11. STOCK-BASED COMPENSATION EXPENSE

Plans

The Company adopted two stock compensation plans prior to the Merger, the 2007 Stock Option Plan, or the 2007 Plan, adopted in August 2007, and the 2010 Stock Option Plan, or the 2010 Plan, adopted in March 2010. The Company ceased granting awards under the 2007 Plan when it adopted the 2010 Plan. Options remain outstanding under both the 2007 Plan and the 2010 Plan. In connection with the Merger, all such options converted into options to purchase shares of Regado common stock, as renamed Tobira, and the applicable share amounts and exercise prices were adjusted to reflect the Exchange Ratio. The Company assumed the 2010 Plan under the terms of the Merger and may grant awards under this plan to certain employees. No additional grants can be made from the 2007 Plan, and shares subject to awards granted under this plan that cancel or expire unexercised do not revert to or become available for re-grant under any other Company stock compensation plan.

Prior to the Merger, Regado adopted two stock compensation plans, the 2004 Plan and 2013 Plan. Options remain outstanding under both the 2004 and the 2013 Plan. The number of shares subject to and the exercise prices applicable to these outstanding options were adjusted in connection with the one for nine reverse stock split. No additional grants may be made from the 2004 Plan. However, shares subject to awards granted under this plan that cancel or expire unexercised do revert to and become available for re-grant under the 2013 Plan pool. Options granted under the 2010 and 2013 Plans generally expire ten years from the date of grant. On July 9, 2015, the Company’s stockholders approved amendments to material terms of the Company’s 2013 Plan, including an increase by 1.2 million shares reserved for issuance and increases in, or imposition of, certain share limits under the 2013 Plan. The Company intends that the 2013 Plan will be its primary stock compensation plan in the future.

Because the Company is considered to be the acquirer for accounting purposes, the pre-Merger vested stock options granted by Regado under the 2004 Plan and the 2013 Plan are deemed to have been exchanged for equity awards of the Company and as such the portion of the acquisition date fair value of these equity awards attributable to pre-Merger service to Regado were accounted for as a component of the consideration transferred.

The exchange of Private Tobira stock options to purchase Regado common stock, as renamed Tobira, was accounted for as a modification of the awards because the legal exchange of the awards is considered a modification of Private Tobira stock options. The modification of the stock options did not result in any incremental compensation expense as the modification did not increase the fair value of the stock options.

Stock Option Activity

As of December 31, 2015, a total of 113,270 and 997,811 options were available for grant under the 2010 and 2013 Plans, respectively.

The following table summarizes stock option activity:

	Number of Options			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (in Years)		Weighted- Average Grant Date Fair Value
Outstanding as of December 31, 2012		893,039		$	3.29		8.11
Granted		170,269		$	3.51			$	1.37
Exercised		(20,161	)	$	3.14
Canceled		(288,073	)	$	3.40
Outstanding as of December 31, 2013		755,074		$	3.30		7.62
Granted		865,516		$	4.94			$	4.02
Exercised		—		$	—
Canceled		(509,846	)	$	3.27
Outstanding as of December 31, 2014		1,110,744		$	4.59		8.72
Granted		766,882		$	15.04			$	11.60
Options assumed in the Merger		551,363		$	30.11
Exercised		(38,570	)	$	4.20
Canceled		(20,572	)	$	28.09
Outstanding as of December 31, 2015		2,369,847		$	13.99		8.28
Vested and expected to vest as of December 31, 2015		2,309,228		$	14.05		8.26
Vested and exercisable as of December 31, 2015		1,155,771		$	17.11		7.52

As of December 31, 2015, the range of exercise prices was between $2.59 and $112.77 for options outstanding.

Intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that had exercise prices that were lower than the fair value per share of the common stock on the date of exercise. The aggregate intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was $0.4 million, $0 and $10,000, respectively.

The following table presents intrinsic values related to options as of December 31, 2015 (in thousands):

	As of December 31, 2015
Intrinsic value of options outstanding	$	6,314
Intrinsic value of vested and expected to vest		6,191
Intrinsic value of vested and exercisable		3,840

As of December 31, 2015, total unrecognized stock-based compensation expense related to nonvested equity awards was $8.3 million which is expected to be recognized over an estimated weighted-average period of 3.0 years.

Stock-based Compensation Expense

Stock-based compensation expense related to options granted was recorded as follows (in thousands):

	Year Ended December 31,
	2015		2014		2013
Research and development	$	624	$	149	$	188
General and administrative		1,629		564		235
Total	$	2,253	$	713	$	423

Valuation Assumptions

The Company determined stock-based compensation expense using the Black-Scholes option valuation model. The fair value of each stock option grant was determined using assumptions which are subjective and require significant judgment and estimation by management. The risk-free rate assumption was based on observed U.S. Treasury instruments with terms consistent with the expected term of the Company’s stock options. The expected volatility assumption was based on historical volatilities of a group of comparable industry companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry. The expected term of stock options represents the weighted-average period that the stock options are expected to be outstanding. Because the Company does not have historical exercise behavior, it determined the expected life assumption using the simplified method, which is an average of the options ordinary vesting period and the contractual term. The expected dividend assumption was based on the Company’s history and expectation of dividend payouts. The company has not paid and does not expect to pay dividends at any time in the foreseeable future. The Company reduced stock-based compensation expense for estimated forfeitures. Forfeitures were estimated at the time of grant based on historical experience, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The following table presents the assumptions used in the Black-Scholes option pricing model to determine the fair value of stock options granted in the periods presented:

	Year Ended December 31,
	2015	2014	2013
Risk-free interest rate	1.56% — 1.93%	1.83% — 2.29%	1.10% — 1.68%
Expected price volatility	90.00% — 95.80%	94.50% — 105.40%	95.75% — 96.13%
Expected term (in years)	6.2	7.0	0.9 — 10.0
Expected dividend yield	— %	— %	— %

Prior to the Merger, the fair value of the shares of common stock underlying the stock options had been the responsibility of and determined by the Company’s Board of Directors. Because there had been no public market for the Company’s common stock, the Board of Directors determined fair value of common stock at the time of grant of the option by considering a number of objective and subjective factors including independent third party valuations of the Company’s common stock, sales prices of convertible preferred stock to unrelated third parties, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook, among other factors.