Share-Based Compensation

9 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

MRV records share-based compensation expense at fair value. The following table summarizes the impact on MRV's results of operations of recording share-based compensation for the three and nine months ended September 30, 2015 and 2014 (in thousands):



	Three months ended				Nine months ended
	September 30,				September 30,
	2015		2014		2015		2014
Cost of goods sold	$	35	$	34	$	90	$	87
Product development and engineering	68		49		161		122
Selling, general and administrative	222		148		531		497
Total share-based compensation expense (1)	$	325	$	231	$	782	$	706


(1)	Income tax benefits realized from stock option exercises and similar awards were immaterial in all periods.

During the three months ended September 30, 2015, the Company granted 31,000 stock options with a related fair value of $5.28 per option and 11,000 restricted shares with a related fair value $12.12 per share. During the nine months ended September 30, 2015, the Company granted 228,848 stock options with a related fair value of $4.31 per option and 82,872 restricted shares with a related fair value of $9.96 per share.

During the three months ended September 30, 2014, the Company granted 15,000 stock options with a related fair value of $6.06 per option and 5,000 restricted shares with a related fair value $13.46 per share. During the nine months ended September 30, 2014, the Company granted 188,722 stock options with a related fair value of $7.07 per option and 90,907 restricted shares with a related fair value of $14.35 per share.

As of September 30, 2015, the total unrecognized share-based compensation balance for unvested options, net of expected forfeitures, was $1.9 million, which is expected to be amortized over a weighted-average period of 2.2 years.

Valuation Assumptions

MRV uses the Black-Scholes option pricing model to estimate the fair value of stock option awards or related modifications. The Black-Scholes model requires the use of subjective and complex assumptions including the option's expected life and the underlying stock price volatility. MRV bases volatility on the Company's historical quoted prices and peer company data. There were no options modified during the three and nine months ended September 30, 2015 and 2014.



Nine months ended September 30,	2015		2014
Risk-free interest rate	1.7	%	2.0	%
Dividend yield ₍₁₎	—		—
Volatility	43	%	51	%
Expected life (in years)	6.0		5.9


(1)	As the Company does not pay a dividend on a regular basis, and dividends paid in the past have been special in nature, a dividend rate of zero was used.