11. Share-Based Compensation

9 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

11. Share-Based Compensation

Equity Plans

The Company’s board of directors and stockholders approved the following equity plans:

· the 1998 Share Incentive Plan

· the 2000 Share Incentive Plan

· the 2004 Share Incentive Plan

· the 2006 Share Incentive Plan

· the 2013 Equity Incentive Plan (“2013 Plan”)

The Company issues stock options, restricted stock awards (“RSAs”) and restricted units (“RSUs”) to employees, consultants and non-employee directors. Stock option awards generally vest over a four year period and have a maximum term of ten years. Stock options under these plans have been granted with an exercise price equal to the fair market value on the date of the grant. Nonqualified and Incentive Stock Options, RSAs and RSUs may be granted from these plans. Prior to the Company’s initial public offering, the fair market value of the Company’s stock had been historically determined by the board of directors and from time to time with the assistance of third party valuation specialists.

Stock Options

Options have been granted to the Company’s employees under the five incentive plans and generally become exercisable as to 25% of the shares on the first anniversary date following the date of grant and 12.5% on a semi-annual basis thereafter. All options expire ten years after the date of grant.

The following is a summary of option activity:

	Number of shares (in thousands)			Weighted Average Exercise Price		Weighted Average Share Price on Date of Exercise		Weighted Average Fair Value		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding, December 31, 2014		1,423			8.96				4.48		–		3,486
Exercised		(68	)		7.13	$	15.99		2.75		–		604
Cancelled/Forfeited		(26	)		9.39				5.01		–		135
Outstanding, September 30, 2015		1,329		$	9.04			$	4.55		7.408	$	12,938
Exercisable, September 30, 2015		775		$	8.52			$	4.05		7.091	$	7,954
Vested and expected to vest		1,283		$	9.00			$	4.53		7.389	$	12,537

As of September 30, 2015, there was approximately $2.5 million of unrecognized stock option expense, net of estimated forfeitures, which is expected to be recognized over 1.89 years.

Restricted Stock Units/Awards

The following is a summary of RSU/RSA activity:

	Number of shares (in thousands)			Weighted Average Share Price on Date of Exercise		Weighted Average Fair Value		Aggregate Intrinsic Value
Outstanding at December 31, 2014		21					18.22		238
Granted		147					10.50		1,542
Exercised/Released		(19	)	$	13.51		18.24		251
Cancelled/Forfeited		(5	)				10.16		86
Outstanding at September 30, 2015		144				$	10.65	$	2,711
Exercisable, September 30, 2015		6				$	19.45	$	106
Vested and expected to vest		139				$	10.67	$	2,620

The table above includes 57,600 RSA’s granted on January 30, 2015 and issued on March 5, 2015.

As of September 30, 2015, there was $1.2 million of unrecognized compensation expense related to these RSU’s and RSA’s. This expense is expected to be recognized over 2.9 years.

Share-Based Compensation

Employee share-based compensation expenses recognized for the periods indicated (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Share-Based compensation - by expense type
Cost of sales	$	17	$	7	$	52	$	60
Research and development		55		28		165		84
Sales and marketing		58		24		162		72
General and administrative		387		428		1,188		1,278
	$	517	$	487	$	1,567	$	1,494
	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Share-Based compensation - by award type
Employee stock options	$	388	$	405	$	1,152	$	1,238
Restricted stock units/awards		129		82		415		240
Warrants		–		–		–		16
	$	517	$	487	$	1,567	$	1,494