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FalconStor Software Announces First Quarter 2013 Results

MELVILLE, N.Y., April 25, 2013 — FalconStor Software, Inc. (NASDAQ: FALC), a market leader in disk-based data protection, today announced financial results for its first quarter ended March 31, 2013.

Total revenues for the first quarter of 2013 were $15.3 million, a decrease of 21 percent compared with $19.4 million in the same period a year ago. GAAP loss from operations for the first quarter of 2013 was $3.9 million, compared with an operating loss of $2.1 million for the first quarter of 2012. GAAP net loss for the quarter was $4.4 million, or $0.09 per share, compared with a net loss of $2.4 million, or $0.05 per share, for the same period a year ago. Included in the operating results for the first quarter of 2013 and 2012 were an expense of $0.1 million and a net reduction of $1.3 million, respectively, of investigation, litigation and settlement related costs.

Non-GAAP loss from operations was $2.9 million for the first quarter of 2013, compared with non-GAAP loss from operations of $1.9 million for the same period a year ago. Non-GAAP net loss was $3.4 million, or $0.07 per share, in the first quarter of 2013, compared with a non-GAAP net loss of $2.3 million, or $0.05 per share, in the first quarter of 2012. Non-GAAP results exclude the effects of stock-based compensation and costs associated with the Company’s investigations, litigation and settlement related costs.

The Company closed the quarter with $28.2 million in cash, cash equivalents and marketable securities. Deferred revenue at March 31, 2013, was $23.7 million, compared with $24.1 million at December 31, 2012.

“While governmental changes in three key Asia regions and continued economic malaise in Europe impacted our overall number, I am happy to report that we signed up more than 50 new logos in the quarter and we are rolling out a new demand generation program globally,” said Jim McNeil, president and CEO of FalconStor. “Additionally, the increased interest in cloud computing has resulted in more activity surrounding our data migration capabilities. We fully expect our work in migration to have a positive impact on this year’s performance.”

The Company also recently announced the promotion of Gary Quinn to chief operating officer and the hiring of Rob Zecha as chief product officer. The appointments of these two industry veterans were made to further drive the Company’s global deployment of best practices in engineering and in sales and marketing.

Conference Call
The Company will host a conference call to discuss its financial results on Thursday April 25, 2013 at 4:30 p.m. EDT. To participate in the conference call, please dial:

Toll Free: 1-800-762-8779
International: +1-480-629-9819

To view the presentation, please copy and paste the following link into your browser and register for this meeting. Once you have registered for the meeting, you will receive an email message confirming your registration.

https://falconstor.webex.com/falconstor/j.php?ED=20892683&;RG=1&UID

Meeting: FalconStor Q1 2013 Earnings
Meeting password: q1numbers
Meeting Number: 832 216 009

If you are unable to register via the Internet, please contact Joanne Ferrara, Investor Relations at 631-773-5813 or joanne.ferrara@falconstor.com.

A conference call replay is scheduled to be available beginning April 25 at 6:30 p.m. EDT through 11:59 p.m. EDT on May 1. To listen to the replay of the call, dial toll free: 1-800-406-7325 or International: +1-303-590-3030, passcode: 4614280, or visit our website at www.falconstor.com/investors.

Non-GAAP Financial Measures
The non-GAAP financial measures used in this press release are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The Company’s management refers to these non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the Company’s operating performance. In addition, these non-GAAP financial measures facilitate management’s internal comparisons to the Company’s historical operating results and comparisons to competitors’ operating results. We include these non-GAAP financial measures (which should be viewed as a supplement to, and not a substitute for, their comparable GAAP measures) in this press release because we believe they are useful to investors in allowing for greater transparency into the supplemental information used by management in its financial and operational decision-making. The non-GAAP financial measures exclude (i) costs associated with the Company’s class action and derivative lawsuits, government investigations, and related legal fees and (ii) noncash stock-based compensation charges and any potential tax effects. For a reconciliation of our GAAP and non-GAAP financial results, please refer to our Non-GAAP Operating Data GAAP Reconciliation, presented in this release.

About FalconStor Software
FalconStor Software, Inc. (NASDAQ: FALC) is a market leader in disk-based data protection. The company’s mission is to transform traditional backup and disaster recovery into next-generation service-oriented data protection. Built upon an award-winning platform, FalconStor solutions deliver disk-based backup, continuous data protection, WAN-optimized replication and disaster recovery automation. FalconStor solutions are available through a worldwide network of partners, including solution providers, top-tier strategic partners and major OEMs. Thousands of customers worldwide, from small businesses to Fortune 100 enterprises, entrust their data to FalconStor solutions. FalconStor maintains headquarters in Melville, N.Y., and offices throughout Europe and the Asia Pacific region. For more information, visit www.falconstor.com or call 1-866-NOW-FALC (866-669-3252).

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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 data protection industry; competition in the data protection market; results and costs associated with governmental investigations; 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 FalconStor Software are registered trademarks of FalconStor Software, Inc., in the U.S. and other countries. All other company and product names contained herein may be trademarks of their respective holders.

Links to websites or pages controlled by parties other than FalconStor are provided for the reader’s convenience and information only. FalconStor does not incorporate into this release the information found at those links nor does FalconStor represent or warrant that any information found at those links is complete or accurate. Use of information obtained by following these links is at the reader’s own risk.




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