11. Stock-Based Compensation

2014 Equity Incentive Plan

The Company’s Board of Directors adopted, and its stockholders subsequently approved, its 2014 Equity Incentive Plan (the “2014 Plan”) in January 2014. The 2014 Plan became effective immediately upon the signing of the underwriting agreement for the Company’s initial public offering. The 2014 Plan is administered by the Company’s Board of Directors or a duly authorized committee thereof (the “Plan administrator”). The 2014 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of equity compensation (collectively, “Stock Awards”). Additionally, the 2014 Plan provides for the grant of performance cash awards. Incentive stock options may be granted only to employees. All other awards may be granted to employees, including officers, non-employee directors, and consultants. No incentive stock options may be granted under the 2014 Plan after the tenth anniversary of the effective date of the 2014 Plan. Stock Awards granted under the 2014 Plan vest at the rate specified by the Plan administrator. The Plan administrator determines the term of Stock Awards granted under the 2014 Plan up to a maximum of ten years.

Initially, the aggregate number of shares of the Company’s common stock that may be issued pursuant to Stock Awards under the 2014 Plan is 1,600,000 shares. Additionally, the number of shares of the Company’s common stock reserved for issuance under the 2014 Plan will automatically increase on January 1 of each year, beginning on January 1, 2015 and continuing through and including January 1, 2024, by 3% of the total number of shares of the Company’s capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s Board of Directors. The maximum number of shares that may be issued pursuant to the exercise of incentive stock options under the 2014 Plan is 30,000,000 shares.

2004 Stock Incentive Plan

Under the 2004 Stock Incentive Plan (“2004 Plan”), the Company has granted stock options to selected officers, employees and consultants of the Company. As of December 31 2013, options to purchase 490,160 shares of common stock were outstanding under the 2004 Plan, with a weighted average exercise price per share of $1.34. Although as of December 31 2013, 757,799 shares remained available for future issuance pursuant to the grant of options or restricted share awards under the 2004 Plan, following the effectiveness of the 2014 Plan in January 2014, no additional options or restricted share awards have been or will be granted under the 2004 Plan. The 2014 Plan and 2004 Plan are referred to collectively as the Stock Incentive Plans.

Under the Stock Incentive Plans, the Company granted 227,000 and 614,000 stock options during the three and six months ended June 30, 2014, respectively, and no stock options during the three and six months ended June 30, 2013. The fair values of stock options granted during the three and six months ended June 30, 2014 were estimated as of the dates of grant using the Black-Scholes option pricing model with the following assumptions:


	Three Months Ended June 30, 2014	Six Months Ended June 30, 2014
Risk-free interest rate	1.80% - 1.99%	1.80% - 2.72%
Expected volatility	65%	65% - 71%
Expected dividend yield	0%	0%
Expected life of employee options (in years)	6.25	6.25
Expected life of nonemployee options (in years)	10	10

The weighted average grant date fair value of options granted to employees and members of the Board of Directors for their Board service during the three and six months ended June 30, 2014 was $8.53 and $7.55, respectively. The fair value of options granted to nonemployee consultants, which is marked to market at each reporting date in accordance with ASC 505-50, was $13.70 at June 30, 2014.

During the three and six months ended June 30, 2014 and 2013, the Company recognized compensation expense relating to stock options, as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Research and development	$	159	$	23	$	231	$	31
General and administrative		297		17		578		20

Total stock option expense	$	456	$	40	$	809	$	51

A summary of stock option award activity under the Company’s Stock Incentive Plans as of and for the six months ended June 30, 2014 is presented below:


	Number of Shares			Weighted Average Exercise Price
Outstanding, December 31, 2013		490,160		$	1.34
Granted		614,000			12.11
Exercised		(46,000	)		0.64

Outstanding, June 30, 2014		1,058,160			7.62

Options exercisable, June 30, 2014		476,451		$	2.43