10. Stock-Based Compensation

In the accompanying condensed consolidated statement of operations, the Company recognized stock-based compensation expense for its employees and non-employees as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in thousands)
Research and development	$	733	$	11	$	1,032	$	29
General and administrative		579		105		880		168

Total stock-based compensation	$	1,312	$	116	$	1,912	$	197

Determination of Fair Value

The estimated grant-date fair value of all the Company’s stock-based awards was calculated using the Black-Scholes option pricing model, based on assumptions as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2015	2014	2015	2014
Expected term (in years)	6.1	5.9 – 6.3	5.2 – 10	5.0 – 6.3
Expected volatility	79%	82 – 83%	75 – 84%	81 – 83%
Risk-free interest rate	1.7 – 1.9%	1.7 – 1.8%	1.5 – 2.4%	1.5 – 1.8%
Expected dividend rate	— %	— %	— %	— %

Equity Incentive Plans

2015 Plan

The 2015 Equity Incentive Plan (the “2015 Plan”) became effective on July 14, 2015. Under the 2015 Plan, 3,400,000 shares of common stock were initially reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, restricted stock awards, stock appreciation rights, restricted stock units, performance awards, cash awards and stock bonuses. In addition, 365,535 shares that had been available for future awards under the 2008 Plan as of July 14, 2015, were added to the initial reserve available under the 2015 Plan, bringing the total number of shares reserved for issuance under the 2015 Plan upon its effective date to 3,765,535 shares. The number of shares initially reserved for issuance under the 2015 Plan will increase automatically on January 1 of each calendar year 2016 through 2025 by the number of shares equal to 4% of the total outstanding shares of the Company’s common stock as of the immediately preceding December 31. The Company’s Board of Directors or Compensation Committee may reduce the amount of the increase in any particular year. The exercise price of each stock-based award issued under the 2015 Plan is required to be no less than the fair value of the Company’s capital stock, as determined by the board of directors on the date of the grant.

2008 Plan

The Company granted options under the 2008 Stock Plan (the “2008 Plan”) until July 2015 when it was terminated as to future awards, although it continues to govern the terms of options that remain outstanding under the 2008 Plan. The 2008 Plan provided for the granting of Incentive Stock Options (ISO), nonqualified stock options and stock purchase rights. In connection with the Board of Directors approval of the 2015 Plan, all remaining shares available for future award under the 2008 Plan were transferred to the 2015 Plan, and the 2008 Plan was terminated.

2005 Stock Plan

As of September 30, 2015, there were 940 awards issued and outstanding under the Company’s 2005 Plan (the “2005 Plan”). The terms of the 2005 Plan are similar to those of the 2008 Plan. On August 20, 2008, the board of directors canceled all shares available under the 2005 Plan with the intention to not issue any more shares under the plan.

A summary of activity under the 2005 Plan, 2008 Plan and 2015 Plan and related information is as follows:


				Options Outstanding
	Shares Available for Grant			Number of Shares Outstanding			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value of Outstanding Options (in thousands)

Outstanding — December 31, 2014		1,550,101			2,138,096		$	0.91		9.29	$	3,153
Awards authorized		3,400,000			—
Options granted		(1,217,568	)		1,217,568			5.96
Options exercised		—			(41,505	)		0.76
Options cancelled		—			—			—

Outstanding — September 30, 2015		3,732,533			3,314,159		$	2.77		8.96	$	58,866


Exercisable — September 30, 2015					2,127,353		$	0.98		8.59	$	41,564


Vested and expected to vest — September 30, 2015					3,217,100		$	2.72		8.95	$	57,303

The weighted-average grant date fair values of options granted during the three and nine months ended September 30, 2015 was $23.60 and $10.19 per share and during the three and nine months ended September 30, 2014 was $1.12 and $0.96 per share. The aggregate intrinsic value of options exercised was $0.2 million for the three and nine months ended September 30, 2015 and $0.2 million for the three and nine months ended September 30, 2014. The total grant date fair value of options vested for the three and nine months ended September 30, 2015 was $0.7 million and $0.9 million and during the three and nine months ended September 30, 2014 was $0.1 million and $0.2 million.

As of September 30, 2015, total unrecognized stock-based compensation related to unvested stock options was $11.9 million, net of estimated forfeitures, which the Company expects to recognize over a remaining weighted-average period of 3.3 years. Certain stock options are subject to occurrence of a performance condition.

Performance-Based Stock Option Grant

During the year ended December 31, 2014, the Company granted options to purchase 217,305 shares of common stock to an executive officer which contains both performance-based and service-based vesting criteria. Stock-based compensation associated with these performance-based stock options is recognized if the performance condition is achieved.

On January 24, 2015, the Company amended the terms of the performance-based stock options to extend the date of the performance-based milestone. Upon the completion of the IPO in July 2015, the performance-based criteria of the stock options was achieved and the Company recorded additional stock-based compensation related to the achievement of these options of $0.1 million during the three and nine months ended September 30, 2015.

Liability for Early Exercise of Stock Options

The 2008 Plan allows for the granting of options that may be exercised before the options have vested. In December 2014, an executive officer early exercised 103,252 stock options. In February 2015, an executive officer early exercised 13,422 stock options. On early exercise, the awards became subject to a restricted stock agreement. The shares of restricted stock granted upon early exercise of the options are subject to the same vesting provisions as the original stock option awards. Shares issued as a result of early exercise that have not vested are subject to repurchase by the Company upon termination of the purchaser’s employment or services, at the price paid by the purchaser, and are not deemed to be issued for accounting purposes until those related shares vest. The liability is reclassified into common stock and additional paid-in capital as the shares vest and the repurchase right lapses. Accordingly, the Company has recorded the unvested portion of the exercise proceeds of $38,000 as a current liability as of September 30, 2015 and $0.1 million as a long-term liability as of December 31, 2014 from the early exercise in the accompanying condensed consolidated balance sheet. As of September 30, 2015 and December 31, 2014, 39,493 and 103,252 shares held by the employee remain unvested and subject to repurchase.

2015 Employee Stock Purchase Plan

The Company adopted the 2015 Employee Stock Purchase Plan (ESPP) and initially reserved 700,000 shares of common stock as of its effective date of July 15, 2015. The number of shares initially reserved for issuance under the ESPP will increase automatically on January 1 for nine years from the first offering date by the number of shares equal to 1% of the total outstanding shares of the Company’s common stock as of the immediately preceding December 31. The aggregate number of shares issued over the term of the 2015 Employee Stock Purchase Plan will not exceed 3,400,000 shares of common stock. Under the ESPP, participants are offered the options to purchase shares of Company’s common stock at a 15% discount during a series of discrete offering periods. The ESPP will not become effective until such time as the Compensation Committee determines in the future, and as of September 30, 2015, the initial offering periods had not commenced. As of September 30, 2015, no shares of common stock have been issued to employees participating in the ESPP and 700,000 shares were available for issuance under the ESPP.