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Press Release

LANOPTICS ANNOUNCES 2005 FOURTH QUARTER AND YEAR END RESULTS

 

Yokneam, Israel, February 22, 2006 -- LanOptics Ltd. (NASDAQ: LNOP), a provider of network processors, today announced results for the fourth quarter and year ended December 31, 2005.

 

For the three months ended December 31, 2005, LanOptics reported revenues of US$1,285,000 versus US$1,721,000 in the fourth quarter of 2004. All of the revenues were attributable to LanOptics’ subsidiary, EZchip Technologies. LanOptics incurred an operating loss of US$1,829,000, versus an operating loss of US$2,224,000 in the fourth quarter of 2004. 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 fourth quarter was US$2,036,000, including the cumulative effect of a change in accounting principles in the amount of US$115,000, a loss of US$0.18 per share, compared to a net loss of US$2,378,000, or US$0.24 per share, for the same period last year.

 

For the twelve months ended December 31, 2005, LanOptics reported revenues of US$5,848,000, compared with US$4,746,000 for the same period last year. All of the revenues were attributable to EZchip Technologies. LanOptics incurred an operating loss for the twelve months of US$10,126,000, which included a US$1,475,000 one-time in-process research and development write-off required by generally accepted accounting principles in the United States in connection with the June 2005 share exchange, versus an operating loss of US$8,416,000 in the same period last year. Net loss for the twelve months was US$10,347,000, including the cumulative effect of a change in accounting principles in the amount of US$115,000, or US$0.93 per share, compared to a year-earlier loss for the comparable period of US$9,154,000, or US$0.98 per share.

 

“During 2005, we saw growing demand for NP-2, which manifested itself in over 40 design wins with customers that develop a variety of products based on that network processor,” said Dr. Meir Burstin, Chairman of the Board. “Unlike our NP-1c network processor, which is targeted at service cards, NP-2 will be used in line cards. This means multiple chips (10 or more) per communication box and consequently higher revenues. Many of our customers are first-tier, global communication companies from all continents. Our customer’s feedback regarding their future needs strongly affects our product roadmap and future development plans, and assures that the products we are brining to the market are the products that our customers need.

 

“2005 revenues showed growth compared with 2004, but still reflect only a handful of our 15 NP-1c customers that are already in production. An additional 20 NP-1c customers are still in their design phase and we expect most of them to enter production during 2006. Our NP-2 customers have not yet contributed to revenues and we expect the first NP-2 customers to enter production during the second half of 2006. Our chips go into communication equipment that average about two years from design win to product, and volume orders can be expected only after the customer’s equipment enters production. Consequently, we have not yet realized the potential of our design wins and we expect that our quarterly revenues will continue to fluctuate. 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. F or 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.

                           LanOptics Ltd.
                    Consolidated Statement of Operations
                   (U.S. Dollars in thousands, except share and per share amounts)

                                    Three Months Ended       Twelve Months Ended
                                        December 31              December 31
                                         Unaudited         Unaudited     Audited
                                     2005        2004         2005         2004

Revenues                              1,285      1,721        5,848        4,746
Cost of Revenues                        569        734        2,350        1,890
Amortization of Developed 
  Technology                             86         60          291          240
                                 ----------   ---------    ---------   ---------
Gross Profit                            630        927        3,207        2,616

Research & Development                1,631      2,089        8,215        7,267
In-process Research & 
  Development Write-off                  --         --        1,475           --
  General & Admin.                      828       1,062       3,643        3,765
                                 ----------   ---------    ---------   --------- 
                              
Operating Loss                       (1,829)     (2,224)    (10,126)      (8,416)

Financial and Other Income
  (Expenses), net                       (92)       (154)       (312)        (738)
                                 -----------   ---------    ---------   ---------
Loss Before Minority Interest        (1,921)     (2,378)    (10,438)      (9,154)
Minority Interest in Loss of
  Subsidiaries                           --          --         206           --   
                                 -----------   ---------    ---------   ---------
Net Loss                             (1,921)     (2,378)    (10,232)      (9,154)     
                                 ===========   =========    =========   =========

Cumulative Effect of Change 
  in Accounting Principle              (115)         --        (115)          --
                                 -----------   ---------    ---------   ---------
Net Loss after Cumulative Effect
  of Change in Accounting Principle  (2,036)    (2,378)     (10,347)      (9,154)
                                 ===========   =========    =========   =========

Net Loss per Share                    (0.17)     (0.24)       (0.92)       (0.98)
Net Loss per Share after 
  Cumulative Effect of Change 
  in Accounting Principle             (0.18)     (0.24)       (0.93)       (0.98)

Weighted Average Number of Shares  
  Used in Computing Net Losses
  per Share                       11,633,771   9,709,118   11,156,250   9,365,181 
                                 -----------   ---------    ---------   ---------                            
                                  
                                LanOptics Ltd.
                          Consolidated Balance Sheet
                              (U.S. Dollars in thousands)

                                      December 31, 2005  December 31, 2004
                                             Unaudited         Audited
ASSETS
Current Assets:
Cash, Cash Equivalents & 
  Marketable Securities                       19,552           25,619
Trade Receivable                                 931              781
Other Receivables                                300              703
Inventories                                    2,098            1,279
                                           -----------     -----------
Total Current Assets                           22,881          28,382

Long-term Investments:
Prepaid Development & Production Costs, net      381              476
Severance Pay Fund                             1,564            1,489
                                          -----------     -----------
Total Long-term Investments                    1,945            1,965

Property and Equipment, net                      351              384 

Goodwill                                       4,833               --
Intangible Assets, net                           861              634
                                          -----------     -----------
Total Assets                                  30,871           31,365
                                          ===========     ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade Payables                                   338              856
Other Payables & Accrued Expenses              1,916            2,478
                                          -----------     -----------
Total Current Liabilities                      2,254            3,334

Long-term Liabilities:
Accrued Severance Pay                          1,990            1,985
Warrants to Redeemable Preferred Shares          253               --
                                           -----------     -----------
Total Long-term Liabilities                    2,243            1,985
 
Preferred Shares in a Subsidiary              38,567           35,937

Shareholder's Deficiency:
Share Capital                                     75               70
Additional Paid -in Capital                   61,185           53,193
Accumulated Other Comprehensive Income/
  (loss)                                         (36)             (84)
Accumulated Deficit                          (73,417)         (63,070)
                                           -----------     -----------
Total Shareholder's Deficiency               (12,193)          (9,891)
                                           -----------     -----------

Total Liabilities and Shareholder's 
  Deficiency                                  30,871           31,365
                                           ===========     ===========

Contact:

Dror Israel, CFO, LanOptics Ltd. Israel, +972-4-959-6666, E.Mail:

 

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