Stock-Based Compensation

3 Months Ended

Jun. 30, 2014

2. Stock-Based Compensation

The Company accounts for its stock-based compensation at fair value. The following table summarizes stock-based compensation expense by financial statement line item for the three months ended June 30, 2014 and 2013 (in thousands):

	Three months ended June 30,
	2014		2013
Cost of revenues	$	153	$	205
Research and development		479		575
Selling, general and administrative		949		1,355
Total	$	1,581	$	2,135

During the three months ended June 30, 2014, the Company granted 1,000,000 stock options, and 972,336 restricted stock awards. There were 314,765 stock options granted during the three months ended June 30, 2013. These stock options vest over 5 years, and the restricted stock awards vest over one year. For options and awards that vest upon the passage of time, expense is being recorded over the vesting period. Performance-based restricted stock awards are expensed over the requisite service period.

The estimated fair value of the Company’s stock-based awards, less expected annual forfeitures, is amortized over the awards’ service period. The total unrecognized compensation cost for unvested outstanding stock options was $2.3 million at June 30, 2014. This expense will be recognized over a weighted average expense period of approximately 3.1 years. The total unrecognized compensation cost for unvested outstanding restricted stock was $2.1 million at June 30, 2014. This expense will be recognized over a weighted-average expense period of approximately 1.0 years.

The weighted-average assumptions used in the Black-Scholes valuation model for stock options granted during the three months ended June 30, 2014 and 2013 are as follows:

	Three months ended June 30,
	2014			2013
Expected volatility		85.5	%		74.6	%
Risk-free interest rate		1.9	%		1.7	%
Expected life (years)		5.8			5.9
Dividend yield		None			None

The expected volatility rate was estimated based on an equal weighting of the historical volatility of the Company’s common stock and the implied volatility of the Company’s traded options. The expected term was estimated based on an analysis of the Company’s historical experience of exercise, cancellation, and expiration patterns. The risk-free interest rate is based on the average of the five and seven year United States Treasury rates.

- 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.

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