Form 8-K FALCONSTOR SOFTWARE INC For: Aug 03
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 3, 2022
| (Exact name of registrant as specified in its charter) | ||||||||||||||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
Registrant’s telephone number, including area code: 631 -777-5188
| N/A | ||
| (Former name or former address, if changed since last report.) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
| Item 2.02. | Results of Operations and Financial Condition | ||||
On August 3, 2022 , the Company issued a press release announcing its results of operations for the fiscal quarter ended June 30, 2022.
The text of a press release issued by the Company is furnished as Exhibit 99.1 and is incorporated herein by reference. The information furnished herein shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01. | Financial Statements and Exhibits | ||||
| (d) | Exhibits | |||||||||||||
| Exhibit Number | Description | |||||||||||||
| 99.1 | ||||||||||||||
| 104.0 | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document). | |||||||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FALCONSTOR SOFTWARE, INC. | |||||||||||
| Date: August 3, 2022 | By: | /s/ Vincent Sita | |||||||||
| Name: | Vincent Sita | ||||||||||
| Title: | Chief Financial Officer and Treasurer | ||||||||||
Exhibit 99.1
For more information, contact:
FalconStor Software, Inc.
Vincent Sita
Chief Financial Officer
vincent.sita@falconstor.com
FalconStor Software Announces Second Quarter of 2022 Results
Launched Hybrid Cloud Data Protection Sales with IBM and Continued Managed Service Provider (“MSP”) Adoption
•Secured first group of customers for new joint IBM/FalconStor solutions, enabling hybrid cloud data migration, backup, and restoration services for IBM Power Virtual Server Cloud (“IBM Power VS Cloud”)
•Added three new MSP partners for the StorSafe secure backup-as-a-service solution while existing MSP partners expanded their business to protect new customers and systems, aligning with the FalconStor hybrid cloud focus
•Continued shift to subscription- and monthly-consumption based annual recurring revenue (“ARR”) model
AUSTIN, TEXAS (August 3, 2022) - FalconStor Software, Inc. (OTCQB: FALC), a trusted data protection leader modernizing disaster recovery and backup for the hybrid cloud world, today announced financial results for its second quarter 2022, which ended on June 30, 2022.
“Our shift to recurring revenue-based hybrid cloud data protection solutions continued to progress in the quarter as we secured our first several hybrid cloud customers under the IBM reseller relationship we announced on May 11th, 2022,” said Todd Brooks, FalconStor CEO. “IBM’s hybrid cloud push has been a centerpiece of its corporate strategy, as highlighted in its first and second quarter 2022 results. Through our expanding relationship with IBM, enterprises can now leverage new joint hybrid cloud solutions from FalconStor and IBM. These solutions are especially important to the tens of thousands of companies around the globe that leverage IBM i and AIX environments, as they now have the ability to securely backup and restore to the cloud as well as migrate their IBM i and AIX workloads to IBM Power VS Cloud with secure backup and recovery on an on-going basis.”
“Our aggressive focus on advancing critical hybrid cloud relationships and our efforts to realign to a subscription- and monthly consumption-based recurring revenue model continue to challenge our year-over-year revenue growth as second quarter revenue was $2.4 million, compared to $3.3 million in the second quarter of 2021. However, from a sequential quarter perspective, total revenue increased to $2.4 million, compared to $2.0 million in the first quarter of 2022," stated Brooks. "To more closely align with our current quarterly revenue level, we decreased operating expenses quarter-over-quarter by 8.8% in second quarter, and are making additional expense adjustments this quarter. Our sales pipeline for the second half of 2022 is growing, especially as it relates to our hybrid cloud initiatives. As a result, we expect sequential quarter-over-quarter revenue to continue growing over the next two quarters.”
Second Quarter 2022 Financial Results
•Annual Recurring Revenue: 4% year-over-year growth
•Ending Cash: $1.8 million, compared to $3.4 million in the previous quarter, and $3.7 million in the second quarter of fiscal year 2021
•Total Revenue: $2.4 million, compared to $2.0 million in the previous quarter, and $3.3 million in the second quarter of fiscal year 2021
•Total Cost of Revenue: $0.4 million, compared to $0.4 million in the previous quarter, and $0.4 million in the second quarter of fiscal year 2021
•Total Operating Expenses: $2.5 million, compared to $2.7 million in the previous quarter, and $3.0 million in the second quarter of fiscal year 2021
•GAAP Net Income (Loss): $(0.9) million, compared to $(1.1) million in the previous quarter, and $(0.4) million in the second quarter of fiscal year 2021
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Guidance
Given Q1 and Q2 2022 results, we are reducing full-year 2022 guidance as follows. Revised guidance reflects continued sequential quarterly GAAP total revenue growth, and GAAP Net Income positive results in Q3 and Q4 2022:
*Adjusted EBITDA adds back Depreciation, Amortization, Restructuring, Severance, Board expenses, Stock Based Compensation as well as Non-Operating Expenses including Income Taxes and Interest & Other Income Expenses
Conference Call and Webcast Information
WHO: Todd Brooks, Chief Executive Officer, FalconStor and Vincent Sita, Chief Financial Officer, FalconStor
WHEN: Wednesday, August 3, 2022, 4:00 PM Central; 5:00 PM Eastern
To register for our earnings call, please click the following link:
FALCONSTOR SECOND QUARTER 2022 FINANCIAL TELECONFERENCE AND PRESENTATION
As an alternative, you can copy and paste the following link into your web browser to register:
https://register.gotowebinar.com/register/5419515227960883215
Conference Call:
Please dial the following if you would like to interact with and ask questions to FalconStor hosts:
Toll Free: 866-901-6455
Access Code: 859-295-195
Non-GAAP Financial Measures
The non-GAAP financial measures used in this press release are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The Company’s management refers to these non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the Company’s operating performance. In addition, these non-GAAP financial measures facilitate management’s internal comparisons to the Company’s historical operating results and comparisons to competitors’ operating results. We include these non-GAAP financial measures (which should be viewed as a supplement to, and not a substitute for, their comparable GAAP measures) in this press release because we believe they are useful to investors in allowing for greater transparency into the supplemental information used by management in its financial and operational decision-making. The non-GAAP financial measures exclude (i) depreciation, (ii) amortization, (iii) restructuring expenses, (iv) severance expenses, (v) board expenses, (vi) stock based compensation, (vii) non-operating expenses (income) including income taxes and interest & other expenses (income). For a reconciliation of our GAAP and non-GAAP financial results, please refer to our Reconciliation of Net Income (Loss) to Adjusted EBITDA presented in this release.
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About FalconStor Software
FalconStor is the trusted data protection software leader modernizing disaster recovery and backup operations for the hybrid cloud world. The Company enables enterprise customers and managed service providers to secure, migrate, and protect their data while reducing data storage and long-term retention costs by up to 95%. More than 1,000 organizations and managed service providers worldwide standardize on FalconStor as the foundation for their cloud first data protection future. Our products are offered through and supported by a worldwide network of leading managed service providers, systems integrators, resellers, and original equipment manufacturers.
# # #
FalconStor and FalconStor Software are trademarks or registered trademarks of FalconStor Software, Inc., in the U.S. and other countries. All other company and product names contained herein may be trademarks of their respective holders.
Links to websites or pages controlled by parties other than FalconStor are provided for the reader's convenience and information only. FalconStor does not incorporate into this release the information found at those links nor does FalconStor represent or warrant that any information found at those links is complete or accurate. Use of information obtained by following these links is at the reader's own risk.
CONTACT INFORMATION
For more information, contact:
Vincent Sita
Chief Financial Officer FalconStor Software Inc.
investorrelations@falconstor.com
CONTACT US AROUND THE GLOBE
| Corporate Headquarters | Europe Headquarters | |||||||
501 Congress Avenue | GERMANY | |||||||
| Suite 150 | Landsberger Straße 302 | |||||||
| Austin, Texas 78701 | 80687 München, Germany | |||||||
| Tel: +1.631.777.5188 | salesemea@falconstor.com | |||||||
| salesinfo@falconstor.com | ||||||||
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FalconStor Software, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2022 | December 31, 2021 | |||||||||||||
| (unaudited) | ||||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 1,808,118 | $ | 3,181,209 | ||||||||||
| Accounts receivable, net | 1,552,626 | 2,855,135 | ||||||||||||
| Prepaid expenses and other current assets | 1,074,029 | 1,074,972 | ||||||||||||
| Contract assets, net | 401,582 | 209,936 | ||||||||||||
| Inventory | — | 7,744 | ||||||||||||
| Total current assets | 4,836,355 | 7,328,996 | ||||||||||||
| Property and equipment, net | 110,265 | 153,904 | ||||||||||||
| Operating lease right-of-use assets | 70,355 | 112,405 | ||||||||||||
| Deferred tax assets, net | 28,110 | 30,190 | ||||||||||||
| Software development costs, net | 67,189 | 42,695 | ||||||||||||
| Other assets, net | 98,774 | 106,023 | ||||||||||||
| Goodwill | 4,150,339 | 4,150,339 | ||||||||||||
| Other intangible assets, net | 35,350 | 51,362 | ||||||||||||
| Contract assets | 449,564 | 692,712 | ||||||||||||
| Total assets | $ | 9,846,301 | $ | 12,668,626 | ||||||||||
| Liabilities and Stockholders' Deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 468,427 | $ | 297,033 | ||||||||||
| Accrued expenses | 1,107,409 | 1,099,257 | ||||||||||||
| Operating lease liabilities | 70,355 | 76,940 | ||||||||||||
| Deferred revenue, net | 3,576,161 | 4,557,317 | ||||||||||||
| Total current liabilities | 5,222,352 | 6,030,547 | ||||||||||||
| Other long-term liabilities | 957,462 | 950,843 | ||||||||||||
| Notes payable, net | 2,160,225 | 2,154,098 | ||||||||||||
| Operating lease liabilities | — | 35,465 | ||||||||||||
| Deferred tax liabilities, net | 500,499 | 500,499 | ||||||||||||
| Deferred revenue, net | 1,456,333 | 1,578,769 | ||||||||||||
| Total liabilities | 10,296,871 | 11,250,221 | ||||||||||||
| Commitments and contingencies | ||||||||||||||
| Series A redeemable convertible preferred stock | 15,074,134 | 14,384,388 | ||||||||||||
| Total stockholders' deficit | (15,524,704) | (12,965,983) | ||||||||||||
| Total liabilities and stockholders' deficit | $ | 9,846,301 | $ | 12,668,626 | ||||||||||
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FalconStor Software, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Product revenue | $ | 962,898 | $ | 1,602,005 | $ | 1,557,826 | $ | 3,741,734 | ||||||||||||||||||
| Support and services revenue | 1,431,437 | 1,656,742 | 2,885,616 | 3,345,339 | ||||||||||||||||||||||
| Total revenue | 2,394,335 | 3,258,747 | 4,443,442 | 7,087,073 | ||||||||||||||||||||||
| Cost of revenue: | ||||||||||||||||||||||||||
| Product | 24,588 | 34,781 | 45,307 | 257,615 | ||||||||||||||||||||||
| Support and service | 373,822 | 405,960 | 768,371 | 832,133 | ||||||||||||||||||||||
| Total cost of revenue | 398,410 | 440,741 | 813,678 | 1,089,748 | ||||||||||||||||||||||
| Gross profit | $ | 1,995,925 | $ | 2,818,006 | $ | 3,629,764 | $ | 5,997,325 | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Research and development costs | 655,524 | 661,147 | 1,361,505 | 1,321,087 | ||||||||||||||||||||||
| Selling and marketing | 1,124,498 | 1,259,735 | 2,314,344 | 2,656,375 | ||||||||||||||||||||||
| General and administrative | 724,066 | 658,100 | 1,574,005 | 1,495,967 | ||||||||||||||||||||||
| Restructuring costs | — | 421,737 | 744 | 724,050 | ||||||||||||||||||||||
| Total operating expenses | 2,504,088 | 3,000,719 | 5,250,598 | 6,197,479 | ||||||||||||||||||||||
| Operating income (loss) | (508,163) | (182,713) | (1,620,834) | (200,154) | ||||||||||||||||||||||
| Gain on debt extinguishment | — | — | — | 754,000 | ||||||||||||||||||||||
| Interest and other expense | (201,236) | (176,928) | (319,231) | (460,576) | ||||||||||||||||||||||
| Income (loss) before income taxes | (709,399) | (359,641) | (1,940,065) | 93,270 | ||||||||||||||||||||||
| Income tax expense (benefit) | 221,827 | 2,659 | 100,567 | 47,275 | ||||||||||||||||||||||
| Net income (loss) | $ | (931,226) | $ | (362,300) | $ | (2,040,632) | $ | 45,995 | ||||||||||||||||||
| Less: Accrual of Series A redeemable convertible preferred stock dividends | 338,428 | 282,926 | 639,349 | 560,096 | ||||||||||||||||||||||
| Less: Accretion to redemption value of Series A redeemable convertible preferred stock | 35,582 | 75,183 | 50,397 | 272,297 | ||||||||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | (1,305,236) | $ | (720,409) | $ | (2,730,378) | $ | (786,398) | ||||||||||||||||||
| Basic net income (loss) per share attributable to common stockholders | $ | (0.18) | $ | (0.12) | $ | (0.39) | $ | (0.13) | ||||||||||||||||||
| Diluted net income (loss) per share attributable to common stockholders | $ | (0.18) | $ | (0.12) | $ | (0.39) | $ | (0.13) | ||||||||||||||||||
| Weighted average basic shares outstanding | 7,090,885 | 6,021,483 | 7,086,605 | 5,985,672 | ||||||||||||||||||||||
| Weighted average diluted shares outstanding | 7,090,885 | 6,021,483 | 7,086,605 | 5,985,672 | ||||||||||||||||||||||
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FalconStor Software, Inc. and Subsidiaries
Supplemental Information
Unaudited Reconciliation of Net Income (Loss) to Adjusted EBITDA
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Net income (loss) | $ | (931,226) | $ | (362,300) | $ | (2,040,632) | $ | 45,995 | ||||||||||||||||||
| Income tax expense | 221,827 | 2,659 | 100,567 | 47,275 | ||||||||||||||||||||||
| Interest and other expense | 201,236 | 176,928 | 319,231 | 460,576 | ||||||||||||||||||||||
| Depreciation and amortization | 33,009 | 48,496 | 68,528 | 105,982 | ||||||||||||||||||||||
| Restructuring costs | — | 421,737 | 744 | 724,050 | ||||||||||||||||||||||
| Severance costs | — | — | — | 8,136 | ||||||||||||||||||||||
| Other restructuring costs | 1,768 | 115,400 | 6,070 | 388,844 | ||||||||||||||||||||||
| Board costs | 136,229 | 144,076 | 320,664 | 277,339 | ||||||||||||||||||||||
| Stock based compensation | 19,102 | 4,697 | 27,286 | 9,168 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | (318,055) | $ | 551,693 | $ | (1,197,542) | $ | 2,067,365 | ||||||||||||||||||
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