FalconStor Announces Resolution of Government Investigations

FalconStor Software, Inc.

announced today that it has reached settlements with the United States Attorney's Office for the Eastern District of New York (USAO) and the Securities and Exchange Commission (SEC). These parallel settlements resolve the government's investigations into improper payments made to a FalconStor customer. The agreed-upon payments to settle these investigations total $5.8 million, for which the Company has previously reserved within its consolidated financial statements. The Company entered into a Deferred Prosecution Agreement (DPA) with the USAO. Under the DPA, the USAO agrees that it will defer prosecution of the Company in connection with the matter, and ultimately not prosecute the Company if the Company satisfies its obligations during the 18 month term of the DPA. The DPA acknowledges the remedial actions taken by the Company in response to its discovery of the improper payments and does not require the Company to make any additional control or compliance changes. Under the DPA, the Company will forfeit $2.9 million over eighteen months, of the $5.8 million combined settlement payments.