12.

Stock-Based Compensation

Upon consummation of the Merger, all outstanding options to purchase Diffusion Units were converted into stock options to purchase the Company’s common stock on terms substantially identical to those in effect prior to the reverse merger, except for adjustments to the underlying number of shares and the exercise price based on the Exchange Ratio. At the time of the Merger, there were

301,156

stock options that were exercisable for shares of the Company’s common stock at a weighted average exercise price of

$40.13

per share.

2015

Equity Plan

The

2015

Equity Plan, as amended in

July

2016,

currently allows for the issuance of up to a maximum of

500,000

shares of common stock in connection with the grant of stock-based awards, including stock options, restricted stock, restricted stock units, stock appreciation rights and other types of awards as deemed appropriate, not including shares subject to awards assumed in connection with certain transactions, including the Merger. As of

December

31,

2016,

there were

40,507

shares of common stock available for future issuance under the

2015

Equity Plan. In addition, beginning on

January

2017,

on each

January

through the term of the plan, up to

4.0%

of the total shares of the Company’s common stock outstanding as of

December

will be added to the plan reserve, unless a lesser amount is stipulated by the Compensation Committee of the Company’s Board of Directors. On

January

2017,

the maximum number of shares of the

2015

Equity Plan increased by

413,825

shares, or

4.0%

of the total shares of the Company’s common stock outstanding at

December

31,

2016.

The Company recorded stock-based compensation expense in the following expense categories of its consolidated statements of operations for the periods indicated:

	Year ended December 31 ,
	2016		2015

Research and development	$	674,643	$	309,579

General and administrative		716,425		284,596

Total stock-based compensation expense	$	1,391,068	$	594,175

The following table summarizes the activity related to all stock option grants to employees and non-employees for the year ended

December

31,

2016:

	Number of Options			Weighted average exercise price per share		Weighted average remaining contractual life (in years)		Aggregate Intrinsic Value (A)
Balance at January 1, 2016		1,495,615		$	3.92

RestorGenex options outstanding		301,156			40.13

Cancelled		(48,190	)		61.30

Granted		458,828			6.25

Outstanding at December 31, 2016		2,207,409		$	8.09		7.8		$94,599

Exercisable at December 31, 2016		1,446,121		$	9.36		7.0		$94,599

Vested and expected to vest at December 31, 2016		2,203,011		$	8.09		7.8		$94,599


	(A)	The difference, if positive, between the stock option’s exercise price and the closing price of the Company’s common stock at December 31, 2016.

Generally, the options have a

ten

(10)

year contractual term and vest in equal monthly installments over

three

(3)

years. In

August

2016,

the Company granted an option to purchase

204,907

shares of Common Stock to a director in connection with the director’s appointment to the board of directors. The options will vest in equal quarterly installments over

ten

(10)

years and any options exercised are restricted from being sold until

August

2021.

Non-employee Stock Options

Non-employee options are remeasured to fair value each period through operations using a Black-Scholes option-pricing model until the options vest. There were

stock options granted to non-employees during the year ended

December

31,

2016.

Key assumptions used to estimate the fair value of the non-employee stock options granted during the year ended

December

31,

2015

included risk-free interest rates of

1.9%

2.4%,

an expected volatility of

125.8%

127.4%,

expected dividend yield and an expected term equal to the remaining contractual option term. The total fair value of non-employee stock options vested during the years ended

December

31,

2016

and

2015

was

$0.8

million and

$0.2

million, respectively. The weighted average stock price used to determine the fair value of non-employee stock options that vested during the years ended

December

31,

2016

and

2015

was

$8.27

and

$1.90,

respectively. At

December

31,

2016,

there was

$75.0

thousand of unrecognized compensation cost related to

42,963

unvested stock options and subject to re-measurement until vested. The total unrecognized compensation expense will be recognized as expense over a weighted-average period of

1.0

year.

Employee Stock Options

The weighted average grant date fair value of stock option awards granted to employees was

$5.55

and

$2.25

during the year ended

December

31,

2016

and

2015,

respectively. The total fair value of options vested during the years ended

December

31,

2016

and

2015

were

$0.6

million and

$0.3

million, respectively.

options were exercised during any of the periods presented. At

December

31,

2016,

there was

$2.9

million of unrecognized compensation cost related to unvested options that will be recognized as expense over a weighted-average period of

6.02

years.

The grant date fair value of employee stock options is determined using the Black-Scholes model. The following assumptions were used during the years ended

December

31,

2016

and

2015:

	2016			2015
Expected term (in years)	5.76	-	7.48		5.76
Risk-free interest rate	1.2%	-	2.0%	2.1%	-	2.3%
Expected volatility	106.8%	-	125.5%	125.6%	-	125.8%
Dividend yield		0%			0%

Restricted Stock Awards

As of

December

31,

2016,

there were

9,198

unvested shares of restricted stock. During the year ended

December

31,

2016,

6,140

shares vested. The fair value as of the respective vesting dates of the restricted stock awards was

$12.0

thousand and

$6.0

thousand for

2016

and

2015,

respectively. The grant date fair value of each restricted stock award granted during the year ended

December

31,

2015

was

$1.97.

There were

restricted stock awards granted in

2016.

December

31,

2016,

there was

$18.0

thousand of unrecognized compensation cost related to unvested restricted stock that will be recognized as expense over a weighted average period of

1.5

years.