Total share-based compensation related to stock options, common stock awards, and non-financing warrants was $3,224,652 and $2,594,113 for the years ended December 31, 2016 and 2015, respectively. (See Warrants Related to Collaboration and Consulting Agreements in Note 11, Stockholders’ Equity for discussion of the non-financing warrants.)

Share-based payments is classified in the consolidated statements of comprehensive loss as follows:

Stock Option Modifications

During the year ended December 31, 2015, the Company modified 688,408 employee stock option awards to extend the expiry dates through March 31, 2016. As a result of the modification, the Company recognized $25,008 in incremental compensation expense during the year ended December 31, 2015. Certain of these awards were extended again to March 31, 2017, resulting in a change in incremental value of approximately $24,000 which was charged to general and administrative expense in the consolidated statements of comprehensive loss.

In August 2016, the Company modified the exercise price and vesting of certain employee and non-employee stock option awards resulting in a change in incremental value and catch up of share-based amortization of approximately $165,000.

Stock Options

The Company grants stock option awards to employees and non-employees with varying vesting terms under the Xenetic Biosciences, Inc. Equity Incentive Plan (“Stock Plan”). The Company measures the fair value of stock option awards using the Black-Scholes option pricing model, which uses the assumptions noted in the tables below, including the risk-free interest rate, expected term, share price volatility, dividend yield and forfeiture rate. The risk-free interest rate is based upon the U.S. Treasury yield curve in effect at the time of grant, with a term that approximates the expected life of the option. For employee stock options issued in 2016 and 2015 that qualify as “plain vanilla” stock options, the expected term is based on the simplified method. The Company has a limited history of stock option exercises, which does not provide a reasonable basis for the Company to estimate the expected term of employee stock options. For all other employee stock options, the Company estimates the expected life using judgment based on the anticipated research and development milestones of the Company’s clinical projects and behaviour of the Company’s employees. The expected life of non-employee options is the contractual life of the option. The Company determines the expected volatility based on a blended volatility rate of its own historical volatility with that of comparable publicly traded companies with drug candidates in similar therapeutic areas and stages of nonclinical and clinical development to the Company’s drug candidates. The Company has applied an expected dividend yield of 0% as the Company has not historically declared a dividend and does not anticipate declaring a dividend during the expected life of the options. Further, the Company has applied a forfeiture rate of 0% as the Company has not historically experienced forfeitures.

Employee Stock Options

During the years ended December 31, 2016 and 2015, 603,622 and 493,945 total stock options to purchase shares of common stock were granted by the Company, respectively. Of the 2016 awards, 365,972 were granted under the Stock Plan and 237,650 were approved subject to stockholder approval of a new equity plan. The weighted average grant date fair value per option share of $2.94 and $9.35, respectively. No stock options were exercised during the years ended December 31, 2016 and 2015.

During the years ended December 31, 2016 and 2015, 212,472 and 161,657 total stock options vested, with total fair values of $1,700,335 and $1,391,450, respectively. As of December 31, 2016, there was $2,866,432 of unrecognized share-based payments related to employee stock options that are expected to vest. The Company expects to recognize this expense over a weighted-average period of approximately 2.4 years.

Key assumptions used in the Black-Scholes option pricing model for options granted to employees during the years ending December 31, 2016 and 2015 are as follows:

The following is a summary of employee stock option activity for the years ended December 31, 2016 and 2015:

A summary of the status of the Company’s non-vested employee stock option shares as of December 31, 2016, and the changes during the year ended December 31, 2016, is as follows:

Non-Employee Stock Options

Share-based payments expense related to stock options granted to non-employees is recognized as the services are rendered on a straight-line basis. The Company determined that the fair value of the stock options is more reliably measurable than the fair value of the services received. Compensation expense related to stock options granted to non-employees is subject to re-measurement at each reporting period until the options vest.

During the year ended December 31, 2016, no options were granted to non-employees. During the year ended December 31, 2015, 30,304 non-employee stock options were granted under the Stock Plan with a weighted average grant date fair value per option share of $13.13. No non-employee stock options were exercised during years ended December 31, 2016 and 2015.

During the year ended December 31, 2016 and 2015, 17,857 and 17,857 total stock options vested, with total fair values of $196,306 and $195,575, respectively. As of December 31, 2016, there was $90,268 of unrecognized share-based payments related to non-employee stock options that are expected to vest. The Company expects to recognize this expense over a weighted-average period of approximately 1.5 years.

Key assumptions used in the Black-Scholes option pricing model for non-employee options during the year ended December 31, 2015, are as follows:

The following is a summary of non-employee stock option activity for the years ended December 31, 2016 and 2015:

A summary of the status of the Company’s non-vested non-employee stock option shares as of December 31, 2016, and the changes during the year ended December 31, 2016 is as follows:

Common Stock Awards

The Company granted common stock awards to several non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized as services are rendered on a straight-line basis.

A summary of the Company’s common stock awards granted and issued during the years ended December 31, 2016 and 2015 are as follows:

The Company granted 26,760 and 34,402 shares of common stock during the years ended December 31, 2016 and 2015, respectively, in exchange for professional services. As all services were rendered in each respective period, expense related to common stock awards of $180,971 and $392,661 was recognized during the years ended December 31, 2016 and 2015, respectively.

Joint Share Ownership Plan

In 2010 and 2012, the Company issued 1,701,913 and 8,986,281 JSOP awards, respectively, to two senior executives under the JSOP. Under the JSOP, shares in the Company are jointly purchased at fair market value by the participating executives and the trustees of the JSOP trust, with such shares held in the JSOP trust. For U.S. GAAP purposes the awards were valued as employee options and recorded as a reduction in equity as treasury shares until they are exercised by the employee.

During 2011, the 2010 JSOP awards fully vested under the terms of the JSOP due to a significant change in beneficial ownership of the Company and the related compensation charges were fully recorded during periods prior to 2013 related to this accelerated vesting. During the first quarter of 2014, the 2012 JSOP awards fully vested under the terms of the JSOP due to the achievement of specific share price hurdles and the related compensation charges were fully recorded during the first quarter of 2014 related to this accelerated vesting. As of December 31, 2014, all JSOP awards were fully vested. As of December 31, 2016 and 2015, there were 323,885 JSOP awards issued.