8. EQUITY INCENTIVE PLANS

2008 Plan

The Company granted options under its 2008 Stock Incentive Plan (the “2008 Plan”) until June 2014 when it was terminated as to future awards, although it continues to govern the terms of options that remain outstanding under the 2008 Plan. The 2008 Plan provided for the granting of incentive and non-qualified stock options, and stock purchase rights to employees, directors and consultants at the discretion of the Board of Directors. Stock options granted generally vest over a period of four years from the date of grant. In connection with the Board of Directors and stockholders’ approval of the 2014 Plan, all remaining shares available for future award under the 2008 Plan were transferred to 2014 Plan, and the 2008 Plan was terminated.

2014 Plan

The 2014 Equity Incentive Award Plan (the “2014 Plan”) became effective on June 18, 2014. Under the 2014 Plan, 1,419,328 shares of common stock were initially reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, or SARs, restricted stock awards, service-based restricted stock unit (“RSU”) awards, performance-based restricted stock unit (“PRSU”) awards, deferred stock awards, deferred stock unit awards, dividend equivalent awards, stock payment awards and performance awards. In addition, 35,221 shares that had been available for future awards under the 2008 Plan as of June 18, 2014, were added to the initial reserve available under the 2014 Plan, bringing the total reserve upon the effective date of the 2014 Plan to 1,454,549. The number of shares initially reserved for issuance or transfer pursuant to awards under the 2014 Plan will be increased by (i) the number of shares represented by awards outstanding under 2008 Plan on June 18, 2014, that are either forfeited or lapse unexercised or that are repurchased for the original purchase price thereof, up to a maximum of 1,153,279 shares, and (ii) if approved by the Administrator of the 2014 Plan, an annual increase on the first day of each fiscal year ending in 2024 equal to the lesser of (A) four percent (4.0%) of the shares of stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (B) such smaller number of shares of stock as determined by our board of directors; provided, however, that no more than 10,683,053 shares of stock may be issued upon the exercise of incentive stock options.

2016 Plan

In November 2016, the Company’s board of directors approved the 2016 Employment Commencement Incentive Plan (the “Inducement Plan”) under which 1,000,000 shares were reserved. As of December 31, 2019, no shares of the Company’s common stock were subject to inducement grants that were issued pursuant to the Inducement Plan.

Stock Plan Activity

The following table summarizes activity under the 2008 Plan and the 2014 Plan, including grants issued to nonemployees, in the year ended December 31, 2019:


		Options Issued and Outstanding			Weighted
			Weighted-Average		Average
	Shares Available		Exercise Price per		Remaining	Aggregate
	for Grant	Number of Shares	Share		Contractual Term	Intrinsic Value
					(in Years)	(in thousands)
Balance at December 31, 2018	608,528	5,506,760	$	8.32
Options authorized	2,490,417	—	$	—
Options granted	(2,362,685)	2,362,685	$	2.56
Options exercised	—	(68,062)	$	2.59
Options canceled	528,615	(528,615)	$	7.69
Issuance of common stock for services	(113,136)	—		—
Forfeitures of PRSUs granted in prior years	45,007	—		—
Balance at December 31, 2019	1,196,746	7,272,768	$	6.55	7.40	$	19,128
Vested and expected to vest at December 31, 2019		6,754,711	$	6.74	7.30	$	17,217
Exercisable at December 31, 2019		4,183,281	$	7.95	6.46	$	8,753

The aggregate intrinsic value represents the difference between the total pre-tax value (i.e., the difference between the Company’s stock price and the exercise price) of stock options outstanding as of December 31, 2019, based on the Company’s common stock closing price of $7.51 per share, which would have been received by the option holders had all their in-the-money options been exercised as of that date.

The intrinsic value of options exercised during the years ended December 31, 2019, 2018 and 2017, was $0.4 million, zero, and $0.3 million, respectively.

The weighted-average grant-date estimated fair value of options granted during the years ended December 31, 2019, 2018 and 2017 was $1.79, $4.29 and $8.19 per share, respectively. The estimated grant date fair value of employee stock options was calculated using the Black-Scholes option-pricing model, based on the following weighted-average assumptions:


	Year Ended December 31,
	2019
Expected term (years)	6.00
Expected volatility	81	%
Risk-free interest rate	2.42	%
Dividend yield	—	%

Expected Term—The Company has limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock-option grants. As such, the expected term was estimated using the simplified method whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option.

Expected Volatility—Since January 1, 2017, the Company has used the historic volatility of its own stock over the retrospective period corresponding to the expected remaining term of the options, or the period since its shares were first quoted on The Nasdaq Global Market, if that is shorter, to compute its expected stock price volatility.

Risk-Free Interest Rate—The risk-free interest rate assumption is based on the zero-coupon U.S. treasury instruments on the date of grant with a maturity date consistent with the expected term of the Company’s stock option grants.

Dividend Yield—To date, the Company has not declared or paid any cash dividends and does not have any plans to do so in the future. Therefore, the Company used an expected dividend yield of zero.

Restricted Stock Units

The following table summarizes restricted stock unit activity under the 2014 Plan in the year ended December 31, 2019, and includes restricted stock units with time or service-based vesting and those restricted stock units with performance-based vesting:


					Weighted-
		Weighted-Average			Average Grant
	Number of	Grant Date Fair		Number of	Date Fair Value
	RSUs	Value Per Share		PRSUs	Per Share
Non-vested restricted stock units at December 31, 2018	85,609	$	4.70	894,764	$	4.30
Granted	—	$	—	—	$	—
Vested	(85,609)	$	4.70	—	$	—
Forfeited	—	$	—	(45,007)	$	4.30
Non-vested restricted stock units at December 31, 2019	—	$	—	849,757	$	4.30

RSUs and PRSUs are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions. The related compensation expense, which is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted, is recognized ratably over the period during which the vesting restrictions lapse.

In January 2017, the Company granted 161,865 PRSUs to certain employees that vested upon the achievement of specified performance conditions, subject to the employees’ continued service relationship with the Company through the date of achievement, of which 125,895 PRSUs vested in November 2018. None of these PRSUs vested during the year ended December 31, 2017. The related compensation cost was recognized as an expense over the estimated vesting period ratably after achievement of the milestone was deemed probable. The expense recognized for these awards was based on the grant date fair value of the Company’s common stock multiplied by the number of units granted. The Company recognized zero, $0.6 million and $1.0 million of related expense during the year ended December 31, 2019, 2018 and 2017, respectively.

In July 2018, the Company granted 903,374 PRSUs to its employees that vest upon the achievement of certain performance conditions, subject to the employees’ continued service relationship with the Company through the achievement date. At December 31, 2019, 849,757 of these PRSUs were outstanding and none vested. Based on the evaluation of the performance conditions at December 31, 2019, the Company recorded stock-based compensation expense of $2.4 million for the year ended December 31, 2019. Stock-based compensation expense recorded related to these PRSUs were zero for the year ended December 31, 2018. The related compensation cost was recognized as an expense over the estimated vesting period ratably when achievement of the milestone was considered probable. The expense recognized for these awards is based on the grant date fair value of the Company’s common stock multiplied by the number of units granted.

With respect to RSUs, we recognize expense over the estimated vesting period ratably, contingent on continued service. The Company recognized $0.3 million, $0.9 million and $0.9 million of related expense during the year ended December 31, 2019, 2018 and 2017, respectively. The total estimated fair value of RSUs vested during the years ended December 31, 2019, 2018 and 2017 was $0.2 million, $0.6 million and $0.4 million, respectively.

Issuance of Common Stock for Services

During the years ended December 31, 2019, 2018 and 2017, the Company issued 113,136, 75,183 and 46,858 shares, respectively, of common stock to members of the board of directors who elected to receive stock in lieu of their cash fees under the Company’s Non-Employee Director Compensation Program. The shares issued during the years ended December 31, 2019, 2018 and 2017 were valued at $0.3 million, $0.3 million and $0.2 million, respectively, based on the fair value of the common stock on the date of grant.

Employee Stock Purchase Plan

The Company adopted the 2014 Employee Stock Purchase Plan (“ESPP”) and initially reserved 202,762 shares of common stock as of its effective date of June 18, 2014. If approved by the Administrator of the ESPP, on the first day of each calendar year, ending in 2024, the number of shares in the reserve will increase by an amount equal to the lesser of (i) one percent (1.0%) of the shares of common stock outstanding on the last day of the immediately preceding fiscal year and (ii) such number of shares of common stock as determined by the board of directors; provided, however, no more than 2,230,374 shares of our common stock may be issued under the ESPP.

The following table summarizes ESPP activity in the year ended December 31, 2019:


	Shares Available	Number of Shares	Purchase Price
	for Grant	Purchased	per Share		Gross Proceeds
					(in thousands)
Balance at December 31, 2018	680,322	330,936
Shares purchased	(160,744)	160,744	$	2.48	$	396
Balance at December 31, 2019	519,578	491,680

The following table illustrates the weighted-average assumptions for the Black-Scholes option-pricing model used in determining the fair value of ESPP purchase rights granted to employees:


	Year Ended December 31,
	2019
Expected term (years)	0.5
Expected volatility	69	%
Risk-free interest rate	2.20	%
Dividend yield	—	%

Stock-based Compensation

Total stock-based compensation recognized was as follows:


	Year Ended December 31,
	2019		2018			2017
	(in thousands)
Research and development	$	4,104	$	3,666	$	4,585
General and administrative		5,832		5,560		5,005
Total	$	9,936	$	9,226	$	9,590

At December 31, 2019, the Company had total unrecognized stock-based compensation expense, net of estimated forfeitures, of the following:



	At December 31, 2019
	Unrecognized Compensation Expense		Average Vesting Period
	(in thousands)		(Years)
Stock options grants	$	8,277	2.5
PRSU grants	$	965	0.7
ESPP	$	53	0.2