Stock-based Compensation

6 Months Ended

Jun. 30, 2016

Note 9. 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				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Cost of revenue	$	5	$	5	$	10	$	10
Selling, general and administrative		213		417		413		642
Research and development		37		44		85		88
Total stock-based compensation		255		466		508		740
Tax effect on stock-based compensation		—		—		—		—
Net effect on net income (loss)	$	255	$	466	$	508	$	740

As of June 30, 2016, the unamortized compensation costs related to unvested stock options granted to employees under our stock option plan was approximately $1.2 million, net of estimated forfeitures of $75,000. These costs will be amortized on a straight-line basis over a weighted-average period of approximately 2.8 years and will be adjusted for subsequent changes in estimated forfeitures. We did not capitalize any stock-based compensation to inventory as of June 30, 2016 and 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 June 30, 2016 and there were 20,000 options with weighted average grant date fair values of $0.48 granted in the three months ended June 30, 2015. There were 68,000 and 20,000 options with weighted average grant date fair values of $1.01 and $0.48 granted in the six months ended June 30, 2016 and 2015, respectively. The fair value of our stock options granted to employees for the three and six months ended June 30, 2016 was estimated using the following weighted-average assumptions:


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2016		2016
Expected term (in years)	—		4.0
Volatility	—	%	49.21	%
Expected dividend	—	%	—	%
Risk-free interest rate	—	%	1.38	%

The following table summarizes the stock option transactions during the six months ended June 30, 2016 (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, 2016	3,779	$	2.97	6.26	$	764
Granted	68		2.56
Exercised	(1)		1.59
Canceled and expired	(536)		3.21
Balance as of June 30, 2016	3,310	$	2.92	6.83	$	2,358
Options vested as of June 30, 2016 and unvested options expected to vest, net of forfeitures	3,239	$	2.94	6.78	$	2,292
Options exercisable as of June 30, 2016	1,910	$	3.39	5.39	$	1,096

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing price of $3.19 on June 30, 2016, 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 six months ended June 30, 2016 is presented below (in thousands, except per share data):


		Weighted-Average
		Grant Date
Stock Awards	Shares	Fair Value
Non-vested as of January 1, 2016	546	$	2.39
Granted	49	$	3.69
Vested	(37)	$	2.46
Forfeited	(207)	$	2.55
Non-vested as of June 30, 2016	351	$	2.47

As of June 30, 2016, the unamortized compensation costs related to unvested restricted stock awards was approximately $674,000, which is to be amortized on a straight-line basis over a weighted average period of approximately 1.3 years.