8. Stock Based Compensation

The Company has a 2000 Long-Term Incentive Plan, which expired on August 6, 2010. As of September 30, 2014, there were approximately 0.8 million shares subject to outstanding stock options under this plan. No further shares are available for future grant under this plan.

The Company also has a 2008 Stock Incentive Plan. As of September 30, 2014, there were 5.9 million shares subject to outstanding stock options and 4.1 million shares available for future grant under this plan.

The Company follows ASC 718, Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees.

For stock options and stock warrants paid in consideration of services rendered by non-employees, the Company recognizes compensation expense in accordance with the requirements of ASC 505-50.

Non-employee option grants that do not vest immediately upon grant are recorded as an expense over the vesting period. At the end of each financial reporting period, the value of these options, as calculated using the Black-Scholes option-pricing model, is determined, and compensation expense recognized or recovered during the period is adjusted accordingly. Since the fair market value of options granted to non-employees is subject to change in the future, the amount of the future compensation expense is subject to adjustment until the common stock options are fully vested.

The following table sets forth the total stock-based compensation expense resulting from stock options and warrants included in the Company’s unaudited interim statements of operations:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Research and development — employee	$	213,180	$	52,492	$	622,818	$	156,247
General and administrative — employee		380,274		202,827		1,017,613		590,056
Total employee stock-based compensation	$	593,454	$	255,319	$	1,640,431	$	746,303

Research and development — non-employee	$	—	$	—	$	86,539	$	—
General and administrative — non-employee		24,228		271,594		376,849		450,880
Total non-employee stock-based compensation	$	24,228	$	271,594	$	463,388	$	450,880

During the nine-month period ended September 30, 2014, the Company granted stock options to purchase 362,500 shares of its common stock and issued warrants to purchase 25,000 shares of its stock with an exercise of $5.60. The fair value of the stock options and warrants was estimated using the Black-Scholes option-pricing model, based on the following assumptions:

	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013
Risk-free interest rate		1.98	%		1.36	%
Expected volatility		83.9% - 89.6	%		84.5% - 85.8	%
Expected lives (years)		6 - 10			5 - 6
Expected dividend yield		0.00	%		0.00	%

The Company’s computation of expected volatility is based on the historical daily volatility of its publicly traded stock. The Company uses historical information to compute expected lives. In the nine-month period ended September 30, 2014, the contractual term of the options granted was ten years and the Company used six years as the expected life. The contractual term for the warrants issued was ten years. The dividend yield assumption of zero is based upon the fact the Company has never paid cash dividends and presently has no intention to do so. The risk-free interest rate used for each grant and issuance is equal to the U.S. Treasury rates in effect at the time of the grant and issuance for instruments with a similar expected life. Based on historical experience, for the nine-month period ended September 30, 2014, the Company has estimated an annualized forfeiture rate of 12% for options granted to its employees, 2% for options granted to senior management and 0% for options granted to directors and non-employees and warrants issued to non-employees. For the comparative nine-month period ended September 30, 2013, the Company has estimated an annualized forfeiture rate of 12% for options granted to its employees, 3% for options granted to senior management and 0% for options granted to directors and non-employees. No non-employee warrants were issued in the nine-month period ended September 30, 2013. Compensation costs will be adjusted for future changes in estimated forfeitures. The Company will record additional expense if the actual forfeitures are lower than estimated and will record a recovery of prior expense if the actual forfeiture rates are higher than estimated. No amounts relating to stock-based compensation have been capitalized.

As of September 30, 2014, there remained approximately $3.9 million of unrecognized compensation expense related to unvested stock options granted to current and former employees and directors, which is expected will be recognized over a weighted-average period of 1.03 years. Presented below is the Company’s stock option activity:

	Nine Months Ended September 30, 2014
	Number of Options (Employees)			Number of Options (Non-Employees)			Total Number of Options			Weighted-Average Exercise Price
Outstanding at January 1, 2014		6,228,593			167,143			6,395,736		$	3.11
Granted		362,500			—			362,500		$	4.91
Exercised, forfeited or expired		(56,431	)		(25,000	)		(81,431	)	$	4.78
Outstanding at September 30, 2014		6,534,662			142,143			6,676,805		$	3.19
Options exercisable at September 30, 2014		3,989,640			142,143			4,131,783		$	3.53

A summary of the unvested stock options as of September 30, 2014, and changes during the nine-month period then ended, are presented below:

	Number of Options (Employees)			Number of Options (Non-Employees)		Total Number of Options			Weighted-Average Grant Date Fair Value per Share
Non-vested at January 1, 2014		3,102,873			—		3,102,873		$	1.66
Granted		362,500			—		362,500		$	3.61
Forfeited		(23,168	)		—		(23,168	)	$	1.98
Vested		(897,183	)		—		(897,183	)	$	1.78
Non-vested at September 30, 2014		2,545,022			—		2,545,022		$	1.89

The following table summarizes significant ranges of outstanding stock options under the Company’s plans at September 30, 2014:

Range of Exercise Prices		Number of Options		Weighted-Average Remaining Contractual Life (years)		Weighted-Average Exercise Price		Number of Options Exercisable		Weighted-Average Remaining Contractual Life (years)		Weighted-Average Exercise Price
$	1.83 - $2.50		5,115,056		8.71	$	2.21		2,918,951		8.71	$	2.16
$	2.51 – $3.50		224,482		6.88	$	2.82		141,387		6.88	$	2.72
$	3.51 – $8.00		989,201		6.29	$	6.27		723,379		6.29	$	6.63
$	8.01 – $32.55		348,066		2.60	$	8.92		348,066		2.60	$	8.92
			6,676,805		7.97	$	3.19		4,131,783		7.97	$	3.53

The aggregate intrinsic value of outstanding options as of September 30, 2014 was $11.33 million, which represents the exercise price of the options over the fair market value of the Company’s common stock on September 30, 2014 of $2.54 per share.

There were 7,894,791 and 8,324,609 warrants outstanding at September 30, 2014 and December 31, 2013, respectively at a weighted-average price of $4.80 and $4.86, respectively.

Restricted Stock

On January 1, 2014, the Company granted to Dr. Daniel Levitt, Executive Vice President and Chief Medical Officer, 100,000 CytRx Corporation restricted shares of common stock of the Company pursuant to the 2008 Plan, of which 50,000 shares vested on June 30, 2014, and the remaining 50,000 shares will vest in equal monthly installments over the subsequent six months, provided that Dr. Levitt remains employed by the Company on each vesting date. The Company also granted to Dr. Levitt 100,000 restricted common stock of the Company pursuant to the 2008 Plan on December 31, 2012, which shares were fully vested as of June 30, 2014. The fair value of the restricted stock is based on the market price of the Company’s common stock on the grant date less the par value received as consideration. The fair value of the restricted shares granted on January 1, 2014 was $627,000, and the fair value of the restricted shares granted on December 31, 2012 was $186,900. The stock-based compensation expense relating to restricted stock for the three-month and nine-month periods ended September 30, 2014 was $158,013 and $468,887, respectively. The stock-based compensation expense relating to restricted stock for the three-month and nine-month periods ended September 30, 2013 was $47,006 and $139,484, respectively.