Beeio Honey Ltd. — Annual Report 2003

Jan 22, 2004

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Orckit Communications Reports 2003 Fourth Quarter and Year End Results

TEL AVIV, Israel, January 22, 2004 -- Orckit Communications Ltd. (Nasdaq: ORCT) today reported results for the fourth quarter and year-end ended December 31, 2003.

Revenues in the fourth quarter of 2003 were $173,000 compared to $3.8 million in the quarter ended December 31, 2002. The net loss for the quarter was $5.5 million, or $(1.26) per share, compared to net income of $4.6 million, or $0.92 per diluted share, for the quarter ended December 31, 2002. Results for the quarter ended December 31, 2002 included financial income of $6.9 million, primarily from the early retirement of Orckit’s convertible subordinated notes and interest on a long-term loan.

Revenues for the year ended December 31, 2003 were $1.7 million compared to $53.4 million for the year ended December 31, 2002. Net loss for the year ended December 31, 2003 was $21.6 million, or $(4.62) per share, compared to net income of $4.1 million, or $0.79 per diluted share, for the year ended December 31, 2002. Results for the years ended December 31, 2003 and 2002 included financial income of $5.1 million and $ 17.6 million respectively, primarily from the early retirement of Orckit's convertible subordinated notes.

The key highlights for the quarter:

-- Orckit’s majority-owned subsidiary, Corrigent Systems, continued to make progress toward commercial deployment of its packet-ADM CM 100 metro product line. The CM 100 is gaining traction among telecom carriers as this platform offers 10 Gig and 2.5 Gig ring connections with high port density for packetized and SONET/TDM services. The platform also offers a wide range of line card interfaces, including 1 Gbps, 10/100 Mbps and OC-x/DS-x.

-- Corrigent received new Requests for Information (RFIs) from U.S. and Asian carriers that require Resilient Packet Ring (RPR) metro solutions for Ethernet and SONET/SDH services. It is expected that RPR-based solutions will better handle the growth of data transmission in metro networks than traditional SONET/SDH equipment.

-- Market awareness of the prospects for RPR increased. According to a recent report on "Metro Ethernet Equipment" from Infonetics Research, a leading telecom market research firm, the worldwide RPR market is projected to grow at a CAGR of 32% to approximately $1 billion by 2007.

-- The board of directors of Orckit approved the redemption of all outstanding 5.75% Convertible Subordinated Notes at their principal amount of $16.2 million, plus accrued and unpaid interest to the redemption date. Redemption is expected to conclude on April 1, 2004.

Izhak Tamir, President of Orckit, commented: "Corrigent is preparing for the commercial launch of its packet ADM platform, and we expect the first commercial deployment of the product in 2004. In order to support carrier requirements, Corrigent is focused on new releases and additional functionalities to enable a wider range of services.”

Mr. Tamir added: “Fiber-based services are expected to be the main growth drivers of packet data transmissions over metro networks. Expansion of fiber infrastructure in Asia and the US and deployment of Fiber-to-the-premise (FTTP) and Fiber-to-the-curb (FTTC) networks are intensifying the load on metro networks and are expected to support the demand for Corrigent’s solutions and products.”

Mr. Tamir concluded: “2004 will be a year of transition for Orckit, in which our three years of investment in Corrigent are expected to generate commercial sales. We believe that a substantial market need exists for a solution that addresses increasing demand for packet capacity in the metro network. Corrigent’s CM-100 product line provides a bestof-breed solution for that need.”

About Orckit Communications

Orckit Communications Ltd. is a leading provider of advanced telecom equipment targeting high capacity broadband services. Orckit is a majority shareholder of Corrigent Systems, which is developing metro transport telecom products designed to provide SONET and Ethernet services utilizing advanced packet technologies.

Certain matters discussed in this news release are forward-looking statements that involve a number of risks and uncertainties including, but not limited to, risks in product development plans and schedules, rapid technological change, changes and delays in product approval and introduction, customer acceptance of new products, the impact of competitive products and pricing, market acceptance, the lengthy sales cycle, proprietary rights of the Company and its competitors, risk of operations in Israel, government regulation, dependence on third parties to manufacture products, general economic conditions and other risk factors detailed in the Company's United States Securities and Exchange Commission filings. Orckit assumes no obligation to update the information in this release.

ORCKIT COMMUNICATIONS LTD. CONSOLIDATED BALANCE SHEETS

(US$ in thousands)

(US$ in thousands)
	December 31		December 31
	2003		2002
	(Audited)		(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	10,048	$	10,165
Short-term investments		29,075		53,684
Trade receivables		147		786
Other receivables		1,596		2,443
Inventories		100		100
Total current assets		40,966		67,178
Long term Investments		40,418		52,829
Long term loan to related party				7,000
Severance pay fund		2,707		2,150
Property and equipment, net		2,093		6,070
Deferred issuance costs, net		147		623
Total assets	$	86,331	$	135,850
		======		======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade payables	$	3,108	$	4,827
Accrued expenses and other payables		5,878		7,158
Total current liabilities		8,986		11,985
Long term liabilities:
Accrued Severance pay		3,435		3,265
Convertible subordinated notes		16,238		38,179
Total liabilities		28,659		53,429
Shareholders' equity		57,672		82,421
Total liabilities and shareholders' equity	$	86,331	$	135,850
		======		======

ORCKIT COMMUNICATIONS LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (US$ in thousands, except per share data)

		Three Months	Three Months	Ended	Ended			Year Ended	Year Ended
			December	31				December	31
		2003			2002		2003			2002
		(Unaudited)		(Unaudited)			(Audited)		(Audited)
Revenues	$	173	$			3,805 $	1,683	$		53,420
Cost of revenues		27				(2,841)	748			32,963
		______			______		______			______
Gross profit		146				6,646	935			20,457
Research and development expenses,
net		3,289				5,197	15,003			19,291
Selling, general and administrative
expenses		2,625				3,784	12,656			14,699
		______			______		______			______
Total operating expenses		5,914				8,981	27,659			33,990
		______			______		______			______
Operating loss		(5,768)				(2,335)	(26,724)			(13,533)
Financial income, net		293				6,925	5,108			17,616
		______			______		______			______
Net income (loss)	$	(5,475)	$			4,590 $	(21,616)	$		4,083
		======			======		======			======
Net income (loss) per share - basic	$	(1.26)	$			0.92 $	(4.62)	$		0.83
		======			======		======			======
Net income (loss) per share - diluted	$	(1.26)	$			0.92 $	(4.62)	$		0.79
		======			======		======			======
Weighted average number of shares
outstanding - basic		4,342				4,972	4,676			4,932
		======			======		======			======
Weighted average number of shares
outstanding - diluted		4,342				4,972	4,676			5,163
		======			======		======			======