13. Stock Options and Equity-Classified Warrants

Stock Options

The Company has a 2000 Long-Term Incentive Plan under which 233,334 shares of common stock were originally reserved for issuance. As of December 31, 2017, there were 44,371shares subject to outstanding stock options. This plan expired on August 6, 2010, and thus no further shares are available for future grant under this plan.

The Company also has a 2008 Stock Incentive Plan under which 5 million shares of common stock are reserved for issuance. As of December 31, 2017, there were 2.8 million shares subject to outstanding stock options and 0.8 million shares outstanding related to restricted stock grants issued from the 2008 Plan and 1.2 million shares available for future grant under this plan.

The Company follows the provisions of ASC 718, Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees.

The fair value of the stock options at the date of grant was estimated using the Black-Scholes option-pricing model, based on the following assumptions:

	2017			2016			2015
Risk-free interest rate		2.04% - 2.35	%		1.20% - 2.26	%		1.74% - 2.12	%
Expected volatility		86% - 92	%		74% - 88	%		74% - 85	%
Expected lives (years)		6 - 10			6 - 10			6 - 10
Expected dividend yield		0.00	%		0.00	%		0.00	%

The Company's computation of expected volatility is based on the historical daily volatility of its publicly traded stock. For option grants issued during years ended December 31, 2017, 2016 and 2015, the Company used a calculated volatility for each grant. The Company lacks adequate information about the exercise behavior at this time and has determined the expected term assumption under the simplified method provided for under ASC 718, which averages the contractual term of the Company's options of ten years with the average vesting term of three years for an average of six years. The dividend yield assumption of zero is based upon the fact the Company has never paid cash dividends and presently has no intention of paying cash dividends. The risk-free interest rate used for each grant is equal to the U.S. Treasury rates in effect at the time of the grant for instruments with a similar expected life. Based on historical experience, for each of the two years ended December 31, 2016 and 2015, the Company has estimated an annualized forfeiture rate of 10% for options granted to its employees, 2% for options granted to senior management and 0% for options granted to directors. Compensation costs will be adjusted for future changes in estimated forfeitures. The Company will record additional expense if the actual forfeitures are lower than estimated and will record a recovery of prior expense if the actual forfeiture rates are higher than estimated. On January 1, 2017, the Company adopted ASU 2016-09 and made a policy election to recognize forfeitures as they occur. The adoption of ASU 2016-09 did not have a material impact to the Company's financial condition or results of operations. No amounts relating to stock-based compensation have been capitalized. No amounts relating to employee stock-based compensation have been capitalized.

At December 31, 2017, there remained approximately $1.8 million of unrecognized compensation expense related to unvested stock options granted to current employees and directors, to be recognized as expense over a weighted-average period of 1.15 years. Presented below is the Company's stock option activity for employees and directors:

	Stock Options									Weighted Average Exercise Price
	2017			2016			2015			2017		2016		2015
Outstanding — beginning of year		2,813,280			2,263,977			1,559,765		$	14.14	$	18.66	$	16.98
Granted		591,369			809,500			765,000			1.87		3.54		15.66
Exercised		(19,213	)		(55,000	)		(47,857	)		2.58		12.84		12.30
Forfeited		(874,210	)		(196,054	)		—			13.11		20.94		—
Expired		(19,047	)		(9,143	)		(12,931	)		56.88		48.18		33.48
Outstanding — end of year		2,492,179			2,813,280			2,263,977			11.35		14.14		18.66
Exercisable at end of year		1,701,445			1,811,320			1,336,694		$	14.85	$	17.70	$	20.70
Weighted average fair value of stock options granted during the year:	$	1.47		$	2.58		$	11.28

For stock options paid in consideration of services rendered by non-employees, the Company recognizes compensation expense in accordance with the requirements of ASC 505-50.

Non-employee option grants that do not vest immediately upon grant are recorded as an expense over the vesting period. At the end of each financial reporting period prior to performance, the value of these options, as calculated using the Black-Scholes option pricing model, is determined, and compensation expense recognized or recovered during the period is adjusted accordingly. Since the fair market value of options granted to non-employees is subject to change in the future, the amount of the future compensation expense is subject to adjustment until the common stock options are fully vested.

The Company recorded approximately $422,000, $0 and $0 of non-cash charges related to the issuance of stock options to certain consultants in exchange for services during 2017, 2016 and 2015, respectively.

At December 31, 2017, there was no unrecognized compensation expense related to unvested non-employee stock options. Presented below is the Company's non-employee stock option activity:

	Stock Options								Weighted Average Exercise Price
	2017		2016			2015			2017		2016		2015
Outstanding — beginning of year		100,000		105,952			115,357		$	16.41	$	18.12	$	20.82
Granted		273,333		—			—			1.78		—		—
Exercised		—		—			—			—		—		—
Expired/Forfeited		—		(5,952	)		(9,405	)		—		46.62		51.24
Outstanding — end of year		373,333		100,000			105,952			5.70		16.41		18.12
Exercisable at end of year		373,333		100,000			105,952		$	5.70	$	16.41	$	18.12
Weighted average fair value of stock options granted during the year:	$	1.54	$	—		$	—

The fair value of the stock options at the date of grant was estimated using the Black-Scholes option-pricing model, based on the following assumptions:

	2017			2016		2015
Risk-free interest rate		2.30% - 2.35	%		—		—
Expected volatility		92.00	%		—		—
Expected lives (years)		10			—		—
Expected dividend yield		—			—		—

The following table summarizes significant ranges of outstanding stock options under the two plans at December 31, 2017:

Range of Exercise Prices		Number of Options		Weighted Average RemainingContractual Life (years)		Weighted Average Exercise Price		Number of Options Exercisable		Weighted Average Contractual Life		Weighted Average Exercise Price
$	1.50 — 1.75		829,702		9.96	$	1.75		400,000		9.96	$	1.75
$	1.76 —11.00		720,970		7.98		4.76		469,910		7.47		5.92
$	11.01 — 15.00		776,290		7.20		13.92		667,290		7.07		13.80
$	15.01 — 195.30		538,550		5.44		27.36		537,578		5.43		27.36

			2,865,512		7.86	$	10.62		2,074,778		7.29	$	13.21

There was no aggregate intrinsic value to the outstanding options, options vested, and options exercised during 2017.

The following table sets forth the total stock-based compensation expense resulting from stock options included in the Company's Statements of Operations:

	Years Ended December 31,
	2017		2016		2015
Research and development - employee	$	549,315	$	1,822,508	$	1,590,267
General and administrative - employee		1,909,729		4,661,795		5,568,537
Total employee stock-based compensation	$	2,459,044	$	6,484,303	$	7,158,804

Research and development – non-employee	$	11,600	$	—	$	—
General and administrative – non-employee		410,400		235,764		225,852
Total non-employee stock-based compensation	$	422,000	$	235,764	$	225,852

Restricted Stock

In December 2017, the Company granted to Steven Kriegsman, Chief Executive Officer, 387,597 shares of restricted common stock, pursuant to the 2008 Plan. This restricted stock vests in equal annual instalments over three years. The fair value of the restricted stock is based on the market price of the Company's shares on the grant date less the par value received as consideration. The fair value of the restricted stock on the grant date was $679,000. In December 2016, the Company granted to Steven Kriegsman, Chief Executive Officer, 387,597 shares of restricted common stock, pursuant to the 2008 Plan. This restricted stock vests in equal annual instalments over three years. The fair value of the restricted stock is based on the market price of the Company's shares on the grant date less the par value received as consideration. The fair value of the restricted stock on the grant date was $1,000,000. The Company did not issue any restricted stock for the year ended December 31, 2015. The Company recorded an employee stock-based compensation expense for restricted stock of approximately $344,000, $15,000 and $0 for the years ended December 31, 2017, 2016 and 2015, respectively.

Equity-Classified Warrants

In July 2017, pursuant to a Loan amendment (see Note 9), a portion of the warrants (representing 80% of the total number of shares issuable upon exercise of the warrants) was amended to change the exercise price of 84,554 warrants to $12.30 per share from $4.62 per share.

In July 2017, the Company issued 500,000 warrants to purchase common stock as part of an exclusive licensing agreement granted to NantCell, Inc.

In December 2016, the Company issued to a consultant an eighteen-month contingent warrant to purchase 333,334 shares of common stock at an exercise price of $4.20. No expense was recorded due to the performance contingent nature of the warrants.

In February 2016, in connection with a loan and security agreement with Hercules Technology Growth Capital, Inc. and Hercules Technology III, L.P. ("lenders") (see Note 9), the Company issued to the lenders warrants to purchase a total of 105,691 shares of our common stock at an exercise price of $12.30. These warrants had a fair value of $633,749 on the date of issuance and were recorded as a loan discount.

In February 2016, the Company also issued a warrant to a consultant to purchase 83,334 shares of our common stock at an exercise price of $10.44. These warrants will be fully vested by February 2018. The warrant expense in 2017 and 2016, recognized as non-employee stock-based compensation expenses, was $41,865 and $157,797, respectively.

A summary of the Company's warrant activity and related information for the years ended December 31 are shown below.

	Warrants									Weighted Average Exercise Price
	2017			2016			2015			2017		2016		2015
Outstanding — beginning of year		5,417,155			1,204,245			1,224,960		$	4.08	$	25.68	$	25.62
Granted		584,554			5,284,263			—			6.31		3.72		—
Exercised		(861,581	)		(9,393	)		(1,667	)		3.66		4.20		15.00
Forfeited		—			—			—			—		—		—
Expired		(1,159,347	)		(1,061,960	)		(19,048	)		4.92		26.88		22.92
Outstanding — end of year		3,980,781			5,417,155			1,204,245			4.26		4.08		25.68
Exercisable at end of year		3,626,613			5,031,715			1,204,245		$	4.23	$	4.02	$	25.68
Weighted average fair value of warrants granted during the year:	$	1.65		$	1.56		$	—

The following table summarizes additional information concerning warrants outstanding and exercisable at December 31, 2017:

						Warrants Outstanding
Range of Exercise Prices		Number of Shares		Weighted Average RemainingContractual Life (years)		Weighted Average Exercise Price		Number of Warrants Exercisable		Weighted Average Contractual Life		Weighted Average Exercise Price
$	3.00 — 6.00		3,252,137		0.60	$	3.19		2,918,803		0.62	$	3.08
$	6.01 — 9.00		500,000		1.07		6.60		500,000		1.07		6.60
$	9.01 — 12.00		83,335		3.11		10.44		62,501		3.11		10.44
$	12.01 — 33.60		145,309		1.19		16.65		145,309		1.19		16.65

			3,980,781		0.74	$	4.26		3,626,613		0.75	$	4.23