STOCK OPTIONS

6 Months Ended

Jun. 30, 2015

Stock Options

STOCK OPTIONS

(9)STOCK OPTIONS

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model with certain assumptions noted below. Expected volatilities are based on historical volatility of the Common Stock using historical periods consistent with the expected term of the options. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the financial statements, to estimate option exercise and employee termination and forfeitures within the valuation model. The expected term of stock options granted under the Company’s stock plans is based on the average of the contractual term (generally 10 years) and the vesting period (generally 24 to 42 months). The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option.

For options issued and outstanding during the three month periods ended June 30, 2015 and 2014, the Company recorded additional paid-in capital and non-cash compensation expense of $585,000 and $137,000, respectively, each net of estimated forfeitures.

The assumptions used principally for stock options granted to employees and members of the Company’s Board of Directors in the six months ended June 30, 2015 and 2014 were as follows:

	2015	2014
Risk-free interest rate %	1.46 - 1.90	0.11 - 2.08
Expected dividend yield	—	—
Expected term -  years	5 – 5.5	1 - 6
Forfeiture rate % (excluding fully vested stock options)	7.5 - 15	15
Expected volatility %	92 - 93	129 - 141

A summary of stock option activity for the six months ended June 30, 2015 is as follows:

Stock Options	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding options at January 1, 2015		1,039,900		$	3.00
Granted		895,000		$	1.47
Forfeited or expired		(267,667	)	$	4.06
Outstanding options at June 30, 2015		1,667,233		$	2.01		9.24	$	—
Exercisable options at June 30, 2015		593,750		$	2.56		9.02	$	—

The weighted-average grant-date fair value of stock options granted for the ended June 30, 2015 was $1.47 per share.  As of June 30, 2015, there was approximately $950,000 of total unrecognized compensation expense related to non-vested share-based option compensation arrangements. With the exception of the unrecognized share-based compensation related to certain restricted stock grants to officers and employees that contain performance conditions related to FDA approval for the Company’s CGM system or the sale of substantially all of the stock or assets of the Company, unrecognized compensation is expected to be recognized over the next four years.