10. Stock options

Stock option plans

In June 2017 the Company’s shareholders approved the 2017 Stock Incentive Plan (the 2017 Plan). Under the 2017 Plan, up to 2,255,000 shares of common stock were initially available to be granted to the Company's employees, officers, directors, consultants and advisors in the form of options, restricted stock units (RSUs) or other stock-based awards. The number of shares of common stock issuable under the 2017 Plan will be cumulatively increased annually by 4% of the outstanding shares or such lesser amount specified by the Board. The terms of the awards are determined by the Board, subject to the provisions of the 2017 Plan. Any cancellations under the 2007 Plan, which expired in June 2017, would increase the number of shares that could be granted under the 2017 Plan. In January 2020, the number of shares of common stock issuable under the 2017 Plan was increased by 1,815,520 shares. As of March 31, 2020, there were 1,642,679 shares available for future issuance under the 2017 Plan.

With respect to incentive stock options, the exercise price per share will equal the fair market value of the common stock on the date of grant, and the vesting period is generally four years. Nonqualified stock options will be granted at an exercise price established by the Board at its sole discretion (which has not been less than fair market value on the date of grant) and the vesting periods may vary. Options granted under the 2017 Plan expire no later than 10 years from the date of grant. The Board may accelerate vesting or extend the expiration of granted options in the case of a merger, consolidation, dissolution, or liquidation of the Company.

Stock option activity

A summary of the options activity under the Plans is as follows:


		Weighted-
	Number	Average
	of Shares	Exercise Price

Outstanding at January 1, 2020	4,720,772	$	5.24
Granted	1,412,653		6.10
Exercised	(43,055)		2.77
Cancelled	(41,082)		8.50
Outstanding at March 31, 2020	6,049,288	$	5.44

Exercisable at March 31, 2020	2,846,100	$	4.68

The weighted-average grant date fair value of options granted during the three months ended March 31, 2020 and 2019, was $3.79 and $2.39 per share, respectively.

Cash received from the exercise of stock options was $119 and $42 for the three months ended March 31, 2020 and 2019, respectively.

Restricted stock units

In July 2019, the Company issued RSUs with service conditions to employees. The awards cliff-vest two years after the grant date. In January 2020, the Company issued 324,932 RSUs with a service condition to employees for which the vesting term is annually over four years. Vesting of these awards is contingent on the fulfillment of the service conditions during the vesting term.

A summary of the RSU activity under the 2017 Plan is as follows:


		Number
		of Shares

Unvested at January 1, 2020		447,336
Granted		324,932
Vested		—
Forfeited		(12,075)
Unvested at March 31, 2020		760,193

Stock-based compensation expense

The Company uses the provisions of ASC 718, Stock Compensation, to account for all stock-based awards to employees and nonemployees.

The measurement date for employee awards is generally the date of grant. Stock-based compensation expense is recognized over the requisite service period, which is generally the vesting period, using the straight-line method.

The following table presents stock-based compensation expense by award type included within the Company’s condensed consolidated statement of operations and comprehensive loss:


	Three months ended
	March 31,
		2020		2019
Stock options	$	1,233	$	1,094
Restricted stock units		310		—
Employee stock purchase plan		66		70
Stock-based compensation expense included in Total operating expenses	$	1,609	$	1,164

The following table presents stock-based compensation expense as reflected in the Company’s condensed consolidated statements of operations and comprehensive loss:


	Three months ended
	March 31,
		2020		2019
Research and development	$	797	$	516
General and administrative		812		648
Stock-based compensation expense included in Total operating expenses	$	1,609	$	1,164

As of March 31, 2020, there was $11,341 and $3,022 of unrecognized stock compensation expense related to unvested stock options and unvested RSUs, respectively, that is expected to be recognized over a weighted-average period of 2.5 and 2.9 years.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:


	Three months ended
	March 31,
	2020		2019
Risk-free interest rate	1.6	%	2.6	%
Expected dividend yield	—	%	—	%
Expected term (years)	6.04		6.00
Expected stock price volatility	69	%	74	%

Employee Stock Purchase Plan

During the year ended December 31, 2017, the Board adopted and the Company’s stockholders approved the 2017 employee stock purchase plan (the 2017 ESPP). The Company initially reserved 225,000 shares of common stock for issuance under the 2017 ESPP. In January 2020, the number of shares of common stock for issuance under the 2017 ESPP was increased by 450,000 shares. The Company did not issue any shares under the 2017 ESPP during the three months ended March 31, 2020 and 2019. As of March 31, 2020, there were 725,085 shares available for issuance under the 2017 ESPP.