7. Stock-Based Compensation

2016 Equity Incentive Plan

On April 5, 2016, the day preceding the effectiveness of the Registration Statement, the 2016 Equity Incentive Plan (the “2016 Plan”) became effective and serves as the successor to the 2015 Equity Incentive Plan (the “2015 Plan”). Under the 2016 Plan, the Company may grant stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards, and stock bonuses. A total of 1,100,000 shares of common stock were reserved for issuance under the 2016 Plan. The shares reserved exclude shares of common stock reserved for issuance under the 2015 Plan. Shares totaling 509,869 that were remaining under the 2015 Plan were added to the shares initially reserved under the 2016 Plan upon its effectiveness. In addition, the number of shares of stock available for issuance under the 2016 Plan may be increased each January 1, beginning on January 1, 2017 and continuing through 2023, by 4% of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31 or such lesser number as determined by the Company’s board of directors. No further stock option or other awards may be granted under the 2015 Plan.

2016 Employee Stock Purchase Plan

On April 6, 2016, upon the effectiveness of the Registration Statement, the 2016 Employee Stock Purchase Plan (the “2016 ESPP”) became effective. A total of 165,000 shares of common stock were reserved for issuance under the 2016 ESPP. Eligible employees may purchase shares of common stock under the 2016 ESPP at 85% of the lower of the fair market value of the Company’s common stock as of the first or the last day of each offering period. Employees are limited to contributing 15% of the employee’s eligible compensation, and may not purchase more than $25,000 of stock during any calendar year or more than 2,000 shares during any one purchase period or a lesser amount determined by the board of directors. The 2016 ESPP will terminate ten years from the first purchase date under the plan, unless terminated earlier by the board of directors. As of June 30, 2016, no shares had been issued from the ESPP and 165,000 shares were available for issuance under the 2016 ESPP.

Stock Options

In May 2016, the Company’s board of directors approved the modification of 542,392 outstanding stock options for 21 employees to align the vesting schedule of existing awards with the Company’s planned vesting schedule for future awards. The result was an acceleration of vesting for the modified awards. Stock options with a five year vesting schedule and 25% vesting after year two and 6.25% quarterly thereafter were modified to a four year vesting schedule with 25% vesting after year one and 2.08% monthly thereafter. Stock options with a four year vesting schedule and 25% vesting after year one and 6.25% quarterly thereafter were modified to a similar four year vesting schedule with 25% vesting after year one and 2.08% monthly thereafter. The modified awards have service conditions only.

In accordance with ASC 718, the Company determined the fair value of the awards immediately before the modification and compared that amount to the then fair value of the modified awards. Given there was no incremental fair value in connection with the modification of the awards, the Company will continue to recognize the compensation expense originally estimated for the stock options at the date of grant over the modified service period. The Company recognized $89,000 in cumulative expense as of the modification date related to changes in the service period for the modified awards.

During the three months ended June 30, 2016 and 2015, the Company issued an aggregate of 635,800 and 544,059 options, respectively, to purchase common stock under its equity incentive plans for an aggregate fair value of $3.4 million and $2.0 million , respectively.

During the six months ended June 30, 2016 and 2015, the Company issued an aggregate of 720,217 and 644,505 options, respectively, to purchase common stock under its equity incentive plans for an aggregate fair value of $3.7 million and $2.1 million, respectively.

Total stock-based compensation expense related to the Company’s equity incentive plans and 2016 ESPP was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Research and development	$	156	$	72	$	210	$	86
General and administrative		233		74		319		98
Total stock-based compensation expense	$	389	$	146	$	529	$	184

The following table summarizes the weighted-average Black-Scholes option pricing model assumptions used to estimate the fair value of stock options granted under the 2016 Plan and 2015 Plan and the shares purchasable under the 2016 ESPP during the periods presented:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
2016 Plan and 2015 Plan
Expected term		6.00			6.29			6.00			6.29
Expected volatility		87	%		87	%		87	%		87	%
Risk-free interest		1.29	%		1.37	%		1.29	%		1.37	%
Dividend yield		0	%		0	%		0	%		0	%

2016 ESPP
Expected term		0.36			—			0.36			—
Expected volatility		85	%		—			85	%		—
Risk-free interest		0.36	%		—			0.36	%		—
Dividend yield		0	%		—			0	%		—