Stock-Based Compensation

March 6, 2018,

Edward R. Monfort ceased serving as the Company’s Chief Technology Officer. Upon Mr. Monfort’s separation from service, the Company’s board of directors suspended Mr. Monfort’s outstanding options. Although such options remain outstanding, they were unexercisable as of

September 30, 2018

and through the date of this Quarterly Report. As of

September 30, 2018,

outstanding options to purchase an aggregate of

14,297,902

shares of common stock are attributable to Mr. Monfort.

March 2018,

the Company determined that certain non-employees, to whom it previously granted options, were

longer providing services to the Company. As a result, the Company canceled unvested options to purchase

297,694

shares of common stock previously granted pursuant to Company’s

2012

Stock Option and Stock Incentive Plan (the

“2012

Plan”), effective as of

February 28, 2018.

In accordance with GAAP, the Company reversed

$423,308

of previously recorded expense with respect to such unvested options. During

May,

June

and

August 2018,

certain non-employees exercised options to purchase an aggregate of

994,695

shares of common stock, for which the Company received aggregate gross proceeds of

$99,470.

June 2018,

unexercised options to purchase an aggregate of

499,123

shares of common stock previously held by such non-employees terminated in accordance with their terms, and the Company agreed to extend the exercise period of

one

non-employee’s option to purchase

207,968

shares of common stock until

July 31, 2018.

July 2018,

the Company agreed to further extend the exercise period of such option to

August 31, 2018,

and on

August 31, 2018,

such option expired unexercised.

April 2018,

the Company’s board of directors granted to certain employees and directors options to purchase an aggregate of

655,000

shares of common stock pursuant to the Company’s

2017

Equity Incentive Plan. The options vest over a

three

-year period, with

one

third

of the options vesting on the

one

-year anniversary of the grant date and the remainder vesting in equal installments thereafter. The exercise price for these options is

$1.31

per share. The options were valued using the Black-Scholes option-pricing model, resulting in a fair market value of

$229,643.

The assumptions used in the valuation included an expected term of

5.75

years, volatility of

62%

and a risk-free interest rate of

2.78%.

June 2018,

certain employees and directors agreed to voluntarily surrender options to purchase an aggregate of

3,450,000

shares of common stock at an exercise price of

$10.49

per share previously issued to such individuals in

March 2017

pursuant to the

2012

Plan. Neither the Company nor the holders of such options will have any further rights or obligations with respect to such options, or with respect to any shares of common stock that could have been purchased upon exercise of such options, and

none

of the holders of the options received any value from the Company in connection with such surrender. The Company recognized stock-based compensation expense relating to these options for the months of

April

and

May 2018

and for

days for the month of

June 2018,

as these options vested monthly on the

of each month. Accordingly,

additional stock-based compensation expense relating to these options has been recorded.

Stock option activity for the

nine

months ended

September 30, 2018

is as follows:

				Weighted		Weighted
				Average		Average
	Number of			Exercise		Remaining
	Shares			Price		Contractual Life (years)
Outstanding at December 31, 2017		30,375,000		$	1.33		4.0
Granted		655,000		$	1.31
Exercised		(994,695	)	$	0.10
Canceled/Forfeited		(5,306,883	)	$	7.05
Outstanding at September 30, 2018		24,728,422		$	0.15		2.9

Exercisable at September 30, 2018		8,758,138		$	0.10		3.2

Stock-based compensation expense was approximately

$317,222

and

$10.6

million for the

three

months ended

September 30, 2018

and

2017,

respectively, and approximately

$6.1

million and

$15.7

million for the

nine

months ended

September 30, 2018

and

2017,

respectively, and is included in general and administrative expense in the accompanying unaudited consolidated statements of operations. As of

September 30, 2018,

the Company expects to recognize approximately

$1.2

million of stock-based compensation expense for the non-vested portion of outstanding options over a weighted-average period of

1.1

years.

As of

September 30, 2018,

the Company’s outstanding options have an intrinsic value of approximately

$11.1

million, which includes the suspended options to purchase an aggregate of

14,297,902

shares of common stock that are attributable to Mr. Monfort.