CAMBRIDGE, MA -- Bitstream Inc. today reported that it increased total revenue by $1,322,000 or 35% to $5,153,000 for the three months ended September 30, 2006 as compared to $3,831,000 for the three months ended September 30, 2005. We generated an operating income of $851,000 for the three months ended September 30, 2006, an increase of $521,000 as compared to $330,000 for the three months ended September 30, 2005. Our net income for the three months ended September 30, 2006 increased $641,000 to $953,000 or $0.09 per diluted share as compared to net income of $312,000 for the three months ended September 30, 2005. The Company’s cash and cash equivalents at September 30, 2006 totaled $9,819,000, an increase of $1,881,000 from $7,938,000 at June 30, 2006 and an increase of $5,020,000 from $4,799,000 at September 30, 2005. Income from operations for the quarter ended September 30, 2006 includes $83,000 in non-cash compensation expense associated with our adoption of Statement of Financial Accounting Standards No. 123R, Share-Based Payments, ("SFAS 123R") which is effective for periods beginning January 1, 2006. We have adopted SFAS 123R on a modified prospective basis and thus periods prior to January 1, 2006 do not include stock-based compensation expense. We estimate our non-cash stock-based compensation expense on options outstanding as of September 30, 2006 will be approximately $286,000 for the year ending December 31, 2006. “We are very pleased with our continued revenue growth, achieving 35% growth for the third quarter of 2006 as compared to third quarter of 2005 and surpassing the $5 million quarterly revenue mark for the first time since becoming a publicly-held company.” said Anna M. Chagnon, President and Chief Executive Officer. “We continue to improve our operating performance generating operating income of $851,000 for the quarter ended September 30, 2006, which increased operating income to $2,013,000 for the nine months ended September 30, 2006. Net income for the nine months ended September 30, 2006 was $2,604,000 and included other income recognized during our quarter ended June 30, 2006 of $464,000 in recovered legal fees and related expenses resulting from the payment to us by Monotype Imaging, Inc. and International Typeface Corporation for attorneys' fees, expenses and costs awarded to Bitstream by the U.S. District Court for the Northern District of Illinois in connection with the TrueDoc lawsuit. Based on our continued focus on increasing revenue and managing operations we expect to enhance our operating performance and profitability during the remainder 2006.”