Stock-based Compensation

3 Months Ended

Mar. 31, 2018

Stock-based Compensation

Stock-based Compensation

Note 9. Stock-Based Compensation

We account for stock-based compensation in accordance with the provisions of 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,
	2018		2017
Cost of revenue	$	21	$	8
Selling, general and administrative		369		256
Research and development		77		48
Total stock-based compensation		467		312
Tax effect on stock-based compensation		—		—
Net effect on net income	$	467	$	312

As of March 31, 2018, the unamortized compensation costs related to unvested stock options granted to employees under our stock option plan was approximately $1.5 million, net of estimated forfeitures of $175,000. These costs will be amortized on a straight-line basis over a weighted-average period of approximately 2.2 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, 2018 and December 31, 2017 due to the immateriality of the amount.

We estimate the fair value of stock options using the Black-Scholes valuation model, consistent with the provisions of ASC 718. There were no  options granted in the three months ended March 31, 2018. There were 60,000 options with a weighted-average grant date fair values of $2.76 per share granted in the three months ended March 31, 2017. The fair values of our stock options granted to employees for the three months ended March 31, 2018 and 2017 were estimated using the following weighted-average assumptions:

	Three Months Ended		Three Months Ended
	March 31,		March 31,
	2018		2017
Expected term (in years)	—		5.9
Volatility	—	%	46.71	%
Expected dividend	—	%	—	%
Risk-free interest rate	—	%	2.08	%

The following table summarizes the stock option transactions during the three months ended March 31, 2018 (in thousands, except per share data):

				Weighted
				average
		Weighted-		Remaining
	Number of	average		Contractual	Aggregate
	Options	Exercise		Life	Intrinsic
Stock Options	Outstanding	Price		(in years)	Value
Balance as of January 1, 2018	2,666	$	3.81	6.87	$	13,149
Granted	—		—
Exercised	(22)		2.94		$	97
Canceled and expired	—		—
Balance as of March 31, 2018	2,644	$	3.81	6.66	$	9,409
Options vested as of March 31, 2018 and unvested options expected to vest, net of forfeitures	2,616	$	3.79	6.64	$	9,352
Options exercisable as of March 31, 2018	1,694	$	3.41	5.81	$	6,523

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing price of $7.25 on March 29, 2018, 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, 2018 is presented below (in thousands, except per share data):

		Weighted-Average
		Grant Date
Stock Awards	Shares	Fair Value
Non-vested as of January 1, 2018	480	$	7.13
Granted	4	$	7.35
Vested	—	$	—
Forfeited	—	$	—
Non-vested as of March 31, 2018	484	$	7.13

As of March 31, 2018, the unamortized compensation costs related to unvested restricted stock awards was approximately $2.9 million, which is to be amortized on a straight-line basis over a weighted-average period of approximately 1.7 years.