Stock-Based Compensation

3 Months Ended

Mar. 31, 2014

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,
	2014		2013

Cost of revenue	$	5	$	6
Selling, general and administrative		244		284
Research and development		43		42
Total stock-based compensation		292		332
Tax effect on stock-based compensation		—		—
Net effect on net income (loss)	$	292	$	332

As of March 31, 2014, the unamortized compensation costs related to unvested stock options granted to employees under our stock option plans were approximately $1.4 million, net of estimated forfeitures of $92,000. 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 elected not to capitalize any stock-based compensation to inventory as of March 31, 2014 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 no stock options granted in the three months ended March 31, 2014 and 2013.

The following table summarizes our stock option activities during the three months ended March 31, 2014 (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, 2014		2,671		$	3.29		6.71	$	893

Granted		—			—

Exercised		—			—

Canceled and expired		(74	)		5.18

Balance as of March 31, 2014		2,597		$	3.24		6.65	$	438

Options vested and expected to vest as of March 31, 2014		2,597		$	3.24		6.65	$	438

Options exercisable as of March 31, 2014		1,663		$	3.30		5.43	$	438

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing price of $2.20 on March 31, 2014, 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, 2014 is presented below:

Stock Awards	Shares		Weighted-Average Grant Date Fair Value
Non-vested as of January 1, 2014		241,232	$	3.44
Granted		—	$	—
Vested		—	$	—
Non-vested as of March 31, 2014		241,232	$	3.44

As of March 31, 2014, the unamortized compensation costs related to unvested restricted stock awards was approximately $581,000, which is to be amortized on a straight-line basis over a weighted average period of approximately 2.3 years.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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