Revenues for the three-month period were $6.0 million, compared to $5.8 million for the same period in 2000. The net income for the three-month period in 2001 was $431,000, or $0.06 per share on a diluted basis, compared to $357,000, or $0.05 per share on a diluted basis, in 2000.

During the quarter, SafeNet shipped its first significant licenses of SecureIP(TM) to OEM customers. Three SafeNet customers licensed the SecureIP technology, which provides OEM customers the building blocks for security implementations. The revenue stream from SecureIP licenses includes an upfront license fee, and recurring revenue through royalty payments, and annual maintenance fees.

Also, at the end of the quarter, SafeNet released its Next Generation VPN Client, SoftRemote(TM), with features including personal firewall capabilities and support for strong two-factor authentication through industry-standard smart cards. Although not released until the end of the quarter, SafeNet shipped SoftRemote to four customers. Standard terms for SoftRemote deals yield recurring revenues over a three year period rather than all upfront revenues as in past generation VPN Client sales.

We are pleased that SafeNet was able to remain profitable during this period when inventory reduction programs at several of our OEM customers reduced revenue below our expectations, commented Anthony Caputo, SafeNet’s Chairman and CEO. We have been implementing new development and marketing programs aimed at expanding our revenue base beyond the networking industry. During the quarter several new OEM customers in the wireless and broadband markets made significant commitments to SafeNet technology. This is a clear indication that our SecureIP technology, as well as our development and marketing strategies, is sound. We will continue to execute on these sound strategies, and at the same time manage our expenses in order to remain profitable as we seek to gain important new customers.

With the renaming of SafeNet technology to SecureIP in January, and the announcement of the ability to purchase it in embeddable IP modules, important customers in the first quarter chose SafeNet technology for single and multiple implementations. Centillium Communications, who designs and markets communications chipset solutions for DSL, home networking, and voice-over networks, licensed SecureIP to provide a next-generation DSL encryption solution for manufacturers of telecommunications equipment. SecureIP was also licensed by a major semi-conductor company for applications including broadband access, cell phones, and PDAs.

Our end-user VPN business performed well during the quarter with continued interest from several government and financial institutions. Several organizations placed large orders for SafeNet products including Lockheed Martin, the Social Security Administration, and Citicorp.

In the first quarter of 2001, SafeNet made several important announcements including the introduction of its new VPN software, SoftRemote, and several new OEM customers including WorldCom, MossBeach, NetMax, Secure Computing, and Centillium Communications. SafeNet continued its branding initiative with the kick off of the SafeNet Secure Tour in Washington, DC, a four-month cross-country bus tour, which was successful in capturing a national audience with appearances on NBC, CBS, CNBC, and BloombergTV. SafeNet also entered into a strategic partnership with Zone Labs, a leading personal firewall provider, to begin integrating the companies’ technologies together.

SOURCE: COMPANY PRESS RELEASE