FalconStor Software Inc. (FALC, Financial) filed Quarterly Report for the period ended 2010-03-31.
Falconstor Software Inc. has a market cap of $130 million; its shares were traded at around $2.92 with and P/S ratio of 1.4.
Revenues for the three months ended March 31, 2010 decreased 19% to $17.1 million compared with $21.0 million for the three months ended March 31, 2009. Our operating expenses increased 17% from $21.8 million for the three months ended March 31, 2009 to $25.6 million for the three months ended March 31, 2010. Included in our operating expenses for the three months ended March 31, 2010 and 2009 was $2.7 million and $2.2 million, respectively, of share-based compensation expense. Net loss for the three months ended March 31, 2010 was $5.5 million compared with a net loss of $0.9 million for the three months ended March 31, 2009. Included in our net loss for the three months ended March 31, 2010 was an income tax benefit of $3.1 million compared with an income tax benefit of $0.4 million for the three months ended March 31, 2009. The income tax benefits of $3.1 million and $0.4 million were primarily attributable to the impact of our estimated full year effective tax rate on our pre-tax losses for the three months ended March 31, 2010 and 2009, respectively.
Selling and marketing expenses consist primarily of sales and marketing personnel and related costs, share-based compensation expense, travel, public relations expense, marketing literature and promotions, commissions, trade show expenses, and the costs associated with our foreign sales offices. Selling and marketing expenses increased $1.5 million, or 16%, to $11.0 million for the three months ended March 31, 2010 from $9.5 million for the same period in 2009. The increase in selling and marketing expenses was primarily due to (i) higher salary and personnel related costs as a result of increased sales and marketing headcount, specifically in support of our non-OEM business, and (ii) higher marketing expenses related to our ongoing product awareness and branding campaign. Share-based compensation expense included in selling and marketing increased to $1.0 million from $0.9 million for the three months ended March 31, 2010 and 2009, respectively. Share-based compensation expense included in selling and marketing expenses was equal to 6% of revenue for the three months ended March 31, 2010 and 4% for the same period in 2009.
General and administrative expenses consist primarily of personnel costs of general and administrative functions, share-based compensation expense, public company related costs, directors and officers insurance, legal and professional fees, and other general corporate overhead costs. General and administrative expenses increased $0.2 million, or 11%, to $2.5 million for the three months ended March 31, 2010 from $2.2 million for the same period in 2009. The overall increase within general and administrative expenses related to increases in various administrative costs including (i) personnel related costs, and (ii) various professional fees. Share-based compensation expense included in general and administrative expenses increased to $0.3 million from $0.2 million for the three months ended March 31, 2010 and 2009, respectively. Share-based compensation expense included in general and administrative expenses was equal to 2% of revenue for the three months ended March 31, 2010 and 1% for the same period in 2009.
We invest our cash primarily in money market funds, government securities, and corporate bonds. As of March 31, 2010, our cash, cash equivalents, and marketable securities totaled $40.5 million, compared with $41.8 million as of March 31, 2009. Interest and other loss decreased $0.3 million to ($0.1) million for the three months ended March 31, 2010, compared with ($0.5) million for the same period in 2009. The decrease in interest and other loss was due to foreign currency losses of $0.2 million incurred during the three months ended March 31, 2010 as compared with a foreign currency losses of $0.6 million for the same period in 2009.
Our provision for income taxes consists of U.S., state and local, and foreign taxes in amounts necessary to align our year-to-date tax provision with the effective rate that we expect to achieve for the full year. For the three months ended March 31, 2010, we recorded an income tax benefit of $3.1 million, compared with an income tax benefit of $0.4 million for the same period in 2009. The increase in the benefit for income taxes was primarily attributable to our pre-tax loss of $8.6 million for the three months ended March 31, 2010, as compared with a pre-tax loss of $1.3 million for the same period in 2009. In addition, our effective tax rate increased to 36% for the three months ended March 31, 2010, as compared with 33% in the same period in 2009. As of each of March 31, 2010 and December 31, 2009, our deferred tax assets, net of a valuation allowance, were $14.0 million.
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Falconstor Software Inc. has a market cap of $130 million; its shares were traded at around $2.92 with and P/S ratio of 1.4.
Highlight of Business Operations:
Our total revenue from Oracle USA (the new name for Sun Microsystems) decreased to $1.3 million from $2.4 million in the first quarter of 2009. Of the $1.3 million, only $0.4 million were new software license sales. The remaining $1.3 million was revenue from maintenance for software previously licensed. While the software license agreement was not terminated when Oracle completed its purchase of Sun, we do not expect new software license revenues from Oracle USA to be significant.Revenues for the three months ended March 31, 2010 decreased 19% to $17.1 million compared with $21.0 million for the three months ended March 31, 2009. Our operating expenses increased 17% from $21.8 million for the three months ended March 31, 2009 to $25.6 million for the three months ended March 31, 2010. Included in our operating expenses for the three months ended March 31, 2010 and 2009 was $2.7 million and $2.2 million, respectively, of share-based compensation expense. Net loss for the three months ended March 31, 2010 was $5.5 million compared with a net loss of $0.9 million for the three months ended March 31, 2009. Included in our net loss for the three months ended March 31, 2010 was an income tax benefit of $3.1 million compared with an income tax benefit of $0.4 million for the three months ended March 31, 2009. The income tax benefits of $3.1 million and $0.4 million were primarily attributable to the impact of our estimated full year effective tax rate on our pre-tax losses for the three months ended March 31, 2010 and 2009, respectively.
Selling and marketing expenses consist primarily of sales and marketing personnel and related costs, share-based compensation expense, travel, public relations expense, marketing literature and promotions, commissions, trade show expenses, and the costs associated with our foreign sales offices. Selling and marketing expenses increased $1.5 million, or 16%, to $11.0 million for the three months ended March 31, 2010 from $9.5 million for the same period in 2009. The increase in selling and marketing expenses was primarily due to (i) higher salary and personnel related costs as a result of increased sales and marketing headcount, specifically in support of our non-OEM business, and (ii) higher marketing expenses related to our ongoing product awareness and branding campaign. Share-based compensation expense included in selling and marketing increased to $1.0 million from $0.9 million for the three months ended March 31, 2010 and 2009, respectively. Share-based compensation expense included in selling and marketing expenses was equal to 6% of revenue for the three months ended March 31, 2010 and 4% for the same period in 2009.
General and administrative expenses consist primarily of personnel costs of general and administrative functions, share-based compensation expense, public company related costs, directors and officers insurance, legal and professional fees, and other general corporate overhead costs. General and administrative expenses increased $0.2 million, or 11%, to $2.5 million for the three months ended March 31, 2010 from $2.2 million for the same period in 2009. The overall increase within general and administrative expenses related to increases in various administrative costs including (i) personnel related costs, and (ii) various professional fees. Share-based compensation expense included in general and administrative expenses increased to $0.3 million from $0.2 million for the three months ended March 31, 2010 and 2009, respectively. Share-based compensation expense included in general and administrative expenses was equal to 2% of revenue for the three months ended March 31, 2010 and 1% for the same period in 2009.
We invest our cash primarily in money market funds, government securities, and corporate bonds. As of March 31, 2010, our cash, cash equivalents, and marketable securities totaled $40.5 million, compared with $41.8 million as of March 31, 2009. Interest and other loss decreased $0.3 million to ($0.1) million for the three months ended March 31, 2010, compared with ($0.5) million for the same period in 2009. The decrease in interest and other loss was due to foreign currency losses of $0.2 million incurred during the three months ended March 31, 2010 as compared with a foreign currency losses of $0.6 million for the same period in 2009.
Our provision for income taxes consists of U.S., state and local, and foreign taxes in amounts necessary to align our year-to-date tax provision with the effective rate that we expect to achieve for the full year. For the three months ended March 31, 2010, we recorded an income tax benefit of $3.1 million, compared with an income tax benefit of $0.4 million for the same period in 2009. The increase in the benefit for income taxes was primarily attributable to our pre-tax loss of $8.6 million for the three months ended March 31, 2010, as compared with a pre-tax loss of $1.3 million for the same period in 2009. In addition, our effective tax rate increased to 36% for the three months ended March 31, 2010, as compared with 33% in the same period in 2009. As of each of March 31, 2010 and December 31, 2009, our deferred tax assets, net of a valuation allowance, were $14.0 million.
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