11.	Stock-Based Compensation

Stock Incentive Plan—Overview

The Company maintains the 2010 Stock Incentive Plan (the “Plan”) for employees, consultants, advisors, and directors. The Plan provides for the grant of equity awards such as stock options and restricted stock. The Plan has been amended at various times since its approval. In March 2013, the Company’s board of directors amended the Plan to increase the number of shares of common stock reserved for issuance to 7,875,000 shares, plus the number of shares of common stock subject to awards granted under the Company’s 2002 Incentive Plan which expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us, up to a maximum of 625,000 shares. This amendment also adopted a fungible share pool whereby any award that is a full-value award (i.e. any restricted stock award, restricted stock unit award, or other stock-based award with a per share price or per unit purchase price lower than 100% of fair market value on the date of the grant) is counted against the share limits under the Plan as 1.5 shares for each one share of common stock subject to such full-value award. In June 2014, the Company’s stockholders approved an amendment to the Plan, which increased the annual per participant share limit under the Plan from 250,000 to 1,000,000 shares per fiscal year. No other amendments to the Plan were made.

The Company has reserved 8,500,000 shares of common stock under the Plan, and at December 31, 2015, the Company has 3,413,353 shares available for future issuance under the Plan. Shares issued upon exercise of options are generally issued from new shares of the Company. The Plan provides that the exercise price of incentive stock options cannot be less than 100% of the fair market value of the common stock on the date of the award for participants who own less than 10% of the total combined voting power of stock of the Company and not less than 110% for participants who own more than 10% of the total combined voting power of the stock of the Company. Options and restricted stock granted under the Plan vest over periods as determined by the Board, which generally are equal to four years. Options generally expire ten years from the date of grant.

Stock Incentive Plan—Employee Stock Options

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions noted in the following table:

	Years Ended December 31,
	2015	2014	2013
Volatility	73.04%-78.7%	69.38%-77.92%	64.22%-72.65%
Expected Term (in years)	5.50-6.25	5.50-6.25	5.50-6.25
Risk-Free Interest Rates	1.54%-1.93%	1.81%-2.02%	1.01%-2.10%
Dividend Yield	—	—	—

The risk-free interest rate is determined based upon the United States Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the options being valued. The Company does not expect to pay dividends in the foreseeable future.

The Company does not have sufficient history to support a calculation of volatility and expected term using only its historical data. As such, the Company has used a weighted-average volatility considering the Company’s own volatility since March 2010, and the volatilities of several peer companies. For purposes of identifying similar entities, the Company considered characteristics such as industry, length of trading history, similar vesting terms and in-the-money option status. Due to lack of available option activity data, the Company elected to use the “simplified” method for “plain vanilla” options to estimate the expected term of the stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option. Additionally, the Company is required to include an estimate of the value of the awards that will be forfeited in calculating compensation costs, which the Company estimates based upon actual historical forfeitures. The forfeiture estimates are recognized over the requisite service period of the awards on a straight-line basis. During the years ending December 31, 2015, 2014 and 2013 the Company estimated its forfeiture rates to be 71%, 62% and 49%, respectively. Based upon these assumptions, the weighted-average grant date fair value of stock options granted during the years ended December 31, 2015, 2014, and 2013 was $0.75, $1.15 and $4.32 per share, respectively.

During the year ended December 31, 2014 the Company issued stock options to purchase 2,250,000 shares of common stock that contain market and performance –based vesting conditions. As of December 31, 2015, there were 381,500 shares remaining which were not deemed probable of vesting. As of December 31, 2015, there was $0.7 million of total unrecognized stock-based compensation expense related to stock options granted under the Company’s 2002 Stock Incentive Plan and 2010 Stock Incentive Plan (collectively, the “Plans”). The expense is expected to be recognized over a weighted-average period of 2.9 years. The intrinsic value of options exercised was $58,000 for the years ended December 31, 2015. No options were exercised during the year ended December 31, 2014.

The following table summarizes the activity of the Plans for the year ended December 31, 2015:

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2014		5,817,313		$	4.45
Granted		3,159,134		$	1.11
Exercised		(165,805	)	$	1.45
Forfeited		(2,964,938	)	$	1.85
Expired		(1,049,699	)	$	5.27
Outstanding at December 31, 2015		4,796,005		$	3.78		6.93	$	596,660
Exercisable at December 31, 2015		3,153,440		$	5.09		5.86	$	325,107
Vested or expected to vest at December 31, 2015		2,276,447		$	6.56		4.61	$	115,704

Stock Incentive Plan—Nonemployee Stock Options

There were no stock options granted to nonemployee consultants during 2015 or 2013. During 2014, the Company granted nonqualified options to purchase 225,000 shares of common stock to nonemployee consultants, with an average exercise price of $1.47 per share. The Company valued these options using the Black-Scholes option-pricing model and recognized expense related to these awards using the accelerated attribution method. The unvested options held by consultants have been revalued using the Company’s estimate of fair value at each reporting period over the vesting period. Stock-based compensation expense of approximately $0.1 million was recorded during the year ended December 31, 2014 relating to nonemployee stock option awards.

Stock Incentive Plan—Restricted Stock

The Company periodically grants awards of restricted stock to employees. These awards typically vest upon completion of the requisite service period or upon achievement of specified performance targets.

The following table summarizes the restricted stock activity for the year ended December 31, 2015:

	Number of Shares			Weighted- Average Price
Unvested at December 31, 2014		477,600		$	1.81
Granted		—			—
Cancelled		(201,180	)		1.87
Expired		—			—
Vested/Released		(233,670	)		1.80
Unvested at December 31, 2015		42,750		$	1.61

The fair value of restricted stock awards that vested was $0.1 million, $0.2 million, and $0.5 million for the years ended December 31, 2015, 2014, and 2013, respectively. As of December 31, 2015, there was $6,000 of total unrecognized stock-based compensation expense related to restricted stock awards granted under the Plan. The expense is expected to be recognized over a weighted-average period of 0.1 years if all performance targets are met.

Employee Stock Purchase Plan

In February 2010, the Board of Directors adopted the 2010 Employee Stock Purchase Plan (the “ESPP”) pursuant to which the Company may sell up to an aggregate of 250,000 shares of Common Stock. The ESPP was approved by the Company’s stockholders in February 2010. The plan was amended in March 2013 to increase the total number of shares available under the ESPP for the Company to sell to 764,000. The ESPP allows eligible employees to purchase common stock at a price per share equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each six month period during the term of the ESPP. The first offering period began on July 1, 2010.

Pursuant to the ESPP, the Company sold a total of 7,138 shares of common stock during the year ended December 31, 2015 at purchase prices of $0.75 and $1.07, respectively, which represent 85% of the closing price of the Company’s common stock on June 30, 2015 and December 31, 2015, respectively. For the year ended December 31, 2014, the Company sold a total of 139,032 shares of common stock at purchase prices of $1.53 and $0.71, respectively, which represent 85% of the closing price of the Company’s common stock on June 30, 2014 and December 31, 2014, respectively. For the year ended December 31, 2013, the Company sold a total of 109,610 shares of common stock at purchase prices of $2.13 and $1.56, respectively, which represent 85% of the closing price of the Company’s common stock on June 28, 2013 and December 31, 2013, respectively. The total stock-based compensation expense recorded as a result of the ESPP was approximately $27,000, $0.2 million and $0.2 million during the years ended December 31, 2015, 2014 and 2013, respectively.