14. STOCK INCENTIVE PLANS

2014 Equity Incentive Plan

Prior to its IPO, the Company had one active stock option plan, the 2008 Equity Incentive Plan (“2008 Plan”), one assumed stock option plan (“the ImmuMetrix 2013 Equity Incentive Plan”), and one terminated stock option plan, the 1998 Stock Plan.

Upon its IPO, the Company reserved 838,695 shares of common stock for issuance under a new 2014 Equity Incentive Plan (“2014 Plan”). The shares reserved for issuance under the 2014 Plan also include shares returned to the 2008 Plan as the result of expiration or termination of options, provided that the maximum number of shares that may be added to the 2014 Plan thereby is limited to a maximum of 865,252 shares. The number of shares available for issuance under the 2014 Plan also includes an annual increase on the first day of each year equal to the lesser of:

357,075 shares;

4.0% of the outstanding shares of common stock as of the last day of the immediately preceding year; or

such other number of shares as the Company’s board of directors may determine.

Stock Options Under the 2014 Plan

The following table summarizes option activity and related information:

	Shares Underlying Stock Options Outstanding			Weighted- average Exercise Price
Balance—December 31, 2015		1,577,317		$	6.87
Granted		474,045			5.01
Exercised		(2,770	)		3.14
Forfeited		(205,049	)		6.94
Expired		(1,433	)		11.59
Balance—June 30, 2016		1,842,110			6.38

Options outstanding that have vested or are expected to vest as of June 30, 2016 are as follows:

	Number of Shares Issued		Weighted Average Exercise Price		Weighted Average Contractual Life (Years)		Aggregate Intrinsic Value (In Thousands)
Vested		926,702	$	6.17		6.70	$	977
Expected to vest		781,850		6.59		8.99		35
Total		1,708,552		6.37		7.75	$	1,012

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock at June 30, 2016 for stock options that were in-the-money. The fair market value of the Company’s common stock as of June 30, 2016 was $4.31 per share.

Restricted Stock Units Under the 2014 Plan

The Company’s 2014 Plan allows restricted stock units (“RSUs”) to be granted in addition to stock options. The RSUs vest annually over four years in equal increments. The Company began granting RSUs in March 2015.

Unvested RSU activity for the six months ended June 30, 2016 is summarized below:

	Number of Shares			Weighted- Average Grant Date Fair Value
Unvested balance—December 31, 2015		106,200		$	6.49
Granted		111,900			5.12
Vested		(26,550	)		6.49
Forfeited		(47,105	)		5.88
Unvested balance—June 30, 2016		144,445			5.63

Shares Available for Grant Under the 2014 Plan

The following table summarizes shares available for grant under the 2014 Plan:

	Shares Available for Grant
Balance—December 31, 2015		404,692
Additional shares authorized for options and RSUs		357,075
Options granted		(474,045	)
Options forfeited		205,049
Options expired		1,433
RSUs granted		(111,900	)
RSUs forfeited		47,105
Balance—June 30, 2016		429,409

2016 Inducement Plan

On April 21, 2016, our Board, including our independent directors, adopted the Company’s 2016 Inducement Plan (the “Inducement Plan”), pursuant to which we may grant stock awards of up to a total of 155,500 shares of common stock to new employees of the Company. The Inducement Plan was adopted to accommodate a reserve of additional shares of common stock for issuance to new employees hired by the Company from Allenex. The terms in the Inducement Plan are substantially similar to the Company’s 2014 Plan.

Restricted Stock Units Under the Inducement Plan

The Inducement Plan allows RSUs to be granted in addition to stock options. The RSUs vest annually over four years in equal increments. The Company began granting RSUs starting June 2016.

Unvested RSU activity for the six months ended June 30, 2016 is summarized below:

	Number of Shares		Weighted- Average Grant Date Fair Value
Unvested balance—December 31, 2015		—	$	—
Granted		141,000		5.93
Vested		—		—
Forfeited		—		—
Unvested balance—June 30, 2016		141,000		5.93

The following table summarizes shares available for grant under the Inducement Plan:

	Shares Available for Grant
Balance—December 31, 2015		—
Additional shares authorized for options and RSUs		155,500
RSUs granted		(141,000	)
RSUs forfeited		—
Balance—June 30, 2016		14,500

2014 Employee Stock Purchase Plan

The Company’s board of directors adopted its 2014 Employee Stock Purchase Plan (“the ESPP”) in March 2014 and its stockholders approved the ESPP in July 2014. The Company’s ESPP was not made available to its employees on January 1, 2015. The first offering period in 2016 began on January 1, 2016 and ended on June 30, 2016. Under the first offering period in 2016, 35,024 shares were purchased for aggregate proceeds of $0.1 million from the issuance of shares, which occurred on July 1, 2016.

The option price per share of common stock to be paid by a participant on the applicable exercise date for an offering period shall be equal to 85% of the lesser of the fair market value of a share of common stock on (a) the applicable grant date or (b) the applicable exercise date.

Valuation Assumptions

The estimated fair values of employee stock options and ESPP shares were estimated using the Black-Scholes option-pricing model based on the following weighted-average assumptions:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Employee stock options
Expected term (in years)	5.3 ‒ 6.0				5.8		5.3 ‒ 6.0				6.0
Expected volatility	45.94 – 46.44%				40.04	%	39.60 – 46.44%				40.85	%
Risk-free interest rate	1.13 – 1.52%				1.69	%	1.13 – 1.65%				1.87	%
Expected dividend yield		—	%		—	%		—	%		—	%
Employee stock purchase plan
Expected term (in years)		0.5			0.5			0.5			0.5
Expected volatility		64.21	%		34.08	%		64.21	%		34.08	%
Risk-free interest rate		0.49	%		0.11	%		0.49	%		0.11	%
Expected dividend yield		—	%		—	%		—	%		—	%

The weighted-average grant-date fair value of options granted during the three months ended June 30, 2016 and 2015 using the Black-Scholes Model was $2.01 and $2.10 per share, respectively, and $2.06 per share and $2.62 per share during the six months ended June 30, 2016 and 2015, respectively.

Stock-based Compensation Expense

The following table summarizes stock-based compensation expense relating to employee and nonemployee stock options, RSUs, and ESPP shares for the three and six months ended June 30, 2016 and 2015, included in the statements of operations as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Cost of testing	$	38	$	54	$	66	$	69
Research and development		100		89		213		136
Sales and marketing		43		36		71		56
General and administrative		186		232		462		431
Total	$	367	$	411	$	812	$	692

No tax benefit was recognized related to share-based compensation expense since the Company has never reported taxable income and has established a full valuation allowance to offset all of the potential tax benefits associated with its deferred tax assets. In addition, no amounts of stock-based compensation were capitalized for the periods presented.

As of June 30, 2016, there was approximately $2.2 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to non-vested stock options that will be recognized on a straight-line basis over the remaining average vesting period of 2.58 years.

As of June 30, 2016, there was approximately $1.4 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to non-vested RSUs that will be recognized on a straight-line basis over the remaining average vesting period of 3.48 years.