Stock Options and Restricted Stock Awards

12 Months Ended

Jun. 30, 2012

Stock Options and Restricted Stock Awards [Abstract]

Stock Options and Restricted Stock Awards

7. Stock Options and Restricted Stock Awards

The Company has a 2007 Equity Incentive Plan (the “2007 Plan”), which was assumed from CSI-MN, under which options to purchase common stock and restricted stock awards have been granted to employees, directors and consultants at exercise prices determined by the board of directors; and also in connection with the merger the Company assumed options and restricted stock awards granted by CSI-MN under its 1991 Stock Option Plan (the “1991 Plan”) and 2003 Stock Option Plan (the “2003 Plan”) (the 2007 Plan, the 1991 Plan and the 2003 Plan collectively, the “Plans”). The 1991 Plan and 2003 Plan permitted the granting of incentive stock options and nonqualified options. A total of 485,250 shares of common stock were originally reserved for issuance under the 1991 Plan, but with the approval of the 2003 Plan no additional options were granted under it. A total of 2,458,600 shares of common stock were originally reserved for issuance under the 2003 Plan, but with the approval of the 2007 Plan no additional options will be granted under it.

The 2007 Plan originally allowed for the granting of up to 1,941,000 shares of common stock as approved by the board of directors in the form of nonqualified or incentive stock options, restricted stock awards, restricted stock unit awards, performance share awards, performance unit awards or stock appreciation rights to officers, directors, consultants and employees of the Company. The Plan was amended in February 2009 to increase the number of authorized shares to 2,509,969. Generally, options or shares granted under the 2007 Plan expire ten years from the date of grant and vest over three years. The amended 2007 Plan includes a renewal provision whereby the number of shares shall automatically be increased on the first day of each fiscal year ending on July 1, 2017, by the lesser of (i) 970,500 shares, (ii) 5% of the outstanding common shares on such date, or (iii) a lesser amount determined by the board of directors. On July 1, 2012, the number of shares available for grant was increased by 450,000 under the 2007 Plan renewal provision, which was 2.2% of shares outstanding at June 30, 2012.

The Company also maintains the 2006 Equity Incentive Plan (the “2006 Plan”), relating to Replidyne activity prior to the merger in February 2009. A total of 794,641 shares were originally reserved under the 2006 Plan, but effective with the merger no additional options will be granted under it. Generally, options granted under the 2006 Plan expire ten years from the date of grant and vested over four years. Vested options granted to employees terminated 90 days after termination.

All options granted under the Plans become exercisable over periods established at the date of grant. The option exercise price is generally not less than the estimated fair market value of the Company’s common stock at the date of grant, as determined by the Company’s management and board of directors. In addition, the Company has granted nonqualified stock options to a director outside of the Plans.

Stock option activity is as follows:

	Number of Options(a)			Weighted Average Exercise Price
Options outstanding at June 30, 2009		3,707,882		$	10.43
Granted		58,551		$	7.70
Exercised		(37,313	)	$	8.36
Forfeited or expired		(372,127	)	$	9.34
Options outstanding at June 30, 2010		3,356,993		$	10.49
Exercised		(180,702	)	$	8.60
Forfeited or expired		(105,292	)	$	12.32
Options outstanding at June 30, 2011		3,070,999		$	10.54
Exercised		(311,814	)	$	9.12
Forfeited or expired		(387,987	)	$	13.11
Options outstanding at June 30, 2012		2,371,198		$	10.31

(a) Includes the effect of options granted, exercised, forfeited or expired from the 1991 Plan, 2003 Plan, 2007 Plan, 2006 Plan and options granted outside the stock option plans described above.

Options outstanding and exercisable at June 30, 2012 were as follows:

	Options Outstanding				Options Exercisable
Exercise Price	Number of Outstanding Shares		Remaining Weighted Average Contractual Life (Years)		Number of Exercisable Shares		Remaining Weighted Average Contractual Life (Years)
$5.01		12,940		7.43		12,940		7.43
$7.90		352,488		5.10		352,488		5.10
$8.75		85,080		6.67		85,080		6.67
$8.83		823,919		4.40		823,919		4.40
$9.28		32,671		2.40		32,671		2.40
$11.38		70,055		5.38		70,055		5.38
$12.15		739,532		2.99		739,532		2.99
$12.37		138,781		3.30		138,781		3.30
$13.98		74,281		5.63		74,281		5.63
$14.00		4,000		0.50		4,000		0.50
$16.40		6,000		0.50		6,000		0.50
$18.55		31,451		3.75		31,451		3.75
		2,371,198		4.11		2,371,198		4.11

As of June 30, 2012, all options were fully vested. An employee’s vested options must be exercised at or within 90 days of termination to avoid forfeiture. The Company determined the fair value of options using the Black-Scholes option pricing model. The estimated fair value of options, including the effect of estimated forfeitures, was recognized as expense on a straight-line basis over the options’ vesting periods. There were no options granted during the years ended June 30, 2012 or 2011.

The aggregate intrinsic value of a stock option award is the amount by which the market value of the underlying stock exceeds the exercise price of the award. The aggregate intrinsic value for vested and outstanding options at June 30, 2012, 2011 and 2010 was $1,624, $12,712 and $0, respectively. The total aggregate intrinsic value of options exercised during the years ended June 30, 2012, 2011 and 2010 was $770, $736 and $30, respectively. Shares supporting option exercises are sourced from new share issuances.

The fair value of each restricted stock award was equal to the fair market value of the Company’s common stock at the date of grant. Vesting of restricted stock awards range from one to three years. The estimated fair value of restricted stock awards, including the effect of estimated forfeitures, is recognized on a straight-line basis over the restricted stock’s vesting period. Restricted stock award activity is as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Restricted stock awards outstanding at June 30, 2009		744,377		$	10.81
Granted		877,751		$	6.87
Forfeited		(187,441	)	$	8.48
Vested		(328,804	)	$	6.00
Restricted stock awards outstanding at June 30, 2010		1,105,883		$	7.69
Granted		804,159		$	6.08
Forfeited		(199,910	)	$	6.91
Vested		(511,925	)	$	7.68
Restricted stock awards outstanding at June 30, 2011		1,198,207		$	6.39
Granted		817,878		$	11.32
Forfeited		(253,810	)	$	7.80
Vested		(517,445	)	$	12.88
Restricted stock awards outstanding at June 30, 2012		1,244,830		$	9.08

Estimated pre-vesting forfeitures are considered in determining stock-based compensation expense. As of June 30, 2012, 2011 and 2010, the Company estimated its forfeiture rate at 11.6%, 10.7% and 9.4%, respectively. As of June 30, 2012, 2011 and 2010 the total compensation cost for non-vested awards not yet recognized in the consolidated statements of operations was $7,767, $5,128 and $4,226, respectively, net of the effect of estimated forfeitures. These amounts are expected to be recognized over a weighted-average period of 2.44, 2.27 and 1.02 years, respectively.

The Company grants restricted stock units to members of the Board of Directors. Restricted stock units represent the right to receive payment in the form of shares of the Company’s common stock or in cash at the Company’s option. Restricted stock unit payments would occur within 30 days following the six month anniversary of the date that the director ceases to serve on the Board. The estimated fair value of restricted stock awards is recognized on a straight-line basis over the vesting period. Restricted stock unit activity is as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Restricted stock units outstanding at June 30, 2009		42,238		$	8.75
Granted		93,024		$	8.60
Forfeited		(5,814	)	$	8.60
Restricted stock units outstanding at June 30, 2010		129,448		$	8.65
Granted		158,880		$	4.79
Converted to common stock		(28,212	)	$	7.09
Forfeited		(22,397	)	$	6.70
Restricted stock units outstanding at June 30, 2011		237,719		$	6.51
Granted		50,344		$	13.91
Forfeited		(3,596	)	$	13.91
Restricted stock units outstanding at June 30, 2012		284,467		$	7.67

The following amounts were recognized as stock-based compensation expense in the consolidated statements of operations for the year ended June 30, 2012:

	Restricted Stock Awards		Employee Stock Purchase Plan		Restricted Stock Units		Total
Cost of goods sold	$	256	$	40	$	0	$	296
Selling, general and administrative		3,105		621		669		4,395
Research and development		439		35		0		474
Total	$	3,800	$	696	$	669	$	5,165

The following amounts were recognized as stock-based compensation expense in the consolidated statements of operations for the year ended June 30, 2011:

	Stock Options		Restricted Stock Awards		Employee Stock Purchase Plan		Restricted Stock Units		Total
Cost of goods sold	$	97	$	200	$	15	$	0	$	312
Selling, general and administrative		1,175		3,384		298		712		5,569
Research and development		34		518		35		0		587
Total	$	1,306	$	4,102	$	348	$	712	$	6,468

The following amounts were recognized as stock-based compensation expense in the consolidated statements of operations for the year ended June 30, 2010:

	Stock Options		Restricted Stock  Awards		Employee Stock Purchase Plan		Restricted Stock  Units		Total
Cost of goods sold	$	323	$	205	$	20	$	0	$	548
Selling, general and administrative		3,405		3,382		378		107		7,272
Research and development		527		706		41		0		1,274
Total	$	4,255	$	4,293	$	439	$	107	$	9,094

The following summarizes shares available for grant under the Company’s various equity incentive plans:

	Shares Available for Grant(a)
Shares available for grant at June 30, 2009		84,838
Reserved		705,695
Granted		(936,302	)
Forfeited, expired or cancelled		255,942
Shares available for grant at June 30, 2010		110,173
Reserved		757,427
Granted		(1,092,500	)
Forfeited, expired or cancelled		275,623
Shares available for grant at June 30, 2011		50,723
Reserved		849,353
Granted		(868,222	)
Forfeited, expired or cancelled		581,447
Shares available for grant at June 30, 2012		613,301

(a) Excludes the effect of shares granted, exercised, forfeited or expired related to activity from shares granted outside the stock option plans described above. Excludes share forfeitures from grants not under the 2007 Plan.

Employee Stock Purchase Plan

The Company maintains an employee stock purchase plan (ESPP). The plan provides eligible employees the opportunity to acquire common stock in accordance with Section 423 of the Internal Revenue Code of 1986. Stock can be purchased each six-month period per year (twice per year). The purchase price is equal to 85% of the lower of the price at the beginning or the end of the respective period. The ESPP allows for an annual increase in reserved shares on each July 1 equal to the lesser of (i) one percent of the common shares outstanding, or (ii)180,000 shares, provided that the Board of Directors may designate a smaller amount of shares to be reserved. On July 1, 2012, 180,000 shares were added to the plan. Employees purchased 170,000 shares at an average price of $8.34 per share during the year ended June 30, 2012. Shares reserved under the plan for the year ending June 30, 2013 totaled 180,709.