FalconStor: Fiscal 4Q10 Financial Results

FalconStor Software, Inc. announced financial results for its fourth quarter and full year ended December 31, 2010.

Total revenues for the fourth quarter of 2010 were $26.5 million, an
increase of 18% compared with $22.4 million in the same period a year
ago. GAAP income from operations for the fourth quarter of 2010 was $0.8
million, compared with a loss from operations of $3.3 million for the
same period a year ago. GAAP net loss for the quarter was $0.1 million
with breakeven earnings per share compared with a net loss of $1.5
million or $0.03 per share for the same period a year ago.

Non-GAAP income from operations was $2.4 million in the fourth quarter
of 2010, compared with a loss from operations of $1.2 million for the
same period a year ago. Non-GAAP net income was $2.2 million or $0.05
per diluted share in the fourth quarter of 2010, compared with a net
loss of $0.8 million or $0.02 per share, in the fourth quarter of 2009.
Non-GAAP results exclude the effects of stock-based compensation net of
the related income taxes.

For the year ended December 31, 2010, revenues declined 7% to $82.8
million, compared with $89.5 million for the same period a year ago.
GAAP loss from operations for 2010 was $17.6 million compared with a
loss of $6.3 million in 2009. GAAP net loss was $35.4 million, or $0.78
per share for 2010 compared with a net loss of $3.1 million, or $0.07
per share in 2009. In 2010, the Company concluded that its domestic
deferred tax assets could not be realized on a more-likely-than-not
basis, therefore a valuation allowance of $16.3 million was required to
be recorded on these previously recognized deferred tax assets. This
valuation allowance had no cash impact and was recorded within the tax
provision during the third quarter of 2010, and is included within the
full year 2010 tax provision.

Non-GAAP loss from operations in 2010 was $8.9 million compared with
income from operations of $2.5 million in 2009. Non-GAAP results exclude
the effects of stock-based compensation expense net of the related
income taxes.

The Company closed the year with $37.3 million in cash, cash equivalents, and marketable securities.
Cash flow from operations for the fourth quarter of 2010 was $4.2
million and for the full year 2010 cash flow from operations was ($1.7)
million. Deferred revenue at December 31, 2010 was $23.5 million, an
increase of 6% compared with the same period a year ago.

"We achieved a solid fourth quarter, which was highlighted by record
quarterly revenues and significant enterprise wins with our partner
Hitachi Data Systems. We are pleased to see the results of our increased
focus on partners and channel operations," said Jim McNiel, president and CEO of FalconStor Software. "We
are excited about our new sales team in North America and about
delivering on our vision of service-oriented data protection in 2011.
FalconStor is on course for delivering the next generation of data
protection solutions."