7.	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 June 30, 2015, options to purchase 1,470,235 shares of the Company´s common stock are outstanding under the Pieris Plan to its executive officers and directors. 40,235 of these shares were granted during the second quarter of 2015. All other shares were granted in the fourth quarter of 2014. In addition, options to purchase 1,146,500 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, 32,000 of these shares were granted during the second quarter of 2015 and 1,089,500 were granted during the fourth quarter of 2014. As a result of such grants, 583,265 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 and six months ended June 30, 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 and six months ended June 30, 2015, was comprised of the following:


	Three months ended		Six months ended
	June 30, 2015		June 30, 2015
Research and Development	$	78,551	$	129,590
General and administrative		189,488		355,785

Total stock-option expense	$	268,039	$	485,375

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 and six months ended June 30, 2015:


	Three months ended			Six months ended
	June 30, 2015			June 30, 2015
Forfeiture rate		6.0	%		6.0	%
Dividend yield		0.0	%		0.0	%
Expected volatility		73.7	%		74.1	%
Weighted average risk-free interest rate		1.73	%		1.71	%
Expected term		5.3 - 5.8 years			5.3 - 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 cancelled or expired		—		—		—
Outstanding at March 31, 2015		2,544,500	$	2.01		5.6 - 5.8 years
Options granted		72,235	$	2.89		5.3 - 5.8 years
Options exercised		—	$	—		—
Options cancelled or expired		—	$	—		—
Outstanding at June 30, 2015		2,616,735	$	2.03		5.3 - 5.8 years
Vested at June 30, 2015		799,068	$	2.03		—
Expected to vest after June 30,2015		1,708,607	$	2.03		—
Exercisable at June 30, 2015		799,068	$	2.03		—

The weighted-average grant date fair value for awards granted during the three and six months ended June 30, 2015 was $130,456 and $176,898, respectively. There were no options exercised during the three and six months ended June 30, 2015 and 2014. 200,673 and 375,319 shares were vested in the three and six months ended June 30, 2015, respectively.

The unrecognized share-based compensation expense related to employee stock option awards at June 30, 2015, is $2,253,478, which will be recognized over a weighted-average service period of 2.5 years.