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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Globalscape Inc | AMEX:GSB | AMEX | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 9.48 | 0 | 01:00:00 |
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
74-2785449
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
4500 Lockhill-Selma, Suite 150
San Antonio, Texas
|
78249
|
(Address of Principal Executive Office)
|
(Zip Code)
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
☒
|
|
|
Page
|
Part I.
|
Financial Information
|
|
Item 1.
|
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
6
|
|
Item 2.
|
19
|
|
Item 3.
|
39
|
|
Item 4.
|
40
|
|
Part II.
|
Other Information
|
41
|
Item 1.
|
41
|
|
Item1A.
|
41
|
|
Item 6.
|
41
|
|
42
|
September 30,
|
December 31,
|
|||||||
2016
|
2015
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
17,421
|
$
|
15,885
|
||||
Short term investments
|
3,303
|
3,254
|
||||||
Accounts receivable (net of allowance for doubtful accounts
of $335 and $325 in 2016 and 2015, respectively)
|
8,870
|
6,081
|
||||||
Federal income tax receivable
|
104
|
290
|
||||||
Prepaid and other expenses
|
425
|
511
|
||||||
Total current assets
|
30,123
|
26,021
|
||||||
Property and equipment, net
|
463
|
498
|
||||||
Capitalized software development costs, net
|
3,961
|
3,982
|
||||||
Goodwill
|
12,712
|
12,712
|
||||||
Deferred tax asset, net
|
976
|
940
|
||||||
Other assets
|
30
|
60
|
||||||
Total assets
|
$
|
48,265
|
$
|
44,213
|
||||
Liabilities and Stockholders’ Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
622
|
$
|
839
|
||||
Accrued expenses
|
1,841
|
1,893
|
||||||
Deferred revenue
|
13,005
|
12,000
|
||||||
Income taxes payable
|
517
|
127
|
||||||
Total current liabilities
|
15,985
|
14,859
|
||||||
Deferred revenue, non-current portion
|
3,688
|
3,612
|
||||||
Other long term liabilities
|
34
|
44
|
||||||
Commitments and contingencies
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock, par value $0.001 per share, 10,000,000
authorized, no shares issued or outstanding
|
-
|
-
|
||||||
Common stock, par value $0.001 per share, 40,000,000
authorized, 21,548,602 and 21,383,467 shares issued
at September 30, 2016, and December 31, 2015, respectively
|
21
|
21
|
||||||
Additional paid-in capital
|
20,632
|
19,583
|
||||||
Treasury stock, 403,581 shares, at cost, at
September 30, 2016 and December 31, 2015
|
(1,452
|
)
|
(1,452
|
)
|
||||
Retained earnings
|
9,357
|
7,546
|
||||||
Total stockholders’ equity
|
28,558
|
25,698
|
||||||
Total liabilities and stockholders’ equity
|
$
|
48,265
|
$
|
44,213
|
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Operating Revenues:
|
||||||||||||||||
Software licenses
|
$
|
3,373
|
$
|
2,852
|
$
|
8,565
|
$
|
8,590
|
||||||||
Maintenance and support
|
4,713
|
4,142
|
13,843
|
12,269
|
||||||||||||
Professional services
|
667
|
653
|
2,013
|
1,531
|
||||||||||||
Total Revenues
|
8,753
|
7,647
|
24,421
|
22,390
|
||||||||||||
Cost of revenues
|
||||||||||||||||
Software licenses
|
873
|
562
|
2,303
|
1,651
|
||||||||||||
Maintenance and support
|
363
|
341
|
1,145
|
1,057
|
||||||||||||
Professional services
|
534
|
605
|
1,689
|
1,257
|
||||||||||||
Total cost of revenues
|
1,770
|
1,508
|
5,137
|
3,965
|
||||||||||||
Gross profit
|
6,983
|
6,139
|
19,284
|
18,425
|
||||||||||||
Operating expenses
|
||||||||||||||||
Sales and marketing
|
2,759
|
2,289
|
8,453
|
7,060
|
||||||||||||
General and administrative
|
1,638
|
1,449
|
5,083
|
4,629
|
||||||||||||
Research and development
|
528
|
646
|
1,727
|
1,832
|
||||||||||||
Total operating expenses
|
4,925
|
4,384
|
15,263
|
13,521
|
||||||||||||
Income from operations
|
2,058
|
1,755
|
4,021
|
4,904
|
||||||||||||
Other income
|
28
|
17
|
88
|
51
|
||||||||||||
Income before income taxes
|
2,086
|
1,772
|
4,109
|
4,955
|
||||||||||||
Income tax expense
|
687
|
542
|
1,348
|
1,585
|
||||||||||||
Net income
|
$
|
1,399
|
$
|
1,230
|
$
|
2,761
|
$
|
3,370
|
||||||||
Comprehensive income
|
$
|
1,399
|
$
|
1,230
|
$
|
2,761
|
$
|
3,370
|
||||||||
Net income per common share -
|
||||||||||||||||
Basic
|
$
|
0.07
|
$
|
0.06
|
$
|
0.13
|
$
|
0.16
|
||||||||
Diluted
|
$
|
0.06
|
$
|
0.06
|
$
|
0.13
|
$
|
0.16
|
||||||||
Weighted average shares outstanding:
|
||||||||||||||||
Basic
|
21,122
|
20,892
|
21,061
|
20,782
|
||||||||||||
Diluted
|
21,674
|
21,440
|
21,640
|
21,294
|
||||||||||||
Cash dividends declared per share
|
$
|
0.015
|
$
|
0.015
|
$
|
0.045
|
$
|
0.030
|
For the Nine Months Ended September 30,
|
||||||||
2016
|
2015
|
|||||||
Operating Activities:
|
||||||||
Net income
|
$
|
2,761
|
$
|
3,370
|
||||
Items not involving cash at the time they are recorded in the statement of operations:
|
||||||||
Bad debt expense
|
67
|
147
|
||||||
Depreciation and amortization
|
1,522
|
1,116
|
||||||
Share-based compensation
|
721
|
482
|
||||||
Deferred taxes
|
(36
|
)
|
(320
|
)
|
||||
Excess tax benefit from share-based compensation
|
5
|
(49
|
)
|
|||||
Subtotal before changes in operating assets and liabilities
|
5,040
|
4,746
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(2,856
|
)
|
(1,690
|
)
|
||||
Prepaid expenses
|
86
|
154
|
||||||
Deferred revenue
|
1,081
|
531
|
||||||
Accounts payable
|
(217
|
)
|
(757
|
)
|
||||
Accrued expenses
|
(52
|
)
|
10
|
|||||
Other Assets
|
30
|
37
|
||||||
Other long-term liabilities
|
(10
|
)
|
(5
|
)
|
||||
Income tax receivable and payable
|
571
|
403
|
||||||
Net cash provided by operating activities
|
3,673
|
3,429
|
||||||
Investing Activities:
|
||||||||
Software development costs capitalized
|
(1,298
|
)
|
(1,613
|
)
|
||||
Purchase of property and equipment
|
(168
|
)
|
(108
|
)
|
||||
Interest reinvested in short and long term investments
|
(49
|
)
|
(48
|
)
|
||||
Net cash (used in) investing activities
|
(1,515
|
)
|
(1,769
|
)
|
||||
Financing Activities:
|
||||||||
Proceeds from exercise of stock options
|
333
|
417
|
||||||
Excess tax benefit from share-based compensation
|
(5
|
)
|
49
|
|||||
Dividends paid
|
(950
|
)
|
(626
|
)
|
||||
Net cash (used in) financing activities
|
(622
|
)
|
(160
|
)
|
||||
Net increase in cash
|
1,536
|
1,500
|
||||||
Cash at beginning of period
|
15,885
|
11,358
|
||||||
Cash at end of period
|
$
|
17,421
|
$
|
12,858
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$
|
-
|
$
|
-
|
||||
Income taxes
|
$
|
776
|
$
|
1,341
|
1. |
Nature of Business
|
2. |
Basis of Presentation
|
3. |
Significant Accounting Policies
|
Quarter Ended September 30, 2015
|
||||||||||||||||||||||||||||
|
Reclassification of Previously Reported Amounts
|
|
||||||||||||||||||||||||||
As
Previously
|
Cost
of
|
Capitalized
Software Cost
|
Personnel
Costs
|
Depreciation
|
Selling,
General
|
As
Now
|
||||||||||||||||||||||
Operating Revenues:
|
||||||||||||||||||||||||||||
Software licenses
|
$
|
2,852
|
$
|
2,852
|
||||||||||||||||||||||||
Maintenance and support
|
4,142
|
4,142
|
||||||||||||||||||||||||||
Professional services
|
653
|
653
|
||||||||||||||||||||||||||
Total revenues
|
7,647
|
7,647
|
||||||||||||||||||||||||||
Cost of Revenues:
|
||||||||||||||||||||||||||||
Software licenses
|
195
|
367
|
562
|
|||||||||||||||||||||||||
Maintenance and support
|
341
|
341
|
||||||||||||||||||||||||||
Professional services
|
263
|
342
|
605
|
|||||||||||||||||||||||||
Total cost of revenues
|
-
|
1,508
|
||||||||||||||||||||||||||
Gross profit
|
-
|
6,139
|
||||||||||||||||||||||||||
Operating Expenses
|
||||||||||||||||||||||||||||
Sales and marketing
|
-
|
2,289
|
2,289
|
|||||||||||||||||||||||||
General and administrative
|
-
|
1,449
|
1,449
|
|||||||||||||||||||||||||
Cost of Revenues
|
458
|
(458
|
)
|
-
|
||||||||||||||||||||||||
Selling, general and administrative
|
4,355
|
(683
|
)
|
66
|
(3,738
|
)
|
-
|
|||||||||||||||||||||
Research and development
|
646
|
646
|
||||||||||||||||||||||||||
Depreciation and amortization
|
433
|
(367
|
)
|
(66
|
)
|
-
|
||||||||||||||||||||||
Total operating expenses
|
5,892
|
4,384
|
||||||||||||||||||||||||||
Income from operations
|
1,755
|
1,755
|
||||||||||||||||||||||||||
Other income (expense), net
|
17
|
17
|
||||||||||||||||||||||||||
Income before income taxes
|
1,772
|
1,772
|
||||||||||||||||||||||||||
Income tax expense
|
542
|
542
|
||||||||||||||||||||||||||
Net income
|
$
|
1,230
|
$
|
1,230
|
||||||||||||||||||||||||
Comprehensive income
|
$
|
1,230
|
$
|
1,230
|
||||||||||||||||||||||||
Net income per common share -
|
||||||||||||||||||||||||||||
Basic
|
$
|
0.06
|
$
|
0.06
|
||||||||||||||||||||||||
Diluted
|
$
|
0.06
|
$
|
0.06
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||||||||||||
Reclassification of Previously Reported Amounts
|
||||||||||||||||||||||||||||
As
Previously
|
Cost
of
|
Capitalized
Software Cost
|
Personnel
Costs
|
Depreciation
|
Selling,
General
|
As
Now
|
||||||||||||||||||||||
Operating Revenues:
|
||||||||||||||||||||||||||||
Software licenses
|
$
|
8,590
|
$
|
8,590
|
||||||||||||||||||||||||
Maintenance and support
|
12,269
|
12,269
|
||||||||||||||||||||||||||
Professional services
|
1,531
|
1,531
|
||||||||||||||||||||||||||
Total revenues
|
22,390
|
22,390
|
||||||||||||||||||||||||||
Cost of Revenues:
|
||||||||||||||||||||||||||||
Software licenses
|
739
|
912
|
1,651
|
|||||||||||||||||||||||||
Maintenance and support
|
1,057
|
1,057
|
||||||||||||||||||||||||||
Professional services
|
327
|
930
|
1,257
|
|||||||||||||||||||||||||
Total cost of revenues
|
-
|
3,965
|
||||||||||||||||||||||||||
Gross profit
|
-
|
18,425
|
||||||||||||||||||||||||||
Operating Expenses
|
||||||||||||||||||||||||||||
Sales and marketing
|
-
|
7,060
|
7,060
|
|||||||||||||||||||||||||
General and administrative
|
-
|
4,629
|
4,629
|
|||||||||||||||||||||||||
Cost of Revenues
|
1,066
|
(1,066
|
)
|
-
|
||||||||||||||||||||||||
Selling, general and administrative
|
13,472
|
(1,987
|
)
|
204
|
(11,689
|
)
|
-
|
|||||||||||||||||||||
Research and development
|
1,832
|
1,832
|
||||||||||||||||||||||||||
Depreciation and amortization
|
1,116
|
(912
|
)
|
(204
|
)
|
-
|
||||||||||||||||||||||
Total operating expenses
|
17,486
|
13,521
|
||||||||||||||||||||||||||
Income from operations
|
4,904
|
4,904
|
||||||||||||||||||||||||||
Other income (expense), net
|
51
|
51
|
||||||||||||||||||||||||||
Income before income taxes
|
4,955
|
4,955
|
||||||||||||||||||||||||||
Income tax expense
|
1,585
|
1,585
|
||||||||||||||||||||||||||
Net income
|
$
|
3,370
|
$
|
3,370
|
||||||||||||||||||||||||
Comprehensive income
|
$
|
3,370
|
$
|
3,370
|
||||||||||||||||||||||||
Net income per common share -
|
||||||||||||||||||||||||||||
Basic
|
$
|
0.16
|
$
|
0.16
|
||||||||||||||||||||||||
Diluted
|
$
|
0.16
|
$
|
0.16
|
•
|
Macroeconomic conditions.
|
•
|
Industry and market considerations.
|
•
|
Cost factors and trends for labor and other expenses of operating our business.
|
•
|
Our overall financial performance and outlook for the future.
|
•
|
Trends in the quoted market value and trading of our common stock.
|
•
|
We estimate expected volatility based on historical volatility of our common stock.
|
•
|
We use primarily the simplified method to derive an expected term which represents an estimate of the time options are expected to remain outstanding. We use this method because our options are plain-vanilla options, and we believe our historical option exercise experience is not adequately indicative of our future expectations.
|
•
|
We base the risk-free rate for periods within the contractual life of the option on the U.S. treasury yield curve in effect at the time of grant.
|
•
|
We estimate a dividend yield based on our historical and expected future dividend payments.
|
4. |
Capitalized Software Development Costs
|
September 30,
|
December 31,
|
|||||||
2016
|
2015
|
|||||||
Gross capitalized cost
|
$
|
7,012
|
$
|
5,714
|
||||
Accumulated amortization
|
(3,051
|
)
|
(1,732
|
)
|
||||
Net balance
|
$
|
3,961
|
$
|
3,982
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Amount capitalized
|
$
|
452
|
$
|
506
|
$
|
1,298
|
$
|
1,613
|
||||||||
Amortization expense
|
(450
|
)
|
(367
|
)
|
(1,319
|
)
|
(912
|
)
|
Released
|
Unreleased
|
|||||||
Products
|
Products
|
|||||||
Gross capitalized amount at September 30, 2016
|
$
|
5,700
|
$
|
1,312
|
Future amortization expense:
|
||||||||
Three months ending December 31, 2016
|
452
|
|||||||
Year ending December 31,
|
||||||||
2017
|
1,433
|
|||||||
2018
|
699
|
|||||||
2019
|
65
|
|||||||
Total
|
$
|
2,649
|
5. |
Stock Options, Restricted Stock and Share-Based Compensation
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Share-based compensation expense
|
$
|
221
|
$
|
167
|
$
|
721
|
$
|
482
|
·
|
It authorizes the issuance of up to three million shares of common stock for stock-based incentives including stock options and restricted stock awards.
|
·
|
The exercise price, term and other conditions applicable to each stock option or stock award granted are determined by the Compensation Committee of the Board of Directors.
|
·
|
The exercise price of stock options is set on the grant date and may not be less than the fair market value per share of our stock at market close on that date.
|
·
|
Stock options we issue generally become exercisable ratably over a three-year period and expire ten years from the date of grant.
|
·
|
We issued no restricted stock awards under this plan during the 2016 or 2015 periods.
|
·
|
As of September 30, 2016, stock-based incentives for up to 167,335 shares remained available for issuance in the future under this plan.
|
Number of
Shares
|
Weighted
Average
Exercise
Price
Per Share
|
Weighted Average
Remaining
Contractual
Term in Years
|
Aggregate
Intrinsic
Value
(000's)
|
|||||||||||||
Outstanding at December 31, 2015
|
2,091,325
|
$
|
2.45
|
6.09
|
$
|
3,277
|
||||||||||
Granted
|
1,055,300
|
$
|
3.58
|
|||||||||||||
Forfeited
|
(372,045
|
)
|
$
|
3.14
|
||||||||||||
Exercised
|
(165,135
|
)
|
$
|
2.02
|
||||||||||||
Outstanding at September 30, 2016
|
2,609,445
|
$
|
2.83
|
6.29
|
$
|
2,015
|
||||||||||
Exercisable at September 30, 2016
|
1,351,760
|
$
|
2.26
|
3.59
|
$
|
1,814
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Weighted average fair value of options granted
|
$
|
1.61
|
$
|
1.42
|
$
|
1.63
|
$
|
1.38
|
||||||||
Intrinsic value of options exercised
|
$
|
78,607
|
$
|
105,450
|
$
|
261,061
|
$
|
386,408
|
||||||||
Cash received from stock options exercised
|
$
|
70,320
|
$
|
98,706
|
$
|
333,329
|
$
|
416,680
|
||||||||
Number of options that vested
|
42,390
|
93,290
|
308,736
|
274,824
|
||||||||||||
Fair value of options that vested
|
$
|
42,565
|
$
|
97,679
|
$
|
418,877
|
$
|
296,886
|
||||||||
Unrecognized compensation expense related to non-vested options at end of period
|
$
|
1,609,593
|
$
|
753,846
|
$
|
1,609,593
|
$
|
753,846
|
||||||||
Weighted average years over which non-vested option expense will be recognized
|
2.3
|
2.0
|
2.3
|
2.0
|
As of September 30, 2016
|
||||||||||||||||||||||
Range of
Exercise Prices
|
Underlying
Shares
Outstanding
|
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||
Weighted
Average
Remaining
Contractual
Life
|
Weighted
Average
Exercise
Price
|
Number of
Underlying
Shares
|
Weighted
Average
Exercise
Price
|
|||||||||||||||||||
$
|
0.85 - $1.43
|
168,600
|
3.16
|
$
|
1.16
|
168,600
|
$
|
1.16
|
||||||||||||||
$
|
1.47 - $2.32
|
612,995
|
4.05
|
$
|
1.82
|
607,255
|
$
|
1.82
|
||||||||||||||
$
|
2.34 - $3.52
|
1,319,850
|
7.29
|
$
|
3.13
|
445,905
|
$
|
2.74
|
||||||||||||||
$
|
3.53 - $4.21
|
508,000
|
7.44
|
$
|
3.83
|
130,000
|
$
|
4.10
|
||||||||||||||
Total options
|
2,609,445
|
1,351,760
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Expected volatility
|
54
|
%
|
56
|
%
|
55
|
%
|
57
|
%
|
||||||||
Expected annual dividend yield
|
1.50
|
%
|
2.40
|
%
|
1.50
|
%
|
2.40
|
%
|
||||||||
Risk free rate of return
|
1.18
|
%
|
1.75
|
%
|
1.46
|
%
|
1.59
|
%
|
||||||||
Expected option term (years)
|
6.00
|
6.00
|
6.00
|
6.00
|
·
|
The exercise price, term and other conditions applicable to each stock option or stock award granted are determined by the Compensation Committee of the Board of Directors.
|
·
|
Restricted stock awards are initially issued with a legend restricting transferability of the shares until the recipient satisfies the vesting provision of the award, which is generally continuing service for one year subsequent to the date of the award.
|
·
|
As of September 30, 2016, stock based incentives for up to 340,000 shares remained available for issuance in the future under this plan.
|
|
Number of
Shares
|
Grant Date
Fair Value
Per Share
|
Total
Fair Value of
Shares That
Vested
|
|||||||||
Restricted Shares Outstanding at December 31, 2015
|
80,000
|
$
|
3.34
|
|||||||||
Shares granted with restrictions
|
80,000
|
$
|
3.31
|
|||||||||
Shares vested and restrictions removed
|
(80,000
|
)
|
$
|
3.34
|
$
|
276,000
|
||||||
Restricted Shares Outstanding at September 30, 2016
|
80,000
|
$
|
3.31
|
|||||||||
|
||||||||||||
Unrecognized compensation expense for non-vested shares as of September 30,2016
|
||||||||||||
Expense to be recognized in future periods
|
$
|
156,999
|
||||||||||
Weighted average number of months over which expense is expected to be recognized
|
7
|
6. |
Income Taxes
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||||||||||||||||||||||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||||||||||||||||||||||||||||||||||
|
Current
|
Deferred
|
Total
|
Current
|
Deferred
|
Total
|
Current
|
Deferred
|
Total
|
Current
|
Deferred
|
Total
|
||||||||||||||||||||||||||||||||||||
Federal
|
$
|
688
|
$
|
(81
|
)
|
$
|
607
|
$
|
797
|
$
|
(254
|
)
|
$
|
543
|
$
|
1,214
|
$
|
(21
|
)
|
$
|
1,193
|
$
|
1,812
|
$
|
(313
|
)
|
$
|
1,499
|
||||||||||||||||||||
Foreign
|
12
|
-
|
12
|
6
|
-
|
6
|
37
|
$
|
22
|
33
|
-
|
$
|
33
|
|||||||||||||||||||||||||||||||||||
State
|
72
|
(4
|
)
|
68
|
(4
|
)
|
(3
|
)
|
(7
|
)
|
133
|
(15
|
)
|
$
|
133
|
60
|
(7
|
)
|
$
|
53
|
||||||||||||||||||||||||||||
Total
|
$
|
772
|
$
|
(85
|
)
|
$
|
687
|
$
|
799
|
$
|
(257
|
)
|
$
|
542
|
$
|
1,384
|
$
|
(36
|
)
|
$
|
1,348
|
$
|
1,905
|
$
|
(320
|
)
|
$
|
1,585
|
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Current federal income tax expense in the statement of operations
|
$
|
687
|
$
|
542
|
$
|
1,348
|
$
|
1,585
|
||||||||
Tax (deficiency) from stock-based compensation recorded in additional paid-in capital
|
(13
|
)
|
(15
|
)
|
(26
|
)
|
(59
|
)
|
||||||||
Current taxes per our federal income tax return
|
$
|
674
|
$
|
527
|
$
|
1,322
|
$
|
1,526
|
September 30,
|
December 31,
|
|||||||
2016
|
2015
|
|||||||
Deferred tax assets:
|
||||||||
Share-based compensation
|
$
|
718
|
$
|
677
|
||||
Deferred revenue
|
1,185
|
1,154
|
||||||
Net operating loss carryforward
|
106
|
151
|
||||||
Compensation and benefits
|
164
|
168
|
||||||
Allowance for doubtful accounts
|
114
|
111
|
||||||
Other
|
52
|
33
|
||||||
Total deferred tax assets
|
2,339
|
2,294
|
||||||
Deferred tax liabilities:
|
||||||||
Intangible assets
|
1,356
|
1,339
|
||||||
Depreciation
|
7
|
15
|
||||||
Total gross deferred tax liabilities
|
1,363
|
1,354
|
||||||
Net deferred tax assets
|
$
|
976
|
$
|
940
|
2016
|
2015
|
|||||||
Balance at beginning of year
|
$
|
90
|
$
|
125
|
||||
Increases for tax positions related to the current year
|
9
|
-
|
||||||
Increases for tax positions related to prior years
|
11
|
48
|
||||||
Decreases for tax positions related to prior years
|
-
|
(51
|
)
|
|||||
Decreases due to settlements related to prior years
|
-
|
(32
|
)
|
|||||
Balance at September 30 and December 31, respectively
|
$
|
110
|
$
|
90
|
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Income tax expense (benefit) at federal statutory rate
|
$
|
710
|
$
|
603
|
$
|
1,397
|
$
|
1,685
|
||||||||
Increase (decrease) in taxes resulting from:
|
||||||||||||||||
State taxes, net of federal benefit
|
44
|
(5
|
)
|
72
|
33
|
|||||||||||
Incentive stock options
|
25
|
0
|
60
|
0
|
||||||||||||
Other
|
(1
|
)
|
(13
|
)
|
20
|
8
|
||||||||||
R&D tax credit uncertain tax position (net)
|
10
|
110
|
21
|
59
|
||||||||||||
Research and development credit
|
(55
|
)
|
(123
|
)
|
(119
|
)
|
(123
|
)
|
||||||||
Domestic production activities deduction
|
(46
|
)
|
(30
|
)
|
(103
|
)
|
(77
|
)
|
||||||||
Income tax expense (benefit) per the statement of operations
|
$
|
687
|
$
|
542
|
$
|
1,348
|
$
|
1,585
|
7. |
Earnings per Common Share
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Net income
|
$
|
1,399
|
$
|
1,230
|
$
|
2,761
|
$
|
3,370
|
||||||||
Weighted average shares outstanding - basic
|
21,122
|
20,892
|
21,061
|
20,782
|
||||||||||||
Stock options
|
552
|
548
|
579
|
512
|
||||||||||||
Weighted average shares outstanding - diluted
|
21,674
|
21,440
|
21,640
|
21,294
|
||||||||||||
Net income per common share - basic
|
$
|
0.07
|
$
|
0.06
|
$
|
0.13
|
$
|
0.16
|
||||||||
Net income per common share - diluted
|
$
|
0.06
|
$
|
0.06
|
$
|
0.13
|
$
|
0.16
|
8. |
Dividends
|
|
March 31, 2016
|
June 30, 2016
|
September 30, 2016
|
|||||||||
Dividend per share of common stock
|
$
|
0.015
|
$
|
0.015
|
$
|
0.015
|
||||||
Dividend record date
|
February 23, 2016
|
May 23, 2016
|
August 23, 2016
|
|||||||||
Dividend payment date
|
March 3, 2016
|
June 1, 2016
|
September 9, 2016
|
9. |
Commitments and Contingencies
|
10. |
Concentration of Business Volume and Credit Risk
|
11. |
Segment and Geographic Disclosures
|
·
|
In 2016:
|
-
|
Recognized as a 2016 Top Workplace by San Antonio Express-News, marking Globalscape’s sixth recognition as a Top Workplace in San Antonio.
|
-
|
Named as Leader in Secure Information Exchange Services 2016 – Texas by the Corp America 2016 Small Cap Awards.
|
-
|
Earned awards from
Info Security Guide
in several categories, including:
|
o
|
EFT Workspaces – Gold Winner in BYOD Security.
|
o
|
Enhanced File Transfer – Silver Winner in Compliance.
|
o
|
EFT Cloud Services – Bronze Winner in Cloud Security.
|
o
|
Mail Express – Bronze Winner in Email Security and Management.
|
-
|
Received a 5-Star rating in The Channel Company’s CRN 2016 Partner Program Guide for the second year in a row.
|
-
|
Named by
Texas Monthly
magazine as one of the best companies to work for in Texas for the sixth year in a row with a ranking of #16 in the medium size category.
|
-
|
Honored as the HR Employer of the Year and Excellence in Engagement Strategy in North America by the HRO Today Services and Technology Association.
|
-
|
Recognized by the
San Antonio Business Journal
as a 2016 Best Place to Work, making this the fifth time GlobalSCAPE has received this honor.
|
-
|
Named by
Computerworld
as one of the best companies to work for in IT for the third consecutive year with a ranking of #3 in the small company category.
|
·
|
In 2015:
|
-
|
Listed as a Champion in the Ad-Hoc Mid-Market category and a Leader in the Ad-Hoc Enterprise use case by Info-Tech Research Group within its Managed File Transfer Vendor Landscape report. This is the second consecutive time that Info-Tech Research Group has named GlobalSCAPE a Champion within this report.
|
-
|
Named one of the best places to work in the information technologies small business category by
Computerworld
for the fourth time.
|
-
|
Named as one of San Antonio’s best places to work by the
San Antonio Business Journal
for the fifth time in the medium size category.
|
-
|
Received a 5-Star rating in The Channel Company’s CRN 2015 Partner Program Guide.
|
-
|
Named by
Texas Monthly
magazine as one of the best companies to work for in Texas for the fifth year in a row with a ranking of #3 in the medium size category.
|
-
|
Named to the
San Antonio Business Journal’s
2015 Fast Track list for companies with $10 million or more in revenue.
|
-
|
Named by the
San Antonio Express News
as the #1 Top Workplace for 2015 in the small company category, and recognized as one of the Top Workplaces for the fifth time.
|
-
|
Two members of the channel leadership team recognized as The Channel Company’s 2015
CRN
Channel Chiefs.
|
-
|
Two channel team members named to The Channel Company’s 2015
CRN
Women of the Channel list.
|
-
|
Recognized by the Golden Bridge Business and Innovation Awards as a Gold Winner in the Managed File Transfer – Innovations category for EFT Workspaces.
|
-
|
Recognized by the Info Security Products Guide’s Global Excellence Awards as a Gold Winner within the Compliance category for Enhanced File Transfer (EFT) and as a Bronze Winner within the Email Security and Management category for Mail Express.
|
-
|
Recognized by the Network Products Guide awards as a Gold Winner in Compliance Data Centers for EFT v7.0 and a Silver Winner in Email, Security and Management with Mail Express v4.
|
·
|
Ongoing innovation of, and focus on, our core EFT platform and its expansion into broader segments of the market.
|
·
|
Developing emerging technologies and/or acquiring products with features that build upon and add capabilities to our EFT platform.
|
·
|
Continuing the evolution of enhanced demand generation activities including marketing, customer-focused, and partner-focused programs.
|
·
|
Increasing sales staff capacity as needed to address our markets.
|
·
|
Aligning our sales group to enhance its industry and geographic focus.
|
·
|
Implementing new sales and marketing campaigns.
|
·
|
Using third party digital marketing experts with search engine optimization expertise to enhance our efforts in this area.
|
·
|
Evolving our lead generation programs to increase our sales staff’s exposure to potential purchasers.
|
·
|
Enhancing our support of channel partners and engaging them to sell our products through training, orientation and marketing programs.
|
·
|
Invoiced amounts for products and services we have delivered and for which we recognize revenue currently.
|
·
|
Invoiced amounts for products and services we will deliver in the future and for which we will recognize revenue in those future periods.
|
·
|
Arrangements to provide customers with software-as-a-service for which we will invoice over the course of an agreed-upon period of time in the future.
|
·
|
Statements of work under which customers have engaged us to deliver professional services for which we will invoice in the future as we complete that work.
|
Three Months Ending September 30,
|
Nine Months Ending September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Bookings
|
$
|
10,296
|
$
|
9,869
|
$
|
26,256
|
$
|
24,011
|
||||||||
Products and services sold for which we will recognize revenue at a future date when the goods and services are delivered to and accepted by the customer
|
(8,967
|
)
|
(6,772
|
)
|
(20,945
|
)
|
(15,455
|
)
|
||||||||
Products and services delivered to and accepted by the customer for which revenue recognition had been deferred at the time of booking
|
7,424
|
4,550
|
19,110
|
13,834
|
||||||||||||
Revenue
|
$
|
8,753
|
$
|
7,647
|
$
|
24,421
|
$
|
22,390
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Net Income
|
$
|
1,399
|
$
|
1,230
|
$
|
2,761
|
$
|
3,370
|
||||||||
Add (subtract) items to determine adjusted EBITDA:
|
||||||||||||||||
Income tax expense
|
687
|
542
|
1,348
|
1,585
|
||||||||||||
Interest (income) expense, net
|
(28
|
)
|
(17
|
)
|
(88
|
)
|
(51
|
)
|
||||||||
Depreciation and amortization:
|
||||||||||||||||
Total depreciation and amortization
|
513
|
433
|
1,522
|
1,116
|
||||||||||||
Amortization of capitalized software development costs
|
(450
|
)
|
(367
|
)
|
(1,319
|
)
|
(912
|
)
|
||||||||
Stock-based compensation expense
|
221
|
167
|
721
|
482
|
||||||||||||
Adjusted EBITDA
|
$
|
2,342
|
$
|
1,988
|
$
|
4,945
|
$
|
5,590
|
Nine Months Ended
|
||||||||
September 30,
|
||||||||
2016
|
2015
|
|||||||
Adjusted EBITDA
|
$
|
4,945
|
$
|
5,590
|
||||
Add (subtract) items to reconcile to cash flow from operations:
|
||||||||
Income tax expense
|
(1,348
|
)
|
(1,585
|
)
|
||||
Interest income (expense), net
|
88
|
51
|
||||||
Amortization of capitalized software development costs
|
1,319
|
912
|
||||||
Bad debt expense
|
67
|
147
|
||||||
Deferred taxes
|
(36
|
)
|
(320
|
)
|
||||
Excess tax benefit from share-based comp
|
5
|
(49
|
)
|
|||||
Accounts receivable
|
(2,856
|
)
|
(1,690
|
)
|
||||
Prepaid expenses
|
86
|
154
|
||||||
Other Assets
|
30
|
37
|
||||||
Accounts payable
|
(217
|
)
|
(757
|
)
|
||||
Accrued expenses
|
(52
|
)
|
10
|
|||||
Deferred revenue
|
1,081
|
531
|
||||||
Other long term liabilities
|
(10
|
)
|
(5
|
)
|
||||
Income tax receivable and payable
|
571
|
403
|
||||||
Net cash provided by operating activities
|
$
|
3,673
|
$
|
3,429
|
·
|
Transfer of transactional information within an enterprise on a repetitive basis from one geographic location to another, such as a transfer of deposit and withdrawal information throughout the day from a branch of a bank to a central data processing center at another location.
|
·
|
Movement of accumulated information within an enterprise from one data processing application to another on a periodic basis, such as a transfer of bi-weekly payroll information from a payroll system that is used to pay employees to a job cost system that is used to manage the cost of a project.
|
·
|
Exchange of information between enterprises to facilitate the completion of one or more business transactions, such as a retailer transmitting inventory purchasing requirements produced by its material requirements planning system to an order entry system at a supplying vendor.
|
·
|
Perpetual software licenses under which customers install our products in their information systems environment.
|
·
|
Cloud-based SaaS hosted solutions to which our customers subscribe and pay us a recurring, monthly fee to access the service.
|
·
|
M&S.
|
·
|
Professional services for product customization and integration.
|
·
|
Support information sharing and exchange capabilities using traditional email systems.
|
·
|
Enable enterprise file synchronization and sharing.
|
·
|
Enhance the ability to replicate, share and backup files within a wide area network or local area network, thereby allowing users to access their data at higher speeds than possible with most alternate approaches.
|
·
|
Support file transfers by individuals and small businesses.
|
·
|
State-of-the-art, enterprise-level security when transferring information within or between computer networks as well as for collaboration with business partners, customers, and employees. EFT provides automation that supports effective integration of back-end systems. It has built-in regulatory compliance, governance, and visibility controls to provide a means of safely maintaining information. EFT offers a high level of performance and scalability to support operational efficiency and maintain business continuity. Administrative tools are provided at various levels of granularity to allow for complete control and monitoring of file transfer activities.
|
·
|
Transmission of critical information such as financial data, medical records, customer files, vendor files, personnel files, transaction activity, and other similar documents between diverse and geographically separated network infrastructures while supporting a range of information protection approaches to meet privacy and other security requirements. In addition to enabling the secure, flexible transmission of critical information using servers, desktop, and notebook computers and a wide range of network-enabled mobile devices, our products also provide customers with the ability to monitor and audit file transfer activities.
|
·
|
Compliance with government regulations and industry standards relating to the protection of information while allowing users to reduce information systems and technologies costs, increase efficiency, track and audit transactions, and automate processes. Our solutions also provide data replication, acceleration of file transfer, sharing/collaboration, and continuous data backup and recovery to our customers.
|
·
|
Accelerate, which is an accelerated file transfer module that boosts the speed and efficiency of secure data transfers and allows for the fast transfer of large files over disparate geographic distances.
|
·
|
Workspaces, which is a file-sharing module that allows employees to create their own groups and assign permissions for those groups, much like a virtual data room, to provide access to files for which they themselves have access on the EFT server. This functionality is accomplished without compromising the security, control, and governance of those files.
|
·
|
Active-active high availability, or HA, which maximizes uptime and performance of critical information technology systems.
|
·
|
Enhanced compatibility of web transfer client file transfers through HTML5 support in addition to the existing Java Runtime Environment.
|
·
|
Increased scalability and business continuity with more flexible, uninterrupted file transfer service.
|
·
|
Improved facilitation of PCI DSS version 3.0 compliance with updates to security components, such as PGP and AS2.
|
·
|
Addition of new Content Integrity Control providing an Internet Content Adaptation Protocol (ICAP) connector to anti-malware scanners and data loss prevention (DLP) solutions.
|
·
|
Integration with SMS PASSCODE for Mobile-Based 2 Factor Authentication.
|
·
|
Enhanced and expanded event rule functionality which improves the ability to integrate our products with client business processes and backend systems
|
·
|
Support for Unicode (UTF-8) characters that allows greater international use.
|
·
|
Web Distributed Authoring and Versioning (WebDAV) support to facilitate collaboration between users in editing and managing documents and files stored on World Wide Web servers.
|
Number of
|
||||
Department
|
Employees
|
|||
Sales and Marketing
|
44
|
|||
Engineering
|
28
|
|||
Professional Services
|
12
|
|||
Customer Support
|
22
|
|||
Management and Administration
|
20
|
|||
Total
|
126
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||||||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||||||||||||||||||
Amount
|
% of Total
Revenue
|
Amount
|
% of Total
Revenue
|
Amount
|
% of Total
Revenue
|
Amount
|
% of Total
Revenue
|
|||||||||||||||||||||||||
Revenue by Type
|
||||||||||||||||||||||||||||||||
Software licenses
|
$
|
3,373
|
38.6
|
%
|
$
|
2,852
|
37.3
|
%
|
$
|
8,565
|
35.1
|
%
|
$
|
8,590
|
38.4
|
%
|
||||||||||||||||
Maintenance and support
|
4,713
|
53.8
|
%
|
4,142
|
54.2
|
%
|
13,843
|
56.7
|
%
|
12,269
|
54.8
|
%
|
||||||||||||||||||||
Professional services
|
667
|
7.6
|
%
|
653
|
8.5
|
%
|
2,013
|
8.2
|
%
|
1,531
|
6.8
|
%
|
||||||||||||||||||||
Total Revenue
|
$
|
8,753
|
100.0
|
%
|
$
|
7,647
|
100.0
|
%
|
$
|
24,421
|
100.0
|
%
|
$
|
22,390
|
100.0
|
%
|
||||||||||||||||
Revenue by Product
|
||||||||||||||||||||||||||||||||
EFT Enterprise and Standard
|
$
|
8,212
|
93.8
|
%
|
$
|
6,905
|
90.3
|
%
|
$
|
22,678
|
92.9
|
%
|
$
|
19,983
|
89.2
|
%
|
||||||||||||||||
Wide Area File Services
|
209
|
2.4
|
%
|
236
|
3.1
|
%
|
658
|
2.7
|
%
|
764
|
3.4
|
%
|
||||||||||||||||||||
CuteFTP
|
124
|
1.4
|
%
|
240
|
3.1
|
%
|
480
|
2.0
|
%
|
665
|
3.0
|
%
|
||||||||||||||||||||
Other
|
208
|
2.4
|
%
|
266
|
3.5
|
%
|
605
|
2.4
|
%
|
978
|
4.4
|
%
|
||||||||||||||||||||
Total Revenue
|
$
|
8,753
|
100.0
|
%
|
$
|
7,647
|
100.0
|
%
|
$
|
24,421
|
100.0
|
%
|
$
|
22,390
|
100.0
|
%
|
•
|
License revenue from sales of our EFT and Mail Express products that we deliver as either software installed at the customer’s premises, for which we earn the full amount of the license revenue at the time the license is delivered, or as a cloud-based service under our EFT Cloud Services brand delivered using a SaaS model, for which we earn monthly subscription revenue as these services are delivered over a contract period that is typically one year.
|
•
|
License revenue from sales of our WAFS and CuteFTP products that are installed at the customer’s premises for which we earn the full amount of the license revenue at the time the license is delivered.
|
•
|
M&S revenue under contracts to provide ongoing product support and software updates to our customers who have purchased license software which we recognize ratably over the contractual period, which is typically one year, but can be up to three years.
|
•
|
Professional services revenue from a variety of customization, implementation, and integration services, as well as delivery of education and training associated with our solutions, which we recognize as the services are performed and accepted by the client
.
|
·
|
Increasing sales staffing and capabilities as needed to address our markets.
|
·
|
Aligning our sales group to enhance its industry and geographic focus.
|
·
|
Implementing new sales and marketing campaigns.
|
·
|
Evolving our lead generation programs to increase our sales staff’s exposure to potential purchasers.
|
·
|
Enhancing our support of channel partners and engaging them to sell our products through training, orientation and marketing programs.
|
|
September 30, 2016
|
December 31, 2015
|
September 30, 2015
|
|||||||||
Cash and cash equivalents
|
$
|
17,421
|
$
|
15,885
|
$
|
12,858
|
||||||
Short term investments
|
3,303
|
3,254
|
3,233
|
|||||||||
Total cash, cash equivalents and long term investments
|
$
|
20,724
|
$
|
19,139
|
$
|
16,091
|
||||||
|
||||||||||||
Working capital
|
$
|
14,138
|
$
|
11,162
|
$
|
6,515
|
||||||
Deferred revenue, current portion
|
13,005
|
12,000
|
11,848
|
|||||||||
Working capital plus current deferred revenue (non-GAAP presentation)
|
$
|
27,143
|
$
|
23,162
|
$
|
18,363
|
|
Cash Provided (Used) During the Nine Months Ended September 30,
|
|||||||
|
2016
|
2015
|
||||||
Operating activities
|
$
|
3,673
|
$
|
3,429
|
||||
Investing activities
|
(1,515
|
)
|
(1,769
|
)
|
||||
Financing activities
|
(622
|
)
|
(160
|
)
|
·
|
Accounts payable decreased $217,000 during the 2016 nine months compared to decreasing $757,000 in the 2015 nine months. The change in the amount of the decrease was primarily due to the payment during the 2015 nine months of certain large obligations to third-party software developers which was not repeated in the 2016 nine months as a result of our increased use of internal resources to develop our products and normal variations in the timing of payments to our vendors.
|
·
|
Income tax receivable and payable increased $571,000 in the 2016 nine months compared to increasing $403,000 in the 2015 nine months. The change in the amount of the increase was a result of changes in the level of our taxable income between periods and normal variations in the timing of our tax payments.
|
·
|
Net income after considering adjustments to reconcile net income to net cash provided by operating activities, as set forth on our Condensed Consolidated Statements of Cash Flow, decreased $609,000. See the section below under
Comparison of the Statement of Operations for the Nine Months Ended September 30, 2016 and 2015
for a discussion of the changes in the components of these amounts.
|
·
|
Accounts receivable increased $2.8 million in the 2016 nine months which provided less cash than the $1.7 million increase in the 2015 nine months. This increase was due to an increase in software licenses sold and bookings of multi-year M&S contracts during the 2016 nine months as compared to the 2015 nine months.
|
·
|
Increased use of our employees as an internal resource to do this work in the 2016 nine months compared to the 2015 nine months when we relied more on the use of higher cost, third-party software developers.
|
·
|
Enhancement of relationships with those third-party developers we continue to use by replacing legacy arrangements carrying higher costs with more cost effective and efficient arrangements.
|
·
|
Shortages of qualified software engineers and qualified technical personnel that caused some of our open positions that arise during the normal course of business to take longer to fill.
|
·
|
An obligation to deliver services in the future to satisfy our right to earn our deferred revenue of $16.7 million. Those future services primarily relate to our obligations under M&S contracts for which we have invoiced our customers. We will recognize this deferred revenue as revenue over the remaining life of those contracts which generally ranges from one to three years. Deferred revenue, unlike the other liability components of our working capital, is an obligation we will satisfy through providing services in the future to our customers as part of our ongoing operating activities from which we have historically generated cash flow. Our deferred revenue does not involve a disbursement of cash as a direct payment of that liability.
|
·
|
Trade accounts payable and accrued liabilities which include our contractual obligations to pay software royalties to third parties that vary in amount based on our sales volume of products upon which royalties are payable.
|
·
|
Operating lease for our office space.
|
·
|
Federal and state taxes.
|
|
Amounts Due for the Period
|
|||||||||||||||||||
|
Three Months Ending
December 31,
2016
|
Fiscal Years
|
||||||||||||||||||
|
2017 - 2018 | 2019 - 2020 |
Thereafter
|
Total
|
||||||||||||||||
|
||||||||||||||||||||
Operating leases
|
$
|
90
|
$
|
720
|
$
|
120
|
$
|
-
|
$
|
930
|
Three Months Ended September 30,
|
||||||||||||
2016
|
2015
|
$ Change
|
||||||||||
$ in thousands
|
||||||||||||
Total revenues
|
$
|
8,753
|
$
|
7,647
|
$
|
1,106
|
||||||
Total cost of revenues
|
1,770
|
1,508
|
262
|
|||||||||
Gross profit
|
6,983
|
6,139
|
844
|
|||||||||
Operating expenses
|
||||||||||||
Sales and marketing
|
2,759
|
2,289
|
470
|
|||||||||
General and administrative
|
1,638
|
1,449
|
189
|
|||||||||
Research and development
|
528
|
646
|
(118
|
)
|
||||||||
Total operating expenses
|
4,925
|
4,384
|
541
|
|||||||||
Income from operations
|
2,058
|
1,755
|
303
|
|||||||||
Other income (expense), net
|
28
|
17
|
11
|
|||||||||
Income before income taxes
|
2,086
|
1,772
|
314
|
|||||||||
Income tax expense
|
687
|
542
|
145
|
|||||||||
Net income
|
$
|
1,399
|
$
|
1,230
|
$
|
169
|
Three Months Ended September 30,
|
||||||||||||||||
2016
|
2015
|
|||||||||||||||
$ in thousands
|
||||||||||||||||
Amount
|
% of Total
Revenue
|
Amount
|
% of Total
Revenue
|
|||||||||||||
Revenue by Type
|
||||||||||||||||
Software licenses
|
$
|
3,373
|
38.6
|
%
|
$
|
2,852
|
37.3
|
%
|
||||||||
Maintenance and support
|
4,713
|
53.8
|
%
|
4,142
|
54.2
|
%
|
||||||||||
Professional services
|
667
|
7.6
|
%
|
653
|
8.5
|
%
|
||||||||||
Total Revenue
|
$
|
8,753
|
100.0
|
%
|
$
|
7,647
|
100.0
|
%
|
||||||||
Revenue by Product
|
||||||||||||||||
EFT Enterprise and Standard
|
$
|
8,212
|
93.8
|
%
|
$
|
6,905
|
90.3
|
%
|
||||||||
Wide Area File Services
|
209
|
2.4
|
%
|
236
|
3.1
|
%
|
||||||||||
CuteFTP
|
124
|
1.4
|
%
|
240
|
3.1
|
%
|
||||||||||
Other
|
208
|
2.4
|
%
|
266
|
3.5
|
%
|
||||||||||
Total Revenue
|
$
|
8,753
|
100.0
|
%
|
$
|
7,647
|
100.0
|
%
|
·
|
In mid-2016, we reviewed how we were allocating our resources across all of our product lines. Based on that review, we initiated changes that were in place throughout the 2016 quarter to enhance our focus on our EFT platform that is our flagship product and from which we earn a substantial portion of our revenue. While these changes initially prioritized attention to our product research and development activities, we identified corporate-wide synergies from a similar focus on how we were expending resources in our marketing and sales activities. As a result, the attention we paid to our EFT platform gained momentum across all departments resulting in our overall resources being more optimally used to translate sales leads into completed transactions and revenue for that product line. As a result, we realized 25.1% growth in revenue from our EFT platform perpetual license sales.
|
·
|
Revenue from delivery of our EFT platform through a cloud-based SaaS solution grew 52.8%. We achieved this growth by promoting our ability to offer the features and functions of our EFT platform through a SaaS delivery method without materially impacting our perpetual license sales. We believe this flexibility allows us to address the full range of users, whether they prefer a SaaS solution or an on-premises solution, without negatively compromising our ability to earn revenue from both.
|
·
|
We made an investment in early 2016 to enhance the talent level of our sales force. During the 2016 quarter, we began to realize the benefits of them completing their first full sales cycles of substance and converting our sales pipeline into revenue. These efforts, combined with the refocus on our EFT platform discussed above, allowed our sales and marketing teams to achieve greater efficiencies that led to increased revenue.
|
·
|
Amortization of capitalized software development costs we incur when producing our software products. This amortization begins when a product is ready for general release to the public.
|
·
|
Royalties we pay to use software developed by others for certain features of our products.
|
·
|
Fees we pay to third parties who provide services supporting our SaaS and cloud-based subscription solutions.
|
·
|
Increasing the size of our sales, marketing and product strategy teams and increased compensation rates due to competitive demands in the marketplace.
|
·
|
Increasing marketing activities related to competitive intelligence and channel development.
|
·
|
An increase in revenue which resulted in a higher absolute dollar amount of sales commissions paid to employees although the commission rate as a percent of sales did not change materially.
|
Three Months Ended September 30,
|
||||||||
2016
|
2015
|
|||||||
R&D expenditures capitalized
|
$
|
452
|
$
|
506
|
||||
R&D expenditures expensed
|
528
|
646
|
||||||
Total R&D expenditures (non-GAAP measurement)
|
$
|
980
|
$
|
1,152
|
·
|
Increased use of our employees as an internal resource to do this work in the 2016 quarter compared to the 2015 quarter when we relied more on the use of higher cost, third-party software developers.
|
·
|
Enhancement of relationships with those third-party developers we continue to use by replacing legacy arrangements carrying higher costs with more cost effective and efficient arrangements.
|
·
|
Shortages of qualified software engineers and qualified technical personnel that caused some of our open positions that arise during the normal course of business to take longer to fill.
|
·
|
The domestic production activities deduction in both quarters, and the research and development credit, that are items considered in our federal income tax return that are not part of our income before taxes on our financial statements.
|
·
|
Certain expenses in our financial statements, such as a portion of meals and entertainment expenses, that are not deductible on our federal income tax return.
|
·
|
State income taxes included in income tax expense in our financial statements.
|
Nine Months Ended September 30,
|
||||||||||||
2016
|
2015
|
$ Change
|
||||||||||
$ in thousands
|
||||||||||||
Total revenues
|
$
|
24,421
|
$
|
22,390
|
$
|
2,031
|
||||||
Total cost of revenues
|
5,137
|
3,965
|
1,172
|
|||||||||
Gross profit
|
19,284
|
18,425
|
859
|
|||||||||
Operating expenses
|
||||||||||||
Sales and marketing
|
8,453
|
7,060
|
1,393
|
|||||||||
General and administrative
|
5,083
|
4,629
|
454
|
|||||||||
Research and development
|
1,727
|
1,832
|
(105
|
)
|
||||||||
Total operating expenses
|
15,263
|
13,521
|
1,742
|
|||||||||
Income from operations
|
4,021
|
4,904
|
(883
|
)
|
||||||||
Other income (expense), net
|
88
|
51
|
37
|
|||||||||
Income before income taxes
|
4,109
|
4,955
|
(846
|
)
|
||||||||
Income tax expense
|
1,348
|
1,585
|
(237
|
)
|
||||||||
Net income
|
$
|
2,761
|
$
|
3,370
|
$
|
(609
|
)
|
Nine Months Ended September 30,
|
||||||||||||||||
2016
|
2015
|
|||||||||||||||
$ in thousands
|
||||||||||||||||
Amount
|
% of Total
Revenue
|
Amount
|
% of Total
Revenue
|
|||||||||||||
Revenue by Type
|
||||||||||||||||
Software licenses
|
$
|
8,565
|
35.1
|
%
|
$
|
8,590
|
38.4
|
%
|
||||||||
Maintenance and support
|
13,843
|
56.7
|
%
|
12,269
|
54.8
|
%
|
||||||||||
Professional services
|
2,013
|
8.2
|
%
|
1,531
|
6.8
|
%
|
||||||||||
Total Revenue
|
$
|
24,421
|
100.0
|
%
|
$
|
22,390
|
100.0
|
%
|
||||||||
Revenue by Product
|
||||||||||||||||
EFT Enterprise and Standard
|
$
|
22,678
|
92.9
|
%
|
$
|
19,983
|
89.2
|
%
|
||||||||
Wide Area File Services
|
658
|
2.7
|
%
|
764
|
3.4
|
%
|
||||||||||
CuteFTP
|
480
|
2.0
|
%
|
665
|
3.0
|
%
|
||||||||||
Other
|
605
|
2.4
|
%
|
978
|
4.4
|
%
|
||||||||||
Total Revenue
|
$
|
24,421
|
100.0
|
%
|
$
|
22,390
|
100.0
|
%
|
·
|
During the six months ended June 30, 2016, we reviewed how we had been allocating our product research and development resources across all of our products. We determined that we had been allocating resources to the development of our EFT platform at a level less than that necessary to allow our sales and marketing activities to continue to yield growth in license revenue from that product during the six months ended June 30, 2016. As a result, software license revenue decreased 9.5% for this period as compared to the six months ended June 30, 2015.
|
·
|
Based on the review described above, we initiated changes that were in place throughout the 2016 quarter to enhance our focus on our EFT platform that is our flagship product and from which we earn a substantial portion of our revenue. While these changes initially prioritized attention to our product research and development activities, we identified corporate-wide synergies from a similar focus on how we were expending resources in our marketing and sales activities. Our enhanced attention to our EFT platform gained momentum across all departments resulting in our overall resources being more optimally used to translate sales leads into completed transactions and revenue for that product line. As a result, we realized 25.1% growth in revenue from our EFT platform perpetual license sales during the 2016 quarter which substantially offset the decrease in software license revenue for first six months of 2016 yielding the 0.3% decrease in software license revenue for the 2016 nine months.
|
·
|
Revenue from delivery of our EFT platform through a cloud-based SaaS solution grew 39.3%. The dollar amount of this revenue is not yet material to our total revenue. We achieved this growth by promoting our ability to offer the features and functions of our EFT platform through a SaaS delivery method without materially impacting our perpetual license sales. We believe this flexibility allows us to address the full range of users, whether they prefer a SaaS solution or an on-premises solution, without negatively compromising our ability to earn revenue from both.
|
·
|
We made an investment in early 2016 to enhance the talent level of our sales force. During the 2016 nine months, we began to realize the benefits of them completing their first full sales cycles of substance and converting our sales pipeline into revenue. These efforts, combined with the refocus on our EFT platform discussed above, allowed our sales and marketing teams to achieve greater efficiencies that led to increased revenue.
|
·
|
Amortization of capitalized software development costs we incur when producing our software products. This amortization begins when a product is ready for general release to the public.
|
·
|
Royalties we pay to use software developed by others for certain features of our products.
|
·
|
Fees we pay to third parties who provide services supporting our SaaS and cloud-based subscription solutions.
|
·
|
Increasing the size of our sales, marketing and product strategy teams and increased compensation rates due to competitive demands in the marketplace.
|
·
|
Increasing marketing activities related to competitive intelligence and channel development.
|
·
|
An increase in revenue which resulted in a higher absolute dollar amount of sales commissions paid to employees although the commission rate as a percent of sales did not change materially.
|
Nine Months Ended September 30,
|
||||||||
2016
|
2015
|
|||||||
R&D expenditures capitalized
|
$
|
1,298
|
$
|
1,613
|
||||
R&D expenditures expensed
|
1,727
|
1,832
|
||||||
Total R&D expenditures (non-GAAP measurement)
|
$
|
3,025
|
$
|
3,445
|
·
|
Increased use of our employees as an internal resource to do this work in the 2016 nine months compared to the 2015 nine months when we relied more on the use of higher cost, third-party software developers.
|
·
|
Enhancement of relationships with those third-party developers we continue to use by replacing legacy arrangements carrying higher costs with more cost effective and efficient arrangements.
|
·
|
Shortages of qualified software engineers and qualified technical personnel that caused some of our open positions that arise during the normal course of business to take longer to fill.
|
·
|
The domestic production activities deduction in both quarters, and the research and development credit in the 2016 nine months only, that are items considered in our federal income tax return that are not part of our income before taxes on our financial statements.
|
·
|
Certain expenses in our financial statements, such as a portion of meals and entertainment expenses, that are not deductible on our federal income tax return.
|
·
|
State income taxes included in income tax expense in our financial statements.
|
(a) |
Exhibits
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
101
|
Interactive Data File.
|
|
|
|
GLOBALSCAPE, INC.
|
November 10, 2016
|
|
By:
|
/s/ James W. Albrecht, Jr.
|
Date
|
|
|
James W. Albrecht, Jr.
|
|
|
|
Chief Financial Officer
|
1 Year Globalscape Chart |
1 Month Globalscape Chart |
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