9. Stock-Based Compensation

Stock Option Plan

In June 2016, the Company’s stockholders approved the 2016 Equity Incentive Plan (the 2016 Plan). The 2016 Plan provides for the issuance of incentive awards in the form of non-qualified and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance-based stock awards. The awards may be granted by the Company’s Board of Directors to its employees, directors and officers and to consultants, agents, advisors and independent contractors who provide services to the Company or to a subsidiary of the Company. The exercise price for stock options must not be less than the fair market value of the underlying shares on the date of grant. Stock options expire no later than ten years from the date of grant and generally vest and typically become exercisable over a four-year period following the date of grant. Upon the exercise of stock options, the Company issues the resulting shares from shares reserved for issuance under the 2016 Plan. With the approval of the 2016 Plan, the remaining unallocated shares under the Company’s 2013 Stock Incentive Plan were allocated to the 2016 Plan and an additional 100,000 new shares were added to the authorized share reserve under the 2016 Plan. Under the 2016 Plan, the number of shares authorized for issuance automatically increases annually beginning January 1, 2017 and through January 1, 2026. On January 1, 2017, the number of shares reserved for future issuance was automatically increased by 82,440 common shares.

Share-based Compensation

The Company estimates the fair value of stock options with performance and service conditions using a Black-Scholes option valuation model. The assumptions used in the Black-Scholes option pricing model are presented below:



	Three Months Ended March 31,
	2017		2016
Risk-free interest rate	2.10 to 2.38	%	1.58 to 1.63	%
Expected volatility	116 to 118	%	113	%
Expected term (years)	6.0 to 9.8		6.0
Expected dividend yield	0	%	0	%

The table below summarizes the total stock-based compensation expense included in the Company’s consolidated statements of operations for the periods presented:



	Three Months Ended March 31,
	2017		2016

Research and development	$	28,000	$	26,000
General and administrative		143,000		790,000
Total stock-based compensation	$	171,000	$	816,000

Stock option transactions during the three months ended March 31, 2017 are presented below:



	Options Outstanding
					Average
			Weighted		Remaining
			Average		Contractual
			Exercise		Term		Intrinsic
	Shares		Price		(Years)		Value
Balance, December 31, 2016		74,890	$	64.50		8.65	$	-
Granted		46,732		4.50		-		-
Exercised		-		-		-		-
Forfeited/Cancelled		(1,262)		28.60		-		-
Balance, March 31, 2017		120,360	$	41.60		8.95	$	-
Exercisable at March 31, 2017		39,766	$	78.00		8.13	$	-

The intrinsic value of options exercisable as of March 31, 2017 was $0, based on the Company’s closing stock price of $4.30 per share and the exercise price of the options. As of March 31, 2017, there was $1.6 million of total unrecognized compensation expense related to unvested stock options, which the Company expects to recognize over the weighted average remaining period of 2.5 years.

Shares Reserved For Future Issuance

As of March 31, 2017, the Company had reserved shares of its common stock for future issuance as follows:



	Shares Reserved
Stock options outstanding		120,360
Employee stock purchase plan		25,215
Available for future grants under the 2016 Plan		200,987
Warrants		775,137
Total shares reserved		1,121,699

As of March 31, 2017, the Company was obligated under the CSIA agreement and permitted to issue under the NYSE MKT rules to issue an aggregate of 28,684 shares of common stock to the Holders (see Note 6) for no additional consideration.

Employee Stock Purchase Plan (ESPP)

On June 20, 2016, the Company’s stockholders approved the Company’s 2016 Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible employees to purchase shares of the Company’s common stock on a voluntary basis. The shares are sold to participants at a price equal to the lesser of 85% of the fair market value of the Company’s common stock at the (i) beginning of the offering period, or (ii) end of the six-month purchase period. The ESPP provides for four six-month purchase periods during each 24 month term. The initial shares provided for under the plan are 12,000, and automatically increase annually as allowed for under the ESPP, beginning January 1, 2017 and through January 1, 2026. On January 1, 2017, the number of shares of common stock reserved for issuance under the ESPP was automatically increased by 16,488 common shares.

During the three months ended March 31, 2017, there were no shares issued under the ESPP and the Company recognized $3,000 in compensation expenses related to the ESPP.