4.	Share-Based Compensation

The Company’s 2008 Equity Compensation Plan (the “Plan”) was amended and restated pursuant to stockholder approval on June 2, 2016 in order to increase the number of shares available for issuance under the Plan, extend the term of the Plan, impose a one-year minimum vesting requirement and provide for double trigger vesting for certain awards in the event of a change in control. The Plan allows for grants in the form of incentive stock options, nonqualified stock options, stock units, stock awards, stock appreciation rights, and other stock-based awards. All of the Company’s officers, directors, employees, consultants and advisors are eligible to receive grants under the Plan. The maximum number of shares authorized for issuance under the amended and restated Plan is 32,200,000 and the maximum number of shares of stock that may be granted to any one employee for qualified performance-based compensation during a calendar year is 4,000,000 shares. Options to purchase shares of common stock are granted at exercise prices not less than 100% of fair market value on the dates of grant. The term of each option is ten years and the options typically vest in quarterly installments over a three-year period with a minimum vesting period of one year. As of September 30, 2016 the Plan had approximately 8,900,000 shares available for grant.

Stock Options

The following is a summary of stock option activity under the Plan as of and for the nine months ended September 30, 2016:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price ($)		Term (Years)		Value ($)
Outstanding at December 31, 2015		9,480,497		$	2.19
Granted		3,784,500			1.10
Exercised		(21,492	)		1.12
Cancelled/Forfeited		(1,433,293	)		1.90
Outstanding at September 30, 2016		11,810,212			1.88		7.2	$	3,429,807
Exercisable at September 30, 2016		7,824,499		$	2.13		6.1	$	1,666,229

The per share weighted average fair values of all options granted during the nine months ended September 30, 2016 and 2015 were estimated as $0.54 and $1.13, respectively, on the date of grant using the Black-Scholes option pricing model based on the assumptions noted in the table below. Expected volatilities are based on the historical volatility of the Company’s stock price. The weighted average expected life is based on both historical and anticipated employee behavior.

	September 30,
	2016			2015
Risk-free interest rate		1.3	%		1.3	%
Annualized volatility		51.6	%		53.5	%
Weighted average expected life, in years		6.00			6.00
Expected dividend yield		0.0	%		0.0	%

During the nine months ended September 30, 2016, stock option exercises resulted in proceeds of $24,071 and the issuance of 21,492 shares of common stock. No stock options were exercised during the nine months ended September 30, 2015.

The Company recognized $1,572,710 and $2,177,067 in compensation expense related to stock options for the nine months ended September 30, 2016 and 2015, respectively, and stock compensation expense of $505,663 and $766,062 for the three months ended September 30, 2016 and 2015, respectively. As of September 30, 2016, there was approximately $2,300,000 of total unrecognized compensation cost related to nonvested outstanding stock options that is expected to be recognized over a weighted average period of approximately 2.0 years.

Long Term Incentive Program (LTIP)

The Company’s Board of Directors has approved a long term incentive program (“LTIP”) for the benefit of the Company’s senior executives. Pursuant to the LTIP, the Company’s senior executives have been awarded stock options, restricted stock units (“RSU”) and performance stock units (“PSU”) with targeted values based on values granted to similarly situated senior executives in the Company’s peer group.

The stock options have a ten-year term, have an exercise price equal to the closing price of the Company’s common stock on the date of grant, vest in quarterly installments over three years, were otherwise granted on the same standard terms and conditions as other stock options granted pursuant to the Plan and are included in the stock options table above. The RSUs vest in three equal annual installments. The PSU awards made to the senior executives vest and convert into shares of the Company’s common stock based on the Company’s attainment of certain performance goals as established by the Company’s Board of Directors over a performance period, which is typically three to five years.

The performance stock unit awards and restricted stock unit awards granted under the long term incentive program are summarized in the following table:

	Performance Stock Units					Restricted Stock Units
	Number of Shares			Weighted Average Grant Date Fair Value ($)		Number of Shares			Weighted Average Grant Date Fair Value ($)
Outstanding at December 31, 2015		956,178		$	2.40		714,828		$	2.32
Granted		750,500			1.12		750,500			1.12
Vested/settled		(11,223	)		3.96		(264,002	)		2.41
Forfeited/expired		(227,490	)		1.70		(378,668	)		1.55
Outstanding at September 30, 2016		1,467,965		$	1.85		822,658		$	1.53

In 2016 and 2015, the LTIP awards include PSUs that may be earned based on the Company’s total shareholder return (“TSR”) relative to the Nasdaq Biotechnology Index (“NBI”) at the end of the performance period, which performance period is January 1, 2015 to December 31, 2017 for the 2015 award and January 1, 2016 to December 31, 2018 for the 2016 award. Depending on the outcome of the performance goal, a recipient may ultimately earn a number of shares greater or less than the target number of shares granted, ranging from 0% to 150% of the PSUs granted. The fair values of the TSR PSUs granted in June 2016 and May 2015 was determined using a Monte Carlo simulation and utilized the following inputs and assumptions:

	2016 Award			2015 Award
Closing stock price on grant date	$	1.12		$	2.18
Performance period starting price	$	1.29		$	2.52
Term of award (in years)		2.58			2.59
Volatility		70.1	%		60.5	%
Risk-free interest rate		0.97	%		0.83	%
Expected dividend yield		0.00	%		0.00	%
Fair value per TSR PSU	$	1.25		$	1.71

The performance period starting price is measured as the average closing price over the last 20 trading days prior to the performance period start. The Monte Carlo simulation model also assumed correlations of returns of the prices of the Company’s common stock and the common stocks of the NBI companies and stock price volatilities of the NBI companies. The fair value of the target number of shares that can be earned under the TSR PSUs is being recognized as compensation expense over the performance period.

Total compensation expense recognized in connection with PSU awards was $11,331 and $89,911 for the nine months ended September 30, 2016 and 2015, respectively. Compensation expense recognized in connection with RSU awards was $302,782 and $382,084 for the nine months ended September 30, 2016 and 2015, respectively.

Some of the shares issued in connection with RSU awards that vested in the nine months ended September 30, 2016 and 2015 were net-share settled such that the Company withheld shares with a value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld to satisfy tax obligations were 65,575 and 39,665 in the nine months ended September 30, 2016 and 2015, respectively, and were based on the fair value of the shares on their vesting date as determined by the Company’s closing stock price. Total payments for the employees’ tax obligations to the taxing authorities were $64,096 and $87,770 in the nine months ended September 30, 2016 and 2015, respectively, and are reflected as a financing activity within the consolidated statements of cash flows. These net-share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.