Capital Stock

9 Months Ended

Sep. 30, 2019

13. Capital Stock

Stock-Based Payment Awards

The Company accounts for stock-based payment awards in accordance with the provisions of FASB ASC 718, which requires it to recognize compensation expense for all stock-based payment awards made to employees and directors including stock options, restricted stock units, Market Condition RSUs and employee stock purchases related to the ESPP. The Company has elected as an accounting policy to account for forfeitures for service based awards as they occur, with no adjustment for estimated forfeitures.

Stock option and restricted stock unit activity for the nine months ended September 30, 2019 was as follows:

		Stock Options			Restricted Stock Units			Market Condition RSU's
			Weighted			Weighted			Weighted
		Stock	Average		Restricted	Average		Market	Average
		Options	Exercise		Stock Units	Grant Date		Condition RSU's	Grant Date
		Outstanding	Price		Outstanding	Fair Value		Outstanding	Fair Value

Balance at December 31, 2018		1,956,732	$	4.25	1,233,762	$	3.36	116,944	$	4.19
	Granted	804,039		3.35	1,472,884		2.25	541,627		2.14
	Exercised	(2,500)		3.25	-		-	-		-
	Vested (RSUs)	-		-	(788,512)		3.30	(3,778)		3.30
	Cancelled / forfeited	(616,436)		3.96	(471,006)		3.41	(188,680)		3.63
Balance at September 30, 2019		2,141,835	$	4.15	1,447,128	$	3.19	466,113	$	4.16

Stock-based compensation expense related to stock options, restricted stock units, Market Condition RSUs and the ESPP for the three and nine months ended September 30, 2019 and 2018 was allocated as follows:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2019		2018		2019		2018
		(in thousands)

Cost of revenues	$	13	$	19	$	34	$	45
Sales and marketing		39		105		68		331
General and administrative		895		308		1,975		1,581
Research and development		40		54		116		125
Discontinued operations		-		-		-		150
Total stock-based compensation	$	987	$	486	$	2,193	$	2,232

The Company did not capitalize any stock-based compensation.

Earnings per share

Basic earnings per share is computed by dividing net income by the number of weighted average common shares outstanding during the period. The calculation of diluted earnings per share assumes conversion of stock options, restricted stock units and Market Condition RSUs into common stock using the treasury method. The weighted average number of shares used to compute basic and diluted earnings per share consists of the following:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018

Basic	38,036,261	36,947,052	37,764,489	36,169,536
Effect of assumed conversion of employee and director stock options, restricted stock units and Market Condition RSUs	-	-	-	-
Diluted	38,036,261	36,947,052	37,764,489	36,169,536

Excluded from the shares used in calculating the diluted earnings per common share in the above table are options, restricted stock units and Market Condition RSUs of approximately 4,055,076 and 3,286,853 shares of common stock for the nine months ended September 30, 2019 and 2018, respectively, as the impact of these shares would be anti-dilutive.