PNO Path 1 Netwk Tech

SAN DIEGO, Feb. 17 /PRNewswire-FirstCall/ -- Path 1 Network Technologies (AMEX:PNO), a leading provider of video networking products that enable the transmission of broadcast-quality video over IP networks, today announced its preliminary unaudited financial results for the three and twelve months ended December 31, 2005. Fourth Quarter and Full Year Results For the fourth quarter of 2005, the Company reported revenue of $521,000, an increase of 29% compared to the third quarter of 2005. The increase in revenue was the result of an increase in shipments of the Company's long-haul gateway products. On a year over year quarterly basis revenues declined slightly from $538,000 for the same quarter a year ago. For the twelve months ended December 31, 2005, the Company reported revenue of $2,931,000 compared to revenue of $3,193,000 for the same period a year ago. The decrease in full-year 2005 revenue is primarily the result of reduced sales of the Company's cable products, partially offset by an increase in long haul gateway products. Gross profit for the fourth quarter of 2005 totaled $135,000, or 26% of total revenues, compared to gross profit of $35,000, or 9% in the previous sequential quarter. On a year over year quarterly basis, gross profit decreased by $39,000, or 22% from $174,000 for the same quarter a year ago. Gross profit for the twelve-months ended December 31, 2005 totaled $1,403,000, or 48% of total revenues, compared to gross profit of $994,000, or 31% of total revenues, in the same period a year ago. Gross profit in the fourth quarter of 2005 reflected decreased sales of the Company's long haul products combined with higher sales of lower margin cable products and the impact of a reallocation of corporate expenses that in prior periods were classified as general and administrative expenses. The increase in margin for the full year of 2005 as compared to the full year of 2004 was attributable to an increased mix of higher margin long-haul products and a reduction in cost of sales attributed to reduced material costs. Net loss for the fourth quarter of 2005 was $2,326,000, or $0.32 per share, compared to a net loss of $1,347,000 or $0.20 per share for the same period in 2004. Net loss available for common shareholders for the year ended December 31, 2005 was $9,646,000, or $1.38 per share, compared to a net loss attributable for common shareholders of $7,134,000, or $1.06 per share, for 2004. Net loss for the fourth quarter and full year of 2005 included a non-cash stock-based compensation charge of $231,000 and $1,356,000, respectively. On a non-GAAP basis, excluding the effect of these charges, the Company's net loss for the fourth quarter and full year of 2005 was $2,095,000, or $0.29 per share, and $8,290,000, or $1.19 per share, respectively, compared to a net loss of $1,347,000, or $0.20 per share, and $6,862,000, or $1.02 per share, respectively, for the same periods in 2004. Commenting on the results, Tom Tullie, Chief Executive Officer of said, "I am pleased that Path 1 generated sequential revenue growth of 29% during the fourth quarter as a result of stronger sales of our long-haul gateway products. That said, significant work lies ahead in order for Path 1 to compete successfully in the emerging video over IP equipment market. Since joining the Company late last year, I have dedicated my energies to date to assessing Path 1's strengths along with areas where improvement is required. The Path 1 management team currently is in the process of implementing a plan that I believe will enable the Company to produce sustainable growth to fulfill its potential as an industry leader in a rapidly growing video over IP marketplace. I look forward to sharing with the investment community the progress we make with these efforts in future periods." Conference Call and Webcast Path 1's fourth quarter and full year 2005 conference call will be held on Friday, February 17, 2006 at 1:30 p.m. Pacific (4:30 p.m. Eastern). The conference call can be accessed by dialing 1-800-240-5318 (domestic) or 1-303-262-2125 (international). A listen-only broadcast of the call may be accessed on the Company's website at: http://www.path1.com/. A replay of the call will be available by dialing 1-800-405-2236 (domestic) or 1-303-590-3000 (international) through February 24, 2006; the pass code for the replay is 11054356. About Path 1 Network Technologies Inc. Path 1 Network Technologies Inc. is the pioneer and leading provider of video gateway products that enable the conversion and distribution of real-time, broadcast-quality video over Internet Protocol (IP) through both public and private networks. From the delivery of live MPEG-2, MPEG-4, and VC-1 standard definition and high definition (HD) broadcasts to Video on Demand (VOD), Path 1's video infrastructure platforms allow broadcasters, cable, telco, satellite and mobile operators to transmit high-quality point-to-point, multipoint and multiplexed video across town or around the world. To find out more about Path 1 Network Technologies Inc., visit our website at http://www.path1.com/ or call 877/ONE-PATH (663-7284). This news release contains "forward-looking statements" that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" describe future expectations, plans, results or strategies and are generally preceded by words such as "future," "plan" or "planned," "will" or "should," "expected," "anticipates," "draft," "eventually" or "projected." You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events or results to differ materially from those projected in the forward-looking statements, including the risks that Path 1 may or will require additional financing, that uncertainties inherent in our executive leadership transition might hinder our progress, that our products might not achieve customer or market acceptance, that our products might not perform as expected, that customer trials might not lead to future sales, that our sales and gross profits might fluctuate between reporting periods, and other risks identified in our annual report on Form 10-K and other filings with the SEC. You should consider these factors in evaluating the forward-looking statements included herein and not place undue reliance on such statements. The forward-looking statements are made as of the date hereof, and Path 1 undertakes no obligation to update such statements. This press release includes certain non-GAAP financial measures, including adjusted net income and net income per share amounts, which exclude the stock -based compensation expense. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for measures of financial performance prepared in accordance with GAAP. The company's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the performance of the company's business operations. These measures also facilitate management's internal comparisons to our historical operating results and to our competitors' operating results, operational forecasting and budgeting. Investors and potential investors are encouraged to review the reconciliation of the non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results. MEDIA: AT FINANCIAL RELATIONS BOARD: Alice Borda Lasse Glassen Sterling Communications General Information (408) 395-5500 (310) 854-8313 Amy Cozamanis Investor/Analyst Information (310) 854-8314 PATH 1 NETWORK TECHNOLOGIES INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, December 31, 2005 2004 (Preliminary) ASSETS (Unaudited) (Audited) Current assets: Cash and cash equivalents $1,636 $929 Accounts receivables, net 346 810 Inventory 697 541 Other current assets 86 468 Total current assets 2,765 2,748 Property and equipment, net 244 352 Issuance costs for mandatorily-redeemable preferred stock, net 764 4 Other assets 110 60 Total assets $3,883 $3,164 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable and accrued liabilities $1,196 $752 Accrued compensation and benefits 317 176 Deferred revenue 144 256 Current portion of leases payable 3 21 Current portion of notes payable, net 727 78 Total current liabilities 2,387 1,283 Mandatorily-redeemable preferred shares, net 966 Notes Payable 873 -- Total liabilities 4,226 1,283 Shareholders' equity (deficit): Common stock, $0.001 par value; 40,000,000 shares authorized; 7,410,754 and 6,820,606 shares issued and outstanding at December 31, 2005 and December 31, 2004, respectively; nil and 2,777 shares held in treasury at December 31, 2005 and 2004, respectively 7 7 Additional paid in capital 55,856 48,743 Deferred compensation (1,048) (1,357) Accumulated deficit (55,158) (45,512) Total shareholders' equity (deficit) (343) 1,881 Total liabilities and shareholders' equity (deficit) $3,883 $3,164 PATH 1 NETWORK TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share amounts) (Preliminary, Unaudited) For the three months For the twelve months ended December 31, ended December 31, 2005 2004 2005 2004 Revenues: (Audited) Product revenue $503 $534 $2,855 $3,127 License revenue 6 -- 6 20 Contract revenue -- 16 20 Royalty revenue - 3 6 -- Services revenue 10 -- 33 -- Other revenue 2 1 15 26 Total revenues 521 538 2,931 3,193 Cost of revenues: Cost of product sales 386 364 1,528 2,192 Cost of contract services -- -- -- 7 Total cost of revenues 386 364 1,528 2,199 Gross profit 135 174 1,403 994 Operating expenses: Engineering research and development 734 439 3,846 1,912 Sales and marketing 734 496 3,058 2,739 General and administrative 255 538 1,624 3,082 Stock-based compensation 231 -- 1,356 272 Total operating expenses 1,954 1,473 9,884 8,005 Operating loss (1,819) (1,299) (8,481) (7,011) Other income (expense) Interest expense, net (422) (29) (896) (102) Other income (expense) (3) (19) -- (21) Total other expense (425) (48) (896) (123) Net loss (2,244) (1,347) (9,377) (7,134) Accumulated preferred dividends (82) -- (269) Net loss available to common shareholders $(2,326) $(1,347) $(9,646) $(7,134) Net loss per common share $(0.32) $(0.20) $(1.38) $(1.06) Weighted average shares used in loss per common share calculation 7,212 6,817 6,970 6,738 PATH 1 NETWORK TECHNOLOGIES INC. Reconciliation of GAAP to Non-GAAP Net Loss Available to Common Shareholders (In thousands, except share amounts) (Preliminary, Unaudited) For the three months For the twelve months ended December 31, ended December 31, 2005 2004 2005 2004 GAAP Net Loss available to common shareholders $(2,326) $(1,347) $(9,646) $(7,134) Less: Items charged to Operating Expense Stock-Based Compensation 231 -- 1,356 272 Non-GAAP Net Loss available to common shareholders $(2,095) $(1,347) $(8,290) $(6,862) Net Loss available to common shareholders per common share GAAP $(0.32) $(0.20) $(1.38) $(1.06) Non-GAAP $(0.29) $(0.20) $(1.19) $(1.02) DATASOURCE: Path 1 Network Technologies Inc. CONTACT: Media, Alice Borda of Sterling Communications, +1-408-395-5500, , for Path 1 Network Technologies Inc.; or General Information, Lasse Glassen, +1-310-854-8313, , or Investor/Analyst Information, Amy Cozamanis, +1-310-854-8314, , both of Financial Relations Board, for Path 1 Network Technologies Inc. Web site: http://www.path1.com/

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