Common Stock and Stock Compensation

Stock Repurchase Program

On June 17, 2013, the Company announced the commencement of a modified Dutch tender offer to repurchase up to 400,000 shares of its common stock at a price of not less than $12.00 nor greater than $14.00 per share. The Company's Board of Directors determined it was in the best interest of its stockholders to repurchase shares at that time given its cash position and stock price and the likelihood that the Company's common stock may be removed from the Russell 2000 Index. The Company was subsequently removed from the Russell 2000 Index on June 28, 2013. The tender offer expired on July 15, 2013. Pursuant to the terms of the tender offer, the Company purchased 53,884 shares at $14.00 per share for a total cost of $0.8 million, excluding fees and expenses related to the tender offer. These shares represented approximately 0.81% of the shares outstanding as of July 15, 2013.

Equity Incentive Plans

In December 2007, the Company's stockholders approved the 2007 Equity Incentive Plan (“2007 Plan”). The 2007 Plan replaced the Company's 1998 Stock Plan (the “1998 Plan”) and the 1999 Director Option Plan (the “Directors' Plan”), collectively referred to as the “Equity Plans”. The Equity Plans will continue to govern awards previously granted under each respective plan. There were initially 525,000 shares of common stock reserved for issuance under the 2007 Plan, subject to increase for stock options or awards previously issued under the Equity Plans which expire, cancel or are forfeited. In May 2011, the Company's stockholders approved the addition of 200,000 shares of common stock available for issuance under the 2007 Plan. At December 31, 2013, a total of 313,577 shares of common stock were available for issuance under the 2007 Plan.

In May 2012 at the Annual Meeting of Stockholders, the stockholders approved an amendment to the 2007 Plan. The 2007 Plan was amended to change the way restricted stock unit grants reduce the number of shares available for issuance under the 2007 Plan. Prior to the amendment, for each grant or forfeiture of a restricted stock unit, the number of shares available for issuance under the 2007 Plan decreased or increased by two. The amendment changed this 2:1 ratio to a 1:1 ratio.

Options granted under the 2007 Plan must be issued at a price equal to at least the fair market value of the Company’s common stock on the date of grant. All vested stock options under the 2007 Plan may be exercised at any time within 10 years of the date of grant or within 90 days of termination of employment, or such other time as may be provided in the stock option agreement, and vest as determined by the Board of Directors. The Company’s policy is to issue new shares upon exercise of options, granting of Restricted Stock Awards ("RSA") or vesting of Restricted Stock Units ("RSU") under the 2007 Plan.

Stock Options

The following table summarizes option activities from December 31, 2012 through December 31, 2013:



	Number of Shares		Weighted-Average Exercise Price per Share	Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2012	208,862		$20.75
Granted	40,293		$15.67
Exercised	(23,505	)	$13.14
Forfeited	(92,072	)	$25.07
Outstanding as of December 31, 2013	133,578		$17.57	7.4	$365
Vested or expected to vest at December 31, 2013	121,170		$17.63	7.3	$340
Exercisable at December 31, 2013	81,090		$17.53	6.4	$266

The total intrinsic value of options exercised was negligible, $0.1 million and $0.6 million for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively. The Company issues new shares upon the exercise of options. The weighted average grant date fair value was $6.11, $7.42 and $13.72 for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, respectively. The total cash received from stock option exercises was $0.3 million, $0.4 million, and $1.2 million for the years ended December 31, 2013, December 31, 2012, and December 31, 2011, respectively. For the years ended December 31, 2013, December 31, 2012 and December 31, 2011, no tax benefit was realized from exercised options.

The fair value of the option grants has been calculated on the date of grant using the Black-Scholes option pricing model. The expected life was based on historical settlement patterns. Expected volatility was based on historical implied volatility in the Company’s stock. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The following table summarizes the weighted-average assumptions for stock options granted:



	Year Ended December 31,
	2013		2012		2011
Expected life (years)	3.00		3.02		4.36
Risk-free interest rate	0.5	%	0.4	%	1.2	%
Volatility	58	%	62	%	74	%
Dividend yield	—		—		—

Restricted Stock

Outstanding restricted stock units granted to employees vest over a three year period. Outstanding restricted stock units granted to non-employee directors typically vest in less than a year and represent compensation for serving on the Company's Board of Directors. The following table summarizes restricted stock activities from December 31, 2012 through December 31, 2013:



	Number of Shares		Weighted-Average Grant-Date Fair Value
Outstanding as of December 31, 2012	226,402		$21.70
Granted	95,388		$14.33
Restricted Stock Release	(147,898	)	$19.49
Canceled	(79,121	)	$21.51
Outstanding as of December 31, 2013	94,771		$17.91

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense as recorded in the Consolidated Statements of Operations (in thousands):



	Year Ended December 31,
	2013			2012		2011
Cost of revenue	$	(81	)	$	376	$	193

Sales and marketing	$	(32	)	$	148	$	55
Technology and design	187			133		57
General and administrative	1,996			2,902		2,712
Included in operating expenses	2,151			3,183		2,824

Total stock-based compensation expense	$	2,070		$	3,559	$	3,017

Stock-based compensation expense is recognized, net of estimated forfeitures, on a straight line basis over the vesting period. Forfeitures are estimated at the time of the grant, based on historical trends, and revised in subsequent periods as necessary.

As of December 31, 2013, total compensation cost not yet recognized and the weighted-average remaining term is as follows ($ in thousands):

Expense not yet
recognized

Weighted Average Remaining Term (in years)

Stock Options

Restricted Stock Units