iRobot 2014 Annual Report Download - page 129

iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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employment status would qualify them for the tax treatment associated with incentive stock options in accordance with the
Internal Revenue Code of 1986, as amended. As of December 27, 2014, there were 4,762,446 shares available for future grant
under the 2005 Plan.
Options granted under the Plans are subject to terms and conditions as determined by the compensation committee of the
board of directors, including vesting periods. Options granted under the Plans are exercisable in full at any time subsequent to
vesting, generally vest over periods from one to five years , and expire seven or ten years from the date of grant or, if earlier, 60
or 90 days from employee termination. The exercise price of incentive stock options is typically equal to the closing price on
the NASDAQ Global Market on the date of grant. The exercise price of nonstatutory options may be set at a price other than the
fair market value of the common stock.
In conjunction with the acquisition of Evolution Robotics, Inc. on October 1, 2012, each outstanding and unvested
incentive stock option held by Evolution employees as of the acquisition date was automatically converted into stock options of
the Company under the same terms and conditions as were applicable to the original Evolution grants. The number of
replacement options granted and the associated exercise prices were determined utilizing a conversion ratio as defined in the
merger agreement. There were 114,248 incentive stock options issued by the Company as a result of this automatic conversion
with exercise prices ranging from $2.55 to $4.81. All of these options were granted from the 2007 Plan, which was assumed by
the Company as a result of the acquisition.
The Company recognized $4.1 million of stock-based compensation expense during the fiscal year ended December 27,
2014 for stock options. The unamortized fair value as of December 27, 2014 associated with these grants was $6.6 million with
a weighted-average remaining recognition period of 2.47 years. The Company expects to recognize associated stock-based
compensation expense of $2.9 million, $2.2 million, $1.1 million and $0.4 million in 2015, 2016, 2017 and 2018, respectively.
The fair value of each option grant for the fiscal years ended December 27, 2014, December 28, 2013 and December 29,
2012 was computed on the grant date using the Black-Scholes option-pricing model with the following assumptions:
Fiscal Year Ended
December 27,
2014 December 28, 2013 December 29, 2012
Risk-free interest rate 1.65% — 1.69% 0.90% — 1.77% 0.63% — 0.90%
Expected dividend yield — — —
Expected life 3.91 — 4.00 years 4.03 — 4.21 years 4.12 — 4.18 years
Expected volatility 52.8% — 56.0% 54.0% — 58.0% 63.0% — 64.0%
The risk-free interest rate is derived from the average U.S. Treasury constant maturity rate, which approximates the rate in
effect at the time of grant, commensurate with the expected life of the instrument. The dividend yield is zero based upon the
fact the Company has never paid and has no present intention to pay cash dividends. The Company utilizes company specific
historical data for purposes of establishing expected volatility and expected term.
Based upon the above assumptions, the weighted average fair value of each stock option granted for the fiscal years
ended December 27, 2014, December 28, 2013 and December 29, 2012 was $15.87, $11.17 and $13.23, respectively.
Form 10-K