(6) Stock-Based Compensation

The Company’s 2006 Stock Plan provides for the grant of incentive stock options, non-statutory stock options and non-vested restricted stock to employees, officers, directors and consultants of the Company. In January 2014, the number of shares of common stock reserved for issuance under the 2006 Stock Plan was increased from 9,000,000 to 10,300,000 pursuant to an “evergreen” provision, which provides for an annual increase based on the lesser of 1,300,000 shares, 5% of the Company’s then outstanding shares of common stock, or such other amount as the board of directors may determine. This increase was approved by the board of directors in December 2013. The administration of the 2006 Stock Plan is under the general supervision of the compensation committee of the board of directors. The exercise price of the stock options is determined by the compensation committee of the board of directors, provided that incentive stock options are granted at not less than fair market value of the common stock on the date of grant and expire no later than ten years from the date the option is granted. Options generally vest over four years. As of March 31, 2014, the Company had options outstanding to purchase 8,179,958 shares of its common stock, which includes options outstanding under its 2001 Stock Plan that was terminated in March 2006, and had 35,000 restricted shares of common stock outstanding. As of March 31, 2014, 1,250,918 shares were available for future issuance.

The following table summarizes stock option activity during the three months ended March 31, 2014:

	Shares		Weighted average exercise price
Outstanding at January 1, 2014	6,814,417		$	6.90
Options granted	1,743,946		6.15
Options exercised	(203,125	)	4.16
Options cancelled	(175,280	)	7.05
Outstanding at March 31, 2014	8,179,958		$	6.80
Exercisable at March 31, 2014	4,590,267		$	6.86

The total cash received by the Company as a result of stock option exercises during the three months ended March 31, 2014 and 2013 was $0.8 million and $1.0 million, respectively. The weighted-average grant date fair values of options granted during the three months ended March 31, 2014 and 2013 were $5.02 and $7.77, respectively.

Non-Vested (“Restricted”) Stock Awards With Service Conditions

The Company’s share-based compensation plan provides for awards of restricted shares of common stock to employees, officers, directors and consultants to the Company. Restricted stock awards are subject to forfeiture if employment or service terminates during the prescribed retention period. Restricted shares vest over the service period. The total fair value of restricted stock that vested during the three months ended March 31, 2014 and 2013 was $0.1 million and $0.1 million, respectively.

The following table summarizes unvested restricted share activity during the three months ended March 31, 2014:

	Shares		Weighted average grant date fair value
Outstanding at January 1, 2014	45,000		$	4.63
Vested	(10,000	)	5.00
Outstanding at March 31, 2014	35,000		$	4.53

Stock-Based Compensation Expense

For the three months ended March 31, 2014 and 2013, the fair value of each employee stock option award was estimated on the date of grant based on the fair value method using the Black-Scholes option pricing valuation model with the following weighted average assumptions:

	Three Months Ended March 31,
	2014		2013
Risk-free interest rate	1.84	%	1.10	%
Expected life in years	6.25		6.25
Volatility	104	%	101	%
Expected dividend yield	—		—

Stock-based compensation expense during the three months ended March 31, 2014 and 2013 was as follows (in thousands):

	Three Months Ended March 31,
	2014		2013
Stock-based compensation expense by type of award:
Employee stock options	$	2,529	$	1,131
Restricted stock	57		85
Total stock-based compensation expense	$	2,586	$	1,216

Effect of stock-based compensation expense by line item:
Research and development	$	1,131	$	629
General and administrative	1,455		587
Total stock-based compensation expense included in net loss	$	2,586	$	1,216

Unrecognized stock-based compensation expense as of March 31, 2014 was as follows (dollars in thousands):

	Unrecognized stock compensation expense as of March 31, 2014		Weighted average remaining period (in years)
Employee stock options	$	16,538	3.08
Restricted stock	151		1.90
Total	$	16,689	3.07