PNO Path 1 Netwk Tech

SAN DIEGO, May 8 /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 financial results for the three months ended March 31, 2006. First Quarter Results For the first quarter of 2006, the Company reported revenue of $614,000, an increase of 18% compared to the fourth quarter of 2005. The increase in revenue was the result of higher sales of our broadcast long-haul products combined with an increase in service and royalty revenue. On a year over year quarterly basis, revenues declined $250,000 from $864,000 for the same quarter a year ago. Gross profit for the first quarter of 2006 totaled $262,000, or 43% of total revenues, compared to gross profit of $135,000, or 26% in the previous sequential quarter. The increase in gross profit for the first quarter of 2006 was attributable to increased average selling prices of units sold combined with decreased cost of sales attributed to lower material costs and overhead allocation. On a year over year quarterly basis, the Company reported a decrease of $336,000 in gross profit from $598,000 for the same quarter a year ago. Net loss for the first quarter of 2006 was $2.0 million, or $0.27 per share, compared to a net loss of $1.6 million or $0.24 per share for the same period in 2005. Net loss for the first quarter of 2006 included a non-cash stock-based compensation charge of $189,000 equivalent to $0.03 per share related to the adoption of FAS 123 (R) during the quarter. As of March 31, 2006, the Company had cash and cash equivalents of $387,000 and a debt balance of $1,582,000. Commenting on the results, Tom Tullie, Chief Executive Officer of said, "I am pleased that Path 1 is on the right track as evidenced by its second sequential quarter of revenue growth. For the first quarter we grew revenue by 18% over the prior quarter as a result of an increase in sales of our broadcast long-haul products, service and royalty revenue. We are also pleased with the continued activity occurring in the Japanese market. As previously announced we were able to secure our bridge financing which provided $916,000 in working capital. We are continuing to make good progress in meeting our quarterly revenue goals and securing additional financing to support our growth for the remainder of the year. " Conference Call and Webcast Path 1's first quarter of 2006 conference call will be held on Monday, May 8, 2006 at 10:00 a.m. Pacific (1:00 p.m. Eastern). The conference call can be accessed by dialing 1-800-366-7417 (domestic) or 1-303-262-2211 (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 May 15, 2006; the pass code for the replay is 11060452. 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." The forward-looking statements are made as of the date hereof, and Path 1 undertakes no obligation to update such statements. For Further Information: MEDIA: Alice Borda Sterling Communications (408) 395-5500 AT FINANCIAL RELATIONS BOARD: Lasse Glassen General Information (310) 854-8313 Amy Cozamanis Investor/Analyst Information (310) 854-8314 PATH 1 NETWORK TECHNOLOGIES INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) March 31, December 31, 2006 2005 (Preliminary) (Audited) ASSETS Current assets: Cash and cash equivalents $387 $1,636 Accounts receivables, net 217 346 Inventory 480 697 Other current assets 117 86 Total current assets 1,201 2,765 Property and equipment, net 173 244 Issuance costs for mandatorily-redeemable preferred stock and note payable, net 860 764 Other assets 99 110 TOTAL ASSETS $2,333 $3,883 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable and accrued liabilities $908 $1,196 Accrued compensation and benefits 308 317 Deferred revenue 88 144 Current portion of leases payable 1 3 Current portion of notes payable, net 727 727 Total current liabilities 2,032 2,387 Mandatorily-redeemable preferred shares, net 1,582 1,280 Note payable, net 855 873 Total liabilities 4,469 4,540 SHAREHOLDERS' EQUITY (DEFICIT) Common stock, $0.001 par value; 40,000,000 shares authorized; 7,515,294 and 7,410,754 shares issued and outstanding at March 31, 2006 and December 31, 2005, respectively; 2,777 shares held in treasury at March 31, 2006 and December 31, 2005 7 7 Additional paid in capital 55,028 55,553 Deferred compensation -- (1,048) Accumulated deficit (57,171) (55,169) Total shareholders' equity (deficit) (2,136) (657) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $2,333 $3,883 The accompanying notes are an integral part of these consolidated financial statements. PATH 1 NETWORK TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share amounts) (Unaudited) For the three months ended March 31, 2006 2005 REVENUES: (Preliminary) Product revenue $505 $830 License revenue 12 -- Contract revenue -- 16 Royalty revenue 30 -- Services revenue 67 -- Other revenue -- 18 Total revenues 614 864 COST OF REVENUES: Cost of product sales 352 266 Cost of contract services -- -- Total cost of revenues 352 266 GROSS PROFIT 262 598 OPERATING EXPENSES: Engineering research and development 519 940 Sales and marketing 798 808 General and administrative 376 345 Total operating expenses 1,693 2,093 LOSS FROM OPERATIONS (1,431) (1,495) Other income (expense) Interest expense, net (303) (88) Other income (expense) (35) (3) Total other expense (338) (91) LOSS BEFORE INCOME TAXES (1,769) (1,586) Provision for income taxes (1) (1) NET LOSS (1,770) (1,587) Accumulated preferred dividends (232) -- NET LOSS AVAILABLE TO COMMON SHAREHOLDERS $(2,002) $(1,587) NET LOSS PER COMMON SHARE: Basic and Diluted $(0.27) $(0.24) WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic and Diluted 7,455 6,746 The accompanying notes are an integral part of these consolidated financial statements. 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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