We adopted an equity incentive plan in 2009 (“2009 Plan”) that provides for the issuance of incentive and nonqualified common stock options, and other share-based awards for employees, directors and consultants. Under the 2009 Plan, the option exercise price for incentive and nonqualified stock options may not be less than the fair market value of our common stock at the date of grant as determined by our Board of Directors. Options expire no later than ten years from the grant date, and vesting is established at the time of grant. As of June 30, 2019, we have 20,837,404 shares of common stock available for issuance under the 2009 Plan.

A summary of our option activity during the six months ended June 30, 2019 is as follows:

	Shares Available for Grant			Shares Subject to Outstanding Options			Weighted- Average Exercise Price per Share		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2018		6,827,996			14,893,253		$	4.59	$	39,864
Options granted (unaudited)		(3,890,331	)		3,890,331			7.55
Forfeited or cancelled (unaudited)		218,303			(218,303	)		6.19
Exercised (unaudited)		—			(883,845	)		2.13
Outstanding at June 30, 2019 (unaudited)		3,155,968			17,681,436			5.35		759,479

In connection with our acquisition of Sequenta in January 2015, we assumed Sequenta’s Equity Incentive Plan (“2008 Plan”), including all outstanding options and shares available for future issuance under the 2008 Plan, which are all exercisable for Series E-1 convertible preferred stock.

A summary of our Series E-1 convertible preferred stock option activity during the six months ended June 30, 2019 is as follows:

	Convertible Preferred Shares Subject to Outstanding Options			Weighted- Average Exercise Price per Share		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2018		264,677		$	0.44	$	1,826
Options granted (unaudited)		—			—
Forfeited or cancelled (unaudited)		—			—
Exercised (unaudited)		(249,643	)		0.44
Outstanding at June 30, 2019 (unaudited)		15,034			0.49		719

The estimated fair value of options granted during the six months ended June 30, 2019 and 2018 was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions for our 2009 Plan:

	Adaptive 2009 Equity Incentive Plan
	Six Months Ended June 30,
	2019			2018
	(unaudited)
Grant date fair value	$	8.55		$	6.55
Expected term (in years)		6.06			6.16
Risk-free interest rate		2.4	%		2.7	%
Expected volatility		67.9	%		69.2	%
Expected dividend yield		—			—

The determination of the fair value of stock options on the date of grant using a Black-Scholes option-pricing model is affected by the estimated fair value of our common stock, as well as assumptions regarding a number of variables that are complex, subjective and generally require significant judgment to determine. The valuation assumptions were determined as follows:

Fair value of common stock—The grant date fair value of our common stock has been determined by our Board of Directors with input from management. The grant date fair value of the common stock was determined using valuation methodologies which utilize certain assumptions, including probability weighting of events, volatility, time to liquidation, a risk-free interest rate and an assumption for a discount for lack of marketability (Level 3 inputs). In determining the fair value of the common stock, the methodologies used to estimate the enterprise value were performed using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. For valuations after the closing of our IPO, our board of directors plans to determine the fair value of each share of common stock based on the closing price of our common stock on the date of grant or other relevant determination date, as reported on The Nasdaq Global Select Market.

Expected term—The expected life of options granted to employees is determined using the “simplified” method, as illustrated in ASC Topic 718, Compensation—Stock Compensation, as we do not have sufficient exercise history to determine a better estimate of expected term. Under this approach, the expected term is presumed to be the average of the weighted-average vesting term and the contractual term of the option.

Risk-free interest rate—We utilize a risk-free interest rate in the option valuation model based on U.S. Treasury zero-coupon issues, with remaining terms similar to the expected term of the options.

Expected volatility—As we do not have sufficient trading history for our common stock, the expected volatility is based on the historical volatility of our publicly traded industry peers utilizing a period of time consistent with our estimate of the expected term.

Expected dividend yield—We do not anticipate paying any cash dividends in the foreseeable future and, therefore, use an expected dividend yield of zero in the option valuation model.

Share-based compensation expense of $3.3 million and $2.4 million was recognized during the three months ended June 30, 2019 and 2018, respectively, and $6.4 million and $5.6 million was recognized during the six months ended June 30, 2019 and 2018, respectively. The compensation costs related to stock options are included in our unaudited condensed statements of operations as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(unaudited)
Cost of revenue	$	113	$	92	$	243	$	176
Research and development		978		652		1,895		1,468
Sales and marketing		943		592		1,849		1,549
General and administration		1,298		1,112		2,391		2,357
Total share-based compensation expense	$	3,332	$	2,448	$	6,378	$	5,550

At June 30, 2019, unrecognized share-based compensation expense related to unvested stock options was $33.2 million, which is expected to be recognized over a remaining weighted-average period of 3.16 years.