Stock-based Compensation

9 Months Ended

Sep. 30, 2011

Stock-based Compensation [Abstract]

Stock-based Compensation

7. Stock-based Compensation

Stock Options

     The Company’s 2005 Stock Incentive Plan (the “2005 Plan”) provided for granting of incentive stock options, non- qualified stock options, restricted stock, or other awards to the Company’s employees, officers, directors, and outside consultants up to an aggregate of 3,601,551 shares of the Company’s common stock. In conjunction with the effectiveness of the 2011 Equity Award Plan (the “2011 Plan”), the Board of Directors voted that no further stock options or other equity-based awards would be granted under the 2005 Plan.

     In July 2011, the Company’s Board of Directors and stockholders adopted the 2011 Plan, which became effective concurrently with the consummation of the Company’s IPO on August 11, 2011. The 2011 Plan provides for the issuance of stock options, restricted stock, and other stock-based awards to the employees, officers, directors, and consultants of the Company or its subsidiaries. In connection with the approval of the 2011 Plan, the Company reserved 1,662,000 shares of common stock for issuance under the 2011 Plan. On January 1^st of each year, beginning on January 1, 2012, the number of shares reserved under the 2011 Plan will increase by the lesser of 1,500,000 shares, 4.0% of the outstanding shares of common stock and common stock equivalents, or another amount determined by the Company’s Board of Directors.

     As of September 30, 2011, 1,662,000 shares of common stock were available for future grant under the 2011 Plan.

     Stock options granted to employees generally vest over a four-year period, and expire ten years from the date of grant. Certain option awards provide for accelerated vesting if there is a change of control, as defined in the 2005 Plan or 2011 Plan, as applicable.

     The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options. The determination of the fair value of stock options awards on the date of grant using an option-pricing model is affected by the Company’s stock price, as well as a number of complex and subjective variables. These variables include the expected term of the awards, the Company’s expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate, and expected dividends.

Incentive Unit Agreements

     In April 2011, the Company’s Board of Directors authorized its subsidiary in China to enter into Incentive Unit Agreements pursuant to an Incentive Unit Plan (the “Unit Plan”) providing up to an aggregate of 60,000 incentive units (the “Units”) to certain employees of its subsidiary in China to afford these employees the benefit of any appreciation in the value of the Company. The Units have a five year term and vest upon the achievement of a performance condition, which was satisfied during the period, and a service period of up to four years. Upon vesting, the recipients of Units are entitled to a cash bonus based on the difference between the fair value of the Company’s common stock and the base value set forth in their respective Incentive Units Agreements. As of September 30, 2011, 38,000 Units are outstanding with weighted average base values of $7.80 and an additional 22,000 Units are available for grant under the Unit Plan.

Stock-based Compensation Expense

     Stock-based compensation is reflected in the consolidated statement of operations as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
Cost of revenues	$	55	$	16	$	142	$	45
Research and development		163		82		358		175
General and administrative		91		62		202		192
Sales and marketing		102		20		261		40
	$	411	$	180	$	963	$	452