LNOP Lanoptics Ltd. (MM)

LanOptics Ltd. (NASDAQ: LNOP), a provider of network processors, today announced results for the second quarter ended June 30, 2006. For the three months ended June 30, 2006, LanOptics reported revenues of US$ 1,577,000 versus US$ 2,004,000 in the second quarter of 2005. All of the revenues were attributable to LanOptics' subsidiary, EZchip Technologies. LanOptics incurred an operating loss of US$ 2,256,000, versus an operating loss of US$ 3,880,000 in the second quarter of 2005, which included a one-time in-process research and development write-off, in the amount of $1,475,000. The majority of the expenses that resulted in the operating loss were attributable to EZchip's research and development efforts on future products. The balance of the expenses were related primarily to EZchip's sales and marketing activities. Net loss for the second quarter was US$ 2,342,000, including stock based compensation expenses in the amount of $76,000 which are being reported as of January 1st 2006 pursuant to SFAS 123R, a loss of US$ 0.20 per share, compared to a net loss of US$ 3,701,000, or US$ 0.35 per share, for the same period last year. For the six months ended June 30, 2006, LanOptics reported revenues of US$ 3,012,000, compared with US$ 3,876,000 for the same period last year. All of the revenues were attributable to LanOptics' subsidiary, EZchip Technologies. LanOptics incurred an operating loss for the six months of US$ 4,914,000, versus an operating loss of US$ 5,893,000, which included a one-time in-process research and development write-off, in the amount of $1,475,000 in the same period last year. Net loss for the six months was US$ 5,081,000, including stock based compensation expenses in the amount of $224,000 which are being reported for the first time pursuant to SFAS 123R, or US$ 0.44 per share, compared to a year-earlier loss for the comparable period of US$ 5,797,000, or US$ 0.54 per share. "We are pleased to report that during the second quarter several tier-1 customers completed their system development around EZchip's NP-2 network processor and are ready for production," said Dr. Meir Burstin, Chairman of the Board. "We received initial production orders from them and we expect to ship these orders during the third quarter. We expect that in the third quarter, for the first time, a meaningful portion of our revenues will be NP-2 related. In general, we continue to witness growing demand for the NP-2 product line, mostly for new line cards in next-generation metro Ethernet equipment." "Demand for metro Ethernet equipment, which is the primary target market for our network processors, has grown significantly. According to Infonetics Research, a market research and consulting firm, the worldwide revenues from the sale of metro Ethernet equipment nearly doubled between 2004 and 2005, and are expected to triple again by 2009. We believe the large communication vendors will be the main providers of the metro Ethernet equipment and most of them are now shifting from in-house chip development to network processors to better deal with the quality of service requirements of carrier Ethernet networks. EZchip is becoming a favorite chip choice in this market, which may result in a significant increase in our market share in the future." "Our second quarter revenues reflected sales to only a handful of our NP-1c customers that have products in production. We are still expecting additional NP-1c design wins to mature into more meaningful revenues, but at the same time we are seeing the NP-2 revenues gradually taking over. Our future revenue ramp-up will continue to depend on the success of our customers' new products that incorporate our network processors, on market acceptance of these products, and on the pace of recovery in the telecommunications and related markets." About LanOptics LanOptics is focused on its subsidiary EZchip Technologies, a fabless semiconductor company providing highly integrated 10-Gigabit and 5-Gigabit network processors. EZchip's network processors integrate many functions normally found in separate chips into a single device. Flexibility, integration and high port-count make EZchip's solutions ideal for a wide range of Layer 2-7 applications for the carrier metro and edge, the enterprise backbone and data centers. For more information on EZchip, visit the web site at http://www.ezchip.com For more information on LanOptics, visit the web site at http://www.lanoptics.com "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This release contains forward looking statements that are subject to risks and uncertainties, including, but not limited to, the impact of competitive products, product demand and market acceptance risks, customer order cancellations, reliance on key strategic alliances, fluctuations in operating results, delays in development of highly-complex products and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. These risks could cause the Company's actual results for 2006 and beyond to differ materially from those expressed in any forward looking statements made by, or on behalf of LNOP. -0- *T LanOptics Ltd. Consolidated Statement of Operations (U.S. Dollars in thousands, except per share amounts) Three Months Ended Six Months Ended June 30 June 30 (UnAudited) (UnAudited) 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Revenues 1,577 2,004 3,012 3,876 Cost of Revenues 755 749 1,389 1,488 Amortization of Developed Technology 86 60 172 120 ----------- ----------- ----------- ----------- Gross Profit 736 1,195 1,451 2,268 Research & Development, Net 2,018 2,684 4,277 4,770 In-process Research and Development Write-off -- 1,475 -- 1,475 Selling, General & Administration 974 916 2,088 1,916 ----------- ----------- ----------- ----------- Operating Loss (2,256) (3,880) (4,914) (5,893) Financial Expenses, net (98) (22) (179) (110) ----------- ----------- ----------- ----------- Loss Before Minority Interest (2,354) (3,902) (5,093) (6,003) Minority Interest in Loss of Subsidiaries 12 201 12 206 ----------- ----------- ----------- ----------- Net Loss (2,342) (3,701) (5,081) (5,797) =========== =========== =========== =========== Net Loss per Share (0.20) (0.35) (0.44) (0.54) Weighted Average Number of Shares Used in Computing net Losses per Share 11,650,021 10,714,855 11,642,031 10,670,815 ----------- ----------- ----------- ----------- LanOptics Ltd. Consolidated Balance Sheet (U.S. Dollars in thousands) June 30, December 31, 2006 2005 ------------ ------------ (UnAudited) (Audited) ASSETS CURRENT ASSETS: Cash, Cash Equivalents & Marketable Securities 15,743 19,552 Trade Receivable 1,049 931 Other Receivables 277 300 Inventories 2,126 2,098 ------------ ------------ Total Current Assets 19,195 22,881 LONG-TERM INVESTMENTS: Prepaid Development and Production Costs, Net 336 381 Severance Pay Fund 1,727 1,564 ------------ ------------ Total Long-Term Investments 2,063 1,945 PROPERTY & EQUIPMENT, NET 358 351 Developed Technology, Net 690 861 Goodwill 4,833 4,833 ------------ ------------ TOTAL ASSETS 27,139 30,871 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade Payables 483 338 Other Payables and Accrued Expenses 2,066 1,916 ------------ ------------ Total Current Liabilities 2,549 2,254 LONG TERM LIABILITIES: Accrued Severance Pay 2,234 1,990 Warrants to Redeemable Preferred Shares 248 253 ------------ ------------ Total Long-Term Liabilities 2,482 2,243 PREFERRED SHARES IN A SUBSIDIARY 39,068 38,567 SHAREHOLDERS' DEFICIENCY: Share Capital 75 75 Additional Paid-in Capital 61,477 61,185 Accumulated Other Comprehensive Income/(Loss) (14) (36) Accumulated Deficit (78,498) (73,417) ------------ ------------ Total Shareholders' Deficiency (16,960) (12,193) ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY 27,139 30,871 ============ ============ *T