(8) Share-based Compensation

Stock Plans

The Company’s equity incentive plan, the 2013 Equity Incentive Plan (the Equity Plan), was approved by stockholders on September 17, 2013. The maximum number of shares issuable under this plan is 321,428 shares.

The Equity Plan provides for the granting of stock options (including indexed options), restricted stock units, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, performance shares, performance units and deferred stock units. Under the Equity Plan, awards may be granted to employees, directors and consultants of ARCA, except for incentive stock options, which may be granted only to employees. As of December 31, 2015, options and awards for 210,387 shares were outstanding under the Equity Plan, and 64,419 shares were reserved for future awards.

In general, the Equity Plan authorizes the grant of stock options that vest at rates set by the Board of Directors or the Compensation Committee thereof. Generally, stock options granted by ARCA under the equity incentive plans become exercisable ratably for a period of three to four years from the date of grant and have a maximum term of ten years. The exercise prices of stock options under the equity incentive plan generally meet the following criteria: the exercise price of incentive stock options must be at least 100% of the fair market value on the grant date and exercise price of options granted to 10% (or greater) stockholders must be at least 110% of the fair market value on the grant date.

In conjunction with the adoption of the Equity Plan, the Company discontinued grants under its previous plan, the Amended and Restated ARCA biopharma, Inc. 2004 Equity Incentive Plan (the 2004 Plan), effective September 17, 2013. The 2004 Plan expired in 2014; however, options outstanding under the 2004 plan will continue to vest according to the original terms of each grant. As of December 31, 2015, options to purchase 7,827 shares with a weighted average exercise price of $105.24 per share were outstanding under this plan. Other stock plans that were assumed by ARCA in the Merger still have options outstanding that will continue to vest according to the original terms of each grant, but no new options can be granted under these plans, as the plans have expired. As of December 31, 2015, options to purchase 5,423 shares with a weighted average exercise price of $131.01 were outstanding under these plans.

The Company granted options and awards for 52,801 and 60,020 shares of common stock in the years ended December 31, 2015 and 2014, respectively. The fair values of the majority of employee stock options granted in the years ended December 31, 2015 and 2014 were estimated at the date of grant using the Black-Scholes model with the following assumptions and had the following estimated weighted average grant date fair value per share:

	Years Ended December 31,
	2015			2014
Expected term	5.8 years			5.9 years
Expected volatility		89	%		94	%
Risk-free interest rate		1.61	%		1.53	%
Expected dividend yield		0	%		0	%
Weighted-average grant date fair value per share	$	3.57		$	9.58

A summary of ARCA’s stock option activities for the years ended December 31, 2015 and 2014, and related information as of December 31, 2015, is as follows:

	Options Outstanding
	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Options outstanding - December 31, 2013		120,433		$	25.72
Granted		32,644			12.64
Exercised		—			—
Forfeited and cancelled		(493	)		867.70
Options outstanding - December 31, 2014		152,584		$	20.20		8.25	$	—
Granted		21,492			4.92
Exercised		—			—
Forfeited and cancelled		(12,798	)		18.45
Options outstanding - December 31, 2015		161,278		$	18.30		6.97	$	—
Options exercisable - December 31, 2015		114,198		$	21.55		6.44	$	—
Options vested and expected to vest - December 31, 2015		161,102		$	18.31		6.97	$	—

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing price as of December 31 of the respective year, which would have been received by the option holders had all the option holders with in-the-money options exercised as of that date. The total intrinsic value of options exercised for the years ended December 31, 2015 and 2014 was $0 and $0, respectively. As of December 31, 2015, the unrecognized compensation expense related to unvested options, excluding estimated forfeitures, was $307,000 which is expected to be recognized over a weighted average period of 1.6 years. The Company recognizes compensation costs for its share-based awards on a straight-line basis over the requisite service period for the entire award, as adjusted for expected forfeitures.

Restricted Stock Units

The Company began granting restricted stock units (RSUs) to employees during 2013 in conjunction with the adoption of the Equity Plan. The fair value of RSU awards is the closing price of the Company’s common stock on the date of grant and is recognized as compensation expense on a straight-line basis over the respective vesting period. The stock awards granted have a requisite service period between three and four years with annual vesting on the grant anniversary date.

A summary of RSU activity for the years ended December 31, 2015 and 2014 is presented below:

	Restricted Stock Units Outstanding
	Number of Shares			Weighted Average Grant Date Fair Value
RSUs outstanding - December 31, 2013		59,851		$	9.75
Granted		27,376			13.65
Vested and released		(19,953	)		9.75
Forfeited and cancelled	—			—
RSUs outstanding - December 31, 2014		67,274		$	11.33
Granted		31,309			4.77
Vested and released		(26,669	)		10.75
Forfeited and cancelled		(9,555	)		10.90
RSUs outstanding - December 31, 2015		62,359		$	8.36

As of December 31, 2015, the total unrecognized compensation cost related to unvested stock awards was approximately $376,000. This cost will be recognized on a straight-line basis over the next 1.8 years and will be adjusted for estimated forfeitures.

Non-cash Stock-based Compensation

For the years ended December 31, 2015 and 2014, the Company recognized the following non-cash, share-based compensation expense (in thousands):

	Years Ended
	December 31,
	2015		2014
Research and development	$	175	$	158
General and administrative	$	424	$	489
Total	$	599	$	647

Stock-based compensation expense related to non-employees was approximately $25,000 in 2015 and negligible in 2014. ARCA did not recognize any tax benefit related to employee stock-based compensation cost as a result of the full valuation allowance on its net deferred tax assets.