Note 11. Stock-Based Compensation

The Company maintains an equity compensation plan to provide long-term incentives for employees, contractors, and members of its Board of Directors. The Company currently grants equity awards from one plan, the 2008 Equity Incentive Plan (the “2008 Plan”). The 2008 Plan allows for the issuance of non-statutory and incentive stock options, restricted stock, restricted stock units, stock appreciation rights, other stock-related awards, and performance awards which may be settled in cash, stock, or other property. The Company continues to have equity awards outstanding under its previous stock plans: 1998 Non-Officer Stock Option Plan and 1999 Equity Incentive Plan (collectively, the “Prior Plans”) and 1996 Equity Incentive Plan (the “1996 Plan”). Equity awards issued under the Prior Plans and the 1996 Plan continue to adhere to the terms of those respective stock plans and no further options may be granted under those previous plans. However, at June 2, 2008, any shares that remained available for future grants under the Prior Plans became available for issuance under the 2008 Plan. On each of June 6, 2012 and June 12, 2013, the stockholders approved an amendment to the 2008 Plan (“Amended 2008 Plan”) which increased the aggregate number of shares of common stock authorized for issuance by 3,000,000 and 6,000,000 shares, respectively, such that the Amended 2008 Plan has reserved for issuance an amount not to exceed 19,540,940 shares effective June 12, 2013. At March 31, 2014, the Company had an aggregate of approximately 18.1 million shares of its common stock reserved for issuance under the Amended 2008 Plan, the Prior Plans and the 1996 Plan, of which approximately 12.3 million shares were subject to outstanding options and other stock-based awards, and approximately 5.8 million shares were available for future issuance under the Amended 2008 Plan.

The Company also maintains an Employee Stock Purchase Plan (the “Purchase Plan”) which is intended to qualify as an employee stock purchase plan within the meaning of Section 423(b) of the Internal Revenue Code. Under the Purchase Plan, the Company’s Board of Directors may authorize participation by eligible employees, including officers, in periodic offerings. On June 6, 2012, the stockholders approved an amendment to the Purchase Plan to increase the aggregate number of shares of common stock authorized for issuance by 500,000 shares, such that the Purchase Plan has reserved for issuance an amount not to exceed 1,320,500 shares. At March 31, 2014, the Company had approximately 0.5 million shares available for future issuance under the Purchase Plan.

The Company has granted restricted stock units primarily to its senior management in accordance with the Amended 2008 Plan. Subject to each grantee’s continued employment, the restricted stock units generally vest in three annual installments from the date of grant and are generally issuable at the end of the three-year vesting term. At March 31, 2014, all restricted stock units were fully vested.

Activity under the Company’s equity incentive plans related to stock options is set forth below (in thousands except per share amounts):


	Number of Options Outstanding			Weighted Average Exercise Price per Share
Balances at December 31, 2013		10,405		$	3.46
Granted		2,347			6.20
Forfeited		(36	)		4.49
Expired		(30	)		9.78
Exercised		(478	)		2.65

Balances at March 31, 2014		12,208		$	4.00

The Company uses the Black-Scholes option pricing model to determine the grant-date fair value of stock options and employee stock purchase plan shares. The Black-Scholes option pricing model is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables, which include the expected term of the grants, actual and projected employee stock option exercise behaviors, including forfeitures, the Company’s expected stock price volatility, the risk-free interest rate and expected dividends. The Company recognizes the grant-date fair value of the stock award as stock-based compensation expense on a straight-line basis over the requisite service period, which is the vesting period, and is adjusted for estimated forfeitures.

Stock-based compensation recognized on the Company’s condensed consolidated statements of operations for the three months ended March 31, 2014 and 2013, was as follows (in thousands):


	Three Months Ended March 31,
	2014		2013
Stock-based compensation expense by caption:
Research and development	$	183	$	87
Selling, general and administrative		762		626

Total stock-based compensation expense	$	945	$	713

The Company did not record any stock-based compensation associated with performance-based stock options during the three months ended March 31, 2014 and 2013 as the performance criteria was not probable of being achieved. Performance-based stock options of 50,000 remained outstanding at March 31, 2014.