Stock-Based Compensation

6 Months Ended

Jun. 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 June 30,				Six Months Ended June 30,
	2015		2014		2015		2014

Cost of revenue	$	5	$	5	$	10	$	10
Selling, general and administrative		417		245		642		489
Research and development		44		47		88		90
Total stock-based compensation		466		297		740		589
Tax effect on stock-based compensation		—		—		—		—
Net effect on net income (loss)	$	466	$	297	$	740	$	589

As of June 30, 2015, 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 $68,000. These costs will be amortized on a straight-line basis over a weighted-average period of approximately 2.5 years and will be adjusted for subsequent changes in estimated forfeitures. We elected not to capitalize any stock-based compensation to inventory as of June 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 20,000 and 52,000 options granted with weighted average grant date fair values of $0.48 and $1.10 in the three and six months ended June 30, 2015 and 2014, respectively. The fair value of our stock options granted to employees for the three and six months ended June 30, 2015 was estimated using the following weighted-average assumptions:

	Three Months Ended June 30, 2015			Six Months Ended June 30, 2015

Expected term (in years)		1.0			1.0
Volatility		54.21	%		54.21	%
Expected dividend		0	%		0	%
Risk-free interest rate		1.86	%		1.86	%

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

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

Balance as of January 1, 2015		3,198		$	3.12		6.95	$	1,247
Granted		20			2.51
Exercised		(54	)		1.40
Canceled and expired		(62	)		3.86
Balance as of June 30, 2015		3,102		$	3.13		5.54	$	659

Options vested as of June 30, 2015 and unvested options expected to vest, net of forfeitures		3,102		$	3.13		5.54	$	659

Options exercisable as of June 30, 2015		1,998		$	3.44		4.38	$	547

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing price of $2.52 on June 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 six months ended June 30, 2015 is presented below (in thousands, except per share data):

Stock Awards	Shares			Weighted-Average Grant Date 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 June 30, 2015		466		$	2.63

As of June 30, 2015, the unamortized compensation costs related to unvested restricted stock awards was approximately $1.1 million, which is to be amortized on a straight-line basis over a weighted average period of approximately 1.8 years.