8. Stockholders’ Equity

In 2005, we adopted the 2005 Stock Option and Incentive Plan (2005 Plan) that authorizes us to grant options, restricted stock and other equity-based awards. As of December 31, 2018, 362,112 options to purchase shares of common stock were outstanding pursuant to grants in connection with the 2005 Plan. No additional shares are available for issuance under the 2005 Plan. The amount, terms of grants, and exercisability provisions are determined and set by our board of directors.

Effective August 2014, we adopted our 2014 Equity Incentive Plan, as amended (2014 Plan) that authorizes us to grant options, restricted stock, and other equity-based awards, subject to adjustment in accordance with the 2014 Plan. As of December 31, 2018, 4,278,297 options to purchase shares of common stock and 105,200 restricted shares of common stock were outstanding pursuant to grants in connection with the 2014 Plan, and 1,302,703 shares of common stock were available for future issuance. The amount, terms of grants, and exercisability provisions are determined and set by our board of directors. In accordance with the 2014 Plan, on January 1, 2018, shares of common stock available for future grants under the 2014 plan was increased to 3,302,703.

In addition, during the year ended December 31, 2018, we granted 311,000 options to purchase shares of common stock outside of our 2014 Plan as inducements material to new employees entering into employment agreements with us pursuant to NASDAQ Listing Rule 5635(c)(4). The amount, terms of grants, and exercisability provisions of these grants are determined and set by our board of directors, and are largely consistent with the terms and exercisability provisions of grants under our 2014 Plan.

Stock Options

Total compensation cost recognized for all stock option awards in the statements of operations is as follows (in thousands):



	Year Ended December 31,
	2018		2017		2016
Research and development	$	1,712	$	724	$	980
General and administrative		2,995		1,697		1,975
Total	$	4,707	$	2,421	$	2,955

Options issued under both the 2005 Plan and 2014 Plan and the inducement grants may have a contractual life of up to 10 years and may be exercisable in cash or as otherwise determined by the board of directors. Vesting generally occurs over a period of not greater than four years. A summary of activity for the years ended December 31, 2018, 2017 and 2016 is presented below (in thousands, except share and per share amounts):


		Weighted‑
		Average		Aggregate
		Exercise Price		Intrinsic
	Shares	Per Share		Value
Outstanding—December 31, 2015	1,799,226	$	7.74
Granted	603,975		2.42
Exercised	(118,365)		1.04
Forfeited	(45,792)		12.08
Outstanding—December 31, 2016	2,239,044		6.57
Granted	1,884,800		4.02
Exercised	(98,402)		1.46
Forfeited	(141,358)		7.09
Expired	(129,764)		11.75
Outstanding—December 31, 2017	3,754,320		5.22
Granted	1,372,000		6.60
Exercised	(12,308)		1.18
Forfeited	(162,603)		5.00
Outstanding—December 31, 2018	4,951,409	$	5.62	$	2,429

Exercisable—December 31, 2018	2,894,726	$	5.69	$	1,836
Exercisable and expected to vest—December 31, 2018	4,951,409	$	5.62	$	2,429

Included in the 2017 exercised shares above are options that were net shares settled for an exercise price of $49 thousand (7,893 shares).

The weighted average remaining contractual term of options outstanding and exercisable as of December 31, 2018 is 7.9 and 7.1 years, respectively.

Intrinsic value in the table above was determined by calculating the difference between the market value of our common stock on the last trading day of 2018 of $2.87 per share and the exercise price, multiplied by the number of in-the-money options.

The weighted‑average grant date fair value of options granted was $5.51, $2.67 and $1.60 per share in 2018, 2017 and 2016, respectively, and was estimated at the date of grant using the Black‑Scholes option‑pricing model with the following ranges of weighted‑average assumptions:


	2018				2017				2016
Expected stock price volatility	106.64	-	113.19	%	74.45	-	83.29	%	74.69	-	87.67	%
Expected term of options	5.2	-	6.1	years	5.3	-	6.1	years	5.2	-	6.1	years
Risk‑free interest rate	2.32	-	3.1	%	1.78	-	2.18	%	1.07	-	1.86	%
Expected annual dividend yield			0	%			0	%			0	%

The weighted‑average valuation assumptions were determined as follows:

Expected stock price volatility: As of December 31, 2018, the expected volatility is based on historical volatility of our stock price. As of December 31, 2017 and 2016, the expected volatility was based on historical volatilities of similar entities within our industry which were commensurate with our expected term assumption as described in the SEC’s Staff Accounting Bulletin, or SAB, No. 107.

Expected term of options: We estimated the expected term of our stock options with service‑based vesting using the “simplified” method, as prescribed in SAB No. 107, whereby the expected life equals the average of the vesting tranches and the original contractual term of the option due to our lack of sufficient historical data.

Risk‑free interest rate: We base the risk‑free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.

Expected annual dividend yield: The estimated annual dividend yield is 0% because we have not historically paid, and do not expect for the foreseeable future to pay, a dividend on our common stock.

As of December 31, 2018, there was $8.1 million of total unrecognized compensation expense related to unvested stock options. That expense is expected to be recognized over the next four years as follows, in thousands:


2019	$	3,413
2020		3,144
2021		1,161
2022		372
	$	8,090

Restricted Stock

All issued and outstanding restricted shares of common stock are time-based and become vested one year after the grant date, pursuant to the 2014 Plan. Compensation expense is recorded ratably over the requisite service period. Compensation expense related to restricted stock is measured based on the fair value using the closing market price of the Company’s common stock on the date of the grant.

No restricted shares of common stock were issued during fiscal year 2018. A summary of activity for the years ended December 31, 2018, 2017 and 2016 is presented below (in thousands, except share and per share amounts):


		Weighted‑average
		Grant Date
	Shares	Fair Value per Share
Outstanding—December 31, 2015	—	$	—
Granted	196,275		1.51
Forfeited	(375)		1.50
Outstanding—December 31, 2016	195,900		1.51
Granted	245,200		1.26
Vested	(179,700)		1.12
Forfeited	(21,600)		0.17
Outstanding—December 31, 2017	239,800		1.21
Vested	(120,600)		1.21
Forfeited	(14,000)		1.21
Outstanding—December 31, 2018	105,200	$	1.21

Expected to vest—December 31, 2018	105,200	$	1.21

As of December 31, 2018, there was $0.1 million of total unrecognized compensation cost related to unvested restricted stock is expected to be recognized over a weighted average service period of 0.58 years.

Total compensation cost recognized for all restricted stock awards in the statements of operations for the year ended December 31, 2018 is as follows (in thousands):


	Year Ended
	December 31,
	2018		2017
Research and development	$	19	$	125
General and administrative		62		334
Total	$	81	$	459

Equity Distribution Agreement

In August 2015, we entered into an Equity Distribution Agreement (2015 EDA) with JMP Securities LLC (JMP), under which JMP, as our exclusive agent, at our discretion and at such times that we may determine from time to time, may sell over a three-year period from the execution of the agreement up to a maximum of $35 million of shares of our common stock. We are not required to sell any shares at any time during the term of the EDA. This agreement expired in August 2018. In October 2017, we also entered into an Equity Distribution Agreement (2017 EDA) with JMP Securities LLC (JMP), under which JMP, as our exclusive agent, at our discretion and at such times that we may determine from time to time, may sell over a three-year period from the execution of the agreement up to a maximum of $50 million of shares of our common stock

The 2017 EDA will terminate upon the earliest of: (1) the sale of all shares subject to the EDA, (2) October 31, 2020 or (3) the termination of the 2017 EDA in accordance with its terms. Either party may terminate the 2017 EDA at any time upon written notification to the other party in accordance with the 2017 EDA, and upon such notification, the offering will terminate.

We agreed to pay JMP a commission of up to 3.0% of the gross sales price of any shares sold pursuant to either the 2017 EDA or 2015 EDA. With the exception of expenses related to the shares, JMP will be responsible for all of its own costs and expenses incurred in connection with the offering.

We did not issue any shares pursuant to the 2017 EDA or 2015 EDA during the year ended December 31, 2018. During the year ended December 31, 2017, we issued 9,768,142 shares of our common stock pursuant to the 2015 EDA for aggregate net proceeds to us of $14.9 million. As of December 31, 2018, $50.0 million remained available under the 2017 EDA.