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Stock-Based Compensation

9 Months Ended

Sep. 30, 2020

Note 9. Stock-Based Compensation

We account for stock-based compensation in accordance with the provisions of 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				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Cost of revenue	$	28	$	31	$	83	$	92
Selling, general and administrative		496		433		1,480		1,296
Research and development		124		119		369		321
Total stock-based compensation		648		583		1,932		1,709
Tax effect on stock-based compensation		—		—		—		—
Net effect on net income (loss)	$	648	$	583	$	1,932	$	1,709

As of September 30, 2020, the unamortized compensation costs related to unvested stock options granted to employees under our stock option plan was approximately $1.0 million, net of estimated forfeitures of $80,000. 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 did not capitalize any stock-based compensation to inventory as of September 30, 2020 and December 31, 2019 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 and nine months ended September 30, 2020 and 2019.

The following table summarizes the stock option transactions during the nine months ended September 30, 2020 (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, 2020	2,953	$	4.00	5.95	$	3,040
Granted	—		—	—		—
Exercised	(460)		2.47	—		—
Canceled and expired	(162)		5.83	—		—
Balance as of September 30, 2020	2,331	$	4.18	5.89	$	5,061
Options vested as of September 30, 2020 and unvested options expected to vest, net of forfeitures	2,313	$	4.18	5.87	$	5,012
Options exercisable as of September 30, 2020	1,703	$	4.20	4.88	$	3,675

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing price of $6.12 on September 30, 2020, 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, 2020 is presented below (in thousands, except per share data):


		Weighted-Average
		Grant Date
Stock Awards	Shares	Share Value
Non-vested as of January 1, 2020	939	$	5.02
Granted	55	$	5.21
Vested	(127)	$	6.00
Forfeited	(12)	$	5.69
Non-vested as of September 30, 2020	855	$	4.88

As of September 30, 2020, the unamortized compensation costs related to unvested restricted stock awards was approximately $3.0 million, which is to be amortized on a straight-line basis over a weighted-average period of approximately 1.1 years.