NOTE 10 — STOCK OPTION PLAN

The Company adopted the 2013 Equity Incentive Plan (the Plan) in December 2013, which provides for the issuance of options, stock appreciation rights, stock awards and stock units. On April 30, 2014, the Company increased the shares reserved for issuance under the 2013 Equity Incentive Plan to 3,543,754. The exercise price per share shall not be less than the fair value of the Company’s underlying common stock on the grant date and no option may have a term in excess of ten years. Stock option activity under the Plan is as follows:

			Weighted-Average
	Stock Options		Exercise Price
Outstanding January 1, 2013		—		—

Granted		646,759	$	9.49
Outstanding December 31, 2013		646,759	$	9.49

Granted		1,975,151	$	6.05
Outstanding September 30, 2014		2,621,910	$	6.90
Exercisable September 30, 2014		633,996	$	6.33

The fair value of each stock option to purchase common stock of the Company granted on December 20, 2013 was estimated by management using the Black-Scholes option pricing model applying the following assumptions: (i) expected term of 5.8 to 10 years, (ii) risk free interest rate of 1.9 to 2.9%, (iii) volatility of 102 to 107%, (iv) no dividend yield and (v) a grant date fair value of common stock of $9.49 per share. The Company recognized stock-based compensation expense for the three and nine months ended September 30, 2014 related to these options of $0.3 million and $0.9 million, respectively, which is included in general and administrative expense.

The table above includes stock options granted on December 20, 2013 to purchase an aggregate of 20,089 shares of the Company’s common stock which became fully vested and exercisable on June 30, 2014, the effective date of the Company’s IPO registration statement. The Company recognized stock-based compensation expense for the nine months ended September 30, 2014 related to these options of $0.1 million, which is included in general and administrative expense.

The Company entered into two employment agreements effective May 1, 2014. In accordance with the employment agreements, on June 30, 2014, the Company granted 539,116 fully vested stock options to purchase shares of the Company’s common shares at an exercise price of $6.00 per share and recognized stock based compensation expense of approximately $2.8 million related to these grants on the grant date. The fair value of each such option was estimated by management using the Black Scholes option pricing model applying the following assumptions: (i) expected term of 6.25 years, (ii) risk free interest rate of 1.9%, (iii) volatility of 113%, (iv) no dividend yield and (v) a grant date fair value of common stock of $6.00 per share.

Under the terms of three employment agreements, the Company issued 955,932 stock options upon the effective date of the Company's IPO registration statement, which vest over a four-year period beginning from November 12, 2013, the date of the Sonkei Merger. The Company recognized stock-based compensation expense related to these options of approximately $0.3 million and $1.1 million for the three and nine months ended September 30, 2014, respectively. The fair value of each such option was estimated by management using the Black Scholes option pricing model applying the following assumptions: (i) expected term of 6.25 years, (ii) risk free interest rate of 1.9%, (iii) volatility of 113%, (iv) no dividend yield and (v) a grant date fair value of common stock of $6.00 per share.

An additional 480,103 options were granted to employees and directors at and following the IPO of which 352,590 options vest over a four year period and 127,513 options vest over a three year period beginning with the date each recipient began providing service. The Company recognized stock-based compensation expense related to these options of approximately $0.3 million and $0.3 million for the three and nine months ended September 30, 2014, respectively. The fair value of each of these options to purchase common stock of the Company granted was estimated by management using the Black Scholes option pricing model applying the following assumptions: (i) expected term of 6-6.25 years, (ii) risk free interest rate of 1.9%, (iii) volatility of 113%, (iv) no dividend yield.

The weighted average grant-date fair value of stock options outstanding on September 30, 2014 was $5.81 per share. Total unrecognized compensation costs related to non-vested awards at September 30, 2014 was approximately $9.6 million and is expected to be recognized within future operating results over a period of 3.1 years. At September 30, 2014, the weighted average contractual term of the options outstanding is approximately 9.6 years. The intrinsic value of outstanding stock options at September 30, 2014 was $0.1 million.