6. Stock‑Based Compensation

2007 and 2015 Stock Plans

In January 2007, the Board of Directors (the Board) adopted, and our stockholders approved, our 2007 Stock Plan (the 2007 Plan), which was amended and restated on March 25, 2010 and amended on April 16, 2015. Pursuant to the 2007 Plan, stock options may be granted to employees, consultants, and outside directors of the Company. Options granted may be either incentive stock options or non-statutory stock options. Under the amended and restated 2007 Plan, the Company had reserved 15,999,289 shares of its common stock for issuance through June 30, 2015. The 2007 Plan was terminated in July 2015; however, the terms of the 2007 Plan will continue to govern any outstanding awards thereunder.

In June 2015, the Board adopted, and our stockholders approved, our 2015 Equity Incentive Plan (the 2015 Plan), which, by its terms, took effect as of the Company’s IPO. The Company reserved 3,451,495 shares of its common stock for issuance under the 2015 Plan; in addition, the Board and stockholders authorized the reservation of up to 9,890,310 shares of common stock to cover shares reserved but unissued under the 2007 Plan and shares subject to outstanding awards under the 2007 Plan that expire or lapse unexercised or shares issued under the 2007 Plan that are subsequently reacquired by the Company.

Early Exercise of Employee Options

Stock options granted under the 2007 Plan provide employee option holders the right to exercise unvested options in exchange for common stock. As of June 30, 2015, the Company had approximately 1.5 million exercised and unvested shares outstanding that are subject to a repurchase right held by the Company at the original issuance price in the event that the optionee’s employment is terminated, either voluntarily or involuntarily. Accordingly, the Company has recognized the notes receivable from officers as an offset to stockholders' equity. Generally, the repurchase right lapses on the first anniversary of the grant vesting start date for 25% of the options and in 36 equal monthly amounts for the remaining 75% thereafter.

Stock Options

The following table summarizes option activity for the six months ended June 30, 2015:


	Outstanding Options
					Weighted‑
			Weighted‑		Average
	Shares		Average		Remaining	Aggregate
	Available for	Number of	Exercise		Contractual	Intrinsic
(in thousands, except for contractual life and exercise price)	Grant	Shares	Price		Life	Value
					(In years)
Balance at December 31, 2014	294	8,463	$	2.28	8.83
Additional shares authorized	1,534
Options granted	(1,465)	1,465		8.96
Options exercised	—	(179)		1.71
Options forfeited	346	(346)		3.26
Balance at June 30, 2015	709	9,403		3.30	8.66	137,066
Exercisable at June 30, 2015		5,390		1.65	5.72	87,708
Vested and expected to vest at June 30, 2015		8,443		3.08	8.32	124,597

Stock‑Based Compensation Expense

Employee and non‑employee stock‑based compensation expense was calculated based on awards ultimately expected to vest and have been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates.

The following table presents the effect of employee and non‑employee stock‑based compensation expense on selected statements of operations line items for the three and six months ended June 30, 2015 and 2014.


	Three months ended June 30,
	2015						2014
	Employee		Non‑Employee		Total		Employee		Non‑Employee		Total
	(in thousands)
Cost of revenues	$	88	$	184	$	272	$	32	$	1	$	33
Research and development		309		11		320		94		3		97
Selling, general and administrative		926		74		1,000		282		6		288
Total	$	1,323	$	269	$	1,592	$	408	$	10	$	418


	Six months ended June 30,
	2015						2014
	Employee		Non‑Employee		Total		Employee		Non‑Employee		Total
	(in thousands)
Cost of revenues	$	149	$	206	$	355	$	97	$	4	$	101
Research and development		558		23		581		1,143		7		1,150
Selling, general and administrative		1,711		93		1,804		1,764		13		1,777
Total	$	2,418	$	322	$	2,740	$	3,004	$	24	$	3,028

As of June 30, 2015, approximately $14.8 million of unrecognized compensation expense, adjusted for estimated forfeitures, related to unvested stock options will be recognized over a weighted‑average period of approximately 2.12 years.

Valuation of Stock Option Grants to Employees

The Company estimates the fair value of its stock options granted to employees on the grant date using the Black‑Scholes option‑pricing model. The fair value of employee stock options is amortized on a straight‑line basis over the requisite service period of the awards, generally the vesting period. The fair value of employee stock options was estimated using the following assumptions (note that no grants were made during the three months ended June 30, 2014):


	Three months ended							Six months ended
	June 30,							June 30,
	2015					2014		2015					2014
Expected term	5.9		—	6.1			—	5.6		—	6.1		5.4		—	6.3
Expected volatility	72.0	%	—	73.0	%		—	72.0	%	—	73.0	%	84.4	%	—	87.0	%
Expected dividend rate				0	%		—				0	%				0	%
Risk‑free interest rate	1.84	%	—	1.88	%		—	1.56	%	—	1.88	%	1.65	%	—	1.94	%

Expected Term: The expected term of options represents the period of time that options are expected to be outstanding. The Company's historical stock option exercise experience does not provide a reasonable basis upon which to estimate an expected term due to a lack of sufficient data. For granted "at-the-money" stock options, the Company estimates the expected term by using the simplified method permitted by the Securities and Exchange Commission. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options. For stock options that are not granted "at-the-money," the Company uses the binomial lattice model to calculate the expected term.

Expected Volatility: The Company derived the expected volatility from the average historical volatilities of comparable publicly traded companies within its peer group over a period approximately equal to the expected term.

Expected Dividend Rate: The Company has not paid and does not anticipate paying any dividends in the near future.

Risk-Free Interest Rate: The risk-free interest rate assumption is based on U.S. Treasury yield in effect at the time of grant for zero coupon U. S. Treasury notes with maturities approximately equal to the expected term.