GSB Globalscape Inc

Reports Strong Earnings Growth Driven by Increased Revenue Combined with Lower Operating Expenses

GlobalSCAPE, Inc. (NYSE MKT: GSB), a leading developer of secure information exchange solutions, today announced its financial results for the three and nine month periods ended September 30, 2013.

Revenue for the three months ended September 30, 2013, was $6.3 million, a 3% increase over revenue of $6.1 million for the three months ended September 30, 2012. Revenue for the nine months ended September 30, 2013 was $18.1 million, a 5% increase over revenue of $17.2 million for the nine months ended September 30, 2012.

The Company’s deferred revenue, which the Company believes can be an indicator of future revenue trends, grew to $10.7 million at September 30, 2013, compared to $9.8 million at September 30, 2012, a 9.2% increase.

For the three months ended September 30, 2013, the Company had net income of $2.3 million or $0.12 per share, compared to a net loss of $2.7 million, or ($0.15) per share, for the three months ended September 30, 2012. For the nine months ended September 30, 2013, the Company had net income of $3.2 million, or $0.17 per share, compared to a net loss of $3.1 million, or ($0.17) per share for the nine months ended September 30, 2012.

Adjusted EBITDA Excluding Infrequent Items was $1.9 million for the three months ended September 30, 2013, compared to $1.1 million for the three months ended September 30, 2012, and was $4.1 million for the nine months ended September 30, 2013, compared to $1.7 for the nine months ended September 30, 2012. Adjusted EBITDA Excluding Infrequent Items is not a measure of financial performance under GAAP and has limitations as an analytical tools and when assessing the Company’s operating performance. Adjusted EBITDA Excluding Infrequent Items should not be considered in isolation or as a substitute for net income or other income statement data prepared in accordance with GAAP.

Net cash provided by operating activities was $3.8 million for the nine months ended September 30, 2013. This cash flow performance allowed the Company to end the quarter with over $9.8 million of cash and $3.1 million of long term investments.

“Our third quarter results continue the year-long trend toward greater profitability and position us for further growth,” said James Bindseil, interim president of Globalscape. “Our revenue and deferred revenue continue their consistent pattern of growth between comparable periods, which reflects ongoing customer satisfaction with our solutions. While we intend to remain focused on customer satisfaction, we will also be enhancing our position through marketing growth, competitive displacements, and continued evolution of our products to further enhance our market leadership position.”

Conference Call November 12, 2013 at 4:30 p.m. ET

Globalscape management will hold a conference call Tuesday, November 12, 2013 to discuss financial results for the third quarter of 2013 and other corporate matters at 4:30 p.m. Eastern Time/3:30 p.m. Central Time. Those wanting to join should dial 1-877-941-4775 and use Conference ID # 4647703. 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 December 12, 2013.

About Globalscape

San Antonio, Texas-based GlobalSCAPE, Inc. (NYSE MKT: GSB) ensures the reliability of mission-critical operations by securing sensitive data and intellectual property. Globalscape’s suite of solutions features EFT Server, the industry-leading enterprise file transfer solution that delivers military-grade security and a customizable platform for achieving best in class control and visibility of data in motion or at rest, across multiple locations. Founded in 1996, Globalscape is a leading enterprise solution provider of secure information exchange software and services to thousands of customers, including global enterprises, governments and small businesses. For more information, visit Globalscape, or subscribe to our Blog or Twitter updates.

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," "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 2012 calendar year, filed with the Securities and Exchange Commission on March 28, 2013.

    Summary Financial Data   GlobalSCAPE, Inc. Statements of Operations (Unaudited) (in thousands, except per share amounts)             Three months ended September 30, Nine months ended September 30,   2013     2012     2013     2012     Operating Revenues: Software license $ 2,103 $ 2,528 $ 5,966 $ 7,424 Maintenance and support 3,478 3,054 10,128 8,294 Professional services 412 274 1,237 1,013 Others   344     222     811     442   Total Revenues 6,337 6,078 18,142 17,173 Operating Expenses: Cost of revenues 250 331 782 962 Selling, general and administrative expenses 3,492 4,136 11,137 12,532 Research and development expenses 923 822 2,653 2,660

TappIn intangible asset impairment and earnout liability elimination

(128 ) - (128 ) - Affiliated entity asset impairment - 3,264 - 3,264 Depreciation and amortization   265     314     787     951   Total operating expenses   4,802     8,867     15,231     20,369   Income (loss) from operations 1,535 (2,789 ) 2,911 (3,196 ) Other income (expense), net   (39 )   (11 )   (130 )   (138 ) Income (loss) before income taxes 1,496 (2,800 ) 2,781 (3,334 ) Provision (benefit) for income taxes   (791 )   (86 )   (404 )   (227 ) Net income (loss) $ 2,287   $ (2,714 ) $ 3,185   $ (3,107 ) Comprehensive income (loss) $ 2,287   $ (2,714 ) $ 3,185   $ (3,107 )   Net income (loss) per common share - basic $ 0.12 $ (0.15 ) $ 0.17 $ (0.17 ) Net income (loss) per common share - diluted $ 0.12 $ (0.15 ) $ 0.17 $ (0.17 ) Average shares outstanding: Basic 18,761 18,398 18,570 18,336 Diluted 19,158 18,398 19,001 18,336     GlobalSCAPE, Inc. Balance Sheets (Unaudited) In thousands except per share amounts.         September 30, December 31,   2013         2012     Assets Current assets: Cash and cash equivalents $ 9,757 $ 8,079 Accounts receivable (net of allowance for doubtful accounts of $155 and $171 on September 30, 2013 and December 31, 2012 respectively) 3,572 3,350 Income tax receivable - - Current deferred tax assets 123 177 Prepaid expenses   418         426   Total current assets 13,870 12,032   Fixed assets, net 739 900 Investment in certificate of deposit 3,107 3,060 Intangible assets, net 867 4,308 Goodwill 12,712 12,712 Deferred tax asset 1,619 535 Other assets   103         41   Total assets $ 33,017       $ 33,588     Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 426 $ 432 Accrued expenses 1,204 1,353 Deferred revenue 9,134 8,293 Income taxes payable 22 46

TappIn earn out, current portion

- 500 Long term debt, current portion   1,381         1,335   Total current liabilities 12,167 11,959   Deferred revenue, non-current portion 1,587 1,480 TappIn earn out, non-current portion - 3,694 Long-term debt. non-current portion 3,344 4,389 Other long term liabilities 60 62   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, 19,184,197 and 18,846,547 issued September 30, 2013 and December 31, 2012 19 19 Additional paid-in capital 15,105 14,435 Treasury stock, 403,581 shares, at cost, at September 30, 2013 and December 31, 2012. (1,452 ) (1,452 ) Retained earnings   2,187         (998 ) Total stockholders’ equity   15,859         12,004   Total liabilities and stockholders’ equity $ 33,017       $ 33,588       GlobalSCAPE, Inc. Statements of Cash Flows (Unaudited) (in thousands)     For the nine months ended September 30,   2013         2012   Operating Activities: Net income (loss) $ 3,185 $ (3,107 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 787 951 Stock-based compensation 522 711 Deferred taxes (1,030 ) (341 ) Bad debt expense (recoveries) 29 (55 )

Net tax effect of stock option and restricted stock activity

83 2

TappIn intangible asset impairment and earnout liability elimination

(128 ) - Affiliated entity asset impairment - 3,264 Other   -     40   Subtotal before changes in operating assets and liabilities 3,448 1,465 Changes in operating assets and liabilities: Accounts receivable (251 ) 314 CoreTrace receivable - (150 ) Prepaid expenses 8 (65 ) Income tax receivable and payable (107 ) (178 ) Other assets (62 ) (11 ) Accounts payable (6 ) (239 ) Accrued expenses (149 ) (202 ) Deferred revenues 948 1,926 Other long-term liabilities   (2 )   6   Net cash provided by (used for) operating activities   3,827     2,866   Investing Activities: Purchase of property and equipment (65 ) (210 ) Software development costs (686 ) (313 ) TappIn, Inc, earnout liability paid (500 ) - Interest reinvested in certificate of deposit   (47 )   (45 ) Net cash provided by (used for) investing activities (1,298 ) (568 ) Financing Activities: Proceeds from exercise of stock options 231 48 Net tax effect of stock option and restricted stock activity (83 ) (2 ) Notes payable principle payments   (999 )   (952 ) Net cash provided by (used for) financing activities (851 ) (906 ) Net increase (decrease) in cash 1,678 1,392 Cash at beginning of period   8,079     8,861   Cash at end of period $ 9,757   $ 10,253     Supplemental disclosure of cash flow information: Cash paid during the period for: Interest on notes payable $ 182   $ 248   Income taxes $ 731   $ 271       GlobalSCAPE, Inc. Adjusted EBITDA Excluding Infrequent Items (Unaudited) (In thousands)       Three Months Ended     Nine Months Ended September 30, September 30,   2013       2012     2013       2012   Net income (loss) 2,287 (2,714 ) 3,185 (3,107 ) Add (subtract) items to determine adjusted EBITDA excluding infrequent items: Income tax expense (791 ) (86 ) (404 ) (227 ) Other expense 39 11 130 138 Depreciation and amortization 265 314 787 951 Stock-based compensation expense 225 283 522 711 Infrequent item:

TappIn intangible asset impairment and earnout liability elimination

(128 ) - (128 ) - Affiliated entity asset impairment - 3,264 - 3,264         Adjusted EBITDA excluding infrequent items $ 1,897   $ 1,072   $ 4,092   $ 1,730  

Adjusted EBITDA [Earnings before Interest, Taxes, Total Other Income (Expense), Depreciation, and Amortization (including amortized stock-based compensation expense)] Excluding Infrequent Items is not a measure of financial performance under generally accepted accounting principles and should not be considered a substitute for net income. Adjusted EBITDA Excluding Infrequent Items has limitations as an analytical tool and when assessing our operating performance. Adjusted EBITDA Excluding Infrequent Items should not be considered in isolation or as a substitute for net income or other income statement data prepared in accordance with generally accepted accounting principles.

GlobalSCAPE, Inc.Jim AlbrechtChief Financial Officerir@Globalscape.comorDarrow Associates, Inc.Jim Fanucchi, 408-404-5400ir@Globalscape.com