6.	Stock-Based Compensation

2015

Equity Plan

The Diffusion Pharmaceuticals Inc.

2015

Equity Plan, as amended (the

"2015

Equity Plan"), provides for increases to the number of shares reserved for issuance thereunder each

January 1

equal to

4.0%

of the total shares of the Company’s Common Stock outstanding as of the immediately preceding

December 31,

unless a lesser amount is stipulated by the Compensation Committee of the Company's board of directors. Accordingly,

580,785

shares were added to the reserve as of

January 1, 2018,

which shares

may

be issued 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, in each case, in accordance with the terms of the

2015

Equity Plan. As of

March

31,

2018,

there were

185,076

shares of Common Stock available for future issuance under the

2015

Equity Plan.

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 March 31,
	2018		2017
Research and development		16,372		43,322
General and administrative		308,295		323,061
Total stock-based compensation expense		324,667		366,383

The following table summarizes the activity related to all stock option grants to employees and non-employees for the

three

months ended

March

31,

2018:

	Number of Options			Weighted average exercise price per share		Weighted average remaining contractual life (in years)
Balance at January 1, 2018		2,555,989			7.32
Granted		500,000			1.18
Expired		(2,192	)		17.10
Outstanding at March 31, 2018		3,053,797			6.30		7.36
Exercisable at March 31, 2018		2,011,881			7.84		6.46

Non-employee Stock Options

Non-employee options are remeasured to fair value each period through operations using a Black-Scholes option-pricing model until the options vest. The Company did

not

grant any stock options to non-employees during the

three

months ended

March

31,

2018.

The total fair value of non-employee stock options vested during the

three

months ended

March 31, 2018

and

2017

was approximately

$1,000

and

$53,000,

respectively. At

March

31,

2018,

there were

11,107

unvested options subject to remeasurement and approximately

$5,000

of unrecognized compensation expense that will be recognized over a weighted-average period of

1.36

years.

Employee Stock Options

The weighted average grant date fair value of stock option awards granted to employees was

$0.98

during the

three

months ended

March 31, 2018.

The total fair value of options vested during the

three

months ended

March 31, 2018

and

2017

was

$0.3

million and

$0.2

million, respectively.

options were exercised during any of the periods presented. At

March

31,

2018,

there was

$2.7

million of unrecognized compensation expense that will be recognized over a weighted-average period of

4.97

years.

Options granted were valued using the Black-Scholes model and assumptions used to value the options granted during the

first

three

months of

2018

were as follows:

Expected term (in years)	5.66
Risk-free interest rate	2.3	%
Expected volatility	112.7	%
Dividend yield	—	%

Restricted Stock Awards

As of

March

31,

2018,

there were

1,533

unvested shares of restricted stock. During the

three

months ended

March

31,

2018,

there were

1,533

shares that vested and the Company recognized stock-based compensation expense of approximately

$3,000.

March

31,

2018,

there was approximately

$2,000

of unrecognized compensation expense that will be recognized during the

second

quarter of

2018.