The condensed consolidated statements of operations include $0.9 million and $0.7 million of stock compensation expense for the three months ended March 31, 2019 and 2018, respectively. The Company accounts for forfeitures as they occur.

	Three Months Ended March 31,
	2019		2018
Service-based awards	$	580	$	572
Performance-based awards - short-term incentive plan		189		41
Performance-based awards - long-term incentive plan		57		0
Stock option and employee purchase plans		56		55
Total	$	882	$	668

Total stock-based compensation is reflected in the condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
	2019		2018
Cost of revenues	$	103	$	88
Research and development		172		138
Sales and marketing		180		131
General and administrative		427		311
Total	$	882	$	668

The Company grants restricted shares as employee and director incentives. When service-based restricted stock is granted, the Company records deferred stock compensation within additional paid in capital, representing the fair value of the common stock on the date the restricted shares are granted. The Company records stock compensation expense on a straight-line basis over the vesting period of the applicable service-based restricted shares. These grants vest over various periods. During the first quarter 2019, the Company issued 190,159 service-based restricted stock awards to employees that vest in equal annual increments over three years.

The following table summarizes service-based restricted stock activity for the three months ended March 31, 2019:

	Shares			Weighted Average Fair Value
Unvested Restricted Stock Awards - December 31, 2018		838,967		$	6.21
Shares awarded		190,159			5.25
Shares vested		(404,122	)		6.26
Shares cancelled		(2,750	)		6.90
Unvested Restricted Stock Awards - March 31, 2019		622,254		$	5.88

The intrinsic value of service-based restricted shares that vested during the three months ended March 31, 2019 and 2018 was $2.1 million and $0.8 million, respectively.

At March 31, 2019, total unrecognized compensation expense related to restricted stock was approximately $3.0 million to be recognized through 2022 over a weighted average period of 1.5 years.

The Company grants restricted stock units as employee incentives. Restricted stock units are primarily granted to foreign employees for long-term incentive purposes. Employee restricted stock units are service-based awards and are amortized over the vesting period. At the vesting date, these units are converted to shares of common stock. The Company records expense on a straight-line basis for restricted stock units.

The following table summarizes the restricted stock unit activity during the three months ended March 31, 2019:

	Shares			Weighted Average Fair Value
Unvested Restricted Stock Units - December 31, 2018		18,638		$	5.66
Units awarded		2,700			5.27
Units vested/Shares awarded		(5,721	)		5.67
Unvested Restricted Stock Units - March 31, 2019		15,617		$	5.48

The intrinsic value of service-based restricted stock units that vested and were issued as shares during the three months ended March 31, 2019 and 2018 was $30 and $29, respectively.

As of March 31, 2019, the unrecognized compensation expense related to the unvested portion of the Company’s restricted stock units was approximately $0.1 million, to be recognized through 2022 over a weighted average period of 1.2 years.

The Company grants stock options to purchase common stock primarily to certain new employees. The exercise price of the stock options is no less than the fair value of the Company’s stock on the grant date. The stock options have a seven-year life and generally vest over a period of four years, 25% after one year, and ratably on a monthly basis thereafter. Stock options may be exercised at any time prior to their expiration date or within ninety days of termination of employment, or such shorter time as may be provided in the related stock option agreement.

A summary of the Company’s stock option activity for the three months ended March 31, 2019 is as follows:

	Options Outstanding			Weighted Average Exercise Price
Outstanding at December 31, 2018		423,534		$	7.15
Options cancelled/expired		(100,262	)		7.16
Outstanding at March 31, 2019		323,272		$	7.14
Exercisable at March 31, 2019		318,541		$	7.16

The range of exercise prices for options outstanding and exercisable at March 31, 2019, was $5.00 to $8.32. The following table summarizes information about stock options outstanding under all stock option plans:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Contractual Life (Years)		Weighted- Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$ 5.00 - $ 7.15		19,126		2.95	$	6.03		14,416	$	6.15
$ 7.16		195,041		1.03		7.16		195,041		7.16
$ 7.22		93,605		1.01		7.22		93,605		7.22
$ 7.23 - $ 8.32		15,500		1.84		7.83		15,479		7.84
$ 5.00 - $ 8.32		323,272		1.17	$	7.14		318,541	$	7.16

The weighted average contractual life and intrinsic value of options outstanding and options exercisable at March 31, 2019, was the following:

Weighted

Average

Contractual

Life (years)

Intrinsic

Value

Options Outstanding

1.17

Options Exercisable

1.12

There were no stock options granted during the three months ended March 31, 2019. For outstanding stock options, the Company calculated the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models may not necessarily provide a reliable single measure of the fair value of the employee stock options. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility and expected option life.

The dividend yield rate is calculated by dividing the Company’s annual dividend by the closing price on the grant date. The risk-free interest rate is based on the U.S. Treasury yields with a remaining term that approximates the expected life of the options granted. The expected volatility is based on a five-year historical period of the Company’s stock price. The expected life for options granted is based on historical data of employee exercise performance. The Company records expense based on the graded vesting method.

As of March 31, 2019, the unrecognized compensation expense related to the unvested portion of the Company’s stock options was approximately $2, to be recognized through 2021 over a weighted average period of 1.5 years.

In February 2019, the Company’s Board of Directors approved the 2019 Long-Term Incentive Plan (“2019 LTIP”). Under the 2019 LTIP, shares of the Company’s stock can be earned by certain executive employees based on achievement of a three-year revenue growth target with a penalty if a certain adjusted EBITDA level is not maintained. At target, the aggregate number of shares that can be earned is 174,117. If the Company achieves less than the target growth over the performance period, the participant will receive fewer shares than the target award, determined on a straight-line basis. If the Company, achieves greater than the target growth, the participant will receive more shares than the target award on an accelerated basis. The maximum number of aggregate shares that may be issues under the 2019 LTIP is 304,705 as of March 31, 2019.

The performance period for the 2019 LTIP is from January 1, 2019 through December 31, 2021 and the participants are required to be in service at the determination date of the award following the end of the performance period in order to receive the award. Shares earned under the 2019 LTIP will be fully vested shares. Stock compensation expense is amortized over the performance period for these awards based on estimated achievement of the goal. At target, the total fair market of the award was $0.9 million based on the share price on $5.27 on the grant date.

In February 2019, the Board of Directors approved the 2019 short-term incentive plan (“2019 STIP”) based on two components of the Company’s performance: (1) revenues weighted 20% and (2) Adjusted EBITDA weighted 80%. “Adjusted EBITDA” is defined as GAAP operating profit excluding stock compensation expenses, amortization of intangible assets, depreciation, restructuring charges, impairment charges, gain/loss on sale of product lines, and expenses included in GAAP operating profit to the extent recovery of such expenses is recorded in other income. The goals are consistent for all employees who participate in the 2019 STIP. Incentive awards earned by certain executives and key managers under the Company’s 2019 STIP will be settled 50% in cash and 50% in shares of the Company’s stock. The incentive awards for all other participants under the 2019 STIP will be 100% in cash. The Company records stock compensation expense based on the estimated payouts under the STIP. No incentive awards were settled for the 2018 short-term incentive plan because the Company did not meet the performance objectives.

The ESPP enables eligible employees to purchase common stock at the lower of 85% of the fair market value of the common stock on the first or last day of each offering period. Each offering period is approximately six months. The Company received proceeds of $0.3 million from the issuance of 95,376 shares under the ESPP in February 2019 and received proceeds of $0.4 million from the issuance of 68,212 shares under the ESPP in February 2018. The Company received proceeds of $0.3 million from the issuance of 88,583 shares under the ESPP in August 2018.

Based on the 15% discount and the fair value of the option feature of the ESPP, it is considered compensatory. Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model.

The Company calculated the fair value of each employee stock purchase grant on the date of grant using the Black-Scholes option-pricing model using the following assumptions:

	Employee Stock Purchase Plan
	2019			2018
Dividend yield		4.1	%		3.2	%
Risk-free interest rate		2.5	%		2.1	%
Expected volatility		34	%		33	%
Expected life (in years)		0.5			0.5

The dividend yield rate was calculated by dividing the Company’s annual dividend by the closing price on the grant date. The risk-free interest rate was based on the U.S. Treasury yields with a remaining term that approximates the expected life of the options granted. The volatility was based on a five-year historical period of the Company’s stock price. The expected life was based on the offering period.

For ease in administering the issuance of stock awards, the Company holds back shares of vested restricted stock awards and short-term incentive plan stock awards for the value of the statutory withholding taxes. For each individual receiving a share award, the Company redeems the shares it computes as the value for the withholding tax and remits this amount to the appropriate tax authority. For withholding taxes related to stock awards, the Company paid $0.7 million and $0.3 million during the three months ended March 31, 2019 and 2018, respectively.