Floware Announces Fourth Quarter and Year 2000 Results

Or Yehuda, Israel, February 7, 2001 ­ Floware Wireless Systems Ltd. (NASDAQ: FLRE), a leading provider of broadband wireless access (BWA) communication systems, today announced results for the fourth quarter and fiscal year ended December 31, 2000.

Highlights:

Revenues for the quarter reached a record $17,556,000, up 50% from 3Q00 Revenues for the full year grew to a record $38,477,000, up 1,057% from 1999 Gross margins for the quarter increased to 22% of revenues, up from 16% in 3Q00 Proforma net loss per share for the quarter was $0.06 and for the year was $0.36 Selection by new major carriers during the quarter included the Abrared Consortium in Spain, a large carrier in the Czech Republic and two leading Chinese telecommunications operators Agreement with SCI Systems for turn-key production of indoor units New offices opened in Sao Paulo, Brazil and Prague in the Czech Republic Revenues for the fourth quarter of 2000 increased to $17,556,000 from $1,846,000 in the fourth quarter of 1999. Revenues rose by 50% in the fourth quarter from $11,703,000 in the third quarter of 2000. Gross profit for the fourth quarter 2000 was $3,812,000 or 22% of revenues, compared to a gross loss of $196,000 in the fourth quarter of 1999. Gross profit in the third quarter of 2000 was $1,856,000 or 16% of revenues.

Revenues for the year 2000 increased to $38,477,000 from $3,325,000 in 1999. Gross profit for the year 2000 reached $6,360,000, or 17% of revenues, compared to a gross loss of $695,000 in 1999.

On a pro forma basis, which excludes $1,302,000 in amortization of deferred stock compensation, net loss for the quarter was $1,939,000 or a loss of $0.06 per share. This compares to a pro forma net loss for the fourth quarter of 1999 of $2,691,000 or $0.11 loss per share and a pro forma net loss in the third quarter of 2000 of $2,267,000 or a loss of $0.07 per share. For the year 2000, pro forma net loss was $10,193,000 or a pro forma net loss of $0.36 per share compared to a pro forma net loss of $8,668,000 for the year 1999 or a pro forma net loss of $0.42 per share.

"I am delighted to report that Floware had an excellent fourth quarter and, indeed, looking at the year as a whole, our performance has been nothing short of exceptional," said Amnon Yacoby, CEO of Floware. "Our achievements demonstrate Floware's ability to deliver on our strategy to become the leading provider in the broadband wireless fixed access market. We continued to grow and strengthen our relationships with carriers and integrators, won major sales in key markets and continued to develop our products to the highest standards. By all of these measures, Floware has more than met its 2000 objectives and in the year ahead we expect to continue to deliver outstanding results to our shareholders."

Research and development costs rose to $4,115,000 for the quarter, compared to $1,747,000 for the fourth quarter in 1999 and $2,901,000 for the third quarter in 2000. For the year 2000 research and development costs increased to $11,440,000 compared to $5,558,000 in 1999. In addition to continuing to develop the WALKair 3000 system and feature enhancements to the WALKair 1000 system, Floware's R&D efforts focused on reducing expenses associated with the WALKair 1000. To further reduce the production cost of the WALKair 1000, Floware expects to introduce FPGA masked chips by first quarter 2001 to replace the programmable chips currently used. The Company is also continuing to develop ASIC chips which will further reduce the production cost of terminal stations. Floware also signed an agreement with SCI Systems, a leading EMS (electronic manufacturing services) provider, to conduct turn-key production of its terminal and base station indoor units which is expected to further reduce production costs.

Sales and marketing expenses were $2,144,000 for the fourth quarter, compared to $935,000 for the same period in 1999 and $1,542,000 for the third quarter in 2000. Sales and marketing expenses for the year 2000 were $10,047,000 compared to $2,417,000 in 1999. The increase in expenses reflects an increase in sales and marketing personnel, including the expansion of the customer service group.

As of December 31, 2000, Floware's systems were deployed in 61 installations in 36 countries, including 35 commercial deployments.

Major wins in the quarter included two leading telecommunications operators in China, a large carrier in the Czech Republic and the Abrared Consortium in Spain.

In China, Floware was selected to supply its WALKair BWA system to two leading telecommunications operators for commercial deployments. These operators are both well established and well financed companies that are currently deploying commercial networks. Floware has received initial purchase orders for equipment for more than $6,000,000 and has already shipped substantial amounts of product. These are important wins for Floware as they give it a foothold in one of the largest markets in the world with significant growth potential.

The Abrared Consortium of Spain has selected Floware's WALKair system for its wireless network rollout throughout Spain. Spain, as one of the top five European countries by population, is a large market for fixed wireless systems. This win, along with Floware's previous selection by FirstMark Spain, means that Floware is now the supplier of BWA systems to two major carriers in Spain. In March 2000, the Abrared Consortium won a 3.5GHz license to provide fixed wireless access and is deploying a nationwide wireless infrastructure throughout Spain. The system integrator for Abrared, Lucent Technologies, has already placed purchase orders for equipment of approximately $3.7 million. The Abrared Consortium comprises six major Spanish companies and banks, including Iberdrola, the second largest electrical power company in Spain, and Formus Communications Iberica S.A., a leading global high-speed broadband services company.

In addition, Floware was awarded an order from a major carrier in the Czech Republic. which was one of three operators that won a license for the 26GHz frequency in the country in September 2000. This is Floware's second selection as a BWA supplier in the Czech Republic, following its earlier selection by Ceske Radiokomunikace.

During the fourth quarter Floware's existing customers continued to deploy their networks and major deliveries included FirstMark and Arctel in Germany, Abrared and FirstMark in Spain, Novis in Portugal, Ceske Radiokomunikace in the Czech Republic, Rivizul in Uruguay and the two carriers in China. Other developments in the quarter included:

An agreement with SCI Systems, a leading EMS provider, to conduct turn-key production of the Company's indoor units for terminals and base stations at its Scotland plant for all the radio frequencies that the WALKair system supports. The outsourcing of indoor unit production to SCI is an important component of Floware's strategy to reduce production costs. SCI is scheduled to begin turn-key production in the third quarter of 2001 and will reach full capacity production in the fourth quarter of the year. Opening offices in Sao Paulo, Brazil and Prague in the Czech Republic. Both offices are currently providing sales services and are expected to provide technical support in the near future. Floware opened these offices to support its strategic distribution partners in those markets as well as its customers, the telecommunications carriers. Total number of permanent employees grew to 234 at December 31, 2000, compared to 97 at the end of 1999 and 190 at September 30, 2000. Largest growth was in R&D, adding 24 new engineers during the quarter and 75 during the course of the year, and sales and marketing, which added five employees during the quarter for a total of 42 employees at the end of the year. "We are very optimistic for the year ahead," said Yacoby. "We can count on a well-established and high quality customer base. We will continue to focus on the lucrative SME (small and medium enterprises) market segment and we will continue to benefit from excellent global sales channels and strong relationships with our partners. With this firm foundation in place and by continuing to execute our strategy, we believe that we can look forward to another successful year ahead for Floware."

CEO Amnon Yacoby and CFO Tali Idan will host a conference call today, February 7, at 9:00 a.m. (Eastern) to discuss the results. To participate in the call, please dial (913) 981-5507 ten minutes prior to the scheduled call start time. A replay of the call will be available from 12:00 p.m. (Eastern) on February 7 until midnight on February 14. To access the replay, please dial (719) 457-0820 and enter code 790806.

Floware Wireless Systems Ltd. is a leading provider of point-to-multipoint fixed broadband wireless access (BWA) systems. These systems are used mainly by new carriers (CLECs) which connect business customers in the "last mile." Floware's WALKair system enables carriers to provide high-speed Internet access, as well as a wide range of voice and data services, on the 3.5, 10.5 and 26 GHz radio frequency bands. Floware currently has more than 60 deployments worldwide.

This press release and statements by Floware in shareholder reports and public filings, as well as in oral public statements by Floware´s representatives may contain forward looking statements. Such statements are subjected to certain facts, risks and uncertainties that may cause actual results, events and performance to differ materially from those referred to in such statements. The risks are identified in Floware´s registration statement on Form F-1 (Registration Statement No. 333-12290) filed with the Securities and Exchange Commission.

(Tables to follow)

CONDENSED STATEMENTS OF OPERATIONS U.S. dollars in thousands Three months ended December 31, Nine months ended December 31, 2000 1999 2000 1999 Revenues $ 17,556 $ 1,846 $ 38,477 $ 3,325 Cost of revenues 13,744 2,042 32,117 4,020 Gross profit (loss) 3,812 (196) 6,360 (695) Operating expenses: Research and development 4,115 1,747 11,440 5,558 Sales and marketing, net 2,144 935 10,047 2,417 General and administrative 800 177 1,877 732 Amortization of deferred stock compensation 1,302 278 4,279 717 Total operating expenses 8,361 3,137 27,643 9,424 Operating income (loss) (4,549) (3,333) (21,283) (10,119) Financial income (expenses), net 1,308 364 2,712 734 Net income (loss) $ (3,241) $ (2,969) $ (18,571) $ (9,385) Preferred shares deemed dividend - - 4,671 - Net loss to shareholders of ordinary shares (3,241) (2,969) (23,242) (9,385) Basic and diluted net loss per share $ (0.10) $ (0.87) $ (1.52) $ (2.76) Weighted average number of shares used in computing basic and diluted net loss per share 32,091,700 3,400,000 15,298,625 3,400,000 x Pro forma net loss(1) $(1,939) $(2,691) $(10,193) $(8,668) x Pro forma net loss per share $(0.06) $(0.11) $(0.36) $(0.42) x Pro forma weighted average number of shares used in computing pro forma net loss per share(2) 32,091,700 25,329,200 28,619,825 20,781,700 (1) Excluding the amortization of deferred stock compensation, the preferred shares deemed dividend (Q1-00) and the stock compensation included in marketing expenses (Q1-00). (2) Assuming a full conversion of the preferred shares into ordinary shares for the period prior to the initial public offering, in which preferred shares were outstanding. CONDENSED BALANCE SHEET U.S. dollars in thousands December 31, 2000 December 31, 1999 ASSETS CURRENT ASSETS: Cash, cash equivalents and short- term investments $ 75,187 $ 25,947 Trade receivables 10,777 1,755 Other accounts receivables and prepaid expenses 1,852 589 Inventories 21,416 2,861 Total current assets 109,232 31,152 SEVERANCE PAY FUND 1,384 571 PROPERTY AND EQUIPMENT, NET 5,275 1,919 Total assets $ 115,891 $ 33,642 LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES: Trade payable $ 15,643 $ 3,791 Employees and payroll accruals 2,808 767 Accrued expenses and other accounts payables 5,074 452 Total current liabilities 23,525 5,010 ACCRUED SEVERANCE PAY 1,420 696 Total liabilities 24,945 5,706 SHAREHOLDERS' EQUITY 90,946 27,936 Total liabilities and shareholders' equity $ 115,891 $ 33,642 Copyright © 2000 Floware Wireless Systems Ltd. All Rights Reserved

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