Equity Plans

Equity Incentive Plan

In July 2016, the Company’s board of directors and stockholders approved the Company's 2016 Equity Incentive Plan (the “2016 Plan”) to replace the 2007 Stock Option Plan, which became effective upon the Company’s IPO. Under the 2016 Plan, 1,200,000 shares of the Company’s common stock were initially reserved for issuance of stock options, restricted stock units, and other awards to employees, directors, and consultants. Pursuant to the “evergreen” provision contained in the 2016 Plan, the number of shares reserved for issuance under the 2016 Plan automatically increases on January 1 of each year, starting on January 1, 2017 and continuing through (and including) January 1, 2026, by 4% of the total number of shares of the Company’s capital stock outstanding on December 31 of the preceding fiscal year, or a lesser number of shares determined by the Company’s board of directors. As of June 30, 2017, the Company has reserved 1,868,891 shares of common stock for issuance under the 2016 Plan. The 2016 Plan is administered by the board of directors or a committee appointed by the board of directors, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. Options granted under the 2016 Plan expire no later than ten years from the date of grant. Employee stock options generally vest over a period of four years. Non-employee director initial stock options generally vest over a period of three years, and non-employee director annual refresher stock options generally vest over a period of approximately one year.

Stock Options

Activity under the Company’s equity incentive plans is set forth below:



					Options Outstanding
	Options Available for Grant		Options Outstanding		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (1)
								(in thousands)
Balances at December 31, 2016	164,328		2,393,829		$	10.39	8.79
Additional options authorized	668,891		—
Options granted	(261,000	)	261,000		$	10.54
Options exercised	—		(151,299	)	$	1.32
Options forfeited	50,271		(50,271	)	$	18.91
Balances at June 30, 2017	622,490		2,453,259		$	10.80	8.73	$	10,463
Options exercisable at June 30, 2017			680,187		$	8.20	8.22	$	4,056
Options vested and expected to vest at June 30, 2017			2,453,259		$	10.80	8.73	$	10,463

____________________

⁽¹⁾The aggregate intrinsic values were calculated as the difference between the exercise price of the options and the closing price of the Company’s common stock on June 30, 2017. The calculation excludes options with an exercise price higher than the closing price of the Company's common stock on June 30, 2017.

During the six months ended June 30, 2017, the estimated weighted-average grant-date fair value of common stock underlying options granted was $6.26 per share.

Employee Stock Options Valuation

The fair value of employee and director stock option awards was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:



	Three Months Ended June 30,		Six Months Ended June 30,
	2017	2016	2017	2016
Expected term (in years)	5.50 - 6.07	5.88	5.50 - 6.08	5.88 - 5.94
Expected volatility	64.4% - 65.4%	62.5%	62.5% - 65.4%	62.5% - 64.8%
Risk-free interest rate	1.88% - 1.98%	1.38%	1.88% - 2.07%	1.27% - 1.38%
Dividend yield	—	—	—	—

Employee Stock Purchase Plan

In July 2016, the Company’s board of directors and stockholders approved the 2016 Employee Stock Purchase Plan (the “2016 ESPP”), which became effective upon the closing of the IPO. Under the 2016 ESPP, 150,000 shares of the Company’s common stock were initially reserved for issuance for employee purchases of the Company’s common stock. Pursuant to the “evergreen” provision contained in the 2016 ESPP, the number of shares reserved for issuance under the 2016 ESPP automatically increases on January 1 of each year, starting on January 1, 2017 and continuing through (and including) January 1, 2026 by the lesser of (i) 1% of the total number of shares of the Company’s capital stock outstanding on December 31 of the preceding fiscal year, (ii) 300,000 shares, or (iii) such other number of shares determined by the Company’s board of directors. The 2016 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation. At the end of each offering period, eligible employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock at the beginning of the offering period or at the end of each applicable purchase period. As of June 30, 2017, a total of 317,222 shares of common stock were authorized for issuance under the 2016 ESPP, and 25,682 shares have been issued.

Stock-Based Compensation

Total stock-based compensation expense was as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Research and development	$	476	$	46	$	799	$	75
General and administrative	525		60		1,046		87
Total stock-based compensation expense	$	1,001	$	106	$	1,845	$	162

As of June 30, 2017, total unrecognized stock-based compensation expense related to stock options totaled $11.6 million, which the Company expects to recognize over a weighted-average period of approximately 2.71 years.