Stock Option and Other Benefit Plans | 9 Months Ended |
Sep. 30, 2014 |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' |
Stock Option and Other Benefit Plans | ' |
Note 9 — Stock Option and Other Benefit Plans |
2007 Equity Incentive Plan |
In 2007, the Company’s Board of Directors adopted, and the Company’s stockholders approved, the 2007 Equity Incentive Plan (the “2007 Plan”). The 2007 Plan permits the Company to grant stock options, RSUs, and other stock-based awards to employees, non-employee directors and consultants. In April 2013, the Company’s Board of Directors approved, and in June 2013, the Company’s stockholders approved, the amended and restated 2007 Equity Incentive Plan (the “Amended 2007 Plan”). The Amended 2007 Plan includes an increase of 7,200 shares in the aggregate number of shares of common stock authorized for issuance under the plan. It also includes a fungible share provision, pursuant to which each share that is subject to a stock-based award that is not a “full value award” (restricted stock, RSUs, or other stock-based awards where the price charged to the participant for the award is less than 100% of the fair market value) reduces the number of shares available for issuance by 1.39 shares. When a stock-based award that is not a full value award is cancelled, the underlying shares are returned to the pool of shares available for grant at a ratio of 1.39 shares for each share cancelled. As of September 30, 2014, 1,911 shares were available for future grants under the Amended 2007 Plan. |
2007 Employee Stock Purchase Plan |
In 2007, the Company’s Board of Directors adopted, and the Company’s stockholders approved, the 2007 Employee Stock Purchase Plan (the “2007 Purchase Plan”). As of September 30, 2014, 1,283 shares were available for issuance under the 2007 Purchase Plan. |
2008 Equity Inducement Plan |
In March 2008, the Company’s Board of Directors adopted the 2008 Equity Inducement Plan (the “Inducement Plan”) to augment the shares available under its existing 2007 Plan. The Company has not sought stockholder approval for the Inducement Plan. As such, awards under the Inducement Plan are granted in accordance with NASDAQ Listing Rule 5635(c)(4) and only to persons not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such individuals entering into employment with the Company. The Inducement Plan initially permitted the Company to grant only nonqualified stock options, but effective November 2013, the Compensation Committee of the Company’s Board amended the Inducement Plan to permit the award of RSUs under the plan. As of September 30, 2014, 266 shares of common stock were reserved for future grants under the Inducement Plan. |
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Share-Based Awards Available for Grant |
The calculation of share-based awards available for grant under the Amended 2007 Plan and the Inducement Plan for the nine months ended September 30, 2014 is as follows: |
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| | | | | | | | | | | | | | | | |
| | Shares | | | | | | | | | | | | | |
| | Available | | | | | | | | | | | | | |
Balances at December 31, 2013 | | | 4,890 | | | | | | | | | | | | | |
Share-based awards granted (1) | | | (5,104 | ) | | | | | | | | | | | | |
Share-based awards canceled (2) | | | 2,391 | | | | | | | | | | | | | |
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Balances at September 30, 2014 | | | 2,177 | | | | | | | | | | | | | |
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-1 | Under the terms of the Amended 2007 Plan, RSUs granted on or after June 6, 2013 reduce the number of shares available for grant by 1.39 shares for each share subject to an RSU award. | | | | | | | | | | | | | | | |
-2 | RSUs granted after June 6, 2013 that are forfeited and returned to the pool of shares available for grant increase the pool by 1.39 shares for each share subject to an RSU that is forfeited. | | | | | | | | | | | | | | | |
RSU Activity |
A summary of the Company’s RSU activity for the nine months ended September 30, 2014, is as follows: |
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| | | | | | | | | | | | | | | | |
| | | | | Weighted | | | | | | | | | |
| | Number of | | | Average | | | | | | | | | |
| | Units | | | Grant Date | | | | | | | | | |
| | Outstanding | | | Fair Value | | | | | | | | | |
Awarded and unvested, December 31, 2013 | | | 2,578 | | | $ | 2.91 | | | | | | | | | |
Granted | | | 3,183 | | | | 3.97 | | | | | | | | | |
Vested | | | (292 | ) | | | 2.7 | | | | | | | | | |
Forfeited | | | (788 | ) | | | 3.43 | | | | | | | | | |
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Awarded and unvested, September 30, 2014 | | | 4,681 | | | $ | 3.56 | | | | | | | | | |
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Restricted stock units expected to vest, September 30, 2014 | | | 3,666 | | | | | | | | | | | | | |
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Stock Option Activity |
The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2014: |
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| | Options Outstanding | | | | | | | |
| | | | | Weighted | | | Weighted | | | | |
| | Number | | | Average | | | Average | | | Aggregate | |
| | of | | | Exercise | | | Contractual | | | Intrinsic | |
| | Shares | | | Price | | | Term (Years) | | | Value | |
Balances at December 31, 2013 | | | 10,399 | | | $ | 2.98 | | | | | | | | | |
Options granted | | | 859 | | | | 4.1 | | | | | | | | | |
Options canceled | | | (1,228 | ) | | | 3.47 | | | | | | | | | |
Options exercised | | | (2,782 | ) | | | 2.19 | | | | | | | | | |
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Balances at September 30, 2014 | | | 7,248 | | | $ | 3.32 | | | | 3.64 | | | $ | 14,416 | |
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Options vested and expected to vest at September 30, 2014 | | | 6,806 | | | $ | 3.31 | | | | 3.57 | | | $ | 13,611 | |
Options exercisable at September 30, 2014 | | | 4,175 | | | $ | 3.3 | | | | 2.99 | | | $ | 8,782 | |
The aggregate intrinsic value in the preceding table is calculated as the difference between the exercise price of the underlying awards and the quoted closing price of the Company’s common stock on The NASDAQ Global Market of $5.17 per share as of September 30, 2014 (the last trading day in the quarter). Consolidated net cash proceeds from option exercises were $6,081 and $571 for the nine months ended September 30, 2014 and 2013, respectively. The Company realized no significant income tax benefit from stock option exercises during the three or nine months ended September 30, 2014 or 2013. As required, the Company presents excess tax benefits from the exercise of stock options, if any, as financing cash flows rather than operating cash flows. |
Stock-Based Compensation |
The cost of RSUs is determined using the fair value of the Company’s common stock based on the quoted closing price of the Company’s common stock on the date of grant. RSUs typically vest and are settled over approximately a four-year period with 25% of the shares vesting on or around the one-year anniversary of the grant date and the remaining shares vesting quarterly thereafter. Compensation cost is amortized on a straight-line basis over the requisite service period. |
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During the nine months ended September 30, 2014, the Company granted to its Chief Executive Officer two RSU awards for a total of 575 shares of the Company’s common stock with both time-based and stock-price-based vesting components (the “Market-Based RSUs”). One of the Market-Based RSUs for 225 shares vests over four years but also required that the Company’s average closing stock price for 30 consecutive trading days equal $7.00 per share or greater (the “$7.00 Vesting Trigger”). The other Market-Based RSU for 350 shares also vests over four years but required that the Company’s average closing stock price for 30 consecutive trading days equal $10.00 per share or greater (the “$10.00 Vesting Trigger”). The Company estimated the fair values and derived service periods of the Market-Based RSUs on the date of grant using a Monte Carlo valuation model. The total fair value of both Market-Based RSUs was initially estimated at $1,311 and was to be recognized in tranches over the longer of the derived service period or time-based vesting period on a graded vesting basis. Key assumptions for the nine months ended September 30, 2014 included an expected volatility of 48.5%, risk-free rate of 1.35%, dividend yield of 0.00%, and grant price of $4.05 based on closing price of the Company’s common stock on The NASDAQ Global Market on April 24, 2014. On July 24, 2014, the Compensation Committee of the Company’s Board of Directors approved a modification to the Market-Based RSUs to remove the $7.00 Vesting Trigger and the $10.00 Vesting Trigger. Accordingly, the Market-Based RSUs will only be subject to time-based vesting from July 24, 2014 onwards. As a result of the modification to the market-based vesting condition, the original unamortized stock-based compensation expense and an incremental unamortized expense of $2,714 will be recognized over the remaining service period. |
Under Compensation-Stock Compensation (“ASC 718”), the Company estimated the fair value of each option award on the grant date using the Black-Scholes option valuation model and the weighted average assumptions noted in the following table. |
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| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
| | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Dividend yield | | | — | % | | | — | % | | | — | % | | | — | % |
Risk-free interest rate | | | 1.41 | % | | | 1.16 | % | | | 1.31 | % | | | 0.69 | % |
Expected volatility | | | 57.9 | % | | | 50.8 | % | | | 49.3 | % | | | 52.5 | % |
Expected term (years) | | | 4 | | | | 4 | | | | 4 | | | | 4 | |
The Company based its expected volatility on its own historic volatility and the historical volatility of a peer group of publicly traded entities. The expected term of options gave consideration to early exercises, post-vesting cancellations and the options’ six-year contractual term. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury Constant Maturity Rate as of the date of grant. The weighted-average fair value of stock options granted during the nine months ended September 30, 2014 and 2013 was $1.61 and $1.07 per share, respectively. |
The Company calculated employee stock-based compensation expense recognized for the three and nine months ended September 30, 2014 and 2013 based on awards ultimately expected to vest and reduced it for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. |
The following table summarizes the consolidated stock-based compensation expense by line items in the condensed consolidated statement of operations: |
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| | Three Months Ended | | | Nine Months Ended | |
| | September 30, | | | September 30, | |
| | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Research and development | | $ | 764 | | | $ | 268 | | | $ | 6,686 | | | $ | 1,099 | |
Sales and marketing | | | 201 | | | | 40 | | | | 492 | | | | 200 | |
General and administrative | | | 989 | | | | 412 | | | | 2,321 | | | | 1,402 | |
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Total stock-based compensation expense | | $ | 1,954 | | | $ | 720 | | | $ | 9,499 | | | $ | 2,701 | |
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The above table includes compensation expense attributable to the consideration that was issuable to the Blammo employees who were former shareholders of Blammo, which was recorded as research and development expensed over the term of the earn-out periods, since these employees are primarily employed in product development. The Company re-measured the fair value of the contingent consideration each reporting period and only recorded a compensation expense for the portion of the earn-out target that was likely to be achieved. During the three and nine months ended September 30, 2014, the Company recorded zero and $4,559 of stock-based compensation expense, respectively, related to this contingent consideration. During the three and nine months ended September 30, 2013, the Company recorded $161 and $134 of stock-based compensation income and expense, respectively, related to this contingent consideration. Since the contingency related to the number of shares to be earned in connection with all earnout years was resolved as of June 30, 2014, the full fair value of the shares has been presented in additional paid in capital. See Note 3 for further details. |
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As of September 30, 2014, the Company had $14,441 of total unrecognized compensation expense, net of estimated forfeitures, related to RSUs that will be recognized over a weighted-average period of approximately 3.11 years. As of September 30, 2014, the Company had $4,514 of total unrecognized compensation expense related to stock options, net of estimated forfeitures, which will be recognized over a weighted average period of 2.25 years. As permitted by ASC 718, the Company has deferred the recognition of its excess tax benefit from non-qualified stock option exercises. |