Stock-based compensation

The Company has in place a stock option plan (the "Stock Option Plan") for the benefit of employees, directors, officers and consultants of the Company. In May 2013 our Board of Directors adopted the 2013 Equity Incentive Plan (the "2013 Plan"). The 2013 Plan was approved by our stockholders in connection with the Arrangement. The 2013 Plan is a continuation of and successor to the Stock Option Plan and no further grants will be made under the Stock Option Plan. As of December 31, 2013, there were 0.1 million stock options available to be issued.

To date, stock-based compensation awards under either the Stock Option Plan or the 2013 Plan consist of incentive and non-qualified stock options. Stock options granted under each of the plans must have an exercise price equal to at least 100% of the fair market value of our common stock on the date of grant and generally vest over four years. The Stock Option Plan has contractual terms ranging from five to seven years and the 2013 Plan has contractual terms ranging from seven to ten years.

In May 2013 the Company's Board of Directors adopted the 2013 Employee Stock Purchase Plan (the "ESPP"). The ESPP was approved by the Company's stockholders in connection with the Arrangement. As of December 31, 2013 the ESPP has not been implemented by the Company.

The following table summarizes our stock option activity and related information for the year ended December 31, 2013:



	Number of options		Weighted average exercise price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (millions)
Options outstanding at December 31, 2012	559,812		$	15.00
Granted	687,040		11.21
Forfeited	(244,060	)	16.96
Expired	(3,756	)	54.37
Exercised	(40,534	)	13.90
Options outstanding at December 31, 2013	958,502		$	11.18	6.6	$	5.4
Options exercisable at December 31, 2013	251,981		$	10.57	5.0	$	1.7
Options vested and expected to vest at December 31, 2013	896,778		$	11.18	6.5	$	5.1

The total intrinsic value of stock options exercised was $0.2 million for the year ended December 31, 2013. The Company received total cash of $0.5 million for the exercise of options for the year ended December 31, 2013. There were no options exercised during the year ended December 31, 2012. The total fair value of options vested during the years ended December 31, 2013 and 2012 was $2.0 million and $2.4 million, respectively. Upon option exercise we issue new shares of our common stock.

Total stock-based compensation expense by operating statement classification is presented below (in thousands):



	Year ended December 31,
	2013		2012
Research and development expense	$	245	817
General and administrative expense	2,947		1,192
	$	3,192	$	2,009

In the years ended December 31, 2013 and 2012, no stock-based compensation expense was capitalized and there were no recognized tax benefits associated with the stock-based compensation charge.

The fair value of options granted is estimated at the date of grant using the Black-Scholes option pricing model. The assumptions used for the specified reporting periods and the resulting estimates of weighted-average estimated fair value per share of options granted during those periods are as follows:



	Year Ended December 31,
	2013	2012
Risk-free interest rate	2.0%	1.2%
Dividend yield	—%	—%
Volatility factor	112.9%	116.4%
Expected life in years	7	4.4
Weighted average estimated fair value per share	$11.21	$9.00

The estimated fair value of the options is amortized to expense over the option's vesting period. The expected life of the options is based on historical data and current expectation and is not necessarily indicative of exercise patterns that may occur. Prior to the fourth quarter of 2013, the Company estimated the life of the options using historical data as well as various assumptions regarding the Company's expected progress on its development programs. As a result of the Arrangement, beginning in the fourth quarter of 2013, the Company began to estimate the expected term using the midpoint between the vesting date and the end of the contractual term. The Company believes this methodology is more appropriate as the Company's historical stock option activity is no longer predictive of future activity due to the Arrangement, the Company's listing on NASDAQ and subsequent delisting from the TSX and the organizational changes announced on October 1, 2013. Volatility is determined based on historical share price history, over a period similar to the expected life of the options, which may also not be necessarily indicative of the actual outcome. The risk-free interest rate is the rate for periods equal to the expected term of the stock option based on either the Canadian Treasury yield (for grants prior to July 16, 2013), or U.S. Treasury zero-coupon bonds (for grants after July 16, 2013).

The total compensation cost not yet recognized as of December 31, 2013 related to non-vested option awards was $4.9 million which will be recognized over a weighted-average period of 1.9 years.