Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | Apr. 30, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'FALCONSTOR SOFTWARE INC | ' |
Entity Central Index Key | '0000922521 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Entity Voluntary Filers | 'No | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 48,031,737 |
Document Fiscal Period Focus | 'Q1 | ' |
Document Fiscal Year Focus | '2014 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Current assets: | ' | ' |
Cash and cash equivalents | $17,493,097 | $19,288,340 |
Restricted cash | 750,000 | 750,000 |
Marketable securities | 9,645,934 | 8,073,108 |
Accounts receivable, net of allowances of $302,848 and $276,302, respectively | 9,715,785 | 11,150,323 |
Prepaid expenses and other current assets | 2,421,076 | 1,636,891 |
Inventory | 652,346 | 919,390 |
Deferred tax assets, net | 358,092 | 358,092 |
Total current assets | 41,036,330 | 42,176,144 |
Property and equipment, net of accumulated depreciation of $16,489,956 and $16,022,230, respectively | 3,093,740 | 3,317,344 |
Deferred tax assets, net | 56,059 | 49,651 |
Software development costs, net | 1,693,772 | 1,796,075 |
Other assets | 1,469,865 | 1,549,255 |
Goodwill | 4,150,339 | 4,150,339 |
Other intangible assets, net | 160,579 | 179,596 |
Total assets | 51,660,684 | 53,218,404 |
Current liabilities: | ' | ' |
Accounts payable | 1,282,032 | 1,024,180 |
Accrued expenses | 7,414,251 | 8,658,863 |
Deferred tax liabilities, net | 18,005 | 18,005 |
Deferred revenue, net | 19,370,270 | 18,148,268 |
Total current liabilities | 28,084,558 | 27,849,316 |
Other long-term liabilities | 587,427 | 617,300 |
Deferred tax liabilities, net | 199,791 | 193,705 |
Deferred revenue, net | 12,536,651 | 11,602,177 |
Total liabilities | 41,408,427 | 40,262,498 |
Commitments and contingencies | ' | ' |
Series A redeemable convertible preferred stock, $.001 par value, 2,000,000 shares authorized, 900,000 shares issued and outstanding, redemption value of $9,000,000 | 6,852,954 | 6,737,578 |
Stockholders' equity: | ' | ' |
Common stock - $.001 par value, 100,000,000 shares authorized, 56,036,972 and 56,036,972 shares issued, respectively and 48,031,737 and 48,031,737 shares outstanding, respectively | 56,037 | 56,037 |
Additional paid-in capital | 166,794,108 | 166,683,726 |
Accumulated deficit | -114,644,507 | -111,842,709 |
Common stock held in treasury, at cost (8,005,235 and 8,005,235 shares, respectively) | -46,916,339 | -46,916,339 |
Accumulated other comprehensive loss, net | -1,889,996 | -1,762,387 |
Total stockholders' equity | 3,399,303 | 6,218,328 |
Total liabilities and stockholders' equity | $51,660,684 | $53,218,404 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ' | ' |
Allowances on accounts receivable | $302,848 | $276,302 |
Accumulated depreciation on Property and equipment | 16,489,956 | 16,022,230 |
Redeemable convertible preferred stock, par value | $0.00 | $0.00 |
Redeemable convertible preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Redeemable convertible preferred stock, shares issued | 900,000 | 900,000 |
Redeemable convertible preferred stock, shares outstanding | 900,000 | 900,000 |
Redeemable convertible preferred stock, redemption value | $9,000,000 | $9,000,000 |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 56,036,972 | 56,036,972 |
Common stock, shares outstanding | 48,031,737 | 48,031,737 |
Common Stock held in treasury, shares | 8,005,235 | 8,005,235 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Revenues: | ' | ' |
Product revenues | $4,963,059 | $7,759,456 |
Support and services revenues | 7,038,440 | 7,525,361 |
Total revenues | 12,001,499 | 15,284,817 |
Cost of revenues: | ' | ' |
Product | 575,124 | 1,299,654 |
Support and service | 2,099,251 | 3,008,403 |
Total cost of revenues | 2,674,375 | 4,308,057 |
Gross profit | 9,327,124 | 10,976,760 |
Operating expenses: | ' | ' |
Research and development costs | 3,348,795 | 4,648,609 |
Selling and marketing | 5,888,466 | 6,840,571 |
General and administrative | 2,391,410 | 3,247,067 |
Investigation, litigation, and settlement related costs | 111,711 | 114,066 |
Restructuring costs | 223,573 | 0 |
Total operating expenses | 11,963,955 | 14,850,313 |
Operating loss | -2,636,831 | -3,873,553 |
Interest and other income (loss), net | 50,108 | -330,790 |
Loss before income taxes | -2,586,723 | -4,204,343 |
Provision for income taxes | 215,075 | 176,102 |
Net loss | -2,801,798 | -4,380,445 |
Less: Accrual of preferred stock dividends | 186,904 | 0 |
Less: Accretion to redemption value of Series A preferred stock | 115,376 | 0 |
Net loss attributable to common stockholders | ($3,104,078) | ($4,380,445) |
Basic net loss per share attributable to common stockholders (in dollars per share) | ($0.06) | ($0.09) |
Diluted net loss per share attributable to common stockholders (in dollars per share) | ($0.06) | ($0.09) |
Weighted average basic shares outstanding (in shares) | 48,031,737 | 47,862,834 |
Weighted average diluted shares outstanding (in shares) | 48,031,737 | 47,862,834 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Statement of Comprehensive Income [Abstract] | ' | ' |
Net loss | ($2,801,798) | ($4,380,445) |
Other comprehensive (loss) income, net of taxes: | ' | ' |
Foreign currency translation | -126,286 | 34,527 |
Net unrealized (loss) gain on marketable securities | -1,815 | 4,007 |
Net minimum pension liability | 492 | -4,558 |
Total other comprehensive (loss) income, net of taxes: | -127,609 | 33,976 |
Total comprehensive loss | -2,929,407 | -4,346,469 |
Less: Accrual of preferred stock dividends | 186,904 | 0 |
Less: Accretion to redemption value of Series A preferred stock | 115,376 | 0 |
Total comprehensive loss attributable to common stockholders | ($3,231,687) | ($4,346,469) |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Cash flows from operating activities: | ' | ' |
Net loss | ($2,801,798) | ($4,380,445) |
Adjustments to reconcile net loss to net cash from operating activities: | ' | ' |
Depreciation and amortization | 624,590 | 698,584 |
Share-based payment compensation | 411,353 | 890,735 |
Non-cash professional services expenses | 1,308 | 0 |
Restructuring costs | 223,573 | 0 |
Payment of restructuring costs | -555,516 | -478 |
Provision for returns and doubtful accounts | -67,265 | -409,050 |
Deferred income tax provision | -6,045 | 3,807 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | 1,486,819 | 4,247,431 |
Prepaid expenses and other current assets | -824,037 | 4,342 |
Inventory | 267,044 | -425,358 |
Other assets | 157,383 | -34,291 |
Accounts payable | 249,979 | 394,837 |
Accrued expenses and other long-term liabilities | -986,921 | -2,505,012 |
Deferred revenue | 2,156,828 | -277,929 |
Net cash provided by (used in) operating activities | 337,295 | -1,792,827 |
Cash flows from investing activities: | ' | ' |
Sales of marketable securities | 9,976,078 | 3,544,663 |
Purchases of marketable securities | -11,550,719 | -2,815,604 |
Purchases of property and equipment | -254,204 | -580,843 |
Security deposits | -91,059 | 0 |
Purchase of intangible assets | -9,953 | -14,511 |
Net cash (used in) provided by investing activities | -1,929,857 | 133,705 |
Cash flows from financing activities: | ' | ' |
Proceeds from exercise of stock options | 0 | 697,500 |
Dividends paid on Series A preferred stock | -216,379 | 0 |
Net cash (used in) provided by financing activities | -216,379 | 697,500 |
Effect of exchange rate changes on cash and cash equivalents | 13,698 | -81,282 |
Net decrease in cash and cash equivalents | -1,795,243 | -1,042,904 |
Cash and cash equivalents, beginning of period | 19,288,340 | 18,651,468 |
Cash and cash equivalents, end of period | 17,493,097 | 17,608,564 |
Supplemental disclosures: | ' | ' |
Cash paid for income taxes, net | 83,771 | 141,148 |
Non-cash financing activities: | ' | ' |
Undistributed preferred stock dividends | $186,904 | $0 |
Basis_of_Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Basis of Presentation | ' |
Basis of Presentation | |
(a) The Company and Nature of Operations | |
FalconStor Software, Inc., a Delaware Corporation (the "Company"), develops, manufactures and sells data migration, business continuity, disaster recovery, optimized backup and de-duplication solutions and provides the related maintenance, implementation and engineering services. | |
(b) 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. | |
(c) Use of Estimates | |
The preparation of financial statements in conformity with generally accepted accounting principles 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, share-based payment compensation, marketable securities, valuation of embedded derivatives, software development costs, goodwill and other intangible assets 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 to the Company’s significant accounting estimates discussed above. | |
(d) Unaudited Interim Financial Information | |
The accompanying unaudited interim condensed consolidated financial statements have been prepared, without audit, 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 accounting principles generally accepted in the United States of America 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 present fairly the financial position of the Company at March 31, 2014, and the results of its operations for the three months ended March 31, 2014 and 2013. 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, 2013 ("2013 Form 10-K"). | |
(e) Reclassifications | |
Certain reclassifications were made to the prior period amounts to conform to the current period presentation. | |
(f) Recently Adopted Accounting Pronouncements | |
In July 2013, the FASB issued new guidance which requires the netting of an unrecognized tax benefit, or a portion of an unrecognized tax benefit, against a deferred tax asset for a net operating loss carry forward, a similar tax loss, or a tax credit carry forward if such settlement is required or expected in the event the uncertain tax position is disallowed. The new guidance is effective prospectively to all existing unrecognized tax benefits, but entities can choose to apply it retrospectively. The adoption of this new accounting guidance in the first quarter of 2014 did not have any impact on the Company's consolidated financial position, results of operations or cash flows. | |
(g) Recently Issued Accounting Pronouncements | |
On May 14, 2013, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued its updated Internal Control - Integrated Framework (the 2013 Framework) and related illustrative documents. COSO will continue to make available its original Framework during the transition period extending to December 15, 2014. The Company currently utilizes COSO’s original Framework, which was published in 1992 and is recognized as the leading guidance for designing, implementing and conducting internal controls over external financial reporting and assessing its effectiveness. The 2013 Framework is expected to help organizations design and implement internal control in light of many changes in business and operating environments since the issuance of the original Framework, broaden the application of internal control in addressing operations and reporting objectives, and clarify the requirements for determining what constitutes effective internal control. The Company plans to adopt the 2013 Framework during 2014 and does not expect that it will have a significant impact on the Company. |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2014 | |
Accounting Policies [Abstract] | ' |
Summary of Significant Accounting Policies | ' |
Summary of Significant Accounting Policies | |
The Company's significant accounting policies were described in Note (1) "Summary of Significant Accounting Policies" of the Company's 2013 Form 10-K. There have been no significant changes in the Company's significant accounting policies since December 31, 2013. The Company's revenue recognition accounting policy is included below. For a description of the Company's other significant accounting policies refer to the Company's 2013 Form 10-K. | |
Revenue Recognition | |
The Company derives its revenue from sales of its products, support and services. Product revenue consists of the Company’s software integrated with industry standard hardware and sold as complete turn-key integrated solutions and as stand-alone software applications. Support and services revenue consists of both maintenance revenues and professional services revenues. Revenue is recorded net of applicable sales taxes. | |
In accordance with the authoritative guidance issued by the FASB on revenue recognition, the Company recognizes revenue from product sales when persuasive evidence of an arrangement exists, the fee is fixed and determinable, the product is delivered, and collection of the resulting receivable is deemed probable. Products delivered to a customer on a trial basis are not recognized as revenue until the trial period has ended and acceptance has occurred by the customer. Reseller customers typically send the Company a purchase order when they have an end user identified. Distributor customers typically send the Company a purchase order when they have a reseller and end user identified. For bundled arrangements that include either maintenance or both maintenance and professional services, the Company uses the residual method to determine the amount of product revenue to be recognized. Under the residual method, consideration is allocated to the undelivered elements based upon vendor-specific objective evidence (“VSOE”) of the fair value of those elements, with the residual of the arrangement fee allocated to and recognized as product revenue. If VSOE does not exist for all undelivered elements of an arrangement, the Company recognizes total revenue from the arrangement ratably over the term of the maintenance agreement. The Company's long-term portion of deferred revenue consists of (i) payments received for maintenance contracts with terms in excess of one year as of the balance sheet date, (ii) payments received for product sales bundled with multiple years of maintenance but for which VSOE did not exist for all undelivered elements of the arrangement, and (iii) payments received in connection with a joint development agreement entered into by the Company in 2013 pursuant to which revenue is being deferred until final delivery and acceptance of the software product being developed and then recognized ratably over a twenty-four month maintenance period. The Company provides an allowance for product returns as a reduction of revenue, based upon historical experience and known or expected trends. | |
Revenues associated with maintenance services are deferred and recognized as revenue ratably over the term of the contract. Revenues associated with software implementation and software engineering services are recognized when the services are performed. Costs of providing these services are included in cost of support and services. | |
The Company has entered into various distribution, licensing and joint promotion agreements with OEMs, whereby the Company has provided to the OEM a non-exclusive software license to install the Company’s software on certain hardware or to resell the Company’s software in exchange for payments based on the products distributed by these OEMs. Such payments from the OEM or distributor are recognized as revenue in the period reported by the OEM. | |
From time to time the Company will enter into funded software development arrangements. Under such arrangements, revenue recognition will not commence until final delivery and/or acceptance of the product. For arrangements where the Company has VSOE for the undelivered elements, the Company will follow the residual method and recognize product revenue upon final delivery and/or acceptance of the product. For arrangements where the Company does not have VSOE for the undelivered elements, the Company will recognize the entire arrangement fee ratably commencing at the time of final delivery and/or acceptance through the end of the service period in the arrangement. |
Earnings_Per_Share
Earnings Per Share | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Earnings Per Share [Abstract] | ' | ||||||||
Earnings Per Share | ' | ||||||||
Earnings Per Share | |||||||||
Basic 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, restricted stock unit awards and redeemable convertible preferred stock outstanding. Due to the net loss for the three months ended March 31, 2014 and 2013, all common stock equivalents, totaling 16,749,848 and 10,994,077, respectively, were excluded from diluted net loss per share because they were anti-dilutive. The common stock equivalents consist of 7,968,332 of outstanding stock option and restricted stock awards and 8,781,516 related to outstanding redeemable convertible preferred stock for the three months ended March 31, 2014 and 10,994,077 of outstanding stock option and restricted stock awards for the three months ended March 31, 2013. | |||||||||
The following represents a reconciliation of the numerators and denominators of the basic and diluted EPS computation: | |||||||||
Three Months Ended March 31, | |||||||||
2014 | 2013 | ||||||||
Numerator | |||||||||
Net loss | $ | (2,801,798 | ) | $ | (4,380,445 | ) | |||
Effects of redeemable convertible preferred stock: | |||||||||
Less: Preferred stock dividends | 186,904 | — | |||||||
Less: Accretion to redemption value of Series A preferred stock | 115,376 | — | |||||||
Net loss attributable to common stockholders | $ | (3,104,078 | ) | $ | (4,380,445 | ) | |||
Denominator | |||||||||
Basic shares outstanding | 48,031,737 | 47,862,834 | |||||||
Effect of dilutive securities: | |||||||||
Stock options and restricted stock | — | — | |||||||
Preferred Stock | — | — | |||||||
Diluted shares outstanding | 48,031,737 | 47,862,834 | |||||||
EPS | |||||||||
Basic net loss per share attributable to common stockholders | $ | (0.06 | ) | $ | (0.09 | ) | |||
Diluted net loss per share attributable to common stockholders | $ | (0.06 | ) | $ | (0.09 | ) |
Inventories
Inventories | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Inventories | ' | ||||||||
Inventories | |||||||||
At March 31, 2014 and December 31, 2013 inventories are as follows: | |||||||||
31-Mar-14 | 31-Dec-13 | ||||||||
Component materials | $ | 7,475 | $ | 10,073 | |||||
Finished systems | 644,871 | 909,317 | |||||||
Total Inventory | $ | 652,346 | $ | 919,390 | |||||
As of March 31, 2014 and December 31, 2013, the Company has not recorded any reserve for excess and/or obsolete inventories in arriving at estimated net realizable value of its inventory. |
Property_and_Equipment
Property and Equipment | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property and Equipment | ' | ||||||||
Property and Equipment | |||||||||
The gross carrying amount and accumulated depreciation of property and equipment as of March 31, 2014 and December 31, 2013 are as follows: | |||||||||
March 31, 2014 | December 31, 2013 | ||||||||
Property and Equipment: | |||||||||
Gross carrying amount | $ | 19,583,696 | $ | 19,339,574 | |||||
Accumulated depreciation | (16,489,956 | ) | (16,022,230 | ) | |||||
Property and Equipment, net | $ | 3,093,740 | $ | 3,317,344 | |||||
For the three months ended March 31, 2014 and 2013, depreciation expense was $493,317 and $586,980, respectively. |
Software_Development_Costs
Software Development Costs | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Research and Development [Abstract] | ' | ||||||||
Software Development Costs | ' | ||||||||
Software Development Costs | |||||||||
The gross carrying amount and accumulated amortization of software development costs as of March 31, 2014 and December 31, 2013 are as follows: | |||||||||
March 31, 2014 | December 31, 2013 | ||||||||
Software development costs: | |||||||||
Gross carrying amount | $ | 2,718,900 | $ | 2,718,900 | |||||
Accumulated amortization | (1,025,128 | ) | (922,825 | ) | |||||
Software development costs, net | $ | 1,693,772 | $ | 1,796,075 | |||||
During the three months ended March 31, 2014 and 2013, the Company recorded $102,303 and $82,062, respectively, of amortization expense related to capitalized software costs. |
Goodwill_and_Other_Intangible_
Goodwill and Other Intangible Assets | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||
Goodwill and Other Intangible Assets | ' | ||||||||
Goodwill and Other Intangible Assets | |||||||||
The gross carrying amount and accumulated amortization of goodwill and other intangible assets as of March 31, 2014 and December 31, 2013 are as follows: | |||||||||
31-Mar-14 | 31-Dec-13 | ||||||||
Goodwill | $ | 4,150,339 | $ | 4,150,339 | |||||
Other intangible assets: | |||||||||
Gross carrying amount | $ | 3,266,662 | $ | 3,256,709 | |||||
Accumulated amortization | (3,106,083 | ) | (3,077,113 | ) | |||||
Net carrying amount | $ | 160,579 | $ | 179,596 | |||||
For the three months ended March 31, 2014 and 2013, amortization expense was $28,970 and $29,542, respectively. |
ShareBased_Payment_Arrangement
Share-Based Payment Arrangements | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||
Share-Based Payment Arrangements | ' | ||||||||
Share-Based Payment Arrangements | |||||||||
The following table summarizes the plans under which the Company was able to grant equity compensation as of March 31, 2014: | |||||||||
Shares | Shares Available | Shares | Last Date for Grant | ||||||
Name of Plan | Authorized | for Grant | Outstanding | of Shares | |||||
FalconStor Software, Inc., 2006 Incentive Stock Plan | 13,455,546 | 4,357,329 | 6,437,865 | May 17, 2016 | |||||
FalconStor Software, Inc., 2013 Outside Directors Equity Compensation Plan | 400,000 | 350,000 | 50,000 | May 9, 2016 | |||||
The following table summarizes the Company’s equity plans that have expired but that still have equity awards outstanding as of March 31, 2014: | |||||||||
Name of Plan | Shares Available for Grant | Shares Outstanding | |||||||
FalconStor Software, Inc., 2000 Stock Option Plan | — | 1,124,967 | |||||||
2004 Outside Directors Stock Option Plan | — | 145,000 | |||||||
FalconStor Software, Inc., 2007 Outside Directors Equity Compensation Plan | — | 160,000 | |||||||
FalconStor Software, Inc., 2010 Outside Directors Equity Compensation Plan | — | 50,500 | |||||||
The Company recognized 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 months ended March 31, 2014 and 2013: | |||||||||
Three Months Ended March 31, | |||||||||
2014 | 2013 | ||||||||
Cost of revenues - Product | $ | — | $ | 49 | |||||
Cost of revenues - Support and Service | 21,883 | 50,256 | |||||||
Research and development costs | 88,799 | 134,910 | |||||||
Selling and marketing | 162,187 | 284,038 | |||||||
General and administrative | 139,792 | 421,482 | |||||||
$ | 412,661 | $ | 890,735 | ||||||
On April 1, 2014 the Company granted 2,037,857 shares of restricted stock to certain Company officers and employees. The restricted shares have terms of ten years. The restrictions on various portions of the restricted stock lapse upon the Company's achievement of performance criteria related to: Common Stock price; GAAP earnings per share; non-GAAP earnings per share; cash related targets; and revenue/billings related targets. |
Income_Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2014 | |
Income Tax Disclosure [Abstract] | ' |
Income Taxes | ' |
Income Taxes | |
The Company’s provision for income taxes consists 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 three months ended March 31, 2014 and 2013, the Company recorded an income tax provision of $215,075 and $176,102, respectively, consisting primarily of state and local and foreign taxes. The effective tax rate for the three months ended March 31, 2014 and March 31, 2013 was (8.5%) and (4.2%). As of March 31, 2014, the Company’s conclusion did not change with respect to the realizability of its domestic deferred tax assets and, therefore, the Company has not recorded any benefit for its expected net domestic deferred tax assets for the full year 2014 estimated annual effective tax rate. As of March 31, 2014, the valuation allowance totaled approximately $35.0 million. | |
The Company’s total unrecognized tax benefits, excluding interest, at both March 31, 2014 and December 31, 2013 were $217,237. At March 31, 2014, $288,193 including interest, if recognized, would reduce the Company’s effective tax rate. As of March 31, 2014 and December 31, 2013, the Company had $70,956 and $66,875, respectively, of accrued interest. |
Fair_Value_Measurements
Fair Value Measurements | 3 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
Fair Value Measurements | ' | ||||||||||||||||
Fair Value Measurements | |||||||||||||||||
The Company measures its cash equivalents, marketable securities 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. | |||||||||||||||||
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 March 31, 2014 and December 31, 2013 the Level 1 category included money market funds and commercial paper, which are included within cash and cash equivalents in the condensed consolidated balance sheets. | ||||||||||||||||
• | Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly. At March 31, 2014 and December 31, 2013 the Level 2 category included government securities and corporate debt securities, which are included within cash and cash equivalents and marketable securities in the condensed consolidated balance sheets. | ||||||||||||||||
• | Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. At March 31, 2014 and December 31, 2013, the Level 3 category included derivatives, which are included within other long-term liabilities in the condensed consolidated balance sheets. The Company did not hold any cash, cash equivalents or marketable securities categorized as Level 3 as of March 31, 2014 or December 31, 2013. | ||||||||||||||||
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2014: | |||||||||||||||||
Fair Value Measurements at Reporting Date Using | |||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant other | Significant | ||||||||||||||
Inputs | Unobservable | ||||||||||||||||
(Level 2) | Inputs | ||||||||||||||||
(Level 3) | |||||||||||||||||
Cash equivalents: | |||||||||||||||||
Money market funds and commercial paper | $ | 7,916,260 | $ | 7,916,260 | $ | — | $ | — | |||||||||
Total cash equivalents | 7,916,260 | 7,916,260 | — | — | |||||||||||||
Marketable securities: | |||||||||||||||||
Corporate debt and government securities | 9,645,934 | — | 9,645,934 | — | |||||||||||||
Total marketable securities | 9,645,934 | — | 9,645,934 | — | |||||||||||||
Derivative liabilities: | |||||||||||||||||
Derivative Instruments | 127,288 | — | — | 127,288 | |||||||||||||
Total derivative liabilities | 127,288 | — | — | 127,288 | |||||||||||||
Total assets and liabilities measured at fair value | $ | 17,689,482 | $ | 7,916,260 | $ | 9,645,934 | $ | 127,288 | |||||||||
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2013: | |||||||||||||||||
Fair Value Measurements at Reporting Date Using | |||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant other | Significant | ||||||||||||||
Inputs | Unobservable | ||||||||||||||||
(Level 2) | Inputs | ||||||||||||||||
(Level 3) | |||||||||||||||||
Cash equivalents: | |||||||||||||||||
Money market funds and commercial paper | $ | 8,486,633 | $ | 8,486,633 | $ | — | $ | — | |||||||||
Total cash equivalents | 8,486,633 | 8,486,633 | — | — | |||||||||||||
Marketable securities: | |||||||||||||||||
Corporate debt and government securities | 8,073,108 | — | 8,073,108 | — | |||||||||||||
Total marketable securities | 8,073,108 | — | 8,073,108 | — | |||||||||||||
Derivative liabilities: | |||||||||||||||||
Derivative Instruments | 159,134 | — | — | 159,134 | |||||||||||||
Total derivative liabilities | 159,134 | — | — | 159,134 | |||||||||||||
Total assets and liabilities measured at fair value | $ | 16,718,875 | $ | 8,486,633 | $ | 8,073,108 | $ | 159,134 | |||||||||
The fair value of the Company’s investments in corporate debt and government securities have been determined utilizing third party pricing services and verified by management. The pricing services use inputs to determine fair value which are derived from observable market sources including reportable trades, benchmark curves, credit spreads, broker/dealer quotes, bids, offers, and other industry and economic events. These investments are included in Level 2 of the fair value hierarchy. | |||||||||||||||||
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 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) as of March 31, 2014 and March 31, 2013: | |||||||||||||||||
Fair Value Measurements Using | |||||||||||||||||
Significant Unobservable Inputs | |||||||||||||||||
(Level 3) | |||||||||||||||||
March 31, 2014 | March 31, 2013 | ||||||||||||||||
Beginning Balance | $ | 159,134 | $ | — | |||||||||||||
Total gains recognized in earnings | (31,846 | ) | — | ||||||||||||||
Ending Balance | $ | 127,288 | $ | — | |||||||||||||
Marketable_Securities
Marketable Securities | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Investments, Debt and Equity Securities [Abstract] | ' | ||||||||||||
Marketable Securities | ' | ||||||||||||
Marketable Securities | |||||||||||||
The Company’s marketable securities consist of available-for-sale securities, which are carried at fair value, with unrealized gains and losses reported as a separate component of stockholders’ equity. Unrealized gains and losses are computed on the specific identification method. Realized gains, realized losses and declines in value judged to be other-than-temporary, are included in interest and other income, net. The cost of available-for-sale securities sold is based on the specific identification method and interest earned is included in interest and other income. | |||||||||||||
The cost and fair values of the Company’s available-for-sale marketable securities as of March 31, 2014, are as follows: | |||||||||||||
Aggregate | Cost or Amortized | Net Unrealized | |||||||||||
Fair Value | Cost | Gains | |||||||||||
Government securities | $ | 7,474,401 | $ | 7,473,328 | $ | 1,073 | |||||||
Corporate debt securities | 2,171,533 | 2,171,011 | 522 | ||||||||||
$ | 9,645,934 | $ | 9,644,339 | $ | 1,595 | ||||||||
The cost and fair values of the Company’s available-for-sale marketable securities as of December 31, 2013, are as follows: | |||||||||||||
Aggregate | Cost or Amortized | Net Unrealized | |||||||||||
Fair Value | Cost | Gains | |||||||||||
Government securities | $ | 6,252,339 | $ | 6,249,483 | $ | 2,856 | |||||||
Corporate debt securities | 1,820,769 | 1,820,215 | 554 | ||||||||||
$ | 8,073,108 | $ | 8,069,698 | $ | 3,410 | ||||||||
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Commitments and Contingencies Disclosure [Abstract] | ' | |||
Commitments and Contingencies | ' | |||
Commitments and Contingencies | ||||
The Company has an operating lease covering its corporate office facility that expires in April 2021. The Company also has several additional operating leases related to offices in foreign countries. The expiration dates for these leases range from 2014 through 2017. The following is a schedule of future minimum lease payments for all operating leases as of March 31, 2014: | ||||
2014 | $ | 1,966,498 | ||
2015 | 1,812,336 | |||
2016 | 1,520,551 | |||
2017 | 1,465,064 | |||
2018 | 1,459,190 | |||
Thereafter | 3,577,335 | |||
$ | 11,800,974 | |||
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 months ended March 31, 2014, the Company has not incurred any costs related to warranty obligations. | ||||
Under the terms of substantially all of its software license agreements, the Company has agreed to indemnify 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 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. As of March 31, 2014, there were no claims outstanding under such indemnification provisions. | ||||
Upon certain triggering events, such as bankruptcy, insolvency or a material adverse effect or failure of the Company to issue shares upon conversion of the redeemable convertible preferred stock in accordance with its obligations, the redeemable convertible preferred stockholders may require the Company to redeem all or some of the redeemable convertible preferred stock at a price equal to the greater of 100% of the stated value plus accrued and unpaid dividends or the product of the number of shares of common stock underlying the redeemable convertible preferred stock and the closing price as of the occurrence of the triggering event. On or after August 5, 2017, each redeemable convertible preferred stockholder can require the Company to redeem its redeemable convertible preferred stock in cash at a price equal to 100% of the stated value being redeemed plus accrued and unpaid dividends. As of March 31, 2014, there were no triggering events that would allow the redeemable convertible preferred stockholders to require the Company to redeem any of the redeemable convertible preferred stock and the Company does not expect to incur any triggering events in fiscal 2014. However, if certain financial covenants are not met over the next nine months, the Company would work on addressing any financial measures needed to remedy the failed covenants as well as work with the holders of the Series A redeemable convertible preferred stock on obtaining waivers as applicable. | ||||
On July 23, 2013, the Company entered into an Employment Agreement (“Quinn Employment Agreement”) with Gary Quinn. Pursuant to the Quinn Employment Agreement, the Company agreed to employ Mr. Quinn as President and Chief Executive Officer of the Company effective July 23, 2013 through July 22, 2015, at an annual salary of $400,000 per annum. The Quinn Employment Agreement also provided for the grant of 500,000 restricted shares which vest over a two-year period at 50% and 50% annually. The 500,000 restricted shares were granted to Mr. Quinn by the Company’s Compensation Committee on August 5, 2013. | ||||
In July, 2013, the Company signed a joint development agreement with Violin Memory under which Violin will pay the Company $12.0 million for licenses to certain of the Company's software and for further development of that software. The first two milestones under the contract were met during 2013 and as a result the Company received $6.0 million under that agreement during 2013 and the Company has recorded this amount as long term deferred revenue as of March 31, 2014. Receipt of the final $6.0 million is broken into several payments and is contingent upon the Company's successful development of future versions of the software within a designated time period, which is expected to be completed during 2014. If the Company is unable to develop the software, the Company will not receive the additional payments. In addition, certain provisions of the joint development agreement could require the Company to return some or all of the money that the Company has already received. | ||||
From time to time, the Company has undertaken restructuring and expense control measures to support its business performance and to align the Company’s cost structure with its resources. During the third quarter of 2013, the Company adopted a restructuring plan intended to better align the Company’s cost structure with the skills and resources required to more effectively execute the Company’s long-term growth strategy and to support revenue levels we expect to achieve on a go forward basis (the “2013 Plan”). In connection with the 2013 Plan the Company eliminated over 100 positions worldwide, implemented tighter expense controls, ceased non-core activities and closed or downsized several facilities. As of March 31, 2014 the restructuring accrual totaled $974,550. The remaining payments under the 2013 Plan are expected to be paid throughout 2014; however, there can be no assurance that all payments will be completed by that time. | ||||
On December 1, 2005, the Company adopted the 2005 FalconStor Software, Inc., Key Executive Severance Protection Plan, which was amended April 1, 2014 (“Severance Plan”). Pursuant to the Severance Plan, the Company’s Chief Executive Officer, Chief Financial Officer and certain other key personnel are entitled to receive certain contingent benefits, as set forth in the Severance Plan, including lump sum payments and acceleration of stock option vesting, each in certain circumstances. |
Redeemable_Convertible_Preferr
Redeemable Convertible Preferred Stock | 3 Months Ended |
Mar. 31, 2014 | |
Equity [Abstract] | ' |
Redeemable Convertible Preferred Stock | ' |
Redeemable Convertible Preferred Stock | |
On September 16, 2013, the Company issued to Hale Capital Partners, LP (“Hale”) 900,000 shares of the Company’s newly created Series A redeemable convertible preferred stock (the "redeemable convertible preferred stock"), par value $0.001 per share, at a price of $10 per share, for an aggregate purchase consideration of $9.0 million. Hale subsequently assigned and transferred all of its shares of the redeemable convertible preferred stock to HCP-FVA LLC. Each share of redeemable convertible preferred stock is convertible into common stock equivalents, at the option of the holder and upon certain mandatory conversion events described below, at a conversion rate of $1.02488 (as adjusted for stock splits, stock dividends, reverse stock splits, stock combinations, reclassifications and similar events). The Company received net proceeds of approximately $8,731,677 from the issuance of the redeemable convertible preferred stock in 2013, net of transaction costs. | |
If on or after the first anniversary of the issuance of the redeemable convertible preferred stock, the volume weighted average price of common stock for each trading day of any 60 consecutive trading days exceeds 250% of the conversion price and exceeds 225% of the conversion price through the conversion date, and certain equity conditions are met such that shares of common stock issued upon conversion can be immediately saleable by the redeemable convertible preferred stockholders, the Company can convert the redeemable convertible preferred stock up to an amount equal to the greater of 25% of the daily trading volume for the 20 consecutive trading days immediately preceding the conversion date or the amount of an identified bona fide block trade at a price reasonably acceptable to the applicable redeemable convertible preferred stockholder, but which price is not less than the arithmetic average of the weighted average prices of the common stock for the five trading days immediately preceding such sale. | |
Upon certain triggering events, such as bankruptcy, insolvency or a material adverse effect, failure to achieve minimum financial covenants or failure of the Company to issue shares upon conversion of the redeemable convertible preferred stock in accordance with its obligations, the redeemable convertible preferred stockholders may require the Company to redeem all or some of the redeemable convertible preferred stock at a price equal to the greater of 100% of the stated value plus accrued and unpaid dividends or the product of the number of shares of common stock underlying the redeemable convertible preferred stock and the closing price as of the occurrence of the triggering event. On or after August 5, 2017, each redeemable convertible preferred stockholder can require the Company to redeem its redeemable convertible preferred stock in cash at a price equal to 100% of the stated value being redeemed plus accrued and unpaid dividends. If the Company does not have the funds necessary to redeem the Series A redeemable convertible preferred stock, the dividends accruing on any outstanding Series A redeemable convertible preferred stock will increase to prime plus 10% (from prime plus 5%). For each six months that the Series A redeemable convertible preferred stock remains unredeemed, the dividend rate increases by 1%, subject to a maximum dividend rate of 19%. In addition, the Company's failure to redeem the redeemable convertible preferred stock would be considered a “Breach Event” under the agreements with the holders of the redeemable convertible preferred stock. If a Breach Event were to occur, then, under the agreements with the holders of our redeemable convertible preferred stock, the Company's Board of Directors would automatically be increased, with the holders of the redeemable convertible preferred stock having the right to appoint the new directors, so that the holders of the redeemable convertible preferred stock would have appointed a majority of the Board of Directors. This would give the holders of the Series A redeemable convertible preferred stock control of the Company. As of March 31, 2014, there were no triggering events that would allow the redeemable convertible preferred stockholders to require the Company to redeem any of the redeemable convertible preferred stock and the Company does not expect to incur any triggering events during fiscal 2014. | |
The Purchase Agreement for the redeemable convertible preferred stock provided that the Company would use commercially reasonable efforts to file a registration statement with the SEC within 90 days for the resale of all of the common stock issuable on the conversion of the Preferred Stock and as dividends. On December 2, 2013 the registration statement was declared effective by the Securities and Exchange Commission. The Purchase Agreement also contains other representations, warranties and financial and non-financial covenants, customary for an issuance of Preferred Stock in a private placement of this nature. | |
Holders of the redeemable convertible preferred stock are entitled to receive quarterly dividends at the Prime Rate (Wall Street Journal Eastern Edition) plus 5% (up to a maximum amount of 10%), payable in cash, provided, that if the Company will not have at least $1.0 million in positive cash flow for any calendar quarter after giving effect to the payment of such dividends, the Company can pay such dividends part in cash and the remainder can be accrued or paid in common stock to the extent certain equity conditions are satisfied. | |
The Company was in compliance with the financial and non-financial covenants as of March 31, 2014, except for the $1.0 million positive cash flow requirement to pay dividends in cash. The Company obtained a waiver from the holders to pay the first quarter 2014 quarterly dividend in cash on April 16, 2014. The Company does not expect to incur any triggering events during fiscal 2014; however, if certain financial covenants are not met over the next nine months, the Company would work on addressing any financial measures needed to remedy the failed covenants as well as work with the holders of the Series A redeemable convertible preferred stock on obtaining waivers as applicable. | |
Each share of redeemable convertible preferred stock has a vote equal to the number of shares of common stock into which the redeemable convertible preferred stock would be convertible as of the record date of September 13, 2013. The Company’s closing stock price on the record date was $1.23 which results in voting power of 7,317,073 shares. In addition, holders of a majority of the redeemable convertible preferred stock must approve certain actions, including any amendments to the Company's charter or bylaws that adversely affects the voting powers, preferences or other rights of the redeemable convertible 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 in parity with the redeemable convertible 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 capital stock of the Company. | |
The Company has classified the redeemable convertible 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 preferred stock, the contingent redemption put options in the redeemable convertible 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 were bifurcated from the redeemable convertible preferred stock and recorded as a liability. These derivative instruments were determined, in the aggregate, to have a fair value of $170,337 at the time of issuance of the preferred stock and were recorded as a reduction to preferred stock. This discount will be accreted to the redeemable convertible 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. As of March 31, 2014 the fair value of these derivative instruments was $127,288. The change in fair value of these derivative instruments from December 31, 2013 of $31,846 was included in “Interest and other income (loss), net” within the consolidated statement of operations for the three months ended March 31, 2014. | |
A beneficial conversion feature (“BCF”) is recorded when the consideration allocated to a convertible security, divided by the number of common shares into which the security converts, is below the fair value of the common stock at the commitment date. The Company’s common stock price on the date one day prior to the closing of the Preferred Stock Agreement (the commitment date) was $1.23 per share, which was $0.21 greater than the conversion price of the redeemable convertible preferred stock. As the closing stock price on the commitment date was greater than the conversion price, the Company recognized a BCF at the time of issuance. The Company allocated $1,951,266 to the BCF through an increase to additional paid-in capital and a corresponding decrease to the preferred stock. The resulting additional discount to the preferred stock is also being accreted to the redeemable convertible 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. | |
The Company included a deduction of $115,376 as an adjustment to net loss attributable to common stockholders on the statement of operations and in determining loss per share for the three months ended March 31, 2014. This represents the current quarter accretion of the transaction costs of $268,323, BCF of $1,951,266 and fair value allocated to the embedded derivatives of $170,337 recorded at the time of the issuance. The Company also included a deduction of $186,904 as an adjustment to net loss attributable to common shareholders on the statement of operations and in determining loss per share for the three months ended March 31, 2014 for accrued dividends on the redeemable convertible preferred stock during the period. These dividends were paid in April 2014. |
Accumulated_Other_Comprehensiv
Accumulated Other Comprehensive Loss | 3 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||
Accumulated Other Comprehensive Loss | ' | ||||||||||||||||
Accumulated Other Comprehensive Loss | |||||||||||||||||
The changes in Accumulated Other Comprehensive Loss, net of tax, for the three months ended March 31, 2014 are as follows: | |||||||||||||||||
Foreign Currency | Net Unrealized | Net Minimum | Total | ||||||||||||||
Translation | Gains on Marketable | Pension Liability | |||||||||||||||
Securities | |||||||||||||||||
Accumulated other comprehensive (loss) income at December 31, 2013 | $ | (1,693,905 | ) | $ | 3,410 | $ | (71,892 | ) | $ | (1,762,387 | ) | ||||||
Other comprehensive (loss) income | |||||||||||||||||
Other comprehensive (loss) income before reclassifications | (126,286 | ) | (1,815 | ) | (2,698 | ) | (130,799 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive (loss) income | — | — | 3,190 | 3,190 | |||||||||||||
Total other comprehensive (loss) income | (126,286 | ) | (1,815 | ) | 492 | (127,609 | ) | ||||||||||
Accumulated other comprehensive (loss) income at March 31, 2014 | $ | (1,820,191 | ) | $ | 1,595 | $ | (71,400 | ) | $ | (1,889,996 | ) | ||||||
The changes in Accumulated Other Comprehensive Loss, net of tax, for the three months ended March 31, 2013 are as follows: | |||||||||||||||||
Foreign Currency | Net Unrealized | Net Minimum | Total | ||||||||||||||
Translation | Gains on Marketable | Pension Liability | |||||||||||||||
Securities | |||||||||||||||||
Accumulated other comprehensive (loss) income at December 31, 2012 | $ | (1,601,138 | ) | $ | 6,210 | $ | (55,122 | ) | $ | (1,650,050 | ) | ||||||
Other comprehensive (loss) income | |||||||||||||||||
Other comprehensive (loss) income before reclassifications | 34,527 | 4,007 | (6,718 | ) | 31,816 | ||||||||||||
Amounts reclassified from accumulated other comprehensive (loss) income | — | — | 2,160 | 2,160 | |||||||||||||
Total other comprehensive (loss) income | 34,527 | 4,007 | (4,558 | ) | 33,976 | ||||||||||||
Accumulated other comprehensive (loss) income at March 31, 2013 | $ | (1,566,611 | ) | $ | 10,217 | $ | (59,680 | ) | $ | (1,616,074 | ) | ||||||
For the three months ended March 31, 2014 and 2013, the amounts reclassified to net loss related to the Company’s defined benefit plan. These amounts are included within “Operating loss” within the condensed consolidated statements of operations. |
Litigation
Litigation | 3 Months Ended |
Mar. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Litigation | ' |
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. | |
Stockholder Litigation | |
The Company is a defendant in a class action lawsuit brought in United Stated District Court for the Eastern District of New York, by Company shareholders (the “Class Action”). The other defendants are James Weber, the Company's former CFO and Vice President for Operations, and the estate of ReiJane Huai. Mr. Huai was the Company’s former Chairman, President and CEO. | |
The Class Action complaint alleges that the defendants defrauded shareholders by falsely certifying in the Company’s SEC filings that they had disclosed any fraud, whether or not material, that involved management or other employees who had a significant role in the registrant’s internal control over financial reporting. The Class Action complaint alleges that the defendants were in fact aware of fraud. | |
On May 8, 2014 a settlement of the action was approved by the court. In the fourth quarter of 2013, following preliminary approval of the settlement by the district court, the Company deposited $5.0 million into an escrow account, where it was being held pending final settlement. | |
Company stockholders filed actions in the Suffolk County Division of the Supreme Court of the State of New York, putatively derivatively on behalf of the Company, against the Company, each of the Company’s Directors, Mr. Weber, Wayne Lam, a former Vice president of the Company, the estate of Mr. Huai, and Jason Lin, a former employee of the Company (the “Derivative Action”). The consolidated amended Derivative Action complaint alleged that the defendants breached their duties to the Company by: (1) causing or allowing the dissemination of false and misleading information; (2) failing to maintain internal controls; (3) failing to manage the Company properly; (4) unjustly enriching themselves; (5) abusing their control of the Company; and (6) wasting Company assets. | |
On March 5, 2013, the Suffolk County Division of the Supreme Court of the State of New York granted a motion made by all of the defendants in the Derivative Action, except Mr. Lin, and dismissed the Derivative Action as to all defendants other than Mr. Lin. The stockholders have appealed the dismissal of the Derivative Action. The Company cannot predict when the appeal will be resolved or the ultimate outcome of the matter. Certain of the defendants may be entitled to indemnification by the Company under the laws of Delaware and/or the Company’s by-laws. | |
The Company has insurance policies that were purchased to cover, among other things, lawsuits like the Class Action and the Derivative Action. The Company’s Directors and Officers (“D&O”) Insurance, is composed of more than one layer, each layer written by a different insurance company. However, the events that gave rise to the claims in the Class Action and the Derivative Action caused the Company’s insurers to reserve their rights to disclaim, rescind, or otherwise not be obligated to provide coverage to the Company and certain other insureds under the policies. In light of these uncertainties, the Company has entered into settlements with two of its insurers. Pursuant to these settlements, the Company will not receive repayment of all amounts it might otherwise have received. | |
In October 2012 the Company entered into an agreement with the carrier of the first $5.0 million layer of the Company’s D&O insurance. Pursuant to this agreement, the Company accepted a payment of $3.9 million from the first layer insurance carrier in satisfaction of the carrier’s obligations to the Company under the first layer D&O insurance policy. In addition, as part of the October 2012 agreement with the carrier, the Company agreed to indemnify the carrier of the first layer of D&O insurance against potential claims by certain named insured persons under the first layer D&O insurance policy. The Company cannot predict the likelihood or the outcome of any such claims by the named insureds. | |
Because the carrier of the next layer of insurance would not be obligated to make payment to the Company until the full $5.0 million first layer limit had been exhausted, this means that the Company was responsible for $1.1 million out of pocket before it could again seek reimbursement from its insurers. The Company accrued for the $1.1 million during 2012. | |
On July 31, 2013 the Company entered into an agreement with the carrier of the second $5.0 million layer of the Company’s D&O insurance. Pursuant to the agreement, the insurer agreed to pay seventy five percent (75%) of the Company’s losses attributable to the Class Action and the Derivative Action above the first $5.25 million of such losses. In addition, as part of the July 31, 2013 agreement with the carrier, the Company agreed to indemnify the carrier of the second layer of D&O insurance against potential claims by certain named insured persons under the second layer D&O insurance. The Company cannot predict the likelihood or the outcome of any such claims by the named insureds. | |
While, at present, the Company does not believe that the amounts it will pay in connection with the Class Action and the Derivative Action will exceed the limits of the first two layers of its coverage, there can be no assurance that if the Company seeks recovery from the additional layers, the recovery the Company makes on the remainder of its insurance will be adequate to cover the costs of its defense or settlement of the Derivative Action, or any damages that might ultimately be awarded against the Company or anyone to whom the Company might owe indemnification if the appeal is successful. | |
The Company’s remaining insurers may deny coverage under the policies. If the plaintiffs are awarded damages and the Company’s insurance is not adequate to cover the amounts, or its insurers deny coverage, the amounts to be paid by the Company could have a significant negative impact on its financial results, cash flow and cash balances. | |
Since October 1, 2012, the Company has recorded $7.4 million of total costs associated with the Class Action and the Derivative Actions. The Company has recorded a liability in the amount of $0.3 million in “accrued expenses” in the consolidated balance sheets as of March 31, 2014 which includes estimated legal fees for both the Class Action and the Derivative Action to date. As a result of the agreement reached with the insurer carriers of the Company’s D&O insurance, the Company recorded insurance recoveries of $5.5 million since October 1, 2012 of which $5.3 million have been reimbursed by the Company's insurance carriers and the remaining $0.2 million is recorded as a receivable in “prepaid expenses and other current assets” in the consolidated balance sheet as of March 31, 2014. | |
During both the three months ended March 31, 2014 and 2013, the Company recorded $0.1 million of investigation, litigation and settlement related legal costs, net of expected recoveries, related to expenses related to the class action and derivative lawsuits and other settlement related activities that are not recoverable through insurance. | |
The Estate of ReiJane Huai | |
On October 24, 2013, the Company filed a Petition against the Estate of ReiJane Huai (the “Estate”) in Surrogates Court, Nassau County, State of New York. Mr. Huai was the former Chairman, President and Chief Executive Officer of the Company. The Company believes that the Estate owns more than 10% of the voting stock of the Company. | |
The Petition alleges that Mr. Huai breached his fiduciary duties to the Company, breached his contracts with the Company, was unjustly enriched at the Company’s expense, and must repay legal fees advanced on Mr. Huai’s behalf by the Company. The Company demands payment of approximately $10 million from the Estate representing (1) wages and other compensation paid to Mr. Huai during the period that Mr. Huai was involved in the payment of bribes to a Company customer, and (2) legal fees advanced on behalf of Mr. Huai in connection with the criminal and regulatory investigations of the Company, and the civil litigation, arising out of the bribes. The legal fees were advanced under the indemnification provisions of the Company’s by-laws and pursuant to an undertaking to repay under certain conditions signed by Mr. Huai. | |
In January, 2014, the Estate moved for partial dismissal of the Petition on the grounds that Mr. Huai was entitled to indemnification. The Company has filed its opposition to the Estate’s motion. | |
Other Claims | |
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
Segment Reporting | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Segment Reporting [Abstract] | ' | ||||||||
Segment Reporting | ' | ||||||||
Segment Reporting | |||||||||
The Company is organized in a single operating segment for purposes of making operating decisions and assessing performance. Revenues from the United States to customers in the following geographical areas for the three months ended March 31, 2014 and 2013, and the location of long-lived assets as of March 31, 2014 and December 31, 2013, are summarized as follows: | |||||||||
Three Months Ended March 31, | |||||||||
2014 | 2013 | ||||||||
Revenues: | |||||||||
Americas | $ | 4,364,592 | $ | 6,435,926 | |||||
Asia Pacific | 3,924,304 | 4,396,003 | |||||||
Europe, Middle East, Africa and Other | 3,712,603 | 4,452,888 | |||||||
Total Revenues | $ | 12,001,499 | $ | 15,284,817 | |||||
31-Mar-14 | 31-Dec-13 | ||||||||
Long-lived assets: | |||||||||
Americas | $ | 9,157,985 | $ | 9,712,675 | |||||
Asia Pacific | 1,063,034 | 717,527 | |||||||
Europe, Middle East, Africa and Other | 403,335 | 612,058 | |||||||
Total long-lived assets | $ | 10,624,354 | $ | 11,042,260 | |||||
For the three months ended March 31, 2014 the Company had one customer that accounted for 10% of total revenues. For the three months ended March 31, 2013 the Company had one customer that accounted for 17% of total revenues. As of March 31, 2014, the Company had one customer that accounted for 12% of the accounts receivable balance. As of December 31, 2013, the Company had one customer that accounted for 12% of the accounts receivable balance. | |||||||||
Due to cash collections of previously reserved accounts receivable balances, the Company recorded benefits of $67,265 and $136,350 during the three months ended March 31, 2014 and 2013, respectively. These amounts are included within revenues in the accompanying condensed consolidated statement of operations. |
Restructuring_Costs
Restructuring Costs | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Restructuring and Related Activities [Abstract] | ' | ||||||||||||
Restructuring Costs | ' | ||||||||||||
Restructuring Costs | |||||||||||||
From time to time, the Company has undertaken restructuring and expense control measures to support its business performance and to align the Company’s cost structure with its resources. In the third quarter of 2013, the Company adopted a restructuring plan intended to better align the Company’s cost structure with the skills and resources required to more effectively execute the Company’s long-term growth strategy and to support revenue levels we expect to achieve on a go forward basis. In connection with the 2013 Plan the Company eliminated over 100 positions worldwide, implemented tighter expense controls, ceased non-core activities and closed or downsized several facilities. The 2013 Plan is expected to be completed during the first half of 2014. The following table summarizes the activity related to restructuring liabilities recorded in connection with the Company's 2013 Plan: | |||||||||||||
Severance related costs | Facility and other costs | Total | |||||||||||
Original charge | $ | 3,179,131 | $ | 426,889 | $ | 3,606,020 | |||||||
Utilized/Paid | (2,067,554 | ) | (231,973 | ) | (2,299,527 | ) | |||||||
Balance at December 31, 2013 | $ | 1,111,577 | $ | 194,916 | $ | 1,306,493 | |||||||
Provisions/Additions | 59,279 | 164,294 | 223,573 | ||||||||||
Utilized/Paid | (450,650 | ) | (104,866 | ) | (555,516 | ) | |||||||
Balance at March 31, 2014 | $ | 720,206 | $ | 254,344 | $ | 974,550 | |||||||
The severance related liabilities and facility and other liabilities are included within “accrued expenses” and "accounts payable" in the accompanying condensed consolidated balance sheets. The expenses under the 2013 Plan are included within “restructuring costs” in the accompanying condensed consolidated statements of operations. The remaining payments under the 2013 Plan are expected to be paid throughout 2014; however, there can be no assurance that all payments will be completed by that time. |
Basis_of_Presentation_Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
The Company and Nature of Operations | ' |
The Company and Nature of Operations | |
FalconStor Software, Inc., a Delaware Corporation (the "Company"), develops, manufactures and sells data migration, business continuity, disaster recovery, optimized backup and de-duplication solutions and provides the related maintenance, implementation and engineering services. | |
Principles of Consolidation | ' |
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 | ' |
Use of Estimates | |
The preparation of financial statements in conformity with generally accepted accounting principles 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, share-based payment compensation, marketable securities, valuation of embedded derivatives, software development costs, goodwill and other intangible assets 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 to the Company’s significant accounting estimates discussed above. | |
Unaudited Interim Financial Information | ' |
Unaudited Interim Financial Information | |
The accompanying unaudited interim condensed consolidated financial statements have been prepared, without audit, 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 accounting principles generally accepted in the United States of America 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 present fairly the financial position of the Company at March 31, 2014, and the results of its operations for the three months ended March 31, 2014 and 2013. 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, 2013 ("2013 Form 10-K"). | |
Reclassifications | ' |
Reclassifications | |
Certain reclassifications were made to the prior period amounts to conform to the current period presentation. | |
Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements | ' |
Recently Adopted Accounting Pronouncements | |
In July 2013, the FASB issued new guidance which requires the netting of an unrecognized tax benefit, or a portion of an unrecognized tax benefit, against a deferred tax asset for a net operating loss carry forward, a similar tax loss, or a tax credit carry forward if such settlement is required or expected in the event the uncertain tax position is disallowed. The new guidance is effective prospectively to all existing unrecognized tax benefits, but entities can choose to apply it retrospectively. The adoption of this new accounting guidance in the first quarter of 2014 did not have any impact on the Company's consolidated financial position, results of operations or cash flows. | |
(g) Recently Issued Accounting Pronouncements | |
On May 14, 2013, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued its updated Internal Control - Integrated Framework (the 2013 Framework) and related illustrative documents. COSO will continue to make available its original Framework during the transition period extending to December 15, 2014. The Company currently utilizes COSO’s original Framework, which was published in 1992 and is recognized as the leading guidance for designing, implementing and conducting internal controls over external financial reporting and assessing its effectiveness. The 2013 Framework is expected to help organizations design and implement internal control in light of many changes in business and operating environments since the issuance of the original Framework, broaden the application of internal control in addressing operations and reporting objectives, and clarify the requirements for determining what constitutes effective internal control. The Company plans to adopt the 2013 Framework during 2014 and does not expect that it will have a significant impact on the Company. |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Accounting Policies [Abstract] | ' |
Revenue Recognition | ' |
Revenue Recognition | |
The Company derives its revenue from sales of its products, support and services. Product revenue consists of the Company’s software integrated with industry standard hardware and sold as complete turn-key integrated solutions and as stand-alone software applications. Support and services revenue consists of both maintenance revenues and professional services revenues. Revenue is recorded net of applicable sales taxes. | |
In accordance with the authoritative guidance issued by the FASB on revenue recognition, the Company recognizes revenue from product sales when persuasive evidence of an arrangement exists, the fee is fixed and determinable, the product is delivered, and collection of the resulting receivable is deemed probable. Products delivered to a customer on a trial basis are not recognized as revenue until the trial period has ended and acceptance has occurred by the customer. Reseller customers typically send the Company a purchase order when they have an end user identified. Distributor customers typically send the Company a purchase order when they have a reseller and end user identified. For bundled arrangements that include either maintenance or both maintenance and professional services, the Company uses the residual method to determine the amount of product revenue to be recognized. Under the residual method, consideration is allocated to the undelivered elements based upon vendor-specific objective evidence (“VSOE”) of the fair value of those elements, with the residual of the arrangement fee allocated to and recognized as product revenue. If VSOE does not exist for all undelivered elements of an arrangement, the Company recognizes total revenue from the arrangement ratably over the term of the maintenance agreement. The Company's long-term portion of deferred revenue consists of (i) payments received for maintenance contracts with terms in excess of one year as of the balance sheet date, (ii) payments received for product sales bundled with multiple years of maintenance but for which VSOE did not exist for all undelivered elements of the arrangement, and (iii) payments received in connection with a joint development agreement entered into by the Company in 2013 pursuant to which revenue is being deferred until final delivery and acceptance of the software product being developed and then recognized ratably over a twenty-four month maintenance period. The Company provides an allowance for product returns as a reduction of revenue, based upon historical experience and known or expected trends. | |
Revenues associated with maintenance services are deferred and recognized as revenue ratably over the term of the contract. Revenues associated with software implementation and software engineering services are recognized when the services are performed. Costs of providing these services are included in cost of support and services. | |
The Company has entered into various distribution, licensing and joint promotion agreements with OEMs, whereby the Company has provided to the OEM a non-exclusive software license to install the Company’s software on certain hardware or to resell the Company’s software in exchange for payments based on the products distributed by these OEMs. Such payments from the OEM or distributor are recognized as revenue in the period reported by the OEM. | |
From time to time the Company will enter into funded software development arrangements. Under such arrangements, revenue recognition will not commence until final delivery and/or acceptance of the product. For arrangements where the Company has VSOE for the undelivered elements, the Company will follow the residual method and recognize product revenue upon final delivery and/or acceptance of the product. For arrangements where the Company does not have VSOE for the undelivered elements, the Company will recognize the entire arrangement fee ratably commencing at the time of final delivery and/or acceptance through the end of the service period in the arrangement. |
Earnings_Per_Share_Tables
Earnings Per Share (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Earnings Per Share [Abstract] | ' | ||||||||
Computation of Earnings Per Share | ' | ||||||||
The following represents a reconciliation of the numerators and denominators of the basic and diluted EPS computation: | |||||||||
Three Months Ended March 31, | |||||||||
2014 | 2013 | ||||||||
Numerator | |||||||||
Net loss | $ | (2,801,798 | ) | $ | (4,380,445 | ) | |||
Effects of redeemable convertible preferred stock: | |||||||||
Less: Preferred stock dividends | 186,904 | — | |||||||
Less: Accretion to redemption value of Series A preferred stock | 115,376 | — | |||||||
Net loss attributable to common stockholders | $ | (3,104,078 | ) | $ | (4,380,445 | ) | |||
Denominator | |||||||||
Basic shares outstanding | 48,031,737 | 47,862,834 | |||||||
Effect of dilutive securities: | |||||||||
Stock options and restricted stock | — | — | |||||||
Preferred Stock | — | — | |||||||
Diluted shares outstanding | 48,031,737 | 47,862,834 | |||||||
EPS | |||||||||
Basic net loss per share attributable to common stockholders | $ | (0.06 | ) | $ | (0.09 | ) | |||
Diluted net loss per share attributable to common stockholders | $ | (0.06 | ) | $ | (0.09 | ) |
Inventories_Tables
Inventories (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Schedule of Inventory | ' | ||||||||
At March 31, 2014 and December 31, 2013 inventories are as follows: | |||||||||
31-Mar-14 | 31-Dec-13 | ||||||||
Component materials | $ | 7,475 | $ | 10,073 | |||||
Finished systems | 644,871 | 909,317 | |||||||
Total Inventory | $ | 652,346 | $ | 919,390 | |||||
Property_and_Equipment_Tables
Property and Equipment (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Schedule of Property and Equipment | ' | ||||||||
The gross carrying amount and accumulated depreciation of property and equipment as of March 31, 2014 and December 31, 2013 are as follows: | |||||||||
March 31, 2014 | December 31, 2013 | ||||||||
Property and Equipment: | |||||||||
Gross carrying amount | $ | 19,583,696 | $ | 19,339,574 | |||||
Accumulated depreciation | (16,489,956 | ) | (16,022,230 | ) | |||||
Property and Equipment, net | $ | 3,093,740 | $ | 3,317,344 | |||||
Software_Development_Costs_Tab
Software Development Costs (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Research and Development [Abstract] | ' | ||||||||
Software Development Costs | ' | ||||||||
The gross carrying amount and accumulated amortization of software development costs as of March 31, 2014 and December 31, 2013 are as follows: | |||||||||
March 31, 2014 | December 31, 2013 | ||||||||
Software development costs: | |||||||||
Gross carrying amount | $ | 2,718,900 | $ | 2,718,900 | |||||
Accumulated amortization | (1,025,128 | ) | (922,825 | ) | |||||
Software development costs, net | $ | 1,693,772 | $ | 1,796,075 | |||||
Goodwill_and_Other_Intangible_1
Goodwill and Other Intangible Assets (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||
Schedule of Intangible Assets and Goodwill | ' | ||||||||
The gross carrying amount and accumulated amortization of goodwill and other intangible assets as of March 31, 2014 and December 31, 2013 are as follows: | |||||||||
31-Mar-14 | 31-Dec-13 | ||||||||
Goodwill | $ | 4,150,339 | $ | 4,150,339 | |||||
Other intangible assets: | |||||||||
Gross carrying amount | $ | 3,266,662 | $ | 3,256,709 | |||||
Accumulated amortization | (3,106,083 | ) | (3,077,113 | ) | |||||
Net carrying amount | $ | 160,579 | $ | 179,596 | |||||
ShareBased_Payment_Arrangement1
Share-Based Payment Arrangements (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||
Details of Stock Option Plan | ' | ||||||||
The following table summarizes the plans under which the Company was able to grant equity compensation as of March 31, 2014: | |||||||||
Shares | Shares Available | Shares | Last Date for Grant | ||||||
Name of Plan | Authorized | for Grant | Outstanding | of Shares | |||||
FalconStor Software, Inc., 2006 Incentive Stock Plan | 13,455,546 | 4,357,329 | 6,437,865 | May 17, 2016 | |||||
FalconStor Software, Inc., 2013 Outside Directors Equity Compensation Plan | 400,000 | 350,000 | 50,000 | May 9, 2016 | |||||
Schedule of Equity Awards Outstanding | ' | ||||||||
The following table summarizes the Company’s equity plans that have expired but that still have equity awards outstanding as of March 31, 2014: | |||||||||
Name of Plan | Shares Available for Grant | Shares Outstanding | |||||||
FalconStor Software, Inc., 2000 Stock Option Plan | — | 1,124,967 | |||||||
2004 Outside Directors Stock Option Plan | — | 145,000 | |||||||
FalconStor Software, Inc., 2007 Outside Directors Equity Compensation Plan | — | 160,000 | |||||||
FalconStor Software, Inc., 2010 Outside Directors Equity Compensation Plan | — | 50,500 | |||||||
Schedule Of Share Based Compensation Recognized | ' | ||||||||
The Company recognized 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 months ended March 31, 2014 and 2013: | |||||||||
Three Months Ended March 31, | |||||||||
2014 | 2013 | ||||||||
Cost of revenues - Product | $ | — | $ | 49 | |||||
Cost of revenues - Support and Service | 21,883 | 50,256 | |||||||
Research and development costs | 88,799 | 134,910 | |||||||
Selling and marketing | 162,187 | 284,038 | |||||||
General and administrative | 139,792 | 421,482 | |||||||
$ | 412,661 | $ | 890,735 | ||||||
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
Schedule of Fair Value Assets 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 March 31, 2014: | |||||||||||||||||
Fair Value Measurements at Reporting Date Using | |||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant other | Significant | ||||||||||||||
Inputs | Unobservable | ||||||||||||||||
(Level 2) | Inputs | ||||||||||||||||
(Level 3) | |||||||||||||||||
Cash equivalents: | |||||||||||||||||
Money market funds and commercial paper | $ | 7,916,260 | $ | 7,916,260 | $ | — | $ | — | |||||||||
Total cash equivalents | 7,916,260 | 7,916,260 | — | — | |||||||||||||
Marketable securities: | |||||||||||||||||
Corporate debt and government securities | 9,645,934 | — | 9,645,934 | — | |||||||||||||
Total marketable securities | 9,645,934 | — | 9,645,934 | — | |||||||||||||
Derivative liabilities: | |||||||||||||||||
Derivative Instruments | 127,288 | — | — | 127,288 | |||||||||||||
Total derivative liabilities | 127,288 | — | — | 127,288 | |||||||||||||
Total assets and liabilities measured at fair value | $ | 17,689,482 | $ | 7,916,260 | $ | 9,645,934 | $ | 127,288 | |||||||||
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2013: | |||||||||||||||||
Fair Value Measurements at Reporting Date Using | |||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant other | Significant | ||||||||||||||
Inputs | Unobservable | ||||||||||||||||
(Level 2) | Inputs | ||||||||||||||||
(Level 3) | |||||||||||||||||
Cash equivalents: | |||||||||||||||||
Money market funds and commercial paper | $ | 8,486,633 | $ | 8,486,633 | $ | — | $ | — | |||||||||
Total cash equivalents | 8,486,633 | 8,486,633 | — | — | |||||||||||||
Marketable securities: | |||||||||||||||||
Corporate debt and government securities | 8,073,108 | — | 8,073,108 | — | |||||||||||||
Total marketable securities | 8,073,108 | — | 8,073,108 | — | |||||||||||||
Derivative liabilities: | |||||||||||||||||
Derivative Instruments | 159,134 | — | — | 159,134 | |||||||||||||
Total derivative liabilities | 159,134 | — | — | 159,134 | |||||||||||||
Total assets and liabilities measured at fair value | $ | 16,718,875 | $ | 8,486,633 | $ | 8,073,108 | $ | 159,134 | |||||||||
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) as of March 31, 2014 and March 31, 2013: | |||||||||||||||||
Fair Value Measurements Using | |||||||||||||||||
Significant Unobservable Inputs | |||||||||||||||||
(Level 3) | |||||||||||||||||
March 31, 2014 | March 31, 2013 | ||||||||||||||||
Beginning Balance | $ | 159,134 | $ | — | |||||||||||||
Total gains recognized in earnings | (31,846 | ) | — | ||||||||||||||
Ending Balance | $ | 127,288 | $ | — | |||||||||||||
Marketable_Securities_Tables
Marketable Securities (Tables) | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Investments, Debt and Equity Securities [Abstract] | ' | ||||||||||||
Schedule Of Available For Sale Securities | ' | ||||||||||||
The cost and fair values of the Company’s available-for-sale marketable securities as of March 31, 2014, are as follows: | |||||||||||||
Aggregate | Cost or Amortized | Net Unrealized | |||||||||||
Fair Value | Cost | Gains | |||||||||||
Government securities | $ | 7,474,401 | $ | 7,473,328 | $ | 1,073 | |||||||
Corporate debt securities | 2,171,533 | 2,171,011 | 522 | ||||||||||
$ | 9,645,934 | $ | 9,644,339 | $ | 1,595 | ||||||||
The cost and fair values of the Company’s available-for-sale marketable securities as of December 31, 2013, are as follows: | |||||||||||||
Aggregate | Cost or Amortized | Net Unrealized | |||||||||||
Fair Value | Cost | Gains | |||||||||||
Government securities | $ | 6,252,339 | $ | 6,249,483 | $ | 2,856 | |||||||
Corporate debt securities | 1,820,769 | 1,820,215 | 554 | ||||||||||
$ | 8,073,108 | $ | 8,069,698 | $ | 3,410 | ||||||||
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Commitments and Contingencies Disclosure [Abstract] | ' | |||
Schedule of Future Minimum Payments for Operating Leases | ' | |||
The following is a schedule of future minimum lease payments for all operating leases as of March 31, 2014: | ||||
2014 | $ | 1,966,498 | ||
2015 | 1,812,336 | |||
2016 | 1,520,551 | |||
2017 | 1,465,064 | |||
2018 | 1,459,190 | |||
Thereafter | 3,577,335 | |||
$ | 11,800,974 | |||
Accumulated_Other_Comprehensiv1
Accumulated Other Comprehensive Loss (Tables) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||
Schedule of accumulated other comprehensive loss | ' | ||||||||||||||||
The changes in Accumulated Other Comprehensive Loss, net of tax, for the three months ended March 31, 2014 are as follows: | |||||||||||||||||
Foreign Currency | Net Unrealized | Net Minimum | Total | ||||||||||||||
Translation | Gains on Marketable | Pension Liability | |||||||||||||||
Securities | |||||||||||||||||
Accumulated other comprehensive (loss) income at December 31, 2013 | $ | (1,693,905 | ) | $ | 3,410 | $ | (71,892 | ) | $ | (1,762,387 | ) | ||||||
Other comprehensive (loss) income | |||||||||||||||||
Other comprehensive (loss) income before reclassifications | (126,286 | ) | (1,815 | ) | (2,698 | ) | (130,799 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive (loss) income | — | — | 3,190 | 3,190 | |||||||||||||
Total other comprehensive (loss) income | (126,286 | ) | (1,815 | ) | 492 | (127,609 | ) | ||||||||||
Accumulated other comprehensive (loss) income at March 31, 2014 | $ | (1,820,191 | ) | $ | 1,595 | $ | (71,400 | ) | $ | (1,889,996 | ) | ||||||
The changes in Accumulated Other Comprehensive Loss, net of tax, for the three months ended March 31, 2013 are as follows: | |||||||||||||||||
Foreign Currency | Net Unrealized | Net Minimum | Total | ||||||||||||||
Translation | Gains on Marketable | Pension Liability | |||||||||||||||
Securities | |||||||||||||||||
Accumulated other comprehensive (loss) income at December 31, 2012 | $ | (1,601,138 | ) | $ | 6,210 | $ | (55,122 | ) | $ | (1,650,050 | ) | ||||||
Other comprehensive (loss) income | |||||||||||||||||
Other comprehensive (loss) income before reclassifications | 34,527 | 4,007 | (6,718 | ) | 31,816 | ||||||||||||
Amounts reclassified from accumulated other comprehensive (loss) income | — | — | 2,160 | 2,160 | |||||||||||||
Total other comprehensive (loss) income | 34,527 | 4,007 | (4,558 | ) | 33,976 | ||||||||||||
Accumulated other comprehensive (loss) income at March 31, 2013 | $ | (1,566,611 | ) | $ | 10,217 | $ | (59,680 | ) | $ | (1,616,074 | ) | ||||||
Segment_Reporting_Tables
Segment Reporting (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Segment Reporting [Abstract] | ' | ||||||||
Schedule of Revenues And Long Lived Assets By Geographical Areas | ' | ||||||||
The Company is organized in a single operating segment for purposes of making operating decisions and assessing performance. Revenues from the United States to customers in the following geographical areas for the three months ended March 31, 2014 and 2013, and the location of long-lived assets as of March 31, 2014 and December 31, 2013, are summarized as follows: | |||||||||
Three Months Ended March 31, | |||||||||
2014 | 2013 | ||||||||
Revenues: | |||||||||
Americas | $ | 4,364,592 | $ | 6,435,926 | |||||
Asia Pacific | 3,924,304 | 4,396,003 | |||||||
Europe, Middle East, Africa and Other | 3,712,603 | 4,452,888 | |||||||
Total Revenues | $ | 12,001,499 | $ | 15,284,817 | |||||
31-Mar-14 | 31-Dec-13 | ||||||||
Long-lived assets: | |||||||||
Americas | $ | 9,157,985 | $ | 9,712,675 | |||||
Asia Pacific | 1,063,034 | 717,527 | |||||||
Europe, Middle East, Africa and Other | 403,335 | 612,058 | |||||||
Total long-lived assets | $ | 10,624,354 | $ | 11,042,260 | |||||
Restructuring_Costs_Tables
Restructuring Costs (Tables) | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Restructuring and Related Activities [Abstract] | ' | ||||||||||||
Schedule Of Restructuring Costs | ' | ||||||||||||
The following table summarizes the activity related to restructuring liabilities recorded in connection with the Company's 2013 Plan: | |||||||||||||
Severance related costs | Facility and other costs | Total | |||||||||||
Original charge | $ | 3,179,131 | $ | 426,889 | $ | 3,606,020 | |||||||
Utilized/Paid | (2,067,554 | ) | (231,973 | ) | (2,299,527 | ) | |||||||
Balance at December 31, 2013 | $ | 1,111,577 | $ | 194,916 | $ | 1,306,493 | |||||||
Provisions/Additions | 59,279 | 164,294 | 223,573 | ||||||||||
Utilized/Paid | (450,650 | ) | (104,866 | ) | (555,516 | ) | |||||||
Balance at March 31, 2014 | $ | 720,206 | $ | 254,344 | $ | 974,550 | |||||||
Earnings_Per_Share_Details
Earnings Per Share (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Numerator | ' | ' |
Net loss | ($2,801,798) | ($4,380,445) |
Preferred Stock Dividends and Other Adjustments [Abstract] | ' | ' |
Less: Preferred stock dividends | 186,904 | 0 |
Less: Accretion to redemption value of Series A preferred stock | 115,376 | 0 |
Net loss attributable to common stockholders | ($3,104,078) | ($4,380,445) |
Denominator | ' | ' |
Weighted average basic shares outstanding (in shares) | 48,031,737 | 47,862,834 |
Effect of dilutive securities: | ' | ' |
Stock options and restricted stock | 0 | 0 |
Preferred Stock | 0 | 0 |
Weighted average diluted shares outstanding (in shares) | 48,031,737 | 47,862,834 |
Basic net loss per share attributable to common stockholders (in dollars per share) | ($0.06) | ($0.09) |
Diluted net loss per share attributable to common stockholders (in dollars per share) | ($0.06) | ($0.09) |
Earnings_Per_Share_Details_Nar
Earnings Per Share (Details Narrative) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ' | ' |
Common stock equivalents excluded from diluted net loss per share | 16,749,848 | 10,994,077 |
Stock option and restricted stock award | ' | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ' | ' |
Common stock equivalents excluded from diluted net loss per share | 7,968,332 | 10,994,077 |
Series A redeemable convertible preferred stock | ' | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ' | ' |
Common stock equivalents excluded from diluted net loss per share | 8,781,516 | ' |
Inventories_Details
Inventories (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Inventory Disclosure [Abstract] | ' | ' |
Component materials | $7,475 | $10,073 |
Finished systems | 644,871 | 909,317 |
Total Inventory | $652,346 | $919,390 |
Property_and_Equipment_Details
Property and Equipment (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Property, Plant and Equipment [Abstract] | ' | ' | ' |
Gross carrying amount | $19,583,696 | ' | $19,339,574 |
Accumulated depreciation | -16,489,956 | ' | -16,022,230 |
Property and Equipment, net | 3,093,740 | ' | 3,317,344 |
Depreciation expense | $493,317 | $586,980 | ' |
Software_Development_Costs_Det
Software Development Costs (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Research and Development [Abstract] | ' | ' | ' |
Gross carrying amount | $2,718,900 | ' | $2,718,900 |
Accumulated amortization | -1,025,128 | ' | -922,825 |
Software development costs, net | 1,693,772 | ' | 1,796,075 |
Capitalized computer software amortization | $102,303 | $82,062 | ' |
Goodwill_and_Other_Intangible_2
Goodwill and Other Intangible Assets (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ' | ' |
Goodwill | $4,150,339 | ' | $4,150,339 |
Other intangible assets: | ' | ' | ' |
Gross carrying amount | 3,266,662 | ' | 3,256,709 |
Accumulated amortization | -3,106,083 | ' | -3,077,113 |
Net carrying amount | 160,579 | ' | 179,596 |
Amortization of intangible assets | $28,970 | $29,542 | ' |
ShareBased_Payment_Arrangement2
Share-Based Payment Arrangements (Details) | 3 Months Ended |
Mar. 31, 2014 | |
FalconStor Software, Inc., 2006 Incentive Stock Plan | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Shares Authorized | 13,455,546 |
Shares Available for Grant | 4,357,329 |
Shares Outstanding | 6,437,865 |
Last Date for Grant of Shares | 17-May-16 |
FalconStor Software, Inc., 2013 Outside Directors Equity Compensation Plan | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Shares Authorized | 400,000 |
Shares Available for Grant | 350,000 |
Shares Outstanding | 50,000 |
Last Date for Grant of Shares | 9-May-16 |
ShareBased_Payment_Arrangement3
Share-Based Payment Arrangements (Details 1) | Mar. 31, 2014 |
FalconStor Software, Inc., 2000 Stock Option Plan | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Shares Available for Grant | 0 |
Shares Outstanding | 1,124,967 |
2004 Outside Directors Stock Option Plan | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Shares Available for Grant | 0 |
Shares Outstanding | 145,000 |
FalconStor Software, Inc., 2007 Outside Directors Equity Compensation Plan | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Shares Available for Grant | 0 |
Shares Outstanding | 160,000 |
FalconStor Software, Inc., 2010 Outside Directors Equity Compensation Plan | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Shares Available for Grant | 0 |
Shares Outstanding | 50,500 |
ShareBased_Payment_Arrangement4
Share-Based Payment Arrangements (Details 2) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Share-based compensation expense | $412,661 | $890,735 |
Cost of revenues - Product | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Share-based compensation expense | 0 | 49 |
Cost of revenues - Support and Service | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Share-based compensation expense | 21,883 | 50,256 |
Research and development costs | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Share-based compensation expense | 88,799 | 134,910 |
Selling and marketing | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Share-based compensation expense | 162,187 | 284,038 |
General and administrative | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Share-based compensation expense | $139,792 | $421,482 |
ShareBased_Payment_Arrangement5
Share-Based Payment Arrangements (Details Narrative) (Subsequent event, Certain officers and employees, Restricted stock) | 0 Months Ended |
Apr. 02, 2014 | |
Subsequent event | Certain officers and employees | Restricted stock | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Number of restricted stock shares granted (in shares) | 2,037,857 |
Restricted stock terms (in years) | '10 years |
Income_Taxes_Details_Narrative
Income Taxes (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Income Tax Disclosure [Abstract] | ' | ' | ' |
Income tax provision | $215,075 | $176,102 | ' |
Effective income tax rate | -8.50% | -4.20% | ' |
Valuation allowance | 35,000,000 | ' | ' |
Unrecognized tax benefits | 217,237 | ' | 217,237 |
Unrecognized tax benefits impact on effective tax rate | 288,193 | ' | ' |
Unrecognized Tax Benefits, Interest on Income Taxes Accrued | $70,956 | ' | $66,875 |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (USD $) | Mar. 31, 2014 | Sep. 16, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 |
Recurring | Recurring | Fair Value, Inputs, Level 1 | Fair Value, Inputs, Level 1 | Fair Value, Inputs, Level 2 | Fair Value, Inputs, Level 2 | Fair Value, Inputs, Level 3 | Fair Value, Inputs, Level 3 | Corporate debt and government securities | Corporate debt and government securities | Corporate debt and government securities | Corporate debt and government securities | Corporate debt and government securities | Corporate debt and government securities | Corporate debt and government securities | Corporate debt and government securities | Money market funds and commercial paper | Money market funds and commercial paper | Money market funds and commercial paper | Money market funds and commercial paper | Money market funds and commercial paper | Money market funds and commercial paper | Money market funds and commercial paper | Money market funds and commercial paper | |||
Recurring | Recurring | Recurring | Recurring | Recurring | Recurring | Recurring | Recurring | Fair Value, Inputs, Level 1 | Fair Value, Inputs, Level 1 | Fair Value, Inputs, Level 2 | Fair Value, Inputs, Level 2 | Fair Value, Inputs, Level 3 | Fair Value, Inputs, Level 3 | Recurring | Recurring | Fair Value, Inputs, Level 1 | Fair Value, Inputs, Level 1 | Fair Value, Inputs, Level 2 | Fair Value, Inputs, Level 2 | Fair Value, Inputs, Level 3 | Fair Value, Inputs, Level 3 | |||||
Recurring | Recurring | Recurring | Recurring | Recurring | Recurring | Recurring | Recurring | Recurring | Recurring | Recurring | Recurring | |||||||||||||||
Cash equivalents: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total cash equivalents | ' | ' | $7,916,260 | $8,486,633 | $7,916,260 | $8,486,633 | $0 | $0 | $0 | $0 | ' | ' | ' | ' | ' | ' | ' | ' | $7,916,260 | $8,486,633 | $7,916,260 | $8,486,633 | $0 | $0 | $0 | $0 |
Marketable securities: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total marketable securities | ' | ' | 9,645,934 | 8,073,108 | 0 | 0 | 9,645,934 | 8,073,108 | 0 | 0 | 9,645,934 | 8,073,108 | 0 | 0 | 9,645,934 | 8,073,108 | 0 | 0 | ' | ' | ' | ' | ' | ' | ' | ' |
Derivative liabilities: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Derivative Instruments | 127,288 | 170,337 | 127,288 | 159,134 | 0 | 0 | 0 | 0 | 127,288 | 159,134 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total derivative liabilities | ' | ' | 127,288 | 159,134 | 0 | 0 | 0 | 0 | 127,288 | 159,134 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total assets and liabilities measured at fair value | ' | ' | $17,689,482 | $16,718,875 | $7,916,260 | $8,486,633 | $9,645,934 | $8,073,108 | $127,288 | $159,134 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fair_Value_Measurements_Detail1
Fair Value Measurements (Details 1) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ' | ' |
Beginning Balance | $159,134 | $0 |
Total gains recognized in earnings | -31,846 | 0 |
Ending Balance | $127,288 | $0 |
Marketable_Securities_Details
Marketable Securities (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Aggregate Fair Value | $9,645,934 | $8,073,108 |
Cost or Amortized Cost | 9,644,339 | 8,069,698 |
Net Unrealized Gains | 1,595 | 3,410 |
Government securities | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Aggregate Fair Value | 7,474,401 | 6,252,339 |
Cost or Amortized Cost | 7,473,328 | 6,249,483 |
Net Unrealized Gains | 1,073 | 2,856 |
Corporate debt securities | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Aggregate Fair Value | 2,171,533 | 1,820,769 |
Cost or Amortized Cost | 2,171,011 | 1,820,215 |
Net Unrealized Gains | $522 | $554 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Details) (USD $) | Mar. 31, 2014 |
Operating Lease Payment | ' |
2014 | $1,966,498 |
2015 | 1,812,336 |
2016 | 1,520,551 |
2017 | 1,465,064 |
2018 | 1,459,190 |
Thereafter | 3,577,335 |
Total Future Minimum Lease Payments Due | $11,800,974 |
Commitments_and_Contingencies_2
Commitments and Contingencies (Details Narrative) (USD $) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |
Jul. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Jul. 23, 2013 | |
position | ||||
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | ' | ' | ' | ' |
Maximum length of warranty on software products | ' | '90 days | ' | ' |
Upon certain triggering events holders can redeem | ' | 100.00% | ' | ' |
Restricted shares grants | ' | ' | ' | 500,000 |
Percentage of shares vested in Year 1 | ' | ' | ' | 50.00% |
Percentage of shares vested in Year 2 | ' | ' | ' | 50.00% |
Licensing agreement with Violin Memory | $12,000,000 | ' | ' | ' |
Proceeds received from licensing agreement | ' | ' | 6,000,000 | ' |
Remaining proceeds contingent on successful development | ' | 6,000,000 | ' | ' |
Number of positions eliminated, worldwide (over 100( | ' | 100 | ' | ' |
Restructuring Costs Under the 2013 Plan | ' | ' | ' | ' |
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | ' | ' | ' | ' |
Number of positions eliminated, worldwide (over 100( | ' | 100 | ' | ' |
Restructuring Reserve | ' | 974,550 | 1,306,493 | ' |
President and Chief Executive Officer | ' | ' | ' | ' |
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | ' | ' | ' | ' |
Annual salary President and Chief Executive Officer of the Company effective July 23, 2013 through July 22, 2015 | ' | ' | ' | 400,000 |
Restricted shares vesting period | ' | ' | ' | '2 years |
Redeemable_Convertible_Preferr1
Redeemable Convertible Preferred Stock (Details Narrative) (USD $) | 0 Months Ended | 3 Months Ended | ||||
Sep. 16, 2013 | Mar. 31, 2014 | Sep. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2013 | Sep. 13, 2013 | |
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' |
Series A redeemable convertible preferred stock issued | ' | 900,000 | ' | ' | 900,000 | ' |
Series A redeemable convertible preferred stock, par value | ' | $0.00 | ' | ' | $0.00 | ' |
Series A redeemable convertible preferred stock, purchase consideration (in millions) | ' | $9,000,000 | ' | ' | $9,000,000 | ' |
Consecutive trading days, convertible debt threshold | ' | '60 days | ' | ' | ' | ' |
Minimum percentage of common stock price to conversion price to determine eligibility of conversion through 60 consecutive trading days | ' | 250.00% | ' | ' | ' | ' |
Threshold of stock price trigger, percentage | ' | 225.00% | ' | ' | ' | ' |
Daily trading volume | ' | 25.00% | ' | ' | ' | ' |
Consecutive days | ' | '20 days | ' | ' | ' | ' |
Upon certain triggering events holders can redeem | ' | 100.00% | ' | ' | ' | ' |
Basis spread on preferred stock dividend, percentage | ' | 5.00% | ' | ' | ' | ' |
Preferred stock dividend rate description | ' | 'Holders of the redeemable convertible preferred stock are entitled to receive quarterly dividends at the Prime Rate (Wall Street Journal Eastern Edition) plus 5% (up to a maximum amount of 10%) | ' | ' | ' | ' |
Preferred stock dividend, minimum cash flow requirement | ' | 1,000,000 | ' | ' | ' | ' |
Share Price | ' | ' | ' | ' | ' | $1.23 |
Voting power | ' | 7,317,073 | ' | ' | ' | ' |
Percentage of accounts receivable | ' | 80.00% | ' | ' | ' | ' |
Accounting treatment for temporary equity | ' | 'The Company has classified the redeemable convertible preferred stock as temporary equity in the financial statements as it is subject to redemption at the option of the holder under certain circumstances. | ' | ' | ' | ' |
Derivative instruments, fair value | 170,337 | 127,288 | ' | ' | ' | ' |
Stock price on the date one day prior to the closing of the Preferred Stock Agreement | ' | ' | ' | ' | ' | $1.23 |
Stock price greater than conversion price of preferred stock | $0.21 | ' | ' | ' | ' | ' |
Beneficial conversion feature | 1,951,266 | ' | ' | ' | ' | ' |
Accretion to redemption value of Series A preferred stock | ' | 115,376 | ' | 0 | ' | ' |
Transaction costs associated with the preferred stock issuance | ' | ' | 268,323 | ' | ' | ' |
Undistributed preferred stock dividends | ' | 186,904 | ' | 0 | ' | ' |
Interest and other income (loss) | ' | ' | ' | ' | ' | ' |
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' |
Gain on derivative | ' | 31,846 | ' | ' | ' | ' |
Series A redeemable convertible preferred stock | ' | ' | ' | ' | ' | ' |
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' |
Series A redeemable convertible preferred stock issued | 900,000 | ' | ' | ' | ' | ' |
Series A redeemable convertible preferred stock, par value | $0.00 | ' | ' | ' | ' | ' |
Redeemable preferred stock price per share | $10 | ' | ' | ' | ' | ' |
Series A redeemable convertible preferred stock, purchase consideration (in millions) | 9,000,000 | ' | ' | ' | ' | ' |
Redeemable convertible preferred stock conversion price | $1.02 | ' | ' | ' | ' | ' |
Net proceeds from issuance of redeemable convertible preferred stock | $8,731,677 | ' | ' | ' | ' | ' |
Series A redeemable convertible preferred stock | Prime rate | ' | ' | ' | ' | ' | ' |
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' |
Preferred stock basis spread of dividend | ' | 10.00% | ' | ' | ' | ' |
Basis spread on preferred stock dividend, percentage | ' | 5.00% | ' | ' | ' | ' |
Increase of dividend rate each six months stock remains unredeemed | ' | 1.00% | ' | ' | ' | ' |
Maximum | Prime rate | ' | ' | ' | ' | ' | ' |
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' |
Maximum dividend rate | ' | 10.00% | ' | ' | ' | ' |
Maximum | Series A redeemable convertible preferred stock | Prime rate | ' | ' | ' | ' | ' | ' |
Class of Stock [Line Items] | ' | ' | ' | ' | ' | ' |
Maximum dividend rate | ' | 19.00% | ' | ' | ' | ' |
Accumulated_Other_Comprehensiv2
Accumulated Other Comprehensive Loss (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ' | ' |
Accumulated other comprehensive (loss) income at December 31, | ($1,762,387) | ($1,650,050) |
Other comprehensive (loss) income | ' | ' |
Other comprehensive (loss) income before reclassifications | -130,799 | 31,816 |
Amounts reclassified from accumulated other comprehensive (loss) income | 3,190 | 2,160 |
Total other comprehensive (loss) income, net of taxes: | -127,609 | 33,976 |
Accumulated other comprehensive (loss) income at March 31, | -1,889,996 | -1,616,074 |
Foreign Currency Translation | ' | ' |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ' | ' |
Accumulated other comprehensive (loss) income at December 31, | -1,693,905 | -1,601,138 |
Other comprehensive (loss) income | ' | ' |
Other comprehensive (loss) income before reclassifications | -126,286 | 34,527 |
Amounts reclassified from accumulated other comprehensive (loss) income | 0 | 0 |
Total other comprehensive (loss) income, net of taxes: | -126,286 | 34,527 |
Accumulated other comprehensive (loss) income at March 31, | -1,820,191 | -1,566,611 |
Net Unrealized Gains On Marketable Securities | ' | ' |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ' | ' |
Accumulated other comprehensive (loss) income at December 31, | 3,410 | 6,210 |
Other comprehensive (loss) income | ' | ' |
Other comprehensive (loss) income before reclassifications | -1,815 | 4,007 |
Amounts reclassified from accumulated other comprehensive (loss) income | 0 | 0 |
Total other comprehensive (loss) income, net of taxes: | -1,815 | 4,007 |
Accumulated other comprehensive (loss) income at March 31, | 1,595 | 10,217 |
Net Minimum Pension Liability | ' | ' |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ' | ' |
Accumulated other comprehensive (loss) income at December 31, | -71,892 | -55,122 |
Other comprehensive (loss) income | ' | ' |
Other comprehensive (loss) income before reclassifications | -2,698 | -6,718 |
Amounts reclassified from accumulated other comprehensive (loss) income | 3,190 | 2,160 |
Total other comprehensive (loss) income, net of taxes: | 492 | -4,558 |
Accumulated other comprehensive (loss) income at March 31, | ($71,400) | ($59,680) |
Litigation_Details_Narrative
Litigation (Details Narrative) (USD $) | 3 Months Ended | 18 Months Ended | 0 Months Ended | 1 Months Ended | 3 Months Ended | 0 Months Ended | ||||||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Oct. 24, 2013 | Oct. 31, 2012 | Dec. 31, 2012 | Jul. 31, 2013 | |
Stockholder Litigation | Stockholder Litigation | Stockholder Litigation | Stockholder Litigation | Stockholder Litigation | Stockholder Litigation | The Estate of ReiJane Huai | Directors and officers liability insurance, layer 1 | Directors and officers liability insurance, layer 1 | Directors and officers liability insurance, layer 2 | |||
Accrued expenses | Prepaid expenses and other current assets | Stockholder Litigation | Stockholder Litigation | Stockholder Litigation | ||||||||
Loss Contingencies [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Estimated litigation liability | ' | ' | ' | ' | ' | $5,000,000 | $300,000 | ' | ' | ' | ' | ' |
Companybs Directors and Officers (bD&Ob) Insurance Agreement | ' | ' | 'Company entered into an agreement with the carrier of the first $5.0 million layer of the Companybs D&O insurance. Pursuant to this agreement, the Company accepted a payment of $3.9 million from the first layer insurance carrier in satisfaction of the carrierbs obligations to the Company under the first layer D&O insurance policy. In addition, as part of the October 2012 agreement with the carrier, the Company agreed to indemnify the carrier of the first layer of D&O insurance against potential claims by certain named insured persons under the first layer D&O insurance policy. The Company cannot predict the likelihood or the outcome of any such claims by the named insureds. | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Insurance arrangement | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5,000,000 | ' | 5,000,000 |
Accrual for the settlement of the class action and derivative lawsuits | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,100,000 | ' |
Percentage of losses insurer agreed to pay (maximum) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 75.00% |
Insurance coverage floor | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5,250,000 |
Litigation settlement costs the company is responsible for | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,100,000 | ' |
Legal fees | ' | ' | ' | ' | 7,400,000 | ' | ' | ' | ' | ' | ' | ' |
Insurance recoveries recorded since inception | ' | ' | ' | ' | 5,500,000 | ' | ' | ' | ' | ' | ' | ' |
Insurance recoveries reimbursed since inception | ' | ' | ' | ' | 5,300,000 | ' | ' | ' | ' | 3,900,000 | ' | ' |
Insurance settlement receivable | ' | ' | ' | ' | ' | ' | ' | 200,000 | ' | ' | ' | ' |
Reduction of investigation, litigation and settlement related costs | 111,711 | 114,066 | 100,000 | 100,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Voting stock the Company believes to be owned by the Estate (more than 10%) | ' | ' | ' | ' | ' | ' | ' | ' | 10.00% | ' | ' | ' |
Damages sought by Company | ' | ' | ' | ' | ' | ' | ' | ' | $10,000,000 | ' | ' | ' |
Schedule_Of_Segment_Reporting_
Schedule Of Segment Reporting By Geographical Areas (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Revenues: | ' | ' | ' |
Total revenues | $12,001,499 | $15,284,817 | ' |
Long-lived assets: | ' | ' | ' |
Total long-lived assets | 10,624,354 | ' | 11,042,260 |
Americas | ' | ' | ' |
Revenues: | ' | ' | ' |
Total revenues | 4,364,592 | 6,435,926 | ' |
Long-lived assets: | ' | ' | ' |
Total long-lived assets | 9,157,985 | ' | 9,712,675 |
Asia Pacific | ' | ' | ' |
Revenues: | ' | ' | ' |
Total revenues | 3,924,304 | 4,396,003 | ' |
Long-lived assets: | ' | ' | ' |
Total long-lived assets | 1,063,034 | ' | 717,527 |
Europe, Middle East, Africa and Other | ' | ' | ' |
Revenues: | ' | ' | ' |
Total revenues | 3,712,603 | 4,452,888 | ' |
Long-lived assets: | ' | ' | ' |
Total long-lived assets | $403,335 | ' | $612,058 |
Segment_Reporting_Details_Narr
Segment Reporting (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | |||||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Accounts receivable | Accounts receivable | Revenue | Revenue | Customer concentration risk | Customer concentration risk | Customer concentration risk | Customer concentration risk | |||
customer | customer | customer | customer | Accounts receivable | Accounts receivable | Revenue | Revenue | |||
Revenue, Major Customer [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage accounted for by one customer | ' | ' | ' | ' | ' | ' | 12.00% | 12.00% | 10.00% | 17.00% |
Number of customers accounting for greater than 10% of accounts receivable or revenues | ' | ' | 1 | 1 | 1 | 1 | ' | ' | ' | ' |
Sales return reserve (benefit) expense | ($67,265) | ($136,350) | ' | ' | ' | ' | ' | ' | ' | ' |
Schedule_Of_Restructuring_Cost
Schedule Of Restructuring Costs (Details) (USD $) | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | |
Restructuring Costs Under the 2013 Plan | Restructuring Costs Under the 2013 Plan | Severance related costs | Severance related costs | Facility and other costs | Facility and other costs | |||
Restructuring Costs Under the 2013 Plan | Restructuring Costs Under the 2013 Plan | Restructuring Costs Under the 2013 Plan | Restructuring Costs Under the 2013 Plan | |||||
Restructuring Reserve [Roll Forward] | ' | ' | ' | ' | ' | ' | ' | ' |
Beginning Balance | ' | ' | $1,306,493 | ' | $1,111,577 | ' | $194,916 | ' |
Restructuring costs | 223,573 | 0 | 223,573 | 3,606,020 | 59,279 | 3,179,131 | 164,294 | 426,889 |
Utilized/Paid | -555,516 | -478 | -555,516 | -2,299,527 | -450,650 | -2,067,554 | -104,866 | -231,973 |
Ending Balance | ' | ' | $974,550 | $1,306,493 | $720,206 | $1,111,577 | $254,344 | $194,916 |
Restructuring_Costs_Details_Na
Restructuring Costs (Details Narrative) | 3 Months Ended |
Mar. 31, 2014 | |
position | |
Restructuring Cost and Reserve [Line Items] | ' |
Number of positions eliminated, worldwide (over 100( | 100 |
Restructuring Costs Under the 2013 Plan | ' |
Restructuring Cost and Reserve [Line Items] | ' |
Number of positions eliminated, worldwide (over 100( | 100 |