Philip Obal's  Instablog

Operator

Good afternoon. My name is Angela and I will be your conference operator today.

 

At this time I would like to welcome everyone to the 2008 GlobalSCAPE year-end 4th Quarter Conference Call.

 

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star (*), then the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound (#) key.

 

Mendy Marsh, CFO GlobalSCAPE

Safe Harbor Statement

Thank you, Angela. Good afternoon. Thank you for joining our earnings call today. This is Mendy Marsh, Chief Financial Officer for GlobalSCAPE. Joining me on the call this afternoon is Jim Morris, GlobalSCAPE's CEO.

 

Before we begin, I would like to remind everyone that today's call, including the question & answer session, may include forward-looking statements regarding expected revenue, earnings per share, future plans, opportunities, and expectations of the company. These precautions, estimates and other forward-looking statements involve other known and unknow risks that may cause actual results to differ materially from those expressed or implied on the call. These risks are detailed in the company's Form 10-K released today. The statements included in this conference call were based upon information known to GlobalSCAPE as of the date of this call, and GlobalSCAPE assumes no obligation to update the information obtained in this call.

 

With those Safe Harbor Statements presented, I'll begin by summarizing our financial results for 2008.

 

As covered in our press release today, our Revenue for 2008 was $15,792,242 as compared to $18,360,341 in 2007. However, the 2007 Revenue included a large non-recurring sale to the US Army of approximately $2.8 Million. Excluding this sale, our Total Revenues increased by 2% in 2008 when compared to 2007. The increase in baseline revenue is mainly due to higher earned- Maintenance & Support Revenues during 2008. Also, as announced in our press release, we recorded a non-cash impairment of Goodwill and Long-Lived Assets of $5.77 Million and $3.24 Million, respectively. With this non-cash impairment, our Net Income for 2008 was negative $7,659,961. The corresponding Net Income for 2007 was $3,642,267. Without the impairment, our Net Income would have been approximately $254,000. The impairment does not impact our Cash position. In fact, we have sustained a strong Balance Sheet, with no long-term Debt, and over $6.3 Million in Cash at the end of 2008. Our Cash position is up over $1 Million from the end of 2007, an increase of 21%.

 

Now I'll turn to financial highlights from the 4th Quarter of 2008. We had Q4 Revenue of $3.7 Million. This Revenue is comparable to our 3rd Quarter Revenue during 2008. Our Net Loss for Q4 was $417,000. However, this Net Loss is a direct result of four non-recurring events. First, we announced in November 2008, that we would be closing our Massachusetts office and consolidating all operations to our San Antonio location effective December 31st. We incurred a one-time charge of approximately $230,000 related to this office closure. Second, we had previously announced in March 2008 the retirement of Randy Poole, our former CEO. During the 4th Quarter of 2008 the BOD granted him immediate and full vesting in all his remaining stock options. This resulted in a one-time charge of approximately $130,000 to Stock-Option Expense. Third, as previously announced, we continued to accrue Salary Expenses for Mr. Poole and Earl Posey, our former VP of Business Operations through December 31, 2008. These expenses totalled approximately $56,000 in the 4th Quarter. With the hiring of Jim Morris as CEO in August 2008, and the hiring of Craig Robinson as COO in October, we effectively incurred expenses for two additional executives during the 4th Quarter as compared to prior quarters. As of the end of 2008, we have no further Salary or Benefit Expenses associated with Mr. Poole or Mr. Posey's executive positions with the company. Finally, we made a one-time accounting adjustment to reduce the useful life of the software purchased from Availl to 5 years. Previously the software had been assigned a 10-year useful life. We incurred a one-time charge of approximately $156,000 in Q4 associated with the reduction of this useful life from 10 to 5 years. Together, these four non-recurring items added over $570,000 in expenses during Q4. These additional expenses were necessary to resolve prior agreements and practices, and are not carried over into 2009. Without these four non-recurring events, our Net Income for Q4 would have been approximately $155,000, sustaining our previous 18-consecutive quarters of positive Net Income.

 

In closing, we continue to have solid financial performance and ended 2008 with a strong Balance Sheet. Our Cash was approximately 40% of our 2008 annual revenue, and we are well-positioned to continue making Long-Term Investments in 2009 in accordance with our business strategy.

 

I'd like to turn the program over to Jim Morris. After Jim's initial comments, we will then open up the lines for Questions & Answers. Jim.

 

Jim Morris, CEO GlobalSCAPE

 Thank you, Mendy. Good afternoon everyone.

 

I am pleased to be participating in my 1st annual earnings call as President & CEO of GlobalSCAPE, and I thank all of you for your interest in joining this call. Now I'd like to present some summary comments and perspectives from my position as CEO. We are VERY pleased with our financial performance in the current economic environment. Before I discuss other topics, I want to ensure that everyone clearly understands what the 2008 impairment means. The impairment simply means that accounting rules require adjusting the book value of certain assets on an annual basis. Again, this impairment-adjustment is a non-cash event. In fact, our Cash position improved in 2008 as compared to 2007. As Mendy mentioned, as of December 31st, '08, we had $6.3 Million of Cash On Hand. This is approximately $1.1 Million (or 21%). more in Cash On Hand than at the end of 2007. Second, taking this impairment in 2008 effectively reduces the potential negative impact on this year's earnings as we will be reducing our Depreciation and Amortization in 2009 by approximately $300,000 as compared to 2008. The investment community is well-versed on impairments, their non-cash nature and the fact that they do not impact ongoing operations. Many companies took impairments in 2008 with little to no adverse effect on shareholder value.

 

Excluding the single, large, Army deal in 2007, our Revenue grew 2% in 2008. We are very pleased with this baseline Revenue increase especially through the current economic downturn. We realize that many investors look closely at Net Income. Our Net Income is down from 2007, but the numbers are much more comparable when placed in context:

 

First, our Net Income loss from 2008 reflects the previously discussed impairment of approximately $9 Million. Second, Net Income for 2008 also was impacted by the four non-recurring charges in Q4, as Mendy mentioned earlier. These four items in Q4 added approximately $570,000 in expenses. Together with the impairment and the non-recurring items added almost $10 Million in Operating Expenses that are not carried forward into 2009. Minus these non-recurring items, our performance in 2008 would have delivered positive Net Income of approximately $600,000. This observation is important for a couple of reasons: First, it is clearly apparent from a cash perspective, that we ran a solid and profitable business in 2008, as reflected in our 21% increase in Cash and lack of any long-term debt.

 

Second, we increased our Cash position during 2008 while increasing Research & Development investment by $900,000 as compared to 2007. Our increased R&D is a direct result of our strategic decision to invest in improved product features, developing new products, and exploring innovative solutions potentially to be added in the future. These investments allowed us to add 21 new staff members, mostly engineers, in 2008. Our Research and Development investment from prior years and in 2008 paid off in several new solutions and certifications during the year.

 

In February we announced that our Secure FTP Server had received FIPS 140-2 Validation. FIPS 140-2 Validation is required by most government departments including the national security community to protect the integrity of their files across their network. FIPS 140-2 is also recognized by many US and international commercial corporations as the Gold Standard for secure information exchange. Specifically, companies in the financial, retail and healthcare markets are under pressure to ensure that customer and patient information is secure, protected, and kept private in transit and in storage.

 

In July we announced the availability of an AS2 add-on module for Enhanced File [Transfer] Server product. AS2, or Applicability Statement 2 Specification, supports the exchange of structured business data securely on top of HTTP, and HTTPS protocols. Our AS2 module allows manufacturing and retail customers to efficiently connect their supply chains to suppliers and key trading partners.

 

In September we announced the availability of our latest versions of CuteFTP products in five additional languages: Spanish, German, French, Portuguese and Turkish.

 

And then in December we added Russian and Simplified Chinese to our CuteFTP products.

 

In November we announced the versions of SecureFTP Server and CuteFTP Pro had received the Certificate of Networthiness from the US Army Network Technology Command. GlobalSCAPE's receipt of this certificate enables Army installations worldwide to install and operate the certified versions of our Secure FTP Server and CuteFTP Pro over Army communications networks, including those used by our war-fighters in the Middle East. Finally in December we announced the release of Mail Xpress, a Microsoft Outlook ® email plug-in, to facilitate the transfer of large file attachments and provide enhanced tracking and auditing of the file attachments through read-receipts and log files. From an internal engineering perspective, we implemented a milestone-based, go-to-market process during 2008 as a framework for guiding and monitoring our continued R&D activities. This structured approach, over time, will allow us to deliver new and enhanced solutions in accordance with our strategy and will increase our return on investments for these new and improved products. Our strategic intent is to continue with our investments in high-pay-off solutions, to sustain our solution roadmap, and to capture greater market share in the future.

 

During 2008 we also announced new industry-relationships:

 

In October we announced QBS Distribution as a channel partner to enhance distribution of our solutions in the United Kingdom and Ireland. The entire GlobalSCAPE product line is available through QBS Distribution and the UK remains a strong source of business for GlobalSCAPE.

 

In November we announced that we had joined the Cisco Technology Developer Program. This program unites Cisco with 3rd-party developers of hardware and software to deliver tested and inter-operable solutions to joint-customers. And we continue to pursue additional industry partnerships as we execute on our business strategy. 

 

Again, we are pleased that we have kept our strategic investments and laser-focus while conserving our strong cash position in the current economy.

 

 

With that, I'll turn it back over to InterCall for instructions relating to the Q&A Session of this call.

 

Operator

Thank you. At this time, ladies and gentlemen, I would like to remind everyone in order to ask a question, please press star, then the number one on your telephone keypad. Please be mindful that you are limited to two questions at this time. We'll pause for just a moment to compile the Q&A roster...

 

And you have no questions at this time, sir. 

 

I do apologize. You have a question from Greg Newman.

 

Greg Newman

Thank you. Congratulations to everybody on your many successes in 2008 in improving Cash On Hand 21% during such a wild recession in 2008 while increasing Research & Development expenses. That's excellent. I'll jump to two questions I have on Sales and Revenues.

 

When does your team, Jim, expect Sales to really breakout above the $20 million Annual Sales plateau that's kind of ridden above us? (We've been close to that.) From all the Research & Development, the new product advances, the B2B gateways like EFT's new AS2 module, the rebranding, the new certifications, the potential for a multi-million dollar military order (a lot of people want to see that 2007 repeated and want to know what it takes to get that); I know you've got channel sales, resellers, international partners, looking for more major partners, maybe a merger or acquisition, and not only the Research & Development expenditures, but also somebody asked before the acceleration of Sales & Marketing. So when do you expect those things, any of those things, to really boost Revenues and Earnings going forward?

 

Jim Morris

Well, Greg, thank you very much for all of your questions. I'll try to pick them off.

 

Greg Newman

Okay.

 

Jim Morris

From getting more traction and getting more return on our investment in Research & Development, our products that we are delivering to the marketplace today are stronger than ever before in the history of the company! We have got a great team. We have reorganized. We have a formal Q&A (Quality Assurance) Department and we are delivering to the marketplace industrial-strength products, one. 

 

Two! You may have noticed in some of the previous press releases that there is a point-of-contact with a company called New Ventures Communications. That is the public relations firm that we have retained about six weeks ago to help us create mind-share in the marketplace, so we then can increase Sales because people have now heard of GlobalSCAPE as opposed to the private, in the past the company that was quiet. And so we're doing that.

 

Another thing that we have done to support Sales: we have retained the services of the best business developer that myself and Craig Robinson know of to help us do business development in the federal, state, local marketplace.

 

Item next, that's why we are partnered with Carasoft. Carasoft is allowing us to use their GSA Schedule. Carasoft has their own direct-sales force. Carasoft is a $300,000,000 revenue company focused specifically in the government marketplace. So with all of the questions I hope that I answered; the answers that I've provided for your questions, we believe that we're gonna get additional traction both in commercial and in federal, and we are pursuing large deals, and we, like you, want to get above the $20 million annual revenue run rate.

 

From an acquisition point-of-view, we have no short list of companies that we would do an acquisition of, as far as our foreseeable future, but we're always looking at technology, intellectual property, potential small organizations that are pre-revenue that would add to our core business and either our managed file transfer information exchange business or adjacent spaces.

 

Does that answer your question?

 

Greg Newman

Yes, except for when would y'all expect ... I know it's hard to put a finger on it; it's a forward-looking statement, but when do you see that we would breach the $20 million in annual sales, that would be $5 million a quarter, anytime soon?

 

Jim Morris

The answer to that question, Greg, is we here at GlobalSCAPE will not provide guidance to you or to the Street. There's just so much uncertainty, particularly in today's economic environment.

 

Greg Newman

Okay. But you still held up well during this recession; I think that's pretty remarkable.

 

Jim Morris

I think, you know, the impairment has occurred and we had a lot of events that occurred last year. I believe that making a statement that we increased Cash-On-Hand by 21% shows that we are running a solid business every day.

 

Greg Newman

You'd think it surprised some people that probably thought that you were gonna have a drawdown in Cash due to everything ... loss of sales? But yeah, that was good to hear.

 

I have another question about your five-year growth plan that we've talked about in the past and I wondered what growth you expect to see in 2009 and 2010. I think that people are looking at, well, if you're close to $20 million, what's it gonna take to get us to $50 million? or $100 million. And, if you can't tell us a timeline, but at least you could tell us 'Yes, we do have a five-year growth plan that entails those numbers".

 

Jim Morris

Yeah, we certainly have a strategy and a business plan with compounded annual growth rates (or CAGRs) built into that on what our expectation is. Right now we have budgets, we have rebaselined our budgets. We're thinking not only of our tactics, but our strategy going forward. You certainly understand that going from a $20 million to a $100 million company in a five-year time period is very difficult to do organically; it would probably have to come in the form of a partnership or a strategic relationship or acquisition, but we have none on the roadmap right now. 

 

Greg Newman

Okay. Well, they gave us two questions, so I'll go ahead and yield the floor and if nobody else has a question, then I'll come back with one or two more.

 

Jim Morris

Yes, please do.

 

Greg Newman

All right. Thank you.

 

Operator

Your next question comes from Phil Obal.

 

Phil Obal

Good afternoon. I was curious about how are Sales doing for the new products, you know, a number of new products, and because of those new products, have you increased sales staff or plan on increasing the sales staff?

 

Jim Morris

Right now our sales staff is fully-staffed. As far as the announcement of new products this year, you know, we are getting traction in the marketplace, but that is for First Quarter 2009 and we do not have an overall capture of the financial results as far as Sales of new products this quarter.

 

Phil Obal

Okay. Which products are growing in Sales (your current products); which products specifically are growing in Sales on a domestic or North America basis and international basis? Kind of in a yearly growth rate what yearly growth rate do you expect as well for these products?

 

Jim Morris

Yeah, the highest growth rate that we experienced in 2008 was with our EFT Server product, which we actually increased approximately $1 million, I believe. 

 

Phil Obal

And what about the other products that you have? What kind of expectations on yearly growth rates do you have?

 

Jim Morris

As a percentage of growth, again, we don't provide any guidance. We hope to in 2009 sustain our investments, our roadmap, our partnerships. We would hope to be able to have deeper market penetration both commercial and in government. 

 

Phil Obal

Okay, thank you. That's hit my two questions.

 

Jim Morris

Great. Thank you very much.

 

Your next question comes from George Roe.

 

George Roe

Good evening, gentlemen. My first question is perhaps a bit retrospective. I think there's a sense that the deal done with Availl did not really result in the benefits that were anticipated. If that is accurate, on a going-forward basis, say we're are looking at other companies, what lessons, if any, perhaps, did we learn in terms of future acquisitions?

 

Jim Morris

George, that is a great question. You know, when you tee up a technology, either pre- or post- revenue, and see how it fits into your strategy, at the time of the acquisition of Availl, it fit into the strategy within GlobalSCAPE to enter into an adjacent space in the wide area file service (WAFS) and continuous data protection (CDP) business. During due diligence, some of the statements made potentially on the opportunities for revenue in the future, we did not experience in 2008 that expectation as far as revenue growth. The current team at GlobalSCAPE has much experience in doing due diligence, and so when we identify a technology or an intellectual property or a company, you can be assured, George, that from a due diligence perspective, not only on the technology but on the business process, we will be doing very diligent due diligence, and we'll be looking under the covers and testing out all aspects of the company or technology prior to an acquisition, if one is teed up this year.

 

George Roe

Jim, that's excellent. Again, that was the company's first foray into the M&A world (mergers & acquisitions), and having some background in that field, it is a learning experience and mistakes happen. At least expectations, I don't want to call them mistakes, that may be unfair, let's just say that expectations oftentimes are not always met, and leave it at that.

 

Jim Morris

Yeah.

 

George Roe

My second question is a bit happier question, I think. We are sitting back with no long-term debt and apparently some real cash.  I know we have some investor relations people and PR people; obviously the thing nearest and dearest to most of the shareholders is current share price. What does it look like tomorrow morning, I really don't know, looking at the charts here. Prior to certain issues, we had a fair number of institutional investors when of course the stock was trading at significant multiples above its current rate. One thing, and I don't know if it's more of a suggestion or a question, is what can we do to get over this quiet company concept which actually helps, well, nobody, make our presence in the investment market better known. We have a list; we know who the prior institutional investors were to maybe go back to those people somehow and say, "By the way, no debt, lots of cash, good prospects", to get the type of share volume and then pricing that obviously benefits not only the company but all the shareholders. Sorry for the long question there.

 

Jim Morris

George, you're absolutely right on. One of the things that benefitted our share price going back over last year when we traded over $7.00 a share was the previous CEO went on the road and got in front of institutional investors, and had a story to tell based upon the acquisition of Availl and the financial performance. Our intent is, this year, that Mendy and I will go on the road when we have some sizzle to talk about. So it could be a large award; it could be a breakthrough technology; it could be a breakthrough partnership! But it's basically putting together the story that when we go out to recover our old institutional investors, we have a compelling story for them to reinvest in GlobalSCAPE.

 

George Roe

I think, certainly, that makes sense. I would appendage one suggestion. Good news. I think you have the sizzle. Right now you have no Debt, and Cash, and in a lot of investment circles, knowing some of the players in that field, that in itself can get an awful lot of attention, thus, perhaps instead of waiting for the breaking news environment, which I certainly understand, you actually may have some of those tools before you right now, especially for certain investors who can see what's happening: that there is not only great potential but no Debt and Cash, $0.70 is not a bad price to get in at. With the float being as low as it is, we could arguably have a significant bump in share price and we may not have to wait for the breaking news. I think you may have the breaking news: no Debt and Cash. Just a thought.

 

Jim Morris

No, no. George, great point. We fully intend to, this month, reach out to prior institutional investors and tell the story to them. There are a couple of speaking opportunities coming forth in this quarter, one specifically in April where I'm going to be speaking at America's Growth Capital in San Francisco as one of the public company speakers that's going to be attended by institutional investors. 

 

George Roe

That's great.

 

Jim Morris

George, we're not waiting, but as far as a formal roadshow, I think that we could draw a lot of attention, but we fully intend to go to previous institutional investors in the next two weeks to tell the story to see if they'll re-engage with us.

 

George Roe

That's the stuff most of us love to hear. Thank you very much, gentlemen.

 

Jim Morris

Thank you, George.

 

Operator

We have a follow-up question from Greg Newman.

 

Greg Newman

Thank you. I enjoyed the questions and answers from the other callers.  I had to strike a few things off of my list. I was looking at the Gartner MFT (managed file transfer) report for 2008 and they had listed some cautions among the many good things, but they said there no Unix support which eliminates some RFPs and RFIs (Request for Proposal/Information), and that GlobalSCAPE had limited but growing deployments of common application integration technologies and methodologies like BPM, workflow and transformation, which apparently y'all are addressing. You have the workflow (engine), you've got the AS2 (module) B2B, so I was looking at that and wondering are y'all gonna go to address some of these issues with UNIX or are y'all looking at UNIX at all at this time or any further things to address in the Gardner report, from the customers that you're hearing what's most important to them.

 

Jim Morris

Yes, Greg. Great question. We have a very close relationship with Gartner and we're exchanging information with them both as an analyst and a strategic advisor. The whole issue of cross-platform in UNIX or LINUX is certainly something that we are discussing. We have not made the business decision on pursuing or not pursuing. Pursuing is a mate or a partner tradeoff, so when we do make a decision, if we make the decision to get involved in cross-platform, then it will get down to the how. Do we build it in-house, or do we partner, or do we acquire it and white-label it. But certainly being cross-platformed is a conversation that occurs at GlobalSCAPE probably daily.

 

Greg Newman

Okay. Thank you. And Synteras is on my mind as a partner. You've worked there. And watching Netflix with the file-sharing of music, the DVDs, that's also on my heart. I come from a country music background, so I wake up everyday thinking about is Synteras going to do something with GlobalSCAPE that we're gonna see in the news, and are we going to move into file sharing of music in any way; is that, because I watch, we all have watched the different ones that have got into trouble dealing with music and then now they're a $200 million company, and I'm thinking, should we grab some of that or is it still risky? I know you've got a few people looking at that; how's that going?

 

Jim Morris

Yeah, the applicability of moving music or videos via streaming videos or video production again is something that is discussed probably daily within GlobalSCAPE. 

 

Let me be clear as far as Synteras. Both myself and the Chief Operating Officer, Craig Robinson, worked at Synteras. Craig was the General Manager and I was the Vice-President Strategy & Business Development. It is a very small firm. They have good intent; they have a great contractual bind vehicle because of their 8A status being Native American. There is no dollar ceiling on the contract size that could be awarded to them and the award is non-protestable. So we still have a relationship with Synteras, but that's the reason why we established a relationship with Carasoft. Carasoft is a $300 million dollar reseller of high-technology products specifically into the government, state and local markets; and we have developed a very strong relationship with them; and we're actually doing a webinar with them in the next two weeks. So we believe that relationship is gonna get us more traction in the federal, state and local marketplace, but we still have the relationship with Synteras to use their contract vehicle as a small, Alaskan native-corporation and any awards that can be made there can be made on a sole-source basis with no dollar ceiling.

 

Greg Newman

Thank you. That sounds very excellent. Well, that's my two questions. I'll yield the floor again. Thank you much.

 

Operator

Your next question comes from Barry Groos.

 

Barry Groos

Gentlemen, I think you did a very nice job of streamlining your operations this past year such that it didn't eat into your Cash and you were able to show that you were were able to even grow your Cash in the interim, which is commendable in this environment. My question relates to your, and you just elaborated while I was in queue for a moment in reference to your teaming with Carasoft. In specific, you noted in that press release, which was the 18th of this month, that you had previously received an order from the US Army in May of '07 for $2.8 million. I was curious what your thoughts were moving forward regarding your teaming with Carasoft and how you anticipate those orders being received? Will they be in the two-, three-, five- million dollar range? Do you think that there might be a $15-20 million order? How do you see that moving forward? I, for one, was very excited when I saw this announcement because I think it offers you great potential as really the base and a tremendous growth opportunity for your future. I'm just curious if you can elaborate on this partnership yourself.

 

Jim Morris

Great. Thanks, Barry. CaraSoft, being a $300 million company, gets orders on the size of a thousand dollars up to multi-million dollar awards. We have never had a history other than a relationship with Synteras of trying to do business development in the federal marketplace. We now have a business developer who lives in the Washington, D.C. area who has a phenomenal Rolodex of who the economic buyers are in the government. He also has a very strong relationship with both mid- and large- [size] system integraters that are going after the large, multi-million dollar, hundreds of millions of dollars, billion dollar acquisitions. So if we can be positioned on the winning team, or positioned on multiple competing teams, to leverage our solution of information exchange, the size of the deal could be, again, in the thousands of dollars or the millions of dollars. In our future we do not see being positioned in the hundreds of millions of dollars of awards for our products, even on a large acquisition. 

 

Barry Groos

All right. Thank you. Let me ask you a follow-up question in reference to the environment changing over the course of the last eight to twelve months, as we all know it has, where do you see your largest opportunity for growth in reference to a target market or industry? Everything has changed dramatically. It's kind of a mystery as to what we might see moving forward, but I was just curious in reference to your thoughts as to how your sales team is targeting your efforts to get the most for your buck, if you will.

 

Jim Morris

Well, you know, going it alone, historically that's what we've done from a sales perspective. We do have some pre-existing reseller arrangements. We're always interested and we are always exploring other reseller and partnership arrangements, both as a reseller or as a partnership with another technology firm where we could go to market separately or we could go to market and white-label or co-brand an offering. Going after the commercial marketplace, as you know, Barry, in this environment is very tough. You know, company budgets have been reduced, IT budgets under the CIO organizations have been reduced. One of the things that I think that people on the call would appreciate is since President Obama has come into office he has made a lot of statements in the government, openly in the press and within the government, about looking at all contracts and how the US government contracts for services and hardware & software. Anytime that happens in a change of administration, and me being a former government contractor, has significant impacts as far as how long it takes an acquisition from idea to purchase to occur. And so Carasoft has told us that they're actually seeing some slowdown while the government crosses the t's and dots the i's on all of their RFPs and RFQs that are hitting the street. And they're also seeing more awards for fixed-price contracting as opposed to, in the past, level-of-effort or award-fee. So there's a whole thing going on right now within the federal government procurement as far as really being cautious and conservative as far as how they buy from vendors such as GlobalSCAPE solutions to support the government operations for their networking.

 

Barry Groos

Great. Thank you very much.

 

Jim Morris

Thank you, Barry.

 

Operator

Your next question comes from Mert Goodspeed. 

 

Jim Morris

Hello Mert.

 

Mert Goodspeed

Hello, yes. The stock buyback which was announced, I believe, in the 4th quarter of 2007, at the conference call just a year ago, the interim CEO said that the program had been suspended in February of 2007; I believe it was several hundred thousand dollars unexpended, and that it would be up to the board of directors to consider in the future. I wonder if any consideration is being considered by management at this time concerning that or is it being tabled indefinitely.

 

Mendy Marsh

Mert, this is Mendy I'll go ahead and answer that one. To my knowledge the original purpose of that stock buyback was to make sure that we had enough stock on hand to support our employee stock option program (ESOP); and in the analysis that we've done as part of our year-end review we still do have enough available in the event that we need to award addtitional stock options in the future. So yes, at this point we have suspended it (stock buyback program), and currently we have no plan to reinstate it in the near future.

 

Mert Goodspeed

Thank you.

 

Jim Morris

Thanks, Mert.

 

Operator

Your next question comes from Noah Agron

 

Noah Agron

Hi, how are you guys doing? Thank you for having the call today. Actually to expand upon the previous question and also to go back to your discussion of your IR plan with regards to your institutional investors. I was interested to know specifically, number one, why not use some of the Cash to buy back the stock that's sort of floating out there? Number two, what makes you believe that, and this is taking a look at the calc table and taking a look at your prior investors, what makes you sort of think that these instititutions are ready to jump back in the market? I don't think that any nay-saying on their part has anything to do with your balance sheet, which is rather strong, but it has to do with their own position, which is somewhat tenuous. What makes you believe that going after these same institutions is not really a waste of your time?

 

Jim Morris

Well, we don't know. We're gonna test that water. We have people that had invested in us; some had very large positions of Globalscape stock. They left us, many of them left us in 2008. We're gonna go back because they know us; they may want to invest in us again. But you're absolutely right; there's a lot of shortage of cash out there to make investments in microcap companies. Some people feel that it's quite a bit of risk in doing so. I have talked to some institutional investors and some hedge funds, and I believe that we'll be in a position this quarter to resurface with old institutional investors or prior institutional investors and new ones because I think we have a very compelling story.

 

Noah Agron

I mean, just to follow up with that, would you say that a reason for a decline in the stock price could be sort of chalked up to forced selling by these institutional investors who were doing that at the time -- forced selling out of their portforlio?

 

Jim Morris

Yeah, I certainly couldn't comment on that (why they decided to get out of our stock). Maybe they were doing some trend models and we were trending down, but the last time I looked at the trend lines in the different markets they've all been trending down. 

 

Noah Agron

Thank you.

 

Jim Morris

Your welcome.

 

Operator

You have a follow-up question from Greg Newman.

 

Greg Newman

Yes, I was gonna follow-up with a short question if you could elaborate on how MailXpress is doing as the latest enterprise software product and also how the Andover consolidation, how they made the move, and how they enjoy the Alamo City.

 

Jim Morris

Very quickly. The move of the Andover office, the close of the Andover office and the relocation, the folks that we relocated to San Antonio still root for the Celtics, they have acquired a taste for Bar-B-Q, but most importantly, Greg, they've done just a phenomenal job integrating into our organization and providing expert support to the people that have purchased our WAFS solution.

 

Greg Newman

To follow-up on that WAFS solution. You know, we've waited a long time with it in re-development for ever since it was acquired. How is your assessment of it now, it seems like it....

 

Jim Morris

Without providing guidance on exactly when, but we have had a team on the WAFS solution, on its code base and bug fix, as you know for many months now. (Yes). Some very talented engineers, phenomenal leadership. We think that we're very close. As far as getting back to the first part of your last question series on MailXpress. We are experiencing some traction in MailXpress. (Good). As you know we constantly are doing product improvements and additional version releases, and MailXpress is no exception.

 

Greg Newman

Okay, and just quickly, y'all mentioned other certifications in the news release. Are y'all talking about other ones that we haven't heard of yet like AS4, not necessarily that one, but other ones like that that are gonna come into play in the days ahead, weeks?

 

Jim Morris

Yeah, again Greg, I mean, we have a lot of certifications, accreditations, validations on our roadmap, but we don't provide that type of guidance or exposure of our roadmap to the public until after something happens.

 

Greg Newman

Understood. Under... you very much.

 

Jim Morris

You're welcome. Thank you.

 

Greg Newman

Yes sir.

 

Operator:

And you have no questions at this time.

 

Mendy Marsh:

All right then. Thank you everyone for all of your questions. They were very insightful and I think hopefully that we provided answers, sufficient answers to your questions and as you feel a lot more comfortable with the current management team and our strategy for the future, we look forward to speaking with everyone again on our first quarter conference call in May. Thank you very much and have a good evening.