Stock Option and Incentive Plans
|9 Months Ended|
Sep. 30, 2014
|Disclosure of Compensation Related Costs, Share-based Payments [Abstract]|
|Stock Option and Incentive Plans||
9. 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. Originally, upon 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 26, 2013, the board of directors approved an amended and restated plan (the “Amended Plan”) to increase the number of shares of common stock available under the Amended Plan to 1,571,428 and to reduce the period that exercisable awards remain exercisable upon termination of service from ten years to two years. The board of directors also approved an option exchange offer (the “Exchange Offer”) for eligible option holders with outstanding options with an exercise price in excess of $3.50 per share. The offering period for the Exchange Offer commenced on March 11, 2013 and expired on April 9, 2013. Participation in the Exchange Offer was voluntary. Options to purchase 647,521 shares of the Company’s common stock, held by a total of 26 participants, including 20 employees, were exchanged under the tender offer. The exchanged option grants were granted at an exercise price of $3.50 per share. The Company recorded expense associated with the modification with an immediate charge for the vested portion of option grants exchanged and additional charges as the remaining unvested portions become vested.
On February 24, 2014, the board of directors increased the number of shares of common stock available under the Company’s Amended Plan to 1,857,142.
On April 29, 2014, the board of directors increased the number of shares of common stock available under the Company’s Amended Plan to 2,357,142 and approved grants to purchase a total of 559,285 shares of the Company’s common stock.
As of the Company’s prospectus dated July 28, 2014, filed with the SEC on July 29, 2014 pursuant to Rule 424(b)(1) under the Securities Act, related to the Company’s IPO, the Company expects no further grants to be made under the Amended 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 shareholders 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 ending December 31, 2015 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.
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 nine months ended September 30, 2014, is summarized as follows:
Of the option grants outstanding to purchase 2,843,995 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 following table summarizes information regarding all stock options outstanding and exercisable at September 30, 2014:
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 nine months ended September 30, 2014 and 2013 was $4.27 and $3.50, respectively. Total compensation expense recognized amounted to $1,249,124, $248,789, $1,630,300 and $1,063,709 for the three and nine months ended September 30, 2014 and 2013, respectively. As of September 30, 2014, the total remaining unrecognized compensation cost related to unvested stock options was $1,762,160 which will be recognized over a weighted average period of approximately 2.34 years.
The following assumptions were used to compute the fair value of stock option grants:
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.
The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.
Reference 1: http://www.xbrl.org/2003/role/presentationRef