7. 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 entitled 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 (“RSUs”), 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 Rubicon Technology, Inc. 2016 Stock Incentive Plan, (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, RSUs, 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 expire 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 following table summarizes the activity of the stock incentive and equity plans:


	Shares available for grant			Number of options outstanding			Weighted- average option exercise price		Number of restricted stock shares issued			Number of restricted stock units outstanding
Outstanding at January 1, 2015		1,772,529			2,238,286		$	10.31		140,653			134,731
Granted		(1,457,826	)		992,684			1.40		60,802			404,340
Exercised		—			(5,692	)		0.78		—			(29,432	)
Canceled/forfeited		417,567			(373,710	)		10.02		—			(55,618	)

Outstanding at December 31, 2015		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		—			—			—		—			(133,685	)
Canceled/forfeited		1,337,606			(1,259,783	)		8.96		(30,701	)		(194,497	)

Outstanding at December 31, 2016		2,432,184			2,535,405		$	3.73		764,826			125,839

The following table sets forth option grants made during 2016 and 2015 with intrinsic value calculated based on grant date fair value.


Date of grant	Number of options granted		Exercise price		Intrinsic value per share
March – July 2015		92,600	$	2.43 - $4.04		—
September – December 2015		900,084	$	1.00 - $1.35		—
January – April 2016		51,120	$	0.73 - $1.14		—
September 2016		892,500	$	0.61		—

There is no intrinsic value because the exercise price per share of each option was equal to the fair value of the common stock on the date of grant.

At December 31, 2016, the exercise prices of outstanding options were as follows:


Exercise price	Number of options outstanding		Average remaining contractual life (years)		Number of options exercisable
$ 0.61 - $ 0.73		874,250		9.74		—
$ 1.00 - $ 1.35		725,019		8.86		196,438
$ 2.43 - $ 5.20		548,439		5.90		467,564
$ 6.11 - $12.16		206,692		2.89		200,567
$15.00 - $19.49		132,476		2.85		132,476
$20.20 - $32.67		48,529		3.76		48,529

		2,535,405		7.62		1,045,574

The weighted average grant date fair value of the options that became vested in the years ended 2016 and 2015 was $928,000 and $1.3 million, respectively.

The following table summarizes the activity of non-vested options:


	Non-vested options			Weighted- average option exercise price
Non-vested at January 1, 2015		628,733		$	5.93
Granted		992,684			1.40
Vested		(200,402	)		6.64
Cancelled		(169,054	)		5.86

Non-vested at December 31, 2015		1,251,961			2.23
Granted		943,620			0.63
Vested		(330,115	)		2.81
Cancelled		(375,635	)		2.51

Non-vested at December 31, 2016		1,489,831		$	1.02

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 December 31, 2016 and 2015, there was no aggregate intrinsic value for options outstanding and exercisable.

For the years ended December 31, 2016 and 2015, the Company used historical stock prices as the basis for 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 for the year ended December 31, 2016 and 2015 is based upon the Company’s median average life of its options. The forfeiture rate is based on past history of forfeited options. The expense is being allocated using the straight-line method. For the years ended December 31, 2016 and 2015 the Company recorded $527,000 and $731,000, respectively, of stock option compensation expense. As of December 31, 2016, the Company has $780,000 of total unrecognized compensation cost related to non-vested options granted under the Company’s stock-based plans that it expects to recognize over a weighted-average period of 2.86 years.

For the years ended December 31, 2016 and 2015, the assumptions used for the estimated fair value at the date of option grant using the Black-Scholes option-pricing model were as follows:


	2016	2015
Weighted average fair value per share of option	$0.63	$1.40
Expected term	5.1 years	5.5 years
Risk free interest rate	1.24% - 1.73%	1.41% - 1.70%
Volatility	65%	65%
Dividend yield	None	None
Forfeiture rate	23.1%	18.56%

The Company continues to account for options issued prior to January 1, 2006 under the intrinsic value method.

A summary of the Company’s RSUs 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		404,340			1.48
Vested		(29,432	)		5.44
Cancelled		(55,618	)		5.37

Non-vested restricted stock units as of December 31, 2015		454,021			1.92
Granted		—			—
Vested		(133,685	)		1.60
Cancelled		(194,497	)		2.35

Non-vested at December 31, 2016		125,839		$	1.60	$	75,503

The fair value of each RSU is the market price on the date of grant and is being recorded as compensation expense ratably over the vesting terms. For the years ended December 31, 2016 and 2015, the Company recorded $262,000 and $224,000 of RSU expense, respectively. The RSUs are forfeited by a participant upon termination for any reason and there is no proportionate or partial vesting in the periods between the vesting dates. As of December 31, 2016, there was $168,000 of unrecognized compensation cost related to the non-vested restricted stock units. This cost is expected to be recognized over a weighted-average period of 1.53 years.

An analysis of restricted stock issued is as follows:


Non-vested restricted stock as of January 1, 2015	12,207
Granted	60,802
Vested	(57,809	)

Non-vested restricted stock as of December 31, 2015	15,200
Granted	594,072
Vested	(413,870	)
Cancelled/Forfeited	(30,701	)

Non-vested restricted stock as of December 31, 2016	164,701

For the years ended December 31, 2016 and 2015, the Company recorded $559,000 and $295,000, respectively, of stock compensation expense related to restricted stock.

In 2013, the Board of Directors awarded 47,050 shares of restricted stock and 70,365 stock options to key executives at a price of $7.97, the closing price of the shares on the date of the grant. Vesting of the shares was subject to achievement of specified targets by December 31, 2013 and March 31, 2014. All of the milestones were achieved by the specified dates. As of December 31, 2014, 20,911 restricted shares and 31,274 stock options were cancelled. As of December 31, 2015, the remaining restricted shares were vested.