Restructuring Costs

9 Months Ended

Sep. 30, 2020

Restructuring and Related Activities [Abstract]

In June 2017, the Board approved a comprehensive plan to increase operating performance (the “2017 Plan”). The 2017 Plan was substantially completed by the end of the Company’s fiscal year ended December 31, 2017, and when combined with previous workforce reductions in the second quarter of fiscal 2017 reduced the Company’s workforce to approximately 86 employees at December 31, 2018. In making these changes, the Company prioritized customer support and development while consolidating operations and streamlining direct sales resources, allowing the Company to focus on the install base and develop alternate channels to the market. As part of this consolidation effort the Company vacated a portion of the Mellville, NY office space during the three months ended June 30, 2018. In accordance with accounting standards governing costs associated with exit or disposal activities, expenses related to future rental payments for which the Company no longer intends to receive any economic benefit are accrued, net of any anticipated sublease income, when the Company ceases use of the leased space. During the nine months ended September 30, 2020, the Company incurred lease disposal-related costs for this property of $0.7 million.

In the third quarter of 2019, the Company adopted the 2019 Plan 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 the Company expected to achieve on a go forward basis. In connection with the 2019 Plan, the Company eliminated 23 positions worldwide, implemented tighter expense controls, ceased non-core activities and downsized several facilities. During the three months ended March 31, 2020, the Company incurred $0.1 million in severance expense as a result of this action. The 2019 Plan was substantially completed as of March 31, 2020.

Given the commercial uncertainty caused by the novel coronavirus pandemic, or COVID-19, the Company developed and implemented an even more aggressive expense control plan in March 2020, that it is prepared to keep in place for the remainder of 2020 (the "2020 Plan"). The 2020 Plan reduced the Company's annual cash expense run rate by $4.0 million or 29%. The Company has furloughed 21 positions worldwide, and 8 of these positions were reinstated in the second and third quarters of 2020. During the nine months ended September 30, 2020, the Company has not yet incurred severance expense as a result of this action. We believe the reduced expense level will enable FalconStor to remain profitable during the remainder of 2020, even with continued revenue challenges throughout.

The following table summarizes the activity during 2019 and 2020 related to restructuring liabilities recorded in connection with the 2017, 2019 and 2020 Plans:


	Severance Related Costs		Facility and Other Costs		Total












































Balance at December 31, 2018	$	461,362	$	453,446	$	914,808
Additions (Reductions)	—		157,693		157,693
Utilized/Paid	—		(187,833)		(187,833)
Balance at March 31, 2019	$	461,362	$	423,306	$	884,668
Additions (Reductions)	—		202,679		202,679
Utilized/Paid	—		(238,090)		(238,090)
Balance at June 30, 2019	$	461,362	$	387,895	$	849,257
Additions (Reductions)	214,050		170,779		384,829
Utilized/Paid	(214,050)		(257,453)		(471,503)
Balance at September 30, 2019	$	461,362	$	301,221	$	762,583
Additions (Reductions)	31,860		327,257		359,117
Utilized/Paid	(199,423)		(390,985)		(590,408)
Balance at December 31, 2019	$	293,799	$	237,493	$	531,292
Additions (Reductions)	76,708		210,752		287,460
Utilized/Paid	(156,415)		(225,835)		(382,250)
Balance at March 31, 2020	$	214,092	$	222,410	$	436,502
Additions (Reductions)	—		153,685		153,685
Translation Adjustment	4,674		—		4,674
Utilized/Paid	—		(201,211)		(201,211)
Balance at June 30, 2020	$	218,766	$	174,884	$	393,650
Additions (Reductions)	—		317,595		317,595
Translation Adjustment	9,554		—		9,554
Utilized/Paid	—		(366,562)		(366,562)
Balance at September 30, 2020	$	228,320	$	125,917	$	354,237

The severance and facility related liabilities are included within “accrued expenses” in the accompanying condensed consolidated balance sheets. The expenses under the 2017 and 2019 Plans are included within “restructuring costs” in the accompanying condensed consolidated statements of operations.