(13) Stock-Based Compensation

The Company recognizes all stock-based payments to employees and directors as expense in the statements of operations and comprehensive loss based on their fair values. The Company records compensation expense over an award’s requisite service period, or vesting period, based on the award’s fair value at the date of grant. The Company’s policy is to charge the fair value of stock options as an expense on a straight-line basis over the vesting period, which is generally four years for employees and three years for directors. The Company accounts for forfeitures when they occur. Ultimately, the actual expense recognized over the vesting period will be for only those shares that vest.

Total stock-based compensation expense recognized using the straight-line attribution method and included in operating expenses in the Company’s statements of operations and comprehensive loss was $1.6 million for both the three months ended September 30, 2017 and 2016, and $9.2 million and $5.1 million for the nine months ended September 30, 2017 and 2016, respectively. Included in the $9.2 million recognized during the nine months ended September 30, 2017 is $4.3 million of stock-based compensation resulting from modifications to previously issued stock option awards in connection with the resignation of an executive in the second quarter of 2017, which is recorded in Research and development expense. Additionally, as of September 30, 2017, there was approximately $10.9 million of unrecognized compensation expense related to non-vested stock options which is expected to be recognized over a weighted-average period of 2.2 years.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The following weighted average assumptions apply to the options to purchase 4,166,500 and 3,281,000 shares of common stock granted to employees and directors during the nine months ended September 30, 2017 and 2016, respectively:


	Nine Months Ended
	September 30,
	2017		2016
Average risk free interest rate		1.7%		1.4%
Expected dividend yield		—		—
Expected lives (years)		4.0		4.2
Expected volatility		86.5%		92.8%
Weighted average grant date fair value (per share)	$	1.01	$	1.77
Weighted average exercise price (per share)	$	1.61	$	2.65

The expected lives and the expected volatility of the options granted during the nine months ended September 30, 2017 and 2016 are based on historical experience. All options granted during the nine months ended September 30, 2017 and 2016 were granted at exercise prices equal to the fair market value of the common stock on the dates of grant.