STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2016

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

STOCK-BASED COMPENSATION

8. STOCK-BASED COMPENSATION

All equity-based service awards are granted under the ANI Pharmaceuticals, Inc. Amended and Restated 2008 Stock Incentive Plan (the “2008 Plan”). As of September 30, 2016, 0.2 million shares of our common stock remained available for issuance under the 2008 Plan. In addition, in July 2016, we commenced administration of our ESPP, which was approved by shareholders in our May 25, 2016 annual shareholder meeting. The Board of Directors and shareholders approved a maximum of 0.2 million shares of common stock, which were reserved and made available for issuance under the ESPP. Under the ESPP, participants can purchase shares of our stock at a 15% discount. No shares have been issued to date. In the three months ended September 30, 2016, we recognized $12 thousand of stock-based compensation expense related to the ESPP.

The following table summarizes stock-based compensation expense, net of forfeitures, included in our accompanying unaudited interim condensed consolidated statements of earnings:

(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Cost of sales	$	24	$	23	$	38	$	60
Research and development		25		31		74		80
Selling, general, and adminstrative		1,316		1,066		4,575		2,577
	$	1,365	$	1,120	$	4,687	$	2,717

Separation Agreement

On April 26, 2016, we entered into a Separation Agreement and Release (the “Separation Agreement”) with our former Chief Financial Officer (the “Former Officer”), who resigned effective May 6, 2016. Under the Separation Agreement, 25,167 stock options previously granted to the Former Officer vested on May 6, 2016. In addition, 4,050 restricted stock awards and 2,000 stock options previously granted to the Former Officer will vest on March 15, 2017, subject to certain conditions. These actions were accounted for as a modification of the underlying awards and the full expense for the modified awards was recorded in the second quarter 2016. In the second quarter of 2016, we recorded $0.9 million of stock-based compensation expense, net of forfeitures, in relation to the Separation Agreement. In the second quarter 2016, we recognized $0.4 million of additional expense related to the Separation Agreement and transition that was not related to stock-based compensation. All expenses related to the Separation Agreement and transition have been recognized in the second quarter 2016.

A summary of stock option and restricted stock activity under the Plan during the nine months ended September 30, 2016 and 2015 is presented below:

(in thousands)	Options		RSAs
Outstanding December 31, 2014		458		63
Granted		130		28
Options Exercised/RSAs Vested		(81)		(10)
Forfeited		(33)		(5)
Outstanding September 30, 2015		474		76
Outstanding December 31, 2015		474		63
Granted		293		42
Options Exercised/RSAs Vested		(120)		(15)
Forfeited		(59)		(12)
Outstanding September 30, 2016		588		78