Avistar Communications Reports Financial Results for the First Quarter of 2008

Progress in cost alignment, and go-to-market and product strategies for 2008
growth offsetting patent challenge

SAN MATEO, Calif., April 17 /PRNewswire-FirstCall/ -- Avistar
Communications Corporation (Nasdaq: AVSR), a video collaboration platform
provider, today announced its financial results for the three months ended
March 31, 2008.
Financial highlights for the quarter included:

-- Total revenue, prepared in accordance with GAAP, was $1.2 million, as
compared to $1.9 million for the quarter ended December 31, 2007.
-- Income from settlement and licensing activity, which management sees as
a key component of the company's "top line" performance, was $1.1
million in both the first quarter of 2008 and the fourth quarter of
2007.
-- Net income represented a loss of $3.8 million, or $0.11 per basic and
diluted share. The fourth quarter of 2007 posted a similar result of a
loss of $3.7 million, or $0.11 per basic and diluted share.
-- The cash and cash equivalent balance at the end of the first quarter
was $6.0 million.

"The first quarter of 2008 has been both formative and challenging for
Avistar," said Simon Moss, Avistar's President and CEO. "Our first quarter
financial results did not reflect the significant progress that has been
achieved in our turn-around initiatives. A primary cause for this is simple to
identify -- a reduction in revenue and licensing proceeds versus our
expectations was caused by an external party's submittal of our entire U.S.
patent portfolio into re-examination in the U.S. Patent and Trademark Office,
as has been previously communicated. This single, but dramatic, action
resulted in delays in our licensing activity, and caused disruption in our
product sales channel. We've responded decisively with a set of cost
management programs which will provide considerable relief beginning in the
second quarter."
Mr. Moss continued, "This development happened at an especially critical
time for the company, and as previously disclosed, has impacted a number of
strategic and growth initiatives that we were enthusiastically pursuing. As
we've previously and frequently stated, our business is "lumpy" and will
continue to be as long as technology and licensing proceeds constitute a large
portion of our "top line" mix. The process of patent re-examination will make
our stated objective of achieving profitable growth in 2008 more challenging.
However, Avistar has adapted quickly, and intends to maintain its key
strategic goals-- including the delivery of world class product, and the
establishment of effective partnerships with large technology companies, in
addition to the achievement of positive revenue and licensing growth and
profit trends."
Examples of our progress include:

-- Projected operating expense for 2008 will represent a 40% reduction
relative to 2007, while delivery on client commitments and product
innovations continue.
-- We have recently signed important services and funded development
agreements, including a project for the development of a potentially
market-changing video-enabled supply chain community, linking buy-side
and sell-side firms and corporate treasury departments.
-- Continuing progress on technology licensing discussions with a large,
global IT provider, as one avenue for Avistar to participate in the
dynamic growth of the Unified Communications (UC) market, a market that
is estimated by Wainhouse Research to reach $16.6 billion by 2012.
-- And despite a significant downturn during the first quarter in
Avistar's traditional and dominant vertical - that being Financial
Services - we maintained historical levels of sales bookings, actually
reflecting a modest increase relative to the fourth quarter of 2007,
and added multiple new clients.

"We are clear, though, that the action against us represents a significant
challenge," Mr. Moss continued, "Our team has acted decisively and quickly,
and the company has shown itself to be impressively adaptive as we have set
the stage for improvement in the second quarter. Beyond that, we are in a
strong position to exploit opportunities that the first quarter identified,
progressed or signed."
About Avistar Communications Corporation
Avistar creates technology that provides the missing critical element in
unified communications: bringing people in organizations face-to-face through
enhanced communications, for true collaboration anytime, anyplace. Its latest
product, C3, draws on over a decade of market experience to deliver a single-
click desktop or room-based videoconferencing and collaboration experience,
that moves business communications into a new era. Available as a stand-alone
solution, or integrated with existing unified communications software from
other vendors, Avistar's C3 users gain instant messaging-style ability to
initiate video communications and collaborate across and outside the
enterprise. Patented bandwidth management enables thousands of users to access
desktop videoconferencing, Voice over IP (VoIP), collaboration services, and
streaming media without requiring substantial new network investment or
impairing network performance.
Avistar's desktop videoconferencing and collaboration installations are
among the world's largest, including more than 18,000 seats in more than 40
countries. Clients report as much as a 20 percent reduction in travel expense
and carbon emissions, 3 percent increase in productivity, and immeasurably
improved relationship building within their organizations, as well as with
suppliers and customers. Avistar holds a portfolio of 80 patents for
inventions in video and network technology and licenses IP to
videoconferencing, rich-media services, public networking and related
industries. Current licensees include Sony Corporation, Sony Computer
Entertainment Inc., Polycom, Inc., Tandberg ASA, Radvision Ltd. and
Emblaze-VCON.
For more information, visit www.avistar.com

Forward Looking Statements

Statements made in this news release that are not purely historical,
including but not limited to statements regarding Avistar's projected
operating expense for 2008, delivery on client commitments and product
innovations, the project for the development of a video-enabled supply chain
community, progress on technology licensing discussions, sales bookings and
new clients, and an improvement in the second quarter of 2008 are forward-
looking statements within the meaning of Section 21E of the Securities
Exchange Act. Such statements are subject to risks and uncertainties that
could cause actual results to differ materially, including such factors, among
others, as 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, ongoing technological
developments and changing industry standards, and challenges associated with
protecting and licensing Avistar's intellectual property.. As a result of
these and other factors, Avistar expects to experience significant
fluctuations in revenue and operating results, and there can be no assurance
that Avistar will become or remain profitable in the future, or that its
future results will meet expectations. These and other risk factors are
discussed in Avistar's Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q filed with the Securities and Exchange Commission from time to time.
Avistar disclaims any intent or obligation to update these forward-looking
statements.
- financial statements follow -

AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the three months ended March 31, 2008 and 2007
(in thousands, except per share data)

Three Months Ended March 31,
2008 2007
(unaudited)

Revenue:
Product $249 $1,258
Licensing 154 232
Services, maintenance and support 748 902
Total revenue 1,151 2,392
Costs and expenses:
Cost of product revenue* 359 729
Cost of services, maintenance and
support revenue* 519 676
Income from settlement and patent
licensing (1,057) (13,057)
Research and development* 1,851 1,657
Sales and marketing* 1,329 1,489
General and administrative* 1,878 6,463
Total costs and expenses (income) 4,879 (2,043)
(Loss) income from operations (3,728) 4,435
Other (expense) income:
Interest income 46 113
Other expense, net (85) (55)
Total other (expense) income, net (39) 58
Net (loss) income $(3,767) $4,493

Net (loss) income per share $(0.11) $0.13
Weighted average shares used in
calculating
Basic net (loss) income per share 34,532 34,101
Diluted net (loss) income per share 34,532 35,146

*Including stock based compensation of:
Cost of products, services, maintenance
and support revenue $7 $60
Research and development 63 204
Sales and marketing (36) 185
General and administrative 113 233
$147 $682

AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS
as of March 31, 2008 and December 31, 2007
(in thousands, except share and per share data)

March 31, December 31,
2008 2007
(unaudited)
Assets:
Current assets:
Cash and cash equivalents $5,975 $4,077
Marketable securities - 799
Total cash, cash equivalents and
marketable securities 5,975 4,876
Accounts receivable, net of allowance
for doubtful accounts of $34 and $24
at March 31, 2008 and December 31,
2007, respectively 1,570 1,385
Inventories 492 428
Deferred settlement and patent licensing
costs 1,256 1,256
Prepaid expenses and other current assets 451 462
Total current assets 9,744 8,407
Property and equipment, net 671 767
Long-term deferred settlement and
patent licensing costs 799 1,117
Other assets 288 286
Total assets $11,502 $10,577

Liabilities and Stockholders' Equity
(Deficit):
Current liabilities:
Line of credit $4,000 $5,100
Accounts payable 962 1,287
Deferred income from settlement
and patent licensing 5,520 5,520
Deferred services revenue and
customer deposits 2,071 2,231
Accrued liabilities and other 1,901 1,451
Total current liabilities 14,454 15,589
Long-term liabilities:
Long-term convertible debt 7,000 -
Long-term deferred income from
settlement and patent licensing
and other 3,438 4,814
Total liabilities 24,892 20,403
Stockholders' equity (deficit):
Common stock, $0.001 par value;
250,000,000 shares authorized at
March 31, 2008 and December 31, 2007;
35,733,179 and 35,678,807 shares issued
including treasury shares at March 31,
2008 and December 31, 2007,
respectively 36 36
Less: treasury common stock, 1,182,875
shares at March 31, 2008 and
December 31, 2007, respectively, at cost (53) (53)
Additional paid-in-capital 96,128 95,925
Accumulated deficit (109,501) (105,734)
Total stockholders' equity (deficit) (13,390) (9,826)
Total liabilities and stockholders'
equity (deficit) $11,502 $10,577

AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY

THREE MONTHS ENDED MARCH 31, 2008 FINANCIAL RESULTS
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(in thousands)

Reconciliation of Net (Loss) Income to Adjusted EBITDA

Three Months Ended March 31,
2008 2007
(unaudited)

Net (loss) income $(3,767) $4,493
Interest income (46) (113)
Other (expense) income, net 85 55
Depreciation 131 50
EBITDA (3,597) 4,485
Stock-based compensation expense 147 682
Adjusted EBITDA $(3,450) $5,167

AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended March 31, 2008 and 2007
(in thousands)

Three Months Ended March 31,
2008 2007
(unaudited)

Cash Flows from Operating Activities:
Net (loss) income $(3,767) $4,493
Adjustments to reconcile net (loss)
income to net cash (used in)
provided by operating activities:
Depreciation 131 50
Stock based compensation for
options issued to consultants
and employees 147 682
Provision for doubtful accounts 10 (3)
Changes in assets and liabilities:
Accounts receivable (195) 62
Inventories (64) 78
Prepaid expenses and other current
assets 11 65
Deferred settlement and patent
licensing costs 318 318
Other assets (2) (2)
Accounts payable (325) (373)
Deferred income from settlement
and patent licensing and other (1,376) (1,375)
Deferred services revenue and
customer deposits (160) (574)
Accrued liabilities and other 450 1,249
Net cash (used in) provided by
operating activities (4,822) 4,670

Cash Flows from Investing Activities:
Maturities of short-term marketable
securities 799 -
Purchase of property and equipment (35) (314)
Net cash provided by (used in)
investing activities 764 (314)

Cash Flows from Financing Activities:
Line of credit payments (1,100) -
Proceeds of debt issuance 7,000 -
Net proceeds from stock option and
stock purchase plans 56 129
Net cash provided by financing activities 5,956 129
Net increase in cash and cash equivalents 1,898 4,485
Cash and cash equivalents, beginning of
year 4,077 7,854
Cash and cash equivalents, end of period $5,975 $12,339

Copyright (C) 2008 Avistar Communications Corporation. All rights
reserved. Avistar, AvistarVOS, and the Avistar logo are trademarks or
registered trademarks of Avistar Communications Corporation
SOURCE Avistar Communications Corporation

Robert J. Habig of Avistar Communications Corporation, +1-650-525-3310,
ir@avistar.com