STOCK-BASED COMPENSATION

Stock-based compensation expense (including amounts related to restricted stock units, modifications and exchanges discussed below) was as follows (in thousands):



	2016		2015		2014
Employees	$	10,862	$	14,652	$	23,881
Nonemployees	1,050		1,032		1,668
Total stock based compensation expense	$	11,912	$	15,684	$	25,549
Comprised as follows:
Continuing operations: Research and development	$	2,623	$	4,562	$	7,407
Continuing operations: Sales, general and administrative	8,827		10,052		16,938
Total continuing operations	11,450		14,614		24,345
Discontinued operations	462		1,070		1,204
Total stock based compensation expense	$	11,912	$	15,684	$	25,549

Our equity incentive plans allow us to grant options, restricted stock and stock purchase rights to our employees, directors, or consultants. Options granted may be either incentive stock options or nonstatutory stock options. Incentive stock options may be granted to employees (including offices and directors, who are also employees). Nonstatutory stock options may be granted to employees, directors or consultants. As of December 31, 2016 there were 10,650,151 shares available for issuance under our equity plans.

Options under our plans may be granted for periods up to ten years. All options issued to date have had up to a ten year life. The exercise price of incentive and nonstatutory stock options shall not be less than 100% of the fair market value of the shares on the date of grant. The Board of Directors determines the vesting period of stock-based awards. Our stock options generally vest over four years. Restricted stock awards are subject to forfeiture if certain vesting requirements are not met. We issue new common stock from authorized shares upon the exercise of stock options.

Employee Stock Purchase Plan—We have an Employee Stock Purchase Plan (the ESPP). The purchase price of the common stock under the ESPP is 85% of the lower of the fair market value of a share of common stock on the first day of the offering period or the last day of the purchase period. The ESPP also provides for automatic annual increases in the number of shares reserved for future issuance, and during 2016 an additional 817,340 shares were reserved under the ESPP as a result of this provision. As of December 31, 2016 there were 3,409,883 shares available for issuance under the ESPP.

We recognized stock-based compensation expense (benefit) related to our 2011 ESPP of ($0.2 million), $0.1 million and $0.7 million for 2016, 2015 and 2014, respectively.

Stock Options

A summary of our stock option activity under the Plans and related information is as follows:



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value⁽¹⁾
						(in thousands)
Balance at December 31, 2015	11,900,671		$	4.20	7.7	$	999
Granted	4,286,008		$	2.15
Exercised	(380,145	)	$	1.83
Forfeited, canceled or expired	(3,099,497	)	$	4.26
Balance at December 31, 2016	12,707,037		$	3.56	7.4	$	137
Options vested and exercisable at December 31, 2016	7,553,273		$	4.34	6.3	$	137
Options vested and expected to vest as of December 31, 2016	11,543,799		$	3.68	7.2	$	137


⁽¹⁾	The aggregate intrinsic value represents the value by which our closing stock price on the last trading day of the year ended December 31, 2016 exceeds the exercise price of the stock multiplied by the number of options outstanding or exercisable, excluding any that have a negative intrinsic value.

The weighted-average grant date fair value of options granted was $1.42, $1.68 and $3.98 for 2016, 2015 and 2014, respectively. The total intrinsic value of options exercised was $254,000, $251,000 and $5.8 million for 2016, 2015 and 2014, respectively.

The total grant date fair value of options vesting in 2016, 2015 and 2014 was $11.3 million, $3.8 million and $14.7 million, respectively.

The following table presents the composition of options outstanding and vested and exercisable as of December 31, 2016:



	Options Outstanding				Options Vested and Exercisable
Range of Exercise Prices	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Number of Vested and Exercisable Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
$0.12-2.39	3,107,393	$	1.72	7.4	1,536,600	$	1.71	5.5
$2.46-2.60	4,087,859	$	2.52	6.8	2,823,284	$	2.54	6.2
$2.62-2.72	3,215,695	$	2.66	9.1	1,115,374	$	2.68	8.6
$2.76-8.77	1,008,356	$	5.50	6.4	823,328	$	5.94	6.0
$8.92-27.03	1,287,734	$	12.07	5.6	1,254,687	$	12.06	5.6
Totals	12,707,037	$	3.56	7.4	7,553,273	$	4.34	6.3

No income tax benefits have been recognized related to stock-based compensation expense for 2016, 2015 and 2014.

Employee Stock-Based Compensation—There was unrecognized stock-based compensation cost of $6.6 million related to nonvested stock options granted to employees and directors as of December 31, 2016, and we expect to recognize this cost over a weighted-average period of 2.2 years. The grant date fair value of employee stock-based awards was estimated using the following weighted-average assumptions:



	2016	2015	2014
Expected term (in years)	5.1-6.1	5.3-6.0	5.3-6.0
Volatility	75%-80%	67%-73%	51%-68%
Risk-free interest rate	1.05%-2.02%	0.86%-1.85%	1.58%-2.0%
Dividend yield	—%	—%	—%

Nonemployee Stock-Based Compensation—There was unrecognized stock-based compensation cost of approximately $0.2 million related to nonvested stock options granted to nonemployees as of December 31, 2016, and we expect to recognize this cost over a weighted-average period of 0.9 years. The fair value of non-employee stock-based awards was estimated using the following weighted-average assumptions:



	2016	2015	2014
Expected term (in years)	8.9-9.2	8.2-8.6	8.3-8.6
Volatility	69%-70%	65%-67%	53%-64%
Risk-free interest rate	1.42%-2.32%	1.83%-2.21%	2.0%-2.5%
Dividend yield	—%	—%	—%

Restricted Stock Units—A summary of our restricted stock unit activity was as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2015	1,883,552		$	9.85
Granted	681,325		$	2.16
Vested	(682,064	)	$	6.87
Canceled	(608,854	)	$	6.13
Unvested at December 31, 2016	1,273,959		$	4.22

Stock-based compensation expense related to RSUs was as follows (in thousands):



	Year ended December 31,
	2016		2015		2014
Continuing operations	$	3,796	$	5,076	$	8,077
Discontinued operations	70		556		509
Total stock based compensation expense	$	3,866	$	5,632	$	8,586

Stock Option Modification—In August 2016, we modified an employee’s stock options and recorded $116,000 of additional discontinued operations stock-based compensation expense in 2016. In October 2014, we modified an employee’s stock options and recorded $2.3 million of additional continuing operations stock-based compensation expense in 2014.

Employee Stock Option Exchange Program—In January 2015, we commenced an exchange offer to allow employees the opportunity to exchange, on a grant-by-grant basis, their outstanding eligible options that had an exercise price per share equal to or greater than $6.79 for new stock options on a two-for-one basis that we granted under our 2011 EIP. Generally, all employees with options were eligible to participate in the program, which expired on February 18, 2015. Non-employee members of our Board of Directors were not eligible to participate. Each new stock option has an exercise price of $2.58, the last reported sale price per share of our common stock on the NASDAQ Global Select Market on February 19, 2015, which was the new stock option grant date.Each new stock option has a maximum term that is equal to the remaining term of the corresponding eligible option. Each new stock option has the same final vesting date as the corresponding eligible option. Each new stock option has the same rate of vesting, from the same vesting commencement date, as the corresponding eligible option, provided that any vesting that would have occurred prior to January 1, 2016 cumulated and cliff vested on January 1, 2016. This is the case even if the eligible options were fully vested on the date of the exchange. On February 19, 2015, we granted new options to eligible options holders to purchase 2,745,279 shares of common stock in exchange for the cancellation of the tendered options. We record a charge of approximately $0.5 million associated with the stock option modification over the vesting periods of the new options which range from ten months to four years. This modification charge was recorded as additional stock-based compensation expense beginning in the first quarter of 2015.