6. Stockholders’ Equity and Stock-Based Compensation

Common Stock Warrants

In connection with a private placement of the Company’s common stock, par value $0.001 per share, in 2014, the Company issued warrants as compensation to the placement agent to purchase a total of 299,625 shares of its common stock at a price of $2.67 per share (the Private Placement Warrants). The Private Placement Warrants are exercisable for period of seven years from issuance. As of March 31, 2020, a total of 46,238 of Private Placement Warrants were outstanding. In connection with the closing of the Company’s initial public offering in 2016, the Company issued warrants as compensation to its underwriters to purchase a total of 574,985 shares of its common stock at a price of $5.00 per share (the IPO Warrants). The IPO Warrants are exercisable for a period of five years from issuance. As of March 31, 2020, a total of 121,609 of the IPO Warrants were outstanding.

Equity Plans

2017 Equity Incentive Plan and 2017 Inducement Equity Incentive Plan

The Board of Directors of the Company (the Board) previously adopted, and the Company’s stockholders approved, the Company’s 2017 Equity Incentive Plan (the 2017 Plan).

The 2017 Plan has a 10-year term, and provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and performance shares to employees, directors and consultants of the Company and any parent or subsidiary of the Company, as the Compensation Committee of the Board may determine. Subject to an annual evergreen increase and adjustment in the case of certain capitalization events, the Company initially reserved 1,500,000 shares of the Company’s common stock for issuance pursuant to awards under the 2017 Plan. In addition, shares remaining available under the Company’s 2015 Equity Incentive Plan, as amended (the 2015 Plan), and shares reserved but not issued pursuant to outstanding equity awards that expire or terminate without being exercised or that are forfeited or repurchased by the Company will be added to the shares of common stock available for issuance under the 2017 Plan. The 2017 Plan is administered by the Board’s Compensation Committee. Effective January 1, 2020, the Company’s Board authorized an increase in the number of shares of common stock available under the 2017 Plan increased by 833,018 shares pursuant to the evergreen provision of the 2017 Plan. Pursuant to the 2017 Plan, the 2019 share increase is determined based on the least of (i) 1,200,000 shares, (ii) 4% of the Company’s common stock outstanding at December 31 of the immediately preceding year, or (iii) such number of shares as determined by the Board. As of March 31, 2020, 1,721,093 shares of common stock remained available for issuance under the 2017 Plan.

During November 2017, the Board adopted the 2017 Inducement Equity Incentive Plan (the Inducement Plan) and reserved 1,000,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. The Inducement Plan was adopted without stockholder approval.

The Inducement Plan has a 10-year term, and provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the 2017 Plan, including with respect to treatment of equity awards in the event of a “merger” or “change in control” as defined under the Inducement Plan. Options issued under the Inducement Plan may have a term up to ten years and have variable vesting provisions. New hire grants generally vest 25% annual starting upon the first anniversary of the grant. Equity-based awards issued under the Inducement Plan are only issuable to individuals not previously engaged as employees or non-employee directors of the Company prior to the Inducement Plan’s adoption date. As of March 31, 2020, 8,492 shares of common stock remained available for issuance under the Inducement Plan.

Certain stock options awarded to the Company’s executives contain performance conditions related to certain financial measures and achievements of strategic/operational milestones (performance options). As of March 31, 2020, it is not probable that these performance conditions will be achieved and accordingly no stock compensation has been recorded for these performance options to date.

2017 Employee Stock Purchase Plan

The Board previously adopted and the stockholders approved the Company’s 2017 Employee Stock Purchase Plan (the 2017 ESPP).

The 2017 ESPP is a broad-based plan that provides employees of the Company and its designated affiliates with the opportunity to become stockholders through periodic payroll deductions that are applied towards the purchase of Company common shares at a discount from the then-current market price. Subject to adjustment in the case of certain capitalization events, a total of 250,000 common shares of the Company were available for purchase at adoption of the 2017 ESPP. Pursuant to the 2017 ESPP, the annual share increase pursuant to the evergreen provision is determined based on the least of (i) 450,000 shares, (ii) 1.5% of the Company’s common stock outstanding at December 31 of the immediately preceding year, or (iii) such number of shares as determined by the Board. During January 2019, the Board determined not to increase the number of shares of common stock available under the 2017 ESPP pursuant to the evergreen provision of the 2017 ESPP. During the three-month period ended March 31, 2020, the Company issued 43,224 shares of common stock under the 2017 ESPP. As of March 31, 2020, 396,971 shares of common stock remained available for issuance under the 2017 ESPP.

A summary of stock option activity under the 2015 Plan, 2017 Plan and Inducement Plan for the three-month period ended March 31, 2020 is presented below:


	Stock Options Outstanding
			Weighted
	Number		average
	of shares		exercise price
Balances — December 31, 2019	3,749,186	$	16.18
Options granted	178,000
Options exercised	(750)
Options canceled	(12,855)
Options expired	(21,974)
Balances — March 31, 2020	3,891,607	$	15.67
Exercisable — March 31, 2020	2,301,566	$	16.48

The table above excludes 69,375 performance stock options granted for which the performance criteria had not been established as of March 31, 2020.

Stock-based Compensation

Total stock-based compensation expense consisted of the following (in thousands):



	Three-Month Periods Ended
	March 31,
	2020		2019
General and administrative	$	1,749	$	1,485
Research and development		877		876
Total stock-based compensation expense	$	2,626	$	2,361

The Company estimated the fair value of employee stock options on the grant date using the Black-Scholes option pricing model. The estimated fair value of employee stock options is amortized on a straight-line basis over the requisite service period of the awards. The Company reviews and, when deemed appropriate, updates the assumptions used on a periodic basis. Due to the limited trading history of the Company’s common stock, the Company utilizes a portfolio of comparable companies to estimate volatility. The fair value of employee stock options was estimated using the following weighted-average assumptions:


	Three-Month Periods Ended March 31,
	2020	2019
Expected term in years	6.1	0.4 - 6.1
Expected volatility	70%	70%
Risk-free interest rate	0.4% - 1.7%	2.4% - 2.7%
Dividend yield	—	—

The Company estimated the fair value of ESPP on the grant date using the Black-Scholes option pricing model. The estimated fair value of ESPP is amortized on a straight-line basis over the requisite service period of the awards. The Company reviews and, when deemed appropriate, updates the assumptions used on a periodic basis. The Company utilizes its estimated volatility in the Black-Scholes option pricing model to determine the fair value of ESPP. The fair value of ESPP was estimated using the following weighted-average assumptions:


	Three-Month Periods Ended March 31,
	2020	2019
Expected term in years	0.5 - 1.0	0.5 - 1.0
Expected volatility	70%	70%
Risk-free interest rate	0.9% - 1.0%	2.5% - 2.6%
Dividend yield	—	—

The fair value of restricted stock unit (RSUs) awards is determined based on the number of units granted and the closing price of the Company’s common stock as of the grant date. The estimated fair value of RSUs is recognized on a straight-line basis over the requisite service period.