16.	Stock-based Compensation

During 1997, we adopted the 1997 Stock Option and Stock Purchase Plan (the “1997 Plan”), which provides for the direct award or sale of shares and for the grant of incentive stock options (“ISOs”) and non-statutory options to employees, directors or consultants. The 1997 Plan, as amended, provides for the issuance of up to 7,000,000 shares of our common stock. The exercise price of ISOs cannot be less than the fair market value of the underlying shares on the date of grant. ISOs can be granted only to employees. The 1997 Plan expired on October 22, 2007.

During 2004, we adopted the 2004 Equity Incentive Plan (the “2004 Plan”), which provides our employees, directors and consultants the opportunity to purchase our common stock through non-qualified stock options, stock appreciation rights, restricted stock units, or restricted stock and cash awards. The 2004 Plan initially provides for issuance of 3,000,000 shares of our common stock, which number may be cumulatively increased (subject to Board discretion) on an annual basis beginning January 1, 2005, which annual increase shall not exceed 2% of our then outstanding stock. As of December 31, 2013, there are 700,647 securities remaining and available for future issuances under 2004 Plan, which is exclusive of securities to be issued upon an exercise of outstanding options, warrants, and rights.

In August 2011, stockholders approved the 2011 Employee Stock Purchase Plan (ESPP), with a maximum of 500,000 shares of our common stock to be issued under this plan. Under the ESPP, eligible employees may purchase shares of our common stock through payroll deductions, which may not exceed 15% of an employee’s compensation. The price at which shares are sold under the ESPP is established by the duly appointed committee of the Board but may not be less than 90% of the lesser of the fair market value per share of our common stock on the offering date or on the purchase date. The ESPP is compensatory. For the year ended December 31, 2011, there were no stock issuances under this plan and no stock-based compensation was recorded for this plan. During the year ended December 31, 2013 and 2012, we recorded stock-based compensation of $75,000 and $53,000, respectively.

Stock Options

Generally, options issued under the 2004 Plan or the 1997 Plan are subject to four-year vesting, and have a contractual term of 10 years. Most options contain one of the following two vesting provisions:

12/48 of a granted award will vest after one year of service, while an additional 1/48 of the award will vest at the end of each month thereafter for 36 months, or

1/48 of the award will vest at the end of each month over a four-year period.

A summary of activity for the year ended December 31, 2013 is as follows:

	Options			Weighted Average Exercise Price
Balance as of January 1, 2013		6,744,986		$	5.02
Granted		2,548,950		$	3.23
Exercised		(17,500	)	$	2.14
Expired		(499,586	)	$	4.28
Cancelled/forfeited		(454,561	)	$	4.55
Balance as of December 31, 2013		8,322,289		$	4.55

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Balance as of December 31, 2013		8,322,289	$	4.55		6.10	$	148,817
Vested and expected to vest at December 31, 2013		8,277,773	$	4.56		6.09	$	147,931
Exercisable at December 31, 2013		5,718,096	$	5.05		4.88	$	111,654

The total intrinsic value of stock options exercised was $3,500, $311,000 and $541,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

The fair value of each option awarded during the year ended December 31, 2013, 2012 and 2011 was estimated on the date of grant using the Black-Scholes-Merton option valuation model based on the following weighted-average assumptions:

	Years ended December 31,
	2013			2012			2011
Expected term	6.0 years			5.20 years			5.5 years
Risk-free interest rate		1.12	%		0.83	%		1.95	%
Volatility		75.27	%		75.63	%		72.36	%
Dividends		—			—			—
Resulting weighted average grant date fair value	$	1.72		$	1.96		$	3.24

We calculated the expected term of our stock options based on our historical data. The expected term is calculated for and applied to all employee awards as a single group as we do not expect (nor does historical data suggest) substantially different exercise or post-vesting termination behavior amongst our employee population.

We estimate volatility based on the historical volatility of our daily stock price over the period preceding grant date commensurate with the expected term of the option.

The weighted average risk-free interest rate represents the interest rate for treasury constant maturity instruments published by the Federal Reserve Board. If the term of available treasury constant maturity instruments is not equal to the expected term of an employee option, we use the weighted average of the two Federal Reserve securities closest to the expected term of the employee option.

The dividend yield has been assumed to be zero as we (a) have never declared or paid any dividends and (b) do not currently anticipate paying any cash dividends on our outstanding shares of common stock in the foreseeable future.

Restricted Stock Awards

Generally, restricted stock awards issued under the 2004 Plan are subject to a vesting period that coincides with the fulfillment of service requirements for each award and have a contractual term of 10 years. These awards are amortized to compensation expense over the estimated vesting period based upon the fair value of our common stock on the award date.

A summary of activity for the year ended December 31, 2013 is as follows:

	Restricted Stock Awards			Weighted Average Grant Date Fair Value
Balance as of January 1, 2013		294,741		$	3.55
Granted		57,600		$	2.60
Exercised/Released		(236,000	)	$	3.29
Cancelled/forfeited		(10,000	)	$	3.44
Balance as of December 31, 2013		106,341		$	3.62

	Restricted Stock Awards		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (years)
Balance as of December 31, 2013		106,341	$	3.62		8.45
Vested and expected to vest at December 31, 2013		106,341	$	3.62		8.45
Exercisable at December 31, 2013		85,341	$	3.95		8.13

Performance-Based Restricted Stock Awards

We granted 246,225 performance-based restricted stock awards under the 2004 Equity Incentive Plan in February 2011. The awards provide certain employees until January 1, 2012 to achieve certain performance goals established by the Compensation Committee. Effective January 2012, the outstanding awards were terminated in their entirety based upon the decision by the Compensation Committee that performance criteria had not been met as of January 1, 2012. No compensation expense was recognized related to these awards.

In January 2012, we granted 276,375 performance-based restricted stock awards under the 2004 Equity Incentive Plan. The awards provide certain employees until December 31, 2012 to achieve certain performance goals established by the Compensation Committee. Once earned, the awards remain unvested until January 10, 2014. Termination of employment prior to vesting will result in the forfeiture of the awards.

In January 2013, the Compensation Committee modified the awards to allow a portion of the awards to continue vesting based on partial achievement of certain performance goals. As a result of this modification, 86,229 shares with fair value of $2.74 per share will continue vesting under the modified terms of the grant that would have been cancelled under the original terms. Additional compensation expense $236,000 resulting from this modification will be recognized from the modification date through the vesting date of January 2014.

We recognized $344,000 and $107,000 of compensation expense related to performance-based awards during the years ended December 31, 2013 and 2012, respectively.

The following table summarizes activity with respect to the performance based restricted stock awards during the year ended December 31, 2013:

	Restricted Stock Awards			Weighted Average Grant- Date Fair Value
Outstanding at January 1, 2013		261,300		$	3.44
Granted		—			—
Vested		—			—
Cancelled/forfeited		(109,749	)	$	3.44
Outstanding at December 31, 2013		151,551		$	3.44
Vested at December 31, 2013		—			—

The following summarizes the total compensation cost recognized for the stock options and restricted stock awards in the accompanying financial statements:

	Years ended December 31,
	2013		2012		2011

Total compensation cost for share-based payment arrangements recognized in the statement of operations (net of tax of $0)	$	3,608,000	$	3,904,000	$	3,316,000

As of December 31, 2013, the total compensation cost related to non-vested stock options and stock awards not yet recognized for all our plans is approximately $4,810,000. Of this amount, $4,725,000 is expected to be recognized as a result of vesting under service conditions over a weighted average period of 1.81 years.

As of December 31, 2012, the total compensation cost related to non-vested stock options and stock awards not yet recognized for all our plans is approximately $4,593,000. Of this amount, $3,918,000 is expected to be recognized as a result of vesting under service conditions over a weighted average period of 1.56 years.

Cash received from stock option and warrant exercises and employee stock purchase for the years ended December 31, 2013, 2012 and 2011 was approximately $225,000, $1,413,000 and $2,849,000, respectively. No income tax benefits have been recorded related to the stock option exercises as the benefits have not been realized in our income tax returns.

To settle stock options and restricted stock awards, we will issue new shares of our common stock. At December 31, 2013, we have an aggregate of 64,739,929 shares authorized and available to satisfy option exercises under our plans.