15.SHARE-BASED COMPENSATION

Equity Incentive Awards

Our 2014 Equity Incentive Plan (the “2014 Plan”) and our 2012 Equity Incentive Plan (as amended, the “2012 Plan”) are used to attract and retain the best available personnel, to provide additional incentives to employees, directors and consultants and to promote the success of our business. The 2014 Plan superseded the then current 2005 Stock Incentive Plan (the “2005 Plan”). The 2012 Plan was assumed in connection with our acquisition of Everi Games Holding and conformed to include similar provisions to those as set forth in the 2014 Plan. Our equity incentive plans are administered by the Compensation Committee of our Board of Directors, which has the authority to select individuals who are to receive equity incentive awards and to specify the terms and conditions of grants of such awards, including, but not limited to: the vesting provisions and exercise prices.

Generally, we grant the following award types: (a) time-based options, (b) market-based options and (c) restricted stock. These awards have varying vesting provisions and expiration periods. For the three months ended March 31, 2017, we granted time- and market-based options.

Our time-based stock options granted under our equity plans generally vest at a rate of 25% per year on each of the first four anniversaries of the option grant dates. These options expire after a ten-year period.

Our market-based options granted in 2017 vest at a rate of 25% per year on each of the first four anniversaries of the grant date, provided that as of the vesting date for each vesting tranche, the closing price of the Company’s shares on the New York Stock Exchange is at least a specified price hurdle, defined as a 25% premium to the closing stock price on the grant date. If the price hurdle is not met as of the vesting date for a vesting tranche, then the vested tranche shall vest and become vested shares on the last day of a period of 30 consecutive trading days during which the closing price is at least the price hurdle. These options expire after a ten-year period.

Our market-based options granted in 2016 vest at a rate of 25% per year on each of the first four anniversaries of the grant date, provided that as of the vesting date for each vesting tranche, the closing price of the Company’s shares on the New York Stock Exchange is at least a specified price hurdle, defined as a 50% premium to the closing stock price on the grant date. If the price hurdle is not met as of the vesting date for a vesting tranche, then the vested tranche shall vest and become vested shares on the last day of a period of 30 consecutive trading days during which the closing price is at least the price hurdle. These options expire after a ten-year period.

A summary of award activity is as follows (in thousands):


	Stock Options	Restricted Stock
	Granted	Granted
Outstanding, December 31, 2016	18,233	80
Additional authorized shares	—	—
Granted	4,003	—
Exercised options or vested shares	(4)	(9)
Cancelled or forfeited	(71)	—
Outstanding, March 31, 2017	22,161	71

The maximum number of shares available for future equity awards, both under the 2014 Plan and 2012 Plan, is approximately 1.0 million shares of our common stock. There are no shares available for future equity awards under the 2005 Plan.

Stock Options

The fair value of our standard time-based options in connection with our annual grant that occurred during the first quarter of 2017 was determined as of the date of grant using the Black-Scholes option pricing model with the following assumptions:


	Three months ended
	March 31,
	2017
Risk-free interest rate	2	%
Expected life of options (in years)	6
Expected volatility	54	%
Expected dividend yield	—	%

For the three months ended March 31, 2016, certain executive and director grants were valued under the Black-Scholes option pricing model that utilized different assumptions from those used for our standard time-based options. For the time-based options granted on February 25, 2016, the assumptions were: (a) risk-free interest rate of 1%; (b) expected term of five years; (c) expected volatility of 49%; and (d) no expected dividend yield. For the time-based options granted on February 13, 2016, the assumptions were: (a) risk-free interest rate of 1%; (b) expected term of six years; (c) expected volatility of 49%; and (d) no expected dividend yield.

The fair value of our market-based options in connection with the annual grant that occurred during the first quarter of 2017 was determined as of the date of grant using a lattice-based option valuation model with the following assumptions:


	Three months ended
	March 31,
	2017
Risk-free interest rate	3	%
Measurement period (in years)	10
Expected volatility	70	%
Expected dividend yield	—	%

For the three months ended March 31, 2016, there were no market-based options granted.

The following tables present the options activity:


				Weighted
	Number of	Weighted Average		Average Life	Aggregate
	Common Shares	Exercise Price		Remaining	Intrinsic Value
	(in thousands)	(per share)		(years)	(in thousands)
Outstanding, December 31, 2016	18,233	$	6.02	6.4	$	2,387
Granted	4,003		3.29
Exercised	(4)		2.20
Canceled or forfeited	(71)		5.56
Outstanding, March 31, 2017	22,161	$	5.53	6.9	$	20,511
Vested and expected to vest, March 31, 2017	19,149	$	5.68	6.7	$	16,465
Exercisable, March 31, 2017	9,573	$	7.12	4.6	$	2,186

There were 4.0 million and 0.6 million options granted for the three months ended March 31, 2017 and 2016, respectively. The weighted average grant date fair value per share of options granted was $1.81 and $1.28 for the three months ended March 31, 2017 and 2016, respectively. The total intrinsic value of options exercised was $6,132 for the three months ended March 31, 2017. No options were exercised during the three months ended March 31, 2016.

There was $15.3 million in unrecognized compensation expense related to options expected to vest as of March 31, 2017. This cost is expected to be recognized on a straight-line basis over a weighted average period of 2.5 years. We recorded $1.3 million in non-cash compensation expense related to options granted that were expected to vest for the three months ended March 31, 2017. We received $8,554 in cash from the exercise of options for the three months ended March 31, 2017.

There was $15.0 million in unrecognized compensation expense related to options expected to vest as of March 31, 2016. This cost was expected to be recognized on a straight-line basis over a weighted average period of 2.5 years. We recorded $1.0 million in non-cash compensation expense related to options granted that were expected to vest as of March 31, 2016. There were no proceeds received from the exercise of options as no exercises occurred during the period.

Restricted Stock

The following is a summary of non-vested share awards for our time-based restricted stock:


		Weighted
	Shares	Average Grant
	Outstanding	Date Fair Value
	(in thousands)	(per share)
Outstanding, December 31, 2016	80	$	7.12
Granted	—		—
Vested	(9)		7.09
Forfeited	—		—
Outstanding, March 31, 2017	71	$	7.12

There were no shares of restricted stock granted for the three months ended March 31, 2017 and 2016. The total fair value of restricted stock vested was $45,050 and $24,267 for the three months ended March 31, 2017 and 2016, respectively.

There was $0.8 million in unrecognized compensation expense related to shares of time based restricted stock expected to vest as of March 31, 2017. This cost is expected to be recognized on a straight-line basis over a weighted average period of 1.6 years. There were 9,405 shares of restricted stock that vested and we recorded $0.1 million in non-cash compensation expense related to the restricted stock granted that was expected to vest during the three months ended March 31, 2017.

There was $1.7 million in unrecognized compensation expense related to shares of time-based restricted shares expected to vest as of March 31, 2016. This cost was expected to be recognized on a straight-line basis over a weighted average period of 2.2 years. There were 10,600 shares of time-based restricted shares vested and we recorded $0.1 million in non-cash compensation expense related to the restricted stock granted that was expected to vest for the three months ended March 31, 2016.