11. Stock-Based Compensation

The Company sponsors the Ruthigen, Inc. Amended and Restated 2013 Employee, Director and Consultant Equity Incentive Plan, and immediately following the Effective Time, renamed the plan the Pulmatrix, Inc. 2013 Employee, Director and Consultant Equity Incentive Plan (the “2013 Plan”). The 2013 Plan was amended and restated at the Effective Time to, among other things, (i) increase the number of shares of Company Common Stock authorized under the plan, (ii) comply with the requirements imposed by Section 162(m) of the Internal Revenue Code of 1986, as amended, and (iii) provide an increase in the number of shares of Company Common Stock available for issuance under the 2013 Plan’s “evergreen” provision. As of June 30, 2015, the 2013 Plan provides for the grant of up to 2,713,261 shares of Company Common Stock, of which 1,191,598 shares remained available for future grant at June 30, 2015.

At the Effective Time, the Company assumed Pulmatrix Operating’s 2013 Employee, Director and Consultant Equity Incentive Plan (the “Original 2013 Plan”) and Pulmatrix Operating’s 2003 Employee, Director, and Consultant Stock Plan (the “2003 Plan”). At the Effective Time, the Company terminated the Original 2013 Plan as to future awards. An aggregate of 35,556 and 629,983 shares of Company Common Stock may be delivered under options outstanding as of June 30, 2015 under the Original 2013 Plan and the 2003 Plan, respectively, however no additional awards may be granted under the Original 2013 Plan or the 2003 Plan.

In connection with the Merger, all outstanding stock options of Pulmatrix Operating converted into stock options to purchase Company Common Stock, subject to the Exchange Ratio. The conversion of the Pulmatrix Operating stock options for stock options to purchase Company Common Stock was treated as a modification of the awards. The modification of the stock options did not result in any incremental compensation expense as the modification did not increase the fair value of the stock options.

Options

The following table summarizes stock option activity for the six months ended June 30, 2015:


	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding—December 31, 2014		732,823		$	2.08		6.73	$	5,508
Granted		1,299,251		$	11.56
Options assumed in Merger		24,400		$	14.07
Exercised		(70,988	)	$	2.11
Forfeited or expired		(2,016	)	$	2.16

Outstanding—June 30, 2015		1,983,470		$	8.44		9.07	$	4,339
Exercisable—June 30, 2015		694,942		$	3.73		7.71	$	5,582
Vested or expected to vest—June 30, 2015		1,888,088		$	8.31		9.03	$	6,535

The weighted-average grant-date fair values of stock options granted during the six months ended June 30, 2015 was $11.56 per share.

During the six months ended June 30, 2015, the Company received cash of $150 from the exercise of options. The intrinsic value of options exercised during the six months ended June 30, 2015 was $531. As of June 30, 2015 there was $8,132 of unrecognized stock-based compensation expense related to unvested stock options granted under the Company’s stock award plans. This expense is expected to be recognized over a weighted-average period of approximately 9.95 years.

The following table presents the stock-based compensation expense related to option awards for the three and six months ended June 30:


	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Research and development	$	50	$	40	$	81	$	105
General and administrative		2,661		15		2,664		41

Total stock based compensation expense	$	2,711	$	55	$	2,745	$	146

The estimated fair values of employee stock options granted during the six months ended June 30, 2015 and 2014, were determined on the date of grant using the Black-Scholes option-pricing model with the following assumptions:


	Three Months Ended June 30,		Six Months Ended June 30,
	2015	2014	2015	2014
Expected option life (years)	1.48 - 6.12	5.96	1.48 - 6.22	5.96
Risk-free interest rate	0.68% - 1.91%	1.54%	0.68% - 1.91%	1.54% - 1.57%
Expected volatility	65.85% - 73.33%	133%	73.33% - 132.0%	131% - 133%
Expected dividend yield	0%	0%	0%	0%

Restricted Stock Units

In connection with the Merger, the Company signed one-year employment agreements with the former CEO and CFO of Ruthigen pursuant to which the Company granted 329,052 RSUs of which 130,435 RSUs were immediately vested upon the date of the grant. The Company recorded stock-based compensation expense of $1,755 for the RSUs vested during the three and six months ended June 30, 2015.

The following table summarizes stock RSU activity for the six months ended June 30, 2015:


	Number of Units			Weighted- Average Grant Date Fair Value		Total Grant Date Fair Value
Outstanding—December 31, 2014		—		$	—	$	—
Granted		329,052		$	12.65		4,163
Vested		(130,435	)	$	12.65		(1,650	)
Forfeited or expired		—			—		—

Outstanding—June 30, 2015		198,617		$	12.65	$	2,513