8. 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 June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(in thousands)
Research and development	$	1,008	$	807	$	2,021	$	1,761
General and administrative		503		496		1,017		905

Total stock-based compensation	$	1,511	$	1,303	$	3,038	$	2,666

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
June 30,

Six Months Ended
June 30,

2017

2016

2017

2016

Expected term (in years)

5.3 – 6.1

5.3 – 7.0

5.3 – 9.9

Expected volatility

86 – 87

77 – 85

86 – 96

77 – 85

Risk-free interest rate

1.8 – 1.9

1.1 – 1.7

1.8 – 2.3

1.1 – 1.9

Expected dividend rate

—

On January 1, 2017, the Company adopted FASB ASU No. 2016-09 (ASU 2016-09), Compensation – Stock Compensation (Topic 718) using the modified retrospective approach, including making an accounting policy election to account for forfeitures when they occur, and thus recorded a $8,000 retrospective adjustment to retained earnings included in the accompanying condensed consolidated statement of stockholders’ equity for the six months ended June 30, 2017. In accordance with this standard, all tax effects related to share-based payments are recorded as part of the provision for income taxes including any accumulated excess tax benefits or deficiencies. Since the Company has incurred net losses since its inception and maintains a full valuation allowance on its net U.S. deferred tax assets, adoption of the new guidance had no significant impact on the accompanying consolidated statements of operations or cash flow presentation.

Equity Incentive Plans

2015 Plan

The 2015 Equity Incentive Plan (2015 Plan) became effective on July 14, 2015. As of June 30, 2017, 6,445,747 shares were reserved for issuance under the 2015 Plan. The number of shares 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. 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, 2016		1,392,521			6,543,654		$	3.44		8.82	$	888
Awards authorized		1,214,837
Options granted		(1,393,775	)		1,393,775			1.43
Options exercised		—			(49,861	)		0.46
Options forfeited/cancelled		171,525			(171,525	)		4.39

Outstanding — June 30, 2017		1,385,108			7,716,043		$	3.07		8.60	$	337

Exercisable — June 30, 2017					3,479,127		$	2.91		7.92	$	332

Vested and expected to vest — June 30, 2017					7,716,043		$	3.07		8.60	$	337

The weighted-average grant date fair values of options granted during the three and six months ended June 30, 2017 was $0.80 and $1.08 per share, and $2.23 and $3.93 per share during the three and six months ended June 30, 2016. The aggregate intrinsic value of options exercised was $0.1 million for the six months ended June 30, 2017, and $0.2 million and $0.1 million for the three and six months ended June 30, 2016. No options were exercised during the three months ended June 30, 2017. The total grant date fair value of options vested for the three and six months ended June 30, 2017 was $1.6 million and $3.8 million, and $2.7 million and $3.5 million during the three and six months ended June 30, 2016.

As of June 30, 2017, total unrecognized stock-based compensation related to unvested stock options was $12.4 million. These costs are expected to be recognized over a remaining weighted-average period of 2.2 years as of June 30, 2017.

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 June 30, 2017, the initial offering periods had not commenced. As of June 30, 2017, 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.