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 May 4, 2017. |
FALCONSTOR SOFTWARE, INC. | |||
Date: May 4, 2017 | By: | /s/ Daniel Murale | |
Name: | Daniel Murale | ||
Title: | Executive Vice President, Chief Financial Officer and Treasurer |
Three Months Ended March 31, | Change Period to Period | |||||||||||||||||||
(in millions except per share data) | 2017 | 2016 | ||||||||||||||||||
Total revenue | $ | 6.0 | 100.0 | % | $ | 7.4 | 100.0 | % | $ | (1.4 | ) | (18.7 | )% | |||||||
Total cost of revenue | $ | 1.5 | 24.1 | % | $ | 2.0 | 27.0 | % | $ | (0.6 | ) | (27.6 | )% | |||||||
Total operating expenses | $ | 5.7 | 94.9 | % | $ | 9.7 | 130.7 | % | $ | (4.0 | ) | (41.0 | )% | |||||||
Operating loss (GAAP) | $ | (1.1 | ) | (18.9 | )% | $ | (4.3 | ) | (57.7 | )% | $ | 3.1 | (73.3 | )% | ||||||
Net loss (GAAP) | $ | (1.1 | ) | (18.4 | )% | $ | (4.3 | ) | (57.8 | )% | $ | 3.2 | (74.1 | )% | ||||||
EPS GAAP | $ | (0.03 | ) | $ | (0.11 | ) | $ | 0.08 |
Three Months Ended, | |||||||||||
(in millions except per share data) | March 31, 2017 | December 31, 2016 | March 31, 2016 | ||||||||
Revenue | $ | 6.0 | $ | 7.4 | $ | 7.4 | |||||
Bookings | $ | 5.5 | $ | 8.4 | $ | 7.4 | |||||
Non-GAAP Expenses | $ | 7.0 | $ | 8.1 | $ | 10.6 | |||||
Non-GAAP Gross Margin | 77 | % | 74 | % | 73 | % | |||||
Non-GAAP Operating Loss | $ | (0.9 | ) | $ | (0.7 | ) | $ | (3.2 | ) | ||
Non-GAAP Net Loss | $ | (0.9 | ) | $ | (1.3 | ) | $ | (3.2 | ) | ||
Non-GAAP EPS | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.08 | ) | ||
Cash provided by (used in) operations | $ | 0.1 | $ | (2.3 | ) | $ | (2.0 | ) |
• | We now have over 350 customers using our FreeStor platform, not including the customers of our MSP and OEM partners. |
• | Revenue from our FreeStor platform increased 79% to $1.6 million for the first quarter of 2017, compared with the first quarter of 2016. |
• | Bookings from our FreeStor platform was 37% of total bookings for the first quarter of 2017, compared with 36% for the first quarter of 2016. |
• | During the first quarter of 2017, we realized the full impact of our cost rationalization initiatives completed during 2016 and we ended the quarter with $3.4 million in cash and cash equivalents representing a slight increase from December 31, 2016. |
March 31, 2017 | December 31, 2016 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,431,763 | $ | 3,391,528 | ||||
Accounts receivable, net | 3,525,036 | 5,003,972 | ||||||
Prepaid expenses and other current assets | 1,237,323 | 1,245,085 | ||||||
Inventory | 6,181 | 6,181 | ||||||
Total current assets | 8,200,303 | 9,646,766 | ||||||
Property and equipment, net | 989,719 | 1,174,942 | ||||||
Deferred tax assets, net | 580,419 | 577,735 | ||||||
Software development costs, net | 458,317 | 547,558 | ||||||
Other assets, net | 1,026,401 | 973,949 | ||||||
Goodwill | 4,150,339 | 4,150,339 | ||||||
Other intangible assets, net | 208,851 | 209,456 | ||||||
Total assets | $ | 15,614,349 | $ | 17,280,745 | ||||
Liabilities and Stockholders' Deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 860,397 | $ | 419,877 | ||||
Accrued expenses | 3,651,703 | 4,471,010 | ||||||
Deferred revenue, net | 15,809,374 | 15,236,123 | ||||||
Total current liabilities | 20,321,474 | 20,127,010 | ||||||
Other long-term liabilities | 1,159,992 | 1,170,844 | ||||||
Deferred tax liabilities, net | 260,896 | 254,776 | ||||||
Deferred revenue, net | 7,640,759 | 8,430,692 | ||||||
Total liabilities | 29,383,121 | 29,983,322 | ||||||
Commitments and contingencies | ||||||||
Series A redeemable convertible preferred stock | 9,000,000 | 9,000,000 | ||||||
Total stockholders' deficit | (22,768,772 | ) | (21,702,577 | ) | ||||
Total liabilities and stockholders' deficit | $ | 15,614,349 | $ | 17,280,745 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Revenue: | ||||||||
Product revenue | $ | 1,921,052 | $ | 2,280,858 | ||||
Support and services revenue | 4,118,063 | 5,151,473 | ||||||
Total revenue | 6,039,115 | 7,432,331 | ||||||
Cost of revenue: | ||||||||
Product | 198,715 | 244,273 | ||||||
Support and service | 1,253,916 | 1,762,220 | ||||||
Total cost of revenue | 1,452,631 | 2,006,493 | ||||||
Gross profit | $ | 4,586,484 | $ | 5,425,838 | ||||
Operating expenses: | ||||||||
Research and development costs | 2,294,863 | 3,656,777 | ||||||
Selling and marketing | 2,050,542 | 4,268,800 | ||||||
General and administrative | 1,621,551 | 1,705,925 | ||||||
Restructuring | (236,302 | ) | 83,984 | |||||
Total operating expenses | 5,730,654 | 9,715,486 | ||||||
Operating loss | (1,144,170 | ) | (4,289,648 | ) | ||||
Interest and other income, net | 154,921 | 118,183 | ||||||
Loss before income taxes | (989,249 | ) | (4,171,465 | ) | ||||
Provision for income taxes | 122,948 | 125,147 | ||||||
Net loss | $ | (1,112,197 | ) | $ | (4,296,612 | ) | ||
Less: Accrual of Series A redeemable convertible preferred stock dividends | 204,575 | 192,608 | ||||||
Less: Accretion to redemption value of Series A redeemable convertible preferred stock | — | 163,669 | ||||||
Net loss attributable to common stockholders | $ | (1,316,772 | ) | $ | (4,652,889 | ) | ||
Basic net loss per share attributable to common stockholders | $ | (0.03 | ) | $ | (0.11 | ) | ||
Diluted net loss per share attributable to common stockholders | $ | (0.03 | ) | $ | (0.11 | ) | ||
Weighted average basic shares outstanding | 44,088,352 | 41,882,232 | ||||||
Weighted average diluted shares outstanding | 44,088,352 | 41,882,232 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
GAAP loss from operations | $ | (1,144,170 | ) | $ | (4,289,648 | ) | ||
Non-cash stock option expense (1) | $ | 445,414 | $ | 990,610 | ||||
Restructuring costs (3) | (236,302 | ) | 83,984 | |||||
Non-GAAP loss from operations | $ | (935,058 | ) | $ | (3,215,054 | ) | ||
GAAP net loss attributable to common stockholders | $ | (1,316,772 | ) | $ | (4,652,889 | ) | ||
Non-cash stock option expense, net of income taxes (2) | 445,414 | 990,610 | ||||||
Restructuring costs (3) | (236,302 | ) | 83,984 | |||||
Effects of Series A redeemable convertible preferred stock (4) | 204,575 | 356,277 | ||||||
Non-GAAP net loss | $ | (903,085 | ) | $ | (3,222,018 | ) | ||
GAAP gross margin | 76 | % | 73 | % | ||||
Non-cash stock option expense (1) | 1 | % | 0 | % | ||||
Non-GAAP gross margin | 77 | % | 73 | % | ||||
GAAP gross margin - Product | 90 | % | 89 | % | ||||
Non-cash stock option expense (1) | 0 | % | 0 | % | ||||
Non-GAAP gross margin - Product | 90 | % | 89 | % | ||||
GAAP gross margin - Support and Service | 70 | % | 66 | % | ||||
Non-cash stock option expense (1) | 1 | % | 0 | % | ||||
Non-GAAP gross margin - Support and Service | 71 | % | 66 | % | ||||
GAAP operating margin | (19 | %) | (58 | %) | ||||
Non-cash stock option expense (1) | 7 | % | 13 | % | ||||
Restructuring costs (3) | (4 | %) | 1 | % | ||||
Non-GAAP operating margin | (15 | %) | (43 | %) | ||||
GAAP Basic EPS | $ | (0.03 | ) | $ | (0.11 | ) | ||
Non-cash stock option expense, net of income taxes (2) | 0.01 | 0.02 | ||||||
Restructuring costs (3) | (0.01 | ) | 0.00 | |||||
Effects of Series A redeemable convertible preferred stock (4) | 0.00 | 0.01 | ||||||
Non-GAAP Basic EPS | $ | (0.02 | ) | $ | (0.08 | ) | ||
GAAP Diluted EPS | $ | (0.03 | ) | $ | (0.11 | ) | ||
Non-cash stock option expense, net of income taxes (2) | 0.01 | 0.02 | ||||||
Restructuring costs (3) | (0.01 | ) | 0.00 | |||||
Effects of Series A redeemable convertible preferred stock (4) | 0.00 | 0.01 | ||||||
Non-GAAP Diluted EPS | $ | (0.02 | ) | $ | (0.08 | ) | ||
Weighted average basic shares outstanding (GAAP and as adjusted) | 44,088,352 | 41,882,232 | ||||||
Weighted average diluted shares outstanding (GAAP and as adjusted) | 44,088,352 | 41,882,232 |
(1) | Represents non-cash, stock-based compensation charges as follows: |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Cost of revenue - Product | $ | — | $ | — | ||||
Cost of revenue - Support and Service | 56,451 | 24,771 | ||||||
Research and development costs | 129,715 | 746,162 | ||||||
Selling and marketing | 56,540 | 67,730 | ||||||
General and administrative | 202,708 | 151,947 | ||||||
Total non-cash stock based compensation expense | $ | 445,414 | $ | 990,610 |
(2) | Represents the effects of non-cash stock-based compensation expense recognized, net of related income tax effects. For the three months ended March 31, 2017 and 2016, the tax expense for both GAAP and Non-GAAP basis approximate the same amount. Included in share-based compensation expense for the three months ended March 31, 2016, was $0.7 million, related to costs associated with our exclusive source code license and development agreement which were paid through the issuance of our common stock. |
(3) | Represents restructuring costs which were incurred during each respective period presented. |
(4) | 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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