Stock-Based Compensation

The Trovagene, Inc. 2014 Equity Incentive Plan (the “2014 EIP”), authorizing up to 34,722 shares of common stock for issuance under the 2014 EIP, was approved by the Board in June 2014 and approved by the stockholders of the Company at the September 17, 2014 Annual Meeting of Stockholders. The total number of authorized shares was increased to 131,944 between the inception of the 2014 EIP through December 31, 2017. At the May 30, 2018 Annual Meeting of Stockholders, the stockholders approved the increase of number of authorized shares in the 2014 EIP to 243,056. At the June 6, 2019 Annual Meeting of Stockholders, the stockholders approved the increase of number of authorized shares in the 2014 EIP to 1,243,056.

As of December 31, 2019, there were 167,888 shares available for issuance under the 2014 EIP.

Stock-based compensation has been recognized in operating results as follows:



	Years ended December 31,
	2019		2018
Cost of revenue	$	—	$	30,488
Research and development expenses	399,687		752,127
Selling, general and administrative expenses	485,256		1,392,012
Total stock-based compensation	$	884,943	$	2,174,627

Stock Options

The estimated fair value of stock option awards was determined on the date of grant using the Black-Scholes option valuation model with the following assumptions during the years indicated below:



	Years ended December 31,
	2019	2018
Risk-free interest rate	1.66% - 2.33%	2.42% - 2.93%
Dividend yield	0%	0%
Expected volatility (range)	95% - 99%	89% - 98%
Expected volatility (weighted-average)	96%	91%
Expected term (in years)	5.9 years	5.2 years

Risk-free interest rate — Based on the daily yield curve rates for U.S. Treasury obligations with maturities that correspond to the expected term of the Company’s stock options.

Dividend yield — Trovagene has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future.

Expected volatility — Based on the historical volatility of Trovagene’s common stock.

Expected term — The expected option term represents the period that stock-based awards are expected to be outstanding based on the simplified method, which averages an award’s weighted-average vesting period and expected term for “plain vanilla” share options. Options are considered to be “plain vanilla” if they have the following basic characteristics: (1) are granted “at-the-money”; (2) exercisability is conditioned upon service through the vesting date; (3) termination of service prior to vesting results in forfeiture; (4) limited exercise period following termination of service; and (5) are non-transferable and non-hedgeable.

Forfeitures — The Company estimates forfeitures based on its historical experience.

The weighted-average fair value per share of all options granted during the years ended December 31, 2019 and 2018, estimated as of the grant date using the Black-Scholes option valuation model, was $1.91 and $13.08 per share, respectively.

The unrecognized compensation cost related to non-vested stock options outstanding at December 31, 2019 and 2018 was $1,256,924 and $375,548, respectively. The weighted-average remaining amortization period at December 31, 2019 and 2018 for non-vested stock options was 2.2 years and 1.2 years, respectively.

The total fair value of shares vested during the years ended December 31, 2019 and 2018 was $386,654 and $1,864,537, respectively.

A summary of stock option activity and of changes in stock options outstanding is presented below:



	Number of Options		Weighted-Average Exercise Price Per Share		Intrinsic Value		Weighted-Average Remaining Contractual Life
Balance outstanding, December 31, 2017	62,376		$	291.10	$	—	7.1 years
Granted	52,791		$	18.69
Forfeited	(31,590	)	$	219.03
Expired	(232	)	$	216.00
Balance outstanding, December 31, 2018	83,345		$	146.09	$	—	7.3 years
Granted	971,313		$	2.49
Forfeited	(36,148	)	$	26.55
Expired	(3,092	)	$	220.27
Balance outstanding, December 31, 2019	1,015,418		$	12.77	$	—	9.1 years
Vested and exercisable, December 31, 2019	71,518		$	147.46	$	—	4.8 years

Restricted Stock Units

RSU's are measured at the grant date based on the closing market price of the Company’s common stock at the grant date and recognized ratably over the service period through the vesting date. All RSU's were granted with no purchase price. Vesting of the RSU's is generally subject to service conditions.

A summary of the RSU's activity is presented below:



	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Intrinsic Value
Non-vested RSU's outstanding, December 31, 2017	17,700		$	103.32	$	391,878
Granted	34,125		$	4.64
Vested	(18,609	)	$	59.06
Forfeited	(3,084	)	$	147.60
Non-vested RSU's outstanding, December 31, 2018	30,132		$	14.36	$	95,005
Granted	9,167		$	1.61
Vested	(22,057	)	$	8.68
Forfeited	(5,941	)	$	13.82
Non-vested RSU's outstanding, December 31, 2019	11,301		$	15.38	$	14,013

The total fair values of RSU's vested during the year ended December 31, 2019 and 2018 were $191,436 and $1,099,058, respectively.