Notes to the Consolidated Financial Statements
1. Nature
of Business and Basis of Presentation
Ezenia! Inc. (Ezenia,
we, or the Company) operates in one business segment, which is the design,
development, manufacturing, marketing and sale of conferencing and real-time
collaboration solutions for corporate and governmental networks and
eBusiness. Founded in 1991, Ezenia
develops and markets products that enable organizations to provide high-quality
group communication and collaboration capabilities to commercial, governmental,
consumer and institutional users. Ezenias products allow individuals and
groups, regardless of proximity constraints, to interact and share information
in a natural, spontaneous way voice-to-voice, face-to-face, mouse-to-mouse,
or keyboard-to-keyboard, flexibly, securely and in real-time. Using our products, individuals can interact
through a natural meeting experience, allowing groups to work together
effectively and disseminate vital information quickly in a secure environment.
The consolidated financial statements include the accounts of Ezenia
and its wholly owned subsidiaries. All
significant inter-company transactions and balances have been eliminated. All assets and liabilities of Ezenias
foreign subsidiaries are translated at the rate of exchange at the end of the
year, while sales and expense are translated at the average rate in effect
during the year. The net effect of these
translation adjustments was immaterial for all periods presented.
2. Summary
of Significant Accounting Policies
Use of
Estimates
The preparation of
the financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results
could differ from these estimates.
Revenue recognition
Product revenue consists of sales of InfoWorkSpace (IWS)
software licenses and maintenance agreements, IWS product related training,
installation, and consulting, and video products. Revenue from sales of IWS software licenses
and maintenance agreements is recognized ratably over the subscription software
license contract periods, which are generally one year, pursuant to the
guidance provided by Statement of Position (SOP) 97-2,
Software
Revenue Recognition,
issued by the American Institute of Certified
Public Accountants (AICPA). Revenue from IWS training, installation, and
consulting services are recognized as the services are performed because the
Company believes we have established vendor specific objective evidence (VSOE)
of fair value based on the price charged when the services are sold separately.
Revenue from video product sales is recognized upon
shipment to the customer and the fulfillment of all contractual terms and
conditions, pursuant to the guidance provided by Staff Accounting Bulletin (SAB)
No. 104,
Revenue Recognition in Financial Statements
issued by the Securities and Exchange Commission.
Product development revenue relates to contracts
involving customization of the IWS product according to customer
specifications. We account for product
development revenue in conformity with the guidance provided by SOP 81-1,
Accounting For Performance of Construction Type and Certain Production
Type Contracts
issued by the AICPA.
When reliable estimates are available for the costs and efforts
necessary to complete the product development and the contract does not include
contractual milestones or other acceptance criteria, product development
revenue is recognized under the percentage of completion contract method based
upon input measures, such as hours. When
such estimates are not available, we defer all revenue recognition until we
have completed the contract and have no further obligations to the
customer. Revenue associated with contracts
for product development revenue with milestone-based deliverables requiring a
customers acceptance is recognized upon the customers acceptance in
accordance with terms of the contract.
The associated cost recognition with these deliverables or milestones is
deferred until the terms of acceptance
32
are satisfied and revenue is recognized. As of December 31, 2007 and 2006, we had
no unbilled receivables or deferred costs related to milestone contracts.
Certain of our product development contracts are subject to government audit
and retroactive adjustment of the direct and indirect costs used to determine
the contract billings. Product
development revenue and accounts receivable reported in the financial
statements are recorded at the amount expected to be received. Product development revenue is adjusted to
actual upon final audit and retroactive adjustment. Estimated contractual allowances are provided
based on managements evaluation of current contract terms.
Service revenue represents sales of service
contracts related to the maintenance of video products. Maintenance revenue is deferred and
recognized ratably over the term of the applicable agreement.
Products and software licenses are sold without any
contractual right of return by the customer.
Deferred revenue represents amounts received from customers under
subscription software licenses, maintenance agreements, or for product sales in
advance of revenue recognition.
Judgments are required in evaluating the creditworthiness of our
customers. In all instances, revenue is
not recognized until we have determined, at the outset of the arrangement that
collectibility is reasonably assured.
Amounts billed to customers related to shipping and handling charges are
recorded as revenue upon shipment and the related costs are included in cost of
goods sold.
Third-Party Technology
Ezenias IWS product incorporates third party technology in the form of
software licenses, which we purchase from other software vendors. Software licenses purchased from vendors are
reported as prepaid licenses and, when deployed, amortized to cost of revenue
over the subscription period, which is generally one year.
Advertising
Advertising costs
are included in sales and marketing expense.
Ezenia uses its website as its main form of advertising along with
participating in various industry related trade shows and currently does not
incur material advertising costs. Advertising costs are expensed as incurred.
Advertising expense approximated $24 thousand and $49 thousand in fiscal years
2007 and 2006, respectively.
Cash equivalents
Ezenia considers
all highly liquid investments with a maturity of 90 days or less at the date of
purchase, or investments that can be converted to cash quickly such as mutual
funds, to be cash equivalents.
Financial instruments and
concentrations of credit risk
Ezenias financial
instruments consist primarily of cash and cash equivalents, trade receivables,
accounts payable and accrued expenses.
The carrying value of these financial instruments approximates fair
value due to their short term to maturity.
Financial instruments, which potentially subject Ezenia to
concentrations of credit risk, are cash equivalents and accounts receivable.
Major financial
institutions maintain all the Companys cash equivalents. Concentration of credit risk with respect to
accounts receivable is limited to certain customers to whom Ezenia makes
substantial sales. To reduce risk, we routinely
assess the financial strength of our customers.
Ezenia maintains an allowance for doubtful accounts based on accounts
past due according to contractual terms and historical collection experience. Actual losses when incurred are charged to
the allowance. Write-offs related to
accounts receivable have been within managements expectations.
Revenue from one
customer accounted for approximately 27% of total revenue in 2007 and 17% of
total revenue in 2006. Accounts
receivable from this customer accounted for approximately 4% and 17% of the
balances at December 31, 2007 and 2006, respectively. A second customer
accounted for approximately 18% of total revenue in 2007 and 17% of total
revenue in 2006. The accounts receivable
balance accounted for approximately 49% and 28% of the balances at December 31,
2007 and 2006, respectively. A third
customer accounted for approximately 12% of total revenue in 2007 and 10% of
total revenue in 2006. The accounts
receivable balance accounted for approximately 33% and 31% at December 31,
2007 and 2006 respectively. Revenue from
international markets was approximately $40 thousand and $209 thousand in 2007
and 2006, respectively.
33
Equipment and improvements
Equipment and
improvements are stated at cost and depreciated using the straight-line method
over the following estimated useful lives:
Computer
software and equipment
|
|
3 years
|
Office equipment
|
|
5 years
|
Furniture and
fixtures
|
|
5 years
|
Leasehold
improvements
|
|
Shorter of lease
term or estimated useful life
|
Repairs and maintenance costs are expensed as incurred.
Research
and development costs
We account for research
and development costs in accordance with several accounting pronouncements,
including
Statement
of Financial Accounting Standard (SFAS)
No. 2,
Accounting for
Research and Development Costs
, and SFAS No. 86,
Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed
. SFAS No. 86 specifies that costs
incurred internally in researching and developing a computer software product
should be charged to expense until technological feasibility has been
established for the product. Once technological feasibility is established, all
software costs should be capitalized until the product is available for general
release to customers. During the quarter
ended March 31, 2006, we released Version 3.0 of our InfoWorkSpace
software product. In connection with
this development effort, a total of $140 thousand of costs were capitalized and
are being amortized on a straight-line basis over the remaining estimated
economic life of the product, which we have determined to be two years.
Judgment is required in
determining when technological feasibility of a product is established. In most
cases, we have determined that technological feasibility for our software
products/updates is reached shortly before the products are released to
manufacturing. Costs incurred after technological feasibility is established
have historically not been material, and accordingly, were expensed when
incurred in these instances.
Income
taxes
Deferred tax assets and liabilities are determined
at the end of each year based on the future tax consequences that can be
attributed to net operating loss and credit carryovers as well as the
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases.
The deferred tax assets are reduced by a valuation allowance if it is
more likely than not that the tax benefits will not be realized. The realization of deferred tax assets is
dependent upon the generation of future taxable income. In determining the valuation allowance, we
consider past performance, expected future taxable income, and qualitative
factors which we consider to be appropriate to be considered in estimating
future taxable income. The Companys
forecast of expected future taxable income is for future periods that can be
reasonably estimated. Results that
differ materially from our current expectations may cause us to change our
judgment on future taxable income. These changes, if any, may require us to
adjust our existing tax valuation allowance higher or lower than the amount we
have recorded.
Based upon our assessment of current and future
taxable income, and our analysis of the future tax consequences attributable to
net operating loss and credit carryovers at December 31, 2006 and 2005, we
released approximately $579 thousand and $138 thousand of valuation allowance
against deferred tax assets in 2006 and 2005, respectively, resulting in a net deferred tax asset of
approximately $717 thousand as of December 31, 2006.
As of December 31, 2007 we believe that the
realizability of the net deferred tax asset balance of $717 thousand is in
question due to the loss in 2007 and the uncertainty of future taxable
income. We therefore provided a full
reserve against the deferred tax assets in 2007.
34
Net income (loss) per share
The Company
reports net income (loss) per share in accordance with SFAS No. 128,
Earnings per Share
. Diluted earnings per share include the
effect of dilutive stock options.
Shares used in
computing basic and diluted net income (loss) per share are as follows:
|
|
2007
|
|
2006
|
Basic
|
|
14,672,808
|
|
14,638,488
|
Effect of assumed exercise of
stock options
|
|
|
|
409,644
|
Diluted
|
|
14,672,808
|
|
15,048,132
|
Outstanding options excluded
as
impact is anti-dilutive
|
|
2,747,066
|
|
1,486,608
|
Accounting for share-based
compensation
In
December 2004, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123R,
Share-Based Payment
(SFAS No. 123R). This
Statement is a revision of SFAS 123,
Accountin
g
for Stock-Based Compensation
(SFAS 123), and supersedes
Accounting Principles Board Opinion No. 25,
Accounting
for Stock Issued to Employees
(APB 25), and its related
implementation guidance. SFAS No. 123R establishes standards for
transactions in which an entity exchanges its equity instruments for goods or
services. This standard requires a
public entity to measure the cost of employee services received in exchange for
an award of equity instruments based on the grant date fair value of the award
and recognize that cost over the period that such services are performed. This eliminates the exception to account for
such awards using the intrinsic method previously allowable under APB 25. The Company adopted SFAS No. 123R on January 1,
2006 under the modified-prospective transition method.
Prior
to adopting SFAS No. 123R, we accounted for stock-based compensation under
APB 25, as permitted by SFAS No. 123.
Accordingly, no stock-based compensation cost was recognized in the
statement of operations in connection with the issuance of stock options under
any of our stock option plans, or through our 1995 Employee Stock Purchase Plan
for periods ended prior to January 1, 2006. We have applied the modified-prospective
method in adopting SFAS No. 123R.
Accordingly, periods prior to adoption have not been restated and are
not directly comparable to periods after adoption. Under the modified prospective method,
compensation cost recognized subsequent to January 1, 2006 includes (a) compensation
cost for all share-based payments granted prior to, but not yet vested as of January 1,
2006, based on the grant date fair value estimated in accordance with the
original provisions of SFAS No. 123, less estimated forfeitures, and (b) compensation
cost for all share-based payments granted and vested subsequent to January 1,
2006, based on the grant date fair value estimated in accordance with the
provisions of SFAS No. 123R.
In March 2005, the Staff of the SEC
issued SAB 107,
Share-based Payment
(SAB 107),
which expresses the view of the SEC regarding the interaction between SFAS No. 123R
and certain SEC rules and regulations concerning the valuation of
share-based payment arrangements for public companies. In particular, SAB 107
provides guidance related to share-based payment transactions with
non-employees, the transition from nonpublic to public entity status, valuation
methods (including assumptions such as expected volatility and expected term),
the accounting for certain redeemable financial instrument issues under
share-based payment arrangements, the classification of compensation expense,
non-GAAP financial measures, first-time adoption of SFAS No. 123R in an
interim period, capitalization of compensation costs related to share-based
payment arrangements, the accounting for income tax effects of share-based
payment arrangements, the accounting for income tax effects of share-based
payment arrangements upon adoption of SFAS No. 123R, the modification of
employee share options prior to adoption of SFAS No. 123R, and disclosures
in Managements Discussion and Analysis of Financial Condition and Results of
Operations subsequent to adoption of SFAS No. 123R. The Company has
accounted for its stock option grants in compliance with SAB 107.
35
For the years ended December 31, 2007,and 2006, the Company
recorded share-based compensation expense in the consolidated statements of
operations as follows:
(
in
thousands
)
|
|
Year Ended
|
|
Year Ended
|
|
|
December 31, 2007
|
|
December 31, 2006
|
Cost of revenue
|
|
$
|
13
|
|
$
|
5
|
Research and development
|
|
50
|
|
69
|
Sales and marketing
|
|
27
|
|
75
|
General and administrative
|
|
385
|
|
273
|
|
|
$
|
475
|
|
$
|
422
|
We estimate the fair value of each option award issued under the plans
on the date of grant using a Black-Scholes based option-pricing model that uses
the assumptions noted in the following table.
Expected volatilities are based on historical volatility of our common
stock. We base the expected term of the
options on our historical option exercise data with a minimum life expected
equal to the vesting period of the option.
We base the risk-free interest rate on the U.S. Treasury yield in effect
at the time of the grant for a term closest to the expected life of the
options.
|
|
Year ended December 31,
|
|
|
|
2007
|
|
2006
|
|
Expected volatility
|
|
93.13%-93.75
|
%
|
99.64%-110.66
|
%
|
Risk-free interest rate
|
|
2.93%-3.84
|
%
|
4.28%-5.22
|
%
|
Expected life in years
|
|
4.0
|
|
4.0
|
|
Expected dividend yield
|
|
None
|
|
None
|
|
Based on the above assumptions, the weighted average
estimated fair value of options granted in fiscal years 2007 and 2006 was $1.33
and $2.34 per share, respectively. We
estimated forfeitures related to option grants at an annual rate of 30.66% per
year and true up for actual forfeitures each reporting period.
Other reasonable assumptions about these factors could
provide different estimates of fair value.
Future changes in stock price volatility, life of options, interest
rates, forfeitures and dividend practices, if any, may require changes in our
assumptions, which could materially affect the calculation of fair value.
Total unrecognized share-based compensation expense related
to unvested stock options, expected to be recognized over a weighted average
period of 1.24 years, amounted to $1.4 million at December 31, 2007.
The weighted average exercise price of stock options
exercised for the year ended December 31, 2007 was $0.56. The intrinsic value of stock options
exercised for the year ended December 31, 2007 was $55 thousand.
In November 2005, the FASB issued FASB Staff Position SFAS 123R-3
Transition Election Related to Accounting for Tax Effects of
Share-Based Payment Awards.
The Company has elected to adopt the alternative transition method
provided by this FASB Staff Position for calculating the tax effects (if
any) of stock-based compensation expense pursuant to SFAS No. 123R. The alternative transition method includes
simplified methods to establish the beginning balance of the additional paid-in
capital pool related to the tax effects of employee stock-based compensation,
and to determine the subsequent impact to the additional paid-in capital pool
and the consolidated statements of operations and cash flows of the tax effects
of employee stock-based compensation awards that are outstanding upon adoption
of SFAS No.123R.
Recent
Accounting pronouncements
We adopted the provisions of FASB Interpretation No. 48, Accounting
for Uncertainty in Income Taxes (FIN 48) an interpretation of FASB Statement
No. 109 (SFAS 109) on January 1, 2007.
FIN 48 addresses the determination of whether tax
36
benefits claimed or expected to be claimed on a tax return should be
recorded in the financial statements. Under FIN 48, we may recognize the tax
benefit from an uncertain tax position only if it is more likely than not that
the tax position will be sustained on examination by the taxing authorities,
based on the technical merits of the position. The tax benefits recognized in
the financial statements from such a position should be measured based on the
largest benefit that has a greater than fifty percent likelihood of being
realized upon ultimate settlement. FIN 48 also provides guidance on
derecognition, classification, interest and penalties on income taxes,
accounting in interim periods and requires increased disclosures. At the date
of adoption, and as of December 31, 2007, the Company does not have a liability
for unrecognized tax benefits.
At December 31, 2007, the Company had federal and state net
operating loss (NOL) carryforwards of $60.3 million and $7.3 million,
expiring at various dates through 2027. Utilization of the NOL carryforwards
may be subject to a substantial annual limitation due to ownership change
limitations that have occurred previously or that could occur in the future
provided by Section 382 of the Internal Revenue Code of 1986, as well as
similar state provisions. These ownership changes may limit the amount of NOL
that can be utilized annually to offset future taxable income and tax,
respectively. In general, an ownership change, as defined by Section 382,
results from transactions increasing the ownership of certain stockholders or
public groups in the stock of a corporation by more than 50 percentage points
over a three-year period. Since the Companys formation, the Company has raised
capital through the issuance of capital stock on several occasions which,
combined with the purchasing stockholders subsequent disposition of those
shares, may have resulted in a change of control, as defined by Section 382,
or could result in a change of control in the future upon
subsequent disposition. The
Company has not currently completed a study to assess whether a change of
control has occurred or whether there have been multiple changes of control
since the Companys formation due to the significant complexity and cost
associated with such study and due to the possibility of additional changes in
control in the future. If we have experienced a change of control at any time
since Company formation, utilization of our NOL carryforwards would be subject
to an annual limitation under Section 382. Further, until a study is
completed and any limitation known, no amounts are being presented as an
uncertain tax position under FIN 48.
We recognize interest and penalties related to uncertain tax positions
in income tax expense. As of December 31,
2007, we had no accrued interest or penalties related to uncertain tax
positions.
The tax years 1999 through 2006 remain open to examination by the major
taxing jurisdictions to which we are subject. The Internal Revenue Service is
currently conducting an audit of our consolidated federal income tax return for
the 2005 tax year.
In September 2006, the Staff of the SEC issued SAB No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements (
SAB No. 108
).
SAB No. 108
provides guidance on the consideration of the effects of
prior
year misstatements in quantifying current year misstatements for the purpose of
determining whether the current years financial statements are materially
misstated. SAB No. 108 is effective
for fiscal years ending after November 15, 2006. We adopted SAB No. 108 during fiscal
2006. Our 2006 financial results include
a cumulative effect adjustment for adjustments previously deemed immaterial in
our revenue and cost of sales amortization for our IWS product line and a
non-material correction of the 2005 income tax provision. The cumulative effect adjustment results from
applying the provisions of SAB No. 108.
Historically, the amortization of the IWS deferred revenue and the
related cost of sales was done using a full month convention of amortization,
whereby a full month of revenue and prepaid license cost was amortized in the month
of license shipment, regardless of what day of the month the product was
shipped on. This had the effect of
accelerating revenue and cost recognition.
Prior to the adoption of SAB No. 108, we used the rollover method
described therein in evaluating the materiality of financial statements
adjustments related to the license revenue and prepaid license cost
amortization. We determined the impact
from the adjustment to be immaterial to current and prior periods financial
results under the rollover method.
However, we have evaluated the adjustment using the dual approach method
described in SAB No. 108 and accordingly, as of January 1, 2006, we
recorded a cumulative effect adjustment to increase the deferred revenue
balance by $358 thousand and increase the prepaid software license cost by $70
thousand, with a corresponding net charge to retained earnings of $288
thousand. During 2006 we also identified
a $100 thousand error in the 2005 tax provision related primarily to income
apportionments for state taxes. We
believe that this adjustment is immaterial to both 2006 and 2005 operating
results. In accordance with SAB No. 108,
the income tax error was corrected as of January 1, 2006 by recording an
adjustment to increase the income tax accrual by $100 thousand,
37
with a corresponding charge to retained earnings of $100 thousand. In accordance with SAB No. 108, reported
results for periods prior to January 1, 2006 have not been adjusted.
The 2006 financial
statements were affected by these adjustments through a $149 thousand increase
in product revenue, with a corresponding increase of $25 thousand in cost of
product revenue and a $99 thousand increase in the income tax benefit.
In
September 2006, the FASB issued SFAS No. 157,
Fair Value
Measurements
(SFAS No. 157).
Among other requirements, SFAS No. 157 defines fair value and
establishes a framework for measuring fair value and also expands disclosure
about the use of fair value to measure assets and liabilities. SFAS No. 157 is effective beginning the
first fiscal year that begins after November 15, 2007. The FASB has deferred the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis. We are required to adopt SFAS No. 157 on January 1,
2008. We do not expect the adoption of SFAS No. 157 will have a material impact on our financial position or results
of operations.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115
(SFAS No. 159). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for financial statements issued beginning with the first quarter of 2008. The adoption of SFAS No. 159 is not expected to have a material impact on the Companys consolidated results of operations and financial condition.
In December 2007, the FASB issued SFAS No. 141R,
Business Combinations
(SFAS No. 141R). SFAS No. 141R
expands the scope of acquisition accounting to all transactions under which
control of a business is obtained. Principally, SFAS No. 141R
requires that contingent consideration as well as contingent assets and
liabilities be recorded at fair value on the acquisition date and that certain
transaction and restructuring costs be expensed. SFAS No. 141R is
effective for fiscal years beginning after December 15, 2008. The Company
is currently evaluating the potential impact of the adoption of SFAS No. 141R
on the Companys consolidated financial position and results of operations.
3.
Equipment and
Improvements
Property and equipment are recorded at cost less accumulated
depreciation and amortization.
Depreciation is calculated using the straight-line method over the
useful lives of the respective assets.
Leasehold improvements are amortized over the shorter of the estimated
useful lives of the improvements or the remaining lease term. For the years
ended December 31, 2007 and 2006, equipment and improvements consisted of
the following:
(in
thousands)
|
|
2007
|
|
2006
|
|
Computer equipment and
purchased software
|
|
$
|
387
|
|
$
|
306
|
|
Office equipment
|
|
34
|
|
46
|
|
Furniture and fixtures
|
|
76
|
|
40
|
|
Leasehold improvements
|
|
176
|
|
69
|
|
Total equipment and improvements
|
|
$
|
673
|
|
$
|
461
|
|
Less: accumulated depreciation
|
|
(293
|
)
|
(157
|
)
|
Total equipment and improvements, net
|
|
$
|
380
|
|
$
|
304
|
|
Depreciation expense for the years ended December 31, 2007 and
2006 was $191 thousand and $105 thousand respectively. Also included in depreciation expense for the
year ended December 31, 2007 was a $24 thousand write-off related to the
assets of the Companys closed Colorado facility.
4.
Income taxes
The provision (benefit) for income taxes is as follows:
38
|
|
Year ended
December 31
|
|
(in thousands)
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
$
|
15
|
|
|
|
State
|
|
(6
|
)
|
51
|
|
|
|
|
|
|
|
|
|
|
|
Total
current
|
|
(6
|
)
|
66
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
Federal
|
|
667
|
|
(
560
|
)
|
|
|
State
|
|
50
|
|
(
19
|
)
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
717
|
|
(
579
|
)
|
|
|
|
|
|
|
|
|
Total tax
expense(benefit)
|
|
|
|
$
|
711
|
|
$
|
(
513
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
The 2007 current
state tax benefit is a result of prior year true-ups. The 2007 deferred tax expense is associated
with an increase to the Companys valuation allowance in the amount of $717
thousand, and represents managements conclusion that under the more likely
than not criterion of SFAS No.109, the Companys deferred tax asset will not be
realized. The 2006 current federal tax
expense is comprised of estimated federal Alternative Minimum tax expense
associated with the 2006 federal income tax return. The 2006 state income tax expense arises from
states where the company conducts business and files a return in, and receives
minimal or no benefit from state NOL carryovers to absorb current year taxable
income from current state taxation. The
2006 deferred tax benefit is associated with the release of a portion of the
Companys valuation allowance in the amount of $579 thousand and represents
managements conclusion that under the more likely than not criterion of SFAS
109, a portion of the deferred tax asset would be realized.
The Companys deferred tax assets consist of the following:
Deferred Tax Assets:
|
|
December 31, 2007
|
|
December 31, 2006
|
|
(in thousands)
|
|
|
|
|
|
Net Operating Loss Carryforwards
|
|
$
|
20,771
|
|
$
|
17,362
|
|
Purchased intangibles
|
|
3,754
|
|
4,266
|
|
Tax Credit Carryforwards
|
|
2,541
|
|
2,484
|
|
Reserves, accruals and allowances
|
|
237
|
|
1,843
|
|
Capitalized Research and Development Costs
|
|
151
|
|
226
|
|
Deferred Revenue
|
|
70
|
|
83
|
|
Depreciation and Amortization
|
|
53
|
|
17
|
|
|
|
|
|
|
|
Other
|
|
331
|
|
337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Deferred
Tax Asset
|
|
27,908
|
|
26,618
|
|
Valuation Allowance
|
|
(27,908
|
)
|
(25,901
|
)
|
Net Deferred Tax Asset
|
|
$
|
|
|
$
|
717
|
|
At December 31,
2007 and December 31, 2006, the Company has domestic federal NOL
carryforwards of approximately $60.3 million and $51.1 million respectively,
available to reduce future taxable income, which expire at various dates
beginning in 2020 through 2027. The
Company also has federal research and development tax credit carryforwards of
approximately $2.4 million at December 31, 2007 available to reduce future
tax liabilities which expire at various dates beginning in 2012 through
2027. The Company has state net
operating loss carryforwards of approximately $7.3 million and $3.1 million,
respectively, available to reduce future state taxable income, which expire at
various dates beginning in 2008 through 2027.
39
Under the
provisions of the Internal Revenue Code, certain substantial changes in the
Companys ownership may result in a limitation on the amount of NOL
carryforwards and research and development credit carryforwards which may be
utilized annually to offset future taxable income and taxes payable.
As required by
SFAS No. 109, management of the Company has evaluated the positive and
negative evidence bearing upon the realizability of its deferred tax assets,
which are comprised principally of NOL carryforwards, research and
experimentation credit carryforwards, and capitalized start up expenditures and
research and development expenditures
amortizable over sixty months straight-line.
Management has determined at this time that it is more likely than not
that the Company will not recognize the benefits of its federal and state
deferred tax assets and, as a result, a valuation allowance of approximately
$27.9 million has been established at December 31, 2007 and approximately
$25.9 million at December 31, 2006, respectively. Management has determined that no release of
the valuation allowance should be undertaken in 2007. Management has determined at this time that
the net deferred tax asset is appropriate, and that it is more likely than not
that the remaining net deferred tax asset will not be realized.
A reconciliation
of the expected income tax (benefit) computed using the federal statutory
income tax rate to the
Companys
effective income tax rate is as follows for the years ended December 31,
2007 and 2006.
|
(in thousands)
|
|
December 31, 2007
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
|
Income tax computed at
federal statutory tax rate
|
|
$
|
(1,304
|
)
|
$
|
1,163
|
|
|
|
|
|
|
|
|
|
State taxes, net of
federal benefit
|
|
245
|
|
4,406
|
|
|
|
|
|
|
|
|
|
Change in valuation
allowance
|
|
2,007
|
|
(6,075
|
)
|
|
|
|
|
|
|
|
|
R&D and other
credits
|
|
(31
|
)
|
16
|
|
|
|
|
|
|
|
|
|
Permanent differences
and other
|
|
(206
|
)
|
(23
|
)
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
711
|
|
$
|
(513
|
)
|
The increase in state taxes during the year ended December 31,
2006 is predominantly due to the expiration of state tax benefits and a change
in effective state rates due to a change in the location of the Companys
headquarters from Massachusetts to New Hampshire.
The change in the Deferred Tax Asset Valuation Allowance is analyzed as
follows:
|
|
Balance at
|
|
|
|
|
|
Balance at
|
|
(in thousands)
|
|
Beginning
of Period
|
|
Additions
|
|
Deductions
|
|
End of
Period
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
25,901
|
|
10,065
|
|
8,058
|
|
27,908
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
$
|
31,976
|
|
587
|
|
6,662
|
|
25,901
|
|
The Company was
previously headquartered in Massachusetts and had accumulated approximately $53
million and $918 thousand in Massachusetts NOL and credit carryforwards,
respectively. During 2006, the Company
concluded that it does not expect to have income reportable in
Massachusetts. Accordingly, the Company
wrote the Massachusetts NOL and credit carryforwards off against the previously
provided valuation allowance.
40
5
.
Commitments and Contingencies
We lease our primary facility in Nashua, New Hampshire, under an
operating lease, which expires in June 2010. In July 2007, we signed
an additional lease for 6,000 square feet adjacent to our existing rented space
in Nashua, New Hampshire. These leases
will expire in August 2010. We also have leased office space, located in
Sterling, Virginia for our sales force which expires in 2010. Future minimum lease obligations at December 31,
2007, under all of these non-cancelable operating leases are approximately $120
thousand in 2008, $120 thousand in 2009, and $50 thousand in 2010.
In December 2007, the Company completed the closure of its
Colorado Springs facility. The Company
recorded a restructuring charge of $215 thousand to cover the expected lease
payments of the abandoned facility, net of expected sublease proceeds. The space is currently available for
subleasing.
In April 2007, we entered into a new agreement with Microsoft to
extend an existing software distribution license agreement through 2008. Under the agreement, the Company was required
to purchase a minimum of $1.7 million of product licenses during fiscal year
2007, and a minimum of $2.75 million of product licenses during fiscal year
2008, with an additional $0.5 million over the life of the agreement.
After a review of the current forecast for license sales for the
balance of the agreement, the Company recorded a charge of $1.45 million to
reserve for excess purchase commitments under the Microsoft agreement. The charge was recorded as a component of
cost of product revenue in September 2007.
The Company is continuing its efforts to maximize utilization of
licenses on hand and licenses under commitment.
The computation of the excess purchase commitment reserve requires
management to make certain significant assumptions regarding future license
renewals, and sales growth. Actual
results may differ materially from managements estimates.
6.
Stockholders Equity
The Company has
authorized 2,000,000 shares of undesignated preferred stock. Each series of
preferred stock shall have such rights, preferences, privileges and
restrictions, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences as determined by the Board of
Directors.
Share
Repurchase Program
In October 2007, the Board of Directors authorized the repurchase
up to $1.0 million of common stock. This
authority may be exercised from time to time through November 2008, and in
such amounts as market conditions warrant. The repurchases may be made on the
open market, in block trades or otherwise. The
program may be suspended or discontinued at any time. As of December 31, 2007, the Company has
purchased $84 thousand of common stock with a balance of $916 thousand
available for this repurchase program.
7.
Benefit Plans
Stock Option Plans
The Companys
Amended and Restated 1991 Stock Incentive Plan (the 1991 Plan) provided for
the sale or award of common stock, or the grant of incentive stock options or
nonqualified stock options for the purchase of common stock, for up to
6,090,541 shares to officers, employees and consultants. The 1991 Plan terminated on March 31,
2001, and no further options have been granted under the 1991 Plan subsequent to
that date. At December 31, 2007,
there were 650,252 shares of common stock reserved for issuance upon exercise
of outstanding options granted under the 1991 Plan.
The Companys 2001
Stock Incentive Plan was approved and adopted by the Board of Directors on April 11,
2001 (the 2001 Plan). The 2001 Plan provided for the sale or award of common
stock, or the grant of non-qualified stock options for the purchase of common
stock, for up to 5,000,000 shares to officers, directors, employees and
consultants of the Company. Vesting of
options granted under the 2001 Plan accelerates upon change of control or
acquisition as defined in the 2001 Plan. The 2001 Plan terminated on December 31,
2004 and no further options have been granted under the 2001 Plan subsequent to
this date. At December 31, 2007,
there were 109,218 shares of common stock reserved for issuance upon exercise
of outstanding options granted under the 2001 Plan.
41
The Companys 2004
Stock Incentive Plan was approved and adopted by the Board of Directors on December 31,
2004 (the 2004 Plan). The 2004 Plan provides for the sale or award of common
stock or the grant of non-qualified stock options for the purchase of common
stock, for up to 7,500,000 shares to officers, directors, employees and
consultants of the Company. The Board of Directors administers the 2004 Plan,
and the terms of grants and awards made pursuant to the 2004 Plan. Vesting of options granted under the 2004
Plan accelerates upon change of control or acquisition as defined in the 2004
Plan. The 2004 Plan will terminate on December 31, 2014. At December 31, 2007, there were
1,957,245 shares of common stock reserved for issuance upon exercise of
outstanding options granted under the 2004 Plan.
In April 1995, the Board of Directors and stockholders approved the
Companys Non-Employee Director Stock Option Plan (the Director Plan), which
was amended by the Board of Directors on June 5, 2002 (the Director Plan). The Director Plan provided that the Board of
Directors, at its discretion, was permitted to grant options to non-employee
directors, subject to terms and conditions as determined by the Board of
Directors.
The Director Plan terminated on November 9, 2004,
and no further options have been granted under the Director Plan subsequent to
that date. At December 31, 2006,
there were 34,000 shares of common stock reserved for issuance upon exercise of
outstanding options granted under the Director Plan.
A summary of option activity under the 2004 Plan, 2001 Plan, the 1991
Plan and the Director Plan is as follows:
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
Outstanding at
December 31, 2005
|
|
1,845,639
|
|
$
|
3.65
|
Granted
|
|
773,600
|
|
3.15
|
Terminated
|
|
(165,418
|
)
|
2.44
|
Exercised
|
|
(56,973
|
)
|
0.31
|
|
|
|
|
|
Outstanding at
December 31, 2006
|
|
2,396,848
|
|
$
|
3.66
|
Granted
|
|
996,550
|
|
1.82
|
Terminated
|
|
(596,877
|
)
|
2.02
|
Exercised
|
|
(49,455
|
)
|
0.68
|
|
|
|
|
|
Outstanding at
December 31, 2007
|
|
2,747,066
|
|
$
|
3.40
|
|
|
|
|
|
The weighted average remaining contractual term and the aggregate
intrinsic value for options outstanding at December 31, 2007 were 6.42
years and $39 thousand, respectively.
The weighted average remaining contractual term and the aggregate
intrinsic value for options exercisable at December 31, 2007 were 4.74
years and $39 thousand, respectively.
Related
information for options outstanding and exercisable as of December 31,
2007 under these option plans is as follows:
Range
of exercise prices
|
|
Outstanding Options
|
|
Weighted
Average Remaining Contractual Life
|
|
Weighted
Average
Exercise Price
|
|
Exercisable Options
|
|
Weighted
Average
Exercise Price
|
|
$0.11 $ 0.97
|
|
747,693
|
|
6.87
|
|
$
|
0.87
|
|
520,715
|
|
$
|
0.83
|
|
1.02 2.01
|
|
209,808
|
|
8.77
|
|
1.48
|
|
46,916
|
|
1.65
|
|
2.01 2.95
|
|
706,079
|
|
8.78
|
|
2.28
|
|
113,204
|
|
2.49
|
|
3.08 4.50
|
|
447,986
|
|
8.01
|
|
3.33
|
|
213,520
|
|
3.36
|
|
7.81 9.13
|
|
635,500
|
|
1.39
|
|
8.33
|
|
635,500
|
|
8.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,747,066
|
|
6.42
|
|
3.40
|
|
1,529,855
|
|
4.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
Savings
Plan
The Company sponsors a savings plan for its employees, which has been
qualified under Section 401 (k) of the Internal Revenue Code. Eligible employees are permitted to
contribute to the 401 (k) plan through payroll deductions within statutory
and plan limits. Contributions from the
Company are made at the discretion of the Board of Directors and approximated
$38,000 and $32,000 in 2007 and 2006, respectively.
Deferred Compensation Plan
Effective March 31, 2006, the Company adopted the Ezenia Deferred
Compensation Plan (the Plan). Under this Plan, eligible employees may elect
to defer up to 100% of their base and incentive compensation into the Plan. The
Company is under no obligation to establish a fund or reserve in order to pay
the benefits under the Plan except in the event of a change in control. If funded, the plan Trustee makes all
investment decisions for the Trust on behalf of the participants. The Company
has not guaranteed a return on investment for the participants, however, all
earnings and losses on the Plan assets are borne by the participant. All contributions and earnings are fully
vested to the participant when made but are subject to the Companys creditors
in the event of bankruptcy. As a result,
the assets held in the Plan have been recorded as cash equivalents in the
consolidated balance sheet with a corresponding liability being recorded as
deferred compensation, which is included in employee compensation and benefits
in the accompanying consolidated balance sheet.
Interest earned on the Plan assets is recorded as interest income in the
consolidated statement of operations. A corresponding entry to deferred
compensation is made to increase (decrease) the amounts due the participant
resulting from the changes in the asset value with an offsetting charge or
credit to general and administrative expense. Compensation expense, including
employee deferrals, was approximately $36 thousand and $195 thousand in the
years ended December 31, 2007 and 2006, respectively.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15
under the Securities Exchange Act of 1934, as of December 31, 2007, the
Companys management, under the supervision and with the participation of both
the chief executive officer and the chief financial officer, carried out an
evaluation of the effectiveness of the Companys disclosure controls and
procedures. Based on this evaluation, the Companys chief executive
officer and chief financial officer concluded that the Companys disclosure
controls and procedures were effective at the reasonable assurance level to
ensure that the information required to be disclosed in the reports filed or
submitted by the Company under the Securities Exchange Act of 1934 was
recorded, processed, summarized, and reported within the requisite time
periods, including ensuring that such material information is accumulated and
communicated to the Companys management to allow timely decisions regarding
required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in the Companys internal control over financial
reporting that occurred during the quarter ended December 31, 2007 that
materially affected, or are reasonably likely to materially affect, the Companys
internal control over financial reporting.
43
Managements Report on Internal Control Over Financial
Reporting
Ezenias management is responsible for
establishing and maintaining adequate internal control over financial reporting
as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934.
Ezenias internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Ezenias internal control over
financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of Ezenias assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that Ezenias receipts and expenditures are being made
only in accordance with authorizations of Ezenias management and directors;
and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of Ezenias assets
that could have a material effect on the financial statements.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
Management has assessed Ezenias internal
control over financial reporting in relation to criteria described in
Internal Control Integrated Framework,
issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on this assessment using those criteria, we concluded that, as of December 31,
2007, Ezenias internal control over financial reporting was effective.
This annual report does not include an
attestation report of the Companys independent registered public accounting
firm regarding internal control over financial reporting. Managements
report was not subject to attestation by the Companys independent registered
public accounting firm pursuant to the rules of the Securities and
Exchange Commission that permit the Company to provide only managements report
in this annual report.
ITEM 9B.
OTHER INFORMATION
None
PART III
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 will be included in the Companys
definitive Proxy Statement to be delivered to stockholders in connection with
the 2008 Annual Meeting of Stockholders. Such information is incorporated
herein by reference.
The Company has
adopted a Code of Business Conduct and Ethics (the Code) that applies to all
of the Companys employees, including its executive officers and directors. The
Code is available on the Companys website at www.ezenia.com. The Company intends to disclose any
amendments to or waivers of the Code of Business Conduct and Ethics on behalf
of the Companys Chief Executive Officer, Chief Financial Officer, Controller,
and persons performing similar functions on the Companys website. The Company
shall also provide to any person without charge, upon request, a copy of the
Code. Any such request must be made in
writing to the Company, c/o Investor Relations, 14 Celina Ave, Suite 17-18,
Nashua, New Hampshire 03063.
44
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 will be included in the Companys
definitive Proxy Statement to be delivered to stockholders in connection with
the 2008 Annual Meeting of Stockholders. Such information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 will be included in the Companys
definitive Proxy Statement to be delivered to stockholders in connection with
the 2008 Annual Meeting of Stockholders is incorporated herein by reference.
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2007
about the Companys equity compensation plans under which shares of its common
stock are authorized for issuance.
Plan
Category
|
|
Number of securities to be issued upon exercise
of outstanding options, warrants and rights
|
|
Weighted-average exercise price of outstanding options,
warrants and rights
|
|
Number of securities remaining available for future issuance under
equity compensation plans (excluding securities reflected in column (a))
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Equity compensation plans
approved by securityholders
|
|
2,638,373
|
(1)
|
$
|
3.53
|
|
5,524,676
|
(2)
|
Equity compensation
plans not approved by securityholders
|
|
108,693
|
(3)
|
$
|
0.37
|
|
|
|
Total
|
|
2,747,066
|
|
$
|
3.40
|
|
5,524,676
|
|
(1)
Includes 650,252 shares of common stock to be issued upon exercise of
outstanding options under the Amended and Restated 1991 Stock Incentive Plan,
34,000 shares of common stock to be issued upon exercise of outstanding options
under the 1994 Non-Employee Director Option Plan, and 1,957,245 shares of
common stock to be issued upon exercise of outstanding options under the 2004
Stock Incentive Plan.
(2)
Includes 5,524,676 shares of common stock remaining available for
future issuance under the 2004 Stock Incentive Plan. The Amended and Restated
1991 Stock Incentive Plan terminated on March 31, 2001, the 1994 Non
Employee Director Option Plan terminated on November 9, 2004, and the 1995
Employee Stock Purchase Plan terminated on January 31, 2005, and no
additional options may be granted under these plans.
(3)
Represents shares of common stock to be issued upon exercise of
outstanding options under the 2001 Stock Incentive Plan. The 2001 Stock Incentive Plan terminated on December 31,
2004, and no additional options may be granted under this plan.
45
A description of the Stock Incentive Plans is
included in Note 7 to the Companys Consolidated Financial Statements set forth
herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS; DIRECTOR INDEPENDENCE
The information required by Item 13 will be included in the Companys
definitive Proxy Statement to be delivered to stockholders in connection with
the 2008 Annual Meeting of Stockholders. Such information is incorporated
herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 will be included in the Companys
definitive Proxy Statement to be delivered to stockholders in connection with
the 2008 Annual Meeting of Stockholders.
Such information is incorporated herein by reference.
PART IV
ITEM 15.
EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)
Documents Filed as Part of Form 10-K
1.
Consolidated Financial
Statements.
The following
consolidated financial statements and supplementary data are included in Part II-Item
8 filed as part of this report:
·
Report of Independent Registered Public Accounting Firm
·
Consolidated Balance Sheets as of December 31, 2007 and 2006
·
Consolidated Statements of Operations for the years ended December 31,
2007 and 2006
·
Consolidated Statements of Stockholders Equity for the years ended December 31,
2007 and 2006
·
Consolidated Statements of Cash Flows for the years ended December 31,
2007 and 2006
·
Notes to Consolidated Financial Statements
·
Quarterly Financial Information (unaudited)
46
2.
Financial Statement Schedule.
·
Schedule II Valuation and Qualifying Accounts
Schedules not listed above have been omitted because they are not
applicable, not required or the information required is shown in the
consolidated financial statements or the notes thereto.
3.
List of Exhibits.
Exhibit
Number
|
|
Description of Exhibit
|
3.1(1)
|
|
Amended and
Restated Certificate of Incorporation of the Registrant.
|
3.2(1)
|
|
Amended and
Restated By-Laws of the Registrant.
|
4.1(1)
|
|
Specimen Stock
Certificate.
|
10.1(1)+
|
|
Amended and
Restated 1991 Stock Incentive Plan of the Registrant.
|
10.2(1)
|
|
Amended and
Restated 1994 Non-Employee Director Option Plan of the Registrant.
|
10.3(1)+
|
|
1995 Employee
Stock Purchase Plan of the Registrant.
|
10.4(8)+
|
|
2004 Stock
Incentive Plan.
|
10.5(1)
|
|
License
Agreement dated January 2, 1995 between the Registrant and Datapoint Corporation.
|
10.6(1)
|
|
Letter Agreement
dated December 31, 1994 between the Registrant and Fleet Bank of
Massachusetts, N.A.
|
10.7(2)+
|
|
Employment
Agreement dated as of November 9, 2007 between the Registrant and Khoa
D. Nguyen.
|
10.8(3)
|
|
Asset Purchase Agreement
dated as of December 28, 2000 between the Registrant and General
Dynamics
|
|
|
Government Systems
Corporation, as amended.
|
10.9(a)(4)
|
|
Put Agreement dated as of
March 27, 2001 (as amended to date) by and between the Registrant and
General
|
|
|
Dynamics Government
Systems Corporation.
|
10.10(b)(7)
|
|
Agreement and Release
dated as of December 31, 2002 by and between the Registrant and General
Dynamics
|
|
|
Government Systems
Corporation.
|
10.11(5)+
|
|
2001 Stock
Incentive Plan of the Registrant.
|
10.12(6)
|
|
Asset Purchase
Agreement dated as of August 1, 2002 between the Registrant and Tandberg
Telecom AS.
|
10.13(6)
|
|
License
Agreement dated as of August 1, 2002 between the Registrant and Telecom
AS.
|
10.14(6)
|
|
Promissory Note
dated as of August 1, 2002 made by the Registrant in favor Tandberg
Telecom AS.
|
10.15(6)
|
|
Security
Agreement dated as of August 1, 2002 between the Registrant and Tandberg
Telecom AS.
|
10.16(6)
|
|
Ezenia! License
Agreement dated as of October 30, 2002 between the Registrant and Tandberg
Telecom AS.
|
10.17(9)
|
|
First Amended and Restated Software Distribution
License Agreement dated January 1, 2005 by and between
|
|
|
Microsoft Corporation and Ezenia! Inc.
|
10.18
|
|
Amendment to First Amended and Restated Software
Distribution License Agreement by and between Microsoft
|
|
|
Corporation and Ezenia! Inc. dated April 2007.
|
21.1
|
|
Subsidiaries of
the Registrant.
|
23.2
|
|
Consent of
Vitale, Caturano & Company Ltd.
|
31.1
|
|
Consent of the Companys Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
|
|
|
Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
|
Consent of the Companys Chief Financial Officer
pursuant to 18 U. S.C. Section 1350, as adopted pursuant to
|
|
|
Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
|
Certification of
the Companys Chief Executive Officer pursuant to 18 U.S.C. ection 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
|
Certification of
the Companys Chief Financial Officer pursuant to 18 U.S.C. ection 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
47
Copies of any of
these exhibits are available without charge upon written request to Investor
Relations, Ezenia! Inc., 14 Celina Avenue, Suite 17-18, Nashua, NH 03063.
+
Management contract for compensatory plan
or arrangement required to be filed as an exhibit to this report pursuant to
Item 15(c) of this report.
(1)
Incorporated by reference from the
Companys Registration Statement on Form S-1.
(2)
Incorporated by reference from the
Companys Form 8-K filed with the Securities and Exchange Commission on November 14,
2007.
(3)
Incorporated by reference from the
Companys Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 2000.
(4)
Incorporated by reference from the
Companys Form 10-Q for the quarter ended September 30, 2001.
(5)
Incorporated by reference from the
Companys Registration Statement on Form S-8 filed with the Securities and
Exchange Commission on December 21, 2001.
(6)
Incorporated by reference from the
Companys Form 10-Q for the quarter ended September 30, 2002.
(7)
Incorporated by reference from the
Companys Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 2002.
(8)
Incorporated by reference from the
Companys Form 10-K/A filed with the Securities and xchange Commission for
the year ended December 31, 2004.
(9)
Incorporated by reference from the
Companys Form 10-Q for the quarter ended March 31, 2005.
48
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
EZENIA! INC.
|
|
|
|
|
By:
|
/s/ Khoa D.
Nguyen
|
|
|
Khoa D. Nguyen
|
|
|
Chairman, Chief Executive Officer, and President
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
Date:
|
March 26,
2008
|
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Khoa D.
Nguyen
|
|
Chairman, Chief Executive Officer,
|
|
March 26, 2008
|
Khoa D. Nguyen
|
|
and President (Principal executive officer)
|
|
|
|
|
|
|
|
/s/ Ronald L.
Breland
|
|
Director
|
|
March 26, 2008
|
Ronald L.
Breland
|
|
|
|
|
|
|
|
|
|
/s/ Gerald P. Carmen
|
|
Director
|
|
March 26,
2008
|
Gerald P. Carmen
|
|
|
|
|
|
|
|
|
|
/s/ John A. McMullen
|
|
Director
|
|
March 26,
2008
|
John A. McMullen
|
|
|
|
|
|
|
|
|
|
/s/ Robert N. McFarland
|
|
Director
|
|
March 26,
2008
|
Robert N. McFarland
|
|
|
|
|
|
|
|
|
|
/s/ Roger N. Tuttle
|
|
Chief Financial
Officer
|
|
March 26,
2008
|
Roger N. Tuttle
|
|
and Secretary (Principal financial and
|
|
|
|
|
Accounting officer)
|
|
|
49
EZENIA! INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Column
A Description
|
|
Column B
|
|
Column C Additions
|
|
Column D
|
|
Column E
|
|
Accounts
Receivable Allowances
|
|
Balance At
Beginning Of
Period
|
|
Charged
(Credited) to
Costs and
Expenses
|
|
Charged to Other
Accounts
|
|
Deductions Uncollectible
Accounts
Written-off
|
|
Balance at
End of
Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2007
|
|
$
|
412,909
|
|
|
|
|
|
|
|
$
|
412,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2006
|
|
$
|
339,246
|
|
(15,967
|
)
|
89,630
|
|
|
|
$
|
412,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
Exhibit Index
Exhibit
Number
|
|
Description of Exhibit
|
|
|
|
3.1(1)
|
|
Amended and
Restated Certificate of Incorporation of the Registrant.
|
3.2(1)
|
|
Amended and
Restated By-Laws of the Registrant.
|
4.1(1)
|
|
Specimen Stock
Certificate.
|
10.1(1)+
|
|
Amended and
Restated 1991 Stock Incentive Plan of the Registrant.
|
10.2(1)
|
|
Amended and
Restated 1994 Non-Employee Director Option Plan of the Registrant.
|
10.3(1)+
|
|
1995 Employee
Stock Purchase Plan of the Registrant.
|
10.4(8)+
|
|
2004 Stock
Incentive Plan.
|
10.5(1)
|
|
License
Agreement dated January 2, 1995 between the Registrant and Datapoint Corporation.
|
10.6(1)
|
|
Letter Agreement
dated December 31, 1994 between the Registrant and Fleet Bank of
Massachusetts, N.A.
|
10.7(2)+
|
|
Employment
Agreement dated as of November 9, 2007 between the Registrant and Khoa
D. Nguyen.
|
10.8(3)
|
|
Asset Purchase Agreement dated as of December 28, 2000 between
the Registrant.
|
10.9(a)(4)
|
|
Put Agreement dated as of March 27, 2001 (as amended to date) by
and between the Registrant and General
|
|
|
Dynamics Government Systems Corporation.
|
10.10(b)(7)
|
|
Agreement and Release dated as of December 31, 2002 by and
between the Registrant and General Dynamics
|
|
|
Government Systems Corporation.
|
10.11(5)+
|
|
2001 Stock
Incentive Plan of the Registrant.
|
10.12(6)
|
|
Asset Purchase
Agreement dated as of August 1, 2002 between the Registrant and Tandberg
Telecom AS.
|
10.13(6)
|
|
License
Agreement dated as of August 1, 2002 between the Registrant and Telecom
AS.
|
10.14(6)
|
|
Promissory Note
dated as of August 1, 2002 made by the Registrant in favor Tandberg
Telecom AS.
|
10.15(6)
|
|
Security
Agreement dated as of August 1, 2002 between the Registrant and Tandberg
Telecom AS.
|
10.16(6)
|
|
Ezenia! License
Agreement dated as of October 30, 2002 between the Registrant Tandberg
Telecom AS.
|
10.17(9)
|
|
First Amended
and Restated Software Distribution License Agreement dated January 1, 2005 by
and between
|
|
|
Microsoft
Corporation and Ezenia! Inc.
|
10.18
|
|
Amendment to
First Amended and Restated Software Distribution License Agreement by and
between Microsoft
|
|
|
Corporation and
Ezenia! Inc. dated April 2007.
|
21.1
|
|
Subsidiaries of
the Registrant.
|
23.2
|
|
Consent of
Vitale, Caturano & Company, Ltd.
|
31.1
|
|
Consent of the
Companys Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to
|
|
|
Section 302
of the Sarbanes-Oxley Act of 2002.
|
31.2
|
|
Consent of the
Companys Chief Financial Officer pursuant to 18 U. S.C. Section 1350, as
adopted pursuant to
|
|
|
Section 302
of the Sarbanes-Oxley Act of 2002.
|
32.1
|
|
Certification of
the Companys Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to
|
|
|
Section 906
of the Sarbanes-Oxley Act of 2002.
|
32.2
|
|
Certification of
the Companys Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to
|
|
|
Section 906
of the Sarbanes-Oxley Act of 2002.
|
+
Management contract for compensatory plan
or arrangement required to be filed as an exhibit to this report pursuant to
Item 15(c) of this report.
(1)
Incorporated by reference from the
Companys Registration Statement on Form S-1.
(2)
Incorporated by reference from the
Companys Form 8-K filed with the Securities and Exchange Commissionon November 14,
2007.
(3)
Incorporated by reference from the
Companys Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 2000.
(4)
Incorporated by reference from the
Companys Form 10-Q for the quarter ended September 30, 2001.
(5)
Incorporated by reference from the
Companys Registration Statement on Form S-8 filed with the Securities and
Exchange Commission on December 21, 2001.
(6)
Incorporated by reference from the
Companys Form 10-Q for the quarter ended September 30, 2002.
(7)
Incorporated by reference from the
Companys Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 2002.
(8)
Incorporated by reference from the
Companys Form 10-K/A filed with the Securities and Exchange Commission
for the year ended December 31, 2004.
(9)
Incorporated by reference from the
Companys Form 10-Q for the quarter ended March 31, 2005.
51
Ezenia (CE) (USOTC:EZEN)
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