SYNACOR, INC., 10-Q filed on 11/14/2013
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2013
Oct. 31, 2013
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
Synacor, Inc. 
 
Entity Central Index Key
0001408278 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2013 
 
Amendment Flag
false 
 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q3 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Non-accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
27,339,636 
Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
CURRENT ASSETS:
 
 
Cash and cash equivalents
$ 34,778 
$ 41,944 
Accounts receivable—net of allowance of $25 and $276
14,359 
15,624 
Deferred income taxes
1,013 
1,999 
Prepaid expenses and other current assets
2,239 
1,831 
Total current assets
52,389 
61,398 
PROPERTY AND EQUIPMENT—Net
13,244 
11,043 
DEFERRED INCOME TAXES, NON-CURRENT
3,981 
2,527 
OTHER LONG-TERM ASSETS
428 
543 
GOODWILL
819 
819 
CONVERTIBLE PROMISSORY NOTE
1,000 
INVESTMENT IN EQUITY INTEREST
86 
TOTAL ASSETS
71,947 
76,330 
CURRENT LIABILITIES:
 
 
Accounts payable
11,696 
14,204 
Accrued expenses and other current liabilities
6,043 
7,328 
Current portion of capital lease obligations
1,914 
2,127 
Total current liabilities
19,653 
23,659 
LONG-TERM PORTION OF CAPITAL LEASE OBLIGATIONS
753 
1,712 
OTHER LONG-TERM LIABILITIES
212 
148 
Total liabilities
20,618 
25,519 
COMMITMENTS AND CONTINGENCIES (Note 6)
   
   
STOCKHOLDERS’ EQUITY:
 
 
Preferred stock, $0.01 par value—10,000,000 shares authorized, no shares issued and outstanding at December 31, 2012 and September 30, 2013
Common stock, $0.01 par value—100,000,000 shares authorized, 27,517,665 issued and 27,198,165 outstanding at December 31, 2012, and 100,000,000 authorized, 27,659,136 issued and 27,339,636 shares outstanding at September 30, 2013
277 
275 
Treasury stock—at cost, 319,500 shares at December 31, 2012 and September 30, 2013
(569)
(569)
Additional paid-in capital
101,497 
99,449 
Accumulated deficit
(49,877)
(48,338)
Accumulated other comprehensive income (loss)
(6)
Total stockholders’ equity
51,329 
50,811 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$ 71,947 
$ 76,330 
Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)
In Thousands, except Share data, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 276 
$ 25 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
10,000,000 
10,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares issued
27,659,136 
27,517,665 
Common stock, shares outstanding
27,339,636 
27,198,165 
Treasury stock, shares
319,500 
319,500 
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Income Statement [Abstract]
 
 
 
 
REVENUE
$ 26,551 
$ 28,326 
$ 82,402 
$ 89,803 
COSTS AND OPERATING EXPENSES:
 
 
 
 
Cost of revenue (exclusive of depreciation shown separately below)
14,083 
15,792 
43,864 
49,432 
Research and development (exclusive of depreciation shown separately below)
7,404 
6,218 
21,548 
18,629 
Sales and marketing
2,058 
2,000 
6,332 
6,776 
General and administrative (exclusive of depreciation shown separately below)
2,805 
2,676 
8,772 
8,384 
Depreciation
1,119 
981 
3,387 
2,696 
Total costs and operating expenses
27,469 
27,667 
83,903 
85,917 
INCOME (LOSS) FROM OPERATIONS
(918)
659 
(1,501)
3,886 
OTHER INCOME (EXPENSE)
(15)
25 
(30)
INTEREST EXPENSE
(39)
(72)
(140)
(208)
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY INTEREST
(972)
612 
(1,671)
3,685 
(BENEFIT) PROVISION FOR INCOME TAXES
(260)
(40)
(446)
660 
LOSS IN EQUITY INTEREST
(120)
(314)
NET INCOME (LOSS)
$ (832)
$ 652 
$ (1,539)
$ 3,025 
NET INCOME (LOSS) PER SHARE:
 
 
 
 
Basic (in dollars per share)
$ (0.03)
$ 0.02 
$ (0.06)
$ 0.13 
Diluted (in dollars per share)
$ (0.03)
$ 0.02 
$ (0.06)
$ 0.11 
WEIGHTED AVERAGE SHARES USED TO COMPUTE NET INCOME (LOSS) PER SHARE:
 
 
 
 
Basic (in shares)
27,333,693 
27,329,106 
27,293,898 
23,728,120 
Diluted (in shares)
27,333,693 
30,010,359 
27,293,898 
28,765,152 
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Statement of Other Comprehensive Income [Abstract]
 
 
 
 
Net income (loss)
$ (832)
$ 652 
$ (1,539)
$ 3,025 
Other comprehensive income:
 
 
 
 
Change in foreign currency translation adjustment
(17)
(8)
Comprehensive income (loss)
$ (831)
$ 635 
$ (1,532)
$ 3,017 
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
Net income (loss)
$ (1,539)
$ 3,025 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
Depreciation
3,387 
2,696 
Stock-based compensation expense
1,862 
1,503 
Loss on disposal of property and equipment
32 
Deferred income taxes
(468)
563 
Loss in equity interest
314 
Change in assets and liabilities, net of effect of acquisition:
 
 
Accounts receivable, net
1,265 
(57)
Prepaid expenses and other current assets
(408)
(115)
Other long-term assets
115 
223 
Accounts payable
(2,586)
1,048 
Accrued expenses and other current liabilities
(1,246)
812 
Other long-term liabilities
64 
101 
Net cash provided by operating activities
760 
9,831 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
Purchases of property and equipment
(4,550)
(2,983)
Cash paid for business acquisition
(500)
(600)
Purchases of convertible promissory note
(1,000)
Investment in equity interest
(400)
Net cash used in investing activities
(6,450)
(3,583)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
Repayment on bank financing
(250)
Repayments on capital lease obligations
(1,662)
(1,739)
Proceeds from exercise of common stock options
179 
922 
Proceeds from initial public offering
25,364 
Initial public offering costs
(2,753)
Net cash provided by (used in) financing activities
(1,483)
21,544 
Effect of exchange rate changes on cash and cash equivalents
(8)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(7,166)
27,784 
CASH AND CASH EQUIVALENTS—Beginning of period
41,944 
10,925 
CASH AND CASH EQUIVALENTS—End of period
34,778 
38,709 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 
 
Cash paid for interest
125 
201 
Cash paid for income taxes
138 
109 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:
 
 
Property and equipment acquired under capital lease obligations
490 
2,484 
Accrued business acquisition consideration
500 
Accrued property and equipment expenditures
808 
616 
Accrued property and equipment expenditures
$ 0 
$ 60 
The Company and Summary of Significant Accounting Policies
The Company and Summary of Significant Accounting Policies
The Company and Summary of Significant Accounting Policies
Synacor, Inc., together with its consolidated subsidiary (collectively, the “Company”), is a leading provider of startpages, TV Everywhere solutions, Identity Management (IDM) and various cloud-based services across multiple devices for cable, satellite, telecom and consumer electronics companies. The Company is also a leading provider of authentication and aggregation solutions for delivery of personalized online content. The Company's technology allows its customers to package a wide array of personalized content and cloud-based services with their high-speed Internet, communications, television and other offerings. The Company's customers offer the Company's services under their own brands on Internet-enabled devices such as PCs, tablets, smartphones and connected TVs.
Initial Public Offering — In February 2012, the Company completed its initial public offering whereby 6,818,170 shares of common stock were sold to the public at a price of $5.00 per share. The Company sold 5,454,545 common shares and selling stockholders sold 1,363,625 common shares. The Company received aggregate proceeds of $25,364 from the initial public offering, net of underwriters’ discounts and commissions but before deducting offering expenses of $3,016.
In connection with the initial public offering in February 2012, the Board of Directors of the Company approved a 1-for-2 reverse stock split of the Company’s common stock. All common shares, stock options, and per share information presented in these condensed consolidated financial statements reflect the reverse stock split on a retroactive basis for all periods presented. There was no change in the par value of the Company’s common stock. The ratio by which shares of preferred stock were convertible into shares of common stock was adjusted to reflect the effects of the reverse stock split. In addition, in accordance with their rights and consistent with the conversion rates discussed in Note 7, Equity, all shares of the Company’s outstanding preferred stock were converted into common stock upon the closing of the initial public offering.
Basis of Presentation — The interim unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiary. Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise have the power to control, are accounted for using the equity method and are included as investments in equity interest on the condensed consolidated balance sheets. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the interim unaudited condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position for the periods presented. These interim unaudited condensed consolidated financial statements are not necessarily indicative of the results expected for the full fiscal year or for any subsequent period and should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
Accounting Estimates — The preparation of financial statements in conformity with GAAP in the U.S. requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. We base our 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. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, actual results may differ from estimated amounts.
Concentrations of Risk — As of December 31, 2012 and September 30, 2013, and for the three and nine months ended September 30, 2012 and 2013, the Company had concentrations equal to or exceeding 10% of the Company’s accounts receivable and revenue as follows:
 
Accounts Receivable
 
December 31,
2012
 
September 30,
2013
Google
40
%
 
31
%
Customer A
N/A

 
11

    
 
Revenue
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2013
 
2012
 
2013
Google
51
%
 
50
%
 
57
%
 
52
%

For the three and nine months ended September 30, 2012 and 2013, the following customers received revenue-share payments equal to or exceeding 10% of the Company’s cost of revenue. The costs represent revenue share paid to them for their supply of Internet traffic on the Company's startpages.
 
 
Cost of Revenue
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2013
 
2012
 
2013
Customer A
19
%
 
24
%
 
20
%
 
21
%
Customer B
16

 
13

 
17

 
13

Customer C
13

 
10

 
13

 
11

Customer D
12

 
15

 
12

 
13


Acquisitions — In January 2012, the Company acquired the assets of Carbyn, Inc., or Carbyn, an Ontario, Canada-based company. The assets acquired are principally comprised of mobile device software and technology and other intellectual property, which the Company expects to enhance its efforts in the development of next generation web applications for
mobile devices. The aggregate purchase price was up to $1,100 for the acquired assets, of which $600 was paid upon consummation of the acquisition and the remaining $500 was paid in April 2013. In addition, the Company hired seven employees from Carbyn who accepted employment with Synacor Canada, Inc., a wholly-owned subsidiary of the Company. The acquisition and its impact on the consolidated financial statements are not material. The purchase price was allocated to the assets acquired based on their respective fair values as of the acquisition date, with the amount exceeding the fair value recorded as goodwill of $819.

In November 2013, the Company acquired the assets of Teknision, Inc., or Teknision, an Ontario, Canada-based company. Teknision has created a development framework that accelerates the production of home screen and other Android applications. The Company expects to leverage the framework to enable a range of customer applications for Android devices. The Company also expects to enhance its presence in mobile and provide a platform for custom Android launchers and intelligent home screens for wireless carriers and consumer electronics companies. The aggregate purchase price is up to $1,005 for the acquired assets, of which $510 was paid upon consummation of the acquisition and the remaining $495 is due in May 2015 unless such amount is offset in satisfaction of certain indemnification obligations of Teknision. In addition, the Company hired eleven employees from Teknision who accepted employment with Synacor Canada, Inc. The acquisition and its impact on the condensed consolidated financial statements are not material.
Fair Value and Investments
Fair Value and Investments
Investments and Fair Value Measurements
In July 2013 the Company made a $1,000 investment (in the form of a convertible promissory note) in a privately held Delaware corporation called Blazer and Flip Flops, Inc., or B&FF (doing business as The Experience Engine). B&FF is a professional services company whose principals have experience integrating its customers' systems with their consumers' devices, including smartphones and tablets.
The investment in B&FF is considered an available-for-sale security and is reported on the Company’s condensed consolidated balance sheets in long term assets as a convertible promissory note.
The provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 820, Fair Value Measurements and Disclosures, establish a framework for measuring the fair value in accounting principles generally accepted in the U.S. and establish a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value as follows:
Level 1 - Level 1 inputs are defined as observable inputs such as quoted prices in active markets.
Level 2 - Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Level 3 inputs are unobservable inputs that reflect the Company’s determination of assumptions that market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including the Company’s own data.
The Company classifies its investment in B&FF within Level 3 because it is valued using unobservable inputs and at September 30, 2013 the estimated fair value is equal to the purchase price of $1,000.
Property and Equipment - Net
Property and Equipment - Net
Property and Equipment—Net
Property and equipment, net consisted of the following (in thousands):
 
December 31,
2012
 
September 30,
2013
Computer equipment (1)
$
17,630

 
$
18,829

Computer software
3,715

 
4,575

Furniture and fixtures
1,050

 
1,520

Leasehold improvements
732

 
968

Work in process (2)
226

 
2,931

Other
173

 
173

 
23,526

 
28,996

Less accumulated depreciation (3)
(12,483
)
 
(15,752
)
Total property and equipment—net
$
11,043

 
$
13,244

Notes:
(1)
Includes equipment under capital lease obligations of approximately $5,882 and $4,988 as of December 31, 2012 and September 30, 2013, respectively.
(2)
Includes internal-use software development costs of $40 and $2,800 as of December 31, 2012 and September 30, 2013, respectively.
(3)
Includes $1,834 and $1,798 of accumulated depreciation of equipment under capital leases as of December 31, 2012 and September 30, 2013, respectively.
Accrued Expenses and Other Current Liabilities
Accrued Expenses and Other Current Liabilities
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
 
December 31,
2012
 
September 30,
2013
Accrued compensation
$
4,265

 
$
3,160

Accrued content fees
555

 
881

Accrued property and equipment expenditures
132

 
593

Accrued business acquisition consideration
500

 

Unearned revenue on contracts
297

 
437

Other
1,579

 
972

Total
$
7,328

 
$
6,043

Information About Segment and Geographic Areas
Information About Segment and Geographic Areas
Information About Segment and Geographic Areas
The Company considers operating segments to be components of the Company in which separate financial information is available that is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance. The chief operating decision maker for the Company is the Chief Executive Officer. The Chief Executive Officer reviews financial information presented on a total Company basis, accompanied by information about revenue by major service line for purposes of allocating resources and evaluating financial performance. The Company has one business activity and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the Company level. Accordingly, the Company has determined that it has a single reporting segment and operating unit structure.
The following table sets forth revenue and long-lived tangible assets by geographic area (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2013
 
2012
 
2013
Revenue
 
 
 
 
 
 
 
United States
$
28,152

 
$
26,386

 
$
89,307

 
$
81,883

United Kingdom
174

 
165

 
496

 
519

Total revenue
$
28,326

 
$
26,551

 
$
89,803

 
$
82,402

 
December 31,
2012
 
September 30,
2013
Long-lived tangible assets
 
 
 
United States
$
10,638

 
$
12,984

Netherlands
405

 
260

Total long-lived tangible assets
$
11,043

 
$
13,244

Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Litigation —From time to time, the Company is a party to legal actions. In the opinion of management, the outcome of these matters is not expected to have a material impact on the consolidated financial statements of the Company.
Contract Commitments —The Company is obligated to make payments under various contracts with vendors and other business partners, principally for revenue-share and content arrangements. Contract commitments as of September 30, 2013 are summarized as follows (in thousands):
Year ending December 31:
 
2013 (remaining three months)
$
1,220

2014
1,419

2015
1,080

2016
1,080

2017
360

Due after 5 years

Total contract commitments
$
5,159

Equity
Equity
Equity
Common Stock — Effective on February 15, 2012, the Company’s board of directors and stockholders approved the Fifth Amended and Restated Certificate of Incorporation. The total number of common shares that the Company is authorized to issue is 100 million with a par value of $0.01 per share.
Preferred Stock — Effective on February 15, 2012, the Company’s board of directors and stockholders approved the Fifth Amended and Restated Certificate of Incorporation. The total number of preferred shares that the Company is authorized to issue is 10 million with a par value of $0.01 per share. None have been issued to date.
Conversion — Prior to the Company's initial public offering, each share of Series A, A-1, B, and C preferred stock was convertible at the option of the holder at any time into common stock. The conversion rate was the quotient obtained by dividing the original issue price of the Series A, A-1, B, or C by the conversion price. Subsequent to the Second Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation, the conversion price was adjusted to effect a conversion of one preferred share into one and one-half common shares, as explained in Note 1, The Company and Summary of Significant Accounting Policies. The conversion price was subject to adjustment as set forth in the Restated Certificate of Incorporation for certain dilutive issuances, splits, and combinations, as therein defined. Conversion was automatic upon either the consent of the holders of 66% of the outstanding shares of preferred stock or the effective date of a firm commitment underwritten public offering of the Company’s common stock in which the post-offering valuation on a fully diluted basis was at least $150 million and the proceeds were not less than $25 million. All shares of the Company’s outstanding preferred stock were converted into common stock in February 2012 in connection with the Company’s initial public offering.
Stock-based Compensation
Stock-based Compensation
Stock-based Compensation
The Company recorded $520 and $683 of stock-based compensation expense for the three months ended September 30, 2012 and 2013, respectively. Stock-based compensation expense for the nine months ended September 30, 2012 and 2013, was $1,503 and $1,862, respectively. No income tax deduction is allowed for incentive stock options, or ISOs. Accordingly, no deferred income tax asset is recorded for the expense related to these options. Stock option grants of non-qualified stock options, or NQSOs, result in the creation of a deferred tax asset, which is a temporary difference, until the time that the option is exercised.
Total stock-based compensation expense included in the accompanying condensed consolidated statements of operations for the periods presented, is as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2013
 
2012
 
2013
Research and development
$
146

 
$
318

 
$
373

 
$
860

Sales and marketing
119

 
97

 
292

 
249

General and administrative
255

 
268

 
838

 
753

Total stock-based compensation expense
$
520

 
$
683

 
$
1,503

 
$
1,862


Stock Option Activity —A summary of the stock option activity for the nine months ended September 30, 2013 is presented below:
 
Number of
Stock
Options
 
Weighted
Average
Exercise
Price
 
Aggregate
Intrinsic Value
(in thousands)
 
Weighted Average Remaining Contractual Term (in years)
Outstanding—January 1, 2013
4,510,807

 
$
4.06

 
 
 
 
Granted
1,240,750

 
3.57

 
 
 
 
Exercised
(141,471
)
 
1.26

 
 
 
 
Forfeited
(138,198
)
 
6.83

 
 
 
 
Outstanding—September 30, 2013
5,471,888

 
3.91

 
$
1,115

 
7.43
Vested and expected to vest—September 30, 2013
5,029,234

 
3.85

 
$
1,115

 
7.31
Vested and exercisable—September 30, 2013
2,520,618

 
3.06

 
$
1,114

 
5.78

Aggregate intrinsic value represents the difference between the Company’s closing stock price of its common stock and the exercise price of outstanding, in-the-money options. The Company’s closing stock price as reported on the NASDAQ as of September 30, 2013 was $2.58. The total intrinsic value of options exercised was approximately $0 and $186 for the three and nine months ended September 30, 2013, respectively.
The per-share fair value of each stock option was determined on the date of grant using the Black-Scholes option pricing model using the following assumptions:
Grant Date
Options
Granted
 
Weighted-
Average
Exercise Price
 
Expected
Life of
Options
(In years)
 
Risk-Free
Interest
Rate
 
Expected
Volatility
 
Expected
Dividend
Yield
February 3, 2013
44,500

 
$
5.55

 
6.25
 
1.43
%
 
61
%
 
%
March 11, 2013
50,500

 
$
3.12

 
6.25
 
1.43
%
 
60
%
 
%
April 29, 2013
62,500

 
$
2.88

 
6.25
 
1.10
%
 
60
%
 
%
May 16, 2013
889,250

 
$
3.68

 
6.25
 
1.25
%
 
60
%
 
%
June 17, 2013
45,000

 
$
3.23

 
6.25
 
1.57
%
 
60
%
 
%
July 26, 2013
47,500

 
$
3.25

 
6.25
 
1.67
%
 
59
%
 
%
September 16, 2013
101,500

 
$
2.69

 
6.25
 
1.96
%
 
59
%
 
%

As of September 30, 2013, the unrecognized compensation cost related to non-vested options granted, for which vesting is probable, under the plan was approximately $6,389. This cost is expected to be recognized over a weighted-average period of 2.8 years. The total fair value of shares vested was $668 and $2,066 for the three and nine months ended September 30, 2013, respectively.

RSU Activity—A summary of RSU activity for the nine months ended September 30, 2013, is as follows:
 
Number of
Shares
 
Weighted-Average
Grant Date Fair
Value
Unvested - January 1, 2013
50,000

 
$
5.82

Granted
7,500

 
3.86

Released

 

Forfeited

 

Unvested - September 30, 2013
57,500

 
$
5.54

Expected to vest—September 30, 2013
48,875

 
$
5.54


As of September 30, 2013, total unrecognized compensation cost, adjusted for estimated forfeitures, related to RSUs was approximately $236, which is expected to be recognized over the next 3.22 years.
Equity Investments
Equity Investments
Investment in Equity Interest
In March 2013, the Company entered into a Joint Venture Agreement, pursuant to which it owns 50% of the outstanding common stock and 100% of the preferred shares of Synacor China, Ltd., or the JV Company. In July 2013 the Company provided $400 in initial funding and has agreed to provide up to $1,600 in additional funding to the JV Company over the following two years. Subject to the completion of customary regulatory requirements, the JV Company will, through its wholly foreign-owned subsidiary in the People's Republic of China (the “PRC”), supply authentication and aggregation solutions for the delivery of online content and services to customers in the PRC.
The investment in the JV Company is being accounted for using the equity method and is classified as an investment in equity interest on the Company’s condensed consolidated balance sheets. The Company records its share of the results of the JV Company within earnings in equity interest in the condensed consolidated statements of operations. Since acquiring its interest in the JV Company, the company has recorded, in retained earnings, cumulative losses in equity interest of $314.
Net Income Per Common Share Data
Net Income (Loss) Per Common Share Data
Net Income (Loss) Per Common Share Data
Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. The Company’s potential common shares consist of the incremental common shares issuable upon the exercise of stock options, and to a lesser extent, shares issuable upon the release of RSUs. In addition, for the nine months ended September 30, 2012, the potential common shares included the conversion of preferred stock on an as if converted basis prior to the Company's initial public offering in February 2012. The dilutive effect of these potential common shares is reflected in diluted earnings per share by application of the treasury stock method.
The following table presents the calculation of basic and diluted net income (loss) per share for the three and nine month periods ended September 30, 2012 and 2013 (in thousands, except share and per share amounts):
 
Three Months Ended,
September 30,
 
Nine Months Ended,
September 30,
 
2012
 
2013
 
2012
 
2013
Basic net income (loss) per share:


 


 
 
 
 
  Numerator:


 


 
 
 
 
        Net income (loss)
$
652

 
$
(832
)
 
$
3,025

 
$
(1,539
)
  Denominator:
 
 
 
 
 
 
 
        Weighted-average common shares outstanding
27,329,106

 
27,333,693

 
23,728,120

 
27,293,898

Basic net income (loss) per share
$
0.02

 
$
(0.03
)
 
$
0.13

 
$
(0.06
)
 
 
 
 
 
 
 
 
Diluted net income (loss) per share:
 
 
 
 
 
 
 
  Numerator:
 
 
 
 
 
 
 
        Net income (loss)
$
652

 
$
(832
)
 
$
3,025

 
$
(1,539
)
  Denominator:
 
 
 
 
 
 
 
        Number of shares used in basic calculation
27,329,106

 
27,333,693

 
23,728,120

 
27,293,898

        Add weighted-average effect of dilutive securities:
 
 
 
 
 
 
 
        Conversion of preferred stock (as if converted basis)

 

 
2,602,923

 

        Employee stock options and RSUs
2,681,253

 

 
2,434,109

 

  Number of shares used in diluted calculation
30,010,359

 
27,333,693

 
28,765,152

 
27,293,898

Diluted net income (loss) per share
$
0.02

 
$
(0.03
)
 
$
0.11

 
$
(0.06
)

The following equivalent shares were excluded from the calculation of diluted net income (loss) per share because their effect would have been anti-dilutive for the periods presented:
 
Three Months Ended,
September 30,
 
Nine Months Ended,
September 30,
  
2012
 
2013
 
2012
 
2013
Antidilutive equity awards:
 
 
 
 
 
 
 
Stock options and RSUs
132,850

 
5,529,388

 
132,850

 
5,529,388


* * * * * *
The Company and Summary of Significant Accounting Policies (Policies)
Initial Public Offering — In February 2012, the Company completed its initial public offering whereby 6,818,170 shares of common stock were sold to the public at a price of $5.00 per share. The Company sold 5,454,545 common shares and selling stockholders sold 1,363,625 common shares. The Company received aggregate proceeds of $25,364 from the initial public offering, net of underwriters’ discounts and commissions but before deducting offering expenses of $3,016.
In connection with the initial public offering in February 2012, the Board of Directors of the Company approved a 1-for-2 reverse stock split of the Company’s common stock. All common shares, stock options, and per share information presented in these condensed consolidated financial statements reflect the reverse stock split on a retroactive basis for all periods presented. There was no change in the par value of the Company’s common stock. The ratio by which shares of preferred stock were convertible into shares of common stock was adjusted to reflect the effects of the reverse stock split. In addition, in accordance with their rights and consistent with the conversion rates discussed in Note 7, Equity, all shares of the Company’s outstanding preferred stock were converted into common stock upon the closing of the initial public offering.
Basis of Presentation — The interim unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiary. Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise have the power to control, are accounted for using the equity method and are included as investments in equity interest on the condensed consolidated balance sheets. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the interim unaudited condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position for the periods presented. These interim unaudited condensed consolidated financial statements are not necessarily indicative of the results expected for the full fiscal year or for any subsequent period and should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
Accounting Estimates — The preparation of financial statements in conformity with GAAP in the U.S. requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. We base our 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. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, actual results may differ from estimated amounts.
Concentrations of Risk — As of December 31, 2012 and September 30, 2013, and for the three and nine months ended September 30, 2012 and 2013, the Company had concentrations equal to or exceeding 10% of the Company’s accounts receivable and revenue as follows:
 
Accounts Receivable
 
December 31,
2012
 
September 30,
2013
Google
40
%
 
31
%
Customer A
N/A

 
11

    
 
Revenue
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2013
 
2012
 
2013
Google
51
%
 
50
%
 
57
%
 
52
%

For the three and nine months ended September 30, 2012 and 2013, the following customers received revenue-share payments equal to or exceeding 10% of the Company’s cost of revenue. The costs represent revenue share paid to them for their supply of Internet traffic on the Company's startpages.
 
 
Cost of Revenue
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2013
 
2012
 
2013
Customer A
19
%
 
24
%
 
20
%
 
21
%
Customer B
16

 
13

 
17

 
13

Customer C
13

 
10

 
13

 
11

Customer D
12

 
15

 
12

 
13


The Company and Summary of Significant Accounting Policies (Tables)
As of December 31, 2012 and September 30, 2013, and for the three and nine months ended September 30, 2012 and 2013, the Company had concentrations equal to or exceeding 10% of the Company’s accounts receivable and revenue as follows:
 
Accounts Receivable
 
December 31,
2012
 
September 30,
2013
Google
40
%
 
31
%
Customer A
N/A

 
11

    
 
Revenue
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2013
 
2012
 
2013
Google
51
%
 
50
%
 
57
%
 
52
%
For the three and nine months ended September 30, 2012 and 2013, the following customers received revenue-share payments equal to or exceeding 10% of the Company’s cost of revenue. The costs represent revenue share paid to them for their supply of Internet traffic on the Company's startpages.
 
 
Cost of Revenue
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2013
 
2012
 
2013
Customer A
19
%
 
24
%
 
20
%
 
21
%
Customer B
16

 
13

 
17

 
13

Customer C
13

 
10

 
13

 
11

Customer D
12

 
15

 
12

 
13


Property and Equipment - Net (Tables)
Schedule of property and equipment
Property and equipment, net consisted of the following (in thousands):
 
December 31,
2012
 
September 30,
2013
Computer equipment (1)
$
17,630

 
$
18,829

Computer software
3,715

 
4,575

Furniture and fixtures
1,050

 
1,520

Leasehold improvements
732

 
968

Work in process (2)
226

 
2,931

Other
173

 
173

 
23,526

 
28,996

Less accumulated depreciation (3)
(12,483
)
 
(15,752
)
Total property and equipment—net
$
11,043

 
$
13,244

Notes:
(1)
Includes equipment under capital lease obligations of approximately $5,882 and $4,988 as of December 31, 2012 and September 30, 2013, respectively.
(2)
Includes internal-use software development costs of $40 and $2,800 as of December 31, 2012 and September 30, 2013, respectively.
(3)
Includes $1,834 and $1,798 of accumulated depreciation of equipment under capital leases as of December 31, 2012 and September 30, 2013, respectively.
Accrued Expenses and Other Current Liabilities (Tables)
Schedule of accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
 
December 31,
2012
 
September 30,
2013
Accrued compensation
$
4,265

 
$
3,160

Accrued content fees
555

 
881

Accrued property and equipment expenditures
132

 
593

Accrued business acquisition consideration
500

 

Unearned revenue on contracts
297

 
437

Other
1,579

 
972

Total
$
7,328

 
$
6,043

Information About Segment and Geographic Areas (Tables)
Schedule of revenue and long-lived tangible assets by geographic area
The following table sets forth revenue and long-lived tangible assets by geographic area (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2013
 
2012
 
2013
Revenue
 
 
 
 
 
 
 
United States
$
28,152

 
$
26,386

 
$
89,307

 
$
81,883

United Kingdom
174

 
165

 
496

 
519

Total revenue
$
28,326

 
$
26,551

 
$
89,803

 
$
82,402

 
December 31,
2012
 
September 30,
2013
Long-lived tangible assets
 
 
 
United States
$
10,638

 
$
12,984

Netherlands
405

 
260

Total long-lived tangible assets
$
11,043

 
$
13,244

Commitments and Contingencies (Tables)
Schedule of contract commitments
Contract commitments as of September 30, 2013 are summarized as follows (in thousands):
Year ending December 31:
 
2013 (remaining three months)
$
1,220

2014
1,419

2015
1,080

2016
1,080

2017
360

Due after 5 years

Total contract commitments
$
5,159

Stock-based Compensation (Tables)
Total stock-based compensation expense included in the accompanying condensed consolidated statements of operations for the periods presented, is as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2012
 
2013
 
2012
 
2013
Research and development
$
146

 
$
318

 
$
373

 
$
860

Sales and marketing
119

 
97

 
292

 
249

General and administrative
255

 
268

 
838

 
753

Total stock-based compensation expense
$
520

 
$
683

 
$
1,503

 
$
1,862

A summary of the stock option activity for the nine months ended September 30, 2013 is presented below:
 
Number of
Stock
Options
 
Weighted
Average
Exercise
Price
 
Aggregate
Intrinsic Value
(in thousands)
 
Weighted Average Remaining Contractual Term (in years)
Outstanding—January 1, 2013
4,510,807

 
$
4.06

 
 
 
 
Granted
1,240,750

 
3.57

 
 
 
 
Exercised
(141,471
)
 
1.26

 
 
 
 
Forfeited
(138,198
)
 
6.83

 
 
 
 
Outstanding—September 30, 2013
5,471,888

 
3.91

 
$
1,115

 
7.43
Vested and expected to vest—September 30, 2013
5,029,234

 
3.85

 
$
1,115

 
7.31
Vested and exercisable—September 30, 2013
2,520,618

 
3.06

 
$
1,114

 
5.78
The per-share fair value of each stock option was determined on the date of grant using the Black-Scholes option pricing model using the following assumptions:
Grant Date
Options
Granted
 
Weighted-
Average
Exercise Price
 
Expected
Life of
Options
(In years)
 
Risk-Free
Interest
Rate
 
Expected
Volatility
 
Expected
Dividend
Yield
February 3, 2013
44,500

 
$
5.55

 
6.25
 
1.43
%
 
61
%
 
%
March 11, 2013
50,500

 
$
3.12

 
6.25
 
1.43
%
 
60
%
 
%
April 29, 2013
62,500

 
$
2.88

 
6.25
 
1.10
%
 
60
%
 
%
May 16, 2013
889,250

 
$
3.68

 
6.25
 
1.25
%
 
60
%
 
%
June 17, 2013
45,000

 
$
3.23

 
6.25
 
1.57
%
 
60
%
 
%
July 26, 2013
47,500

 
$
3.25

 
6.25
 
1.67
%
 
59
%
 
%
September 16, 2013
101,500

 
$
2.69

 
6.25
 
1.96
%
 
59
%
 
%
A summary of RSU activity for the nine months ended September 30, 2013, is as follows:
 
Number of
Shares
 
Weighted-Average
Grant Date Fair
Value
Unvested - January 1, 2013
50,000

 
$
5.82

Granted
7,500

 
3.86

Released

 

Forfeited

 

Unvested - September 30, 2013
57,500

 
$
5.54

Expected to vest—September 30, 2013
48,875

 
$
5.54

Net Income (Loss) Per Common Share Data (Tables)
The following table presents the calculation of basic and diluted net income (loss) per share for the three and nine month periods ended September 30, 2012 and 2013 (in thousands, except share and per share amounts):
 
Three Months Ended,
September 30,
 
Nine Months Ended,
September 30,
 
2012
 
2013
 
2012
 
2013
Basic net income (loss) per share:


 


 
 
 
 
  Numerator:


 


 
 
 
 
        Net income (loss)
$
652

 
$
(832
)
 
$
3,025

 
$
(1,539
)
  Denominator:
 
 
 
 
 
 
 
        Weighted-average common shares outstanding
27,329,106

 
27,333,693

 
23,728,120

 
27,293,898

Basic net income (loss) per share
$
0.02

 
$
(0.03
)
 
$
0.13

 
$
(0.06
)
 
 
 
 
 
 
 
 
Diluted net income (loss) per share:
 
 
 
 
 
 
 
  Numerator:
 
 
 
 
 
 
 
        Net income (loss)
$
652

 
$
(832
)
 
$
3,025

 
$
(1,539
)
  Denominator:
 
 
 
 
 
 
 
        Number of shares used in basic calculation
27,329,106

 
27,333,693

 
23,728,120

 
27,293,898

        Add weighted-average effect of dilutive securities:
 
 
 
 
 
 
 
        Conversion of preferred stock (as if converted basis)

 

 
2,602,923

 

        Employee stock options and RSUs
2,681,253

 

 
2,434,109

 

  Number of shares used in diluted calculation
30,010,359

 
27,333,693

 
28,765,152

 
27,293,898

Diluted net income (loss) per share
$
0.02

 
$
(0.03
)
 
$
0.11

 
$
(0.06
)
The following equivalent shares were excluded from the calculation of diluted net income (loss) per share because their effect would have been anti-dilutive for the periods presented:
 
Three Months Ended,
September 30,
 
Nine Months Ended,
September 30,
  
2012
 
2013
 
2012
 
2013
Antidilutive equity awards:
 
 
 
 
 
 
 
Stock options and RSUs
132,850

 
5,529,388

 
132,850

 
5,529,388

The Company and Summary of Significant Accounting Policies - Initial Public Offering (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
9 Months Ended 1 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Feb. 29, 2012
IPO [Member]
Subsidiary, Sale of Stock [Line Items]
 
 
 
Number of common stock sold to the public
 
 
6,818,170 
Sale of stock, price per share
 
 
$ 5.00 
Shares sold by company
 
 
5,454,545 
Shares sold by selling stockholders
 
 
1,363,625 
Proceeds from initial public offering
$ 0 
$ 25,364 
$ 25,364 
Offering expenses
 
 
$ 3,016 
Reverse stock split conversion ratio
 
 
0.5 
The Company and Summary of Significant Accounting Policies - Concentrations of Risk (Details) (Customer Concentration Risk [Member])
9 Months Ended 12 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2013
Accounts Receivable [Member]
Google [Member]
Dec. 31, 2012
Accounts Receivable [Member]
Google [Member]
Sep. 30, 2013
Accounts Receivable [Member]
Customer A [Member]
Sep. 30, 2013
Revenue [Member]
Google [Member]
Sep. 30, 2012
Revenue [Member]
Google [Member]
Sep. 30, 2013
Revenue [Member]
Google [Member]
Sep. 30, 2012
Revenue [Member]
Google [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer A [Member]
Sep. 30, 2012
Cost of Revenue [Member]
Customer A [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer A [Member]
Sep. 30, 2012
Cost of Revenue [Member]
Customer A [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer B [Member]
Sep. 30, 2012
Cost of Revenue [Member]
Customer B [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer B [Member]
Sep. 30, 2012
Cost of Revenue [Member]
Customer B [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer C [Member]
Sep. 30, 2012
Cost of Revenue [Member]
Customer C [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer C [Member]
Sep. 30, 2012
Cost of Revenue [Member]
Customer C [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer D [Member]
Sep. 30, 2012
Cost of Revenue [Member]
Customer D [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer D [Member]
Sep. 30, 2012
Cost of Revenue [Member]
Customer D [Member]
Schedule of concentrations equal to or exceeding 10% of the Company's accounts receivable and revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Concentration risk, percentage
31.00% 
40.00% 
11.00% 
50.00% 
51.00% 
52.00% 
57.00% 
24.00% 
19.00% 
21.00% 
20.00% 
13.00% 
16.00% 
13.00% 
17.00% 
10.00% 
13.00% 
11.00% 
13.00% 
15.00% 
12.00% 
13.00% 
12.00% 
The Company and Summary of Significant Accounting Policies - Acquisition (Details) (USD $)
In Thousands, unless otherwise specified
1 Months Ended
Jan. 31, 2012
Carbyn Inc [Member]
person
Nov. 30, 2013
Subsequent Event [Member]
Teknision, Inc [Member]
person
Business Acquisition [Line Items]
 
 
Aggregate purchase price for the acquired assets
$ 1,100 
$ 1,005 
Amount paid upon consummation of the acquisition
600 
510 
Payment remaining
500 
495 
Employees hired from acquiree
11 
Amount exceeding the fair value recorded as goodwill
$ 819 
 
Fair Value and Investments (Details) (USD $)
In Thousands, unless otherwise specified
1 Months Ended 9 Months Ended
Jul. 31, 2013
Sep. 30, 2013
Sep. 30, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
 
Payments to acquire investment
$ 1,000 
$ 1,000 
$ 0 
Level 3 [Member]
 
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
 
Estimated fair value of convertible promissory note
 
$ 1,000 
 
Property and Equipment - Net (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
Schedule of property and equipment
 
 
Property and equipment-gross
$ 28,996 
$ 23,526 
Less accumulated depreciation
(15,752)1
(12,483)1
Total property and equipment-net
13,244 
11,043 
Computer equipment [Member]
 
 
Schedule of property and equipment
 
 
Property and equipment-gross
18,829 2
17,630 2
Computer software [Member]
 
 
Schedule of property and equipment
 
 
Property and equipment-gross
4,575 
3,715 
Furniture and fixtures [Member]
 
 
Schedule of property and equipment
 
 
Property and equipment-gross
1,520 
1,050 
Leasehold improvements [Member]
 
 
Schedule of property and equipment
 
 
Property and equipment-gross
968 
732 
Work in process [Member]
 
 
Schedule of property and equipment
 
 
Property and equipment-gross
2,931 3
226 3
Other [Member]
 
 
Schedule of property and equipment
 
 
Property and equipment-gross
$ 173 
$ 173 
Property and Equipment - Net - Additional Disclosures (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
Property and Equipment - Net (Textual) [Abstract]
 
 
Property and equipment-gross
$ 28,996 
$ 23,526 
Accumulated depreciation of equipment under capital leases
15,752 1
12,483 1
Capital lease obligations [Member]
 
 
Property and Equipment - Net (Textual) [Abstract]
 
 
Accumulated depreciation of equipment under capital leases
1,798 
1,834 
Computer equipment [Member]
 
 
Property and Equipment - Net (Textual) [Abstract]
 
 
Property and equipment-gross
18,829 2
17,630 2
Computer equipment [Member] |
Capital lease obligations [Member]
 
 
Property and Equipment - Net (Textual) [Abstract]
 
 
Property and equipment-gross
4,988 
5,882 
Work in process [Member]
 
 
Property and Equipment - Net (Textual) [Abstract]
 
 
Property and equipment-gross
2,931 3
226 3
Software Development [Member]
 
 
Property and Equipment - Net (Textual) [Abstract]
 
 
Property and equipment-gross
$ 2,800 
$ 40 
Accrued Expenses and Other Current Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
Schedule of accrued expenses and other current liabilities
 
 
Accrued compensation
$ 3,160 
$ 4,265 
Accrued content fees
881 
555 
Accrued property and equipment expenditures
593 
132 
Accrued business acquisition consideration
500 
Unearned revenue on contracts
437 
297 
Other
972 
1,579 
Total
$ 6,043 
$ 7,328 
Information About Segment and Geographic Areas (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Dec. 31, 2012
Schedule of revenue and long-lived tangible assets by geographic area
 
 
 
 
 
Revenue
$ 26,551 
$ 28,326 
$ 82,402 
$ 89,803 
 
Long-lived tangible assets
13,244 
 
13,244 
 
11,043 
United States [Member]
 
 
 
 
 
Schedule of revenue and long-lived tangible assets by geographic area
 
 
 
 
 
Revenue
26,386 
28,152 
81,883 
89,307 
 
Long-lived tangible assets
12,984 
 
12,984 
 
10,638 
United Kingdom [Member]
 
 
 
 
 
Schedule of revenue and long-lived tangible assets by geographic area
 
 
 
 
 
Revenue
165 
174 
519 
496 
 
Netherlands [Member]
 
 
 
 
 
Schedule of revenue and long-lived tangible assets by geographic area
 
 
 
 
 
Long-lived tangible assets
$ 260 
 
$ 260 
 
$ 405 
Commitments and Contingencies (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2013
Schedule of contract commitments
 
2013 (remaining three months)
$ 1,220 
2013
1,419 
2014
1,080 
2015
1,080 
2016
360 
Due after 5 years
Total contract commitments
$ 5,159 
Equity (Details) (USD $)
9 Months Ended
Sep. 30, 2013
Dec. 31, 2012
Feb. 15, 2012
Conversion of Stock
 
 
 
Conversion price adjustment
one preferred share into one and one-half common shares 
 
 
Equity (Textual)
 
 
 
Common stock, shares authorized
100,000,000 
100,000,000 
100,000,000 
Common stock, par value
$ 0.01 
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
10,000,000 
10,000,000 
10,000,000 
Preferred stock, par value
$ 0.01 
$ 0.01 
$ 0.01 
Preferred stock, shares issued
 
Automatic Conversion of Shares [Member]
 
 
 
Conversion of Stock
 
 
 
Percentage of outstanding shares of preferred stockholders required for conversion
66.00% 
 
 
Minimum post-offering valuation on a fully diluted basis required
$ 150,000,000 
 
 
Minimum proceeds required
$ 25,000,000 
 
 
Common Stock [Member]
 
 
 
Conversion of Stock
 
 
 
Number of common stock shares issued upon conversion of one convertible preferred stock
1.5 
 
 
Stock-based Compensation - Allocation of Stock-based Compensation Expense (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Schedule of total stock-based compensation expense
 
 
 
 
Total stock-based compensation expense
$ 683 
$ 520 
$ 1,862 
$ 1,503 
Research and development [Member]
 
 
 
 
Schedule of total stock-based compensation expense
 
 
 
 
Total stock-based compensation expense
318 
146 
860 
373 
Sales and marketing [Member]
 
 
 
 
Schedule of total stock-based compensation expense
 
 
 
 
Total stock-based compensation expense
97 
119 
249 
292 
General and administrative [Member]
 
 
 
 
Schedule of total stock-based compensation expense
 
 
 
 
Total stock-based compensation expense
$ 268 
$ 255 
$ 753 
$ 838 
Stock-based Compensation - Stock Option Activity (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
9 Months Ended
Sep. 30, 2013
Summary of the status of options granted under all options
 
Outstanding number of stock options beginning balance
4,510,807 
Number of stock options granted
1,240,750 
Number of stock options exercised
(141,471)
Number of stock options forfeited
(138,198)
Outstanding number of stock options ending balance
5,471,888 
Outstanding number of stock options expected to vest
5,029,234 
Outstanding number of stock options vested and exercisable
2,520,618 
Weighted Average Exercise Price
 
Outstanding, Weighted Average Exercise Price, Beginning
$ 4.06 
Weighted Average Exercise Price Granted
$ 3.57 
Weighted Average Exercise Price Exercised
$ 1.26 
Weighted Average Exercise Price Forfeited
$ 6.83 
Outstanding, Weighted Average Exercise Price, Ending Balance
$ 3.91 
Expected to vest, Weighted Average Exercise Price Ending Balance
$ 3.85 
Vested and exercisable, Weighted Average Exercise Price Ending Balance
$ 3.06 
Aggregate intrinsic value, outstanding
$ 1,115 
Aggregate intrinsic value, vested and expected to vest
1,115 
Aggregate intrinsic value, vested and exercisable
$ 1,114 
Weighted Average Remaining Contractual Term (in years), outstanding
7 years 5 months 5 days 
Weighted Average Remaining Contractual Term (in years), vested and expected to vest
7 years 3 months 22 days 
Weighted Average Remaining Contractual Term (in years), vested and exercisable
5 years 9 months 11 days 
Stock-based Compensation - Weighted Average Assumptions (Details) (Stock options [Member], USD $)
9 Months Ended
Sep. 30, 2013
February 3, 2013 [Member]
 
Summary of the option grants and assumptions used in the Black-Scholes option pricing model to value the options
 
Grant Date
Feb. 03, 2013 
Options Granted
44,500 
Weighted-Average Fair Value
$ 5.55 
Expected Life of Options (In years)
6 years 3 months 
Risk-Free Interest Rate
1.43% 
Expected Volatility
61.00% 
Expected Dividend Yield
0.00% 
March 11, 2013 [Member]
 
Summary of the option grants and assumptions used in the Black-Scholes option pricing model to value the options
 
Grant Date
Mar. 11, 2013 
Options Granted
50,500 
Weighted-Average Fair Value
$ 3.12 
Expected Life of Options (In years)
6 years 3 months 
Risk-Free Interest Rate
1.43% 
Expected Volatility
60.00% 
Expected Dividend Yield
0.00% 
April 29, 2013 [Member]
 
Summary of the option grants and assumptions used in the Black-Scholes option pricing model to value the options
 
Grant Date
Apr. 29, 2013 
Options Granted
62,500 
Weighted-Average Fair Value
$ 2.88 
Expected Life of Options (In years)
6 years 3 months 
Risk-Free Interest Rate
1.10% 
Expected Volatility
60.00% 
Expected Dividend Yield
0.00% 
May 16, 2013 [Member]
 
Summary of the option grants and assumptions used in the Black-Scholes option pricing model to value the options
 
Grant Date
May 16, 2013 
Options Granted
889,250 
Weighted-Average Fair Value
$ 3.68 
Expected Life of Options (In years)
6 years 3 months 
Risk-Free Interest Rate
1.25% 
Expected Volatility
60.00% 
Expected Dividend Yield
0.00% 
June 17, 2013 [Member]
 
Summary of the option grants and assumptions used in the Black-Scholes option pricing model to value the options
 
Grant Date
Jun. 17, 2013 
Options Granted
45,000 
Weighted-Average Fair Value
$ 3.23 
Expected Life of Options (In years)
6 years 3 months 
Risk-Free Interest Rate
1.57% 
Expected Volatility
60.00% 
Expected Dividend Yield
0.00% 
July 26, 2013 [Member]
 
Summary of the option grants and assumptions used in the Black-Scholes option pricing model to value the options
 
Grant Date
Jul. 26, 2013 
Options Granted
47,500 
Weighted-Average Fair Value
$ 3.25 
Expected Life of Options (In years)
6 years 3 months 
Risk-Free Interest Rate
1.67% 
Expected Volatility
59.00% 
Expected Dividend Yield
0.00% 
September 16, 2013 [Member]
 
Summary of the option grants and assumptions used in the Black-Scholes option pricing model to value the options
 
Grant Date
Sep. 16, 2013 
Options Granted
101,500 
Weighted-Average Fair Value
$ 2.69 
Expected Life of Options (In years)
6 years 3 months 
Risk-Free Interest Rate
1.96% 
Expected Volatility
59.00% 
Expected Dividend Yield
0.00% 
Stock-based Compensation - RSU Activity (Details) (Restricted Stock Units (RSUs) [Member], USD $)
9 Months Ended
Sep. 30, 2013
Restricted Stock Units (RSUs) [Member]
 
Number of Shares
 
Unvested - January 1, 2013
50,000 
Granted
7,500 
Released
Forfeited
Unvested - September 30, 2013
57,500 
Expected to vest—September 30, 2013
48,875 
Weighted-Average Grant Date Fair Value
 
Unvested - January 1, 2013
$ 5.82 
Granted
$ 3.86 
Released
$ 0.00 
Forfeited
$ 0.00 
Unvested - September 30, 2013
$ 5.54 
Expected to vest—September 30, 2013
$ 5.54 
Stock-based Compensation - Additional Disclosures (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Stock-based compensation expense
$ 683,000 
$ 520,000 
$ 1,862,000 
$ 1,503,000 
Tax deduction allowed for incentive stock options
 
 
 
Deferred income tax asset for the expense related to options
 
 
Closing stock price as reported on the NASDAQ
$ 2.58 
 
$ 2.58 
 
Total intrinsic value of options exercised
 
186,000 
 
Unrecognized compensation cost related to non-vested options granted
6,389,000 
 
6,389,000 
 
Total fair value of shares vested
668,000 
 
2,066,000 
 
Stock Options [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Expected weighted-average period to recognize unrecognized compensation cost
 
 
2 years 10 months 2 days 
 
Restricted Stock Units (RSUs) [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Unrecognized compensation cost related to RSUs
$ 236,000 
 
$ 236,000