Entorian Technologies Reports Second Quarter 2011 Financial Results

Entorian Technologies Inc. (OTC MARKETS: ENTN), a leader in rugged, mission-critical mobile computing solutions for use in harsh, demanding environments, today announced financial results for the second quarter ended June 30, 2011.

Second Quarter Highlights:

• Second quarter revenue of $17.0 million
• GAAP net loss of $0.8 million, or ($0.21) per share
• Non-GAAP net income of $21,000, or $0.01 per share (excludes non-cash charges for stock-based compensation and amortization of acquisition intangibles)
• Cash and cash equivalents of $17.6 million

Management Commentary

"During the second quarter, our leading OEM customer launched its next-generation, fully rugged notebook. It is based on our new, differentiated rugged computing technologies, which enhance protection from drops, rain, dust, dirt, spills and temperature extremes. The initial end customer feedback on the product has been strong,” stated Stephan Godevais, Entorian’s president and CEO.

Second Quarter 2011 Financial Results

Total revenue for the second quarter of 2011 was $17.0 million, including $16.4 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 $19.4 million in the first quarter of 2011, which included $18.8 million of rugged technology product revenue and $0.6 million in memory license revenue.

In accordance with GAAP, gross profit for the second quarter of 2011 was $1.7 million, or 9.8 percent of revenue, compared to $2.8 million, or 14.3 percent, in the previous quarter. On a non-GAAP basis, gross margin was 13.7 percent in the second quarter of 2011, compared to 17.9 percent in the previous quarter.

On a GAAP basis, total operating expenses in the second quarter of 2011 were $2.6 million, compared to $3.0 million in the previous quarter. On a non-GAAP basis, excluding approximately $0.2 million in stock-based compensation expense, total operating expenses for the second quarter of 2011 were $2.4 million, compared to $2.9 million in the previous quarter.

Second quarter GAAP net loss was $0.8 million, or ($0.21) per share, compared to a net loss in the previous quarter of $0.3 million, or ($0.07) per share.

Excluding non-cash charges for stock-based compensation of $0.2 million and amortization of acquisition intangibles totaling $0.6 million, non-GAAP net income for the second quarter was $21,000, or $0.01 per share, compared to the non-GAAP net income of $0.6 million, or $0.15 per share, in the previous quarter. 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 and cash equivalents on June 30, 2011 were $17.6 million, compared to $19.7 million on March 31, 2011. Inventory as of June 30, 2011 was $15.2 million, compared to $9.6 million in the previous quarter. The inventory increase was due to the launch of the next-generation rugged notebook in the second quarter, and to purchases of components for our line of rugged servers.

Business Outlook

"The current federal and state government budget concerns will continue to impact our short-term performance. However, we are excited about the new product released in the second quarter, and will continue our efforts to diversify our products and services,” 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. 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; 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 income, 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) 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.