8. Stock-Based Compensation and Stock Options and Awards

The following table shows the stock-based compensation expense included in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2014 and 2013 (in thousands):


	March 31, 2014		March 31, 2013
	March 31, 2014		March 31, 2013

Costs and expenses:
Research and development	$	57	$	24
General and administrative		136		71

Total stock-based compensation expense	$	193	$	95

There was no capitalized stock-based employee compensation cost for the three months ended March 31, 2014 and 2013. Since the Company did not record a tax provision during the quarters ended March 31, 2014 and 2013, there was no recognized tax benefit associated with stock-based compensation expense.

In February 2014, the Company granted to the officers certain stock option bonus grants whose vesting is contingent upon meeting certain specified company-wide performance goals. These options were granted at-the-money, contingently vest upon achievement of performance goals, and have contractual lives of ten years.

The Company recognizes compensation expense for only the portion of options that are expected to vest. As a result, the Company will begin to recognize stock-based compensation expense for these performance-based options at the time it becomes probable that the respective performance conditions will be achieved. The expected term of these options will be determined when the achievement of the performance goals is considered probable and is therefore measurable. The inputs for expected volatility, expected dividends, and risk-free rate used in estimating those options’ fair value will correspondingly be determined based on grant date inputs for the expected term.

For restricted stock awards, the Company recognizes compensation expense over the vesting period for the fair value of the stock award on the measurement date. The total fair value of restricted stock awards that vested during the three months ended March 31, 2014 was $140,000. The Company retained purchase rights with respect to 640,334 shares of unvested restricted stock awards issued pursuant to stock purchase agreements at no cost per share as of March 31, 2014.

Stock Option Plans: 1996 Equity Incentive Plan, 2005 Equity Incentive Plan and 1996 Non-Employee Directors’ Plan

The 1996 Equity Incentive Plan (the “1996 Plan”) and the 2005 Equity Incentive Plan (the “2005 Plan”), which amended, restated and retitled the 1996 Plan, were adopted to provide a means by which selected officers, directors, scientific advisory board members and employees of and consultants to the Company and its affiliates could be given an opportunity to acquire an equity interest in the Company. All employees, directors, officers, scientific advisory board members and consultants of the Company are eligible to participate in the 2005 Plan. During 2000, the Board of Directors approved the termination of the 1996 Non-Employee Directors’ Stock Option Plan (the “Directors’ Plan”). This termination had no effect on options already outstanding under the Directors’ Plan.

Stock Option Activity

The following is a summary of activity under the 1996 Plan, the 2005 Plan and the Directors’ Plan for the three months ended March 31, 2014:


	Shares Available for Future Grant
Balance at January 1, 2014		40,869,591
Options granted		(10,665,000	)
Options cancelled		22,000
Restricted stock awards granted		(450,000	)

Balance at March 31, 2014		29,776,591


	Options Outstanding
	Number of Shares			Weighted Average Exercise Price		Weighted Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2014		7,766,300		$	0.71
Options granted		10,665,000		$	0.24
Options cancelled		(22,000	)	$	12.00

Outstanding at March 31, 2014		18,409,300		$	0.42		7.93	$	646,015

Exercisable at March 31, 2014		7,118,050		$	0.72		4.88	$	373,990

No stock options were exercised during the three months ended March 31, 2014. The total amount of unrecognized compensation cost related to non-vested stock options and stock purchases, net of forfeitures, was $760,000 as of March 31, 2014. This amount will be recognized over a weighted average period of 3.63 years.

A summary of the Company’s unvested restricted stock and performance bonus stock award activities as of March 31, 2014 is presented below representing the maximum number of shares that could be earned or vested under the 2005 Plan:


	Number of Shares			Weighted Average Grant Date Fair Value
Balance at December 31, 2013		768,677		$	0.18
Restricted shares granted		450,000		$	0.24
Restricted share awards vested		(578,333	)		0.22

Balance at March 31, 2014		640,334		$	0.19

As of March 31, 2014, there was approximately $24,000 of total unrecognized compensation costs, net of forfeitures, related to non-vested stock award which are expected to be recognized over a weighted average period of 0.06 years.