(2) Share-Based Payment Arrangements (Tables)

9 Months Ended

Sep. 30, 2013

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	13,455,546	3,480,696	7,314,498	May 17, 2016
FalconStor Software, Inc., 2013 Outside Directors Equity
Compensation Plan	400,000	350,000	50,000	May 9, 2016

Schedule of Equity Awards Outstanding

	Shares Available	Shares
Name of Plan	for Grant	Outstanding
FalconStor Software, Inc., 2000 Stock Option Plan	--	1,562,727
2004 Outside Directors Stock Option Plan	--	190,000
FalconStor Software, Inc., 2007 Outside Directors Equity	--	170,000
Compensation Plan
FalconStor Software, Inc., 2010 Outside Directors Equity	--	50,500
Compensation Plan

Schedule of Stock Option Activity

			Weighted
		Weighted	Average
		Average	Remaining	Aggregate
	Number of	Exercise	Contractual	Intrinsic
	Options	Price	Life  (Years)	Value
Options Outstanding at December 31, 2012	11,360,842	$4.66
Granted	70,000	$2.31
Exercised	(310,000)	$2.25
Forfeited	(224,795)	$4.56
Expired	(20,000)	$3.96
Options Outstanding at March 31, 2013	10,876,047	$4.72	6.13	$       1,136,141
Granted	1,812,000	$1.38
Exercised	-	$0.00
Forfeited	(1,334,592)	$4.04
Expired	(152,500)	$5.44
Options Outstanding at June 30, 2013	11,200,955	$4.25	5.93	$            15,505
Granted	15,000	$1.15
Exercised	-	$0.00
Forfeited	(2,473,830)	$3.46
Expired	(10,000)	$6.30
Options Outstanding at September 30, 2013	8,732,125	$4.47	5.77	$              2,550
Options Exercisable at September 30, 2013	5,854,660	$5.68	4.17	$                      -

Schedule Of Share Based Compensation Recognized

	Three months ended September 30,		Nine months ended September 30,
	2013	2012	2013	2012
Cost of revenues - Product	$                 82	$               113	$               181	$               212
Cost of revenues - Support and Service	7,990	53,314	112,182	103,158
Research and development costs	69,542	127,982	291,480	572,170
Selling and marketing	(56,838)	388,167	215,352	1,272,823
General and administrative	142,636	486,202	675,747	1,645,793
	$        163,412	$     1,055,778	$     1,294,942	$     3,594,156

Stock Based Compensation Expense - Restricted Stock

	Three months ended September 30,		Nine months ended September 30,
	2013	2012	2013	2012
Directors, officers and employees	$          82,689	$          82,284	$        178,437	$        489,864
Non-employee consultants	-	13,488	-	13,488
	$          82,689	$          95,772	$        178,437	$        503,352

Schedule of Restricted Stock Units Activity

	Number of
	Restricted Stock
	Awards
Non-Vested at December 31, 2012	171,190
Granted	-
Vested	(48,570)
Forfeited	(4,590)
Non-Vested at March 31, 2013	118,030
Granted	50,000
Vested	(45,410)
Forfeited	-
Non-Vested at June 30, 2013	122,620
Granted	500,000
Vested	(17,020)
Forfeited	-
Non-Vested at September 30, 2013	605,600

Schedule Of Share Based Compensation - Nonemployee

	Three months ended September 30,		Nine months ended September 30,
	2013	2012	2013	2012
Non-qualified stock options	$        36,942	$         (15,527)	$    36,942	$             14,403
Restricted stock awards	-	13,488	-	13,488
	$        36,942	$           (2,039)	$    36,942	$             27,891