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Stock-Based Compensation
 9 Months Ended
Sep. 30, 2016
Stock-Based Compensation [Abstract]  
Stock-Based Compensation

5. Stock-Based Compensation

 

The stock-based compensation expense for the three and nine months ended September 30, 2016 and 2015 reflects the estimated fair value of the vested portion of options granted to employees, directors and eligible consultants. Stock-based compensation expense in the accompanying condensed consolidated statements of operations is as follows (in thousands):

 

  Three months ended 
September 30,		  Nine months ended 
September 30,		 
  2016  2015  2016  2015 
Product research and development $8  $100  $48  $422 
Sales and marketing  19   68   132   240 
General and administrative  27   8   44   286 
Total stock-based compensation expense $54  $176  $224  $948 

 

  Remaining
unrecognized
expense at
September 30,
2016		 
Stock-based compensation $115 

 

The remaining unrecognized expense related to stock options will be recognized on a straight line basis monthly as compensation expense over the remaining vesting period, which approximates 1.3 years.

 

The estimated fair value of stock-based awards is calculated using the Black-Scholes option pricing model, even though this model was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which differ significantly from our stock options. The Black-Scholes model also requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The expected term and forfeiture rate of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior, as well as expected behavior on outstanding options. The risk-free rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. The expected volatility is based on the historical volatility of our stock price. These factors could change in the future, which would affect fair values of stock options granted in such future periods, and could cause volatility in the total amount of the stock-based compensation expense reported in future periods.

 

Stock Options

 

We have adopted equity incentive plans for which stock options and restricted stock awards are available to grant to employees, consultants and directors. Except for 265,000 options issued to certain Swedish employees during 2015, all employee, consultant and director stock options granted under our stock option plans have an exercise price equal to the market value of the underlying common stock on the grant date. There are no vesting provisions tied to performance conditions for any options, as vesting for all outstanding option grants was based only on continued service as an employee, consultant or director. All of our outstanding stock options and restricted stock awards are classified as equity instruments.

 

As of September 30, 2016 we had two equity incentive plans:

 

 ●The 2006 Equity Incentive Plan; and
 ●The 2015 Stock Incentive Plan

 

We also had expired one non-employee director stock option plan.

 

 ●The 2001 Non-Employee Director Stock Option Plan (the “Director Plan”), which expired in March 2011.

 

A summary of the combined activity under all of the stock option plans is set forth below:

 

  Number of Options Outstanding  Weighted Average Exercise Price 
Outstanding at January 1, 2016  2,184,117  $4.48 
Granted  25,000   1.44 
Forfeited  (324,367)  4.57 
Outstanding at September 30, 2016  1,884,750  $4.43 

 

The aggregate intrinsic value of the 1,884,750 stock options that are outstanding, vested and expected to vest as of September 30, 2016 was approximately $0.

 

For the three and nine months ended September 30, 2016 and 2015, we recorded $54,000 and $0.2 million and $0.2 million and $0.9, respectively, of compensation expense related to the vesting of stock options. The fair value of the stock-based compensation was calculated using the Black-Scholes option pricing model as of the date of grant of the stock option.

 

During the nine months ended September 30, 2016, we granted 25,000 options to purchase shares of our common stock to employees with a grant fair value of $17,000 computed using the Black-Sholes option pricing model. The weighted-average grant date fair value of the options during the nine months ended September 30, 2016 was $0.67 per share. We did not grant any options to purchase shares to any of the members of our board of directors.

 

See below for assumptions used in the valuation of stock options: 

  

  For the nine months ended 
  September 30, 2016 
    
 Annual dividend yield  - 
 Expected life (years)  3.50 
 Risk-free interest rate  0.83%
 Expected volatility  65%

 

Stock options granted under the 2006 and 2015 Plans are exercisable over a maximum term of ten years from the date of grant, vest in various installments over a one to four-year period and have exercise prices reflecting the market value of the shares of common stock on the date of grant.