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,
	2019		2018		2019		2018
Cost of sales	$	1	$	8	$	8	$	27
Product development	2		31		24		86
Selling, general, and administrative	31		237		525		593
Total stock-based compensation	$	34	$	276	$	557	$	706

Total unearned stock-based compensation was $0.2 million at September 30, 2019, compared to $1.1 million at September 30, 2018. 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, 2019 is expected to be recognized is approximately 2.2 years.

Pursuant to agreements dated March 29, 2019, and effective April 1, 2019, Theodore L. Tewksbury III resigned as Chairman of the Board, Chief Executive Officer and President, and Jerry Turin resigned as Chief Financial Officer and Secretary. In accordance with their separation agreements, Theodore Tewksbury’s outstanding restricted stock units vested immediately and one-third of Jerry Turin’s outstanding restricted stock units vested immediately. Any stock options vested for Theodore Tewksbury as of April 1, 2019, shall remain exercisable for one year following. All unvested stock options were cancelled. The impact of the accelerated vesting of the restricted stock units and cancellation of the stock options was recognized during the three months ended March 31, 2019 and totaled $0.3 million.

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,
	2019			2018
Fair value of options issued	$	0.32		$	1.41
Exercise price	$	0.42		$	1.97
Expected life of options (in years)	6.3			5.9
Risk-free interest rate	1.9		%	2.6		%
Expected volatility	90.0		%	84.2		%
Dividend yield	0.0		%	0.0		%

A summary of option activity under all plans for the nine months ended September 30, 2019 is presented as follows:



	Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in years)
Balance at December 31, 2018	292,871		$	3.78
Granted	450,000		0.42
Canceled/forfeited	(151,993	)	2.90
Expired	(27,525	)	5.33
Balance at September 30, 2019	563,353		$	1.26	9.1

Vested and expected to vest at September 30, 2019	420,864		$	1.54	8.9

Exercisable at September 30, 2019	109,837		$	4.63	6.3

Restricted stock units

A summary of restricted stock unit activity under all plans for the nine months ended September 30, 2019 is presented as follows:



	Restricted Stock Units		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (in years)
Balance at December 31, 2018	546,858		$	2.54
Granted	27,187		1.04
Released	(377,894	)	2.51
Canceled/forfeited	(152,441	)	2.32
Balance at September 30, 2019	43,710		$	2.62	1.2