HALIFAX ANNOUNCES FOURTH QUARTER
AND FISCAL 2007 FINANCIAL RESULTS

Alexandria, VA – July 11, 2007 – Halifax Corporation (AMEX: HX) today announced its financial results for the fourth quarter and fiscal year ended March 31, 2007.

Revenues for fiscal 2007 were $50.7 million compared to prior fiscal 2006 revenues of $54.9 million.  The revenue decrease, which was primarily due to the cessation of an unprofitable nationwide contract in April 2006, was partially offset by new more profitable business.

Halifax reported gross margins of $4.4 million, or 9% of revenues, for the 2007 fiscal year, versus $3.7 million, or 7% of revenues, for the previous year.  The margin improvement in fiscal 2007 was due to a better mix of more profitable business.  The Company’s current year margins were negatively impacted as a result of a contract loss in the fourth quarter and a non-cash charge of $640,000 taken in the fourth quarter related to inventory reserves.  In fiscal 2006, margins were negatively impacted by the unprofitable nationwide contract referenced above.  This contract was concluded in April 2006.

The Company reported breakeven results for operating profit in fiscal 2007, versus an operating loss of $1.5 million for the prior year.  Halifax also recognized a gain of $2.5 million on the sale of its Secure Network Services business in fiscal 2006.

The net loss for fiscal 2007 was $2.8 million, or $0.88 per share.  The principal reason for the loss was a non-cash charge of approximately $2.2 million related to recording a full valuation allowance against a deferred tax asset, which had been carried on the balance sheet.  For fiscal 2006 the Company reported net income of $1.5 million, or $0.48 per basic and diluted share.

According to Charles McNew, president and chief executive officer, “Were it not for certain non-cash adjustments, we would have reported a marginally profitable year for fiscal 2007, as contrasted to a loss from continuing operations of $1.3 million for fiscal 2006.  From an operational standpoint, we have a healthy backlog and as mentioned in recent releases, despite the competitive marketplace, we are encouraged by the present volume of potential new deals.” 

McNew added, “We are continuing to evaluate various strategic alternatives to further position our Company for near and longer term growth opportunities.”

For the quarter ended March 31, 2007, revenues were $13.0 million compared to $12.9 million for the same period last year. Gross margin was $225,000 for the quarter ended March 31, 2007, compared to gross margin of $1.1 million for the same period last year.  The primary reason for the decrease in gross margin was a non-cash charge for inventory obsolescence and a loss on a contract that has been terminated.  The operating loss for the quarter ended March 31, 2007, was $822,000 as compared to an operating loss of $74,000 for the same period last year.  Primarily as a result of the non-cash deferred tax asset adjustment, the Company reported a net loss of $2.9 million for the quarter ended March 31, 2007, or $0.93 per share, as compared to net income of $233,000, or $0.07 per basic and diluted share, for the same period last year, which included a gain on the sale of discontinued operations.

The Company will host a conference call for investors at 11:00 a.m. EDT on Wednesday, July 11, 2007, to review the financial and operational results for the quarter.  The conference call phone number is 800-926-6531 for U.S. callers and 415-226-5360 for international callers.  The conference call replay will be available from 1 p.m. EDT on Wednesday, July 11, 2007, to 1 p.m  EDT on Thursday, July 12, 2007.  The replay number is 800-633-8284 for U.S. callers and 402-977-9140 for international callers.  The reservation number is 21343980.

Founded in 1967, Halifax Corporation is an enterprise maintenance solutions company providing a wide range of technology services to commercial and government customers throughout the United States.  The Company’s principal products are high availability hardware maintenance services, technology deployment and integration services.  More information on Halifax can be found at www.hxcorp.com.