Share-Based Compensation | 12 Months Ended |
Dec. 31, 2013 |
Share-Based Compensation [Abstract] | ' |
Share-Based Compensation | ' |
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8. SHARE-BASED COMPENSATION |
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We did not capitalize any expense related to share-based payments. The following table presents share-based compensation expense included in our statements of comprehensive loss for the years ended December 31, 2013, 2012, and 2011, respectively: |
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| Year ended December 31, | | | | | | |
| 2013 | | 2012 | | 2011 | | | | | | |
Research and development expense | $ | 1,594,603 | | $ | 765,126 | | $ | 706,734 | | | | | | |
Sales and marketing expense | | 327,199 | | | 207,125 | | | 121,384 | | | | | | |
General and administrative expense | | 5,009,636 | | | 2,581,163 | | | 609,056 | | | | | | |
Total share-based expense | $ | 6,931,438 | | $ | 3,553,414 | | $ | 1,437,174 | | | | | | |
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As of December 31, 2013, there was $4,131,257 of total unrecognized compensation cost, net of estimated forfeitures, related to all non-vested share-based compensation awards. That cost is expected to be recognized over a weighted-average period of 1.1 years. |
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Stock Incentive Plans |
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2000 Performance Equity Plan |
We adopted a performance equity plan in July 2000 (the “2000 Plan”). The 2000 Plan provides for the grant of options and other stock awards to employees, directors and consultants, not to exceed 5,000,000 shares of common stock. The 2000 Plan provides for benefits in the form of nonqualified stock options, stock appreciation rights, restricted share awards, stock bonuses and various stock benefits or cash. Prior to July 2010, the 2000 Plan also provided for awards of incentive stock options. Forfeited and expired options under the 2000 Plan become available for reissuance. The plan provides that no participant may be granted awards in excess of 1,000,000 shares in any calendar year. At December 31, 2013, 631,134 shares of common stock were available for future grants. |
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2008 Equity Incentive Plan |
We adopted an equity incentive plan in August 2008 (the “2008 Plan”). The 2008 Plan provides for the grant of stock-based awards to employees (excluding named executives), directors and consultants, not to exceed 500,000 shares of common stock. The 2008 Plan provides for benefits in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted share awards, and other stock based awards. Forfeited and expired options under the 2008 Plan become available for reissuance. The plan provides that no participant may be granted awards in excess of 50,000 shares in any calendar year. At December 31, 2013, 8,315 shares of common stock were available for future grants. |
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2011 Long-Term Incentive Equity Plan |
We adopted a long-term incentive equity plan in September 2011 (the “2011 Plan”). The 2011 Plan provides for the grant of stock-based awards to employees, officers, directors and consultants, not to exceed 5,000,000 shares of common stock. The Plan provides for benefits in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted share awards, and other stock based awards. Forfeited and expired options under the 2011 Plan become available for reissuance. The plan provides that no participant may be granted awards in excess of 1,500,000 shares in any calendar year. At December 31, 2013, 7,000 shares of common stock were available for future grants. |
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Restricted Stock Awards |
RSAs are issued as executive and employee incentive compensation and as payment for services to others. The value of the award is based on the closing price of our common stock on the date of grant. RSAs are generally immediately vested. We had no unvested RSAs at December 31, 2013, 2012, or 2011 and no RSAs were forfeited during 2013, 2012, or 2011. |
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Restricted Stock Units |
RSUs are issued as incentive compensation to executives, employees, and non-employee directors as well as payment for services to consultants. Each RSU represents a right to one share of our common stock, upon vesting. The RSUs are not entitled to voting rights or dividends, if any, until vested. RSUs generally vest over a three year period for employee awards, a one year period for non-employee director awards and the life of the related service contract for third-party awards. The fair value of RSUs is generally based on the closing price of our common stock on the date of grant and is amortized to share-based compensation expense over the estimated life of the award, generally the vesting period. In the case of RSUs issued to consultants, the fair value is recognized based on the closing price of our common stock on each vesting date. |
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Plan-Based RSAs and RSU |
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The following table presents a summary of RSA and RSU activity under the 2000, 2008, and 2011 Plans (collectively, the “Stock Plans”) as of December 31, 2013: |
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| Non-vested Shares | | | | | | | | | | |
| Shares | | Weighted-Average Grant-Date Fair Value | | | | | | | | | | |
Non-vested at beginning of year | 953,842 | | $ | 2.67 | | | | | | | | | | |
Granted | 259,290 | | | 3.99 | | | | | | | | | | |
Vested | -214,082 | | | 3.22 | | | | | | | | | | |
Forfeited | 0 | | | 0 | | | | | | | | | | |
Non-vested at end of year | 999,050 | | $ | 2.90 | | | | | | | | | | |
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The total fair value of RSAs and RSUs vested under the Stock Plans for the year ended December 31, 2013 is $871,417. |
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Non-Plan RSUs |
RSUs granted outside the Stock Plans represent awards issued as payment for services to consultants. The shares underlying these non-plan RSUs are unregistered. |
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| Non-vested Shares | | | | | | | | | | |
| Shares | | Weighted-Average Grant-Date Fair Value | | | | | | | | | | |
Non-vested at beginning of year | 480,000 | | $ | 0.99 | | | | | | | | | | |
Granted | 900,000 | | | 3.90 | | | | | | | | | | |
Vested | -496,666 | | | 1.09 | | | | | | | | | | |
Forfeited | 0 | | | 0 | | | | | | | | | | |
Non-vested at end of year | 883,334 | | $ | 3.90 | | | | | | | | | | |
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Non-plan RSUs include 150,000 RSUs granted to consultants in November 2013 that vest over a six month period beginning December 31, 2013. Non-plan RSUs also include 750,000 RSUs granted in November 2013 to these same consultants as performance incentives. These RSUs vest only upon achievement of certain market conditions, as measured based on the closing price of our common stock during a period ending on the earlier of (i) December 31, 2015 or (ii) thirty days following termination of the related consulting agreement. Upon thirty days’ notice, the consulting agreements may be terminated and any unvested portion of the RSUs will be cancelled. |
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Compensation cost related to the vesting of non-plan RSUs was approximately $1,912,000, $960,000, and $29,000 for the periods ended December 31, 2013, 2012, and 2011 respectively, and is included in general and administrative expense in the table of share-based compensation expense shown above. |
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Stock Options and Warrants |
Stock options are issued as incentive compensation to executives, employees, and non-employee directors as well as payment for services to consultants. In addition, we have granted warrants to investors in connection with securities offerings (see Note 9). Stock options and warrants are generally granted with exercise prices at or above fair market value of the underlying shares at the date of grant. |
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Plan-Based Options |
Options for employees, including executives and non-employee directors, are generally granted under the Stock Plans. The following table presents a summary of option activity under the Stock Plans for the year ended December 31, 2013: |
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| Shares | | Weighted-Average Exercise Price | | Weighted-Average Remaining Contractual Term | | Aggregate Intrinsic Value ($) | | | | |
Outstanding at beginning of year | 7,514,697 | | $ | 3.26 | | | | | | | | | | |
Granted | 258,780 | | | 3.32 | | | | | | | | | | |
Exercised | -217,181 | | | 1.21 | | | | | | | | | | |
Forfeited | 0 | | | 0 | | | | | | | | | | |
Expired | -627,086 | | | 8.36 | | | | | | | | | | |
Outstanding at end of year | 6,929,210 | | | 2.87 | | 4.40 | years | | $ | 15,433,876 | | | | |
Exercisable at end of year | 4,780,057 | | $ | 3.24 | | 3.98 | years | | $ | 10,042,794 | | | | |
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The weighted average fair value of option shares granted during the years ended December 31, 2013, 2012, and 2011 was $2.53, $2.65, and $0.66, respectively. The total fair value of option shares vested during the years ended December 31, 2013, 2012, and 2011, was $3,285,859, $1,404,456, and $192,959, respectively. |
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The fair value of options granted under the Stock Plans is estimated using the Black-Scholes option pricing model. Generally, fair value is determined as of the grant date. In the case of option grants to third parties, the fair value is estimated at each interim reporting date until vested. |
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The fair value of option grants under the Stock Plans for the years ended December 31, 2013, 2012, and 2011 respectively, was estimated using the Black-Scholes option-pricing model with the following assumptions: |
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| Year ended December 31, | | | | | | | | | |
| 2013 | | 2012 | | 2011 | | | | | | | | | |
Expected option term 1 | 5 to 6 years | | 6 to 7 years | | 5 to 6 years | | | | | | | | | |
Expected volatility factor 2 | 97.9% to 103.7% | | 90.2% to 94.8% | | 92.0% to 97.7% | | | | | | | | | |
Risk-free interest rate 3 | 0.8% to 1.8% | | 0.8% to 1.0% | | 0.9% to 2.0% | | | | | | | | | |
Expected annual dividend yield | 0% | | 0% | | 0% | | | | | | | | | |
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1 The expected term was generally determined based on historical activity for grants with similar terms and for similar groups of employees and represents the period of time that options are expected to be outstanding. For employee options, groups of employees with similar historical exercise behavior are considered separately for valuation purposes. For consultants, the expected term was determined based on the contractual life of the award. |
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2 The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period equal to the expected option life of the grant. |
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3 The risk-free interest rate for periods equal to the expected term of the share option is based on the U.S. Treasury yield curve in effect at the measurement date. |
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The aggregate intrinsic value of plan-based options exercised during 2013, 2012, and 2011 was $648,433, $62,945, and $0, respectively. |
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Non-Plan Options and Warrants |
Options and warrants granted outside the Stock Plans represent options issued as payment for services to consultants and warrants issued in connection with offerings of securities. As of December 31, 2013, all outstanding non-plan options and warrants have been registered by us on a registration statement. The following table presents a summary of non-plan option and warrant activity for the year ended December 31, 2013: |
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| Shares | | Weighted-Average Exercise Price | | Weighted-Average Remaining Contractual Term | | Aggregate Intrinsic Value ($) | | | | |
Outstanding at beginning of year | 2,967,911 | | $ | 0.87 | | | | | | | | | | |
Granted | 0 | | | 0 | | | | | | | | | | |
Exercised | -1,008,394 | | | 0.99 | | | | | | | | | | |
Forfeited | 0 | | | 0 | | | | | | | | | | |
Expired | 0 | | | 0 | | | | | | | | | | |
Outstanding at end of year | 1,959,517 | | | 0.81 | | 1.96 | years | | $ | 7,336,710 | | | | |
Exercisable at end of year | 1,959,517 | | $ | 0.81 | | 1.96 | years | | $ | 7,336,710 | | | | |
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The aggregate fair value of non-plan options and warrants vested during the years ended December 31, 2013, 2012, and 2011 was $129,192, $166,668, and $470,383, respectively. |
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Non-plan options and warrants outstanding at December 31, 2013 and 2012 include warrants issued in connection with the sale of equity securities in various public and private placement transactions from 2009 to 2011 that represent 1,849,517 and 2,607,911 shares respectively (see Note 9). The estimated fair value of these warrants as of December 31, 2013 and 2012 are included in shareholders’ equity in the accompanying balance sheets. |
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The fair value of non-plan options and warrants for the years ended December 31, 2013, 2012, and 2011, respectively, was estimated using the Black-Scholes option-pricing model at each measurement date with the following assumptions: |
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| Year ended December 31, | | | | | | | | | |
| 2013 | | 2012 | | 2011 | | | | | | | | | |
Expected option term 1 | 4 to 5 years | | 4 to 6 years | | 4 to 5 years | | | | | | | | | |
Expected volatility factor 2 | 91.5% to 104% | | 93.4% to 104.3% | | 89.4% to 100.2% | | | | | | | | | |
Risk-free interest rate 3 | 0.5% to 1.0% | | 0.7% to 1.0% | | 0.9% to 2.4% | | | | | | | | | |
Expected annual dividend yield | 0% | | 0% | | 0% | | | | | | | | | |
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1 The expected term was determined based on the remaining contractual life of the award on the measurement date. |
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2 The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period equal to the expected life of the award. |
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3 The risk-free interest rate for periods equal to the expected term of the award is based on the U.S. Treasury yield curve in effect at the measurement date. |
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The aggregate intrinsic value of non-plan options and warrants exercised during 2013, 2012, and 2011 was $3,038,635, $3,831,971 and $232,269 respectively. |
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Options and Warrants by Price Range |
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The options and warrants outstanding at December 31, 2013 under all plans, including the non-plan options and warrants, have exercise price ranges, weighted average contractual lives, and weighted average exercise prices are as follows: |
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| | Options and Warrants Outstanding | | Options and Warrants Exercisable |
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Range of Exercise Prices | | Number Outstanding at December 31, 2013 | | Wtd. Avg. Exercise Price | | Wtd. Avg. Remaining Contractual Life | | Number Exercisable at December 31, 2013 | | Wtd. Avg. Exercise Price | | Wtd. Avg. Remaining Contractual Life |
$0.54 - $0.88 | | 1,960,208 | | $ | 0.59 | | 2.29 | | 1,925,030 | | $ | 0.59 | | 2.25 |
$0.89 - $1.88 | | 2,708,742 | | $ | 1.00 | | 4.54 | | 1,771,182 | | $ | 1.01 | | 4.35 |
$2.01 - $3.13 | | 3,019,371 | | $ | 2.81 | | 5.21 | | 1,972,987 | | $ | 2.84 | | 5.00 |
$3.15 - $5.40 | | 404,655 | | $ | 4.30 | | 2.98 | | 274,624 | | $ | 4.35 | | 1.14 |
$5.70 - $8.60 | | 337,470 | | $ | 6.74 | | 1.10 | | 337,470 | | $ | 6.74 | | 1.10 |
$9.06 - $26.75 | | 458,281 | | $ | 11.08 | | 0.58 | | 458,281 | | $ | 11.08 | | 0.58 |
| | 8,888,727 | | $ | 2.41 | | 3.87 | | 6,739,574 | | $ | 2.53 | | 3.39 |
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Upon exercise of options and warrants under all plans, we issue new shares of our common stock. For shares issued upon exercise of warrants or equity awards granted under the Stock Plans, the shares of common stock are registered. For shares issued upon exercise of non-plan RSU or option awards, the shares are not registered unless they have been subsequently registered by us on a registration statement. Cash received from option and warrant exercises for the years ended December 31, 2013, 2012, and 2011, was $1,147,380, $1,381,694, and $330,938, respectively. No tax benefit was realized for the tax deductions from exercise of the share-based payment arrangements for the years ended December 31, 2013, 2012, and 2011 as the benefits were fully offset by a valuation allowance (see Note 7). |
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