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Note 8 - Stock-based Compensation
 6 Months Ended
Jun. 30, 2016
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
8.            Stock-Based Compensation
 
Stock-based Compensation
 
Upon consummation of the reverse merger with RestorGenex on January 8, 2016, all outstanding options to purchase Diffusion LLC units were converted into stock options to purchase the Company’s common stock on terms substantially identical to those in effect prior to the reverse merger, except for adjustments to the underlying number of shares and the exercise price based on the Exchange Ratio. As a result of the Merger, the Company assumed 3,011,498 RestorGenex stock options that are exercisable for shares of the Company’s common stock at a weighted average exercise price of $4.02 per share.
 
 
 
The Company recorded stock-based compensation expense in the following expense categories of its unaudited interim condensed consolidated statements of operations for the periods indicated:
 
 
 
Three Months Ended
June 30
,
 
 
Six
Months Ended
June 30
,
 
 
 
201
6
 
 
2015
 
 
2016
 
 
201
5
 
Research and development
   $ 184,051     $ 79,626     $ 426,328     $ 119,582  
General and administrative
     154,111       57,099       305,305       112,999  
                                 
Total stock-based compensation expense
   $ 338,162     $ 136,725     $ 731,633     $ 232,581  
 
The following table summarizes the activity related to all stock option grants to employees and non-employees for the six months ended June 30, 2016:
 
   
Number of
Options
    
Weighted
average
exercise price
per share
    
Weighted
average
remaining
contractual life
(in years)
  
Balance at January 1, 2016
     14,955,753     $ 0.39          
Assumed in connection with Merger
     3,011,498       4.02          
Cancelled
     (481,885 )     6.13          
Granted
     393,750       0.96          
Outstanding at June 30, 2016
     17,879,116     $ 0.86       7.8  
Exercisable at June 30, 2016
     12,657,098     $ 1.00       7.3  
Vested and expected to vest at June 30, 2016
     17,858,930     $ 0.86       7.8  
 
At June 30, 2016, there was $1,767,805 of unrecognized compensation cost related to non-vested options of which $651,989 is attributable to 924,524 options issued to non-employees and subject to re-measurement until vested. The total unrecognized compensation expense will be recognized as expense over a weighted-average period of 1.9 years. Other than 400,400 stock options and options assumed as a result of the Merger, all other stock options outstanding have been issued outside of the 2015 Equity Plan.
 
 
 
All of these options have a ten-year term, vest in equal monthly installments over three years and were valued using the Black-Scholes model and assumptions used to value the options granted during the first six months of 2016 were as follows:
 
Weighted average grant date fair value
   $ 0.78  
         
Expected term (in years)
     5.77  
Risk-free interest rate
     1.4 %
Expected volatility
     106.8 %
Dividend yield
     0 %
 
Restricted Stock Awards
 
As of June 30, 2016 and December 31, 2015, there were 122,725 and 153,412, respectively, unvested shares of restricted stock. During the three and six months ended June 30, 2016, 15,342 and 30,684 shares vested, respectively, and the Company recognized stock-based compensation expense of $3,009 and $6,033 during the three and six months ended June 30, 2016, respectively.
At June 30, 2016, there was $23,553 of unrecognized compensation cost related to unvested restricted stock that will be recognized as expense over a weighted average period of 2.0 years.
 
2015 Equity Plan
 
The 2015 Equity Plan allows for the issuance of up to a maximum of 2,500,000 shares of common stock in connection with the grant of stock-based awards, including stock options, restricted stock, restricted stock units, stock appreciation rights and other types of awards as deemed appropriate. Of the 17,879,116 options outstanding at June 30, 2016, 400,400 options were issued under the 2015 Equity Plan (excluding options assumed in connection with the Merger) and 2,099,600 shares of common stock remained available for future issuance.
 
On July 21, 2016, the Company’s stockholders approved an amendment to the 2015 Equity Plan to immediately increase the number of shares of the Company’s common stock available for issuance by 2,500,000 shares for a total of 4,599,600 available for issuance post-amendment approval. In addition, beginning on January 1, 2017, on each January 1
st
through the term of the plan, up to 4.0% of the total shares of the Company’s common stock outstanding as of December 31
st
may be added to the plan reserve upon Board approval.