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Press Release

LANOPTICS ANNOUNCES 2006 FIRST QUARTER RESULTS

 

Yokneam, Israel, May 4, 2006 -- LanOptics Ltd. (NASDAQ: LNOP), a provider of network processors, today announced results for the first quarter ended March 31, 2006.

 

For the three months ended March 31, 2006, LanOptics reported revenues of US$1,435,000 versus US$1,873,000 in the first quarter of 2005 and US$1,285,000 in the preceding quarter ended December 31, 2005. All of the revenues were attributable to LanOptics’ subsidiary, EZchip Technologies. LanOptics incurred an operating loss of US$2,658,000, versus an operating loss of US$2,013,000 in the first quarter of 2005 and US$1,829,000 in the preceding quarter ended December 31, 2005. 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 first quarter was US$2,739,000, including stock based compensation expenses in the amount of US$148,000 which are being reported for the first time pursuant to SFAS 123R, a loss of US$0.24 per share, compared to a net loss of US$2,096,000, or US$0.20 per share, for the same period last year and US$2,036,000 or US$0.18 per share in the preceding quarter ended December 31, 2005.

 

“We are pleased to report that the NP-2, our third-generation network processor, has completed all required qualifications and testing and was officially released for commercial production. NP-2 is the only announced 10-Gigabit full duplex network processor with integrated traffic managers,” said Dr. Meir Burstin, Chairman of the Board. “We continue to witness growing demand for the NP-2 product line, mostly for new line cards in next-generation carrier metro equipment. We have over 50 NP-2 design wins to date, the first of which are expected to enter production during the second half of 2006.

 

“In recent months, we are receiving strong validation for our strategic focus on network processors (NPUs) that are becoming a key part in carrier Ethernet line cards. Deployment of metro Ethernet systems is growing and we see strong demand from Tier-1 customers to build such systems with network processors to enable the support of triple play services. The NP-2 was specifically designed to enable such services and we are now observing major business opportunities that may result in a significant increase in our market share in the future.

 

“Our current revenues continue to reflect sales to only a handful of our NP-1c customers that have products in production. Accordingly we have not yet realized the potential from all of our NP-1c design wins, which we expect will gradually mature into more meaningful revenues over the next couple of years. We currently have 35 NP-1c design wins in total, of which approximately half are already in their early-stages of production. 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.

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

                                             Three Months Ended March 31,
                                                 2006            2005
                                                      (Unaudited)
Revenues                                       $1,435          $1,873
Cost of Revenues                                  634             739
Amortization of Developed Technology               86              60
                                          -----------     -----------
Gross Profit                                      715           1,074

Research & Development, net                     2,260           2,086
Selling, General & Administration               1,113           1,001
                                           -----------     -----------
Operating Loss                                 (2,658)         (2,013)

Financial and Other Expenses, Net                 (81)            (83)
                                           -----------     -----------
Net Loss                                       (2,739)         (2,096)
                                           ===========     ===========

Net Loss Per Share                              (0.24)          (0.20)

Weighted Average Number of Shares Used 
   in Computing Net Loss Per Share          11,633,952      10,626,285
                                          ------------    ------------

                           
                                  LanOptics Ltd.
                        Consolidated Balance Sheet
                              (US dollars in thousands)

                                             March 31,      December 31, 
                                               2006             2005
                                           (Unaudited)       (Audited)
ASSETS
Current Assets:
Cash, Cash Equivalents & Marketable
  Securities                                  $17,616         $19,552
Trade Receivable                                1,049             931
Other Receivables                                 508             300
Inventories                                     2,385           2,098
                                           -----------     -----------
Total Current Assets                           21,558          22,881
Long-term Investments:
Prepaid Development & Production Costs, Net       366             381
Severance Pay Fund                              1,612           1,564
                                           -----------     -----------
Total Long-term Investments                     1,978           1,945

Property and Equipment, Net                       316             351

Developed Technology, Net                         776             861
Goodwill                                        4,833           4,833
                                           -----------     -----------
TOTAL ASSETS                                  $29,461         $30,871
                                           ===========     ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade Payables                                   $919            $338
Other Payables & Accrued Expenses               2,134           1,916
                                           -----------     -----------
Total Current Liabilities                       3,053           2,254

Long-term Liabilities:
Accrued Severance Pay                           2,112           1,990
Warrants to Redeemable Preferred Shares           252             253
                                           -----------     -----------
Total Long-Term Liabilities                     2,364           2,243

Preferred Shares in a Subsidiary               38,817          38,567

Shareholders' Deficiency:
Share Capital                                      75              75
Additional Paid-in Capital                     61,333          61,185
Accumulated Other Comprehensive 
  Income/(Loss)                                   (26)            (36)
Accumulated Deficit                           (76,155)        (73,417)
                                           -----------     -----------
Total Shareholder's Deficiency                (14,773)        (12,193)
                                           -----------     -----------
Total Liabilities & Shareholder's 
Deficiency                                    $29,461         $30,871
                                           ===========     ===========

Contact:

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

 

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