Share-Based Compensation

The Company has recognized share-based compensation expense of approximately $39 thousand and $88 thousand for the nine months ended September 30, 2014 and 2013, respectively. The total non-cash, share-based compensation expense included in the unaudited condensed consolidated statements of operations for the periods presented is included in the following expense categories:



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2014		2013		2014		2013

Cost of contract research, services	$	—	$	1	$	—	$	11
Cost of goods sold	—		—		—		7
Administrative and selling	8		10		39		70
Total share-based compensation	$	8	$	11	$	39	$	88

No share-based compensation expense was capitalized during the nine months ended September 30, 2014 and 2013. Compensation expense related to stock options to be charged in future periods amounts to zero at September 30, 2014.

The Company estimates forfeitures at the time of grant and revises, if necessary, in subsequent periods if actual forfeitures differ from those estimates in order to derive the Company’s best estimate of awards ultimately expected to vest. Forfeitures represent only the unvested portion of a surrendered option and are typically estimated based on historical experience.

At September 30, 2014, the Company had outstanding options under two option plans: the 1996 Equity Incentive Plan (the “1996 Plan”) and the 2007 Stock Equity Plan (the “2007 Plan”, together with the 1996 Plan, the “Plans”). Both Plans were approved by stockholders and provided that the Board of Directors may grant options to purchase the Company’s common stock to key employees and directors of the Company. Incentive and non-qualified options must be granted at least at the fair market value of the common stock or, in the case of certain optionees, at 110% of such fair market value at the time of grant. The options may be exercised, subject to certain vesting requirements, for periods up to ten years from the date of issue. The 1996 Plan expired with respect to the issuance of new grants as of December 10, 2006. Accordingly, future grants may be made only under the 2007 Plan.

A summary of options outstanding under the Plans as of September 30, 2014 and changes during the nine-month period ended September 30, 2014 is as follows:



	Number of Shares		Weighted-Average Exercise Price		Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)
Options Outstanding at December 31, 2013	527,246		$	5.88
Granted	36,000		$	0.72
Exercised	—		$	—
Cancelled/expired	(16,248	)	$	5.57
Options outstanding at September 30, 2014	546,998		$	5.55	4.86	$	1
Options vested and exercisable at September 30, 2014	546,998		$	5.55	4.86	$	1
Option vested and expected to vest at September 30, 2014	546,998		$	5.55	4.86	$	—
Options available for future grant at September 30, 2014	450,259

The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $0.41 as of September 30, 2014, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised was approximately zero and zero for the nine months ended September 30, 2014 and 2013, respectively. The total intrinsic value of options expected to vest at September 30, 2014 was zero.

The per-share weighted-average fair value of stock options granted during the three and nine months ended September 30, 2014 was $0.45 and $0.72, respectively, and $0.26 and $0.55 for the three and nine months ended September 30, 2013, respectively, on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:



Period	Expected Dividend Yield	Risk-Free Interest Rate	Expected Option Life	Expected Volatility Factor
Three Months Ended September 30, 2014	—	1.63%	5.1 years	101.7%
Nine Months Ended September 30, 2014	—	1.62%	5.1 years	104.6%
Three Months Ended September 30, 2013	—	1.40%	5.1 years	99.8%
Nine Months Ended September 30, 2013	—	0.97%	5.1 years	99.8%

The risk free interest rate reflects treasury yields rates over a term that approximates the expected option life. The expected option life is calculated based on historical lives of all options issued under the Plans. The expected volatility factor is determined by measuring the actual stock price volatility over a term equal to the expected useful life of the options granted.