10. Equity Incentive Plans

2019 Equity Incentive Plan

The Company’s board of directors adopted and our stockholders approved our 2019 Equity Incentive Plan, (the “2019 Plan”), on June 2, 2019, and June 7, 2019, respectively. The 2019 Plan became effective on June 19, 2019, and no further grants will be made under the Company’s 2010 Equity Incentive Plan. The purpose of the 2019 Plan, through the grant of stock awards including stock options and other stock-based awards, including restricted stock units (“RSUs”), is to help us secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for our success and that of our affiliates, and provide a means by which the eligible recipients may benefit from increases in the value of our Class A common stock. Under the 2019 Plan, 6,141,842 shares of the Company’s Class A common stock have been reserved for issuance to employees, directors and consultants. Additionally, the number of shares of our Class A common stock reserved for issuance under our 2019 Plan will automatically increase on January 1 of each year, beginning on January 1, 2020 and continuing through and including January 1, 2029, by 4% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our board of directors.

Stock option activity under the Plan is as follow:


	Options Outstanding
				Weighted-
				Average	Aggregate
		Weighted-		Remaining	Intrinsic
	Number	Average		Contractual	Value
	of Shares	Exercise Price		Life (years)	(in thousands)
Balances, December 31, 2019	3,742,144	$	9.58	8.6	$	22,910
Granted*	636,000		22.02
Exercised	(86,872)		4.82
Cancelled	(6,690)		11.43
Balances, March 31, 2020	4,284,582	$	11.52	8.6	$	25,368
Vested and expected to vest at March 31, 2020	4,284,582	$	11.52	8.6	$	25,368
Exerciseable at March 31, 2020	1,888,288	$	6.65	7.8	$	18,813
Vested at March 31, 2020	1,374,666	$	7.21	7.7	$	12,954

* The board of directors of the Company approved the grant of 564,800 stock options on February 26, 2020. As the Company prioritized other communications including COVID-19 related matters, the terms of the 564,800 stock options were not communicated until April 2020. As a result, the Company excluded these options from the computation of expense and option activity in the quarter ended March 31, 2020. These options will be included in the second Quarterly Report on Form 10-Q.

The weighted‑average grant date fair value of options granted to employees and non‑employees in the three months ended March 31, 2020 and 2019 was $15.63 and $8.46, respectively. The fair value of each option is estimated on the date of grant using the Black‑Scholes option pricing model, assuming no expected dividends and the following weighted average assumptions:


	Three Months Ended March 31,
	2020		2019
Expected life (in years)	5.95		6.02
Volatility	84.9	%	80.8	%
Risk-free interest rate	1.19	%	2.46	%

Expected volatility is based on volatilities of public companies operating in the Company’s industry. The expected life of the options is estimated using the simplified method detailed in SEC Staff Accounting Bulletin No. 107. The simplified method calculates the expected term as the mid-point between the weighted-average time to vesting and the contractual maturity. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures.

2019 Employee Stock Purchase Plan

The Company’s board of directors adopted the 2019 Employee Stock Purchase Plan, (“ESPP”), on June 2, 2019, and the Company’s stockholders approved the ESPP on June 7, 2019. The ESPP became effective on June 19, 2019. The Company’s board of directors authorized 283,333 shares of Class A common stock to be reserved for future issuance under the ESPP. The number of shares of our Class A common stock reserved for issuance will automatically increase on January 1 of each calendar year, from January 1, 2020 through January 1, 2029, by the lesser of (1) 1% of the total number of shares of our Class A common stock outstanding on December 31 of the preceding calendar year, and (2) 416,666 shares; provided, that prior to the date of any such increase, the Company’s board of directors may determine that such increase will be less than the amount set forth in clauses (1) and (2). During the three months ended March 31, 2020, the expense related to the ESPP was $163,000. The fair value of each ESPP is estimated on the date of grant using the Black‑Scholes option pricing model, assuming no expected dividends and the following range of assumptions:


	Three Months Ended March 31,
	2020
Expected life (in years)	0.5 - 2.0
Volatility	91.4 - 106.8	%
Risk-free interest rate	0.86 - 1.11	%

The Company recognized $2,482,000 and $776,000 of stock‑based compensation expense related to options and ESPP granted to employees and non‑employees for the three months ended March 31, 2020 and 2019, respectively. The compensation expense is allocated on a departmental basis, based on the classification of the option holder as follows (in thousands):


	Three Months Ended March 31,
	2020		2019
Research and development	$	1,058	$	419
General and administrative		1,424		357
	$	2,482	$	776

No income tax benefits have been recognized in the statements of operations for stock‑based compensation arrangements and no stock‑based compensation costs have been capitalized as property and equipment as of March 31, 2020.

Unrecognized estimated compensation expense as of March 31, 2020 totaled $27.5 million related to non‑vested stock options with a remaining requisite service period of 3.1 years.