10. Stock‑Based Compensation

The 2007 Equity Compensation Plan as amended (the “2007 Plan”), amended, restated and renamed the Company’s 1999 Stock Based Compensation Plan (the “1999 Plan”), which provided for the granting of incentive and nonqualified stock options and restricted stock to its employees, directors and consultants at the discretion of the board of directors.

The 2013 Equity Compensation Plan (the “2013 Plan”), amended, restated and renamed the 2007 Plan. Under the 2013 Plan, the Company may grant incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, deferred share awards, performance awards and other equity-based awards to employees, directors and consultants. The Company initially reserved 40,718 shares of Common Stock for issuance, subject to adjustment as set forth in the 2013 Plan. The 2013 Plan included an evergreen provision, pursuant to which the maximum aggregate number of shares that may be issued under the 2013 Plan is increased on the first day of each fiscal year by the lesser of (a) a number of shares equal to four percent (4%) of the issued and outstanding Common Stock of the Company, without duplication, (b) 13,333 shares and (c) such lesser number as determined by the Company’s board of directors, subject to specified limitations.

The 2018 Omnibus Incentive Compensation Plan (the “2018 Plan”) was unanimously approved by the Company’s Board of Directors on May 24, 2018 and was approved by the Company’s stockholders on June 27, 2018. The 2018 Plan replaces the 2013 Plan. Upon stockholders’ approval of the 2018 Plan, no further awards will be made under the 2013 Plan. Awards granted under the 2013 Plan will continue in effect in accordance with the terms of the applicable award agreement and the terms of the 2013 Plan in effect when the awards were granted.

Under the 2018 Plan, the Company may grant incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based awards to employees, non-employee directors and consultants, and advisors. The maximum aggregate number of shares of the Company’s common stock that may be issued under the 2018 Plan is 402,354, which is equal to the sum of (i) 400,000 shares of the Company’s common stock, plus (ii) 2,354 shares, which is the number of shares of the Company common stock reserved for issuance under the 2013 Plan that remained available as of the effective date of the 2018 Plan. In addition, the number of shares of common stock subject to outstanding awards under the 2013 Plan that terminate, expire, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested, or paid in shares under the 2013 Plan after the effective date of the 2018 Plan will be available for issuance under the 2018 Plan. At December 31, 2018, there were 95,264 shares available for future issuance.

Stock-based compensation expense includes stock options granted to employees and non-employees and has been reported in the Company’s statements of operations and comprehensive loss in either research and development expenses or general and administrative expenses depending on the function performed by the optionee. No net tax benefits related to the stock-based compensation costs have been recognized since the Company’s inception. The Company recognized stock-based compensation expense as follows for the years ended December 31, 2018 and 2017:


	Year ended December 31,
	2018		2017
General and administrative	$	589,000	$	975,000
Research and development		507,000		735,000
	$	1,096,000	$	1,710,000

A summary of stock option activity for the six months ended December 31, 2018 is as follows:


		Options Outstanding
						Weighted
				Weighted-		Average
	Shares			Average		Remaining	Aggregate
	Available		Number	Exercise		Contractual	Intrinsic
	for Grant		of Shares	Price		Term (in years)	Value
Balance, December 31, 2017	3,842		59,666	$	855.30	6.72	$	0
Authorized	413,333		—
Granted	(335,405)		335,405	$	7.50
Exercised	—		—	$	—
Forfeitures	15,743		(15,743)	$	615.72
Cancelled	(2,249)
Balance, December 31, 2018	95,264		379,328	$	76.33	9.19	$	0
Vested or expected to vest, December 31, 2018			365,790	$	76.33	9.19	$	0
Exercisable at December 31, 2018			51,973	$	76.33	9.19	$	0

Information with respect to stock options outstanding and exercisable at December 31, 2018 is as follows:


Exercise Price	Shares	Exercisable
$3.41 – $7.05	308,339	—
$16.35 – $97.50	50,555	32,060
$222.00 - $225.00	1,931	1,594
$348.00 – $597.00	4,931	4,777
$651.00 – $1,129.50	5,636	5,606
$1,992.00 - $2,268.00	7,585	7,585
$4,156.50 - $4,371.00	351	351
	379,328	51,973

Options granted after April 23, 2013

The Company accounts for all stock‑based payments made after April 23, 2013 to employees and directors using an option pricing model for estimating fair value. Accordingly, stock‑based compensation expense is measured based on the estimated fair value of the awards on the date of grant, net of forfeitures. Compensation expense is recognized for the portion that is ultimately expected to vest over the period during which the recipient renders the required services to the Company using the straight‑line single option method. In accordance with authoritative guidance, the fair value of non-employee stock-based awards is re‑measured as the awards vest, and the resulting increase in fair value, if any, is recognized as expense in the period the related services are rendered.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options at the grant date. The Black-Scholes model requires the Company to make certain estimates and assumptions, including estimating the fair value of the Company’s Common Stock, assumptions related to the expected price volatility of the Common Stock, the period during which the options will be outstanding, the rate of return on risk-free investments and the expected dividend yield for the Company’s stock.

As of December 31, 2018, there was $1,429,000 of unrecognized compensation expense related to the unvested stock options issued from April 24, 2013 through December 31, 2018, which is expected to be recognized over a weighted-average period of approximately 2.31 years.

The weighted-average assumptions underlying the Black-Scholes calculation of grant date fair value include the following:


	Year ended December 31,
	2018			2017
Risk-free interest rate		2.84	%		2.09	%
Expected volatility		79.42	%		79.02	%
Expected term		5.94	years		5.98	years
Expected dividend yield		0	%		0	%
Weighted average grant date fair value	$	1.18		$	1.76

The weighted-average valuation assumptions were determined as follows:

Risk-free interest rate: The Company based the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.

Expected term of options: Due to its lack of sufficient historical data, the Company estimates the expected life of its employee stock options using the "simplified" method, as prescribed in Staff Accounting Bulletin (SAB) No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option.

Expected stock price volatility: Expected volatility is based on the historical volatility of the Company’s Common Stock since its IPO in July 2013.

Expected annual dividend yield: The Company has never paid, and does not expect to pay, dividends in the foreseeable future. Accordingly, the Company assumed an expected dividend yield of 0.0%.

Estimated forfeiture rate: The Company’s estimated annual forfeiture rate on stock option grants was 4.14% in 2018 and 2017, based on the historical forfeiture experience.