Share-Based Payment Arrangements

9 Months Ended

Sep. 30, 2014

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

Share-Based Payment Arrangements

Share-Based Payment Arrangements

The following table summarizes the plans under which the Company was able to grant equity compensation as of September 30, 2014: 

	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	3,237,347	7,284,597	May 17, 2016
FalconStor Software, Inc., 2013 Outside Directors Equity Compensation Plan	400,000	290,000	93,500	May 9, 2016

The following table summarizes the Company’s equity plans that have expired but that still have equity awards outstanding as of September 30, 2014: 

Name of Plan	Shares Available for Grant	Shares Outstanding
FalconStor Software, Inc., 2000 Stock Option Plan	—	778,757
2004 Outside Directors Stock Option Plan	—	120,000
FalconStor Software, Inc., 2007 Outside Directors Equity Compensation Plan	—	160,000
FalconStor Software, Inc., 2010 Outside Directors Equity Compensation Plan	—	17,000

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 condensed consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2014		2013			2014		2013
Cost of revenues - Product	$	—	$	82		$	—	$	181
Cost of revenues - Support and Service	20,563		7,990			74,900		112,182
Research and development costs	47,085		69,542			222,492		291,480
Selling and marketing	67,214		(56,838		)	280,188		215,352
General and administrative	236,196		142,636			628,193		675,747
	$	371,058	$	163,412		$	1,205,773	$	1,294,942

On April 1, 2014 the Company granted 2,037,857 shares of restricted stock to certain Company officers and employees. The restricted shares have terms of four years. The restrictions on various portions of the restricted stock lapse upon the Company's achievement of performance criteria related to: Common Stock price; GAAP earnings per share; non-GAAP earnings per share; cash related targets; and revenue/billings related targets. The restricted stock agreement contained a clause that provided the Company with discretion to recover the awards in certain circumstances. This discretion clause was amended on July 30, 2014 and as a result the grant date was determined to be July 30, 2014 in accordance with U.S. GAAP.

The fair value for awards related to the earnings per share, cash and revenue performance criteria is the closing stock price of the Company's common stock on the date of grant of $1.58. Share-based compensation expense for the performance criteria is recorded when the achievement of the performance condition is considered probable of achievement and is recorded straight-line over the requisite service period. The fair value of the common stock price market condition was calculated using the Monte Carlo simulation model resulting in a weighted average fair value of $0.80. Share-based compensation expense for the common stock price market condition is recorded straight-line over the longer of the explicit service period or the service period derived from the Monte Carlo simulation. The explicit service period and the service period derived from the Monte Carlo simulation were the same for the grant.