FalconStor Software, Inc.

Gary Quinn - Chief Executive Officer Louis Petrucelly - EVP and CFO

John Zaro - BCM

Thank you, operator, and good afternoon ladies and gentlemen. And welcome to the third quarter of the fiscal year 2015, which was a very busy one for the FalconStor team.

We continue to see a tale of two cities as we mentioned from last quarter in the results of our performance while looking forward to the future. The marketplace continues to struggle with an environment that is very confusing for customers who are trying to determine their future storage architectures and selections from the many choices available.

Many customers believe that they need to modernize their data centers but how do they do it, who do they choose, should they go it alone or should they adopt a hybrid model with both cloud and on-premise. Many of the new kids on the block as we like to call them at FalconStor are offering innovation and price performance, but for a Greenfield environment.

Many of the enterprise customers we are talking to about FalconStor and FreeStor are trying to migrate from traditional storage platforms and ways of managing storage to the new way, but are finding that they are unable to take advantage of Greenfield technology because their environment is Brownfield and the new technology just generates another disparate vertical silo. One of the most attractive qualities about FreeStor is its horizontal approach.

Along with its pace you grow pricing model, but which many customers have told us they feel is very attractive. We are finding that many enterprise customers have tried just about everything over the years from IBM, EMC, HP and others without fulfilling the promise of a simple, manageable, heterogeneous converged data services approach.

Our 15 years of experience is enabling customers to begin to work through their existing Brownfield and move to modern all flash arrays, hybrid flash arrays as well as make the move to a private cloud or hosted private cloud offering. In addition, our four pillars philosophy is allowing enterprises and service providers to migrate to their new storage platforms or locations and provide modern data services like continuous availability through synchronous replication, high availability, two-way and four-way IO clustering as well as metro and geo clustering.

We are also assisting customers looking to change their backup strategy from traditional backup to snapshot and rapid recovery for those increased SLAs that their business units and customers demand. We are enabling migration from traditional HDDs to all flash arrays and hybrid flash arrays.

And finally, we continue to support customers with traditional backup to a virtualized or physical tape library. So FalconStor continues to follow its three-pronged strategy for transitioning the Company to growth in the near future.

I would like to give you an update on each of these strategic directives for FalconStor with companies who are using FreeStor or FreeStor technology to support and grow their businesses. First, as I’ve mentioned in the past, hardware OEM partnerships.

We have secured a number of OEM partnerships, both FalconStor branded and private labeled. During the quarter, we transacted with four of our six relationships.

We feel this is positive, but we believe that the ramp with each of them is going to take a little bit longer than expected. Internal expectations were not met for two of our six partners, but we believe they should return in the coming quarter.

Service providers, we have secured a number of managed and hosted private cloud partnerships, both FalconStor branded and private labeled. During the quarter, we implemented all of our announced relationships with their initial capacity transactions and we were able to get an extension already from our first service provider that we announced in the previous quarter with FreeStor, C&C Company in Brazil.

We are proud to announce that we were able to secure an additional three service providers during the quarter. First, Ricoh as many of you know as an office solutions provider, also provides IT services to its customers and we’ve been able to secure Ricoh in Singapore which will be our entry point to the Southeast Asia community.

Similar to the way we entered Latin America with Telefónica Empresas, Ricoh which is a Japan based global entity known for their office solutions has expanded its reach by providing IT solutions for their global customers through a number of IT infrastructure and communication services. Number two, we’ve added an additional partnership in Latin America which is becoming somewhat of a FreeStor colony of customers, a service provider known as Intec in Argentina, which is the master franchise for a global fast food chain company in Latin America and has chosen FreeStor as its platform for the future storage infrastructure.

Finally, we’ve been able to execute in Korea with LG CNS which is the communication and network services on or data center services provider for the LG family of companies as well as additional companies who are looking for data center services, not only in Korea, but Japan and China for redundancy purposes. We have executed a memo of understanding and are expecting a contract to be completed very, very soon.

Last but not least, as I mentioned in our three-pronged approach, we look to get hardware OEM relationships, service providers to adopt our technology, both in FalconStor brand and as well as private labeled. We believe that once we were able to achieve that we could attract enterprise customers because we would have gained the credibility needed to support the FreeStor new offering from FalconStor.

So I am pleased to announce that we have secured our first Global 2000 enterprise customer for FreeStor with the addition of Volkswagen in Central Europe. The vision of Volkswagen is to transform its existing storage architecture into a modern and flexible solution by its IT leadership for the future of the company.

They believe FreeStor is capable of delivering upon a hardware agnostic heterogeneous storage platform with a common set of data services for all its future needs. We are very proud to secure this globally known brand and be part of their technology transformation.

And last but not least, on the VP [ph] enterprise category, I would like to bring to your attention our announcement this week of FalconStor being at the OpenStack Conference in Tokyo and submission of our Cinder driver to the OpenStack community for certification and availability in the spring 2016 distribution. One thing for you folks on the call tonight, many, many enterprise customers are looking to deploy the OpenStack platform for their environments as they move forward in building private clouds, as well as hosted private cloud providers also looking to utilize OpenStack as their platform of choice as they start delivering upon these cloud infrastructures.

During the quarter, we’ve been able to attract a number of high-profile and successful industry names to join the FreeStor team and build the future of our storage industry. We believe this is second validation point to the belief that FreeStor is the right solution for the software-defined marketplace.

The first validation point is a successful implementation and deployment of our FreeStor offerings to our three-pronged approach. And I am proud to say that as of tonight, all of our Q2 announcements, our customers, partners and hardware relationship vendors are all in production with FreeStor.

Both Louis and I have indicated, we would be using our assets to enhance shareholder value and company competitiveness as we saw opportunities. During the quarter, we entered into an exclusive software distribution agreement with Cumulus Logic which is a software company in California that was developing a platform for cloud-based analytics.

The platform could be used for compute, network or storage. We are partner with them and entered into a joint development agreement that will customize their platform to FreeStor.

The jointly developed offering will be the exclusive property of FalconStor and will be made available to all FreeStor customers without additional charges. Remember, our FreeStor offering is $350 per terabyte for an annual subscription for the use of the software for 12 months.

At the end of the 12-month term, the customer needs to true up looking forward and the current capacity under management of FreeStor. We believe this model is a way customers wish to buy in the future and gives them the best total cost of ownership and flexibility.

Throughout the year, they may use more or less capacity with no additional costs. At the end of the year, if their capacity goes up, then they pay the current capacity amount times to $350 terabytes per annum, or $0.03 per gig per month.

If it goes down, they pay the lower amount for the year ahead. Enterprise customers we are speaking to believe that this is the way to pay in the future.

Also service providers prefer the ramping up model, capabilities they procure new customers and move existing customers to the FreeStor platform. The efforts being put behind in the FreeStor public relations effort and ensuring we are getting the visibility and awareness that is necessary to return FalconStor to a successful status in the marketplace are exceeding our expectations.

I believe you can see through our own website and press releases along with the support of the industry analysts, bloggers and editorial community, we are gaining acceptance in a higher profile. Now turning to the actual business itself from a geographic perspective, here are my thoughts on where the FalconStor business is currently performing now and into 2016.

We’re seeing some good traction with the corporate alliances team and the corporate management teams securing new FreeStor customers. Our Asia Pacific business which includes Japan, achieved our internal goals for the quarter with the exception of Korea where we use to do a little bit of house cleaning.

The EMEA business was good especially viewed in the constant currency perspective, our concerns there are late start for FreeStor marketing and awareness which is now solved with the new additions of our marketing team made this quarter. Our Latin American business is becoming a FreeStor colony of customers which we believe is attributable to the service provider market space which demands flexible pricing, deployment and strong economic value.

Finally, our North American business which we have reset in May 2015 has hit or revised internal targets for Q3 and appears to be on track for Q4. This is the first sign that we maybe on the right trajectory, focus and enthusiasm in the U.S.

and Canada. I think once we show two to three quarters sequentially performing in the upward direction and add some additional resources, we will know that the North American business is stable and improving.

Finally, I am going to have Louis give you an overview of the numbers, I believe we did see more adoption of FreeStor from some larger household names this quarter. We also had some follow-up transactions from the early adopters already.

I am also very excited about the Volkswagen enterprise customer transaction and the pipeline of enterprise customers who are interested in FreeStor. We continue to transition with our legacy point solutions to the new FreeStor technology and FreeStor opportunities as well as adding new FreeStor customers.

We are very conscious in speaking to many of you about the ability to ensure that our existing legacy revenue streams are not cannibalized by the FreeStor model of procurement. I am pleased with the amount of FreeStor acquisition that we have accomplished so far this year.

I believe without the headwinds from currency in both Europe and Japan, we would have shown a 3% increase sequentially from Q2 2015 and year-over-year for Q3 2015. In a marketplace that is showing some giants declining with some significant numbers, I believe FalconStor with FreeStor is well-positioned for the software defined storage marketplace, which is in the early adopter phase with the long road ahead.

Remember, the future of storage is flash, software and cloud. And now, I’d like to turn it over for a review of the numbers with Louis Petrucelly.

Louis?

Thank you, Gary and good evening to everyone. As we pointed out on our last call, over the past two years, the Company has restructured its operations to better align its cost structures in support of its anticipated future business.

We have changed our licensing and pricing schemes which are more geared towards a ratable and subscription based models and finally completed a product transition in early May with our new flagship product offering, FreeStor. All this -- it’s a gauge to progress that company has made over this time.

It’s difficult to provide clear trends moving forward. We have been cognizant of these challenges our investors have voiced and we have been tracking and collecting data on various metrics over the past 18 months such as new product sales versus legacy product sales, new customer acquisitions, migration of legacy customers to new product offerings, average rise and revenue workflow [ph] effects of deferred revenue and other various metrics.

And we anticipate as we enter into 2016, we will begin to discuss these metrics with our investors as we reach the typical sales lifecycle and have meaningful data to support these metrics. Most of our discussion this evening will focus on non-GAAP financial measures and on the key business performance indicators for the quarter.

The balance of our financial details could be found on our supplemental and press release, which are distributed earlier today which contains our year-over-year results and all the applicable disclosures in accordance with the GAAP. Before I discuss the quarter, I’d like to spend a momentum discussing the exclusive source code license we acquired from Cumulus Logic.

As Gary commented earlier, we are very excited to have the opportunity to acquire the source code license which will provide our FreeStor platform with next-generation, intelligent, cloud-based predictive analytics in a real-time monitoring system. One of the major benefits of the FreeStor platform design is the ability to snap on incremental functionality and capabilities whether developed internally or integrated from externally developed technology which provides incremental value to the FreeStor platform.

We acquired the exclusive source code license for approximately $2.5 million which is payable over four pre-defined development milestones in either cash or company stock. We have an exclusive potential license to the basic source code and we have full ownership rights for any driven works performed to that base source code.

We anticipate that the four milestones will be completed by the close of Q1 2016. During the quarter, we spent approximately $750,000 in cash on both milestone and development service payments.

We anticipate that at least one milestone will become due in Q4 and we anticipate paying for that milestone with Company’s stock. For any milestone payments we have Company stock, the number of shares will determine based on the 30-day trading value of our Company stock immediately pursuing the close of this transaction which amounted to a $1.51 per share.

As we have stated in the past several calls, we will continue to evaluate each quarter the best use of our cash and stock as currency to enhance our shareholder value through investments within sales and marketing, and technology services. The Cumulus Logic exclusive source code license was one example of our valuation of the best use of our currency and we believe this technology adds significant value to our new FreeStor platform.

Now, let me provide you some brief commentary on our Q3 results. For the quarter -- for third quarter 2015, our consolidated GAAP revenue totaled $9.7 million, up 1% compared with the previous quarter and down 13% compared with prior year.

During the quarter, we have one customer who accounted for more than 10% of total revenues which was HDS, which accounted for 50% of our revenue. As we discussed on the previous call, the past six months marked a true product transition period for the Company with the release in May of our new flagship product offering FreeStor.

The effects of the product transition were experienced throughout all the geographies which resulted in some transactions with our existing point solutions being negatively impacted as some customers delayed purchases and renewals as they evaluated our new product offerings and how they intend to transition their existing infrastructures. As many of you are aware, the dollar continues to strengthen against most major currencies, and since approximately 6% of our total bookings over the past several years are derived from international markets, this has negatively impacted both our bookings and subscription revenues.

From a bookings perspective, our Q3 total bookings were $8.8 million, up 6% sequentially and flat compared to prior year. On a constant currency basis, Q3 bookings were up 3% sequentially and compared with the prior year.

Geographically, all of our regions outperformed the prior quarter’s booking performances. Excluding Korea which we experienced an unusually soft quarter, on a year-over-year basis, our Asia Pacific region was up 7% as reported and 10% on a constant currency basis.

Our EMEA region was down 9% as reported but up 2% on a constant currency basis year-over-year. Finally, our Americas business was up 12% on a year-over-year basis.

On a year-to-date basis, the EMEA region increased their bookings by 9% on a constant currency basis while the Asia Pacific region excluding Korea was largely off on a constant currency basis. While we are pleased with our Americas business during the current quarter, we continued to experience soft business region and on a year-to-date basis we’ve formed below both our internal expectations and the prior year’s performance.

We have made organizational changes in our Americas management profile, and streamlined our sales assets in the U.S. and Canada at the beginning of the Q3 which we believe has shown early signs of improvement but we will continue to monitor our progress and ensure that we are properly addressing our go-to-market strategies and pipeline generations within the Americas markets.

During the quarter, 16% of our total bookings were derived from new product sales, 45% of the total bookings were derived from our legacy product sales and the remaining 38% of bookings were associated with means renewals. Our total bookings breakdown goal is to have 35% of our total bookings associated with new products, 25% of the total bookings associated with the expansion of existing customers and 40% of our total bookings associated with maintenance renewals.

We believe that the optimal mix of bookings support our growth initiative and expand our strong base of customers and grow our new customer acquisitions. Next, I’d like to turn to our non-GAAP expenses which exclude restructuring charges, legal costs and stock-based compensation.

We are pleased that we have maintained our cost structure. And during the quarter our non-GAAP expenses totaled $11.8 million compared with $12.3 million in the previous quarter.

Our non-GAAP operating expenses were $9.3 million compared with $9.6 million in the previous quarter and our non-GAAP loss from operations improved to $2.1 million as compared with $2.7 million in the previous quarter. Our non-GAAP gross margins were 75% compared with 73% in the previous quarter.

And we closed the quarter with 237 employees worldwide compared with 263 at year end. We believe our existing expense structure has been optimized and we expect to have a consistent expense run rate throughout the rest of the year even as we make incremental investments in support of our near term objectives.

However, we will continue to monitor our expense structures closely and continue to drive a bottom line culture across the entire Company. For the quarter, cash flow used in operations totaled $2.4 million compared with cash flows used in operations of $1.4 million and $1.5 million in the previous quarter and prior year respectively.

While our goal remains to be break even or better on cash flow from operations on a full year basis for 2015, a key factor in achieving this goal is primarily based upon our ability to collect by year-end our anticipated renewals which are expected to become due during the fourth quarter. Turning to our balance sheet, as of September 30th, we had $16.1 million in cash, cash equivalents and marketable securities compared with $21.8 million as of December 31st.

As we discussed earlier, we spent approximately $750,000 on both milestone and development service payments associated with this exclusive source code license agreement we entered into with Cumulus Logic during the quarter. We continually monitor our cash balance and evaluate each quarter the best use of our cash and stock as currency to enhance our shareholder through investments within sales and marketing and technology services.

As of September 30th, excluding any impacts from our previous joint development agreements our deferred revenue totaled $24.8 million compared with $25.2 million at year end. We are pleased that we have been able to maintain our deferred revenue balances and we continue to focus on securing bookings and improving our maintenance and support renewals.

As of September 30th, approximately 28% of our deferred revenue balances were related to product revenues as compared with 22% as of yearend, and the average life of our deferred revenue was approximately 2.1 years. In summary, as I stated earlier, we recognized that it may be difficult to currently see the progress we have made during the transition and the success we’ve had on executing our plans.

We continue to work on improving our key metrics and measuring the success during our transitions which are, maintaining balance sheet strength; ensuring operating expenses are streamlined and at peak efficiencies; driving cash flow generation; and growing our new customer acquisitions and product adoption rates. As of September 30th, we’ve had over 150 adopters of our new technology which represents 13% of our year-to-date total bookings.

Now, we’re strongly encouraged by the early adoption rate, customer feedback and interest in our new product offerings. We believe we are well positioned in all these metrics as we head into Q4 and into 2016 and look to further expand our reporting on these metrics during 2016.

Finally, I want to point out to our shareholders that within a next several weeks, we expect Gary Quinn will sell approximately 100,000 shares of common stock to fund tax obligations associated with some recent restricted stock dressings which occurred in July. Obviously this is a sale necessity and not any indicator of the Company’s performance.

Once again, we believe we’re on the correct path to execute our plans. We continue to look to improve on all of our key metrics and remain very excited and focused.

And Gary and I look forward to updating everyone on our year-end call -- on our progress on year-end call. And now I turn the call back over to Gary.

Gary?

Thanks Louis. So, as you can see, we’re still in the tale of two cities with our performance, but that is true to be expected as we move into the first-half of 2016.

We may see a transition of legacy point solution customers to FreeStor during 2016, but we need to ensure we do not cannibalize our existing legacy payments revenue base. I think you can see in here that we at the Company are committed to delivering to you more granularities in a public forum for better evaluation of FalconStor.

Of course, the increasing GAAP revenue is the easiest way to see growth, but as the Company transitions from upfront revenue recognition to over time revenue recognition, the key performance indicators are bookings growth, billings growth, non-GAAP expense stability or a decline, deferred revenue increases sequentially and year-over-year, and positive non-GAAP cash flow from operations. In a turbulent marketplace with many premier brands showing declines, instability and erosion, we believe that we are best positioned public software defined storage company today to address the future which includes flash, software and cloud.

Now operator, can you compile the Q&A roster.

Well, I actually have two; one, when we started this whole process in the spring, I asked you this question before, we were sort of marching along and you said, well, we should definitely know by the end of the summer into the fall how things are going. We went through last quarter; we kind of had the same issues, some of the same issues that we still have, particularly in the case of the U.S.

And here we are and for another quarter, and I guess the question is the way you guys are talking, now are talking about into the next spring. And I guess the question is A, are we stretching this out from where we thought and if we’re stretching it out, is it because you’re willing to stretch it out because the confidence is so good that things are -- the interest is so great, it’s just taking longer even though there is so much interest there or is this a change of plan?

John, maybe you misunderstood me. We’re not looking to stretch this out into the spring of 2016.

I think that as we mentioned, in spring of 2016, we indicated that we would acquire a few hardware OEM relationships, I think we’ve done that, I think we have six. And these are pure FreeStor guys.

If you look at the acquisition of service providers, I think that that is moving along quite well. Everybody that we announced in Q2 is implemented and in production.

And we even had one of those service providers come back for a repeat buy in less than 90 days. So, they went from a 100 terabytes initially, they bought an additional 200 terabytes right now.

So, I think that the model actually works, I think the product works fine, adoption is occurring and we’re moving along. You also have to remember that everything that we are booking from these FreeStor customers are all subscription based.

So none of this revenue is upfront, it’s all over time based upon the life or the minimum life of 12 months in a contract. And third, we said that once we achieved some hardware momentum, some service provider momentum, we would expect to see an enterprise customer.

And that first enterprise customer which is the first to pop out of a pipeline of enterprise customers has occurred with Volkswagen which is a fairly significant sized global company, barring any of the recent news around them we think that that’s a good sign of the acceptance of the product. So, I think we said Q3, Q4 you should start to see progress around those particular routes to market for us.

If you saw that starting to occur, we believe we’re on the right track. We’re not pushing out into the New Year, we think that we are still on track with our initial plans that we laid out back, early in this year in 2015.

So your confidence level is as high or higher than it’s been? Each successive quarter you are becoming more confident about what’s happening I suppose.

I am absolutely confident in what we are doing. I think might we even said along the way that we probably overachieved a little bit on the hardware guys.

And I’ll give a little color on the hardware guys because I think some people are little gaga over the whole all flash array space. And although there is a lot of people talking about and a lot of money behind it, if you actually look at the actual performance of those companies, although achieving some significant quarterly year-over-year triple-digit increases off of albeit some low numbers and you might say, well, gee, if you had those numbers Gary, you’d feel better too.

But I think when you look at the declines that are going on across some of the larger names and if you add up the amount that is being delivered by some of these new guys that are public and some other guys that are not public yet, it barely puts a dent in IBM or EMC’s flash performances. So, you ask we are with a couple of those guys today, I think that there is some still question mark on whether or not the branded flash guys, how long they survive and how much market share they actually gain.

So, I think that at the moment our three-pronged approach is probably the weakest of three maybe, not to say that it’s not performing but I think that marketplace has some question marks in it. Secondly, on the service provider side, I think we’re making very-very good progress.

And we’ve got everybody implemented now. So, if we can burn to the initial orders before the end of Q4, then you’ll see repeats coming back from them.

Because our service providers are looking at primarily quarterly capacity true ups based upon customers that they either acquire or they move over to the FreeStor platform within their current portfolio. So, the only customers that we have that are doing annual true ups are enterprise customers, that’s what we promote.

Our service providers are primarily on quarterly based upon ramping up customers into their environments. And the hardware guys are just on pure capacity.

So, answer to your question do I feel confident what we’re doing? Absolutely I’m confident.

The message resonates, we’re getting a lot of traction here, it’s just us taking a little bit more time maybe to get the actual money, but actually to be quite honest, the size of the transactions we’re getting are anywhere between the initial 35,000 up to -- I think we had a 150,000 at Volkswagen. So I think that those things only get bigger and better as time goes on.

And I think we’re in a good -- I think we’re in absolute great spot from the software-defined storage marketplace today.

And as far as just competing with these other large storage vendors offering the cloud, it’s just been -- it’s just a different marketplace?

Do you want to give me a couple of names and I’ll tell you -- because there is a lot of people running around, closing a very turbulent market for…

Yes. I guess that’s the issue, right, it’s the very large guys are out creating a lot of turbulence and having all those customers sort of look at each other and say okay what do you we do.

I think customers are having a very difficult time selecting what they should do next. I think the moment all they’re really doing right now is adding existing capacity for the minimal requirements they have with their existing vendors.

Yes, you do see some of the new kids on the block getting some traction, but once again, I would ask somebody to go out and add up all the revenue coming from all the new kids on the block and how does that really compare to anybody of significant size. It’s an interesting exercise.

So that being said -- its’ a great investment exercise I think for people who ride the initial curve. But I think that as time goes on, I think we’re going to see a different outcome.

But with that being said, I think being a software only company and as companies are looking to optimize their current infrastructures as they move forward, we have one of our largest customers here two weeks ago in our office spending three days going through FreeStor and how to apply to their current environment, they were just absolutely ecstatic about what we’re doing and where we’re going because not only are they be able to basically go forward, they’re going to be all to remove existing software vendors that they are paying money for and take advantage of the FreeStor platform with the functionality with no additional cost to them.

And then one last thing, you’ve been great about putting these road maps out there a little bit for quarter-to-quarter without giving earnings estimates and things like that. Anything we should be looking at for over the next quarter?

When you say a road map…

Well, in other words, you had goals of trying to line up certain customers or lining up for certain -- having at least one OEM and…

I think John, we’ll run out the rest of the year, we’ll tally off the numbers, I think that we’re already above what our initial maybe small low estimates were; we’re over those numbers already, both for accounts, we’re talking OEM guys, service providers and enterprise customers. I think when we do the annual call coming up in the beginning of 2016; we’ll set goals again with you guys.

We’ll give you I believe probably a far better, both extrapolated addressable market roadmap and opportunity size as well as some goals around customer acquisition capacities and we’ll probably even through in a little bit of a technical roadmap for you guys. So, that may take a little bit longer to do as a call for all you interested parties, but I think would be good to get that out to the public domain.

And then at some point in spring as we -- if everything works the way it’s going to work, we should start to see a tick up in visible revenues. In another words as these things start rolling through, the comparison should start to show growth?

I think what everybody -- as I indicated, nothing better than GAAP revenue year-over-year compares. I think we’ve got to run a little bit more math, but I think if we can show you guys actual currency, year-over-year compares and bookings, billings in deferred revenue and cash is positive, I think that probably you’ll be able to see when the GAAP comes in.

As long as all of those are going in the right direction, are green, I think then…

It usually takes like a year or so to get…

Yes, but we’ve been doing it for a little while. So, if you noticed in the press release, I think it said approximately -- for the first nine months of 2015 approximately 81% of our total bookings were ratable as compared with 75% in 2014.

So, if 81% of our bookings are ratable over time, I think that will only continue to grow; will never be at 100%, there is always some kind of one-off here and there. But then you have to see that and you see average life, you can see when the revenue flows in.

Okay.

I do think John if you look at some of the numbers, albeit on a GAAP side, year-over-year wasn’t great. I think if you look at the individual numbers without GAAP, I think we were very close to teetering on green or even a yellow at this point back and forth.

So, it’s a lot better than red.

All right. Thank you very much operator.

Thank you, ladies and gentlemen for joining us today. As you can see, we are making some good progress with our new FreeStor product.

The software-defined storage space is a very exciting and very potentially large addressable market to grow into as the future moves forward here. And we think that we are well-positioned in the center of that marketplace as we enter 2016.

Thank you so much. Have a good night.

Bye.