EXHIBIT 99.1
Contacts: Herman Chin, Public Relations Christine Rogers, Investor Relations
631-962-1163 631-962-1160
herman.chin@falconstor.com christine.rogers@falconstor.com
FALCONSTOR SOFTWARE ANNOUNCES Q2 QUARTERLY RESULTS
REVENUES INCREASE 58% FROM PRIOR YEAR AND 23% FROM PRIOR QUARTER
MELVILLE, N.Y., July 28, 2004--FalconStor Software, Inc. (Nasdaq: FALC), a
leading developer of network storage infrastructure software solutions, today
announced financial results for its second quarter ended June 30, 2004.
For the second quarter of 2004, revenues increased 23% from $5.3 million in the
first quarter of 2004 to $6.5 million in the second quarter of 2004. Net loss
for the quarter was $1.7 million, down from $2.2 million in the previous
quarter. Diluted net loss per share for the second quarter was $0.04 per share,
compared with $0.05 per share for the previous quarter. Operating expenses in
the second quarter increased 9%, or $0.7 million, which included $0.6 million in
legal fees related to a patent lawsuit.
Revenues for the second quarter of 2004 increased 58% to $6.5 million, compared
with $4.1 million for the same period a year ago. Operating expenses increased
from $5.9 million in the second quarter of 2003 to $8.4 million for the second
quarter of 2004. Net loss for the second quarter was $1.7 million compared with
$1.6 million for the same period a year ago. Diluted net loss per share for the
second quarter was $0.04 per share, compared with $0.03 per share for the same
period a year ago.
For the first six months of fiscal 2004, FalconStor recorded revenues of $11.7
million, compared with $7.8 million for the same period a year earlier. Net loss
for the six month period was $3.9 million compared with a net loss of $3.3
million reported in the corresponding period a year ago. Diluted net loss per
share during the six-month period was $0.08, compared with $0.07 per share for
the same period a year ago.
The Company closed the quarter financially strong with $34.7 million in cash,
cash equivalents and marketable securities, a decrease of only $950,000 from the
previous quarter. Deferred revenue at June 30, 2004, increased by $0.6 million,
or 19%, compared with the balance at March 31, 2004, and by 91% compared with
the same period a year ago. Gross margins for the second quarter of 2004
increased to 78% compared with 74% in the first quarter of 2004.
"We are pleased with our continuing market expansion in the areas of data
replication, disk-based backup/recovery, and server/storage consolidation, as
well as our success in building upon last quarter," said FalconStor Chairman and
CEO ReiJane Huai. "We are reaping the benefits of our OEM relationships, as
evidenced by the quick acceptance, adoption and momentum of our VirtualTape
Library and iSCSI Storage Server appliance business initiatives."
SECOND QUARTER HIGHLIGHTS:
Highlights of the second quarter include new and continuing business
relationships, customers, products, and further interoperability certifications
with leading industry solutions:
o Channel partners and OEMs announced this quarter included Acer, Inc.,
AXIOMTEK CO., LTD, Ciara Technologies, Dynamic Network Factory, EMC
Corporation, SYSTEMAT, and Systex Corp.
o Premier solution and service providers teamed with FalconStor on new
domestic and international business across many industries, including
legal, education, government, and manufacturing, for IPStor Enterprise
Edition, VirtualTape Library Appliance, and iSCSI Storage Server. Customer
wins in the past quarter included Cuesta College, Netherlands City of
Oosterhout, Prime-Line Products, Saint Bernard Software, SimmonsCooper
LLC, and the Australian State Warehousing and Distribution Services.
o FalconStor delivered its iSCSI Storage Server for Microsoft Windows
Storage Server 2003, providing both file and block level services, while
addressing the needs of small and medium businesses and departmental
customers seeking to centralize and consolidate their storage, improve
availability, consolidate backup, and provide offsite replication.
FalconStor was also awarded a patent for Fibre Channel fail-over
technology.
o FalconStor's VirtualTape Library Appliance solution received the
Enterprise Backup Solution (EBS) certification from HP, as well as
certification with Sony Electronics' SAIT drives and PetaSite(R) storage
systems.
o FalconStor's iSCSI Storage Server was named by Windows & .NET Magazine and
SQL Server Magazine as a Best of TechEd 2004 awards finalist, and named
Best of TechEd Europe 2004 in the Data Management Solution category.
The company will host a conference call on Wednesday, July 28 at 4:30 PM ET to
discuss the results. To participate in the call, dial 1-800-257-1836 in the
United States or 303-262-2211 outside the United States. To view the
synchronized slide presentation during the call, visit:
http://falconstor.webex.com.
Meeting Name: FalconStor Q2 Earnings
Meeting password: falcon
Meeting number: 761530256
To listen to a replay of the call beginning July 28 at 6:30 PM ET, dial
1-800-405-2236 in the United States or 303-590-3000 outside the United States,
passcode 11003256#, or visit
www.falconstor.com/investors.asp.
ABOUT IPStor
IPStor 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 potential failure of FalconStor's
OEM partners to introduce or to market products incorporating FalconStor's
products; 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.
###
FalconStor and IPStor are registered trademarks of FalconStor Software, Inc. All
other company and product names contained herein are trademarks of the
respective holders.
FALCONSTOR SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2004 2003
-------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents ............................... $12,535,117 $ 8,486,144
Marketable securities ................................... 22,167,010 28,199,242
Accounts receivable, net ................................ 7,960,190 7,109,922
Prepaid expenses and other current assets ............... 1,323,158 1,273,125
----------- -----------
Total current assets ........................... 43,985,475 45,068,433
----------- -----------
Property and equipment, net ................................ 4,182,617 3,861,069
Goodwill ................................................... 3,512,796 3,366,642
Other intangible assets, net ............................... 334,500 396,940
Other assets ............................................... 3,039,982 3,799,949
----------- -----------
Total assets ................................... $55,055,370 $56,493,033
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ........................................ $ 922,014 $ 562,305
Accrued expenses ........................................ 3,519,753 2,777,391
Deferred revenue ........................................ 3,057,476 2,202,179
----------- -----------
Total current liabilities ...................... 7,499,243 5,541,875
Deferred revenue ........................................... 877,952 395,609
----------- -----------
Total liabilities .............................. 8,377,195 5,937,484
----------- -----------
Commitments
Total stockholders' equity ................................. 46,678,175 50,555,549
----------- -----------
Total liabilities and stockholders' equity ..... $55,055,370 $56,493,033
=========== ===========
FALCONSTOR SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
------------------------------- ------------------------------
June 30, June 30,
2004 2003 2004 2003
Revenues
Software license revenue .................................. $ 4,915,498 $ 3,023,920 $ 8,463,329 $ 5,710,738
Maintenance revenue ....................................... 1,043,202 762,837 1,865,055 1,047,048
Software services and other revenue ....................... 524,437 304,120 1,413,551 1,011,998
------------ ------------ ------------ ------------
6,483,137 4,090,877 11,741,935 7,769,784
Operating expenses:
Amortization of purchased and
capitalized software ............................... 409,250 338,798 824,298 622,539
Cost of maintenance, software services
and other revenue................................... 989,955 591,655 1,967,960 1,183,656
Software development costs ............................. 2,178,927 1,671,490 4,340,843 3,283,754
Selling and marketing .................................. 3,401,078 2,637,991 6,714,616 5,186,921
General and administrative ............................. 1,397,409 698,499 2,208,052 1,390,819
------------ ------------ ------------ ------------
8,376,619 5,938,433 16,055,769 11,667,689
------------ ------------ ------------ ------------
Operating loss ................................. (1,893,482) (1,847,556) (4,313,834) (3,897,905)
------------ ------------ ------------ ------------
Interest and other income ................................. 188,852 279,528 391,777 597,839
------------ ------------ ------------ ------------
Loss before income taxes ......................... (1,704,630) (1,568,028) (3,922,057) (3,300,066)
------------ ------------ ------------ ------------
Provision for income taxes ................................ 8,461 10,897 12,541 17,712
------------ ------------ ------------ ------------
Net loss ......................................... $ (1,713,091) $ (1,578,925) $ (3,934,598) $ (3,317,778)
============ ============ ============ ============
Basic and diluted net loss per share ...................... $ (0.04) $ (0.03) $ (0.08) $ (0.07)
============ ============ ============ ============
Weighted average basic and diluted
shares outstanding ..................................... 46,859,326 45,848,994 46,750,352 45,675,392
============ ============ ============ ============
