(8)	STOCK OPTION PLANS

In February 2010, the Company's Board of Directors approved, and in March 2010 the Company’s stockholders approved, the Raptor Pharmaceutical Corp. 2010 Stock Incentive Plan, as subsequently amended and approved by its stockholders in March 2011 ("Amended Plan"). As of December 31, 2012, there were 8.9 million shares authorized and 1.9 million shares remaining available for issuance.

Stock options are granted to recognize the contributions made by its employees, independent contractors, consultants and directors, to provide those individuals with additional incentive to devote themselves to the Company's future success and to improve its ability to attract, retain and motivate individuals upon whom its growth and financial success depends. Employee stock options generally vest over four years with a six-month cliff-vesting period. In general, all options are exercisable over a period not to exceed the contractual term of ten years from the date the stock options are granted at prices not less than the fair market value of the Company's common stock on the grant date. The Company has and may grant options with different vesting terms from time to time.

The Company recorded employee stock-based compensation expense as follows:

	For the four months ended		For the period from September 8, 2005 (inception) to		For the year ended August 31,
	December 31, 2012		December 31, 2012		2012		2011		2010
Research and development	$	453	$	2,045	$	926	$	421	$	96
Selling, general and administrative		1,777		8,022		3,561		1,499		121
Total stock-based compensation expense	$	2,230	$	10,067	$	4,487	$	1,920	$	217

Stock-based compensation expense was based on the Black-Scholes option-pricing model assuming the following:

			Expected
	Risk-free		life of stock	Annual
Period*	interest rate		option	volatility
September 8, 2005 (inception) to August 31, 2006**	5	%	10 years	100	%
Year ended August 31, 2007	4 to 5	%	8 years	100	%
Year ended August 31, 2008	2 to 3.75	%	%8 years	109 to 128	%
Year ended August 31, 2009	1.5 to 3.2	%	7 years	170 to 240	%
Year ended August 31, 2010	2.1 to 3.1	%	6 to 7 years	55 to 245	%
Year ended August 31, 2011	1.6 to 2.4	%	6 years	88 to 116	%
Year ended August 31, 2012	0.68 to 1.2	%	5 to 6 years	121 to 125	%
Four months ended December 31, 2012	0.68 to 0.7	%	5 years	95	%

*	Dividend rate is 0% for all periods presented.

**	Employee stock-based compensation expense was recorded on the consolidated statements of operations commencing on September 1, 2006.

The compensation expense for stock-based compensation awards includes an estimate for forfeitures.

If factors change and different assumptions are employed, the compensation expense recorded in future periods may differ significantly from what was recorded in the current period.

The Company recognizes as an expense the fair value of options granted to persons who are neither employees nor directors. The fair value of expensed options was based on the Black-Scholes option-pricing model assuming the same factors shown in the stock-based compensation expense table above. Stock-based compensation expense for consultants for the four months ended December 31, 2012, the years ended August 31, 2012, 2011 and 2010 and for the cumulative period from September 8, 2005 (inception) to December 31, 2012 was $9, $72, $197, $78 and $764, respectively, of which $147 was included in general and administrative expense and $617 was included in research and development expense for the cumulative period.

A summary of the activity in the 2010 Equity Incentive Plan, the 2006 Equity Compensation Plan, as amended and the Company's other stock option plans, is as follows:

	Option shares			Weighted-average exercise price		Weighted-average fair value of options granted
Outstanding at September 8, 2005		0		$	0	$	0
Granted		580			2.64		2.47
Exercised		0			0		0
Canceled		0			0		0
Outstanding at August 31, 2006		580			2.64		2.47
Granted		107			2.56		2.31
Exercised		(3	)		2.57		2.40
Canceled		0			0		0
Outstanding at August 31, 2007		684			2.63		2.45
Granted		223			2.27		2.21
Exercised		0			0		0
Canceled		0			0		0
Outstanding at August 31, 2008		907			2.54		2.39
Granted		82			1.13		1.04
Exercised		0			0		0
Canceled		0			0		0
Outstanding at August 31, 2009		989			2.42		2.40
Granted		303			2.29		1.24
Assumed in the 2009 Merger		161			114.12		2.63
Exercised		(38	)		1.69		1.49
Canceled		(24	)		142.42		2.00
Outstanding at August 31, 2010		1,391			14.25		1.87
Granted		2,232			3.39		2.54
Exercised		(39	)		2.44		2.02
Canceled		(3	)		1,088.33		0
Outstanding at August 31, 2011		3,581			6.64		2.30
Granted		2,722			5.38		4.62
Exercised		(160	)		2.28		1.72
Canceled		(18	)		119.27		0.02
Outstanding at August 31, 2012		6,125			5.87		3.37
Granted		1,759			5.36		3.84
Exercised		(79	)		2.45		1.79
Canceled		(14	)		6.16		4.49
Outstanding at December 31, 2012		7,791			5.79		3.48

As of December 31, 2012, the options outstanding under all of the Company's stock option plans consisted of the following (in thousands, except per share data):

		Options outstanding						Options vested and exercisable
Range of exercise prices		Number of options outstanding		Weighted- average remaining contractual life		Weighted- average exercise price		Number of options exercisable		Weighted- average exercise price		Weighted- average remaining contractual life (years)
($)		(#)		(years)		($)		(#)
$	0 to $1.00		9		6.29	$	0.85		7	$	0.85		6.29
$	1.01 to $2.00		79		6.46		1.78		74		1.76		6.41
$	2.01 to $3.00		1,353		5.89		2.66		1,075		2.61		5.42
$	3.01 to $4.00		1,764		7.90		3.50		1,229		3.52		7.84
$	4.01 to $5.00		310		8.90		4.79		87		4.71		6.65
$	5.01 to $6.00		3,884		9.16		5.27		899		5.18		8.83
$	6.01 to $7.00		278		9.17		6.48		66		6.50		9.17
$	7.01 to $8.00		70		9.13		7.75		14		7.75		9.13
$	8.01 to $965.00		44		2.72		249.4		43		249.43		2.72
			7,791		8.23		5.79		3,494		6.80		7.25

The aggregate intrinsic value of stock options outstanding as of December 31, 2012 was $10.0 million. The aggregate intrinsic value of stock options exercisable as of December 31, 2012 was $ 6.8 million.

The number of options outstanding, vested and expected to vest as of December 31, 2012 was 7,644 and the weighted-average remaining contractual life was 8.2 years. The aggregate intrinsic value and the weighted-average intrinsic value of stock options outstanding, vested and expected to vest as of December 31, 2012 was $10.3 million and $1.34 per option, respectively.

The number of options outstanding, vested and expected to vest as of August 31, 2012 was 5.93 million and the weighted-average remaining contractual life was 7.0 years. The aggregate intrinsic value and the weighted-average intrinsic value of stock options outstanding, vested and expected to vest as of August 31, 2012 was 5.95 million and 1.00 per option, respectively.

At December 31, 2012, the total unrecognized compensation cost was approximately $15.5 million. The weighted-average period over which it is expected to be recognized is 3 years.

		For the four months ended		For the year ended August 31,
(In thousands, except for per share data)		December 31, 2012		2012		2011
Aggregate intrinsic value of options exercised	$	228	$	602	$	131