GSB Globalscape Inc

GlobalSCAPE, Inc. (NYSE Amex: GSB), a leading developer of secure information exchange solutions, today announced financial results for its second quarter of fiscal year 2010, ended June 30, 2010.

Revenue was $4.5 million for the second quarter of fiscal year 2010, a decrease of 6 percent when compared with revenue of $4.7 million in the same quarter last year. Jim Morris, GlobalSCAPE president and CEO, notes that the revenue and other key financials from the second quarter of last year were influenced by a large U.S. Army contract announced in April 2009. “We are very pleased with our second quarter performance,” said Morris. “Our baseline revenue actually increased, considering we had a single $2.7 million order from the Army in the same quarter of last year that contributed more than $1 million dollars in revenue during that quarter. In addition to increasing baseline revenue, we continued our strong financial results from the first quarter of 2010, with total revenue for the first six months of fiscal year 2010 outpacing the same period a year ago.”

Net income for the second quarter was $134,000, or $0.01 per diluted share, compared with net income of $943,000, or $0.05 per diluted share, in the same quarter last year. Cash and short term investments grew to $9.5 million, representing a four percent increase from the first quarter. Cash flow from operating activities for the six months ended June 30, 2010, was $1.3 million compared with $3.2 million for the same period in 2009, a decrease of 60 percent. Finally, Adjusted EBITDA for the second quarter of 2010 was $603,000, a 57 percent decrease compared with the same quarter last year. The Adjusted EBITDA margin for the second quarter of 2010 was 13.5 percent, compared with 29.3 percent in the second quarter of 2009. Net income, cash flow from operating activities, and Adjusted EBITDA for the prior year were largely affected by the Army order.

“At the midpoint of the year, we are on a revenue run rate of almost $18 million, which significantly exceeds our 2009 results, even with the inclusion of the large Army order last year,” Morris continued. “We look forward to establishing a new high water mark for GlobalSCAPE revenue and entering 2011 with the momentum necessary to continue growing the business significantly. As we make the investments necessary to achieve these results, we also plan to manage expenses closely and sustain our profitability.”

Quarterly Highlights

During the second quarter, GlobalSCAPE continued to deliver solid results by raising the Company’s visibility within the marketplace and investment community, establishing a new partnership with Rackspace® Hosting, and winning key industry awards.

In June, GlobalSCAPE was selected to join the Russell Microcap® Index. Membership in the Russell Microcap Index, determined on an annual basis, means automatic inclusion in the appropriate growth and value style indexes. Russell determines membership for its equity indexes primarily by objective, market-capitalization rankings and style attributes. Russell indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for both passive and active investment strategies. When commenting on GlobalSCAPE’s inclusion in the Russell Microcap Index, Morris stated, “Inclusion in the Russell Index could benefit our shareholders by increasing the visibility and awareness of GlobalSCAPE with institutional investors and the broader investment community.”

GlobalSCAPE announced in June that it entered into a partnership with Rackspace® Hosting, the world's leader in the hosting and cloud computing industry. Through Rackspace's infrastructure, GlobalSCAPE is able to deliver cloud-based managed file transfer solutions for the secure exchange of business-to-business data, including large files and sensitive data. The initial GlobalSCAPE product offering, GlobalSCAPE Managed Information Xchange™ (or MIX), integrates GlobalSCAPE's market-leading EFT Server solution with Rackspace’s infrastructure. It allows customers to outsource all or part of their complex and demanding information exchange needs to reduce costs, improve operational efficiencies, track and audit transactions, and provide a greater level of security.

Thomas Skybakmoen, a senior research analyst with Gartner, Inc, commented on the market need for cloud-based managed solutions in July, as GlobalSCAPE announced the availability of the MIX offering. "As organizations adopt cloud computing, they demand solutions that offer comprehensive security capabilities for exchanging important data and confidential files," said Skybakmoen. "In addition to security, they look to take advantage of cloud efficiencies, offered by technology leaders in managed file transfer."

During the second quarter, GlobalSCAPE also was recognized with two prestigious awards. In April, GlobalSCAPE announced that it was chosen as one of the “Best Places to Work” for 2010 by the San Antonio Business Journal. The award honors companies with the best workplaces in the greater San Antonio area. In June, GlobalSCAPE announced that it was chosen as a 2010 "Best Places to Work in IT" honoree by IDG's Computerworld. Each year, Computerworld ranks the top 100 work environments for technology professionals. The organizations selected are those that challenge their IT staff with exciting projects, offer them access to and training with today's hottest technology, and provide great benefits and compensation. These industry awards demonstrate GlobalSCAPE’s continuing commitment to establishing and maintaining a work environment that allows the Company to attract and retain the best possible personnel.

In April, GlobalSCAPE hired Bill Buie as Executive Vice President of Sales. Mr. Buie is an accomplished high-tech industry executive with nearly 30 years of sales and marketing management experience. Prior to joining GlobalSCAPE, Mr. Buie was a senior vice president with Fujitsu, a global IT services, hardware and software provider, where he was responsible for alliance, channel, and system integrator sales in North America. Prior to Fujitsu, Mr. Buie was the Vice President of Global Strategic Partner Sales at Symantec Corporation where he grew re-sell bookings from $43M in 2004 to $933M in 2008. “Bill Buie is a tremendous talent and a great addition to our executive team,” Morris noted. “Our team includes leaders with substantial executive experience with leading IT and information security companies. We will continue to seek the best possible talent as we grow the business and deliver increasing shareholder value.”

Conference Call August 12, 2010 At 4:30 p.m. ET

GlobalSCAPE management will hold a conference call Thursday, August 12 to discuss the second quarter 2010 financial results and other corporate matters at 4:30 p.m. Eastern Time/3:30 p.m. Central Time. Those wishing to join should dial 1-800-380-1061 and use Conference ID # 87434214. A live webcast of the conference call will also be available in the investor relations page of the company's website at www.globalscape.com. A webcast replay of the conference call will be available on the Company’s website through September 12, 2010.

About GlobalSCAPE

GlobalSCAPE, Inc. (NYSE Amex: GSB), headquartered in San Antonio, TX, is a global provider of managed file transfer (MFT) and wide area file services (WAFS) solutions for securely exchanging critical information over the Internet, within an enterprise, and with business partners. Since the release of Cute FTP in 1996, GlobalSCAPE's solutions have continued to evolve to meet the business and technology needs of an increasingly interconnected global marketplace. For more information about GlobalSCAPE's products, visit www.globalscape.com or the Company’s Secure Info Exchange blog.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words "would," "exceed," "should," "anticipates," believe," "possibly," "steady," "dramatic," and variations of such words and similar expressions identify forward-looking statements, but their absence does not mean that a statement is not a forward-looking statement. These forward-looking statements are based upon the Company's current expectations and are subject to a number of risks, uncertainties, and assumptions. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Among the important factors that could cause actual results to differ significantly from those expressed or implied by such forward-looking statements are risks that are detailed in the Company's Annual Report on Form 10-K for the 2009 calendar year, filed with the Securities and Exchange Commission on March 30, 2010.

GlobalSCAPE, Inc. Statements of Operations (Unaudited)                 (in thousands, except per share amounts)   Three months ended June 30, Six months ended June 30, 2010 2009 2010 2009   Operating Revenues: Software product revenues $ 2,595 $ 3,218 $ 5,224 $ 5,165 Maintenance and support   1,871   1,527     3,654   2,820   Total Revenues 4,466 4,745 8,878 7,985 Operating Expenses: Cost of revenues 144 75 246 127 Selling, general and administrative expenses 3,213 2,846 6,122 5,429 Research and development expenses 725 690 1,371 1,365 Depreciation and amortization   199   178     399   350   Total operating expenses   4,281   3,789     8,138   7,271   Income from operations 185 956 740 714 Other income (expense), net   4   (52 )   5   (41 ) Income before income taxes 189 904 745 673 Provision for income tax expense (benefit)   55   (39 )   248   (26 ) Net Income $ 134 $ 943   $ 497 $ 699     Net income per common share - basic $ 0.01 $ 0.05 $ 0.03 $ 0.04 Net income per common share - diluted $ 0.01 $ 0.05 $ 0.03 $ 0.04 Weighted average shares outstanding: Basic 17,354 17,233 17,318 17,230 Diluted 18,021 17,712 17,934 17,683  

GlobalSCAPE, Inc.

Balance Sheets

      (in thousands except share amounts)   June 30, December 31, 2010 2009 (Unaudited) Assets Current assets: Cash and cash equivalents $ 9,132 $ 7,026 Short term investments 350 1,205

Accounts receivable (net of allowance for doubtful accounts of $130 and $217 on June 30, 2010 and December 31, 2009, respectively)

2,879 2,162 Federal income tax receivable - 36 Current deferred tax assets 777 130 Prepaid expenses   193     132   Total current assets 13,331 10,691   Fixed assets, net 1,437 1,653 Investment - CoreTrace, at cost 2,278 2,278 Intangible assets, net 682 833 Goodwill 619 619 Deferred tax assets - 46 Other assets   42     53     Total assets $ 18,389   $ 16,173     Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 307 $ 316 Accrued expenses 969 764 Income tax payable 355 - Deferred revenue   4,589     4,071   Total current liabilities 6,220 5,151   Deferred tax liabilities 63 - Other long term liabilities 1,084 1,079   Commitments and contingencies - -   Stockholders’ equity:

Preferred stock, par value $0.001 per share, 10,000,000 authorized, no shares issued or outstanding

- -

Common stock, par value $0.001 per share, 40,000,000 authorized, 17,881,682 and 17,686,252 issued June 30, 2010 and December 31, 2009

18 18 Additional paid-in capital 11,383 10,801

Treasury stock, 403,581 shares, at cost, at June 30, 2010 and December 31, 2009

(1,452 ) (1,452 ) Retained earnings   1,073     576   Total stockholders’ equity   11,022     9,943   Total liabilities and stockholders’ equity

$

18,389   $ 16,173     GlobalSCAPE, Inc. Statements of Cash Flows (Unaudited)       (in thousands) For the six months ended June 30, 2010 2009 Operating Activities: Net income $ 497 $ 699 Adjustments to reconcile net income to net cash provided by operating activities: Bad debt recoveries (81 ) (41 ) Depreciation and amortization 399 350 Loss on disposition of assets 52 53 Stock-based compensation 481 541 Deferred taxes (538 ) (284 ) Excess tax benefits from vested restricted stock 15 - Excess tax benefits from exercise of stock options 48 - Changes in operating assets and liabilities: Accounts receivable (636 ) 236 Prepaid expenses (61 ) 11 Federal income tax 344 58 Other assets 11 (4 ) Accounts payable (9 ) (213 ) Accrued expenses 205 74 Deferred revenues 518 1,956 Deferred compensation - (216 ) Other long-term liabilities   5     10   Net cash provided by operating activities   1,250     3,230   Investing Activities: Proceeds from sale of property and equipment - 1 Purchase of property and equipment (85 ) (466 ) Purchase of short-term investments (350 ) (1,405 ) Redemption of short-term investments   1,205     -   Net cash provided by (used in) investing activities 770 (1,870 ) Financing Activities: Proceeds from exercise of stock options 37 6 Tax benefit from stock-based compensation   49     -   Net cash provided by financing activities 86 6 Net increase in cash 2,106 1,366 Cash at beginning of period   7,026     6,319   Cash at end of period $ 9,132   $ 7,685     Supplemental disclosure of cash flow information: Cash paid during the period for: Income taxes $ 374   $ 162    

Non-GAAP Financial Measures

Adjusted EBITDA(In thousands)

We define Adjusted EBITDA as Net Income, plus Income Taxes, Total Other Income (Expense), Depreciation and Amortization, and non-cash charges for share-based compensation and asset impairments.

Adjusted EBITDA is a metric that is used in our industry by the investment community for comparative and valuation purposes. We disclose this metric in order to support and facilitate the dialogue with research analysts and investors.

Note that Adjusted EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States (GAAP) and should not be considered a substitute for net income. Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, you should not consider Adjusted EBITDA in isolation, or as a substitute for net income or other income statement data prepared in accordance with GAAP. Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. See our Adjusted EBITDA to net income reconciliations in the table below.

  Three Months Ended

(Unaudited)

June 30,     June 30, 2010 2009 Net Revenue $ 4,466 $ 4,745   Income (loss) from operations $ 185 $ 956   Net income (loss): $ 134 $ 943 Plus: Income taxes 55 (39 ) Plus: Total other (income) expense (4 ) 52 Plus: Depreciation and amortization 199 178 Plus: Share-based compensation expense   219     258   Adjusted EBITDA $ 603   $ 1,392     Operating income margin 4.1 % 20.1 %   Adjusted EBITDA margin 13.5 % 29.3 %