Document And Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Feb. 29, 2012	Jun. 30, 2011
Entity Registrant Name	CUTERA INC
Entity Central Index Key	0001162461
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 92
Entity Common Stock, Shares Outstanding		13,954,178
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2011

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 14,020	$ 12,519
Marketable investments	74,666	77,484
Accounts receivable, net of allowance for doubtful accounts of $8 and $20, respectively	5,193	4,208
Inventories	10,729	6,448
Deferred tax asset	55	63
Other current assets and prepaid expenses	1,432	2,740
Total current assets	106,095	103,462
Property and equipment, net	853	597
Long-term investments	3,027	6,784
Intangibles, net	446	637
Deferred tax asset, net of current portion	446	325
Other long-term asset	486	0
Total assets	111,353	111,805
Current liabilities:
Accounts payable	2,573	1,296
Accrued liabilities	9,262	6,194
Deferred revenue	5,185	5,633
Total current liabilities	17,020	13,123
Deferred rent	1,448	1,501
Deferred revenue, net of current portion	840	1,287
Income tax liability	478	477
Total liabilities	19,786	16,388
Commitments and contingencies (Note 11)
Stockholders' equity:
Convertible preferred stock, $0.001 par value Authorized: 5,000,000 shares; none issued and outstanding	0	0
Common stock, $0.001 par value: Authorized: 50,000,000 shares; Issued and outstanding: 13,948,395 and 13,629,713 shares at December 31, 2011 and 2010, respectively	14	14
Additional paid-in capital	95,719	90,423
Retained earnings (accumulated deficit)	(3,325)	6,736
Accumulated other comprehensive loss	(841)	(1,756)
Total stockholders' equity	91,567	95,417
Total liabilities and stockholders' equity	$ 111,353	$ 111,805

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Current assets:
Accounts receivable, allowance for doubtful accounts	$ 8	$ 20
Stockholders' equity:
Convertible preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Convertible preferred stock, authorized (in shares)	5,000,000	5,000,000
Convertible preferred stock, issued (in shares)	0	0
Convertible preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	50,000,000	50,000,000
Common stock, issued (in shares)	13,948,395	13,629,713
Common stock, outstanding (in shares)	13,948,395	13,629,713

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Net revenue:
Products	$ 46,879	$ 40,043	$ 40,496
Service	13,411	13,231	13,186
Total net revenue	60,290	53,274	53,682
Cost of revenue:
Products	17,545	15,805	14,083
Service	8,433	7,253	7,676
Total cost of revenue	25,978	23,058	21,759
Gross profit	34,312	30,216	31,923
Operating expenses:
Sales and marketing	25,499	24,735	24,286
Research and development	9,141	7,004	6,810
General and administrative	10,104	9,576	10,320
Litigation settlement	0	0	850
Total operating expenses	44,744	41,315	42,266
Loss from operations	(10,432)	(11,099)	(10,343)
Interest and other income, net	614	583	1,572
Loss before income taxes	(9,818)	(10,516)	(8,771)
Provision for income taxes	243	2	8,908
Net loss	$ (10,061)	$ (10,518)	$ (17,679)
Net loss per share:
Basic and diluted (in dollars per share)	$ (0.73)	$ (0.78)	$ (1.33)
Weighted-average number of shares used in per share calculations:
Basic and diluted (in shares)	13,807	13,540	13,279

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (loss) [Member]
Balance at Dec. 31, 2008	$ 112,108	$ 13	$ 80,318	$ 31,410	$ 367
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock for employee purchase plan	326	0	326	0	0
Issuance of common stock for employee purchase plan (in shares)		59,365
Exercise of stock options	291	0	291	0	0
Exercise of stock options (in shares)		527,721
Issuance of common stock in settlement of restricted stock units, net of shares withheld for employee taxes, and stock awards	(32)	0	(32)	0	0
Issuance of common stock in settlement of restricted stock units, net of shares withheld for employee taxes, and stock awards (in shares)		43,042
Stock-based compensation expense	4,236	0	4,236	0	0
Tax benefit from exercises of stock-based payment awards	109	0	109	0	0
Change in accounting principle (see Note 1)	0	0	0	3,523	(3,523)
Components of other comprehensive loss:
Net loss	(17,679)	0	0	(17,679)	0
Other comprehensive income (loss)	1,494	0	0	0	1,494
Comprehensive loss	(16,185)	0	0	0	0
Balance at Dec. 31, 2009	100,853	13	85,248	17,254	(1,662)
Balance (in shares) at Dec. 31, 2009		13,436,163
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock for employee purchase plan	306	0	306	0	0
Issuance of common stock for employee purchase plan (in shares)		43,859
Exercise of stock options	338	1	337	0	0
Exercise of stock options (in shares)		90,362
Issuance of common stock in settlement of restricted stock units, net of shares withheld for employee taxes, and stock awards	(126)	0	(126)	0	0
Issuance of common stock in settlement of restricted stock units, net of shares withheld for employee taxes, and stock awards (in shares)		59,329
Stock-based compensation expense	4,650	0	4,650	0	0
Tax benefit from exercises of stock-based payment awards	8	0	8	0	0
Components of other comprehensive loss:
Net loss	(10,518)	0	0	(10,518)	0
Other comprehensive income (loss)	(94)	0	0	0	(94)
Comprehensive loss	(10,612)	0	0	0	0
Balance at Dec. 31, 2010	95,417	14	90,423	6,736	(1,756)
Balance (in shares) at Dec. 31, 2010	13,629,713	13,629,713
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock for employee purchase plan	276	0	276	0	0
Issuance of common stock for employee purchase plan (in shares)		45,161
Exercise of stock options	1,230	0	1,230	0	0
Exercise of stock options (in shares)		207,624
Issuance of common stock in settlement of restricted stock units, net of shares withheld for employee taxes, and stock awards	(146)	0	(146)	0	0
Issuance of common stock in settlement of restricted stock units, net of shares withheld for employee taxes, and stock awards (in shares)		65,897
Stock-based compensation expense	3,907	0	3,907	0	0
Tax benefit from exercises of stock-based payment awards	29	0	29	0	0
Components of other comprehensive loss:
Net loss	(10,061)	0	0	(10,061)	0
Other comprehensive income (loss)	915	0	0	0	915
Comprehensive loss	(9,146)	0	0	0	0
Balance at Dec. 31, 2011	$ 91,567	$ 14	$ 95,719	$ (3,325)	$ (841)
Balance (in shares) at Dec. 31, 2011	13,948,395	13,948,395

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash flows from operating activities:
Net loss	$ (10,061)	$ (10,518)	$ (17,679)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation	3,907	4,650	4,236
Tax benefit (deficit) from stock-based compensation	29	8	109
Excess tax benefit related to stock-based compensation	(22)	(8)	(23)
Depreciation and amortization	637	717	860
Provision for excess and obsolete inventories	0	235	611
Provision for doubtful accounts receivable	15	(122)	525
Change in deferred tax asset net of valuation allowance	(113)	(116)	10,512
Gain on sale of marketable and long term investments, net	(5)	(74)	(103)
Tax on unrealized gains on marketable and long term investments	197	0	0
Other	13	0	0
Changes in assets and liabilities:
Accounts receivable	(1,000)	(759)	1,940
Inventories	(4,281)	(275)	2,908
Other current assets and prepaid expenses	2,604	2,314	1,014
Other long-term assets	(486)	0	0
Accounts payable	1,277	215	(609)
Accrued liabilities	2,970	(2,646)	42
Deferred rent	45	(200)	(62)
Deferred revenue	(895)	(1,208)	(3,537)
Income tax liability	1	(272)	(703)
Net cash provided by (used in) operating activities	(5,168)	(8,059)	41
Cash flows from investing activities:
Acquisition of property and equipment	(751)	(275)	(154)
Disposal of property and equipment	36	0	0
Proceeds from sales of marketable and long-term investments	21,198	42,830	27,914
Proceeds from maturities of marketable investments	47,935	42,505	11,535
Purchase of marketable investments	(63,131)	(87,837)	(53,655)
Net cash provided by (used in) investing activities	5,287	(2,777)	(14,360)
Cash flows from financing activities:
Proceeds from exercise of stock options and employee stock purchase plan	1,360	518	585
Excess tax benefit related to stock-based compensation	22	8	23
Net cash provided by financing activities	1,382	526	608
Net increase (decrease) in cash and cash equivalents	1,501	(10,310)	(13,711)
Cash and cash equivalents at beginning of year	12,519	22,829	36,540
Cash and cash equivalents at end of year	14,020	12,519	22,829
Supplemental and non-cash disclosure of cash flow information:
Cash paid (received) for income taxes	$ (1,345)	$ 272	$ 578

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2011

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Operations and Principles of Consolidation

Cutera, Inc. (Cutera or the Company) is a global provider of laser and light-based aesthetic systems for practitioners worldwide. The Company designs, develops, manufactures, and markets the CoolGlide, Xeo, Solera, GenesisPlus and Excel V (introduced in 2011) product platforms for use by physicians and other qualified practitioners to allow its customers to offer safe and effective aesthetic treatments to their customers. Commencing in the fourth quarter ended December 31, 2011, the Company started distributing a Q-switched laser product called myQ in Japan, which is sourced from an original equipment manufacturer. The Xeo and Solera platforms offer multiple hand pieces and applications, which allow customers to upgrade their systems (Upgrade revenue). In addition to systems and upgrade revenue, the Company generates revenue from the sale of post warranty service contracts, providing services for products that are out of warranty, Titan hand piece refills, and distributing third party manufactured dermal fillers and cosmeceuticals.

Headquartered in Brisbane, California, the Company has wholly-owned subsidiaries in Australia, Canada, France, Japan, Spain, Switzerland and United Kingdom that market, sell and service its products outside of the United States. The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All inter-company transactions and balances have been eliminated.

Use of Estimates

The preparation of Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States of America (GAAP) requires the Company's management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, the Company evaluates their estimates, including those related to warranty obligation, sales commission, accounts receivable and sales allowances, fair values of long-term investments, fair values of acquired intangible assets, useful lives of intangible assets and property and equipment, fair values of options to purchase the Company's common stock, recoverability of deferred tax assets, and effective income tax rates, among others. Management bases their estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Cash, Cash Equivalents, Marketable Investments, and Long-Term Investments

The Company invests its cash primarily in money market funds and in highly liquid debt instruments of U.S. federal and municipal governments and their agencies, commercial paper and corporate debt securities. All highly liquid investments with stated maturities of three months or less from date of purchase are classified as cash equivalents; all highly liquid investments with stated maturities of greater than three months are classified as marketable investments. The majority of the Company's cash and investments are held in U.S. banks and its foreign subsidiaries maintain a limited amount of cash in their local banks to cover their short term operating expenses.

The Company determines the appropriate classification of its investments in marketable securities at the time of purchase and re-evaluates such designation at each balance sheet date. The Company's marketable securities have been classified and accounted for as available-for-sale. The Company may, or may not, hold securities with stated maturities greater than 12 months until maturity. In response to changes in the availability of and the yield on alternative investments as well as liquidity requirements, it occasionally sells these securities prior to their stated maturities. As these securities are viewed by the Company as available to support current operations, based on the provisions of the Financial Accounting Standards Board Accounting Standards Codification (ASC) topic 210, subtopic 10, securities with maturities beyond 12 months (such as variable rate demand notes) are classified as current assets under the caption marketable investments in the accompanying Consolidated Balance Sheets. These securities are carried at fair value, with the unrealized gains and losses reported as a component of stockholders' equity. Any realized gains or losses on the sale of marketable securities are determined on a specific identification method, and such gains and losses are reflected as a component of interest and other income, net.

The Company holds a variety of interest bearing auction rate securities (ARS) that represent investments in pools of student loan assets issued by the Federal Family Education Loan Program (FELP). At the time of acquisition, the majority of ARS investments were intended to provide liquidity via an auction process that resets the applicable interest rate at predetermined calendar intervals, allowing investors to either roll over their holdings or gain immediate liquidity by selling such interests at par. Since February 2008, uncertainties in the credit markets affected the majority of ARS investments and auctions for the Company's investments in these securities have failed to settle on their respective settlement dates. However, since 2009 $9.5 million of ARS were redeemed at full par value. Maturity dates for the ARS investments in the Company's portfolio range from 2032 to 2041.

As of December 31, 2011, the Company had $3.0 million of ARS classified as long-term investments. The Company has classified its ARS investment balance as long-term investments in the accompanying Consolidated Balance Sheet because of the Company's belief that it could take more than one year before they are readily marketable. The Company's ARS have been classified and accounted for as available-for-sale. These securities are carried at fair value with the unrealized gains and losses reported as a component of stockholders' equity. The estimated fair value of the Company's ARS investments was $3.0 million at December 31, 2011 and $6.8 million at December 31, 2010.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. Carrying amounts of the Company's financial instruments, including cash equivalents, marketable investments, accounts receivable, accounts payable and accrued liabilities, approximate their fair values as of the balance sheet dates because of their generally short maturities.

The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

●

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

●

Level 2: Directly or indirectly observable inputs as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

●

Level 3: Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions.

Impairment of Marketable Investments and ARS Securities

The Company reviews its marketable and long term investments for impairment on a quarterly basis. If it concludes that any of these investments are impaired, it determines whether such impairment is other-than-temporary. Factors that the Company considers to make such determination include the duration and severity of the impairment, the reason for the decline in value and the potential recovery period, and its intent to sell, or whether it is more likely than not that it will be required to sell, the investment before recovery.

Beginning April 1, 2009, if an entity intends to sell, or if it is more likely than not that we will be required to sell, an impaired debt security prior to recovery of its cost basis, the security is other-than-temporarily impaired and the full amount of the impairment is required to be recognized as a loss through earnings. Otherwise, losses on securities which are other-than-temporarily impaired are separated into:

(iii)

the portion of loss which represents the credit loss; or

(iv)

the portion which is due to other factors.

The credit loss portion is recognized as a loss through earnings while the loss due to other factors is recognized in other comprehensive income (loss), net of taxes and related amortization. At December 31, 2011, the Company had approximately $3.9 million of par value ARS investments. The Company intends to, and has the ability to, hold these investments until the anticipated date of maturity. As such, the company treats the decline in value as temporary and has recognized approximately $873,000 in unrealized losses. Given the Company believed that such losses were not credit related, it has included them in accumulated other comprehensive loss.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to concentrations of risk consist principally of cash, cash equivalents, marketable investments and accounts receivable. The Company's cash and cash equivalents are primarily invested in deposits and money market accounts with two major banks in the United States. In addition, the Company has operating cash balances in banks in each of the international locations in which it operates. Deposits in these banks may exceed the amount of insurance provided on such deposits, if any. Management believes that these financial institutions are financially sound and, accordingly, believes that minimal credit risk exists. The Company has not experienced any losses on its deposits of cash and cash equivalents. Accounts receivable are typically unsecured and are derived from revenue earned from worldwide customers. The Company performs credit evaluations of its customers and maintains reserves for potential credit losses. Concentrations of accounts receivable balances are presented in Note 3 and segment, geographic and major customer information is presented in Note 10.

The Company invests in debt instruments-including bonds and ARS-of the U.S. Government, its agencies and municipalities. In addition, starting from 2010, the Company has invested in other high grade investments such as commercial paper and corporate bonds. By policy, the Company restricts its exposure to any single issuer by imposing concentration limits. To minimize the exposure due to adverse shifts in interest rates, the Company maintains investments at an average maturity (interest reset date for auction-rate securities and variable rate demand notes) of generally less than eighteen months.

The Company is subject to risks common to companies in the medical device industry, including, but not limited to, new technology innovations, dependence on key personnel, dependence on key suppliers, protection of proprietary technology, product liability and compliance with government regulations. The Company must continue to successfully design, develop, acquire, manufacture and market its products. There can be no assurance that current or recently acquired products will continue to be accepted in the marketplace. Nor can there be any assurance that any future products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed, if at all. These factors could have a material adverse effect on the Company's future financial results and cash flows.

Future products developed or acquired by the Company may require additional approvals from the Food and Drug Administration or international regulatory agencies prior to commercial sales. There can be no assurance that the Company's products will continue to meet the necessary regulatory requirements. If the Company was denied such approvals or such approvals were delayed, it may have a materially adverse impact on the Company.

Inventories

Inventories are stated at the lower of cost or market, cost being determined on a standard cost basis (which approximates actual cost on a first-in, first-out basis) and market being determined as the lower of replacement cost or net realizable value.

The Company includes demonstration units within inventories. Demonstration units are carried at cost and amortized over their estimated economic life of two years. Amortization expense related to demonstration units is recorded in cost of revenue or in the respective operating expense line based on which function and purpose it is being used for. Proceeds from the sale of demonstration units are recorded as revenue and all costs incurred to refurbish the systems prior to sale are charged to cost of revenue.

Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the related assets, which is generally three years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful life of the related assets. Upon sale or retirement of assets, the costs and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in operating expenses. Maintenance and repairs are charged to operations as incurred.

Intangible Assets

Purchased technology sublicenses are presented at cost, net of accumulated amortization. The technology licenses are being amortized on a straight-line basis over their expected useful life of 9-10 years.

Impairment of Long-lived Assets

The Company reviews long-lived assets, including property and equipment, and intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company would recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. Impairment, if any, is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value. Through December 31, 2011, there have been no such impairments.

Warranty Obligations

The Company provides a one-year standard warranty on all systems. Warranty coverage provided is for labor and parts necessary to repair the systems during the warranty period. The Company accounts for the estimated warranty cost of the standard warranty coverage as a charge to costs of revenue when revenue is recognized. The estimated warranty cost is based on historical product performance. To determine the estimated warranty reserve, the Company utilizes actual service records to calculate the average service expense per system and applies this to the equivalent number of units exposed under warranty. The Company updates these estimated charges every quarter.

Revenue Recognition

Product, Upgrade, Titan hand piece refill, and Dermal filler and cosmeceutical revenue is recognized when title and risk of ownership has been transferred, provided that:

●

Persuasive evidence of an arrangement exists;

●

The price is fixed or determinable;

●

Delivery has occurred or services have been rendered; and

●

Collectability is reasonably assured.

Transfer of title and risk of ownership occurs when the product is shipped to the customer or when the customer receives the product, depending on the nature of the arrangement. Revenue is recorded net of customer and distributor discounts. For sales transactions when collectability is not reasonably assured, the Company recognizes revenue upon receipt of cash payment. Sales to customers and distributors do not include any return or exchange rights. In addition, the Company's distributor agreements obligate the distributor to pay the Company for the sale regardless of whether the distributor is able to resell the product. Shipping and handling charges are invoiced to customers based on the amount of products sold. Shipping and handling fees are recorded as revenue and the related expense as a component of cost of revenue.

The FASB amended the accounting standards for multiple deliverable revenue arrangements to:

●

provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and how the consideration should be allocated;

●

require an entity to allocate revenue in an arrangement using estimated selling price (ESP) of deliverables if a vendor does not first have vendor-specific objective evidence (VSOE) of selling price or secondly does not have third-party evidence (TPE) of selling price; and

●

eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method.

Multiple-element arrangements - A multiple-element arrangement includes the sale of one or more tangible product offerings with one or more associated services offerings, each of which are individually considered separate units of accounting. The determination of the Company's units of accounting did not change with the adoption of the new revenue recognition guidance and as such the Company allocates revenue to each element in a multiple-element arrangement based upon the relative selling price of each deliverable. When applying the relative selling price method, the Company determines the selling price for each deliverable using VSOE of selling price, if it exists, or TPE of selling price. If neither VSOE nor TPE of selling price exist for a deliverable, the Company uses its best estimate of selling price for that deliverable. Revenue allocated to each element is then recognized when the other revenue recognition criteria are met for each element.

The above mentioned update was effective for the Company from January 1, 2011 and the Company elected to apply it prospectively to new or materially modified revenue arrangements after its effective date. This did not have a material impact on the Company's financial position or results of operations for the year ended December 31, 2011, and does not change the units of accounting for its revenue transactions. The new accounting standard, if applied to the year ended December 31, 2010, would not have had a material impact on our revenue for that year.

The Company also offers customers extended service contracts. Revenue under service contracts is recognized on a straight-line basis over the period of the applicable service contract. Service revenue, from customers whose systems are not under a service contact, is recognized as the services are provided. Service revenue for the years ended December 31, 2011, 2010, and 2009 was $13.4 million, $13.2 million, and $13.2 million, respectively.

Cost of Revenue

Cost of revenue consists primarily of material, finished and semi-finished products purchased from third-party manufacturers, labor, stock-based compensation expenses, overhead involved in our internal manufacturing processes, technology license amortization and royalties, and costs associated with product warranties.

Shipping and Handling Costs

Amounts charged to customers and costs incurred by the Company related to shipping and handling are included in net sales and cost of goods sold, respectively.

Research and Development Expenditures

Costs related to research, design, development and testing of products are charged to research and development expense as incurred. Expenses incurred primarily relate to employees, facilities, material, third party contractors and clinical and regulatory fees.

Advertising Costs

Advertising costs are included as part of sales and marketing expense and are expensed as incurred. Advertising expenses were $1.3 million in 2011, $947,000 in 2010, and $891,000 in 2009.

Stock-based Compensation

The Company elected to use the Black-Scholes-Merton (BSM) pricing model to determine the fair value of stock options on the dates of grant. Restricted stock units (RSUs) and stock awards are measured based on the fair market values of the underlying stock on the dates of grant. Shares are issued on the vesting dates, net of the statutory withholding requirements to be paid by the Company on behalf of its employees. As a result, the actual number of shares issued will be fewer than the actual number of RSUs outstanding. Furthermore, the Company records the liability for withholding amounts to be paid by us as a reduction to additional paid-in capital when the shares are issued. Also, the Company recognizes stock-based compensation using the straight-line method.

The Company includes as part of cash flows from financing activities the benefits of tax deductions in excess of the tax-effected compensation of the related stock-based awards for options exercised and RSUs vested during the period. The amount of cash received from the exercise of stock options and employee stock purchases, net of taxes withheld and paid was $1.4 million in 2011, $518,000 in 2010, and $585,000 in 2009, and the total direct tax benefit (deficit) realized, including the excess tax benefit (deficit), from stock-based award activity was $29,000 in 2011, $8,000 in 2010, and $109,000 in 2009. The Company elected to account for the indirect effects of stock-based awards-primarily the research and development tax credit-through the Statement of Operations.

Income Taxes

The Company recognizes income taxes under the liability method. The Company recognizes deferred income taxes for differences between the financial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which differences are expected to reverse. The Company recognizes the effect on deferred taxes of a change in tax rates in income in the period that includes the enactment date. The Company has determined that its future taxable income will be sufficient to recover all of the deferred tax assets. However, should there be a change in their ability to recover the deferred tax assets, the Company could be required to record a valuation allowance against its deferred tax assets. This would result in an increase to the Company's tax provision in the period in which they determined that the recovery was not probable.

The measurement of deferred taxes often involves an exercise of judgment related to the computation and realization of tax basis. The deferred tax assets and liabilities reflect management's assessment that tax positions taken, and the resulting tax basis, are more likely than not to be sustained if they are audited by taxing authorities. Also, assessing tax rates that the Company expects to apply and determining the years when the temporary differences are expected to affect taxable income requires judgment about the future apportionment of our income among the states in which the Company operates. These matters, and others, involve the exercise of significant judgment. Any changes in our practices or judgments involved in the measurement of deferred tax assets and liabilities could materially impact our financial condition or results of operations.

Valuation allowances are established when necessary to reduce deferred income tax assets to amounts that the Company believes are more likely than not to be recovered. The Company evaluates its deferred tax assets quarterly to determine whether adjustments to our valuation allowance are appropriate. In making this evaluation, the Company relies on its recent history of pre-tax earnings, estimated timing of future deductions and benefits represented by the deferred tax assets, and its forecasts of future earnings, the latter two of which involve the exercise of significant judgment. As of September 30, 2009, the Company could not sustain a conclusion that it was more likely than not that the Company would realize any of its deferred tax assets resulting from its cumulative losses reported in the recent past as well as other factors. Consequently, the Company established a valuation allowance against those deferred tax assets. The Company also performed this evaluation as of December 31, 2011, and determined the full valuation allowance was still required.

The Company establishes reserves for uncertain tax positions in accordance with the Income Taxes subtopic of the ASC. The subtopic prescribes the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. Additionally, the subtopic provides guidance on derecognition, measurement, classification, interest and penalties, and transition of uncertain tax positions. The impact of an uncertain income tax position on income tax expense must be recognized at the largest amount that is more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company has provided taxes and related interest and penalties due for potential adjustments that may result from examinations of open U.S. Federal, state and foreign tax years. If the Company ultimately determines that payment of these amounts are not more-likely-than-not, the Company will reverse the liability and recognize a tax benefit during the period in which the Company makes the determination. The Company will record an additional charge in the Company's provision for taxes in the period in which the Company determines that the recorded tax liability is less than the Company expects the ultimate assessment to be.

Comprehensive Loss

Comprehensive loss generally represents all changes in stockholders' equity except those resulting from investments or contributions by stockholders. The Company's unrealized gains and losses on marketable and long-term investments represent the only component of other comprehensive loss.

On April 1, 2009, the Company adopted updates issued by the Financial Accounting Standards Board (FASB) to the recognition and presentation of other-than-temporary impairments. A cumulative effect adjustment was required to retained earnings and a corresponding adjustment to accumulated other comprehensive loss to reclassify the non-credit portion of previously other-than-temporarily impaired securities which were held at the beginning of the period of adoption and for which the Company does not intend to sell and it is more likely than not that the Company will not be required to sell such securities before recovery of the amortized cost basis. As a result of the implementation of this pronouncement, the Company reclassified the cumulative effect of the non-credit portion of previously recognized other-than-temporarily impaired adjustments of $3.5 million by increasing retained earnings and decreasing accumulated other comprehensive loss.

Foreign Currency

The U.S. dollar is the functional currency of the Company's subsidiaries. Monetary and non-monetary assets and liabilities are remeasured into U.S. dollars at the applicable period end exchange rate. Sales and operating expenses are remeasured at average exchange rates in effect during each period, except for those expenses related to non-monetary assets which are remeasured at historical exchange rates. Gains or losses resulting from foreign currency transactions are included in net income (loss) and are insignificant for each of the three years ended December 31, 2011. The effect of exchange rate changes on cash and cash equivalents was insignificant for each of the three years presented in the period ended December 31, 2011.

New Accounting Standards

On January 1, 2011, the Company adopted changes issued by the FASB to the classification of certain employee share-based payment awards. These changes clarify that there is not an indication of a condition that is other than market, performance, or service if an employee share-based payment award's exercise price is denominated in the currency of a market in which a substantial portion of the entity's equity securities trade and differs from the functional currency of the employer entity or payroll currency of the employee. An employee share-based payment award is required to be classified as a liability if the award does not contain a market, performance or service condition. Prior to this guidance, the Company did not consider the difference between the currency denomination of an employee share-based payment award's exercise price and the functional currency of the employer entity or payroll currency of the employee in determining the proper classification of the share-based payment award. The adoption of these changes had no impact on the Company's financial statements.

On January 1, 2011, the Company adopted changes issued by the FASB to disclosure requirements for fair value measurements. Specifically, the changes require a reporting entity to disclose, in the reconciliation of fair value measurements using significant unobservable inputs (Level 3), separate information about purchases, sales, issuances and settlements, (i.e., on a gross basis rather than as one net number). These changes were applied to the disclosure in the Fair Value of Financial Instruments section of Note 2 to the Condensed Consolidated Financial Statements. The adoption of these changes had no impact on our financial statements.

In May 2011, the FASB issued ASU No. 2011-04 “Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards”. Some of the amendments clarify the Board's intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This guidance is effective for interim and annual periods beginning after December 15, 2011. The Company is still evaluating the potential future effects of this guidance.

In June 2011, the FASB amended its authoritative guidance on the presentation of comprehensive income. Under the amendment, an entity will have the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This amendment, therefore, eliminates the currently available option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendment does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The Company will adopt this amended guidance for the fiscal year beginning January 1, 2012. As this guidance relates to presentation only, the adoption of this guidance will not have any other effect on the Company's financial statements.

INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2011

INVESTMENT SECURITIES [Abstract]

INVESTMENT SECURITIES

NOTE 2-INVESTMENT SECURITIES

The following tables summarize cash, cash equivalents, marketable securities and long term investments (in thousands):

	December 31,
	2011		2010
Cash and cash equivalents:
Cash	$	2,153	$	1,989
Cash equivalents:
Money market funds		7,318		8,330
Commercial paper		4,549		2,200
Total cash and cash equivalents		14,020		12,519

Marketable securities:
U.S. government notes		3,665		2,070
U.S. government agencies		41,565		24,087
Municipal securities		6,134		15,011
Commercial paper		4,747		11,465
Corporate debt securities		18,555		24,851
Total marketable securities		74,666		77,484

Long-term investments in ARS		3,027		6,784
Total cash, cash equivalents, marketable securities and long term investments	$	91,713	$	96,787

The following table summarizes unrealized gains and losses related to our marketable investments and long term investments, both designated as available-for-sale (in thousands):

			Gross		Gross			Fair
	Amortized		Unrealized		Unrealized			Market
December 31, 2011	Cost		Gains		Losses			Value
Cash and cash equivalents	$	14,020	$	-	$	-		$	14,020

Marketable investments
U.S. government notes		3,655		10		-			3,665
U.S. government agencies		41,535		44		(14	)		41,565
Municipal securities		6,091		44		(1	)		6,134
Commercial paper		4,747		1		(1	)		4,747
Corporate debt securities		18,574		15		(34	)		18,555
Total marketable securities		74,602		114		(50	)		74,666

Long-term investments in ARS		3,900		-		(873	)		3,027
Total cash, cash equivalents, marketable securities and long term investments	$	92,522	$	114	$	(923	)	$	91,713

			Gross		Gross			Fair
	Amortized		Unrealized		Unrealized			Market
December 31, 2010	Cost		Gains		Losses			Value
Cash and cash equivalents	$	12,519	$	-	$	-		$	12,519

Marketable investments
U.S. government notes		2,069		1		-			2,070
U.S. government agencies		24,088		17		(18	)		24,087
Municipal securities		15,029		2		(20	)		15,011
Commercial paper		11,459		7		(1	)		11,465
Corporate debt securities		24,825		55		(29	)		24,851
Total marketable securities		77,470		82		(68	)		77,484

Long-term investments in ARS		8,325		-		(1,541	)		6,784
Total cash, cash equivalents, marketable securities and long term investments	$	98,314	$	82	$	(1,609	)	$	96,787

The Company did not have any gains or losses associated with its long-term investments. The realized gains and losses associated with short-term investments were as follows (in thousands):

		Year Ended December 31,
		2011		2010			2009
Realized gains on investments	$	5	$	78		$	103
Realized losses on investments		-		(4	)		-

The following table summarizes the fair value and the gross unrealized losses for investments that were in an unrealized loss position, aggregated by category and by the length in time that the individual securities have been in a continuous loss position (in thousands):

	Less Than 12 Months					12 Months or Greater					Total
	Fair		Gross			Fair		Gross			Fair		Gross
	Market		Unrealized			Market		Unrealized			Market		Unrealized
December 31, 2011	Value		Losses			Value		Losses			Value		Losses
U.S. government agencies	$	12,758	$	(14	)	$	-	$	-		$	12,758	$	(14	)
Municipal securities		929		(1	)		-		-			929		(1	)
Commercial paper		999		(1	)		-		-			999		(1	)
Corporate debt securities		-		-			7,799		(34	)		7,799		(34	)
Long-term investments in ARS		-		-			3,027		(873	)		3,027		(873	)
Total	$	14,686	$	(16	)	$	10,826	$	(907	)	$	25,512	$	(923	)

	Less Than 12 Months					12 Months or Greater					Total
	Fair		Gross			Fair		Gross			Fair		Gross
	Market		Unrealized			Market		Unrealized			Market		Unrealized
December 31, 2010	Value		Losses			Value		Losses			Value		Losses
U.S. government agencies	$	7,830	$	(18	)	$	-	$	-		$	7,830	$	(18	)
Municipal securities		10,083		(19	)		2,050		(1	)		12,133		(20	)
Commercial paper		-		-			-		-			-		-
Corporate debt securities		8,498		(29	)		-		-			8,498		(29	)
Long-term investments in ARS		-		-			6,784		(1,541	)		6,784		(1,541	)
Total	$	26,411	$	(66	)	$	8,834	$	(1,542	)	$	35,245	$	(1,608	)

The following table summarizes the estimated fair value of our marketable investments and long term investments classified by the contractual maturity date of the security as of December 31, 2011 (in thousands):

	Amount
Due in less than one year (fiscal year 2012)	$	40,988
Due in 1 to 3 years (fiscal year 2013- 2014)		33,678
Due in 3 to 5 years (fiscal year 2015-2016)		-
Due in 5 to 10 years (fiscal year 2017-2022)		-
Due in greater than 10 years (fiscal year 2023 and beyond)		3,027
	$	77,693

Fair Value Measurements

The following table summarizes financial assets measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above (in thousands):

December 31, 2011	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	7,318	$	-	$	-	$	7,318
Commercial paper		-		4,549		-		4,549
Short term marketable investments:
Available-for-sale securities		-		74,666		-		74,666
Long-term investments:
Available-for-sale ARS		-		-		3,027		3,027
Total assets at fair value	$	7,318	$	79,215	$	3,027	$	89,560

December 31, 2010	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	8,331	$	-	$	-	$	8,331
Commercial paper		-		2,200		-		2,200
Short term marketable investments:
Available-for-sale securities		-		77,484		-		77,484
Long-term investments:
Available-for-sale ARS		-		-		6,784		6,784
Total assets at fair value	$	8,331	$	79,684	$	6,784	$	94,799

The Company's Level 1 financial assets are money market funds with stated maturities of three months or less from the date of purchase, whose fair values are based on quoted market prices. The Company's Level 2 financial assets are highly liquid debt instruments of U.S. federal and municipal governments and their agencies, commercial paper and corporate debt securities whose fair values are obtained from readily-available pricing sources for the identical underlying security that may, or may not, be actively traded.

At December 31, 2011, observable market information was not available to determine the fair value of the Company's ARS investments. Therefore, the fair value is based on broker-provided valuation models that relied on Level 3 inputs including those that are based on expected cash flow streams and collateral values, assessments of counterparty credit quality, default risk underlying the security, market discount rates and overall capital market liquidity. The valuation of the Company's ARS investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact the valuations in the future include changes to credit ratings of the securities, as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates, counterparty risk and ongoing strength and quality of market credit and liquidity. These financial instruments are classified within Level 3 of the fair value hierarchy.

The table presented below summarizes the change in carrying value associated with Level 3 financial assets, which represents the Company's investment in long term ARS, for the year ended December 31, 2011 (in thousands):


Balance at December 31, 2009	$	7,275
Total gains or losses (realized or unrealized)
Included in earnings (or changes in net assets)		-
Included in other comprehensive income (loss)		(26	)
Purchases and issuances		-
Settlements		(465	)
Balance at December 31, 2010		6,784
Total gains or losses (realized or unrealized)
Included in earnings (or changes in net assets)		-
Included in other comprehensive income (loss)		668
Purchases and issuances		-
Settlements		(4,425	)
Balance at December 31, 2011	$	3,027

BALANCE SHEET DETAIL

12 Months Ended

Dec. 31, 2011

BALANCE SHEET DETAIL [Abstract]

BALANCE SHEET DETAIL

NOTE 3-BALANCE SHEET DETAIL

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses existing in accounts receivable and is based on historical write-off experience and any specific customer issues that have been identified. Account balances are charged off against the allowance when it is probable the receivable will not be recovered. The Company had one customer who accounted for 8% at December 31, 2011 and 10% at December 31, 2010 of the Company's total accounts receivable balance.

Inventories

Inventories consist of the following (in thousands):

	December 31,
	2011		2010
Raw materials	$	6,587	$	4,204
Finished goods		4,142		2,244
Total	$	10,729	$	6,448

Property and Equipment, net

Property and equipment, net consists of the following (in thousands):

	December 31,
	2011			2010
Leasehold improvements	$	590		$	361
Office equipment and furniture		2,761			2,702
Machinery and equipment		2,893			2,688
		6,244			5,751
Less: Accumulated depreciation		(5,391	)		(5,154	)
Property and equipment, net	$	853		$	597

Depreciation expense related to property and equipment was $446,000 in 2011, $525,000 in 2010, and $664,000 in 2009.

Intangible Assets

Intangible assets were comprised of a patent sublicense acquired from Palomar in 2006 and a technology sublicense acquired in 2002. The components of intangible assets at December 31, 2011 and 2010 were as follows (in thousands):

	Gross Carrying Amount		Accumulated Amortization Amount		Net Amount
December 31, 2011
Patent sublicense	$	1,218	$	793	$	425
Technology sublicense		538		517		21
Total	$	1,756	$	1,310	$	446
December 31, 2010
Patent sublicense	$	1,218	$	656	$	562
Technology sublicense		538		463		75

Total	$	1,756	$	1,119	$	637

Amortization expense for intangible assets was $191,000 in 2011, $192,000 in 2010, and $196,000 in 2009.

Based on intangible assets recorded at December 31, 2011, and assuming no subsequent additions to, or impairment of the underlying assets, the remaining estimated annual amortization expense is expected to be as follows (in thousands):

Year ending December 31,	Amount
2012	$	158
2013		138
2014		138
2015		12

Total	$	446

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	December 31,
	2011		2010
Payroll and related expenses	$	4,172	$	3,035
Warranty		1,121		796
Customer deposits		1,054		131
Sales tax		839		809
Professional fees		483		335
Royalty		434		475
Income tax		276		-
Sales and marketing accruals		191		131
Other		692		482
Total	$	9,262	$	6,194

WARRANTY AND SERVICE CONTRACTS

12 Months Ended

Dec. 31, 2011

WARRANTY AND SERVICE CONTRACTS [Abstract]

WARRANTY AND SERVICE CONTRACTS

NOTE 4-WARRANTY AND SERVICE CONTRACTS

The Company has a direct field service organization in the United States. Internationally, the Company provides direct service support through its wholly-owned subsidiaries in Australia, Canada, France, Japan, Spain, Switzerland (through November 2011) as well as through a network of distributors and third-party service providers in several other countries where it does not have a direct presence. The Company provides a warranty with its products, depending on the type of product. After the original warranty period, maintenance and support are offered on a service contract basis or on a time and materials basis. The Company currently provides for the estimated cost to repair or replace products under warranty at the time of sale.

Warranty Accrual (in thousands)

	December 31,
	2011			2010
Balance at beginning of year	$	796		$	1,049
Add: Accruals for warranties issued during the year		4,043			3,061
Less: Settlements made during the year		(3,718	)		(3,314	)
Balance at end of year	$	1,121		$	796

Deferred Service Contract Revenue (in thousands)

	December 31,
	2011			2010
Balance at beginning of year	$	6,765		$	8,128
Add: Payments received		8,332			8,254
Less: Revenue recognized		(9,259	)		(9,617	)
Balance at end of year	$	5,838		$	6,765

Costs incurred under service contracts amounted to $4.6 million in 2011, $4.3 million in 2010, and $4.7 million in 2009, and are recognized as incurred.

STOCKHOLDERS' EQUITY, STOCK PLANS AND STOCK-BASED COMPENSATION EXPENSE

12 Months Ended

Dec. 31, 2011

STOCKHOLDERS' EQUITY, STOCK PLANS AND STOCK-BASED COMPENSATION EXPENSE [Abstract]

STOCKHOLDERS' EQUITY, STOCK PLANS AND STOCK-BASED COMPENSATION EXPENSE

NOTE 5-STOCKHOLDERS' EQUITY, STOCK PLANS AND STOCK-BASED COMPENSATION EXPENSE

Stock Option Plans

As of December 31, 2011, the Company had the following stock-based employee compensation plans:

2004 Employee Stock Purchase Plan

On January 12, 2004, the Board of Directors adopted the 2004 Employee Stock Purchase Plan. A total of 200,000 shares of common stock were reserved for issuance pursuant to the 2004 Employee Stock Purchase Plan. Under the 2004 Employee Stock Purchase Plan, or 2004 ESPP, eligible employees are permitted to purchase common stock at a discount through payroll deductions. The 2004 ESPP offering and purchase periods are for approximately six months. Shares of common stock eligible for purchase are increased on the first day of each fiscal year by an amount equal to the lesser of (i) 600,000 shares, (ii) 2.0% of the outstanding shares of common stock on such date or (iii) an amount as determined by the Board of Directors. The Company's Board of Directors voted not to increase the shares available for future grant on January 1, 2011 and 2010. The price of the common stock purchased is the lower of 85% of the fair market value of the common stock at the beginning of an offering period or at the end of the offering period. Under the 2004 ESPP the Company issued 45,161 shares in 2011 and 43,859 shares in 2010. At December 31, 2011, 1,056,936 shares remained available for future issuance.

2004 Equity Incentive Plan and 1998 Stock Plan

In 1998, the Company adopted the 1998 Stock Plan, or 1998 Plan, under which 4,650,000 shares of the Company's common stock were reserved for issuance to employees, directors and consultants.

On January 12, 2004, the Board of Directors adopted the 2004 Equity Incentive Plan. A total of 1,750,000 shares of common stock were originally reserved for issuance pursuant to the 2004 Equity Incentive Plan. In addition, the shares reserved for issuance under the 2004 Equity Incentive Plan included shares reserved but un-issued under the 1998 Plan and shares returned to the 1998 Plan as the result of termination of options or the repurchase of shares.

Options granted under the 1998 Plan and 2004 Equity Incentive Plan may be incentive stock options or non-statutory stock options. Stock purchase rights may also be granted under the 2004 Equity Incentive Plan. Incentive stock options may only be granted to employees. The Board of Directors determines the period over which options become exercisable, however, except in the case of options granted to officers, directors and consultants, options shall become exercisable at a rate of no less than 20% per year over five years from the date the options are granted. Options are to be granted at an exercise price not less than the fair market value per share on the grant date for incentive options or 85% of fair market value for nonqualified stock options. For employees holding more than 10% of the voting rights of all classes of stock, the exercise price shall not be less than 110% of the fair market value per share on the grant date. Options granted under the Plan to employees generally become exercisable 25% on the first anniversary of the vesting commencement date and an additional 1/48th of the total number of shares subject to the option shares shall become exercisable on the last day of each calendar month thereafter until all of the shares have become exercisable. Unvested options that have been exercised are subject to repurchase upon termination of the holder's status as an employee, director or consultant. The contractual term of the options granted is either five, seven or ten years.

In accordance with the 2004 Equity Incentive Plan, the Company's non-employee directors are granted $60,000 of grant date fair value, fully vested, stock awards annually on the date of the Company's Annual Meeting of stockholders. In the year ended December 31, 2011 and 2010, the Company issued 37,925 and 37,266 shares of stock, respectively. In addition, in the year ended December 31, 2011 and 2010, the Company's Board of Directors granted 39,300 and 109,025, respectively, of RSUs to certain members of the Company's management. These RSUs vest at the rate of one-third on June 1of the year of grant, and one-third in each of the subsequent two years. The Company measured the fair market values of the underlying stock on the dates of grant and recognizes the stock-based compensation expense using the straight-line method over the vesting period.

The Company issues new shares upon the exercise of options, restricted stock units and ESPP shares.

Option Exchange Program

In July 2009, the Company completed its Option Exchange Program for its employees to exchange certain options outstanding for new options to purchase shares of the Company's common stock. As a result, options to purchase 864,373 shares of the Company's common stock were cancelled and new options to purchase up to 447,841 shares of the Company's common stock were issued in exchange. The new options have an exercise price per share of $8.49, the closing price of the Company's common stock as reported on the Nasdaq Global Select Market on the date that the offer expired and Option Exchange Program was completed, are unvested as of the grant date, and subject to an additional six (6) months of vesting over and above the vesting schedule of the surrendered options.

Given the Option Exchange Program was designed to be approximately a “value-for-value” exchange, the Company did not incur any significant additional non-cash compensation charges as the fair value of the replacement options was approximately equal to or less than the fair value of the surrendered options. The Company determined the fair value of stock options using the Black Scholes valuation model.

Option Activity

Activity under the 1998 Plan and 2004 Equity Incentive Plan is summarized as follows:

				Options Outstanding
	Shares Available For Grant			Number of Shares			Weighted- Average Exercise Price		Weighted-Average Remaining ContractualLife (in years)		Aggregate Intrinsic Value (in $ millions)(1)
Balances as of December 31, 2008		2,013,089			3,081,733		$	12.94		4.6		6.0
Options granted (2)		(1,409,371	)		1,409,371		$	8.51
Options exercised		-			(527,721	)	$	0.55
Options cancelled (expired or forfeited) (2)		1,270,828			(1,270,828	)	$	17.55
Stock awards granted		(36,540	)		-			-
Restricted stock units cancelled (expired or forfeited)		2,375			-			-
Balances as of December 31, 2009		1,840,381			2,692,555		$	10.87		5.1	$	1.6
Options granted (2)		(961,500	)		961,500		$	10.14
Options exercised		-			(90,362	)	$	3.74
Options cancelled (expired or forfeited) (2)		267,274			(267,274	)	$	9.91
Stock awards granted		(146,291	)		-			-
Restricted stock units cancelled (expired or forfeited)		5,583			-			-
Balances as of December 31, 2010		1,005,447			3,296,419		$	10.93		4.4	$	1.1
Options granted (2)		(1,206,500	)		1,206,500		$	8.61
Options exercised		-			(207,624	)	$	5.92
Options cancelled (expired or forfeited) (2)		746,273			(746,273	)		13.40
Stock awards granted		(77,225	)		-			-
Restricted stock units cancelled (expired or forfeited)		6,542			-			-
Balances as of December 31, 2011		474,537			3,549,022		$	9.92		4.6	$	0.4
Exercisable as of December 31, 2011					1,806,558		$	10.86		3.5	$	0.4

(1)	Based on the closing stock price of the Company's stock of $7.45 on December 30, 2011, $8.29 on December 31, 2010 and $8.51 on December 31, 2009.

(2)	Included in options granted and options cancelled are shares granted and cancelled in connection with the Company's Option Exchange Program in 2009 (see ‘Option Exchange Program' above for more details).

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the aggregate difference between the Company's closing stock price on the last trading day of the fiscal year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2011. The aggregate intrinsic amount changes based on the fair market value of the Company's common stock. Total intrinsic value of options exercised was $521,000 in 2011, $128,000 in 2010, and $3.2 million in 2009. The options outstanding and exercisable at December 31 of the respective year were in the following exercise price ranges:

		Options Outstanding			Options Exercisable
Range of Exercise Prices		Number Outstanding	Weighted-Average Remaining Contractual Life (in years)		Number Outstanding	Weighted-Average Exercise Price
$	4.25–$8.48	381,425		3.69	179,508	$	5.15
$	8.49–$8.49	296,773		2.93	258,193		8.49
$	8.66–$8.66	599,833		4.20	414,797		8.66
$	8.72–$8.72	811,500		6.31	-		-
$	8.75–$9.74	174,000		7.62	45,376		9.38
$	10.24–$10.24	625,916		5.18	259,982		10.24
$	10.43–$14.14	423,196		2.92	412,323		11.85
$	14.78–$24.46	207,254		3.04	207,254		20.26
$	25.39–$25.39	20,000		2.47	20,000		25.39
$	25.73–$25.73	9,125		2.59	9,125		25.73
$	4.25–$25.73	3,549,022		4.63	1,806,558	$	10.86

As of December 31, 2010 there were 1,679,268 options that were exercisable at a weighted average exercise price of $12.12.

Restricted Stock Units and Stock Awards

Information with respect to restricted stock units activity is as follows (in thousands):

	Number of Shares			Weighted-Average Grant- Date Fair Value		Aggregate Fair Value (1) (in thousands)
Outstanding at December 31, 2010		67,096		$	10.24
Granted		77,225		$	8.32
Vested (2)		(82,526	)	$	8.93	$	691	(3)
Forfeited		(6,542	)	$	9.99
Outstanding at December 31, 2011		55,253		$	9.55

(1)	Represents the value of the Company's stock on the date that the restricted stock units vest.

(1)	The number of restricted stock units vested includes shares that the Company withheld on behalf of the employees to satisfy the statutory tax withholding requirements.

(3)	On the grant date, the fair value for these vested awards was $737,000.

Stock-Based Compensation

Stock-based compensation expense for stock options, restricted stock units, stock awards and ESPP shares for the year ended December 31, 2011, 2010 and 2009 was as follows (in thousands):

	Year EndedDecember 31,
	2011		2010		2009
Stock options	$	3,047	$	3,628	$	3,763
RSUs and Stock awards		775		927		360
ESPP		85		95		113
Total stock-based compensation expense	$	3,907	$	4,650	$	4,236

Total stock-based compensation expense by department recognized during the year ended December 31, 2011, 2010 and 2009 was as follows (in thousands):

	Year EndedDecember 31,
	2011		2010		2009
Cost of revenue	$	659	$	724	$	717
Sales and marketing		788		1,189		1,044
Research and development		698		629		473
General and administrative		1,762		2,108		2,002
Total stock-based compensation expense	$	3,907	$	4,650	$	4,236

As of December 31, 2011, the unrecognized compensation cost, net of expected forfeitures, was $4.6 million for stock options and stock awards, which will be recognized using the straight- line attribution method over an estimated weighted-average remaining amortization period of 2.49 years. For the ESPP, the unrecognized compensation cost, net of expected forfeitures, was $31,000, which will be recognized using the straight- line attribution method over an estimated weighted-average amortization period 0.33 years.

Valuation Assumptions and Fair Value of Stock Option and ESPP Grants

The Company uses the Black-Scholes option pricing model to estimate the fair value of options granted under its equity incentive plans and rights to acquire stock granted under its employee stock purchase plan. The Company based the weighted average estimated values of employee stock option grants and rights granted under the employee stock purchase plan, as well as the weighted average assumptions used in calculating these values, on estimates at the date of grant, as follows:

	Stock Options									Stock Purchase Plan
	2011			2010			2009			2011			2010			2009
Estimated fair value of grants during the year	$	3.10		$	3.76		$	3.93		$	2.06		$	2.41		$	2.39
Expected term (in years)(1)		4.15			3.84			4.23			0.50			0.50			0.50
Risk-free interest rate(2)		1.41	%		1.73	%		2.6	%		0.08	%		0.2	%		0.1	%
Volatility(3)		43	%		46	%		55	%		39	%		40	%		52	%
Dividend yield(4)		-	%		-	%		-	%		-	%		-	%		-	%

(1)

The expected term represents the period during which the Company's stock-based awards are expected to be outstanding. The estimated term is based on historical experience of similar awards, giving consideration to the contractual terms of the awards, vesting requirements, and expectation of future employee behavior, including post-vesting terminations.

(2)	The risk-free interest rate is based on U.S. Treasury debt securities with maturities close to the expected term of the option as of the date of grant.

(3)	Expected volatility is a 50%/50% blend of implied and historical volatility. The Company has determined that this is a more reflective measure of market conditions and a better indicator of expected volatility, than its limited historical volatility since the IPO of its common stock.

(4)	The Company has not historically issued any dividends and does not expect to do so in the foreseeable future.

The Company periodically estimates forfeiture rates based on its historical experience within separate groups of employees and adjusts the stock-based payment expense accordingly.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 123R

-Paragraph 64, 65, A240

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher AICPA

-Name Statement of Position (SOP)

-Number 93-6

-Paragraph 53

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Staff Accounting Bulletin (SAB)

-Number Topic 14

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 505

-SubTopic 50

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 10

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 10

-Section 50

-Paragraph 4

-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 40

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929

+ Details

COMMON STOCK REPURCHASES	12 Months Ended
COMMON STOCK REPURCHASES	Dec. 31, 2011
COMMON STOCK REPURCHASES [Abstract]
COMMON STOCK REPURCHASES	NOTE 6-COMMON STOCK REPURCHASES Restricted Stock Unit Withholdings The Company issues restricted stock units as part of its equity incentive plans, which are described more fully in “Note 5-Stockholders' Equity, Stock Plans and Stock-Based Compensation Expense.” For the majority of restricted stock units granted, the number of shares issued on the date the restricted stock units vest is net of the statutory withholding requirements paid on behalf of the employees. The Company withheld 16,629 in 2011, 14,283 in 2010, and 3,934 in 2009, shares of common stock to satisfy its employees' tax obligations of $146,000 in 2011, $126,000 in 2010, and $32,000 in 2009. The Company paid this amount in cash to the appropriate taxing authorities. Although shares withheld are not issued, they are treated as common stock repurchases for accounting and disclosure purposes, as they reduce the number of shares that would have been issued upon vesting.

INCOME TAXES

12 Months Ended

Dec. 31, 2011

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 7-INCOME TAXES

The Company files income tax returns in the U.S. federal and various state and local jurisdictions and foreign jurisdictions. The components of the provision for income taxes are as follows (in thousands):

	Year Ended December 31,
	2011			2010			2009
Current:
Federal	$	(52	)	$	(154	)	$	(1,973	)
State		69			37			32
Foreign		208			235			338
		225			118			(1,603	)
Deferred:
Federal		(13	)		(45	)		9,686
State		13			45			871
Foreign		18			(116	)		(46	)
		18			(116	)		10,511
Provision for income taxes	$	243		$	2		$	8,908

The Company's deferred tax asset consists of the following (in thousands):

	December 31,
	2011			2010
Net operating loss	$	8,939		$	6,281
Stock-based compensation		6,374			5,644
Other accruals and reserves		3,374			3,385
Credits		2,062			1,488
Capital loss		312			558
Foreign		370			388
Accrued warranty		429			303
Depreciation and amortization		206			146
Other		(143	)		63
Net deferred tax asset before valuation allowance		21,923			18,256
Valuation allowance		(21,553	)		(17,868	)
Net deferred tax asset after valuation allowance	$	370		$	388

The Company's deferred tax asset balance is reported in the following captions in the Consolidated Balance Sheets (in thousands):

	December 31,
	2011			2010
Deferred tax asset (current portion)	$	55		$	63
Deferred tax asset, net of current portion		446			325
Accrued liabilities (current deferred tax liability)		(131	)		-
Net deferred tax asset after valuation allowance	$	370		$	388

The differences between the U.S. federal statutory income tax rate to the Company's effective tax are as follows:

	Year Ended December 31,
	2011			2010*		2009*
U.S. federal statutory income tax rate		35.00	%	35.00	%	35.00	%
State tax rate, net of federal benefit		2.56		2.81		(0.38	)
Benefit for research and development credit		6.02		2.97		1.05
Changes in unrecognized tax benefits		(0.02	)	2.59		0.71
Tax-exempt interest		0.19		0.98		5.42
Meals and entertainment		(0.88	)	(0.63	)	(0.76	)
Foreign income inclusion		(2.15	)	-		(0.32	)
Income tax refund		2.34		(1.13	)	11.00
Stock-based compensation		(9.64	)	(1.54	)	(8.91	)
Adjustment to beginning deferreds for state rate changes		4.30		(0.53	)	(0.47	)
Tax effect of other comprehensive income		(2.01	)	-		-
Valuation allowance		(37.54	)	(38.31	)	(142.18	)
Other		(0.65	)	(2.21	)	(1.73	)
Effective tax rate		(2.48	)%	0.00	%	(101.57	)%

*	Certain items have changed for classification purposes.

The Company recognizes deferred tax assets for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. The Company records a valuation allowance to reduce the deferred tax assets to their estimated realizable value, when it is more likely than not that it will not be able to generate sufficient future taxable income to realize the net carrying value. The Company reviews the deferred tax asset and valuation allowance on a quarterly basis, and considers whether positive and negative evidence exists to effect the realization of deferred tax assets. After considering both the positive and negative evidence as of September 30, 2009, the Company determined that it was not more-likely-than-not that it would realize the full value of its deferred tax assets. As a result, the Company established a valuation allowance of $10.2 million against the net deferred tax asset balance as of December 31, 2008. In addition, the Company recorded a valuation allowance against its deferred tax assets generated in 2009, 2010 and 2011, which resulted in a valuation allowance of $21.6 million as of December 31, 2011.

As of December 31, 2011, the Company had cumulative net operating loss carry-forwards for federal and state income tax reporting purposes of approximately $24.0 million and $9.6 million, respectively. The federal net operating loss carry-forwards expire through the year 2031 and the state net operating loss carry-forwards expire at various dates through the year 2031. Such net operating losses consist of excess tax benefits from employee stock option exercises and have not been recorded in the Company's deferred tax assets. The Company will record approximately $3.9 million as a credit to additional paid in capital as and when such excess tax benefits are ultimately realized.

As of December 31, 2011, the Company had research and development tax credits for federal and state income tax purposes of approximately $3.2 million and $3.6 million, respectively. The federal research and development tax credits expire through the year 2031. The state research and development credits can be carried forward indefinitely, except for $284,000, which will expire at various dates through the year 2020. The Company maintained a valuation allowance against these tax credits as of December 31, 2011. The Tax Reform Act of 1986 and similar state provisions limit the use of net operating loss carryforwards in certain situations where equity transactions result in a change of ownership as defined by Internal Revenue Code Section 382. In the event the Company should experience an ownership change, as defined, utilization of its federal and state net operating loss carryforwards could be limited.

Undistributed earnings of the Company's foreign subsidiaries net of foreign income inclusion of approximately $2.7 million at December 31, 2011, are considered to be indefinitely reinvested and, accordingly, no provision for federal and state income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries.

Uncertain Tax Positions

The Company establishes reserves for uncertain tax positions in accordance with the ASC. The subtopic prescribes the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. Additionally, the subtopic provides guidance on derecognition, measurement, classification, interest and penalties, and transition of uncertain tax positions. The impact of an uncertain income tax position on income tax expense must be recognized at the largest amount that is more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company has provided taxes and related interest and penalties due for potential adjustments that may result from examinations of open U.S. Federal, state and foreign tax years. If the Company ultimately determines that payment of these amounts are not more-likely-than-not, the Company will reverse the liability and recognize a tax benefit during the period in which the Company makes the determination. The Company will record an additional charge in the Company's provision for taxes in the period in which the Company determines that the recorded tax liability is less than the Company expects the ultimate assessment to be. The Company's policy is to include interest and penalties related to gross unrecognized tax benefits within the provision for income taxes.

The following table summarizes the activity related to the Company's gross unrecognized tax benefits in December 31, 2009 to December 31, 2011 (in thousands):

	Year Ended December 31,
	2011			2010			2009
Balance at beginning of year	$	555		$	787		$	1,640
Increases related to prior year tax positions		-			-			88
Decreases related to prior year tax positions		-			(29	)		(857	)
Increases related to current year tax positions		44			24			29
Decreases related to lapsing of statute of limitations		(16	)		(227	)		(113	)
Balance at end of year	$	583		$	555		$	787

The Company's total unrecognized tax benefits that, if recognized, would affect its effective tax rate were approximately $400,000 and $405,000 as of December 31, 2011 and 2010, respectively. The Company had accrued approximately $79,000 and $71,000 for payment of interest as of December 31, 2011 and 2010, respectively. Interest included in the provision for income taxes was not significant in all the periods presented. The Company has not accrued any penalties related to its uncertain tax positions as it believes that it is more likely than not that there will not be any assessment of penalties. The Company expects that the amount of unrecognized tax benefits will not change within the next 12 months.

The Company files U.S., state, and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2004 through 2011 tax years generally remain subject to examination by U.S., federal and most state tax authorities due to the Company's net operating loss and credit carryforwards. For significant foreign jurisdictions, the 2006 through 2011 tax years generally remain subject to examination by their respective tax authorities.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 08

-Paragraph h

-Article 4

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 136, 172

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 43, 44, 45, 46, 47, 48, 49

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 15

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 9

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 235

-SubTopic 10

-Section S99

-Paragraph 1

-Subparagraph (SX 210.4-08.(h))

-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

+ Details

NET LOSS PER SHARE

12 Months Ended

Dec. 31, 2011

NET LOSS PER SHARE [Abstract]

NET LOSS PER SHARE

NOTE 8-NET LOSS PER SHARE

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the year. Diluted net income per share is calculated by using the weighted-average number of common shares outstanding during the year increased to include the number of additional shares of common stock that would have been outstanding if the dilutive potential shares of common stock had been issued. The dilutive effect of outstanding options, Employee Stock Purchase Plan shares and restricted stock units is reflected in diluted net income per share by application of the treasury stock method, which includes consideration of stock-based compensation.

For years presented with a net loss, diluted net loss per common share is the same as basic net loss per common share, as the effect of the potential common stock equivalents is anti-dilutive and as such is excluded from the calculations of the diluted net loss per share.

The following table sets forth the computation of basic and diluted net loss and the weighted average number of shares used in computing basic and diluted net loss per share (in thousands):

	Year Ended December 31,
	2011			2010			2009
Numerator:
Net loss-basic and diluted	$	(10,061	)	$	(10,518	)	$	(17,679	)
Denominator:
Weighted-average number of common shares outstanding used in computing basic net loss per share		13,807			13,540			13,279
Dilutive potential common shares used in computing diluted net loss per share		-			-			-
Total weighted-average number of shares used in computing diluted net loss per share		13,807			13,540			13,279

Anti-dilutive Securities

The following number of weighted shares outstanding, prior to the application of the treasury stock method, were excluded from the computation of diluted net loss per common share for the years presented because including them would have had an anti-dilutive effect (in thousands):

	Year Ended December 31,
	2011		2010		2009
Options to purchase common stock		3,667		3,187		2,746
Restricted stock units		61		48		5
Employee stock purchase plan shares		70		66		84
Total		3,798		3,301		2,835

- Definition

The entire disclosure for earnings per share.

+ References+ Details

DEFINED CONTRIBUTION PLAN	12 Months Ended
DEFINED CONTRIBUTION PLAN	Dec. 31, 2011
DEFINED CONTRIBUTION PLAN [Abstract]
DEFINED CONTRIBUTION PLAN	NOTE 9-DEFINED CONTRIBUTION PLAN In the United States, the Company has an employee savings plan (401(k) Plan) that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Eligible employees may make voluntary contributions to the 401(k) Plan up to 100% of their annual compensation, subject to statutory annual limitations. From April 1999 to December 31, 2008, the Company made discretionary matching contributions of 50% to 75% of all U.S. employees' contributions in each 401(k) Plan year. The Company made no discretionary contributions in 2011, 2010 and 2009 under the 401(k) Plan. For the Company's Japanese subsidiary, it has established an employee retirement plan at its discretion. In addition, for some of the Company's other foreign subsidiaries, the Company deposits funds with insurance companies, third-party trustees, or into government-managed accounts consistent with the requirements of local laws. The Company has fully funded or accrued for its obligations as of December 31, 2011, and the related expense for each of the three years then ended was not significant.

- Definition

The entire disclosure for pension and other postretirement benefits.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Implementation Guide (Q and A)

-Number FAS88

-Paragraph 63

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 715

-URI http://asc.fasb.org/topic&trid=2235017

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 158

-Paragraph 7, 21, 22

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5, 6, 7, 8

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph a

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph b

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph h

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-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph q

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 8

-Subparagraph m

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 106

-Paragraph 518

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 87

-Paragraph 264

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-Publisher FASB

-Name Emerging Issues Task Force (EITF)

-Number 03-2

-Paragraph 8

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-Publisher AICPA

-Name Accounting Principles Board Opinion (APB)

-Number 30

-Paragraph 26

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-Publisher FASB

-Name FASB Staff Position (FSP)

-Number FAS106-2

-Paragraph 20, 21, 22

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+ Details

SEGMENT, GEOGRAPHIC AND MAJOR CUSTOMER INFORMATION

12 Months Ended

Dec. 31, 2011

SEGMENT, GEOGRAPHIC AND MAJOR CUSTOMER INFORMATION [Abstract]

SEGMENT, GEOGRAPHIC AND MAJOR CUSTOMER INFORMATION

NOTE 10-SEGMENT, GEOGRAPHIC AND MAJOR CUSTOMER INFORMATION

In accordance with the FASB ASC 280 guidance on disclosures about segments of an enterprise and related information, operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The Company's chief decision maker, as defined under the FASB's ASC 280 guidance, is a combination of the Chief Executive Officer and the Executive Vice President and Chief Financial Officer. To date, the Company has viewed its operations, managed its business, and used one measurement of profitability for the one operating segment – the sale of aesthetic medical equipment and services, and distribution of cosmeceutical and dermal filler products, to qualified medical practitioners. In addition, substantially all of the Company's long-lived assets are located in the United States. As a result, the financial information disclosed in the Company's Consolidated Financial Statements represents all of the material financial information related to the Company's operating segment. The following table summarizes revenue by geographic region, which is based on the shipping location of where the product is delivered, and product category (in thousands):

	Year Ended December 31,
	2011		2010		2009(1)
Revenue mix by geography:
United States	$	23,313	$	19,337	$	21,019
Japan		15,019		13,625		9,636
Asia, excluding Japan		4,984		5,131		4,727
Europe		3,571		5,801		7,087
Rest of the world		13,403		9,380		11,213
Consolidated total	$	60,290	$	53,274	$	53,682
Revenue mix by product category:
Products	$	33,703	$	27,808	$	26,842
Upgrades		3,505		4,824		6,343
Service		13,411		13,231		13,186
Titan hand piece refills		4,686		3,863		5,599
Dermal filler and cosmeceuticals(1)		4,985		3,548		1,712
Consolidated total	$	60,290	$	53,274	$	53,682

(1) Beginning in 2010, we classified revenue from dermal fillers and cosmeceuticals product in the revenue category ‘Dermal fillers and cosmeceuticals.' Previously, we classified this revenue under the category of ‘Products.' As such, we reclassified the 2009 revenue from ‘Products' to ‘Dermal fillers and cosmeceuticals.'

The Company had one customer that accounted for 8% at December 31, 2011 and 10% at December 31, 2010 of the Company's total accounts receivable balance.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 280

-SubTopic 10

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8380-108599

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 280

-SubTopic 10

-Section 50

-Paragraph 12

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Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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-SubTopic 10

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-SubTopic 10

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Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 131

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 280

-SubTopic 10

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-Publisher FASB

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-Name Accounting Standards Codification

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-Name Accounting Standards Codification

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-SubTopic 10

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-Paragraph 10

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 280

-SubTopic 10

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-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8906-108599

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 280

-SubTopic 10

-Section 50

-Paragraph 41

-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e9038-108599

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 280

-SubTopic 10

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-Paragraph 29

-URI http://asc.fasb.org/extlink&oid=6534315&loc=d3e8864-108599

+ Details

COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2011

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 11-COMMITMENTS AND CONTINGENCIES

Facility Leases

As of December 31, 2011, the Company was committed to minimum lease payments for facilities and other leased assets under long-term non-cancelable operating leases as follows (in thousands):

Year Ending December 31,	Amount
2012	$	1,680
2013		1,739
2014		1,717
2015		1,370
2016		1,310
2017 and thereafter		1,346
Future minimum rental payments	$	9,162

Gross rent expense was $1.9 million in 2011, $1.7 million in 2010 and $1.6 million in 2009.

Purchase Commitments

The Company maintains certain open inventory purchase commitments with its suppliers to ensure a smooth and continuous supply for key components. The Company's liability in these purchase commitments is generally restricted to a forecasted time-horizon as agreed between the parties. These forecasted time-horizons can vary among different suppliers. The Company's open inventory purchase commitments with its suppliers were not significant at December 31, 2011.

Indemnifications

In the normal course of business, the Company enters into agreements that contain a variety of representations, warranties, and indemnification obligations. For example, the Company has entered into indemnification agreements with each of its directors and executive officers. The Company's exposure under its various indemnification obligations is unknown and not reasonably estimable as they involve future claims that may be made against the Company. As such, the Company has not accrued any amounts for such obligations.

Litigation

A Telephone Consumer Protection Act, or TCPA, class action lawsuit was filed against the Company in January 2008 and settled in 2009 on a class-wide basis. In 2009, the Company paid a total of $950,000 in exchange for a full release of all claims and recorded a charge of $850,000 in its 2009 Consolidated Statements of Operations for the cost of the settlement, net of the administrative expenses and contributions from its insurance carrier.

Other Legal Matters

In addition to the foregoing lawsuits, the Company is named from time to time as a party to product liability and contractual lawsuits in the normal course of its business. As of December 31, 2011, the Company was not a party to any pending litigation that the Company believes will have a material impact to its results of operations other than those described above in the “Litigation” section.

- Definition

The entire disclosure for commitments and contingencies.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name FASB Interpretation (FIN)

-Number 14

-Paragraph 3

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 5

-Paragraph 9, 10, 11, 12

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 210

-SubTopic 10

-Section S99

-Paragraph 1

-Subparagraph (SX 210.5-02.25)

-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

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-Publisher FASB

-Name Accounting Standards Codification

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-Paragraph 4

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-Name Accounting Standards Codification

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-Publisher FASB

-Name Accounting Standards Codification

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-SubTopic 20

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6449706&loc=d3e16207-108621

+ Details

SUBSEQUENT EVENT

12 Months Ended

Dec. 31, 2011

SUBSEQUENT EVENT [Abstract]

SUBSEQUENT EVENT

NOTE 12-SUBSEQUENT EVENT

On February 2, 2012, the Company completed the acquisition of certain assets of IRIDEX Corporation's global aesthetic business for $5.1 million in cash. The company will account for this acquisition as a business combination.

SUPPLEMENTARY FINANCIAL DATA (UNAUDITED)

(In thousands, except per share amounts)

Quarter ended:	Dec. 31, 2011			Sept. 30, 2011			June 30, 2011			March 31, 2011			Dec. 31, 2010			Sept. 30, 2010			June 30, 2010			March 31, 2010
Net revenue	$	18,542		$	15,232		$	14,895		$	11,621		$	15,216		$	12,092		$	12,217		$	13,749
Cost of revenue		7,506			6,772			6,476			5,224			6,233			5,661			5,335			5,829
Gross profit		11,036			8,460			8,419			6,397			8,983			6,431			6,882			7,920
Operating expenses:
Sales and marketing		6,779			6,426			6,348			5,946			6,123			5,799			6,452			6,361
Research and development		2,313			2,352			2,346			2,130			2,173			1,871			1,506			1,454
General and administrative		2,878			2,310			2,588			2,328			2,238			2,352			2,744			2,242
Litigation settlement		-			-			-			-			-			-			-			-
Total operating expense		11,970			11,088			11,282			10,404			10,534			10,022			10,702			10,057
Loss from operations		(934	)		(2,628	)		(2,863	)		(4,007	)		(1,551	)		(3,591	)		(3,820	)		(2,137	)
Interest and other income, net		140			91			199			184			144			132			141			166
Loss before income taxes		(794	)		(2,537	)		(2,664	)		(3,823	)		(1,407	)		(3,459	)		(3,679	)		(1,971	)
Provision (benefit) for income taxes		93			326			(208	)		32			(127	)		-			82			47
Net loss	$	(887	)	$	(2,863	)	$	(2,456	)	$	(3,855	)	$	(1,280	)	$	(3,459	)	$	(3,761	)	$	(2,018	)
Net loss per share-basic	$	(0.06	)	$	(0.21	)	$	(0.18	)	$	(0.28	)	$	(0.09	)	$	(0.25	)	$	(0.28	)	$	(0.15	)
Net loss per share-diluted	$	(0.06	)	$	(0.21	)	$	(0.18	)	$	(0.28	)	$	(0.09	)	$	(0.25	)	$	(0.28	)	$	(0.15	)
Weighted average number of shares used in per share calculations:
Basic		13,930			13,862			13,765			13,667			13,622			13,589			13,501			13,438
Diluted		13,930			13,862			13,765			13,667			13,622			13,589			13,501			13,438

SUPPLEMENTARY FINANCIAL DATA (UNAUDITED)

12 Months Ended

Dec. 31, 2011

SUPPLEMENTARY FINANCIAL DATA (UNAUDITED) [Abstract]

SUPPLEMENTARY FINANCIAL DATA (UNAUDITED)

(In thousands, except per share amounts)

Quarter ended:	Dec. 31, 2011			Sept. 30, 2011			June 30, 2011			March 31, 2011			Dec. 31, 2010			Sept. 30, 2010			June 30, 2010			March 31, 2010
Net revenue	$	18,542		$	15,232		$	14,895		$	11,621		$	15,216		$	12,092		$	12,217		$	13,749
Cost of revenue		7,506			6,772			6,476			5,224			6,233			5,661			5,335			5,829
Gross profit		11,036			8,460			8,419			6,397			8,983			6,431			6,882			7,920
Operating expenses:
Sales and marketing		6,779			6,426			6,348			5,946			6,123			5,799			6,452			6,361
Research and development		2,313			2,352			2,346			2,130			2,173			1,871			1,506			1,454
General and administrative		2,878			2,310			2,588			2,328			2,238			2,352			2,744			2,242
Litigation settlement		-			-			-			-			-			-			-			-
Total operating expense		11,970			11,088			11,282			10,404			10,534			10,022			10,702			10,057
Loss from operations		(934	)		(2,628	)		(2,863	)		(4,007	)		(1,551	)		(3,591	)		(3,820	)		(2,137	)
Interest and other income, net		140			91			199			184			144			132			141			166
Loss before income taxes		(794	)		(2,537	)		(2,664	)		(3,823	)		(1,407	)		(3,459	)		(3,679	)		(1,971	)
Provision (benefit) for income taxes		93			326			(208	)		32			(127	)		-			82			47
Net loss	$	(887	)	$	(2,863	)	$	(2,456	)	$	(3,855	)	$	(1,280	)	$	(3,459	)	$	(3,761	)	$	(2,018	)
Net loss per share-basic	$	(0.06	)	$	(0.21	)	$	(0.18	)	$	(0.28	)	$	(0.09	)	$	(0.25	)	$	(0.28	)	$	(0.15	)
Net loss per share-diluted	$	(0.06	)	$	(0.21	)	$	(0.18	)	$	(0.28	)	$	(0.09	)	$	(0.25	)	$	(0.28	)	$	(0.15	)
Weighted average number of shares used in per share calculations:
Basic		13,930			13,862			13,765			13,667			13,622			13,589			13,501			13,438
Diluted		13,930			13,862			13,765			13,667			13,622			13,589			13,501			13,438

- Definition

The entire disclosure for the quarterly financial data in the annual financial statements. The disclosure may include a tabular presentation of financial information for each fiscal quarter for the current and previous year, including revenues, gross profit, income or loss before extraordinary items and earnings per share data. It also includes an indication if the information in the note is unaudited, comments on the aggregate effect of year-end adjustments, and an explanation of matters or transactions that affect comparability or are pertinent to an understanding of the information furnished.

+ References+ Details

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

12 Months Ended

Dec. 31, 2011

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS [Abstract]

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II

CUTERA, INC.

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

For the Years Ended December 31, 2011, 2010 and 2009

	Balance at Beginning of Year		Additions		Deductions		Balance at End of Year
Deferred tax assets valuation allowance
Year ended December 31, 2011	$	17,868	$	4,148	$	463	$	21,553
Year ended December 31, 2010	$	13,838	$	5,347	$	1,317	$	17,868
Year ended December 31, 2009	$	1,367	$	13,131	$	660	$	13,838

	Balance at Beginning of Year		Additions		Deductions		Balance at End of Year
Allowance for doubtful accounts receivable
Year ended December 31, 2011	$	20	$	39	$	51	$	8
Year ended December 31, 2010	$	586	$	116	$	682	$	20
Year ended December 31, 2009	$	61	$	675	$	150	$	586