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Accounting for stock-based compensation
 6 Months Ended
Jun. 30, 2013
Accounting for stock-based compensation

3. Accounting for stock-based compensation

Total stock-based compensation expense recognized in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2013 and 2012 was as follows (in thousands):

 

     Three months ended
June 30,		      Six months ended
June 30,		  
     2013      2012      2013      2012  

Stock-based compensation

    $ 10,172       $ 3,072       $ 15,362       $ 5,951   
  

 

 

     

 

 

     

 

 

     

 

 

  

On March 7, 2013, the Board approved a management proposal designed to encourage employee retention, as recommended for approval by the Compensation Committee. The Company granted 5,846,000 performance-based restricted stock units to employees, including executive officers of the Company other than our Chief Executive Officer, with vesting terms subject to the achievement of specified regulatory and business development milestones related to AFREZZA. The performance-based restricted stock units had a grant date fair value of $2.81 per unit.

On May 23, 2013, the Company’s stockholders approved the 2013 Equity Incentive Plan (the “Plan”). The Plan is the successor to and continuation of the previous active stock-based compensation plans - 2004 Equity Incentive Plan and the 2004 Non-Employee Directors’ Stock Option Plan. The Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, other stock awards, and performance awards that may be settled in cash, stock, or other property. All of the Company’s employees, non-employee directors and consultants are eligible to participate in the Plan and may receive all types of awards; provided that incentive stock options may be granted under the Plan only to employees (including officers) and employees of the Company’s affiliates.

On May 23, 2013, the Compensation Committee approved a management proposal designed to encourage employee retention. The proposal involved the grant of 5,598,100 performance-based stock options and 1,687,900 performance-based restricted stock units to employees, including executive officers of the Company. These grants have vesting terms subject to the achievement of certain performance milestones. The performance-based options and performance-based restricted stock units had a grant date per share fair value of $3.05 and $6.85, respectively.

As of June 30, 2013, there was $24.3 million and $31.5 million of unrecognized compensation cost related to options and restricted stock units, respectively, which are expected to be recognized over the remaining weighted average vesting period of 0.8 years. The Company evaluates stock awards with performance conditions as to the probability that the performance conditions will be met and estimates the date at which the performance conditions will be met in order to properly recognize stock-based compensation expense over the requisite service period. As of June 30, 2013, there was $107,000 and $3.7 million of unrecognized expenses related to performance options and restricted stock units, respectively, for milestones not considered probable of achievement.