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Stock-Based Compensation | 9 Months Ended
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Sep. 30, 2014
Stock-Based Compensation |
Stock-Based Compensation | Note 7. Stock-Based Compensation The Company recorded $1.1 million and $1.0 million of stock-based compensation expense for the three months ended September 30, 2014 and 2013, respectively. The Company recorded $3.6 million and $2.8 million of stock-based compensation expense for the nine months ended September 30, 2014 and 2013, respectively. The expense relating to stock-based awards is recognized on a straight-line basis over the requisite service period, usually the vesting period, based on the grant-date fair value. The unamortized compensation cost, net of expected forfeitures, as of September 30, 2014 was $4.1 million related to stock options and is expected to be recognized as expense over a weighted average period of approximately 2.13 years. The expense related to restricted stock units is recognized over a three-to-five year vesting period and is based on the fair value of the underlying stock on the dates of grant. The unamortized compensation cost, net of expected forfeitures, as of September 30, 2014 was $1.2 million related to restricted stock units and is expected to be recognized as expense over a weighted average period of approximately 2.49 years. The Company presents the tax benefits resulting from tax deductions in excess of the compensation cost recognized from the exercise of stock options as financing cash flows in the condensed consolidated statements of cash flows. For the three and nine months ended September 30, 2014 and 2013, there were no such tax benefits associated with the exercise of stock options due to the Company’s loss position. Common Stock Options and Restricted Stock A summary of the option activity under the Company’s Amended and Restated 2000 Stock Option and Equity Incentive Plan and Amended and Restated 2010 Equity Incentive Plan (Amended 2010 Plan), referred to collectively as the “Plans,” is presented below (in thousands, except exercise price):
|  |  |  | Options Outstanding |
|  | Available for Grant |  | Number of Shares |  | Weighted Average Exercise Prices |
Balance at December 31, 2013 |  | 422 |  | 6,727 |  | $ | 3.86 |
Additional shares authorized under the Amended 2010 Plan |  | 500 |  | — |  | — |
Restricted stock units granted |  | (499 | ) | — |  | — |
Options granted |  | (49 | ) | 49 |  | $ | 4.69 |
Options cancelled |  | 60 |  | (60 | ) | $ | 3.42 |
Options exercised |  | — |  | (300 | ) | $ | 3.58 |
Options expired |  | (60 | ) | — |  | 3.42 |
Balance at March 31, 2014 |  | 374 |  | 6,416 |  | $ | 3.89 |
Additional shares authorized under the Amended 2010 Plan |  | 1,500 |  | — |  | — |
Restricted stock units granted |  | (9 | ) | — |  | — |
Options cancelled |  | 4 |  | (4 | ) | $ | 5.21 |
Options exercised |  | — |  | (52 | ) | $ | 1.61 |
Options expired |  | (4 | ) | — |  | $ | 5.21 |
Balance at June 30, 2014 |  | 1,865 |  | 6,360 |  | $ | 3.91 |
Options granted |  | (120 | ) | 120 |  | $ | 3.10 |
Options cancelled |  | 257 |  | (257 | ) | $ | 4.55 |
Options exercised |  | — |  | (48 | ) | $ | 1.72 |
Options expired |  | (257 | ) | — |  | $ | 4.55 |
Balance at September 30, 2014 |  | 1,745 |  | 6,175 |  | $ | 3.88 |
At the Company’s 2014 Annual Meeting of Stockholders held on June 3, 2014, the Company’s stockholders approved an increase of 1,500,000 shares reserved for issuance under the Amended 2010 Plan. The Company also has awarded options to new employees outside of the Plans and may continue to do so, as material inducements to the acceptance of employment with the Company, as permitted under the Listing Rules of the Nasdaq Stock Market. These grants must be approved by the compensation committee of the board of directors, a majority of the independent directors or, below a specified share level, by an authorized executive officer. A summary of the inducement grant option activity is presented below (in thousands, except exercise price):
|  | Options Outstanding |
|  | Number of Shares |  | Weighted Average Exercise Prices |
Balance at December 31, 2013 |  | 3,178 |  | $ | 4.42 |
Granted |  | 118 |  | $ | 5.22 |
Cancelled |  | (40 | ) | $ | 4.47 |
Exercised |  | (32 | ) | $ | 3.88 |
Balance at March 31, 2014 |  | 3,224 |  | $ | 4.46 |
Granted |  | 125 |  | $ | 3.87 |
Exercised |  | (20 | ) | $ | 1.55 |
Balance at June 30, 2014 |  | 3,329 |  | $ | 4.45 |
Granted |  | 95 |  | $ | 3.11 |
Exercised |  | (5 | ) | $ | 1.55 |
Balance at September 30, 2014 |  | 3,419 |  | $ | 4.42 |
A summary of restricted stock unit activity under the Plans is presented below (in thousands, except fair value):
|  | Number of Shares |  | Weighted Average Grant-Date Fair Value |
Non-vested shares at December 31, 2013 |  | 27 |  | $ | 4.46 |
Granted |  | 499 |  | $ | 4.62 |
Vested |  | (122 | ) | $ | 4.62 |
Non-vested shares at March 31, 2014 |  | 404 |  | $ | 4.61 |
Granted |  | 9 |  | $ | 4.62 |
Vested |  | (5 | ) | $ | 4.62 |
Non-vested shares at June 30, 2014 |  | 408 |  | $ | 4.61 |
Vested |  | (9 | ) | $ | 4.46 |
Non-vested shares at September 30, 2014 |  | 399 |  | $ | 4.61 |
The following table summarizes significant ranges of outstanding and exercisable options as of September 30, 2014 (in thousands, except contractual life and exercise price):
|  | Options Outstanding |  | Options Exercisable |
Range of Exercise Price |  | Number Outstanding |  | Weighted Average Remaining Contractual Life (in Years) |  | Weighted Average Exercise Price |  | Aggregate Intrinsic value |  | Number Exercisable |  | Weighted Average Remaining Contractual Life (in Years) |  | Weighted Average Exercise Price |  | Aggregate Intrinsic value |
$1.50 - $3.23 |  | 2,845 |  | 3.05 |  | $ | 2.68 |  | $ | 574 |  | 1,904 |  | 2.24 |  | $ | 2.47 |  | $ | 574 |
$3.24 - $4.25 |  | 2,512 |  | 4.11 |  | $ | 3.82 |  | — |  | 1,706 |  | 3.57 |  | $ | 3.83 |  | — |
$4.26 - $5.61 |  | 3,377 |  | 3.75 |  | $ | 4.94 |  | — |  | 2,473 |  | 2.09 |  | $ | 5.09 |  | — |
$5.62 - $7.00 |  | 860 |  | 2.56 |  | $ | 6.00 |  | — |  | 730 |  | 2.34 |  | $ | 6.00 |  | — |
|  | 9,594 |  | 3.53 |  | $ | 4.07 |  | $ | 574 |  | 6,813 |  | 2.53 |  | $ | 4.14 |  | $ | 574 |
As of September 30, 2014, the Company had 9.3 million shares subject to outstanding options fully vested and expected to vest, after estimated forfeitures, with a remaining contractual life of 3.43 years, weighted average exercise price of $4.08 and aggregate intrinsic value of $0.6 million. The total fair value of shares subject to outstanding options vested during the nine months ended September 30, 2014 and 2013 calculated using the Black-Scholes valuation method was $2.6 million and $2.5 million, respectively. The total intrinsic value of employee stock options exercised during the nine months ended September 30, 2014 and 2013 was $0.7 million and $0.8 million, respectively. Valuation Assumptions and Expense Information The fair value of the Company’s share-based payment awards for the three and nine months ended September 30, 2014 and 2013 was estimated on the grant date using a Black-Scholes valuation option-pricing model with the following assumptions:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |
Employee stock options: |  | 2014 |  | 2013 |  | 2014 |  | 2013 |
Risk-free interest rate |  | 1.3% - 1.7% |  | 1.0% - 1.7% |  | 1.3% – 1.7% |  | 0.5% – 1.7% |
Volatility |  | 53.7% – 55.6% |  | 57.7% – 62.9% |  | 53.7% – 57.5% |  | 57.7% – 62.9% |
Expected life (years) |  | 4.0-5.0 |  | 4.0-5.0 |  | 4.0-5.0 |  | 4.0-5.0 |
Dividend yield |  | 0% |  | 0% |  | 0% |  | 0% |
The risk-free interest rate was derived from the Daily Treasury Yield Curve Rates as published by the U.S. Department of the Treasury as of the grant date for terms equal to the expected terms of the options. The expected volatility was based on the historical volatility of the Company’s stock price over the expected term of the options. The expected term of options granted was derived from historical data based on employee exercises and post-vesting employment termination behavior. A dividend yield of zero is applied because the Company has never paid dividends and has no intention to pay dividends in the near future. The stock-based compensation expense recorded is adjusted based on estimated forfeiture rates. An annualized forfeiture rate has been used as a best estimate of future forfeitures based on the Company’s historical forfeiture experience. The stock-based compensation expense will be adjusted in later periods if the actual forfeiture rate is different from the estimate. Employee Stock Purchase Plan In June 2010, the Company’s stockholders approved the 2010 Employee Stock Purchase Plan (ESPP). A total of 2,000,000 shares of common stock have been reserved for issuance under the ESPP. The ESPP, which is intended to qualify under Section 423 of the Internal Revenue Code, is administered by the board of directors or the compensation committee of the board of directors. The ESPP provides that eligible employees may purchase up to $25,000 worth of the Company’s common stock annually over the course of two six-month offering periods. The purchase price to be paid by participants is 85% of the price per share of the Company’s common stock either at the beginning or the end of each six-month offering period, whichever is less. On September 1, 2010, the Company commenced the first offering period under the ESPP. On February 28, 2014, approximately 140,000 shares of common stock were issued at an aggregate purchase price of $434,000 under the ESPP. On August 29, 2014, approximately 154,000 shares of common stock were issued at an aggregate purchase price of $422,000 under the ESPP. As of September 30, 2014, there were approximately 766,000 shares authorized and unissued under the ESPP.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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