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Share-Based Payment Arrangements (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

The following table summarizes the plans under which the Company was able to grant equity compensation as of December 31, 2013:



Name of Plan	Shares Authorized	Shares Available for Grant	Shares Outstanding	Last Date for Grant of Shares
FalconStor Software, Inc., 2006 Incentive Stock Plan	13,455,546	4,191,329	6,603,865	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

The following table summarizes the Company’s equity plans that have expired but that still have equity awards outstanding as of December 31, 2013:



Name of Plan	Shares Available for Grant	Shares Outstanding

FalconStor Software, Inc., 2000 Stock Option Plan	—	1,140,667

2004 Outside Directors Stock Option Plan	—	145,000

FalconStor Software, Inc., 2007 Outside Directors Equity Compensation Plan	—	160,000

FalconStor Software, Inc., 2010 Outside Directors Equity Compensation Plan	—	50,500

Schedule of Stock Option Activity

A summary of the Company’s stock option activity for 2013 is as follows:



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Options Outstanding at December 31, 2012	11,360,842		$	4.66	6.46	$	497,695
Granted	2,034,500		$	1.43
Exercised	(310,000	)	$	2.25
Forfeited	(5,178,050	)	$	4.13
Expired	(362,860	)	$	6.69
Options Outstanding at December 31, 2013	7,544,432		$	4.16	6.28	$	3,000
Options Exercisable at December 31, 2013	4,836,007		$	5.41	4.87	$	—
Options Expected to Vest after December 31, 2013 (1)	1,895,898		$	1.93	8.80	$	2,100
(1) Options expected to vest after December 31, 2013 reflect an estimated forfeiture rate

Schedule of Share Based Compensation Recognized

The Company recognized share-based compensation expense for all awards issued under the Company’s stock equity plans in the following line items in the consolidated statement of operations:



	Years ended December 31,
	2013		2012		2011
Cost of revenues - Product	$	181	$	262	$	2,960
Cost of revenues - Support and Service	136,975		172,707		461,735
Research and development costs	363,296		727,826		1,302,129
Selling and marketing	397,967		1,677,469		2,023,370
General and administrative	807,010		2,036,505		1,727,864
	$	1,705,429	$	4,614,769	$	5,518,058

Stock Based Compensation Expense - Restricted Stock

A summary of the total stock-based compensation expense related to restricted stock awards and restricted stock units, which is included in the Company’s total share-based compensation expense for each respective year, is as follows:



	Years ended December 31,
	2013		2012		2011
Directors, officers and employees	$	257,843	$	584,959	$	1,358,107
Non-employee consultants	—		13,488		21,882
	$	257,843	$	598,447	$	1,379,989

Schedule of Restricted Stock Units Activity

A summary of the Company’s restricted stock activity for 2013 is as follows:



	Number of Restricted Stock Awards

Non-Vested at December 31, 2012	171,190

Granted	550,000
Vested	(111,000	)
Forfeited	(4,590	)

Non-Vested at December 31, 2013	605,600

Schedule of Share-based Compensation, Nonemployee

awards granted to non-employee consultants range from immediate vesting to three years depending on service requirements. A summary of the total stock-based compensation expense/(benefit) related to share-based awards granted to non-employee consultants, which is included in the Company’s total share-based compensation expense for each respective period, is as follows:



	Years ended December 31,
	2013		2012		2011
Non-qualified stock options	$	37,379	$	13,999	$	2,487
Restricted stock awards	—		13,488		21,882
	$	37,379	$	27,487	$	24,369

Schedule of assumptions used to value share-based compensation

In addition to the exercise and grant date prices of the awards, certain weighted average assumptions that were used to estimate the fair value of share-based payment grants in the respective periods are listed in the table below:



	Years ended December 31,
	2013	2012	2011
Expected dividend yield	0%	0%	0%
Expected volatility	61 - 64%	60 - 61%	56 - 61%
Risk-free interest rate	0.84 - 1.64%	0.7 - 1.2%	1.0 - 2.5%
Expected term (years)	5.5	5.5	5.5
Discount for post-vesting restrictions	N/A	N/A	N/A

- Definition

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

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