Note 7 - Stock Options

The Company has three equity compensation plans: the 2010 Equity Incentive Plan, the 2012 Equity Incentive Plan and the 2014 Equity Incentive Plan (the “Plans”). Originally, the Company was able to grant up to 548,206 and 1,096,411 shares of Common Stock as both incentive stock options (“ISOs”) and nonqualified stock options (“NQs”) under the 2010 Equity Incentive Plan and the 2012 Equity Incentive Plan, respectively. In 2013, the Company’s stockholders approved an increase to 1,279,146 shares authorized for issuance under the 2010 Equity Incentive Plan. In 2014, the Board of Directors of the Company (the “Board”) approved an increase to 1,350,412 shares authorized for issuance under the 2010 Equity Incentive Plan.

In 2014, the Company’s stockholders approved the 2014 Equity Incentive Plan pursuant to which the Company may grant up to 1,827,351 shares as both ISOs and NQs, subject to increases as hereafter described (the “Plan Limit”). However, on January 1, 2015 and each January 1 thereafter prior to the termination of the 2014 Equity Incentive Plan, pursuant to the terms of the 2014 Equity Incentive Plan, the Plan Limit was and shall be increased by the lesser of (x) 4% of the number of shares of Common Stock outstanding as of the immediately preceding December 31 and (y) such lesser number as the Board of Directors may determine in its discretion. On January 1, 2016 the Plan Limit was increased to 3,047,323 shares. As of January 1, 2017, the Plan Limit increased to 4,204,063.

Pursuant to the terms of the Plans, ISOs have a term of ten years from the date of grant or such shorter term as may be provided in the option agreement. Unless specified otherwise in an individual option agreement, ISOs generally vest over a four year term and NQs generally vest over a three or four year term. Unless terminated by the Board, the Plans shall continue to remain effective for a term of ten years or until such time as no further awards may be granted and all awards granted under the Plans are no longer outstanding.

On November 16, 2015, the Company issued non-qualified options to purchase a total of 80,000 shares of common stock to its newly appointed Senior Vice President, General Counsel and Secretary. The award was granted outside of the Company’s 2014 Equity Incentive Plan and vests over four years with 25% vesting on October 30, 2016, which is one year following the date of hire, and the remaining 75% vesting in 36 equal monthly installments thereafter, subject to continued service to the Company through each vesting date and subject to acceleration or forfeiture upon the occurrence of certain events as set forth in the applicable option agreement and employment agreement. The foregoing grant award was made pursuant to the NASDAQ inducement grant exception as a material component of employment compensation.

On July 1, 2016, the Company issued non-qualified options to purchase a total of 85,000 shares of common stock to its newly appointed Vice President, Clinical Development. The award was granted outside of the Company’s 2014 Equity Incentive Plan and vests over four years with 25% vesting on June 20, 2017, which is one year following the date of hire, and the remaining 75% vesting in 36 equal monthly installments thereafter, subject to continued service to the Company through each vesting date and subject to acceleration or forfeiture upon the occurrence of certain events as set forth in the applicable option agreement and Company policies. The foregoing grant award was made pursuant to the NASDAQ inducement grant exception as a material component of the employment compensation.

On November 1, 2016, the Company issued non-qualified options to purchase a total of 150,000 shares of common stock to its newly appointed Chief Operating Officer. The award was granted outside of the Company’s 2014 Equity Incentive Plan and vests over four years with 25% vesting on October 17, 2017, which is one year following the date of hire, and the remaining 75% vesting in 36 equal monthly installments thereafter, subject to continued service to the Company through each vesting date and subject to acceleration or forfeiture upon the occurrence of certain events as set forth in the applicable option agreement and employment agreement. The foregoing grant award was made pursuant to the NASDAQ inducement grant exception as a material component of the employment compensation.

The Company’s stock-based compensation expense was recognized in operating expense as follows:

	Year Ended December 31,
	2016		2015		2014
Stock-Based Compensation
Research and development	$	2,177,643	$	1,129,556	$	569,132
General and administrative		3,127,427		1,769,748		728,853
Total	$	5,305,070	$	2,899,304	$	1,297,985

The fair value of options and warrants granted during the years ended December 31, 2016, 2015 and 2014 was estimated using the Black-Scholes option valuation model utilizing the following assumptions:

	For the year ended December 31,
	2016			2015			2014
	Weighted Average			Weighted Average			Weighted Average

Volatility		77.20	%		79.80	%		75.54	%
Risk-Free Interest Rate		1.39	%		1.74	%		1.96	%
Expected Term in Years		6.02			6.05			5.78
Dividend Rate		0.00	%		0.00	%		0.00	%
Fair Value of Option on Grant Date	$	5.39		$	5.42		$	5.35

The following table summarizes the number of options outstanding and the weighted average exercise price:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value

Options outstanding at January 1, 2014		1,993,301		$	2.00
Granted		452,410		$	8.15
Exercised		-			-
Forfeited		-			-
Options outstanding at December 31, 2014		2,445,711		$	3.13		8.18	$	6,247,407
Vested and expected to vest at December 31, 2014		2,408,395		$	3.12		8.17	$	6,175,025
Exercisable at December 31, 2014		1,413,335		$	2.46		7.86	$	4,162,373

Options outstanding at December 31, 2014		2,445,711		$	3.13
Granted		1,902,609			7.87
Exercised		(4,753	)		0.23
Forfeited		(30,640	)		7.98
Expirations		(10,660	)		8.28
Options outstanding at December 31, 2015		4,302,267		$	5.19		8.14	$	31,659,550
Vested and expected to vest at December 31, 2015		4,213,091		$	5.14		8.12	$	31,202,132
Exercisable at December 31, 2015		1,857,077		$	2.83		7.05	$	17,952,965

Options outstanding at December 31, 2015		4,302,267		$	5.19
Granted		1,211,400			8.09
Exercised		(63,639	)		4.62
Forfeited		(133,517	)		5.79
Options outstanding at December 31, 2016		5,316,511		$	5.84		7.60	$	35,599,646
Vested and expected to vest at December 31, 2016		5,235,931		$	5.80		7.58	$	35,246,927
Exercisable at December 31, 2016		3,027,112		$	4.41		6.76	$	24,559,384

At December 31, 2016 there was approximately $10,076,261 of unamortized stock compensation expense, which is expected to be recognized over a remaining average vesting period of 1.35 years.