STOCK-BASED COMPENSATION

At September 30, 2016, there was approximately $2,073 of pre-tax stock-based compensation expense, net of estimated forfeitures, related to unvested awards not yet recognized.

Employee, Non-employee and Director Stock Options

The Company recognized stock-based compensation expense related to stock option awards of $254 and $1,155 for the three and nine months ended September 30, 2016, respectively. Of these amounts, $16 and $212 are included in discontinued operations within the Company's condensed consolidated statements of operations included within this quarterly report. The Company recognized stock-based compensation expense related to stock option awards of $588 and $1,483 for the three and nine months ended September 30, 2015, respectively. Of these amounts, $187 and $478 are included in discontinued operations. The compensation expense related to unvested stock options is expected to be recognized over a remaining weighted average period of 1.31 years.

A summary of option activity for the nine months ended September 30, 2016 is as follows:



	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2015	904,133		$	26.58
Granted	55,000		1.34
Exercised	—		—
Forfeited	(28,670	)	6.35
Expired	(15,943	)	39.67
Outstanding at September 30, 2016	914,520		$	25.47

Options vested and expected to vest at September 30, 2016	903,129		$	25.71
Options exercisable at September 30, 2016	683,550		$	31.95

Restricted Stock Units

On January 2, 2014, the Company awarded 100,000 restricted stock units ("RSUs") to its then Chief Executive Officer ("CEO"). These restricted stock units contained both market and performance conditions which were based on the achievement of certain stock price and revenue targets, respectively. The restricted stock units would have vested in various percentages over three years (subject to certain accelerated and continued vesting events) once the agreed-upon stock price and/or revenue based targets were achieved. Neither the market nor performance conditions were met by January 2, 2016, resulting in the restricted stock units being forfeited as of that date. In accordance with accounting guidance for stock compensation, the amortization of these restricted stock units will continue through the requisite service period.

During 2015, the Company began using RSUs as a broad-based form of long-term compensation incentive for its officers, directors and employees. On April 1, 2015, the Company awarded 203,967 RSUs under the 2014 Stock Option and Incentive Plan (the "2014 Plan") to members of senior management pursuant to elections previously made by the senior managers to convert a portion of their 2014 performance bonuses from cash to equity. These RSUs vested one year from the date of grant, on April 1, 2016. During the year ended December 31, 2015, the Company also awarded a total of 906,806 additional long-term incentive RSUs to senior managers and employees. These RSUs vest in four equal annual installments beginning one year after the date of grant, subject to service conditions. On September 10, 2015, the Company awarded 81,250 RSUs to its non-employee directors. These RSUs vested on May 28, 2016. No RSUs were awarded by the Company during the nine months ending September 30, 2016.

The Company records stock compensation expense for RSUs on a straight line basis over their vesting period based on each RSU's award date market value. The Company recognizes compensation expense for only the portion of awards that are expected to vest based on forfeiture estimates. In developing a forfeiture rate estimate, the Company considered its historical experience and actual forfeitures for the year. The Company will continue to evaluate its forfeiture rate as compared to the actual number of forfeitures in future periods to determine if adjustments to compensation expense may be required.

The Company pays required minimum federal, state or provincial income tax withholding associated with RSUs for its U.S. and Canadian employees. As the RSUs vest, the Company withholds a number of shares with an aggregate fair market value equal to the minimum tax withholding amount (unless the employee makes other arrangements for payment of the tax withholding) from the common stock issuable at the vest date. During the nine months ended September 30, 2016, the Company paid $274 for income tax withholdings associated with RSUs that vested during the period.

A summary of RSU activity for the nine months ended September 30, 2016 is as follows:



	Number of RSUs		Weighted Average Remaining Contractual Life (years)
Outstanding at December 31, 2015	1,286,773
Awarded	—
Common stock issued upon vesting	(454,131	)
Forfeited	(239,963	)
Outstanding at September 30, 2016	592,679		1.50

Remaining RSUs expected to vest as of September 30, 2016	504,423		1.46

Weighted average remaining recognition period	2.50

Stock Compensation Subsequent Events

On October 26, 2016, the Company's Compensation Committee granted stock options for a total of 4,560,000 shares to employees who are expected to remain with the Company in support of Yield10 after completion of the Company's strategic restructuring. Of this amount, options for 1,750,000 shares are contingent upon receiving shareholder approval of certain amendments to the 2014 Plan. Each option has an exercise price per share equal to the fair market value of the Company's common stock on the date of grant, vests in 4 equal semi-annual installments at a rate of 25% per installment over two years, and has a term of ten years from the date of grant. The contingent options will be canceled if shareholder approval of the amendments is not received. These new options were granted in connection with changes to the Company's compensation programs to reduce total cash compensation, including suspension of the Company's cash bonus program, and to increase equity-based compensation.

On November 4, 2016, Joseph Shaulson, the Company's former chief executive officer, was granted stock options for 750,000 shares upon the execution of a separation agreement and release agreement relating to the termination of his employment with the Company. These options have an exercise price per share equal to the fair market value of the Company's common stock on the date of grant, are fully vested on the effective date of Mr. Shaulson's release agreement, and will be exercisable through December 19, 2023. Options for 350,000 of the 750,000 shares are contingent upon receiving shareholder approval of certain amendments to the 2014 Plan. The contingent options will be canceled if shareholder approval of the amendments is not received.

Also in connection with the execution of the separation agreement, on November 4, 2016, the vesting of 151,250 previously outstanding RSUs and 191,667 previously outstanding non-qualified stock options held by Mr. Shaulson was accelerated. The Company will record stock compensation expense for the fair value of these RSUs and non-qualified stock options during its fiscal quarter ended December 31, 2016, as a result of the immediate vesting. The new option grants and the accelerated vesting of the RSUs and existing stock options were provided in lieu of any cash severance and 2016 cash bonus payable under Mr. Shaulson’s previous employment agreement.