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Hirsch International Corp. Reports Second Quarter Results

HAUPPAUGE, N.Y.-(Business Wire)-August 12, 2008 - Hirsch International Corp. (NASDAQ: HRSH, http://www.hirschinternational.com), the leading provider of advanced embroidery, screen-printing, textile laser systems, and digital printing and services to the North American graphic and decorated apparel marketplace, reports its financial results for the second quarter ended June 30, 2008. Hirsch's net loss for the quarter ended June 30, 2008 was $1.0 million or $0.11 per diluted share. This compares to net income of $0.76 million or $0.08 per diluted share for the prior year quarter.

Management Comment

"It is evident that we are operating in a difficult economic environment with declining consumer confidence. Beginning in 2007 and continuing in 2008 we have seen overall weakness in capital expenditures throughout the graphic and decorated apparel industry. During the first half of 2008, we experienced a 31% decrease in revenue in our legacy embroidery segment over last year's first half," said Paul Gallagher, President and Chief Executive Officer of Hirsch International. "On a more positive note, sales of textile laser, screen printing, and digital printing equipment, all new products added over the past two years, have increased 30% over the same six months compared to last year."

"Additional pressure has resulted from the continued weakness in the US dollar as compared to the currencies in the countries where our equipment is produced, on both market prices and profit margins. The overall effect to our bottom-line results is disappointing and unacceptable and while our results do reflect overall industry pressures and weaker economic conditions, our Company is addressing the challenges head-on and adjusting our near-term strategic direction."

"Subsequent to the second quarter, on August 4th, 2008, Hirsch acquired 80% of the outstanding equity interest in U.S. Screen Print and Inkjet Technology ("U. S. Screen"). U.S. Screen has a global presence with revenues of approximately $18 million in 2007 and is headquartered in Tempe, AZ. For twenty-nine years, U. S. Screen has provided the decorated and graphic apparel industry with a wide range of educational services, software and supplies and over the past four years designed and produced the worldwide industry leading digital inkjet garment printer. As part of the acquisition, a wholly owned subsidiary of Hirsch will also provide working capital for the expansion of U.S. Screen Print and Inkjet Technology's business."

Mr. Gallagher concluded, "Our balance sheet and liquidity position are solid, and we are committed to keeping them that way. We will continue to stay focused on this mission with the best interests of our shareholders always at the forefront of our efforts." -0- *T Income Summary (Unaudited) (in thousands, except EPS) Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2008 2007 2008 2007 ————— ————- ————- ————- Revenues $10,188 $12,200 $21,880 $26,234 Operating Expenses 4,436 3,826 9,123 8,364 ————— ————- ————- ————- Operating (Loss) Income (1,043) 732 (1,782) 1,543 ————— ————- ————- ————- Other Income 38 53 144 109 ————— ————- ————- ————- Net (Loss) Income Before Taxes (1,005) 785 (1,638) 1,652 Income Tax Provision 9 24 9 74 ————— ————- ————- ————- Net (Loss) Income $(1,014) $761 $(1,647) $1,578 ========== ========= ========= ========= Income Per Share: Basic $(0.11) $0.08 $(0.17) $0.18 ————— ————- ————- ————- Diluted $(0.11) $0.08 $(0.17) $0.17 ————— ————- ————- ————- *T

Second Quarter and Six Months Ended June 30, 2008

Revenues for the three months ended June 30, 2008, were $10.2 million, a decrease of $2.0 million, or 16.4%, compared to revenue of $12.2 million for the three months ended June 30, 2007. The decrease in sales for the three months ended June 30, 2008, is primarily attributable to a $2.6 million decrease in new embroidery equipment, a $0.1 million decrease in software sales, offset by an increase of $0.2 million from laser equipment, $0.1 million from screen printing equipment, and an increase of $0.4 million from digital printing equipment. Revenue for the six-month period ended June 30, 2007, decreased 16.4% to $21.9 from revenue of $26.2 million for the six months ended June 30, 2007.

Gross Margin as a percentage of net revenue decreased to 33.3% for the three months ended June 30, 2008 as compared to 37.4% for the three months ended June 30, 2007. The Company's gross margin decreased by $1.2 million or 26.1% for the three months ended June 30, 2008 to $3.4 million compared to gross margin of $4.6 million June 30, 2007. For the six-month period ended June 30, 2008, gross margin as a percentage of net revenue decreased to 33.6% compared to 37.8% for the comparable period in 2007. Gross margin decreased by $2.6 million or 26.3% to $7.3 million for the six-month period ended June 30, 2008, compared to gross margin of $9.9 million June 30, 2007. Exchange rate fluctuations of the dollar against the yen continue to affect machine sales pricing competitiveness. These fluctuations have caused embroidery machine prices to change in U.S. dollars.

Operating Expenses for the three months ended June 30, 2008, were $4.4 million, an increase of $0.7 million as compared to the three months ended June 30, 2007 and for the six months ended June 30, 2008, were $9.1 million, an increase of $0.7 million from operating expenses of $8.4 million for the six months ended June 30, 2007. The increase in operating expenses for the three and six months ended June 30, 2008 is a result of increased marketing and selling costs incurred in the current period as well as an offset to operating expenses for the three and six months ended June 30, 2007 due to the recognition of $450,000 in income associated with the settlement agreement with Sheridan Square. -0- *T Balance Sheet (Unaudited) (in thousands) June 30, 2008 December 31, 2007 ———————— ————————- Cash (including restricted cash) $10,776 $16,706 Accounts Receivable, net 5,028 5,798 Inventories, net 10,681 5,725 Other Current Assets 573 518 Property, Plant & Equipment, net 982 512 Other Assets 37 41 ———————— ————————- Total Assets $28,077 $29,300 ================ ================= Accounts Payable & Accrued Expenses $9,340 $8,962 Customer Deposits 583 621 Other Liabilities 24 111 ———————— ————————- Total Liabilities 9,947 9,694 Stockholders' Equity 18,130 19,606 ———————— ————————- Total Liabilities and Stockholders' Equity $28,077 $29,300 ================ ================= *T

About Hirsch International Corp.

Hirsch is a leading provider of equipment and education and support services to the graphic and decorated apparel industry. The Company exclusively represents the decorated apparel industry's leading brands including Tajima embroidery equipment, MHM screen printing equipment, SEIT textile bridge lasers, Pulse Microsystems digitizing and design software and now Kornit and Mimaki digital garment printers. Hirsch also offers a broad line of consumable supplies, accessories and machine parts as well as factory certified technical support services. Hirsch's customer groups include: a wide range of contract manufacturers that outsource their embellishment requirements; manufacturers who use embroidery, screenprinting, laser etching or digital printing to embellish their apparel and fashion accessories; promotional products, uniform, and sportswear companies; retail stores; and graphic and decorated apparel entrepreneurs servicing the athletic apparel, corporate logo-wear, and advertising specialties markets.

The Company is led by a strong and experienced management team focused on continuing to grow its core business through sound acquisitions of products and processes, as well as through related business ventures in which the Company can build and maximize stockholder value. The Company was founded in 1968 and is headquartered in Hauppauge, N.Y.

Safe Harbor Statement

This press release contains forward-looking statements set within the meaning of the Private Securities Litigation Reform Act of 1995. Except for historical information contained herein, the matters set forth in this news release are forward-looking statements. Readers should note that forward-looking statements set forth above involve a number of risks and uncertainties that could cause actual results to differ materially from any such statement, including, without limitation, the risks and uncertainties discussed under the caption "Risk Factors" in the Company's Form 10-K for calendar 2007, which discussion is incorporated herein by reference. Readers are also urged to read the periodic filings and current reports on Form 8-K of the Company.

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