3.	Share-Based Compensation

The Company’s 2008 Equity Compensation Plan (the “Plan”) allows for grants in the form of incentive stock options, nonqualified stock options, stock units, stock awards, stock appreciation rights, and other stock-based awards. All of the Company’s officers, directors, employees, consultants and advisors are eligible to receive grants under the Plan. The maximum number of shares authorized for issuance under the Plan is 21,000,000 and the maximum number of shares of stock that may be granted to any one participant during a calendar year is 1,000,000 shares. Options to purchase shares of common stock are granted at exercise prices not less than 100% of fair market value on the dates of grant. The term of each option is ten years and the options typically vest in quarterly installments over a three-year period. As of March 31, 2016 the Plan had approximately 1,500,000 shares available for grant.

Stock Options

The following is a summary of stock option activity under the Plan as of and for the three months ended March 31, 2016:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price ($)		Term (Years)		Value ($)
Outstanding at December 31, 2015		9,480,497			2.19
Granted		402,000			0.92
Exercised		—			—
Cancelled/Forfeited		(792,998	)		1.80
Outstanding at March 31, 2016		9,089,499			2.17		6.9		234,627
Exercisable at March 31, 2016		6,864,944			2.19		6.2		229,622

The per share weighted average fair values of all options granted during the three months ended March 31, 2016 and 2015 were estimated as $0.44 and $1.35, respectively, on the date of grant using the Black-Scholes option pricing model based on the assumptions noted in the table below. Expected volatilities are based on the historical volatility of the Company’s stock price. The weighted average expected life is based on both historical and anticipated employee behavior.

	March 31,
	2016			2015
Risk-free interest rate		1.3	%		1.5	%
Annualized volatility		50.2	%		54.8	%
Weighted average expected life, in years		6.00			6.00
Expected dividend yield		0.0	%		0.0	%

There were no stock option exercises during the three months ended March 31, 2016 and 2015, respectively.

The Company recognized $562,200 and $641,000 in compensation expense related to stock options for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, there was approximately $2,000,000 of total unrecognized compensation cost related to nonvested outstanding stock options that is expected to be recognized over a weighted average period of approximately 2.01 years.

Long Term Incentive Program (LTIP)

The Company’s Board of Directors has approved a long term incentive program (“LTIP”) for the benefit of the Company’s senior executives. Pursuant to the LTIP, the Company’s senior executives have been awarded stock options, restricted stock units (“RSU”) and performance stock units (“PSU”) with targeted values based on values granted to similarly situated senior executives in the Company’s peer group.

The stock options have a ten-year term, have an exercise price equal to the closing price of the Company’s common stock on the date of grant, vest in quarterly installments over three years, were otherwise granted on the same standard terms and conditions as other stock options granted pursuant to the Plan and are included in the stock options table above. The RSUs vest in three equal annual installments. The PSU awards made to the senior executives vest and convert into shares of the Company’s common stock based on the Company’s attainment of certain performance goals over a performance period, which is typically three to five years.

The performance stock unit awards and restricted stock unit awards granted under the long term incentive program are summarized in the following table:

	Performance Stock Units				Restricted Stock Units
	Number of Shares		Weighted Average Grant Date Fair Value ($)		Number of Shares			Weighted Average Grant Date Fair Value ($)
Outstanding at December 31, 2015		956,178		2.40		714,828			2.32
Granted		—				—
Vested/settled		—				(112,298	)		2.41
Forfeited/expired		—				(194,142	)		2.31
Outstanding at March 31, 2016		956,178		2.40		408,388			2.31

The Company recognized a net expense reduction of $95,100 in connection with performance stock unit awards for the three months ended March 31, 2016. The expense reduction was primarily the result of awards that were previously granted to the Company’s former Chief Executive Officer that are no longer considered probable of achievement due to the executive’s departure in January 2016. Total compensation expense recognized in connection with PSU awards was $35,100 for the three months ended March 31, 2015. Compensation expense recognized for the three months ended March 31, 2016 and 2015 in connection with RSUs was $68,700 and $57,800, respectively.

Shares issued in connection with RSU awards that vested in the three months ended March 31, 2016 and 2015 were net-share settled such that the Company withheld shares with a value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld to satisfy tax obligations were 33,150 and 4,779 in the three months ended March 31, 2016 and 2015, respectively, and were based on the fair value of the shares on their vesting date as determined by the Company’s closing stock price. Total payments for the employees’ tax obligations to the taxing authorities were $34,476 and $11,277 in the three months ended March 31, 2016 and 2015, respectively, and are reflected as a financing activity within the consolidated statements of cash flows. These net-share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.