8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

May 9, 2008

Date of Report (Date of earliest event reported)

	Captaris, Inc.
	(Exact Name of Registrant as Specified in Charter)
Washington	0-25186	91-1190085
(State or Other Jurisdiction of Incorporation)	(Commission File No.)	(IRS Employer Identification No.)

301 116th Ave SE, Suite 400 Bellevue, Washington 98004
(Address of principal executive offices)	(Zip Code)

(425) 455-6000

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.Results of Operations and Financial Condition

May 9, 2008 Captaris, Inc. issued a press release announcing its financial results for the first quarter ended March 31, 2008. The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Current Report, including but not limited to Exhibit 99.1, is being furnished and shall not be deemed "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that Section. The information in this Current Report, including but not limited to Exhibit 99.1, shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01.Financial Statements and Exhibits

(d)Exhibits.

Exhibit No.Description

99.1Press Release dated May 9, 2008

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Captaris, Inc.
Dated: May 9, 2008	By:/s/ Peter Papano Peter Papano Chief Financial Officer

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EX-99.1

FOR IMMEDIATE RELEASE

Captaris Reports Q1, 2008 Financial Results

Special Committee of Independent Directors Continues to Evaluate Strategic Alternatives

Bellevue, Wash. — May 9, 2008 — Captaris, Inc. (NASDAQ: CAPA), a leading provider of software products that automate document-centric processes, today reported financial results for its first quarter ended March 31, 2008.

Total revenue for the quarter was $27.9 million, a 36% increase over the prior year’s first quarter. Revenue by category, compared to the first quarter of 2007 was as follows:

·   Software revenue was $8.9 million, an increase of $1.8 million, or 25%

·   Maintenance, support and services revenue was $14.4 million, an increase of $5.0 million or 53%

·   Hardware revenue was $3.7 million, a decrease of $379,000 or 9%

·   Appliance revenue, the FaxPress product line of hardware and embedded software, was $1.0 million

“We transformed our business in the first quarter of 2008,” said David P. Anastasi, President and CEO of Captaris. “The acquisition of CDT, with the expanded international reach and document capture technology it brought to Captaris, marked a major milestone in realizing our strategic vision. In addition, we made several important product announcements and enhanced our customer offerings with our ability to integrate acquired technologies with existing Captaris products.”

“Captaris has a solid set of assets including a large customer base, a worldwide distribution network, a collection of intellectual property rights and a skilled and diverse work force,” continued Mr. Anastasi. “The integration of our acquisitions of Castelle and CDT are on track. We have also initiated cost reductions and will continue to eliminate redundant headcount and programs. We expect these actions will favorably impact our operating expenses in the second quarter and we will continue to look for additional opportunities to run the business more efficiently.”

Gross profit was $18.2 million, an increase of $3.9 million from the first quarter of 2007; gross margin was 65.1%, compared to 69.5% in the same quarter last year. The decline in the gross margin was due to the inclusion of CDT and Castelle, which have lower gross margins than our legacy business. Technology amortization expense recognized in the first quarter of 2008 related to CDT and Castelle was $634,000.

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Total operating expenses for the quarter were $26.9 million, compared to $15.3 million in the prior year’s first quarter. R&D increased $3.2 million, including $2.4 million due to acquisitions and $750,000 for the consolidation and outsourcing of the Company’s software development activities. Sales and marketing increased $3.9 million, including $3.1 million from the acquisitions and $1.1 million for additional sales resources, primarily in International markets, partially offset by a reduction of $273,000 in marketing. G&A increased $1.7 million, including $906,000 for the acquisitions and $695,000 associated with the evaluation of strategic alternatives and related shareholder matters. The operating results also include a $1.2 million charge for acquired in-process development expense associated with the acquisition of CDT. In addition, during the first quarter of 2007 the Company received a final $1.0 million cash payment related to the sale of the CallXpress product line which was recorded as a reduction of operating expenses; no similar payment was received during the first quarter of 2008.

Amortization of intangible assets for the quarter was $1.7 million, including $1.1 million in cost of revenue and $664,000 in operating expenses, compared to $622,000 for the same quarter last year, including $481,000 in cost of revenue and $141,000 in operating expenses. Depreciation was $936,000 in the first quarter of 2008, compared to $726,000 in the first quarter of 2007. Stock based compensation expense was $396,000 in the first quarter of 2008 compared to $195,000 in the first quarter of 2007.

The decrease in other income for the quarter ended March 31, 2008 compared to the same quarter last year was primarily due to less interest income earned as a result of cash used for the acquisition of CDT. Interest expense included $234,000 for CDT’s pension plan and $184,000 for the credit facility. Included in other income for the quarters ended March 31, 2008 and 2007 were gains on foreign currency translation of $474,000 and $125,000, respectively.

The Company reported a net loss for the first quarter of 2008 of $6.6 million, or $0.25 per basic and diluted share, compared to a net loss of $265,000, or $0.01 per basic and diluted share for the first quarter of 2007.

Cash flow from operations was $836,000 million in the first quarter of 2008, compared to $2.1 million in the same quarter last year.

Consolidated cash, cash equivalents and investment balances as of March 31, 2008 totaled $39.9 million, compared to $47.2 million as of December 31, 2007 and $58.9 million as of March 31, 2007. On January 4, 2008 the Company purchased Captaris Document Technologies GmbH (“CDT”) (formerly Océ Document Technologies GmbH) for a net cash payment of $17.9 million.

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Deferred revenue at March 31, 2008 was $31.5 million compared to $28.7 million at December 31, 2007 and $27.8 million as of March 31, 2007.

Stock Repurchase

During the quarter, the Company repurchased 36,000 shares of its outstanding common stock at a cost of $138,000, at an average purchase price of $3.85 per share. On March 31, 2008, approximately 26.4 million shares of common stock were outstanding and $9.5 million was available for share repurchase under the Company's stock repurchase program. Captaris may repurchase shares under its stock repurchase program subject to overall market conditions, stock prices and its cash position and requirements.

Evaluation of Strategic Alternatives

In March, 2008, the company announced that the Board of Directors decided to evaluate strategic alternatives to further enhance shareholder value. To oversee and expedite this process, the Board established a special committee of the Board comprised of independent directors. This evaluation is ongoing and developments will be disclosed as the Board deems appropriate.

Conference Call

The Company will discuss its 2008 first quarter results and business outlook on its regularly scheduled conference call today, May 9^th, at 7:30 a.m. PT (10:30 a.m. ET). The live web cast of the conference call can be accessed from the Captaris Web site at www.captaris.com under About Us -- Investor Relations or by dialing into the call at 1-800-240-7305 and providing the Company name “Captaris.” An audio replay of the conference call can be accessed at 1-800-405-2236. The replay will be available starting two hours after the call and remain in effect until Friday, May 16^th at 11:59 PT. The required pass code is 11113910#.

About Captaris, Inc.

Captaris, Inc. is a leading provider of software products that automate business processes, manage documents electronically and provide efficient information delivery. The products of Captaris and its subsidiaries Castelle and Captaris Document Technologies GmbH, including Captaris RightFax, Captaris Workflow, Captaris Alchemy, the FaxPress line of products, RecoStar, DOKuStar, DOKuStar Capture Suite, Single Click Entry, ID-Star, BUSY, Invoice CENTER, Tax CENTER, and Mail CENTER are distributed through a global network of leading technology partners. We have customers in financial services, healthcare, government and many other industries, and our products are installed in all of the Fortune 100 and many Global 2000 companies. Headquartered in Bellevue, Washington, Captaris was founded in 1982 and is publicly traded on the NASDAQ Global Market under the symbol CAPA. For more information please visitwww.captaris.com.

The following are registered trademarks and trademarks of Captaris: Captaris, Alchemy, RightFax and Captaris Workflow. FaxPress is a trademark of Castelle. RecoStar, DOKuStar, DOKuStar Capture Suite, Single Click Entry, ID-Star, BUSY, Invoice CENTER, Tax CENTER and Mail CENTER are trademarks of Captaris Document Technologies GmbH. All other brand names and trademarks are the property of their respective owners.

Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding the expected impact of our cost reduction actions on our operating expenses in the second quarter. Forward-looking statements include all passages containing verbs such as "aims," "anticipates," "estimates," "expects," "intends," "plans," "predicts," "projects" or "targets" or nouns corresponding to such verbs. Forward-looking statements also include any other passages that are primarily relevant to expected future events or that can only be evaluated by events that will occur in the future. Forward-looking statements are based on the opinions and estimates of the management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could affect Captaris’ actual results include, among others, the impact, if any, of stock-based compensation charges, the potential failure to maintain and expand Captaris’ network of dealers and resellers or to establish and maintain strategic relationships, inability to integrate recent and future acquisitions, including the recent acquisition of Captaris Document Technologies GmbH, inability to develop new products or product enhancements on a timely basis, inability to protect our proprietary rights or to operate without infringing the patents and proprietary rights of others, and quarterly and seasonal fluctuations in operating results. More information about factors that potentially could affect Captaris’ financial results is included in Captaris’ most recent annual report on Form 10-K filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance upon these forward-looking statements that speak only as to the date of this release. Except as required by law, Captaris undertakes no obligation to update any forward-looking or other statements in this press release, whether as a result of new information, future events or otherwise.

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INVESTOR RELATIONS

Captaris, Inc.

Erika Simms

Treasury Analyst

(425) 638-4048

ErikaSimms@Captaris.com

# # #

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Captaris, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(Unaudited)

	March 31,		December 31,
	2008		2007
Assets
Current assets:
Cash and cash equivalents	$	39,851	$	46,182
Restricted cash		—		1,000
Accounts receivable, net		21,647		19,348
Inventories		2,568		1,681
Prepaid expenses and other current assets		2,252		4,564
Income tax receivable and current deferred tax assets, net		3,263		3,527
Total current assets		69,581		76,302
Other long-term assets		1,122		847
Equipment and leasehold improvements, net		10,220		7,735
Intangible assets, net		31,851		11,748
Goodwill		57,181		37,522
Long-term deferred tax assets, net		2,199		5,344
Total assets	$	172,154	$	139,498
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	13,589	$	8,621
Accrued compensation and benefits		6,114		5,528
Other accrued liabilities		3,708		1,706
Income taxes payable		49		327
Deferred revenue		25,791		22,747
Total current liabilities		49,251		38,929
Other long-term accrued liabilities		654		696
Long-term deferred revenue		5,716		5,962
Pension and other long-term employee benefit obligations		19,513		—
Bank loan		9,675		—
Total liabilities		84,809		45,587
Shareholders' equity:
Common stock		264		264
Additional paid-in capital		41,442		40,971
Retained earnings		43,314		49,961
Accumulated other comprehensive income		2,325		2,715
Total shareholders' equity		87,345		93,911
Total liabilities and shareholders' equity	$	172,154	$	139,498

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Captaris, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

	Quarter Ended
	March 31,
	2008			2007
Net revenue	$	27,919		$	20,513
Cost of revenue		9,753			6,258
Gross profit		18,166			14,255
Operating expenses:
Research and development		6,351			3,186
Selling and marketing		12,222			8,278
General and administrative		6,461			4,716
Amortization of intangible assets		664			141
In-process research and development		1,224			—
Gain on sale of discontinued product line CallXpress		—			(1,000	)
Total operating expenses		26,922			15,321
Operating loss		(8,756	)		(1,066	)
Other income (expense):
Interest income		271			575
Interest expense		(440	)		—
Other income, net		474			144
Other income		305			719
Loss from continuing operations before income tax benefit		(8,451	)		(347	)
Income tax benefit		(1,805	)		(84	)
Loss from continuing operations		(6,646	)		(263	)
Discontinued operations:
Loss from sale of MediaTel assets, net of income tax benefit		(1	)		(2	)
Loss from discontinued operations		(1	)		(2	)
Net loss	$	(6,647	)	$	(265	)
Basic and diluted net loss per common share:
Loss from continuing operations	$	(0.25	)	$	(0.01	)
Loss from discontinued operations		(0.00	)		(0.00	)
Net loss	$	(0.25	)	$	(0.01	)
Weighted average basic and diluted common shares		26,406			27,476

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Captaris, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Quarter Ended
	March 31,
	2008			2007
Cash flows from operating activities:
Net loss	$	(6,647	)	$	(265	)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation		936			726
Amortization		1,744			622
Stock-based compensation expense		396			195
Gain on foreign currency revaluation		(525	)		(63	)
Pension and long-term employee benefit expense		458			—
Provision for doubtful accounts		64			49
In-process research and development		1,224			—
(Gain) loss on disposition of assets		29			(46	)
Deferred income tax benefit		(1,717	)		(426	)
Changes in assets and liabilities (net of acquired assets and liabilities):
Accounts receivable		3,180			1,415
Inventories		(346	)		362
Prepaid expenses and other assets		(622	)		(401	)
Accounts payable		2,514			(778	)
Accrued compensation and benefits		(1,538	)		(882	)
Other accrued liabilities		857			(243	)
Income taxes payable		(8	)		(40	)
Pension liability		(43	)		—
Deferred revenue		880			1,914
Net cash flow provided by operating activities		836			2,139
Cash flows from investing activities:
Purchase of equipment and leasehold improvements		(2,590	)		(1,149	)
Purchase of investments		—			(10,171	)
Purchase of Captaris Document Technologies GmbH		(17,926	)		—
Proceeds from disposals of assets		35			55
Proceeds from sales and maturities of investments		4			7,328
Net cash used in investing activities		(20,477	)		(3,937	)
Cash flows from financing activities:
Proceeds from bank loan		9,675			—
Proceeds from release of restricted cash		1,000			—
Proceeds from exercise of common stock options		208			1,009
Repurchase of common stock		(138	)		(2,649	)
Excess tax benefits from stock-based compensation		5			135
Net cash provided by (used in) financing activities		10,750			(1,505	)
Net decrease in cash		(8,891	)		(3,303	)
Effect of exchange rate changes on cash		2,560			(3	)
Cash and cash equivalents at beginning of period		46,182			10,695
Cash and cash equivalents at end of period	$	39,851		$	7,389

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