Artisoft, Inc. Releases Results for First Quarter of Fiscal Year 2002

Business Wire, Oct 25, 2001

Business/Technology Editors

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Oct. 25, 2001

Artisoft(R) Inc. (NASDAQ: ASFT), developer of the first software-based phone system, today reported its financial results for the first quarter of fiscal year 2002, ended September 30, 2001. Excluding the effects of reserves, channel inventory rotations and OEM revenue schedules, the company reported sequential revenue growth of 9% over the previous quarter.

For the first quarter, Artisoft reported net sales of $1.4 million and a net loss of $2.7 million. These results compare to net sales of $1.5 million and a net loss of $2.5 million or $.16 per share for the fourth quarter of fiscal year 2001. Gross margins for the first quarter of fiscal year 2002 were 84% compared with 61% in the fourth quarter of fiscal year 2001. Operating expenses were $4.0 million in the first fiscal quarter compared with $3.6 million in the fourth fiscal quarter of fiscal year 2001. The first quarter expenses include $350,000 in employee severence costs.

Reflected in the company's financial statements were several non-routine transactions. First quarter revenues include $260,000 in restocking orders associated with a channel inventory rotation resulting from the company's introduction of TeleVantage(R) Release 4.0, and fourth quarter revenues include a reduction in sales of approximately $500,000 to reserve for channel inventory rotation and an increase of $400,000 due to the reversal of a previously established returns reserve relating to the company's discontinued product line. Additionally, based on contractual schedules, the first quarter was impacted by a reduction in OEM TeleVantage sales of approximately $400,000 from the previous quarter; the company expects to realize growth of approximately $800,000 in OEM TeleVantage sales in the second quarter.

In the first quarter the company recorded a non-cash dividend of $2.4 million relating to the value of the warrants and the beneficial conversion feature on the Series B Preferred Stock issued in connection with the financing announced in August 2001. The applicable loss per common share in the first quarter of fiscal year 2002, including the non-cash dividend, was $.32. Excluding the non-cash dividend, the loss per common share was $.17 in the first quarter. The comparable loss per common share in the fourth quarter of fiscal year 2001 was $.16.

During the first quarter, the company strengthened its position in the open systems communications market by shipping two new major product releases. TeleVantage 4.0, which began shipping in September, includes the introduction of the TeleVantage Call Center, an add-on module for managing and optimizing call center performance. TeleVantage 4.0 will also soon be rebranded and distributed by Toshiba. TeleVantage CTM Suite, which is being pre-bundled on the Intel(R) Converged Communications Platform, is a modular set of open-architecture software that bundles soft switch, auto attendant, voice-mail applications, and fully integrated Voice-over-IP capabilities. Limited quantities of TeleVantage CTM Suite began shipping in late August.

TeleVantage also continued to be recognized as the "best of class" software-based phone system, winning two more awards for technical excellence and attracting a number of new partnerships. TeleVantage received a "Best of Show" award at the Customer Inter@ction Solutions Conference & Expo and the CompTIA Convergence Award by the Computing Technology Industry Association, bringing its total to 29 industry awards. Artisoft also expanded its Open Communications Alliance to over 20 best-of-breed technology partners. Recent additions include Oncontact Software, a developer of CRM systems for the mid market; SBS Technologies, a manufacturer of computer components; Digisoft Computers, a developer of a leading PC-based call center and CRM software; and Sitara Networks, a provider of integrated Quality of Service solutions.

"With the recent introduction of TeleVantage 4.0 and TeleVantage CTM Suite, Artisoft now has three exciting new growth opportunities," said Steve Manson, president and CEO of Artisoft. "TeleVantage 4.0 provides our reseller channel with a compelling solution for mid-size call center customers, TeleVantage CTM Suite is a first-to-market product that enables us to leverage the powerful marketing and distribution resources of Intel; and the Toshiba OEM version of TeleVantage 4.0 will allow us to leverage the channel of one of the strongest telephony suppliers in the industry."

Artisoft will be holding a conference call at 4:45 EDT today to discuss the first quarter fiscal year 2002 results. A live Webcast will be available at www.artisoft.com.

About Artisoft

Artisoft, Inc. (NASDAQ: ASFT) of Cambridge, Mass., is a leading developer of open, software-based telephone systems that bring together voice and data for more powerful and productive communications. Designed specifically for small to midsize businesses, corporate branch offices, and call centers, Artisoft's TeleVantage delivers greater functionality, flexibility and value than proprietary PBXs. Artisoft's innovative software products have received more than 30 industry awards including "Product of the Year," "Best of Show," and "Editors' Choice" by Network Magazine, Communications Solutions Magazine and Customer Inter@action Solutions Magazine. The company distributes its products and services worldwide through a dedicated and growing channel of authorized resellers. For more information, please call 800-914-9985 or visit our website, http://www.artisoft.com.