The 2016 Long-Term Incentive Plan (the “2016 Plan”), approved by the Company’s stockholders on December 12, 2016 (the “Adoption Date”), provides for the issuance of up to 3,000,000 shares of the Company’s Common Stock reserved for issuance under the 2016 Plan plus any additional shares of the Company’s Common Stock that were available for grant under the 2008 Incentive Plan (the “2008 Plan”) at the Adoption Date or would otherwise become available for grant under the 2008 Plan as a result of subsequent termination or forfeiture of awards under the 2008 Plan. At the Company’s Annual Meeting of Stockholders held on June 25, 2019, the Company’s stockholders approved an amendment to the 2016 Plan to increase the number of shares authorized for issuance by 11,000,000 shares. At June 30, 2019, a total of 8,923,038 shares were available for new awards.

Certain inducement awards, although not awarded under the 2016 Plan or the 2008 Plan, are subject to and governed by the terms and conditions of the 2016 Plan or 2008 Plan, as applicable.

The following table provides a reconciliation of stock option activity under the Company’s equity incentive plans and for inducement awards for the six months ended June 30, 2019:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number			Exercise		Contractual		Intrinsic
	of Options			Price		Life		Value
						(in years)		(in thousands)
Outstanding at January 1, 2019		8,139,377		$	2.83
Granted		4,162,096			2.43
Exercised		(166,760	)		1.84
Forfeited		(555,474	)		2.55
Expired		(32,100	)		2.26
Outstanding at June 30, 2019		11,547,139		$	2.72		7.68	$	89
Exercisable at June 30, 2019		4,398,395		$	3.18		5.33	$	9

During the six months ended June 30, 2019, the Company granted 2,892,060 options to employees with ratable monthly vesting over four years, 788,000 options to employees with 25% vesting after one year followed by ratable monthly vesting over three years, 80,000 options to a newly appointed non-executive director with ratable annual vesting over three years, 13,500 options to employees with ratable annual vesting over three years, and 388,536 options to directors and two external consultants with 1-year cliff vesting. All option grants have a 10-year term. Options to purchase a total of 1,212,780 shares of the Company’s Common Stock vested during the six months ended June 30, 2019.

In determining the grant date fair value of option awards during the six months ended June 30, 2019, the Company applied the Black-Scholes option pricing model based on the following key assumptions:

The following table summarizes information about employee, non-executive director and external consultant stock options for the six months ended June 30, 2019 (in thousands, except per share amount):

Time-vested restricted stock unit awards (“RSUs”) issued to date under the 2016 Plan generally vest on a ratable annual basis over 3 years. The related stock-based compensation expense is recorded over the requisite service period, which is the vesting period. The fair value of all time-vested RSUs is based on the closing share price of the Company’s Common Stock on the date of grant.

The following table provides a reconciliation of RSU activity under the 2016 Plan for the six months ended June 30, 2019:

				Weighted
	Number of			Average
	Restricted			Grant Date
	Stock Units			Fair Value
Nonvested at January 1, 2019		590,213		$	1.86
Granted		587,761			1.90
Vested		(206,067	)		1.79
Forfeited		(102,845	)		2.19
Nonvested at June 30, 2019		869,062		$	1.86

At June 30, 2019, the weighted average remaining vesting term of the RSUs was 1.53 years.

Performance Stock Units (“PSUs”) were previously awarded under the 2016 Plan to certain employees. The performance conditions associated with the PSU awards were as follows: (a) for one third of the PSUs, upon an FDA acceptance of the Company’s NDA submission of YUTIQ for review on or before March 31, 2018 and (b) for two-thirds of the PSUs, upon an FDA approval of YUTIQ on or before March 31, 2019. For each performance criteria achieved, 50% of the PSUs associated with that performance condition vest at the achievement date and 50% vest on the first anniversary of such date, in each case subject to continued employment through such date. As a result of the achievement of the first performance condition on March 19, 2018, 48,332 PSUs vested at that date and the other 48,334 PSUs became subject only to a service-based condition with a vesting date of March 19, 2019. As a result of the achievement of the second performance condition on October 12, 2018, 96,668 PSUs vested at that date and the other 96,666 PSUs became subject only to a service-based condition with a vesting date of October 12, 2019.

In addition, there were 225,000 outstanding PSUs at June 30, 2019 and December 31, 2018 that were granted as inducement awards to the Company’s Chief Financial Officer in connection with his hire at August 1, 2018. The PSUs are subject to proportional vesting based on cumulative measurement over a 3-year period, with two-thirds of the award based upon the achievement of defined amounts of the Company’s product revenues through June 30, 2021 and one-third of the award based upon the net present value of each applicable business development transaction, as defined, through August 1, 2021 measured as of the date that each such transaction is consummated by the Company. The performance conditions of the PSUs were not deemed to be probable of occurrence at June 30, 2019 and, accordingly, no stock-based compensation has been recorded for the three and six months ended June 30, 2019. The Company’s Chief Financial Officer resigned from his position on July 8, 2019 and as a result, the performance metrics will not be met for vesting.

The following table provides a reconciliation of PSU activity for the six months ended June 30, 2019:

				Weighted
	Number of			Average
	Performance			Grant Date
	Stock Units			Fair Value
Nonvested at January 1, 2019		370,000		$	2.01
Vested		(48,334	)		1.52
Forfeited		(20,000	)		1.77
Nonvested at June 30, 2019		301,666		$	2.10

The weighted-average remaining vesting term of the outstanding PSUs at June 30, 2019 under the 2016 Plan was approximately 3.4 months.

There were 417 and 35,418 non-vested deferred stock units (“DSUs”) issued and outstanding to the Company’s non-executive directors at each of June 30, 2019 and December 31, 2018, respectively. Each DSU vests one year from the date of grant. Subsequent to vesting, the DSUs will be settled in shares of the Company’s Common Stock upon the earliest to occur of (i) each director’s termination of service on the Company’s Board of Directors and (ii) the occurrence of a change of control as defined in the award agreement. At June 30, 2019, there were 70,834 vested DSUs that have not been settled in shares of the Company’s Common Stock.

				Weighted
	Number of			Average
	Deferred			Grant Date
	Stock Units			Fair Value
Nonvested at January 1, 2019		35,418		$	1.95
Vested		(35,001	)		1.95
Nonvested at June 30, 2019		417		$	2.32

At June 30, 2019, the weighted average remaining vesting term of the DSUs was approximately 2.3 months.

At June 30, 2019 and December 31, 2018, there were 500,000 market-based RSUs (“market-based RSUs”) outstanding that were issued on September 15, 2016 as an inducement award to the Company’s President and CEO in connection with her hire. Subject to a service condition through September 15, 2019, the number of shares underlying the market-based RSUs that will vest will be based upon the determination of the relative percentile rank of the 3-year change in the closing price of the Company’s Common Stock compared to that of the companies that make up the Nasdaq Biotechnology Index over that same 3-year period. The weighted average grant date fair value of the market-based RSUs of $1.45 per share was determined using a Monte Carlo valuation model at the date of grant. Stock-based compensation has been recorded from the grant date on a straight-line basis.

On June 25, 2019, the Company’s stockholders approved the adoption of the EyePoint Pharmaceuticals, Inc. 2019 Employee Stock Purchase Plan (the “ESPP”) and authorized up to 1,100,000 shares of Common Stock reserved for issuance to participating employees. The ESPP allows qualified participants to purchase the Company’s Common Stock at 85% of the lesser of the average of the high and low sales price of the Company’s Common Stock on (i) the first trading day of the relevant offering period and (ii) the last trading day of the relevant offering period. The first six month offering period under the ESPP will begin on August 1, 2019 and end on January 31, 2020. As of June 30, 2019, no shares of the Company’s Common Stock were issued pursuant to the ESPP.

The Company’s consolidated statements of comprehensive loss included total compensation expense from stock-based payment awards for the three and six months ended June 30, 2019 and 2018, respectively, as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Compensation expense included in:
Research and development	$	268	$	345	$	664	$	660
Sales and marketing		179		50		323		50
General and administrative		1,049		579		1,747		707
	$	1,496	$	974	$	2,734	$	1,417

At June 30, 2019, there was approximately $6.0 million of unrecognized compensation expense related to outstanding equity awards under the 2016 Plan, the 2008 Plan and the inducement awards that is expected to be recognized as expense over a weighted-average period of approximately 1.6 years.