Avistar Communications Reports Financial Results for the Fourth Quarter of 2009

Avistar Communications Corporation (www.avistar.com), a leader in unified visual communications solutions, today announced its financial results for the three and twelve months ended December 31, 2009.

Financial highlights included:

• Total revenue was $8.8 million for each of the years ended December 31, 2009 and 2008. Total revenue for the fourth quarter of 2009 was $1.9 million, compared to $3.1 million for same quarter in 2008, a decrease of 39%.
• Operating expense (research and development, sales and marketing, and general and administrative) for the year ended December 31, 2009 was $11.8 million, as compared to $14.5 million for the year ended December 31, 2008, representing a substantial reduction of 19%. Operating expense was $2.9 million for the fourth quarter of 2009, as compared to $3.1 million for the fourth quarter of 2008, demonstrating the continued success of efforts to control Avistar’s cost structure.
• Net loss was $4.0 million for the year ended December 31, 2009, or $0.11 per basic and diluted share, as compared to a net loss of $6.4 million, or $0.18 per basic and diluted share, for the year ended December 31, 2008, a 38% decrease. Net loss in the fourth quarter of 2009 was $1.5 million, or $0.04 per basic and diluted share, as compared to a net loss of $231,000, or $0.01 per basic and diluted share, in the fourth quarter of 2008, a 565% increase.
• Cash and cash equivalents balance as of December 31, 2009 was $294,000. Cash used in operations during the year ended December 31, 2009 was $4.9 million, compared to $8.9 million for the year ended December 31, 2008, a $4.0 million improvement.
• Adjusted EBITDA loss (as described below) for the year ended December 31, 2009 was $1.5 million compared to an Adjusted EBITDA loss of $4.0 million for the same period in 2008, a reduction in adjusted EBITDA loss of $2.5 million, or 63%. Adjusted EBITDA loss for the fourth quarter of 2009 was $909,000, compared to an Adjusted EBITDA profit of $591,000 in the same quarter of 2008.

Recent Developments:

• Avistar’s total debt balance of $11.3 million at December 31, 2009 was repaid on January 25, 2010 with the $14.0 million in proceeds from the recently announced license and sale of substantially all of Avistar’s patent portfolio.
• Avistar’s revolving line of credit limit will be reduced from $11.3 million to $6.0 million on March 31, 2010.

Bob Kirk, CEO of Avistar, said, "Avistar continued to work diligently to overcome marketplace and economic challenges in 2009. Our annual results show a 19% decrease in operating expenses, in conjunction with stable year-over-year revenues, which produced a 38% reduction in net loss and a 63% reduction in Adjusted EBITDA loss year over year. In 2010, we expect to see the full financial impact in our continued efforts to control costs, and also see benefit from our plans to bring new products online while uniquely positioning Avistar within the Unified Communications (UC) and Virtual Desktop Infrastructure (VDI) markets. In fact, we expect to nearly triple the number of products and components available to our distributors and licensing partners in 2010.

"In 2009, we dealt with a challenging global economy while we introduced our newly developed sales channel model, which took some time to come up to speed. We have now consolidated our channel partners under a handful of master distributors and made our channel model more productive and supportable. In addition, our newly implemented pricing model makes our solutions among the most cost-efficient desktop visual communications product bundles in the industry today. We are already noticing a beneficial effect on our channel strategy from these two changes.

Kirk continued, "Additionally, we expanded our focus on signing new technology licensing partners. Our goal is to provide a substantial number of video-enabling components to a variety of technology vendors (OEMs) to allow them to deliver superior video-enabled products. Avistar’s 17-year history, knowledge, and experience in the video collaboration space presents us with a great advantage in assisting these OEMs in providing a better visual communications product.

"Finally, the licensing and sale of a substantial majority, but not all, of our patent portfolio provides us the necessary funding to retire all of our outstanding debt. This important improvement in our balance sheet also provides us the needed working capital in 2010 to invest in product engineering, which is necessary to accelerate delivery of our new products and video components to the market. With this investment, we can better take advantage of substantial growth within our industry, as reported by analyst data from renowned research firms. As our new products become available within the visual communications, UC and VDI markets, we believe that Avistar will be well positioned to gain additional market share and emerge as a leader within our industry.

Kirk added, "With a backlog of contracted revenue with existing licensing partners, a strong, experienced management team in place, a growing product and component portfolio, a rationalized distribution strategy, inroads in the technology licensing arena, a stronger balance sheet, lack of debt, and the recognized value of visual communication within businesses globally, we expect great things from the company over the next year and into 2011.”

Significant recent developments included:

• Avistar continues to invest heavily in its UC and VDI strategies by introducing the Avistar C3 Unified™ - Microsoft OCS Edition and the Avistar C3 Integrator™ - Citrix Edition solutions. Both were launched at VoiceCon – San Francisco and attracted strong interest.
• The Avistar technology licensing business continues to grow, with successful product deliveries to LifeSize, IBM, Logitech and Zultys. Royalties from LifeSize and Logitech have commenced and are expected to contribute to Avistar’s revenue momentum for many years.
• Other important product milestones include the successful upgrade of two of Avistar’s longstanding customers to the Avistar C3 Desktop™ solution – v10.2.6, converting tens of thousands of desktop seats from Avistar’s legacy product line to the Avistar C3™ all-software visual communications platform. Additionally, several new customers have begun strategic deployments of the Avistar C3™ platform, including a large aerospace contractor and pilot deployments within the educational and manufacturing sectors.
• In January 2010, Avistar completed a license and a sale of substantially all of its patent portfolio for $14.0 million.

Kirk concluded, "Avistar’s financial position, product strategy and product portfolio ready the company for success and leadership in our rapidly expanding industry. Clearly, this has been the moment we’ve been working toward for many years. Now it’s up to the team and company as a whole to deliver, execute and succeed, which I have no doubt we will.”

About Avistar Communications Corporation

Avistar (AVSR.PK) is an innovation leader in the unified visual communications industry, providing proven business-class desktop videoconferencing technology. Avistar's installations include more than 100,000 committed desktop seats worldwide, bringing together business users anytime and anyplace. Companies such as IBM, LifeSize, Logitech, Paradial and Zultys use Avistar technology to power their unified communications solutions. Avistar also works with leading channel partners and resellers including AVI-SPL, CityIS, Fontel, Jenne and Media Plus in more than 40 countries. For more information, please visit www.avistar.com.

Cautionary Note Regarding Forward-Looking Statements

The statements made in this press release that are not historical facts are "forward-looking statements." These forward-looking statements, include, but are not necessarily limited to, statements regarding, availability of funds under our line of credit, expansion of our product portfolio, the future performance of our sales and distribution channels, the impact of changes in our pricing model, growth in our business and the video conferencing industry, our ability to capture market share in the video conferencing industry, future royalties and revenue associated with our business, and our positioning to emerge as a leader in the desktop visual communications industry. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties. The company cautions readers of this release that a number of important factors could cause actual future events and results to differ materially from those expressed in any such forward-looking statements. Such factors include, without limitation, Avistar’s lengthy sales cycle, volatility associated with Avistar’s sales and licensing activities, market acceptance of Avistar’s products, increased competition in the market for unified communications, technical challenges associated with product development and completion of our deliverables to customers, ongoing technological developments and changing industry standards, the ability of Avistar’s distributors to sell our products to end users, the capital markets for both debt and equity, and challenges associated with protecting and licensing Avistar’s intellectual property. These important factors and other factors that potentially could cause actual future results to differ materially from current expectations are described in our filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Readers of this release are referred to such filings. The forward-looking statements in this release are based upon information available to the company as of the date of the release, and the company assumes no obligations to update any such forward-looking statements.

Non-GAAP Financial Measures

This press release and the accompanying tables include a discussion of adjusted EBITDA, excluding stock-based compensation expense, which is a non-GAAP financial measure provided as a complement to results provided in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The term "adjusted EBITDA" refers to a financial measure that we define as earnings before net interest, income taxes, depreciation, and amortization, as further adjusted for stock-based compensation. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. In addition, our definition of adjusted EBITDA may not be comparable to the definitions as reported by other companies. We believe adjusted EBITDA is relevant and useful information to our investors as this measure is an integral part of our internal management reporting and planning process and is a primary measure used by our management to evaluate the operating performance of our business. The components of adjusted EBITDA include the key revenue and expense items and income from settlement and patent licensing for which our operating managers are responsible and upon which we evaluate their performance. Furthermore, we intend to provide this non-GAAP financial measure as part of our future earnings releases and, therefore, the inclusion of this non-GAAP financial measure will provide consistency in our financial reporting. A reconciliation of this non-GAAP measure to GAAP is provided in the accompanying tables.