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10. Share-Based Compensation
 6 Months Ended
Jun. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
10. Share-Based Compensation

The Accounting Standards Codification (“ASC”) 718 requires companies to record compensation expense for stock options measured at fair value, on the date of grant, using an option –pricing model.

 

The Company’s board of directors and stockholders previously approved the 1998 Share Incentive Plan, the 2000 Share Incentive Plan, the 2004 Share Incentive Plan and the 2006 Share Incentive Plan, (collectively the “Prior Plans”). Following the Company’s initial public offering, no further awards will be granted under the Prior Plans. However, all outstanding awards under the Prior Plans will continue to exist and will continue to be governed by their existing terms.

 

On April 12, 2013, the Company’s board of directors adopted and approved the Company’s 2013 Equity Incentive Plan, (the “2013 Plan”), and it was subsequently approved by the Company’s stockholders on May 21, 2013.

 

The Company issues stock options to employees, consultants and non-employee directors. Stock option awards for the Prior Plans and the 2013 Plan generally vest over a four year period and have a maximum term of ten years. Stock options under these plans have been granted with an exercise price equal to the fair market value on the date of the grant. Nonqualified and incentive stock options and restrictive stock units (“RSUs”) may be granted from these plans. Prior to the Company’s initial public offering, the fair market value of the Company’s stock had been historically determined by the board of directors and from time to time with the assistance of third party valuation specialists.

 

As of June 30, 2014, the Company had outstanding equity awards to purchase 1,471,848 shares of common stock under its share incentive plans with a weighted average exercise price of $8.93.

  

The following table summarizes employee share-based compensation expense resulting from stock options and RSUs for the periods indicated, (in thousands):

 

   Three months ended June 30,   Six months ended June 30, 
   2014   2013   2014   2013 
Cost of sales  $28   $14   $53   $26 
Research and development   31    13    56    24 
Sales and marketing   25    11    48    21 
General and administrative   434    91    850    169 
   $518   $129   $1,007   $240 

 

The following is a summary of stock option activity during the six month period ending June 30, 2014 (in thousands, except price data):

 

   Shares   Weighted Average Exercise Price   Weighted Average Fair Value   Weighted Average Remaining Contractual Life   Aggregate Intrinsic Value 
Outstanding, December 31, 2013   1,468   $8.38   $4.11        $9,731 
Granted   108    13.84    7.12         – 
Exercised   (91)   5.99    2.03         1,447 
Forfeited   (14)   8.43    5.11         209 
Expired   –    6.75    4.88         1 
Outstanding, June 30, 2014   1,471   $8.93   $4.45    8.564   $20,992 
Exercisable, June 30, 2014   301   $6.35   $1.95    6.802   $5,069 
Vested and expected to vest   1,347   $8.84   $4.38    8.514   $19,342 

 

As of June 30, 2014, total compensation cost related to unvested stock options not yet recognized was $4.3 million, which is expected to be expensed over a weighted-average period of 3.1 years. The aggregated intrinsic value of options outstanding and options exercisable as of June 30, 2014 was $21.0 million and $5.1 million, respectively.

 

Under the 2013 Plan, participants may be granted RSUs, representing an unfunded, unsecured right to receive common stock on the date specified in the recipient’s award. The Company recognizes compensation expense on a straight-line basis over the applicable vesting term of the award.

 

During the three months ended June 30, 2014, the Company granted 2,839 RSUs with a total grant-date fair market value of $0.1 million. As of June 30, 2014, there was approximately $23,000 of unrecognized compensation cost related to RSUs.