Quarterly report pursuant to Section 13 or 15(d)

Stock Option and Incentive Plans

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Stock Option and Incentive Plans
6 Months Ended
Jun. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Option and Incentive Plans

10. Stock Option and Incentive Plans

Amended and Restated 2008 Equity Incentive Plan

In July 2008, the Company adopted the 2008 Equity Incentive Plan (the “Plan”). The Plan allows for the granting of non-qualified stock options, restricted stock, stock appreciation rights and other performance awards to the Company’s employees, members of the board of directors and consultants of the Company.

Upon the original adoption of the Plan, the number of shares of common stock reserved pursuant to the Plan was 214,285. On December 12, 2011, the Plan was amended to increase the number of shares of common stock available under the Plan to 900,000. On February 24, 2014, the board of directors increased the number of shares of common stock available under the Plan to 1,857,142. On April 29, 2014, the board of directors increased the number of shares of common stock available under the Plan to 2,357,142. The Company expects no further grants to be made under the Plan.

2014 Omnibus Incentive Plan

In April 2014, the Company’s board of directors adopted the 2014 Omnibus Incentive Plan (the “2014 Plan”). The 2014 Plan was approved by the Company’s stockholders on July 3, 2014. The 2014 Plan allows for the granting of incentive and non-qualified stock options, restricted stock and stock unit awards, stock appreciation rights and other performance-based awards to the Company’s employees, members of the board of directors and consultants of the Company. On July 28, 2014, the effective date of the 2014 Plan, the number of shares of common stock reserved pursuant to the 2014 Plan was 571,429. The 2014 Plan provides for an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ended December 31, 2014 and continuing until the expiration of the 2014 Plan, equal to the lesser of (i) 4% of the outstanding shares of common stock on such date or (ii) an amount determined by the Company’s board of directors. Consistent with the provision for an annual increase, an additional 808,690 shares of common stock have been reserved under the 2014 Plan.

 

The Company recognized compensation expense for share-based compensation based on the fair value of the underlying instrument. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. A summary of stock option activity for the six months ended June 30, 2015, is summarized as follows:

 

     Number of
Options
     Weighted
Average
Exercise Price
     Weighted
Average Remaining
Contractual Life

(in years)
     Aggregate
Intrinsic Value
 

Options outstanding at December 31, 2014

     3,089,327       $ 4.95         

Granted

     1,100,050         4.75         

Exercised

     (75,197      3.50         

Forfeited

     (37,858      3.61         
  

 

 

          

Options outstanding at June 30, 2015

     4,076,322         4.93         7.71       $ 3,854,130   
  

 

 

          

 

 

 

Vested and exercisable at June 30, 2015

     2,620,985         5.14         6.78       $ 2,815,048   
  

 

 

          

 

 

 

Of the option grants outstanding to purchase 4,076,322 shares of common stock, grants to purchase 682,154 shares of common stock were issued and are outstanding outside the Company’s incentive plans.

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. The weighted average grant date fair value of options granted during the three and six months ended June 30, 2015 and 2014 was $4.99, $4.75, $4.27 and $4.27, respectively. Total compensation expense recognized amounted to $579,921, $945,650, $226,337 and $381,176 for the three and six months ended June 30, 2015 and 2014, respectively. As of June 30, 2015, the total remaining unrecognized compensation cost related to unvested stock options was $3,202,553 which will be recognized over a weighted average period of approximately 2.57 years.

The following assumptions were used to compute the fair value of stock option grants:

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2015     2014     2015     2014  

Risk free interest rate

     1.54     2.02     1.59     1.99

Expected dividend yield

     —         —         —         —    

Expected term (in years)

     5.27        5.75        5.72        5.75   

Expected volatility

     74.1     77.7     73.8     77.0

Expected volatility—The Company estimated the expected volatility based on an average of the volatility of similar companies with publicly-traded equity securities. The companies were selected based on their enterprise value, risk profiles, position within the industry, and with historical information sufficient to meet the expected term of the associated award.

Expected term—The Company based expected term on the midpoint of the vesting period and the contractual term of each respective option grant.

Risk-free interest rate—The Company estimated the risk-free interest rate in reference to yield on U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award.

Expected dividend yield—The Company estimated the expected dividend yield based on consideration of its historical dividend experience and future dividend expectations. The Company has not historically declared or paid dividends to common stockholders. Moreover, it does not intend to pay dividends in the future, but instead expects to retain any earnings to invest in its continued growth.