Shareholders' Equity

9 Months Ended

Sep. 30, 2011

Shareholders' Equity [Abstract]

Shareholders' Equity

5. Shareholders' Equity

Stock Options

We have a stock plan (the "Stock Plan") and an inducement stock plan for newly hired employees (the "Inducement Plan") (together the "Plans"). Under the Plans, stock options may be granted with a fixed exercise price that is equivalent to fair market value on the date of grant. These options have a term of up to 10 years and vest over a predetermined period, generally four years. Incentive stock options granted under the Stock Plan may only be granted to our employees. The Stock Plan also allows for awards of non-qualified stock options, stock appreciation rights, RSAs and unrestricted stock awards, and RSUs. The Stock Plan allows for an automatic annual increase in the number of shares reserved for issuance under the Stock Plan. Such automatic annual increase is in an amount equal to the lesser of: (i) four percent of our outstanding shares at the end of the previous fiscal year, (ii) an amount determined by our Board of Directors, or (iii) 375,000 shares. The Inducement Plan was established during the three months ended September 30, 2011 in connection with the MPC acquisition. The Inducement Plan may only be used to grant non-qualified stock option awards to new employees. Initially, 250,000 shares were allocated for award under the Inducement Plan. The number of shares available for award may be modified by our Board of Directors, subject to SEC and NASDAQ limitations.

Stock-Based Compensation

The estimated fair value of stock-based awards is recognized as compensation expense over the vesting period of the award, net of estimated forfeitures. We estimate forfeitures based on historical experience and expected future activity. The fair values of RSAs and RSUs are determined based on the number of shares granted and the quoted price of our common stock on the date of grant, less our estimation of future forfeitures. The fair value of stock option awards is estimated at the grant date based on the fair value of each vesting tranche as calculated by the Black-Scholes-Merton ("BSM") option-pricing model. The BSM model requires various highly judgmental assumptions including expected volatility and option life. If any of the assumptions used in the BSM model change significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period. The fair values of our equity awards, primarily stock option grants, were estimated with the following weighted average assumptions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Dividend yield		0	%		0	%		0	%		0	%
Expected life		4 years			4 years			4 years			4 years
Expected volatility		73	%		73	%		74	%		72	%
Risk-free interest rate		0.8	%		1.2	%		1.2	%		1.6	%

The impact on our results of operations of recording stock-based compensation expense for the three and nine months ended September 30, 2011 and 2010 was as follows (in thousands, except per share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Cost of revenue — service	$	184	$	78	$	560	$	197
Selling, general and administrative		346		187		1,000		327
Research and development		48		11		125		30
Total stock-based compensation expense	$	578	$	276	$	1,685	$	554
Per diluted share	$	0.05	$	0.03	$	0.14	$	0.05

Stock Option Activity

The following table summarizes stock option activity for the nine months ended September 30, 2011:

Stock Options	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Balance at January 1, 2011		1,942,723		$	3.66
Granted at fair value		423,215			7.93
Exercised		(172,867	)		2.84
Forfeited		(35,910	)		3.32
Expired		(114,682	)		6.02
Balance at September 30, 2011		2,042,479		$	4.49		4.63	$	1,999,000
Vested and expected to vest at September 30, 2011		1,935,135		$	4.39		4.53	$	1,939,000
Exercisable at September 30, 2011		1,393,341		$	3.87		3.78	$	1,542,000

At September 30, 2011, total compensation cost related to stock options granted to employees but not yet recognized was $1,130,000, net of estimated forfeitures. This cost will be amortized on the straight-line method over a weighted-average period of approximately 1.62 years.

The following table summarizes certain information about stock options for the three and nine months ended September 30, 2011 and 2010:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Weighted-average grant-date fair value of option grants for the period	$	3.67	$	1.89	$	4.52		1.71
Options in-the-money at period end		1,040,047		874,328		1,040,047		874,328
Aggregate intrinsic value	$	119,000	$	20,000	$	871,000	$	26,000

The aggregate intrinsic value represents the difference between the exercise price of the underlying options and the quoted price of our common stock for the number of options that were in-the-money at period end or that were exercised during the period. We issue new shares of common stock upon exercise of stock options.

Restricted Stock Award Activity

The following table summarizes RSA activity for the nine months ended September 30, 2011:

	Number of Shares			Weighted Average Grant-Date Fair Value Per Share
Unvested at December 31, 2010		42,000		$	3.38
Granted		30,000			6.58
Vested		(36,000	)		3.26
Forfeited		—			—
Unvested at September 30, 2011		36,000		$	6.17
Expected to vest after September 30, 2011		32,400		$	6.47

At September 30, 2011, total compensation cost related to RSAs granted but not yet recognized was $100,000, net of estimated forfeitures. This cost will be amortized on the straight-line method over a period of approximately 0.5 years. Currently, only non-employee members of our Board of Directors receive restricted RSAs. Compensation for non-employee Directors has been modified such that future equity compensation will be issued through RSUs.

Restricted Stock Unit Activity

The following table summarizes RSU activity for the nine months ended September 30, 2011:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2010		346,776		$	4.47
Granted		146,966			5.88
Vested		(108,901	)		3.21
Forfeited		(29,760	)		4.75
Unvested at September 30, 2011		355,081		$	5.34
Expected to vest after September 30, 2011		321,289		$	5.33

At September 30, 2011, total compensation cost related to RSUs granted but not yet recognized was $1.0 million, net of estimated forfeitures. This cost will be amortized on the straight-line method over a period of approximately 2.0 year.

Common Stock Reserved for Future Issuance

The following table summarizes our shares of common stock reserved for future issuance at September 30, 2011:

	September 30, 2011
Stock options outstanding		2,042,479
Restricted stock units outstanding		355,081
Stock options available for future grant		590,830
Common stock reserved for future issuance		2,988,390