6. Equity Compensation

 

Stock Options

 

In 2003, the Board of Directors adopted the 2003 Equity Incentive Plan (the “2003 Plan”), which provided for the granting of nonqualified and incentive stock options, stock appreciation rights, stock awards and restricted stock. Under the 2003 Plan, the Company was able to grant nonqualified and incentive stock options to directors, employees and non-employees providing services to the Company. On June 11, 2013, the Company’s Board of Directors adopted the 2013 Stock Option and Incentive Plan (the “2013 Plan”), which was subsequently approved by the Company’s stockholders. The 2013 Plan became effective as of the closing of the Company’s initial public offering. To the extent that any awards outstanding under the 2003 Plan are forfeited or lapse unexercised subsequent to August 1, 2013, the shares of common stock subject to such awards will become available for issuance under the 2013 Plan. The 2013 Plan provides for annual increases in the number of reserved shares of up to 5% of the outstanding number of shares of the Company’s Common Stock as of the preceding December 31. On January 1, 2014, the number of reserved shares was increased by 1,139,255 shares in accordance with the provisions of the 2013 Plan.

 

A summary of stock option activity for the six months ended June 30, 2014 is presented below:

 

		Shares Subject to Options Outstanding		Weighted Average Grant Date Fair Value			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (Years)
Balance at December 31, 2013		4,905,214					$	6.31
Granted		838,878		$	11.72		20.68
Exercised		(997,960	)				4.25
Expired		(136	)				7.40
Forfeited		(48,189	)				16.69
Balance at June 30, 2014		4,697,807					9.18
Exercisable options at June 30, 2014		2,694,980					5.62			5.1
Vested and expected to vest at June 30, 2014		4,507,086					8.90			6.5

 

The following table summarizes information about stock options outstanding and exercisable at June 30, 2014:

 

		Options Outstanding							Options Exercisable
Range of Exercise Prices		Weighted Average Exercise Price			Number of Underlying Shares		Weighted- Average Remaining Contractual Life (in years)		Number of Underlying Shares		Weighted- Average Remaining Contractual Life (in years)
$0.52 - 1.72		$	0.98		52,971		1.2		52,971		1.2
1.97 — 3.38		2.43			410,623		1.9		410,623		1.9
3.58 — 6.14		5.54			1,897,260		5.5		1,600,058		5.2
6.34 — 9.94		8.27			1,062,937		7.8		527,829		7.6
11.28 — 16.97		11.99			442,984		7.9		101,799		6.6
17.66 — 22.92		21.01			831,032		9.6		1,700		9.1
					4,697,807				2,694,980

 

For the stock option awards vested during the three and six months ended June 30, 2014, the total fair value was $1.4 million and $2.4 million, respectively. The following table summarizes the aggregate intrinsic-value of options exercised, exercisable and vested and expected to vest (in thousands):

 

		For the six months ended and as of June 30, 2014
Options Exercised		$	16,907
Options Exercisable		37,576
Options Vested and Expected to Vest		49,142

 

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 

		Three Months Ended June 30,				Six Months Ended June 30,
		2013		2014		2013		2014
Expected volatility		56-59	%	59	%	56-59	%	56-60	%
Expected dividends		0	%	0	%	0	%	0	%
Expected terms (in years)		3.3-7.2		6.0-6.1		3.3-7.2		3.8-6.1
Risk-free rate		0.8-1.7	%	1.7-1.9	%	0.8-1.7	%	1.1-2.0	%

 

Total stock-based compensation expense has been classified as follows in the accompanying statements of operations (in thousands):

 

		Three Months Ended June 30,						Six Months Ended June 30,
		2013			2014			2013			2014
Cost of revenue		$	15		$	28		$	31		$	48
Research and development		319			642			555			1,120
Sales and marketing		172			292			356			514
General and administrative		364			446			766			973
Total stock-based compensation expense		$	870		$	1,408		$	1,708		$	2,655

 

At June 30, 2014, there was $16.0 million of total unrecognized compensation cost related to non-vested stock option awards that will be recognized over a weighted-average period of 3.1 years.