# EDGAR Filing Document

**Accession Number:** 0000922521
**File Stem:** 0000950170-23-008175
**Filing Date:** 2023-3
**Character Count:** 21839
**Document Hash:** 9c2ad7bcc2f5d252be90c9f267248230
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-23-008175.hdr.sgml**: 20230315

**ACCESSION NUMBER**: 0000950170-23-008175

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 14

**CONFORMED PERIOD OF REPORT**: 20230315

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230315

**DATE AS OF CHANGE**: 20230315

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** FALCONSTOR SOFTWARE INC
- **CENTRAL INDEX KEY:** 0000922521
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-PREPACKAGED SOFTWARE [7372]
- **IRS NUMBER:** 770216135
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-23970
- **FILM NUMBER:** 23735706

**BUSINESS ADDRESS:**
- **STREET 1:** 125 BAYLIS ROAD
- **CITY:** MELVILLE
- **STATE:** NY
- **ZIP:** 11747
- **BUSINESS PHONE:** 631 777 5188

**MAIL ADDRESS:**
- **STREET 1:** 125 BAYLIS ROAD
- **CITY:** MELVILLE
- **STATE:** NY
- **ZIP:** 11747

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** NETWORK PERIPHERALS INC
- **DATE OF NAME CHANGE:** 19940502

?xml version="1.0" encoding="ASCII"? 8-K

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549**

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**FORM** 8-K

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**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

**Date of Report (Date of earliest event reported):** March 15, 2023<br>

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FALCONSTOR SOFTWARE, INC.

**(Exact name of Registrant as Specified in Its Charter)**

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| | | |
|:---|:---|:---|
| Delaware | 000-23970 | 77-0216135 |
| **(State or Other Jurisdiction<br>of Incorporation)** | **(Commission File Number)** | **(IRS Employer<br>Identification No.)** |
| 501 Congress Avenue<br>Suite 150 |  |  |
| Austin**,** Texas |  | 78701 |
| **(Address of Principal Executive Offices)** |  | **(Zip Code)** |

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**Registrant's Telephone Number, Including Area Code:** 631 777-5188<br>

**(Former Name or Former Address, if Changed Since Last Report)**

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

**Securities registered pursuant to Section 12(b) of the Act:**

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| | |
|:---|:---|
| **<br>Title of each class** | **<br>Name of each exchange on which registered** |
| Common stock, $0.001 Par Value<br> FALC | OTCQB |

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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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**Item 2.02 Results of Operations and Financial Condition.**

On March 15, 2023, the Company issued a press release announcing its results of operations for the fiscal year ended December 31, 2022.

The text of a press release issued by the Company is furnished as Exhibit 99.1 and is incorporated herein by reference. The information furnished herein shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

**Item 9.01 Financial Statements and Exhibits.**

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| | | |
|:---|:---|:---|
| (d) | Exhibits |  |
|  | <u>Exhibit Number</u> | <u>Description</u> |
|  | 99.1 | [<u>Press release of the Company dated March 15, 2023</u>](falc-ex99_1.htm) |
|  | 104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document). |

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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| | | | |
|:---|:---|:---|:---|
|  |  |  | Falconstor Software, Inc. |
| Date: | March 15, 2023 | By:  | /s/ Vincent Sita |
|  |  |  | Name: Vincent Sita<br>Title: Chief Financial Officer and Treasurer |

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## Ex-99

Exhibit 99.1

![img100405939_0.jpg](img100405939_0.jpg)

**For more information, contact:**

FalconStor Software, Inc.

Vincent Sita

Chief Financial Officer

<u>vincent.sita@falconstor.com</u>

**FalconStor Software Announces Fourth Quarter and Full Year 2022 Results**

Expanding Hybrid Cloud Momentum Fuels ARR Growth

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Generated a 20% increase in total hybrid cloud ARR run-rate for Q4 versus the previous quarter and a 222% increase versus Q4 of 2021, as sales from IBM relationship formally launched in the second half of 2022

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Extended hybrid cloud sales beyond IBM Cloud and MSPs in Q4 with first customer using Microsoft Azure IBM Power virtual server offering managed by Skytap for DRaaS

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Generated 14% increase in MSP-driven hybrid cloud ARR run-rate for Q4 versus the previous quarter and a 104% increase versus Q4 2021

**AUSTIN, TEXAS (March 15, 2023) -** FalconStor Software, Inc. (OTCQB: FALC), a trusted data protection leader modernizing disaster recovery and backup for the hybrid cloud world, today announced financial results for its fourth quarter and full year 2022, which ended on December 31, 2022.

"We are pleased with the progress we made in the 2022, especially in Q4 and the last half of the year, as our joint sales with IBM to deliver hybrid cloud data protection solutions to IBM customers formally launched in the second half and began to increase," said Todd Brooks, FalconStor CEO. "IBM's hybrid cloud focus is a key element of its growth strategy, as detailed in each of their earnings announcements in 2022. Our joint solutions enable IBM customers across the globe to optimize data protection within each of their operating environments, whether those environments run on-premises or in the cloud. In addition, our partnership with IBM is enabling MSPs to expand the backup-as-a-service offerings they provide to IBM and non-IBM customers alike, as more and more enterprises entrust MSPs to manage their IT environments."

"While total revenue declined by 30% year over year in 2022, as we continued our shift from legacy perpetual revenue to annual recurring revenue, total revenue increased by 26% in the second half of 2022 compared to the first half of the year. This increase is a good early validation of our expanding partner sales since the formal launch of our IBM relationship at the beginning of the second half of 2022, stated Brooks. "In addition, we continued to maintain tight control of our operating expenses, resulting in positive net income in the second half of 2022. We are excited by the progress we made in 2022 and believe we have created a strong foundation from which to build in 2023 and beyond."

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**Fourth Quarter 2022 Financial Results**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**Hybrid Cloud ARR Run-Rate:** 20% increase compared to the previous quarter, and 222% increase year over year

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**Ending Cash**: $2.0 million, compared to $1.7 million in the previous quarter, and $3.2 million in the fourth quarter of fiscal year 2021

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**Total Revenue:** $2.5 million, compared to $3.1 million in the previous quarter, and $3.7 million in the fourth quarter of fiscal year 2021

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**Total Cost of Revenue:** $0.4 million, compared to $0.4 million in the previous quarter, and $0.4 million in the fourth quarter of fiscal year 2021

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**Total Operating Expenses:** $2.2 million, compared to $2.3 million in the previous quarter, and $3.0 million in the fourth quarter of fiscal year 2021

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**GAAP Net Income (Loss):** $20 thousand, compared to $0.2 million in the previous quarter, and ($0.3) million in the fourth quarter of fiscal year 2021

**Second Half 2022 Financial Results**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**Total Revenue:** $5.6 million, compared to $4.4 million during the first half of year 2022

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**Total Cost of Revenue:** $0.8 million, compared to $0.8 million during the first half of year 2022

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**Total Operating Expenses:** $4.5 million, compared to $5.3 million during the first half of year 2022

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**GAAP Net Income (Loss):** $0.2 million, compared to ($2.0) million during the first half of year 2022

**Full Year 2022 Financial Results**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**Total Revenue:** $10.1 million, compared to $13.9 million during the full year of 2021

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**Total Cost of Revenue:** $1.6 million, compared to $2.0 million during the full year of 2021

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**Total Operating Expenses:** $9.7 million, compared to $11.6 million during the full year of 2021

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•**GAAP Net Income (Loss):** ($1.8) million, compared to ($42) thousand during the full year of 2021

**Conference Call and Webcast Information**

**WHO:** Todd Brooks, Chief Executive Officer, FalconStor and Vincent Sita, Chief Financial Officer, FalconStor

**WHEN:** Wednesday, March 15, 2023, 4:00 PM Central; 5:00 PM Eastern

To register for our earnings call, please click the following link:

FALCONSTOR FOURTH QUARTER 2022 FINANCIAL TELECONFERENCE AND PRESENTATION

<u>As an alternative, you can copy and paste the following link into your web browser to register:</u>

https://register.gotowebinar.com/register/1800241812476581214

**Conference Call:**

Please dial the following if you would like to interact with and ask questions of FalconStor hosts:

Toll Free: 877-568-4108

Access Code: 796-227-449

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**Non-GAAP Financial Measures**

The non-GAAP financial measures used in this press release are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The Company's management refers to these non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the Company's operating performance. In addition, these non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and comparisons to competitors' operating results. We include these non-GAAP financial measures (which should be viewed as a supplement to, and not a substitute for, their comparable GAAP measures) in this press release because we believe they are useful to investors in allowing for greater transparency into the supplemental information used by management in its financial and operational decision-making. The non-GAAP financial measures exclude (i) depreciation, (ii) amortization, (iii) restructuring expenses, (iv) severance expenses, (v) board expenses, (vi) stock based compensation, (vii) non-operating expenses (income) including income taxes and interest & other expenses (income). For a reconciliation of our GAAP and non-GAAP financial results, please refer to our Reconciliation of Net Income (Loss) to Adjusted EBITDA presented in this release.

**About FalconStor Software**

FalconStor is the trusted data protection software leader modernizing disaster recovery and backup operations for the hybrid cloud world. The Company enables enterprise customers and managed service providers to secure, migrate, and protect their data while reducing data storage and long-term retention costs by up to 95%. More than 1,000 organizations and managed service providers worldwide standardize on FalconStor as the foundation for their cloud first data protection future. Our products are offered through and supported by a worldwide network of leading managed service providers, systems integrators, resellers, and original equipment manufacturers.

\# \# \#

FalconStor and FalconStor Software are trademarks or registered trademarks of FalconStor Software, Inc., in the U.S. and other countries. All other company and product names contained herein may be trademarks of their respective holders.

Links to websites or pages controlled by parties other than FalconStor are provided for the reader's convenience and information only. FalconStor does not incorporate into this release the information found at those links nor does FalconStor represent or warrant that any information found at those links is complete or accurate. Use of information obtained by following these links is at the reader's own risk.

**CONTACT INFORMATION**

For more information, contact:

Vincent Sita

Chief Financial Officer FalconStor Software Inc.

<u>investorrelations@falconstor.com</u>

**CONTACT US AROUND THE GLOBE**

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| | |
|:---|:---|
| **Corporate Headquarters** | **Europe Headquarters** |
| 501 Congress Avenue | GERMANY |
| Suite 150 | Landsberger Straße 302 |
| Austin, Texas 78701 | 80687 München, Germany |
| Tel: +1.631.777.5188 | salesemea@falconstor.com |
| salesinfo@falconstor.com |  |

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**FalconStor Software, Inc. and Subsidiaries**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

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| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $2011062 | $3181209 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net | 2278802 | 2855135 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 897493 | 1074972 |
| &nbsp;&nbsp;&nbsp;Contract assets, net | 181933 | 209936 |
| &nbsp;&nbsp;&nbsp;Inventory |  | 7744 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 5369290 | 7328996 |
| Property and equipment, net | 86263 | 153904 |
| Operating lease right-of-use assets | 34416 | 112405 |
| Deferred tax assets, net |  | 30190 |
| Software development costs, net | 53057 | 42695 |
| Other assets, net | 98747 | 106023 |
| Goodwill | 4150339 | 4150339 |
| Other intangible assets, net | 20086 | 51362 |
| Contract assets | 357914 | 692712 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $10170112 | $12668626 |
| **Liabilities and Stockholders' Deficit** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $387379 | $297033 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 1427979 | 1099257 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities | 34416 | 76940 |
| &nbsp;&nbsp;&nbsp;Current portion of notes payable, net of debt issuance costs and discounts | 177149 |  |
| &nbsp;&nbsp;&nbsp;Deferred revenue, net | 3684742 | 4617422 |
| Total current liabilities | 5711665 | 6090652 |
| Other long-term liabilities | 956023 | 950843 |
| Notes payable, net | 2163090 | 2154098 |
| Operating lease liabilities |  | 35465 |
| Deferred tax liabilities, net | 537651 | 500499 |
| &nbsp;&nbsp;&nbsp;Deferred revenue, net | 1281107 | 1764249 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | $10649536 | $11495806 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commitments and contingencies |  |  |
| Series A redeemable convertible preferred stock | 15928018 | 14384388 |
| &nbsp;&nbsp;&nbsp;Total stockholders' deficit | (16407442) | (13211568) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' deficit | $10170112 | $12668626 |

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**FalconStor Software, Inc. and Subsidiaries**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)** 

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended December 31,** | **Three months ended December 31,** | **Twelve months ended December 31,** | **Twelve months ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| Revenue: |  |  |  |  |
| &nbsp;&nbsp;Product revenue | $1120241 | $1816094 | $4246177 | $6988067 |
| &nbsp;&nbsp;Support and services revenue | 1429424 | 1851716 | 5806071 | 6946828 |
| &nbsp;&nbsp;Total revenue | 2549665 | 3667810 | 10052248 | 13934895 |
| Cost of revenue: |  |  |  |  |
| &nbsp;&nbsp;Product | 32252 | 26123 | 97270 | 325089 |
| &nbsp;&nbsp;Support and service | 338847 | 394120 | 1467611 | 1627187 |
| &nbsp;&nbsp;Total cost of revenue | 371099 | 420243 | 1564881 | 1952276 |
| Gross profit | 2178566 | 3247567 | 8487367 | 11982619 |
| &nbsp;&nbsp;Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;Research and development costs | 618379 | 801283 | 2561825 | 2833643 |
| &nbsp;&nbsp;Selling and marketing | 801453 | 1405013 | 4003764 | 5672023 |
| &nbsp;&nbsp;General and administrative | 778043 | 758036 | 3178604 | 2887957 |
| &nbsp;&nbsp;Gain on litigation settlement |  |  |  | (632600) |
| &nbsp;&nbsp;Restructuring costs |  | 40559 | 744 | 833313 |
| &nbsp;&nbsp;Total operating expenses | 2197875 | 3004891 | 9744937 | 11594336 |
| &nbsp;&nbsp;Operating income (loss) | (19309) | 242676 | (1257570) | 388283 |
| Gain on debt extinguishment |  |  |  | 754000 |
| Interest and other income (expense) | 99703 | (113149) | (330927) | (657773) |
| &nbsp;&nbsp;Income (loss) before income taxes | 80394 | 129527 | (1588497) | 484510 |
| Income tax expense (benefit) | 60089 | 462959 | 210458 | 526763 |
| &nbsp;&nbsp;Net income (loss) | $20305 | $(333432) | $(1798955) | $(42253) |
| Less: Accrual of Series A redeemable convertible preferred stock dividends | 463692 | 294799 | 1494057 | 1143697 |
| Less: Accretion to redemption value of Series A redeemable convertible preferred stock | (40847) | 14155 | 49573 | 299969 |
| &nbsp;&nbsp;Net income (loss) attributable to common stockholders | $(402540) | $(642386) | $(3342585) | $(1485919) |
| Basic net income (loss) per share attributable to common stockholders | $(0.06) | $(0.09) | $(0.47) | $(0.23) |
| Diluted net income (loss) per share attributable to common stockholders | $(0.06) | $(0.09) | $(0.47) | $(0.23) |
| Weighted average basic shares outstanding | 7118239 | 7081760 | 7100929 | 6515274 |
| Weighted average diluted shares outstanding | 7118239 | 7081760 | 7100929 | 6515274 |

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**FalconStor Software, Inc. and Subsidiaries**

**Supplemental Information**

**Unaudited Reconciliation of Net Income (Loss) to Adjusted EBITDA**

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended December 31,** | **Three months ended December 31,** | **Twelve months ended December 31,** | **Twelve months ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| Net income (loss) | $20305 | $(333432) | $(1798955) | $(42253) |
| Income tax expense | 60089 | 462959 | 210458 | 526763 |
| Interest and other expense | (99703) | 113149 | 330927 | 657773 |
| Depreciation and amortization | 25498 | 47778 | 120208 | 199246 |
| Restructuring costs |  | 40559 | 744 | 833313 |
| Severance costs | 2680 | 15667 | 59926 | 23803 |
| Other restructuring costs |  | 30460 | 6070 | 463950 |
| Board costs | 146013 | 176131 | 602727 | 647830 |
| Stock based compensation | 3499 | 7094 | 38770 | 21178 |
| Adjusted EBITDA | $158381 | $560365 | $(429125) | $3331612 |

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**FalconStor Software, Inc. and Subsidiaries**

**Supplemental Information**

**Condensed Consolidated Statements of Operations Second Half vs. First Half 2022**

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| | | |
|:---|:---|:---|
|  | **Second Half** | **First Half** |
|  | **2022** | **2022** |
| Revenue: |  |  |
| &nbsp;&nbsp;Product revenue | $2688351 | $1557826 |
| &nbsp;&nbsp;Support and services revenue | 2920455 | 2885616 |
| &nbsp;&nbsp;Total revenue | 5608806 | 4443442 |
| Cost of revenue: |  |  |
| &nbsp;&nbsp;Product | 51963 | 45307 |
| &nbsp;&nbsp;Support and service | 699240 | 768371 |
| &nbsp;&nbsp;Total cost of revenue | 751203 | 813678 |
| Gross profit | 4857603 | 3629764 |
| &nbsp;&nbsp;Operating expenses: |  |  |
| &nbsp;&nbsp;Research and development costs | 1200320 | 1361505 |
| &nbsp;&nbsp;Selling and marketing | 1689420 | 2314344 |
| &nbsp;&nbsp;General and administrative | 1604599 | 1574005 |
| &nbsp;&nbsp;Restructuring costs |  | 744 |
| &nbsp;&nbsp;Total operating expenses | 4494339 | 5250598 |
| &nbsp;&nbsp;Operating income (loss) | 363264 | (1620834) |
| Interest and other income (expense) | (11696) | (319231) |
| &nbsp;&nbsp;Income (loss) before income taxes | 351568 | (1940065) |
| Income tax expense (benefit) | 109891 | 100567 |
| &nbsp;&nbsp;Net income (loss) | $241677 | $(2040632) |
| Less: Accrual of Series A redeemable convertible preferred stock dividends | 854708 | 639349 |
| Less: Accretion to redemption value of Series A redeemable convertible preferred stock | (824) | 50397 |
| &nbsp;&nbsp;Net income (loss) attributable to common stockholders | $(612207) | $(2730378) |

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