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Stock-Based Compensation
9 Months Ended
Sep. 30, 2013
Stock-Based Compensation  
Stock-Based Compensation

(6) Stock-Based Compensation

 

The Company’s 2006 Stock Plan provides for the grant of incentive stock options, nonstatutory stock options and non-vested (“restricted”) stock to employees, officers, directors and consultants of the Company. In January 2013, the number of shares of common stock reserved for issuance under the 2006 Stock Plan was increased from 7,700,000 to 9,000,000 pursuant to an “evergreen” provision, which provides for an annual increase based on the lesser of 1,300,000 shares, 5% of the Company’s then outstanding shares of common stock, or such other amount as the board of directors may determine. This increase was approved by the board of directors in December 2012. The administration of the 2006 Stock Plan is under the general supervision of the compensation committee of the board of directors. The exercise price of the stock options is determined by the compensation committee of the board of directors, provided that incentive stock options are granted at not less than fair market value of the common stock on the date of grant and expire no later than ten years from the date the option is granted. Options generally vest over four years. As of September 30, 2013, the Company had options outstanding to purchase 6,736,209 shares of its common stock, which includes options outstanding under its 2001 Stock Plan that was terminated in March 2006, and had 42,500 restricted shares of common stock outstanding. As of September 30, 2013, 1,628,225 shares were available for future issuance.

 

The following table summarizes stock option activity during the nine months ended September 30, 2013:

 

 

 

Shares

 

Weighted average
exercise price

 

Outstanding at January 1

 

5,521,584

 

$

6.40

 

Options granted

 

1,801,079

 

9.53

 

Options exercised

 

(132,991

)

8.14

 

Options cancelled

 

(453,463

)

9.88

 

Outstanding at September 30

 

6,736,209

 

$

6.97

 

Exercisable at September 30

 

3,662,767

 

$

6.61

 

 

The total cash received by the Company as a result of stock option exercises during the nine months ended September 30, 2013 and 2012 was $1.1 million and $0.9 million, respectively. In January 2013, a director of the Company exercised a total of 114,250 stock options that resulted in approximately $990,000 in cash proceeds to the Company. The weighted-average grant date fair values of options granted during the three months ended September 30, 2013 and 2012 were $4.21 and $6.00, respectively, and during the nine months ended September 30, 2013 and 2012 were $7.65 and $4.04, respectively.

 

Non-Vested (“Restricted”) Stock Awards With Service Conditions

 

The Company’s share-based compensation plan provides for awards of restricted shares of common stock to employees, officers, directors and consultants to the Company. Restricted stock awards are subject to forfeiture if employment or service terminates during the prescribed retention period. Restricted shares vest over the service period. The total fair value of restricted stock that vested during the nine months ended September 30, 2013 and 2012 was $0.2 million and $0.4 million, respectively.

 

The following table summarizes unvested restricted share activity during the nine months ended September 30, 2013:

 

 

 

Shares

 

Weighted
average
grant date
fair value

 

Outstanding at January 1

 

35,122

 

$

5.04

 

Vested

 

(32,622

)

5.33

 

Granted

 

115,000

 

7.99

 

Forfeited

 

(75,000

)

9.59

 

Outstanding at September 30

 

42,500

 

$

4.78

 

 

Stock-Based Compensation Expense

 

For the three months and nine months ended September 30, 2013 and 2012, the fair value of each employee stock option award was estimated on the date of grant based on the fair value method using the Black-Scholes option pricing valuation model with the following weighted average assumptions:

 

 

 

Three Months
Ended September 30,

 

Nine Months
Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Risk-free interest rate

 

1.74

%

0.92

%

1.12

%

1.11

%

Expected life in years

 

6.25

 

6.23

 

6.25

 

6.24

 

Volatility

 

103

%

102

%

102

%

101

%

Expected dividend yield

 

 

 

 

 

 

Stock-based compensation expense during the three months and nine months ended September 30, 2013 and 2012 was as follows (in thousands):

 

 

 

Three Months
Ended September 30,

 

Nine Months
Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Stock-based compensation expense by type of award:

 

 

 

 

 

 

 

 

 

Employee stock options

 

$

1,620

 

$

765

 

$

4,276

 

$

2,222

 

Restricted stock

 

63

 

36

 

214

 

137

 

Total stock-based compensation expense

 

$

1,683

 

$

801

 

$

4,490

 

$

2,359

 

 

 

 

 

 

 

 

 

 

 

Effect of stock-based compensation expense by line item:

 

 

 

 

 

 

 

 

 

Research and development

 

$

902

 

$

612

 

$

2,363

 

$

1,797

 

General and administrative

 

781

 

189

 

2,127

 

562

 

Total stock-based compensation expense included in net loss

 

$

1,683

 

$

801

 

$

4,490

 

$

2,359

 

 

Unrecognized stock-based compensation expense as of September 30, 2013 was as follows (dollars in thousands):

 

 

 

Unrecognized
stock
compensation
expense as of
September 30,
2013

 

Weighted
average
remaining
period
(in years)

 

Employee stock options

 

$

14,125

 

2.85

 

Restricted stock

 

159

 

.72

 

Total

 

$

14,284

 

2.83