15. Equity Incentive Plan

On July 12, 2013, the Company’s stockholders approved the Company’s 2013 Equity Incentive Plan (the “2013 Plan”) and the reservation of 2,500,000 shares of the Company’s common stock for issuance under the 2013 Plan. The 2013 Plan is intended to promote the interests of the Company and its stockholders by providing the Company’s employees, directors and consultants with incentives and rewards to encourage them to continue in the Company’s service and with a proprietary interest in pursuing the Company’s long-term growth, profitability and financial success. Equity awards available under the 2013 Plan include stock options, stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units, share-denominated performance units and cash awards. The 2013 Plan is administered by the compensation committee of the board of directors of the Company, which has the authority to designate the employees, consultants and members of the board of directors who will be granted awards under the 2013 Plan, to designate the amount, type and other terms and conditions of such awards and to interpret any and all provisions of the 2013 Plan and the terms of any awards under the 2013 Plan. The 2013 Plan will terminate on the tenth anniversary of its effective date.

On August 13, 2013 the Company granted the former Chief Executive Officer 350,000 shares of common stock under the 2013 Plan. The shares had a three-year vesting period beginning in April 2014. The calculated fair value of shares was $8.00 per share, equal to the share price on the date of the grant. On July 22, 2014 the CEO resigned. In connection with his resignation, the CEO became vested in 100,000 shares of common stock and the remaining unvested restricted stock grant was forfeited. The expense recognized for these shares was $249 for the year ended December 31, 2014.

On July 22, 2014, the Company awarded 500,000 options to its new CEO under the 2013 Plan. These options have an exercise price of $2.45 and vest over a 3.5 year period. The cost associated with these options for the year ended December 31, 2014 was $70. The unamortized cost of these options at December 31, 2014 was $520 to be recognized over a weighted-average life of 2.56 years. At December 31, 2014, none of these options were exercisable and there was no intrinsic value associated with these options. The weighted-average remaining contractual life of the options outstanding is 9.8 years.

In connection with the resignation of the Company’s CFO during 2014, the Company’s Board of Directors accelerated the vesting of 66,666 shares of unvested stock options for a total of 100,000, which remain outstanding at December 31, 2015.  The Company recognized no incremental costs during the year ended December 31, 2014 related to the modification.

There were no new equity awards granted during the year ended December 31, 2015. The amortization expense associated with stock options during the years ended December 31, 2015 and 2014 were $1,563 and $2,060, respectively.  The unamortized cost of the options at December 31, 2015 was $1,294, to be recognized over a weighted-average remaining life of 0.8 years. At the years ended December 31, 2015 and 2014, 916,667 and 565,000 shares of the options were exercisable. In addition, there was no intrinsic value associated with the options as of December 31, 2015. The weighted-average remaining contractual life of the options outstanding is 6.9 years.

A summary of the changes in outstanding stock options under all equity incentive plans is as follows:

Following is a summary of compensation expense recognized for the issuance of stock options and restricted stock grants for the years ended December 31, 2015 and 2014:

The Company computed the estimated fair values of stock options using the Black-Scholes model. These values were calculated using the following assumptions:

Expected Term:     The Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment behavior, so we estimate the expected term of awards granted by taking the average of the vesting term and the contractual term of the awards, referred to as the simplified method.

Volatility:     The expected volatility being used is based on a blend of comparable small- to mid-size public companies serving similar markets.

Risk Free Interest Rate:     The risk free interest rate is based on the U.S. Treasury’s zero coupon issues with remaining terms similar to the expected term on the award.

Dividend Yield:     The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and, therefore, used an expected dividend yield of zero in the valuation model.

Forfeitures:     As we do not have sufficient historical information to develop reasonable expectations about forfeitures, we currently apply actual forfeitures.