10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                        to                      .

Commission file number: 001-33184

Double-Take Software, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-0230046
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
257 Turnpike Road, Suite 210, Southborough, MA	01772
(Address of Principal Executive Offices)	(Zip Code)

(877) 335-5674
(Registrant’s telephone number, including area code)

None.
(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ    NO o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one).

Large accelerated filer    o    Accelerated filer    o    Non-accelerated filer   þ

     Indicate by check mark whether the registrant is a shell company (as determined in Rule 12b-2 of the Exchange Act). YES o     NO þ

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Outstanding at November 2, 2007
common stock, $0.001 par value	21,832,816

DOUBLE-TAKE SOFTWARE, INC.
For The Quarterly Period Ended September 30, 2007

INDEX

		Page No.
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements		1
	Condensed Consolidated Balance Sheets at September 30, 2007 (unaudited) and December 31, 2006		1
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2007 and September 30, 2006		2
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and September 30, 2006		3
	Unaudited Notes to Condensed Consolidated Financial Statements		4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		25
Item 4.	Controls and Procedures		25
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		26
Item 1A.	Risk Factors		26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 3.	Defaults Upon Senior Securities		26
Item 4.	Submission of Matters to a Vote of Security Holders		26
Item 5.	Other Information		26
Item 6.	Exhibits		27
	Signatures		28

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

DOUBLE-TAKE SOFTWARE, INC.
Condensed Consolidated Balance Sheets
As of September 30, 2007 and December 31, 2006
(in thousands, except share and per share amounts)

	September 30,			December 31,
	2007			2006
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	38,845		$	55,170
Short term investments		28,561			—
Accounts receivable, net of allowance for doubtful accounts of $566 and $570 at September 30, 2007 and December 31, 2006, respectively		16,068			12,676
Inventory		—			14
Prepaid expenses and other current assets		2,751			2,210
Deferred tax assets		2,849			—
Total current assets		89,074			70,070
Property and equipment — at cost, net of accumulated depreciation of $4,036 and $2,838 at September 30, 2007 and December 31, 2006, respectively		3,274			3,000
Goodwill		3,059			—
Customer relationships, net of accumulated amortization of $614 and $274 at September 30, 2007 and December 31, 2006, respectively		1,653			1,993
Marketing relationships, net of accumulated amortization of $337 and $150 at September 30, 2007 and December 31, 2006, respectively		1,655			1,842
Other assets		150			121
Total assets	$	98,865		$	77,026
Liabilities
Current liabilities:
Accounts payable		1,273			2,217
Accrued expenses		4,425			6,845
Accrued purchase price payable		—			1,425
Other liabilities		360			135
Deferred revenue		21,284			16,774
Total current liabilities		27,342			27,396
Long-term deferred revenue		4,463			3,977
Long-term deferred rent		306			406
Long-term capital lease obligations		3			17
Total long-term liabilities		4,772			4,400
Total liabilities		32,114			31,796
Stockholders’ Equity
Preferred Stock, $.01 par value per share; 20,000,000 shares authorized; 0 shares issued and outstanding		—			—
Common stock, $.001 par value per share; 130,000,000 shares authorized; 21,723,234 and 20,726,589 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively		22			21
Additional paid-in capital		146,313			138,398
Accumulated deficit		(79,579	)		(93,317	)
Cumulative foreign currency translation		(5	)		128
Total stockholders’ equity		66,751			45,230
Total liabilities and stockholders’ equity	$	98,865		$	77,026

See notes to financial statements

1

DOUBLE-TAKE SOFTWARE, INC.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Revenue:
Software licenses	$	12,612		$	10,231		$	34,993		$	26,240
Maintenance and professional services		8,695			6,185			24,251			15,547
Total revenue		21,307			16,416			59,244			41,787
Cost of revenue:
Software licenses		71			514			216			1,329
Maintenance and professional services		1,927			1,703			5,792			4,426
Total cost of revenue		1,998			2,217			6,008			5,755
Gross profit		19,309			14,199			53,236			36,032
Operating expenses:
Sales and marketing		6,935			5,641			20,683			15,591
Research and development		3,042			2,753			8,756			7,749
General and administrative		4,100			2,577			11,007			6,371
Depreciation and amortization		603			492			1,707			1,094
Total operating expenses		14,680			11,463			42,153			30,805
Operating income		4,629			2,736			11,083			5,227
Interest income		798			92			2,213			213
Interest expense		(9	)		(26	)		(39	)		(69	)
Foreign exchange gains (losses)		(55	)		24			(50	)		79
Income before income taxes		5,363			2,826			13,207			5,450
Income tax expense (benefit)		2,055			317			(531	)		403
Net income		3,308			2,509			13,738			5,047
Accretion on redeemable shares:
Series B		—			(1,328	)		—			(3,983	)
Series C		—			(6	)		—			(17	)
Dividends on Series B		—			(562	)		—			(1,636	)
Dividends on Series C		—			(181	)		—			(527	)
Net income (loss) attributable to common stockholders	$	3,308		$	432		$	13,738		$	(1,116	)
Net income (loss) attributable to common stockholders per share:
Basic	$	0.15		$	0.11		$	0.65		$	(0.29	)
Diluted	$	0.14		$	0.07		$	0.60		$	(0.29	)
Weighted-average number of shares used in per share amounts:
Basic		21,524,576			3,795,846			21,152,464			3,793,721
Diluted		23,052,447			6,222,408			22,950,392			3,793,721

See notes to financial statements

2

DOUBLE-TAKE SOFTWARE, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands, except share and per share amounts)

	Nine Months Ended September 30,
	2007			2006
Cash flows from operating activities:
Net income	$	13,738		$	5,047
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,180			848
Amortization of intangible assets		527			249
Provision for doubtful accounts		(9	)		150
Stock based compensation		1,895			1,185
Deferred income taxes		(2,849	)		—
Issuance of redeemable convertible Series C preferred to management as compensation		—			102
Changes in:
Accounts receivable		(3,044	)		(315	)
Prepaid expenses and other assets		(201	)		37
Inventory		14			1,257
Other assets		(22	)		(3	)
Accounts payable and accrued expenses		(3,753	)		(5,961	)
Other liabilities		270			(208	)
Deferred revenue		4,458			3,009
Net cash provided by operating activities		12,204			5,397
Cash flows from investing activities:
Purchase of property and equipment		(1,438	)		(1,232	)
Purchase of short term investments		(44,556	)		—
Sales of short term investments		15,995			—
Acquisition of Double-Take EMEA, net of cash acquired		(4,484	)		(1,200	)
Net cash used in investing activities		(34,483	)		(2,432	)
Cash flows from financing activities:
Proceeds from public offering, net of expenses		1,127			(880	)
Proceeds from exercise of stock options		1,188			6
Excess tax benefits on stock based compensation		3,706			—
Payment on capital lease obligation		(14	)		(6	)
Net cash provided by (used in) financing activities		6,007			(880	)
Effect of exchange rate changes on cash		(53	)		12
Net increase (decrease) in cash and cash equivalents		(16,272	)		2,085
Cash and cash equivalents — beginning of period		55,170			8,341
Cash and cash equivalents — end of period	$	38,845		$	10,438
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	—		$	17
Income taxes	$	1,601		$	934
Supplemental disclosures of noncash investing and financing activities:
Issuance of common stock upon cashless exercise of warrants	$	201			—
Accrued purchase price payments		—		$	3,026
Accrued costs for public offering		—		$	589

See notes to financial statements

3

DOUBLE-TAKE SOFTWARE, INC.
Unaudited Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

     Double-Take Software, Inc. (the “Company”), a Delaware corporation, is engaged in developing, marketing and supporting data protection software solutions for high availability, disaster recovery and centralized backup. The Company operates in one reportable segment and its revenues are mainly derived from sales of software and related services. Software is licensed by the Company primarily to distributors, value added resellers (“VARS”) and original equipment manufacturers (“OEMS”), located primarily in the United States and in Europe.

     The Company completed an initial public offering of its common stock in December 2006.

     In connection with the Company’s initial public offering, or IPO:

• There were 7.5 million shares of common stock sold at $11.00 per share to the public, comprising 5 million shares of common stock sold by the Company and 2.5 million shares of common stock sold by existing stockholders. The Company received gross proceeds of $55,000, or $47,549 after deducting underwriting discounts and commissions of $3,850 and offering costs of $3,601. Upon closing of the IPO, all shares of redeemable preferred stock automatically converted into 11,553,130 shares of common stock.

• On January 4, 2007, the underwriters of the Company’s initial public offering exercised their over-allotment option to purchase an additional 1,125,000 shares of common stock of the Company from certain existing stockholders. The Company did not receive any proceeds from the sale of the shares of the selling stockholders.

     The Company completed a secondary offering of its common stock in August 2007.

     In connection with this secondary offering:

• There were 2.8 million shares of common stock sold at $16.00 per share to the public, comprising 100,000 shares of common stock sold by the Company and 2.7 million shares of common stock sold by existing stockholders. The Company did not receive any proceeds from shares of common stock sold by the selling stockholders. The Company received gross proceeds of $1,600, or $1,002 after deducting underwriting discounts and commissions of $88 and offering costs of $510. The Company paid the offering costs of the selling stockholders.

• On August 13, 2007, the underwriters of the Company’s secondary offering exercised their over-allotment option to purchase an additional 15,750 shares from the Company and 402,750 shares from one of the selling stockholders. The Company did not receive any proceeds from the sale of shares by the selling stockholder. The Company received gross proceeds of $252, or $238 after underwriting commissions of $14.

Significant Accounting Policies

Principles of Consolidation

     The consolidated financial statements include all subsidiaries. All inter-company transactions and balances have been eliminated. Double-Take Software S.A.S., or Double-Take EMEA, was acquired by the Company on May 23, 2006; therefore the consolidated financial statements only include Double-Take EMEA’s financial results and activities from the date of acquisition.

Basis of Presentation

     The accompanying consolidated balance sheet as of September 30, 2007, the consolidated statements of operations for the three and nine months ended September 30, 2007 and September 30, 2006, and the consolidated statements of cash flows for the nine months ended September 30, 2007 and September 30, 2006 are unaudited. The accompanying statements should be read in conjunction with the audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2006.

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     The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP, pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC. They do not include all of the financial information and footnotes required by GAAP for complete financial statements. The consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments considered necessary for the fair presentation of our statement of financial position as of September 30, 2007, our results of operations for the three and nine months ended September 30, 2007 and September 30, 2006, and cash flows for the nine months ended September 30, 2007 and September 30, 2006. All adjustments are of a normal recurring nature. The results for the three and nine months ended September 30, 2007 are not necessarily indicative of the results to be expected for any subsequent period or for the fiscal year ending December 31, 2007. Other than the adoption of the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, or FIN 48, there have been no significant changes in our accounting policies during the nine months ended September 30, 2007 as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2006.

Use of Estimates

     GAAP requires us to make certain estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Significant estimates and assumptions made by management include the determination of the fair value of stock options issued, estimates in connection with the acquisition of Double-Take EMEA, and the allowance for doubtful accounts. The estimates and judgments upon which we rely are based upon information available to us at the time that these estimates and judgments are made. To the extent there are material differences between these estimates and actual results, our consolidated financial statements will be affected.

Goodwill

     The Company accounts for goodwill in accordance with SFAS No. 142 “Goodwill and Other Intangible Assets” (“FAS 142”). FAS 142 requires that goodwill with indefinite lives is not amortized but reviewed for impairment if impairment indicators arise and, at a minimum, annually.

Revenue Recognition

     In accordance with EITF Issue No. 01-9, our revenue is reported net of rebates and discounts because we do not receive an identifiable benefit in exchange for the rebate or discount. The Company derives revenues from two primary sources or elements: software licenses and services. Services include customer support, consulting, installation services and training. A typical sales arrangement includes both software licenses and services. The Company applies the provisions of Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended by SOP 98-4 and SOP 98-9, and related interpretations to all transactions to determine the recognition of revenue.

     For software arrangements involving multiple elements, the Company recognizes revenue using the residual method as described in SOP 98-9. Under the residual method, the Company allocates and defers revenue for the undelivered elements based on relative fair value and recognizes the difference between the total arrangement fee and the amount deferred for the undelivered elements as revenue. The determination of fair value of the undelivered elements in multiple element arrangements is based on the price charged when such elements are sold separately, which is commonly referred to as vendor-specific objective-evidence (“VSOE”).

     The Company’s software licenses typically provide for a perpetual right to use the Company’s software and are sold on a per-copy basis. The Company recognizes software revenue through direct sales channels and resellers upon receipt of a purchase order or other persuasive evidence and when all other basic revenue recognition criteria are met as described below. Revenue from software licenses sold through an original equipment manufacturer partner is recognized upon the receipt of a royalty report evidencing sales.

     Services revenue includes revenue from customer support and other professional services. Customer support includes software updates (including unspecified product upgrades and enhancements) on a when-and-if-available basis, telephone support and bug fixes or patches. Customer support revenue is recognized ratably over the term of the customer support agreement, which is typically one year. To determine the price for the customer support element when sold separately, the Company uses actual rates at which it sells support as established VSOE.

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          Other professional services such as consulting and installation services provided by the Company are not essential to the functionality of the software and can also be performed by the customer or a third party. Revenues from consulting and installation services are recognized when the services are completed. Training fees are recognized after the training course has been provided. Based on the Company’s analysis of such other professional services transactions sold on a stand-alone basis, the Company has concluded it has established VSOE for such other professional services when sold in connection with a multiple-element software arrangement. The price for other professional services has not materially changed for the periods presented.

          The Company has analyzed all of the undelivered elements included in its multiple-element arrangements and determined that VSOE of fair value exists to allocate revenues to services. Accordingly, assuming all basic revenue recognition criteria are met, software revenue is recognized upon delivery of the software license using the residual method in accordance with SOP 98-9.

          The Company considers the four basic revenue recognition criteria for each of the elements as follows:

     Persuasive evidence of an arrangement with the customer exists.  The Company’s customary practice is to require a purchase order and, in some cases, a written contract signed by both the customer and the Company prior to recognizing revenue on an arrangement.

     Delivery or performance has occurred.  The Company’s software applications are usually physically delivered to customers with standard transfer terms such as FOB shipping point. Software and/or software license keys for add-on orders or software updates are typically delivered digitally, over the internet. We recognize software revenue upon shipment to resellers and distributors because there is no right of return or refund and no price protection agreements. In situations where multiple copies of licenses are purchased, all copies are delivered to the customer in one shipment and revenue is recognized upon shipment. Occasionally, the Company enters into a site license with a customer that allows the customer to use a specified number of licenses within the organization. When a site license is sold, the Company delivers a master disk to the customer that allows the product to be installed on multiple servers. The Company has no further obligation to provide additional copies of the software or user manuals. Revenue on site licenses is recognized upon shipment of the master disk to the customer. Sales made by the Company’s Original Equipment Manufacturer (OEM) partners are recognized as revenue in the month the product is shipped. The Company estimates the revenue from a preliminary report received from the OEM shortly after the end of the month. Once the final report is received, the revenue is adjusted to that based on the final report, usually in the following month. Services revenue is recognized when the services are completed, except for customer support, which is recognized ratably over the term of the customer support agreement, which is typically one year.

     Fee is fixed or determinable.  The fee customers pay for software applications, customer support and other professional services is negotiated at the outset of an arrangement. The fees are therefore considered to be fixed or determinable at the inception of the arrangement.

     Collection is probable.  Probability of collection is assessed on a customer-by-customer basis. Each new customer undergoes a credit review process to evaluate its financial position and ability to pay. If the Company determines from the outset of an arrangement that collection is not probable based upon the review process, revenue is recognized on a cash-collected basis.

          The Company’s arrangements do not generally include acceptance clauses. However, if an arrangement does include an acceptance clause, revenue for such an arrangement is deferred and recognized upon acceptance. Acceptance occurs upon the earliest of receipt of a written customer acceptance, waiver of customer acceptance or expiration of the acceptance period.

Stock-Based Compensation

          Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based Payment,” using the prospective transition method, which requires the Company to apply its provisions only to awards granted, modified, repurchased or cancelled after the effective date. Under this transition method, stock-based compensation expense recognized beginning January 1, 2006 is based on the grant-date fair value of stock option awards granted or modified after January 1, 2006. As the Company had used the minimum value method for valuing its stock options under SFAS 123, all options unmodified granted prior to January 1, 2006 continue to be accounted for under APB Opinion No. 25.

6

     The Company accounts for stock option grants to non-employees in accordance with SFAS No. 123(R) and EITF Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” which require that the fair value of these instruments be recognized as an expense over the period in which the related services are rendered.

     The fair values of options granted were estimated at the date of grant using the following assumptions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Expected Term	7 years			7 years			7 years			7 years
Volatility		76.29	%		82.06	%		76.29-80.64	%		82.06%
Risk free rate		4.80	%		4.79	%		4.63% - 4.82	%		4.36% - 5.12	%
Dividend Yield		—			—			—			—

Income Taxes

     The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted laws and tax rates that are expected to be in effect when the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits not expected to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted.

2. NET INCOME (LOSS) PER COMMON SHARE

     Basic and diluted net income (loss) per share information for all periods is presented under the requirements of SFAS No. 128, “Earnings Per Share.” Basic loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding, adjusted for the dilutive effect, if any, of potential common shares.

     The following table sets forth the computation of income (loss) per share:

	Three months Ended September 30,				Nine months Ended September 30,
	2007		2006		2007		2006
Net Income (loss) attributable to common stockholders	$	3,308	$	432	$	13,738	$	(1,116	)
Weighted average common shares outstanding net of weighted-average shares subject to repurchase – basic		21,524,576		3,795,846		21,152,464		3,793,721
Dilutive effect of stock options		1,527,871		2,298,360		1,774,913		—
Dilutive effect of common stock warrants		—		128,202		23,015		—
Weighted average common shares outstanding net of weighted-average shares subject to repurchase – diluted		23,052,447		6,222,408		22,950,392		3,793,721
Basic net income (loss) per share	$	0.15	$	0.11	$	0.65	$	(0.29	)
Diluted net income (loss) per share	$	0.14	$	0.07	$	0.60	$	(0.29	)
The following potential common shares were excluded from the computation of diluted net income (loss) attributable to common stockholders per share because they had an anti-dilutive impact:
	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Stock options		633,874		237,121		647,374		3,020,303
Warrants		—		—		—
Redeemable convertible preferred stock		—		11,347,662		—		11,347,662

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3. CASH, CASH EQUIVALENTS AND SHORT TERM INVESTMENTS

     Cash and cash equivalents consist primarily of highly liquid investments in time deposits held at major banks, commercial paper, corporate bonds and other money market securities with remaining maturities at date of purchase of 90 days or less.            

     Short term investments, which are carried at fair value, consist of commercial paper and corporate bonds with original maturities of one year or less.  The Company classifies these securities as available-for-sale. Management determines the appropriate classification of its investments at the time of purchase and at each balance sheet date. Available-for-sale securities are carried at fair value with unrealized gains and losses, if any, reported in accumulated other comprehensive income. Interest received on these securities is included in interest income. Realized gains or losses upon disposition of available-for-sale securities are included in other income. As of September 30, 2007, the fair value of these securities approximated their cost.

4. PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

	September 30,		December 31,
	2007		2006
Equipment	$	106	$	95
Furniture and fixtures		506		460
Motor Vehicles		111		104
Computer hardware		5,947		4,561
Leasehold improvements		640		618
		7,310		5,838
Less accumulated depreciation and amortization		4,036		2,838
	$	3,274	$	3,000

5. INTANGIBLE ASSETS

     In connection with the acquisition of Double-Take EMEA, a portion of the contingent purchase price equal to the excess of the fair value of the assets acquired and liabilities assumed over the non-contingent portion of the purchase price was accrued in accordance with SFAS No. 141. Earn-out payments in excess of the initial amount recorded as a liability are recorded as additional purchase price and result in goodwill. For the nine months ended September 30, 2007, the Company paid aggregate earn-out payments of $4,484 to the former owners of Double-Take EMEA, $3,059 of which was recorded as goodwill. Earn-out payments to the former owners of Double-Take EMEA will continue through December 31, 2007.

     Intangible assets consist of the following:

	September 30,			December 31,
	2007			2006
Customer relationships	$	2,267		$	2,267
Less accumulated amortization		(614	)		(274	)
	$	1,653		$	1,993
Marketing relationships	$	1,992		$	1,992
Less accumulated amortization		(337	)		(150	)
	$	1,655		$	1,842

6. CONTINGENCIES

     In the normal course of its business, the Company may be involved in various claims, negotiations and legal actions; however, at September 30, 2007, the Company is not party to any litigation that is expected to have a material effect on the Company’s financial position, results of operations or cash flows.

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7. STOCKHOLDERS’ EQUITY

Common stock

     Options to purchase 812,977 and 6,186 shares of common stock were exercised for the nine months ended September 30, 2007 and September 30, 2006, respectively, and the Company received aggregated proceeds of $1,188 and $6, respectively.

Warrants

     For the nine months ended September 30, 2007, the Company issued 67,918 shares of common stock upon the exercise of warrants to purchase shares of common stock. The warrants were exercisable for up to 81,632 shares of common stock, however, pursuant to the terms of the warrant agreements, the holders of the warrants performed cashless exercises in which the Company issued fewer shares in lieu of receiving proceeds of $201.

As of September 30, 2007, no warrants were outstanding to purchase common stock.  

Stock option plans

     In the nine months ended September 30, 2007, the Company issued options to purchase 489,153 shares of common stock, with a weighted average exercise price of $16.74 per share, which is based on exercise prices equal to the fair market value per share on the dates of grant. The weighted average fair value as of the grant date of the options issued was $12.43.

     A summary of the Company’s stock option activity for the nine months ended September 30, 2007 is presented below:

				Weighted
				Average
				Exercise
	Shares			Price
Outstanding at December 31, 2006		2,929,081		$	3.12
Options granted		489,153		$	16.74
Options cancelled		(93,626	)	$	10.22
Options exercised (1)		(812,977	)	$	1.46
Outstanding at September 30, 2007		2,511,631		$	6.04
Options exercisable at September 30, 2007		1,604,958		$	4.02
Options not vested at September 30, 2007(2)		906,673		$	9.62

(1)	Intrinsic value of $12,043 and cash received of $1,188.
(2)	99,185 additional options are expected to vest in the remainder of 2007.

     The Company’s policy is to issue new shares upon exercise of options as the Company does not hold shares in treasury.

     The aggregate intrinsic value of stock options outstanding at September 30, 2007 was approximately $33,034. The aggregate intrinsic value of stock options exercisable at September 30, 2007 was approximately $24,425.

     All options granted are equity awards and the Company has not granted any liability awards. The Company expects to recognize future compensation costs aggregating $6,901 for options granted but not vested as of September 30, 2007. Such amount will be recognized over the weighted average requisite service period, which is expected to be approximately 3 years. The options generally have a contractual life of ten years.

     The following table presents the stock-based compensation expense for the three and nine months ended September 30, 2007 and September 30, 2006:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Cost of revenue, maintenance and professional services	$	62	$	27	$	129	$	51
Sales and marketing		165		53		309		104
Research and development		85		62		183		115
General and administrative		828		344		1,274		915
	$	1,140	$	486	$	1,895	$	1,185

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Executive bonus plans

     In February 2006, the Company issued 67,998 shares of Series C Preferred to certain of its executives and recorded a compensation charge of $102 based on the fair value of the Series C Preferred at $1.50 per share. In connection with the completion of the Company’s initial public offering in December 2006, all preferred shares were converted into common shares.

8. INCOME TAXES

     In the three and nine months ended September 30, 2007, the Company recorded a current tax expense of $2,055 and $5,167 related to income generated during the periods using an effective tax rate expected to be in effect for the full year.

     As of December 31, 2006, the Company recorded a full valuation allowance against net deferred tax assets, which are primarily comprised of net operating loss carryforwards as a result of operating losses incurred since inception. Realization of deferred tax assets is dependent upon future earnings, if any, the timing of which is uncertain. Accordingly, the net deferred tax assets were fully offset by a valuation allowance. If not utilized, the federal and state net operating loss and tax credit carryforwards will expire between 2011 and 2025. Utilization of these net operating losses and credit carryforwards are subject to annual limitations due to provisions of the Internal Revenue Code of 1986, as amended, that are applicable due to “ownership changes” that have occurred.

     The Company analyzes the carrying value of its deferred tax assets on a regular basis. Because the Company has delivered consistent profitability over the past two years, it was concluded that it was more likely than not that the Company would generate sufficient taxable income to utilize the benefit from the net operating loss carryforwards eligible to be used in 2007 and 2008. As a result, as of June 30, 2007, the Company reversed the valuation allowance on $5,698 of deferred tax assets. In determining future taxable income, assumptions are made to forecast federal, state and international operating income, the reversal of temporary timing differences, and the implementation of any feasible and prudent tax planning strategies. The assumptions require significant judgment regarding the forecasts of future taxable income, and are consistent with forecasts used to manage the business. As of September 30, 2007, the remaining valuation allowance on the deferred tax asset is approximately $19,300 and will be maintained until sufficient further positive evidence exists to support a reversal of, or decrease in, the valuation allowance.

     The Company adopted the provisions of FIN 48 on January 1, 2007. The application of this Interpretation requires a two-step process that separates recognition from measurement. Upon implementing FIN 48 and performing the analysis, we did not recognize any uncertain tax positions and during the nine months ended September 30, 2007, we did not recognize any increase or decrease to reserves for uncertain tax positions.

     The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax assessments by tax authorities for the years before 2002.

     The Company has elected to record interest and penalties recognized in accordance with FIN 48 in the financial statements as income taxes. Any subsequent change in classification of FIN 48 interest and penalties will be treated as a change in accounting principle subject to the requirements of SFAS No. 154, Accounting Changes and Error Corrections.

9. PROFIT SHARING PLAN

     Effective March 1, 1996, the Company adopted a defined contribution plan (the “Plan”), which, as amended, qualifies under Section 401(k) of the Internal Revenue Code. The Plan covers all employees who meet eligibility requirements. Employer contributions are discretionary. The Company recorded an expense of $55, $227, $0 and $0 for the three and nine months ended September 30, 2007 and September 30, 2006, respectively.

10. SEGMENT INFORMATION

     The Company operates in one reportable segment.

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     The Company operates in three geographic regions: North America, Europe, Middle East & Africa and Asia-Pacific. All transfers between geographic regions have been eliminated from consolidated revenues. Revenue, long-lived assets and intangible assets by geographic region are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
Revenue:
North America	$	14,347	$	10,843	$	38,299	$	30,617
Europe, Middle East & Africa		6,423		5,016		19,232		9,661
Asia-Pacific		537		557		1,713		1,509
	$	21,307	$	16,416	$	59,244	$	41,787

	September 30,		December 31,
	2007		2006
Long-lived assets:
North America	$	3,037	$	2,733
Europe, Middle East & Africa		237		267
Asia-Pacific		—		—
	$	3,274	$	3,000

	September 30,		December 31,
	2007		2006
Intangible assets and goodwill:
North America	$	—	$	—
Europe, Middle East & Africa		6,367		3,835
Asia-Pacific		—		—
	$	6,367	$	3,835

11. RELATED PARTY TRANSACTIONS

     The Company has had transactions with Sunbelt Software Distribution, Inc., or Sunbelt Distribution. An officer of the Company who joined the Company as a result of the acquisition of Double-Take EMEA is Chairman of Sunbelt Distribution. The balances and transactions with Sunbelt Distribution are described below:

	September 30, 2007
Trade Receivable	$	2,104
Trade Payable	$	13

	Three Months Ended		Three Months Ended		Nine Months Ended		May 24, 2006 through
	September 30, 2007		September 30, 2006		September 30, 2007		September 30, 2006 (1)
Sales to Sunbelt Distribution	$	2,708	$	1,765	$	7,511	$	2,780
Purchases from Sunbelt Distribution	$	68	$	63	$	176	$	139

(1) The related party information includes only information after the date of the acquisition of Double-Take EMEA. The acquisition date was May 23, 2006.

12. RECENT ACCOUNTING PRONOUNCEMENTS

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (FAS 159). The fair value option established by FAS 159 permits, but does not require, all entities to choose to measure eligible items at fair value at specified election dates. An entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. FAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company is currently assessing what the impact of the adoption of this Statement will be on the Company’s financial position and results of operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

CAUTIONARY ADVICE REGARDING FORWARD-LOOKING STATEMENT

     Some of the statements contained in this Form 10-Q that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-Q is filed with the Securities and Exchange Commission (“SEC”).

     We may, in some cases, use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “potentially,” “will,” or “may,” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this Form 10-Q include statements about:

• competition and competitive factors in the markets in which we operate;

• demand for replication software;

• the advantages of our technology as compared to others;

• changes in customer preferences and our ability to adapt our product and services offerings;

• our ability to obtain and maintain distribution partners and the terms of these arrangements;

• our ability to develop and maintain positive relationships with our customers;

• our ability to maintain and establish intellectual property rights;

• our ability to retain and hire necessary employees and appropriately staff our development, marketing, sales and distribution efforts;

• our cash needs and expectations regarding cash flow from operations;

• our ability to manage and grow our business and execution of our business strategy; and

• our financial performance.

     The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition and results of operations may vary materially from those expressed in our forward-looking statements. There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These important factors include those that we discuss in this section of our Form 10-Q and in the “Risk Factors” section in our annual report on Form 10-K, which we filed with the SEC on March 29, 2007 and the Risk Factors section of our Prospectus that forms a part of our Registration Statement on Form S-1, as amended, which Prospectus was filed pursuant to Rule 424(b)(1) on August 10, 2007 (Registration No. 333-144746). You should read these factors and the other cautionary statements made in this Form 10-Q in combination with the more detailed description of our business in our annual report on Form 10-K as being applicable to all related forward-looking statements wherever they appear in this quarterly report. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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Overview

     Double-Take Software develops, sells and supports affordable software that reduces downtime and protects data for business-critical systems. We believe that we are the leading supplier of replication software for Microsoft server environments. By simply loading our software onto servers running current Windows operating systems, organizations of any size can maintain an off-site standby server with replicated data, providing rapid recovery in the event of a disaster. We estimate that we have sold licenses for approximately 125,000 copies of Double-Take to more than 10,000 customers.

     In recent years, we have experienced substantial growth, increasing our total revenue from $14.3 million for the year ended December 31, 2002 to $60.8 million for the year ended December 31, 2006, and we have gone from having net losses of $14.3 million to a net income of $6.8 million during that same period. Revenue for the nine months ended September 30, 2007 totaled $59.2 million and we recorded net income of $13.7 million. We believe that our focus on providing affordable replication software to companies of all sizes through an efficient direct sales team and a robust distribution network has been instrumental to our continued revenue growth. Revenue generated by sales of our software represented 59% and 63% of our total revenue in the nine months ended September 30, 2007 and September 30, 2006, respectively. Sales of maintenance and professional services generated the remainder of our revenue.

     As a result of our investments in developing our software and establishing our broad distribution network, as well as legal fees and settlement costs associated with the defense and settlement of a legal case involving our intellectual property, we experienced significant operating losses through 2005. Our ability to increase the productivity of our sales force and distribution partners while controlling our other expenses has driven an improvement in our results, from an operating loss of $3.8 million and a net loss of $3.8 million in 2005 to an operating income of $7.0 million and net income of $6.8 million in 2006. Our acquisition of Double-Take EMEA on May 23, 2006 has also contributed to our improved results. We achieved operating income of $11.1 million and net income of $13.7 million for the nine months ended September 30, 2007.

Some Important Aspects of Our Operations

     We license our software under perpetual licenses to end-user customers directly and to a network of distributors, value-added resellers and original equipment manufacturers, or OEMs. Our distributors primarily sell our software to our resellers. Our resellers bundle or sell our software together with their own products and also sell our software independently. Our OEMs market, sell and support our software and services on a stand-alone basis and incorporate our software into their own hardware and software products.

     Software sales made to or through our indirect channels such as distributors, value-added resellers and OEMs generated approximately 94% of total software revenue in the nine months ended September 30, 2007 and September 30, 2006. During the nine months ended September 30, 2007 and September 30, 2006, approximately 6% of our software sales were made solely by our direct sales force, approximately 12% and 19%, respectively, were made to our distributors for sale to value-added resellers, approximately 75% and 67%, respectively, were made directly through resellers and approximately 7% and 8%, respectively, were made through OEMs, primarily Hewlett-Packard Co. We believe that we will need to continue to maintain close relationships with our partners to sustain and increase profitability. We have no current plans to focus future growth on one distribution channel versus another.

     In the nine months ended September 30, 2007, the median price of sales of Double-Take software licenses to customers was approximately $4,000 and the average sales cycle was less than three months. On May 1, 2007, we implemented a nominal price increase across all of our products except in a few international markets where the price was already commensurate with the nominal price increase. We believe that relatively small deal levels have contributed to more balanced sales throughout the quarter and more predictable revenue streams in comparison to other software companies with perpetual license models.

     On May 23, 2006, we completed our acquisition of Sunbelt System Software S.A.S., which is now known as Double-Take Software S.A.S., or Double-Take EMEA. From 1998 through the acquisition date, Double-Take EMEA was the principal or exclusive distributor of our software in our European, Middle Eastern and African markets and a certified Double-Take training organization. Sales of our software and related services generated 93% of Double-Take EMEA’s revenue in 2005. Our acquisition of Double-Take EMEA has provided us with a direct presence in the European, Middle Eastern and African markets, the opportunity to further our strategic initiative to increase revenue generated outside of the United States, and opportunities for improved margins. The inclusion of Double-Take EMEA’s assets and operations in our business since May 23, 2006 has contributed to a significant increase in the size of our business.

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Revenue

     We derive revenue from sales of perpetual licenses for our software and from maintenance and professional services.

     Software Licenses.  We derive the majority of our revenue from sales of perpetual licenses of our software applications, which allow our customers to use the software indefinitely. We do not customize our software for a specific end user customer. We recognize revenue from sales of perpetual licenses generally upon shipment of the software. In accordance with EITF 01-9, our software revenue is reported net of rebates and discounts because we do not receive an identifiable benefit in exchange for the rebate or discount.

     Our software revenue generated approximately 59% and 63% of our total revenue in the nine months ended September 30, 2007 and September 30, 2006, respectively. Our software revenue generally experiences some seasonality. Many organizations make the bulk of their information technology purchases, including software, in the second half of the year. We believe that this generally has resulted in higher revenue generated by software sales during the last half of any year. We believe this pattern is consistent in 2007. Software revenue has increased each consecutive quarter during 2007.

     Maintenance and Professional Services.  We also generate revenue by providing our customers with maintenance comprised of software updates and product support. We generally include our maintenance for a designated period in the price of the software at the time of sale. In addition, some of our customers enter into a maintenance agreement for periods longer than a year. These agreements entitle our customers to software updates on a when-and-if-available basis and product support for an annual fee based on the licenses purchased and the level of service subscribed. Almost all of our customers that purchase maintenance pay the entire amount payable under the agreement in advance, although we recognize maintenance revenue ratably over the term of the agreement. This policy has contributed to increasing deferred revenue balances on our balance sheet and positive cash flow from operations.

     In some cases, most often in connection with the licensing of our software, we provide professional services to assist our customers in strategic planning for disaster recovery and application high availability, the installation of our software and the training of their employees to use our software. We provide most of our professional services on a fixed price basis and we recognize the revenue for professional services once we complete the engagement.

     Of total maintenance and professional services revenue, maintenance revenue represented 88% and 86% in the nine months ended September 30, 2007 and September 30, 2006, respectively. Professional services generated the remainder of our total maintenance and professional services revenue in these periods.

     Of our total revenue, maintenance revenue represented 36% and 32% in the nine months ended September 30, 2007 and September 30, 2006, respectively. Professional services accounted for 5% of our total revenue in the nine months ended September 30, 2007 and September 30, 2006. Our maintenance and professional services revenue historically has generated lower gross margins than our software revenue. The gross margin generated by our maintenance and professional services revenue was 76% and 72% in the nine months ended September 30, 2007 and September 30, 2006, respectively. We expect the proportion of revenue derived from sales of maintenance to increase in the future as we increase the number of software licenses sold and in service. As the percentage of total revenue attributable to maintenance increases, our overall gross margins will be adversely affected.

Cost of Revenue

     Our cost of revenue primarily consists of the following:

     Cost of Software Revenue.  Cost of software revenue consists primarily of media, manual, translation and distribution costs and may in the future include royalties to third-party software developers for technology embedded within our software. Because our development initiatives have resulted in insignificant time and costs incurred between technological feasibility and the point at which the software is ready for general release, we no longer capitalize costs of our internally-developed software. As a result, we do not believe that amortization of internally developed software will have any effect on our cost of software revenue in future periods.

     Cost of Services Revenue.  Cost of services revenue consists primarily of salary and other personnel-related costs incurred in connection with our provision of maintenance and professional services. Cost of services revenue also includes other allocated overhead expenses for our professional services and product support personnel, as well as travel-related expenses for our staff to perform work at a customer’s site.

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Operating Expenses

     We classify our operating expenses as follows:

     Sales and Marketing.  Sales and marketing expenses primarily consist of the following:

• personnel and related costs for employees engaged in sales, corporate marketing, product marketing and product management, including salaries, commissions and other incentive compensation, including equity-based compensation, related employee benefit costs and allocated overhead expenses;

• travel related expenses to meet with existing and potential customers, and for other sales and marketing related purposes; and

• sales promotion expenses, public relations expenses and costs for marketing materials and other marketing events, including trade shows, industry conventions and advertising, and marketing development funds for our distribution partners.

     We expense our sales commissions at the time of sale. We expect our sales and marketing expense to increase in the future as we increase the number of direct sales professionals and invest in marketing programs.

     Research and Development.  Research and development expenses primarily represent the expense of developing new software and modifying existing software. These expenses primarily consist of the following:

• personnel and related costs, including salaries, employee benefits, equity and other incentive compensation and allocated overhead expenses, for research and development personnel, including software engineers, software quality assurance engineers and systems engineers; and

• contract labor expense and consulting fees paid to independent consultants and others who provide software engineering services to us, as well as other expenses associated with the design and testing of our software.

     To date, our research and development efforts have been primarily devoted to increases in features and functionality of our existing software. We expect research and development expense to increase in the future as we continue to develop new solutions for our customers.

     General and Administrative.  General and administrative expenses represent the costs and expenses of managing and supporting our operations. General and administrative expenses consist primarily of the following:

• personnel and related costs including salaries, employee benefits, equity and other incentive compensation and allocated overhead expenses, for our executives, finance, human resources, corporate information technology systems, strategic business, corporate quality, corporate training and other administrative personnel

• legal and accounting professional fees;

• recruiting and training costs;

• travel related expenses for executives and other administrative personnel; and

• computer maintenance and support for our internal information technology system.

     General and administrative expenses have increased as we have incurred increased expenses related to being a publicly-traded company and have invested in an infrastructure to support our continued growth. However, we expect general and administrative expenses to decrease as a percentage of revenue for the foreseeable future, as we believe the rate at which our revenue will increase will exceed the rate at which we expect to incur these additional expenses.

15

     Depreciation and Amortization. Depreciation and amortization expense consists of depreciation expense primarily for computer equipment we use for information services and in our development and test labs, and amortization of intangible assets acquired.

Results of Operations

     Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2006

     Revenue. We derive our revenue from sales of our products and support and services. Revenue increased 30% to $21.3 million, from $16.4 million for the three months ended September 30, 2007 compared to September 30, 2006. Of our total revenue in the three months ended September 30, 2007, 88% was attributable to sales to or through our indirect channels such as distributors, value-added resellers and OEMs, which was a decrease from 96% of our total revenue attributable to sales to or through our indirect channels for the three months ended September 30, 2006. This percentage can vary from quarter to quarter and we do not plan to significantly increase our proportion of sales from direct sales. Of our total revenue in the three months ended September 30, 2007, 12% was attributable to direct sales to end users, an increase from 4% of our total revenue attributable to end users in the three months ended September 30, 2006.

     Software License Revenue. Software revenue increased $2.4 million, or 23%, from $10.2 million in the three months ended September 30, 2006 to $12.6 million in the three months ended September 30, 2007. The increase in software revenue was primarily due to the increased number of software licenses sold resulting from broader demand for, and acceptance of, our software.

     Maintenance and Professional Services Revenue. Maintenance and professional services revenue increased $2.5 million, or 41%, from $6.2 million in the three months ended September 30, 2006 to $8.7 million in the three months ended September 30, 2007. Maintenance and professional services revenue represented 38% of our total revenue in the three months ended September 30, 2006 and 41% of our total revenue in the three months ended September 30, 2007. Maintenance revenue increased $2.4 million, or 46%, from $5.3 million in the three months ended September 30, 2006 to $7.7 million in the three months ended September 30, 2007. The increase in maintenance revenue was attributable to higher sales to our expanding base of customers in both North America and through Double-Take EMEA as well as continued maintenance renewals from our existing customers. Professional services revenue increased $0.1 million, or 8%, from $0.9 million in the three months ended September 30, 2006 to $1.0 million in the three months ended September 30, 2007. The slight increase in professional services revenue was due to more professional service deliveries due to an increase in professional services personnel as well as increased revenue generated by Double-Take EMEA.

     Cost of Revenue and Gross Profit

     Total cost of revenue decreased $0.2 million, or 10%, from $2.2 million for the three months ended September, 30 2006 to $2.0 million in the three months ended September 30, 2007. Total cost of revenue represented 14% of our total revenue in the three months ended September 30, 2006 and 9% of our total revenue in the three months ended September 30, 2007.

     Cost of software revenue decreased $0.4 million, or 86%, from $0.5 million for the three months ended September 30, 2006 to $0.1 million for the three months ended September 30, 2007. The decrease was due to cost of software for Double-Take EMEA sales in the three month period ending September 30, 2006 relating to the inventory of Double-Take products on hand at May 23, 2006 of $1.4 million. The balance of the inventory was sold from the acquisition date through the three months ended March 31, 2007, resulting in no similar cost of revenue for the three months ended September 30, 2007 as compared to the three months ended September 30, 2006. Cost of software revenue represented 5% and 1% of our software revenue in the three months ended September 30, 2006 and September 30, 2007, respectively.

     Cost of services revenue increased $0.2 million, or 13%, from $1.7 million for the three months ended September 30, 2006 to $1.9 million in the three months ended September 30, 2007. The increase was primarily a result of an increase in personnel. Cost of services revenue represented 28% of our services revenue in the three months ended September 30, 2006 and 22% in the three months ended September 30, 2007.

     Gross profit increased $5.1 million, or 36%, from $14.2 million for the three months ended September 30, 2006 to $19.3 million for the three months ended September 30, 2007. Gross margin increased from 86% in the three months ended September 30, 2006 to 91% in the three months ended September 30, 2007. This increase is primarily related to higher cost of software revenue relating to Double-Take EMEA’s inventory in the three months ended September 30, 2006.

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     Operating Expenses

     Sales and Marketing. Sales and marketing expenses increased $1.3 million, or 23%, from $5.6 million for the three months ended September 30, 2006 to $6.9 million for the three months ended September 30, 2007. The increase was substantially due to increased compensation expense related to an increase in personnel as well as increased commission expense resulting from increased sales.

     Research and Development. Research and development expenses increased $0.2 million, or 10%, from $2.8 for the three months ended September 30, 2006 to $3.0 million for the three months ended September 30, 2007. The increase primarily resulted from higher compensation expense of $0.1 million due to an increase in personnel and $0.1 million from outsourced development projects.

     General and Administrative. General and administrative expenses increased $1.5 million, or 59%, from $2.6 million for the three months ended September 30, 2006 to $4.1 million for the three months ended September 30, 2007. The increase was substantially related to an increase of $0.5 million in compensation expense in the three months ended September 30, 2007 attributable to stock option expense, a $0.1 increase in compensation due to increased personnel, an increase in insurance expense of $0.2 million related to higher premiums associated with coverages for a public company, an increase of $0.3 million in legal and accounting fees due to being a public company, an increase of $0.4 million of costs from Double-Take EMEA primarily related to personnel expense, and a $0.3 decrease in bad debt expense.

     Depreciation and Amortization. Depreciation and amortization expense increased $0.1 million, or 23%, from $0.5 million in the three months ended September 30, 2006 to $0.6 million for the three months ended September 30, 2007. The increase was attributable to increased depreciation expense associated with increased capital expenditures.

     Interest Income. Interest income increased $0.7 million, or 767%, from $0.1 million for the three months ended September 30, 2006 to $0.8 million for the three months ended September 30, 2007. The increase is attributable to higher balances in our cash and short term investment accounts, mainly as a result of our initial public offering in December 2006, our secondary offering in August 2007, and our positive cash flow from operations.

     Foreign Exchange gains (losses)

     Foreign currency losses increased a nominal amount due to foreign currency fluctuations related to Double-Take EMEA for the three months ended September 30, 2007.

     Income Tax Expense (Benefit)

     Income tax expense increased by $1.8 million, or 548%, from $0.3 million for the three months ended September 30, 2006 to $2.1 million for the three months ended September 30, 2007 substantially as a result of increased taxable income generated from operations in the United States. In the three months ended September 30, 2007, we recorded a current tax expense of $2.1 million related to income generated during the period using an effective tax rate expected to be in effect for the full year.

     In determining future taxable income, assumptions are made to forecast federal, state and international operating income, the reversal of temporary timing differences, and the implementation of any feasible and prudent tax planning strategies. The assumptions require significant judgment regarding the forecasts of future taxable income, and are consistent with forecasts used to manage the business. As of September 30, 2007, the valuation allowance against net deferred tax assets, which are primarily comprised of net operating loss carryforwards as a result of operating losses incurred since inception, is approximately $19.3 million. Realization of deferred tax assets is dependent upon future earnings, if any, the timing of which is uncertain. Accordingly, the net deferred tax assets were offset by the valuation allowance. If not utilized, the federal and state net operating loss and tax credit carryforwards will expire between 2011 and 2025. Utilization of these net operating losses and credit carryforwards are subject to annual limitations due to provisions of the Internal Revenue Code of 1986, as amended, that are applicable due to “ownership changes” that have occurred. The valuation allowance as of September 30, 2007 will be maintained until sufficient further positive evidence exists to support a reversal of, or decrease in, the valuation.

17

     Net Income

     Net income increased $0.8 million, or 32%, from $2.5 million for the three months ended September 30, 2006 to $3.3 million for the three months ended September 30, 2007. This increase is substantially related to our revenue growth of $4.9 million during the three months ended September 30, 2007. The increase in revenue is a result of the continued leverage of our existing sales forces and partners to generate revenue. Operating expenses increased by only $3.2 million in the same period as we are continuing to focus on expense control. The revenue and operating expenses are partially offset by the increase in income tax expense of $1.8 million and the increase in net interest income and foreign currency expense of $0.6 million.

     Preferred Stock

     Accretion on our Series B and Series C Preferred stock decreased from $1.3 million in the three months ended September 30, 2006 to $0.0 million in the three months ended September 30, 2007. The accretion increased the carrying value of the preferred shares from their carrying value to their redemption value on a straight-line basis over the period from the investment date to the mandatory redemption date. Accretion ceased as of November 12, 2006, the original redemption date for both issuances.

     Dividends on our Series B and Series C Preferred stock decreased from $0.7 million in the three months ended September 30, 2006 to $0.0 million in the three months ended September 30, 2007. In connection with our public offering in December 2006, our Series B and Series C Preferred stock converted into an aggregate of 11,553,130 shares of common stock. Thus, there are no dividends for the three months ended September 30, 2007.

     Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006

     Revenue. We derive our revenue from sales of our products and support and services. Revenue increased 42% to $59.2 million, from $41.8 million for the nine months ended September 30, 2007 compared to September 30, 2006. Revenue for the nine months ended September 30, 2007 includes revenue from Double-Take EMEA for the full nine months whereas revenue for the nine months ended September 30, 2006 only includes revenue from Double-Take EMEA from the acquisition date of May 23, 2006 through September 30, 2006. Of our total revenue in the nine months ended September 30, 2007, 91% was attributable to sales to or through our indirect channels such as distributors, value-added resellers and OEMs, which was a decrease from 94% of our total revenue attributable to sales to or through our indirect channels in the nine months ended September 30, 2006. Of our total revenue in the nine months ended September 30, 2007, 9% was attributable to direct sales to end users, an increase from 6% of our total revenue attributable to end users in the nine months ended September 30, 2006.

     Software License Revenue. Software revenue increased $8.8 million, or 33%, from $26.2 million in the nine months ended September 30, 2006 to $35.0 million in the nine months ended September 30, 2007. The increase in software revenue was primarily due to increased volume of $3.8million resulting from broader demand for, and acceptance of, our software, $0.7 million from new products available during the nine months ended September 30, 2007, and $4.3 million from sales through Double-Take EMEA, which was acquired on May 23, 2006.

     Maintenance and Professional Services Revenue. Maintenance and professional services revenue increased $8.8 million, or 56%, from $15.5 million in the nine months ended September 30, 2006 to $24.3 million in the nine months ended September 30, 2007. Maintenance and professional services revenue represented 37% of our total revenue in the nine months ended September 30, 2006 and 41% of our total revenue in the nine months ended September 30, 2007. Maintenance revenue increased $7.9 million, or 60%, from $13.3 million in the nine months ended September 30, 2006 to $21.2 million in the nine months ended September 30, 2007. The increase in maintenance revenue was attributable to higher sales to our expanding base of customers, continued maintenance revenue from our existing customers, as well as maintenance revenue of $4.5 million generated by Double-Take EMEA, which was acquired on May 23, 2006. Professional services revenue increased $0.8 million, or 35%, from $2.2 million in the nine months ended September 30, 2006 to $3.1 million in the nine months ended September 30, 2007. The increase in professional services revenue was due to more professional service deliveries due to an increase in professional services personnel as well as $0.7 million of revenue generated by Double-Take EMEA which was acquired on May 23, 2006.

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     Cost of Revenue and Gross Profit

     Total cost of revenue increased $0.2 million, or 4%, from $5.8 million for the nine months ended September 30, 2006 to $6.0 million in the nine months ended September 30, 2007. Total cost of revenue represented 14% of our total revenue in the nine months ended September 30, 2006 and 10% of our total revenue in the three months ended September 30, 2007.

     Cost of software revenue decreased $1.1 million, or 84%, from $1.3 million in the nine months ended September 30, 2006 to $0.2 million in the nine months ended September 30, 2007. The decrease was due to cost of software for Double-Take EMEA sales in the period from May 24, 2006 through September 30, 2006 relating to the inventory of Double-Take products on hand at May 23, 2006 of $1.4 million. The balance of the inventory was sold from the acquisition date through the three months ended March 31, 2007, resulting in a decrease of similar cost of revenue for the nine months ended September 30, 2007 as compared to the nine months ended September 30, 2006. Cost of software revenue represented 5% and 1% of our software revenue in the nine months ended September 30, 2006 and September 30, 2007.

     Cost of services revenue increased $1.4 million, or 31%, from $4.4 million for the nine months ended September 30, 2006 to $5.8 million in the nine months ended September 30, 2007. The increase was the result of higher employee compensation of $0.6 million and $0.1 of travel expenses due to an increase in the number of our maintenance and professional services personnel and $0.7 million of costs of maintenance and professional services personnel of Double-Take EMEA which was acquired on May 23, 2006. Cost of services revenue represented 28% of our services revenue in the nine months ended September 30, 2006 and 24% of our services revenue in the nine months ended September 30, 2007.

     Gross profit increased $17.2 million, or 48%, from $36.0 million for the nine months ended September 30, 2006 to $53.2 million for the nine months ended September 30, 2007. Gross margin increased from 86% in the nine months ended September 30, 2006 to 90% in the nine months ended September 30, 2007. This increase is primarily related to the lower cost of revenue in the nine months ended September 30, 2007 as a result of the use of Double-Take EMEA’s inventory during the nine months ended September 30, 2006 and the increased maintenance revenue in the nine months ended September 30, 2007 from Double-Take EMEA.

     Operating Expenses

     Sales and Marketing. Sales and marketing expenses increased $5.1 million, or 33%, from $15.6 million for the nine months ended September 30, 2006 to $20.7 million for the nine months ended September 30, 2007. The increase was substantially due to an increase of compensation and commission expense of $1.4 million resulting from increased sales and headcount, an increase of $0.6 million in marketing and advertising related to creating Double-Take brand awareness and an increase of $2.9 million of costs of sales and marketing efforts through Double-Take EMEA which was acquired on May 23, 2006.

     Research and Development. Research and development expenses increased $1.0 million, or 13%, from $7.8 million for the nine months ended September 30, 2006 to $8.8 million for the nine months ended September 30, 2007. The increase resulted primarily from higher compensation expense of $0.6 million due to an increase in personnel and $0.4 million from outsourced development projects.

     General and Administrative. General and administrative expenses increased $4.6 million, or 73%, from $6.4 million for the nine months ended September 30, 2006 to $11.0 million for the nine months ended September 30, 2007. The increase was substantially related to an increase of $1.0 million in compensation expense in the nine months ended September 30, 2007 attributable to stock option expense, $0.2 million associated with an increase in headcount, an increase in insurance expense of $0.6 million related to higher premiums associated with coverages for a public company, an increase of $1.0 million in legal and accounting fees due to being a public company and an increase of $1.5 million of costs from Double-Take EMEA which was acquired on May 23, 2006.

     Depreciation and Amortization. Depreciation and amortization expense increased $0.6 million, or 56%, from $1.1 million for the nine months ended September 30, 2006 to $1.7 million for the nine months ended September 30, 2007. The increase was attributable to increased depreciation expense associated with increased capital expenditures, which were applied primarily for product development and other computer-related equipment, as well as amortization related to the intangible assets acquired in the Double-Take EMEA acquisition.

     Interest Income. Interest income increased $2.0 million, or 939%, from $0.2 million for the nine months ended September 30, 2006 to $2.2 million for the nine months ended September 30, 2007. The increase is attributable to higher balances in our cash and short term investment accounts, mainly as a result of our initial public offering in December 2006, our secondary offering in August 2007, and our positive cash flow from operations.

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     Foreign Exchange gains (losses)

     Foreign currency losses increased a nominal amount due to foreign currency fluctuations related to Double-Take EMEA for the nine months ended September 30, 2007.

     Income Tax Expense (Benefit)

     Income tax expense was $0.4 million for the nine months ended September 30, 2006 and was a benefit of $0.5 million for the nine months ended September 30, 2007. In the nine months ended September 30, 2007, we recorded a current tax expense of $5.2 million related to income generated during the period using an effective tax rate expected to be in effect for the full year. Because we have delivered consistent profitability over the past two years, we concluded that it was more likely than not that we would generate sufficient taxable income to utilize the benefit from our net operating loss carryforwards eligible to be used in 2007 and 2008. As a result, the Company reversed the valuation allowance on $5.7 million of deferred tax assets resulting in a net benefit of $0.5 million for the nine months ended September 30, 2007.

     In determining future taxable income, assumptions are made to forecast federal, state and international operating income, the reversal of temporary timing differences, and the implementation of any feasible and prudent tax planning strategies. The assumptions require significant judgment regarding the forecasts of future taxable income, and are consistent with forecasts used to manage the business. As of September 30, 2007, the valuation allowance against net deferred tax assets, which are primarily comprised of net operating loss carryforwards as a result of operating losses incurred since inception, is approximately $19.3 million. Realization of deferred tax assets is dependent upon future earnings, if any, the timing of which is uncertain. Accordingly, the net deferred tax assets were offset by the valuation allowance. If not utilized, the federal and state net operating loss and tax credit carryforwards will expire between 2011 and 2025. Utilization of these net operating losses and credit carryforwards are subject to annual limitations due to provisions of the Internal Revenue Code of 1986, as amended, that are applicable due to “ownership changes” that have occurred. The valuation allowance as of September 30, 2007 will be maintained until sufficient further positive evidence exists to support a reversal of, or decrease in, the valuation.

     Net Income

     Net income increased $8.7 million, or 172%, from $5.0 million for the nine months ended September 30, 2006 to $13.7 million for the nine months ended September 30, 2007. This increase is primarily related to our revenue growth of $17.5 million during the nine months ended September 30, 2007 while operating expenses have increased by only $11.3 million in the same period. This increase was the result of our continued focus on expense control and continuing to leverage our existing sales force and partners to generate incremental revenue, as well as our acquisition of Double-Take EMEA, which occurred on May 23, 2006. The other contributing factors are the reversal of the valuation allowance on our deferred tax assets as well as increased interest income during the nine months ended September 30, 2007.

     Preferred Stock

     Accretion on our Series B and Series C Preferred stock decreased from $4.0 million in the nine months ended September 30, 2006 to $0.0 million in the nine months ended September 30, 2007. The accretion increased the carrying value of the preferred shares from their carrying value to their redemption value on a straight-line basis over the period from the investment date to the mandatory redemption date. Accretion ceased as of November 12, 2006, the original redemption date for both issuances.

     Dividends on our Series B and Series C Preferred stock decreased from $2.2 million in the nine months ended September 30, 2006 to $0.0 million in the three months ended September 30, 2007. In connection with our initial public offering in December 2006, our Series B and Series C Preferred stock converted into an aggregate of 11,553,130 shares of common stock. Thus, there are no dividends for the nine months ended September 30, 2007.

Critical Accounting Policies

     In presenting our financial statements in conformity with accounting principles generally accepted in the United States, we are required to make estimates and judgments that affect the amounts reported in our financial statements. Some of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. We formulate these estimates and assumptions based on historical experience and on various other matters that we believe to be reasonable and appropriate. Actual results may differ significantly from these estimates. Of our significant accounting policies described in Note 1 to the financial statements included elsewhere in this Form 10-Q, we believe that the following policies may involve a higher degree of judgment and complexity.

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Revenue Recognition

     We derive revenue from two primary sources or elements: software licenses and services. Services include customer support, consulting, installation services and training. A typical sales arrangement includes both of these elements. We apply the provisions of Statement of Position, or SOP, 97-2, “Software Revenue Recognition,” as amended by SOP 98-4 and SOP 98-9, and related interpretations to all transactions to determine the recognition of revenue.

     For software arrangements involving multiple elements, we recognize revenue using the residual method as described in SOP 98-9. Under the residual method, we allocate and defer revenue for the undelivered elements based on relative fair value and recognize the difference between the total arrangement fee and the amount deferred for the undelivered elements as revenue. The determination of fair value of the undelivered elements in multiple element arrangements is based on the price charged when such elements are sold separately, which is commonly referred to as vendor-specific objective-evidence, or VSOE.

     Our software licenses typically provide for a perpetual right to use our software and are sold on a per copy basis. We recognize software revenue through direct sales channels and resellers upon receipt of a purchase order and when all other basic revenue recognition criteria are met as described below. Revenue from software licenses sold through an OEM is recognized upon the receipt of a royalty report evidencing sales.

     Services revenue includes revenue from customer support and other professional services. Customer support includes software updates (including unspecified product upgrades and enhancements) on a when-and-if-available basis, telephone support and bug fixes or patches. Customer support revenue is recognized ratably over the term of the customer support agreement, which is typically one year. To determine the price for the customer support element when sold separately, we use actual rates at which we sell support as established VSOE.

     Other professional services such as consulting and installation services provided by us are not essential to the functionality of the software and can also be performed by the customer or a third party. Revenues from consulting and installation services are recognized when the services are completed. Training fees are recognized after the training course has been provided. Based on our analysis of such other professional services transactions sold on a stand-alone basis, we establish VSOE for such other professional services when sold in connection with a multiple-element software arrangement.

     We have analyzed all of the undelivered elements included in our multiple-element arrangements and determined that VSOE of fair value exists to allocate revenues to services. Accordingly, assuming all basic revenue recognition criteria are met, software revenue is recognized upon delivery of the software license using the residual method in accordance with SOP 98-9.

     We consider the four basic revenue recognition criteria for each of the elements as follows:

Persuasive evidence of an arrangement with the customer exists. Our customary practice is to require a purchase order and, in some cases, a written contract signed by both the customer and us prior to recognizing revenue on an agreement.

Delivery or performance has occurred. Our software applications are usually physically delivered to customers with standard transfer terms such as FOB shipping point. Software and/or software license keys for add-on orders or software updates are typically delivered digitally, over the internet. We recognize software revenue upon shipment to resellers and distributors because there is no right of return or refund and no price protection agreements. In situations where multiple copies of licenses are purchased, all copies are delivered to the customer in one shipment and revenue is recognized upon shipment. Occasionally, the Company enters into a site license with a customer that allows the customer to use a specified number of licenses within the organization. When a site license is sold, the Company delivers a master disk to the customer that allows the product to be installed on multiple servers. The Company has no further obligation to provide additional copies of the software or user manuals. Revenue on site licenses is recognized upon shipment of the master disk to the customer. Sales made by our OEM partners are recognized as revenue in the month the product is shipped to the end user. We estimate the revenue from a preliminary report received from the OEM shortly after the end of the month. Once the final report is received, the revenue is adjusted to that based on the final report, usually in the following month. Services revenue is recognized when the services are completed, except for customer support, which is recognized ratably over the term of the customer support agreement, which is typically a year.

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Fee is fixed or determinable. The fee customers pay for software applications, customer support and other professional services is negotiated at the outset of an arrangement. The fees are therefore considered to be fixed or determinable at the inception of the arrangement.

Collection is probable. Probability of collection is assessed on a customer-by-customer basis. Each new customer undergoes a credit review process to evaluate its financial position and ability to pay. If the Company determines from the outset of an arrangement that collection is not probable based upon the review process, revenue is recognized on a cash-collected basis.

     Our arrangements do not generally include acceptance clauses. However, if an arrangement does include an acceptance clause, revenue for such an arrangement is deferred and recognized upon acceptance. Acceptance occurs upon the earliest of receipt of a written customer acceptance, waiver of customer acceptance or expiration of the acceptance period.

Stock-Based Compensation

     Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based Payment,” using the prospective transition method, which requires the Company to apply its provisions only to awards granted, modified, repurchased or cancelled after the effective date. Under this transition method, stock-based compensation expense recognized beginning January 1, 2006 is based on the grant-date fair value of stock option awards granted or modified after January 1, 2006. As the Company had used the minimum value method for valuing its stock options under SFAS 123, all unmodified options granted prior to January 1, 2006 continue to be accounted for under APB Opinion No. 25.

     The Company accounts for stock option grants to non-employees in accordance with SFAS No. 123(R) and EITF Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” which require that the fair value of these instruments be recognized as an expense over the period in which the related services are rendered.

     The fair values of options granted were estimated at the date of grant using the following assumptions:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2007	2006	2007	2006
Expected Term	7 years	7 years	7 years	7 years
Volatility	76.29%	82.06%	76.29-80.64%	82.06%
Risk free rate	4.80%	4.79%	4.63% - 4.82%	4.36% - 5.12%
Dividend Yield	—	—	—	—

Income Taxes

     In the three and nine months ended September 30, 2007, we recorded a current tax expense of $2.1 million and $5.2 million related to income generated during the periods using an effective tax rate expected to be in effect for the full year.

     As of December 31, 2006, we recorded a full valuation allowance against net deferred tax assets, which are primarily comprised of net operating loss carryforwards as a result of operating losses incurred since inception. Realization of deferred tax assets is dependent upon future earnings, if any, the timing of which is uncertain. Accordingly, the net deferred tax assets were fully offset by a valuation allowance. If not utilized, the federal and state net operating loss and tax credit carryforwards will expire between 2011 and 2025. Utilization of these net operating losses and credit carryforwards are subject to annual limitations due to provisions of the Internal Revenue Code of 1986, as amended, that are applicable due to “ownership changes” that have occurred.

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     We analyze the carrying value of our deferred tax assets on a regular basis. Because we have delivered consistent profitability over the past two years, we concluded that it was more likely than not that we would generate sufficient taxable income to utilize the benefit from our net operating loss carryforwards eligible to be used in 2007 and 2008. As a result, in the nine months ended September 30, 2007, we reversed the valuation allowance on $5.7 million of deferred tax assets. In determining future taxable income, assumptions are made to forecast federal, state and international operating income, the reversal of temporary timing differences, and the implementation of any feasible and prudent tax planning strategies. The assumptions require significant judgment regarding the forecasts of future taxable income, and are consistent with forecasts used to manage the business. As of September 30, 2007, the remaining valuation allowance is approximately $19.3 million. This valuation allowance will be maintained until sufficient further positive evidence exists to support a reversal of, or decrease in, the valuation allowance.

     We adopted the provisions of FIN 48 on January 1, 2007. The application of this Interpretation requires a two-step process that separates recognition from measurement. Upon implementing FIN 48 and performing the analysis we did not recognize any uncertain tax positions and during the nine months ended September 30, 2007, we did not recognize any increase or decrease to reserves for uncertain tax positions.

     The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax assessments by tax authorities for the years before 2002.

     We have elected to record interest and penalties recognized in accordance with FIN 48 in the financial statements as income taxes. Any subsequent change in classification of FIN 48 interest and penalties will be treated as a change in accounting principle subject to the requirements of SFAS No. 154, Accounting Changes and Error Corrections.

Liquidity and Capital Resources

Overview

     During the development stages of our business, we incurred significant losses from operating activities. Since the three months ended June 30, 2005, however, our operations have generated sufficient cash flow to meet the cash requirements of our business, including our operating, capital and other cash requirements. Our ability to sustain a level of positive cash flow from operations that is sufficient to continue to meet all of our future operating, capital and other cash requirements is subject to the risks associated with our business, including those described under “Risk Factors” in our annual report on Form 10-K, which we filed with the Securities and Exchange Commission on March 29, 2007, and those described under “Risk Factors” in our Prospectus that forms a part of our Registration Statement on Form S-1, as amended, which Prospectus was filed pursuant to Rule 424(b)(1) on August 10, 2007 (Registration No. 333-144746), and to changes in our business plan, capital structure and other events.

     From the start of our operations in 1991 until the three months ended June 30, 2005, we financed our operations primarily through the issuance of preferred stock and common stock. Since the three months ended June 30, 2005, we have primarily financed our operations through internally generated cash flows. In December 2006, we received $47.5 million in net proceeds from our initial public offering. As of September 30, 2007, we had cash and short term investments of $67.4 million and accounts receivable of $16.1 million.

     In January 2006, in connection with the settlement of an intellectual property dispute reached in December 2005, we paid $3.8 million to another company. We also agreed to make future payments of $0.5 million in each of January 2007, 2008, 2009 and 2010, which we collateralized by a $2.0 million letter of credit to that company. In December 2006, we purchased $0.5 million of the company’s products which was paid for in January 2007 and the letter of credit was reduced to $1.5 million. Our future obligations under the settlement will be reduced on a dollar-for-dollar basis to the extent that we purchase or resell the other company’s products.

     In May 2006, we paid $1.1 million to the former stockholders of Double-Take EMEA, which was our primary distributor in Europe, the Middle East and Africa as the initial payment for the acquisition of that company. Subsequent payments totaling $6.9 million have been made through September 30, 2007. The remaining portion of the total purchase price, which we estimate will range between $2.0 million and $3.0 million, will be payable in monthly increments based upon a specified percentage of the intercompany amounts paid by Double-Take EMEA to us each month in respect of purchases under our intercompany distribution agreement with Double-Take EMEA through December 31, 2007. A portion of our earn-out payments are held in escrow through December 31, 2007, to satisfy claims against the selling shareholders that we may have from time to time as a result of breaches of representations, warranties or covenants.

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     At September 30, 2007, we had no borrowings under our existing credit facility with Silicon Valley Bank (“Bank”). There was a letter of credit relating to our settled legal proceeding (noted above) outstanding for $1.5 million

     In May 2007, we entered into an amendment to our credit facility that extended the term of the facility to April 29, 2008. Under the terms of the amended credit facility, our maximum borrowings are $2 million less the aggregate amounts undrawn on all outstanding letters of credit, foreign exchange contracts, or any other accommodations issued or incurred, or caused to be issued or incurred by the bank. Up to $0.5 million of the facility is available for foreign exchange contracts. The rate of interest for this facility is 0.75% above the prime rate. The facility is collateralized by all of our assets, excluding our intellectual property.

     Our credit facility contains a number of restrictions that will limit our ability, among other things, to do the following: borrow money; enter into transactions outside the ordinary course of business; pledge our accounts receivable, inventory, intellectual property and most of our other assets as security in other borrowings or transactions; pay dividends on stock, redeem or acquire any of our securities; sell certain assets; make certain investments; guaranty obligations of third-parties; undergo a merger or consolidation; or engage in any business other than the business in which we are currently engaged or business that is reasonably related to that business.

Sources and Uses of Cash

	Nine Months Ended
	September 30,
	2007			2006
	(in thousands)
Cash flow data:
Net cash provided by operating activities	$	12,204		$	5,397
Net cash used by investing activities		(34,483	)		(2,432	)
Net cash provided by (used in) financing activities		6,007			(880	)
Effect of exchange rate changes on cash and cash equivalents		(53	)		12
Net increase (decrease) in cash and equivalents		(16,325	)		2,097
Cash and cash equivalents, beginning of period		55,170			8,341
Cash and equivalents, end of period	$	38,845		$	10,438

Cash Flows from Operating Activities

     Cash provided by operating activities increased in the nine months ended September 30, 2007 compared to September 30, 2006 primarily due to having $13.7 million of net income in the nine months ended September 30, 2007 as opposed to a net income of $5.0 million in the nine months ended September 30, 2006. Other factors that contributed to the increase were our continued growth of deferred revenue of $1.4 million, which was a result of our increase in software license sales and maintenance renewals, the decrease in accounts payable and accrued expenses and other liabilities of $2.7 million resulting from payments made during the nine months ended September 30, 2007, and increased depreciation, amortization and stock option expense of $1.3 million. These increases in cash flow from operations were partially offset by the increase in accounts receivable of $2.7 million resulting from slower collections and growth in receivables associated with the growth in revenue, the change in inventory of $1.2 million as a result of Double-Take EMEA using the inventory and the release of the valuation allowance of $2.8 million on deferred tax assets that has not been utilized.

Cash Flows from Investing Activities

     Cash used in investing activities increased in the nine months ended September 30, 2007 compared to September 30, 2006 primarily due to purchases of short term investments with the proceeds of our initial public offering, increased research and development lab equipment expenditures, and our acquisition of Double-Take EMEA on May 23, 2006. As we continue to make earn-out payments related to our acquisition of Double-Take EMEA, which we estimate will range between $2.0 and $3.0 million, we expect that cash used in investing activities will continue to increase until the end of the earn-out period at the end of 2007.

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Cash Flows from Financing Activities

     Cash provided by financing activities increased $6.9 million in the nine months ended September 30, 2007 compared to September 30, 2006 due to tax benefits associated with stock based compensation, proceeds associated with exercises of stock options, and net proceeds from the secondary offering completed in August 2007. This was offset by additional costs paid in connection with the public offering.

Off-Balance Sheet Arrangements

     As of September 30, 2007, other than our operating leases and letter of credit, we do not have off-balance sheet financing arrangements, including any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

     We do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

     Historically, our exposure to foreign currency exchange rates was limited as our international sales were denominated in the United States dollar. As a result of our acquisition of Double-Take EMEA in May 2006, we now have international sales that are denominated in foreign currencies, and we face exposure to adverse movements in foreign currency exchange rates. Depending on the amount of our revenue generated from Double-Take EMEA, adverse movement in foreign currency exchange rates could have a material adverse impact on our financial results. Our primary exposures are to fluctuations in exchange rates for the United States dollar versus the Euro and to a lesser extent, the United States dollar versus the British Pound. Changes in currency exchange rates could adversely affect our reported revenue and could require us to reduce our prices to remain competitive in foreign markets, which could also materially adversely affect our results of operations. We have not historically hedged exposure to changes in foreign currency exchange rates and, as a result, we could incur unanticipated gains or losses.

Item 4. Controls and Procedures.

     We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

     Under the supervision and with the participation of our management, including our CEO and CFO, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

     There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

We currently have no material legal proceedings pending.

Item 1A. Risk Factors.

     An investment in our stock involves a high degree of risk. You should carefully consider the risks set forth in the Risk Factors section of our annual report on Form 10-K, which we filed with the SEC on March 29, 2007, the Risk Factors set forth in our Form S-1, as amended, originally filed with the SEC on July 20, 2007, and all of the other information set forth in this Form 10-Q and our Form 10-K before deciding to invest in our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

     None.

Use of Proceeds

     On December 14, 2006, our Registration Statement on Form S-1 (333-136499) covering our initial public offering was declared effective by the SEC. We used approximately $10.2 million of the proceeds from our initial public offering to make payment of a special dividend to the holders of the Series B Preferred Stock in December 2006. We intend to use the remaining $37.4 million of the proceeds from the offering for working capital and other general corporate purposes. Our management has significant flexibility in applying the net proceeds of the offering. Pending their use, we have invested the net proceeds of the offering in short-term, interest-bearing securities.

Item 3. Defaults Upon Senior Securities.

     Not Applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

     None.

Item 5. Other Information.

     On November 9, 2007, we entered into letter agreements with each of Dean Goodermote, our President, Chief Executive Officer and Chairman of the Board of Directors, S. Craig Huke, our Chief Financial Officer, Daniel Jones, our Vice President of Sales and Marketing, and Michael Lesh, our Vice President of Professional Services and Support, and an amended and restated employment/severance agreement with David Demlow, our Chief Technology Officer. The letter agreements with Messrs. Goodermote, Huke, Jones and Lesh provide for severance payments, in the event that their employment with us is terminated without cause, in the amount of one times such person’s annual salary, which amounts will be paid in accordance with the Company’s regular payroll periods, and provide for the continuation of certain health care benefits for a 12-month period following such person’s termination. The payments and benefits under the letter agreements are subject to each person executing and not revoking a release of claims shortly after that person’s termination and compliance with the terms of a non-disclosure agreement between us and that person. The agreement with Mr. Demlow provides for severance payments, in the event of his termination without cause, in the amount of one times his annual salary and the continuation of certain health care benefits for a 12-month period following his termination, if he abides by certain non-competition provisions and a non-disclosure agreement, and signs a termination agreement at the time of his termination.

26

     The description of the letter agreements and the amended and restated employment/severance agreement in this Item 5 is qualified in its entirety by reference to the full text of those agreements, copies of which are attached hereto as Exhibits 10.48 and 10.50 and incorporated herein by reference.

Item 6. Exhibits.

Exhibit No.	Exhibit Description
10.48	Form of Change in Control Severance Agreement between Double-Take Software, Inc and Dean Goodermote, S. Craig Huke, Daniel M. Jones and Michael Lesh
10.49	Amended and Restated Employment/Severance Agreement, dated November 9, 2007, between Double-Take Software, Inc and Robert L. Beeler
10.50	Amended and Restated Employment/Severance Agreement, dated November 9, 2007, between Double-Take Software, Inc and David J. Demlow
31.01	Certification of Chief Executive officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.02	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.01	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

27

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DOUBLE-TAKE SOFTWARE, INC.
November 14, 2007	By:	/s/ S. Craig Huke
		S. Craig Huke
		Chief Financial Officer (Principal Financial and Principal Accounting Officer)

28

EX-10.48

Exhibit 10.48

November 9, 2007

[NAME]
[TITLE]
c/o Double-Take Software, Inc.
257 Turnpike Road, Suite 210
Southborough, MA 01772

Dear [NAME]:

Once executed by both parties, this letter agreement (this “Letter Agreement”) will constitute an agreement between DoubleTake Software, Inc. (the “Company”) and you with respect to certain payments and benefits that may become payable to you in connection with a termination of your employment by the Company without Cause (as defined in Section 1). For purposes of this Letter Agreement, the “Effective Date” shall be the date first set forth above.

1. Certain Definitions

For purposes of this Agreement:

“Cause” means: (i) willful disobedience of a material and lawful instruction of the CEO or Board of Directors of the Company; (ii) conviction of any misdemeanor involving fraud or embezzlement or similar crime, or any felony; (iii) conduct amounting to fraud, dishonesty, negligence, willful misconduct or recurring insubordination; (iv) inattention to your duties; (v) excessive absences from work; or (vi) your violation of the Non-Disclosure Confidentiality Agreement (the “NDA”) between you and the Company.

“Code” means the Internal Revenue Code of 1986, as amended.

“Termination Date” means the effective date of the termination of your employment with the Company and its affiliates.

2. Release

As a condition to, and as consideration for, the receipt of any payments or other benefits under this Letter Agreement, you agree to first execute the Waiver and Release of Claims Agreement annexed hereto as Addendum A (the “Release”) within 45 days of your termination of employment and to not revoke such Release within the time permitted therein for such revocation.

3. Qualifying Termination of Employment

If your employment with the Company and its affiliates is terminated by the Company or its affiliates without Cause, you will be entitled to the payments and benefits outlined in Section 4, subject to the terms and conditions outlined in this Letter Agreement.

4. Severance Benefits

If your employment with the Company and its affiliates is terminated as described in Section 3, then subject to your satisfaction of the requirements of this Letter Agreement and execution of the Release, you will be entitled to the following severance benefits:

(a)	Severance Pay. You will be entitled to receive severance pay in an amount equal to one times your current annual base salary. Subject to Section 4(c) below, your severance pay will be paid in accordance with the Company’s regular payroll periods, commencing on the first day of the first payroll period following the date of the termination of your employment. Each payment shall be deemed to be a separate payments for purposes of Section 409A of the Code.
(b)	Benefits Continuation. If you and your eligible dependents shall be entitled to “continuation coverage” within the meaning of section 4980B of the Code for health, dental and vision insurance, elect to continue coverage and timely take the required steps to initiate such coverage, then for a period of twelve months from the date of termination of your employment (or such shorter period if you and/or your eligible dependents cease to be eligible for such coverage), the Company will pay the amount by which the cost of such coverage for you and your eligible dependents exceeds the amount that you previously paid for coverage under such health, dental and vision insurance plans; provided, however, that if you become eligible for group health, dental or vision benefits under plans maintained by a subsequent employer, the benefits provided under this Section 4(b) shall be secondary to the benefits provided by such subsequent employer.
(c)	Earlier Termination of Benefits. Notwithstanding any other provision of this Letter Agreement, the Company’s obligation to pay or provide the severance payments and benefits provided under this Section 4 shall terminate as of the date on which the Company determines in good faith that you have violated the NDA between you and the Company or the Release.

5. Miscellaneous

(a) Death or Disability. In the event that you die or become disabled (within the meaning of the Company’s long-term disability plan) prior to the receipt of all payments and benefits that become payable under this Letter Agreement, any unpaid balance will be paid in a lump sum to you or, if applicable, the executor or administrator of your estate or to a properly qualified personal representative.

(b) Withholding. The Company shall be entitled to withhold from amounts to be paid to you under this Letter Agreement any federal, state or local withholding or other taxes which it is from time to time required to withhold.

6. Section 409A of the Code. Anything in this Agreement to the contrary notwithstanding, if (A) on the date of termination of your employment with the Company or an affiliate, any of the Company’s stock is publicly traded on an established securities market or otherwise (within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code, as amended (the “Code”)), (B) if you are determined to be a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, (C) the payments exceed the amounts permitted to be paid pursuant to Treasury Regulations section 1.409A-1(b)(9)(iii) and (D) such delay is required to avoid the imposition of the tax set forth in Section 409A(a)(1) of the Code as a result of such termination, you would receive any payment that, absent the application of this Section 6, would be subject to interest and additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(2)(B)(i) of the Code, then no such payment shall be payable prior to the date that is the earliest of (1) 6 months after your termination date, (2) your death or (3) such other date as will cause such payment not to be subject to such interest and additional tax (with a catch-up payment equal to the sum of all amounts that have been delayed to be made as of the date of the initial payment). It is the intention of the parties that payments or benefits payable under this Agreement not be subject to the additional tax imposed pursuant to Section 409A of the Code. To the extent such potential payments or benefits could become subject to such Section, the parties shall cooperate to amend this Agreement.

7. Unenforceability. If any portion of this Letter Agreement is deemed to be void or unenforceable by a court of competent jurisdiction, the remaining portions will remain in full force and effect to the maximum extent allowed by law. The parties intend and desire that each portion of this Letter Agreement be given the maximum possible effect allowed by law.

8. Headings. The heading of the several sections of this Letter Agreement have been prepared for convenience and reference only and shall not control, affect the meaning, or be taken as the interpretation of any provision of this Letter Agreement.

9. Successors; Binding Agreement. This Letter Agreement will inure to the benefit of and be binding upon the parties’ personal or legal representatives, executors, administrators, successors, heirs, distributes, devises and legatees.

10. Applicable Law. This Letter Agreement, and its interpretation and application, will be governed and controlled by the laws of the Commonwealth of Massachusetts, applicable as though to a contract made in Massachusetts by residents of Massachusetts and wholly to be performed in Massachusetts without giving effect to principles of conflicts of law.

11. Amendment. This Letter Agreement may not be changed, modified, or amended, except in a writing signed by both you and the Company.

12. Term. The term of this Agreement shall commence on the Effective Date and, unless sooner terminated as hereinafter set forth, shall end on March 31, 2009 (the “Term”); provided, however, that this Agreement will automatically renew for additional one (1) year periods (each a “Renewal Term”) on each anniversary thereafter, unless the Company delivers to you written notice of intent not to renew at least thirty (30) days prior to the expiration of the Term or any Renewal Term and during a time that is not during the Pendency of a Change in Control.

13. Your signature below means that:

(i)	You have had ample opportunity to discuss the terms and conditions of this Letter Agreement with an attorney and/or financial advisor of your choice and as a result fully understand its terms and conditions; and
(ii)	You accept the terms and conditions set forth in this Letter Agreement; and
(iii)	This Letter Agreement supersedes and replaces any and all agreements or understandings, whether written or oral, that you may have with the Company concerning your termination of employment and any other separation, termination, retirement or compensation arrangement in connection therewith, other than any agreements or arrangements concerning any options or other equity compensation separately addressed in any option agreements or similar equity compensation agreements and plans.

If you find the foregoing acceptable, please sign your name on the signature line provided below. Once this Letter Agreement is executed, please return it directly to my attention. Should you have any questions regarding this Letter Agreement or any of the terms hereof, now or in the future, please contact Dean Goodermote.

Very truly yours,

Double-Take Software, Inc.

By: Dean Goodermote

I accept the terms and conditions of this Letter Agreement.

Signed:

Dated:

ADDENDUM A

WAIVER AND RELEASE OF CLAIMS AGREEMENT

     I HAVE BEEN ADVISED TO CONSULT AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT.

     I UNDERSTAND THAT I HAVE [FORTY-FIVE] [TWENTY-ONE] DAYS AFTER RECEIVING THIS AGREEMENT TO CONSIDER WHETHER TO SIGN IT.

     AFTER SIGNING THIS AGREEMENT, I UNDERSTAND THAT I HAVE ANOTHER SEVEN DAYS IN WHICH TO REVOKE IT, AND IT DOES NOT TAKE EFFECT UNTIL THOSE SEVEN DAYS HAVE ENDED.

     In consideration of, and subject to, the payments to be made to me by DoubleTake Software, Inc. (“DoubleTake Software” or the “Company”) or any of its subsidiaries or affiliates, pursuant to the Letter Agreement dated as of November 9, 2007 between DoubleTake Software and me (the “Letter Agreement”), which I acknowledge that I would not otherwise be entitled to receive, I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary or affiliate thereof after the date hereof, and I further agree to and do release and forever dischargethe Company or any subsidiary or affiliate of the Company and their respective past and present officers, directors, shareholders, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary or affiliate of the Company or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, any State’s Human Relations Act, the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, Sections 1981-1988 of Title 42 of the U.S. Code, Older Workers’ Benefit Protection Act, Family and Medical Leave Act, the Fair Labor Standards Act, any State’s Wage Payment and Collection laws, the Age Discrimination in Employment Act of 1967, the Pregnancy Discrimination Act, the Employee Retirement Income Security Act of 1974 (“ERISA”), all as amended. Should I decide to file any charge or legal claim against the Company, I agree to waive my right to recover any damages or other relief awarded to me which arises out of any such charge or legal claim made by me against the Company.

     In consideration of, and subject to, the payments to be made to me by DoubleTake Software or any of its subsidiaries or affiliates, pursuant to the Letter Agreement, which I acknowledge that I would not otherwise be entitled to receive, I hereby agree not to make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage the Company or any of its affiliates or their respective officers, directors, employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Letter Agreement.

     Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims Agreement shall adversely affect (i) my rights under the Letter Agreement; (ii) my rights to vested benefits (other than severance benefits) under any “employee benefit plan” (within the meaning of Section 3(3) of ERISA) of the Company or any subsidiary or affiliate of the Company; (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary of the Company, and my rights under any director’s and officer’s liability insurance policy covering me; or (iv) my rights to make truthful statements or disclosures that are required by applicable law, regulation or legal process .

     I acknowledge that I have signed this Waiver and Release of Claims Agreement voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations, written or oral, have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company’s acknowledgment of my rights reserved under the preceding paragraph above.

     I acknowledge that I have been given not less than [forty-five (45)] [twenty-one (21)] days to review and consider this Waiver and Release of Claims Agreement, and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims Agreement seven days or less after its execution by providing written notice to the [Vice-President of Human Resources] at the Company’s corporate headquarters (or some other designee).

     Finally, I acknowledge that I have carefully read this Waiver and Release of Claims Agreement and understand all of its terms. This is the entire Agreement between the parties and is legally binding and enforceable.

     This Waiver and Release of Claims Agreement shall be governed and interpreted under federal law and the laws of the Commonweath of Massachusetts.

     I knowingly and voluntarily sign this Waiver and Release of Claims Agreement and agree to be bound by its terms.

Date Delivered to	:	DOUBLETAKE SOFTWARE, INC.
Date Signed by	:	By:
		Title:
Seven-Day Revocation Period Ends:
Signed:		Date:

EX-10.49

Exhibit 10.49

AMENDED AND RESTATED

EMPLOYMENT/SEVERANCE AGREEMENT

     AMENDED AND RESTATED AGREEMENT made as of the 9th day of November, 2007 by and between Robert Beeler residing at the address indicated on the signature page hereto (hereinafter referred to as the “Employee”) and Double-Take Software, Inc., a Delaware corporation with principal offices located at 257 Turnpike Road, Suite 210, Southborough, Massachusetts 01772 (hereinafter referred to as the “Company”).

     The Employee is currently employed by the Company. The Company and the Executive desire to amend and restate all prior agreements and understandings regarding the Executive’s employment by the Company as set forth herein.

ARTICLE I
DEFINITIONS

     1.1 Base Salary. Base Salary shall mean the highest annualized rate of Employee’s base compensation in effect at any time during the ninety (90) day period prior to the Date of Termination of Employment, and shall include all amounts of Employee’s base compensation that are reported as income, provided however, that Base Salary shall not include any bonus or any other payment contingent on performance.

     1.2 Cause. Cause shall mean (i) willful disobedience by Employee of a material and lawful instruction of the Chief Executive Officer or the Board of Directors of the Company; (ii) conviction of Employee of any misdemeanor involving fraud or embezzlement or similar crime, or any felony; (iii) breach by Employee of any material provision of this Agreement; (iv) conduct amounting to fraud, dishonesty, willful misconduct or recurring insubordination; or (v) excessive absences from work for any reason.

     1.3 Disability. Disability shall mean a physical or mental infirmity which impairs the Employee’s ability to substantially perform his duties with the Company for a period of (30) consecutive days, and Employee has not returned to his full time employment prior to the Employment Termination Date as stated in the “Notice of Termination of Employment” (as defined below).

     1.4 Employment Termination Date. Employment Termination Date shall mean (i) in the case of the Employee’s death, his date of death; (ii) in all other cases, the date specified in the Notice of Termination of Employment; provided, however, if the Employee’ s employment is terminated by the Company due to Disability, the date specified in the Notice of Termination of Employment shall be at least 30 days from the date the Notice of Termination of Employment is given to the Employee, and provided further that in the case of Disability, the Employee shall not have returned to the full-time performance of his duties during such period of at least 30 days. For purposes of this Agreement a termination of employment means a “separation from service” within the meaning of Treas. Reg. §1.409A-1(h).

     1.5 Notice of Termination of Employment. Notice of Termination of Employment shall mean a written notice from the Company, or the Employee, of termination of the Employee’s employment which indicates the specific termination provision in this Agreement relied upon, if any. A Notice of Termination of Employment served by the Company shall specify the effective Employment Termination Date.

- 2 -

     1.6 Severance Benefits. Severance Benefits shall mean if Employee and Employee’s eligible dependents shall be entitled to “continuation coverage” within the meaning of section 4980B of the Code for health, dental and vision insurance, elects to continue coverage and timely takes the required steps to initiate such coverage, the amount by which the cost of such coverage for Employee and Employee’s eligible dependents exceeds the amount that Employee previously paid for coverage under such health, dental and vision insurance plans, provided, however, that Severance Benefits shall cease to the extent that Employee or Employee’s eligible dependents are no longer eligible for such continuation coverage and shall, if Employee becomes eligible for group health, dental or vision benefits under plans maintained by a subsequent employer, be secondary to the benefits provided by such subsequent employer.

     1.7 Severance Payment. Severance Payment shall mean a cash payment equal to twelve (12) months Base Salary, payable in accordance with the Company’s regular payroll periods, commencing on the first day of the first payroll period following the Employment Termination Date. Each payment shall be deemed to be a separate payments for purposes of Section 409A of the Code.

     1.8 Termination Agreement. Termination Agreement shall mean an agreement in the form attached hereto as Addendum A, which shall be signed by Employee within thirty (30) days of the Employment Termination Date.

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ARTICLE II

EMPLOYMENT

     Employee’s employment is at-will and nothing in this Agreement is intended, or shall be construed, to limit the right of the Company to terminate Employee’s employment at any time in its sole discretion.

ARTICLE III
NON-DISCLOSURE

     Employee agrees that this Agreement is conditioned on Employee’s compliance with the non-disclosure agreement (the “NDA”) between the Company and Employee, a copy of which is attached hereto as Addendum B and is hereby incorporated by reference. Any breach or violation of any terms of the NDA shall be considered a breach or violation of this Agreement.

ARTICLE IV
RESTRICTIVE COVENANT

     4.1 In the event of the termination of employment with the Company for any reason, Employee agrees that he will not, for a period of one (1) year following such termination, directly or indirectly, enter into or become associated with or engage in any other business (whether as a partner, officer, director, shareholder, employee, consultant, or otherwise), which is in the business of providing real time data replication and high availability software technologies in competition with the Company or is otherwise engaged in the same or similar business as the Company in direct competition with the Company’s products or services, or those which the Company was in the process of developing, during the tenure of Employee’s employment by the Company. Notwithstanding the foregoing, the ownership by Employee of less than 5 percent of the shares of any publicly held corporation shall not violate the provisions of this Article IV.

- 4 -

     4.2 In furtherance of the foregoing, Employee shall not during the aforesaid period of non-competition, directly or indirectly, in connection with any business of providing real time data replication and high availability software technologies, or any business similar to the business in which the Company was engaged, or in the process of developing during Employee’s tenure with the Company, solicit any customer or employee of the Company who was a customer or employee of the Company during the term of his employment.

     4.3 If any court shall hold that the duration of non-competition or any other restriction contained in this Article IV is unenforceable, it is our intention that same shall not thereby be terminated but shall be deemed amended to delete therefrom such provision or portion adjudicated to be invalid or unenforceable or, in the alternative, such judicially substituted term may be substituted therefor.

ARTICLE V
SEVERANCE PAYMENT; TERMINATION OF OPTIONS

     5.1 In the event the Company terminates Employee’s employment without Cause during the term of this Agreement, and (i) Employee does not violate the provisions of Articles III and IV; and (ii) Employee signs a Termination Agreement satisfactory to the Company, Employee shall be paid a Severance Payment.

     5.2 In the event (i) Employee is terminated for Cause, or (ii) Employee violates the provisions of Article III or IV, any and all employment stock options held by Employee, whether vested or unvested, shall immediately terminate and Employee shall not be entitled to exercise such options.

- 5 -

ARTICLE VI
TERM AND TERMINATION

     6.1 The term of this Agreement has commenced as of the date hereof and, unless sooner terminated as hereinafter set forth, shall end on March 31, 2009 (the “Term”); provided, however, that this Agreement will automatically renew for additional one year periods (each a “Renewal Term”) on each anniversary thereafter, unless the Company delivers to Employee written notice of intent not to renew at least thirty (30) days prior to the expiration of the Term or any Renewal Term .

     6.2 This Agreement shall automatically terminate upon the voluntary resignation of Employee.

ARTICLE VII
TERMINATION OF PRIOR AGREEMENTS AND UNDERSTANDINGS

     This Agreement sets forth the entire agreement between the parties and supersedes all prior agreements and understandings between the parties regarding severance payments or benefits, whether oral or written prior to the effective date of this Agreement.

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ARTICLE VIII
ARBITRATION, COSTS AND INDEMNIFICATION

     8.1 Any dispute arising out of the interpretation, application, and/or performance of this Agreement with the sole exception of any claim, breach, or violation arising under Articles III or IV hereof shall be settled through final and binding arbitration before a single arbitrator in the State of New Jersey in accordance with the Rules of the American Arbitration Association. The arbitrator shall be selected by the Association and shall be an attorney-at-law experienced in the field or fields involved in the dispute (e.g., corporate, employment, trade secret, non-competition, or securities law). Any judgment upon any arbitration award may be entered in any court, federal or state, having competent jurisdiction of the parties. Whether in arbitration or in any litigation between the parties in federal or state court relating to or concerning this Agreement, it is agreed that the losing shall pay the prevailing party’s reasonable attorney’s fees and costs.

     8.2 The Company hereby agrees to indemnify, defend, and hold harmless Employee for any and all claims arising from or related to his employment by the Company at any time asserted, at any place asserted, and to the fullest extent permitted by law, except for any claims arising out of a breach of any restrictive covenant, non-solicitation agreement or similar arrangement between Employee and an entity other than the Company.

ARTICLE IX
SEVERABILITY

     If any provision of this Agreement shall be held invalid and unenforceable, the remainder of this Agreement shall remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall remain in full force and effect in all other circumstances.

- 7 -

ARTICLE X

NOTICE

     For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the Company at the address set forth below and to Employee at the address set forth on the signature page or to any such other address as the party to receive the notice shall advise by due notice given in accordance with this paragraph. All notices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof except that notice of change of address shall be effective only upon receipt.

     The current address of the Company is as follows:

IF TO THE COMPANY:	Double-Take Software, Inc.
	257 Turnpike Road, Suite 210
	Southborough, Massachusetts 01772

ARTICLE XI
BENEFIT

     This Agreement shall inure to, and shall be binding upon, the parties hereto, the successors and assigns of the Company, and the heirs and personal representatives of the Employee.

ARTICLE XII
WAIVER

     The waiver by either party of any breach or violation of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of construction and validity.

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ARTICLE XIII
GOVERNING LAW

     This Agreement has been negotiated and executed in the Commonwealth of Massachusetts, which shall govern its construction and validity.

ARTICLE XIV
JURISDICTION

     Any or all actions or proceedings which may be brought by the Company or Employee under this Agreement shall be brought in courts having a stitus within the State of Massachusetts, and Employee and the Company each hereby consent to the jurisdiction of any local, state, or federal court located within the State of Massachusetts.

ARTICLE XV
ENTIRE AGREEMENT

     This Agreement contains the entire agreement between the parties hereto. No change, addition, or amendment shall be made hereto, except by written agreement signed by the parties hereto.

ARTICLE XVI
SURVIVAL

     Articles III, IV, VIII, X, XIII and XIV shall survive the termination of this Agreement.

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ARTICLE XVII
ADVICE OF COUNSEL

     Employee acknowledges that the Company advised Employee to retain his own counsel to review this Agreement and gave Employee sufficient time to obtain a review of this Agreement by his own counsel.

ARTICLE XVIII
SECTION 409A OF THE CODE

     Anything in this Agreement to the contrary notwithstanding, if (A) on the date of termination of Employee’s termination of employment with the Company or an affiliate, any of the Company’s stock is publicly traded on an established securities market or otherwise (within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code, as amended (the “Code”)), (B) if Employee is determined to be a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, (C) the payments exceed the amounts permitted to be paid pursuant to Treasury Regulations section 1.409A-1(b)(9)(iii) and (D) such delay is required to avoid the imposition of the tax set forth in Section 409A(a)(1) of the Code as a result of such termination, Employee would receive any payment that, absent the application of this Article XVIII, would be subject to interest and additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(2)(B)(i) of the Code, then no such payment shall be payable prior to the date that is the earliest of (1) 6 months after the date of termination of Employee’s employment, (2) Employee’s death or (3) such other date as will cause such payment not to be subject to such interest and additional tax (with a catch-up payment equal to the sum of all amounts that have been delayed to be made as of the date of the initial payment). It is the intention of the parties that payments or benefits payable under this Agreement not be subject to the additional tax imposed pursuant to Section 409A of the Code. To the extent such potential payments or benefits could become subject to such Section, the parties shall cooperate to amend this Agreement.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their hands and seals the day and year first above written.

DOUBLE-TAKE SOFTWARE, INC.
By:	/s/ Dean Goodermote
Dean Goodermote
Chief Executive Officer
/s/Robert Beeler
Robert Beeler
5780 Hornbill Place
Carmel, Indiana 46033

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ADDENDUM A

WAIVER AND RELEASE OF CLAIMS AGREEMENT

     I HAVE BEEN ADVISED TO CONSULT AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT.

     I UNDERSTAND THAT I HAVE [FORTY-FIVE] [TWENTY-ONE] DAYS AFTER RECEIVING THIS AGREEMENT TO CONSIDER WHETHER TO SIGN IT.

     AFTER SIGNING THIS AGREEMENT, I UNDERSTAND THAT I HAVE ANOTHER SEVEN DAYS IN WHICH TO REVOKE IT, AND IT DOES NOT TAKE EFFECT UNTIL THOSE SEVEN DAYS HAVE ENDED.

     In consideration of, and subject to, the payments to be made to me by DoubleTake Software, Inc. (“DoubleTake Software” or the “Company”) or any of its subsidiaries or affiliates, pursuant to the Letter Agreement dated as of November 9, 2007 between DoubleTake Software and me (the “Letter Agreement”), which I acknowledge that I would not otherwise be entitled to receive, I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary or affiliate thereof after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary or affiliate of the Company and their respective past and present officers, directors, shareholders, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary or affiliate of the Company or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, any State’s Human Relations Act, the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, Sections 1981-1988 of Title 42 of the U.S. Code, Older Workers’ Benefit Protection Act, Family and Medical Leave Act, the Fair Labor Standards Act, any State’s Wage Payment and Collection laws, the Age Discrimination in Employment Act of 1967, the Pregnancy Discrimination Act, the Employee Retirement Income Security Act of 1974 (“ERISA”), all as amended. Should I decide to file any charge or legal claim against the Company, I agree to waive my right to recover any damages or other relief awarded to me which arises out of any such charge or legal claim made by me against the Company.

 1
Confidential

     In consideration of, and subject to, the payments to be made to me by DoubleTake Software or any of its subsidiaries or affiliates, pursuant to the Letter Agreement, which I acknowledge that I would not otherwise be entitled to receive, I hereby agree not to make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage the Company or any of its affiliates or their respective officers, directors, employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Letter Agreement.

     Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims Agreement shall adversely affect (i) my rights under the Letter Agreement; (ii) my rights to vested benefits (other than severance benefits) under any “employee benefit plan” (within the meaning of Section 3(3) of ERISA) of the Company or any subsidiary or affiliate of the Company; (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary of the Company, and my rights under any director’s and officer’s liability insurance policy covering me; or (iv) my rights to make truthful statements or disclosures that are required by applicable law, regulation or legal process .

     I acknowledge that I have signed this Waiver and Release of Claims Agreement voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations, written or oral, have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company’s acknowledgment of my rights reserved under the preceding paragraph above.

     I acknowledge that I have been given not less than [forty-five (45)] [twenty-one (21)] days to review and consider this Waiver and Release of Claims Agreement, and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims Agreement seven days or less after its execution by providing written notice to the [Vice-President of Human Resources] at the Company’s corporate headquarters (or some other designee).

     Finally, I acknowledge that I have carefully read this Waiver and Release of Claims Agreement and understand all of its terms. This is the entire Agreement between the parties and is legally binding and enforceable.

 2
Confidential

     This Waiver and Release of Claims Agreement shall be governed and interpreted under federal law and the laws of the Commonwealth of Massachusetts.

     I knowingly and voluntarily sign this Waiver and Release of Claims Agreement and agree to be bound by its terms.

Date Delivered to	:	DOUBLETAKE SOFTWARE, INC.
Date Signed by	:	By:
		Title:
Seven-Day Revocation Period Ends:
Signed:		Date:

 3
Confidential

ADDENDUM B

NON-DISCLOSURE CONFIDENTIALITY AGREEMENT
DOUBLE-TAKE SOFTWARE, INC.

Robert Beeler (hereinafter referred to as the “employee”) hereby acknowledges that Double-Take Software, Inc., et al. (hereinafter referred to as the “Corporation”) is engaged in the business of developing, selling, distributing, supporting, installing and servicing computer related software. Both parties agree that the operation of the business and performance of the work of the Corporation involves special skills, knowledge, trade secrets, special techniques, procedures or names and addresses of the customers, past and present, of the Corporation. The employee acknowledges that he is being employed with the express understanding that all of the foregoing shall not be divulged or otherwise disclosed to anyone at any time.

It is further understood and agreed to by the employee, that during the time of his employment by the Corporation, that his time and efforts will be exclusively devoted to the Corporation’s business, and that he will not participate in any activity of a similar nature with any other entity, in any capacity, (e.g. sales, consulting, engineering, supervision or hands on activity). All computer program source and information relating to such source code, trade secrets, books, manuals, bulletins, work papers, files, reports and other related materials are the property of the Corporation and must be returned to the Corporation upon request or at the termination of employment, along with any reproductions of such documentation.

Employee agrees to hold in confidence and to refrain from using or disclosing to any third party, without prior written consent of Corporation, (a) any information disclosed in confidence to employee by the Corporation, and (b) any information developed or delivered by employee during the term of employee’s employment by the Corporation. All computer program source and information relating to such source code received, developed or delivered by employee in connection with his employment shall be deemed confidential information and belonging exclusively to the Corporation for purposes of this paragraph.

Employee agrees to provide the Corporation with all source code and complete source code documentation for all computer programs developed or modified by employee in the course of his employment by the Corporation. Ownership of all goods, code, and materials, etc.; delivered by employee hereunder is hereby assigned irrevocably to the Corporation, including but not limited to all copyrights, trademarks, trade secrets and patent rights in such goods and materials. Employee agrees to execute and return to the Corporation all documents required by the Corporation from time to time to evidence, document or, if necessary, to perfect such ownership, for any purpose desired by the Corporation, and hereby appoints the Corporation employee’s attorney-in-fact with full powers to execute such document itself in the event employee is unable to provide the Corporation with such signed documents.

 1
Confidential

In the event the term of the employee’s employment shall expire or terminate, employee agrees not to divulge any of the above information, etc., or to engage or participate, directly or indirectly, for himself or on behalf of or for the benefit of a third party, firm or corporation in developing products based on the information gained during his term of employment by the Corporation. Employee also agrees he will not participate, directly or indirectly, for himself or on behalf of or for the benefit of a third party, firm or corporation in soliciting competing products, services and/or solutions to the Corporation’s existing customers or proposed customers (which were being solicited by the Corporation during the time of his employment) for a period of two (2) years and will not encourage, induce or attempt to induce any employee of the Corporation to leave the employ of the corporation for a period of two (2) years.

The employee agrees that these terms are so vitally important to the operation of the business of the Corporation, that any violation of the above conditions will result in their termination of employment, forfeitures of any and all benefits and bonuses accrued, as well as entitling the Corporation to any injunctive relief allowed by Law.

This Agreement shall be governed by the Laws of the State of Massachusetts and there are no understandings, agreements, representations, express or implied, not specified herein.

AGREED TO BY:

/s/ Robert Beeler	10/31/06
Employee	(DATE)
ACCEPTED BY:
/s/ Dean Goodermote
For the Corporation
TITLE: Chief Executive Officer	11/1/06
	(DATE)

 2
Confidential

EX-10.50

Exhibit 10.50

AMENDED AND RESTATED

EMPLOYMENT/SEVERANCE AGREEMENT

     AMENDED AND RESTATED AGREEMENT made as of the 9^th day of November, 2007 by and between David J. Demlow residing at the address indicated on the signature page hereto (hereinafter referred to as the “Employee”) and Double-Take Software, Inc., a Delaware corporation with principal offices located at 257 Turnpike Road, Suite 210, Southborough, Massachusetts 01772 (hereinafter referred to as the “Company”).

     The Employee is currently employed by the Company. The Company and the Executive desire to amend and restate all prior agreements and understandings regarding the Executive’s employment by the Company as set forth herein.

ARTICLE I
DEFINITIONS

     1.1 Base Salary. Base Salary shall mean the highest annualized rate of Employee’s base compensation in effect at any time during the ninety (90) day period prior to the Date of Termination of Employment, and shall include all amounts of Employee’s base compensation that are reported as income, provided however, that Base Salary shall not include any bonus or any other payment contingent on performance.

     1.2 Cause. Cause shall mean (i) willful disobedience by Employee of a material and lawful instruction of the Chief Executive Officer or the Board of Directors of the Company; (ii) conviction of Employee of any misdemeanor involving fraud or embezzlement or similar crime, or any felony; (iii) breach by Employee of any material provision of this Agreement; (iv) conduct amounting to fraud, dishonesty, willful misconduct or recurring insubordination; or (v) excessive absences from work for any reason.

     1.3 Disability. Disability shall mean a physical or mental infirmity which impairs the Employee’s ability to substantially perform his duties with the Company for a period of (30) consecutive days, and Employee has not returned to his full time employment prior to the Employment Termination Date as stated in the “Notice of Termination of Employment” (as defined below).

     1.4 Employment Termination Date. Employment Termination Date shall mean (i) in the case of the Employee’s death, his date of death; (ii) in all other cases, the date specified in the Notice of Termination of Employment; provided, however, if the Employee’ s employment is terminated by the Company due to Disability, the date specified in the Notice of Termination of Employment shall be at least 30 days from the date the Notice of Termination of Employment is given to the Employee, and provided further that in the case of Disability, the Employee shall not have returned to the full-time performance of his duties during such period of at least 30 days. For purposes of this Agreement a termination of employment means a “separation from service” within the meaning of Treas. Reg. §1.409A-1(h).

     1.5 Notice of Termination of Employment. Notice of Termination of Employment shall mean a written notice from the Company, or the Employee, of termination of the Employee’s employment which indicates the specific termination provision in this Agreement relied upon, if any. A Notice of Termination of Employment served by the Company shall specify the effective Employment Termination Date.

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     1.6 Severance Benefits. Severance Benefits shall mean if Employee and Employee’s eligible dependents shall be entitled to “continuation coverage” within the meaning of section 4980B of the Code for health, dental and vision insurance, elects to continue coverage and timely takes the required steps to initiate such coverage, the amount by which the cost of such coverage for Employee and Employee’s eligible dependents exceeds the amount that Employee previously paid for coverage under such health, dental and vision insurance plans, provided, however, that Severance Benefits shall cease to the extent that Employee or Employee’s eligible dependents are no longer eligible for such continuation coverage and shall, if Employee becomes eligible for group health, dental or vision benefits under plans maintained by a subsequent employer, be secondary to the benefits provided by such subsequent employer.

     1.7 Severance Payment. Severance Payment shall mean a cash payment equal to twelve (12) months Base Salary, payable in accordance with the Company’s regular payroll periods, commencing on the first day of the first payroll period following the Employment Termination Date. Each payment shall be deemed to be a separate payments for purposes of Section 409A of the Code.

     1.8 Termination Agreement. Termination Agreement shall mean an agreement in the form attached hereto as Addendum A, which shall be signed by Employee within thirty (30) days of the Employment Termination Date.

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ARTICLE II

EMPLOYMENT

     Employee’s employment is at-will and nothing in this Agreement is intended, or shall be construed, to limit the right of the Company to terminate Employee’s employment at any time in its sole discretion.

ARTICLE III
NON-DISCLOSURE

     Employee agrees that this Agreement is conditioned on Employee’s compliance with the non-disclosure agreement (the “NDA”) between the Company and Employee, a copy of which is attached hereto as Addendum B and is hereby incorporated by reference. Any breach or violation of any terms of the NDA shall be considered a breach or violation of this Agreement.

ARTICLE IV
RESTRICTIVE COVENANT

     4.1 In the event of the termination of employment with the Company for any reason, Employee agrees that he will not, for a period of one (1) year following such termination, directly or indirectly, enter into or become associated with or engage in any other business (whether as a partner, officer, director, shareholder, employee, consultant, or otherwise), which is in the business of providing real time data replication and high availability software technologies in competition with the Company or is otherwise engaged in the same or similar business as the Company in direct competition with the Company’s products or services, or those which the Company was in the process of developing, during the tenure of Employee’s employment by the Company. Notwithstanding the foregoing, the ownership by Employee of less than 5 percent of the shares of any publicly held corporation shall not violate the provisions of this Article IV.

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     4.2 In furtherance of the foregoing, Employee shall not during the aforesaid period of non-competition, directly or indirectly, in connection with any business of providing real time data replication and high availability software technologies, or any business similar to the business in which the Company was engaged, or in the process of developing during Employee’s tenure with the Company, solicit any customer or employee of the Company who was a customer or employee of the Company during the term of his employment.

     4.3 If any court shall hold that the duration of non-competition or any other restriction contained in this Article IV is unenforceable, it is our intention that same shall not thereby be terminated but shall be deemed amended to delete therefrom such provision or portion adjudicated to be invalid or unenforceable or, in the alternative, such judicially substituted term may be substituted therefor.

ARTICLE V
SEVERANCE PAYMENT; TERMINATION OF OPTIONS

     5.1 In the event the Company terminates Employee’s employment without Cause during the term of this Agreement, and (i) Employee does not violate the provisions of Articles III and IV; and (ii) Employee signs a Termination Agreement satisfactory to the Company, Employee shall be paid a Severance Payment.

     5.2 In the event (i) Employee is terminated for Cause, or (ii) Employee violates the provisions of Article III or IV, any and all employment stock options held by Employee, whether vested or unvested, shall immediately terminate and Employee shall not be entitled to exercise such options.

- 5 -

ARTICLE VI
TERM AND TERMINATION

     6.1 The term of this Agreement has commenced as of the date hereof and, unless sooner terminated as hereinafter set forth, shall end on March 31, 2009 (the “Term”); provided, however, that this Agreement will automatically renew for additional one year periods (each a “Renewal Term”) on each anniversary thereafter, unless the Company delivers to Employee written notice of intent not to renew at least thirty (30) days prior to the expiration of the Term or any Renewal Term.

     6.2 This Agreement shall automatically terminate upon the voluntary resignation of Employee.

ARTICLE VII
TERMINATION OF PRIOR AGREEMENTS AND UNDERSTANDINGS

     This Agreement sets forth the entire agreement between the parties and supersedes all prior agreements and understandings between the parties regarding severance payments or benefits, whether oral or written prior to the effective date of this Agreement.

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ARTICLE VIII
ARBITRATION, COSTS AND INDEMNIFICATION

     8.1 Any dispute arising out of the interpretation, application, and/or performance of this Agreement with the sole exception of any claim, breach, or violation arising under Articles III or IV hereof shall be settled through final and binding arbitration before a single arbitrator in the State of New Jersey in accordance with the Rules of the American Arbitration Association. The arbitrator shall be selected by the Association and shall be an attorney-at-law experienced in the field or fields involved in the dispute (e.g., corporate, employment, trade secret, non-competition, or securities law). Any judgment upon any arbitration award may be entered in any court, federal or state, having competent jurisdiction of the parties. Whether in arbitration or in any litigation between the parties in federal or state court relating to or concerning this Agreement, it is agreed that the losing shall pay the prevailing party’s reasonable attorney’s fees and costs.

     8.2 The Company hereby agrees to indemnify, defend, and hold harmless Employee for any and all claims arising from or related to his employment by the Company at any time asserted, at any place asserted, and to the fullest extent permitted by law, except for any claims arising out of a breach of any restrictive covenant, non-solicitation agreement or similar arrangement between Employee and an entity other than the Company.

ARTICLE IX
SEVERABILITY

     If any provision of this Agreement shall be held invalid and unenforceable, the remainder of this Agreement shall remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall remain in full force and effect in all other circumstances.

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ARTICLE X

NOTICE

     For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the Company at the address set forth below and to Employee at the address set forth on the signature page or to any such other address as the party to receive the notice shall advise by due notice given in accordance with this paragraph. All notices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof except that notice of change of address shall be effective only upon receipt.

     The current address of the Company is as follows:

IF TO THE COMPANY:	Double-Take Software, Inc.
	257 Turnpike Road, Suite 210
	Southborough, Massachusetts 01772

ARTICLE XI
BENEFIT

     This Agreement shall inure to, and shall be binding upon, the parties hereto, the successors and assigns of the Company, and the heirs and personal representatives of the Employee.

ARTICLE XII
WAIVER

     The waiver by either party of any breach or violation of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of construction and validity.

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ARTICLE XIII
GOVERNING LAW

     This Agreement has been negotiated and executed in the Commonwealth of Massachusetts, which shall govern its construction and validity.

ARTICLE XIV
JURISDICTION

     Any or all actions or proceedings which may be brought by the Company or Employee under this Agreement shall be brought in courts having a stitus within the State of Massachusetts, and Employee and the Company each hereby consent to the jurisdiction of any local, state, or federal court located within the State of Massachusetts.

ARTICLE XV
ENTIRE AGREEMENT

     This Agreement contains the entire agreement between the parties hereto. No change, addition, or amendment shall be made hereto, except by written agreement signed by the parties hereto.

ARTICLE XVI
SURVIVAL

     Articles III, IV, VIII, X, XIII and XIV shall survive the termination of this Agreement.

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ARTICLE XVII
ADVICE OF COUNSEL

     Employee acknowledges that the Company advised Employee to retain his own counsel to review this Agreement and gave Employee sufficient time to obtain a review of this Agreement by his own counsel.

ARTICLE XVIII
SECTION 409A OF THE CODE

     Anything in this Agreement to the contrary notwithstanding, if (A) on the date of termination of Employee’s termination of employment with the Company or an affiliate, any of the Company’s stock is publicly traded on an established securities market or otherwise (within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code, as amended (the “Code”)), (B) if Employee is determined to be a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code, (C) the payments exceed the amounts permitted to be paid pursuant to Treasury Regulations section 1.409A-1(b)(9)(iii) and (D) such delay is required to avoid the imposition of the tax set forth in Section 409A(a)(1) of the Code as a result of such termination, Employee would receive any payment that, absent the application of this Article XVIII, would be subject to interest and additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(2)(B)(i) of the Code, then no such payment shall be payable prior to the date that is the earliest of (1) 6 months after the date of termination of Employee’s employment, (2) Employee’s death or (3) such other date as will cause such payment not to be subject to such interest and additional tax (with a catch-up payment equal to the sum of all amounts that have been delayed to be made as of the date of the initial payment). It is the intention of the parties that payments or benefits payable under this Agreement not be subject to the additional tax imposed pursuant to Section 409A of the Code. To the extent such potential payments or benefits could become subject to such Section, the parties shall cooperate to amend this Agreement.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their hands and seals the day and year first above written.

DOUBLE-TAKE SOFTWARE, INC.
By:	/s/ Dean Goodermote
Dean Goodermote
Chief Executive Officer
/s/ David J. Demlow
David J. Demlow
5776 Kingfisher Place
Carmel, Indiana 46033

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ADDENDUM A

WAIVER AND RELEASE OF CLAIMS AGREEMENT

     I HAVE BEEN ADVISED TO CONSULT AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT.

     I UNDERSTAND THAT I HAVE [FORTY-FIVE] [TWENTY-ONE] DAYS AFTER RECEIVING THIS AGREEMENT TO CONSIDER WHETHER TO SIGN IT.

     AFTER SIGNING THIS AGREEMENT, I UNDERSTAND THAT I HAVE ANOTHER SEVEN DAYS IN WHICH TO REVOKE IT, AND IT DOES NOT TAKE EFFECT UNTIL THOSE SEVEN DAYS HAVE ENDED.

     In consideration of, and subject to, the payments to be made to me by DoubleTake Software, Inc. (“DoubleTake Software” or the “Company”) or any of its subsidiaries or affiliates, pursuant to the Letter Agreement dated as of November 9, 2007 between DoubleTake Software and me (the “Letter Agreement”), which I acknowledge that I would not otherwise be entitled to receive, I hereby waive any claims I may have for employment or re-employment by the Company or any subsidiary or affiliate thereof after the date hereof, and I further agree to and do release and forever discharge the Company or any subsidiary or affiliate of the Company and their respective past and present officers, directors, shareholders, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or any subsidiary or affiliate of the Company or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, any State’s Human Relations Act, the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, Sections 1981-1988 of Title 42 of the U.S. Code, Older Workers’ Benefit Protection Act, Family and Medical Leave Act, the Fair Labor Standards Act, any State’s Wage Payment and Collection laws, the Age Discrimination in Employment Act of 1967, the Pregnancy Discrimination Act, the Employee Retirement Income Security Act of 1974 (“ERISA”), all as amended. Should I decide to file any charge or legal claim against the Company, I agree to waive my right to recover any damages or other relief awarded to me which arises out of any such charge or legal claim made by me against the Company.

1
Confidential

     In consideration of, and subject to, the payments to be made to me by DoubleTake Software or any of its subsidiaries or affiliates, pursuant to the Letter Agreement, which I acknowledge that I would not otherwise be entitled to receive, I hereby agree not to make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage the Company or any of its affiliates or their respective officers, directors, employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Letter Agreement.

     Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims Agreement shall adversely affect (i) my rights under the Letter Agreement; (ii) my rights to vested benefits (other than severance benefits) under any “employee benefit plan” (within the meaning of Section 3(3) of ERISA) of the Company or any subsidiary or affiliate of the Company; (iii) my rights to indemnification under any indemnification agreement, applicable law and the certificates of incorporation and bylaws of the Company and any subsidiary of the Company, and my rights under any director’s and officer’s liability insurance policy covering me; or (iv) my rights to make truthful statements or disclosures that are required by applicable law, regulation or legal process .

     I acknowledge that I have signed this Waiver and Release of Claims Agreement voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations, written or oral, have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company’s acknowledgment of my rights reserved under the preceding paragraph above.

     I acknowledge that I have been given not less than [forty-five (45)] [twenty-one (21)] days to review and consider this Waiver and Release of Claims Agreement, and that I have had the opportunity to consult with an attorney or other advisor of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims Agreement seven days or less after its execution by providing written notice to the [Vice-President of Human Resources] at the Company’s corporate headquarters (or some other designee).

     Finally, I acknowledge that I have carefully read this Waiver and Release of Claims Agreement and understand all of its terms. This is the entire Agreement between the parties and is legally binding and enforceable.

2
Confidential

     This Waiver and Release of Claims Agreement shall be governed and interpreted under federal law and the laws of the Commonwealth of Massachusetts.

     I knowingly and voluntarily sign this Waiver and Release of Claims Agreement and agree to be bound by its terms.

Date Delivered to	:	DOUBLETAKE SOFTWARE, INC.
Date Signed by	:	By:
		Title:
Seven-Day Revocation Period Ends:
Signed:		Date:

3
Confidential

ADDENDUM B

NON-DISCLOSURE CONFIDENTIALITY AGREEMENT
DOUBLE-TAKE SOFTWARE, INC.

David J. Demlow (hereinafter referred to as the “employee”) hereby acknowledges that Double-Take Software, Inc., et al. (hereinafter referred to as the “Corporation”) is engaged in the business of developing, selling, distributing, supporting, installing and servicing computer related software. Both parties agree that the operation of the business and performance of the work of the Corporation involves special skills, knowledge, trade secrets, special techniques, procedures or names and addresses of the customers, past and present, of the Corporation. The employee acknowledges that he is being employed with the express understanding that all of the foregoing shall not be divulged or otherwise disclosed to anyone at any time.

It is further understood and agreed to by the employee, that during the time of his employment by the Corporation, that his time and efforts will be exclusively devoted to the Corporation’s business, and that he will not participate in any activity of a similar nature with any other entity, in any capacity, (e.g. sales, consulting, engineering, supervision or hands on activity). All computer program source and information relating to such source code, trade secrets, books, manuals, bulletins, work papers, files, reports and other related materials are the property of the Corporation and must be returned to the Corporation upon request or at the termination of employment, along with any reproductions of such documentation.

Employee agrees to hold in confidence and to refrain from using or disclosing to any third party, without prior written consent of Corporation, (a) any information disclosed in confidence to employee by the Corporation, and (b) any information developed or delivered by employee during the term of employee’s employment by the Corporation. All computer program source and information relating to such source code received, developed or delivered by employee in connection with his employment shall be deemed confidential information and belonging exclusively to the Corporation for purposes of this paragraph.

Employee agrees to provide the Corporation with all source code and complete source code documentation for all computer programs developed or modified by employee in the course of his employment by the Corporation. Ownership of all goods, code, and materials, etc.; delivered by employee hereunder is hereby assigned irrevocably to the Corporation, including but not limited to all copyrights, trademarks, trade secrets and patent rights in such goods and materials. Employee agrees to execute and return to the Corporation all documents required by the Corporation from time to time to evidence, document or, if necessary, to perfect such ownership, for any purpose desired by the Corporation, and hereby appoints the Corporation employee’s attorney-in-fact with full powers to execute such document itself in the event employee is unable to provide the Corporation with such signed documents.

1
Confidential

In the event the term of the employee’s employment shall expire or terminate, employee agrees not to divulge any of the above information, etc., or to engage or participate, directly or indirectly, for himself or on behalf of or for the benefit of a third party, firm or corporation in developing products based on the information gained during his term of employment by the Corporation. Employee also agrees he will not participate, directly or indirectly, for himself or on behalf of or for the benefit of a third party, firm or corporation in soliciting competing products, services and/or solutions to the Corporation’s existing customers or proposed customers (which were being solicited by the Corporation during the time of his employment) for a period of two (2) years and will not encourage, induce or attempt to induce any employee of the Corporation to leave the employ of the corporation for a period of two (2) years.

The employee agrees that these terms are so vitally important to the operation of the business of the Corporation, that any violation of the above conditions will result in their termination of employment, forfeitures of any and all benefits and bonuses accrued, as well as entitling the Corporation to any injunctive relief allowed by Law.

This Agreement shall be governed by the Laws of the State of Massachusetts and there are no understandings, agreements, representations, express or implied, not specified herein.

AGREED TO BY:

/s/ David J. Demlow	10/31/06
Employee	(DATE)
ACCEPTED BY:
/s/ Dean Goodermote
For the Corporation
TITLE: Chief Executive Officer
	11/1/06
	(DATE)

2
Confidential

EX-31.01

Exhibit 31.01

CERTIFICATIONS

I, Dean Goodermote, certify that:

1. I have reviewed this quarterly report of Double-Take Software, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2007

/s/ Dean Goodermote  

Dean Goodermote 

President, Chief Executive Officer
and Chairman of the Board of Directors
(Principal Executive Officer) 

EX-31.02

Exhibit 31.02

CERTIFICATIONS

I, S. Craig Huke, certify that:

1. I have reviewed this quarterly report of Double-Take Software, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2007

/s/ S. Craig Huke  

S. Craig Huke 

Chief Financial Officer
(Principal Financial Officer) 

EX-32.01

Exhibit 32.01

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

     In connection with the Quarterly Report of Double-Take Software, Inc. (the “registrant”) on Form 10-Q for the fiscal quarter ending September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “report”), we, Dean Goodermote and S. Craig Huke, Chief Executive Officer and Chief Financial Officer, respectively, of the registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge, on the date hereof:

(1)	The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)	The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

November 14, 2007

/s/ Dean Goodermote

Dean Goodermote

Chief Executive Officer

/s/ S. Craig Huke

S. Craig Huke

Chief Financial Officer