9. Stock-Based Compensation

Under our 2007 Stock Incentive Plan, or the Option Plan, we may grant options to purchase shares of common stock to employees, executives, directors and consultants at exercise prices not less than the fair market value at date of grant for incentive stock options and not less than 85% of the fair market value at the date of grant for non-statutory options. During the second quarter, the Board of Directors increased the total number of options under the Option Plan by 1.8 million for a total of 15,859,948 options. The options granted through September 30, 2013 are stock options that generally expire ten years from the date of grant and generally vest 25% twelve months from the date of grant, and ratably over the next 12 quarters thereafter, provided the grantee remains continuously employed by the Company through each vesting date (“service-based options”); however, the Board of Directors retains the authority to grant options with different terms.

We did not grant any service-based options in the three months ended September 30, 2013. For the nine months ended September 30, 2013, we granted service-based stock options to purchase 1,566,750 shares of common stock with a weighted average exercise price of $5.81 per share, a weighted average grant date fair value of $8.95 per share and a total estimated fair value of approximately $21.9 million.

We used the Black-Scholes option pricing model to estimate the fair value of stock options granted with the following assumptions:


	Nine Months Ended September 30, 2013
Assumed forfeiture rate (annual %)		5.0	%
Expected dividend yield		0.0	%
Assumed stock price volatility		63.5	%
Weighted average risk-free rate		1.10	%
Expected life (years)		6.25

Options activity under the Option Plan for the nine month period ended September 30, 2013 is summarized as follows:


	Stock Options Issued and Outstanding			Weighted Average Exercise Price
Balances, at December 31, 2012		10,255,222		$	1.19
Options Granted		1,566,750			5.81
Options Exercised		(2,100,402	)		0.73
Options Forfeited/Expired		(232,689	)		2.03

Balances, September 30, 2013		9,488,881		$	2.03

A summary of outstanding options, options vested and options vested and expected to vest as of September 30, 2013, is as follows:


	Stock Options Issued and Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
Options Outstanding		9,488,881		8.25	$	2.03
Options Vested		3,125,677		7.21	$	0.76
Options Vested and Expected to Vest		9,089,708		8.22	$	1.98

A summary by weighted average exercise price of outstanding options, options vested, and options vested and expected to vest at September 30, 2013, is as follows:


Exercise Price Range	Stock Options Outstanding		Weighted Average Remaining Contractual Life of Outstanding Stock Options (Years)		Number of Stock Options Vested		Number of Stock Options Vested and Expected to Vest
$0.01 - $1.00		5,152,706		7.40		2,724,812		5,049,203
$1.01 - $5.00		3,187,925		9.13		388,654		2,989,216
$5.01 - $10.00		1,148,250		9.62		12,211		1,051,289

$0.01 - $10.00		9,488,881		8.25		3,125,677		9,089,708

We recognized $1.9 million and $0.3 million of stock-based compensation expense related to stock options for the three months ended September 30, 2013 and 2012, respectively. We recognized $3.3 million and $0.8 million of stock-based compensation expense related to stock options for the nine months ended September 30, 2013 and 2012, respectively. As of September 30, 2013, total unrecognized compensation cost was $15.9 million and these costs are expected to be recognized over the next 3.2 years.

No net income tax benefit has been recognized relating to stock-based compensation expense and no tax benefits have been realized from exercised stock options.