10. Stock-Based Compensation

In the accompanying condensed consolidated statements 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,
	2016		2015		2016		2015
	(in thousands)
Research and development	$	863	$	733	$	2,624	$	1,032
General and administrative		436		579		1,341		880

Total stock-based compensation	$	1,299	$	1,312	$	3,965	$	1,912

Determination of Fair Value

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Expected term (in years)		5.1–9.9			6.1			5.1–9.9			5.2–10.0
Expected volatility		80–86	%		79	%		77–86	%		75–84	%
Risk-free interest rate		1.1–1.5	%		1.7–1.9	%		1.1–1.9	%		1.5–2.4	%
Expected dividend rate		—	%		—	%		—	%		—	%

Equity Incentive Plans

2015 Plan

The 2015 Equity Incentive Plan (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. Accordingly, 1,202,324 shares were added to the reserve available under the 2015 Plan on January 1, 2016. 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. The vesting and exercise provisions of options or restricted awards granted are determined individually with each grant. Stock options have a 10-year life and expire if not exercised within that period or if not exercised within three months of cessation of employment with the Company or such longer period of time as specified in the option agreement.

2008 Plan

The Company granted options under the 2008 Stock Plan (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 Director’s 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.

A summary of activity under the 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, 2015		3,523,879			3,522,813		$	3.81		8.78	$	40,425
Awards authorized		1,202,324
Options granted		(3,702,880	)		3,702,880			3.22
Options exercised		—			(292,455	)		0.66
Options forfeited/cancelled		304,075			(304,075	)		7.89

Outstanding — September 30, 2016		1,327,398			6,629,163		$	3.43		9.09	$	1,443

Exercisable — September 30, 2016					2,244,374		$	2.01		8.04	$	1,443

Vested and expected to vest — September 30, 2016					6,394,550		$	3.42		9.08	$	1,418

The weighted-average grant date fair values of options granted during the three and nine months ended September 30, 2016 was $1.26 and $2.20 per share and during the three and nine months ended September 30, 2015 was $23.60 and $10.19 per share. The aggregate intrinsic value of options exercised was $0.2 million and $1.2 million for the three and nine months ended September 30, 2016 and $0.2 million for the three and nine months ended September 30, 2015. The total grant date fair value of options vested for the three and nine months ended September 30, 2016 was $0.9 million and $4.4 million and during the three and nine months ended September 30, 2015 was $0.7 million and $0.9 million.

As of September 30, 2016, total unrecognized stock-based compensation related to unvested stock options was $15.4 million, net of estimated forfeitures. These costs are expected to be recognized over a remaining weighted-average period of 2.8 years as of September 30, 2016.

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. As at September 30, 2016, all stock granted upon early exercise of the options have vested and as such, the Company has no outstanding liability related to the early exercise of stock options. As of December 31, 2015, the Company recorded the unvested portion of the exercise proceeds of $23,000 as a current liability in the accompanying condensed consolidated balance sheets. As of December 31, 2015, 23,554 shares held by the employees were 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 the Company’s common stock at a 15% discount during a series of discrete offering periods, subject to any plan limitations. The ESPP will not become effective until such time as the Compensation Committee determines in the future, and as of September 30, 2016, the initial offering periods had not commenced. As of September 30, 2016, 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.