11. Stock Based Compensation

2013 Equity Incentive Plan

In November 2013, the Company's board of directors and sole stockholder adopted the Jaguar Health, Inc. 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan allows the Company's board of directors to grant stock options, restricted stock awards and restricted stock unit awards to employees, officers, directors and consultants of the Company. Following the effective date of the IPO and after effectiveness of any grants under the 2013 Plan that were contingent on the IPO, no additional stock awards will be granted under the 2013 Plan. Outstanding grants continue to be exercisable, however any unissued shares under the plan and any forfeitures of outstanding options do not rollover to the 2014 Stock Incentive Plan. There were 33,769 option shares outstanding at December 31, 2018.

2014 Stock Incentive Plan

Effective May 12, 2015, the Company adopted the Jaguar Health, Inc. 2014 Stock Incentive Plan (“2014 Plan”). The 2014 Plan provides for the grant of options, restricted stock and restricted stock units to eligible employees, directors and consultants to purchase the Company's common stock. The 2014 Plan that provides for automatic share increases on the first day of each fiscal year in the amount of 2% of the outstanding number of shares of the Company's common stock on last day of the preceding calendar year. The 2014 Plan replaced the 2013 Plan except that all outstanding options under the 2013 Plan remain outstanding until exercised, cancelled or expired.

Stock Options and Restricted Stock Units (“RSUs”)

Activity under the 2013 Plan and the 2014 Plan is set forth below:


				Weighted		Weighted Average
	Shares	Stock		Average		Remaining	Aggregate
	Available	Options	RSUs	Stock Option		Contractual Life	Intrinsic
	for Grant	Outstanding	Outstanding	Exercise Price		(Years)	Value*
Outstanding at December 31, 2017	3,619	229,575	392,904	$	28.05	8.31	$	—
Additional shares authorized	2,877,766	—	—		—	—
Options granted	(2,868,673)	2,868,673	—		1.60	—		—
Options cancelled	150,180	(154,100)	—		4.57	—		—
Outstanding at December 31, 2018	162,892	2,944,148	392,904	$	5.81	9.24	$	—
Exercisable at December 31, 2018		616,309		$	10.86	8.90	$	—
Vested and expected to vest at December 31, 2018		2,849,994		$	6.02	9.24	$	—

* Fair market value of JAGX stock on December 31, 2018 was $0.23 per share.

The intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair market value of the Company's common stock for options that were in-the-money.

The weighted average grant date fair value of stock options granted was $1.60 and $1.95 per share during the years ended December 31, 2018 and 2017.

The number of options that vested in the years ended December 31, 2018 and 2017 was 881,314 and 687,634, respectively. The grant date weighted average fair value of options that vested in the years ended December 31, 2018 and 2017 was $ 2,055,576 and $712,718, respectively.

No options were exercised in the years ended December 31, 2018 and 2017.

The Company granted 209,531 inducement options in fiscal year 2018 to new employees. These options are all non-statutory and were issued outside of the Company’s 2014 Stock Plan. The weighted average grant-date fair value of the options was $1.34 per share. Stock-based compensation expense related to the inducement stock for the fiscal year 2018 was $52,577.

The Company has granted RSUs under both the 2013 Plan and the 2014 Plan. The units granted have varying vesting terms, including RSU’s that vest upon the occurrence of both a liquidity event and satisfaction of the service-based requirement. The stock-based compensation expense is based on the grant date fair market value of the Company’s common stock, and is amortized over the vesting period using the straight-line method, net of estimated forfeitures. There were 392,904 RSU’s outstanding at December 31, 2018 and 2017.

Stock-Based Compensation

The following table summarizes stock-based compensation expense related to stock options, inducement stock options and RSUs for the years ended December 31, 2018 and 2017, and are included in the consolidated statements of operations as follows:


	Year Ended
	December 31,
	2018		2017
Research and development expense	$	579,641	$	216,932
Sales and marketing expense		96,730		32,325
General and administrative expense		1,347,503		565,356
Total	$	2,023,874	$	814,613

As of December 31, 2018, the Company had $2,860,071 of unrecognized stock-based compensation expense for options and RSU’s, which is expected to be recognized over a weighted-average period of 2.0 years.

The estimated grant-date fair value of employee stock option grants was calculated using the Black-Scholes -Merton option-pricing model using the following assumptions:


	Year Ended
	December 31,
	2018		2017
Weighted-average volatility	87.4 - 105.9	%	74.3 - 90.5	%
Weighted-average expected term (years)	5.1 - 5.8		5.1 - 5.8
Risk-free interest rate	2.6 - 2.9	%	2.0 - 2.3	%
Expected dividend yield	—		—

The estimated period-end fair value of non-employee stock options was calculated using the Black-Scholes -Merton option-pricing model using the following assumptions:


	Year Ended
	December 31,
	2018		2017
Weighted-average volatility	83.6 - 89.2	%	85.4 - 85.7	%
Weighted-average expected term (years)	9.1 - 9.7		9.8 - 10.0
Risk-free interest rate	2.6 - 3.0	%	2.4 - 2.5	%
Expected dividend yield	—		—

401(k) Plan

The Company sponsors a 401(k) defined contribution plan covering all employees. There were no employer contributions to the plan from plan inception through December 31, 2018.