Exhibit 99.1
[GRAPHIC OMITTED]
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 Q3 QUARTERLY RESULTS
REPORTS CONTINUED PROFITABILITY AND POSITIVE CASH FLOW;
TEAMS WITH ADDITIONAL TIER-1 OEM TO DELIVER INTEGRATED VTL SOLUTION
MELVILLE, N.Y., October 27, 2005--FalconStor Software, Inc. (Nasdaq: FALC), a
leading developer of network storage software solutions, today announced
financial results for its third quarter ended September 30, 2005. The Company
also announced that another major U.S.-based high-tech company with worldwide
distribution and service capabilities signed an OEM agreement to begin selling a
private-labeled version of FalconStor's VirtualTape Library.
Revenues for the third quarter of 2005 increased 35% to $10.1 million, compared
with $7.5 million for the same period a year ago. Net income for the quarter was
$0.5 million, or $0.01 per share, compared with a net loss of $2.3 million, or
$0.05 per share, for the same period a year ago. Operating expenses in the third
quarter of 2004 included a litigation settlement charge of $1.3 million and
legal fees of $0.4 million, each associated with patent infringement litigation
that was resolved in the third quarter of 2004.
For the nine months ended September 30, 2005, revenues increased 45% to $27.9
million, compared with $19.2 million for the same period a year ago. Net income
for the nine month period was $0.6 million, or $0.01 per share compared with a
net loss of $6.2 million, or $0.13 per share in the corresponding period a year
ago. Operating expenses for the first nine months of 2004 included a litigation
settlement charge of $1.3 million and legal fees of $1.0 million.
For the third quarter of 2005, revenues increased 6% from $9.5 million in the
second quarter of 2005 to $10.1 million in the third quarter of 2005. Net income
for the quarter was $0.5 million compared with net income of $0.3 million in the
previous quarter.
The Company closed the quarter with $35.2 million in cash, cash equivalents and
marketable securities, a $0.9 million increase from the previous quarter.
Deferred revenue at September 30, 2005, increased to $7.6 million, or 10%,
compared with the balance at June 30, 2005, and by 80% compared with the same
period a year ago. Gross margins for the third quarter of 2005 increased to 82%
compared with 80% for the same period a year ago and were consistent with the
previous quarter.
"We are pleased that our VirtualTape Library (VTL) software is enabling another
Tier-1 OEM to enter the disk-based backup market with a compelling solution,"
said FalconStor Chairman and CEO ReiJane Huai. "The selection of our VTL
software to power the OEM's network storage solution is another endorsement of
FalconStor's technology as best in the industry and further evidence of the
expected growth of this market segment."
THIRD QUARTER HIGHLIGHTS:
FalconStor continues to advance its product portfolio with new features, while
expanding efforts to make its network storage solutions compatible with current
and cutting edge technology.
o FalconStor introduced an AES-based encryption service for its
VirtualTape Library solution. The Secure Tape Option allows VTL
customers to export data to physical tapes with on-the-fly encryption
to guard against unauthorized access or misplacement while in transit
to another location.
o The company extended its support for enhanced backup and recovery,
business continuity and disaster recovery to additional platforms. This
includes VTL availability for the first time on the Sun Solaris 10
operating system, based on 64-bit extension technology, as well as
expanded support of IPStor Enterprise Edition(R) for the soon to be
released Microsoft SQL Server 2005.
o FalconStor's IPStor Enterprise Edition software completed validation
testing with Oracle Database environments under the Oracle Storage
Compatibility Program (OSCP). IPStor software and the company's VTL
solution were also certified with the Dot Hill SANnet II line of
storage systems. VTL certification was completed with VERITAS NetBackup
software, now from Symantec, on the Sun Solaris, IBM AIX, Red Hat
Linux, HP-UX and Windows platforms.
o FalconStor further expanded and cultivated relationships with solutions
integrators worldwide, including partnering with Bell Microproducts,
Inc., a leading value-added provider of storage products and solutions,
to deliver turnkey VTL and iSCSI Storage Server backup and recovery
appliances for the small and medium business (SMB) market.
The company will host a conference call on Thursday, October 27 at 4:30 PM ET to
discuss the results. To participate in the call, dial 1-800-240-7305 in the
United States or 303-262-2194 outside the United States. To view the
synchronized slide presentation during the call, visit:
https://falconstor.webex.com/falconstor/j.php?ed=87684432&uid=37320232.
Meeting Name: FalconStor Q3 2005 Earnings
Meeting password: ipstor
Meeting number: 481 989 093
To listen to a replay of the call beginning October 27 at 6:30 PM ET, dial
1-800-405-2236 in the United States or 303-590-3000 outside the United States,
passcode 11042422#, or visit www.falconstor.com/investors.asp.
ABOUT FALCONSTOR
FalconStor Software, Inc. (Nasdaq: FALC) is a leading developer of innovative
network storage software that optimizes the protection and availability of
enterprise and SMB data and applications, ensuring nonstop business productivity
while simplifying storage and backup management to reduce operational costs.
FalconStor's award-winning solutions--IPStor(R) Enterprise Edition, VirtualTape
Library, and iSCSI Storage Server--are available from major OEMs, system
integrators, and resellers, and are deployed worldwide by governments,
educational institutions, and Fortune 1000 enterprises across industries
including aerospace, energy production, financial services, healthcare, law,
manufacturing, and telecommunications.
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 1-866-NOW-FALC
(866-669-3252).
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 network storage 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 is a registered trademark of FalconStor Software, Inc. All other
company and product names contained herein may be trademarks of the respective
holders.
FALCONSTOR SOFTWARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2005 2004
------------------ --------------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 16,388,518 $ 15,484,573
Marketable securities..................................... 18,786,873 18,488,616
Accounts receivable, net.................................. 11,436,107 10,269,822
Prepaid expenses and other current assets................. 688,810 629,036
------------ ------------
Total current assets............................. 47,300,308 44,872,047
------------ ------------
Property and equipment, net.................................. 5,208,574 4,662,269
Goodwill..................................................... 3,512,796 3,512,796
Other intangible assets, net................................. 232,504 307,620
Other assets................................................. 2,093,413 2,719,460
------------ ------------
Total assets..................................... $ 58,347,595 $ 56,074,192
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,317,709 $ 821,433
Accrued expenses.......................................... 3,218,653 3,501,034
Deferred revenue.......................................... 5,731,717 4,097,279
------------ ------------
Total current liabilities........................ 10,268,079 8,419,746
Deferred revenue ............................................ 1,854,303 1,290,496
------------ ------------
Total liabilities................................ 12,122,382 9,710,242
------------ ------------
Commitments
Total stockholders' equity....................... 46,225,213 46,363,950
------------ ------------
Total liabilities and stockholders' equity....... $ 58,347,595 $ 56,074,192
============ ============
FALCONSTOR SOFTWARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------
2005 2004 2005 2004
(unaudited) (unaudited)
Revenues
Software license revenue ......................................... $ 7,007,075 $ 5,430,010 $ 19,940,026 $ 13,893,339
Maintenance revenue .............................................. 1,972,037 1,332,179 5,293,478 3,197,234
Software services and other revenue .............................. 1,077,553 707,810 2,710,784 2,121,361
------------ ------------ ------------ ------------
10,056,665 7,469,999 27,944,288 19,211,934
Operating expenses:
Amortization of purchased and capitalized software ............ 189,472 347,027 605,472 1,171,325
Cost of maintenance, software services and other revenue ...... 1,666,459 1,112,662 4,462,542
3,080,622
Software development costs .................................... 3,007,337 2,271,437 8,438,473 6,612,280
Selling and marketing ......................................... 3,814,540 3,532,531 11,298,883 10,247,147
General and administrative .................................... 1,103,778 1,358,833 3,121,089 3,566,885
Litigation settlement ......................................... -- 1,300,000 1,300,000
------------ ------------ ------------ ------------
9,781,586 9,922,490 27,926,459 25,978,259
------------ ------------ ------------ ------------
Operating income (loss) ............................... 275,079 (2,452,491) 17,829 (6,766,325)
------------ ------------ ------------ ------------
Interest and other income ..................................... 245,218 162,146 668,713 553,923
------------ ------------ ------------ ------------
Income (loss) before income
taxes ...................................... 520,297 (2,290,345) 686,542 (6,212,402)
------------ ------------ ------------ ------------
Provision for income taxes ....................................... 37,418 2,738 49,387 15,279
------------ ------------ ------------ ------------
Net income (loss) ....................................... $ 482,879 $ (2,293,083) $ 637,155 $ (6,227,681)
============ ============ ============ ============
Basic net income (loss) per share ................................ $ 0.01 $ (0.05) $ 0.01 $ (0.13)
============ ============ ============ ============
Diluted net income (loss) per share .............................. $ 0.01 $ (0.05) $ 0.01 $ (0.13)
============ ============ ============ ============
Weighted average basic shares outstanding ........................ 47,720,496 47,054,294 47,615,182 46,852,779
============ ============ ============ ============
Weighted average diluted shares outstanding ...................... 50,531,012 47,054,294 50,715,162 46,852,779
============ ============ ============ ============
FalconStor Software (FALC)
Filed: 27 Oct 05, 12:00am