8. STOCKHOLDERS’ EQUITY

Sales Agreement

On August 28, 2015, we entered into an At Market Issuance Sales Agreement, or the 2015 Sales Agreement, with MLV & Co. LLC, or MLV, pursuant to which we may elect to issue and sell shares of our common stock having an aggregate offering price of up to $50,000,000 from time to time into the open market at prevailing prices through MLV as our sales agent. We will pay MLV an aggregate commission rate equal to up to 3.0% of the gross proceeds of the sales price per share for common stock sold through MLV under the 2015 Sales Agreement. Pursuant to the 2015 Sales Agreement, sales of common stock will be made in such quantities and on such minimum price terms as we may set from time to time. We are not obligated to make any sales of common stock under the 2015 Sales Agreement. In December 2017, we sold an aggregate of 614,230 shares of our common stock pursuant to the 2015 Sales Agreement, resulting in net cash proceeds of approximately $1,060,000 after deducting sales commissions and offering expenses payable by us. The 2015 Sales Agreement will expire in August 2018 unless extended by the parties.

Warrants

In connection with each disbursement under a previous loan agreement with the California Institute for Regenerative Medicine, or CIRM, we were obligated to issue to CIRM a warrant to purchase Geron common stock. Such warrants and the underlying common stock were unregistered. We have no further obligations to issue any additional warrants to CIRM. As of December 31, 2017, a warrant to purchase 537,893 shares of our common stock remained outstanding. The warrant was issued to CIRM in August 2011 at an exercise price of $3.98 per share and expires in August 2021.

On March 31, 2015, a warrant to purchase 235,000 shares of our common stock was exercised at an exercise price of $3.75 per share. We received cash proceeds of approximately $881,000 from the exercise of this warrant.

8. STOCKHOLDERS’ EQUITY (Continued)

Equity Plans

2002 Equity Incentive Plan

The 2002 Equity Incentive Plan, or 2002 Plan, expired in May 2012. Upon the adoption of the 2011 Incentive Award Plan in May 2011 (see below), no further grants of options or stock purchase rights were made from the 2002 Plan. Options granted under the 2002 Plan expire no later than ten years from the date of grant. Option exercise prices were equal to 100% of the fair market value of the underlying common stock on the date of grant. Service‑based stock options under the 2002 Plan generally vested over a period of four years from the date of the option grant. Other stock awards (restricted stock awards and restricted stock units) had variable vesting schedules which were determined by our board of directors on the date of grant. All outstanding awards granted under the 2002 Plan remain subject to the terms of the 2002 Plan and the individual award agreements thereunder.

2011 Incentive Award Plan

In May 2011, our stockholders approved the adoption of the 2011 Incentive Award Plan, or 2011 Plan. Our board of directors administers the 2011 Plan. The 2011 Plan provides for grants of either incentive stock options or nonstatutory stock options and stock purchase rights to employees (including officers and employee directors) and consultants (including non‑employee directors). As of December 31, 2017, an aggregate of 6,202,727 shares of our common stock were available for future grants of equity awards under the 2011 Plan. Pursuant to the terms of the 2011 Plan, any shares subject to outstanding stock options or outstanding unvested restricted stock awards originally granted under the 2002 Plan that expire or terminate for any reason prior to exercise or settlement or are forfeited because of the failure to meet a contingency or condition required to vest such shares shall become available for issuance under the 2011 Plan. Options granted under the 2011 Plan expire no later than ten years from the date of grant. Option exercise prices shall be equal to the fair market value of the underlying common stock on the date of grant. If, at the time we grant an option, the optionee directly or by attribution owns stock possessing more than 10% of the total combined voting power of all classes of our stock, the option exercise price shall be at least 110% of the fair market value of the underlying common stock and shall not be exercisable more than five years after the date of grant.

We grant service‑based stock options to employees under our 2011 Plan that generally vest over a period of four years from the date of the option grant. Other stock awards (restricted stock awards and restricted stock units) have variable vesting schedules as determined by our board of directors on the date of grant.

Under certain circumstances, options may be exercised prior to vesting, subject to our right to repurchase shares subject to such option at the exercise price paid per share. Our repurchase rights would generally terminate on a vesting schedule identical to the vesting schedule of the exercised option. During 2017, we have not repurchased any shares under the 2011 Plan. As of December 31, 2017, we have no shares outstanding subject to repurchase.

As of December 31, 2017, our Non‑Employee Director Compensation Policy adopted by our board of directors in March 2014 and amended by our board of directors in February 2015, May 2015 and February 2016 provides for the automatic grant to non‑employee directors of the following types of equity awards under the 2011 Plan:

First Director Option. Each person who becomes a non‑employee director, whether by election by our stockholders or by appointment by our board of directors to fill a vacancy, will automatically be granted an option to purchase 100,000 shares of common stock, or First Director Option, on the date such person first becomes a non‑employee director. The First Director Option vests annually over three years upon each anniversary date of appointment to our board of directors.

Subsequent Director Option. Each non‑employee director (other than any director receiving a First Director Option on the date of the annual meeting) will automatically be granted a subsequent option to purchase 50,000 shares of common stock, a Subsequent Director Option, on the date of the annual meeting of stockholders in each year during such director’s service on our board of directors. The Subsequent Director Option vests in full on the earlier of: (i) the date of the next annual meeting of our stockholders or (ii) the first anniversary of the date of grant.

8. STOCKHOLDERS’ EQUITY (Continued)

2006 Directors’ Stock Option Plan

The 2006 Directors’ Stock Option Plan, or 2006 Directors Plan, was terminated by our board of directors and replaced by the 2011 Plan in March 2014. No further grants of options were made from the 2006 Directors Plan upon the 2006 Directors Plan’s termination. All outstanding awards granted under the 2006 Directors Plan remain subject to the terms of the 2006 Directors Plan and the individual award agreements made thereunder.

The options granted to non‑employee directors under the 2006 Directors Plan were nonstatutory stock options, and they expire no later than ten years from the date of grant. The option exercise price was equal to the fair market value of the underlying common stock on the date of grant. The First Director Option granted to non‑employee directors under the 2006 Directors Plan vested annually over three years upon each anniversary date of appointment to the board of directors. The Subsequent Director Option granted to non‑employee directors on the date of the annual meeting of stockholders in each year during such director’s service on our board of directors under the 2006 Directors Plan vested one year from the date of grant.

Aggregate option and award activity for the 2002 Plan, 2011 Plan and 2006 Directors Plan is as follows:

				Outstanding Options
									Weighted Average	Aggregate
	Shares						Weighted Average		Remaining	Intrinsic
	Available			Number of			Exercise Price		Contractual Life	Value
	For Grant			Shares			Per Share		(In years)	(In thousands)
Balance at December 31, 2016		9,570,535			19,125,287		$	3.15
Options granted		(3,484,000	)		3,484,000		$	2.19
Awards granted		(72,066	)		—		$	—
Options exercised		—			(12,500	)	$	1.41
Options cancelled/forfeited		188,258			(188,258	)	$	7.99
Balance at December 31, 2017		6,202,727			22,408,529		$	2.96	6.24	$	2,034
Options exercisable at December 31, 2017					17,249,032		$	3.03	5.57	$	2,034
Options fully vested and expected to vest at December 31, 2017					22,171,142		$	2.96	6.21	$	2,034

The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on Geron’s closing stock price of $1.80 per share as of December 29, 2017, which would have been received by the option holders had all the option holders exercised their options as of that date.

We have not granted any options with an exercise price below or greater than the fair market value of our common stock on the date of grant in 2017, 2016 or 2015. As of December 31, 2017, 2016 and 2015, there were 17,249,032, 14,074,457 and 11,356,232 exercisable options outstanding at weighted average exercise prices per share of $3.03, $2.99 and $2.98, respectively.

The total pretax intrinsic value of stock options exercised during 2017, 2016 and 2015 was $15,000, $595,000 and $2,398,000, respectively. Cash received from the exercise of options in 2017, 2016 and 2015 totaled approximately $18,000, $493,000 and $2,205,000, respectively.

8. STOCKHOLDERS’ EQUITY (Continued)

Information about stock options outstanding as of December 31, 2017 is as follows:

	Options Outstanding
					Weighted Average
			Weighted Average		Remaining
	Number of		Exercise Price		Contractual Life
Exercise Price Range	Shares		Per Share		(In years)
$1.10 - $1.51		5,655,662	$	1.45		4.89
$1.55 - $2.16		5,631,031	$	2.08		7.04
$2.22 - $4.34		6,000,783	$	3.37		7.60
$4.42 - $7.31		5,121,053	$	5.10		5.27
$1.10 - $7.31		22,408,529	$	2.96		6.24

Aggregate restricted stock activity for the 2011 Plan is as follows:

				Weighted Average		Weighted Average
				Grant Date		Remaining
	Number of			Fair Value		Contractual Term
	Shares			Per Share		(In years)
Non-vested restricted stock at December 31, 2016		—		$	—		—
Granted		72,066		$	2.20
Vested		(72,066	)	$	2.20
Non-vested restricted stock at December 31, 2017		—		$	—		—

The weighted average grant date fair value of restricted stock granted during the years ended December 31, 2017, 2016 and 2015 was $2.20, $2.44 and $3.75 per share, respectively. The total fair value of restricted stock that vested during 2017, 2016 and 2015 was $159,000, $54,000 and $275,000, respectively.

Employee Stock Purchase Plan

In March 2014, our board of directors adopted the 2014 Employee Stock Purchase Plan, or 2014 Purchase Plan. The 2014 Purchase Plan was approved by our stockholders in May 2014. The 2014 Purchase Plan replaced the 1996 Employee Stock Purchase Plan, or 1996 Purchase Plan, which was terminated effective as of the date the 2014 Purchase Plan was approved by our stockholders. Under the 2014 Purchase Plan, we are authorized to sell to eligible employees up to an aggregate of 1,000,000 shares of Geron common stock. As of December 31, 2017, an aggregate of 104,692 shares of our common stock have been issued under the 2014 Purchase Plan since its adoption.

The 2014 Purchase Plan is comprised of a series of offering periods, each with a maximum duration (not to exceed 12 months) with new offering periods commencing on January 1st and July 1st of each year. The date an employee enters the offering period will be designated as the entry date for purposes of that offering period. An employee may participate only in one offering period at a time. Each offering period consists of two consecutive purchase periods of six months’ duration, with the last day of such period designated a purchase date.

Under the terms of the 2014 Purchase Plan, employees can choose to have up to 10% of their annual salary withheld to purchase our common stock. An employee may not make additional payments into such account or increase the withholding percentage during the offering period.

The purchase price per share at which common stock is purchased by the employee on each purchase date within the offering period is equal to 85% of the lower of (i) the fair market value per share of Geron common stock on the employee’s entry date into that offering period or (ii) the fair market value per share of Geron common stock on the purchase date. If the fair market value per share of Geron common stock on the purchase date is less than the fair market value at the beginning of the offering period, a new 12 month offering period will automatically begin on the first business day following the purchase date with a new fair market value.

8. STOCKHOLDERS’ EQUITY (Continued)

Stock‑Based Compensation for Employees and Directors

We measure and recognize compensation expense for all share‑based payment awards made to employees and directors, including employee stock options, restricted stock awards and employee stock purchases, based on grant‑date fair values for these instruments. We use the Black Scholes option‑pricing model to estimate the grant‑date fair value of our stock options and employee stock purchases. The fair value for service‑based restricted stock awards is determined using the fair value of our common stock on the date of grant.

As stock‑based compensation expense recognized in the statements of operations for the years ended December 31, 2017, 2016 and 2015 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures but at a minimum, reflects the grant‑date fair value of those awards that actually vested in the period. Forfeitures have been estimated at the time of grant based on historical data and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. With the adoption of Accounting Standards Update No. 2016-09, Improvements to Employee Share Based Payment Accounting, or ASU 2016-09, in the first quarter of 2017, we elected to continue to estimate forfeitures expected to occur to determine the amount of stock-based compensation expense to be recognized in each period. The adoption of ASU 2016-09 did not impact our accounting for or presentation of excess tax benefits recognized on stock-based compensation expense on our financial statements since our net deferred tax assets are fully offset by a valuation allowance due to our history of operating losses. In addition, presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to all periods presented.

We recognize stock‑based compensation expense on a straight‑line basis over the requisite service period, which is generally the vesting period. The following table summarizes the stock‑based compensation expense related to stock options, restricted stock awards and employee stock purchases for the years ended December 31, 2017, 2016 and 2015 which was allocated as follows:

	Year Ended December 31,
(In thousands)	2017		2016		2015
Research and development	$	988	$	1,275	$	2,139
Restructuring charges		—		—		307
General and administrative		7,156		6,970		5,951
Stock-based compensation expense included in operating expenses	$	8,144	$	8,245	$	8,397

Stock‑based compensation expense also has been recognized for the modification of the post‑termination exercise period for certain stock options previously granted to employees affected by the March 2015 restructuring, which has been included in restructuring charges in our statements of operations. See Note 6 on Restructuring for further discussion of the restructuring.

The fair value of stock options granted in 2017, 2016 and 2015 has been estimated at the date of grant using the Black Scholes option‑pricing model with the following assumptions:

	Year Ended December 31,
	2017	2016	2015
Dividend yield	0%	0%	0%
Expected volatility range	0.884 to 0.892	0.888 to 0.890	0.874 to 0.884
Risk-free interest rate range	1.98% to 1.99%	1.21% to 1.38%	1.68% to 1.71%
Expected term	5.5 yrs	5.5 yrs	5.5 yrs

8. STOCKHOLDERS’ EQUITY (Continued)

The fair value of employee stock purchases in 2017, 2016 and 2015 has been estimated using the Black Scholes option‑pricing model with the following assumptions:

	Year Ended December 31,
	2017	2016	2015
Dividend yield	0%	0%	0%
Expected volatility range	0.577 to 0.641	0.641 to 0.684	0.654 to 1.392
Risk-free interest rate range	0.45% to 0.89%	0.28% to 0.45%	0.11% to 0.28%
Expected term range	6 - 12 mos	6 - 12 mos	6 - 12 mos

Dividend yield is based on historical cash dividend payments and Geron has paid no cash dividends to date. The expected volatility range is based on historical volatilities of our stock since traded options on Geron common stock do not correspond to option terms and the trading volume of options is limited. The risk‑free interest rate range is based on the U.S. Zero Coupon Treasury Strip Yields for the expected term in effect on the date of grant for an award. The expected term of options is derived from actual historical exercise and post‑vesting cancellation data and represents the period of time that options granted are expected to be outstanding. The expected term of employees’ purchase rights is equal to the purchase period.

Based on the Black Scholes option‑pricing model, the weighted average estimated fair value of stock options granted during the years ended December 31, 2017, 2016 and 2015 was $1.58, $1.83 and $3.06 per share, respectively. The weighted average estimated fair value of employees’ purchase rights for the years ended December 31, 2017, 2016 and 2015 was $0.75, $1.01 and $1.64 per share, respectively. As of December 31, 2017, total compensation cost related to unvested share‑based payment awards not yet recognized, net of estimated forfeitures, was $8,008,000, which is expected to be recognized over the next 26 months on a weighted‑average basis.

401(k) Plan Matching Contributions

We sponsor a defined‑contribution savings plan under Section 401(k) of the Internal Revenue Code covering all full‑time U.S. employees, or the Geron 401K Plan. Participating employees may contribute up to the annual Internal Revenue Service contribution limit. The Geron 401K Plan also permits us to provide discretionary matching and profit sharing contributions. Prior to 2014, our board of directors approved matching contributions for the Geron 401K Plan in our common stock, which vested ratably over four years for each year of service completed by our employees, commencing from the date of hire.

Stock‑Based Compensation to Service Providers

We grant stock options and restricted stock awards to consultants from time to time in exchange for services performed for us. In general, the stock options and restricted stock awards vest over the contractual period of the consulting arrangement. The fair value of stock options and restricted stock awards held by consultants is recorded as operating expenses over the vesting term of the respective equity awards. In addition, we will record any increase in the fair value of the stock options and restricted stock awards as the respective equity award vests. We recorded stock‑based compensation expense of $41,000, $104,000 and $311,000 for the vested portion of the fair value of stock options and restricted stock awards held by consultants in 2017, 2016 and 2015, respectively.

We have also issued common stock to non‑employee directors and consultants. For stock issuances where services are to be performed for us, we record a prepaid asset equal to the fair market value of the shares on the date of issuance and amortize the fair value of the shares to our operating expenses on a pro‑rata basis as services are performed. For stock issuances where services have been performed for us, we record the fair market value of the shares on the date of issuance to offset the amounts owed. In 2017, 2016 and 2015, we issued 72,066, 21,541 and 18,077 shares of common stock, respectively, in exchange for services provided. In 2017, 2016 and 2015, we recognized approximately $159,000, $52,000 and $53,000, respectively, of expense in connection with stock grants to non‑employee directors and consultants.

8. STOCKHOLDERS’ EQUITY (Continued)

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance as of December 31, 2017 is as follows:

Outstanding stock options			22,408,529
Options and awards available for grant			6,202,727
Employee stock purchase plan			895,308
Warrant outstanding			537,893
Total			30,044,457