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FalconStor Software And INLINE Corporation Join Forces To Deliver State-Of-The-Art Fibre Channel Storage Solution

Partnership Enables Introduction of VirtualStor to INLINE´S MorStor TruFibre Product Family, With Virtualization, Key-Based Security, High Availability and Performance

MELVILLE, N.Y. AND DULLES, VA, December 12, 2001--FalconStor Software, Inc. (Nasdaq: FALC), a leading storage networking software infrastructure company, and INLINE Corporation, a leading provider of high-performance data storage solutions, today announced a strategic OEM agreement where INLINE will offer a custom version of IPStor™ with its MorStor TruFibre and FileStorm family of high performance SAN and NAS storage solutions.

The new integrated solution, VirtualStor, combines IPStor with INLINE's Fibre Channel RAID storage line, allowing the complete virtualization of SAN and NAS resources, with key-based security, high availability, and comprehensive management and control of storage network environments with a vast array of storage services.

“Virtualization is getting a lot of attention in the storage industry. IT Managers are looking for ways to get more out of the storage they have and at the same time minimize the time and labor necessary to manage their storage resources,” said Brad Bogle, INLINE director of marketing. “The partnership with FalconStor enables INLINE to bring this solution to market.”

IPStor is the first in the industry to offer active-active failover by configuring a pair of IPStor servers to form a high availability cluster, so that should one of them fail or need maintenance, its counterpart will inherit the workload smoothly without failing any I/O transaction. The IPStor server also provides real-time (synchronous) mirroring to the attached storage devices to guard against controller or disk failure without compromising performance, and utilizes a key-based authentication method for security to positively verify the host identity prior to granting a connection, thus eliminating spoofing.

“We are thrilled to form this partnership with INLINE. Our mutual customers will benefit from the combined expertise and development of this specialized network storage solution,” said Wayne Lam, FalconStor vice president of marketing. “The quality engineering of INLINE´s storage solutions, combined with IPStor´s virtualization and storage services creates an industrial strength network storage solution.”

VirtualStor allows organizations to manage disparate, heterogeneous storage devices including disk arrays, tape libraries and optical storage across a network as if they were one device. The solution includes a virtualization server, disk storage up to 96 disks and the VirtualStor management software. The solution quickly and easily provides business and government with a cost-effective way to maximize existing storage capacity.

About IPStor
IPStor, a storage networking infrastructure software, enables Corporate IT to contain storage management costs and increase storage efficiency with total freedom of choice in connectivity and storage hardware by aggregating, virtualizing and provisioning storage services over the network with high performance, security, scalability and availability. IPStor Server runs on off-the-shelf hardware under Linux or Solaris. It supports industry standards (SCSI, IP, iSCSI, Fibre Channel, SNMP) to facilitate rapid deployment and seamless integration with existing storage equipment and third party enterprise management software. As the result of its robust architecture and industrial strength, major system, storage, appliance vendors and system integrators throughout the world have embraced IPStor.

About INLINE Corporation
Since 1994 INLINE Corporation has been a leading independent provider of open systems storage solutions. Based in Northern Virginia, INLINE Corporation is recognized by a customer base that includes many of the largest telecommunications, digital imaging and multimedia companies as well as government agencies and universities nationwide. Profitable and debt-free since inception, INLINE is also the recipient of many prestigious corporate awards including Deloitte & Touche Technology Fast 500 and Washington Technology Fast 50. The company is committed to delivering solutions that cope with today's business challenges while building information strategies for the future.

For additional information, contact INLINE Corporation at 800.465.4637 or visit the website at http://www.inlinecorp.com.

About FalconStor
FalconStor Software, Inc. (NASDAQ: FALC) helps enterprises rise above ever-expanding storage complexities and costs by providing a state-of-the-art software-only storage networking solution, consolidating storage management while drastically improving storage efficiency and quality of service. With unprecedented manageability, performance, security, and flexibility, FalconStor´s flagship product, IPStor™ transcends the limitations that have historically confined SANs to local data centers.

Founded in 2000, FalconStor is headquartered in Melville, NY. International offices include Paris, Tokyo and Taichung, Taiwan. FalconStor is a voting member of the Storage Networking Industry Association (SNIA). For more information, visit www.falconstor.com or call 1-631-777-5188.

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: the early stage of FalconStor´s business; delays in product development; market acceptance of FalconStor´s products and services; technological change in the storage and networking industries; competition in the storage networking software market; the ability to achieve profitability; intellectual property issues and other disputes; 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.

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FalconStor and IPStor are trademarks of FalconStor Software, Inc. All other company and product names contained herein are trademarks of the respective holders.

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