8. STOCK INCENTIVE PLANS

The Company sponsored a stock option plan, the Rubicon Technology, Inc. 2001 Equity Plan, as amended (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 could be awarded or sold under the 2001 Plan was 1,449,667 shares. Each option granted under the 2001 Plan 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 could not be less than the fair market value on the grant date. Management and the Board of Directors determined vesting periods and expiration dates at the time of the grant. On August 2, 2011, the 2001 Plan expired. Any existing options under the 2001 Plan remain outstanding in accordance with their current terms under the 2001 Plan.

In August 2007, the Company adopted the Rubicon Technology Inc. 2007 Stock Incentive Plan, which was amended and restated effective in March 2011 (the “2007 Plan”), and which allowed for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and bonus shares. The maximum number of shares that could be awarded under the 2007 Plan was 4,407,692 shares. Options granted under the 2007 Plan entitle the holder to purchase shares of the Company’s common stock at the specified option exercise price, which could not be less than the fair market value of the common stock on the grant date. On June 24, 2016, the plan terminated with the adoption of the 2016 Plan. Any existing awards under the 2007 Plan remain outstanding in accordance with their current terms under the 2007 Plan.

On June 24, 2016, the Company’ stockholders approved adoption of the 2016 Plan effective as of March 17, 2016, which allows for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and bonus shares. The Compensation Committee of the Company’s Board of Directors administers the 2016 Plan. The committee determines the type of award to be granted, the fair market value, the number of shares covered by the award, and the time when the award vests and may be exercised.

Pursuant to the 2016 Plan, 2,229,803 shares of the Company’s common stock plus any shares subject to outstanding awards under the 2007 Plan that subsequently expires unexercised, are forfeited without the delivery of shares or are settled in cash, will be available for issuance under the 2016 Plan. The 2016 Plan will automatically terminate on March 17, 2026, unless the Company terminates it sooner.

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 expense is allocated using the straight-line method. For the three and nine months ended September 30, 2016, the Company recorded $147,800 and $460,000, respectively, of stock option compensation expense. For the three and nine months ended September 30, 2015, the Company recorded $173,000 and $558,000, respectively, of stock option compensation expense. As of September 30, 2016, the Company has $1.0 million of total unrecognized compensation cost related to non-vested awards granted under the Company’s stock-based plans that it expects to recognize over a weighted-average period of 2.97 years.

The following table summarizes the activity of the stock incentive and equity plans as of September 30, 2016 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, 2016		732,270			2,851,568		$	7.07		201,455		454,021
Authorized		1,900,000			—			—		—		—
Granted		(1,537,692	)		943,620			0.63		594,072		—
Exercised/Issued		—			—			—		—		(3,702	)
Cancelled/forfeited		1,031,098			(1,012,821	)		9.61		—		(165,652	)

At September 30, 2016		2,125,676			2,782,367		$	3.97		795,527		284,667

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, 2016 and 2015, 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, 2016 was $0.63 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 5.1 years, risk-free interest rates of 1.24% - 1.73%, expected volatility of 65% and no dividend yield. The Company used an expected forfeiture rate of 23.1%.

A summary of the Company’s non-vested options during the nine month period ended September 30, 2016 is presented below:


	Options			Weighted- average exercise price
Non-vested at January 1, 2016		1,251,961		$	2.23
Granted		943,620			0.63
Vested		(189,800	)		3.77
Forfeited		(215,065	)		2.63

Non-vested at September 30, 2016		1,790,716		$	1.18

For the three and nine months ended September 30, 2016, the Company recorded $48,600 and $187,000, respectively, of restricted stock unit (“RSU”) expense. As of September 30, 2016, there was $290,000 of unrecognized compensation cost related to the non-vested RSUs. This cost is expected to be recognized over a weighted-average period of 1.78 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, 2016		454,021		$	1.92
Granted		—			—
Vested		(3,702	)		3.94
Cancelled		(165,652	)		2.46

Non-vested at September 30, 2016		284,667		$	1.58	$	179,340

For the three and nine months ended September 30, 2016, the Company recorded $153,000 and $434,000, respectively, of stock compensation expense related to restricted stock. 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.

An analysis of restricted stock issued is as follows:


Non-vested restricted stock as of January 1, 2016	15,200
Granted	594,072
Vested	(278,011	)

Non-vested restricted stock as of September 30, 2016	331,261