Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation

Stock-Based Compensation

9. STOCK-BASED COMPENSATION

Stock Options and Awards

The Company's equity incentive program is a long-term retention program that is intended to attract, retain, and provide incentives for talented employees, consultants, officers, and directors and to align stockholder and employee interests. The Company may grant options, stock appreciation rights, restricted stock, restricted stock units ("RSUs"), performance shares, performance units, and other stock-based or cash-based awards to employees, officers, directors, and consultants. Under these programs, stock options may be granted at prices not less than the fair market value on the date of grant for stock options. These options generally vest over 4 years and expire from 5 to 10 years from the date of grant. Restricted stock generally vests over one year. RSUs generally vest over 3 years. On June 3, 2011, the Company's stockholders approved the 2011 Equity Incentive Plan in which 2,300,000 shares were authorized. In addition, 400,000 shares were transferred from the Company's 2007 Equity Incentive Plan (the "2007 Plan") and 2,279,263 shares were transferred from the Company's 2008 Equity Incentive Plan (the "2008 Plan") for a total of 4,979,263 available for grant under the new plan. The 2007 Plan and 2008 Plan have been terminated.

	June 30, 2011
Common stock shares available for grant		4,979,263
Common stock options outstanding		3,819,922
Restricted stock awards outstanding		18,000
Restricted stock units outstanding		502,782

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan ("ESPP"). Under the ESPP, eligible employees may purchase common stock through payroll deductions at a purchase price of 85% of the lower of the fair market value of the Company's stock at the beginning of the offering period or the purchase date. Participants may not purchase more than 2,000 shares in a six-month offering period or purchase stock having a value greater than $25,000 in any calendar year as measured at the beginning of the offering period. A total of 1,000,000 shares of common stock are reserved for issuance under the ESPP. As of June 30, 2011, 441,601 shares had been purchased since the inception of the ESPP in 1999. Under ASC 718-10, the ESPP is considered a compensatory plan and the Company is required to recognize compensation cost related to the fair value of common stock purchased under the ESPP. Shares purchased under the ESPP for the six months ended June 30, 2011 are listed below. No shares were purchased under the ESPP for the six months ended June 30, 2010. The intrinsic value listed below is calculated as the difference between the market value on the date of purchase and the purchase price of the shares.

	Six Months Ended June 30, 2011
Shares purchased under ESPP		13,412
Average price of shares purchased under ESPP	$	4.87
Intrinsic value of shares purchased under ESPP	$	14,000

Summary of Stock Options

The following table sets forth the summary of option activity under the Company's stock option plans for the six months ended June 30, 2011 and year ended December 31, 2010:

	Six Months Ended June 30, 2011			Year Ended December 31, 2010
Beginning outstanding balance		4,000,526			5,041,235
Granted		269,413			662,185
Exercised		(348,226	)		(130,135	)
Forfeited and cancelled		(101,791	)		(1,572,759	)
Ending outstanding balance		3,819,922			4,000,526
Aggregate intrinsic value of options exercised	$	887,000		$	308,000
Weighted average fair value of options granted		3.95			3.11

Information regarding stock options outstanding at June 30, 2011 and December 31, 2010 is summarized below:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value (In millions)
June 30, 2011
Options outstanding		3,819,922	$	6.31		6.44	$	10.3
Options vested and expected to vest using estimated forfeiture rates		3,681,156		6.32		6.28		9.9
Options exercisable		2,502,994		6.81		5.28		6.0
December 31, 2010
Options outstanding		4,000,526	$	6.26		6.39	$	5.5
Options vested and expected to vest using estimated forfeiture rates		3,798,092		6.32		6.25		5.1
Options exercisable		2,541,701		6.80		5.03		2.9

Summary of Restricted Stock Units

RSU activity for the six months ended June 30, 2011 and year ended December 31, 2010 was as follows:

	Six Months Ended June 30, 2011			Year Ended December 31, 2010
Beginning outstanding balance		417,923			198,055
Awarded		243,408			363,928
Released		(149,218	)		(69,021	)
Forfeited		(9,331	)		(75,039	)
Ending outstanding balance		502,782			417,923
Weighted average grant date fair value of RSUs granted	$	6.61		$	5.58
Total fair value of RSUs released		1,097,677			315,000
Total fair value of RSUs remaining unvested		4,289,000			2,804,000

Information regarding RSUs outstanding at June 30, 2011 and December 31, 2010 is summarized below:

	Number of Shares		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value (In millions)
June 30, 2011
RSUs outstanding		502,782		1.42	$	4.3
RSUs vested and expected to vest using estimated forfeiture rates		395,280		1.37		3.4
December 31, 2010
RSUs outstanding		417,923		1.13	$	2.8
RSUs vested and expected to vest using estimated forfeiture rates		330,038		1.00		2.2

Summary of Restricted Stock Awards

Restricted stock award activity for the six months ended June 30, 2011 and year ended December 31, 2010 was as follows:

	Six Months Ended June 30, 2011			Year Ended December  31, 2010
Beginning outstanding balance		18,000			27,000
Awarded		30,000			22,500
Released		(21,000	)		(31,500	)
Forfeited		(9,000	)		0
Ending outstanding balance		18,000			18,000
Weighted average grant date fair value of restricted stock awarded	$	6.61		$	5.59
Total fair value of restricted stock awards released		159,000			147,000

Stock Plan Assumptions

The assumptions used to value option grants under the Company's Stock Plans were as follows:

	Three Months Ended June  30,						Six Months Ended June 30,
Options	2011			2010			2011			2010
Expected life (in years)		5.2			5.2			5.2			5.2
Volatility		68	%		67	%		68	%		67	%
Interest rate		2.0	%		2.1	%		2.0	%		2.1	%
Dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
	Three Months Ended June 30,						Six Months Ended June 30,
Employee Stock Purchase Plan	2011			2010			2011			2010
Expected life (in years)		N/A			N/A			0.5			N/A
Volatility		N/A			N/A			50	%		N/A
Interest rate		N/A			N/A			0.2	%		N/A
Dividend yield		N/A			N/A			0.0	%		N/A

Compensation Costs

Total stock-based compensation recognized in the condensed consolidated statements of operations is as follows:

		000000		000000		000000		000000
	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands)				(In thousands)
Statement of Operations Classifications
Cost of product sales	$	0	$	0	$	0	$	10
Sales and marketing		70		226		245		392
Research and development		233		202		437		397
General and administrative		678		510		1,083		734
Total	$	981	$	938	$	1,765	$	1,533

As of June 30, 2011, there was $6.4 million related to stock options, restricted stock awards, and RSUs of unrecognized compensation cost, adjusted for estimated forfeitures, granted to the Company's employees and directors. This cost will be recognized over an estimated weighted-average period of approximately 2.52 years for options, 2.11 years for RSUs, and 0.70 years for restricted stock awards. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

Stock Repurchase Program

On November 1, 2007, the Company announced that its board of directors authorized the repurchase of up to $50 million of the Company's common stock. The Company may repurchase its stock for cash in the open market in accordance with applicable securities laws. The timing of and amount of any stock repurchase will depend on share price, corporate and regulatory requirements, economic and market conditions, and other factors. The stock repurchase authorization has no expiration date, does not require the Company to repurchase a specific number of shares, and may be modified, suspended, or discontinued at any time. During the three and six months ended June 30, 2011 and 2010, there were no stock repurchases under this program, but the program currently remains available. In July 2011, our Board approved a proposal to repurchase some of our shares of common stock under the previously authorized Stock Repurchase Program which currently has $31.6 million remaining.