7. Equity‑Based Compensation

General

The Company has a 2014 GYP Holdings I Corp. Stock Option Plan, (the “Plan”) that provides for granting of stock options and other equity awards. The Plan authorizes 3,591,422 shares of common stock for issuance. The stock options vest over a four-year period and have a 10‑year term. The plan is designed to motivate and retain individuals who are responsible for the attainment of our primary long‑term performance goals. The plan provides a means whereby our employees and directors develop a sense of ownership and personal involvement in our development and financial success and encourage them to devote their best efforts to our business. The Company accounts for share‑based awards in accordance with ASC 718. ASC 718 requires measurement of compensation cost for all share‑based awards at fair value on the grant date (or measurement date if different) and recognition of compensation expense, net of estimated forfeitures, over the requisite service period for awards expected to vest.

Stock Option Awards

We utilize the Black‑Scholes option‑pricing model to estimate the grant‑date fair value of all stock options. The Black‑Scholes option‑pricing model requires the use of weighted average assumptions for estimated expected volatility, estimated expected term of stock options, risk‑free rate, estimated expected dividend yield, and the fair value of the underlying common stock at the date of grant. Prior to our IPO discussed in Note 1, “—Initial Public Offering,” we did not have sufficient history to estimate the expected volatility of our common stock price, therefore expected volatility has been based on the average volatility of peer public entities that are similar in size and industry. We estimate the expected term of all stock options based on previous history of exercises. The risk‑free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the stock option. The expected dividend yield is 0% as we have not declared any common stock dividends to date and do not expect to declare common stock dividends in the near future. The fair value of the underlying common stock at the date of grant was determined based on the value of the Company’s closing stock price on the trading day immediately preceding the date of the grant. We estimate forfeitures based on our historical analysis of actual stock option forfeitures and employee turnover. Actual forfeitures are recorded when incurred and estimated forfeitures are reviewed and adjusted at least annually. The weighted average assumptions used in the Black‑Scholes option‑pricing model during the three months ended July 31, 2016 are set forth below:


	July 31, 2016
Volatility	41.10	%
Expected life (years)	6.0
Risk‑free interest rate	1.53	%
Dividend yield	—	%

In the three months ended July 31, 2016, the Company issued 165,636 stock option awards to employees that vest based on service only. The weighted average grant date fair value of each stock option was $9.56 and the aggregate fair value of options outstanding was $1,583. All of these awards vest over a four‑year period. Additionally, all these options could vest earlier in the event of a change in control, merger or other acquisition. This expense is recorded on an accelerated basis over the requisite service period of each separate vesting tranche. Share‑based compensation expense related to stock option awards was $643 and $498 for the three months ended July 31, 2016 and 2015, respectively, and was included as a component of “Selling, general and administrative” expenses in our Condensed Consolidated Statements of Operations and Comprehensive Income. At July 31, 2016, the unrecognized compensation expense related to stock option awards was $3,284, with a remaining weighted average life of 2.08 years.

The Company did not issue any stock option awards during the three months ended July 31, 2015.

A summary of stock option activity for the three months ended July 31, 2016 follows:


				Weighted
		Weighted		average
		average		remaining	Aggregate
	Number of	exercise		contractual	intrinsic
	options	price		life (years)	value
Outstanding at May 1, 2016	1,935,106	$	12.37
Options granted	165,636	$	23.11
Options exercised	—		—
Options forfeited	—		—
Options expired	—		—
Outstanding at July 31, 2016	2,100,742	$	13.36	7.97	$	24,988
Exercisable at July 31, 2016	793,757	$	12.47	7.77	$	10,145
Expected to vest after July 31, 2016	1,306,985	$	13.89	8.08	$	14,843

Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the fiscal period in excess of the weighted average exercise price multiplied by the number of options outstanding or exercisable. Options expected to vest are unvested shares net of expected forfeitures.