CGN Cognitronics Corp

Cognitronics Corporation (AMEX:CGN) today reported a net loss for the second quarter ended June 30, 2006 of $2.6 million, or $.36 per share on a diluted basis, compared to a net loss of $1.7 million, or $.30 per share on a diluted basis, in the prior year's second quarter. The 2005 net loss included a loss from discontinued operations of $.5 million, or $.08 per share on a diluted basis. Revenues for the second quarter were $1.6 million in 2006 versus $1.1 million in 2005. The company said that the $.5 million increase in second quarter 2006 revenues from the comparable 2005 quarter was primarily attributable to the revenues of ThinkEngine Networks, Inc., which was acquired in November 2005. "We have witnessed a continuing shift in the wireline segment of the telecommunications market resulting in increasing emphasis on capital investment in next generation services and build-out of the fiber optic infrastructure," said Brian J. Kelley, president and chief executive officer of Cognitronics. "In turn, this shift has caused a decreasing amount of available capital investment funding for the legacy wireline operations, impacting the demand for the company's CX Media Servers. As a result, the Company reorganized its CX Media Server group in the second quarter to reflect the current demand level for media servers in the legacy wireline space, including a reduction in and reassignment of personnel. "Concurrently, in view of the increased demand for next generation voice services and conferencing solutions, additional resources are being added to sales, marketing and R&D efforts supporting the VSR 1000 products, including personnel reassigned from the CX Media Server group." For the six months ended June 30, 2006, the Company reported a net loss of $3.3 million, or $.46 per diluted share, versus a net loss of $2.5 million, or $.43 per diluted share, for the same period in 2005. Revenues for the six-month period were $5 million in 2006, compared to $2.8 million in 2005. The 2005 net loss included a loss from discontinued operations of $.7 million, or $.13 per share on a diluted basis. ABOUT COGNITRONICS Cognitronics is a leading supplier of media server solutions to the telecommunications industry. The CX Network Media Servers (CX Series) and VSR1000 are a cost-effective and highly scalable family of carrier class media server platforms, delivering advanced network media solutions in VoIP networks as well as in traditional AIN and TDM circuit switched environments. For more information, visit the company's website at www.cognitronics.com. Statements contained herein which are not historical facts are forward-looking statements. The forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks and uncertainties including, but not limited to, the continuance of reduced capital expenditures throughout the telecommunications market, variability of sales volume from quarter to quarter, product demand, market acceptance, litigation, risk of dependence on significant customers, third party suppliers and intellectual property rights, risks in product and technology development and other risk factors detailed in the company's Securities and Exchange Commission filings. -0- *T COGNITRONICS CORPORATION SUMMARY OF RESULTS Three Months Ended June 30, ------------------------- 2006 2005 ------------ ------------ Net revenues $1,576,000 $1,054,000 Loss from continuing operations ($2,572,000) ($1,241,000) Loss from discontinued operations ($454,000) Net loss ($2,572,000) ($1,695,000) Loss per basic and diluted share: Continuing operations ($.36) ($.22) Discontinued operations ($.08) Net loss ($.36) ($.30) Weighted average number of basic and diluted shares outstanding: 7,058,257 5,653,173 Six Months Ended June 30, ------------------------- 2006 2005 ------------ ------------ Net revenues $5,041,000 $2,775,000 Loss from continuing operations ($3,322,000) ($1,739,000) Loss from discontinued operations ($711,000) Cumulative effect of change in accounting principle $36,000 Net loss ($3,286,000) ($2,450,000) Loss per basic and diluted share: Continuing operations ($.47) ($.31) Discontinued operations ($.13) Cumulative effect of change in accounting principle $.01 Net loss ($.46) ($.43) Weighted average number of basic and diluted shares outstanding 7,104,496 5,643,571 SUMMARY OF FINANCIAL POSITION June 30, December 31, 2006 2005 ------------ ------------ Cash, cash equivalents and marketable securities $5,296,000 $8,120,000 Working capital $4,516,000 $7,251,000 Total assets $15,157,000 $21,205,000 Total stockholders' equity $10,229,000 $14,015,000 *T