1,187 2,479
Prepaid software licenses 1,985 1,417
Prepaid expenses and other current assets 199 307
Total current assets 12,222 13,598
Prepaid licenses, net of current portion 169
Capitalized software, net 18
Equipment and improvements, net 303 380
Total Assets $12,525 $14,165
Liabilities and stockholders’ equity    
Current liabilities    
Accounts payable $ 661 $ 497
Accrued expenses 1,689 1,885
Accrued restructuring 135 215
Employee compensation and benefits 286 266
Deferred revenue 3,067 3,512
Total current liabilties 5,838 6,375
Deferred revenue, net of current portion 1 17
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 at June 30, 2008; 15,360,629 issued and 14,601,092 outstanding at December 31, 2007 154 154
Capital in excess of par value 65,220 64,870
Accumulated deficit (55,743) (54,306)
Treasury stock at cost, 759,537 shares at June 30, 2008 and December 31, 2007 (2,945) (2,945)
Total stockholders’ equity 6,686 7,773
Total liabilities and stockholders’ equity $12,525 $14,165


 Ezenia! Inc.

 CONDENSED Consolidated Statements of Operations

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



  Three Months Ended

June 30,

Six Months Ended

June 30,

  2008 2007 2008 2007
Product revenue $ 1,739 $ 2,158 $ 3,532 $ 4,414
Product development revenue 320 16 731
Service revenue 1 2
  1,739 2,479 3,548 5,147
Cost of revenues        
Cost of product revenue 676 880 1,364 1,761
Cost of product development revenue 243 551
Cost of service revenue 1 2
  676 1,124 1,364 2,314
Gross profit 1,063 1,355 2,184 2,833
Operating expenses        
Research and development 557 565 1,065 1,093
Sales and marketing 574 452 1,093 856
General and administrative 712 636 1,251 1,167
Depreciation 61 35 120 68
Occupancy and other facilities related expenses 79 113 162 228
Total operating expenses 1,983 1,801 3,691 3,412
Loss from operations (920) (446) (1,507) (579)
Interest income, net 40 154 91 307
Other income (expense) (3) 17 (21) 22
  37 171 70 329
Loss before income taxes (883) (275) (1,437) (250)
Income tax benefit 9
Net Loss $ (883) $ (266) $ (1,437) $ (250)
Basic and diluted loss per share:        
Basic $ (0.06) $ (0.02) $ (0.10) $ (0.02)
Diluted $ (0.06) $ (0.02) $ (0.10) $ (0.02)
Weigted average common shares:        
Basic 14,608,696 14,686,234 14,553,189 14,669,950
Diluted 14,608,696 14,686,234 14,553,189 14,669,950


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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