(6) Stock-Based Compensation

The Company’s 2006 Stock Plan provided 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 2015, the number of shares of common stock reserved for issuance under the 2006 Stock Plan was increased from 10,300,000 to 11,600,000 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 2014. In June 2015, upon obtaining stockholder approval at its annual shareholder meeting, the Company implemented its new 2015 Stock Plan and reserved 8,741,000 shares of common stock for future issuance. In June 2015, the Company terminated its 2006 Stock Plan. The administration of these stock plans 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 with an exercise price 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 September 30, 2015, the Company had options outstanding to purchase 9,587,239 shares of its common stock, which includes options outstanding under its 2001 Stock Plan and 2006 Stock Plan that were terminated in March 2006 and June 2015, respectively. As of September 30, 2015, 8,608,133 shares were available for future issuance.

The following table summarizes stock option activity during the nine months ended September 30, 2015:

	Shares		Weighted average exercise price per share
Outstanding at January 1, 2015	8,829,343		$	6.17
Options granted	3,102,486		2.31
Options exercised	—		—
Options cancelled	(2,344,590	)	5.49

Outstanding at September 30, 2015	9,587,239		$	5.08

Exercisable at September 30, 2015	5,523,040		$	6.31

The total cash received by the Company as a result of stock option exercises during the nine months ended September 30, 2015 and 2014 was $0 and $0.8 million, respectively. The weighted-average grant date fair values of options granted during the three months ended September 30, 2015 and 2014 were $1.34 and $3.26, respectively, and during the nine months ended September 30, 2015 and 2014 were $1.79 and $4.44, respectively.

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

The Company’s share-based compensation plans provide 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 in each of the nine months ended September 30, 2015 and 2014 was $0.1 million.

The following table summarizes unvested restricted share activity during the nine months ended September 30, 2015:

	Shares		Weighted average grant date fair value per share
Outstanding at January 1, 2015	744,514		$	3.65
Vested	(45,361	)	3.02
Granted	253,403		2.32
Forfeited	(500,000	)	4.00

Outstanding at September 30, 2015	452,556		$	2.59

Stock-Based Compensation Expense

For the three months and nine months ended September 30, 2015 and 2014, 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 September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Risk-free interest rate	1.83	%	1.96	%	1.81	%	1.88	%
Expected life in years	6.25		6.25		6.24		6.25
Volatility	72	%	104	%	95	%	104	%
Expected dividend yield	—		—		—		—

Stock-based compensation expense during the three months and nine months ended September 30, 2015 and 2014 was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Stock-based compensation expense by type of award:
Employee stock options	$	1,048	$	1,486	$	3,601	$	5,486
Restricted stock	120		80		120		179


Total stock-based compensation expense	$	1,168	$	1,566	$	3,721	$	5,665



Effect of stock-based compensation expense by line item:
Research and development	$	683	$	1,066	$	2,548	$	3,329
General and administrative	485		500		1,173		2,336


Total stock-based compensation expense included in net loss	$	1,168	$	1,566	$	3,721	$	5,665

Unrecognized stock-based compensation expense as of September 30, 2015 was as follows (dollars in thousands):

	Unrecognized stock compensation expense		Weighted average remaining period (in years)
Stock options	$	8,687	2.60
Restricted stock	1,013		2.11

Total	$	9,700	2.55