7.	Share-Based Compensation

The Company has adopted incentive and nonqualified stock option plans for executive, scientific and administrative personnel of the Company as well as outside directors and consultants. In June 2017, the Company’s shareholders approved an amendment to the 2011 Long-Term Incentive Plan, increasing the number of shares reserved for issuance from 11,230,000 to 14,230,000 shares of common stock to be available for grants and awards. As of September 30, 2017, there are 12,242,004 shares issuable under options previously granted and currently outstanding, with exercise prices ranging from $0.86 to $13.75. In 2017, the Company awarded options to employees, covering up to 2,725,000 shares, in which vesting is subject to achievement of certain performance milestones. Options granted under the plans generally vest over periods varying from immediately to one to three years, are not transferable and generally expire ten years from the date of grant. As of September 30, 2017, 2,355,358 shares remained available for grant under the Company’s 2011 Long-Term Incentive Plan.

The Company records compensation expense associated with stock options and other equity-based compensation in accordance with provisions of authoritative guidance. Compensation costs are recognized over the requisite service period, which is generally the option vesting term of up to three years. Awards with performance conditions will be expensed if it is probable that the performance condition will be achieved. For the nine months ended September 30, 2017 and 2016, $30,500 and $10,100, respectively was expensed for share awards with performance conditions that became probable during that period.

The Company’s net loss for the nine months ended September 30, 2017 and 2016 includes non-cash compensation expense of $516,237 and $2,201,401, respectively, related to the Company’s share-based compensation awards. The compensation expense related to the Company’s share-based compensation arrangements is recorded as components of general and administrative expense and research and development expense, as follows:

	Nine Month Period Ended
	September 30,
	2017		2016
Research and development	$	225,342	$	578,626
General and administrative		290,895		1,622,775
Share-based compensation expense	$	516,237	$	2,201,401
Net share-based compensation expense, per common share:
Basic and diluted	$	0.01	$	0.05

The Company uses the Black-Scholes-Merton valuation model to estimate the fair value of stock options granted to employees. Option valuation models, including Black-Scholes-Merton, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant date fair value of an award.

Following are the weighted-average assumptions used in valuing the stock options granted during the nine-month periods ended September 30, 2017 and 2016:

	Nine Month Period Ended
	September 30,
	2017			2016
Expected volatility		78.92	%		83.03	%
Risk-free interest rate		1.97	%		1.31	%
Expected term of option		6.34 years			5.41 years
Forfeiture rate		-			3.00	%*
Expected dividend yield		0.00	%		0.00	%

* - In 2016, authoritative guidance required forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. During the nine-month period ended September 30, 2016, forfeitures were estimated at 3%.

The weighted average fair value of stock options granted during the nine-month periods ended September 30, 2017 and 2016 were $0.73 and $0.75, respectively.

A summary of the Company’s stock option plans and of changes in options outstanding under the plans for the nine months ended September 30, 2017 is as follows:

			Weighted
			Average
	Number of		Exercise
	Options		Price
Outstanding at January 1, 2017		9,535,306	$	1.57
Granted		3,699,500	$	1.04
Exercised		-	$	-
Expired		(992,802)	$	1.64
Forfeited		-	$	-
Outstanding at September 30, 2017		12,242,004	$	1.41
Exercisable at September 30, 2017		8,330,511	$	1.59

There were no option exercises during the nine months ended September 30, 2017 or 2016.