13. Stock Plans

The Company has two stock-based compensation plans under which incentive stock options, nonqualified stock options, restricted and unrestricted stock awards, and other stock-based awards are available for grant to employees, directors and consultants of the Company. At September 30, 2018, there were 1,545,719 shares available for future grant under the 2011 plan.

The 2011 Employee, Director and Consultant Equity Incentive Plan (the “2011 Plan,” together with the 2003 Omnibus Stock Plan, the “Plans”) allows for an annual increase in the number of shares available for issue under the 2011 Plan commencing on the first day of each fiscal year during the period beginning in fiscal year 2012 and ending in fiscal year 2020. The annual increase in the number of shares shall be equal to the lowest of:

500,000 shares;

4% of the number of common shares outstanding as of such date; and

an amount determined by the Board of Directors or the Company’s compensation committee.

Accordingly, in the first quarter of fiscal 2018, 446,299 options available for future grant were added to the 2011 Plan.

Stock-Based Compensation

Stock-based compensation is reflected in the consolidated statements of operations as follows for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Research and development	$	1	$	11	$	6	$	24
Sales and marketing		5		38		15		67
General and administrative		16		32		65		71
	$	22	$	81	$	86	$	162

The stock options granted under the Plans generally vest over a four-year period and expire ten years from the date of grant. From time to time, the Company grants stock options to purchase common stock subject to performance-based milestones. The vesting of these stock options will occur upon the achievement of certain milestones. When achievement of the milestone is deemed probable, the Company expenses the compensation of the respective stock option over the implicit service period.

In calculating stock-based compensation costs, the Company estimates the fair value of stock options using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of short-lived, exchange-traded options that have no vesting restrictions and are fully transferable. Such costs are then recognized over the requisite service period of the awards on a straight-line basis.

Determining the fair value of stock-based awards using the Black-Scholes option-pricing model requires the use of highly subjective assumptions, including the expected term of the award and expected stock price volatility. The weighted-average assumptions used to estimate the fair value of employee stock options using the Black-Scholes option-pricing model were as follows for the three and nine months ended September 30, 2018 and 2017:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Expected volatility		120.3	%		88.2	%		120.3	%		87.8	%
Expected term (in years)		6.05			6.05			6.05			6.05
Risk-free interest rate		3.0	%		2.1	%		3.0	%		2.1	%
Expected dividend yield		0	%		0	%		0	%		0	%

Stock Options

The following table summarizes share-based activity under the Company’s stock option plans for the nine months ended September 30, 2018:

	Shares of Common Stock Attributable to Options			Weighted- Average Exercise Price		Weighted- Average Contractual Life		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding at December 31, 2017		992,221		$	10.71	5.72		$	63
Granted		122,500		$	—			$	—
Exercised	—			$	—			$	—
Cancelled		(381,043	)	$	5.31			$	—
Outstanding at September 30, 2018		733,678		$	4.67		5.96	$	16
Vested or expected to vest at September 30, 2018		733,678		$	4.67		5.96	$	16
Exercisable at September 30, 2018		337,063		$	—		—	—

As of September 30, 2018, there was approximately $299 thousand of unrecognized stock-based compensation related to unvested stock option grants having service-based vesting under the Plans which is expected to be recognized over a weighted-average period of 2.6 years. The intrinsic value in the table above represents the difference between the fair value of the Company’s common stock on the measurement date and the exercise price of the stock option.

The stock-based compensation plans provide that grantees may have the right to exercise an option prior to vesting. Shares purchased upon the exercise of unvested options will be subject to the same vesting schedule as the underlying options and are subject to repurchase at the original exercise price by the Company should the grantee discontinue providing services to the Company for any reason, prior to becoming fully vested in such shares.

Restricted Stock Units & Performance Stock Units

Each restricted stock unit and performance stock unit (“RSU & PSU”) issued under the Company Plans represents a contingent right to receive one share of the Company’s common stock. The RSUs & PSUs outstanding at September 30, 2018 vest upon the achievement of certain product revenue, regulatory and reimbursement milestones. There is no consideration payable on the vesting of RSUs & PSUs issued. Upon vesting, RSUs and PSUs are exercised automatically and settled in shares of the Company’s common stock.

The following table summarizes information related to RSU & PSU activity for the nine months ended September 30, 2018:

	Number of Units			Weighted- Average Contractual Life		Aggregate Intrinsic Value
				(in years)		(in thousands)
Outstanding at December 31, 2017		392,659			8.27	$	429
Granted	—
Exercised	—
Cancelled		(142,659	)	—		—
Outstanding at September 30, 2018		250,000			7.48	$	208

The aggregate intrinsic value at September 30, 2018 and December 31, 2017 noted in the table above represents the closing price of the Company’s common stock multiplied by the number of RSUs and PSUs outstanding. The fair value of each RSU and PSU award equals the closing price of the Company’s common stock on the date of grant

At September 30, 2018, all RSUs and PSUs outstanding are subject to performance-based vesting criteria as described in the applicable award agreement. For these awards, vesting will occur upon the achievement of certain product revenue, regulatory and reimbursement milestones. When achievement of the milestone is deemed probable, the Company expenses the compensation of the respective stock award over the implicit service period.

At September 30, 2018 and 2017, no RSUs and PSUs that have performance-based vesting criteria are considered probable of achievement. For the three and nine months ended September 30, 2018 and 2017, the Company did not recognize any stock-based compensation for RSUs and PSUs subject to performance-based vesting criteria.

As of September 30, 2018, there remains approximately $150 thousand of unrecognized stock-based compensation.