The amount of digital information being created and stored by businesses, governments and other organizations is growing rapidly, particularly fixed content. Fixed content is file-based data that once created, does not typically change until deleted. Examples include digital media such as photographs, medical images, video and audio recordings; digital correspondence such as e-mail, instant messaging transcripts and voicemail; and business documents, such as invoices and purchase orders.

Fixed content is being created and stored at a faster rate than other types of content such as dynamic, transaction-oriented database information. The Enterprise Strategy Group, a market research firm, estimates that approximately 60 - 80% of all new enterprise information will be retained for business reference, compliance or discovery purposes, and that the average retention period for such information will be between four and ten years. Evolving business practices and regulations are changing the requirements placed on systems that store and manage fixed content, and are driving the need for readily-available long-term storage.

Traditionally, high-cost disk drives that are optimized for performance, such as Fibre Channel and SCSI, have been used to store dynamic, transaction-oriented database information, while fixed content has been moved onto less expensive, low-availability storage systems, such as tape and optical disk, for long-term storage. Historically, most research and development in the storage industry has focused on improving the speed and performance characteristics for managing dynamic information. However, as retention periods lengthen and demands placed on long-term storage become more complex, organizations are increasingly looking for cost-effective, intelligent storage solutions with high-availability that can scale to tackle the substantial growth of fixed content.

The Company currently offers two scalable lines of \"green\" energy efficient SATA RAID systems: SATABeast and SATABoy. The Company’s standalone SATA RAID disk-based systems are often packaged together by the Company’s channel partners or end users, with software or appliances from the Company’s technology partners to deliver client-tailored solutions. SATABeast and SATABoy also serve as the storage building blocks for the Company’s Assureon product line.

SATABeast features industry leading density of up to 42 terabytes of storage in 4U of rack space. SATABeast offers dual function Fibre Channel and iSCSI connectivity, utilizing performance RAID controllers for wire-speed read/write throughput and high input/output per second performance. SATABeast\'s advanced mechanical design provides efficient cooling for optimal thermal operation and reduces drive vibration, while delivering energy efficiency through the integration of AutoMAID technology.

SATABoy provides up to 14 terabytes of storage in 3U of rack space. SATABoy offers dual function Fibre Channel and iSCSI connectivity with wire-speed performance. SATABoy also incorporates AutoMAID technology, reducing power consumption.

The Company currently offers Assureon as an appliance, a system-level solution and as software to certain OEM customers. The ready-to-install appliance typically provides 3.75 terabytes of usable archive capacity making it well-suited to interface with e-mail archiving, medical imaging and records management, document management, litigation support and other software applications.

Cost of revenue increased $2.5 million, or 14%, to $20.4 million for the six months ended December 31, 2007, compared to $17.9 million for the six months ended December 31, 2006.

Gross profit increased $3.5 million, or 56%, to $9.7 million for the six months ended December 31, 2007, compared to $6.2 million for the six months ended December 31, 2006.

Research and development expense increased $808,000, or 46%, to $2.6 million for the six months ended December 31, 2007, compared to $1.8 million for the six months ended December 31, 2006.

Sales and marketing expense increased approximately $1.2 million, or 31%, to $5.2 million for the six months ended December 31, 2007, compared to $4.0 million for the six months ended December 31, 2006.