Mail Stop 4561
September 19, 2005
Khoa D. Nguyen
Principal Accounting Officer
Ezenia! Inc.
14 Celina Avenue, Suite 17-18
Nashua, New Hampshire 03063
(781) 505-2100
Re: Ezenia! Inc.
Form 10-K/A: For the Year Ended December 31, 2004
Filed April 27, 2005
Form 10-Q: For the Quarterly Period Ended March 31, 2005
Filed May 13, 2005
Form 10-Q: For the Quarterly Period Ended June 30, 2005
Filed August 10, 2005
File No. 000-25882
Dear Mr. Nguyen,
We have limited our review of your filings to those issues
we
have addressed in our comments. Where indicated, we think you
should
revise your document in response to these comments. If you
disagree,
we will consider your explanation as to why our comments are
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K/A for the Year Ended December 31, 2004
Item 8. Financial Statements and Supplementary Data
Notes to the Consolidated Financial Statements
Note 3.Summary of Significant Accounting Polices
Revenue Recognition, page 31
1. Explain to us why you do not account for your software license
sales under SOP 97-2 when, based on your disclosures, you clearly
sell and market software.
2. Tell us how you have determined that your training,
installation
or consulting services are not essential to the functioning of any
other elements in your arrangements. In this regard, presuming
SOP
97-2 should be applied to your software sales, tell us how your
services accounting complies with paragraphs 63-71 of SOP 97-2.
3. Explain the relationship between your customization of
InfoWorkspace software classified as product development revenue
and
the sale of InfoWorkspace software licenses classified within
"product revenue" in your statement of operations. Are any of the
customization services related to product sales classified as
product
revenue? Explain to us and reference the accounting literature
you
are applying to your customization services.
4. Please explain why in each of the last two fiscal years
deferred
revenues at year end have exceeded 50% of your total annual
revenues.
Please tell us what the length of the terms of subscriptions are
and
the related payment terms. For each of your product and service
offerings tell us the point in time that revenue is recognized and
the basis for any revenue deferral.
Third Party Technology, page 31
5. Please explain to us how you are applying paragraphs 8, 10 and
11
of SFAS 86 to your capitalized computer software.
Note 8. Income Taxes, page 37
6. We note that the reconciliation of your effective tax rate
includes a reconciling item described as "adjustment of prior
year"
of $(4,127,000). Tell us more about the nature of this
reconciling
item and how your disclosures comply with paragraph 47 of SFAS No.
109 Tell us what prior periods the adjustment relates to and the
basis for your recognition in fiscal 2004.
Item 9A. Controls and Procedures, page 42
7. We note your statement, in the first paragraph of this section
that "the Company`s chief executive officer and chief financial
officer concluded that the Company`s disclosure controls and
procedures were effective to provide a reasonable level of
assurance..." In addition, we note your statements in the second
paragraph regarding "the inherent limitations in all controls
systems." You should state clearly, if true, that your disclosure
controls and procedures are designed to provide reasonable
assurance
of achieving their objectives. In the alternative, remove the
reference to the level of assurance of your disclosure controls
and
procedures. Please refer to Section II.F.4 of Management`s
Reports
on Internal Control Over Financial Reporting and Certification of
Disclosure in Exchange Act Periodic Reports, SEC Release No. 33-
8238,
available on our website at <http://www.sec.gov/rules/final/33-
8238.htm>.
Forms 10-Q for the Periods Ending March 31 and June 30, 2005
Item 4. Controls and Procedures
8. You state that the Company`s management carried out an
evaluation
of the effectiveness of the Company`s disclosure control and
procedures within the 90 days prior to the date of this report.
Tell
us how the timing of your assessments complies with Item 307 of
Regulation S-K which requires such assessments as of the end of
the
period covered by the report.
* * * * *
As appropriate, please respond to these comments via EDGAR
within 10 business days or tell us when you will provide us with a
response. Please understand that we may have additional comments
after reviewing your response to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comment on your filing.
You may contact Steve Williams at (202) 551-3478 or Tammy
Tangen at (202) 551-3443 if you have any questions regarding our
comments on the financial statements and related matters. Please
contact me at (202) 551-3730 with any other questions.
Sincerely,
Craig Wilson
Senior Assistant Chief
Accountant
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Khoa D. Nguyen
Ezenia! Inc.
September 19, 2005
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