Hifn: Fiscal 2Q08 Financial Results

Hifn reported financial results for the second quarter ended March 31, 2008. This press release contains both GAAP and non-GAAP financial information.

Revenues for the second quarter of fiscal 2008 were $9.3 million, a decrease of 15 percent from the $10.9 million in revenues reported in the previous quarter and a decrease of 16 percent from the $11.0 million in revenues reported in the second quarter of fiscal 2007. Revenues for the six months ended March 31, 2008 were $20.2 million, a decrease of one percent from the $20.3 million reported for the six months ended March 31, 2007.

Net loss for the second quarter ended March 31, 2008, on a generally-accepted accounting principles (GAAP) basis, was $2.0 million, or a loss of $0.14 per share. Non-GAAP net loss, adjusted for stock-based compensation expense and amortization of intangible assets, for the second quarter of fiscal 2008 was $748,000, or a loss of $0.05 per share. Net loss for the second quarter ended March 31, 2007, on a GAAP basis, was $707,000, or a loss of $0.05 per share. Non-GAAP net income, adjusted for stock-based compensation expense and amortization of intangible assets, for the second quarter of fiscal 2007 was $575,000, or an income of $0.04 per share.

Net loss for the six months ended March 31, 2008, on a GAAP basis, was $2.7 million, or a loss of $0.18 per share. Non-GAAP net loss, adjusted for stock-based compensation expense and amortization of intangible assets, for the six months ended March 31, 2008 was $246,000, or a loss of $0.02 per share. Net loss for the six months ended March 31, 2007, on a GAAP basis, was $3.4 million, or a loss of $0.24 per share. Non-GAAP net loss, adjusted for stock-based compensation expense and amortization of intangible assets, for the six months ended March 31, 2007 was $947,000, or a loss of $0.07 per share.

"This was a challenging quarter for the company, and our results underscore the combined execution and business environment issues we are addressing as we simultaneously expand our product line while diversifying out of our legacy dependence upon a relatively narrow customer set for top line growth. In the most recent quarter, revenue from two of our largest OEM customers came in below our expectations, while the new volume-production revenue streams driving our diversification strategy are now beginning to grow," said Albert E. Sisto, Chairman and CEO of Hifn. "We are however encouraged by our cost and cash management over the quarter. Operating expenses for the quarter were in line with earlier guidance and declined from expenses in the prior year second quarter, and our cash reserves have increased by $3.2M since the end of our 2007 fiscal year. We are continuing to upgrade and expand our sales force as we add feet on the street to stimulate revenue growth." Sisto continued, "Despite these transitional challenges, the core of the Hifn business and product family value proposition is meeting with growing acceptance and market adoption by a much wider customer set than at any time in our history, driven in the main by the ongoing convergence of networking and storage. We remain confident in our technology and close customer relationships going forward in 2008 and we have the financial resources to pursue our strategy," Sisto concluded.

Hifn also announced today that its Board of Directors has approved a stock repurchase program under which Hifn may repurchase up to $8 million of its common stock. Under this stock repurchase program, until September 30, 2008, shares may be repurchased from time to time in the open market or through negotiated transactions.

"We are pleased that our Board of Directors has approved this repurchase program," commented Mr. Sisto. "This repurchase program is consistent with our commitment to enhance shareholder value."

Hifn is not obligated to purchase any shares under this stock repurchase program. Subject to applicable corporate securities laws, repurchases under this stock repurchase program may be made at such times and in such amounts as Hifn’s management deems appropriate. Purchases under this stock repurchase program can be discontinued at any time management feels additional purchases are not warranted. Hifn intends on funding the repurchases under this stock repurchase program with existing cash resources.

Hifn