Ciprico: Fiscal 1Q08 Financial results

Ciprico Inc. reported revenue for the first quarter of the fiscal year 2008
ended December 31, 2007 of $2.0 million, down $0.2 million, or 9% from
the prior quarter, and $0.8 million, or 27% from the first quarter of
fiscal 2007. Gross margins improved sequentially from 26.1% last quarter
to 41.8% this quarter compared to 43% in the first quarter of the prior
year. Operating expenses increased 12% from the prior quarter and
increased $1.7 million from the quarter a year ago resulting in a net
loss of $3 million for this quarter compared to a loss of $838,000 in
the prior year first quarter.

While current revenues were disappointing the company made substantial
progress in building our software platform and customer potential while
strengthening our balance sheet. Ciprico continued to focus on bringing
its industry leading RAIDCore technology to market, and we have only
begun to have any significant penetration into the market. We have
shipped over 40,000 licenses of RAIDCore by Ciprico and we currently
have well over 100 companies evaluating the RAIDCore software with over
30 customers who have purchased RAIDCore from Ciprico. We have received
strong response from them that ultimately the ability to offer silicon
agnostic storage protection software vs. a hardware solution is a
strategic imperative.

We remain highly optimistic that the overall transition from hardware to
virtualized software data protection in the mainstream server IT and
media workstation markets will continue but while testing and OEM
consideration has met plan, adoption rates, efforts to provide security
for the software from piracy and the shipments of products incorporating
the platform have taken longer than expected.

Revenues for the quarter were adversely affected by the overall decline
in the economy evidenced in other storage vendor sales as well as the
on-going entertainment writers’ strike, the
latter which greatly affected our MediaVault
product revenues. During the quarter we did record significant revenue
related to work done on a military contract that flows through Boeing as
prime contractor. We had previously announced that we had been awarded
this contract and that we expected approximately $1 million in revenue
on the initial phase of the contract. Boeing has since indicated that
due to military requested cost reductions it is suspending further work
on this phase of the contract. We have recorded approximately $650,000
in revenue to date related to this contract. We continue to pursue
engagement on the long term aspects of this opportunity and a number of
addition military opportunities, particularly in light of the favorable
customer feedback regarding our technology and solution.

Operating expenses increased as we continue to aggressively invest in
our engineering team and our first full quarter of some sales and
marketing teams hired late in the previous quarter. General and
administrative expenses increased over the previous quarter due to
additional accounting and audit costs related to our year-end, as well
as non-capitalizable debt acquisition costs incurred in the first
quarter of fiscal 2008. These investments in research and development,
sales and marketing, and balance sheet strength resulted in a net loss
for the first quarter of $3.0 million, compared to a net loss of $2.8
million in the previous quarter.

We ended the quarter with cash and investment balances of $6.8 million,
$2.2 million higher than the prior quarter end balance of $4.6 million.
During the quarter we issued $5.2 million of convertible notes and
warrants, which produced net cash proceeds of $5.0 million. Net cash
used in operations was $2.5 million during the first quarter, which
includes our net loss of $3.0 million for the quarter adjusted for $0.3
million of non-cash charges (depreciation and stock compensation) and
$0.2 million of changes in operating assets and liabilities. We also had
$0.3 million in capital expenditures.

“The first quarter was an exciting quarter for
us in terms of customer reception to a software storage protection
platform but not for sales, but early feedback has us confident in our
strategy, said Steve Merrifield, chief executive officer. “Despite
our challenges we do believe we made significant progress last quarter,”
noting the following highlights:

• Since taking over RAIDCore Ciprico has shipped a total of over 40,000
  software licenses and controller boards
• Now have well over 100 system builders & OEMs evaluating over RAIDCore
  solution
• Over 30 customers have purchased RAIDCore from Ciprico
• Achieved a Vanguard award for our first RAIDCore based appliance, the
  MV5108 and delivered first production units
• Introduced RAIDCore technology running on Intel platforms and began
  qualification work with leading motherboard vendors

“Potential customer discussions have convinced
us of the value of the core strategy said Merrifield. As we move into
our second quarter we are focused on execution and believe we are
building momentum with our unique, virtual RAID technology. We will
begin shipments this quarter to a number of new customers running on
multiple silicon solutions as a result of the dramatic growth in
evaluations being conducted over the past two quarters. Also over the
next 90-120 days we expect to announce multiple strategic partnerships
that will accelerate RAIDCore’s market
acceptance. In addition, we will release new MediaVault and DiMeda
products utilizing our RAIDCore Technology."

"With the slower than expected adoption rates we are taking action to
evaluate strategic options and will reduce expenses to insure we are
able to realize the potential our software platform has in the market."

“We are confident we are making progress with
our customers and partners that will allow Ciprico to be successful. As
we have said in the past our revenues will be erratic near term and our
profitability will continue to be impacted by the investments we are
making to enable RAIDCore to be the solution of the future. We will
measure our progress in terms of design in wins, announcing key
partnerships and revenue growth. If we can gain additional short term
traction and reduce the time to revenue, we continue to believe a target
of doubling our revenue in fiscal 2008 may be achievable. We remain
confident Ciprico will return to profitability in fiscal 2009.”

Ciprico Inc.