Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Deficit

v2.3.0.15
Stockholders' Deficit
9 Months Ended
Sep. 30, 2011
Stockholders' Deficit [Abstract]  
Stockholders' Deficit

10. Stockholders' Deficit

In 2002, we adopted the 2002 Stock Plan (the "2002 Plan"), under which our board of directors may issue incentive stock options, non-statutory stock options (options that do not qualify as incentive stock options) and restricted stock to our employees, officers, directors or consultants. In March, 2010, our board of directors and stockholders approved the 2010 Equity Incentive Award Plan (the "2010 Plan"), which became effective upon the completion of our IPO in April 2010. A total of 1,100,000 shares of common stock were initially reserved for future issuance under the 2010 Plan and any shares of common stock reserved for future grant or issuance under our 2002 Plan that remained unissued at the time of completion of the IPO became available for future grant or issuance under the 2010 Plan. In addition, the shares reserved for issuance pursuant to the exercise of any outstanding awards under the 2002 Plan that expire unexercised will also become available for future issuance under the 2010 Plan. The 2010 Plan also provides for automatic annual increases in the number of shares reserved for future issuance, and during the nine months ended September 30, 2011 an additional 1,393,142 shares were reserved under the 2010 plan as a result of this provision. As of September 30, 2011, we had a total of 9,961,440 shares of common stock reserved for issuance under our 2010 Plan and no shares available for issuance under the 2002 Plan.

We granted 18,468 and 578,267 restricted stock units ("RSU") during the three and nine months ended September 30, 2011. The RSUs vest over four years with 25% of the RSUs vesting on each annual anniversary. The fair value of the RSUs was calculated based on the NASDAQ quoted stock price on the date of the grant with the expense recognized over the vesting period. For the three and nine months ended September 30, 2011, we recorded $321,000 and $818,000, respectively of stock compensation expense related to the RSUs.

During the three and nine months ended September 30, 2011, we issued 76,902 and 1,119,487 common shares for stock options exercised, respectively.

Stock-Based Compensation Expense

We estimate the fair value of stock-based awards granted to employees and directors using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions to determine the fair value of stock-based awards, including the expected life of the option and expected volatility of the underlying stock over the expected life of the related grants. Since we were not a publically traded entity prior to April 2010, company-specific historical volatility data is not available. As a result, we estimate the expected volatility based on the historical volatility of a group of unrelated public companies within our industry. We will continue to consistently apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available. Due to our limited history of grant activity, the expected life of options granted to employees is calculated using the "simplified method" permitted by the SEC as the average of the total contractual term of the option and its vesting period. The risk-free rate assumption was based on U.S. Treasury instruments whose terms were consistent with the terms of our stock options. The expected dividend assumption was based on our history and expectation of dividend payouts.

 

The following table presents total stock-based compensation expense included in the condensed consolidated statements of operations (in thousands):

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2011      2010      2011      2010  

Research and development

     955         984         2,756         2,555   

Sales, general and administrative

     1,581         1,531         4,637         3,911   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,536       $ 2,515       $ 7,393       $ 6,466