Falconstor Software (FALC)

Risks

• Our revenues decreased in 2021 compared to 2020. There is no guarantee that we will be able or to maintain, profitability.
• We have undertaken a restructuring and other cost reduction initiatives to reduce our expenses and to better align our expenses with our business. There can be no assurance that we have made enough reductions or the right reductions.
• The loss of any of our key personnel could harm our business.
• Due to the uncertain and shifting development of the data protection and network storage software markets and our reliance on our partners, we may have difficulty accurately predicting revenue for future periods and appropriately budgeting for expenses.
• Our products must conform to industry standards in order to be accepted by customers in our markets.
• Our products handle mission-critical data for our end-customers and are highly technical in nature. If our products have defects, failures occur or end-customer data is lost or corrupted, our reputation and business could be harmed.
• The failure of our resellers to sell our products effectively could have a material adverse effect on our revenue and results of operations.
• Our growth depends in part on the success of our strategic relationships with third parties.
• We rely on channel partners to sell our solutions, and disruptions to, or our failure to develop and manage our channel partners would harm our business.
• We face intense competition in our market, especially from larger, well-established companies, and we may lack sufficient financial or other resources to maintain or improve our competitive position.
• Adverse economic conditions or reduced IT spending may adversely impact our business.
• Our future quarterly results may fluctuate significantly, which could cause our stock price to decline.
• The ability to predict our future effective tax rates could impact our ability to accurately forecast future earnings.
• Our business could be materially affected as a result of a natural disaster, terrorist acts, or other catastrophic events.
• We are dependent on a variety of IT and telecommunications systems, and any failure of these systems could adversely impact our business and operating results.
• United States government export restrictions could impede our ability to sell our software to certain end users.
• The international nature of our business could have an adverse effect on our operating results.
• Foreign currency fluctuations may impact our revenue.
• If we are unable to protect our intellectual property, our business will suffer.
• Our efforts to protect our intellectual property may cause us to become involved in costly and lengthy litigation, which could seriously harm our business.
• Our redemption obligation under the Series A Preferred Stock and indebtedness could adversely affect our financial health.
• To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control. As such, we may not be able to generate sufficient cash to service the Term Notes or our other indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
• We are subject to a number of covenants and other conditions, which may restrict our business and financing activities.
• The likelihood of a change of control in our company could be impacted by the fact that we have a significant amount of authorized but unissued preferred stock, protective provisions in our charter, outstanding Series A Preferred Stock, a staggered board of directors and change of control agreements as well as certain provisions under Delaware law.
• The conversion and exercise of our outstanding securities and the anticipated grant of restricted stock to our employees will dilute the then-existing stockholders’ percentage ownership of our common stock.
• There may be a limited public market for our securities; we presently fail to qualify for listing on any national securities exchanges.
• Our stock price may be volatile.
• The holders of the Series A Preferred Stock are entitled to dividends on the Series A Preferred Stock they hold. Depending on whether these dividends are paid in cash or stock, the payment of these dividends will either decrease cash that is available to us to invest in our business or dilute the holdings of all other stockholders.
• The potential concentration of equity ownership by Hale Capital and ESW Capital LLC may limit your ability to influence corporate matters.