Note 8: Stock Options and Warrants

(a) Acorn Stock Options

A summary of stock option activity for the six months ended June 30, 2011 is as follows:

	Number of Options (in shares)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at December 31, 2010		1,817,665		$	3.69
Granted		66,666		$	3.70
Exercised		(197,385	)	$	2.57
Forfeited or expired		(314,615	)	$	2.97
Outstanding at June 30, 2011		1,372,331		$	4.02	3.9 years	$	750
Exercisable at June 30, 2011		1,241,080		$	4.11	4.0 years	$	609

During 2011, 120,385 options were exercised and 254,615 options were forfeited in connection with the “net exercise” of 375,000 options. In a net exercise of an option, the Company does not require a payment of the exercise price of the option from the optionee, but reduces the number of shares of common stock issued upon the exercise of the option by the smallest number of whole shares that has an aggregate fair market value equal to or in excess of the aggregate exercise price for the option shares covered by the option exercised. The 375,000 options which were exercised under this method had a weighted average exercise price exercise price of $2.60.

The weighted average grant date fair value of the 66,666 stock options granted during the first six months of 2011 was $1.86 per share. The fair value of the options granted was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

Volatility		61	%
Expected term (years)		4.5
Risk free interest rate		2.0	%
Expected dividend yield	None

(b) Stock-based compensation expense

Total stock-based compensation expense included in the Company’s statements of operations for the three and six months ended June 30, 2010 and 2011, respectively, was:

	Six months ended June 30,				Three months ended June 30,
	2010		2011		2010		2011
Cost of sales	$	9	$	16	$	4	$	8
Selling, general and administrative expenses*		503		394		293		187
Total stock based compensation expense	$	512	$	410	$	297	$	195

* In 2011, includes $13 and $26 with respect to stock granted to a consultant for the three and six months ended June 30, 2011, respectively.

A summary of stock warrants activity for the six months ended June 30, 2011 is as follows:

	Number of Warrants (in shares)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Outstanding at December 31, 2010		313,806	$	4.29		2.2 years
Granted		—
Exercised		—
Forfeited or expired		—
Outstanding and exercisable at June 30, 2011		313,806	$	4.29		1.7 years