Note 10. Stock-Based Compensation

Stock Options

The Company’s 2017 Stock Incentive Plan, or the 2017 Stock Plan, became effective in August 2017 and will expire in August 2027. Under the 2017 Stock Plan, the Company may grant incentive stock options, non-statutory stock options, restricted stock awards and other stock-based awards.

As of December 31, 2019, there were 3,389,956 shares of the Company’s common stock authorized for issuance under the 2017 Stock Plan. Options granted under the 2017 Stock Plan have a term of ten years with the vesting term determined by the board of directors, which is generally four years.

The fair value of options granted during the year ended December 31, 2019 was estimated using the Black-Scholes option-pricing model with the following assumptions. Stock‑based awards to non‑employees are re‑measured at fair value each financial reporting date until performance is complete.

The weighted average fair value of options granted in 2019 and 2018 was $9.68 and $7.64 per option, respectively and were determined using the following assumptions:



	For the
	Year Ended
	December 31, 2019
Exercise price per share	$	4.14		-	$	11.28
Expected stock price volatility		78.05	%	-		79.48	%
Risk-free rate of interest		1.51	%	-		2.53	%
Fair value of grants per share	$	2.73		-	$	8.17
Expected Term (years)		5.0		-		7.0

Since the Company completed its IPO within the last year, it does not have a history of market prices of its common stock and, as such, volatility was estimated using historical volatilities of similar public companies. The expected term of the employee awards is estimated based on the simplified method, which calculates the expected term based upon the midpoint of the term of the award and the vesting period. The Company uses the simplified method because it does not have sufficient option exercise data to provide a reasonable basis upon which to estimate the expected term. The expected term of non-employee awards represents the awards contractual term. The expected dividend yield is 0% as the Company has no history of paying dividends nor does management expect to pay dividends over the contractual terms of these options. The risk-free interest rates are based on the United States Treasury yield curve in effect at the time of grant, with maturities approximating the expected term of the stock options.

The following table summarizes information about stock option activity during the period the Plan was in effect (in thousands, except share and per share data):


						Weighted Average
	Number	Weighted Average		Total		Remaining
	of	Exercise		Intrinsic		Contractual
	Shares	Price per Share		Value		Life (in years)
Outstanding as of January 1, 2019	2,744,153	$	2.33	$	7,411	8.8
Options granted	384,800	$	9.68	$	—	9.4
Options forfeited	(15,666)	$	8.53	$	—	—
Options exercised	(54,938)	$	0.41	$	—	—
Outstanding as of December 31, 2019	3,058,349	$	3.26	$	34,725	8.0

Options vested and exercisable as of December 31, 2019	2,095,252	$	1.67	$	27,104	7.8

There were 331,607 shares available for grant as of December 31, 2019.

The Company recognized stock-based compensation expense under the 2017 Stock Plan of $3,070 and $2,872 for the years ended December 31, 2019 and 2018, respectively.

Unrecognized compensation expense related to unvested awards as of December 31, 2019 was $2,772 and will be recognized over the remaining vesting periods of the underlying awards. The weighted-average period over which such compensation is expected to be recognized is 1.3 years.

BioXcel Charges

BioXcel has granted stock options to its employees under its own Equity Incentive Plan (“BioXcel Plan”). Stock-based compensation expense from the BioXcel Plan is allocated to the Company over the period over which those stock option awards vest and are based the on the percentage of time spent on Company activities compared to BioXcel activities. The BioXcel stock option awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service period. The estimated fair value of these BioXcel stock option awards was determined using the Black Scholes option pricing model on the date of grant. Significant judgment and estimates were used to estimate the fair value of these awards, as they are not publicly traded.

Stock based compensation expense, net of forfeitures, recognized by the Company in its statements of operations related to BioXcel equity awards totaled approximately $72 and $210 for the years ended December 31, 2019 and 2018, respectively.

Total stock based compensation charges were approximately $3,142 and $3,082 for the years ended December 31, 2019 and 2018, respectively. The Company charged $1,791 and 1,351 to research and development and general and administrative expense for the year ended December 31, 2019, respectively. The Company charged $1,843 and 1,239 to research and development and general and administrative expense for the year ended December 31, 2018, respectively.