9.STOCK OPTIONS

In 2007, the Company’s Board of Directors adopted, and the Company’s shareholders subsequently approved, the 2007 Employee, Director and Consultant Stock Plan (the “2007 Plan”). Pursuant to the 2007 Plan, the Company’s Board of Directors (or committees and/or executive officers delegated by the Board of Directors) may grant incentive and nonqualified stock options to the Company’s employees, officers, directors, consultants and advisors.

On October 26, 2010, the Company’s Board of Directors adopted, and the Company’s shareholders subsequently approved, the 2010 Equity Incentive Plan (as subsequently amended, the “2010 Plan”). The 2010 Plan provided for grants of incentive stock options to employees and nonqualified stock options and restricted stock to employees, consultants and non-employee directors of the Company.

In April 2015, the Company’s Board of Directors adopted, and the Company’s shareholders subsequently approved, the 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan provides for grants of incentive stock options to employees and nonqualified stock, restricted stock, restricted stock units and stock appreciation rights to employees, consultants and non-employee directors of the Company. Upon approval of the 2015 Plan by the Company’s shareholders in June 2015, the 2010 Plan was terminated and no additional shares or share awards have been subsequently granted under the 2010 Plan. As of September 30, 2016, the total number of shares authorized for issuance under the 2015 Plan was 4,322,355 shares, consisting of 4,000,000 initially approved under the 2015 Plan shares plus the 322,355 shares that remained available for grant under the 2010 Plan at the time of its termination.

Options issued under the 2007 Plan, the 2010 Plan, and the 2015 Plan (collectively, the “Plans”) are exercisable for up to 10 years from the date of issuance. As of September 30, 2016, there were outstanding options to purchase an aggregate of 3,253,949 shares of common stock under the Plans, consisting of 150,207 shares under the 2007 Plan, 1,852,726 shares under the 2010 Plan and 1,251,016 shares under 2015 Plan. As of December 31, 2015, there were outstanding options to purchase an aggregate of 946,760, 2,065,687 and 240,863 shares of common stock under the 2015 Plan, 2010 Plan and 2007 Plan, respectively.

In March 2015, the Company’s Board of Directors adopted, and the Company’s shareholders subsequently approved, the Employee Stock Purchase Plan (the “ESPP”). The ESPP allows employees to buy company stock twice a year through after-tax payroll deductions at a discount from market. The Board of Directors initially authorized 187,500 shares for issuance under the ESPP. Commencing on the first day of 2016 and on the first day of each year thereafter during the term of the ESPP, the number of shares of common stock reserved for issuance were and shall be increased by the lesser of (i) 1% of the Company’s outstanding shares of common stock on such date, (ii) 50,000 shares or (iii) a lesser amount determined by the Board of Directors. Under the terms of the ESPP, in no event shall the aggregate number of shares reserved for issuance during the term of the ESPP exceed 1,250,000 shares. On January 1, 2016, the reserve was increased by 50,000 shares in accordance with the ESPP increase provisions.

In January 2016, 6,948 shares that were purchased in the offering period commencing on July 1, 2015 and ending on December 31, 2015 were issued under the ESPP. In July 2016, 9,781 shares that were purchased in the offering period commencing on January 1, 2016 and ending on June 30, 2016 were issued under the ESPP. The ESPP is considered a compensatory plan with the related compensation cost recognized over each six-month offering period. As of September 30, 2016, $24 of employee payroll deductions have been withheld since July 1, 2016, the commencement of the current offering period, and are included in accrued expenses in the accompanying balance sheet. The compensation expense related to the ESPP for the three and nine months ended September 30, 2016 was $12 and $39, respectively, and is included in stock-based compensation expense.

Share-based compensation

For the three months ended September 30, 2016 and 2015, the Company recorded non-cash, stock-based compensation expense of approximately $1,187 and $1,372, respectively, net of forfeitures. For the nine months ended September 30, 2016 and 2015, the Company recorded non-cash, stock-based compensation expense of approximately $3,571 and $3,614, respectively, net of forfeitures. Stock-based compensation expense for the nine months ended September 30, 2016 includes $112 of expense related to a stock option modification.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the financial statements, to estimate option exercises and employee terminations within the valuation model. The expected term of options granted under the Plans, all of which qualify as “plain vanilla,” is based on the average of the contractual term (10 years) and the vesting period (generally, 48 months). For non-employee options, the expected term is the contractual term. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option.

A summary of option activity as of September 30, 2016 and changes for the nine month period then ended are presented below:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
		Exercise		Contractual	Intrinsic
Options	Shares	Price		Term in Years	Value
Outstanding at December 31, 2015	3,253,310	$	7.47
Granted	308,250	$	6.44
Forfeited	(172,406)	$	9.55
Exercised	(135,205)	$	1.41
Outstanding at September 30, 2016	3,253,949	$	7.51	7.75	$	2,413
Vested at September 30, 2016	1,498,267	$	7.52	6.54	$	1,712
Vested and expected to vest at September 30, 2016	2,676,307	$	7.52	7.53	$	2,165

The weighted average grant-date fair value of options granted during the nine months ended September 30, 2016 was $5.39 per share. The total fair value of options that vested for the three months ended September 30, 2016 was $1,012. The total fair value of options that vested for the nine months ended September 30, 2016 was $3,120. As of September 30, 2016, there was approximately $6,685 of total unrecognized compensation expense related to non-vested share-based option compensation arrangements. The unrecognized compensation expense is estimated to be recognized over a period of 2.57 years at September 30, 2016.