4. Stock Options

In October 2012, our board of directors approved and adopted the 2012 Stock Incentive Plan, which we refer to as the 2012 Plan. Under the 2012 Plan, we are authorized to issue up to 35,000,000 shares of our common stock in stock incentive awards to employees, directors and consultants.

In March 2009, our board of directors and shareholders adopted the 2009 Stock Incentive Plan, which we refer to as the 2009 Stock Incentive Plan. Under the 2009 Plan, we are authorized to issue up to 4,200,000 shares of our common stock in stock incentive awards to employees, directors and consultants.

In December 2013, our board of directors adopted the 2013 Plan. Under the 2013 Plan, we are authorized to issue up to 40,000,000 shares of our common stock in stock incentive awards to employees, directors and consultants. Our shareholders approved the 2013 Plan in February 2014.

The Company’s 2013 Stock Incentive Plan provides for the issuance of long-term incentive awards, or Awards, in the form of non-qualified and incentive stock options, or Options, stock appreciation rights, stock grants and restricted stock units. The Awards may be granted by the Company’s Board of Directors to its employees, directors and officers and to consultants, agents, advisors and independent contractors who provide services to the Company. The exercise price for Options must not be less than the fair market value of the underlying shares on the date of grant. Options expire no later than ten years from the date of grant and generally vest and become exercisable over a four-year period following the date of grant. Under the 2012 Plan, every non-employee member of the Company’s Board of Directors may elect to receive a non-qualified Option or restricted stock unit grant in lieu of certain cash compensation. Upon the exercise of Options, the Company issues the resulting shares from shares reserved for issuance under the Company’s Incentive Plans.

Under ASC 718 Stock Compensation, the Company is required to expense the fair value of share-based payments granted over the vesting period. The Company values Awards granted at their grant date fair value in accordance with the provisions of ASC 718 and recognizes stock-based compensation expense on a straight-line basis over the service period of each award.

Stock-based compensation expense is reduced by an estimated forfeiture rate derived from historical employee termination behavior. If the actual number of forfeitures differs from the Company’s estimates, the Company may record adjustments to increase or decrease compensation expense in future periods. There were no significant adjustments related to changes in the Company’s estimates for the three and nine month periods ended September 30, 2013 and 2014.

Following is a summary of the amount included as stock-based compensation expense in the accompanying consolidated statements of operations:

	Three Months Ended				Nine Months Ended
	September		September		September		September
	30, 2014		30, 2013		30, 2014		30, 2013
Income statement category:
Research and development	$	38,000	$	40,000	$	116,000	$	153,000
General and administrative		209,000		208,000		598,000		1,053,000
Severance charge		1,161,000		—		1,161,000		—
Total stock-based compensation expense	$	1,408,000	$	248,000	$	1,875,000	$	1,206,000

The following table summarizes Option activity:

				Average Remaining
			Weighted Average	Contractual Term
	Shares		Exercise Price	(Years)		Intrinsic Value
Outstanding at December 31, 2013	25,721,000	$	0.19	9.15	$	6,451,441
Granted	—		—
Exercised	—		—
Forfeited	3,137,378		0.19
Expired	2,000		13.10
Outstanding at September 30, 2014	22,581,622	$	0.19	2.15	$	862,982
Exercisable at September 30, 2014	19,972,558	$	0.19	1.35	$	822,989

The aggregate intrinsic value is determined using the closing price of the Company’s common stock of $0.22 on September 30, 2014.

As of September 30, 2014, the Company had unrecognized compensation cost related to unvested Options of approximately $559,358 net of estimated forfeitures, which the Company expects to recognize over a weighted average period of approximately two and a half years.

As of September 30, 2014, the Company had reserved shares of its common stock for future issuance as follows:

			Shares Reserved
Stock options outstanding			22,581,622
Available for future grants under the 2013 Stock Incentive Plan			39,250,000
Warrants			38,890,451
Total shares reserved			100,722,073