10. Accounting for Share-Based Payments

On June 3, 2013, ContraVir adopted the 2013 Equity Incentive Plan (the “Plan”). Stock options granted under the Plan typically will vest after three years of continuous service from the grant date and will have a contractual term of ten years. ContraVir has reserved 1,337,500 shares of common stock issuable pursuant to the Plan. As of June 30, 2018, the Company had 485,268 shares of common stock available for grant under the Plan.

The Company classifies stock-based compensation expense in its statement of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified. For the three and six months ended June 30, 2018 and 2017, respectively, the following table presents the stock based compensation expense for the periods indicated:

	Three months ended				Six months ended
	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
General and administrative	$	120,759	$	272,693	$	308,415	$	601,242
Research and development	32,005		536		61,736		226,459

Total stock based compensation expense	$	152,764	$	273,229	$	370,151	$	827,701

A summary of stock option activity and of changes in stock options outstanding under the Plan for the six months ended June 30, 2018 is presented below:

	Number of Options		Exercise Price Per Share	Weighted Average Exercise Price Per Share		Intrinsic Value		Weighted Average Remaining Contractual Term

Balance outstanding, January 1, 2018	852,648		$0.88 - $35.04	$	11.87	$	47,667	7.00
Granted	—		$0.00 - $0.00	$	0.00
Exercised	—		$0.00 - $0.00	$	0.00
Forfeited	(417	)	$14.16 – $14.16	$	14.16

Balance outstanding, June 30, 2018	852,232		$0.88 - $35.04	$	11.89	$	23,833	6.52
Vested awards and those expected to vest at June 30, 2018	842,220		$0.88 – $35.04	$	11.85	$	10,010	6.51
Vested and exercisable at June 30, 2018	637,501		$0.88 - $35.04	$	11.89	$	10,010	6.52

The weighted-average grant-date fair value per share of options granted to employees during the six months ended June 30, 2018 and 2017 was $0.00 and $7.83, respectively. The total fair value of shares vested during the six months ended June 30, 2018 was $1.0 million. Included within the above table are 0.2 million non-employee options outstanding as of June 30, 2018, of which less than 0.1 million are unvested as of June 30, 2018 and therefore subject to remeasurement. The remeasurement impact for the six months ended June 30, 2018 was negative due to the decreases in the Company’s stock price, which resulted in a decrease in the related expense recognized.

The aggregate intrinsic value of stock options in the tables above is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

As of June 30, 2018, the unrecognized compensation cost related to non-vested stock options outstanding, net of expected forfeitures, was approximately $0.7 million to be recognized over a weighted-average remaining vesting period of approximately 2.2 years.

The following weighted-average assumptions were used in the Black-Scholes valuation model to estimate the fair value of stock option awards granted to employees during the six months ended June 30, 2017. There were no option awards granted to employees during the six months ended June 30, 2018

	Six Months Ended June 30, 2017
Stock price	$	4.72
Risk-free interest rate	1.86		%
Dividend yield	—
Expected volatility	79		%
Expected term (in years)	6 years

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

Dividend yield—ContraVir 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—Because ContraVir has a limited trading history in its common stock, the Company based expected volatility on that of comparable public development stage biotechnology companies.

Expected term—The expected option term represents the period that stock-based awards are expected to be outstanding based on the simplified method provided in SAB No. 107. Options are considered to be “plain vanilla” if they have the following basic characteristics: (i) granted “at-the-money”; (ii) exercisability is conditioned upon service through the vesting date; (iii) termination of service prior to vesting results in forfeiture; (iv) limited exercise period following termination of service; and (v) options are non-transferable and non-hedgeable.

In December 2007, the SEC issued SAB No. 110, Share-Based Payment, (“SAB No. 110”). SAB No. 110 was effective January 1, 2008 and expresses the views of the Staff of the SEC with respect to extending the use of the simplified method, as discussed in SAB No. 107, in developing an estimate of the expected term of “plain vanilla” share options in accordance with ASC 718. The Company will use the simplified method until it has the historical data necessary to provide a reasonable estimate of expected life in accordance with SAB No. 107, as amended by SAB No. 110. For the expected term, the Company has “plain-vanilla” stock options, and therefore used a simple average of the vesting period and the contractual term for options granted as permitted by SAB No. 107.

Forfeitures—ASC 718 requires forfeitures to be estimated at the time of grant and revised if necessary, in subsequent periods if actual forfeitures differ from those estimates. At April 1, 2016, the Company determined that it had sufficient history of issuing stock options and decreased its estimated forfeiture rate from 10%, which was based on the historical experience of its former parent, to 3%, which is the Company’s actual historical forfeiture rate. The forfeiture rate was 10% through the end of the 3rd fiscal quarter ended March 31, 2016 and was the adjusted to 3% through the end of the fiscal year June 30, 2016 based on the aforementioned historical analysis. The forfeiture rate was 3% for the year ended June 30, 2017 and the transition period ended December 31, 2017. There were no forfeitures for the three months ended March 31, 2018. The Company will continue to analyze the forfeiture rate on at least an annual basis or when there are any identified triggers that would justify immediate review.