Castelle Reports Financial Results for Second Quarter and First Half of Fiscal Year 2006.MORGAN Morgan, American family of financiers and philanthropists. Junius Spencer Morgan, 1813–90, b. West Springfield, Mass., prospered at investment banking. HILL, Calif. -- Castelle(R) (Nasdaq:CSTL CSTL Chemical Science and Technology Laboratory CSTL Clinical Study Team Leader ), a leader in "all-in-one (1) A combination computer printer, scanner, copy machine and fax machine. Some all-in-ones exclude the fax capability or make it an option. (2) A desktop computer that houses every component except the keyboard and mouse inside the same case as the monitor. " network fax solutions for the business and enterprise markets, today announced financial results for the Company's second quarter and six months ended June June: see month. 30, 2006. Revenues for the second quarter of 2006 totaled $2.41 million, down 15% from $2.85 million in the second quarter of 2005. The Company attributed this drop in revenues -- which followed a 15% year-over-year increase in revenues in its first quarter -- largely to inventory-driven volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in orders for Castelle products at the distributor level. For the first six months of 2006, revenues totaled $5.40 million, less than 1% below $5.44 million in the first six months of 2005. The net loss for the second quarter of 2006 was $34,000, or ($0.01) per fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to net income of $316,000, or $0.07 per fully diluted share, in the second quarter of 2005. For the first six months of 2006, net income was $172,000, or $0.04 per fully diluted share, compared to $451,000, or $0.10 per fully diluted share, in the first six months of 2005. The Company also released non-GAAP pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma results excluding certain share-based (non-cash) payment expenses incurred due to the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 123R") effective January January: see month. 1, 2006 (see "Use of Pro Forma Operating Results" below). Excluding the impact of non-cash share-based payment expenses, results showed net income of $49,000, or $0.01 per fully diluted share, and $337,000, or $0.08 per fully diluted share for the three and six months ended June 30, 2006, respectively. No comparable expenses were incurred in the first six months of 2005. Castelle's balance sheet remained strong. As of June 30, 2006, cash and cash equivalents totaled $7.0 million, compared to $7.14 million as of March 31, 2006 and $6.77 million as of December December: see month. 31, 2005. Castelle remains free of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. . "Market acceptance of our innovative 'all-in-one' network fax servers have enabled us to deliver four consecutive years of annual top-line revenue growth," said Scott McDonald Scott Douglas McDonald (born 21 August 1983, Melbourne, Australia) is a professional football (soccer) player who currently plays in Scotland for Celtic as a striker. After a £400,000 bid from Rangers was rejected in January 2007,[1] , President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Castelle. "Demand for our products continues, as evidenced by solid sell through rates at our distribution partners, Ingram Micro Ingram Micro, Inc. NYSE: IM a Fortune 100 company founded in 1979 and based in Santa Ana, California. It is the world’s largest technology distributor and a leading technology sales, marketing and logistics company. and Tech Data. However, as experienced in our first two quarters of 2006, you may see occasional volatility due to fluctuations in distributor inventory levels. Based on our recent annual revenue trends, we believe we are on-track towards achieving our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth strategies." Use of Pro Forma Operating Results The Company's GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). results reflect the adoption of SFAS No. 123R effective January 1, 2006. On a non-GAAP basis, net income, excluding share-based payment expenses, was $49,000 for the second quarter of 2006, compared to reported net income of $316,000 in the second quarter of 2005. For the first six months of 2006, net income, excluding share-based payment expenses, was $337,000, as compared to reported net income of $451,000 for the same period in 2005. Prior to fiscal 2006, Castelle had not reported share-based payment in the determination of its GAAP operating results. Castelle discloses non-GAAP financial measures of net income and net income per share and believes that this non-GAAP information provides historical comparability of its operating results over multiple reporting periods due to the absence of share based payment expenses in comparative prior year periods. These non-GAAP financial measures should not be considered an alternative to earnings and earnings per share presented in conformity with U.S. GAAP. Further, these non-GAAP financial measures are unlikely to be comparable to non-GAAP information provided by other companies. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with SEC regulations, reconciliation of the Castelle statements of earnings to the non-GAAP information is provided in the tables attached to this press release. If you would like to be added to Castelle's investor email list, please contact Karin Karin is a common feminine given name in various Germanic languages (geographically including Germany, Scandinavia, and Holland), Japanese, and in some French-speaking areas. Reak n. 1. A rush. 1. A prank. at kreak@castelle.com. About Castelle Castelle (Nasdaq:CSTL), a market leader in "all-in-one" network fax solutions for business and enterprise, develops office automation systems that allow organizations to easily implement faxing over local area networks and the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . Castelle's network fax servers, FaxPress(TM), FaxPress Premier(TM), and FaxPress Enterprise(TM) provide a simple way to integrate fax with email, desktop and back-end (programming) back-end - Any software performing either the final stage in a process, or a task not apparent to the user. A common usage is in a compiler. A compiler's back-end generates machine language and performs optimisations specific to the machine's architecture. applications. Castelle products are designed to be easy to use and maintain, and provide an economical way for companies to share resources over the network. Castelle was founded in 1987 and is headquartered in Morgan Hill, California Morgan Hill (IPA: /ˈmɔrgɨn ˈhɪl/) is a city located in the southern part of Santa Clara County, California, USA. . Its products are available through a worldwide network of distributors, resellers, and online retailers. Visit Castelle online at www.castelle.com. FaxPress(TM), FaxPress Premier(TM) and FaxPress Enterprise(TM) are trademarks of Castelle. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release may contain forward-looking statements, including but not limited to references to revenue growth, long-term growth strategies, fluctuations in our distributors' inventory levels and our ability to successfully expand our product offerings to penetrate new and current markets. These statements are subject to risks and uncertainties, including but not limited to the impact on our results from fluctuations in demand for our products, our ability to maintain and increase market share, the timely development, acceptance and pricing of our products, the impact on EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. from future non-cash tax provisions or benefits and general economic conditions as they affect our customers. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements as contained in our reports to the Securities and Exchange Commission, including our Forms 10-K and 10-Q. The Company assumes no obligation to update the forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information.
CASTELLE
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended Ended
June June June June
30, 30, 30, 30,
2006 2005 2006 2005
------- ------- ------- ----------
Revenues:
Products $1,607 $2,116 $3,794 $ 4,009
Services 805 730 1,607 1,431
------- ------- ------- ----------
Total net revenues 2,412 2,846 5,401 5,440
Cost of revenues:
Products 643 674 1,434 1,216
Services 276 258 552 528
------- ------- ------- ----------
Total cost of revenues 919 932 1,986 1,744
Gross profit 1,493 1,914 3,415 3,696
Operating expenses:
Research and development 431 418 916 857
Sales and marketing 719 618 1,393 1,216
General and administrative 439 582 1,055 1,217
------- ------- ------- ----------
Total operating expenses 1,589 1,618 3,364 3,290
Operating income/(loss) (96) 296 51 406
Other income, net 62 20 121 45
------- ------- ------- ----------
Net income/(loss) $ (34) $ 316 $ 172 $ 451
======= ======= ======= ==========
Net income/(loss) per common share:
Basic $(0.01) $ 0.08 $ 0.04 $ 0.12
======= ======= ======= ==========
Diluted $(0.01) $ 0.07 $ 0.04 $ 0.10
======= ======= ======= ==========
Shares used in per share
calculation:
Basic 4,023 3,871 4,012 3,843
======= ======= ======= ==========
Diluted 4,023 4,460 4,477 4,463
======= ======= ======= ==========
CASTELLE
Pro Forma Condensed Consolidated Statements of Operations
Excluding 123R Share Based Payment Expenses
(in thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended Ended
June June June June
30, 30, 30, 30,
2006 2005 2006 2005
------- ------- ------- ----------
Revenues:
Products $1,607 $2,116 $3,794 $ 4,009
Services 805 730 1,607 1,431
------- ------- ------- ----------
Total net revenues 2,412 2,846 5,401 5,440
Cost of revenues
Products 643 674 1,434 1,216
Services 270 258 536 528
------- ------- ------- ----------
Total cost of revenues 913 932 1,970 1,744
Gross profit 1,499 1,914 3,431 3,696
Operating expenses:
Research and development 403 418 858 857
Sales and marketing 711 618 1,376 1,216
General and administrative 398 582 981 1,217
------- ------- ------- ----------
Total operating expenses 1,512 1,618 3,215 3,290
Operating income/(loss) (13) 296 216 406
Other income, net 62 20 121 45
------- ------- ------- ----------
Net income $ 49 $ 316 $ 337 $ 451
======= ======= ======= ==========
Net income per common share:
Basic $ 0.01 $ 0.08 $ 0.08 $ 0.12
======= ======= ======= ==========
Diluted $ 0.01 $ 0.07 $ 0.08 $ 0.10
======= ======= ======= ==========
Shares used in per share
calculation:
Basic 4,023 3,871 4,012 3,843
======= ======= ======= ==========
Diluted 4,462 4,460 4,477 4,463
======= ======= ======= ==========
CASTELLE
GAAP To Pro Forma Reconciliation of Statements of Operations
Excluding 123R Share Based Payment Expenses
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2006 June 30, 2006
------------------------ ------------------------
Share Share
based based
payment Pro payment Pro
GAAP expenses forma GAAP expenses forma
------- -------- ------- ------- -------- -------
Revenues:
Products $1,607 $ -- $1,607 $3,794 $ -- $3,794
Services 805 -- 805 1,607 -- 1,607
------- -------- ------- ------- -------- -------
Total net
revenues 2,412 -- 2,412 5,401 -- 5,401
Cost of revenues:
Products 643 -- 643 1,434 -- 1,434
Services 276 (6) 270 552 (16) 536
------- -------- ------- ------- -------- -------
Cost of revenues 919 (6) 913 1,986 (16) 1,970
Gross profit 1,493 6 1,499 3,415 16 3,431
Operating expenses:
Research and
development 431 (28) 403 916 (58) 858
Sales and marketing 719 (8) 711 1,393 (17) 1,376
General and
administrative 439 (41) 398 1,055 (74) 981
------- -------- ------- ------- -------- -------
Total operating
expenses 1,589 (77) 1,512 3,364 (149) 3,215
Operating
income/(loss) (96) 83 (13) 51 165 216
Other income, net 62 -- 62 121 -- 121
------- -------- ------- ------- -------- -------
Net income/(loss) $ (34) $ 83 $ 49 $ 172 $ 165 $ 337
======= ======== ======= ======= ======== =======
Net income/(loss)
per common share:
Basic $(0.01) $ 0.02 $ 0.01 $ 0.04 $ 0.04 $ 0.08
======= ======== ======= ======= ======== =======
Diluted $(0.01) $ 0.02 $ 0.01 $ 0.04 $ 0.04 $ 0.08
======= ======== ======= ======= ======== =======
Shares used in per
share
calculation:
Basic 4,023 4,023 4,012 4,012
======= ======= ======= =======
Diluted 4,023 4,462 4,477 4,477
======= ======= ======= =======
CASTELLE
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(Unaudited)
June December
30, 31,
2006 2005
-------- --------
Assets:
Current Assets:
Cash and cash equivalents $ 7,002 $ 6,766
Accounts Receivable, net 1,008 1,137
Inventories 1,219 1,156
Prepaid Expenses and other current assets 160 135
Deferred Taxes 212 212
-------- --------
Total current assets 9,601 9,406
Property and equipment, net 255 200
Other assets 130 140
Deferred taxes 928 928
-------- --------
Total assets $10,914 $10,674
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 6 $ 14
Accounts payable 252 286
Accrued liabilities 545 824
Deferred revenue 1,669 1,498
-------- --------
Total current liabilities 2,472 2,622
Long-term debt -- --
------- -------
Total liabilities 2,472 2,622
Shareholders' equity 8,442 8,052
-------- --------
Total liabilities and shareholders' equity $10,914 $10,674
======== ========
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