5. Stock-Based Compensation

In November 2013, the Board of Directors authorized the 2013 Stock Plan (such plan has since been adopted by the stockholders of the Company in connection with the Merger and renamed the “Inventergy Global, Inc. 2014 Stock Plan”, the “Plan” or the “2014 Plan”). Under the Plan, the Board of Directors may grant incentive stock awards to employees and directors, and non-statutory stock options to employees, directors and consultants as well as restricted stock. The Plan provides for the grant of stock options, restricted stock, and other stock-related and performance awards that may be settled in cash, stock, or other property. The Board of Directors originally reserved 360,545 shares of common stock for issuance over the term of the Plan. In September 2015, 170,000 shares were added to the Plan, and in June 2016, 250,000 shares were added to the Plan. The exercise price of an option cannot be less than the fair value of one share of common stock on the date of grant for incentive stock options or non-statutory stock options. The exercise price of an incentive stock option cannot be less than 110% of the fair value of one share of common stock on the date of grant for stockholders owning more than 10% of all classes of stock. Options are exercisable over periods not to exceed ten years (five years for incentive stock options granted to holders of 10% or more of the voting stock) from the grant date. Options may be granted with vesting terms as determined by the Board of Directors which generally include a one to five-year period or performance conditions or both. The pre-existing options were subsumed under the Plan.

Common stock option and restricted stock award activity under the Plan was as follows:

			Options and RSAs Outstanding
	Shares Available		Number of		Weighted Average Exercise
	for Grant		Shares		Price Per Share
Balance at December 31, 2016		175,046		514,772	$	2.77
Options granted		-		-	$	-
Options forfeited		-		-	$	-
Options expired		27,244		(27,244)	$	15.80
Balance at September 30, 2017		202,290		487,528	$	2.04
Total vested and expected to vest shares (options)				487,528	$	2.04
Total vested shares (options)				280,742	$	2.37

As of September 30, 2017, all of the restricted stock granted under the Plan had vested. The aggregate intrinsic value of stock options outstanding, stock options vested and expected to vest, and exercisable at September 30, 2017 was zero, since all of the options were out-of-the-money at September 30, 2017.

Prior to the Plan being established, the Company granted the equivalent of 1,413,904 RSAs to employees and non-employees in exchange for services with vesting specific to each individual award. As of September 30, 2017, 148,144 of these RSAs were subject to rescission by the Company, and 113,388 RSAs had been cancelled or forfeited.

The following table summarizes information with respect to stock options outstanding at September 30, 2017:

Options Outstanding								Options Vested
				Weighted-						Weighted-
				Average		Weighted-				Average
Exercise				Remaining		Average				Exercise
Price Per		Shares		Contractual		Exercise		Shares		Price Per
Share		Outstanding		Life (Years)		Price		Exercisable		Share
$	1.41		305,000		8.81	$	1.41		120,840	$	1.41
$	3.10		182,528		7.48	$	3.10		159,902	$	3.10
			487,528		8.31	$	2.04		280,742	$	2.37

Stock-based compensation expense

There were no stock options granted during the nine months ended September 30, 2017. For the nine months ended September 30, 2016, the fair value of employee stock options granted was estimated using the following weighted-average assumptions:

Expected volatility	68	%
Risk free rate	1.18	%
Dividend yield	0	%
Expected term (in years)	5.70

The expected term of the options was based on the average period the stock options are expected to remain outstanding based on the option’s vesting term and contractual terms. The expected stock price volatility assumptions for the Company’s stock options were determined by examining the historical volatilities for the Company and industry peers. The risk-free interest rate assumption was based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options. The expected dividend assumption was based on the Company’s history and expectation of dividend payouts. Forfeitures were estimated based on the Company’s estimate of future cancellations.

Stock-based compensation for employees and non-employees related to options and RSAs recognized:

	For the three months ended Sept. 30				For the nine months ended Sept. 30
	2017		2016		2017		2016
General and administrative	$	85,776	$	152,170	$	334,797	$	545,626

No income tax benefit has been recognized related to stock-based compensation expense and no tax benefits have been realized from exercised stock awards. As of September 30, 2017, there were total unrecognized compensation costs of $166,562 related to these stock awards. These costs are expected to be recognized over a period of approximately 1.15 years.

Non-employee stock-based compensation expense

The Company previously issued options and restricted stock awards to non-employees in exchange for services with vesting specific to each individual award. Non-employee stock-based compensation expense is recognized as the awards vest and totaled $21,638 and $77,672 for the three months ended September 30, 2017 and September 30, 2016, respectively, and $133,935 and $297,693 for the nine months ended September 30, 2017 and September 30, 2016, respectively. The fair value of RSAs is calculated as the fair value of the underlying stock multiplied by the number of shares awarded.