Stock Based Compensation | 6 Months Ended |
Jun. 30, 2014 |
Stock Based Compensation | ' |
11. Stock Based Compensation |
Stock Option Plans |
2012 Equity Incentive Award Plan |
The Company’s stockholders approved the 2012 Equity Incentive Award Plan (the “2012 Plan”) at the 2012 Annual Meeting of Stockholders on May 17, 2012 and approved 3,000,000 shares of common stock authorized for issuance. Upon approval of the 2012 Plan, all shares of common stock that remained available for issuance under the 1996 Stock Option Plan (the “1996 Plan”) and the 1998 Director Stock Option Plan (the “Director Plan”) were added to the shares reserved under the 2012 Plan. In addition, pursuant to the 2012 Plan, any shares of common stock subject to awards previously granted under the 1996 Plan, the Director Plan and certain non-plan option agreements entered into with certain individuals as of March 31, 2012 that terminate, expire or lapse will become available for issuance under the 2012 Plan. The 2012 Plan was amended on May 29, 2014 upon stockholder approval of an amendment to the 2012 Plan at the 2014 Annual Meeting of Stockholders to increase the number of shares reserved for issuance thereunder by 4,000,000 shares. The 2012 Plan provides for the granting of options, restricted stock awards, restricted stock unit awards (“RSU”), performance awards, dividend equivalents awards, deferred stock awards, deferred stock unit awards, stock payment awards and stock appreciation rights to employees, non-employee directors and consultants. The Company has granted options and RSUs under the 2012 Plan. Options granted under the 2012 Plan may be designated as qualified or nonqualified at the discretion of the Compensation Committee of the Board of Directors. Generally, shares issuable upon exercise of options vest ratably over four years, beginning one year from the date of grant; however, options can vest upon grant. Option terms expire no later than 10 years from the date of grant, or 5 years from the date the option is granted to a greater than 10% stockholder. The stock options are exercisable at not less than the fair market value of the stock at the date of grant, or not less than 110% of the fair market value of the stock at the date of grant if granted to a greater than 10% stockholder. RSU granted under the 2012 Plan entitle the recipient to receive one share of the Company’s common stock for every RSU upon vesting. RSUs vest annually. As of June 30, 2014, options to purchase 3,477,674 shares of common stock were outstanding, 41,708 shares of common stock were issuable upon the settlement of outstanding RSUs and 5,784,701 shares were available for issuance under the 2012 Plan. |
1996 Stock Option Plan |
The 1996 Plan initially had 4,750,000 shares of common stock authorized for issuance and a provision that automatically increased this number by 3.5% of the issued and outstanding common stock on the last trading day of the December immediately preceding each fiscal year through January 2007. Options granted under the 1996 Plan were designated as qualified or nonqualified at the discretion of the Compensation Committee of the Board of Directors. Generally, shares issuable upon exercise of options vest ratably over four years, beginning one year from the date of grant; however, options could vest upon grant. All options expire no later than 10 years from the date of grant. Qualified stock options are exercisable at not less than the fair market value of the stock at the date of grant, and nonqualified stock options are exercisable at prices determined at the discretion of the Board of Directors, but not less than 85% of the fair market value of the stock at the date of grant. On May 17, 2012, the 1996 Plan was terminated in connection with the effectiveness of the 2012 Plan. All 1,555,492 shares that were available for issuance under the 1996 Plan were transferred to the 2012 Plan, and the 6,398,904 shares that were subject to awards outstanding under the 1996 Plan remained outstanding pursuant to the terms of the 1996 Plan. As of June 30, 2014, options to purchase 2,843,685 shares of common stock were outstanding pursuant to the terms of the 1996 Plan. |
1998 Director Stock Option Plan |
The Director Plan for non-employee directors initially had 300,000 shares of common stock authorized for issuance. On May 17, 2012, the Director Plan was terminated in connection with the effectiveness of the 2012 Plan. All 130,000 shares that were available for issuance under the Director Plan were transferred to the 2012 Plan, and the 170,000 shares that were subject to awards outstanding under the Director Plan remained outstanding pursuant to the terms of the Director Plan. As of June 30, 2014, no options were outstanding pursuant to the terms of the Director Plan. |
Non-Plan Grants |
In October 2004, the Company granted non-qualified stock options to purchase 30,000 shares of common stock outside of the Company’s stock option plans to its former director with an exercise price of $12.27 per share. These options were granted with terms that are substantially in accordance with the Company’s standard stock option terms. As of June 30, 2014, all of these options remained outstanding. |
In September 2011, the Company granted non-qualified stock options to purchase 1,530,000 shares of common stock outside of the Company’s stock option plans to its current Chief Executive Officer with an exercise price of $0.25 per share. These options were granted with terms that are substantially in accordance with the Company’s standard stock option terms. As of June 30, 2014, all of these options remained outstanding. |
In October 2011, the Company granted non-qualified stock options to purchase 1,130,000 shares of common stock outside of the Company’s stock option plans to its current Chief Business Officer with an exercise price of $0.26 per share. These options were granted with terms that are substantially in accordance with the Company’s standard stock option terms. As of June 30, 2014, 1,018,458 of these options remained outstanding. |
On February 1, 2012, the Company granted non-qualified stock options to purchase 1,060,000 shares of common stock outside of the Company’s stock option plans to its current Chief Financial Officer with an exercise price of $0.28 per share. These options were granted with terms that are substantially in accordance with the Company’s standard stock option terms. As of June 30, 2014, 1,055,352 of these options remained outstanding. |
Restricted Stock Units |
On August 6, 2013, the Company awarded an aggregate of 41,708 RSUs to its directors with a grant-date fair value equal to approximately $55,000 in the aggregate. Each RSU entitles the recipient to receive one share of the Company’s common stock upon vesting. The RSUs awarded to directors vest annually. The fair value of nonvested RSUs is based on the Company’s closing stock price on the date of grant. As of June 30, 2014, all of these RSUs remained outstanding and none was vested. A summary for the six months ended June 30, 2014 is as follows: |
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| | | | | | | | | Weighted | | | | | |
| | | | | Average | | | Remaining | | | | | |
| | | | | Grant Date | | | Vesting | | | Aggregate | |
| Shares of | | | Fair Value | | | Period | | | Intrinsic | |
| Underlying RSUs | | | Per Share | | | (In years) | | | Value | |
Nonvested at December 31, 2013 | | 41,708 | | | $ | 1.33 | | | | | | | | | |
Options exercised | | — | | | | — | | | | | | | | | |
Options cancelled/forfeited/expired | | — | | | | — | | | | | | | | | |
Nonvested at June 30, 2014 | | 41,708 | | | $ | 1.33 | | | | — | | | $ | 30,864 | |
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The following table summarizes stock compensation expense related to employee stock options and employee stock-based compensation for the three and six months ended June 30, 2014 and 2013, which was incurred as follows (in thousands): |
|
| Three Months Ended | | | Six Months Ended | |
| June 30, | | | June 30, | |
| 2014 | | | 2013 | | | 2014 | | | 2013 | |
Stock-based compensation expense: | | | | | | | | | | | | | | | |
General and administrative | $ | 139 | | | $ | 57 | | | $ | 263 | | | $ | 117 | |
Research and development | | (30 | ) | | | 30 | | | | 13 | | | | 54 | |
Sales and marketing | | 31 | | | | 32 | | | | 63 | | | | 58 | |
Product costs | | 7 | | | | 6 | | | | 12 | | | | 10 | |
Total stock-based compensation expense | $ | 147 | | | $ | 125 | | | $ | 351 | | | $ | 239 | |
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Stock-based compensation expense recognized during the three and six months ended June 30, 2014 and 2013 includes compensation expense for stock-based awards granted to employees based on the grant date fair value estimated in accordance with the provisions of ASC 718. As of June 30, 2014, the total remaining unrecognized cost was approximately $979,000 to be recognized over approximately two years. |
Valuation Assumptions |
The compensation expense related to stock options recognized was determined using the Black-Scholes option valuation model. Option valuation models require the input of subjective assumptions and these assumptions can vary over time. The weighted average assumptions used were as follows: |
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| Three Months Ended | | | Six Months Ended | |
| June 30, | | | June 30, | |
| 2014 | | | 2013 | | | 2014 | | | 2013 | |
Dividend yield | | — | | | | — | | | | — | | | | — | |
Risk-free interest rate | | 1.27 | % | | | 0.7 | % | | | 1.27 | % | | | 0.68 | % |
Expected volatility | | 100.47 | % | | | 86.21 | % | | | 100.68 | % | | | 91.48 | % |
Forfeiture rate | | 13.94 | % | | | 13.9 | % | | | 13.94 | % | | | 13.9 | % |
Expected term (years) | | 4.45 | | | | 4.06 | | | | 4.45 | | | | 4.06 | |
Fair value per share at grant date | $ | 0.51 | | | $ | 0.47 | | | $ | 0.54 | | | $ | 0.42 | |
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For the three and six months ended June 30, 2014, the volatility assumption was determined by the trading history for the Company. Prior to 2014, the Company did not have sufficient trading history for its common stock and its volatility assumption was determined by examining the historical volatilities for industry peers and the trading history for the Company’s common stock. The Company will continue to use its historical stock price volatility and expected term assumption for future periods. The risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. Different estimates of volatility and expected term could materially change the value of an option and the resulting expense. The expected term of stock options represents the weighted-average period the stock options are expected to remain outstanding and is based on the options vesting terms, contractual terms and historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. |
Employee Stock-Based Compensation |
The table below presents information related to stock option activity for the six months ended June 30, 2014, as follows: |
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| | | | | | | | | Weighted- | | | | | |
| | | | | | | | | Average | | | | | |
| | | | | Weighted- | | | Remaining | | | | | |
| Number of | | | Average | | | Contractual | | | Aggregate | |
| Options | | | Exercise | | | Term | | | Intrinsic | |
| Outstanding | | | Price | | | (In years) | | | Value | |
Outstanding at December 31, 2013 | | 9,705,084 | | | $ | 0.5 | | | | | | | | | |
Options granted | | 1,397,000 | | | | 0.76 | | | | | | | | | |
Options exercised | | (310,831 | ) | | | 0.33 | | | | | | | | | |
Options cancelled/forfeited/expired | | (836,084 | ) | | | 1.31 | | | | | | | | | |
Outstanding at June 30, 2014 | | 9,955,169 | | | $ | 0.45 | | | | 7.57 | | | $ | 3,532,347 | |
Exercisable at June 30, 2014 | | 6,261,138 | | | $ | 0.41 | | | | 7 | | | $ | 2,614,186 | |
Vested and expected to vest at June 30, 2014 | | 9,423,723 | | | $ | 0.44 | | | | 7.5 | | | $ | 3,436,748 | |
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