STOCKHOLDERS’ EQUITY

Stock-based compensation

Stock-based compensation expense is attributable to stock options and restricted stock unit awards. For all stock-based awards, we recognize expense using a straight-line amortization method.

The following table summarizes stock-based compensation expense and the impact it had on operations for the periods presented (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
Cost of sales	$	8	$	10	$	27	$	40
Product development	31		16		86		45
Selling, general, and administrative	237		166		593		540
Total stock-based compensation	$	276	$	192	$	706	$	625

The table above excludes approximately $0.3 million in stock-based compensation expense from prior periods that was reversed and included as a reduction to restructuring expenses due to the workforce reduction associated with our restructuring actions in the first six months of 2017.

Total unearned stock-based compensation was $1.1 million at September 30, 2018, compared to $0.9 million at September 30, 2017. These costs will be charged to expense and amortized on a straight-line basis in future periods. The weighted average period over which the unearned compensation at September 30, 2018 is expected to be recognized is approximately 2.0 years.

Stock options

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model. Estimates utilized in the calculation include the expected life of the option, risk-free interest rate, and expected volatility, and are further comparatively detailed as follows:



	Nine months ended September 30,
	2018			2017
Fair value of options issued	$	1.41		$	2.66
Exercise price	$	1.97		$	3.55
Expected life of options (in years)	5.9			5.8
Risk-free interest rate	2.6		%	2.1		%
Expected volatility	84.2		%	91.9		%
Dividend yield	0.0		%	0.0		%

A summary of option activity under all plans for the nine months ended September 30, 2018 is presented as follows:



	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in years)
Balance at December 31, 2017	248,512		$	5.76
Granted	100,746		1.97
Exercised	—		—
Canceled/forfeited	(43,787	)	7.17
Expired	(10,000	)	20.00
Balance at September 30, 2018	295,471		$	3.78	7.5

Vested and expected to vest at September 30, 2018	269,153		$	3.93	7.3

Exercisable at September 30, 2018	144,191		$	5.20	5.7

Restricted stock units

A summary of restricted stock unit activity under all plans for the nine months ended September 30, 2018 is presented as follows:



	Restricted Stock Units		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (in years)
Balance at December 31, 2017	306,142		$	3.37
Granted	553,657		2.38
Released	(213,795	)	3.14
Canceled/forfeited	(76,950	)	2.99
Balance at September 30, 2018	569,054		$	2.55	2.0