10. Stock-based Compensation

In June 2016, the Company’s stockholders approved the Company’s 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. Under the 2016 Plan, the number of shares authorized for issuance automatically increases annually beginning January 1, 2017 and through January 1, 2026.

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



	Year ended December 31,
	2018		2017
Risk-free interest rate	2.74 to 2.99	%	1.27 to 2.36	%
Expected volatility	121 to 126	%	117 to 144	%
Expected term (in years)	6.02		2.0 to 9.1
Expected dividend yield	0	%	0	%

The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. Expected volatility is based on the historical volatility of the Company’s common stock. The expected term represents the period that the Company expects its stock options to be outstanding. The expected term assumption is estimated using the simplified method set forth in the SEC Staff Accounting Bulletin 110, which is the mid-point between the option vesting date and the expiration date. For stock options granted to parties other than employees or directors, the Company elects, on a grant by grant basis, to use the expected term or the contractual term of the option award. The Company has never declared or paid dividends on its common stock and has no plans to do so in the foreseeable future. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.

Stock options issued to non-employees other than directors are accounted for at their estimated fair values measured at the grant date using the Black-Scholes valuation model. The stock-based compensation expense related to the grant of stock options to non-employees was not significant for the years ended December 31, 2018 and 2017.

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



	Year Ended December 31,
	2018		2017

Research and development	$	326,000	$	171,000
General and administrative		152,000		529,000
Total stock-based compensation	$	478,000	$	700,000

Stock option transactions during the years ended December 31, 2018 and 2017 are presented below:



	Options Outstanding
					Average
			Weighted		Remaining
			Average		Contractual			Aggregate
			Exercise		Term		Intrinsic
	Shares		Price		(Years)		Value
Outstanding at December 31, 2016		74,890	$	64.50		8.65
Granted		1,070,572		1.22
Forfeited/Cancelled		(29,597)		87.87
Outstanding at December 31, 2017		1,115,865		3.17		8.98
Granted		37,500		1.18
Forfeited/Cancelled		(3,300)		11.54
Outstanding at December 31, 2018		1,150,065	$	3.08		8.03	$	-
Vested and expected to vest at December 31, 2018		864,952	$	3.79		7.78	$	-
Exercisable at December 31, 2018		402,642	$	5.86		6.73	$	-

The aggregate intrinsic value of options at December 31, 2018 is based on the Company’s closing stock price on that date of $0.21 per share. As of December 31, 2018, there was $630,000 of total unrecognized stock-based compensation expense related to unvested stock options and the weighted average period over which this cost is expected to be recognized is approximately 2.0 years.

Shares Reserved For Future Issuance

As of December 31, 2018, the Company had reserved shares of its common stock for future issuance as follows:



	Shares Reserved
Stock options outstanding		1,150,065
Employee stock purchase plan		46,472
Available for future grants under the 2016 Plan		446,226
Warrants		26,961,187
Total shares reserved		28,603,950