8. STOCK INCENTIVE PLANS

The Company sponsored a stock option plan, the 2001 Plan, which allowed for the granting of incentive and nonqualified stock options for the purchase of common stock. The maximum number of shares that may be awarded or sold under the 2001 Plan was 1,449,667 shares. Each option entitles the holder to purchase one share of common stock at the specified option exercise price. The exercise price of each incentive stock option granted must not be less than the fair market value on the grant date. At the discretion of management and with the approval of the Board of Directors, the Company granted options under the 2001 Plan. Management and the Board of Directors determined vesting periods and expiration dates at the time of the grant. On August 2, 2011, the plan expired.

In August 2007, the Company adopted the 2007 Plan, which allows for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, RSUs, performance awards and bonus shares. The Board of Directors has appointed the Compensation Committee to administer the plan. The Compensation Committee determines the type of award to be granted, the number of shares covered by the award, and the time when the award vests and may be exercised.

The Company uses the Black-Scholes option pricing model to value stock options issued after January 1, 2006. The Company uses a three year historical stock price average to determine its volatility assumptions. The assumed risk-free rates were based on U.S. Treasury rates in effect at the time of grant with a term consistent with the expected option lives. The expected term is based upon the vesting term of the Company’s options, a review of a peer group of companies, and expected exercise behavior. The forfeiture rate is based on past history of forfeited options. The compensation expense is allocated using the straight-line method. For the three and nine months ended September 30, 2015, the Company recorded $173,000 and $558,000 respectively, of stock option compensation expense. For the three and nine months ended September 30, 2014, the Company recorded $147,000 and $643,000 respectively, of stock compensation expense. As of September 30, 2015, the Company has $1.4 million of total unrecognized compensation expense related to non-vested awards granted under the Company’s stock-based plans that it expects to recognize over a weighted-average period of 2.7 years. The Company accounts for options issued prior to January 1, 2006 under the intrinsic value method.

The following table summarizes the activity of the stock incentive and equity plans as of September 30, 2015 and changes during the nine months then ended:


	Shares available for grant			Number of options outstanding			Weighted- average option exercise price		Number of restricted stock and board shares issued		Number of restricted stock units outstanding
At January 1, 2015		1,772,529			2,238,286		$	10.31		140,653		134,731
Granted		(563,839	)		458,600			1.85		60,802		44,437
Exercised		—			(5,692	)		0.78		—		—
Cancelled/forfeited		307,410			(272,208	)		11.02		—		(46,452	)

At September 30, 2015		1,516,100			2,418,986		$	8.64		201,455		132,716

The Company’s aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock. Based on the fair market value of the common stock at September 30, 2015 and 2014, there was no intrinsic value of the options outstanding and exercisable. The weighted average fair value per share of options granted for the nine months ended September 30, 2015 was $1.85 and the fair value of each option grant was estimated at the date of grant using the Black-Scholes option pricing model using an expected term of 5.5 years, risk-free interest rates of 1.41 – 1.70%, expected volatility of 65% and no dividend yield. The Company used an expected forfeiture rate of 18.56%.

A summary of the Company’s non-vested options during the nine month period ended September 30, 2015 is presented below:


	Options			Weighted- average exercise price
Non-vested at January 1, 2015		628,733		$	5.93
Granted		458,600			1.85
Vested		(109,460	)		6.73
Forfeited		(120,219	)		6.53

Non-vested at September 30, 2015		857,654		$	3.56

For the three and nine months ended September 30, 2015 the Company recorded $45,000 and $161,000, respectively, of RSU expense. As of September 30, 2015, there was $368,000 of unrecognized compensation expense related to the non-vested RSUs. This expense is expected to be recognized over a weighted-average period of 2.1 years.

A summary of the Company’s restricted stock units is as follows:


	RSUs outstanding			Weighted average price at time of grant		Aggregate intrinsic value
Non-vested restricted stock units as of January 1, 2015		134,731		$	5.41
Granted		44,437			4.36
Cancelled		(46,452	)		5.34

Non-vested at September 30, 2015		132,716		$	5.08	$	136,697

For the three and nine months ended September 30, 2015, the Company recorded $74,000 and $220,000, respectively, of stock compensation expense related to restricted stock. For the three and nine months ended September 30, 2014, the Company recorded $134,000 and $215,000, respectively, of stock compensation expense related to restricted stock.

An analysis of restricted stock issued is as follows:


Non-vested restricted stock as of January 1, 2015	12,207
Granted	60,802
Vested	(37,382	)

Non-vested restricted stock as of September 30, 2015	35,627