5. Stock-Based Compensation

The Company’s 2000 Stock Option and Incentive Plan (“2000 Plan”) allowed for the grant of awards in respect of an aggregate of 150,297 shares, of the Company’s common stock in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units and other performance awards. The 2000 Plan has expired, and no further awards may be issued under the plan. Any shares of common stock subject to awards under the 2000 Plan that expire, terminate, or are otherwise surrendered, canceled, forfeited or repurchased without having been fully exercised, or resulting in any common stock being issued, will become available for issuance under the 2013 Stock Incentive Plan (“2013 Plan”) up to a specified number of shares.

Effective February 2003, the Company implemented the 2003 Equity Incentive Plan (“2003 Plan”), and it was amended and approved by the Company’s stockholders in 2005. The 2003 Plan allowed for the grant of awards in respect of an aggregate of 4,336,731. Stock options granted under the 2003 Plan may be either incentive stock options as defined by the Internal Revenue Code (“IRC”), or non-qualified stock options. In October 2013 the 2003 Plan was terminated, and no further awards may be issued under the plan. Any shares of common stock subject to awards under the 2003 Plan that expire, terminate, or are otherwise surrendered, canceled, forfeited or repurchased without having been fully exercised, or resulting in any common stock being issued, will become available for issuance under the 2013 Plan, up to a specified number of shares.

In October 2013, the Company implemented the 2013 Plan. The 2013 Plan provides for the grant of stock options and other stock-based awards, as well as cash-based performance awards. The aggregate number of shares of common stock initially available for issuance pursuant to awards under the 2013 Plan was 1,960,168 shares. The number of shares of common stock reserved for issuance will automatically increase on January 1 of each year from January 1, 2014 through and including January 1, 2023, by the lesser of (a) 1,960,168 shares, (b) 4.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or (c) the number of shares of common stock determined by the Board of Directors. All of the shares available for issuance under the 2013 Plan are eligible for issuance pursuant to the exercise of incentive stock options. If an option expires or terminates for any reason without having been fully exercised, if any shares of restricted stock are forfeited, or if any award terminates, expires or is settled without all or a portion of the shares of common stock covered by the award being issued, such shares are available for the grant of additional awards. However, any shares that are withheld (or delivered) to pay withholding taxes or to pay the exercise price of an option are not available for the grant of additional awards.

The following stock-based compensation amounts were recognized for the periods indicated:


	Three Months Ended March 31,
	2014		2013

Research and development	$	316,533	$	92,555
General and administrative		295,071		52,317


Total stock-based compensation expense	$	611,604	$	144,872

Employee Stock Options

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions in the following table:


	Three Months Ended March 31,
	2014	2013

Expected dividend yield	0%	0%
Expected volatility	66.7% - 66.9%	50.9%
Risk-free interest rate	2.1% - 2.3%	1.2%
Expected term	6 - 6.25 years	7 years
Expected forfeiture rate	5%	5%

Expected Dividend Yield – The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

Expected Volatility – Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. As the Company does not yet have sufficient history of its own volatility, the Company has identified several public entities of similar size, complexity and stage of development and calculates historical volatility using the volatility of these companies.

Risk-Free Interest Rate – This is the U.S. Treasury rate for the week of each option grant during the year, having a term that most closely resembles the expected life of the option.

Expected Term – This is the period of time that the options granted are expected to remain unexercised. Options granted have a maximum term of ten years. The Company estimates the expected life of the option term to be approximately 6.25 years. The Company uses a simplified method to calculate the average expected term.

Expected Forfeiture Rate – The forfeiture rate is the estimated percentage of options granted that is expected to be forfeited or canceled on an annual basis before becoming fully vested. The Company estimates the forfeiture rate based on turnover data with further consideration given to the class of the employees to whom the options were granted.

Equity instruments issued to non-employees are accounted for under the provisions of ASC 505-50, Equity Based Payments to Non-Employees. Accordingly, the estimated fair value of the equity instrument is recorded on the earlier of the performance commitment date or the date the services required are completed.

The following table summarizes stock option activity under the Plan during the three months ended March 31, 2014:


	Shares			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2013		3,200,958		$	4.90		6.9
Granted		30,449			35.41
Exercised		(34,274	)		0.95
Forfeited or expired		(8,281	)		3.36

Outstanding, March 31, 2014		3,188,852			5.24		6.8	$	72,258


March 31, 2014:
Exercisable		1,735,361			1.04		4.8		46,494
Vested and expected to vest		3,010,087			4.96		6.6		69,044

The weighted-average grant-date fair value of options granted for the three months ended March 31, 2014 was $23.13. The total intrinsic value of options exercised during the three months ended March 31, 2014 was approximately $2.5 million, and the total cash received for these exercises was $68,061. The total fair value of shares vested in the three months ended March 31, 2014 was $192,166. As of March 31, 2014 the total unrecognized compensation expense related to non-vested stock options, net of related forfeiture estimates, was $7.6 million, which the Company expects to recognize over a weighted-average period of approximately four years.