FalconStor Reports Earnings Growth

MELVILLE, N.Y. -- FalconStor Software, Inc. (NASDAQ: FALC), the provider of TOTALLY Open data protection solutions, today announced financial results for its third quarter ended September 30, 2008.

Revenues for the third quarter of 2008 increased 6% to $19.6 million, compared with $18.5 million for the same period a year ago. GAAP loss from operations for the quarter was $1.4 million, compared with operating income of $1.1 million in the third quarter of 2007. GAAP net loss for the quarter was $1.6 million, or $0.03 per share, compared with GAAP net income of $6.3 million, or $0.12 per diluted share, in the third quarter of 2007. In the third quarter of 2008, the Company’s GAAP tax expense was $0.5 million, compared with a tax benefit of $4.5 million in the third quarter of 2007. Stock-based compensation expense was $1.6 million in the third quarter of 2008 and $2.1 million in the third quarter of 2007.

“We remain confident in the performance of our products and our prospects for success,” said ReiJane Huai, Chairman and CEO of FalconStor. “FalconStor is well positioned to help IT departments under pressure in current conditions to deliver on their objectives, while reducing their operating costs and their capital expenditures. Our innovative data protection software, our strong balance sheet, and our ability to generate positive cash flow from operations, even in these difficult economic times, all point to long-term success.”

FalconStor Software Inc.