Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2022 | Oct. 31, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2022 | |
Document Transition Report | false | |
Entity File Number | 000-23970 | |
Entity Registrant Name | FALCONSTOR SOFTWARE, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 77-0216135 | |
Entity Address, Address Line One | 501 Congress Avenue | |
Entity Address, Address Line Two | Suite 150 | |
Entity Address, City or Town | Austin | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 78701 | |
City Area Code | 631 | |
Local Phone Number | 777-5188 | |
Title of 12(b) Security | Common stock, $0.001 Par Value | |
Trading Symbol | FALC | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Bankruptcy Proceedings, Reporting Current | true | |
Entity Common Stock, Shares Outstanding | 7,118,609 | |
Entity Central Index Key | 0000922521 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2022 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 1,666,054 | $ 3,181,209 |
Accounts receivable, net of allowances | 2,288,133 | 2,855,135 |
Prepaid expenses and other current assets | 885,734 | 1,074,972 |
Contract assets | 273,945 | 209,936 |
Inventory | 0 | 7,744 |
Total current assets | 5,113,866 | 7,328,996 |
Property and equipment, net | 95,796 | 153,904 |
Operating lease right-of-use assets, net | 49,626 | 112,405 |
Deferred tax assets | 26,327 | 30,190 |
Software development costs, net | 60,123 | 42,695 |
Other assets | 97,212 | 106,023 |
Goodwill | 4,150,339 | 4,150,339 |
Other intangible assets, net | 27,437 | 51,362 |
Long-term contract assets | 445,017 | 692,712 |
Total assets | 10,065,743 | 12,668,626 |
Current liabilities: | ||
Accounts payable | 450,250 | 297,033 |
Accrued expenses | 1,355,927 | 1,099,257 |
Current portion of lease liabilities | 49,626 | 76,940 |
Deferred revenue | 3,504,907 | 4,557,317 |
Total current liabilities | 5,360,710 | 6,030,547 |
Other long-term liabilities | 954,213 | 950,843 |
Notes payable, net of debt issuance costs and discounts | 2,164,251 | 2,154,098 |
Operating lease liabilities, net of current portion | 0 | 35,465 |
Deferred tax liabilities | 500,499 | 500,499 |
Deferred revenue, net of current portion | 1,281,279 | 1,578,769 |
Total liabilities | 10,260,952 | 11,250,221 |
Commitments and contingencies (Note 11) | ||
Series A redeemable convertible preferred stock, $.001 par value, 2,000,000 shares authorized, 900,000 shares issued and outstanding, redemption value of $15,520,639 and $14,490,274, respectively | 15,505,173 | 14,384,388 |
Stockholders' deficit: | ||
Common stock - $.001 par value, 30,000,000 shares authorized, 7,111,801 shares and 7,082,276 shares issued and outstanding, respectively | 7,112 | 7,082 |
Additional paid-in capital | 111,264,069 | 112,349,613 |
Accumulated deficit | (125,281,898) | (123,462,638) |
Accumulated other comprehensive loss | (1,689,665) | (1,860,040) |
Total stockholders' deficit | (15,700,382) | (12,965,983) |
Total liabilities and stockholders' deficit | $ 10,065,743 | $ 12,668,626 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Series A Redeemable convertible preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Series A Redeemable convertible preferred stock, shares authorized (in shares) | 2,000,000 | 2,000,000 |
Series A Redeemable convertible preferred stock, shares issued (in shares) | 900,000 | 900,000 |
Series A Redeemable convertible preferred stock, shares outstanding (in shares) | 900,000 | 900,000 |
Series A redeemable convertible preferred stock, redemption value | $ 15,520,639 | $ 14,490,274 |
Common Stock, Shares, Outstanding | 7,111,801 | 7,082,276 |
Common stock, shares issued (in shares) | 7,111,801 | 7,082,276 |
Common stock, shares authorized (in shares) | 30,000,000 | 30,000,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenue: | ||||
Total revenue | $ 3,059,141 | $ 3,283,469 | $ 7,502,583 | $ 10,370,542 |
Cost of revenue: | ||||
Total cost of revenue | 380,104 | 442,285 | 1,193,782 | 1,532,033 |
Gross profit | 2,679,037 | 2,841,184 | 6,308,801 | 8,838,509 |
Operating expenses: | ||||
Research and development costs | 581,941 | 711,273 | 1,943,446 | 2,032,360 |
Selling and marketing | 887,967 | 1,610,635 | 3,202,311 | 4,267,010 |
General and administrative | 826,556 | 633,954 | 2,400,561 | 2,129,921 |
Gain on litigation settlement | 0 | (632,600) | 0 | (632,600) |
Restructuring costs | 0 | 68,704 | 744 | 792,754 |
Total operating expenses | 2,296,464 | 2,391,966 | 7,547,062 | 8,589,445 |
Operating income (loss) | 382,573 | 449,218 | (1,238,261) | 249,064 |
Gain on debt extinguishment | 0 | 0 | 0 | 754,000 |
Interest and other expense | (111,399) | (84,049) | (430,630) | (544,625) |
Income (loss) before income taxes | 271,174 | 365,169 | (1,668,891) | 458,439 |
Income tax expense (benefit) | 49,802 | 16,529 | 150,369 | 63,804 |
Net income (loss) | 221,372 | 348,640 | (1,819,260) | 394,635 |
Less: Accrual of Series A redeemable convertible preferred stock dividends | 391,016 | 288,802 | 1,030,365 | 848,898 |
Less: Accretion to redemption value of Series A redeemable convertible preferred stock | 40,023 | 13,517 | 90,420 | 285,814 |
Net income (loss) attributable to common stockholders | $ 209,667 | $ 46,321 | $ (2,940,045) | $ (740,077) |
Basic net income (loss) per share attributable to common stockholders | $ (0.03) | $ 0.01 | $ (0.41) | $ (0.12) |
Diluted net income (loss) per share attributable to common stockholders | $ (0.03) | $ 0.01 | $ (0.41) | $ (0.12) |
Weighted average basic shares outstanding | 7,111,801 | 6,990,723 | 7,095,096 | 6,324,370 |
Weighted average diluted shares outstanding | 7,111,801 | 7,039,421 | 7,095,096 | 6,324,370 |
Product Revenue | ||||
Revenue: | ||||
Total revenue | $ 1,568,110 | $ 1,547,013 | $ 3,125,936 | $ 5,288,747 |
Cost of revenue: | ||||
Total cost of revenue | 19,711 | 41,351 | 65,018 | 298,966 |
Support and Services Revenue | ||||
Revenue: | ||||
Total revenue | 1,491,031 | 1,736,456 | 4,376,647 | 5,081,795 |
Cost of revenue: | ||||
Total cost of revenue | $ 360,393 | $ 400,934 | $ 1,128,764 | $ 1,233,067 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 221,372 | $ 348,640 | $ (1,819,260) | $ 394,635 |
Other comprehensive income (loss), net of applicable taxes | ||||
Foreign currency translation | 26,004 | 11,144 | 170,375 | 92,802 |
Total other comprehensive income (loss), net of applicable taxes: | 26,004 | 11,144 | 170,375 | 92,802 |
Total comprehensive income (loss) | 247,376 | 359,784 | (1,648,885) | 487,437 |
Less: Accrual of Series A redeemable convertible preferred stock dividends | 391,016 | 288,802 | 1,030,365 | 848,898 |
Less: Accretion to redemption value of Series A redeemable convertible preferred stock | 40,023 | 13,517 | 90,420 | 285,814 |
Total comprehensive income (loss) attributable to common stockholders | $ (183,663) | $ 57,465 | $ (2,769,670) | $ (647,275) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (Unaudited) - USD ($) | Total | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss, Net |
Beginning balance (shares) at Dec. 31, 2020 | 5,949,463 | ||||
Beginning balance at Dec. 31, 2020 | $ (15,540,812) | $ 5,949 | $ 110,107,170 | $ (123,665,970) | $ (1,987,961) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 408,295 | 408,295 | |||
Share-based compensation to employees | 4,471 | 4,471 | |||
Accretion of Series A redeemable convertible preferred stock | (197,114) | (197,114) | |||
Dividends on Series A redeemable convertible preferred stock | (277,170) | (277,170) | |||
Foreign currency translation | 86,398 | 86,398 | |||
Ending balance (shares) at Mar. 31, 2021 | 5,949,463 | ||||
Ending balance at Mar. 31, 2021 | (15,515,932) | $ 5,949 | 109,637,357 | (123,257,675) | (1,901,563) |
Beginning balance (shares) at Dec. 31, 2020 | 5,949,463 | ||||
Beginning balance at Dec. 31, 2020 | (15,540,812) | $ 5,949 | 110,107,170 | (123,665,970) | (1,987,961) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 394,635 | ||||
Accretion of Series A redeemable convertible preferred stock | (285,814) | ||||
Dividends on Series A redeemable convertible preferred stock | (848,898) | ||||
Foreign currency translation | 92,802 | ||||
Ending balance (shares) at Sep. 30, 2021 | 7,074,364 | ||||
Ending balance at Sep. 30, 2021 | (12,487,667) | $ 7,074 | 112,671,753 | (123,271,335) | (1,895,159) |
Beginning balance (shares) at Mar. 31, 2021 | 5,949,463 | ||||
Beginning balance at Mar. 31, 2021 | (15,515,932) | $ 5,949 | 109,637,357 | (123,257,675) | (1,901,563) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (362,300) | (362,300) | |||
Sale of common stock in public offering, net of underwriting discounts and offering costs, Shares | 811,750 | ||||
Sale of common stock in public offering, net of underwriting discounts and offering costs, Value | 2,737,770 | $ 812 | 2,736,958 | ||
Share-based compensation to employees | 4,697 | 4,697 | |||
Shares issued in connection with vesting of restricted stock (shares) | 28,151 | ||||
Shares issued in connection with vesting of restricted stock | 0 | $ 28 | (28) | ||
Accretion of Series A redeemable convertible preferred stock | (75,183) | (75,183) | |||
Dividends on Series A redeemable convertible preferred stock | (282,926) | (282,926) | |||
Foreign currency translation | (4,740) | (4,740) | |||
Ending balance (shares) at Jun. 30, 2021 | 6,789,364 | ||||
Ending balance at Jun. 30, 2021 | (13,498,614) | $ 6,789 | 112,020,875 | (123,619,975) | (1,906,303) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 348,640 | 348,640 | |||
Sale of common stock in public offering, net of underwriting discounts and offering costs, Shares | 285,000 | ||||
Sale of common stock in public offering, net of underwriting discounts and offering costs, Value | 948,566 | $ 285 | 948,281 | ||
Share-based compensation to employees | 4,916 | 4,916 | |||
Accretion of Series A redeemable convertible preferred stock | (13,517) | (13,517) | |||
Dividends on Series A redeemable convertible preferred stock | (288,802) | (288,802) | |||
Foreign currency translation | 11,144 | 11,144 | |||
Ending balance (shares) at Sep. 30, 2021 | 7,074,364 | ||||
Ending balance at Sep. 30, 2021 | (12,487,667) | $ 7,074 | 112,671,753 | (123,271,335) | (1,895,159) |
Beginning balance (shares) at Dec. 31, 2021 | 7,082,276 | ||||
Beginning balance at Dec. 31, 2021 | (12,965,983) | $ 7,082 | 112,349,613 | (123,462,638) | (1,860,040) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (1,109,406) | (1,109,406) | |||
Share-based compensation to employees | 8,184 | 8,184 | |||
Accretion of Series A redeemable convertible preferred stock | (14,815) | (14,815) | |||
Dividends on Series A redeemable convertible preferred stock | (300,921) | (300,921) | |||
Foreign currency translation | 33,510 | 33,510 | |||
Ending balance (shares) at Mar. 31, 2022 | 7,082,276 | ||||
Ending balance at Mar. 31, 2022 | (14,349,431) | $ 7,082 | 112,042,061 | (124,572,044) | (1,826,530) |
Beginning balance (shares) at Dec. 31, 2021 | 7,082,276 | ||||
Beginning balance at Dec. 31, 2021 | (12,965,983) | $ 7,082 | 112,349,613 | (123,462,638) | (1,860,040) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (1,819,260) | ||||
Accretion of Series A redeemable convertible preferred stock | (90,420) | ||||
Dividends on Series A redeemable convertible preferred stock | (1,030,365) | ||||
Foreign currency translation | 170,375 | ||||
Ending balance (shares) at Sep. 30, 2022 | 7,111,801 | ||||
Ending balance at Sep. 30, 2022 | (15,700,382) | $ 7,112 | 111,264,069 | (125,281,898) | (1,689,665) |
Beginning balance (shares) at Mar. 31, 2022 | 7,082,276 | ||||
Beginning balance at Mar. 31, 2022 | (14,349,431) | $ 7,082 | 112,042,061 | (124,572,044) | (1,826,530) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (931,226) | (931,226) | |||
Share-based compensation to employees | 19,102 | 19,102 | |||
Shares issued in connection with vesting of restricted stock (shares) | 29,525 | ||||
Shares issued in connection with vesting of restricted stock | 0 | $ 30 | (30) | ||
Accretion of Series A redeemable convertible preferred stock | (35,582) | (35,582) | |||
Dividends on Series A redeemable convertible preferred stock | (338,428) | (338,428) | |||
Foreign currency translation | 110,861 | 110,861 | |||
Ending balance (shares) at Jun. 30, 2022 | 7,111,801 | ||||
Ending balance at Jun. 30, 2022 | (15,524,704) | $ 7,112 | 111,687,123 | (125,503,270) | (1,715,669) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 221,372 | 221,372 | |||
Share-based compensation to employees | 7,985 | 7,985 | |||
Accretion of Series A redeemable convertible preferred stock | (40,023) | (40,023) | |||
Dividends on Series A redeemable convertible preferred stock | (391,016) | (391,016) | |||
Foreign currency translation | 26,004 | 26,004 | |||
Ending balance (shares) at Sep. 30, 2022 | 7,111,801 | ||||
Ending balance at Sep. 30, 2022 | $ (15,700,382) | $ 7,112 | $ 111,264,069 | $ (125,281,898) | $ (1,689,665) |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (1,819,260) | $ 394,635 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 94,710 | 151,468 |
Amortization of debt discount on notes payable | 10,153 | 163,769 |
Amortization of right of use assets | 62,779 | 396,034 |
Gain on debt extinguishment | 0 | (754,000) |
Gain on litigation settlement | 0 | (632,600) |
Share-based payment compensation | 35,271 | 14,084 |
Recovery of returns and doubtful accounts | 2,217 | 0 |
Deferred income taxes | 0 | 12,485 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 538,413 | 541,249 |
Prepaid expenses and other current assets | 106,208 | 271,443 |
Contract assets | 183,686 | 236,296 |
Inventory | 7,329 | 0 |
Other assets | (2,604) | 748,457 |
Accounts payable | 340,818 | (53,814) |
Accrued expenses and other long-term liabilities | 401,087 | (614,491) |
Operating lease liabilities | (62,779) | (524,263) |
Deferred revenue | (1,315,987) | (1,058,641) |
Net cash provided by (used in) operating activities | (1,417,959) | (707,889) |
Cash flows from investing activities: | ||
Purchases of property and equipment | 0 | (98,702) |
Capitalized software development costs | (35,000) | (10,226) |
Purchase of intangible assets | (3,078) | 0 |
Net cash provided by (used in) investing activities | (38,078) | (108,928) |
Cash flows from financing activities: | ||
Proceeds from public offering, net of underwriting discounts paid | 0 | 4,181,908 |
Payments of offering costs | 0 | (476,143) |
Payments of short-term debt | 0 | (1,334,058) |
Net cash provided by (used in) financing activities | 0 | 2,371,707 |
Effect of exchange rate changes on cash and cash equivalents | (59,118) | (762) |
Net increase (decrease) in cash and cash equivalents | (1,515,155) | 1,554,128 |
Cash and cash equivalents, beginning of period | 3,181,209 | 1,920,656 |
Cash and cash equivalents, end of period | 1,666,054 | 3,474,784 |
Supplemental disclosures: | ||
Cash paid for interest | 64,842 | 110,408 |
Non-cash investing and financing activities: | ||
Accrual of deferred offering costs | 0 | 19,429 |
Undistributed Series A redeemable convertible preferred stock dividends | 1,030,365 | 848,898 |
Accretion of Series A redeemable convertible preferred stock | $ 90,420 | $ 285,814 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | (1) Basis of Presentation (a) The Company and Nature of Operations FalconStor Software, Inc., a Delaware corporation ("we", the "Company" or "FalconStor"), is a trusted data protection leader modernizing disaster recovery and backup 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. More than 1,000 organizations and managed service providers worldwide standardize on FalconStor as the foundation for their cloud first data protection future. (b) Liquidity As of September 30, 2022, the Company had a working capital deficiency of $ 0.2 million , which is inclusive of current deferred revenue of $ 3.5 million , and a stockholders' deficit of $ 15.7 million . During the nine months ended September 30, 2022, the Company had net loss of $ 1.8 million and negative cash flow from operations of $ 1.4 million . The Company's total cash balance at September 30, 2022 was $ 1.7 million , a decrease of $ 1.5 million compared to $ 3.2 million on December 31, 2021. The Company’s principal sources of liquidity at September 30, 2022 consisted of cash and future cash anticipated to be generated from operations. The Company generated negative net income and negative cash flows from operations during the nine months ended September 30, 2022, and it reported negative working capital as of September 30, 2022. The Company is currently a party to an Amended and Restated Term Loan Credit Agreement, dated as of February 23, 2018, as amended December 27, 2019, by and between the Company and HCP-FVA, LLC (“HCP-FVA”), (the “Amended and Restated Loan Agreement”). In connection with the then-proposed public offering of the Company as described in the Company's Registration Statement on Form S-1, as amended, originally filed on June 3, 2021 (the "June Offering"), we entered into a letter agreement with Hale Capital Partners, LP (“Hale Capital”), dated June 2, 2021 (the “Loan Extension Letter Agreement”), that provided for an extension of the maturity date on Hale Capital’s portion of the outstanding indebtedness owed under the Amended and Restated Loan Agreement to June 30, 2023. The remaining principal amount outstanding, which was owed to other lenders, was repaid in full. On July 19, 2022, we entered into a letter agreement with Hale Capital (the "Second Loan Extension Letter Agreement"), that provided for a subsequent extension of the maturity date on the outstanding indebtedness owed under the Amended and Restated Loan Agreement from June 30, 2023 to December 31, 2023. See Note (9) Notes Payable for more information. Also, as described further in Note (12) Series A Redeemable Convertible Preferred Stock , the effective date of the mandatory redemption right of the Company's Series A Redeemable Convertible Preferred Stock (the “Series A Preferred Stock”) held by HCP-FVA and Hale Capital was extended from July 30, 2021 to July 30, 2023 pursuant to that certain Amendment No. 1 to the Amended and Restated Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of the Company, dated as of June 24, 2021 (as amended, the “Certificate of Designations”). On July 19, 2022, the Company and Hale Capital entered into a letter agreement pursuant to which Hale Capital agreed not to exercise or to permit the exercise of the mandatory redemption right of the Series A Preferred Stock on or prior to December 31, 2023 unless the redemption is in accordance with Section 8(e)(z) of the Certificate of Designations or in accordance with a Breach Event (as defined in the Certificate of Designations). If such Series A Preferred Stock was redeemed at September 30, 2022, the Company would have been required to pay the holders of the Series A Preferred Stock $ 15.5 million . As discussed in Note (17) Restructuring Costs the Melville, NY office lease which ended on April 30, 2021 with a gross annualized rental cost of $ 1.5 million, will not be replaced. FalconStor is primarily a virtual company and is redeploying this savings to more productive uses. The Company believes its current cash balances together with anticipated cash flows from operating activities will be sufficient to meet its working capital requirements for at least one year from the date the consolidated financial statements were issued. (c) Revision of Previously Issued Financial Statements Adjustment in Connection with the Adoption of ASC 606, Revenue from Contracts with Customers During the year ended December 31, 2021, the Company identified an immaterial accounting error related to the beginning balance adjustment to deferred revenue and accumulated deficit in connection with the adoption of ASC 606, Revenue from Contracts with Customers. There was no impact of the correction on the previously issued consolidated statement of operations or on the consolidated statements of cash flows for the year ended December 31, 2020. The Company assessed the materiality of this error on prior period financial statements in accordance with the SEC Staff Accounting Bulletin Number 99, Materiality, and ASC 250-10, Accounting Changes and Error Corrections. The Company determined that this error was not material to the financial statements of any prior annual or interim period. Embedded Derivative Liability Fair Value Adjustment During the year ended December 31, 2021, the Company identified an immaterial accounting error related to the fair value adjustments recorded to the embedded derivative liability associated with the Company's Series A Preferred Stock. The redemption feature of the embedded derivative may require cash payment of face value of preferred stock plus the value of accrued but unpaid dividends converted to common stock at a specified conversion rate at the date of occurrence of a specified breach event. The Company recorded the fair value of the liability based on the face value of the preferred stock but not on accrued and unpaid dividends. This error resulted in an understatement of other long-term liabilities and an understatement of interest and other expense in the financial statements included in the Company’s quarterly reports on Form 10-Q and the Company’s annual reports on Form 10-K previously filed with the SEC. The Company assessed the materiality of this error on prior period financial statements in accordance with the SEC Staff Accounting Bulletin Number 99, Materiality, and ASC 250-10, Accounting Changes and Error Corrections. The Company determined that this error was not material to the financial statements of any prior annual or interim period. To correct the misstatements above, the Company revised its previously issued financial statements as follows: For the Three Months Ended September 30, 2021 For the Nine Months Ended September 30, 2021 CONSOLIDATED STATEMENT OF OPERATIONS As Previously Reported Adjustments As Revised As Previously Reported Adjustments As Revised Interest and other expense $ ( 58,257 ) $ ( 25,792 ) $ ( 84,049 ) $ ( 489,264 ) $ ( 55,361 ) $ ( 544,625 ) Income (loss) before income taxes $ 390,961 $ ( 25,792 ) $ 365,169 $ 513,800 $ ( 55,361 ) $ 458,439 Net income (loss) $ 374,432 $ ( 25,792 ) $ 348,640 $ 449,996 $ ( 55,361 ) $ 394,635 Net income (loss) attributable to common $ 72,113 $ ( 25,792 ) $ 46,321 $ ( 684,716 ) $ ( 55,361 ) $ ( 740,077 ) Basic net income (loss) per share $ 0.01 $ — $ 0.01 $ ( 0.11 ) $ ( 0.01 ) $ ( 0.12 ) Diluted net income (loss) per share $ 0.01 $ — $ 0.01 $ ( 0.11 ) $ ( 0.01 ) $ ( 0.12 ) For the Three Months Ended September 30, 2021 For the Nine Months Ended September 30, 2021 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) As Previously Reported Adjustments As Revised As Previously Reported Adjustments As Revised Net income (loss) $ 374,432 $ ( 25,792 ) $ 348,640 $ 449,996 $ ( 55,361 ) $ 394,635 Total comprehensive income (loss) $ 385,576 $ ( 25,792 ) $ 359,784 $ 542,798 $ ( 55,361 ) $ 487,437 Total comprehensive income (loss) $ 83,257 $ ( 25,792 ) $ 57,465 $ ( 591,914 ) $ ( 55,361 ) $ ( 647,275 ) Total Stockholders' Deficit CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT As Previously Reported Adjustments As Revised Balance at January 1, 2021 $ ( 14,608,186 ) $ ( 932,626 ) $ ( 15,540,812 ) Net income (loss) $ 425,248 $ ( 16,953 ) $ 408,295 Balance at March 31, 2021 $ ( 14,566,353 ) $ ( 949,579 ) $ ( 15,515,932 ) Net income (loss) $ ( 349,684 ) $ ( 12,616 ) $ ( 362,300 ) Balance at June 30, 2021 $ ( 12,536,419 ) $ ( 962,195 ) $ ( 13,498,614 ) Net income (loss) $ 374,432 $ ( 25,792 ) $ 348,640 Balance at September 30, 2021 $ ( 11,499,680 ) $ ( 987,987 ) $ ( 12,487,667 ) For the Nine Months Ended September 30, 2021 CONSOLIDATED STATEMENT OF CASH FLOWS As Previously Reported Adjustments As Revised Cash flows from operating activities: Net income (loss) $ 449,996 $ ( 55,361 ) $ 394,635 Changes in operating assets and liabilities: Accrued expenses and other long-term liabilities $ ( 669,852 ) $ 55,361 $ ( 614,491 ) Net cash provided by (used in) operating activities $ ( 707,889 ) $ — $ ( 707,889 ) (d) Impact of the COVID-19 Pandemic We are continuing to monitor the impact of COVID-19, on all aspects of our business. The outbreak of COVID-19 has caused and may continue to cause travel bans or disruptions, and in some cases, prohibitions of non-essential activities, disruption and shutdown of businesses and greater uncertainty in global financial markets. The impact of COVID-19 is fluid and uncertain, but it has caused and may continue to cause various negative effects, including an inability to meet with actual or potential customers, our end customers deciding to delay or abandon their planned purchases or failing to make payments, and delays or disruptions in our or our partners’ supply chains. As a result, we may experience extended sales cycles, our ability to close transactions with new and existing customers and partners may be negatively impacted, our ability to recognize revenue from software transactions we do close may be negatively impacted, our demand generation activities, and the efficiency and effect of those activities, may be negatively affected, and it has been and, until the COVID-19 outbreak is contained, will continue to be more difficult for us to forecast our operating results. These uncertainties have, and may continue to, put pressure on global economic conditions and overall IT spending and may cause our end customers to modify spending priorities or delay or abandon purchasing decisions, thereby lengthening sales cycles and potentially lowering prices for our solutions, and may make it difficult for us to forecast our sales and operating results and to make decisions about future investments, any of which could materially harm our business, operating results and financial condition. Further, our management team is focused on addressing the impacts of COVID-19 on our business, which has required and will continue to require, a large investment of their time and resources and may distract our management team or disrupt our 2022 operating plans. The extent to which COVID-19 ultimately impacts our results of operations, cash flow and financial position will depend on future developments, which are uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions taken by governments and authorities to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, we may continue to experience materially adverse impacts to our business as a result of its global economic impact, including as a result of any recession that may occur. (e) Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. (f) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s significant estimates include those related to revenue recognition, accounts receivable allowances, valuation of derivatives, valuation of goodwill and income taxes. Actual results could differ from those estimates. The financial market volatility in many countries where the Company operates has impacted and may continue to impact the Company’s business. Such conditions could have a material impact on the Company’s significant accounting estimates discussed above. (g) Unaudited Interim Financial Information The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position of the Company at September 30, 2022, and the results of its operations for the three and nine months ended September 30, 2022 and 2021. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 ("2021 Form 10-K"). (h) Recently Issued Accounting Pronouncements In August 2020, the Financial Accounting Standards Board, or FASB, issued ASU 2020-06, regarding ASC Topic 470 “Debt” and ASC Topic 815 “Derivatives and Hedging,” which reduces the number of accounting models for convertible instruments and amends the calculation of diluted earnings per share for convertible instruments, among other changes. The guidance is effective for smaller reporting companies as defined by the SEC, for annual reporting periods beginning after December 15, 2023, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments – Credit Losses (together with all subsequent amendments, ("Topic 326"))", which replaced the previous U.S. GAAP that required an incurred loss methodology for recognizing credit losses and delayed recognition until it was probable a loss had been incurred. Topic 326 replaced the incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of reasonable and supportable information to estimate credit losses. This provision was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. In February 2020, the FASB issued ASU 2020-02, "Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842)", which delayed the effective date of Topic 326 for smaller reporting companies until fiscal years beginning after December 15, 2022. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | (2) Summary of Significant Accounting Policies The Company's significant accounting policies were described in Note (1) Summary of Significant Accounting Policies of the 2021 Form 10-K. There have been no significant changes in the Company's significant accounting policies since December 31, 2021. For a description of the Company's significant accounting policies refer to the 2021 Form 10-K. Revenue from Contracts with Customers and Associated Balances Nature of Products and Services Licenses for on-premises software provide the customer with a right to use the software as it exists when made available to the customer. Customers may purchase perpetual licenses or subscribe to licenses, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software. Revenue from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer. Revenue allocated to software maintenance and support services is recognized ratably over the contractual support period. Hardware products consist primarily of servers and associated components and function independently of the software products and as such are accounted for as separate performance obligations. Revenue allocated to hardware maintenance and support services is recognized ratably over the contractual support period. Professional services are primarily related to software implementation services and associated revenue is recognized upon customer acceptance. Contract Balances Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records a contract asset when revenue is recognized prior to invoicing, or unearned revenue when revenue is recognized subsequent to invoicing. For perpetual licenses with multi-year maintenance agreements, the Company invoices the license and generally one year of maintenance with future maintenance generally invoiced annually. For multi-year subscription licenses, the Company generally invoices customers annually at the beginning of each annual coverage period. The Company records a contract asset related to revenue recognized for multi-year on-premises licenses as its right to payment is conditioned upon providing product support and services in future years. As of September 30, 2022 and December 31, 2021, accounts receivable, net of allowance for doubtful accounts, was $ 2.3 million and $ 2.9 million , respectively. As of September 30, 2022 and December 31, 2021, short and long-term contract assets, net of allowance for doubtful accounts, was $ 0.7 million and $ 0.9 million , respectively. As of September 30, 2022 and December 31, 2021, allowance for doubtful accounts was $ 78,859 and $ 85,816 , respectively. Deferred revenue is comprised mainly of unearned revenue related maintenance and technical support on term and perpetual licenses. Maintenance and technical support revenue is recognized ratably over the coverage period. Deferred revenue also includes contracts for professional services to be performed in the future which are recognized as revenue when the Company delivers the related service pursuant to the terms of the customer arrangement. Changes in deferred revenue were as follows: Nine Months Ended September 30, 2022 Balance at January 1, 2021 $ 7,070,859 Deferral of revenue 13,248,342 Recognition of revenue ( 14,180,480 ) Change in reserves ( 2,635 ) Balance at December 31, 2021 $ 6,136,086 Deferral of revenue 6,147,943 Recognition of revenue ( 7,502,583 ) Change in reserves 4,740 Balance at September 30, 2022 $ 4,786,186 During the three months ended September 30, 2022 and 2021, revenue of $ 1.1 million and $ 1.0 million respectively, and the nine months ended September 30, 2022, revenue of $ 3.8 million and $ 3.9 million respectively, was recognized from the deferred revenue balance at the beginning of each period. Deferred revenue includes invoiced revenue allocated to remaining performance obligations that has not yet been recognized and will be recognized as revenue in future periods. Deferred revenue w as $ 4.8 million as of September 30, 2022, of which the Company expects to recognize approximately 73 % of such amount as revenue over the next 12 months and the remainder thereafter. Approximately $ 1.9 million of revenue is expected to be recognized from remaining performance obligations for unbilled support and services as of September 30, 2022. We expect to recognize revenue on approximately 28 % of these remaining performance obligations over the next twelve months, with the balance recognized thereafter. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 90 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing its products and services, and not to receive financing from our customers or to provide customers with financing. Examples include invoicing at the beginning of a subscription term with maintenance and support revenue recognized ratably over the contract period, and multi-year, on-premises licenses that are invoiced annually with product revenue recognized upon delivery. Significant Judgments The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Judgment is required to determine the standalone selling price (“SSP”) for each distinct performance obligation. For products and services aside from maintenance and support, the Company estimates SSP by adjusting the list price by historical discount percentages. SSP for software and hardware maintenance and support fees is based on the stated percentages of the fees charged for the respective products. The Company’s perpetual and term software licenses have significant standalone functionality and therefore revenue allocated to these performance obligations are recognized at a point in time upon electronic delivery of the download link and the license keys. Product maintenance and support services are satisfied over time as they are stand-ready obligations throughout the support period. As a result, revenues associated with maintenance services are deferred and recognized as revenue ratably over the term of the contract. Revenues associated with professional services are recognized at a point in time upon customer acceptance. Disaggregation of Revenue Please refer to the condensed consolidated statements of operations and Note (16) Segment Reporting and Concentrations for discussion on revenue disaggregation by product type and by geography. The Company believes this level of disaggregation sufficiently depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Assets Recognized from Costs to Obtain a Contract with a Customer The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has determined that its sales commission program meets the requirements for cost capitalization. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in other current and long-term assets on our consolidated balance sheets. The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. Leases We have entered into operating leases for our various facilities. We determine if an arrangement is a lease at inception. Operating leases are included in Right-of-Use ("ROU") assets, and lease liability obligations in our condensed consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liability obligations represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We have lease agreements with lease and non-lease components and account for such components as a single lease component. As most of our leases do not provide an implicit rate, we estimated our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The ROU asset also includes any lease payments made and excludes lease incentives and lease direct costs. Our lease terms may include options to extend or terminate the lease. Such extended terms have been considered in determining the ROU assets and lease liability obligations when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. Right of Use Assets and Liabilities We have various operating leases for office facilities that are expected to continue through 2023. Below is a summary of our ROU assets and liabilities as of September 30, 2022. Right of use assets $ 49,626 Lease liability obligations, current 49,626 Lease liability obligations, less current portion — Total lease liability obligations $ 49,626 Weighted-average remaining lease term 0.75 Weighted-average discount rate 3.35 % Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Components of lease expense: Operating lease cost $ 38,420 $ 88,593 $ 107,800 $ 712,911 Sublease income — — — ( 100,419 ) Net lease cost $ 38,420 $ 88,593 $ 107,800 $ 612,492 During the three months ended September 30, 2022 and 2021, operating cash flows from operating leases were approximately $ 19,249 and $ 57,541 , respectively. During the nine months ended September 30, 2022 and 2021 operating cash flows from operating leases were approximately $ 57,747 and $ 574,757 , respectively. Approximate future minimum lease payments for our ROU assets over the remaining lease periods as of September 30, 2022, are as follows: 2022 (remaining) $ 19,249 2023 38,498 Total minimum lease payments $ 57,747 Less interest 8,121 Present value of lease liabilities $ 49,626 |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | (3) Earnings Per Share Basic earnings per share ("EPS") is computed based on the weighted average number of shares of common stock outstanding. Diluted EPS is computed based on the weighted average number of common shares outstanding increased by dilutive common stock equivalents, attributable to stock option awards, restricted stock awards, warrants and the Series A Preferred Stock outstanding. The following represents the common stock equivalents that were excluded from the computation of diluted shares outstanding because their effect would have been anti-dilutive for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Stock options 4,965 9,640 4,965 9,640 Restricted stock 32,768 — 32,768 63,207 Series A redeemable convertible preferred stock 151,439 138,509 151,439 138,509 Total anti-dilutive common stock equivalents 189,172 148,149 189,172 211,356 |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | (4) Property and Equipment The gross carrying amount and accumulated depreciation of property and equipment as of September 30, 2022 and December 31, 2021 are as follows: September 30, 2022 December 31, 2021 Gross carrying amount $ 15,483,291 $ 15,544,212 Accumulated depreciation ( 15,387,495 ) ( 15,390,308 ) Property and Equipment, net $ 95,796 $ 153,904 For the three months ended September 30, 2022 and 2021, depreciation expense was $ 11,203 and $ 29,838 , respectively. For the nine months ended September 30, 2022 and 2021, depreciation expense was $ 50,135 and $ 100,470 , respe ctively. |
Software Development Costs
Software Development Costs | 9 Months Ended |
Sep. 30, 2022 | |
Research and Development [Abstract] | |
Software Development Costs | (5) Software Development Costs The gross carrying amount and accumulated amortization of software development costs as of September 30, 2022 and December 31, 2021 are as follows: September 30, 2022 December 31, 2021 Gross carrying amount $ 3,015,132 $ 2,980,132 Accumulated amortization ( 2,955,009 ) ( 2,937,437 ) Software development costs, net $ 60,123 $ 42,695 During the three months ended September 30, 2022 and 2021, the Company recorded $ 7,066 and $ 1,649 , respectively, of amortization expense related to capitalized software costs. During the nine months ended September 30, 2022 and 2021, the Company recorded $ 17,572 and $ 4,933 , respectively, of amortization expense related to capitalized software costs. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets | (6) Goodwill and Other Intangible Assets The gross carrying amount and accumulated amortization of goodwill and other intangible assets as of September 30, 2022 and December 31, 2021 are as follows: September 30, 2022 December 31, 2021 Goodwill $ 4,150,339 $ 4,150,339 Other intangible assets: Gross carrying amount $ 4,041,216 $ 4,038,138 Accumulated amortization ( 4,013,779 ) ( 3,986,776 ) Net carrying amount $ 27,437 $ 51,362 For the three months ended September 30, 2022 and 2021, amortization expense was $ 7,913 and $ 13,999 , respectively. For the nine months ended September 30, 2022 and 2021, amortization expense was $ 27,003 and $ 46,065 , respectively. |
Share-Based Payment Arrangement
Share-Based Payment Arrangements | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Share-Based Payment Arrangements | (7) Share-Based Payment Arrangements On June 22, 2018, the Company's stockholders adopted the FalconStor Software, Inc. 2018 Incentive Stock Plan (the "2018 Plan"). The 2018 Plan is administered by the Compensation Committee (the “Compensation Committee”) of the Company’s Board of Directors (the “Board”) and initially provided for the issuance of up to 1,471,997 shares of the Company's common stock upon the grant of shares with such restrictions as determined by the Compensation Committee to the employees and directors of, and consultants providing services to, the Company or its affiliates. In June 2021, the Company's stockholders approved an amendment to increase the number of shares of our common stock authorized and reserved for issuance under the 2018 Plan by 220,800 shares to a total of 1,692,797 shares. Exercise prices of the options are determined by the Compensation Committee, subject to the consent of Hale Capital. The vesting terms are performance based and determined by the Compensation Committee, subject to the consent of Hale Capital, based on various factors, including (i) the return of capital to the holders of the Series A Preferred Stock and the Company’s common stock in the event of a change of control, (ii) the repayment of the Company’s obligations under its senior secured debt, and (iii) the Company’s free cash flow. The following table summarizes the 2018 Plan, which was the only plan under which the Company was able to grant equity compensation as of September 30, 2022: Shares Shares Available Shares Name of Plan Authorized for Grant Outstanding FalconStor Software, Inc. 2018 Incentive Stock Plan 1,692,797 241,899 1,316,933 The following table summarizes the Company’s equity plans that have terminated or expired but that still have equity awards outstanding as of September 30, 2022: Name of Plan Shares Available for Grant Shares Outstanding FalconStor Software, Inc., 2016 Incentive Stock Plan — 2,250 FalconStor Software, Inc., 2006 Incentive Stock Plan — 2,715 A summary of the Company’s restricted stock activity for the nine months ended September 30, 2022 is below. Such restricted stock did not bestow any voting or dispositive power and is not deemed outstanding until they vest. Number of Non-Vested at January 1, 2022 1,513,380 Granted 113,230 Vested ( 37,365 ) Forfeited ( 272,312 ) Non-Vested at September 30, 2022 1,316,933 The following table summarizes the share-based compensation expense for all awards issued under the Company’s stock equity plans in the following line items in the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Cost of revenue - Product $ 46 $ 232 $ 438 $ 688 Cost of revenue - support and service 82 185 410 549 Research and development costs 1,830 167 5,609 167 Selling and marketing 3,598 2,915 17,632 8,475 General and administrative 2,429 1,417 11,182 4,205 $ 7,985 $ 4,916 $ 35,271 $ 14,084 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (8) Income Taxes The Company’s provision for income taxes consists principally of state and local, and foreign taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. For the nine months ended September 30, 2022, the Company recorded an income tax provision of $ 150,369 . The effective tax rate for the nine months ended September 30, 2022 was 9.0 % . The effective tax rate differs from the statutory rate of 21% due to the mix of foreign and domestic earnings, foreign withholding taxes and the application of valuation allowances that are applicable with respect to the Company. As of September 30, 2022, the Company’s conclusion did not change with respect to the realizability of its domestic deferred tax assets and therefore, the Company had not recorded any income tax benefit as such amounts are fully offset with a valuation allowance. For the nine months ended September 30, 2021, the Company recorded an income tax provision of $ 63,804 . The effective tax rate for the nine months ended September 30, 2021 was 13.9 % . The effective tax rate differed from the statutory rate of 21% due to the mix of foreign and domestic earnings and the application of valuation allowances. As of September 30, 2021, the Company’s conclusion did not change with respect to the realizability of its domestic deferred tax assets and therefore, the Company had not recorded any income tax benefit as such amounts are fully offset with a valuation allowance. The Company’s total unrecognized tax benefits, excluding interest, as of September 30, 2022 and September 30, 2021 were $ 70,935 and $ 70,260 , respectively. As of September 30, 2022 and September 30, 2021, the Company had $ 42,859 and $ 36,575 , respectively, of accrued interest reflected in accrued expenses. |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2022 | |
Payables and Accruals [Abstract] | |
Notes Payable | (9) Notes Payable The notes payable balance consists of the following: Total notes payable, net at January 1, 2022 $ 2,154,098 Accretion of discount 2,148 Total notes payable, net at March 31, 2022 $ 2,156,246 Accretion of discount 3,979 Total notes payable, net at June 30, 2022 $ 2,160,225 Accretion of discount 4,026 Total notes payable, net at September 30, 2022 $ 2,164,251 Senior Secured Debt The senior secured debt bears interest at prime plus 0.75 % and had an original maturity date of June 30, 2021. In connection with the June Offering, we entered into the Loan Extension Letter Agreement on June 2, 2021 which provided for an extension of the maturity date on Hale Capital’s portion of the outstanding indebtedness owed under the Amended and Restated Loan Agreement to June 30, 2023. The amount extended constituted approximately $ 2.2 million of the $ 3.5 million principal amount outstanding as of June 2, 2021. The remaining $ 1.3 million of the outstanding principal, which was owed to other lenders, was repaid in full on June 30, 2021. On July 19, 2022, we entered into the "Second Loan Extension Letter Agreement" that provided for a subsequent extension of the maturity date on the outstanding indebtedness owed under the Amended and Restated Loan Agreement from June 30, 2023 to December 31, 2023. The Company concluded the extension resulted in a debt modification under ASC 470-50, Modifications and Extinguishments, and therefore no gain or loss was required to be recognized. The change is accounted for prospectively using the new effective interest rate of the loan . As of September 30, 2022 , the Company was in compliance with the financial covenants contained in the Amended and Restated Loan Agreement. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | (10) Fair Value Measurements The Company measures its cash equivalents and derivative instruments at fair value. Fair value is an exit price, representing the amount that would be received on the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants. As a basis for considering such assumptions, the Company utilizes a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value. Fair Value Hierarchy The methodology for measuring fair value specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect the Company’s own assumptions of market participant valuation (unobservable inputs). As a result, observable and unobservable inputs have created the following fair value hierarchy: • Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities. At September 30, 2022, the Company did not have any Level 1 category assets included 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 September 30, 2022 and December 31, 2021, the Company did not have any Level 2 category assets included 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 September 30, 2022 and December 31, 2021, 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 and cash equivalents categorized as Level 3 as of September 30, 2022 or December 31, 2021. The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2022: Fair Value Measurements at Reporting Date Using Total Quoted Prices in Significant Significant Derivative liabilities: Derivative Instruments $ 795,708 $ — $ — $ 795,708 Total derivative liabilities 795,708 — — 795,708 Total assets and liabilities measured at fair value $ 795,708 $ — $ — $ 795,708 The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2021: Fair Value Measurements at Reporting Date Using Total Quoted Prices in Significant Significant Derivative liabilities: Derivative Instruments $ 776,623 $ — $ — $ 776,623 Total derivative liabilities 776,623 — — 776,623 Total assets and liabilities measured at fair value $ 776,623 $ — $ — $ 776,623 Measurement of Fair Value The fair value of the Company’s derivatives were valued using the Black-Scholes pricing model adjusted for probability assumptions, with all significant inputs, except for the probability and volatility assumptions, derived from or corroborated by observable market data such as stock price and interest rates. The probability and volatility assumptions are both significant to the fair value measurement and unobservable. These embedded derivatives are included in Level 3 of the fair value hierarchy. The derivatives are included in other long-term liabilities on our consolidated balance sheets. The fair value of the Company's Series A Preferred Stock is based on its future cash flows discounted at a 11 % yield. The fair value of the Company's note payable is based on its future cash flows discounted at a 5 % yield. The following table presents a reconciliation of the beginning and ending balances of the Company's liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Beginning Balance $ 796,846 $ 728,063 $ 776,623 $ 703,747 Total (gain) loss recognized in earnings ( 1,138 ) 23,166 19,085 47,482 Ending Balance $ 795,708 $ 751,229 $ 795,708 $ 751,229 The Company’s derivatives were valued using the Black-Scholes pricing model adjusted for probability assumptions, with all significant inputs, except for the probability and volatility assumptions, derived from or corroborated by observable market data such as stock price and interest rates. The probability and volatility assumptions are as follows: Probability of redemption as part of a fundamental sale transaction 0.5 % Probability of redemption absent a fundamental sale transaction 4.75 % Annual volatility 65 % |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | (11) Commitments and Contingencies The Company typically provides its customers a warranty on its software products for a period of no more than 90 days . Such warranties are accounted for in accordance with the authoritative guidance issued by the FASB on contingencies. For the three and nine months ended September 30, 2022, the Company has not incurred any costs related to warranty obligations. Under the terms of substantially all of its software license agreements, the Company indemnifies its customers for all costs and damages arising from claims against such customers based on, among other things, allegations that the Company’s software infringes on the intellectual property rights of a third party. In most cases, in the event of an infringement claim, the Company retains the right to (i) procure for the customer the right to continue using the software; (ii) replace or modify the software to eliminate the infringement while providing substantially equivalent functionality; or (iii) if neither (i) nor (ii) can be reasonably achieved, the Company may terminate the license agreement and refund to the customer a pro-rata portion of the license fee paid to the Company. Such indemnification provisions are accounted for in accordance with the authoritative guidance issued by the FASB on guarantees. From time to time, in the ordinary course of business, the Company receives claims for indemnification, typically from original equipment manufacturers. The Company is not currently aware of any material claims for indemnification. As described under Note (12) Series A Redeemable Convertible Preferred Stock the holders of the Series A Preferred Stock have redemption rights upon certain triggering events. As of September 30, 2022, the Company did not fail any non-financial covenants related to the Company's Series A Preferred Stock. In connection with the appointment of Todd Brooks as Chief Executive Officer, the Board approved an offer letter to Mr. Brooks (the “Brooks Agreement”), which was executed on August 14, 2017. The Brooks Agreement provides that Mr. Brooks is entitled to receive an annualized base salary of $ 350,000 , payable in regular installments in accordance with the Company’s general payroll practices. Mr. Brooks will also be eligible for a cash bonus of $ 17,500 for any quarter that is free cash flow positive on an operating basis and additional incentive compensation of an annual bonus of up to $ 200,000 , subject to attainment of performance objectives to be mutually agreed upon and established. Mr. Brooks' employment can be terminated at will. Pursuant to the Brooks Agreement and the 2018 Plan, Mr. Brooks received 735,973 shares of restricted stock. If Mr. Brooks’ employment is terminated by the Company other than for cause, he is entitled to receive severance equal to 12 months of his base salary if (i) he has been employed by the Company for at least 12 months at the time of termination or (ii) a change of control has occurred within six months of Mr. Brooks’ employment. Except as set forth in the preceding sentence, Mr. Brooks is entitled to receive severance equal to six months of his base salary if he has been employed by the Company for less than six months and his employment was terminated by the Company without cause. Mr. Brooks is also entitled to vacation and other employee benefits in accordance with the Company’s policies as well as reimbursement for an apartment. In connection with Mr. Sita’s appointment as Chief Financial Officer, the Board approved an Independent Contractor Services Agreement with Alucria Consulting, Inc. (“Alucria”), an entity owned by Mr. Sita (the “Sita Agreement”), which was executed on February 11, 2022. The Sita Agreement provides that Alucria is entitled to receive a fee of $ 20,000 per month. Alucria will also be eligible for an additional payment of up to $ 60,000 annually, based upon the achievement of goals determined by the Company, to be paid quarterly in accordance with standard Company policies. The agreement also provided that Mr. Sita received a grant of shares of the Company’s common stock, to be governed by the Company’s 2018 Stock Incentive Plan and subject to specific vesting conditions. The term of the Sita Agreement expires on July 1, 2023, unless earlier terminated by either party in accordance with the terms therein. As described under Note (17) Restructuring Costs, the Company incurred certain restructuring costs in connection with restructuring plans adopted in 2017 and 2019. In addition, as of September 30, 2022, the Company's liability for uncertain tax positions totaled $ 113,788 . At this time, the settlement period for this liability, including related accrued interest, cannot be determined. |
Series A Redeemable Convertible
Series A Redeemable Convertible Preferred Stock | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Series A Redeemable Convertible Preferred Stock | (12) Series A Redeemable Convertible Preferred Stock The Company has 900,000 shares of Series A Preferred Stock outstanding with a par value $ 0.001 per share and a stated value of $ 10 per share . Pursuant to the Certificate of Designations, each share of Series A Preferred Stock can be converted into shares of the Company’s common stock, at an initial conversion price of $ 102.488 per share, subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction, (i) at any time at the option of the holder or (ii) by the Company if, following the first anniversary of the issuance of the Series A Preferred Stock (subject to extension under certain circumstances), the volume weighted average trading price per share of the Company’s common stock for sixty ( 60 ) consecutive trading days exceeds 250 % of the conversion price and continues to exceed 225 % of the conversion price through the conversion date, subject at all times to the satisfaction of, and the limitations imposed by, the equity conditions set forth in the Certificate of Designations (including, without limitation, the volume limitations set forth therein). Pursuant to the Certificate of Designations, the holders of the Series A Preferred Stock are entitled to receive quarterly dividends at the prime rate (provided in the Wall Street Journal Eastern Edition) plus 5 % (up to a maximum dividend rate of 10 %), payable in cash or in kind (i.e., through the issuance of additional shares of Series A Preferred Stock), except that the Company is not permitted to pay such dividends in cash while any indebtedness under the Amended and Restated Loan Agreement remains outstanding without the consent of the holders of the Series A Preferred Stock. In addition, the declaration and payment of dividends is subject to compliance with applicable law and unpaid dividends will accrue. A holder’s right to convert its shares of Series A Preferred Stock and receive dividends in the form of common stock is subject to certain limitations including, among other things, that the shares of common stock issuable upon conversion or as dividends will not, prior to receipt of stockholder approval, result in any holder beneficially owning greater than 9.99 % of the Company’s currently outstanding shares of common stock. The Series A Preferred Stock dividends shall accrue whether or not the declaration or payment of such Series A Preferred Stock dividends are prohibited by applicable law, whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are authorized or declared. Upon certain triggering events, such as bankruptcy, insolvency or a material adverse effect or failure of the Company to issue shares of common stock upon conversion of the Series A Preferred Stock in accordance with its obligations, the holders may require the Company to redeem all or some of the Series A Preferred Stock at a price per share equal to the greater of (i) the sum of 100 % of the stated value of a share of Series A Preferred Stock plus accrued and unpaid dividends with respect thereto, and (ii) the product of the number of shares of common stock underlying a share of Series A Preferred Stock (and accrued and unpaid dividends with respect thereto) and the closing price as of the occurrence of the triggering event. On or after December 31, 2023, subject to the approval of HCP-FVA, each holder of Series A Preferred Stock can also require the Company to redeem its Series A Preferred Stock in cash at a per share price equal to 100 % of the stated value of a share of Series A Preferred Stock plus accrued and unpaid dividends with respect thereto. Notwithstanding the forgoing, no holder of Series A Preferred Stock is permitted to exercise any rights or remedies upon a Breach Event (as defined in the Certificate of Designations) or to exercise any redemption rights under the Certificate of Designations, unless approved by the holders of a majority of the then-outstanding shares of Series A Preferred Stock. Upon consummation of a fundamental sale transaction, the Series A Preferred Stock will be redeemed at a per share redemption price equal to the greater of (y) 250 % of the per share purchase price of the Series A Preferred Stock and (z) the price payable in respect of such share of Series A Preferred Stock if such share of Series A Preferred Stock had been converted into such number of shares of common stock in accordance with the Certificate of Designations (but without giving effect to any limitations or restrictions contained therein) immediately prior to such fundamental sale transaction; provided however that the 250 % threshold is changed to 100% if the fundamental sale transaction is approved by the two Series A Directors (as defined in the Certificate of Designations). In addition, if the Company consummates an equity or debt financing that results in more than $ 5.0 million of net proceeds to the Company and/or its subsidiaries, the holders of Series A Preferred Stock will have the right, but not the obligation, to require the Company to use the net proceeds in excess of $ 5.0 million to repurchase all or a portion of the Series A Preferred Stock at a per share price equal to the greater of (i) the sum of 100% of the stated value of such share of Series A Preferred Stock plus accrued and unpaid dividends with respect thereto, and (ii) the number of shares of common stock into which such share of Series A Preferred Stock is then convertible multiplied by the greater of (y) the closing price of the common stock on the date of announcement of such financing or (z) the closing price of the common stock on the date of consummation of such financing. Each holder of Series A Preferred Stock has a vote equal to the number of shares of common stock into which its Series A Preferred Stock would be convertible as of the record date. In addition, the holders of a majority of the Series A Preferred Stock must approve certain actions, including approving any amendments to the Company’s Restated Certificate of Incorporation as amended or Amended and Restated Bylaws that adversely affects the voting powers, preferences or other rights of the Series A Preferred Stock; payment of dividends or distributions; any liquidation, capitalization, reorganization or any other fundamental transaction of the Company; issuance of any equity security senior to or on parity with the Series A Preferred Stock as to dividend rights, redemption rights, liquidation preference and other rights; issuances of equity below the conversion price; any liens or borrowings other than non-convertible indebtedness from standard commercial lenders which does not exceed 80 % of the Company’s accounts receivable; and the redemption or purchase of any of the capital stock of the Company. The holders of our outstanding Series A Preferred Stock have a mandatory redemption right that may be exercised only with the approval of Hale Capital and HCP-FVA. In connection with the June Offering, the effective date of such redemption right was extended from July 30, 2021 to July 30, 2023 pursuant to an amendment to the Certificate of Designations, dated as of June 24, 2021. On July 19, 2022, the Company and Hale Capital entered into a letter agreement pursuant to which Hale Capital agreed not to exercise or to permit the exercise of the mandatory redemption right of the Series A Preferred Stock on or prior to December 31, 2023 unless the redemption is in accordance with Section 8(e)(z) of the Certificate of Designations or in accordance with a Breach Event (as defined in the Certificate of Designations). The Company concluded the extension resulted in a debt modification under ASC 470-50, Modifications and Extinguishments, and therefore no gain or loss was required to be recognized. The change is accounted for prospectively using the new effective interest rate of the preferred stock. The Company has classified the Series A Preferred Stock as temporary equity in the financial statements as it is subject to redemption at the option of the holder under certain circumstances. As a result of the Company’s analysis of all the embedded conversion and put features within the Series A Preferred Stock, the contingent redemption put options in the Series A Preferred Stock were determined to not be clearly and closely related to the debt-type host and also did not meet any other scope exceptions for derivative accounting. Therefore, the contingent redemption put options are being accounted for as derivative instruments and the fair value of these derivative instruments was bifurcated from the Series A Preferred Stock and recorded as a liability. As of September 30, 2022 and December 31, 2021, the fair value of these derivative instruments was $ 795,708 and $ 776,623 , respectively, and were included in "other long-term liabilities" within the consolidated balance sheets. At the time of issuance, the Company recorded transaction costs, a beneficial conversion feature and the fair value allocated to the embedded derivatives as discounts to the Series A Preferred Stock. These costs were being accreted to the Series A Preferred Stock using the effective interest method through the stated redemption date of August 5, 2017, which represents the earliest redemption date of the instrument. This accretion was accelerated as of December 31, 2016 due to the failure of the financial covenants and the redemption right of the holders at that time. In connection with the June Offering, Hale Capital Partners, which was the sole holder of the Series A Preferred Stock, agreed to the extension of the mandatory redemption right and waived prior breaches of the terms of the Series A Preferred Stock. The Company included deductions for accretion, deemed and accrued dividends on the Series A Preferred Stock as adjustments to net income (loss) attributable to common stockholders on the statement of operations and in determining income (loss) per share for the three and nine months ended September 30, 2022 and 2021, respectively. The Series A Preferred Stock consists of the following: Total Series A redeemable convertible preferred stock, net at January 1, 2022 $ 14,384,388 Accrued dividends 300,921 Accretion of preferred stock 14,815 Total Series A redeemable convertible preferred stock, net at March 31, 2022 $ 14,700,124 Accrued dividends 338,428 Accretion of preferred stock 35,582 Total Series A redeemable convertible preferred stock, net at June 30, 2022 $ 15,074,134 Accrued dividends 391,016 Accretion of preferred stock 40,023 Total Series A redeemable convertible preferred stock, net at September 30, 2022 $ 15,505,173 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Loss | (13) Accumulated Other Comprehensive Loss The changes in Accumulated Other Comprehensive Loss, net of tax, for the three months ended September 30, 2022 are as follows: Foreign Currency Net Minimum Total Accumulated other comprehensive income (loss) at July 1, 2022 $ ( 1,736,634 ) $ 20,965 $ ( 1,715,669 ) Other comprehensive income (loss) Other comprehensive income (loss) before reclassifications 26,004 - 26,004 Total other comprehensive income (loss) 26,004 - 26,004 Accumulated other comprehensive income (loss) at September 30, 2022 $ ( 1,710,630 ) $ 20,965 $ ( 1,689,665 ) The changes in Accumulated Other Comprehensive Loss, net of tax, for the three months ended September 30, 2021 are as follows: Foreign Currency Net Minimum Total Accumulated other comprehensive income (loss) at July 1, 2021 $ ( 1,914,022 ) $ 7,719 $ ( 1,906,303 ) Other comprehensive income (loss) Other comprehensive income (loss) before reclassifications 11,144 — 11,144 Total other comprehensive income (loss) 11,144 — 11,144 Accumulated other comprehensive income (loss) at September 30, 2021 $ ( 1,902,878 ) $ 7,719 $ ( 1,895,159 ) The changes in Accumulated Other Comprehensive Loss, net of tax, for the nine months ended September 30, 2022 are as follows: Foreign Currency Net Minimum Total Accumulated other comprehensive income (loss) at January 1, 2022 $ ( 1,881,005 ) $ 20,965 $ ( 1,860,040 ) Other comprehensive income (loss) Other comprehensive income (loss) before reclassifications 170,375 - 170,375 Total other comprehensive income (loss) 170,375 - 170,375 Accumulated other comprehensive income (loss) at September 30, 2022 $ ( 1,710,630 ) $ 20,965 $ ( 1,689,665 ) The changes in Accumulated Other Comprehensive Loss, net of tax, for the nine months ended September 30, 2021 are as follows: Foreign Currency Net Minimum Total Accumulated other comprehensive income (loss) at January 1, 2021 $ ( 1,995,680 ) $ 7,719 $ ( 1,987,961 ) Other comprehensive income (loss) Other comprehensive income (loss) before reclassifications 92,802 — 92,802 Total other comprehensive income (loss) 92,802 — 92,802 Accumulated other comprehensive income (loss) at September 30, 2021 $ ( 1,902,878 ) $ 7,719 $ ( 1,895,159 ) |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Stockholders' Equity | (14) Stockholders' Equity Stock Repurchase Activity During the three and nine months ended September 30, 2022 and 2021 , the Company did no t repurchase any shares of its common stock. As of September 30, 2022 , the Company had the authorization to repurchase 49,078 shares of its common stock based upon its judgment and market conditions. Common Stock Offerings On June 23, 2021, the Company issued and sold an aggregate of 811,750 shares of its common stock in a public offering underwritten by Roth Capital Partners, LLC (“Roth”), which included $ 86,750 shares purchased by Roth pursuant to the partial exercise of its over-allotment option. At a price of $ 4.10 per share, the Company received net proceeds of approximately $ 2.7 million after deducting the underwriting discount and offering expenses paid by the Company. On July 27, 2021 the Company issued and sold an aggregate of 285,000 shares of its common stock in a public offering underwritten by Roth. At a price of $ 4.10 per share, the Company received net proceeds of approximately $ 0.9 million after deducting the underwriting discount and estimated offering expenses paid by the Company. |
Litigation
Litigation | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation | (15) Litigation In view of the inherent difficulty of predicting the outcome of litigation, particularly where the claimants seek very large or indeterminate damages, the Company generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each pending matter may be. In accordance with the authoritative guidance issued by the FASB on contingencies, the Company accrues anticipated costs of settlement, damages and losses for claims to the extent specific losses are probable and estimable. The Company records a receivable for insurance recoveries when such amounts are probable and collectable. In such cases, there may be an exposure to loss in excess of any amounts accrued. If, at the time of evaluation, the loss contingency related to a litigation is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable and, the Company will expense these costs as incurred. If the estimate of a probable loss is a range and no amount within the range is more likely, the Company will accrue the minimum amount of the range. The Company is subject to various legal proceedings and claims, asserted or unasserted, which arise in the ordinary course of business. While the outcome of any such matters cannot be predicted with certainty, such matters are not expected to have a material adverse effect on the Company’s financial condition or operating results. The Company continues to assess certain litigation and claims to determine the amounts, if any, that the Company believes may be paid as a result of such claims and litigation and, therefore, additional losses may be accrued and paid in the future, which could materially adversely impact the Company’s financial results, its cash flows and its cash reserves. |
Segment Reporting and Concentra
Segment Reporting and Concentrations | 9 Months Ended |
Sep. 30, 2022 | |
Segment Reporting [Abstract] | |
Segment Reporting and Concentrations | (16) Segment Reporting and Concentrations The Company is organized in a single operating segment for purposes of making operating decisions and assessing performance. Revenue from the United States to customers in the following geographical areas for the three and nine months ended September 30, 2022 and 2021, and the location of long-lived assets as of September 30, 2022 and December 31, 2021, are summarized as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenue: Americas $ 1,411,667 $ 880,010 $ 3,482,258 $ 4,422,598 Europe, Middle East, Africa and Other 896,265 1,265,526 2,454,588 3,817,767 Asia Pacific 751,209 1,137,933 1,565,737 2,130,177 Total Revenue $ 3,059,141 $ 3,283,469 $ 7,502,583 $ 10,370,542 September 30, 2022 December 31, 2021 Long-lived assets: Americas $ 603,366 $ 858,417 Asia Pacific 158,267 261,148 Europe, Middle East, Africa and Other 12,468 18,364 Total long-lived assets $ 774,101 $ 1,137,929 For the three and nine months ended September 30, 2022, the Company had one and one custom ers that accounted for 10% or more of total revenue, respectively. For the three and nine months ended September 30, 2021, the Company had two customers that accounted for 10% or more of total revenue, respectively. As of September 30, 2022, the Company had two customers that accounted for 10% or more of the gross accounts receivable balance. As of December 31, 2021 , the Company had two customers that accounted for 10% or more of the gross accounts receivable balance. |
Restructuring Costs
Restructuring Costs | 9 Months Ended |
Sep. 30, 2022 | |
Restructuring and Related Activities [Abstract] | |
Restructuring Costs | (17) Restructuring Costs In June 2017, the Board approved a comprehensive plan to increase operating performance (the “2017 Plan”). The 2017 Plan was substantially completed by the end of the Company’s fiscal year ended December 31, 2017, and when combined with previous workforce reductions in the second quarter of fiscal 2017 reduced the Company’s workforce to approximately 86 employees at December 31, 2018. In making these changes, the Company prioritized customer support and development while consolidating operations and streamlining direct sales resources, allowing the Company to focus on the install base and develop alternate channels to the market. As part of this consolidation effort, the Company vacated a portion of its former Melville, NY office space during the three months ended June 30, 2018. During the six months ended June 30, 2021, the Company incurred lease disposal-related costs for this property of $ 0.7 million. The Melville, NY lease which ended on April 30, 2021 with a gross annualized rental cost of $ 1.5 million, will not be replaced. The Company expects the remaining accrued severance-related costs of $ 116,499 as of September 30, 2022 to be paid once final settlement litigation is completed. Such litigation stems from the termination of three employees in France, one of which has been settled, and the remainder of which are expected to settle by December 31, 2022. The following table summarizes the activity during 2021 through September 30, 2022 related to restructuring liabilities recorded in connection with the 2017, 2019 and 2020 Plans: Severance Related Costs Facility and Other Costs Total Balance at January 1, 2021 $ 239,444 $ 75,466 $ 314,910 Provisions/Additions — 302,313 302,313 Translation Adjustment ( 10,393 ) — ( 10,393 ) Utilized/Paid — ( 357,184 ) ( 357,184 ) Balance at March 31, 2021 $ 229,051 $ 20,595 $ 249,646 Provisions/Additions — 421,737 421,737 Translation Adjustment 2,734 — 2,734 Utilized/Paid ( 90,445 ) ( 442,332 ) ( 532,777 ) Balance at June 30, 2021 $ 141,340 $ — $ 141,340 Translation Adjustment ( 3,429 ) — ( 3,429 ) Balance at September 30, 2021 $ 137,911 $ — $ 137,911 Translation Adjustment ( 3,248 ) — ( 3,248 ) Balance at December 31, 2021 $ 134,663 $ — $ 134,663 Provisions/Additions — 744 744 Translation Adjustment ( 2,534 ) — ( 2,534 ) Balance at March 31, 2022 $ 132,129 $ 744 $ 132,873 Provisions/Additions — ( 744 ) ( 744 ) Translation Adjustment ( 8,112 ) — ( 8,112 ) Balance at June 30, 2022 $ 124,017 $ — $ 124,017 Translation Adjustment ( 7,518 ) — ( 7,518 ) Balance at September 30, 2022 $ 116,499 $ — $ 116,499 The severance and facility related liabilities are included within “accrued expenses” in the accompanying condensed consolidated balance sheets. The expenses under the 2017 Plan are included within “restructuring costs” in the accompanying condensed consolidated statements of operations. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
The Company and Nature of Operations | (a) The Company and Nature of Operations FalconStor Software, Inc., a Delaware corporation ("we", the "Company" or "FalconStor"), is a trusted data protection leader modernizing disaster recovery and backup 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. More than 1,000 organizations and managed service providers worldwide standardize on FalconStor as the foundation for their cloud first data protection future. |
Principles of Consolidation | (e) Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | (f) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s significant estimates include those related to revenue recognition, accounts receivable allowances, valuation of derivatives, valuation of goodwill and income taxes. Actual results could differ from those estimates. The financial market volatility in many countries where the Company operates has impacted and may continue to impact the Company’s business. Such conditions could have a material impact on the Company’s significant accounting estimates discussed above. |
Unaudited Interim Financial Information | (g) Unaudited Interim Financial Information The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position of the Company at September 30, 2022, and the results of its operations for the three and nine months ended September 30, 2022 and 2021. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 ("2021 Form 10-K"). |
Recently Issued Accounting Pronouncements | (h) Recently Issued Accounting Pronouncements In August 2020, the Financial Accounting Standards Board, or FASB, issued ASU 2020-06, regarding ASC Topic 470 “Debt” and ASC Topic 815 “Derivatives and Hedging,” which reduces the number of accounting models for convertible instruments and amends the calculation of diluted earnings per share for convertible instruments, among other changes. The guidance is effective for smaller reporting companies as defined by the SEC, for annual reporting periods beginning after December 15, 2023, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments – Credit Losses (together with all subsequent amendments, ("Topic 326"))", which replaced the previous U.S. GAAP that required an incurred loss methodology for recognizing credit losses and delayed recognition until it was probable a loss had been incurred. Topic 326 replaced the incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of reasonable and supportable information to estimate credit losses. This provision was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. In February 2020, the FASB issued ASU 2020-02, "Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842)", which delayed the effective date of Topic 326 for smaller reporting companies until fiscal years beginning after December 15, 2022. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements. |
Revenue from Contract with Customers and Associated Balances | Revenue from Contracts with Customers and Associated Balances Nature of Products and Services Licenses for on-premises software provide the customer with a right to use the software as it exists when made available to the customer. Customers may purchase perpetual licenses or subscribe to licenses, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software. Revenue from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer. Revenue allocated to software maintenance and support services is recognized ratably over the contractual support period. Hardware products consist primarily of servers and associated components and function independently of the software products and as such are accounted for as separate performance obligations. Revenue allocated to hardware maintenance and support services is recognized ratably over the contractual support period. Professional services are primarily related to software implementation services and associated revenue is recognized upon customer acceptance. Contract Balances Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records a contract asset when revenue is recognized prior to invoicing, or unearned revenue when revenue is recognized subsequent to invoicing. For perpetual licenses with multi-year maintenance agreements, the Company invoices the license and generally one year of maintenance with future maintenance generally invoiced annually. For multi-year subscription licenses, the Company generally invoices customers annually at the beginning of each annual coverage period. The Company records a contract asset related to revenue recognized for multi-year on-premises licenses as its right to payment is conditioned upon providing product support and services in future years. As of September 30, 2022 and December 31, 2021, accounts receivable, net of allowance for doubtful accounts, was $ 2.3 million and $ 2.9 million , respectively. As of September 30, 2022 and December 31, 2021, short and long-term contract assets, net of allowance for doubtful accounts, was $ 0.7 million and $ 0.9 million , respectively. As of September 30, 2022 and December 31, 2021, allowance for doubtful accounts was $ 78,859 and $ 85,816 , respectively. Deferred revenue is comprised mainly of unearned revenue related maintenance and technical support on term and perpetual licenses. Maintenance and technical support revenue is recognized ratably over the coverage period. Deferred revenue also includes contracts for professional services to be performed in the future which are recognized as revenue when the Company delivers the related service pursuant to the terms of the customer arrangement. Deferred revenue includes invoiced revenue allocated to remaining performance obligations that has not yet been recognized and will be recognized as revenue in future periods. Deferred revenue w as $ 4.8 million as of September 30, 2022, of which the Company expects to recognize approximately 73 % of such amount as revenue over the next 12 months and the remainder thereafter. Approximately $ 1.9 million of revenue is expected to be recognized from remaining performance obligations for unbilled support and services as of September 30, 2022. We expect to recognize revenue on approximately 28 % of these remaining performance obligations over the next twelve months, with the balance recognized thereafter. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 90 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing its products and services, and not to receive financing from our customers or to provide customers with financing. Examples include invoicing at the beginning of a subscription term with maintenance and support revenue recognized ratably over the contract period, and multi-year, on-premises licenses that are invoiced annually with product revenue recognized upon delivery. Significant Judgments The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Judgment is required to determine the standalone selling price (“SSP”) for each distinct performance obligation. For products and services aside from maintenance and support, the Company estimates SSP by adjusting the list price by historical discount percentages. SSP for software and hardware maintenance and support fees is based on the stated percentages of the fees charged for the respective products. The Company’s perpetual and term software licenses have significant standalone functionality and therefore revenue allocated to these performance obligations are recognized at a point in time upon electronic delivery of the download link and the license keys. Product maintenance and support services are satisfied over time as they are stand-ready obligations throughout the support period. As a result, revenues associated with maintenance services are deferred and recognized as revenue ratably over the term of the contract. Revenues associated with professional services are recognized at a point in time upon customer acceptance. Disaggregation of Revenue Please refer to the condensed consolidated statements of operations and Note (16) Segment Reporting and Concentrations for discussion on revenue disaggregation by product type and by geography. The Company believes this level of disaggregation sufficiently depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Assets Recognized from Costs to Obtain a Contract with a Customer The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has determined that its sales commission program meets the requirements for cost capitalization. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in other current and long-term assets on our consolidated balance sheets. The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. |
Leases | Leases We have entered into operating leases for our various facilities. We determine if an arrangement is a lease at inception. Operating leases are included in Right-of-Use ("ROU") assets, and lease liability obligations in our condensed consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liability obligations represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We have lease agreements with lease and non-lease components and account for such components as a single lease component. As most of our leases do not provide an implicit rate, we estimated our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The ROU asset also includes any lease payments made and excludes lease incentives and lease direct costs. Our lease terms may include options to extend or terminate the lease. Such extended terms have been considered in determining the ROU assets and lease liability obligations when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of Revision of Previously Issued Financial Statements | To correct the misstatements above, the Company revised its previously issued financial statements as follows: For the Three Months Ended September 30, 2021 For the Nine Months Ended September 30, 2021 CONSOLIDATED STATEMENT OF OPERATIONS As Previously Reported Adjustments As Revised As Previously Reported Adjustments As Revised Interest and other expense $ ( 58,257 ) $ ( 25,792 ) $ ( 84,049 ) $ ( 489,264 ) $ ( 55,361 ) $ ( 544,625 ) Income (loss) before income taxes $ 390,961 $ ( 25,792 ) $ 365,169 $ 513,800 $ ( 55,361 ) $ 458,439 Net income (loss) $ 374,432 $ ( 25,792 ) $ 348,640 $ 449,996 $ ( 55,361 ) $ 394,635 Net income (loss) attributable to common $ 72,113 $ ( 25,792 ) $ 46,321 $ ( 684,716 ) $ ( 55,361 ) $ ( 740,077 ) Basic net income (loss) per share $ 0.01 $ — $ 0.01 $ ( 0.11 ) $ ( 0.01 ) $ ( 0.12 ) Diluted net income (loss) per share $ 0.01 $ — $ 0.01 $ ( 0.11 ) $ ( 0.01 ) $ ( 0.12 ) For the Three Months Ended September 30, 2021 For the Nine Months Ended September 30, 2021 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) As Previously Reported Adjustments As Revised As Previously Reported Adjustments As Revised Net income (loss) $ 374,432 $ ( 25,792 ) $ 348,640 $ 449,996 $ ( 55,361 ) $ 394,635 Total comprehensive income (loss) $ 385,576 $ ( 25,792 ) $ 359,784 $ 542,798 $ ( 55,361 ) $ 487,437 Total comprehensive income (loss) $ 83,257 $ ( 25,792 ) $ 57,465 $ ( 591,914 ) $ ( 55,361 ) $ ( 647,275 ) Total Stockholders' Deficit CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT As Previously Reported Adjustments As Revised Balance at January 1, 2021 $ ( 14,608,186 ) $ ( 932,626 ) $ ( 15,540,812 ) Net income (loss) $ 425,248 $ ( 16,953 ) $ 408,295 Balance at March 31, 2021 $ ( 14,566,353 ) $ ( 949,579 ) $ ( 15,515,932 ) Net income (loss) $ ( 349,684 ) $ ( 12,616 ) $ ( 362,300 ) Balance at June 30, 2021 $ ( 12,536,419 ) $ ( 962,195 ) $ ( 13,498,614 ) Net income (loss) $ 374,432 $ ( 25,792 ) $ 348,640 Balance at September 30, 2021 $ ( 11,499,680 ) $ ( 987,987 ) $ ( 12,487,667 ) For the Nine Months Ended September 30, 2021 CONSOLIDATED STATEMENT OF CASH FLOWS As Previously Reported Adjustments As Revised Cash flows from operating activities: Net income (loss) $ 449,996 $ ( 55,361 ) $ 394,635 Changes in operating assets and liabilities: Accrued expenses and other long-term liabilities $ ( 669,852 ) $ 55,361 $ ( 614,491 ) Net cash provided by (used in) operating activities $ ( 707,889 ) $ — $ ( 707,889 ) |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Schedule of Changes in Deferred Revenue | Changes in deferred revenue were as follows: Nine Months Ended September 30, 2022 Balance at January 1, 2021 $ 7,070,859 Deferral of revenue 13,248,342 Recognition of revenue ( 14,180,480 ) Change in reserves ( 2,635 ) Balance at December 31, 2021 $ 6,136,086 Deferral of revenue 6,147,943 Recognition of revenue ( 7,502,583 ) Change in reserves 4,740 Balance at September 30, 2022 $ 4,786,186 |
Summary of ROU Assets and Liabilities | We have various operating leases for office facilities that are expected to continue through 2023. Below is a summary of our ROU assets and liabilities as of September 30, 2022. Right of use assets $ 49,626 Lease liability obligations, current 49,626 Lease liability obligations, less current portion — Total lease liability obligations $ 49,626 Weighted-average remaining lease term 0.75 Weighted-average discount rate 3.35 % |
Components of Lease Expense | Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Components of lease expense: Operating lease cost $ 38,420 $ 88,593 $ 107,800 $ 712,911 Sublease income — — — ( 100,419 ) Net lease cost $ 38,420 $ 88,593 $ 107,800 $ 612,492 |
Summary of Future Minimum Lease Payments of ROU Assets over Remaining Lease | Approximate future minimum lease payments for our ROU assets over the remaining lease periods as of September 30, 2022, are as follows: 2022 (remaining) $ 19,249 2023 38,498 Total minimum lease payments $ 57,747 Less interest 8,121 Present value of lease liabilities $ 49,626 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of Anti-dilutive Common Stock Equivalents that were Excluded from Computation of Diluted Shares Outstanding | The following represents the common stock equivalents that were excluded from the computation of diluted shares outstanding because their effect would have been anti-dilutive for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Stock options 4,965 9,640 4,965 9,640 Restricted stock 32,768 — 32,768 63,207 Series A redeemable convertible preferred stock 151,439 138,509 151,439 138,509 Total anti-dilutive common stock equivalents 189,172 148,149 189,172 211,356 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Gross Carrying Amount and Accumulated Depreciation of Property and Equipment | The gross carrying amount and accumulated depreciation of property and equipment as of September 30, 2022 and December 31, 2021 are as follows: September 30, 2022 December 31, 2021 Gross carrying amount $ 15,483,291 $ 15,544,212 Accumulated depreciation ( 15,387,495 ) ( 15,390,308 ) Property and Equipment, net $ 95,796 $ 153,904 |
Software Development Costs (Tab
Software Development Costs (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Research and Development [Abstract] | |
Summary of Gross Carrying Amount and Accumulated Amortization of Software Development Costs | The gross carrying amount and accumulated amortization of software development costs as of September 30, 2022 and December 31, 2021 are as follows: September 30, 2022 December 31, 2021 Gross carrying amount $ 3,015,132 $ 2,980,132 Accumulated amortization ( 2,955,009 ) ( 2,937,437 ) Software development costs, net $ 60,123 $ 42,695 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Gross Carrying Amount and Accumulated Amortization of Goodwill and Other Intangible Assets | The gross carrying amount and accumulated amortization of goodwill and other intangible assets as of September 30, 2022 and December 31, 2021 are as follows: September 30, 2022 December 31, 2021 Goodwill $ 4,150,339 $ 4,150,339 Other intangible assets: Gross carrying amount $ 4,041,216 $ 4,038,138 Accumulated amortization ( 4,013,779 ) ( 3,986,776 ) Net carrying amount $ 27,437 $ 51,362 |
Share-Based Payment Arrangeme_2
Share-Based Payment Arrangements (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Summary of Stock Option Plan | The following table summarizes the 2018 Plan, which was the only plan under which the Company was able to grant equity compensation as of September 30, 2022: Shares Shares Available Shares Name of Plan Authorized for Grant Outstanding FalconStor Software, Inc. 2018 Incentive Stock Plan 1,692,797 241,899 1,316,933 |
Schedule of Equity Awards Outstanding | The following table summarizes the Company’s equity plans that have terminated or expired but that still have equity awards outstanding as of September 30, 2022: Name of Plan Shares Available for Grant Shares Outstanding FalconStor Software, Inc., 2016 Incentive Stock Plan — 2,250 FalconStor Software, Inc., 2006 Incentive Stock Plan — 2,715 |
Summary of Restricted Stock Activity | A summary of the Company’s restricted stock activity for the nine months ended September 30, 2022 is below. Such restricted stock did not bestow any voting or dispositive power and is not deemed outstanding until they vest. Number of Non-Vested at January 1, 2022 1,513,380 Granted 113,230 Vested ( 37,365 ) Forfeited ( 272,312 ) Non-Vested at September 30, 2022 1,316,933 |
Summary of Share-Based Compensation Expense | The following table summarizes the share-based compensation expense for all awards issued under the Company’s stock equity plans in the following line items in the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Cost of revenue - Product $ 46 $ 232 $ 438 $ 688 Cost of revenue - support and service 82 185 410 549 Research and development costs 1,830 167 5,609 167 Selling and marketing 3,598 2,915 17,632 8,475 General and administrative 2,429 1,417 11,182 4,205 $ 7,985 $ 4,916 $ 35,271 $ 14,084 |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Payables and Accruals [Abstract] | |
Schedule of Notes Payable | The notes payable balance consists of the following: Total notes payable, net at January 1, 2022 $ 2,154,098 Accretion of discount 2,148 Total notes payable, net at March 31, 2022 $ 2,156,246 Accretion of discount 3,979 Total notes payable, net at June 30, 2022 $ 2,160,225 Accretion of discount 4,026 Total notes payable, net at September 30, 2022 $ 2,164,251 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value Assets and Liabilities Measured On Recurring Basis | The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2022: Fair Value Measurements at Reporting Date Using Total Quoted Prices in Significant Significant Derivative liabilities: Derivative Instruments $ 795,708 $ — $ — $ 795,708 Total derivative liabilities 795,708 — — 795,708 Total assets and liabilities measured at fair value $ 795,708 $ — $ — $ 795,708 The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2021: Fair Value Measurements at Reporting Date Using Total Quoted Prices in Significant Significant Derivative liabilities: Derivative Instruments $ 776,623 $ — $ — $ 776,623 Total derivative liabilities 776,623 — — 776,623 Total assets and liabilities measured at fair value $ 776,623 $ — $ — $ 776,623 |
Summary of Fair Value Measurements using Significant Unobservable Inputs | The following table presents a reconciliation of the beginning and ending balances of the Company's liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Beginning Balance $ 796,846 $ 728,063 $ 776,623 $ 703,747 Total (gain) loss recognized in earnings ( 1,138 ) 23,166 19,085 47,482 Ending Balance $ 795,708 $ 751,229 $ 795,708 $ 751,229 |
Summary of Derivative Probability and Volatility Assumptions | The probability and volatility assumptions are as follows: Probability of redemption as part of a fundamental sale transaction 0.5 % Probability of redemption absent a fundamental sale transaction 4.75 % Annual volatility 65 % |
Series A Redeemable Convertib_2
Series A Redeemable Convertible Preferred Stock (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Schedule of Components of Series A Preferred Stock | The Series A Preferred Stock consists of the following: Total Series A redeemable convertible preferred stock, net at January 1, 2022 $ 14,384,388 Accrued dividends 300,921 Accretion of preferred stock 14,815 Total Series A redeemable convertible preferred stock, net at March 31, 2022 $ 14,700,124 Accrued dividends 338,428 Accretion of preferred stock 35,582 Total Series A redeemable convertible preferred stock, net at June 30, 2022 $ 15,074,134 Accrued dividends 391,016 Accretion of preferred stock 40,023 Total Series A redeemable convertible preferred stock, net at September 30, 2022 $ 15,505,173 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Schedule of Changes in Accumulated Other Comprehensive Loss, Net of Tax | The changes in Accumulated Other Comprehensive Loss, net of tax, for the three months ended September 30, 2022 are as follows: Foreign Currency Net Minimum Total Accumulated other comprehensive income (loss) at July 1, 2022 $ ( 1,736,634 ) $ 20,965 $ ( 1,715,669 ) Other comprehensive income (loss) Other comprehensive income (loss) before reclassifications 26,004 - 26,004 Total other comprehensive income (loss) 26,004 - 26,004 Accumulated other comprehensive income (loss) at September 30, 2022 $ ( 1,710,630 ) $ 20,965 $ ( 1,689,665 ) The changes in Accumulated Other Comprehensive Loss, net of tax, for the three months ended September 30, 2021 are as follows: Foreign Currency Net Minimum Total Accumulated other comprehensive income (loss) at July 1, 2021 $ ( 1,914,022 ) $ 7,719 $ ( 1,906,303 ) Other comprehensive income (loss) Other comprehensive income (loss) before reclassifications 11,144 — 11,144 Total other comprehensive income (loss) 11,144 — 11,144 Accumulated other comprehensive income (loss) at September 30, 2021 $ ( 1,902,878 ) $ 7,719 $ ( 1,895,159 ) The changes in Accumulated Other Comprehensive Loss, net of tax, for the nine months ended September 30, 2022 are as follows: Foreign Currency Net Minimum Total Accumulated other comprehensive income (loss) at January 1, 2022 $ ( 1,881,005 ) $ 20,965 $ ( 1,860,040 ) Other comprehensive income (loss) Other comprehensive income (loss) before reclassifications 170,375 - 170,375 Total other comprehensive income (loss) 170,375 - 170,375 Accumulated other comprehensive income (loss) at September 30, 2022 $ ( 1,710,630 ) $ 20,965 $ ( 1,689,665 ) The changes in Accumulated Other Comprehensive Loss, net of tax, for the nine months ended September 30, 2021 are as follows: Foreign Currency Net Minimum Total Accumulated other comprehensive income (loss) at January 1, 2021 $ ( 1,995,680 ) $ 7,719 $ ( 1,987,961 ) Other comprehensive income (loss) Other comprehensive income (loss) before reclassifications 92,802 — 92,802 Total other comprehensive income (loss) 92,802 — 92,802 Accumulated other comprehensive income (loss) at September 30, 2021 $ ( 1,902,878 ) $ 7,719 $ ( 1,895,159 ) |
Segment Reporting and Concent_2
Segment Reporting and Concentrations (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Segment Reporting [Abstract] | |
Schedule of Revenues and Long Lived Assets by Geographical Areas | Revenue from the United States to customers in the following geographical areas for the three and nine months ended September 30, 2022 and 2021, and the location of long-lived assets as of September 30, 2022 and December 31, 2021, are summarized as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenue: Americas $ 1,411,667 $ 880,010 $ 3,482,258 $ 4,422,598 Europe, Middle East, Africa and Other 896,265 1,265,526 2,454,588 3,817,767 Asia Pacific 751,209 1,137,933 1,565,737 2,130,177 Total Revenue $ 3,059,141 $ 3,283,469 $ 7,502,583 $ 10,370,542 September 30, 2022 December 31, 2021 Long-lived assets: Americas $ 603,366 $ 858,417 Asia Pacific 158,267 261,148 Europe, Middle East, Africa and Other 12,468 18,364 Total long-lived assets $ 774,101 $ 1,137,929 |
Restructuring Costs (Tables)
Restructuring Costs (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Restructuring and Related Activities [Abstract] | |
Summary of Restructuring Liabilities Recorded in Connection with 2017, 2019 and 2020 Plans | The following table summarizes the activity during 2021 through September 30, 2022 related to restructuring liabilities recorded in connection with the 2017, 2019 and 2020 Plans: Severance Related Costs Facility and Other Costs Total Balance at January 1, 2021 $ 239,444 $ 75,466 $ 314,910 Provisions/Additions — 302,313 302,313 Translation Adjustment ( 10,393 ) — ( 10,393 ) Utilized/Paid — ( 357,184 ) ( 357,184 ) Balance at March 31, 2021 $ 229,051 $ 20,595 $ 249,646 Provisions/Additions — 421,737 421,737 Translation Adjustment 2,734 — 2,734 Utilized/Paid ( 90,445 ) ( 442,332 ) ( 532,777 ) Balance at June 30, 2021 $ 141,340 $ — $ 141,340 Translation Adjustment ( 3,429 ) — ( 3,429 ) Balance at September 30, 2021 $ 137,911 $ — $ 137,911 Translation Adjustment ( 3,248 ) — ( 3,248 ) Balance at December 31, 2021 $ 134,663 $ — $ 134,663 Provisions/Additions — 744 744 Translation Adjustment ( 2,534 ) — ( 2,534 ) Balance at March 31, 2022 $ 132,129 $ 744 $ 132,873 Provisions/Additions — ( 744 ) ( 744 ) Translation Adjustment ( 8,112 ) — ( 8,112 ) Balance at June 30, 2022 $ 124,017 $ — $ 124,017 Translation Adjustment ( 7,518 ) — ( 7,518 ) Balance at September 30, 2022 $ 116,499 $ — $ 116,499 |
Basis of Presentation - Additio
Basis of Presentation - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | Apr. 30, 2021 | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||
Working capital deficiency | $ (200,000) | $ (200,000) | ||||||||
Deferred revenue | 3,504,907 | 3,504,907 | $ 4,557,317 | |||||||
Stockholders' deficit | (15,700,382) | (15,700,382) | (12,965,983) | |||||||
Net income (loss) | 221,372 | $ (931,226) | $ (1,109,406) | $ 348,640 | $ (362,300) | $ 408,295 | (1,819,260) | $ 394,635 | ||
Net cash used in operating activities | (1,417,959) | $ (707,889) | ||||||||
Cash balance | 1,666,054 | 1,666,054 | 3,181,209 | |||||||
Increase (decrease) in cash balance | (1,500,000) | |||||||||
Series A redeemable convertible preferred stock, redemption value | $ 15,520,639 | $ 15,520,639 | $ 14,490,274 | |||||||
Restructuring Costs under 2017 Plan | ||||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||||||
Gross annualized rental cost | $ 1,500,000 |
Basis of Presentation - Revisio
Basis of Presentation - Revision of Previously Issued Financial Statements - Consolidated Statement of Operations (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Interest and other expense | $ (111,399) | $ (84,049) | $ (430,630) | $ (544,625) | ||||
Income (loss) before income taxes | 271,174 | 365,169 | (1,668,891) | 458,439 | ||||
Net income (loss) | 221,372 | $ (931,226) | $ (1,109,406) | 348,640 | $ (362,300) | $ 408,295 | (1,819,260) | 394,635 |
Net income (loss) attributable to common stockholders | $ 209,667 | $ 46,321 | $ (2,940,045) | $ (740,077) | ||||
Basic net income (loss) per share attributable to common stockholders | $ (0.03) | $ 0.01 | $ (0.41) | $ (0.12) | ||||
Diluted net income (loss) per share attributable to common stockholders | $ (0.03) | $ 0.01 | $ (0.41) | $ (0.12) | ||||
As Previously Reported | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Interest and other expense | $ (58,257) | $ (489,264) | ||||||
Income (loss) before income taxes | 390,961 | 513,800 | ||||||
Net income (loss) | 374,432 | (349,684) | 425,248 | 449,996 | ||||
Net income (loss) attributable to common stockholders | $ 72,113 | $ (684,716) | ||||||
Basic net income (loss) per share attributable to common stockholders | $ 0.01 | $ (0.11) | ||||||
Diluted net income (loss) per share attributable to common stockholders | $ 0.01 | $ (0.11) | ||||||
Adjustments | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Interest and other expense | $ (25,792) | $ (55,361) | ||||||
Income (loss) before income taxes | (25,792) | (55,361) | ||||||
Net income (loss) | (25,792) | $ (12,616) | $ (16,953) | (55,361) | ||||
Net income (loss) attributable to common stockholders | $ (25,792) | $ (55,361) | ||||||
Basic net income (loss) per share attributable to common stockholders | $ 0 | $ (0.01) | ||||||
Diluted net income (loss) per share attributable to common stockholders | $ 0 | $ (0.01) |
Basis of Presentation - Revis_2
Basis of Presentation - Revision of Previously Issued Financial Statements - Consolidated Statement of Comprehensive Income (Loss) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Net income (loss) | $ 221,372 | $ (931,226) | $ (1,109,406) | $ 348,640 | $ (362,300) | $ 408,295 | $ (1,819,260) | $ 394,635 |
Total comprehensive income (loss) | 359,784 | 487,437 | ||||||
Total comprehensive income (loss) attributable to common stockholders | 57,465 | (647,275) | ||||||
As Previously Reported | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Net income (loss) | 374,432 | (349,684) | 425,248 | 449,996 | ||||
Total comprehensive income (loss) | 385,576 | 542,798 | ||||||
Total comprehensive income (loss) attributable to common stockholders | 83,257 | (591,914) | ||||||
Adjustments | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Net income (loss) | (25,792) | $ (12,616) | $ (16,953) | (55,361) | ||||
Total comprehensive income (loss) | (25,792) | (55,361) | ||||||
Total comprehensive income (loss) attributable to common stockholders | $ (25,792) | $ (55,361) |
Basis of Presentation - Revis_3
Basis of Presentation - Revision of Previously Issued Financial Statements - Consolidated Statement of Stockholders' Deficit (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Beginning balance | $ (15,524,704) | $ (14,349,431) | $ (12,965,983) | $ (13,498,614) | $ (15,515,932) | $ (15,540,812) | $ (12,965,983) | $ (15,540,812) |
Net income (loss) | 221,372 | (931,226) | (1,109,406) | 348,640 | (362,300) | 408,295 | (1,819,260) | 394,635 |
Ending balance | $ (15,700,382) | $ (15,524,704) | $ (14,349,431) | (12,487,667) | (13,498,614) | (15,515,932) | $ (15,700,382) | (12,487,667) |
As Previously Reported | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Beginning balance | (12,536,419) | (14,566,353) | (14,608,186) | (14,608,186) | ||||
Net income (loss) | 374,432 | (349,684) | 425,248 | 449,996 | ||||
Ending balance | (11,499,680) | (12,536,419) | (14,566,353) | (11,499,680) | ||||
Adjustments | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Beginning balance | (962,195) | (949,579) | (932,626) | (932,626) | ||||
Net income (loss) | (25,792) | (12,616) | (16,953) | (55,361) | ||||
Ending balance | $ (987,987) | $ (962,195) | $ (949,579) | $ (987,987) |
Basis of Presentation - Revis_4
Basis of Presentation - Revision of Previously Issued Financial Statements - Consolidated Statement of Cash Flows (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Net income (loss) | $ 221,372 | $ (931,226) | $ (1,109,406) | $ 348,640 | $ (362,300) | $ 408,295 | $ (1,819,260) | $ 394,635 |
Changes in operating assets and liabilities: | ||||||||
Accrued expenses and other long-term liabilities | 401,087 | (614,491) | ||||||
Net cash provided by (used in) operating activities | $ (1,417,959) | (707,889) | ||||||
As Previously Reported | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Net income (loss) | 374,432 | (349,684) | 425,248 | 449,996 | ||||
Changes in operating assets and liabilities: | ||||||||
Accrued expenses and other long-term liabilities | (669,852) | |||||||
Net cash provided by (used in) operating activities | (707,889) | |||||||
Adjustments | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Net income (loss) | $ (25,792) | $ (12,616) | $ (16,953) | (55,361) | ||||
Changes in operating assets and liabilities: | ||||||||
Accrued expenses and other long-term liabilities | 55,361 | |||||||
Net cash provided by (used in) operating activities | $ 0 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | |
Accounting Policies [Abstract] | ||||||
Accounts receivable, net of allowances | $ 2,288,133 | $ 2,288,133 | $ 2,855,135 | |||
Short and long-term contract assets, net of allowance for doubtful accounts | 700,000 | 700,000 | 900,000 | |||
Allowance for doubtful accounts | 78,859 | 78,859 | 85,816 | |||
Deferred revenue recognized | 1,100,000 | $ 1,000,000 | 3,800,000 | $ 3,900,000 | ||
Deferred revenue | 4,786,186 | $ 4,786,186 | $ 6,136,086 | $ 7,070,859 | ||
Revenue expected to be recognized during next 12 months (percent) | 73% | |||||
Remaining performance obligation | $ 1,900,000 | $ 1,900,000 | ||||
Remaining performance obligation expected to be recognized over next 12 months (percent) | 28% | 28% | ||||
Operating leases, payments | $ 19,249 | $ 57,541 | $ 57,747 | $ 574,757 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Schedule of Changes in Deferred Revenue (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2021 | |
Movement in Deferred Revenue [Roll Forward] | ||
Beginning balance | $ 6,136,086 | $ 7,070,859 |
Deferral of revenue | 6,147,943 | 13,248,342 |
Recognition of revenue | (7,502,583) | (14,180,480) |
Change in reserves | 4,740 | (2,635) |
Ending balance | $ 4,786,186 | $ 6,136,086 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Summary of ROU Assets and Liabilities (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Leases [Abstract] | ||
Right of use assets | $ 49,626 | $ 112,405 |
Lease liability obligations, current | 49,626 | 76,940 |
Lease liability obligations, less current portion | 0 | $ 35,465 |
Total lease liability obligations | $ 49,626 | |
Weighted-average remaining lease term | 9 months | |
Weighted-average discount rate | 3.35% |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Components of Lease Expense (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Leases [Abstract] | ||||
Operating lease cost | $ 38,420 | $ 88,593 | $ 107,800 | $ 712,911 |
Sublease income | 0 | 0 | 0 | (100,419) |
Net lease cost | $ 38,420 | $ 88,593 | $ 107,800 | $ 612,492 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Summary of Future Minimum Lease Payments of ROU Assets over Remaining Lease (Details) | Sep. 30, 2022 USD ($) |
Leases [Abstract] | |
2022 (remaining) | $ 19,249 |
2023 | 38,498 |
Total minimum lease payments | 57,747 |
Less interest | 8,121 |
Present value of lease liabilities | $ 49,626 |
Earnings Per Share - Schedule o
Earnings Per Share - Schedule of Anti-dilutive Common Stock Equivalents that were Excluded from Computation of Diluted Shares Outstanding (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total anti-dilutive common stock equivalents | 189,172 | 148,149 | 189,172 | 211,356 |
Stock options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total anti-dilutive common stock equivalents | 4,965 | 9,640 | 4,965 | 9,640 |
Restricted stock | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total anti-dilutive common stock equivalents | 32,768 | 0 | 32,768 | 63,207 |
Series A redeemable convertible preferred stock | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Total anti-dilutive common stock equivalents | 151,439 | 138,509 | 151,439 | 138,509 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Gross Carrying Amount and Accumulated Depreciation of Property and Equipment (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Abstract] | ||
Gross carrying amount | $ 15,483,291 | $ 15,544,212 |
Accumulated depreciation | (15,387,495) | (15,390,308) |
Property and Equipment, net | $ 95,796 | $ 153,904 |
Property and Equipment - Additi
Property and Equipment - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 11,203 | $ 29,838 | $ 50,135 | $ 100,470 |
Software Development Costs - Su
Software Development Costs - Summary of Gross Carrying Amount and Accumulated Amortization of Software Development Costs (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Research and Development [Abstract] | ||
Gross carrying amount | $ 3,015,132 | $ 2,980,132 |
Accumulated amortization | (2,955,009) | (2,937,437) |
Software development costs, net | $ 60,123 | $ 42,695 |
Software Development Costs - Ad
Software Development Costs - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Research and Development [Abstract] | ||||
Amortization expense related to Capitalized software costs | $ 7,066 | $ 1,649 | $ 17,572 | $ 4,933 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Schedule of Gross Carrying Amount and Accumulated Amortization of Goodwill and Other Intangible Assets (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill | $ 4,150,339 | $ 4,150,339 |
Other intangible assets: | ||
Gross carrying amount | 4,041,216 | 4,038,138 |
Accumulated amortization | (4,013,779) | (3,986,776) |
Net carrying amount | $ 27,437 | $ 51,362 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense of intangible assets | $ 7,913 | $ 13,999 | $ 27,003 | $ 46,065 |
Share-Based Payment Arrangeme_3
Share-Based Payment Arrangements - Additional Information (Details) - FalconStor Software, Inc., 2018 Incentive Stock Plan - shares | 3 Months Ended | ||
Jun. 30, 2021 | Sep. 30, 2022 | Jun. 22, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Shares Authorized (in shares) | 1,692,797 | 1,471,997 | |
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized | 220,800 |
Share-Based Payment Arrangeme_4
Share-Based Payment Arrangements - Summary of Stock Option plan (Details) - FalconStor Software, Inc., 2018 Incentive Stock Plan - shares | Sep. 30, 2022 | Jun. 22, 2018 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares Authorized (in shares) | 1,692,797 | 1,471,997 |
Shares Available for Grant (in shares) | 241,899 | |
Shares Outstanding (in shares) | 1,316,933 |
Share-Based Payment Arrangeme_5
Share-Based Payment Arrangements - Schedule of Equity Awards Outstanding (Details) | Sep. 30, 2022 shares |
FalconStor Software, Inc., 2016 Incentive Stock Plan | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares Available for Grant (in shares) | 0 |
Shares Outstanding (in shares) | 2,250 |
FalconStor Software, Inc., 2006 Incentive Stock Plan | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares Available for Grant (in shares) | 0 |
Shares Outstanding (in shares) | 2,715 |
Share-Based Payment Arrangeme_6
Share-Based Payment Arrangements - Summary of Restricted Stock Activity (Details) | 9 Months Ended |
Sep. 30, 2022 shares | |
Restricted Stock Activity [Roll Forward] | |
Nonvested, beginning (in shares) | 1,513,380 |
Granted (in shares) | 113,230 |
Vested (in shares) | (37,365) |
Forfeited (in shares) | (272,312) |
Nonvested, ending (in shares) | 1,316,933 |
Share-Based Payment Arrangeme_7
Share-Based Payment Arrangements - Summary of Share-Based Compensation Expense (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | $ 7,985 | $ 4,916 | $ 35,271 | $ 14,084 |
Cost of revenue - Product | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | 46 | 232 | 438 | 688 |
Cost of revenue - support and service | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | 82 | 185 | 410 | 549 |
Research and development costs | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | 1,830 | 167 | 5,609 | 167 |
Selling and marketing | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | 3,598 | 2,915 | 17,632 | 8,475 |
General and administrative | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Share-based compensation expense | $ 2,429 | $ 1,417 | $ 11,182 | $ 4,205 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | ||||
Income tax provision | $ 49,802 | $ 16,529 | $ 150,369 | $ 63,804 |
Effective income tax rate | 9% | 13.90% | ||
Unrecognized tax benefits | 70,935 | 70,260 | $ 70,935 | $ 70,260 |
Unrecognized tax benefits, interest on income taxes accrued | $ 42,859 | $ 36,575 | $ 42,859 | $ 36,575 |
Notes Payable - Schedule of Not
Notes Payable - Schedule of Notes Payable (Details) - Amended and Restated Loan Agreement - HCP-FVA, LLC - USD ($) | 3 Months Ended | ||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | |
Movement In Notes Payable [Roll Forward] | |||
Total notes payable, beginning | $ 2,160,225 | $ 2,156,246 | $ 2,154,098 |
Accretion of discount | 4,026 | 3,979 | 2,148 |
Total notes payable, ending | $ 2,164,251 | $ 2,160,225 | $ 2,156,246 |
Notes Payable - Additional Info
Notes Payable - Additional Information (Details) - USD ($) | 9 Months Ended | ||||
Jun. 30, 2021 | Feb. 23, 2018 | Sep. 30, 2022 | Sep. 30, 2021 | Jun. 02, 2021 | |
Debt Instrument [Line Items] | |||||
Payments of short-term debt | $ 0 | $ (1,334,058) | |||
Amended and Restated Loan Agreement | |||||
Debt Instrument [Line Items] | |||||
Notes payable | $ 3,500,000 | ||||
Amended and Restated Loan Agreement | HCP-FVA, LLC | |||||
Debt Instrument [Line Items] | |||||
Notes payable | $ 2,200,000 | ||||
Payments of short-term debt | $ (1,300,000) | ||||
Secured Debt | |||||
Debt Instrument [Line Items] | |||||
Debt Instrument, Basis Spread on Variable Rate | 0.75% |
Fair Value Measurements - Sched
Fair Value Measurements - Schedule of Fair Value Assets and Liabilities Measured On Recurring Basis (Details) - USD ($) | Sep. 30, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | Dec. 31, 2020 |
Derivative liabilities: | ||||||
Derivative Instruments | $ 795,708 | $ 796,846 | $ 776,623 | $ 751,229 | $ 728,063 | $ 703,747 |
Recurring | ||||||
Derivative liabilities: | ||||||
Derivative Instruments | 795,708 | 776,623 | ||||
Total derivative liabilities | 795,708 | 776,623 | ||||
Total assets and liabilities measured at fair value | 795,708 | 776,623 | ||||
Fair Value, Inputs, Level 1 | Recurring | ||||||
Derivative liabilities: | ||||||
Derivative Instruments | 0 | 0 | ||||
Total derivative liabilities | 0 | 0 | ||||
Total assets and liabilities measured at fair value | 0 | 0 | ||||
Fair Value, Inputs, Level 2 | Recurring | ||||||
Derivative liabilities: | ||||||
Derivative Instruments | 0 | 0 | ||||
Total derivative liabilities | 0 | 0 | ||||
Total assets and liabilities measured at fair value | 0 | 0 | ||||
Fair Value, Inputs, Level 3 | Recurring | ||||||
Derivative liabilities: | ||||||
Derivative Instruments | 795,708 | 776,623 | ||||
Total derivative liabilities | 795,708 | 776,623 | ||||
Total assets and liabilities measured at fair value | $ 795,708 | $ 776,623 |
Fair Value Measurements - Addit
Fair Value Measurements - Additional Information (Details) - Future Cash Flows - Discount Rate | Sep. 30, 2022 |
Preferred Stock | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |
Discount yield of preferred equity | 0.11 |
Notes Payable | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |
Fair value discount yield of note payable | 0.05 |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of Fair Value Measurements using Significant Unobservable Inputs (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Beginning Balance | $ 796,846 | $ 728,063 | $ 776,623 | $ 703,747 |
Total (gain) loss recognized in earnings | (1,138) | 23,166 | 19,085 | 47,482 |
Ending Balance | $ 795,708 | $ 751,229 | $ 795,708 | $ 751,229 |
Fair Value Measurements - Sum_2
Fair Value Measurements - Summary of Derivative Probability and Volatility Assumptions (Details) | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
Probability of redemption as part of a fundamental sale transaction | 0.50% |
Probability of redemption absent a fundamental sale transaction | 4.75% |
Annual volatility | 65% |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) - USD ($) | 9 Months Ended | ||
Aug. 14, 2017 | Sep. 30, 2022 | Feb. 11, 2022 | |
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |||
Maximum length of warranty on software products | 90 days | ||
Uncertainty in income tax liability | $ 113,788 | ||
Affiliated Entity | Alucria | Independent Contractor Services Agreement | |||
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |||
Due To Related Parties, Monthly Fee | $ 20,000 | ||
Due To Related Parties, Contingent Annual Payment | $ 60,000 | ||
Chief Executive Officer | |||
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |||
Salary and Wage, NonOfficer, Excluding Cost of Good and Service Sold | $ 350,000 | ||
Accrued bonuses | $ 17,500 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number | 735,973 | ||
Severance payment period | 6 months | ||
Award requisite period | 6 months | ||
Deferred Bonus | Chief Executive Officer | |||
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |||
Accrued bonuses | $ 200,000 | ||
Upon Termination | Chief Executive Officer | |||
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |||
Severance payment period | 12 months | ||
Award requisite period | 12 months | ||
Change of control period | 6 months |
Series A Redeemable Convertib_3
Series A Redeemable Convertible Preferred Stock - Additional Information (Details) | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2022 USD ($) $ / shares shares | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) Integer $ / shares shares | Sep. 30, 2021 USD ($) | Jun. 30, 2022 USD ($) | Dec. 31, 2021 USD ($) shares | Jun. 30, 2021 USD ($) | Dec. 31, 2020 USD ($) | Sep. 16, 2013 $ / shares shares | |
Class of Stock [Line Items] | |||||||||
Series A Redeemable convertible preferred stock, shares outstanding (in shares) | shares | 900,000 | 900,000 | 900,000 | ||||||
Derivative Instruments | $ | $ 795,708 | $ 751,229 | $ 795,708 | $ 751,229 | $ 796,846 | $ 776,623 | $ 728,063 | $ 703,747 | |
Loss on change in fair value | $ | $ (1,138) | $ 23,166 | $ 19,085 | $ 47,482 | |||||
Series A redeemable convertible preferred stock | |||||||||
Class of Stock [Line Items] | |||||||||
Series A Redeemable convertible preferred stock, shares outstanding (in shares) | shares | 900,000 | ||||||||
Series A redeemable convertible preferred stock, conversion price | $ / shares | $ 102.488 | ||||||||
Consecutive trading days, convertible debt threshold | Integer | 60 | ||||||||
Series A redeemable convertible preferred stock redemption price upon fundamental sale, percentage of per share purchase price | 250% | ||||||||
Threshold of stock price trigger, percentage | 225% | ||||||||
Upon certain triggering events holders can redeem | 100% | ||||||||
Series A redeemable convertible preferred stock, financing proceeds threshold | $ | $ 5,000,000 | ||||||||
Percentage of accounts receivable | 80% | ||||||||
Series A redeemable convertible preferred stock | Maximum | |||||||||
Class of Stock [Line Items] | |||||||||
Potential ownership percentage by controlling owners (greater than) | 9.99% | ||||||||
Series A redeemable convertible preferred stock | Prime rate | |||||||||
Class of Stock [Line Items] | |||||||||
Basis spread on Series A redeemable convertible preferred stock dividend, percentage | 5% | ||||||||
Series A redeemable convertible preferred stock, basis spread of dividend | 10% | ||||||||
Series A redeemable convertible preferred stock | Series A Preferred Stock Par Value | |||||||||
Class of Stock [Line Items] | |||||||||
Preferred Stock, Par or Stated Value Per Share | $ / shares | $ 0.001 | $ 0.001 | |||||||
Series A redeemable convertible preferred stock | Series A Preferred Stock Stated Value | |||||||||
Class of Stock [Line Items] | |||||||||
Preferred Stock, Par or Stated Value Per Share | $ / shares | $ 10 | $ 10 |
Series A Redeemable Convertib_4
Series A Redeemable Convertible Preferred Stock - Schedule of Components of Series A Preferred Stock (Details) - USD ($) | 3 Months Ended | ||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | |
Increase (Decrease) in Temporary Equity [Roll Forward] | |||
Beginning balance | $ 14,384,388 | ||
Ending balance | $ 15,505,173 | ||
Redeemable Preferred Stock | |||
Increase (Decrease) in Temporary Equity [Roll Forward] | |||
Beginning balance | 15,074,134 | $ 14,700,124 | 14,384,388 |
Accrued dividends | 391,016 | 338,428 | 300,921 |
Accretion of preferred stock | 40,023 | 35,582 | 14,815 |
Ending balance | $ 15,505,173 | $ 15,074,134 | $ 14,700,124 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss - Schedule of Changes in Accumulated Other Comprehensive Loss, Net of Tax (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||
Accumulated other comprehensive (loss) income, beginning balance | $ (12,965,983) | |||
Total other comprehensive income (loss), net of applicable taxes: | $ 26,004 | $ 11,144 | 170,375 | $ 92,802 |
Accumulated other comprehensive (loss) income, ending balance | (15,700,382) | (15,700,382) | ||
Foreign Currency Translation | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||
Accumulated other comprehensive (loss) income, beginning balance | (1,736,634) | (1,914,022) | (1,881,005) | (1,995,680) |
Other comprehensive income (loss) before reclassifications | 26,004 | 11,144 | 170,375 | 92,802 |
Total other comprehensive income (loss), net of applicable taxes: | 26,004 | 11,144 | 170,375 | 92,802 |
Accumulated other comprehensive (loss) income, ending balance | (1,710,630) | (1,902,878) | (1,710,630) | (1,902,878) |
Net Minimum Pension Liability | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||
Accumulated other comprehensive (loss) income, beginning balance | 20,965 | 7,719 | 20,965 | 7,719 |
Other comprehensive income (loss) before reclassifications | 0 | 0 | 0 | 0 |
Total other comprehensive income (loss), net of applicable taxes: | 0 | 0 | 0 | 0 |
Accumulated other comprehensive (loss) income, ending balance | 20,965 | 7,719 | 20,965 | 7,719 |
Accumulated Other Comprehensive Loss, Net | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||
Accumulated other comprehensive (loss) income, beginning balance | (1,715,669) | (1,906,303) | (1,860,040) | (1,987,961) |
Other comprehensive income (loss) before reclassifications | 26,004 | 11,144 | 170,375 | 92,802 |
Total other comprehensive income (loss), net of applicable taxes: | 26,004 | 11,144 | 170,375 | 92,802 |
Accumulated other comprehensive (loss) income, ending balance | $ (1,689,665) | $ (1,895,159) | $ (1,689,665) | $ (1,895,159) |
Stockholders' Equity - Addition
Stockholders' Equity - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||
Jul. 27, 2021 | Jun. 23, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Class of Stock [Line Items] | |||||||
Stock repurchased during period (shares) | 0 | 0 | 0 | 0 | |||
Remaining number of shares authorized for repurchased | 49,078 | 49,078 | |||||
Stock Issued During Period, Shares, New Issues | 285,000 | ||||||
Shares Issued, Price Per Share | $ 4.10 | $ 4.10 | |||||
Stock Issued During Period, Value, New Issues | $ 900,000 | $ 2,700,000 | $ 948,566 | $ 2,737,770 | |||
Common Stock | |||||||
Class of Stock [Line Items] | |||||||
Stock Issued During Period, Shares, New Issues | 811,750 | 285,000 | 811,750 | ||||
Stock Issued During Period, Value, New Issues | $ 285 | $ 812 | |||||
Common Stock | Over-Allotment | |||||||
Class of Stock [Line Items] | |||||||
Stock Issued During Period, Shares, New Issues | 86,750 |
Segment Reporting and Concent_3
Segment Reporting and Concentrations - Schedule of Revenues and Long Lived Assets by Geographical Areas (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Revenue: | |||||
Total revenue | $ 3,059,141 | $ 3,283,469 | $ 7,502,583 | $ 10,370,542 | |
Long-lived assets: | |||||
Total long-lived assets | 774,101 | 774,101 | $ 1,137,929 | ||
Americas | |||||
Revenue: | |||||
Total revenue | 1,411,667 | 880,010 | 3,482,258 | 4,422,598 | |
Long-lived assets: | |||||
Total long-lived assets | 603,366 | 603,366 | 858,417 | ||
Europe, Middle East, Africa and Other | |||||
Revenue: | |||||
Total revenue | 896,265 | 1,265,526 | 2,454,588 | 3,817,767 | |
Long-lived assets: | |||||
Total long-lived assets | 12,468 | 12,468 | 18,364 | ||
Asia Pacific | |||||
Revenue: | |||||
Total revenue | 751,209 | $ 1,137,933 | 1,565,737 | $ 2,130,177 | |
Long-lived assets: | |||||
Total long-lived assets | $ 158,267 | $ 158,267 | $ 261,148 |
Segment Reporting and Concent_4
Segment Reporting and Concentrations - Additional Information (Details) - Customer | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Segment Reporting [Abstract] | |||||
Number of Customers Accounting for More than 10 Percent of Revenue | 1 | 2 | 1 | 2 | |
Number Of Customers With Significant Accounts Receivable Balance | 2 | 2 | 2 |
Restructuring Costs - Additiona
Restructuring Costs - Additional Information (Details) | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||||||||
Sep. 30, 2022 USD ($) | Jun. 30, 2022 USD ($) | Mar. 31, 2022 USD ($) | Sep. 30, 2021 USD ($) | Jun. 30, 2021 USD ($) | Mar. 31, 2021 USD ($) | Jun. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Dec. 31, 2021 USD ($) | Apr. 30, 2021 USD ($) | Dec. 31, 2020 USD ($) | |
Restructuring Cost and Reserve [Line Items] | ||||||||||||
Restructuring costs | $ 0 | $ 68,704 | $ 744 | $ 792,754 | ||||||||
Restructuring Costs under 2017 Plan | ||||||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||||||
Entity number of employees | 86 | |||||||||||
Restructuring costs | $ (744) | $ 744 | $ 421,737 | $ 302,313 | ||||||||
Gross annualized rental cost | $ 1,500,000 | |||||||||||
Restructuring Reserve | 116,499 | 124,017 | 132,873 | 137,911 | 141,340 | 249,646 | $ 141,340 | 116,499 | 137,911 | $ 134,663 | $ 314,910 | |
Lease-Disposal Related Costs | Restructuring Costs under 2017 Plan | ||||||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||||||
Restructuring costs | (744) | 744 | 421,737 | 302,313 | 700,000 | |||||||
Restructuring Reserve | $ 0 | $ 0 | $ 744 | $ 0 | $ 0 | $ 20,595 | $ 0 | $ 0 | $ 0 | $ 0 | $ 75,466 |
Restructuring Costs - Summary o
Restructuring Costs - Summary of Restructuring Liabilities Recorded in Connection with 2017, 2019 and 2020 Plans (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Jun. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Restructuring Reserve [Roll Forward] | ||||||||||
Provisions/Additions | $ 0 | $ 68,704 | $ 744 | $ 792,754 | ||||||
Restructuring Costs under 2017 Plan | ||||||||||
Restructuring Reserve [Roll Forward] | ||||||||||
Beginning Balance | 124,017 | $ 132,873 | $ 134,663 | $ 137,911 | 141,340 | $ 249,646 | $ 314,910 | $ 314,910 | 134,663 | 314,910 |
Provisions/Additions | (744) | 744 | 421,737 | 302,313 | ||||||
Translation Adjustment | (7,518) | (8,112) | (2,534) | (3,248) | (3,429) | 2,734 | (10,393) | |||
Utilized/Paid | (532,777) | (357,184) | ||||||||
Ending Balance | 116,499 | 124,017 | 132,873 | 134,663 | 137,911 | 141,340 | 249,646 | 141,340 | 116,499 | 137,911 |
Employee Severance | Restructuring Costs under 2017 Plan | ||||||||||
Restructuring Reserve [Roll Forward] | ||||||||||
Beginning Balance | 124,017 | 132,129 | 134,663 | 137,911 | 141,340 | 229,051 | 239,444 | 239,444 | 134,663 | 239,444 |
Provisions/Additions | 0 | 0 | 0 | 0 | ||||||
Translation Adjustment | (7,518) | (8,112) | (2,534) | (3,248) | (3,429) | 2,734 | (10,393) | |||
Utilized/Paid | (90,445) | 0 | ||||||||
Ending Balance | 116,499 | 124,017 | 132,129 | 134,663 | 137,911 | 141,340 | 229,051 | 141,340 | 116,499 | 137,911 |
Facility and Other Costs | Restructuring Costs under 2017 Plan | ||||||||||
Restructuring Reserve [Roll Forward] | ||||||||||
Beginning Balance | 0 | 744 | 0 | 0 | 0 | 20,595 | 75,466 | 75,466 | 0 | 75,466 |
Provisions/Additions | (744) | 744 | 421,737 | 302,313 | 700,000 | |||||
Translation Adjustment | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
Utilized/Paid | (442,332) | (357,184) | ||||||||
Ending Balance | $ 0 | $ 0 | $ 744 | $ 0 | $ 0 | $ 0 | $ 20,595 | $ 0 | $ 0 | $ 0 |