Entorian Technologies Reports First Quarter 2011 Financial Results

Entorian Technologies Inc. (OTC MARKETS: ENTN.PK), a leader in rugged, mission-critical mobile computing solutions for use in harsh, demanding environments, today announced financial results for the first quarter ended March 31, 2011.

First Quarter Highlights:

• First quarter revenue of $19.4 million
• GAAP gross profit of $2.8 million, or 14.3% of revenue
• GAAP net loss of $0.3 million, or ($0.07) per share
• Non-GAAP net income of $0.6 million, or $0.15 per share (excludes non-cash charges for stock-based compensation of and amortization of acquisition intangibles)
• Cash, cash equivalents and investments of $19.7 million

Management Commentary

"We are pleased with our financial performance this quarter. Our revenue increased and operating expenses declined from the prior quarter as we maintained our focus on controlling costs. Our cash balance continues to grow and now stands at $19.7 million,” stated Stephan Godevais, Entorian’s president and CEO.

First Quarter 2011 Financial Results

Total revenue for the first quarter of 2011 was $19.4 million, including $18.8 million of product revenue associated with the company’s rugged technology solutions and $0.6 million in memory license revenue. This compares to total revenue of $18.0 million in the fourth quarter of 2010, which included $17.3 million of rugged technology product revenue and $0.7 million in memory license revenue.

In accordance with GAAP, gross profit for the first quarter of 2011 was $2.8 million, or 14.3 percent of revenue, compared to $2.3 million, or 13.0 percent, in the previous quarter. On a non-GAAP basis, gross margin was 17.9 percent in the first quarter of 2011, compared to 17.7 percent in the previous quarter.

On a GAAP basis, total operating expenses in the first quarter of 2011 were $3.0 million, compared to $3.3 million in the previous quarter. On a non-GAAP basis, total operating expenses for the first quarter of 2011 were $2.9 million, compared to $3.1 million in the previous quarter.

First quarter GAAP net loss was $0.3 million, or ($0.07) per share, compared to a net loss in the previous quarter of $1.0 million, or ($0.26) per share.

Excluding non-cash charges for stock-based compensation of $0.2 million and amortization of acquisition intangibles totaling $0.7 million, non-GAAP net income for the first quarter was $0.6 million, or $0.15 per diluted share, compared to the non-GAAP net income of $49 thousand, or $0.01 per share, in the previous quarter. As noted above, the historical per share loss amounts have been adjusted to reflect the company’s 1-for-12 reverse stock split on October 30, 2009. A reconciliation of GAAP results to non-GAAP results has been provided in the financial statement tables following the text of this press release.

Cash, cash equivalents and investments on March 31, 2011 were $19.7 million, compared to $19.0 million on December 31, 2010. Inventory as of March 31, 2011 was $9.6 million, compared to $9.0 million in the previous quarter.

Business Outlook

"We are continuing our efforts to grow our core business while identifying opportunities to diversify our products and services. Although our short-term growth could be impacted by federal and state budget reductions, we expect upcoming product launches to increase our market coverage and our long-term growth prospects,” concluded Mr. Godevais.

Cautionary Language

This press release contains forward-looking statements. These statements are generally accompanied by words such as "expect,” "believe,” and similar expressions. These statements include that we expect upcoming product launches to increase our market coverage and our long-term growth prospects. We do not have sufficient backlog to rely upon when forecasting results, so our future performance is very difficult to predict. Our forward-looking statements are based on our current expectations, estimates and assumptions and are subject to many risks, uncertainties and unknown future events that could cause actual results to differ materially. Risks and uncertainties that may cause future results to differ include, but are not limited to, the risk of a change in our relationship with our OEM customer with which we have an exclusive sales and marketing agreement regarding certain ruggedized computer notebook products; a change in the efforts by our OEM customer to sell our rugged computing products; the timing and volume of sales of our products by our OEM customer; a shortage of critical parts, which could negatively impact our ability to fulfill orders; fluctuating demand for, and life cycles of, our products; risks related to product liability and warranty claims in the event our products do not function according to specification or include defective parts; inconsistency in forecasts provided to us by our largest customer, resulting in increased inventory exposure as we build to our customer’s current forecast; operational risks from our reliance on suppliers, subcontractors and third-party manufacturers for the assembly and production of ruggedized products; the risk that broker-dealers may not make a market in our securities; a failure by us to develop new products that are successfully qualified and utilized by customers; our ability to manufacture and ship products within a particular reporting period; the risk that foreign or domestic manufacturers develop products that compete successfully with our own on cost or other functionality; our ability to enforce our intellectual property rights or to defend claims that we infringe the intellectual property rights of others, and the significant costs to us of related litigation; the risk that our average selling prices decline during the period more than we expect because of competitive pressures, substituted products or overall reduced demand for our products; risks associated with budget constraints of federal, state and local governments that could negatively impact sales of our ruggedized products; risks associated with the failure of our ruggedized products to meet military specifications MIL-STD-810; the risks of seasonality, to which we are subject; and the risks associated with our dependence on a few key personnel to manage our business effectively.

For a discussion of these and other factors that could impact our financial results and cause actual results to differ materially from those in the forward-looking statements, please refer to our recent filings with the OTC Markets Group Inc. The foregoing information concerning our business outlook represents our outlook as of the date of this news release, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.

Non-GAAP Financial Measurements

In addition to the GAAP results provided by this document, the company has provided non-GAAP financial measurements that present net income, operating loss, operating expense, gross profit, gross margin and earnings per diluted share on a basis excluding non-cash charges for stock-based compensation and amortization and impairment of acquisition intangibles. Details of these excluded items are presented in one of the tables below, which reconcile the GAAP results to non-GAAP financial measurements described in this press release. Entorian has chosen to provide non-GAAP financial measurements to investors because it believes that excluding certain charges represents a better basis for the comparison of its current results to the results of its peer companies. In addition, the company believes that it provides a means to highlight the results of core ongoing operations to investors. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

About Entorian Technologies

Entorian Technologies Inc. (OTC MARKETS: ENTN.PK) is a leader in rugged, mission-critical mobile and server computing solutions for use in harsh, demanding environments through its subsidiary, Augmentix Corporation. Its Augmentix-produced servers and mobile products combine best-in-class technologies and standardized components from industry leader Dell, with proven ruggedization methods from Augmentix. These rugged systems are environmentally robust and technologically advanced. For more information, go to www.entorian.com and www.augmentix.com.

Entorian is a trademark of Entorian Technologies Inc. and Augmentix is a trademark of Augmentix Corporation.