Edgar Filing: FALCONSTOR SOFTWARE INC

sec document

Rule 424(b)(3)
to Registration Statement 333-69830

FALCONSTOR SOFTWARE, INC.
SUPPLEMENT DATED DECEMBER 4, 2002
TO
PROSPECTUS DATED OCTOBER 19, 2001

The following information amends and restates the "Selling
Stockholders" table contained in the Prospectus dated October 19, 2001
("Prospectus") relating to the sale of an aggregate of 28,247,984 shares of
common stock, $.001 par value ("Common Stock"), by certain persons ("Selling
Stockholders"). All capitalized terms used herein which are not otherwise
defined have the meaning ascribed to them in the Prospectus. The "Selling
Stockholders" table is being amended primarily to reflect a charitable gift of
50,000 shares by ReiJane Huai to The 2002 ReiJane Huai Revocable Trust and a
charitable gift of 150,000 shares by Barry Rubenstein to the North Shore-L.I.J.
Health System Foundation. Accordingly, The 2002 ReiJane Huai Revocable Trust may
sell up to 50,000 shares of Common Stock pursuant to the Prospectus. The 2002
ReiJane Huai Revocable Trust owns no other shares of Common Stock and, other
than the relationship of ReiJane Huai to the Company, has not been an officer,
director or employee of the Company for the past three years. The number of
shares held by Mr. Rubenstein and the number of shares to be sold by Mr.
Rubenstein pursuant to the Prospectus shall be reduced by 150,000 and North
Shore-L.I.J. Health System Foundation may sell up to 150,000 shares of Common
Stock pursuant to the Prospectus. The North Shore-L.I.J. Health System
Foundation owns no other shares of Common Stock and has not been an officer,
director or employee of the Company for the past three years. In addition,
certain information in the Selling Stockholders table has changed since the
effective date of the Registration Statement underlying the Prospectus. Selling
Stockholders holding approximately 22,200,000 shares of Common Stock have agreed
that none of such shares will be released from a lock-up until April 2004,
subject to certain conditions.

SELLING STOCKHOLDERS

The following list of Selling Stockholders includes, the number of
shares of Common Stock beneficially owned, the maximum number of shares of
Common Stock to be sold in the Offering by the Selling Stockholders and the
number of shares of Common Stock to be beneficially owned by the Selling
Stockholders after the Offering (assuming sale of such maximum number of
shares). We have 45,490,040 shares of Common Stock issued and outstanding as of
December 3, 2002. The number of shares to be sold or have been sold in the
Offering includes 28,247,984 shares of Common Stock. The shares being offered
hereby primarily relate to the resale of shares of Common Stock, by our
affiliates or affiliates of FalconStor, Inc., which were acquired in the merger
between FalconStor, Inc. and us.

A Selling Stockholder may sell all or part of the shares of Common
Stock registered for its account hereunder. To the extent that, pursuant to Rule
13d-3 of the Securities Exchange Act of 1934, as amended, a Selling Stockholder
may be deemed to be the beneficial owner of shares held by one or more other
beneficial owners of Common Stock, we have included all of such shares in the
information presented in the table.

Percent Maximum
Shares Beneficially Number of Shares to be Percent to be
Beneficially Owned Prior Shares to be Beneficially Beneficially
Owned Prior to to this Offered for Owned after Owned after
this Offering(1) Offering(1) Resale this Offering(1) this Offering(1)
------------------------------------------------------------------------------------------

ReiJane Huai (2) 10,824,260 (2) 23.8% 10,824,260 (2) 0 N/A
c/o FalconStor Software, Inc.
125 Baylis Road
Melville, NY 11747

The 2002 ReiJane Huai 50,000 * 50,000 0 N/A
Revocable Trust
3 Carlisle Drive
Old Brookville, NY 11545

Barry Rubenstein (3) 6,793,053 14.9% 6,793,053 0 N/A
68 Wheatley Road
Brookville, NY 11545

North Shore-L.I.J. Health 300,000 * 300,000 0 N/A
Systems Foundation
125 Community Drive
Great Neck, New York 11021

Brookwood Partners, L.P. (4) 395,217 * 395,217 0 N/A
68 Wheatley Road
Brookville, NY 11545

Seneca Ventures (4) 642,453 1.4% 642,453 0 N/A
68 Wheatley Road
Brookville, NY 11545

Wheatley Associates III, L.P. (6) 1,962,836 4.3% 1,962,836 0 N/A
68 Wheatley Road
Brookville, NY 11545

Wheatley Foreign Partners III, L.P. (6) 1,962,836 4.3% 1,962,836 0 N/A
68 Wheatley Road
Brookville, NY 11545

Wheatley Partners III, L.P. (5) 1,962,836 4.3% 1,962,836 0 N/A
68 Wheatley Road
Brookville, NY 11545

Wheatley Foreign Partners, L.P. (6) 525,059 1.2% 525,059 0 N/A
68 Wheatley
Road Brookville, NY 11545

Wheatley Partners, L.P. (6) 525,059 1.2% 525,059 0 N/A
68 Wheatley Road
Brookville, NY 11545

Wheatley Partners II, L.P. (4) 180,089 * 180,089 0 N/A
68 Wheatley Road
Brookville, NY 11545

Woodland Partners (4) 692,983 1.5% 692,983 0 N/A
68 Wheatley Road
Brookville, NY 11545

Woodland Venture Fund (4) 743,513 1.6% 743,513 0 N/A
68 Wheatley Road
Brookville, NY 11545

Irwin Lieber (7) 4,602,689 10.1% 4,602,689 0 N/A
80 Cuttermill Road, Suite 311
Great Neck, NY 11021

Barry Fingerhut (8) 3,100,164 6.6% 3,100,164 100,000 *
767 Fifth Avenue, 45th Floor
New York, NY 10153

Nancy Casey (9) 2,057,580 4.5% 2,057,580 0 N/A
10836 Pleasant Hill Drive
Potomac, MD 20854

Applegreen Partners (4) 259,868 * 259,868 0 N/A
271 Hamilton Road
Chappaqua, NY 10514

Seth Lieber (10) 3,014,474 6.6% 3,014,474 0 N/A
200 East 72 Street, PH N
New York, NY 10021

Jonathan Lieber (11) 2,927,852 6.4% 2,927,852 0 N/A
271 Hamilton Road
Chappaqua, NY 10514

Marilyn Rubenstein (12) 2,475,424 5.4% 2,475,424 0 N/A
c/o Barry Rubenstein
68 Wheatley Road
Brookville, NY 11545

Lawrence S. Dolin (13) 45,001 * 40,000 001 *
c/o FalconStor Software, Inc.
125 Baylis Road
Melville, NY 11747

Steven A. Fischer (14) 9,501 * 2,500 001 *
245 Jerome Street
Syosset, NY 11791

Glenn Penisten (15) 612,654 1.3% 225,908 925 *
11651 Brooks Road
Windsor, CA 95492

Steven Owings (16) 63,031 * 58,030 001 *
ScanSource
6 Logue Court
Greenville, SC 29615

Wayne Lam (17) 238,571 * 3,537 034 *
c/o FalconStor Software, Inc.
125 Baylis Road
Melville, New York 11747
----------------------------------
* Less than one percent

(1) A person is deemed to be the beneficial owner of voting securities
that can be acquired by such person within 60 days after the date
hereof upon the exercise of options, warrants or convertible
securities. Each beneficial owner's percentage ownership is
determined by assuming that options, warrants or convertible
securities that are held by such person (but not those held by any
other person) and that are currently exercisable (i.e., that are
exercisable within 60 days from the date hereof) have been
exercised. Unless otherwise noted, we believe that all persons named
in the table have sole voting and investment power with respect to
all shares beneficially owned by them.

(2) Based upon information contained in a Form 3 and Schedule 13D filed
by Mr. Huai and certain other information. Includes 50,000 shares
held by The ReiJane Huai Revocable Trust (the "Trust"). Mr. Huai
disclaims beneficial ownership of the shares held by the Trust.
Since August 2001, Mr. Huai has been a Director and our President
and Chief Executive Officer. Mr. Huai joined FalconStor, Inc. in
July 2000 as a director, and subsequently became its president and
chief executive officer in December 2000.

(3) Based upon information contained in a report on a Schedule 13D (the
"Wheatley 13D") filed jointly by Barry Rubenstein, Brookwood
Partners, L.P. ("Brookwood"), Seneca Ventures ("Seneca"), Wheatley
Associates III, L.P. ("Wheatley Associates"), Wheatley Foreign
Partners, L.P. ("Wheatley Foreign"), Wheatley Foreign Partners III,
L.P. ("Wheatley Foreign III"), Wheatley Partners, L.P. ("Wheatley"),
Wheatley Partners II, L.P. ("Wheatley II"), Wheatley Partners III,
L.P. ("Wheatley III"), Woodland Partners, Woodland Venture Fund
("Woodland Fund"), and certain other entities with the SEC, and a
Form 4 filed by Mr. Rubenstein with the SEC as well as certain other
information. Consists of (i) 1,650,903 shares of Common Stock held
by Mr. Rubenstein, (ii) 395,217 shares of common stock held by
Brookwood, (iii) 642,453 shares of common stock held by Seneca, (iv)
299,809 shares of common stock held by Wheatley Associates, (v)
41,008 shares of common stock held by Wheatley Foreign, (vi) 293,012
shares of common stock held by Wheatley Foreign III, (vii) 484,051
shares of common stock held by Wheatley, (viii) 180,089 shares of
common stock held by Wheatley II, (ix) 1,370,015 shares of common
stock held by Wheatley III, (x) 692,983 shares of common stock held
by Woodland Partners and (xi) 743,513 shares of common stock held by
Woodland Fund. Does not include 1,258 shares of common stock held by
Mr. Rubenstein's spouse, Marilyn Rubenstein. Mr. Rubenstein was a
director of FalconStor, Inc. from February 2000 to August 2001. Mr.
Rubenstein disclaims beneficial ownership of the securities held by
Wheatley, Wheatley Foreign, Wheatley II, Wheatley III, Wheatley
Foreign III, Wheatley Associates, Seneca, Woodland Ventures,
Woodland Partners and Brookwood except to the extent of his
respective equity interest therein.

(4) Based upon information contained in the Wheatley 13D and certain
other information.

(5) Based upon information contained in the Wheatley 13D. Consists of
(i) 299,809 shares of common stock held by Wheatley Associates, (ii)
293,012 shares of common stock held by Wheatley Foreign III and
(iii) 1,370,015 shares of common stock held by Wheatley III.
Wheatley Associates disclaims beneficial ownership of the securities
held by Wheatley Foreign III and Wheatley III. Wheatley Foreign III
disclaims beneficial ownership of the securities held by Wheatley
Associates and Wheatley III. Wheatley III disclaims beneficial
ownership of the securities held by Wheatley Associates and Wheatley
Foreign III.

(6) Based upon information contained in the Wheatley 13D and certain
other information. Consists of (i) 41,008 held by Wheatley Foreign,
and (ii) 484,051 held by Wheatley. Wheatley Foreign disclaims
beneficial ownership of the securities held by Wheatley and Wheatley
disclaims beneficial ownership of the shares held by Wheatley
Foreign.

(7) Based upon information contained in the Wheatley 13D and certain
other information. Consists of (i) 1,934,705 shares of Common Stock
held by Irwin Lieber, (ii) 484,051 shares of Common Stock held by
Wheatley, (iii) 41,008 shares of Common Stock held by Wheatley
Foreign, (iv) 180,089 shares of Common Stock held by Wheatley II,
(v) 1,370,015 shares of Common Stock held by Wheatley III, (vi)
293,012 shares of Common Stock held by Wheatley Foreign III, and
(vii) 299,809 shares of Common Stock held by Wheatley Associates.
Mr. Lieber disclaims beneficial ownership of the securities held by
Wheatley, Wheatley Foreign, Wheatley II, Wheatley III, Wheatley
Foreign III and Wheatley Associates, except to the extent of his
respective equity interests therein.

(8) Based upon information contained in the Wheatley 13D and certain
other information. Consists of (i) 432,180 shares of Common Stock
held by Barry Fingerhut, (ii) 484,051 shares of Common Stock held by
Wheatley, (iii) 41,008 shares of Common Stock held by Wheatley
Foreign, (iv) 180,089 shares of Common Stock held by Wheatley II,
(v) 1,370,015 shares of Common Stock held by Wheatley III, (vi)
293,012 shares of Common Stock held by Wheatley Foreign III, and
(vii) 299,809 shares of Common Stock held by Wheatley Associates.
Mr. Fingerhut disclaims beneficial ownership of the securities held
by Wheatley, Wheatley Foreign, Wheatley II, Wheatley III, Wheatley
Foreign III and Wheatley Associates, except to the extent of his
respective equity interests therein.

(9) Based upon information contained in the Wheatley 13D and certain
other information. Consists of (i) 94,744 shares of Common Stock
held by Nancy Casey and her husband, as joint tenants, (ii)
1,370,015 shares of Common Stock held by Wheatley III, (iii) 293,012
shares of Common Stock held by Wheatley Foreign III, and (iv)
299,809 shares of Common Stock held by Wheatley Associates. Ms.
Casey disclaims beneficial ownership of the securities held by
Wheatley III, Wheatley Foreign III and Wheatley Associates, except
to the extent of her respective equity interests therein.

(10) Based upon information contained in the Wheatley 13D and certain
other information. Consists of (i) 86,622 shares of Common Stock
held by Seth Lieber, (ii) 484,051 shares of Common Stock held by
Wheatley, (iii) 41,008 shares of Common Stock held by Wheatley
Foreign, (iv) 180,089 shares of Common Stock held by Wheatley II,
(v) 1,370,015 shares of Common Stock held by Wheatley III, (vi)
293,012 shares of Common Stock held by Wheatley Foreign III, and
(vii) 299,809 shares of Common Stock held by Wheatley Associates and
(viii) 259,868 shares of Common Stock held by Applegreen. Mr. Lieber
disclaims beneficial ownership of the securities held by Wheatley,
Wheatley Foreign, Wheatley II, Wheatley III, Wheatley Foreign III,
Wheatley Associates and Applegreen, except to the extent of his
respective equity interests therein.

(11) Based upon information contained in the Wheatley 13D and certain
other information. Consists of (i) 484,051 shares of Common Stock
held by Wheatley, (ii) 41,008 shares of Common Stock held by
Wheatley Foreign, (iii) 180,089 shares of Common Stock held by
Wheatley II, (iv) 1,370,015 shares of Common Stock held by Wheatley
III, (v) 293,012 shares of Common Stock held by Wheatley Foreign
III, and (vi) 299,809 shares of Common Stock held by Wheatley
Associates and (vii) 259,868 shares of Common Stock held by

Applegreen. Mr. Lieber disclaims beneficial ownership of the
securities held by Wheatley, Wheatley Foreign, Wheatley II, Wheatley
III, Wheatley Foreign III, Wheatley Associates and Applegreen,
except to the extent of his respective equity interests therein.

(12) Based upon information contained in the Wheatley 13D and certain
other information. Consists of (i) 1,258 shares of Common Stock held
by Marilyn Rubenstein, (ii) 642,453 shares of Common Stock held by
Seneca, (iii) 743,513 shares of Common Stock held by Woodland
Venture, (iv) 692,983 shares of Common Stock held by Woodland
Partners and (v) 395,217 of Common Stock held by Brookwood. Mrs.
Rubenstein disclaims beneficial ownership of the securities held by
Seneca, Woodland Venture, Woodland Partners and Brookwood, except to
the extent of her respective equity interests therein. Does not
include 1,800,903 shares of Common Stock held by Mrs. Rubenstein's
spouse, Barry Rubenstein.

(13) Based on information contained in the Form 3 filed by Mr. Dolin and
certain other information. Consists of (i) 40,000 shares held by
Northern Union Club and (ii) an option to purchase 5,001 shares of
common stock exercisable within 60 days hereof. Mr. Dolin is a
general partner of Mordo Partners, which is a general partner of
Northern Union Club. Mr. Dolin disclaims beneficial ownership of the
securities held by Northern Union Club, except to the extent of her
respective equity interests therein. Mr. Dolin joined the Company in
August 2001 as a director.

(14) Based upon information contained in the Form 3 filed by Mr. Fischer
and certain other information. Includes an option to purchase 5,001
shares of common stock exercisable within 60 days hereof. Mr.
Fischer joined the Company in August 2001 as a director.

(15) Based upon information contained in the Form 4 filed by Mr. Penisten
and certain other information. Includes 180,464 shares of common
stock held by Lazy P Investors, L.P. and an option to purchase
386,667 shares of common stock within 60 days. Mr. Penisten is a
general partner of Lazy P Investors, L.P.

(16) Based upon information contained in the Form 3 filed by Mr. Owings
and certain other information. Includes an option to purchase 5,001
shares of common stock exercisable within 60 days hereof. Mr. Owings
joined the Company in August 2001 as a director.

(17) Based upon information contained in the Form 3 filed by Mr. Wayne
Lam and certain other information. Includes an option to purchase
190,568 shares of common stock exercisable within 60 days of the
date hereof. Mr. Wayne Lam joined FalconStor, Inc. in April 2000 as
Vice President, Marketing and is currently our Vice President,
Marketing.

The following table names the ultimate beneficial owners of the
shares of our Common Stock for those Selling Stockholders that are not
individuals.

Name of the Entity Information
------------------ -----------

Brookwood Partners, L.P. Mr. Barry Rubenstein
Mrs. Marilyn Rubenstein

Seneca Ventures Mr. Barry Rubenstein

Name of the Entity Information
------------------ -----------

Wheatley Associates III, L.P. Mr. Barry Rubenstein
Mr. Irwin Lieber
Mr. Barry Fingerhut
Mr. Jonathan Lieber
Mr. Seth Lieber
Ms. Nancy Casey

Wheatley Foreign Partners, L.P. Mr. Barry Rubenstein
Mr. Irwin Lieber
Mr. Barry Fingerhut
Mr. Jonathan Lieber
Mr. Seth Lieber

Wheatley Foreign Partners III, L.P. Mr. Barry Rubenstein
Mr. Irwin Lieber
Mr. Barry Fingerhut
Mr. Jonathan Lieber
Mr. Seth Lieber
Ms. Nancy Casey

Wheatley Partners, L.P. Mr. Barry Rubenstein
Mr. Irwin Lieber
Mr. Barry Fingerhut
Mr. Jonathan Lieber
Mr. Seth Lieber

Wheatley Partners II, L.P. Mr. Barry Rubenstein
Mr. Irwin Lieber
Mr. Barry Fingerhut
Mr. Jonathan Lieber
Mr. Seth Lieber

Wheatley Partners III, L.P. Mr. Barry Rubenstein
Mr. Irwin Lieber
Mr. Barry Fingerhut
Mr. Jonathan Lieber
Mr. Seth Lieber
Ms. Nancy Casey

Woodland Partners Mr. Barry Rubenstein
Mrs. Marilyn Rubenstein

Woodland Venture Fund Mr. Barry Rubenstein

Applegreen Partners Mr. Seth Lieber
Mr. Jonathan Lieber