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Xten Reports First Quarter 2006 Financial Results

Santa Clara, CA — September 14, 2005 —

Xten Networks, Inc. (OTCBB: XNWK), a provider of VoIP (Voice over Internet Protocol), Video over IP, Instant Messaging (IM), and Presence SIP softphones, today announced results for its first quarter ended July 31, 2005.

Total revenues for Quarter ended July 31, 2005 were $827,296 compared to $487,151 FY05-Q1, an increase of 70%. This compared to $1,029,754 for FY05-Q4, a 20% decrease. In addition, unearned revenue for FY06-Q1 increased to $216,400 a 226% increase over the prior quarter. Taken together, earned and unearned revenue totaled $1,043,696 a slight decrease over the prior quarter.

"As our deliberate change to our business model takes hold and as we better partner with our current and future customers to assist in developing their Voice over IP offerings, we expect to see positive revenue momentum from these per seat licensing agreements," stated Mark Bruk, Chairman and CEO. "Shifting the emphasis away from one time revenue to licensing or royalty revenue takes significant focus, as up front revenue is impacted and offset by the ramp up of licensing and royalty revenue." *

Financial Highlights for the First Quarter 2005 (FY06 Q1 vs. FY05 Q1)

 


Financial Highlights for the First Quarter 2005 (FY06 Q1 vs. FY05 Q4)

 


"We knew that the first quarter of this year was going to be impacted by the significant changes that we have undergone in the company," stated Mark Bruk. "After scrubbing our customer funnel of opportunities that did not fit the new business model in these past two quarters, we have rebuilt the funnel and I am personally pleased with the results we have achieved to date."

As a company Xten will commit its efforts to the following four key building blocks:

 


The Company's Quarterly Report on Form 10-QSB including consolidated balance sheet and statement of operations for the quarter ended July 31, 2005 was filed and is available for viewing at www.sec.gov.

About Xten Networks, Inc.

Xten Networks is a developer of award-winning, high-quality, carrier- grade VoIP (Voice over IP) and Video over IP SIP softphones for service providers, cable operators, Internet telephony service providers, IP PBX manufacturers and OEMs. Xten's SIP softphones are available either pre-configured or as a software development kit (SDK), and provide VoIP (Voice over IP), Video over IP, IM (Instant Messaging), and Presence functionality. eyeBeam - Xten's feature-rich SIP Video over IP softphone with IM and Presence - recently received both Communications Solutions' Magazine's and INTERNET TELEPHONY® Magazine's "Product of the Year" Award for 2004. Xten's Pocket PC SIP Softphone was recently named a 2005 Innovation Award winner from INTERNET TELEPHONY® magazine. With over 120 customers in more than 30 countries, Xten technology is deployed in more than 5,400,000 IP endpoints worldwide. For more information please visit www.xten.com..

Legal Note on Forward-Looking Statements

Statements in this news release, which are not purely historical, are forward-looking statements, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Forward-looking statements in this news release are marked by an asterisk (*) and include statements regarding management's belief that: Xten expects to see positive revenue momentum from per seat licensing agreements with current and future customers. It is important to note that actual outcomes and Xten's actual results could differ materially from those in such forward-looking statements. Factors that could cause actual results to differ materially include risks and uncertainties such as Xten's ability to remain competitive as other parties develop and release competitive products, Xten's ability to retain the employees necessary to continue research and development of Xten's software products, the success by Xten of the sales of its products, the impact of competitive products on the sales of Xten's products, the impact of technology changes on Xten's software products and on the VoIP industry, the compatibility of Xten's software products with new computer operating systems, the rate of adoption by service providers and the general public of VoIP as a replacement for regular and cellular phone service, general economic conditions as they affect Xten's prospective customers, the ability of Xten 's to control costs operating, general administrative and other expenses, and insufficient investor interest in Xten's securities which may impact on Xten's ability to raise additional financing as required. Readers should also refer to the risk disclosures outlined in Xten's quarterly reports on Form 10- QSB, annual reports on Form 10-KSB and Xten's other disclosure documents filed from time-to-time with the Securities and Exchange Commission.