Path 1 Network Technologies Announces Third Quarter 2005 Financial Results

SAN DIEGO, Nov. 14  /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 and nine months ended September 30, 2005.

Three and Nine Month Results

For the third quarter of 2005, the Company reported revenue of $404,000 compared to revenue of $756,000 for the same quarter a year ago.  For the nine months ended September 30, 2005, the Company reported revenue of $2,409,000 compared to revenue of $2,654,000 for the same period a year ago.  The third quarter revenue in 2005 was impacted heavily by decreased sales of long haul products compared to the same period in 2004, partially offset by increased revenue from cable products.

Gross profit for the third quarter of 2005 totaled $35,000, or 9% of total revenues, compared to gross profit of $516,000, or 68% of total revenues, in the same quarter a year ago.   Gross profit for the nine-months ended September 30, 2005 totaled $1,267,000, or 53% of total revenues, compared to gross profit of $819,000, or 31% of total revenues, in the same period a year ago.  Gross profit in the third quarter ended September 30, 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 first nine months of 2005 as compared to the same period in 2004, was attributable to sales of the Company's long haul products, including the Company's new Vx8000 gateway.

Net loss for the third quarter of 2005 was $3,104,000, or $0.45 per share, compared to a net loss of $1,006,000 or $0.15 per share for the same period in 2004.  Net loss for the nine-months ended September 30, 2005 was $7,320,000, or $1.06 per share, compared to a net loss of $5,787,000, or $0.86 per share, for the same period in 2004.  Net loss for the third quarter and first nine months of 2005 included a non-cash stock-based compensation charge of $234,000 and $1,126,000, respectively. On a non-GAAP basis, excluding the effect of these charges, the Company's net loss for the third quarter and first nine months of 2005 was $2,870,000, or $0.41 per share, and $6,194,000, or $0.90 per share, respectively, compared to a net loss of $1,006,000, or $0.15 per share, and $5,515,000, or $0.82 per share, respectively, for the same periods in 2004.

Conference Call and Webcast

As previously announced, Path 1's third quarter 2005 conference call will be held on Monday, November 14, 2005 at 4:30 p.m. Pacific (7:30 p.m. Eastern). The conference call can be accessed by dialing 1-800-218-0530 (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 November 21, 2005; the pass code for the replay is 11044535.

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.

  For Further Information:

  MEDIA:
  Alice Borda
  Sterling Communications
  [phone]
  

  AT FINANCIAL RELATIONS BOARD:
  Lasse Glassen
  General Information
  [phone]
  

  Amy Cozamanis
  Investor/Analyst Information
  [phone]
  



                       PATH 1 NETWORK TECHNOLOGIES INC.
                         CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share data)

                                                 September 30, December 31,
                                                     2005          2004
                                                  (Unaudited)
                            ASSETS
  Current assets:
    Cash and cash equivalents                       $1,362           $929
    Accounts receivables, net                          704            810
    Inventory                                          536            541
    Other current assets                               186            469
      Total current assets                           2,788          2,749

  Property and equipment, net                          284            352
  Issuance costs for mandatorily-redeemable
   preferred stock, net                                500              4
  Other assets                                         121             59
      Total assets                                  $3,693         $3,164

              LIABILITIES AND SHAREHOLDERS' EQUITY

  Current liabilities:
    Accounts payable and accrued liabilities        $1,261           $752
    Accrued compensation and benefits                  412            176
    Deferred revenue                                   179            256
    Current portion of leases payable                    6             21
    Current portion of notes payable, net               --             78
      Total current liabilities                      1,858          1,283

  Mandatorily-redeemable preferred shares,
   net (note 11)                                     2,297             --
      Total liabilities                              4,155          1,283

  Shareholders' equity (deficit):
    Common stock, $0.001 par value; 40,000,000
     shares authorized; 6,956,604 and 6,820,606
     shares issued and outstanding at
     September 30, 2005 and December 31, 2004,
     respectively; 2,777 shares held in
     treasury at September 30, 2005, and
     December 31, 2004                                   7              7
    Additional paid in capital                      52,708         48,743
    Deferred compensation                             (346)        (1,357)
    Accumulated deficit                            (52,830)       (45,512)
      Total shareholders' equity (deficit)            (462)         1,881

      Total liabilities and shareholders'
       equity (deficit)                             $3,693         $3,164



                       PATH 1 NETWORK TECHNOLOGIES INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except share amounts)
                                 (Unaudited)

                                     For the               For the
                                three months ended     nine months ended
                                   September 30,         September 30,
                                  2005      2004       2005       2004
  Revenues:
    Product revenue               $384      $734      $2,352     $2,593
    License revenue                 --        --          --         20
    Contract revenue                --        20          16         21
    Royalty revenue                 --        --           6         --
    Services revenue                20        --          22         --
    Other revenue                   --         2          13         20
  Total revenues                   404       756       2,409      2,654

  Cost of revenues:
    Cost of product sales          369       233       1,142      1,828
    Cost of contract services       --         7          --          7
  Total cost of revenues           369       240       1,142      1,835

  Gross profit                      35       516       1,267        819

  Operating expenses:
    Engineering research
     and development             1,106       466       3,112      1,472
    Sales and marketing            880       398       2,324      2,242
    General and administrative     615       636       1,369      2,545
    Stock-based compensation       234        --       1,126        272
  Total operating expenses       2,835     1,500       7,931      6,531

  Operating loss                (2,800)     (984)     (6,664)    (5,712)

  Other income (expense)
    Interest expense, net         (217)      (22)       (471)       (72)
    Other income (expense)           7        --           3         (3)
  Total other expense             (210)      (22)       (468)       (75)

  Net loss                      (3,010)   (1,006)     (7,132)    (5,787)

  Accumulated preferred
   dividends                       (94)       --        (188)        --
  Net loss available to
   common shareholders         $(3,104)  $(1,006)    $(7,320)   $(5,787)

  Net loss per common share     $(0.45)   $(0.15)     $(1.06)    $(0.86)

  Weighted average shares
   used in loss per common
   share calculation             6,941     6,764       6,890      6,711



                       PATH 1 NETWORK TECHNOLOGIES INC.
                 Reconciliation of GAAP to Non-GAAP Net Loss
                     (In thousands, except share amounts)
                                 (Unaudited)

                                   For the                For the
                              three months ended     nine months ended
                                 September 30,          September 30,
                                2005      2004        2005       2004

  GAAP Net Loss                $(3,104)  $(1,006)    $(7,320)   $(5,787)
  Less: Items charged to
   Operating Expense
  Stock-Based Compensation         234        --       1,126        272
  Non-GAAP Net Loss            $(2,870)  $(1,006)    $(6,194)   $(5,515)

  Net Loss per common share
    GAAP                        $(0.45)   $(0.15)     $(1.06)    $(0.86)
    Non-GAAP                    $(0.41)   $(0.15)     $(0.90)    $(0.82)


DATASOURCE: Path 1 Network Technologies



CONTACT:  Alice Borda of Sterling Communications, [phone],

, for Path 1 Network Technologies Inc.; or Lasse Glassen,

General Information, [phone], , or

Amy Cozamanis, Investor/Analyst Information, [phone],

, both of Financial Relations Board, for

Path 1 Network Technologies Inc. 



Web site:  http://www.path1.com/ 

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