STOCK BASED COMPENSATION

On July 10, 2014, the Company’s stockholders approved the Finjan Holdings, Inc. 2014 Incentive Compensation Plan (the "2014 Plan") at the annual meeting of stockholders, pursuant to which 2,196,836 shares of common stock were authorized for issuance.

Upon shareholder approval of the 2014 Plan, the 2013 Global Share Option Plan was terminated, other than respect to options outstanding under such plan 1,652,347 options remain outstanding under the 2013 and 2014 plans as of June 30, 2017.

On June 24, 2015, the Company adopted the 2015 Israeli Sub-plan (the “2015 Israeli Sub-plan”) to the Company’s 2014 Plan, which enables the Company to grant options, and issue shares of common stock to employees and non-employees, who are employed by the Company or any of its affiliates, who are residents of the State of Israel.

On June 21, 2017, at the annual meeting of stockholders, the Company's shareholders approved an increase of 1,000,000 shares to the Finjan Holdings, Inc. 2014 Plan. As of June 30, 2017, the Company has 1,836,488 shares available for issuance under the 2014 Plan.

The Company has issued a total of 1,036,872 Restricted Stock Units ("RSUs") of which 317,311 remain outstanding as of June 30, 2017. RSUs generally vest over three or four years, with one-third or one-fourth, respectively, vesting on the one-year anniversary followed by quarterly vesting thereafter.

Stock-based compensation to employees and non-employees are recognized as expense in the condensed consolidated statement of operations. The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award (determined using Black-Scholes option pricing model for stock options and fair value for RSUs), and is recognized as an expense over the requisite service period (generally the vesting of the equity awards). Determining the fair value of stock-based awards at the grant date requires significant estimates and judgments, including future employee stock option exercise behavior and requisite service periods.

During the three and six months ended June 30, 2017, the Company expensed $211,000 and $419,000, respectively, and $311,000 and $453,000 for the three and six months ended June 30, 2016, respectively, of stock-based compensation in the condensed consolidated statements of operations. All stock-based compensation expenses were related to selling, general and administration. The aggregate intrinsic value of stock options and RSU's outstanding and exercisable as of June 30, 2017 was $3.9 million.

During the three and six months ended June 30, 2017, the Company granted options to purchase 10,000 and 165,000 shares of common stock, respectively. During the three and six months ended June 30, 2017, the Company granted zero and 200,000 RSUs of common stock, respectively.

During the three months ended June 30, 2017, 120,000 stock options were exercised, the Company recognized proceeds of $0.2 million.



Number of Options Outstanding and Exercisable			Number of RSUs Outstanding

Outstanding 2013 & 2014 Plans – December 31, 2016	1,607,347		Non vested - December 31, 2016	185,260
Options granted	165,000		Shares granted	200,000
Options exercised	(120,000	)	Shares vested	(67,949	)
Options forfeited	—		Shares forfeited	—
Options expired	—		Shares expired	—
Outstanding – June 30, 2017	1,652,347		Non Vested & Outstanding - June 30, 2017	317,311
Exercisable – June 30, 2017	1,246,563

The Company estimates the fair values of stock options using the Black-Scholes option-pricing model. The assumptions used in the Black-Scholes option-pricing model and the weighted-average grant date fair value of the option awards for the periods presented were as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017		2016
Volatility	141		%	149		%	139% - 142%		149% - 152%
Expected term (in years)	6			7			6		7
Risk-free rate	1.82		%	1.26		%	1.26% - 1.82%		1.22% - 1.26%
Expected dividend yield	—		%	—		%	—	%	—	%
Weighted-average grant date fair value per option	$	2.08		$	1.15		$ 1.15 - 2.08		$ 0.96 - 1.15

As of June 30, 2017, total compensation cost not yet recognized related to unvested stock options was approximately $0.7 million, which is expected to be recognized over a weighted-average period of 1.3 years.

Options granted during the three and six months ended June 30, 2017 had a weighted average exercise price of $2.27 and $1.49 per share, respectively, and a weighted average contractual term of 10 years.

The risk-free interest rate is based on the U.S. Treasury rates with maturities similar to the expected term of the option. The volatility is a measure of the amount by which the Company’s share price has fluctuated or is expected to fluctuate and was based on historical volatility of comparative companies that are similar to the Company. For the six months ended June 30, 2017, the Company updated its volatility assumptions to reflect the increased trading history in the Company’s stock. The expected term was estimated using the simplified method. The simplified method calculates the expected term as the average of the time to vesting and the contractual life of the option. The dividend yield is 0% as the Company has never declared or paid any cash dividends and does not anticipate paying dividends in the future.