STOCKHOLDERS’ EQUITY

Preferred Stock

The Company has 2,000,000 shares of undesignated preferred stock authorized for future issuance. Shares of preferred stock may be issued from time to time in one or more series with rights, preferences and privileges established by the Company's board of directors.

Common Stock

The Company's certificate of incorporation provides for two classes of common stock: Class A common stock and Class B common stock. Each holder of Class A common stock is entitled to one vote per share and each holder of Class B common stock is entitled to ten votes per share. Each share of Class B common stock may be converted into one share of Class A common stock at the option of its holder and are automatically converted upon transfer to Class A common stock, subject to certain limited exceptions. The Company's authorized Class A and Class B common stock consists of 775,000,000 shares, all with a par value of $0.0001 per share. In November 2013, the Company completed its initial public offering ("IPO") in which it issued and sold 7,334,125 shares of Class A common stock at a public offering price of $22.00 per share and the selling stockholders sold 5,890,875 shares of Class A common stock. The Company did not receive any proceeds from the sale of shares by the selling stockholders.

Restricted Common Stock

As of June 29, 2014, all 52,812,500 Class B common shares under restricted stock purchase agreements entered into with the Company's founders have fully vested. No amount of compensation expense has been recognized in connection with these shares, as they were deemed to have nominal value at the date of issuance.

Stock-Based Compensation Expense

A summary of option activity under the Company's equity compensation plans during the six months ended June 29, 2014 is presented below:



					Weighted
					Average
	Number of		Weighted		Remaining
	Shares		Average		Contractual	Total
	Underlying		Exercise		Term	Intrinsic
	Options		Price		(in Years)	Value

	(in thousands, except price, shares and years)
Outstanding at December 29, 2013	13,938,487		$	7.40	8.56	$	462,558
Granted	521,650		42.60
Exercised	(1,454,437	)	1.05
Canceled	(4,147	)	6.89
Forfeited	(266,111	)	12.26
Outstanding at June 29, 2014	12,735,442		$	9.47	8.30	$	374,453
Vested and expected to vest at June 29, 2014	12,445,248		$	9.30	8.38	$	367,820
Exercisable at June 29, 2014	9,005,173		$	7.37	8.36	$	282,126

During the fiscal year ended January 1, 2012, the Company issued 1,439,627 Class B common shares for the exercise of stock options. Of this amount, 473,958 Class B common shares were early exercised and are subject to repurchase in accordance with the provision of the 2009 plan. The unvested portion of the early exercised shares as of June 29, 2014 and December 29, 2013, was 7,163 and 63,151, respectively. No repurchases of the early exercised Class B common shares have been made by the Company.

As of June 29, 2014, total unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock options was approximately $54.8 million and the weighted-average remaining vesting period was 4.99 years.

The Company also grants restricted stock unit ("RSU") awards to its employees and non-employee consultants under the provisions of its 2013 Equity Plan. The fair value of an RSU is generally based on the number of awards granted and the closing price of the Company's Class A common stock on the NASDAQ Global Select Market on the date of grant or measurement. An RSU award entitles the holder to receive shares of the Company's Class A common stock as the award vests, which is generally based on length of service. The Company's unvested RSUs do not have nonforfeitable rights to dividends or dividend equivalents.

A summary of RSU activity under the Company's 2013 Equity Plan during the six months ended June 29, 2014 is presented below:



	Number of		Weighted
	Shares		Average
	Underlying		Grant Date
	RSUs		Fair Value

Outstanding at December 29, 2013	—		$	—
Granted	101,773		36.41
Vested	(675	)	34.36
Forfeited	(399	)	33.00
Outstanding at June 29, 2014	100,699		$	36.43
Vested and expected to vest at June 29, 2014	82,983		$	36.42

As of June 29, 2014, total unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs was approximately $3.0 million and the weighted-average remaining vesting period was 4.90 years.

The following table presents the effects of stock-based compensation on the condensed consolidated statements of operations during the periods presented:



	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013

	(in thousands)
Cost of sales	$	51	$	13	$	73	$	27
Marketing expenses	145		68		308		132
Selling, general and administrative expenses	3,461		1,621		6,450		2,441
Total stock-based compensation expense	$	3,657	$	1,702	$	6,831	$	2,600