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August 3, 2022 4:45 PM

Washington, D.C. 20549


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

Date of Report (Date of earliest event reported): August 3, 2022
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation)(Commission File Number)(IRS Employer Identification No.)
501 Congress AvenueSuite 150AustinTX78701
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: 631-777-5188
(Former name or former address, if changed since last report.)

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 (see General Instruction A.2. below):

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))

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. o

Item 2.02.Results of Operations and Financial Condition
On August 3, 2022, the Company issued a press release announcing its results of operations for the fiscal quarter ended June 30, 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
 Exhibit NumberDescription
Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document).


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.
Date: August 3, 2022By:/s/ Vincent Sita
 Name:Vincent Sita
  Title:Chief Financial Officer and Treasurer

Exhibit 99.1

For more information, contact:
FalconStor Software, Inc.
Vincent Sita
Chief Financial Officer

FalconStor Software Announces Second Quarter of 2022 Results

Launched Hybrid Cloud Data Protection Sales with IBM and Continued Managed Service Provider (“MSP”) Adoption

Secured first group of customers for new joint IBM/FalconStor solutions, enabling hybrid cloud data migration, backup, and restoration services for IBM Power Virtual Server Cloud (“IBM Power VS Cloud”)
Added three new MSP partners for the StorSafe secure backup-as-a-service solution while existing MSP partners expanded their business to protect new customers and systems, aligning with the FalconStor hybrid cloud focus
Continued shift to subscription- and monthly-consumption based annual recurring revenue (“ARR”) model

AUSTIN, TEXAS (August 3, 2022) - 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 second quarter 2022, which ended on June 30, 2022.

“Our shift to recurring revenue-based hybrid cloud data protection solutions continued to progress in the quarter as we secured our first several hybrid cloud customers under the IBM reseller relationship we announced on May 11th, 2022,” said Todd Brooks, FalconStor CEO. “IBM’s hybrid cloud push has been a centerpiece of its corporate strategy, as highlighted in its first and second quarter 2022 results. Through our expanding relationship with IBM, enterprises can now leverage new joint hybrid cloud solutions from FalconStor and IBM. These solutions are especially important to the tens of thousands of companies around the globe that leverage IBM i and AIX environments, as they now have the ability to securely backup and restore to the cloud as well as migrate their IBM i and AIX workloads to IBM Power VS Cloud with secure backup and recovery on an on-going basis.”

“Our aggressive focus on advancing critical hybrid cloud relationships and our efforts to realign to a subscription- and monthly consumption-based recurring revenue model continue to challenge our year-over-year revenue growth as second quarter revenue was $2.4 million, compared to $3.3 million in the second quarter of 2021. However, from a sequential quarter perspective, total revenue increased to $2.4 million, compared to $2.0 million in the first quarter of 2022," stated Brooks. "To more closely align with our current quarterly revenue level, we decreased operating expenses quarter-over-quarter by 8.8% in second quarter, and are making additional expense adjustments this quarter. Our sales pipeline for the second half of 2022 is growing, especially as it relates to our hybrid cloud initiatives. As a result, we expect sequential quarter-over-quarter revenue to continue growing over the next two quarters.”

Second Quarter 2022 Financial Results
Annual Recurring Revenue: 4% year-over-year growth
Ending Cash: $1.8 million, compared to $3.4 million in the previous quarter, and $3.7 million in the second quarter of fiscal year 2021
Total Revenue: $2.4 million, compared to $2.0 million in the previous quarter, and $3.3 million in the second quarter of fiscal year 2021
Total Cost of Revenue: $0.4 million, compared to $0.4 million in the previous quarter, and $0.4 million in the second quarter of fiscal year 2021
Total Operating Expenses: $2.5 million, compared to $2.7 million in the previous quarter, and $3.0 million in the second quarter of fiscal year 2021
GAAP Net Income (Loss): $(0.9) million, compared to $(1.1) million in the previous quarter, and $(0.4) million in the second quarter of fiscal year 2021


Given Q1 and Q2 2022 results, we are reducing full-year 2022 guidance as follows. Revised guidance reflects continued sequential quarterly GAAP total revenue growth, and GAAP Net Income positive results in Q3 and Q4 2022:


*Adjusted EBITDA adds back Depreciation, Amortization, Restructuring, Severance, Board expenses, Stock Based Compensation as well as Non-Operating Expenses including Income Taxes and Interest & Other Income Expenses

Conference Call and Webcast Information

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

WHEN: Wednesday, August 3, 2022, 4:00 PM Central; 5:00 PM Eastern

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


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


Conference Call:
Please dial the following if you would like to interact with and ask questions to FalconStor hosts:
Toll Free: 866-901-6455
Access Code: 859-295-195

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.
For more information, contact:
Vincent Sita
Chief Financial Officer FalconStor Software Inc.


Corporate HeadquartersEurope Headquarters
501 Congress Avenue
Suite 150
Landsberger Straße 302
Austin, Texas 78701
80687 München, Germany
Tel: +1.631.777.5188salesemea@falconstor.com


FalconStor Software, Inc. and Subsidiaries
 June 30, 2022December 31, 2021
Current assets:  
Cash and cash equivalents$1,808,118 $3,181,209 
Accounts receivable, net1,552,626 2,855,135 
Prepaid expenses and other current assets1,074,029 1,074,972 
Contract assets, net401,582 209,936 
Inventory— 7,744 
Total current assets4,836,355 7,328,996 
Property and equipment, net110,265 153,904 
Operating lease right-of-use assets70,355 112,405 
Deferred tax assets, net28,110 30,190 
Software development costs, net67,189 42,695 
Other assets, net98,774 106,023 
Goodwill4,150,339 4,150,339 
Other intangible assets, net35,350 51,362 
Contract assets449,564 692,712 
 Total assets$9,846,301 $12,668,626 
Liabilities and Stockholders' Deficit  
Current liabilities:  
Accounts payable$468,427 $297,033 
Accrued expenses1,107,409 1,099,257 
Operating lease liabilities70,355 76,940 
Deferred revenue, net3,576,161 4,557,317 
Total current liabilities5,222,352 6,030,547 
Other long-term liabilities957,462 950,843 
Notes payable, net2,160,225 2,154,098 
Operating lease liabilities— 35,465 
Deferred tax liabilities, net500,499 500,499 
Deferred revenue, net1,456,333 1,578,769 
Total liabilities10,296,871 11,250,221 
Commitments and contingencies  
Series A redeemable convertible preferred stock15,074,134 14,384,388 
Total stockholders' deficit(15,524,704)(12,965,983)
Total liabilities and stockholders' deficit$9,846,301 $12,668,626 


FalconStor Software, Inc. and Subsidiaries
Three Months Ended June 30,Six Months Ended June 30,
Product revenue$962,898 $1,602,005 $1,557,826 $3,741,734 
Support and services revenue1,431,437 1,656,742 2,885,616 3,345,339 
Total revenue2,394,335 3,258,747 4,443,442 7,087,073 
Cost of revenue:    
Product24,588 34,781 45,307 257,615 
Support and service373,822 405,960 768,371 832,133 
Total cost of revenue398,410 440,741 813,678 1,089,748 
Gross profit$1,995,925 $2,818,006 $3,629,764 $5,997,325 
Operating expenses:    
Research and development costs655,524 661,147 1,361,505 1,321,087 
Selling and marketing1,124,498 1,259,735 2,314,344 2,656,375 
General and administrative724,066 658,100 1,574,005 1,495,967 
Restructuring costs— 421,737 744 724,050 
Total operating expenses2,504,088 3,000,719 5,250,598 6,197,479 
Operating income (loss)(508,163)(182,713)(1,620,834)(200,154)
Gain on debt extinguishment— — — 754,000 
Interest and other expense(201,236)(176,928)(319,231)(460,576)
Income (loss) before income taxes(709,399)(359,641)(1,940,065)93,270 
Income tax expense (benefit)221,827 2,659 100,567 47,275 
Net income (loss)$(931,226)$(362,300)$(2,040,632)$45,995 
Less: Accrual of Series A redeemable convertible preferred stock dividends338,428 282,926 639,349 560,096 
Less: Accretion to redemption value of Series A redeemable convertible preferred stock35,582 75,183 50,397 272,297 
Net income (loss) attributable to common stockholders$(1,305,236)$(720,409)$(2,730,378)$(786,398)
Basic net income (loss) per share attributable to common stockholders$(0.18)$(0.12)$(0.39)$(0.13)
Diluted net income (loss) per share attributable to common stockholders$(0.18)$(0.12)$(0.39)$(0.13)
Weighted average basic shares outstanding7,090,885 6,021,483 7,086,605 5,985,672 
Weighted average diluted shares outstanding7,090,885 6,021,483 7,086,605 5,985,672 


FalconStor Software, Inc. and Subsidiaries
Supplemental Information

Unaudited Reconciliation of Net Income (Loss) to Adjusted EBITDA

Three Months Ended June 30,Six Months Ended June 30,
Net income (loss)$(931,226)$(362,300)$(2,040,632)$45,995 
Income tax expense221,8272,659100,56747,275
Interest and other expense201,236176,928319,231460,576
Depreciation and amortization33,009 48,496 68,528 105,982 
Restructuring costs— 421,737 744 724,050 
Severance costs— — — 8,136 
Other restructuring costs1,768 115,400 6,070 388,844 
Board costs136,229 144,076 320,664 277,339 
Stock based compensation19,102 4,697 27,286 9,168 
Adjusted EBITDA$(318,055)$551,693 $(1,197,542)$2,067,365 



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