Stock-based Compensation

2009 Stock Option Plan

The Company had a share-based compensation plan (the “2009 Stock Option Plan”) under which the Company granted options to purchase shares of common stock to employees, directors, and consultants as either incentive stock options or nonqualified stock options. Incentive stock options could be granted with exercise prices not less than 100% to 110% of the fair market value of the common stock. Options granted under the plan generally vest over three to four years and expire in 10 years from the date of grant.

2014 Equity Incentive Plan

In February 2014, the Company’s board of directors adopted the 2014 Equity Incentive Plan (the "2014 Plan") which was subsequently ratified by its stockholders and became effective on May 2, 2014 (the “Effective Date”). The 2014 Plan is the successor to and continuation of the 2009 Stock Option Plan. As of the Effective Date, no additional awards will be granted under the 2009 Stock Option Plan, but all stock awards granted under the 2009 Stock Option Plan prior to the Effective Date will remain subject to the terms of the 2009 Stock Option Plan. All awards granted on and after the Effective Date will be subject to the terms of the 2014 Plan. The 2014 Plan provides for the grant of the following awards: (i) incentive stock options, (ii) nonstatutory stock options, (iii) stock appreciation rights, (iv) restricted stock awards, (v) restricted stock unit awards, and (vi) other stock awards. Employees, directors, and consultants are eligible to receive awards.

Under the 2014 Plan, after giving effect to the increases to the share reserve approved by the Company’s stockholders in September 2014, and June 2015, discussed below, the aggregate number of shares of common stock that could be issued from and after the Effective Date (the “share reserve”) could not exceed the sum of (i) 1,122,731 new shares, (ii) the shares that represented the 2009 Stock Option Plan’s available reserve on the Effective Date, and (iii) any returning shares from the 2009 Stock Option Plan. Under the 2014 Plan, the share reserve will automatically increase on January 1st of each year, for a period of not more than 10 years, commencing on January 1, 2015 and ending on January 1, 2024, in an amount equal to 4.0% of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year. The board of directors may act prior to January 1st of a given year to provide that there will be no increase in the share reserve or that the increase will be a lesser number of shares than would otherwise occur.

On June 18, 2014, the Company’s board of directors and compensation committee approved an amendment of the 2014 Plan, subject to stockholder approval, to increase the aggregate number of shares of the Company’s common stock that may be issued under the 2014 Plan by an additional 351,653 shares. All other material terms of the 2014 Plan remained unchanged. The Company’s stockholders approved the 2014 Plan amendment on September 11, 2014.

On February 25, 2015, the Company's board of directors approved an amendment of the 2014 Plan, subject to stockholder approval, to increase the aggregate number of shares of common stock that may be issued pursuant to awards under the 2014 Plan by an additional 510,726 shares. The Company's stockholders approved the 2014 Plan amendment on June 4, 2015. All other material terms of the 2014 Plan otherwise remain unchanged.

Pursuant to the terms of the 2014 Plan, on January 1, 2016 and 2015, the Company automatically added 556,223 and 340,484 shares to the total number shares of common stock available for future issuance under the 2014 Plan, respectively.

As of December 31, 2016, there were 668,921 shares of common stock available for future issuance under the 2014 Plan. See Note 17 for certain events occurring after December 31, 2016 that affected the number of shares of common stock available for future issuance under the 2014 Plan.

2015 Inducement Plan

On March 26, 2015, the Company's board of directors adopted the 2015 Inducement Plan (the "2015 Plan"). The 2015 Plan provides for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other forms of equity compensation (collectively, stock awards), all of which may be granted to persons not previously employees or directors of the Company, or following a bona fide period of non-employment, as an inducement material to the individuals’ entering into employment with the Company within the meaning of NASDAQ Listing Rule 5635(c)(4). The 2015 Plan has a share reserve covering 450,000 shares of common stock. During the year ended December 31, 2016, there were no granted options of the Company's common stock under the 2015 Inducement Plan. As of December 31, 2016, there were 165,000 shares of common stock available for future issuance under the 2015 Plan.

Option Valuation Method

The fair value of a stock option is estimated using an option-pricing model that takes into account as of the grant date the exercise price and expected life of the option, the current price of the underlying stock and its expected volatility, expected dividends on the stock, and the risk-free interest rate for the expected term of the option. The Company has used the simplified method in calculating the expected term of all option grants based on the vesting period. Compensation costs related to share-based payment transactions are recognized in the financial statements upon satisfaction of the requisite service or vesting requirements. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company based its estimated forfeiture rate on historical forfeitures of all stock option grants.

The Company has elected to use the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable rather than for use in estimating the fair value of stock options subject to vesting and transferability restrictions. Using the Black-Scholes option-pricing model, the weighted-average fair value of options granted during 2016, 2015, and 2014 was $2.57, $4.79 and $6.24 per option, respectively. The aggregate fair value of options granted during 2016, 2015, and 2014 was $1,279, $4,217 and $3,249, respectively. The assumptions used to estimate fair value and the resulting grant date fair values are as follows:



	Employees			Non-employee Directors
	Years Ended December 31,			Years Ended December 31,
	2016	2015	2014	2016	2015	2014
Expected dividend yield	—	—	—	—	—	—
Weighted average expected volatility	67.18%	64.42%	68.57%	67.61%	63.46%	64.10%
Weighted average risk-free interest rate	1.48%	1.60%	2.05%	1.41%	1.62%	1.75%
Weighted average expected term (in years)	6.08	6.07	6.04	5.30	5.32	5.30
Forfeiture rate	5.00%	5.00%	5.00%	5.00%	5.00%	5.00%

The activity for the 2009 Plan, 2014 Plan and 2015 Plan for the years ended December 31, 2016 and 2015 is summarized as follows:



	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Outstanding — January 1, 2015	615,322		$	9.55	9.48	$	265
Granted	880,116		8.17
Exercised	—		—
Canceled	(115,711	)	9.05
Outstanding — December 31, 2015	1,379,727		$	8.71	7.18	$	—
Exercisable — December 31, 2015	635,548		$	9.41	4.56	$	—
Vested or expected to vest — December 31, 2015	1,342,518		$	8.73	7.11	$	—
Outstanding — January 1, 2016	1,379,727		$	8.71	7.18	$	—
Granted	497,978		$	4.23
Exercised	—		$	—
Canceled	(58,261	)	$	7.47
Outstanding — December 31, 2016	1,819,444		$	7.52	6.98	$	32
Exercisable — December 31, 2016	1,022,515		$	8.59	5.51	$	15
Vested or expected to vest —December 31, 2016	1,779,597		$	7.55	6.94	$	31

The intrinsic values in the table above represent the total intrinsic value (the difference between the Company’s closing stock price as of December 31, 2016 and 2015, and the exercise price multiplied by the number of options).

The total fair value of shares vested during the years ended December 31, 2016, 2015 and 2014 was $1,534, $595 and $458, respectively, which exclude the effects of the 2015 option amendments (described in further detail below) that resulted in accelerated vesting and related incremental fair value.

As of December 31, 2016, there was approximately $2,739 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the plan. That cost is expected to be recognized over weighted-average periods of 2.7. The aggregate intrinsic value of options exercised during the year ended December 31, 2016, 2015, and 2014 was $0, $0, and $11 respectively.

2015 Option Amendments

During the year ended December 31, 2015, the following events resulted in the amendment to terms of outstanding stock option awards:

•

As described in Note 12, Charles F. Osborne, Jr., the Company’s former chief financial officer, resigned from the Company effective June 30, 2015. The Company's compensation committee of the board of directors approved the following modifications to Mr. Osborne's outstanding options to purchase the Company's common stock: (i) accelerated vesting of all unvested stock options as of June 30, 2015, and (ii) an extension to the existing 90-day post-employment option exercise period to 36 months. As of June 30, 2015, Mr. Osborne held outstanding options to purchase an aggregate of 74,490 shares of the Company's common stock at a weighted average exercise price of $9.53 per share, including unvested options to purchase 50,814 shares at a weighted average exercise price of $9.49 per share.

•

Yves J. Ribeill, Ph.D. resigned as President effective July 21, 2015. The Company and Dr. Ribeill entered into a Separation Agreement which included the following modifications to Dr. Ribeill's outstanding options to purchase the Company's common stock: (i) accelerated vesting of all unvested stock options as of July 21, 2015, and (ii) an extension to the existing 90-day post-employment option exercise period to 48 months. As of July 23, 2015, Dr. Ribeill held 84,613 vested options and 183,268 unvested options to purchase shares of the Company’s common stock at a weighted average exercise price of $9.61 and $9.41 per share, respectively.

The Company determined the additional compensation cost associated with the previously described modifications in addition to the modifications of options associated with the sale of the Services Business pursuant to applicable guidance in FASB ASC Topic 718, Compensation—Stock Compensation. The additional compensation cost was determined by calculating the difference between (a) the estimated fair value of each option award immediately prior to the modifications and (b) the estimated fair value of each option award immediately after the modifications. The fair value of each option award immediately prior to and immediately after modification was estimated using the Black-Scholes option-pricing model to determine an incremental fair value, consistent with and in accordance with the Company’s existing accounting policy for stock compensation (see Note 2). Using the Black-Scholes option-pricing model, the weighted-average incremental fair value of outstanding modified option awards was $3.77 per option share. The total additional compensation cost associated with the previously described modifications was determined to be $1,869, which was expensed in the year ended December 31, 2015. The remaining additional compensation cost is associated with future service periods and will be recognized as those services are performed.

2014 Employee Stock Purchase Plan

In February 2014, the Company’s board of directors adopted the 2014 Employee Stock Purchase Plan (“ESPP”), which was subsequently ratified by the Company’s stockholders and became effective on May 2, 2014. The purpose of the ESPP is to provide means by which eligible employees of the Company and of certain designated related corporations may be given an opportunity to purchase shares of the Company’s common stock, and to seek and retain services of new and existing employees and to provide incentives for such persons to exert maximum efforts for the success of the Company. Common stock that may be issued under the ESPP will not exceed 47,794 shares, plus the number of shares of common stock that are automatically added on January 1st of each year for a period of ten years, commencing on January 1, 2015 and ending on January 1, 2024, in an amount equal to the lesser of (i) 0.8% of the total number of shares of outstanding common stock on December 31 of the preceding calendar year, and (ii) 29,411 shares of common stock. Similar to the 2014 Plan, the board of directors may act prior to January 1st of a given year to provide that there will be no increase in the share reserve or that the increase will be a lesser number of shares than would otherwise occur. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code.

During the year ended December 31, 2014, the Company issued 10,048 shares of common stock under the ESPP. During the years ended December 31, 2016 and 2015, the number of shares of common stock available for issuance under the ESPP was automatically increased by 29,411 shares and the Company issued a total of 7,356 and 16,874 shares of common stock under the ESPP, respectively. As of December 31, 2016, there were 72,338 shares of common stock available for future issuance under the ESPP.

Compensation Cost

The compensation cost that has been charged against income for stock awards under the 2009 Stock Option Plan, the 2014 Plan, and the ESPP was $1,210, $3,023 and $1,201 for the years ended December 31, 2016, 2015, and 2014, respectively. The total income tax benefit recognized in the statements of operations for share-based compensation arrangements was $0 for the years ended December 31, 2016, 2015, and 2014, respectively. Cash received from options exercised was $0 for both the years ended December 31, 2016 and 2015, and $9 for the year ended December 31, 2014.

Stock-based compensation expense related to stock options is included in the following line items in the accompanying statements of operations:



	Years Ended December 31,
	2016		2015		2014
Research and development, net	$	299	$	300	$	394
Selling, general and administrative	911		2,515		648
Discontinued operations	—		208		159
Total stock-based compensation expense	$	1,210	$	3,023	$	1,201