The 2016 Long-Term Incentive Plan (the “2016 Plan”), approved by the Company’s stockholders on December 12, 2016 (the “Adoption Date”), provides for the issuance of up to 3,000,000 shares of the Company’s Common Stock reserved for issuance under the 2016 Plan plus any additional shares of the Company’s Common Stock that were available for grant under the 2008 Incentive Plan (the “2008 Plan”) at the Adoption Date or would otherwise become available for grant under the 2008 Plan as a result of subsequent termination or forfeiture of awards under the 2008 Plan. At the Company’s Annual Meeting of Stockholders held on June 25, 2019, the Company’s stockholders approved an amendment to the 2016 Plan to increase the number of shares authorized for issuance by 11,000,000 shares. At December 31, 2019, a total of 9,925,449 shares were available for new awards.

Certain inducement awards, although not awarded under the 2016 Plan or the 2008 Plan, are subject to and governed by the terms and conditions of the 2016 Plan or 2008 Plan, as applicable.

The following table provides a reconciliation of stock option activity under the Company’s equity incentive plans and for inducement awards for the year ended December 31, 2019:

	Number of options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding at January 1, 2019		8,139,377		$	2.83
Granted		5,510,432			2.19
Exercised		(223,426	)		1.85
Forfeited		(1,483,063	)		2.49
Expired		(1,033,520	)		3.39
Outstanding at December 31, 2019		10,909,800		$	2.52		7.73	$	539
Exercisable at December 31, 2019		4,718,213		$	3.05		5.98	$	46

In January 2019, the Company expanded the terms of its annual stock option grants to include vesting ratable monthly over four years, or with 25% vesting after one year followed by ratable monthly vesting over three years. Previously, the Company’s option grants generally had ratable annual vesting over three years, or 1-year cliff vesting. Nonemployee awards are granted similar to the Company’s employee awards. All option grants have a 10-year term. Options to purchase a total of 2,099,851 shares of the Company’s Common Stock vested during the year ended December 31, 2019.

In determining the grant date fair value of option awards, the key assumptions used to apply the Black-Scholes option pricing model for options granted under the 2016 Plan during the year ended December 31, 2019, the six months ended December 31, 2018 and the years ended June 30, 2018 and 2017 were as follows:

	Year Ended December 31,	Six Months Ended December 31,	Year Ended June 30,
	2019	2018	2018	2017
Option life (in years)	5.50 - 6.08	5.50 - 6.00	5.50 - 6.00	5.50 - 6.25
Stock volatility	60% - 65%	59% - 61%	59% - 64%	70% - 72%
Risk-free interest rate	1.37% - 2.63%	2.78% - 3.09%	2.18% - 2.89%	1.23% - 2.08%
Expected dividends	0.0%	0.0%	0.0%	0.0%

The following table summarizes information about employee, consultant and director stock options under the Company’s equity incentive plans for the year ended December 31, 2019, the six months ended December 31, 2018 and the years ended June 30, 2018 and 2017 (in thousands except per share amounts):

	Year Ended December 31,		Six Months Ended December 31,		Year Ended June 30,
	2019		2018		2018		2017
Weighted-average grant date fair value per share	$	0.93	$	1.37	$	1.06	$	1.95
Total cash received from exercise of stock options		414		219		503		99
Total intrinsic value of stock options exercised		84		284		152		53

Time-vested restricted stock units (“RSUs”) issued to date under the 2016 Plan generally vest on a ratable annual basis over 3 years. The related stock-based compensation expense is recorded over the requisite service period, which is the vesting period. The fair value of all time-vested RSUs is based on the closing share price of the Common Stock on the date of grant.

The following table provides a reconciliation of RSU activity under the 2016 Plan for the year ended December 31, 2019:

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2019		590,213		$	1.86
Granted		587,761			1.90
Vested		(229,294	)		1.81
Forfeited		(161,781	)		2.19
Nonvested at December 31, 2019		786,899		$	1.83

The weighted-average remaining vesting term of the RSUs at December 31, 2019 was 1.04 years.

Performance Stock Units (“PSUs”) were previously awarded under the 2016 Plan to certain employees. The performance conditions associated with the PSU awards were as follows: (a) for one third of the PSUs, upon an FDA acceptance of the Company’s NDA submission of YUTIQ for review on or before March 31, 2018 and (b) for two-thirds of the PSUs, upon an FDA approval of YUTIQ on or before March 31, 2019. For each performance criteria achieved, 50% of the PSUs associated with that performance condition vest at the achievement date and 50% vest on the first anniversary of such date, in each case subject to continued employment through such date. As a result of the achievement of the first performance condition on March 19, 2018, 48,332 PSUs vested at that date and the other 48,334 PSUs became subject only to a service-based condition with a vesting date of March 19, 2019. As a result of the achievement of the second performance condition on October 12, 2018, 96,668 PSUs vested at that date and the other 96,666 PSUs became subject only to a service-based condition with a vesting date of October 12, 2019.

In addition, there were 0 and 225,000 outstanding PSUs at December 31, 2019 and 2018, respectively, which were granted as inducement awards to the Company’s former Chief Financial Officer in connection with his hire at August 1, 2018. The PSUs are subject to proportional vesting based on cumulative measurement over a 3-year period, with two-thirds of the award based upon the achievement of defined amounts of the Company’s product revenues through June 30, 2021 and one-third of the award based upon the net present value of each applicable business development transaction, as defined, through August 1, 2021 measured as of the date that each such transaction is consummated by the Company. The Company’s former Chief Financial Officer resigned from his position on July 8, 2019 and as a result, the award was cancelled and the performance metrics for vesting were not met.

The following table provides a reconciliation of PSU activity for the year ended December 31, 2019:

	Number of Performance Stock Units			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2019		370,000		$	2.01
Vested		(115,000	)		1.45
forfeited		(255,000	)		2.26
Nonvested at December 31, 2019		—		$	—

There were 0 and 35,418 non-vested deferred stock units (“DSUs”) issued and outstanding to the Company’s non-executive directors at each of December 31, 2019 and 2018, respectively. Each DSU vests one year from the date of grant. Subsequent to vesting, the DSUs will be settled in shares of the Company’s Common Stock upon the earliest to occur of (i) each director’s termination of service on the Company’s Board of Directors and (ii) the occurrence of a change of control as defined in the award agreement. At December 31, 2019, there were 71,251 vested DSUs that have not been settled in shares of the Company’s Common Stock.

	Number of Deferred Stock Units			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2019		35,418		$	1.95
Vested		(35,418	)		1.95
Nonvested at December 31, 2019		—		$	—

At December 31, 2019 and 2018, there were 0 and 500,000 market-based RSUs (“market-based RSUs”) outstanding that were issued on September 15, 2016 as an inducement award to the Company’s President and CEO in connection with her hire. Subject to a service condition through September 15, 2019, the number of shares underlying the market-based RSUs that will vest will be based upon the determination of the relative percentile rank of the 3-year change in the closing price of the Company’s Common Stock compared to that of the companies that make up the Nasdaq Biotechnology Index over that same 3-year period. The weighted average grant date fair value of the market-based RSUs of $1.45 per share was determined using a Monte Carlo valuation model at the date of grant. Stock-based compensation has been recorded from the grant date on a straight-line basis. The performance metrics were not met for vesting through the measurement date.

On June 25, 2019, the Company’s stockholders approved the adoption of the EyePoint Pharmaceuticals, Inc. 2019 Employee Stock Purchase Plan (the “ESPP”) and authorized up to 1,100,000 shares of Common Stock reserved for issuance to participating employees. The ESPP allows qualified participants to purchase the Company’s Common Stock twice a year at 85% of the lesser of the average of the high and low sales price of the Company’s Common Stock on (i) the first trading day of the relevant offering period and (ii) the last trading day of the relevant offering period. The number of shares of the Company’s Common Stock each employee may purchase under this plan, when combined with all other employee stock purchase plans, is limited to the lower of an aggregate fair market value of $25,000 during each calendar year, or 50,000 shares of the Company’s Common Stock in any one offering period. The first six month offering period under the ESPP began on August 1, 2019 and will end on January 31, 2020. As of December 31, 2019, no shares of the Company’s Common Stock were issued pursuant to the ESPP.

The Company estimated the fair value of the option component of the ESPP shares at the date of grant using a Black-Scholes valuation model. During the year ended December 31, 2019, the compensation expense from ESPP shares was immaterial.

The Company’s statements of comprehensive loss included total compensation expense from stock-based payment awards as follows (in thousands):

	Year Ended December 31,		Six Months Ended December 31,		Year Ended June 30,
	2019		2018		2018		2017
Compensation expense included in:
Research and development	$	1,073	$	913	$	1,252	$	1,109
Sales and marketing		715		325		50		—
General and administrative		2,780		1,312		1,402		1,347
	$	4,568	$	2,550	$	2,704	$	2,456

In connection with termination benefits provided to the Company’s former Chief Executive Officer, the vesting of certain options was accelerated in accordance with the terms of the options, the exercise period for all vested options was extended for one year through September 14, 2017, and all remaining non-vested options were forfeited. Additionally, in connection with the U.K. restructuring, the exercise period of all vested options held by the former U.K. employees was extended through June 30, 2017 and all non-vested options were forfeited. These option modifications and forfeitures were accounted for in the quarter ended September 30, 2016, the net effect of which resulted in an approximate $274,000 increase of stock-based compensation expense included in general and administrative expense and an approximate $35,000 reduction of stock-based compensation expense included in research and development expense for the year ended June 30, 2017 in the table above.

In connection with termination benefits provided to the Company’s former Vice President, Corporate Affairs and General Counsel, the vesting of certain options was accelerated in accordance with the terms of the options, the exercise period for all vested options was extended for eighteen months through June 26, 2018, and all remaining non-vested options were forfeited. The option modification and forfeitures were accounted for in the quarter ended December 31, 2016, the net effect of which resulted in an approximate $104,000 reduction of stock-based compensation expense included in general and administrative expense for the year ended June 30, 2017 in the table above.

In connection with termination benefits provided to the Company’s former EVP & GM, the vesting of certain options was accelerated in accordance with the terms of the options, with an exercise period through December 26, 2018. All remaining non-vested options were forfeited. The option modifications and forfeitures were accounted for in the quarter ended September 30, 2018, the net effect of which resulted in a $171,000 increase of stock-based compensation expense included in sales and marketing for the six months ended December 31, 2018 in the table above.

At December 31, 2019, there was approximately $4.1 million of unrecognized compensation expense related to outstanding equity awards under the 2016 Plan, the 2008 Plan, The inducement awards and the ESPP that is expected to be recognized as expense over a weighted-average period of approximately 1.45 years.