Top Image Systems Reports Record Fourth Quarter and Full Year 2006 Results

Company Crosses $20 million Revenue Mark Surpassing $1 million in Non GAAP Net Profit


TEL AVIV, Israel, Feb. 14, 2007 (PRIME NEWSWIRE) -- Top Image Systems, Ltd. (Nasdaq:TISA) (TASE:TISA) ("TIS"), the leading innovator of data capture solutions, today announced its financial results for the fourth quarter and full year 2006.



 Fourth Quarter and Full Year 2006 Highlights
  * Record quarterly revenue with growth of 17% over last year
  * Annual revenues up 20% crossing $20 million mark
  * Seventh sequential profitable quarter, and record annual
    Non GAAP net income of $1 million
  * Over 100 new deals signed during the year with 70 new customers
  * Strong geographic expansion in APAC, USA, Japan, Germany and the UK

Fourth Quarter Results

Revenues for the fourth quarter of 2006 increased 17% reaching $5.5 million, compared to $4.7 million in the fourth quarter of 2005, and up 5% from $5.3 million as recorded in the prior quarter. 37% of fourth quarter revenues were generated from services and 63% from products.

Non GAAP net income for the fourth quarter increased 45% totaling $284 thousand, compared to $196 thousand in the fourth quarter of 2005. Non GAAP basic net earnings per share in the fourth quarter totaled $0.032 compared with $0.022 in the fourth quarter of 2005. Non GAAP fully diluted net earnings per share in the fourth quarter totaled $0.031 compared with $0.022 in the fourth quarter of 2005. Non GAAP net income excludes stock option compensation expenses of $124 thousand and $44 thousand in the fourth quarter of 2006 and fourth quarter of 2005, respectively. A reconciliation between net income on a GAAP basis and Non GAAP net income is included after the Non GAAP Statement of Operations contained in this press release.

GAAP net income for the fourth quarter increased 5% totaling $160 thousand, compared to $152 thousand in the fourth quarter of 2005. Basic net earnings per share in the fourth quarter of 2006 totaled $0.018 compared with $0.017 in the fourth quarter of 2005. Fully diluted net earnings per share in the fourth quarter of 2006 and in the fourth quarter of 2005 totaled $0.017.

Full Year 2006 Results

Revenues for the year ended December 31, 2006 increased 20% reaching $20.2 million, from $16.8 million in 2005. Operating profit for the year totaled $521 thousand compared with an operating loss of $285 thousand in 2005.

Non GAAP net income for the year totaled $1,044 thousand, compared with a net loss of $417 thousand for 2005. Basic net earnings (loss) per share in 2006 totaled $0.118 compared with a net loss per share of $0.047 in 2005. Fully diluted net earnings per share in 2006 totaled $0.116 compared with a net loss per share of $0.047 in 2005 Non GAAP net income excludes stock option compensation expenses of $243 thousand and $44 thousand in years 2006 and 2005, respectively. A reconciliation between net income on a GAAP basis and Non GAAP net income is included after the Non GAAP Statement of Operations contained in this press release.

GAAP net income for the year totaled $801 thousand, compared with a net loss of $461 thousand for 2005. Basic net earnings per share in 2006 totaled $0.091 compared with a net loss per share of $0.053 in 2005. Fully diluted net earnings per share in 2006 totaled $0.089 compared with a net loss per share of $0.053 in 2005.

"We are delighted to close a strong year of growth, presenting record annual revenues and crossing the $20 million mark in revenues and the $1 million mark in net income on a Non GAAP basis," commented Dr. Ido Schechter, Chief Executive Officer of Top Image Systems. "2006 was indeed an exceptional year for TIS. Our increased revenues, which followed strong contract wins, new customers and our greatly increased geographic footprint, contributed to our net profit and enhanced company value."

Dr. Schechter continued: "Over the last three years, TIS has grown and transformed from a product developer into a total global solutions provider, while laying the solid infrastructure that will allow us to continue to grow, enhance and develop the company in years to come. At the 2006 International Conference held in Berlin towards the end of last year we received strong support and recognition from our customers and partners as to the metamorphosis the company has undergone. This conference further confirmed that TIS has become a strong leading company with a solid customer base and highly advanced technology."

"2006 was very much a year in which we laid the foundations for the future. In 2007, we are planning to bring the business to the next stage. We are actively pursuing complimentary and synergistic growth drivers for our business, which will increase the size and scale of our business, while bringing us increased activity in both the European and the Far Eastern market place. TIS now has a solid balance sheet and, most importantly, a dedicated group of employees focused and eager to contribute, develop and take the company to the next level," concluded Dr. Ido Schechter.

Guidance

The Company also issued preliminary guidance for 2007. Guidance is current as of today only and TIS undertakes no obligation to update its estimates. The Company expects to generate organic revenue growth of approximately 15% over the course of the year. At the same time, the Company is pursuing M&A opportunities which, if they materialize, will bring its revenues to the $30 million mark in 2007.

About Non-GAAP Financial Measures

In its earnings releases, conference calls, slide presentations or webcasts, the Company may use or discuss Non GAAP net income, which is a non-GAAP financial measure as defined by SEC Regulation G. Management regularly reviews Non GAAP net income as an analytical indicator of the Company's financial performance and believes that it is useful to investors in evaluating operating performance because it excludes the effect of stock option compensation expenses. This allows the Company's management and investors to compare the Company's recurring core business operating results over multiple periods. The Company does not intend for Non GAAP net income to be considered in isolation or as a substitute for any GAAP measure. Non GAAP net income, as presented, may not be comparable to similarly titled measures of other companies.

Net income is the GAAP financial measure most directly comparable to Non GAAP net income. A reconciliation of Non GAAP net income to net income is included after the Non GAAP Statement of Operations contained this press release.

Conference Call

TIS management will host a conference call today, February 14, 2007, at 10:00am EST (07:00am Pacific Time, 03:00pm UK Time, 05:00pm Israel Time) to review the fourth quarter and full year 2006 financial results and other corporate events.

Dr. Ido Schechter, CEO, and Arie Rand, CFO, will be on-line to discuss these results and take part in a question and answer session.

The call can be accessed by dialing:



     US Dial-in Number: 1 888 281 1167
     UK Dial-in Number: 0 800 917 5108
     ISRAEL Dial-in Number: 03 918 0610
     INTERNATIONAL Dial-in Number:  +972 3 918 0610

Participants are asked to call the number approximately 10 minutes before the conference call begins.

For those unable to listen to the live call, a replay of the call will be available for three months from the day after the call in the investor relations section of Top Image Systems' website, at: www.topimagesystems.com

About Top Image Systems

Top Image Systems is a leading innovator of enterprise solutions for managing and validating content entering organizations from various sources. Whether originating from mobile, electronic, paper or other sources, TIS solutions deliver the content to applications that drive the organization. TIS's eFLOW Unified Content Platform is a common platform for the company's solutions. TIS markets its platform in more than 30 countries through a multi-tier network of distributors, system integrators, value added resellers as well as strategic partners. Visit the company's website www.topimagesystems.com for more information.

Caution Concerning Forward-Looking Statements

Certain matters discussed in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "anticipate", "project", "expect", "plan", "intend", "may", "should", "will" and similar words or expressions identify some, but not all, of these statements. These statements are based on management's current expectations or beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially 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, quarterly fluctuations in sales of products in the Data Capture market (where in general the fourth quarter is the strongest and the first quarter is the weakest), the Company's ability to successfully integrate TIS Japan, litigation (including litigation over intellectual property rights), general economic conditions and other risk factors detailed in the Company's most recent annual report on Form 20-F and other subsequent filings with the United States Securities and Exchange Commission. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.



                        Top Image Systems Ltd.
          Non-GAAP Statements of Operations for the period of

                          Three months ended          Year ended
                              December 31,            December 31,
                         ---------------------   ---------------------
                           2006        2005        2006        2005
                         ---------   ---------   ---------   ---------
                             In thousands US$, except per share data
 Revenues
 Product sales               3,455       3,128      12,144       9,888
 Service revenues            2,048       1,582       8,080       6,932
                         ---------   ---------   ---------   ---------
 Total revenues              5,503       4,710      20,224      16,820
                         ---------   ---------   ---------   ---------
 Cost of revenues (*)
 Product costs                 737         661       2,391       2,225
 Service costs               1,275       1,209       5,203       4,538
                         ---------   ---------   ---------   ---------

 Total cost of revenues      2,012       1,870       7,594       6,763
                         ---------   ---------   ---------   ---------

 Gross profit                3,491       2,840      12,630      10,057
                         ---------   ---------   ---------   ---------

 Expenses

 Research and development
  costs                        443         367       1,738       1,312
 Selling and marketing       1,785       1,357       6,615       5,396
 General and
  administrative             1,038         870       3,513       3,426
 Liquidated damages
  related to PIPE                -           -           -         164
                         ---------   ---------   ---------   ---------

                             3,266       2,594      11,866      10,298
                         ---------   ---------   ---------   ---------

 Operating profit (loss)       225         246         764        (241)
                         ---------   ---------   ---------   ---------
 Financing income
  (expenses), net               84         (20)        325        (146)
                         ---------   ---------   ---------   ---------
 Income (loss) before
  taxes on income              309         226       1,089        (387)
                         ---------   ---------   ---------   ---------

 Taxes on Income               (25)        (30)        (45)        (30)
                         ---------   ---------   ---------   ---------
 Net income (loss) for
  the period                   284         196       1,044        (417)
                         =========   =========   =========   =========
 Basic net income (loss)
  per share                  0.032       0.022       0.118      (0.047)
                         =========   =========   =========   =========
 Weighted average number
  of shares used in
  computation of basic
  net income (loss)
  per share              8,836,976   8,777,366   8,819,857   8,949,167
                         =========   =========   =========   =========
 Diluted net income
 (loss) per share            0.031       0.022       0.116      (0.047)
                         =========   =========   =========   =========
 Weighted average number
  of shares used in
  computation of diluted
  net income (loss)
  per share              9,167,962   8,861,734   9,032,354   8,764,222
                         =========   =========   =========   =========

 (*) Certain costs were re-classified for prior periods


 A reconciliation of Non GAAP net income to net income is as follows
 (in thousands):

                                           Three Months Ended
                                           ------------------
                                               December 31,
                                             2006        2005
 ------------------------------------------------------------
 Net Income                                   160         152
 ------------------------------------------------------------
 Stock option compensation expenses           124          44
 ------------------------------------------------------------
 Non GAAP Net Income                          284         196
                                            =====       =====
 ------------------------------------------------------------

 ------------------------------------------------------------
                                                 Year Ended
                                           ------------------
                                                December 31,
                                             2006        2005
 ------------------------------------------------------------
 Net Income (loss)                            801        (461)
 ------------------------------------------------------------
 Stock option compensation expenses           243          44
 ------------------------------------------------------------
 Non GAAP Net Income (loss)                 1,044        (417)
                                            =====       =====
 ------------------------------------------------------------

                        Top Image Systems Ltd.
              Statements of Operations for the period of

                          Three months ended         Year ended
                              December 31,           December 31,
                         ---------------------   ---------------------
                            2006       2005        2006        2005
                         ---------   ---------   ---------   ---------
                            In thousands US$, except per share data

 Revenues
 Product sales               3,455       3,128      12,144       9,888
 Service revenues            2,048       1,582       8,080       6,932
                         ---------   ---------   ---------   ---------

 Total revenues              5,503       4,710      20,224      16,820
                         ---------   ---------   ---------   ---------
 Cost of revenues (*)
 Product costs                 737         661       2,391       2,225
 Service costs               1,305       1,209       5,257       4,538
                         ---------   ---------   ---------   ---------

 Total cost of revenues      2,042       1,870       7,648       6,763
                         ---------   ---------   ---------   ---------

 Gross profit                3,461       2,840      12,576      10,057
                         ---------   ---------   ---------   ---------

 Expenses

 Research and development
  costs                        473         368       1,792       1,312
 Selling and marketing       1,830       1,356       6,695       5,396
 General and
  administrative             1,057         914       3,568       3,470
 Liquidated damages
  related to PIPE                -           -           -         164
                         ---------   ---------   ---------   ---------

                             3,360       2,638      12,055      10,342
                         ---------   ---------   ---------   ---------

 Operating profit (loss)       101         202         521        (285)
                         ---------   ---------   ---------   ---------
 Financing income
  (expenses), net               84         (20)        325        (146)
                         ---------   ---------   ---------   ---------
 Income (loss) before
  taxes on income              185         182         846        (431)
                         ---------   ---------   ---------   ---------
 Taxes on Income               (25)        (30)        (45)        (30)
                         ---------   ---------   ---------   ---------
 Net income (loss) for
  the period                   160         152         801        (461)
                         =========   =========   =========   =========
 Basic net income (loss)
  per share                  0.018       0.017       0.091      (0.053)
                         =========   =========   =========   =========
 Weighted average number
  of shares used in
  computation of basic
  net income (loss)
  per share              8,836,976   8,777,366   8,819,857   8,764,222
                         =========   =========   =========   =========
 Diluted net income
  (loss) per share           0.017       0.017       0.089      (0.053)
                         =========   =========   =========   =========
 Weighted average number
  of shares used in
  computation of diluted
  net income (loss)
  per share              9,167,962   8,861,734   9,032,354   8,764,222
                         =========   =========   =========   =========

 (*) Certain costs were re-classified for prior periods


                        Top Image Systems Ltd.
                   Consolidated Balance Sheet as at

                                                   December 31,
                                                  2006      2005
                                                -------    -------
                                                 In thousands US$
 Assets

 Current assets:
 Cash and cash equivalents                        6,195      8,200
 Deposits                                         3,000          -
 Marketable securities                           12,597      1,805
 Trade receivables, net                           7,642      6,802
 Other current assets                             1,120        622
                                                -------    -------

 Total current assets                            30,554     17,429
                                                -------    -------

 Severance funds pay                                717        654
                                                -------    -------
 Property and equipment

 Cost                                             2,531      2,358
 Less / accumulated depreciation                 (1,943)    (1,781)
                                                -------    -------

 Net property and equipment                         588        577
                                                -------    -------

 Goodwill                                           465        465
                                                -------    -------

 Net intangible assets                              800      1,100
                                                -------    -------

 Other long-term assets, net                      1,171        135
                                                -------    -------

                                                -------    -------
 Total assets                                    34,295     20,360
                                                =======    =======

 Liabilities and Shareholders' Equity

 Current liabilities:
 Short-term bank loans                              339      2,179
 Trade payables                                     397        900
 Accrued liabilities and other payables           2,966      2,213
                                                -------    -------

 Total current liabilities                        3,702      5,292
                                                -------    -------
 Long-term liabilities:
 Convertible debenture                           14,197          -
 Liability for severance pay, net                 1,016        850
                                                -------    -------

 Total long-term liabilities                     15,213        850
                                                -------    -------

 Total liabilities                               18,915      6,142
                                                -------    -------
 Shareholders' equity
 Share capital - Ordinary share of
  NIS 0.04 par value                                 98         97
 Surplus capital                                 29,921     29,561
 Accumulated deficit                            (14,639)   (15,440)
                                                -------    -------

 Total shareholders' equity                      15,380     14,218
                                                -------    -------

                                                -------    -------
 Total liabilities and shareholders' equity      34,295     20,360
                                                =======    =======


            

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