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Stock-Based Compensation
 9 Months Ended
Sep. 30, 2013
Stock-Based Compensation [Abstract]  
Stock-Based Compensation
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):

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 
2013
  
2012
  
2013
  
2012
 
        
Cost of revenue
 
$
6
  
$
19
  
$
17
  
$
56
 
Selling, general and administrative
  
285
   
245
   
860
   
721
 
Research and development
  
43
   
36
   
127
   
96
 
Total stock-based compensation
  
334
   
300
   
1,004
   
873
 
Tax effect on stock-based compensation
  
—
   
—
   
—
   
—
 
Net effect on net income (loss)
 
$
334
  
$
300
  
$
1,004
  
$
873
 

As of September 30, 2013, the unamortized compensation costs related to unvested stock options granted to employees under our stock option plan was approximately $1.5 million, net of estimated forfeitures of $30,000. These costs will be amortized on a straight-line basis over a weighted-average period of approximately 2.4 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, 2013 due to the immateriality of the amount.
 
We estimate the fair value of stock options using the Black-Scholes valuation model. There were 60,000 and 0 stock options granted with weighted average grant date fair values of $1.21 and $0 in the three months ended September 30, 2013 and 2012, respectively. There were 60,000 and 104,000 stock options granted with weighted average grant date fair values of $1.21 and $2.84 in the nine months ended September 30, 2013 and 2012, respectively. The fair value of our stock options granted to employees for the three and nine months ended September 30, 2013 was estimated using the following weighted-average assumptions:

 
Three Months
Ended
Nine Months
Ended
 
September 30, 2013
  
September 30,
2013
 
    
Expected term (in years)  
4.0
   
4.0
 
Volatility
  
61.86
%
  
61.86
%
Expected dividend
  
0
%
  
0
%
Risk-free interest rate
  
1.00
%
  
1.00
%

The following table summarizes the stock option transactions during the nine months ended September 30, 2013 (in thousands, except per share data):

Stock Options
 
Shares
  
Weighted-
average
Exercise
Price
  
Weighted-
average
Remaining
Contractual
Life
(in years)
  
Aggregate
Intrinsic
Value
 
 
 
  
  
  
 
Outstanding at January 1, 2013
  
2,727
  
$
3.28
   
6.71
  
$
1,353
 
Granted
  
60
   
2.55
         
Exercised
  
(200
)
 
$
1.40
         
Canceled and expired
  
(48
)
 
$
4.42
         
Outstanding at September 30, 2013
  
2,539
  
$
3.39
   
6.44
  
$
610
 
 
                
Options vested and expected to vest as of September 30, 2013
  
2,522
  
$
3.39
   
6.42
  
$
610
 
 
                
Options exercisable as of September 30, 2013
  
1,682
  
$
3.22
   
5.30
  
$
607
 

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing price of $2.34 on September 30, 2013, 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, 2013 is presented below:

Stock Awards
 
Shares
  
Weighted-Average
Grant Date Fair Value
 
Non-vested as of January 1, 2013
  
238,723
  
$
4.27
 
Granted
  
43,636
  
$
2.75
 
Vested
  
(47,767
)
 
$
5.13
 
Non-vested as of September 30, 2013
  
234,592
  
$
3.82
 

As of September 30, 2013, the unamortized compensation costs related to unvested restricted stock awards was approximately $687,000, which is to be amortized on a straight-line basis over a weighted average period of approximately 2.4 years.