ViryaNet Reports Results of Its Third Fiscal Quarter of 2005; Revenue Results Reflect Sequential Quarter and Year-Over-Year Growth

SOUTHBOROUGH, MA - January 27, 2006 - ViryaNet (NasdaqSC: VRYA), a leading provider of integrated mobile and Web-based software applications for workforce management and field service delivery, today announced financial results of its third fiscal quarter of 2005.

Total revenues were $4.0M for the third quarter, ended September 30, 2005, a 41% increase from $2.8M recorded for the third quarter of 2004, and a 17% increase from $3.4M recorded for the second quarter of 2005. For the first nine months of 2005, total revenues were $11.1M, a 13% increase from the $9.8M of revenue recorded for the comparable period in 2004.

For the third quarter of 2005, the Company reported a net loss of $2.0M, or $0.30 per basic and diluted share, compared to a net loss of $1.4M or $0.28 per basic and diluted share for the third quarter of 2004, and compared to a net loss of $1.4M, or $0.23 per basic and diluted share for the second quarter of 2005. The net loss for the first nine months of 2005 was $4.5M, or $0.73 per basic and diluted share, compared to a net loss of $1.9M, or $0.41 per basic and diluted share for the comparable period in 2004. The net loss for the third quarter of 2005 included a one-time non-cash finance expense of $0.8M related to the accounting for a modification to the terms of an existing convertible note that occurred during the third quarter. During the third quarter, the Company took actions to reduce headcount by 10 positions as part of an ongoing cost reduction program. The full cost savings from these and other actions will be realized in future periods.

Professional services revenues grew 81% to $3.9M for the third quarter of 2005, compared to $2.2M for the third quarter of 2004, and grew 16% from $3.4M for the second quarter of 2005.

The Company reported a gross profit of $1.6M for the third quarter of 2005, or a gross margin of 40%, compared to a gross profit of $0.9M, or a gross margin of 34% in the third quarter of 2004, and compared to a gross profit of $1.4M, or a gross margin of 41% in the second quarter of 2005.

Operating expenses for the third quarter of 2005 were $2.7M, compared to $2.3M for the third quarter of 2004, and compared to $2.7M for the second quarter of 2005.

The Company's cash position on September 30, 2005 was approximately $1.9M, unchanged from the period ending June 30, 2005. The Company's short-term and long-term bank debt position on September 30, 2005 was $1.8M, compared to $2.6M on June 30, 2005. The Days of Sales Outstanding (DSO) for the Company in the third quarter of 2005 was 40 days, compared to 43 days in the second quarter of 2005.

"ViryaNet realized growth in overall revenue for the third quarter of 2005, reflecting sequential quarter and year-over-year improvement," stated Samuel HaCohen, Executive Chairman of the Board, ViryaNet. "Professional services revenue grew significantly and reflected a substantial portion of the mix, but new license bookings were less than expected due to delays in several of our prospects' decision making process. However, our sales pipeline is robust, and we expect that our bookings will increase in future quarters."

The Company also recently announced changes to its management team. Industry veteran Memy Ish-Shalom, who served most recently as CEO, Wadago, Ltd., has been appointed to the position of President and CEO, ViryaNet. Paul V. Brooks, former President and CEO, has resigned for personal reasons. Jeff Oskin, former VP, International Sales, ViryaNet, has been promoted to the position of ViryaNet's COO.

About ViryaNet

ViryaNet is a provider of software applications that improve the quality and efficiency of an organization's service operations. ViryaNet's flagship product - ViryaNet Service Hub - combines the power of the Internet, the freedom of wireless technologies, and the resources of ViryaNet's deep service expertise to help companies improve workforce scheduling, dispatching, and activity reporting; customer contract and entitlement automation; and asset, logistics and repairs management.

Customers in the utility, telecommunications, grocery and retail, and other service industries use ViryaNet Service Hub to transition complex service business processes into a manageable, scalable Internet operation, with the goal of increasing service revenues, decreasing service costs, and maximizing customer satisfaction. Visit ViryaNet at www.viryanet.com.

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, including statements regarding ViryaNet's expectations, beliefs, intentions, or strategies regarding the capabilities of its products, its relationships with its customers, its customer purchases, its future operational plans and objectives including integration of other businesses, its future business prospects, its future financial performance, its future cash position, and its future prospects for profitability. All forward-looking statements included in this document are based upon information available to ViryaNet Ltd. as of the date hereof, and ViryaNet Ltd. assumes no obligation to update any such forward-looking statements. Forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those projected. These and other risks relating to ViryaNet's business include market acceptance of and demand for the Company's products, risks associated with a slow-down in the economy, risks associated with the financial condition of the company's customers, risks associated with competition and competitive pricing pressures, risks associated with increases in costs and operating expenses, risks in technology development and commercialization, the risk of operating losses, risks in product development, risks associated with international sales, and other risks that are set forth in ViryaNet's Form 20-F, dated July 15, 2005, and the other reports filed from time to time with the Securities and Exchange Commission. Reported results should not be considered an indication of future performance. You should not place undue reliance on these forward-looking statements, which speak only as the date hereof. ViryaNet disclaims any obligation to publicly update or revise any such forward-looking statements to reflect any change in our expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

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