Stockholder's Equity

(a) Stock Equity and Incentive Plan

The Company adopted ASC Update No. 2016-09, Compensation- Stock Compensation (ASC Topic 718): Improvements to Employee Share-Based Payment Accounting on January 1, 2017. Although, this ASC update did not impact the Company’s results of operations, financial position or cash flows for any periods prior to the adoption, the adoption of this ASC update had the following impact on the date of adoption:

•

The adoption of ASC Update No. 2016-09 requires all income tax adjustments to be recorded in the consolidated statements of operations. The cumulative adjustment upon adoption to accumulated earnings was zero since the increase in net deferred tax assets was fully offset by a corresponding increase in the deferred tax asset valuation allowance. The amount of deferred tax assets that had not been previously recognized due to the recognition of excess tax benefits was $1,571.


•	The tax benefit or expense is required to be classified as a cash flow provided by (used in) operating activities. It was previously required to be presented as a cash flow provided by (used in) financing activities in the Consolidated Statements of Cash Flows, with a corresponding adjustment to operating cash flows.


•	In the diluted net earnings per share calculation, when applying the treasury stock method for shares that could be repurchased, the assumed proceeds no longer include the amount of excess tax benefit. This provision, which is only applicable on a prospective basis, did not have an impact on the Company's diluted net earnings per share calculation for the three months ended March 31, 2017.

•

The Company has elected to account for forfeitures on share-based payments as these forfeitures occur, which represents a change from the accounting previously required under ASC Topic 718. As a result, the Company notes that future forfeitures could result in a significant reversal of stock-based compensation expense recognized in the period in which such forfeitures occur. During the three months ended March 31, 2017, as a result of share-based award forfeitures, the Company recorded a reversal of previously recognized stock-based compensation expense of $5. In addition, had the Company continued to account for stock-based compensation expense related to forfeitures of share-based payments based on estimating the number of awards expected to be forfeited and recognizing only stock-based compensation expense on awards expected to vest, the Company would have recognized $927 of stock-based compensation expense, or $16 less than what was actually recorded during the three months ended March 31, 2017.

The Company recognizes stock-based compensation in accordance with the provisions of ASC Topic 718, Compensation--Stock Compensation. Stock-based compensation expense, excluding compensation charges related to our employee stock purchase plan, ESPP, was $943 and $1,040 for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, there was $2,022 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 3.24 years. As of March 31, 2017, there was $5,626 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 2.89 years.

Stock Options

During the three months ended March 31, 2017, 114 stock options were exercised for common stock, none of which was delivered to the Company as payment for the exercise price or related minimum tax withholding obligations. Additionally, during the three months ended March 31, 2017, 531 stock options were granted with a weighted average grant date fair value of $2.47, per share and 4 stock options were forfeited. The Company has estimated the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model. The weighted average assumptions utilized to determine the fair value of options granted during the three months ended March 31, 2017 were as follows:




	Three Months Ended March 31,
	2017		2016
Risk-free interest rate	1.96	%	1.43	%
Expected volatility	35.53	%	38.22	%
Expected life (in years)	4.22		4.17
Dividend yield	0	%	0	%

As of March 31, 2017, there were 1,048 options outstanding with a weighted average exercise price of $9.76 per share and 281 options exercisable with a weighted average exercise price of $12.14 per share.

Restricted Stock

During the three months ended March 31, 2017, 209 shares of restricted stock were granted with a weighted average grant date fair value of $8.31 per share and no shares of restricted stock were forfeited. Additionally, during the three months ended March 31, 2017, 233 shares of restricted stock vested, of which 43 shares of common stock were surrendered to the Company as payment by employees in lieu of cash to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock. As of March 31, 2017, there were 620 shares of restricted stock outstanding still subject to service-based vesting conditions.

As of March 31, 2017, the Company had no unvested outstanding options and no shares of restricted stock that were subject to performance-based or market-based vesting conditions.

(b) Employee Stock Purchase Plan

On June 15, 2016, at the Company's 2016 Annual Meeting of Stockholders, the stockholders of the Company also approved amendments to the Company's Amended and Restated 1996 Employee Stock Purchase Plan (ESPP) that, among other things, increased the number of shares of common stock reserved for issuance to a total of 1,650. As amended, the ESPP affords eligible employees the right to purchase common stock, via payroll deductions, through various offering periods at a purchase price equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. During the three months ended March 31, 2017 and 2016, no shares were issued under the ESPP plan. The Company recorded compensation charges of $17 and $13 for the three months ended March 31, 2017 and 2016, related to the ESPP.

The following presents stock-based compensation expense including ESPP in the Company's consolidated statements of operations for the three months ended March 31, 2017 and 2016:



	Three Months Ended March 31,
	2017		2016
Cost of product sales	$	82	$	90
Cost of service sales	—		1
Research and development	189		186
Sales, marketing and support	268		273
General and administrative	421		503
	$	960	$	1,053

(d) Accumulated Other Comprehensive Loss

Comprehensive income (loss) includes net earnings (loss), unrealized gains and losses from foreign currency translation, unrealized gains and losses from available for sale marketable securities and changes in fair value related to interest rate swap derivative instruments, net of tax attributes. The components of the Company’s comprehensive income (loss) and the effect on earnings for the periods presented are detailed in the accompanying consolidated statements of comprehensive income (loss).



	Foreign Currency Translation		Unrealized Gain (Loss) on Available for Sale Marketable Securities	Interest Rate Swaps		Total Accumulated Other Comprehensive Loss
Balance, December 31, 2016	(16,651	)	—	(158	)	(16,809	)
Other comprehensive (loss) income before reclassifications	601		—	5		606
Amounts reclassified from AOCI to Other income (expense), net (1)	—		—	22		22
Net other comprehensive (loss) income, March 31, 2017	601		—	27		628
Balance, March 31, 2017	(16,050	)	—	(131	)	(16,181	)



	Foreign Currency Translation			Unrealized Gain (Loss) on Available for Sale Marketable Securities		Interest Rate Swaps			Total Accumulated Other Comprehensive Loss
Balance, December 31, 2015	$	(7,363	)	$	1	$	(238	)	$	(7,600	)
Other comprehensive (loss) income before reclassifications	(676		)	—		(45		)	(721		)
Amounts reclassified from AOCI to Other income (expense), net (1)	—			—		25			25
Net other comprehensive (loss) income, March 31, 2016	(676		)	—		(20		)	(696		)
Balance, March 31, 2016	(8,039		)	1		(258		)	(8,296		)

(1) For additional information, see Note 4, "Marketable Securities," and see Note 17, "Derivative Instruments and Hedging Activities."