Stock-Based Compensation

3 Months Ended

Mar. 31, 2013

Stock-Based Compensation [Abstract]

Stock-Based Compensation

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 March 31,
	2013			2012
Cost of revenue	$	6		$	18
Selling, general and administrative		284			238
Research and development		42			25
Total stock-based compensation		332			281
Tax effect on stock-based compensation		—			—
Net effect on net income (loss)	$	332		$	281
Effect on net income (loss) attributable to AXT, Inc. per common share:
Basic	$	(0.01	)	$	(0.01	)
Diluted	$	(0.01	)	$	(0.01	)

As of March 31, 2013, the unamortized compensation costs related to unvested stock options granted to employees under our stock option plans was approximately $1.9 million, net of estimated forfeitures of $31,000. These costs are amortized on a straight-line basis over a weighted-average period of approximately 2.6 years and will be adjusted for subsequent changes in estimated forfeitures. We did not capitalize any stock-based compensation to inventory as of March 31, 2013 due to the immateriality of the amount.

We estimate the fair value of stock options using a Black-Scholes valuation model, consistent with the provisions of ASC 718. There were zero and 80,000 stock options granted with weighted-average grant date fair value of $0 and $3.05 in the three months ended March 31, 2013 and 2012, respectively. The fair value of our stock options granted to employees for the three months ended March 31, 2012 was estimated using the following weighted-average assumptions:

	Three months ended March 31, 2012
Expected term (in years)		4.0
Volatility		73.41	%
Expected dividend		0	%
Risk-free interest rate		0.76	%

The following table summarizes our stock option activities during the three months ended March 31, 2013 (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, 2013		2,727		$	3.28		6.71	$	1,353
Granted		—			—
Exercised		(183	)		1.40
Canceled and expired		(26	)		3.80
Balance as of March 31, 2013		2,518		$	3.41		6.84	$	1,239
Options vested and expected to vest as of March 31, 2013		2,502		$	3.41		6.83	$	1,238
Options exercisable as of March 31, 2013		1,523		$	3.14		5.58	$	1,137

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing price of $2.94 on March 28, 2013, 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 three months ended March 31, 2013 is presented below:

Stock Awards	Shares	Weighted-Average Grant Date Fair Value
Non-vested as of January 1, 2013	238,723	$	4.27
Granted	—	$	—
Vested	—	$	—
Non-vested as of March 31, 2013	238,723	$	4.27

As of March 31, 2013, the unamortized compensation costs related to unvested restricted stock awards was approximately $768,000, which is to be amortized on a straight-line basis over a weighted average period of approximately 2.2 years.