8. Stock-Based Compensation

Equity Incentive Plans

The Company maintains two equity incentive plans: The Amended and Restated 2013 Equity Incentive Plan, or the 2013 Plan, and the 2007 Equity Incentive Plan, or the 2007 Plan. The 2013 Plan includes a provision that shares available for grant under the Company’s 2007 Plan become available for issuance under the 2013 Plan and are no longer available for issuance under the 2007 Plan. At the Company’s annual meeting of stockholders held on June 28, 2018, the Company’s stockholders approved amendments to the 2013 Plan, which included an increase in the number of non-inducement shares of common stock authorized for issuance under the 2013 Plan by 146,666 shares. As of September 30, 2018, 59,511 shares of the Company’s common stock were authorized exclusively for the issuance of stock awards to employees who have not previously been an employee or director of the Company, except following a bona fide period of non-employment, as an inducement material to the individual’s entering into employment with the Company, as defined under applicable Nasdaq Listing Rules. As of September 30, 2018, under all plans, a total of 264,098 non-inducement shares were authorized for issuance, 69,449 shares had been issued with 57,863 non-inducement stock options and restricted stock units, or RSUs, underlying outstanding awards, and 194,649 non-inducement shares were available for grant. As of September 30, 2018, 60,268 inducement shares had been issued under the 2013 Plan, with 59,434 inducement stock options and RSUs underlying outstanding awards and 0 inducement shares available for grant.

Stock Options

A summary of stock option activity for the nine months ended September 30, 2018 is as follows:

						Weighted
						Average
				Weighted		Remaining
	Number of			Average Exercise		Contractual
	Shares			Price Per Share		Term in Years
Outstanding at December 31, 2017		81,482		$	113.68		8.80
Granted		58,994		$	2.96		7.43
Exercised		—			—
Cancelled/forfeited/expired		(25,835	)	$	45.83		8.68
Outstanding at September 30, 2018		114,641		$	72.02		8.79
Vested and unvested expected to vest at September 30, 2018		112,280		$	73.23		8.77

The intrinsic values of options outstanding, options exercisable, and options vested and unvested expected to vest at December 31, 2017 and September 30, 2018 were each approximately zero.

The assumptions used in the Black-Scholes pricing model for stock options granted during the three and nine months ended September 30, 2018 were as follows:

Stock and exercise prices	$2.75 - $6.00
Expected dividend yield		0.00%
Discount rate-bond equivalent yield	2.73% – 2.97%
Expected life (in years)	5.00 – 5.96
Expected volatility	100% - 120%

On May 2, 2017, the Company’s Board of Directors approved the issuance of an aggregate of 18,333 performance stock options to be granted on May 31, 2017 to certain of the Company’s employees and all of its executive officers pursuant to the 2013 Plan, of which 6,666 performance stock options were granted to the Company’s CEO, 3,333 performance stock options were granted to its CFO, and 2,500 performance stock options were granted to each of its Chief Scientific Officer and Senior Medical Director. Each performance stock option granted on May 31, 2017 had an exercise price of $45.00 per share and an estimated grant date fair value of $29.70 per share. On July 6, 2017, the Company’s Compensation Committee of the Board of Directors approved the issuance of an aggregate of 2,500 performance stock options to be granted on July 31, 2017 to certain of the Company’s employees pursuant to the 2013 Plan, of which 83 performance stock options were forfeited by December 31, 2017. Each performance stock option granted on July 31, 2017 had an exercise price of $41.70 per share and an estimated grant date fair value of $24.90 per share. The vesting of each of the performance stock options granted during the year ended December 31, 2017 was to be determined by the Company’s Board of Directors or Compensation Committee of the Board of Directors upon the Company’s achievement of specified corporate goals for 2017. During the nine months ended September 30, 2018, none of the performance option awards granted during the year ended December 31, 2017 were declared vested by the Company’s Compensation Committee of the Board of Directors, and the 20,750 shares underlying the remaining outstanding performance stock option awards at December 31, 2017 were forfeited.

Restricted Stock

A summary of RSU activity for the nine months ended September 30, 2018 is as follows:

				Weighted
	Number of			Average Grant
	Shares			Date Fair Value
Outstanding at December 31, 2017		12,026		$	56.10
Granted		—			—
Vested and issued		(5,833	)	$	45.00
Forfeited		(5,833	)	$	45.00
Outstanding at September 30, 2018		360		$	415.80
Vested and unvested expected to vest at September 30, 2018		360		$	415.80

At September 30, 2018, the intrinsic values of RSUs outstanding and RSUs unvested and expected to vest were each approximately $1,000. Of the 360 RSUs outstanding at September 30, 2018, all were fully vested.

On May 2, 2017, the Company’s Board of Directors approved the issuance of an aggregate of 5,833 time-based RSUs and 5,833 performance RSUs to be granted on May 31, 2017 to certain of the Company’s employees and all of its executive officers pursuant to the 2013 Plan, of which 1,666 time-based RSUs and 833 performance RSUs were granted to its CEO, and 833 time-based RSUs and 833 performance RSUs were granted to each of its CFO, Chief Scientific Officer, and Senior Medical Director. Each RSU granted on May 31, 2017 had a grant date fair value of $45.00 per share. Vesting of the time-based RSUs granted on May 31, 2017 occurred on the one-year anniversary of the vesting commencement date, or May 2, 2018, while vesting of the performance RSUs was to be determined by the Company’s Board of Directors or its Compensation Committee of the Board of Directors upon the achievement of specified corporate goals for 2017. During the nine months ended September 30, 2018, none of the performance RSUs granted on May 31, 2017 were declared vested by the Company’s Compensation Committee of the Board of Directors, and the 1,666 shares underlying these awards were forfeited.

Stock-based Compensation Expense

The following table presents the effects of stock-based compensation related to equity awards to employees and nonemployees on the unaudited condensed statements of operations and comprehensive loss during the periods presented:

	For the three months ended				For the nine months ended
	September 30,				September 30,
	2017		2018		2017		2018
Stock Options
Cost of revenues	$	59,720	$	10,150	$	133,105	$	37,150
Research and development expenses		53,405		30,247		121,834		103,267
General and administrative expenses		178,671		57,162		528,406		243,593
Sales and marketing expenses		40,181		15,440		100,327		63,494
Total expenses related to stock options		331,977		112,999		883,672		447,504
RSUs
Cost of revenues		20,417		-		58,717		(18,802	)
Research and development expenses		20,418		-		57,490		13,576
General and administrative expenses		74,521		-		160,927		54,303
Sales and marketing expenses		28,355		-		71,343		15,348
Total stock-based compensation	$	475,688	$	112,999	$	1,232,149	$	511,929

Stock-based compensation expense was recorded net of estimated forfeitures of 0% - 8% per annum during each of the three and nine months ended September 30, 2017 and 2018. As of September 30, 2018, total unrecognized share-based compensation expense related to unvested stock options and RSUs, adjusted for estimated forfeitures, was approximately $900,474 and is expected to be recognized over a weighted-average period of approximately 2.4 years.