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|   | þ | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|--------|--------|---------------------------------------------------------------------------------------------------|

| For      the Quarterly Period Ended December 31,2008 |
|------------------------------------------------------|

|   | o | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|--------|---|-----------------------------------------------------------------------------------------------------|

| Delaware                             | 33-0732700                  |
|--------------------------------------|-----------------------------|
| (State      or other jurisdiction of | (IRS      Employer          |
| Incorporation      or Organization)  | Identification      Number) |

| Large accelerated      filer o | Accelerated filer      þ    |   |
|--------------------------------|----------------------------------|--------|
|                           |                             |   |
| Non-accelerated      filer o   | Smaller reporting      company o |   |

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Table of Contents

HIFN, INC.

| PART I.           | FINANCIAL INFORMATION                                                                                          |          |
|-------------------|----------------------------------------------------------------------------------------------------------------|---------------|
|              |                                                                                                           |          |
| Item 1.           | Financial Statements (unaudited)                                                                               |          |
|              |                                                                                                           |          |
|              | Condensed Consolidated Balance Sheets   as of December 31, 2008 and September 30,      2008     |  1       |
|              |                                                                                                           |          |
|              | Condensed Consolidated Statements of      Operationsfor the three months ended December 31, 2008 and      2007 |  2       |
|              |                                                                                                           |          |
|              | Condensed Consolidated Statements of Cash      Flowsfor the three months ended December 31, 2008 and      2007 |  3       |
|              |                                                                                                           |          |
|              | Notes to Condensed Consolidated Financial      Statements                                                      | 4 – 12  |
|              |                                                                                                           |          |
| Item 2.           | Management’s Discussion and Analysis of Financial Condition      and Results of Operations               | 13 – 19 |
|              |                                                                                                           |          |
| Item 3.           | Quantitative and Qualitative Disclosures About Market      Risk                                                | 19            |
|              |                                                                                                           |          |
| Item 4.           | Controls and Procedures                                                                                        | 19            |
|              |                                                                                                           |          |
|              |                                                                                                           |          |
| PART II.          | OTHER INFORMATION                                                                                              |          |
|              |                                                                                                           |          |
| Item 1A.          | Risk Factors                                                                                                   | 20            |
|              |                                                                                                           |          |
| Item 4.           | Submission of Matters to a Vote of Security      Holders                                                       | 20            |
|              |                                                                                                           |          |
| Item 6.           | Exhibits                                                                                                       | 20            |
|              |                                                                                                           |          |
| Signatures        | 21                                                                                                             |
|              |                                                                                                           |
| Index to Exhibits |                                                                                                           |
|              |                                                                                                           |
| Exhibit 31.1      |                                                                                                           |
|              |                                                                                                           |
| Exhibit 31.2      |                                                                                                           |
|              |                                                                                                           |
| Exhibit 32.1      |                                                                                                           |
|              |                                                                                                           |
| Exhibit 32.2      |                                                                                                           |

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Table of Contents

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

| HIFN, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONDENSED      CONSOLIDATED BALANCE SHEETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
| (in      thousands)(unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | December      31,2008 |   | September      30, 2008 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |
| CURRENT      ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |
|          Cash and cash      equivalents                                                                                                              |   | $ | 11,267 |   | $ | 9,492 |   |
|          Short-term      investments                                                                                                                 |   |   | 23,585 |   |   | 24,879 |   |
|          Trade accounts receivable, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   | 3,639 |   |   | 6,651 |   |
|          Inventories (finished      goods)                                                                                                           |   |   | 2,781 |   |   | 2,283 |   |
|          Prepaid expenses and other current      assets                                                                                              |   |   | 1,406 |   |   | 1,482 |   |
|           Total current assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | 42,678 |   |   | 44,787 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |
| Property      and equipment,      net                                                                                                                     |   |   | 1,857 |   |   | 1,927 |   |
| Intangible      assets,      net                                                                                                                          |   |   | 2,283 |   |   | 3,032 |   |
| Goodwill                                                                                                                                                  |   |   | 1,425 |   |   | 1,425 |   |
| Other      assets,      net                                                                                                                               |   |   | 2,544 |   |   | 2,116 |   |
|                  Total assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $ | 50,787 |   | $ | 53,287 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |
| CURRENT      LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |
|          Accounts      payable                                                                                                                       |   | $ | 1,151 |   | $ | 1,930 |   |
|          Accrued expenses and other current      liabilities                                                                                         |   |   | 3,458 |   |   | 3,744 |   |
|           Total current      liabilities                                                                                                                            |   |   | 4,609 |   |   | 5,674 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |
| STOCKHOLDERS’      EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |
|          Common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   | 15 |   |   | 15 |   |
|          Additional paid-in      capital                                                                                                             |   |   | 175,990 |   |   | 175,164 |   |
|          Accumulated other comprehensive income      (loss)                                                                                          |   |   | 134 |   |   | (102 | ) |
|          Accumulated      deficit                                                                                                                    |   |   | (123,969 | ) |   | (121,472 | ) |
|          Treasury stock, at cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | (5,992 | ) |   | (5,992 | ) |
|         Total stockholders’      equity                                                                                                                                 |   |   | 46,178 |   |   | 47,613 |   |
|                  Total liabilities and stockholders’ equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | $ | 50,787 |   | $ | 53,287 |   |

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| HIFN, INC.CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| (in      thousands, except per share data)(unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | December      31, |   |
| Three      Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 2008 |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |
| Net      revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |
| Processors                                                                                                                                                                                   |   | $ | 6,907 |   | $ | 9,985 |   |
| Software      licenses and      other                                                                                                                                                        |   |   | 1,051 |   |   | 944 |   |
|                Total net      revenues                                                                                                                                   |   |   | 7,958 |   |   | 10,929 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |
| Costs      and operating expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |
| Cost      of revenues –      processors                                                                                                                                                |   |   | 2,251 |   |   | 3,320 |   |
| Cost      of revenues – software licenses and      other                                                                                                                               |   |   | 153 |   |   | 152 |   |
| Research      and      development                                                                                                                                                           |   |   | 3,431 |   |   | 3,602 |   |
| Sales      and      marketing                                                                                                                                                                |   |   | 2,130 |   |   | 2,394 |   |
| General      and      administrative                                                                                                                                                         |   |   | 1,940 |   |   | 1,722 |   |
| Amortization      of      intangibles                                                                                                                                                        |   |   | 749 |   |   | 749 |   |
|                Total costs and operating      expenses                                                                                                              |   |   | 10,654 |   |   | 11,939 |   |
| Loss from      operations                                                                                                                                           |   |   | (2,696 | ) |   | (1,010 | ) |
|         Interest      income                                                                                                                                                       |   |   | 231 |   |   | 462 |   |
|         Other expenses,      net                                                                                                                                                   |   |   | 13 |   |   | (117 | ) |
| Loss before income      taxes                                                                                                                                       |   |   | (2,452 | ) |   | (665 | ) |
| Provision      for income      taxes                                                                                                                                |   |   | 45 |   |   | 15 |   |
| Net      loss                                                                                                                                                       |   | $ | (2,497 | ) | $ | (680 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |
| Net      loss per share, basic and      diluted                                                                                                                     |   | $ | (0.17 | ) | $ | (0.05 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |
| Weighted      average shares outstanding, basic and      diluted                                                                                                    |   |   | 14,693 |   |   | 14,776 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |

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| HIFN, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
| (in      thousands)(unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | December      31, |   |
| Three      Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 2008 |   |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |
| Cash      flows from operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |
| Net      loss                                                                                                                                                                                      |   | $ | (2,497 | ) |   | $ | (680 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| Adjustments      to reconcile net loss to net cash provided by operating      activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |
|          Depreciation and      amortization                                                                                                                                                   |   |   | 491 |   |   |   | 387 |   |
|          Amortization of intangible      assets                                                                                                                                               |   |   | 749 |   |   |   | 749 |   |
|          Stock-based compensation expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   | 638 |   |   |   | 433 |   |
|          Short-term investment      impairment                                                                                                                                                |   | ─ |   |   |   | 90 |   |
|          Provision for excess and obsolete      inventory                                                                                                                                     |   |   | 70 |   |   |   | 22 |   |
|          Benefit from doubtful      accounts                                                                                                                                                  |   |   | (11 | ) |   | ─ |   |
| Changes      in assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |
|          Accounts      receivable                                                                                                                                                             |   |   | 3,023 |   |   |   | (1,413 | ) |
|          Inventories                                                                                                                                                                          |   |   | (568 | ) |   |   | 219 |   |
|          Prepaid expenses and other current      assets                                                                                                                                       |   |   | 76 |   |   |   | 125 |   |
|          Other      assets                                                                                                                                                                    |   |   | (633 | ) |   |   | (83 | ) |
|          Accounts      payable                                                                                                                                                                |   |   | (779 | ) |   |   | 953 |   |
|          Accrued expenses and other current      liabilities                                                                                                                                  |   |   | (286 | ) |   |   |   29 |   |
|           Net cash provided by operating      activities                                                                                                                                                |   |   | 273 |   |   |   | 831 |   |
| Cash      flows from investing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Maturities      of short-term      investments                                                                                                                                                     |   |   | 7,320 |   |   |   | 11,571 |   |
| Purchases      of short-term      investments                                                                                                                                                      |   |   | (5,790 | ) |   |   | (5,134 | ) |
| Purchases      of property and      equipment                                                                                                                                                      |   |   | (216 | ) |   |   | (204 | ) |
| Refund      of escrow funds relating to Siafu      acquisition                                                                                                                                     |   | ─ |   |   |   |   (150 | ) |
|           Net cash provided by investing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   | 1,314 |   |   |   | 6,083 |   |
| Cash      flows from financing activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| Proceeds      from issuance of common stock for stock option exercises and employee      stock purchase plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | 188 |   |   |   | 1,497 |   |
|           Net cash provided by financing      activities                                                                                                                                                |   |   | 188 |   |   |   | 1,497 |   |
| Net increase in cash and cash      equivalents                                                                                                                  |   |   | 1,775 |   |   |   | 8,411 |   |
| Cash      and cash equivalents at beginning of      period                                                                                                      |   |   | 9,492 |   |   |   | 17,049 |   |
| Cash      and cash equivalents at end of      period                                                                                                            |   | $ | 11,267 |   |   | $ | 25,460 |   |

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HIFN, INC.

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | December      31,2008 |         | September      30, 2008 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------------|-------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | ($      in thousands) |         |
| Property      and equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                  |         |                    |   |
|              Computer      equipment                                                                                                                      |   | $                     | 6,394        |                    | $      | 6,181 |   |
|              Furniture and      fixtures                                                                                                                  |   |                  | 915          |                    |   | 914 |   |
|              Leasehold      improvements                                                                                                                  |   |                  | 823          |                    |   | 822 |   |
|              Office      equipment                                                                                                                        |   |                  |  745    |                    |   | 744 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                  | 8,877        |                    |   | 8,661 |   |
|              Less: accumulated depreciation and      amortization                                                                                         |   |                  |  (7,020 | )                       |   | (6,734 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                     | 1,857        |                    | $      | 1,927 |   |

| Intangible      assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |    |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|
|          Developed and core      technology                                                                                                               |   | $      | 14,983  |   | $      | 14,983 |   |
|              Less: accumulated      amortization                                                                                      |   |   | (12,700 | )      |   | (11,951 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $      | 2,283   |   | $      | 3,032 |   |

| Fiscal      year ending September 30, |   |   |   |   |   |   |
|---------------------------------------|--------|--------|--------|--------|--------|--------|
| 2009      (9 months ended)            |   | $      | 482    |   |   |   |   |
|          2010          |   |   | 643    |   |   |   |   |
|          2011          |   |   | 643    |   |   |   |   |
|          2012          |   |   | 515    |   |   |   |   |
| Total      estimated amortization     |   | $      | 2,283  |   |   |   |   |

| Other      assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|              Design tools and other licensed intellectual property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $      | 5,417  |   | $      | 4,794 |   |
|              Less: Accumulated      amortization                                                                                         |   |   | (3,185 | )      |   | (2,981 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   | 2,232  |   |   | 1,813 |   |
|              Other      receivables                                                                                                      |   |   | 136    |   |   | 129 |   |
|              Refundable      deposits                                                                                                    |   |   | 176    |   |   | 174 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $      | 2,544  |   | $      | 2,116 |   |

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| Accrued      expenses and other current liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|              Accrued vacant facility lease      cost                                                                                              |   | $      | 323    |   | $      | 376 |   |
|              Accrued non-recurring engineering      costs                                                                                         |   |   | 319    |   |   | 765 |   |
|              Compensation and employee      benefits                                                                                              |   |   | 1,743  |   |   | 1,830 |   |
|              Deferred income and      revenue                                                                                                     |   |   | 630    |   |   | 583 |   |
|              Income taxes      payable                                                                                                            |   |   | 64     |   |   | 20 |   |
|              Other                                                                                                                                |   |   | 379    |   |   | 170 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $      | 3,458  |   | $      | 3,744 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Quoted      Prices      in Active      Markets      for Identical      InstrumentsLevel      1 |   |   | Significant      Other      Observable      InputsLevel      2 |    |    | Significant      Unobservable InputsLevel      3 |    | Total                                                                     |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------|---------|---------|--------------------------------------------------|---------|---------------------------------------------------------------------------|--------|
|          Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                           |   |   |                                                           |    |    |                                             |    |                                                                      |   |
|          Money market      funds                                                                                              |   | $                                                                                              | 8,812  |   |                                                           | $  | ─ |                                             | $       |            ─ |   | $ | 8,812 |   |
|          Government agency discount      notes                                                                                |   | ─                                                                                        |   |   |                                                           | 10,387  |    |                                             | ─ |                                                                      |   | 10,387 |   |
|          Corporate      securities                                                                                            |   | ─                                                                                        |   |   |                                                           | 6,245   |    |                                             | ─ |                                                                      |   | 6,245 |   |
|          Government agency      obligation                                                                                    |   | ─                                                                                        |   |   |                                                           | 1,876   |    |                                             | ─ |                                                                      |   | 1,876 |   |
|          Commercial      paper                                                                                                |   | ─                                                                                        |   |   |                                                           | 5,545   |    |                                             | ─ |                                                                      |   | 5,545 |   |
|          Asset backed and other      securities                                                                               |   | ─                                                                                        |   |   |                                                           | 6       |    |                                             | ─ |                                                                      |   | 6 |   |
|          Total available-for-sale securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $                                                                                              | 8,812  |   |                                                           | $       | 24,059  |                                             | $       |            ─ |   | $ | 32,871 |   |

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| Years      Ended                                                                                              |   | December      31, 2008      |   | September      30, 2008 |       |
|---------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|-------------------------|------------|
|                                                                                                          |   |                        |   |                    | Unrealized |   |   |   |   |   |   |   | Unrealized |   |   |   |   |
|                                                                                                          |   | Cost                        |   |  Gross Gains       |       |  Gross      Losses |   |  Fair      Value |   |  Cost |   |  Gross      Gains |   |  Gross      Losses |   |  Fair      Value |   |
|                                                                                                          |   |  ($      in thousands) |   |
|          Money market funds                                                                    |   | $                           | 8,812  |                    | $          | — |   | $ | — |   | $ | 8,812 |   | $ | 1,589 |   | $ | — |   | $ | — |   | $ | 1,589 |   |
|          Corporate securities                                                                  |   |                        | 6,236  |                    |       | 16 |   |   | (7 | )  |   | 6,245 |   |   | 7,311 |   |   | 1 |   |   | (80 | )  |   | 7,232 |   |
|          Government agency obligations                                                    |   |                        | 1,859  |                    |       | 17 |   |   |   |   |   | 1,876 |   |   | 1,020 |   |   | — |   |   | (1 | ) |   | 1,019 |   |
|          Government agency discount             notes  |   |                        | 10,287 |                    |       | 100 |   |   | — |   |   | 10,387 |   |   | 4,982 |   |   | 2 |   |   | (2 | ) |   | 4,982 |   |
|          Commercial paper                                                                      |   |                        | 5,537  |                    |       | 8 |   |   | — |   |   | 5,545 |   |   | 18,675 |   |   | — |   |   | (22 | ) |   | 18,653 |   |
|          Asset backed and other securities                                                     |   |                        | 6      |                    |       | — |   |   | — |   |   | 6 |   |   | 6 |   |   | — |   |   | — |   |   | 6 |   |
|          Total available-for-sale securities                                                   |   | $                           | 32,737 |                    | $          | 141 |   | $ | (7 | ) | $ | 32,871 |   | $ | 33,583 |   | $ | 3 |   | $ | (105 | ) | $ | 33,481 |   |

| Years      Ended                                  |   | December      31,2008 |   | September      30, 2008 |   |
|---------------------------------------------------|--------|-----------------------|--------|------------------------------|--------|
|                                              |   | ($      in thousands) |   |
|          Included in:              |   |                  |   |                         |   |
|          Cash and cash equivalents |   | $                     | 9,286  |                         | $      | 8,602 |   |
|          Short-term investments    |   |                  | 23,585 |                         |   | 24,879 |   |
|                                              |   | $                     | 32,871 |                         | $      | 33,481 |   |
|          Contractual maturities:   |   |                  |   |                         |   |   |   |
|          Due in less than one year |   | $                     | 32,871 |                         | $      | 33,481 |   |

|                                                                           |   | December      31, |       |
|--------------------------------------------------------------------------------|--------|-------------------|------------|
| Three      Months Ended                                                        |   | 2008              |       | 2007 |   |
|                                                                           |   |              |       |
|          Basic weighted-average common shares                   |   |              | 14,693,149 |   |   | 14,776,498 |   |
|          Stock options                                          |   |              | —    |   |   | — |   |
|          RSUs                                                   |   |              | —    |   |   | — |   |
|          Weighted-average common shares for diluted computation |   |              | 14,693,149 |   |   | 14,776,498 |   |

|                                                                                              |   | December      31, |      |
|---------------------------------------------------------------------------------------------------|--------|-------------------|-----------|
| Three      Months Ended                                                                           |   | 2008              |      | 2007 |   |
|                                                                                              |   |              |      |
|          In-the-money stock options and RSUs                                       |   |              | 113,628   |   |   | 208,370 |   |
|          Out-of-the-money stock options                                            |   |              | 3,062,311 |   |   | 2,645,015 |   |
|          Weighted stock options outstanding and RSUs to purchase common      stock |   |              | 3,175,939 |   |   | 2,853,385 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | December      31,   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|
|          Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 2008                |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | (in      thousands) |   |
| Net      loss                                                                                                                                                                                   |   | $                   | (2,497 | ) | $ | (680 | ) |
| Unrealized      gain (loss) on short-term investments,      net                                                                                                                                 |   |                | 236    |   |   | (89 | ) |
| Reclassification      adjustment for losses included in net      income                                                                                                                    |   |   ─ |   |   |   90 |   |
| Comprehensive      loss                                                                                                                                                                         |   | $                   | (2,261 | ) | $ | (679 | ) |

|                              |                                                  | Options      Outstanding |   | Options      Vested and Exercisable                     |   |
|-----------------------------------|-------------------------------------------------------|--------------------------|--------|---------------------------------------------------------|--------|
| Range      ofExercise      Prices |                                                  |   Quantity     |   | Weighted      AverageRemaining      Life(in      years) |   | Weighted      AverageExercise      Price |   | Quantity |   | Weighted      AverageExercise      Price |   |
|                              |                                                  |                     |   |                                                    |   |   |   |   |   |   |   |
| $                                 |   2.03 - $        4.12                 |                     |   | 363,390                                                 |   |   | 7.38 |   | $ | 3.31 |   |   | 149,505 |   | $ | 4.06 |   |
|                              |        4.15 -      4.85 |                     |   | 328,750                                                 |   |   | 8.30 |   |   | 4.68 |   |   | 159,999 |   |   | 4.85 |   |
|                              |        4.90 -      5.10 |                     |   | 318,583                                                 |   |   | 7.60 |   |   | 5.10 |   |   | 176,200 |   |   | 5.09 |   |
|                              |        5.11 -      5.93      |                     |   | 310,138                                                 |   |   | 8.20 |   |   | 5.70 |   |   | 110,359 |   |   | 5.59 |   |
|                              |        5.94 -      6.33      |                     |   | 327,028                                                 |   |   | 7.88 |   |   | 6.16 |   |   | 228,374 |   |   | 6.16 |   |
|                              |        6.45 -      6.71      |                     |   | 302,543                                                 |   |   | 4.42 |   |   | 6.63 |   |   | 244,071 |   |   | 6.64 |   |
|                              |        6.74 -      8.35      |                     |   | 313,217                                                 |   |   | 6.25 |   |   | 7.44 |   |   | 268,769 |   |   | 7.45 |   |
|                              |        8.43 -    11.17            |                     |   | 328,050                                                 |   |   | 4.16 |   |   | 9.97 |   |   | 328,050 |   |   | 9.97 |   |
|                              | 11.52      -    16.00                  |                     |   | 310,248                                                 |   |   | 2.95 |   |   | 14.32 |   |   | 310,248 |   |   | 14.32 |   |
|                              | 16.13      -    69.88                  |                     |   | 78,143                                                  |   |   | 1.73 |   |   | 36.41 |   |   | 78,143 |   |   | 36.41 |   |
| $                                 |        2.03 - $ 69.88                       |                     |   | 2,980,090                                               |   |   | 6.26 |   | $ | 7.73 |   |   | 2,053,718 |   | $ | 9.00 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | Shares |     | Weighted      AverageFair      ValuePer      Share |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------|----------------------------------------------------|--------|
|          Balance at September 30,      2008                                                                                                                    |   |   | 287,059  |                                               | $      | 5.91 |   |
| RSUs      Granted                                                                                                                                                                            |   |   | 456,750  |                                               |   | 2.49 |   |
| RSUs      Vested                                                                                                                                                                             |   |   | (62,085  | )                                                  |   | 6.19 |   |
| RSUs      Forfeited/Cancelled                                                                                                                                                                |   |   | (167,500 | )                                                  |   | 5.93 |   |
|          Balance at December 31,      2008                                                                                                                     |   |   | 514,224  |                                               | $      | 2.83 |   |

|                                        |   | December      31,   |   |
|---------------------------------------------|--------|---------------------|--------|
| Three      Months Ended                     |   | 2008                |   | 2007 |   |
|                                        |   | (in      thousands) |   |
| Cost      of revenues                       |   | $                   | 13     |   | $ | 7 |   |
| Research      and development               |   |                | 212    |   |   | 168 |   |
| Sales      and marketing                    |   |                | 264    |   |   | 99 |   |
| General      and administrative             |   |                | 149    |   |   | 159 |   |
| Total      stock-based compensation expense |   | $                   | 638    |   | $ | 433 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | December      31,   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|
|          Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 2008                |   | 2007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | (in      thousands) |   |
|          North America:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                |   |   |   |
|              United      States                                                                                                                                                       |   | $                   | 2,201  |   | $ | 4,719 |   |
|              Other                                                                                                                                                                    |   |                | 271    |   |   | 116 |   |
|                  Total North      America                                                                                                                         |   |                | 2,472  |   |   | 4,835 |   |
|          Asia:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                |   |   |   |   |   |
|              Hong      Kong                                                                                                                                                                |   |                | 3,685  |   |   | 3,970 |   |
|              Japan                                                                                                                                                                         |   |                | 347    |   |   | 198 |   |
|              Thailand                                                                                                                                                                      |   |                | 158    |   |   | 215 |   |
|              China                                                                                                                                                                         |   |                | 62     |   | ─ |   |
|              Taiwan                                                                                                                                                                        |   |                | 48     |   |   | 20 |   |
|              Malaysia                                                                                                                                                                      |   |                | 37     |   |   | 532 |   |
|              Singapore                                                                                                                                                                     |   |                | 28     |   |   | 149 |   |
|              Korea                                                                                                                                                                         |   |                | 12     |   | ─ |   |
|                  Total      Asia                                                                                                                                       |   |                | 4,377  |   |   | 5,084 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                |   |   |   |   |   |
|          Europe and      other                                                                                                                                                                            |   |                | 1,109  |   |   | 1,010 |   |
|                  Total                                                                                                                                            |   | $                   | 7,958  |   | $ | 10,929 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | December      31, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|
|          Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2008              |   | 2007 |   |
|          Cisco Systems, Inc. and its contract      manufacturers                                                                                                              |   |              | 38%    |   |   | 50% |   |
|          EMC      Corporation                                                                                                                                                 |   |              | 10%    |   |   | 13% |   |
|          Hewlett-Packard                                                                                                                                                      |   |              | 10%    |   |   |  4      % |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |              | 58%    |   |   | 67% |   |

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Item 2. 

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | December      31,           |   |                        |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|-----------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 2008                        |   | 2007                        |   |  Year- |   |
|          Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                           |   | %      of net revenues |   | $ |   | %      of net revenues |   | over-Year      Growth |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | (dollars      in thousands) |   |
|          Processors                                                                     |   | $                           | 6,907  |                        |   | 87% |   | $ | 9,985 |   |   | 91% |   |   | (31)% |   |
|          Software licenses and other                                                                                                                                                                                                                                                                                                                                                                                                        |   |                        | 1,051  |                        |   | 13% |   |   | 944 |   |   | 9% |   |   | 11% |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $                           | 7,958  |                        |   | 100% |   | $ | 10,929 |   |   | 100% |   |   | (27)% |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | December      31, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|
|          Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2008              |   | 2007 |   |
|          Cisco Systems, Inc. and its contract      manufacturers                                                                                                              |   |              | 38%    |   |   | 50% |   |
|          EMC      Corporation                                                                                                                                                 |   |              | 10%    |   |   | 13% |   |
|          Hewlett-Packard                                                                                                                                                      |   |              | 10%    |   |   |  4      % |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |              | 58%    |   |   | 67% |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | December      31,           |   |                           |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|--------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 2008                        |   | 2007                           |   |   |   |
|          Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                           |   | %      of revenuecategory |   | $ |   | %      of revenue      category |   | Year-over-Year      Change |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | (dollars      in thousands) |   |
|          Processors                                                                     |   | $                           | 2,251  |                           |   | 33% |   | $ | 3,320 |   |   | 33% |   |   | (32)% |   |
|          Software licenses and other                                                                                                                                                                                                                                                                                                                                                                                                        |   |                        | 153    |                           |   | 15% |   |   | 152 |   |   | 16% |   |   | 1% |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $                           | 2,404  |                           |   | 30% |   | $ | 3,472 |   |   | 32% |   |   | (31)% |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | December      31,           |   |  Year-over-Year |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|----------------------|--------|
|          Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 2008                        |   | 2007                 |   | Change |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | (dollars      in thousands) |   |                 |   |
|          Research & development      expenses                                                                                                      |   | $                           | 3,431  |                 | $      | 3,602 |   |   | (5)% |   |
|          As a percentage of net revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                        | 43%    |                 |   | 33% |   |   |   |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | December      31,           |   |  Year-over-Year |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|----------------------|--------|
|          Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 2008                        |   | 2007                 |   | Change |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | (dollars      in thousands) |   |                 |   |
|          Sales & marketing      expenses                                                                                                      |   | $                           | 2,130  |                 | $      | 2,394 |   |   | (11)% |   |
|          As a percentage of net revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                        | 27%    |                 |   | 22% |   |   |   |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | December      31,           |   |  Year-over-Year |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|----------------------|--------|
|          Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 2008                        |   | 2007                 |   | Growth |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | (dollars      in thousands) |   |                 |   |
|          General & administrative      expenses                                                                                                      |   | $                           | 1,940  |                 | $      | 1,722 |   |   | 13% |   |
|          As a percentage of net revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                        | 24%    |                 |   | 16% |   |   |   |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | December      31,           |   |  Year-over-Year |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|----------------------|--------|
|          Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 2008                        |   | 2007                 |   | Growth |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | (dollars      in thousands) |   |                 |   |
|     Amortization      of      intangibles                                                                                                      |   | $                           | 749    |                 | $      | 749 |   |   | ─% |   |
|          As a percentage of net revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                        | 9%     |                 |   | 7% |   |   |   |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | December      31,           |   |  Year-over-Year |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|----------------------|--------|
|          Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 2008                        |   | 2007                 |   | Growth |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (dollars      in thousands) |   |                 |   |
|          Interest income and other expenses,      net                                                                                                      |   | $                           | 244    |                 | $      | 345 |   |   | (29)% |   |
|          As a percentage of net      revenues                                                                                                              |   |                        | 3%     |                 |   | 3% |   |   |   |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | December      31,           |   |  Year-over-Year |              |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|----------------------|-------------------|
|          Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 2008                        |   | 2007                 |              | Growth |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | (dollars      in thousands) |   |                 |              |
|          Provision for income      taxes                                                                                                           |   | $                           | 45     |                 | $                 | 15 |   |   | 200% |   |
|          As a percentage of net      revenues                                                                                                      |   |                        | 1%     |                 | Less      than 1% |   |   |   |   |

|                                                              |   | December      31,   |   |
|-------------------------------------------------------------------|--------|---------------------|--------|
|          Three Months Ended                        |   | 2008                |   | 2007 |   |
|                                                              |   | (in      thousands) |   |
|          Net cash provided by operating activities |   | $                   | 273    |   | $ | 831 |   |
|          Net cash provided by investing activities |   |                | 1,314  |   |   | 6,083 |   |
|          Net cash provided by financing activities |   |                | 188    |   |   | 1,497 |   |
| Net increase in cash and cash      equivalents                    |   | $                   | 1,775  |   | $ | 8,411 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                |        | Payments      Due By Period |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|-------------|-----------------------------|--------|
|          Contractual Obligations                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | Total               |        | Less      than1      year   |   | 1      – 3years |   | 3      – 5years |   | More      than 5 years |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | (in      thousands) |        |
|          Operating lease      commitments                                                                       |   | $                   | 3,319       |                        | $      | 2,121 |   | $ | 1,198 |   | $ | ─ |   | $ | ─ |   |
|          Inventory Purchases                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                | 1,998       |                        |   | 1,998 |   |   | ─ |   |   | ─ |   |   | ─ |   |
|          Non-recurring engineering expense                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                |  223   |                        |   |  223 |   |   | ─ |   |   | ─ |   |   | ─ |   |
|          Totals                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $                   |  5,540 |                        | $      |  4,342 |   | $ |  1,198 |   | $ | ─ |   | $ | ─ |   |

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Item 3. 

Item 4. 

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PART II

Item 1A.

Item 4.

|   |                   |   |  Votes      for: |  Votes      withheld: |   |
|--------|------------------------|--------|-----------------------|----------------------------|--------|
|   | Richard M.      Noling |   |  9,655,673       |  1,615,335            |   |

|   | Votes      for:      |  11,165,696 |   |
|--------|---------------------------|------------------|--------|
|   | Votes      against:  |  44,535     |   |
|   | Abstentions:         |  60,777     |   |

Item6. 

| Exhibit Number                            |  Exhibit                                                                                                                                               | Incorporated      by Reference |             |
|------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|------------------|
| Form                                           | File      No.                                                                                                                                               | Exhibit                        | Filing      Date | Filed      Herewith |
|                                           |                                                                                                                                                        |                           |             |   |   |   |
|             31.1 | Certification      of Chief Executive Officer pursuant to Rule 13a-14(a) or      15d-14(a)                                                                  |                           |             |   |   | X |
|             31.2 | Certification      of Chief Financial Officer pursuant to Rule 13a-14(a) or      15d-14(a)                                                                  |                           |             |   |   | X |
|             32.1 | Certification      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |                           |             |   |   | X |
|             32.2 | Certification      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |                           |             |   |   | X |

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SIGNATURES

|                                    | hi/fn,      inc.(Registrant)                                                                                                 |
|-----------------------------------------|------------------------------------------------------------------------------------------------------------------------------|
|   Date:      February 6, 2009 |   By: /s/ William R. Walker                                                                                        |
|                                    | William      R. WalkerVice      President, Finance, Chief Financial Officer and      Secretary(duly      authorized officer) |

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INDEX TO EXHIBITS

| Exhibit Number                            |  Exhibit                                                                                                                                               | Incorporated      by Reference |             |
|------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|------------------|
| Form                                           | File      No.                                                                                                                                               | Exhibit                        | Filing      Date | Filed      Herewith |
|                                           |                                                                                                                                                        |                           |             |   |   |   |
|             31.1 | Certification      of Chief Executive Officer pursuant to Rule 13a-14(a) or      15d-14(a)                                                                  |                           |             |   |   | X |
|             31.2 | Certification      of Chief Financial Officer pursuant to Rule 13a-14(a) or      15d-14(a)                                                                  |                           |             |   |   | X |
|             32.1 | Certification      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |                           |             |   |   | X |
|             32.2 | Certification      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |                           |             |   |   | X |

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