6.	Stock-based compensation

In December 2014, the Board of Directors and stockholders of Pieris Pharmaceuticals, Inc. adopted the 2014 Employee, Director and Consultant Equity Incentive Plan (the “Pieris Plan”), which became effective upon closing of the Acquisition. The Pieris Plan is intended to encourage ownership of common stock by the Company´s employees and directors and certain of their consultants, including employees of Pieris AG, in order to attract and retain such people, to induce them to work for the benefit of the Company and to provide additional incentive for them to promote the Company´s success. The Pieris Plan reserves 3,200,000 shares of the Company´s common stock for issuance. In addition, the Pieris Plan provides for an “evergreen” provision whereby the number of shares of the Company´s common stock reserved for issuance under the Pieris Plan shall be automatically increased on January 1 of each of year commencing in fiscal 2016 by the lesser of (i) 1,000,000 shares, (ii) 4% of the number of shares of the Company´s common stock outstanding on such date, and (iii) such other amount determined by the Compensation committee of the Board of Directors. As of March 31, 2015, options to purchase 1,430,000 shares of the Company´s common stock are outstanding under the Pieris Plan to its executive officers and directors, all of which were granted in the fourth quarter of 2014. In addition, options to purchase 1,114,500 shares are outstanding under the Pieris Plan to other employees and consultants. 25,000 of these shares were granted during the first quarter of 2015 and 1,089,500 were granted during the fourth quarter of 2014. As a result of such grants, 655,500 of the Company´s common stock remain available for future issuances under the Pieris Plan.

Stock options granted under the Pieris Plan may be either incentive stock options (“ISOs”), or nonqualified stock options. The Board of Directors determines who will receive options, the vesting periods (which are generally three years) and the exercise prices. Options have a maximum term of ten years. The exercise price of stock options granted under the Pieris Plan must be at least equal to the fair market value of the common stock on the date of grant. The Pieris Plan become effective in December 2014, therefore there was no stock-based compensation expense in the three months ended March 31, 2014.

Total stock-based compensation expense, related to all share-based awards under the Pieris Plan to executive officers, directors, employees and consultants recognized for the three months ended March 31, 2015, was comprised of the following:


	Three months ended March 31, 2015
Research and Development	$	51,038
General and administrative		166,297

Total stock-option expense	$	217,335

The fair value of option grants was estimated using the Black-Scholes model. The following table describes the weighted-average assumptions used for calculating the value of options granted for the three months ended March 31, 2015:


	Three months ended March 31, 2015
Dividend yield		0.0	%
Expected volatility		75.1	%
Weighted average risk-free interest rate		1.66	%
Expected term		5.8 years

A summary of the Company´s stock option activity and related information is as follows:


	Number of shares		Weighted-Average Exercise Price		Weighted-Average Contractual Life
Outstanding at December 31, 2014		2,519,500	$	2.00		5.6-5.8 years
Options granted		25,000	$	2.85		5.8 years
Options exercised		—		—		—
Options canceled or expired		—		—		—
Outstanding at March 31, 2015		2,544,500	$	2.01		5.6-5.8 years
Vested or expected to vest at March 31, 2015		598,396	$	2.00		—
Exercisable at March 31, 2015		598,396	$	2.00		—

The weighted-average grant date fair value for awards granted during the three months ended March 31, 2015 was $46,442. There were no options exercised during the three months ended March 31, 2015 and 2014. 174,646 shares were vested in the three months ended March 31, 2015.

The unrecognized share-based compensation expense related to employee stock option awards at March 31, 2015, is $2,414,729, which will be recognized over a weighted-average service period of 2.75 years. The weighted-average service period of the 25,000 granted during the first quarter of 2015 is 3 years.