11. Stock-based Compensation

In June 2016, the Company’s stockholders approved the Company’s 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan provides for the issuance of incentive awards in the form of non-qualified and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance-based stock awards. The awards may be granted by the Company’s board of directors to its employees, directors and officers and to consultants, agents, advisors and independent contractors who provide services to the Company or to a subsidiary of the Company. The exercise price for stock options must not be less than the fair market value of the underlying shares on the date of grant. Stock options expire no later than ten years from the date of grant and generally vest and typically become exercisable over a four-year period following the date of grant. Upon the exercise of stock options, the Company issues the resulting shares from shares reserved for issuance under the 2016 Plan. With the approval of the 2016 Plan, the remaining unallocated shares under the Company’s 2013 Stock Incentive Plan were allocated to the 2016 Plan and an additional 100,000 new shares were added to the authorized share reserve under the 2016 Plan. Under the 2016 Plan, the number of shares authorized for issuance automatically increases annually beginning January 1, 2017 and through January 1, 2026. On January 1, 2017, the number of shares of common stock authorized for future issuance was automatically increased by 82,440 shares. On September 7, 2017, the Company’s stockholders approved an amendment to the 2016 Plan which increased the aggregate number of shares of common stock authorized for issuance by 800,000 shares.

The Company estimates the fair value of stock options with performance and service conditions on the date of grant using the Black-Scholes valuation model. The assumptions used in the Black-Scholes model are presented below:



	Year Ended December 31,
	2017		2016
Risk-free interest rate	1.27 to 2.36	%	1.22 to 1.63	%
Expected volatility	117 to 144	%	113 to 123	%
Expected term (in years)	2.0 to 9.1		6.0
Expected dividend yield	0	%	0	%

The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. Expected volatility is based on the historical volatility of the Company’s common stock. The expected term represents the period that the Company expects its stock options to be outstanding. The expected term assumption is estimated using the simplified method set forth in the SEC Staff Accounting Bulletin 110, which is the mid-point between the option vesting date and the expiration date. The expected term assumption for stock options granted to parties other than employees or directors is the contractual term of the option award. The Company has never declared or paid dividends on its common stock and has no plans to do so in the foreseeable future. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.

Stock options issued to non-employees other than directors are accounted for at their estimated fair values using the Black-Scholes valuation model and are re-measured to fair value at each period end until the earlier of the date that performance by the non-employee is complete or a performance commitment has been obtained. The stock-based compensation expense related to the grant of stock options to non-employees was not significant for the years ended December 31, 2017 and 2016.

The table below summarizes the total stock-based compensation expense included in the Company’s consolidated statements of operations for the periods presented:



	Year Ended December 31,
	2017		2016

Research and development	$	171,000	$	138,000
General and administrative		529,000		1,857,000
Total stock-based compensation	$	700,000	$	1,995,000

Stock option transactions during the years ended December 31, 2017 and 2016 are presented below:



					Weighted
					Average
			Weighted		Remaining
			Average		Contractual		Aggregate
			Exercise		Term		Intrinsic
	Shares		Price		(Years)		Value
Outstanding at December 31, 2015		66,964	$	86.52		9.29
Granted		26,419		26.48
Forfeited/Cancelled		(18,493)		89.95
Outstanding at December 31, 2016		74,890		64.50		8.65
Granted		1,070,572		1.22
Forfeited/Cancelled		(29,597)		87.87
Outstanding at December 31, 2017		1,115,865	$	3.17		8.98	$	118,000
Vested and expected to vest at December 31, 2017		830,752	$	3.94		8.71	$	90,000
Exercisable at December 31, 2017		136,142	$	13.18		4.02	$	14,000

The aggregate intrinsic value of options at December 31, 2017 is based on the Company’s closing stock price on that date of $1.01 per share. As of December 31, 2017, there was $1.1 million of total unrecognized stock-based compensation expense related to unvested stock options and the weighted average period over which this cost is expected to be recognized is approximately 2.6 years.

Employee Stock Purchase Plan (ESPP)

On June 20, 2016, the Company’s stockholders approved the Company’s 2016 Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible employees to purchase shares of the Company’s common stock on a voluntary basis. The shares are sold to participants at a price equal to the lesser of 85% of the fair market value of the Company’s common stock at the (i) beginning of the offering period, or (ii) end of the six-month purchase period. The ESPP provides for four six-month purchase periods during each 24 month term. The initial shares provided for under the plan are 12,000, and automatically increase annually as allowed for under the ESPP, beginning January 1, 2017 and through January 1, 2026. On January 1, 2017, the number of shares of common stock authorized for issuance under the ESPP was automatically increased by 16,488 shares.

During the years ended December 31, 2017 and 2016, there were 4,200 and 3,272 common shares issued under the ESPP, respectively. The Company recognized $5,000 and $12,000 in compensation expenses related to the ESPP for the years ended December 31, 2017 and 2016, respectively.

Shares Reserved For Future Issuance

As of December 31, 2017, the Company had reserved shares of its common stock for future issuance as follows:



	Shares Reserved
Stock options outstanding		1,115,865
Employee stock purchase plan		21,016
Available for future grants under the 2016 Plan		4,758
Warrants		8,531,918
Total shares reserved		9,673,557