LanOptics Announces 2004 First Quarter Results and Adoption of Generally Accepted Accounting Principles in the United States -U.S. GAAP-

Business Wire, April 29, 2004

Business Editors

YOKNEAM, Israel--(BUSINESS WIRE)--April 29, 2004

Since its inception, LanOptics' consolidated financial statements

have been prepared in U.S. dollars in accordance with generally

accepted accounting principles in Israel (Israeli GAAP)

LanOptics Ltd. (NASDAQ: LNOP), a provider of network processors, today announced results for the first quarter ended March 31, 2003.

LanOptics also announced that, effective with the first quarter of 2004, it will prepare its financial statements in accordance with generally accepted accounting principles in the United States (U.S. GAAP). Since its inception, LanOptics' consolidated financial statements have been prepared in U.S. dollars in accordance with generally accepted accounting principles in Israel (Israeli GAAP), which differ in certain material respects from U.S. GAAP. LanOptics' consolidated financial statements have included a reconciliation note that quantifies the differences between Israeli GAAP and U.S. GAAP. Under recent Israeli accounting pronouncements, LanOptics would be required to discontinue the adjustment of the financial statements to the US dollar and instead to prepare its financial statements in nominal New Israeli Shekels if it were to continue to report under Israeli GAAP. Since LanOptics' functional currency and operating environment is in U.S. dollars, LanOptics believes that the transition to U.S. GAAP will more accurately reflect the results of its operations than reporting in accordance with nominal New Israeli Shekels.

As previously disclosed by LanOptics in its financial statements and quarterly earnings releases, the principal consequence of the change from Israeli GAAP to U.S. GAAP relates to the accounting for preferred shares of LanOptics' subsidiary, EZchip Technologies. Under Israeli GAAP, a subsidiary's losses are attributed to the different classes of the subsidiary's shares according to the ownership level, which is determined by liquidation preference. Under U.S. GAAP, the issuance of a subsidiary's preferred shares to a third party is accounted for as a separate component of minority interest, "Preferred shares of subsidiary," that does not participate in the losses of the subsidiary. As a result, under U.S. GAAP the reported net loss reflects all of the losses of the EZchip Technologies subsidiary, in which LanOptics holds 53%, without any minority participation. The cumulative effect of this change results in a deficiency in the consolidated shareholders' equity.

For the three months ended March 31, 2004, LanOptics reported revenues of US$ 614,000 versus US$ 306,000 in the first quarter of 2003. All of these revenues were attributable to LanOptics' subsidiary, EZchip Technologies. Operating loss amounted to US$ 2,312,000, versus US$ 2,630,000 in the first quarter of 2003. The majority of the expenses that resulted in the operating loss were attributable to EZchip's research and development efforts on future products, and the balance of the expenses related primarily to EZchip's sales and marketing activities. Net loss for the first quarter was US$ 2,480,000, a loss of US$ 0.27 per share, compared to net loss of US$ 2,573,000, or a loss of US$ 0.30 per share, for the same period last year.

"We continue to increase our customer base, move our existing customers into production and solidify our 10-Gigabit leadership with new products," said Dr. Meir Burstin, Chairman of the Board. "We now have close to 35 customers that design their products around our NP-1c, several of them with multiple NP-1c based designs. Four of our initial customers are already in early production and we expect to see several additional customers entering production each quarter. The timing and speed of our customers' production ramp-up will depend on market acceptance of their products and on the pace of recovery in the telecommunications and related markets. During the first quarter we announced the NP-2, which solidifies our 10-Gigabit NPU leadership established with the NP-1c by adding traffic management and further reducing the system chip count, power and cost."

LanOptics is focused on its subsidiary EZchip Technologies, a fabless semiconductor company providing high-speed network processors. EZchip's breakthrough TOPcore(R) technology provides both packet processing and classification on a single chip at wire speed. EZchip's single-chip solutions are used for building networking equipment with immense savings in chip count, power and cost. Highly flexible 7-layer processing enables a wide range of applications to deliver advanced services for the metro, carrier edge and core and enterprise backbone.

For more information on EZchip, visit the web site at http://www.ezchip.com

For more information on LanOptics, visit the web site at http://www.lanoptics.com

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This release contains forward looking statements that are subject to risks and uncertainties, including, but not limited to, the impact of competitive products, product demand and market acceptance risks, reliance on key strategic alliances, fluctuations in operating results, delays in development of highly-complex products and other risks detailed from time to time in LNOP filings with the Securities and Exchange Commission. These risks could cause the Company's actual results for 2004 and beyond to differ materially from those expressed in any forward looking statements made by, or on behalf of LNOP.