Operator: Good afternoon and thank you for joining us to discuss FalconStor Software Q4 2016 Earnings. Gary Quinn, FalconStor’s Chief Executive Officer; and Dan Murale, Chief Financial Officer, will discuss the Company’s results and activities, and then we’ll open the call to your questions. The Company would like to advise all participants that today’s discussion may contain what some consider forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties are discussed in FalconStor’s reports on Forms 10-K, 10-Q and other reports filed with the Securities and Exchange Commission, and the Company’s press release issued today. During today’s call, there will be discussions that include non-GAAP results. A reconciliation of the non-GAAP results to GAAP has been posted on FalconStor’s website at www.falconstor.com, under Investor Relations. After the close of business today, FalconStor released its Q4 2016 earnings. Copies of today’s earnings release and supplemental financial information are available on FalconStor’s website at www.falconstor.com. Just a reminder, today’s call is being recorded. And now I’m pleased to turn the conference over to Mr. Gary Quinn. Please go ahead, sir.

Gary Quinn: Thank you very much operator, and good afternoon ladies and gentlemen. And welcome to the FalconStor Q4 2016 earnings call. I believe as we look back over the 2016 calendar year, there was a significant inflexion point in both the storage hardware and software marketplaces for different reasons. We saw throughout the year in enterprise customer segment that was basically in a holding pattern awaiting the closure of the Dell EMC transaction and hoping to find out that their hardware storage investments were going to continue forward. We saw some of the industry analyst community waiting for any signs of the future from that transaction so they could inform their customers of the future decisions, they should be making, for where their company information should be stored. A completely different area of the industry, we saw the adoption of public clouds continue to accelerate with some customers making informed decisions and others just moving for the sake of moving to a public cloud. We saw just last week that sometimes that is not the best decision especially if those customers thought a public cloud could handle all of their vast recovery needs in one basket. The surging hyper-converged marketplace which just two years ago was going to replace all non-converged or built-it-yourself infrastructure is now coming into focus. And the result is just like the public cloud, it will not replace everything you have today. So, where does that leave us? Customers are in the same place that they’ve always been with just some additional alternative to store the information that companies generate to compete but with some significantly larger volumes, although industry data will show that revenues for all major storage providers are down. The capacity is significantly up. And that doesn’t include those public cloud providers as well as an emerging acceptance of white box storage manufacturers and commodity storage suppliers. It all means that for customers it’s very confusing and what decisions they should be making. They want simplicity, flexibility and economic performance from their IT investments. As you’ll see in the next few slides from Dan, is the FreeStor continues to march forward at a pace which is very promising, significant and real. Since the introduction of FreeStor in May of 2015, we have acquired a significant number of new customers, new routes to market with OEM and service providers as well as some very large enterprise customers both new and converted from our existing client base. The challenge we faced through 2016 is not different from any other hardware or software supplier. Delays in purchases, customers not committed to new technology other than replacing disc with some flash, some hybrid cloud projects and hyper-converged solution purchases. The reason is that customers need to bridge on the past to the future. How do I preserve my startup investment and bring it into the future without a lot of cost? That is where FreeStor is shining with customers both new and old. You can move your applications and databases to flash or to the cloud and manage them with the same management layer across any hardware vendor, public cloud supplier as well as host of private cloud suppliers, who are their local MSPs or CSPs. FreeStor does it in a way that it is flexible, simple and economically effective. Finally, with FreeStor accounting for almost 40% of our annual bookings in 2016, we see the risk of the loss of legacy point solution customers declining because as customers acquire FreeStor, convert to FreeStor or upgrade to our most recent releases of legacy products, those customers are happy, expanding and renewing as you can see from the data that Dan will present and from the press release. If the older legacy product releases which are reaching their end-of-life later in 2017, which are potentially at risk as customers decide whether they should modernize or move to the latest release of their existing solution from FalconStor or FreeStor. All of our legacy point solution product customers have a path to FreeStor in 2017 including our legacy VTL customers which are some of our largest suppliers of maintenance renewal business for the company. We believe by the end of 2017, the legacy base of point solution customers who are at risk will be minimal to our future as a company. I’ll now turn it over to Dan for the financial results and focus on the FreeStor results which are moving in the right direction. I would also like to congratulate Dan Murale on being appointed yesterday as the Executive Vice President, CFO and Treasurer. And I would like to now say Dan, can you take us through the financials?

Dan Murale: Thank you, Gary. This slide is just a reminder of our Safe Harbor Statements. Good afternoon to everybody. Most of our discussion this afternoon will focus on non-GAAP financial measures and on the key business performance indicator for the quarter. The balance of our financial details can be found in our press release which was distributed earlier today and contains our year-over-year results and all the applicable disclosures in accordance for GAAP. During fourth quarter of 2016, our consolidated revenue totaled $7.4 million compared with $7.3 million in the previous quarter and $9.4 million in the fourth quarter of 2015. During the quarter, we had one customer which accounted for more than 10% of total revenue, HDS which accounted for 11% of our total revenue. Booking for the quarter totaled $8.4 million compared with $5.5 million in the previous quarter and $10 million in the fourth quarter of 2015. As we have previously mentioned, some of our more significant headwinds we experienced during 2016 which continued in the fourth quarter included challenges in obtaining new customers increase sales of our legacy products and the level of customer deal elongation and customer indecisiveness to purchase, modernize software versus keeping their traditional software solutions. We see this due to the many prospect transactions which are currently underway with customers evaluating their current environments determining the best destination for that work load public, private or hybrid cloud, evaluating the marketplace for the appropriate technology and then finally making a purchasing decision and then deploying. We believe by focusing on a few key geographies for new FreeStor opportunities, we can grow the business in a way that is efficient and overcome the legacy reduction. Our focus here is on the U.S., U.K., France, Germany and China. Although other subsidiaries have sold FreeStor since its inception, these locations are where our greatest opportunity and penetration is today. Our non-GAAP expenses which excludes restructuring charges and share based compensation expense totaled $8.1 million compared with $8.9 million in the previous quarter and $10.7 million in the prior year. A 9% and 24% decrease respectively. We ended the quarter with 166 employees worldwide compared with 226 at the same period last year. We are pleased that we are able to decreased cost structure and anticipate there our non-GAAP expenses will decrease approximately 30% in 2017 as we recognized the full effect of the cost reduction initiatives completed during the past 6 months. Our non-GAAP gross margins were 74% in the quarter compared with 72% in the previous quarter and 77% in the fourth quarter of 2015. Turning to our balance sheet, as of December 31, we had $3.4 million in cash, cash equivalent in marketable securities compared with $6.1 million as of September 30 and $13.4 million as of the prior year. Included in the current quarter cash burn of $2.7 million was $500,000 of severance payments related to employees who were terminated during 2016 as part of our cost structure optimization initiatives. During 2016, we continued to make strategic investments in engineering resulting in further innovation of our products as seen by our new product releases including FreeStor analytics which was released in April, the ability to execute FreeStor in a number of clouds which was released in October, and in November we announced the general availability of version 9 of our CDP, NSS and OBD products. We believe with the cost reduction initiatives completed during 2016 we have matched our current expense structure with our projected run rate of bookings, billings and total revenue including any further defines of our legacy point solution business, without impacting our ability to continue to develop and innovate our next generation of products. Now I’d like to discuss our FreeStor performance. When looking at this slide, you can see that over the last 18 months, since FreeStor’s release, we are gaining traction with FreeStor in all our reach to market. Total FreeStor subscription based platform and FreeStor technology bookings value for 2016 has exceeded our total FreeStor subscription based platform and FreeStor technology bookings value for 2017 by 70%-30%. While we’re pleased with our bookings growth for the FreeStor technology and subscription based platform, these bookings continue to fill to make up for declines in our legacy product bookings. As Gary mentioned earlier, we believe we should have most of that behind us after the latest refresh cycle of product in 2017, although our internal budget and expectations for 2017 include further legacy customer losses. During the first 18 months of FreeStor, we have delivered the technology to 379 customers by the following routes to market. OEMs 6 customers, MSP 17 customers, enterprise subscription 41 customers, enterprise perpetual 315 customers, this represents an increase of 120% in our FreeStor customer base since December 31, 2015. During 2015 we sold 15 FreeStor subscription based transactions and those respective customers have subsequently increased their capacity by a total of 16% in the last 12 months. Looking at our bookings breakdown you will notice that in the fourth quarter, FreeStor and FreeStor technology combined for 35% of our total bookings compared with 17% in the fourth quarter of 2015. As we look at our year-to-date bookings results, FreeStor and FreeStor technology combined for 37% of our total bookings compared with 16% in 2015.2016 had minimal subscription based FreeStor bookings due to the timing of the release of FreeStor product in May 2016. However, we had a healthy adoption from our OEM partnerships and a few existing customers who adopted the FreeStor technology platform under our traditional perpetual license models. Our year-to-date 2016 bookings reflect a better mix of overall FreeStor and FreeStor technology bookings versus existing customer renewals, expansions and traditional point solution bookings. As a result of the continued adoption and acceptance of FreeStor platforms since its release in 2015. However, as stated on our previous calls, this increase in the percentage of FreeStor and FreeStor technology bookings, as compared to the prior year, it’s not entirely a result of organic growth in our FreeStor platform bookings and is partly a result of declines in our legacy product bookings. Now I’d like to turn the call back over to Gary, who will offer a few comments before Q&A.

Gary Quinn: Thanks Dan. And as you can see, the FreeStor opportunity continues to grow. We believe customers and prospects as well as partners will need the ability to build their own but without the proprietary cost of the past. We see customers looking to simplify their infrastructure, have more flexibility with information and insight to make better decisions. And they want a partner who is successful if they are successful. The FreeStor migration capability, cloud connectivity, analytics information and pay-once pricing, is all very attractive to every FreeStor customer and partner we have today. We have made what we believe are the necessary adjustments to deliver a company which has metrics that are positive and allow us to continue the journey with FreeStor. We are very conscious of those liquidity concerns both internally and externally. You should read our 10-K very carefully as we move ahead and understand the future for FreeStor. With that, operator, I’d like you to take a moment to compile the Q&A roster.

Operator: [Operator Instructions] And we do have a question we’ll go to Allen Zwickler at First Manhattan.

Allen Zwickler: Hi, I don’t have the 10-K yet. But could you give us your burn rate for the next quarter or two, I mean, I wasn’t clear on what it was.

Gary Quinn: So, Allen, we actually don’t provide that information. Going forward we have not actually given guidance in the past. We may look to do a little bit of that after the first quarter’s results which will be, we’ll announce on the first week of May. And I think at that point we’ll share with you a little bit more color around what’s happening internally and the ability to sustain the momentum in 2017.

Allen Zwickler: Well, you did mention that the burn rate was something close to $3 million in the fourth quarter because you talked about a number and then you said less to severance. So is that, given that, is that a good number? I mean, I’m not trying to push you against the wall but on the other hand, with $3 million in cash and losing money, I just want to get a sense?

Dan Murale: Well, so, as we indicated, we project to have a decrease in expenses next year of an additional 30% and have matched our expense structure to what we believe is our run rate for around 2017.

Allen Zwickler: Okay. So that would mean that you would be breakeven. Is that what you’re trying to say without saying it exactly?

Dan Murale: I think that’s fair.

Allen Zwickler: Okay. That’s for the year ’17, not necessarily for the first quarter could I just ask that question?

Gary Quinn: I think based upon the current cash position Allen I think that we need to ensure that we can do that throughout the year, not just at the end of the year, throughout the year.

Allen Zwickler: Right, I understand. Okay, great. Thank you very much.

Gary Quinn: Thanks Allen.

Operator: [Operator Instructions] And we’ll go next to Bill [indiscernible].

Unidentified Analyst: Good afternoon.

Gary Quinn: Hi Bill, how are you?

Unidentified Analyst: Doing just fine. Could you just talk a little bit about 2017 and the storage arena as a whole and how that compares to 2016? Thanks.

Gary Quinn: I mean, from our own finishing up of 2016 and what we see in the pipeline for Q1, I mean, we’re almost finished with Q1 and as well as what’s going at the Q2. I think that the climate is a little better. And the reason why I say that is I think as I mentioned, as people identify where they want to start information whether it’s in hyper-conversion environment like in Nutanix, or some things from some other folks as well as looking at utilizing the public cloud for certain workloads, maybe not all workloads and data. And then just basically retransforming their existing environment as they move to flash or they look for a more sharable on-premise or hosted private environment. I think it’s getting clear now. What you’re seeing a lot of is, customers. The flash migration is absolutely happening and it’s a very simple easy decision for a customer. You’re up for renewal on a disc platform. The pricing is there to move to a flash platform. So it’s very attractive. You get additional performance with doing nothing to your environment. So that’s a good thing. People are trying the cloud, okay I mean, it’s interesting I spoke to an analyst the other day who said they’re seeing people already coming back from the cloud. So, I don’t think that’s fully pervasive but I do think that people are finding that the used cases for the public cloud such as test endeavor very viable. The ability to archive and for long-term retention for compliance reasons is also very viable because it’s a very cost effective destination. And FreeStor allows those customers to move data into the cloud, almost all clouds and have a common management platform to see it as if it was in their own premises. So that’s become very attractive for customers. Whether they do it or not, I mean, a lot of people will say, can you connect it to cloud, and you’re like yes. And then the follow-on question is when are you planning on doing that is that well, we don’t really know yet but it’s a good thing to know that we can in a very common way. So, I think that the marketplace is getting more clarity around how do you, -- what do you do with hyper-converged, what do you do with the traditional general purpose build-it-yourself, when do you use the public cloud, when do you not use the public cloud. And that clarity then allows for customers to start to, make better decisions around buying because what we found a lot of times it was basically a no-decision because the customer is still little confused about what they should do next. And I think because there are so many people out there with a marketing message that confuses these folks. But I do think 2017 is looking better from people understanding where they need to go, with the cost that’s going to be and start making those purchases.

Unidentified Analyst: I did notice that 2016 Q3 to Q4 you had a little sequential growth and I don’t think that’s been the norm in the past?

Gary Quinn: So, we were talking about this. I mean, actually if you look at Q1, Q2 and Q4 for us, as you guys always hear me say, Q1 is usually okay, Q3 is usually worse than Q1, Q2 and Q4 are similar with Q4 usually being a little better. As we look back over it, I mean, I don’t really have a full explanation for this and this may not be a good response. But I mean, I just think we stepped in a big hole in Q3. We looked at it for a number of different reasons that we’re going on both internally and externally. I’m not expecting that drastic drop from Q2 and Q4 moving forward. So I know, thank you for saying we grew from Q3 to Q4 but Q3 was really, not a good performance at all.

Unidentified Analyst: Got you. When do you see possibly quarter-to-quarter sequential growth for the company as a whole, is that the inflexion point here at the end when you get towards the latter part of 2017 and the legacy is finally gone? Or do you see that happening from now on?

Gary Quinn: So, one of the things that is -- was probably underestimated here, I mean, first was, is obviously customer adoption and customer buying patterns in 2015 into ’16. I mean, we actually went into ’16 feeling good coming off of 2015. And 2016 had a lot of dynamics going on in it. And so, I think we also looked at the legacy customers. And I’ll talk about it specifically, specifically Virtual Tape library customers that have historically been with FalconStor for a long time, you think about when those transactions were done, the size of those renewals, which are primarily mostly 6-figures. Those price points just don’t work in today’s world. And a lot of those customers are modernizing. You might say why are they not going to FreeStor? Many of them were done through large partners of ours from the hardware side. And so many of them moved off on to another modern technology like a snapshot technology, and we were not considered during that refresh with the hardware vendor with our original Virtual Tape library. They went off to somebody else’s technology. So, those hurt us and you got to sell a lot of new product at a lower price point to make up for one of those big renewals being lost. And so, I think we have now identified and in our budget built around the high-risk ones that we still believe could go away. So we didn’t count on them. I mean, if they do come that’s a bonus. And the ones that we do know that we have are offering with FreeStor is extending into the inclusion of the Virtual Tape library of products, with the ability primarily of allowing you to store tape or output a tape or data on tape, in the cloud. And that becomes very attractive for customers because they don’t need to change their workload process that creates that actual output and where it’s stored, which would be very costly to modify. They can continue to do that and actually take advantage of some cheap infrastructure in a public cloud space. So, we think that will help us in enabling those customers to continue on. If they do have the need for modernization where they have increased recovery times or faster recovery times, the fact that they own FreeStor now, based upon their tape environment, will allow them to utilize our snapshot technology with no additional cost to them until they actually use it and the capacity that they actually have under management at the time of the true-up. So, we think that after evaluating that in pretty excruciating detail in the second half of the year, I think we have a good handle on that situation of when that risk will either stabilize or disappear. And we did build into our forecast the inclusion of many of those customers.

Unidentified Analyst: So, I mean, I don’t know if you can answer my question but should we expect sequential growth starting now?

Gary Quinn: I mean, I think as well give a better answer on that after Q1 Bill, because I think that we’ll have the first quarter behind us, meeting those goals and then having a little better outlook on Q2 into Q3.

Unidentified Analyst: Okay. In respect to your, did you go and explain or just tell me the magnitude only because I don’t really understand giving the VMware metro storage cluster certification?

Gary Quinn: So, the reason why you need that is some customers, they don’t want to have a situation where in an environment that includes VMware and our technology is running in that with FreeStor. Some customers fear that if they have a support issue and when they call VMware not us, but they call VMware and they say we’ve identified this problem then they say, what’s in your environment. Typically another vendor if you’re not part of their certification program, been certified by them, they’re willing to work with support with us, with the customer, work for the product and solution, customers steer away from that. So, VMware as you know is a very dominant player. I mean, they own probably 65% of the server hypervisor space. So, as you move ahead you don’t want another obstacle or a customer says are you certified for my VMware environment because I don’t want people saying I can’t support you or vendors pointing fingers. So, for us, that has been, I want to say a long process, I think kind of due to the changing ways that that program was administered by them. But at this point right now it’s positive for us, so there are no customers saying you’re not certified in the environment. It goes for a lot of people, I mean, we do have certifications fairly extensively. But we needed to get FreeStor done and it took a little while just due to some I want to say almost administrative issues related to the VMware partner program.

Unidentified Analyst: Thank you. So, really in theory it just opens up your market?

Gary Quinn: Can you say that again?

Unidentified Analyst: In theory it just opens up your market now that you’ve got that in your?

Gary Quinn: It just takes one less obstacle away, if somebody is there saying we’re VMware certified and they’re not so you don’t want a support problem and any issue. So, yes, it does open up your market because you’re not being blocked out because you don’t have the certification.

Unidentified Analyst: Got you. And I’d love to hear your color on the acquisition of Nimble by HP?

Gary Quinn: Well, I think if you, I mean, HP has gone out on a little shopping spree. So they picked up SimpliVity which is a hyper-converged solution which will give them some depth in their portfolio up against the Dell EMC team obviously. Nimble, HP has three par, Nimble is a primarily came up as a hybrid flash environment they went to an all-flash environment. They had a lot of challenges going to the enterprise as many people know. I think they did a fantastic job in the mid-market or medium enterprise. But they kind of stumbled getting to the enterprise side. And I think they needed to find a bigger home, because I think they’re a quality team, I think they got a quality product. I just think that their ability to execute, go-to-market that kind of got stuck. And so I think it’s good, all around. I mean, I know the valuation maybe from an investor side, at the moment we got 45% more. I think while back it was valued quite significantly higher. But I think it’s a good thing in the end. I think they were good company with good technology, hope HP can take them a long way and do the right thing for them. But I do think that by seeing HP do SimpliVity for hyper-converged pick up a mid-tier hybrid or flash solution, they obviously have three par at the high-end that they compete with. So they’re certainly filling out their portfolio to compete. I also think that you see that, although the M&A market is, warming up I think a little bit right now, I mean, I’m not saying it’s on fire but it certainly is warming up. Valuations were lower as you can see but I do think that it’s a good sign because 2016 was a drought for M&A and also for the ability to really, for a lot of people to obtain any additional equity or get recapitalized, was really tough in storage. So I think that’s a little bit of a positive sign. And as you know, when people start doing M&A, those folks all kind of get excited and euphoric maybe not over empirical data but they always get excited. So, I think it’s a good thing for the market to actually see that happen.

Unidentified Analyst: Yes, I think they went out three times rev, you’re not even one. I think as far as to show maybe what this industry is worth now and what it possibly could be worth particularly if it kind of kicks in a little bit. Well, that’s about it my friends. I appreciate your time.

Gary Quinn: Well, it’s good to hear your voice Bill. And as always stay in touch. It’s good to know you. Thanks a lot. Operator?

Operator: [Operator Instructions] Gentlemen it looks like I have no additional questions at this time.

Gary Quinn: All right, so, in closing, thank you operator, and to all the folks on the phone. We look forward to updating you at our next call which will be in the first week in May. We apologize for the delay on this call. As you know, we had a number of new members joining us. We had some scheduling conflicts. Typically our call is in February. But I do believe we’ll be back on track with our calendaring as we were last year. You can look forward to our calls being scheduled at similar times during the rest of 2017. So thank you very much and good night.

Operator: And ladies and gentlemen, once again, that does conclude today’s conference. And I’d like to thank everyone for joining us today.