Stock Option and Compensation Plans

9 Months Ended

Sep. 30, 2013

Stock Option and Compensation Plans

Stock Option and Compensation Plans

7. Stock Option and Compensation Plans

The Company adopted its 2007 Stock Incentive Plan (the “2007 Plan”) for employees and consultants for the purpose of advancing the interests of the Company stockholders by enhancing its ability to attract, retain and motivate persons who are expected to make important contributions to the Company. The 2007 Plan provided for the granting of stock option awards, restricted stock awards, and other stock-based and cash-based awards. Following the effectiveness of the 2013 Stock Incentive Plan described below in connection with the closing of the Company’s initial public offering, the Company is no longer granting additional awards under the 2007 Plan.

During the nine months ended September, 30, 2013, the Company’s Board of Directors and stockholders increased the number of shares authorized under the 2007 Plan by 1,878,343 shares.

During the nine months ended September 30, 2013, the Company’s board of directors also adopted and the Company’s stockholders also approved the 2013 stock incentive plan (the “2013 Plan”), which became effective immediately prior to the closing of the Company’s initial public offering. The 2013 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other stock-based awards. Upon effectiveness of the 2013 Plan, the number of shares of the Company’s common stock that were reserved for issuance under the 2013 Plan was the sum of (1) such number of shares (up to approximately 3,359,641 shares) as is equal to the sum of 739,317 shares (the number of shares of the common stock then available for issuance under the 2007 Plan), and such number of shares of the Company’s common stock that are subject to outstanding awards under the 2007 Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right plus (2) an annual increase, to be added the first day of each fiscal year, beginning with the fiscal year ending December 31, 2014 and continuing until, and including, the fiscal year ending December 31, 2023, equal to the lowest of 2,542,372 shares of the Company’s common stock, 4% of the number of shares of the Company’s common stock outstanding on the first day of the fiscal year and an amount determined by our board of directors. The Company’s employees, officers, directors, consultants and advisors are eligible to receive awards under the 2013 Plan. However, incentive stock options may only be granted to employees of the Company.

As of September 30, 2013, the Company had approximately 2,620,000 stock options outstanding under the 2007 Plan and approximately 739,000 shares available for grant under the 2013 Plan.

The Company recognized share-based compensation of approximately $1.1 million for the three months ended September 30, 2013 and approximately $0.2 million during the three months ended September 30, 2012. The Company recognized share-based compensation of approximately $1.6 million for the nine months ended September 30, 2013 and approximately $0.3 million during the nine months ended September 30, 2012. As of September 30, 2013, there was approximately $11.6 million of total unrecognized share-based compensation expense that is expected to be recognized over a weighted average period of approximately 3.4 years.

The intrinsic value of the Company’s approximately 1,091,000 vested options as of September 30, 2013 was $30.8 million, based on a per share price of $29.71, the closing price of the Company’s stock at September 30, 2013, and a weighted average exercise price of $1.36 per share. The intrinsic value of the Company’s approximately 1,529,000 unvested options as of September 30, 2013 was $30.5 million, based on a per share price of $29.71, the closing price of the Company’s stock at September 30, 2013, and a weighted average exercise price of $9.76 per share.