Stock-Based Compensation

9 Months Ended

Sep. 30, 2015

Note 8. Stock-Based Compensation

We account for stock-based compensation in accordance with the provisions of FASB Accounting Standards Codification (“ASC”) topic 718, Compensation-Stock Compensation (“ASC 718”), which established accounting for stock-based awards exchanged for employee services. Stock-based compensation cost is measured at each grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period of the award. All of our stock compensation is accounted for as an equity instrument.

The following table summarizes compensation costs related to our stock-based awards (in thousands, except per share data):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Cost of revenue	$	5	$	4	$	15	$	14
Selling, general and administrative		260		227		902		716
Research and development		46		41		134		131
Total stock-based compensation		311		272		1,051		861
Tax effect on stock-based compensation		—		—		—		—
Net effect on net income (loss)	$	311	$	272	$	1,051	$	861

As of September 30, 2015, the unamortized compensation costs related to unvested stock options granted to employees under our stock option plan was approximately $1.0 million, net of estimated forfeitures of $60,000. These costs will be amortized on a straight-line basis over a weighted-average period of approximately 2.3 years and will be adjusted for subsequent changes in estimated forfeitures. We elected not to capitalize any stock-based compensation to inventory as of September 30, 2015 due to the immateriality of the amount.

We estimate the fair value of stock options using the Black-Scholes valuation model, consistent with the provisions of ASC 718. There were no options granted in the three months ended September 30, 2015. There were 200,000 options granted with weighted average grant date fair values of $1.08 in the three months ended September 30, 2014. There were 20,000 and 252,000 stock options granted with weighted average grant date fair values of $0.48 and $1.09 in the nine months ended September 30, 2015 and 2014, respectively. The fair value of our stock options granted to employees for the three and nine months ended September 30, 2015 was estimated using the following weighted-average assumptions:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2015		2015
Expected term (in years)	—		1.0
Volatility	—	%	54.21	%
Expected dividend	—	%	—	%
Risk-free interest rate	—	%	1.86	%

The following table summarizes the stock option transactions during the nine months ended September 30, 2015 (in thousands, except per share data):


				Weighted-
				average
		Weighted-		Remaining
	Number of	average		Contractual	Aggregate
	Options	Exercise		Life	Intrinsic
Stock Options	Outstanding	Price		(in years)	Value

Balance as of January 1, 2015	3,198	$	3.12	6.95	$	1,247
Granted	20		2.51
Exercised	(119)		1.38
Canceled and expired	(62)		3.86
Balance as of September 30, 2015	3,037	$	3.17	5.40	$	96
Options vested as of September 30, 2015 and unvested options expected to vest, net of forfeitures	3,037	$	3.17	5.40	$	96
Options exercisable as of September 30, 2015	2,033	$	3.50	4.38	$	96

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing price of $1.92 on September 30, 2015, which would have been received by the option holder had all option holders exercised their options on that date.

Restricted stock awards

A summary of activity related to restricted stock awards for the nine months ended September 30, 2015 is presented below (in thousands, except per share data):


		Weighted-Average
		Grant Date
Stock Awards	Shares	Fair Value
Non-vested as of January 1, 2015	261	$	2.71
Granted	336	$	2.56
Vested	(118)	$	2.65
Forfeited	(13)	$	2.34
Non-vested as of September 30, 2015	466	$	2.63

As of September 30, 2015, the unamortized compensation costs related to unvested restricted stock awards was approximately $1.0 million, which is to be amortized on a straight-line basis over a weighted average period of approximately 1.6 years.