FALCONSTOR SOFTWARE, INC. | ||
(Exact name of registrant as specified in its charter) | ||
Delaware | 000-23970 | 77-0216135 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
2 Huntington Quadrangle, Melville, New York | 11747 | |
(Address of principal executive offices) | (Zip Code) |
N/A |
(Former name or former address, if changed since last report.) |
Item 2.02. | Results of Operations and Financial Condition |
Item 9.01. | Financial Statements and Exhibits |
(d) | Exhibits | |||
Exhibit Number | Description | |||
99.1 | Press release of the Company dated February 16, 2016. |
FALCONSTOR SOFTWARE, INC. | |||
Date: February 16, 2016 | By: | /s/ Louis J. Petrucelly | |
Name: | Louis J. Petrucelly | ||
Title: | Executive Vice President, Chief Financial Officer and Treasurer |
• | Total revenue for the fourth quarter was $9.4 million compared with revenue of $9.7 million in the third quarter of 2015 and compared with $11.8 million in the fourth quarter of 2014. |
• | Total bookings for the fourth quarter increased 14% to $10.0 million compared with $8.8 million in the third quarter of 2015, and compared with $13.6 million in the fourth quarter of 2014. On a constant currency basis our fourth quarter 2015 bookings totaled $10.5 million compared with $9.3 million in the third quarter of 2015. |
• | In the fourth quarter of 2015 approximately 80% of our total bookings were ratable as compared with 81% in the fourth quarter of 2014. For all of fiscal 2015, approximately 81% of our total bookings were ratable compared with 77% in fiscal year 2014. |
• | In the fourth quarter of 2015 approximately 49% of our total product bookings were ratable compared with 57% in the fourth quarter of 2014. For all of fiscal 2015, approximately 56% of our total product bookings were ratable compared with 46% in fiscal year 2014. |
• | Our deferred revenue balance as of December 31, 2015 increased 2% compared with December 31, 2014 when excluding the impact of our joint-development agreement. Our deferred revenue balance as of December 31, 2015 sequentially increased 4% compared with September 30, 2015. |
• | The Company closed the quarter with $13.4 million of cash, cash equivalents and marketable securities, compared with $21.8 million at December 31, 2014. |
• | Non-GAAP operating expenses decreased 9% compared with the third quarter of 2015 and 25% when compared with the fourth quarter of 2014. Those non-GAAP expenses totaled $10.7 million in the fourth quarter of 2015, compared with non-GAAP expenses of $11.8 million in the third quarter of 2015 and non-GAAP expenses of $14.0 million in the fourth quarter of 2014. |
• | Non-GAAP gross margins were 77% in the fourth quarter of 2015, compared with non-GAAP gross margins of 75% in the third quarter of 2015 and 78% in the fourth quarter of 2014. |
• | During the quarter, FreeStor was named “2015 Product of the Year” by the SVC Awards (Virtualization/ Software-Defined Storage) and was the “2015 Storage Company of the Year” runner-up. FreeStor was the “2015 SDS Product of the Year” by DoIT, as well as the “2015 SDS Product of the Year” by ZDNet. Finally, FreeStor was the “2015 SDS Product of the Year” by IT168.com. FreeStor is also in consideration for additional awards to be announced in February and March 2016. |
• | During the quarter the Company announced the addition of industry leaders from the analyst community with Jimmie Chang - Director Marketing Asia along with the addition of Farid Yavari a visionary and architect for storage from eBay. These additions are a tribute to the success that FreeStor is achieving and the belief that the future of software-defined storage resides in the future of FreeStor. |
• | The Company was present and speaking at numerous events throughout the globe: VMworld Barcelona, Oracle OpenWorld, OpenStack - Tokyo, Gartner Symposium and Gartner DC Conference. |
• | The Company announced the availability of its OpenStack Cinder driver to bring the FreeStor offering to the open source community. |
• | The Company continues to increase the awareness and demand for the FreeStor offering with new indicators from TrendKite showing that FreeStor and the Company enjoyed a 65% year-over-year increase in press and media coverage. FreeStor and the Company's “Share of Voice” increased by 145% relative to key competitors according to TrendKite, as well as a 176% year-over year increase in brand awareness according to Nielsen Ratings. |
December 31, 2015 | December 31, 2014 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 6,013,382 | $ | 10,873,891 | ||||
Marketable securities | 7,420,042 | 10,900,722 | ||||||
Accounts receivable, net | 6,635,262 | 8,898,680 | ||||||
Prepaid expenses and other current assets | 1,742,668 | 1,596,916 | ||||||
Inventory | 70,534 | 352,493 | ||||||
Deferred tax assets, net | 205,816 | 316,586 | ||||||
Total current assets | 22,087,704 | 32,939,288 | ||||||
Property and equipment, net | 1,565,932 | 2,147,188 | ||||||
Deferred tax assets, net | 110,060 | 7,503 | ||||||
Software development costs, net | 1,116,816 | 1,508,517 | ||||||
Other assets, net | 1,139,377 | 1,373,964 | ||||||
Goodwill | 4,150,339 | 4,150,339 | ||||||
Other intangible assets, net | 256,137 | 196,037 | ||||||
Total assets | $ | 30,426,365 | $ | 42,322,836 | ||||
Liabilities and Stockholders' Deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,005,944 | $ | 1,266,504 | ||||
Accrued expenses | 6,783,514 | 6,939,198 | ||||||
Deferred tax liabilities, net | 89,343 | 23,307 | ||||||
Deferred revenue, net | 16,553,519 | 23,380,012 | ||||||
Total current liabilities | 24,432,320 | 31,609,021 | ||||||
Other long-term liabilities | 735,089 | 630,444 | ||||||
Deferred tax liabilities, net | 27,069 | 226,443 | ||||||
Deferred revenue, net | 9,122,289 | 13,097,215 | ||||||
Total liabilities | 34,316,767 | 45,563,123 | ||||||
Commitments and contingencies | ||||||||
Series A redeemable convertible preferred stock | 7,818,554 | 7,230,941 | ||||||
Total stockholders' deficit | (11,708,956 | ) | (10,471,228 | ) | ||||
Total liabilities and stockholders' deficit | $ | 30,426,365 | $ | 42,322,836 |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenue: | ||||||||||||||||
Product revenue | $ | 3,470,274 | $ | 4,566,976 | $ | 24,847,724 | $ | 17,723,000 | ||||||||
Support and services revenue | 5,925,026 | 7,226,933 | 23,723,267 | 28,550,515 | ||||||||||||
Total revenue | 9,395,300 | 11,793,909 | 48,570,991 | 46,273,515 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Product | 323,843 | 683,976 | 1,942,985 | 2,791,950 | ||||||||||||
Support and service | 1,863,312 | 1,972,358 | 7,739,149 | 7,838,766 | ||||||||||||
Total cost of revenue | 2,187,155 | 2,656,334 | 9,682,134 | 10,630,716 | ||||||||||||
Gross profit | $ | 7,208,145 | $ | 9,137,575 | $ | 38,888,857 | $ | 35,642,799 | ||||||||
Operating expenses: | ||||||||||||||||
Research and development costs | 3,059,879 | 2,965,359 | 12,787,606 | 12,452,528 | ||||||||||||
Selling and marketing | 4,216,300 | 6,409,467 | 18,021,989 | 24,426,438 | ||||||||||||
General and administrative | 1,971,790 | 2,209,295 | 9,181,289 | 9,105,545 | ||||||||||||
Investigation, litigation, and settlement related (benefits) costs | — | (231,214 | ) | 8,842 | (5,417,925 | ) | ||||||||||
Restructuring costs | — | 89,746 | 172,995 | 1,135,310 | ||||||||||||
Total operating expenses | 9,247,969 | 11,442,653 | 40,172,721 | 41,701,896 | ||||||||||||
Operating loss | (2,039,824 | ) | (2,305,078 | ) | (1,283,864 | ) | (6,059,097 | ) | ||||||||
Interest and other income (loss), net | 70,014 | (157,635 | ) | (269,954 | ) | (642,633 | ) | |||||||||
Loss before income taxes | (1,969,810 | ) | (2,462,713 | ) | (1,553,818 | ) | (6,701,730 | ) | ||||||||
(Benefit) provision for income taxes | (28,193 | ) | 45,858 | 375,543 | 510,091 | |||||||||||
Net loss | $ | (1,941,617 | ) | $ | (2,508,571 | ) | $ | (1,929,361 | ) | $ | (7,211,821 | ) | ||||
Less: Accrual of Series A redeemable convertible preferred stock dividends | 196,727 | 186,904 | 765,203 | 747,616 | ||||||||||||
Less: Accretion to redemption value of Series A redeemable convertible preferred stock | 156,670 | 131,541 | 587,613 | 493,363 | ||||||||||||
Net loss attributable to common stockholders | $ | (2,295,014 | ) | $ | (2,827,016 | ) | $ | (3,282,177 | ) | $ | (8,452,800 | ) | ||||
Basic net loss per share attributable to common stockholders | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.08 | ) | $ | (0.18 | ) | ||||
Diluted net loss per share attributable to common stockholders | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.08 | ) | $ | (0.18 | ) | ||||
Weighted average basic shares outstanding | 41,356,757 | 44,008,043 | 41,093,644 | 46,265,225 | ||||||||||||
Weighted average diluted shares outstanding | 41,356,757 | 44,008,043 | 41,093,644 | 46,265,225 |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
GAAP loss from operations | $ | (2,039,824 | ) | $ | (2,305,078 | ) | $ | (1,283,864 | ) | $ | (6,059,097 | ) | ||||
Non-cash stock option expense (1) | 756,430 | 260,410 | 1,929,377 | 1,466,183 | ||||||||||||
Legal related (benefits) costs (3) | — | (231,214 | ) | 8,842 | (5,417,925 | ) | ||||||||||
Restructuring costs (4) | — | 89,746 | 172,995 | 1,135,310 | ||||||||||||
Non-GAAP (loss) income from operations | $ | (1,283,394 | ) | $ | (2,186,136 | ) | $ | 827,350 | $ | (8,875,529 | ) | |||||
GAAP net loss attributable to common stockholders | $ | (2,295,014 | ) | $ | (2,827,016 | ) | $ | (3,282,177 | ) | $ | (8,452,800 | ) | ||||
Non-cash stock option expense, net of income taxes (2) | 756,430 | 260,410 | 1,929,377 | 1,466,183 | ||||||||||||
Legal related (benefits) costs (3) | — | (231,214 | ) | 8,842 | (5,417,925 | ) | ||||||||||
Restructuring costs (4) | — | 89,746 | 172,995 | 1,135,310 | ||||||||||||
Effects of Series A redeemable convertible preferred stock (5) | 353,397 | 318,445 | 1,352,816 | 1,240,979 | ||||||||||||
Non-GAAP net (loss) income | $ | (1,185,187 | ) | $ | (2,389,629 | ) | $ | 181,853 | $ | (10,028,253 | ) | |||||
GAAP gross margin | 77 | % | 77 | % | 80 | % | 77 | % | ||||||||
Non-cash stock option expense (1) | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Non-GAAP gross margin | 77 | % | 78 | % | 80 | % | 77 | % | ||||||||
GAAP gross margin - Product | 91 | % | 85 | % | 92 | % | 84 | % | ||||||||
Non-cash stock option expense (1) | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Non-GAAP gross margin - Product | 91 | % | 85 | % | 92 | % | 84 | % | ||||||||
GAAP gross margin - Support and Service | 69 | % | 73 | % | 67 | % | 73 | % | ||||||||
Non-cash stock option expense (1) | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Non-GAAP gross margin - Support and Service | 69 | % | 73 | % | 68 | % | 73 | % | ||||||||
GAAP operating margin | (22 | %) | (20 | %) | (3 | %) | (13 | %) | ||||||||
Non-cash stock option expense (1) | 8 | % | 2 | % | 4 | % | 3 | % | ||||||||
Legal related (benefits) costs (3) | 0 | % | (2 | %) | 0 | % | (12 | %) | ||||||||
Restructuring costs (4) | 0 | % | 1 | % | 0 | % | 2 | % | ||||||||
Non-GAAP operating margin | (14 | %) | (19 | %) | 2 | % | (19 | %) | ||||||||
GAAP Basic EPS | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.08 | ) | $ | (0.18 | ) | ||||
Non-cash stock option expense, net of income taxes (2) | 0.02 | 0.01 | 0.05 | 0.03 | ||||||||||||
Legal related (benefits) costs (3) | 0.00 | (0.01 | ) | 0.00 | (0.12 | ) | ||||||||||
Restructuring costs (4) | 0.00 | 0.00 | 0.00 | 0.02 | ||||||||||||
Effects of Series A redeemable convertible preferred stock (5) | 0.01 | 0.01 | 0.03 | 0.03 | ||||||||||||
Non-GAAP Basic EPS | $ | (0.03 | ) | $ | (0.05 | ) | $ | 0.00 | $ | (0.22 | ) | |||||
GAAP Diluted EPS | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.08 | ) | $ | (0.18 | ) | ||||
Non-cash stock option expense, net of income taxes (2) | 0.02 | 0.01 | 0.04 | 0.03 | ||||||||||||
Legal related (benefits) costs (3) | 0.00 | (0.01 | ) | 0.00 | (0.12 | ) | ||||||||||
Restructuring costs (4) | 0.00 | 0.00 | 0.00 | 0.02 | ||||||||||||
Effects of Series A redeemable convertible preferred stock (5) | 0.01 | 0.01 | 0.03 | 0.03 | ||||||||||||
Non-GAAP Diluted EPS | $ | (0.03 | ) | $ | (0.05 | ) | $ | 0.00 | $ | (0.22 | ) | |||||
Weighted average basic shares outstanding (GAAP and as adjusted) | 41,356,757 | 44,008,043 | 41,093,644 | 46,265,225 | ||||||||||||
Weighted average diluted shares outstanding (GAAP) | 41,356,757 | 44,008,043 | 41,093,644 | 46,265,225 | ||||||||||||
Weighted average diluted shares outstanding (as adjusted) | 41,356,757 | 44,008,043 | 42,906,072 | 46,265,225 |
(1) | Represents non-cash, stock-based compensation charges as follows: |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Cost of revenues - Product | $ | — | $ | — | $ | — | $ | — | ||||||||
Cost of revenues - Support and Service | 18,419 | 16,297 | 98,776 | 91,197 | ||||||||||||
Research and development costs | 577,355 | 59,924 | 806,348 | 282,416 | ||||||||||||
Selling and marketing | 60,632 | 47,506 | 285,787 | 327,694 | ||||||||||||
General and administrative | 100,024 | 136,683 | 738,466 | 764,876 | ||||||||||||
Total non-cash stock based compensation expense | $ | 756,430 | $ | 260,410 | $ | 1,929,377 | $ | 1,466,183 |
(2) | Represents the effects of non-cash stock-based compensation expense recognized in accordance with the FASB Accounting Standards Codification, Topic 718, net of related income tax effects. For the three and twelve months ended December 31, 2015 and 2014, the tax expense for both GAAP and Non-GAAP basis approximate the same amount. |
(3) | Legal related costs represent expenses/gains in connection with the Company’s investigations, litigation and settlement related costs for each respective period presented. |
(4) | Represents restructuring costs which were incurred during each respective period presented. |
(5) | Represents the effects of the accretion to redemption value of the Series A redeemable convertible preferred stock and accrual of Series A redeemable convertible preferred stock dividends. |
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