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. The 2007 Plan was amended and restated in 2013 (the “Amended 2007 Plan”) to, among other things, increase the aggregate number of shares of common stock authorized for issuance under the plan by 7,200 shares. In April 2015, the Company’s Board of Directors approved, and in June 2015, the Company’s stockholders approved, the Second Amended and Restated 2007 Equity Incentive Plan (the “Second Amended 2007 Plan”). The Second Amended 2007 Plan includes an increase of 13,000 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 1.32 shares (previously this fungible ratio was 1.39 shares under the Amended 2007 Plan). As of June 30, 2015, 11,529 shares were available for future grants under the Second 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 June 30, 2015, 1,112 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 June 30, 2015, 158 shares of common stock were reserved for future grants under the Inducement Plan. Share-Based Awards Available for Grant The calculation of share-based awards available for grant under the Second Amended 2007 Plan and 2008 Equity Inducement Plan for the six months ended June 30, 2015 is as follows: Shares Available Balances at December 31, 2014 Increase in authorized shares Share-based awards granted (1) Share-based awards canceled (2) Balances at June 30, 2015 (1) Under the terms of the Amended 2007 Plan, RSUs granted on or after June 6, 2013 but before June 4, 2015 reduced the number of shares available for grant by 1.39 shares for each share subject to an RSU award. Under the terms of the Second Amended 2007 Plan, RSUs granted on or after June 4, 2015 reduce the number of shares available for grant by 1.32 shares for each share subject to an RSU award. (1) Under the terms of the Amended 2007 Plan, RSUs forfeited and returned to the pool of shares available for grant that were granted on or after June 6, 2013 but before June 4, 2015 increase the pool by 1.39 shares for each share subject to an RSU that is forfeited. RSUs forfeited and returned to the pool of shares available for grant that were granted on or after June 4, 2015 increase the pool by 1.32 shares for each share subject to an RSU that is forfeited. RSU Activity A summary of the Company’s RSU activity for the six months ended June 30, 2015, is as follows: Weighted Number of Average Units Grant Date Outstanding Fair Value Awarded and unvested, December 31, 2014 $ Granted Vested Forfeited Awarded and unvested, June 30, 2015 $ Restricted stock units expected to vest, June 30, 2015 Stock Option Activity The following table summarizes the Company’s stock option activity for the six months ended June 30, 2015: Options Outstanding Weighted Weighted Number Average Average Aggregate of Exercise Contractual Intrinsic Shares Price Term (Years) Value Balances at December 31, 2014 Options granted Options canceled Options exercised Balances at June 30, 2015 $ $ Options vested and expected to vest at June 30, 2015 $ $ Options exercisable at June 30, 2015 $ $ 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 $ 6.21 per share as of June 30, 2015 (the last trading day in the quarter). Consolidated net cash proceeds from option exercises were $ 3,605 and $4,699 for the six months ended June 30, 2015 and 2014, respectively. The Company realized $63 and $77 of income tax benefit from stock option exercises during the three and six months ended June 30, 2015, and zero income tax benefit from stock option exercises during the three and six months ended June 30, 2014. 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. 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. Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Dividend yield — % — % — % — % Risk-free interest rate % % % % Expected volatility Expected term (years) 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 six months ended June 30, 2015 and 2014 was $ 2.66 and $1.53 per share, respectively. The Company calculated employee stock-based compensation expense recognized for the three and six months ended June 30, 2015 and 2014 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. During 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”). 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 year ended December 31, 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 stock-price-based vesting conditions. 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. The following table summarizes the consolidated stock-based compensation expense by line items in the unaudited condensed consolidated statement of operations: Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Research and development $ $ $ $ Sales and marketing General and administrative Total stock-based compensation expense $ $ $ $ The above table includes compensation expense attributable to the consideration during the three and six months ended June 30, 2014 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 were 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 through June 30, 2014. 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 8 for further details. The Company recorded no stock-based compensation expense related to this contingent consideration during the three and six months ended June 30, 2015. During the three and six months ended June 30, 2014, the Company recorded $2,894 and $4,559 of stock-based compensation income and expense, respectively, related to this contingent consideration. As of June 30, 2015, the Company had $23,565 of total unrecognized compensation expense related to RSUs, net of estimated forfeitures. As of June 30, 2015, the Company had $ 4,082 of total unrecognized compensation expense related to stock options, net of estimated forfeitures. The unrecognized compensation expense related to RSUs will be recognized over a weighted average period of 3.04 years. The unrecognized compensation expense related to stock options will be recognized over a weighted average period of 2. 07 years . |