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Press Release

LANOPTICS ANNOUNCES 2006 SECOND QUARTER RESULTS

 

Yokneam, Israel, August 1, 2006 -- 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.

                     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 & Development
  Write-off                            --      1,475           --      1,475
Selling, General & Admin              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 & Production 
  Costs, net                                     336              381
Severance Pay Fund                             1,727            1,564
                                           -----------     -----------
Total Long-term Investments                    2,063            1,945

Property and 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 & 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

Shareholder's 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 Shareholder's Deficiency                (16,960)        (12,193)

                                           -----------     -----------
Total Liabilities and Shareholder's 
  Deficiency                                   27,139          30,871
                                           ===========     ===========

 

Contact:

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

 

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