EXHIBIT 99.1
Contacts:
Herman Chin Christine Rogers
Public Relations Investor Relations
631-962-1163 631-962-1160
herman.chin@falconstor.com christine.rogers@falconstor.com
FALCONSTOR SOFTWARE ANNOUNCES RESULTS FOR Q4 & FISCAL YEAR 2003
REVENUES INCREASE 25% FROM PREVIOUS QUARTER AND 59% FROM PRIOR YEAR
DEFERRED REVENUE INCREASES 28% FROM PREVIOUS QUARTER
MELVILLE, N.Y., February 4, 2004--FalconStor Software, Inc. (Nasdaq: FALC), a
leading provider of network storage infrastructure software, today announced
financial results for its fourth quarter and fiscal year ended December 31,
2003.
For the fourth quarter 2003, revenues increased 49% to $5.1 million, compared
with $3.4 million for the same period a year ago. Operating expenses increased
from $5.4 million in the fourth quarter of 2002 to $7.5 million in 2003.
Included in operating expenses for the fourth quarter of 2003 was a lease
abandonment charge of $0.6 million, related to the Company's office relocation.
Net loss for the fourth quarter of 2003 decreased to $2.2 million, or $0.05 per
share, compared with a net loss of $2.9 million, or $0.06 per share, in the
fourth quarter of 2002. Excluding the lease abandonment charge of $0.6 million
in the fourth quarter of 2003, and impairment charges of $1.2 million in the
fourth quarter of 2002, adjusted net loss decreased from $1.7 million, or $0.04
per share, in the fourth quarter of 2002 to $1.6 million, or $0.03 per share, in
the fourth quarter of 2003.
For the twelve months ended December 31, 2003, revenues increased 59% to $16.9
million compared with $10.6 million for the year ended December 31, 2002.
Operating expenses increased 19% to $25.4 million in 2003 from $21.4 million in
2002. Operating expenses for 2003 included the lease abandonment charge of $0.6
million and 2002 operating expenses included an asset impairment charge of $0.5
million. Net loss for 2003 decreased to $7.4 million, or $0.16 per share,
compared with a net loss of $11.5 million, or $0.26 per share, for 2002.
Excluding the lease abandonment charge of $0.6 million in 2003, and impairment
charges of $2.8 million in 2002, adjusted net loss decreased from $8.8 million,
or $0.19 per share, in 2002, to $6.8 million, or $0.15 per share, in 2003.
Revenues for the fourth quarter of 2003 increased 25% compared with the previous
quarter from $4.1 million to $5.1 million. Operating expenses increased from
$6.2 million in the third quarter of 2003 to $7.5 million in the fourth quarter.
Net loss for the fourth quarter of 2003 was $2.2 million, or $0.05 per share,
compared with $1.9 million, or $0.04 per share, in the third quarter of 2003.
Excluding the lease abandonment charge of $0.6 million in the fourth quarter of
2003, operating expenses were $7.0 million and adjusted net loss was $1.6
million, or $0.03 per share.
Deferred revenue increased 28% from $2.0 million at the end of the third quarter
2003 to $2.6 million at the end of the fourth quarter of 2003. In addition, the
Company closed the quarter financially strong with $36.7 million in cash, cash
equivalents and marketable securities. "We are pleased with the business
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momentum sustained by our worldwide sales team and state-of-the-art technology.
In December, 2003, we entered into an OEM arrangement with another major
technology company. This company's agreement to create an innovative, turnkey
storage appliance further demonstrates the competitiveness of IPStor and again
validates our commitment to continuing investment in R&D. The storage appliance
is scheduled to be released in 2004. The management team is confident that our
strategic OEM partners can help FalconStor further expand market coverage and
account penetration once they start to ramp up their IPStor-based business in
2004," said ReiJane Huai, Chairman and CEO, FalconStor Software, Inc.
2003 HIGHLIGHTS INCLUDE:
Entered into significant OEM arrangements with multi-billion dollar technology
companies with global presences:
o An agreement with StorageTek to offer a disaster recovery solution launched
in 2003.
o Agreements with two major technology companies for products scheduled to be
released in 2004.
Successfully launched IPStor version 4.0 with advanced network storage services,
including:
o Intelligent delta replication with auto-reconnect, compression and
encryption
o File or Block-based delta replication to protect hosts with Direct Attached
Storage (DAS)
o PXE-based Backup and Bare Metal Recovery
o Bootstrapping and provisioning of storage to diskless server blades over IP
o Advanced Tape Virtualization using off-the-shelf disk storage
o Software-based RAID-0 to enhance I/O performance
Relocated worldwide headquarters to a 45,000 square foot facility to accommodate
expanded Sales, R&D, Training and 24 by 7 support activities.
Continued recognition by leading industry publications and events, including:
o The silver award in TechTarget's Storage and SearchStorage.com's Annual
"Products of the Year" for 2003 in the category of "Backup & Disaster
Recovery Software"
o COMPUTER TECHNOLOGY REVIEW Editor's Choice of "People and Organizations
that Made a Difference in 2003"
o Awards for best SAN management software, and best SAN hardware, in
partnership with Acer Inc., at the Storage World Australia 2003 conference.
Certified IPStor with industry leaders' hardware and/or software platforms to
ensure interoperability:
o Microsoft - Exchange Server 2003 platform, Windows Server 2003, Microsoft
SQL Server, and the DESIGNED FOR WINDOWS Logo Program for the IPStor iSCSI
storage appliance
o Cisco - MDS 9000 Family of Multilayer storage area networking (SAN)
switches, including the MDS 9000 IP Storage Services Module
o Alacritech - TCP/IP accelerated drivers for Linux (Gigabit Ethernet
Accelerator)
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Separately, the Company announced that Jacob Ferng had resigned as Vice
President and Chief Financial Officer effective February 4, 2004. Due to family
obligations, Mr. Ferng will be spending the majority of his time overseas and
can no longer devote the time necessary to the Chief Financial Officer's role.
James Weber, formerly FalconStor's Corporate Controller, has been promoted to
Vice President, Chief Financial Officer and Treasurer to replace Mr. Ferng. Mr.
Ferng will remain with the Company and will focus on strategic corporate
transactions.
Mr. Weber has been FalconStor's Corporate Controller since early 2001. He has
over 10 years of financial, accounting and management experience. Prior to
joining FalconStor, Mr. Weber served as Corporate Controller for theglobe.com
from 1998 to 2001. Before joining theglobe.com, Mr. Weber had been an audit
manager with KPMG and had several years public accounting experience. Mr. Weber
is a Certified Public Accountant in the State of New York and received his
Bachelor of Science degree in accounting from Fordham University.
"The board reluctantly accepted Jacob's decision and is grateful to him for his
exemplary service in assisting management in building the company during his
tenure. We are pleased that he has agreed to stay with the company to assist
with strategic transactions and in other advisory roles," said ReiJane Huai,
FalconStor's Chairman and CEO.
"We congratulate Jim Weber on his promotion," said Mr. Huai. "We are pleased
that someone with Jim's financial management background and knowledge of
FalconStor has agreed to take on this important role and we feel confident that
his experience and expertise will be a valuable addition to our executive
management team."
The company will host a conference call on Wednesday, February 4th at 4:30 p.m.
Eastern Time, to discuss the results. To participate in the call, dial toll
free: (877) 897-9363 or International: (706) 679-0417, conference ID: 5244305.
To participate in the live audio conference & webcast, including business
presentation, please visit
http://invite.mshow.com/findshow.aspx?usertype=0&cobrand=100&shownumber=152656,
show # 152656. A conference call replay will be available beginning 2/4 at 5:30
PM ET through 5:30 PM on 2/6. To listen to the replay of the call, dial: toll
free: (800) 642-1687 or International: (706) 645-9291, conference ID/ Passcode:
5244305, or visit www.falconstor.com/investors.asp.
DISCLOSURE CONCERNING NON-GAAP FINANCIAL INFORMATION
Investors are cautioned that adjusted net loss and adjusted loss per share
information contained in this press release are not financial measures under
generally accepted accounting principles. In addition, they should not be
construed as alternatives to any other measures of performance determined in
accordance with generally accepted accounting principles. These non-GAAP
financial measures are provided to enhance the user's overall understanding of
the Company's current financial performance and the Company's prospects for the
future. We believe adjusted net loss and adjusted loss per share are important
measures of our recurring operations as they exclude items that may not be
indicative of our core operating results and calculate net loss and loss per
share in a manner consistent with prior periods by excluding a lease abandonment
charge in 2003 and impairment charges in 2002.
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ABOUT IPSTOR
IPStor(R) Software delivers an intelligent SAN/NAS infrastructure across
heterogeneous environments by providing a comprehensive set of storage services
for enterprise applications - simplifying management, ensuring data availability
and recoverability, and maximizing performance.
ABOUT FALCONSTOR
FalconStor Software, Inc. (Nasdaq: FALC) is a leading developer of network
storage infrastructure software solutions designed to optimize the performance
and availability of today's complex IT infrastructures. Deployed by a wide range
of Fortune 1000 enterprises, FalconStor's flagship product, IPStor, optimizes
storage utilization, accelerates backup and recovery, maximizes I/O performance
and ensures business continuity via sophisticated data replication services. It
is available and supported through major OEMs, system integrators and resellers
worldwide.
Founded in 2000, FalconStor is headquartered in Melville, NY, with offices
throughout Europe and the Asia Pacific regions including Paris, Tokyo and
Taiwan. FalconStor is an active member of the Technical Support Alliance Network
(TSANet), Storage Networking Industry Association (SNIA) and Fibre Channel
Industry Association (FCIA). For more information visit www.falconstor.com or
call 1-631-777-5188.
This press release includes forward-looking statements that involve risk and
uncertainties that could cause actual results to differ materially from the
forward-looking statements. These risks and uncertainties include: delays in
product development; market acceptance of FalconStor's products and services;
technological change in the storage and networking industries; competition in
the storage networking software market; the failure of FalconStor's OEM partners
to introduce or to market products incorporating FalconStor's products; the
ability to achieve profitability; intellectual property issues; and other risk
factors discussed in FalconStor's reports on Forms 10-K, 10-Q and other reports
filed with the Securities and Exchange Commission.
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FalconStor Software, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2003 2002
----------- -----------
Assets
Current assets:
Cash and cash equivalents ......................... $ 8,486,144 $14,191,075
Marketable securities ............................. 28,199,242 36,910,448
Accounts receivable, net .......................... 7,109,922 4,285,892
Prepaid expenses and other current assets ......... 1,273,125 1,167,174
----------- -----------
Total current assets ..................... 45,068,433 56,554,589
----------- -----------
Property and equipment, net .......................... 3,861,069 2,068,001
Goodwill ............................................. 3,366,642 3,301,599
Other intangible assets, net ......................... 396,940 309,491
Other assets ......................................... 3,799,949 2,476,306
----------- -----------
Total assets ............................. $56,493,033 $64,709,986
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable .................................. $ 562,305 $ 437,088
Accrued expenses .................................. 2,777,391 1,987,651
Deferred revenue .................................. 2,597,788 2,182,729
Liabilities of discontinued operations - 4,201,465
----------- -----------
Total current liabilities ................ 5,937,484 8,808,933
----------- -----------
Commitments
Total stockholders' equity ............... 50,555,549 55,901,053
----------- -----------
Total liabilities and stockholders' equity $56,493,033 $64,709,986
=========== ===========
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FALCONSTOR SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Year Ended
December 31, December 31,
2003 2002 2003 2002
(unaudited)
Revenues:
Software license revenue ................................... $ 3,661,430 $ 2,621,549 $ 12,250,616 $ 8,666,583
Software services and other revenue ........................ 1,430,304 794,361 4,693,519 1,962,309
------------ ------------ ------------ ------------
5,091,734 3,415,910 16,944,135 10,628,892
Operating expenses:
Amortization of purchased and capitalized software ...... 412,964
250,104 1,394,301 899,025
Cost of software services and other revenue ............. 776,126 408,879 2,580,141 1,309,139
Software development costs .............................. 1,962,409 1,561,833 7,067,605 6,280,935
Selling and marketing ................................... 3,073,301 2,527,160 10,966,548 9,856,496
General and administrative .............................. 750,599 692,312 2,878,192 2,591,430
Lease abandonment charge ................................ 550,162 - 550,162 -
Impairment of prepaid royalty ........................... - - - 482,715
------------ ------------ ------------ ------------
7,525,561 5,440,288 25,436,949 21,419,740
------------ ------------ ------------ ------------
Operating loss .................................. (2,433,827) (2,024,378) (8,492,814) (10,790,848)
------------ ------------ ------------ ------------
Interest income
and other income ...................................... 253,477 342,457 1,121,391 1,585,351
Impairment of long-lived assets ............................ 35,000 (1,215,127) 35,000 (2,300,062)
------------ ------------ ------------ ------------
Loss before income taxes .......................... (2,145,350) (2,897,048) (7,336,423) (11,505,559)
------------ ------------ ------------ ------------
Provision for income taxes ................................. 11,629 37,606 32,532 37,606
------------ ------------ ------------ ------------
Net loss .......................................... $ (2,156,979) $ (2,934,654) $ (7,368,955) $(11,543,165)
============ ============ ============ ============
Basic and diluted net loss per share ....................... $ (0.05) $ (0.06) $ (0.16) $ (0.26)
============ ============ ============ ============
Weighted average basic and diluted shares outstanding
46,376,183 45,266,504 45,967,830 45,232,595
============ ============ ============ ============
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