FalconStor, Historical Storage Software Firm, in Big Trouble
To move from OTCQB tier to Pink Current tier
This is a Press Release edited by StorageNewsletter.com on June 30, 2023 at 2:02 pmFalconStor Software, Inc. announced to voluntarily deregister under Section 12(g) of the Securities Exchange Act of 1934, as amended (the Exchange Act).
As such, it intends to file a Form 15 by July 12, 2023.
Moreover, it will move from the OTCQB tier to the Pink Current tier, both operated by the OTC Market Group Inc. (OTC).
The board of directors believes that the decision to deregister and suspend its reporting obligations under the Exchange Act as well as moving to a lower OTC tier is in the best interest of the company and its shareholders. It has determined that the burdens associated with operating as a registered public company outweigh any advantages to the company and its stockholders at this time. It reviewed many factors, including the significant cost savings of no longer preparing and filing periodic reports with the SEC, and the reduction of significant legal, audit and other costs associated with being a reporting company.
The company will continue to provide sufficient information to its shareholders in order to continue enabling a trading market for its common stock within the OTC Pink Current trading market. Once the company is deregistered, the board believes that the firm will refocus its financial and management resources towards growing its current business opportunities.
Comments
It's a shame to see one of the oldest storage software, FalconStor, in such a bad shape.
Born in 2000, it was one of the first in virtualization software with DataCore founded 2 years before. It surfed on the SAN wave to provide various storage virtualization solutions. Among them IPStor, NSS for Network Storage Server, its de-dupe engine, the VTL, StorSafe and more recently VSC, Virtual Storage Container, a persistent storage container for long-term data retention need. The firm has even tried to distribute HyperFS, the file system from Scale Logic.
Founded by former Cheyenne executives, it became public on Nasdaq (through IPO) via Network Peripherals in 2021, then delisted from Nasdaq on September 25, 2017, and then moved to OTCQB tier and finally more recently to Pink Current tier.
It got total investment of $33 million.
In 2012, the company agreed to pay $5.8 million as part as a federal investigation settlement, after it has admitted that its employees gave more than $300,000 in bribes to executives at JPMorgan Chase with restricted stock shares and golf memberships in exchange for contracts. It was further charged with falsifying its corporate books and records associated with the bribery.
It has lost also its CEO and founder ReiJane Huai under strange circumstances.
It acquired 2 firms:
- Network Peripherals, Inc. in 2001 (reverse merger)
- IP Metrics Software in 2002 for $2.5 million
Current products:
- Storsafe VTL: Announced in 2020, it modernizes backup, DR, and cloud migration, improving performance and lowering costs. On-premises, hybrid, and cloud-native data protection optimization, along with workload migration and ransomware protection. It is the only IBM-certified solution for PowerVS data protection and migration and works with all leading cloud and data protection products.
- Storguard: Maintain continuous business operations and improve efficiency with storage virtualization and HA. For environments that have heterogeneous disk arrays, advanced data services are provided without burdening the CPU and RAM of the underlying disk arrays. Resold by Hitachi Vantara.
- Storsight: Manage all instances of StorSafe VTL and StorGuard with this single-pane-of-glass console, providing visibility into the status and health of the data protection, DR, HA, and BC operations.
According to the company, more than 1,000 organizations and MSPs standardize on FalconStor as the foundation for their cloud first data protection future.
Despite strong adoption for its VTL for several years, the company had several periods of difficulties in its history illustrated by its stock value that suffered for more than 10 years. Several new executives joined the team with new ideas, new blood, new strong financial elements but the trajectory was a bit erratic.
The firm registered a record of $89.5 million for sales in FY09, a figure that and then regularly decreased to reach a mere $10.1 million, down -28% Y/Y (with $1.8 million loss) in FY22. For 1FQ23, revenue was as low as $2.3 million (with $0.4 million loss).
It will be hard for Todd Brooks, FalconStor CEO since 2017, to reverse the situation.
Now as the company owns some IP and has an interesting installed base with recognized product and technologies, we predict that it should reappear in a basket of someone in a few weeks.
It seems that there are just two possibilities for FalconStor: to be acquired - market cap being $9 million - or to dye.
Some of the firm's products are distributed by Hitachi Vantara and essentially by IBM, big OEM since many years.
We don't see Big Blue putting even a small amount of money into FalconStor as it is reluctant to invest anymore in storage, its last acquisition specifically in this domain being Cleversafe in 2015.
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