8. 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 of common stock authorized for future issuance was automatically increased by 82,440 shares. On September 7, 2017, the Company’s stockholders approved an amendment to the 2016 Plan which increased the aggregate number of shares of common stock authorized for issuance by 800,000 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:



	Nine Months Ended September 30,
	2017		2016
Risk-free interest rate	1.27 to 2.29	%	1.22 to 1.63	%
Expected volatility	117 to 144	%	113 to 123	%
Expected term (years)	2.0 to 9.6		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 September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016

Research and development	$	32,000	$	37,000	$	133,000	$	89,000
General and administrative		66,000		297,000		435,000		1,609,000
Total stock-based compensation	$	98,000	$	334,000	$	568,000	$	1,698,000

Stock option transactions during the nine months ended September 30, 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		1,070,572		1.22		-
Exercised		-		-		-
Forfeited/Cancelled		(28,697)		89.66		-
Balance, September 30, 2017		1,116,765	$	3.19		9.23	$	24,000
Exercisable at September 30, 2017		131,928	$	12.89		4.13	$	9,000

As of September 30, 2017, there was $1.5 million of total unrecognized compensation expense related to unvested stock options, which the Company expects to recognize over the weighted average remaining period of 2.7 years.

Shares Reserved For Future Issuance

As of September 30, 2017, the Company had reserved shares of its common stock for future issuance as follows:



	Shares Reserved
Stock options outstanding		1,116,765
Employee stock purchase plan		21,016
Available for future grants under the 2016 Plan		4,580
Warrants		8,712,220
Total shares reserved		9,854,581

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 authorized for issuance under the ESPP was automatically increased by 16,488 shares.

During the three and nine months ended September 30, 2017, there were 4,200 common shares issued under the ESPP. The Company recognized $1,000 and $5,000 in compensation expenses related to the ESPP for the three and nine months ended September 30, 2017, respectively.