Note 7. Stock-Based Compensation

We currently grant stock-based compensation under our 2013 Equity Incentive Plan approved by our stockholders and one plan adopted in 2012 pursuant to NASDAQ Listing Rule 5635(c) (4) concerning inducement grants for new employees (our “2012 Commencement Incentive Plan”). As of June 30, 2016, we had 1,257,235 shares available to grant under the above mentioned plans. At our annual stockholders meeting held on December 20, 2013, our stockholders approved our 2013 Equity Incentive Plan to grant stock-based compensation of up to an initial 6,000,000 shares, plus an increase of 4% per year of the outstanding number of shares of our common stock beginning in January 1, 2015. Under the stockholder-approved plan we may grant incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, 401(k) Plan employer match in form of shares and performance-based shares to our employees, directors and consultants, at prices determined by our Board of Directors. Incentive stock options may only be granted to employees under these plans with a grant price not less than the fair market value on the date of grant. Under our 2012 Commencement Inducement Plan, we may only award options, restricted stock units and other equity awards to newly hired employees and newly engaged directors, in each case as allowed by NASDAQ listing requirements.

Generally, stock options and restricted stock units granted to employees have a maximum term of ten years. Stock based awards may vest over a period of time from the date of grant or upon the attainment of certain performance goals established by the Compensation Committee or the Single Member Committee established under our 2006 Equity Incentive Plan and our 2013 Equity Incentive Plan. Upon employee termination of service, any unexercised vested option will be forfeited three months following termination or the expiration of the option, whichever is earlier.

In May 2016, our Board of Directors approved a plan to wind down our current operations, having considered the decision to terminate the Pathway Study, our available strategic alternatives and our current cash position. As part of the wind down of our operations, we conducted a reduction of our work force impacting all of our remaining full-time employees, consisting of approximately 50 employees, as of August 1, 2016. Unvested options and RSUs of the employees impacted were forfeited. As of June 30, 2016, total unrecognized compensation expense related to unvested awards of stock option and restricted stock units is not significant.

Our stock-based compensation expense for the three and six months ended June 30 was as follows:


	Three months ended						Six months ended
	June 30,						June 30,
	2016			2015			2016			2015
Research and development expense	$	(551,156	)	$	698,039		$	(237,780	)	$	1,281,708
General and administrative expense		(368,956	)		653,535			1,170,094			1,378,760

Total stock-based compensation	$	(920,112	)	$	1,351,574		$	932,314		$	2,660,468

Effect on basic and diluted net loss per share	$	0.08		$	(0.17	)	$	(0.09	)	$	(0.39	)

Stock Options

A summary of our stock option activity for the three months ended June 30, 2016 is as follows:


	Number of options			Weighted-average exercise price ($) per share
Outstanding options at March 31, 2016		155,847			32.80
Granted¹		6,250			3.12
Exercised		—			—
Cancelled		(134,266	)		10.10

Outstanding options at June 30, 2016		27,831			135.64

A summary of changes in unvested options for the three months ended June 30, 2016 is as follows:


	Number of options		Weighted-average exercise price ($) per share		Weighted-average grant date fair value ($) per option
Unvested options at March 31, 2016		124,600		7.91		5.18
Granted		6,250		3.12		—
Vested		12,416		8.13		5.28
Cancelled		117,184		7.63		4.89

Unvested options at June 30, 2016		1,250		8.52		5.53

Restricted Stock Units

We have granted restricted stock units (RSUs) to certain employees and members of the Board of Directors which entitle the holders to receive shares of our common stock upon vesting of the RSUs. The fair value of restricted stock units granted is based upon the market price of the underlying common stock as if it were vested and issued on the date of grant.

A summary of changes in our restricted stock units for the three months ended June 30, 2016 is as follows:


	Number of RSUs			Weighted Average Grant Date Fair Value ($)
Outstanding at March 31, 2016		810,951			11.06
Granted		—			—
Vested and exercised		(32,078	)		20.25
Cancelled		(571,939	)		10.69

Outstanding at June 30, 2016		206,934			10.66

This stock award is performance based and vest on achievement of predefined milestones. In light of the decision to terminate the Pathway Study, our available strategic alternatives and our current cash position, the Board of Directors approved a plan to wind down our current operations. As part of this process, we conducted a reduction in work force impacting all of our remaining full-time employees, consisting of approximately 50 employees, effective August 1, 2016. This grant was forfeited unvested.

Stock Appreciation Rights

In July 2006, we granted cash-settled Stock Appreciation Rights (SARs) to certain employees that give the holder the right, upon exercise, to the difference between the price per share of our common stock at the time of exercise and the exercise price of the SARs.

The SARs have a maximum term of ten years with an exercise price of $240.00, which is equal to the market price of our common stock at the date of grant. The SARs vest 25% on the first anniversary of the grant date and 75% vest monthly over the remaining three-year service period. At June 30, 2016 and 2015, there were 110,593 SARs outstanding. All of the outstanding SARs as of June 30, 2016 were fully vested but have expired unexercised in July 2016.