Share-Based Compensation

9 Months Ended

Sep. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

5. Share-Based Compensation

Employee Share-Based Awards

Compensation cost for employee share-based awards is based on the grant-date fair value and is recognized over the vesting period of the applicable award on a straight-line basis. We issue employee share-based awards in the form of stock options and restricted stock units under our equity incentive plans, and stock purchase rights under the ESPP.

Valuation of Stock Options, Stock Purchase Rights and Restricted Stock Units

During the three and nine months ended September 30, 2014 and 2013, the per share weighted average fair value of employee stock options granted were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Stock options	$	2.55	$	3.43	$	3.13	$	3.46
Restricted stock units		—		—		—		4.67
Stock purchase rights		1.04		1.41		1.48		1.53

The estimated grant date fair values of the stock options and stock purchase rights were calculated using the Black-Scholes valuation model, and the following weighted average assumptions:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Stock Option Plans
Expected term		5.0 years			5.0 years			5.0 years			5.0 years
Expected volatility		82	%		98	%		84	%		100	%
Risk-free interest rate		1.74	%		1.47	%		1.62	%		0.83	%
Dividend yield		0	%		0	%		0	%		0	%

Employee Stock Purchase Plan
Expected term		0.5 years			0.5 years			0.5 years			0.5 years
Expected volatility		36	%		63	%		61	%		70	%
Risk-free interest rate		0.10	%		0.12	%		0.67	%		0.13	%
Dividend yield		0	%		0	%		0	%		0	%

The estimated fair value of restricted stock unit awards is calculated based on the market price of our common stock on the date of grant, reduced by the present value of dividends expected to be paid on our common stock prior to vesting of the restricted stock unit. Our estimate assumes no dividends will be paid prior to the vesting of the restricted stock unit.

As of September 30, 2014, there was $4,627,000, $1,191,000, and $11,000 of total unrecognized compensation expense related to unvested stock option awards, unvested restricted stock units and stock purchase rights, respectively, which are expected to be recognized over a weighted average period of 2.7 years, 2.2 years, and 0.1 years, respectively.

Share-based compensation capitalized at September 30, 2014 was not material.

- Definition

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.

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