FALCONSTOR SOFTWARE, INC. (NASDAQ:FALC) Files An 8-K Unregistered Sales of Equity Securities
Item 3.02. Unregistered Sales of Equity Securities.

As of April 23, 2018, FalconStor Software, Inc. (the “Company”) issued HCP-FVA, LLC (“HCP”), an entity affiliated with Martin Hale, a Director of the Company, 53,370,601 shares of Common Stock, $.001 par value (the “Common Stock”) to the cashless exercise of Loan and Backstop Warrants held by HCP. The Loan and Backstop Warrants were acquired by HCP in connection with HCP agreeing to backstop a previously disclosed financing of the Company. The Loan and Backstop Warrants were exercised on a cashless basis in accordance with their terms. The shares of Common Stock were issued to the exemption contained in Section 4(2) of the Securities Act of 1933, as amended.

On April 25, 2018, the Audit Committee of the Board of Directors of the Company approved the engagement of RBSM LLP (“RBSM”) as the Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2018, effective immediately, and dismissed BDO USA, LLP (“BDO”) as the Company’s independent registered public accounting firm. The change in the Company’s independent registered public accounting firm was made to reduce the fees payable by the Company in connection with the audit of its financial statements for the fiscal year ending December 31, 2018.

BDO’s audit reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2017 and 2016 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that BDO’s audit report for the fiscal year ended December 31, 2016 stated that such financial statements have been prepared assuming that the Company will continue as a going concern.

During the fiscal years ended December 31, 2017 and 2016, and the subsequent interim periods through April 25, 2018, there were (i) no disagreements (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and BDO on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to BDO’s satisfaction, would have caused BDO to make reference thereto in their reports on the financial statements for such years, and (ii) no “reportable events” within the meaning of Item 304(a)(1)(v) of Regulation S-K.

The Company provided BDO with a copy of the disclosures it is making in this Current Report on Form 8-K and requested that BDO furnish a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the statements made herein. A copy of BDO’s letter dated April 25, 2018, is filed as Exhibit 16.1 hereto.

During the fiscal years ended December 31, 2017 and 2016, and the subsequent interim periods through April 25, 2018, neither the Company nor anyone acting on its behalf has consulted with RBSM regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements or the effectiveness of internal control over financial reporting, and neither a written report or oral advice was provided to the Company that RBSM concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K, or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation S-K.

(d) Exhibits

About FALCONSTOR SOFTWARE, INC. (NASDAQ:FALC)

FalconStor Software, Inc. is a Software-Defined Storage (SDS) company offering a converged data services software platform. The Company’s platform FreeStor, allows information technology (IT) organizations minimize and eliminate that complexity with the delivery of migration, continuity, protection, recovery and optimization for any storage environment through a management interface for a price based on managed capacity across arrays, servers, hypervisors, data centers, and the cloud. The Company’s Intelligent Abstraction core provides a scalable storage hypervisor, coupled with a data services engine and automation. The Company’s Business Continuity and Disaster Recovery products include network storage server (NSS) and continuous data protector (CDP). Its Optimized Backup and Deduplication (OBD) products merge its virtual tape library (VTL) and file-interface deduplication system (FDS) solutions.