(2) Share-Based Payment Arrangements (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Details of Stock Option Plan

	Shares	Shares Available	Shares	Last Date for Grant
Name of Plan	Authorized	for Grant	Outstanding	of Shares
FalconStor Software, Inc., 2006 Incentive Stock Plan	12,044,957	2,197,887	7,336,713	May 17, 2016
FalconStor Software, Inc., 2010 Outside Directors Equity	400,000	280,000	90,300	May 8, 2020
Compensation Plan

Schedule of Equity Awards Outstanding

	Shares Available	Shares
Name of Plan	for Grant	Outstanding
FalconStor Software, Inc., 2000 Stock Option Plan	--	3,265,212
1994 Outside Directors Stock Option Plan	--	40,000
2004 Outside Directors Stock Option Plan	--	250,000
FalconStor Software, Inc., 2007 Outside Directors Equity	--	175,000
Compensation Plan
Stand-Alone Stock Option Agreement between	--	1,220,000
the Company and James P. McNiel

Schedule of Stock Option Activity

	Number of	Exercise	Contractual	Intrinsic
	Options	Price	Life  (Years)	Value
Options Outstanding at December 31, 2011	14,456,722	$4.95
Granted	521,200	$2.94
Exercised	(82,900)	$2.45
Canceled	(10,000)	$7.98
Forfeited	(428,290)	$6.88
Options Outstanding at March 31, 2012	14,456,732	$4.83	6.12	$       5,497,712
Granted	408,000	$3.21
Exercised	(187,680)	$2.24
Canceled	(666,380)	$5.09
Forfeited	(1,846,570)	$4.28
Options Outstanding at June 30, 2012	12,164,102	$4.89	6.46	$          453,155
Options Exercisable at June 30, 2012	4,146,502	$5.69	5.20	$          432,455

Schedule Of Share Based Compensation Recognized

	Three months ended June 30,
	2012	2011
Cost of revenues - Product	$                49	$               741
Cost of revenues - Support and Service	(21,124)	129,714
Research and development costs	125,231	329,369
Selling and marketing	398,031	462,555
General and administrative	587,889	417,974
	$    1,090,076	$     1,340,353

	Six months ended June 30,
	2012	2011
Cost of revenues - Product	$                99	$            1,473
Cost of revenues - Support and Service	49,844	273,201
Research and development costs	444,188	808,411
Selling and marketing	884,656	885,279
General and administrative	1,159,591	686,936
	$    2,538,378	$     2,655,300

Stock Based Compensation Expense - Restricted Stock

	Three months ended June 30,
	2012	2011
Directors, officers and employees	$       130,164	$        326,964
Non-employee consultants	-	19,290
	$       130,164	$        346,254

	Six months ended June 30,
	2012	2011
Directors, officers and employees	$       407,580	$        721,498
Non-employee consultants	-	21,882
	$       407,580	$        743,380

Schedule of Restricted Stock Units Activity

	Number of Restricted
	Stock Awards / Units
Non-Vested at December 31, 2011	525,889
Granted	-
Vested	(290,105)
Forfeited	(11,496)
Non-Vested at March 31, 2012	224,288
Granted	50,000
Vested	(54,415)
Forfeited	(6,750)
Non-Vested at June 30, 2012	213,123

Schedule Of Share Based Compensation - Nonemployee

	Three months ended June 30,
	2012	2011
Non-qualified stock options	$       (25,262)	$          17,286
Restricted stock awards	-	19,290
	$       (25,262)	$          36,576

	Six months ended June 30,
	2012	2011
Non-qualified stock options	$         29,930	$        104,189
Restricted stock awards	-	21,882
	$         29,930	$        126,071