L.	Stock-Based Compensation

The Company maintains a stock-based compensation plan (the “Incentive Stock Plan”) that governs stock awards made to employees and directors prior to completion of the IPO.

November 2014,

the Board of Directors of the Company ("the Board"), and in

April 2015,

the Company’s stockholders, approved the Company’s

2014

Equity Incentive Plan (the

“2014

Plan”), which became effective in

April 2015.

The

2014

Plan provides for the grant of stock options, other forms of equity compensation, and performance cash awards. The maximum number of shares of common stock that

may

be issued under the

2014

Plan is

5,076,694

as of

December 31, 2019.

The number of shares of common stock reserved for issuance under the

2014

Plan will automatically increase on

January 1

of each year, beginning on

January 1, 2016,

and ending on and including

January 1, 2024,

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 Board. Pursuant to the terms of the

2014

Plan, on

January 1, 2020,

the common stock reserved for issuance under the

2014

Plan automatically increased by

1,454,031

shares.

During the

second

quarter of

2019,

the Company granted to each non-employee member of the Company's board of directors (each a "non-employee Director")

two

separate fully vested restricted stock awards ("RSAs") under the

2014

Plan. The RSAs were granted in lieu of the quarterly cash compensation payable under the Company's Third Amended and Restated Non-Employee Director Compensation Policy to each non-employee Director for service as a member of the Company's board of directors, and applicable committees thereof, in the

first

and

second

quarters of

2019.

For the

first

and

second

quarter of

2019,

RSAs were granted for a total of

42,436

and

39,284

shares of common stock, respectively.

In addition, the Company granted to a consultant fully vested RSAs under the

2014

Plan. The RSAs were granted as part of the monthly compensation package to the consultant for services performed. As of

December 31, 2019,

RSAs were granted for a total of

20,019

shares of common stock for this purpose.

During the year ended

December 31, 2019

stock options were exercised. During the year ended

December 31, 2019

and

2018

, stock options to acquire

23,682

shares of common stock were exercised for approximately

$68,000

with an intrinsic value of approximately

$69,000

Stock-based compensation expense recorded unde

r the Incentive Stock Plan and the

2014

Plan is included in the following line items in the accompanying statements of operations (in thousands):

	Year ended December 31,
	2019		2018
Research and development	$	1,459	$	1,608
General and administrative		2,951		3,651
Severance expense		-		1,236
Total stock-based compensation expense	$	4,410	$	6,495

Stock Option Awards

The Company estimates the fair value of stock options using the Black-Scholes option-pricing model, which requires the use of subjective assumptions, including the expected term of the option, the expected stock price volatility, expe

cted dividend yield and the risk-free interest rate for the expected term of the option. The expected term represents the period of time the stock options are expected to be outstanding. Due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected term of the stock options, the Company uses the simplified method to estimate the expected term for its “plain vanilla” stock options. Under the simplified method, the expected term of an option is presumed to be the mid-point between the vesting date and the end of the contractual term. Some options, for example those that have exercise prices in excess of the fair value of the underlying stock, are

not

considered “plain vanilla” stock options. For these options, the Company uses an expected term equal to the contractual term of the option. Expected volatility for options granted prior to the

second

anniversary of the IPO is based on a blend of historical volatilities for publicly traded stock of comparable

compan

ies and the Company over the estimated expected term of the stock options.

For options granted after the

second

anniversary of the IPO, expected volatility is based on the Company's historical volatility over the estimated expected term of the stock options.

The Company assumes

dividend yield because dividends are

not

expected to be paid in the near future, which is consistent with the Company’s history of

not

paying dividends.

The Company recogni

zes compensation expense related to stock-based payment transactions upon satisfaction of the requisite service or vesting requirements. Forfeitures are estimated at the time of grant and revised based on actual forfeitures, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Using the Black-Scholes option-pricing model, the weighted-average fair value of awards granted during the years ended

December 31, 2019

and

2018

, fair value was

$1.43

and

$4.05

per sha

re, respectively. The assumptions used to estimate fair value are as follows:

	Year Ended December 31,
	2019	2018
Risk-free interest rate	1.75% - 2.61%	2.43% - 2.91%
Expected term (in years)	5.50 - 10.00	5.50 - 6.79
Expected volatility	84.82% - 85.93%	83.10% - 85.05%
Expected dividend yield	0%	0%

The activity under the Incentive Stock Plan and the

2014

Plan

for the year ended

December 31, 2019

is summarized as follows:

				Weighted		Weighted Avg		Aggregate
	Number of			Average		Remaining		Intrinsic
	Options			Exercise Price		Contractual Term		Value
Outstanding balance at January 1, 2019		3,704,755		$	9.35		7.48	$	-
Granted		2,291,820		$	1.84
Exercised or released		(101,739	)	$	-
Canceled or forfeited		(675,950	)	$	8.80
Expired		(26,664	)	$	4.80
Outstanding balance at December 31, 2019		5,192,222		$	6.31		7.63	$	-
Exercisable at December 31, 2019		2,154,640		$	10.80		6.04	$	-
Vested and expected to vest at December 31, 2019		4,503,063		$	7.16		7.30	$	-

Information regarding currently outstanding and exercisable options as of

December 31, 2019

is as follows:

	Options Outstanding				Options Exercisable
			Weighted Avg				Weighted Avg
	Number of		Remaining		Number of		Remaining
Exercise Price	Shares		Contractual Term		Shares		Contractual Term
$0.52 to $5.00		2,902,995		8.72		479,039		7.19
$5.01 to $10.00		1,102,844		6.74		599,969		5.62
$10.01 to $15.00		471,833		5.94		381,208		5.90
$15.01 to $20.00		379,550		5.70		359,424		5.67
$20.01 to $20.45		335,000		5.68		335,000		5.68
		5,192,222		7.63		2,154,640		6.04

The total fair value of stock options vested during the years ended

December 31, 2019

and

2018

, was

$4.9

million and

$5.9

million, respectively.

Unvested stock options as of

December 31, 2019

and

2018

, were as follows:

	Number of Unvested Shares
	December 31,
Exercise Price	2019		2018
$0.52 to $5.00		2,423,956		634,751
$5.01 to $10.00		502,875		818,900
$10.01 to $15.00		90,625		186,584
$15.01 to $20.00		20,126		139,988
$20.01 to $20.45		-		86,950
Total number of unvested stock options		3,037,582		1,867,173

As of

December 31, 2019

there was

$3.8

million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the

2014

Plan. That compensation cost is expected to be recognized over a weighted-average period of

2.29

years.

There was

stock-based compensation expense related to performance-based awards recognized during the years ended

December 31,

2019

2018