(8) Stock-based Compensation

Stock Incentive Plan

The Company maintains the 2010 Stock Incentive Plan (the “Plan”) for employees, consultants, advisors, and directors, as amended in March 2013 and June 2014. The Plan provides for the grant of equity awards such as stock options and restricted stock. The Company has reserved 8,500,000 shares of common stock under the Plan. 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. As of December 31, 2016, there were 2,746,513 shares available for future issuance under the Plan.

The following table summarizes stock option activity during the year ended December 31, 2016:

	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2016		4,796,005		$	3.78
Granted		1,781,134		$	1.01
Exercised		(38,749	)	$	0.84
Forfeited		(1,679,712	)	$	5.17
Outstanding at December 31, 2016		4,858,678		$	2.31		7.98	$	—
Vested or expected to vest at December 31, 2016		3,043,129		$	3.04		7.63	$	—
Exercisable at December 31, 2016		2,327,806		$	3.63		7.34	$	—

Stock options to purchase 197,650 shares of common stock contain market conditions which were not deemed probable of vesting at December 31, 2016.

The fair value of stock options subject only to service or performance conditions that are granted to employees 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,
	2016		2015		2014
Volatility factor	72.18% - 74.47%		73.04% - 78.70%		69.38% - 77.92%
Expected term (in years)	3.00 - 6.25		5.50 - 6.25		5.50 - 6.25
Risk-free interest rates	1.07% - 2.01%		1.54% - 1.93%		1.81% - 2.02%
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.

In 2016, the Company began calculating volatility using its historical data. Previously, the Company did not have sufficient history to support a calculation of volatility using only its historical data. As such, in 2014 and 2015, the Company 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. Based upon these assumptions, the weighted-average grant date fair value of stock options granted during the years ended December 31, 2016, 2015 and 2014 was $0.65, $0.75 and $1.15, respectively.

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. The Company estimated its forfeiture rate to be approximately 76%, 71% and 62% during the years ended December 31, 2016, 2015 and 2014, respectively.

As of December 31, 2016, there was $0.8 million of total unrecognized stock-based compensation expense related to stock options granted to employees 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 2.5 years. The intrinsic value of options exercised during the years ended December 31, 2016 and 2015 was $6,000 and $58,000, respectively. No options were exercised during the year ended December 31, 2014.

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 during the year ended December 31, 2016:

	Number of Shares			Weighted- Average Fair-Value
Unvested at January 1, 2016		42,750		$	1.61
Granted		—			—
Vested/Released		(42,750	)		1.61
Unvested at December 31, 2016		—			—

The fair value of restricted stock awards that vested was $0.1 million in each of the years ended December 31, 2016 and 2015, and $0.2 million for the year ended December 31, 2014.

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, as amended in March 2013. 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 Company has reserved 764,000 shares of common stock under the ESPP. As of December 31, 2016, there were 307,282 shares available for future issuance under the ESPP.

Pursuant to the ESPP, the Company did not sell any shares of common stock during the year ended December 31, 2016. For the year ended December 31, 2015, the Company sold a total of 7,138 shares of common stock 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. The total stock-based compensation expense recorded as a result of the ESPP was approximately $2 thousand, $27 thousand and $0.2 million during the years ended December 31, 2016, 2015 and 2014, respectively.