Note 11. Stock-Based Compensation

As of September 30, 2019, the only equity compensation plans from which the Company may currently issue new awards are the Company’s 2013 Stock Incentive Plan (as amended to date, the “2013 Plan”) and 2017 Employee Stock Purchase Plan (as amended to date, the “2017 ESPP”), each as more fully described below.

Equity Incentive and Employee Stock Purchase Plans

2013 Stock Incentive Plan

The Company's board of directors adopted the 2013 Plan, which was approved by the Company’s stockholders effective July 26, 2013. Amendments to the 2013 Plan were approved by the Company’s stockholders in June 2014, June 2015, June 2017 and June 2019. The 2013 Plan is intended to further align the interests of the Company and its stockholders with its employees, including its officers, non-employee directors, consultants and advisers by providing equity-based incentives. The 2013 Plan allows for the issuance of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, other stock-based awards and performance awards. The total number of shares of common stock authorized for issuance under the 2013 Plan is 5,653,057 shares of the Company’s common stock, plus such additional number of shares of common stock (up to 868,372 shares) as is equal to the number of shares of common stock subject to awards granted under the Company’s 2005 Stock Incentive Plan or 2008 Stock Incentive Plan (the “2008 Plan”), to the extent such awards expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right.

As of September 30, 2019, options to purchase a total of 3,567,161 shares of common stock and 193,625 restricted stock units were outstanding and up to 2,141,103 shares of common stock remained available for grant under the 2013 Plan. The Company has not made any awards pursuant to other equity incentive plans, including the 2008 Plan, since the Company’s stockholders approved the 2013 Plan. As of September 30, 2019, options to purchase a total of 433,470 shares of common stock were outstanding under the 2008 Plan.

In addition, as of September 30, 2019, non-statutory stock options to purchase an aggregate of 393,750 shares of common stock were outstanding. These options were issued outside of the 2013 Plan to certain newly-hired employees in 2017, 2015 and 2014 pursuant to the Nasdaq inducement grant exception as a material component of such new hires’ employment compensation.

Note 11. Stock-Based Compensation (Continued)

2017 Employee Stock Purchase Plan

The Company’s board of directors adopted the 2017 ESPP, which was approved by the Company’s stockholders and became effective on June 7, 2017. An amendment to the 2017 ESPP was approved by the Company’s stockholders in June 2019. The 2017 ESPP is intended to qualify as an "employee stock purchase plan" as defined in Section 423 of the Internal Revenue Code, and is intended to encourage our employees to become stockholders of ours, to stimulate increased interest in our affairs and success, to afford employees the opportunity to share in our earnings and growth and to promote systematic savings by them. The total number of shares of common stock authorized for issuance under the 2017 ESPP is 412,500 shares of common stock, subject to adjustment as described in the 2017 ESPP. Participation is limited to employees that would not own 5% or more of the total combined voting power or value of the stock of the Company after the grant. As of September 30, 2019, 337,053 shares remained available for issuance under the 2017 ESPP.

For the nine months ended September 30, 2019 and 2018, the Company issued 45,241 and 18,355 shares of common stock, respectively, under the 2017 ESPP and received proceeds of $0.1 million and $0.2 million respectively, as a result of employee stock purchases.

Accounting for Stock-based Compensation

The Company recognizes non-cash compensation expense for stock-based awards under the Company’s equity incentive plans over an award’s requisite service period, or vesting period, using the straight-line attribution method, based on their grant date fair value determined using the Black-Scholes option-pricing model. The Company also recognizes non-cash compensation for stock purchases made under the 2017 ESPP. The fair value of the discounted purchases made under the Company’s 2017 ESPP is calculated using the Black-Scholes option-pricing model. The fair value of the look-back provision plus the 15% discount is recognized as compensation expense over each plan period.

Total stock-based compensation expense attributable to stock-based payments made to employees and directors and employee stock purchases included in operating expenses in the Company's statements of operations for the three and nine months ended September 30, 2019 and 2018 was as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2019		2018		2019		2018
Stock-based compensation:
Research and development
Employee Stock Purchase Plan	$	9	$	11	$	27	$	62
Equity Incentive Plan		328		303		978		1,379
	$	337	$	314	$	1,005	$	1,441
General and administrative
Employee Stock Purchase Plan	$	4	$	8	$	18	$	40
Equity Incentive Plan		622		981		1,845		2,949
	$	626	$	989	$	1,863	$	2,989
Restructuring costs
Equity Incentive Plans	$	—	$	24	$	—	$	24
	$	—	$	24	$	—	$	24
Total stock-based compensation expense	$	963	$	1,327	$	2,868	$	4,454

During the nine months ended September 30, 2019 and 2018, the weighted average fair market value of stock options granted was $1.65 and $7.15, respectively.

Note 11. Stock-Based Compensation (Continued)

The following weighted average assumptions apply to the options to purchase 1,259,016 and 1,091,474 shares of common stock granted to employees and directors during the nine months ended September 30, 2019 and 2018, respectively:


	Nine Months Ended
	September 30,
	2019		2018
Average risk-free interest rate		2.1%		2.5%
Expected dividend yield		—		—
Expected lives (years)		3.8		3.8
Expected volatility		83.7%		74.0%
Weighted average exercise price (per share)	$	2.76	$	12.91

All options granted during the nine months ended September 30, 2019 and 2018 were granted at exercise prices equal to the fair market value of the common stock on the dates of grant.

Stock Option Activity

The following table summarizes stock option activity for the nine months ended September 30, 2019:


($ in thousands, except per share data)	Stock Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2018	3,304,531	$	18.42	6.6	$	—
Granted	1,259,016		2.76
Exercised	—		—
Forfeited	(60,595)		13.36
Expired	(108,571)		27.48
Outstanding at September 30, 2019 (1)	4,394,381	$	13.77	7.0	$	279
Exercisable at September 30, 2019	2,311,989	$	20.34	5.1	$	—

(1)

Includes both vested stock options as well as unvested stock options for which the requisite service period has not been rendered but that are expected to vest based on achievement of a service condition.

The fair value of options that vested during the nine months ended September 30, 2019 was $3.7 million. As of September 30, 2019, there was $6.3 million of unrecognized compensation cost related to unvested options, which the Company expects to recognize over a weighted average period of 2.5 years.

Restricted Stock Activity

The following table summarizes restricted stock activity for the nine months ended September 30, 2019:


($ in thousands, except per share data)	Number of Shares	Weighted-Average Grant Date Fair Value
Nonvested shares at December 31, 2018	—	$	—
Granted	194,550		3.14
Cancelled	(925)		3.14
Vested	—		—
Nonvested shares at September 30, 2019	193,625	$	3.14

As of September 30, 2019, there was $0.5 million of unrecognized compensation expense related to the restricted stock units, which is expected to be recognized over a weighted-average period of 3.3 years.