Stock Plans

The Company has two active stock-based compensation plans as of June 30, 2013: the 2004 Employee Stock Purchase Plan and the 2005 Omnibus Equity Incentive Plan under which incentive stock options, non-qualified stock options, restricted stock awards and restricted stock units can be granted to employees and non-employee directors.

Stock Options

Compensation expense recognized from employee stock options for the three months ended June 30, 2013 and 2012 was $154,000 and $167,000, respectively, and $331,000 and $712,000 for the six months ended June 30, 2013 and 2012, respectively. Beginning in 2011, the Company ceased granting stock options and began granting restricted stock awards to employees as part of its annual equity incentive award program. However, during the three months ended June 30, 2013, the Company granted 75,000 stock options to its new chief operating officer upon his initial retention. This option vests in equal annual installments over four years from the date of grant. The Company may determine to grant stock options in the future under the Incentive Plan.



	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2013			2013
Expected dividends	$	—		$	—
Exercise price	$	6.80		6.80
Expected volatility	68.6		%	68.6		%
Average risk-free interest rate	1.1		%	1.1		%
Expected life/term (in years)	4.8			4.8
Fair value per share	$	3.72		$	3.72

Restricted Stock Awards

The Company did not grant any restricted stock awards during the three months ended June 30, 2013. During the three months ended June 30, 2012, the Company issued 1,700 shares, upon granting of restricted stock awards, which had an average grant date fair value per share of $8.90. During the six months ended June 30, 2013 and 2012, the Company issued 305,143 and 251,066 shares, respectively, upon granting of restricted stock awards, which had an average grant date fair value per share of $10.58 and $20.81, respectively. The following table summarizes the amount of compensation expense recognized for restricted stock awards for the three and six months ended June 30, 2013 and 2012 (in thousands):



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Service-based restricted stock	$	621	$	368	$	1,270	$	847
Performance-based restricted stock	25		97		43		160
Total compensation expense recognized for restricted stock awards	$	646	$	465	$	1,313	$	1,007

Restricted Stock Units

Beginning in 2011, non-employee directors receive an annual restricted stock unit award as part of their annual retainer compensation, which vests one year from the date of grant. During the three months ended June 30, 2013 and 2012, no restricted stock units were granted. During the six months ended June 30, 2013 and 2012, non-employee directors were granted a total of 56,616 and 20,342 restricted stock units, respectively, with an average grant date fair value per share of $10.51 and $20.65, respectively.

Total compensation expense recognized for service-based restricted stock unit awards was $139,000 and $104,000 during the three months ended June 30, 2013 and 2012, respectively, and $253,000 and $210,000 for the six months ended June 30, 2013 and 2012, respectively.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (“ESPP”) permits substantially all employees to purchase common stock through payroll deductions, at 85% of the lower of the trading price of the stock at the beginning or at the end of each six month offering period commencing on January 1 and July 1. The number of shares purchased is based on participants’ contributions made during the offering period. In 2013, the Company suspended its ESPP Plan because the registration statement on Form S-8 became ineffective a result of the restatement of the Company's previously issued financial statements (as discussed in Note 2, Restatement of Previously Issued Financial Statements).

ompensation expense recognized for the ESPP for the three months ended June 30, 2013 and 2012 was zero and $34,000, respectively, and zero and $128,000 for the six months ended June 30, 2013 and 2012. During the six months ended June 30, 2013, no shares were issued under the ESPP. The fair value of the ESPP shares was estimated using the Black-Scholes valuation model for a call and a put option with the following weighted-average assumptions:



	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2012			2012
Expected dividends	$	—		$	—
Exercise price	16.24			16.24
Expected volatility	63		%	63		%
Average risk-free interest rate	0.06		%	0.06		%
Expected life/term (in years)	0.5			0.5
Fair value per share	$	5.26		$	5.26

Stock-based Compensation Expense

Compensation cost for restricted stock, restricted stock units, employee stock options and the ESPP included in cost of revenue; selling, general and administrative expense; and research and development expense is as follows (in thousands):



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Cost of revenue	$	261	$	238	$	534	$	380
Selling, general and administrative	507		411		1,004		1,374
Research and development	178		121		365		302
Total stock-based compensation expense	$	946	$	770	$	1,903	$	2,056