Note

- Stock-Based Compensation

As of

September 30, 2019,

the Company had

three

stock-based employee compensation plans, the Amended and Restated Stock Incentive Plan (“Incentive Plan”), the Inducement Equity Incentive Plan (“Inducement Plan”) and the Employee Stock Purchase Plan (“ESPP”). The Incentive Plan was amended and restated on

April 19, 2019

and approved by the Company’s stockholders on

May 29, 2019.

The Inducement Plan was adopted by the Board of Directors on

April 24, 2019.

The ESPP was amended and restated in

March 2014

and approved by the Company’s stockholders in

May 2014.

Stock-based compensation expense of

$14,031

(

$13,635

of expense related to the Incentive Plan,

$164

of expense related to the Inducement Plan and

$232

of expense related to the ESPP) was recognized during the

first

nine

months of

2019,

while

$7,072

(

$6,899

of expense related to the Incentive Plan and

$173

of expense related to the ESPP) was recognized during the

first

nine

months of

2018.

There was approximately

$25,703

of total unrecognized compensation cost related to non-vested stock option awards granted by the Company as of

September 30, 2019.

That cost is expected to be recognized as follows:

$3,741

during the remainder of

2019,

$8,976

2020,

$6,981

2021,

$5,577

2022

and

$428

2023.

In addition, the Company has outstanding performance-based stock options for which

compensation expense is recognized until “performance” becomes probable.

Stock Incentive Plan

The Company grants stock option awards and restricted stock unit awards to its employees, directors, and consultants under the Incentive Plan. Under the Incentive Plan, stock option awards are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock option awards and restricted stock units granted to employees generally vest

25%

each year until fully vested after

four

years. In

August 2013

and

December 2014,

the Company issued

1,032

and

1,250

performance-based stock options, respectively. These awards vest upon successful completion of specific development milestones. As of

September 30, 2019,

75%

of the

August 2013

grants have vested based upon achievement of

three

milestones and

30%

of the

December 2014

grants have vested based upon achievement of a single milestone. During the

first

nine

months of

2019,

the Company recognized

$4,438

of stock compensation expense related to

two

milestones within the

December 2014

grants for which achievement became probable. Stock option awards granted to non-employee directors of the Company generally vest over

one

year. All stock option awards have contractual terms of

years. The vesting and exercise provisions of all awards granted under the Incentive Plan are subject to acceleration in the event of certain stockholder-approved transactions, or upon the occurrence of a change in control as defined in the Incentive Plan.

Related activity under the Incentive Plan is as follows:

	Awards Available			Options Outstanding			Weighted Average Exercise Price
Balance December 31, 2018		805			17,491		$	6.49
Plan amendment		4,000			—			—
Stock option awards granted		(866	)		866			6.72
Stock option awards exercised		—			(251	)		3.75
Stock option awards cancelled		124			(124	)		7.25
Balance September 30, 2019		4,063			17,982		$	6.53

For stock option awards granted under the Incentive Plan during the

first

nine

months of

2019

and

2018,

the fair value was estimated on the date of grant using a Black-Scholes option pricing model and the assumptions noted in the table below. The weighted average grant date fair value per share of the awards granted during the

first

nine

months of

2019

and

2018

was

$4.57

and

$4.22,

respectively. The fair value of the stock option awards is amortized to expense over the vesting periods using a straight-line expense attribution method.

Inducement Equity Incentive Plan

The Company has the ability to grant stock option awards to newly-hired employees as inducements material to each employee entering employment with the Company. Stock option awards granted to newly hired employees generally vest

25%

each year until fully vested after

four

years. Each stock option has a term of

years and is subject to the terms and conditions of the Inducement Equity Incentive Plan. The vesting and exercise provisions of all awards granted under the Inducement Equity Incentive Plan are subject to acceleration in the event of certain stockholder-approved transactions, or upon the occurrence of a change in control as defined in the Inducement Equity Incentive Plan.

During the

nine

months ended

September 30, 2019,

the Company’s Board of Directors approved the issuance of

999

options to newly hired employees. The options were granted with an exercise price equal to the Company’s market price on the respective dates of grant. The fair value was estimated on the date of grant using a Black-Scholes option pricing model and the assumptions noted in the table below. The weighted average grant date fair value of these stock option awards was

$2.72.

The weighted-average exercise price of the inducement grants issued during the

nine

months ended

September 30, 2019

was

$4.03.

The following table summarizes the key assumptions used by the Company to value the stock option awards granted during the

first

nine

months of

2019

and

2018.

The expected life is based on the average of the assumption that all outstanding stock option awards will be exercised at full vesting and the assumption that all outstanding stock option awards will be exercised at the midpoint of the current date (if already vested) or at full vesting (if

not

yet vested) and the full contractual term. The expected volatility represents the historical volatility on the Company’s publicly traded common stock. The Company has assumed

expected dividend yield, as dividends have never been paid to stock or option holders and will

not

be paid for the foreseeable future. The weighted average risk-free interest rate is the implied yield currently available on

zero

-coupon government issues with a remaining term equal to the expected term.

Weighted Average Assumptions for Stock Option Awards Granted to

Employees and Directors under the Plans

	2019			2018
Expected Life in Years		5.5			5.5
Expected Volatility		81.0	%		82.0	%
Expected Dividend Yield		0.0	%		0.0	%
Risk-Free Interest Rate		2.0	%		2.8	%

Employee Stock Purchase Plan (“ESPP”)

The Company has reserved a total of

1,475

shares of common stock to be purchased under the ESPP, of which

119

shares remain available for purchase at

September 30, 2019.

Eligible employees

may

authorize up to

15%

of their salary to purchase common stock at the lower of

85%

of the beginning or

85%

of the ending price during

six

-month purchase intervals.

more than

may

be purchased by any

one

employee at the

six

-month purchase dates and

employee

may

purchase stock having a fair market value at the commencement date of

$25

or more in any

one

calendar year. The Company issued

115

shares during the

first

nine

months of

2019

under the ESPP. Compensation expense for shares purchased under the ESPP related to the purchase discount and the “look-back” option were determined using a Black-Scholes option pricing model.