STOCK BASED COMPENSATION

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.

On June 21, 2017, at the annual meeting of stockholders, the Company's shareholders approved (i) an increase of 1,000,000 shares to the Finjan Holdings, Inc. 2014 Plan and (ii) the addition of an “evergreen” feature which provides for the annual replenishment of shares to the Restated 2014 Plan share reserve without stockholder approval, which represented an additional 1,385,366 shares as of January 1, 2018 (equal to 5.0% of our outstanding shares of Common Stock as of the end of our immediately preceding fiscal year). As of March 31, 2018, the Company has 1,558,142 shares available for issuance under the 2014 Plan.

During the three months ended March 31, 2018 and 2017, the Company expensed $318,000 and $209,000, 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 March 31, 2018 was $5.8 million.

During the three months ended March 31, 2018 and 2017, the Company granted options to purchase 376,667 and 155,000 shares of common stock, respectively. The Company granted 200,000 RSUs of common stock, at both dates ended March 31, 2018 and 2017.



Number of Options Outstanding and Exercisable		Number of RSUs Outstanding

Outstanding 2013 & 2014 Plans – December 31, 2017	2,341,340	Non vested - December 31, 2017	438,712
Options granted	376,667	Shares granted	200,000
Options exercised	—	Shares vested	(12,500	)
Options forfeited	—	Shares forfeited	—
Options expired	—	Shares expired	—
Outstanding – March 31, 2018	2,718,007	Non Vested & Outstanding - March 31, 2018	626,212
Exercisable – March 31, 2018	1,378,473

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 March 31,
	2018			2017
Volatility		104.99%		140.22%
Expected term (in years)		6		6
Risk-free rate		2.24%		1.9%
Expected dividend yield		—		—
Weighted-average grant date fair value per option	$	2.24	$	1.45

As of March 31, 2018, total compensation cost not yet recognized related to unvested stock options was approximately $3.5 million, which is expected to be recognized over a weighted-average period of 2.9 years.

Options granted during the three months ended March 31, 2018 had a weighted average exercise price of $2.41 per share, 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 three months ended March 31, 2018, 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.