Note 10 - Equity

Options

In 2010, the Company’s shareholders approved the adoption of a stock and option award plan (the “2010 Plan”), under which 11.7 million shares were reserved for future equity awards as further defined by the 2010 Plan. In addition, the 2010 Plan permits grants of equity awards to employees, directors and consultants. A total of 3.7 million shares remain available for future equity awards as of September 30, 2019.

The following table summarizes the activity of the 2010 Plan and the available options to be granted as of September 30, 2019:


	2010 Plan

Total shares reserved for equity awards		11,700,000
Options granted		(14,429,757)
Add back: expired, forfeited and/or cancelled equity awards		6,264,655
Add back: options used in net exercise		192,385
Remaining shares available for future equity awards		3,727,283

During the nine months ended September 30, 2019, the Company granted to employees and certain non-employee directors 2,052,500 stock options at a weighted average exercise price of $0.58. Other stock option activity during this period included the cancelation and expiration of 1,550,000 options and 15,000 options, respectively. There were no stock option exercises or forfeitures during this period.

The following table summarizes the Company’s stock option activity during this period:


		Weighted		Weighted Average
	Number of	Average		Remaining		Aggregate
	Options	Exercise Price		Contractual Life		Intrinsic Value
Outstanding at December 31, 2018	5,426,165	$	1.99	4.89	$	—
Granted	2,052,500	$	0.58
Exercised	—	$	—
Forfeited	—	$	—
Expired and/or Cancelled	(1,565,000)	$	2.60
Outstanding at September 30, 2019	5,913,665	$	1.34	5.51	$	42,603
Exercisable at September 30, 2019	5,451,163	$	1.41	5.21	$	26,108

Stock options outstanding at September 30, 2019 are summarized in the table below:


	Number of	Weighted		Weighted Average
	Options	Average		Remaining
Range of Exercise Prices	Outstanding	Exercise Price		Contractual Lives
$0.40 - $2.00	4,885,923	$	0.75	6.14
$2.01 - $5.00	840,000	$	3.28	2.18
$5.01 - $8.62	187,742	$	7.97	4.10
	5,913,665	$	1.34	5.51

The Company computes the fair value for all options granted or modified using the Black-Scholes option pricing model. To calculate the fair value of the options, certain assumptions are made regarding components of the model, including the fair value of the underlying common stock, risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to the valuation. The Company calculates its volatility assumption using the actual changes in the market value of its stock. Forfeitures are recognized as they occur. The Company’s historical option exercises do not provide a reasonable basis to estimate an expected term due to the lack of sufficient data. Therefore, the Company estimates the expected term by using the simplified method. The simplified method calculates the expected term as the average of the vesting term plus the contractual life of the options. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant for treasury securities of similar maturity. The Company computed the fair value of options granted and modified during the period ended September 30, 2019, using the following assumptions:


Expected volatility	130.05 % - 186.92	%
Risk free interest rate	1.42% - 2.38	%
Expected term (years)	1.00 - 5.00
Dividend yield	0.0	%

Stock-based compensation expense related to the fair value of stock options is included in the statements of operations as research and development expenses or general and administrative expenses as set forth in the table below. The following table summarizes stock-based compensation expense for the three and nine months ended September 30, 2019 and 2018:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Research and development expenses
Stock-based compensation	$	46,000	$	20,000	$	77,000	$	73,000

General and administrative expenses
Issuance of common stock for services		—		—		60,000		60,000
Stock-based compensation		209,000		75,000		278,000		214,000

Total stock-based compensation	$	255,000	$	95,000	$	415,000	$	347,000

Unrecognized expense at September 30, 2019	$	44,000

Weighted average remaining years to vest		0.66