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Ciprico Reports Q1

MINNEAPOLIS -- Ciprico Inc. (NASDAQ: CPCI) (the Company”) today 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.

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