NOTE 12. EMPLOYEE AND CONSULTANT EQUITY-BASED COMPENSATION

The Company has 4 equity-based compensation plans, which are discussed below:

Qualified Stock Option Plan

The Qualified Stock Option Plan (the “Qualified Plan”) was a stockholder-approved plan that provided for stock option grants to employees, including executive officers. The exercise price of each option, which has a maximum ten-year life, was established by the Company's Compensation Committee on the date of grant.

As of December 31, 2015, there were 527,500 options exercised under the Qualified Plan and none that remain outstanding. The Qualified Plan has been replaced by the 2012 Omnibus Equity Incentive Plan, so no further options are available for grant.

Non-Qualified Stock Option Plan

The Non-Qualified Stock Option Plan (the “Non-Qualified Plan”) was a stockholder-approved plan that provided for stock option grants to independent contractors, technical advisors and directors of the Company. The exercise price of each option, which has a maximum 10 year life, was established by the Company's Compensation Committee on the date of grant.

As of December 31, 2015, there were 270,000 options exercised under the Non-Qualified Plan and 10,000 that remain outstanding. The Non-Qualified Plan has been replaced by the 2012 Omnibus Equity Incentive Plan, so no further options are available for grant.

2004 Omnibus Stock Option Plan

In December 2004, the Company’s stockholders approved the Omnibus Stock Option Plan and reserved 500,000 shares of its authorized but unissued Common Stock for stock options to be granted to employees, independent contractors, technical advisors and directors of the Company. The authorized shares in this plan were increased by 5,000,000 shares to an aggregate amount of 5,500,000 upon stockholder approval during the fiscal year ended July 31, 2012.

As of December 31, 2015, there were 403,474 options exercised under the 2004 Omnibus Stock Option Plan and 3,536,526 that remain outstanding. The 2004 Omnibus Stock Option Plan has been replaced by the 2012 Omnibus Equity Incentive Plan, so no further options are available for grant.

2012 Omnibus Equity Incentive Plan

In December 2012, the Company’s stockholders approved the Company’s 2012 Omnibus Equity Incentive Plan to replace the Qualified Stock Option Plan, Non-Qualified Stock Option Plan and 2004 Omnibus Stock Option Plan (“Prior Plans”). The Prior Plans remain in effect until all awards granted under those plans have been exercised, forfeited, canceled, expired or otherwise terminated.

In connection with the approval of such plan, all stock options, totaling 1,677,500 formerly available for new awards under the Prior Plans were transferred to the 2012 Omnibus Equity Incentive Plan.

At the Company’s 2014 Annual Meeting of Stockholders held in May 2014, stockholders approved an amendment to the Company’s 2012 Omnibus Equity Incentive Plan increasing the number of stock options of Common Stock reserved and available for grant by 4,000,000 to 5,677,500 shares.

Stock options granted under this plan typically vest either (i) one year after grant date, (ii) monthly over a one year period, or (iii) 40% two years after grant date and the remaining 60% monthly over the next three years. The maximum term is ten years.

As of December 31, 2015, there were 71,147 options exercised under the 2012 Omnibus Equity Incentive Plan and 2,660,894 that remain outstanding, leaving 2,945,459 available for grant.

In December 2015, the board of directors voted to restrict new grants under the 2012 Omnibus Equity Incentive Plan to 200,000 shares until such time as the Company’s total available shares are increased.

Combined Plans

The following table summarizes option activity under all plans during the years ending December 31, 2015 and December 31, 2014 and shows the exercisable shares as of December 31, 2015:



Stock Option Activity
	Number of Shares		Weighted Average Exercise Price per Share
Options Outstanding January 1, 2014	5,185,086		$	3.45
Granted	769,055		16.22
Forfeited	(13,678	)	13.06
Exercised	(311,737	)	2.96
Expired	—		—
Options Outstanding December 31, 2014	5,628,726		5.20
Granted	717,833		20.59
Forfeited	(54,505	)	11.71
Exercised	(124,884	)	6.44
Expired	—		—
Options Outstanding December 31, 2015	6,167,170		6.91
Exercisable December 31, 2015	1,536,520		7.11

The cash received from the exercise of options during the year ending December 31, 2015 was $805,000 and the tax benefit realized was $0 for the same period. Upon exercise, shares are issued from shares authorized and held in reserve. The intrinsic value of options exercised was $2.0 million, $3.8 million and $2.6 million for the years ending December 31, 2015, 2014, and 2013 respectively.

The total fair value of shares vesting during the period was $7.3 million, $3.8 million, and $600,000 for the years ending December 31, 2015, 2014, and 2013, respectively.

As discussed in Note 2, Summary of Significant Accounting Policies, the Company accounts for all option grants using the Black-Scholes option pricing model in accordance with ASC 718 for options granted or extended. Note 2 also describes the significant assumptions utilized for estimating the various inputs required this pricing model. The table below summarizes the resulting weighted average inputs used to calculate the estimated fair value of options awarded for during the periods shown below:



Black-Scholes Assumptions for Option Granted
	12 months			12 months			12 months
	12/31/2015			12/31/2014			12/31/2013
Expected term (in years)	6.26			6.25			6.28
Volatility	91		%	96		%	97		%
Expected dividends	—			—			—
Risk free interest rates	1.7		%	1.9		%	1.5		%
Estimated forfeitures	5.6		%	0.4		%	14.0		%
Weighted average fair value	$	16.69		$	12.63		$	6.05

In general, option awards have a requisite service period and unvested options are forfeited upon employee or consultant termination. The Company estimates a forfeiture rate which is applied to outstanding options to determine options expected to be forfeited with the remaining outstanding options being those expected to vest. Further information regarding the forfeiture rate calculation is included in Note 2, Summary of Significant Accounting Policies. The following table shows summary information for outstanding options, options that are exercisable (vested) and outstanding options that are either vested or expected to vest as of December 31, 2015:



Stock Option Supplemental Information
	Options Outstanding		Options Exercisable		Options Vested and Expected to Vest
Number of options	6,167,170		1,536,520		6,088,562
Weighted average remaining contractual term (in years)	7.19		7.18		7.18
Weighted average exercise price	$	6.91	$	7.11	$	6.80
Weighted average fair value	$	5.43	$	5.48	$	5.34
Aggregate intrinsic value (in thousands)	$	86,102	$	21,734	$	85,804

The aggregate intrinsic value in the table above represents the total pretax intrinsic value that would have been received by the option holders had all option holders exercised their options on that date. It is calculated as the difference between the Company’s closing stock price of $21.49 on the last trading day of 2015 and the exercise price multiplied by the number of shares for options where the exercise price is below the closing stock price. This amount changes based on the fair market value of the Company’s stock.

In December 2015, in connection with the Company's public offering, we modified the stock options of three of our executive officers to restrict the ability to exercise until such time as additional available unissued shares have been authorized. Such authorization was obtained for a majority of our shareholders as of December 31, 2015 and was pending submission to the State of Delaware. There was an immaterial amount of incremental compensation associated with this modification.

The following table summarizes restricted stock activity during the years ending December 31, 2015 and December 31, 2014:



Restricted Stock Activity
	Number of Shares	Weighted Average Grant Date Fair Value per Share
Restricted stock outstanding December 31, 2014	—	—
Granted	40,250	20.91
Forfeited	—	—
Vested/released	—	—
Restricted stock outstanding December 31, 2015	40,250	20.91

The expense and tax benefits recognized on Company’s Statements of Operations and Comprehensive Loss related to options is summarized below (in thousands):



Equity-Based Compensation Expenses and Tax Benefit (in thousands)
	12 months		12 months		12 months
	12/31/2015		12/31/2014		12/31/2013
Research and development	$	2,479	$	4,334	$	1,655
Sales, general and administrative	5,909		5,290		2,173
Equity-based compensation expense	8,388		9,624		3,828
Recognized tax benefit	$	—	$	—	$	—

As of December 31, 2015, unrecognized equity-based compensation cost related to unvested stock options and unvested restricted stock was $11.4 million. This is expected to be recognized over the years 2016 through 2020.