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Share Name | Share Symbol | Market | Type |
---|---|---|---|
FalconStor Software Inc (PK) | USOTC:FALC | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 2.25 | 2.25 | 2.25 | 0.00 | 01:00:00 |
FALCONSTOR SOFTWARE, INC.
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(Exact name of registrant as specified in its charter)
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DELAWARE
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77-0216135
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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2 Huntington Quadrangle
Melville, New York
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11747
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(Address of principal executive offices)
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(Zip Code)
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631-777-5188
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(Registrant’s telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last report)
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Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Page
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June 30, 2016
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December 31, 2015
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||||
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(unaudited)
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Assets
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||||
Current assets:
|
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||||
Cash and cash equivalents
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$
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7,925,334
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|
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$
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6,013,382
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Marketable securities
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1,500,235
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7,420,042
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Accounts receivable, net of allowances of $239,077 and $191,285, respectively
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4,641,500
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6,635,262
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Prepaid expenses and other current assets
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1,396,389
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1,742,668
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Inventory
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6,181
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70,534
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Deferred tax assets, net
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526,391
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205,816
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Total current assets
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15,996,030
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22,087,704
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Property and equipment, net of accumulated depreciation of $18,368,187 and $17,947,675, respectively
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1,257,917
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1,565,932
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Deferred tax assets, net
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127,015
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110,060
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Software development costs, net
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736,453
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1,116,816
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Other assets
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1,045,956
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1,139,377
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Goodwill
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4,150,339
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4,150,339
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Other intangible assets, net
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235,408
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256,137
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Total assets
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$
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23,549,118
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$
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30,426,365
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Liabilities and Stockholders' Deficit
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Current liabilities:
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Accounts payable
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$
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973,739
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$
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1,005,944
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Accrued expenses
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6,186,181
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6,783,514
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Deferred tax liabilities, net
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89,474
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89,343
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Deferred revenue, net
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15,969,741
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16,553,519
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Total current liabilities
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23,219,135
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24,432,320
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Other long-term liabilities
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991,781
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735,089
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Deferred tax liabilities, net
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40,637
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27,069
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Deferred revenue, net
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9,462,032
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9,122,289
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Total liabilities
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33,713,585
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34,316,767
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Commitments and contingencies (Note 12)
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Series A redeemable convertible preferred stock, $.001 par value, 2,000,000 shares authorized, 900,000 shares issued and outstanding, redemption value of $9,000,000
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8,153,204
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7,818,554
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Stockholders' deficit:
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Common stock - $.001 par value, 100,000,000 shares authorized, 58,860,181 and 57,194,817 shares issued, respectively and 43,332,111 and 41,666,747 shares outstanding, respectively
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58,860
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57,195
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Additional paid-in capital
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169,728,951
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167,953,871
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Accumulated deficit
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(128,815,385
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)
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(120,983,891
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)
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Common stock held in treasury, at cost (15,528,070 and 15,528,070 shares, respectively)
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(57,032,917
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)
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(57,032,917
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)
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Accumulated other comprehensive loss, net
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(2,257,180
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)
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(1,703,214
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)
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Total stockholders' deficit
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(18,317,671
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)
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(11,708,956
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)
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Total liabilities and stockholders' deficit
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$
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23,549,118
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$
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30,426,365
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Three Months Ended June 30,
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Six Months Ended June 30,
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||||||||||||
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2016
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2015
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2016
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2015
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Revenue:
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Product revenue
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$
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2,939,594
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$
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3,650,504
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$
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5,220,452
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$
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17,620,871
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Support and services revenue
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5,128,357
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5,902,085
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10,279,830
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11,871,594
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Total revenue
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8,067,951
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9,552,589
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15,500,282
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29,492,465
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Cost of revenue:
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Product
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319,974
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718,057
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564,247
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1,108,281
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Support and service
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1,999,125
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1,940,729
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3,761,345
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3,960,747
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||||
Total cost of revenue
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2,319,099
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2,658,786
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4,325,592
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5,069,028
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Gross profit
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$
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5,748,852
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$
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6,893,803
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$
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11,174,690
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$
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24,423,437
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Operating expenses:
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Research and development costs
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3,304,079
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3,067,732
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6,960,856
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6,273,599
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Selling and marketing
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4,124,350
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4,371,513
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8,393,150
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9,676,875
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General and administrative
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1,833,479
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2,583,893
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3,539,404
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5,076,834
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Investigation, litigation, and settlement related (benefits) costs
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—
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(8,186
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)
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—
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8,842
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||||
Restructuring costs
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93,405
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23,495
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177,389
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157,971
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||||
Total operating expenses
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9,355,313
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10,038,447
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19,070,799
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21,194,121
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||||
Operating (loss) income
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(3,606,461
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)
|
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(3,144,644
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)
|
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(7,896,109
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)
|
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3,229,316
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|
||||
Interest and other income (loss), net
|
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237,251
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98,411
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355,434
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(365,665
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)
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||||
(Loss) income before income taxes
|
|
(3,369,210
|
)
|
|
(3,046,233
|
)
|
|
(7,540,675
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)
|
|
2,863,651
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|
||||
Provision (benefit) for income taxes
|
|
165,672
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(378,049
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)
|
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290,819
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|
|
269,456
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|
||||
Net (loss) income
|
|
$
|
(3,534,882
|
)
|
|
$
|
(2,668,184
|
)
|
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$
|
(7,831,494
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)
|
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$
|
2,594,195
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Less: Accrual of Series A redeemable convertible preferred stock dividends
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195,366
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186,904
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387,974
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377,690
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||||
Less: Accretion to redemption value of Series A redeemable convertible preferred stock
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170,981
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|
143,557
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334,650
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|
280,974
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|
||||
Net (loss) income attributable to common stockholders
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$
|
(3,901,229
|
)
|
|
$
|
(2,998,645
|
)
|
|
$
|
(8,554,118
|
)
|
|
$
|
1,935,531
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|
Basic net (loss) income per share attributable to common stockholders
|
|
$
|
(0.09
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
0.05
|
|
Diluted net (loss) income per share attributable to common stockholders
|
|
$
|
(0.09
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
0.05
|
|
Weighted average basic shares outstanding
|
|
43,159,285
|
|
|
40,964,160
|
|
|
42,521,018
|
|
|
40,949,849
|
|
||||
Weighted average diluted shares outstanding
|
|
43,159,285
|
|
|
40,964,160
|
|
|
42,521,018
|
|
|
42,492,677
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net (loss) income
|
|
$
|
(3,534,882
|
)
|
|
$
|
(2,668,184
|
)
|
|
$
|
(7,831,494
|
)
|
|
$
|
2,594,195
|
|
Other comprehensive (loss) income, net of applicable taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation
|
|
(334,161
|
)
|
|
(4,477
|
)
|
|
(561,576
|
)
|
|
(30,978
|
)
|
||||
Net unrealized (loss) gain on marketable securities
|
|
(283
|
)
|
|
657
|
|
|
3,756
|
|
|
4,676
|
|
||||
Net minimum pension liability
|
|
678
|
|
|
3,341
|
|
|
3,854
|
|
|
5,808
|
|
||||
Total other comprehensive loss, net of applicable taxes:
|
|
(333,766
|
)
|
|
(479
|
)
|
|
(553,966
|
)
|
|
(20,494
|
)
|
||||
Total comprehensive (loss) income
|
|
$
|
(3,868,648
|
)
|
|
$
|
(2,668,663
|
)
|
|
$
|
(8,385,460
|
)
|
|
$
|
2,573,701
|
|
Less: Accrual of Series A redeemable convertible preferred stock dividends
|
|
195,366
|
|
|
186,904
|
|
|
387,974
|
|
|
377,690
|
|
||||
Less: Accretion to redemption value of Series A redeemable convertible preferred stock
|
|
170,981
|
|
|
143,557
|
|
|
334,650
|
|
|
280,974
|
|
||||
Total comprehensive (loss) income attributable to common stockholders
|
|
$
|
(4,234,995
|
)
|
|
$
|
(2,999,124
|
)
|
|
$
|
(9,108,084
|
)
|
|
$
|
1,915,037
|
|
|
|
Six Months Ended June 30,
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||||||
|
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2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net (loss) income
|
|
$
|
(7,831,494
|
)
|
|
$
|
2,594,195
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
|
|
|
|
|
|
||
Depreciation and amortization
|
|
747,974
|
|
|
1,058,581
|
|
||
Share-based payment compensation
|
|
637,231
|
|
|
731,584
|
|
||
Non-cash professional services expenses
|
|
1,480,725
|
|
|
69,190
|
|
||
Restructuring costs
|
|
177,389
|
|
|
157,971
|
|
||
Payment of restructuring costs
|
|
(59,510
|
)
|
|
(422,868
|
)
|
||
Loss on disposal of fixed assets
|
|
—
|
|
|
13,185
|
|
||
Provision for returns and doubtful accounts
|
|
61,068
|
|
|
17,808
|
|
||
Deferred income tax provision
|
|
(265,756
|
)
|
|
32,898
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||
Accounts receivable
|
|
1,787,845
|
|
|
2,655,194
|
|
||
Prepaid expenses and other current assets
|
|
377,103
|
|
|
(176,307
|
)
|
||
Inventory
|
|
64,353
|
|
|
202,257
|
|
||
Other assets
|
|
23,429
|
|
|
41,492
|
|
||
Accounts payable
|
|
(42,587
|
)
|
|
(100,169
|
)
|
||
Accrued expenses and other long-term liabilities
|
|
(407,633
|
)
|
|
1,472,222
|
|
||
Deferred revenue
|
|
(541,348
|
)
|
|
(9,994,575
|
)
|
||
Net cash used in operating activities
|
|
(3,791,211
|
)
|
|
(1,647,342
|
)
|
||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Sales of marketable securities
|
|
6,066,000
|
|
|
6,328,000
|
|
||
Purchases of marketable securities
|
|
(150,000
|
)
|
|
(6,041,913
|
)
|
||
Purchases of property and equipment
|
|
(110,421
|
)
|
|
(505,357
|
)
|
||
Capitalized software development costs
|
|
—
|
|
|
(14,100
|
)
|
||
Security deposits
|
|
82,311
|
|
|
166,003
|
|
||
Purchase of intangible assets
|
|
(61,506
|
)
|
|
(139,989
|
)
|
||
Net cash provided by (used in) investing activities
|
|
5,826,384
|
|
|
(207,356
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
|
||
Proceeds from exercise of stock options
|
|
—
|
|
|
42,412
|
|
||
Repurchase of common stock
|
|
—
|
|
|
(137,859
|
)
|
||
Dividends paid on Series A redeemable convertible preferred stock
|
|
—
|
|
|
(377,690
|
)
|
||
Net cash used in financing activities
|
|
—
|
|
|
(473,137
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
|
(123,221
|
)
|
|
(238,507
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
|
1,911,952
|
|
|
(2,566,342
|
)
|
||
Cash and cash equivalents, beginning of period
|
|
6,013,382
|
|
|
10,873,891
|
|
||
Cash and cash equivalents, end of period
|
|
$
|
7,925,334
|
|
|
$
|
8,307,549
|
|
Supplemental disclosures:
|
|
|
|
|
|
|
||
Cash paid for income taxes, net
|
|
$
|
443,908
|
|
|
$
|
98,653
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
||
Undistributed Series A redeemable convertible preferred stock dividends
|
|
$
|
195,366
|
|
|
$
|
186,904
|
|
Series A redeemable convertible preferred stock dividend payment
|
|
$
|
381,413
|
|
|
$
|
—
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Stock options and restricted stock
|
|
7,692,595
|
|
|
8,047,333
|
|
|
7,692,595
|
|
|
5,007,276
|
|
Series A redeemable convertible preferred stock
|
|
8,781,516
|
|
|
8,781,516
|
|
|
8,781,516
|
|
|
8,781,516
|
|
Total anti-dilutive common stock equivalents
|
|
16,474,111
|
|
|
16,828,849
|
|
|
16,474,111
|
|
|
13,788,792
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Numerator
|
|
|
|
|
|
|
|
|
||||||||
Net (loss) income
|
|
$
|
(3,534,882
|
)
|
|
$
|
(2,668,184
|
)
|
|
$
|
(7,831,494
|
)
|
|
$
|
2,594,195
|
|
Effects of Series A redeemable convertible preferred stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: Series A redeemable convertible preferred stock dividends
|
|
195,366
|
|
|
186,904
|
|
|
387,974
|
|
|
377,690
|
|
||||
Less: Accretion to redemption value of Series A redeemable convertible preferred stock
|
|
170,981
|
|
|
143,557
|
|
|
334,650
|
|
|
280,974
|
|
||||
Net (loss) income attributable to common stockholders
|
|
$
|
(3,901,229
|
)
|
|
$
|
(2,998,645
|
)
|
|
$
|
(8,554,118
|
)
|
|
$
|
1,935,531
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average basic shares outstanding
|
|
43,159,285
|
|
|
40,964,160
|
|
|
42,521,018
|
|
|
40,949,849
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options and restricted stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,542,828
|
|
||||
Series A redeemable convertible preferred stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Weighted average diluted shares outstanding
|
|
43,159,285
|
|
|
40,964,160
|
|
|
42,521,018
|
|
|
42,492,677
|
|
||||
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic net (loss) income per share attributable to common stockholders
|
|
$
|
(0.09
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
0.05
|
|
Diluted net (loss) income per share attributable to common stockholders
|
|
$
|
(0.09
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
0.05
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Finished systems
|
|
$
|
6,181
|
|
|
$
|
70,534
|
|
Total Inventory
|
|
$
|
6,181
|
|
|
$
|
70,534
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Property and Equipment:
|
|
|
|
|
||||
Gross carrying amount
|
|
$
|
19,626,104
|
|
|
$
|
19,513,607
|
|
Accumulated depreciation
|
|
(18,368,187
|
)
|
|
(17,947,675
|
)
|
||
Property and Equipment, net
|
|
$
|
1,257,917
|
|
|
$
|
1,565,932
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Software development costs:
|
|
|
|
|
||||
Gross carrying amount
|
|
$
|
2,917,215
|
|
|
$
|
3,037,215
|
|
Accumulated amortization
|
|
(2,180,762
|
)
|
|
(1,920,399
|
)
|
||
Software development costs, net
|
|
$
|
736,453
|
|
|
$
|
1,116,816
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Goodwill
|
|
$
|
4,150,339
|
|
|
$
|
4,150,339
|
|
Other intangible assets:
|
|
|
|
|
|
|
||
Gross carrying amount
|
|
$
|
3,671,030
|
|
|
$
|
3,609,524
|
|
Accumulated amortization
|
|
(3,435,622
|
)
|
|
(3,353,387
|
)
|
||
Net carrying amount
|
|
$
|
235,408
|
|
|
$
|
256,137
|
|
|
|
Shares
|
|
Shares Available
|
|
Shares
|
|
Last Date for Grant
|
Name of Plan
|
|
Authorized
|
|
for Grant
|
|
Outstanding
|
|
of Shares
|
FalconStor Software, Inc., 2016 Incentive Stock Plan
|
|
1,500,000
|
|
1,500,000
|
|
—
|
|
April 27, 2026
|
FalconStor Software, Inc., 2013 Outside Directors Equity Compensation Plan
|
|
400,000
|
|
330,000
|
|
70,000
|
|
April 27, 2019
|
Name of Plan
|
|
Shares Available for Grant
|
|
Shares Outstanding
|
FalconStor Software, Inc., 2006 Incentive Stock Plan
|
|
—
|
|
7,240,095
|
FalconStor Software, Inc., 2013 Outside Directors Equity Compensation Plan
|
|
—
|
|
74,000
|
FalconStor Software, Inc., 2007 Outside Directors Equity Compensation Plan
|
|
—
|
|
160,000
|
FalconStor Software, Inc., 2000 Stock Option Plan
|
|
—
|
|
148,500
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Cost of revenue - Product
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cost of revenue - Support and Service
|
|
44,066
|
|
|
34,894
|
|
|
68,837
|
|
|
53,704
|
|
||||
Research and development costs
|
|
825,635
|
|
|
98,495
|
|
|
1,571,797
|
|
|
171,515
|
|
||||
Selling and marketing
|
|
75,342
|
|
|
63,510
|
|
|
143,072
|
|
|
151,580
|
|
||||
General and administrative
|
|
182,303
|
|
|
229,069
|
|
|
334,250
|
|
|
423,975
|
|
||||
|
|
$
|
1,127,346
|
|
|
$
|
425,968
|
|
|
$
|
2,117,956
|
|
|
$
|
800,774
|
|
•
|
Level 1
– Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities. At
June 30, 2016
and
December 31, 2015
, the Level 1 category included money market funds and commercial paper, which are included within cash and cash equivalents in the condensed consolidated balance sheets.
|
•
|
Level 2 –
Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly. At
June 30, 2016
and
December 31, 2015
, the Level 2 category included government securities and corporate debt securities, which are included within cash and cash equivalents and marketable securities in the condensed consolidated balance sheets.
|
•
|
Level 3
– Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. At
June 30, 2016
and
December 31, 2015
, the Level 3 category included derivatives, which are included within other long-term liabilities in the condensed consolidated balance sheets. The Company did not hold any cash, cash equivalents or marketable securities categorized as Level 3 as of
June 30, 2016
or
December 31, 2015
.
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
|
|
Total
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1) |
|
Significant other Inputs
(Level 2) |
|
Significant Unobservable Inputs
(Level 3) |
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
4,426,619
|
|
|
$
|
4,426,619
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total cash equivalents
|
|
4,426,619
|
|
|
4,426,619
|
|
|
—
|
|
|
—
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt and government securities
|
|
1,500,235
|
|
|
—
|
|
|
1,500,235
|
|
|
—
|
|
||||
Total marketable securities
|
|
1,500,235
|
|
|
—
|
|
|
1,500,235
|
|
|
—
|
|
||||
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative Instruments
|
|
164,670
|
|
|
—
|
|
|
—
|
|
|
164,670
|
|
||||
Total derivative liabilities
|
|
164,670
|
|
|
—
|
|
|
—
|
|
|
164,670
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total assets and liabilities measured at fair value
|
|
$
|
6,091,524
|
|
|
$
|
4,426,619
|
|
|
$
|
1,500,235
|
|
|
$
|
164,670
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
|
|
Total
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1) |
|
Significant other Inputs
(Level 2) |
|
Significant Unobservable Inputs
(Level 3) |
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
||||||||
Money market funds and commercial paper
|
|
$
|
2,725,094
|
|
|
$
|
2,725,094
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total cash equivalents
|
|
2,725,094
|
|
|
2,725,094
|
|
|
—
|
|
|
—
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt and government securities
|
|
7,420,042
|
|
|
—
|
|
|
7,420,042
|
|
|
—
|
|
||||
Total marketable securities
|
|
7,420,042
|
|
|
—
|
|
|
7,420,042
|
|
|
—
|
|
||||
Derivative liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Derivative Instruments
|
|
82,024
|
|
|
—
|
|
|
—
|
|
|
82,024
|
|
||||
Total derivative liabilities
|
|
82,024
|
|
|
—
|
|
|
—
|
|
|
82,024
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total assets and liabilities measured at fair value
|
|
$
|
10,227,160
|
|
|
$
|
2,725,094
|
|
|
$
|
7,420,042
|
|
|
$
|
82,024
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Beginning Balance
|
|
$
|
133,229
|
|
|
$
|
109,038
|
|
|
$
|
82,024
|
|
|
$
|
137,171
|
|
Total loss (gain) recognized in earnings
|
|
31,441
|
|
|
(8,477
|
)
|
|
82,646
|
|
|
(36,610
|
)
|
||||
Ending Balance
|
|
$
|
164,670
|
|
|
$
|
100,561
|
|
|
$
|
164,670
|
|
|
$
|
100,561
|
|
|
|
Aggregate
Fair Value |
|
Cost or Amortized
Cost |
|
Net Unrealized
Gains |
||||||
Government securities
|
|
$
|
1,500,235
|
|
|
$
|
1,499,885
|
|
|
$
|
350
|
|
Corporate debt securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Marketable Securities
|
|
$
|
1,500,235
|
|
|
$
|
1,499,885
|
|
|
$
|
350
|
|
|
|
Aggregate
Fair Value |
|
Cost or Amortized
Cost |
|
Net Unrealized
Losses |
||||||
Government securities
|
|
$
|
6,560,303
|
|
|
$
|
6,562,792
|
|
|
$
|
(2,489
|
)
|
Corporate debt securities
|
|
859,739
|
|
|
860,656
|
|
|
(917
|
)
|
|||
Marketable Securities
|
|
$
|
7,420,042
|
|
|
$
|
7,423,448
|
|
|
$
|
(3,406
|
)
|
|
|
Fair Value
|
|
Cost
|
||||
Due within one year
|
|
$
|
1,500,235
|
|
|
$
|
1,499,885
|
|
Due after one year
|
|
—
|
|
|
—
|
|
||
|
|
$
|
1,500,235
|
|
|
$
|
1,499,885
|
|
2016
|
$
|
1,075,513
|
|
2017
|
1,668,857
|
|
|
2018
|
1,400,563
|
|
|
2019
|
1,402,181
|
|
|
2020
|
1,444,247
|
|
|
Thereafter
|
491,020
|
|
|
|
$
|
7,482,381
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Beginning Balance
|
|
$
|
133,229
|
|
|
$
|
109,038
|
|
|
$
|
82,024
|
|
|
$
|
137,171
|
|
Total loss (gain) recognized in earnings
|
|
31,441
|
|
|
(8,477
|
)
|
|
82,646
|
|
|
(36,610
|
)
|
||||
Ending Balance
|
|
$
|
164,670
|
|
|
$
|
100,561
|
|
|
$
|
164,670
|
|
|
$
|
100,561
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net (loss) income
|
|
$
|
(3,534,882
|
)
|
|
$
|
(2,668,184
|
)
|
|
$
|
(7,831,494
|
)
|
|
$
|
2,594,195
|
|
Effects of Series A redeemable convertible preferred stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: Series A redeemable convertible preferred stock dividends
|
|
195,366
|
|
|
186,904
|
|
|
387,974
|
|
|
377,690
|
|
||||
Less: Accretion to redemption value of Series A redeemable convertible preferred stock
|
|
170,981
|
|
|
143,557
|
|
|
334,650
|
|
|
280,974
|
|
||||
Net (loss) income attributable to common stockholders
|
|
$
|
(3,901,229
|
)
|
|
$
|
(2,998,645
|
)
|
|
$
|
(8,554,118
|
)
|
|
$
|
1,935,531
|
|
|
|
Foreign Currency
Translation |
|
Net Unrealized (Losses) Gains on Marketable
Securities |
|
Net Minimum
Pension Liability |
|
Total
|
||||||||
Accumulated other comprehensive (loss) income at March 31, 2016
|
|
$
|
(1,954,409
|
)
|
|
$
|
633
|
|
|
$
|
30,362
|
|
|
$
|
(1,923,414
|
)
|
Other comprehensive (loss) income
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other comprehensive (loss) income before reclassifications
|
|
(334,161
|
)
|
|
(81
|
)
|
|
(550
|
)
|
|
(334,792
|
)
|
||||
Amounts reclassified from accumulated other comprehensive (loss) income
|
|
—
|
|
|
(202
|
)
|
|
1,228
|
|
|
1,026
|
|
||||
Total other comprehensive (loss) income
|
|
(334,161
|
)
|
|
(283
|
)
|
|
678
|
|
|
(333,766
|
)
|
||||
Accumulated other comprehensive (loss) income at June 30, 2016
|
|
$
|
(2,288,570
|
)
|
|
$
|
350
|
|
|
$
|
31,040
|
|
|
$
|
(2,257,180
|
)
|
|
|
Foreign Currency
Translation |
|
Net Unrealized (Losses) Gains on Marketable
Securities |
|
Net Minimum
Pension Liability |
|
Total
|
||||||||
Accumulated other comprehensive (loss) income at December 31, 2015
|
|
$
|
(1,726,994
|
)
|
|
$
|
(3,406
|
)
|
|
$
|
27,186
|
|
|
$
|
(1,703,214
|
)
|
Other comprehensive (loss) income
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other comprehensive (loss) income before reclassifications
|
|
(561,576
|
)
|
|
2,513
|
|
|
1,423
|
|
|
(557,640
|
)
|
||||
Amounts reclassified from accumulated other comprehensive (loss) income
|
|
—
|
|
|
1,243
|
|
|
2,431
|
|
|
3,674
|
|
||||
Total other comprehensive (loss) income
|
|
(561,576
|
)
|
|
3,756
|
|
|
3,854
|
|
|
(553,966
|
)
|
||||
Accumulated other comprehensive (loss) income at June 30, 2016
|
|
$
|
(2,288,570
|
)
|
|
$
|
350
|
|
|
$
|
31,040
|
|
|
$
|
(2,257,180
|
)
|
|
|
Foreign Currency
Translation |
|
Net Unrealized
Gains (Losses) on Marketable Securities |
|
Net Minimum
Pension Liability |
|
Total
|
||||||||
Accumulated other comprehensive (loss) income at March 31, 2015
|
|
$
|
(1,562,996
|
)
|
|
$
|
2,611
|
|
|
$
|
29,080
|
|
|
$
|
(1,531,305
|
)
|
Other comprehensive (loss) income
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other comprehensive (loss) income before reclassifications
|
|
(4,477
|
)
|
|
1,792
|
|
|
1,639
|
|
|
(1,046
|
)
|
||||
Amounts reclassified from accumulated other comprehensive (loss) income
|
|
—
|
|
|
(1,135
|
)
|
|
1,702
|
|
|
567
|
|
||||
Total other comprehensive (loss) income
|
|
(4,477
|
)
|
|
657
|
|
|
3,341
|
|
|
(479
|
)
|
||||
Accumulated other comprehensive (loss) income at June 30, 2015
|
|
$
|
(1,567,473
|
)
|
|
$
|
3,268
|
|
|
$
|
32,421
|
|
|
$
|
(1,531,784
|
)
|
|
|
Foreign Currency
Translation |
|
Net Unrealized
Gains (Losses) on Marketable Securities |
|
Net Minimum
Pension Liability |
|
Total
|
||||||||
Accumulated other comprehensive (loss) income at December 31, 2014
|
|
$
|
(1,536,495
|
)
|
|
$
|
(1,408
|
)
|
|
$
|
26,613
|
|
|
$
|
(1,511,290
|
)
|
Other comprehensive (loss) income
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other comprehensive (loss) income before reclassifications
|
|
(30,978
|
)
|
|
4,619
|
|
|
2,450
|
|
|
(23,909
|
)
|
||||
Amounts reclassified from accumulated other comprehensive (loss) income
|
|
—
|
|
|
57
|
|
|
3,358
|
|
|
3,415
|
|
||||
Total other comprehensive (loss) income
|
|
(30,978
|
)
|
|
4,676
|
|
|
5,808
|
|
|
(20,494
|
)
|
||||
Accumulated other comprehensive (loss) income at June 30, 2015
|
|
$
|
(1,567,473
|
)
|
|
$
|
3,268
|
|
|
$
|
32,421
|
|
|
$
|
(1,531,784
|
)
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenue:
|
|
|
|
|
|
|
|
|
||||||||
Americas
|
|
$
|
2,667,901
|
|
|
$
|
3,232,572
|
|
|
$
|
5,053,626
|
|
|
$
|
17,633,091
|
|
Asia Pacific
|
|
2,949,051
|
|
|
3,425,971
|
|
|
5,686,244
|
|
|
6,106,287
|
|
||||
Europe, Middle East, Africa and Other
|
|
2,450,999
|
|
|
2,894,046
|
|
|
4,760,412
|
|
|
5,753,087
|
|
||||
Total Revenue
|
|
$
|
8,067,951
|
|
|
$
|
9,552,589
|
|
|
$
|
15,500,282
|
|
|
$
|
29,492,465
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
Long-lived assets:
|
|
|
|
|
||||
Americas
|
|
$
|
6,803,883
|
|
|
$
|
7,519,787
|
|
Asia Pacific
|
|
625,197
|
|
|
650,633
|
|
||
Europe, Middle East, Africa and Other
|
|
124,008
|
|
|
168,241
|
|
||
Total long-lived assets
|
|
$
|
7,553,088
|
|
|
$
|
8,338,661
|
|
|
|
Severance related costs
|
|
Facility and other costs
|
|
Total
|
||||||
Original charge
|
|
$
|
3,179,131
|
|
|
$
|
426,889
|
|
|
$
|
3,606,020
|
|
Utilized/Paid
|
|
(2,067,554
|
)
|
|
(231,973
|
)
|
|
(2,299,527
|
)
|
|||
Balance at December 31, 2013
|
|
$
|
1,111,577
|
|
|
$
|
194,916
|
|
|
$
|
1,306,493
|
|
Provisions/Additions
|
|
365,174
|
|
|
770,136
|
|
|
1,135,310
|
|
|||
Utilized/Paid
|
|
(653,325
|
)
|
|
(759,563
|
)
|
|
(1,412,888
|
)
|
|||
Balance at December 31, 2014
|
|
$
|
823,426
|
|
|
$
|
205,489
|
|
|
$
|
1,028,915
|
|
Provisions/Additions
|
|
55,527
|
|
|
117,468
|
|
|
172,995
|
|
|||
Utilized/Paid
|
|
(161,313
|
)
|
|
(307,935
|
)
|
|
(469,248
|
)
|
|||
Balance at December 31, 2015
|
|
$
|
717,640
|
|
|
$
|
15,022
|
|
|
$
|
732,662
|
|
Provisions/Additions
|
|
76,030
|
|
|
7,954
|
|
|
83,984
|
|
|||
Utilized/Paid
|
|
(36,531
|
)
|
|
(18,315
|
)
|
|
(54,846
|
)
|
|||
Balance at March 31, 2016
|
|
$
|
757,139
|
|
|
$
|
4,661
|
|
|
$
|
761,800
|
|
Provisions/Additions
|
|
89,198
|
|
|
4,207
|
|
|
93,405
|
|
|||
Utilized/Paid
|
|
—
|
|
|
(4,664
|
)
|
|
(4,664
|
)
|
|||
Balance at June 30, 2016
|
|
$
|
846,337
|
|
|
$
|
4,204
|
|
|
$
|
850,541
|
|
|
|
Three Months Ended June 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Revenue:
|
|
|
|
|
||||
Product revenue
|
|
$
|
2,939,594
|
|
|
$
|
3,650,504
|
|
Support and services revenue
|
|
5,128,357
|
|
|
5,902,085
|
|
||
Total Revenue
|
|
$
|
8,067,951
|
|
|
$
|
9,552,589
|
|
Year-over-year percentage change
|
|
|
|
|
|
|
||
Product revenue
|
|
(19)%
|
|
(14)%
|
||||
Support and services revenue
|
|
(13)%
|
|
(16)%
|
||||
Total percentage change
|
|
(16)%
|
|
(15)%
|
|
|
Three Months Ended June 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Cost of revenue:
|
|
|
|
|
||||
Product
|
|
$
|
319,974
|
|
|
$
|
718,057
|
|
Support and service
|
|
1,999,125
|
|
|
1,940,729
|
|
||
Total cost of revenue
|
|
$
|
2,319,099
|
|
|
$
|
2,658,786
|
|
Total Gross Profit
|
|
$
|
5,748,852
|
|
|
$
|
6,893,803
|
|
Gross Margin:
|
|
|
|
|
|
|
||
Product
|
|
89%
|
|
80%
|
||||
Support and service
|
|
61%
|
|
67%
|
||||
Total gross margin
|
|
71%
|
|
73%
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Revenue:
|
|
|
|
|
||||
Product revenue
|
|
$
|
5,220,452
|
|
|
$
|
17,620,871
|
|
Support and services revenue
|
|
10,279,830
|
|
|
11,871,594
|
|
||
Total Revenue
|
|
$
|
15,500,282
|
|
|
$
|
29,492,465
|
|
Year-over-year percentage change
|
|
|
|
|
|
|
||
Product revenue
|
|
(70)%
|
|
91%
|
||||
Support and services revenue
|
|
(13)%
|
|
(16)%
|
||||
Total percentage change
|
|
(47)%
|
|
27%
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Cost of revenue:
|
|
|
|
|
||||
Product
|
|
$
|
564,247
|
|
|
$
|
1,108,281
|
|
Support and service
|
|
3,761,345
|
|
|
3,960,747
|
|
||
Total cost of revenue
|
|
$
|
4,325,592
|
|
|
$
|
5,069,028
|
|
Total Gross Profit
|
|
$
|
11,174,690
|
|
|
$
|
24,423,437
|
|
Gross Margin:
|
|
|
|
|
|
|
||
Product
|
|
89%
|
|
94%
|
||||
Support and service
|
|
63%
|
|
67%
|
||||
Total gross margin
|
|
72%
|
|
83%
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Cash (used in) provided by:
|
|
|
|
|
||||
Operating activities
|
|
$
|
(3,791,211
|
)
|
|
$
|
(1,647,342
|
)
|
Investing activities
|
|
5,826,384
|
|
|
(207,356
|
)
|
||
Financing activities
|
|
—
|
|
|
(473,137
|
)
|
||
Effect of exchange rate changes
|
|
(123,221
|
)
|
|
(238,507
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
|
$
|
1,911,952
|
|
|
$
|
(2,566,342
|
)
|
•
|
actual or anticipated fluctuations in our operating results, including changes in the timing of when we recognize revenue;
|
•
|
failure to meet financial estimates;
|
•
|
changes in market valuations of other technology companies, particularly those in the network storage software market;
|
•
|
the announcement of any strategic alternatives;
|
•
|
announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, strategic alternatives, joint ventures or capital commitments;
|
•
|
loss of one or more key customers;
|
•
|
the issuance of additional shares of the Series A redeemable convertible preferred stock pursuant to dividend rights; and
|
•
|
departures of key personnel.
|
|
(i)
|
unaudited Condensed Consolidated Balance Sheets – June 30, 2016 and December 31, 2015.
|
|
|
|
|
(ii)
|
unaudited Condensed Consolidated Statement of Operations – Three and Six Months Ended June 30, 2016 and 2015.
|
|
|
|
|
(iii)
|
unaudited Condensed Consolidated Statement of Comprehensive (Loss) Income – Three and Six Months Ended June 30, 2016 and 2015.
|
|
|
|
|
(iv)
|
unaudited Condensed Consolidated Statement of Cash Flows – Six Months Ended June 30, 2016 and 2015.
|
|
|
|
|
(v)
|
Notes to unaudited Condensed Consolidated Financial Statements – June 30, 2016.
|
|
FALCONSTOR SOFTWARE, INC.
|
|
(Registrant)
|
|
|
|
/s/ Louis J. Petrucelly
|
|
Louis J. Petrucelly
|
|
Executive Vice President, Chief Financial Officer and Treasurer
|
|
(principal financial and accounting officer)
|
|
/
s/ Gary Quinn
|
|
Gary Quinn
|
|
President & Chief Executive Officer
|
July 28, 2016
|
(principal executive officer)
|
1 Year FalconStor Software (PK) Chart |
1 Month FalconStor Software (PK) Chart |
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