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Stock Incentive Plans | 6 Months Ended
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Jun. 30, 2020
Share-based Payment Arrangement [Abstract] |
Stock Incentive Plans | Stock Incentive Plans Stock Options The Company maintains the 2008 Stock Incentive Plan (the “2008 Plan”) for employees, consultants, advisors, and directors. The 2008 Plan provided for the granting of incentive and non‑qualified stock option and restricted stock awards as determined by the Board. At inception of the 2008 Plan, a total of 2,213,412 shares of common stock were authorized for grants under the 2008 Plan. The Company ceased granting awards under the 2008 Plan upon the effectiveness of the 2016 Plan (as defined below); however, awards issued under the 2008 Plan remain subject to the terms of the 2008 Plan and the applicable 2008 Plan agreement. Shares subject to awards that were granted under the 2008 Plan and that expire, lapse or terminate following the effectiveness of the 2016 Plan become available under the 2016 Plan as shares available for future grants. All unvested stock options granted under the 2008 Plan may be exercised into restricted stock subject to forfeiture upon termination prior to vesting. On June 7, 2016, the Company’s stockholders approved the 2016 Incentive Award Plan (the “2016 Plan”), which became effective June 21, 2016. The 2016 Plan provides for the granting of incentive and non‑qualified stock option, restricted stock and other stock and cash-based awards as determined by the Board. Shares subject to awards that are granted under the 2016 Plan and that expire, lapse or terminate are available for future grants under the 2016 Plan. At inception of the 2016 Plan, a total of 1,210,256 shares of common stock were authorized for future issuance under the 2016 Plan. The number of shares of common stock that may be issued under the 2016 Plan automatically increases on the first day of each calendar year, beginning in 2017 and ending in and including 2026, by an amount equal to the lesser of: (i) 4% of the number of shares of the Company’s common stock outstanding on the last day of the applicable preceding calendar year and (ii) such smaller number of shares as is determined by the Board. During the six months ended June 30, 2020 and 2019, the number of shares of common stock that may be issued under the 2016 Plan was increased by 3,453,022 shares and 898,871 shares, respectively. As of June 30, 2020, 2,651,062 shares remain available for future issuance under the 2016 Plan. The 2008 Plan and 2016 Plan provide that the exercise price of incentive stock options cannot be less than 100% of the fair market value of the Company's common stock on the grant date for participants who own 10% or less of the total combined voting power of the Company, and not less than 110% for participants who own more than 10% of the Company’s voting power. Options and restricted stock awards granted under the 2008 Plan and 2016 Plan vest over periods as determined by the Board, which are generally four years and, for options, with terms that generally expire ten years from the grant date. The Company’s 2018 Employment Inducement Incentive Award Plan (the “Inducement Incentive Award Plan”), which was adopted by the Board on September 25, 2018 without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules ("Rule 5635(c)(4)"), provides for the grant of equity-based awards in the form of non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and other stock or cash based awards. In accordance with Rule 5635(c)(4), awards under the Inducement Incentive Award Plan may only be made to a newly hired employee who has not previously been a member of the Board, or an employee who is being rehired following a bona fide period of non-employment by the Company, as a material inducement to the employee’s entering into employment with the Company. The Company reserved 1,175,000 shares of its common stock for issuance under the Inducement Incentive Award Plan. On March 25, 2019, the Board approved the amendment and restatement of the Inducement Incentive Award Plan to reserve an additional 2,000,000 shares of the Company’s common stock for issuance thereunder. As of June 30, 2020, there are 1,100,000 shares available for future grant under the Inducement Incentive Award Plan. The fair value of each option award was estimated on the grant date using the Black‑Scholes option pricing model. Expected volatilities are based on the Company’s historical volatility and the historical volatilities of peer companies because the Company's common stock has not traded for a period that is at least equal to the expected term of its stock option awards. The Company uses the “simplified” method to estimate the expected life of options granted and are expected to be outstanding. The risk‑free interest rate used is the rate for a U.S. Treasury zero coupon issue with a remaining life consistent with the options expected life on the grant date. The Company has not paid and does not expect to pay in the foreseeable future, any cash dividends. Forfeitures are estimated at the time of grant and are adjusted, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has estimated a forfeiture rate of 10% based on historical attrition trends. The Company records stock‑based compensation expense only on awards that are expected to vest. Employees Effective June 25, 2020, the Company entered into transition agreements with two executive officers, under which the right to exercise their vested options was extended for a period of two years following their respective separation dates. The subsequent stock based compensation amount recognized in connection with the option modification in the second quarter was less than $0.1 million. The estimated grant date fair values of employee stock option awards granted under the 2016 Plan and the 2018 Inducement Incentive Award Plan were calculated using the Black-Scholes option pricing model, based on the following weighted-average assumptions:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Risk-free interest rate | 0.39 | % |  | 2.18 | % |  | 1.61 | % |  | 2.41 | %
Dividend yield | — |  |  | — |  |  | — |  |  | — |
Expected term | 5.56 |  |  | 5.87 |  |  | 6.03 |  |  | 6.03 |
Expected volatility | 89.70 | % |  | 88.71 | % |  | 88.12 | % |  | 87.56 | %
Weighted-average fair value of common stock | $ | 2.92 |  |  | $ | 2.48 |  |  | $ | 2.36 |  |  | $ | 2.42 |
The weighted average grant date fair value of stock options granted to employees during the three and six months ended June 30, 2020 was $2.08, and $1.73, respectively. The weighted average grant date fair value of stock options granted to employees during the three and six months ended June 30, 2019 was $1.83, and $1.78, respectively. As of June 30, 2020, total unrecognized compensation expense related to unvested employee stock options was $8.1 million, which is expected to be recognized over a weighted average period of 2.3 years. Non-employees The estimated grant date fair values of non-employee stock option awards granted under the 2016 Plan were calculated using the Black-Scholes option pricing model, based on the following weighted-average assumptions:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Risk-free interest rate | — | % |  | 2.07 | % |  | — | % |  | 2.10 | %
Dividend yield | — |  |  | — |  |  | — |  |  | — |
Expected life (in years) | 0 |  |  | 5.49 |  |  | 0 |  |  | 5.50 |
Expected volatility | — | % |  | 88.46 | % |  | — | % |  | 88.44 | %
Weighted-average fair value of common stock | $ | — |  |  | $ | 2.04 |  |  | $ | — |  |  | $ | 2.04 |
No stock option awards were granted to non-employee consultants during the three and six months ended June 30, 2020. The weighted average grant date fair value of stock options granted to non-employees during the three and six months ended June 30, 2019 was $1.46 and $0.65, respectively. As of June 30, 2020, no unrecognized compensation expense related to unvested non‑employee stock options remained. The following table summarizes the activity under the 2008 Plan, 2016 Plan, and 2018 Inducement Incentive Award Plan:
|  |  |  |  | Weighted‑average |  |
|  |  |  |  | remaining |  | Aggregate
| Number of |  | Weighted-average |  | contractual term |  | intrinsic value
| options |  | exercise price ($) |  | (in years) |  | (in thousands)
Employee awards |  |  |  |  |  |  |
Outstanding at December 31, 2019 | 6,323,596 |  |  | $ | 4.91 |  |  | 8.71 |  | $ | 1,716 |
Granted | 1,878,309 |  |  | $ | 2.36 |  |  |  |  |
Exercised | (42,628 | ) |  | $ | 2.42 |  |  |  |  |
Forfeited | (1,158,737 | ) |  | $ | 5.84 |  |  |  |  |
Outstanding at June 30, 2020 | 7,000,540 |  |  | $ | 4.09 |  |  | 8.69 |  | $ | 3,736 |
Vested at June 30, 2020 | 1,632,355 |  |  | $ | 7.62 |  |  | 7.37 |  | $ | 337 |
Vested and expected to vest at June 30, 2020 | 6,472,944 |  |  | $ | 4.22 |  |  | 8.64 |  | $ | 3,381 |
Non‑employee awards |  |  |  |  |  |  |
Outstanding at December 31, 2019 | 473,073 |  |  | $ | 5.89 |  |  | 6.23 |  | $ | 38 |
Granted | — |  |  | $ | — |  |  |  |  |
Exercised | — |  |  | $ | — |  |  |  |  |
Forfeited | — |  |  | $ | — |  |  |  |  |
Outstanding at June 30, 2020 | 473,073 |  |  | $ | 5.89 |  |  | 5.73 |  | $ | 72 |
Vested at June 30, 2020 | 413,191 |  |  | $ | 5.45 |  |  | 5.37 |  | $ | 72 |
Vested and expected to vest at June 30, 2020 | 473,073 |  |  | $ | 5.89 |  |  | 5.73 |  | $ | 72 |
Restricted Stock Units During the second quarter of 2020, the Company entered into a transition agreement with an executive officer under which previously awarded restricted stock units under the Inducement Incentive Award Plan remain eligible to vest in accordance with their terms, notwithstanding the requirement that the executive remain in continuous service with the Company through the applicable vesting date, if the administrator of the Inducement Incentive Award Plan determines the applicable performance conditions are achieved on or prior to December 31, 2020. In accordance with ASC718, the restricted stock units granted were remeasured with a weighted average fair value of $2.92 per share based on the closing price of the Company’s common stock on the date the transition agreement was executed. Since the performance condition is probable of achievement, the restricted stock units were re-valued, resulting in additional expense of less than $0.1 million. Unrecognized compensation expense for the restricted stock units was $0.6 million as of June 30, 2020, which is expected to be recognized over a weighted average period of 2.4 years. The following table summarizes the status of the Company’s restricted stock units:
| Number of shares |  | Weighted average grant date fair value ($)
Unvested at December 31, 2019 | 181,250 |  |  | $ | 5.00 |
Granted | — |  |  | — |
Vested | 21,875 |  |  | 6.03 |
Forfeited | — |  |  | — |
Unvested at June 30, 2020 | 159,375 |  |  | $ | 5.05 |
Employee Stock Purchase Plan On June 7, 2016, the Company’s stockholders approved the 2016 Employee Stock Purchase Plan (the “ESPP”), which became effective June 21, 2016. The ESPP is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986 with the purpose of providing employees with an opportunity to purchase the Company's common stock through accumulated payroll deductions. Under the ESPP, the Company has set two six-month offering periods during each calendar year, one beginning March 1 st and the other beginning September 1 st of each calendar year, during which employees may elect to have up to 25% of their eligible compensation deducted on each payday on an after-tax basis for use in purchasing the Company's common stock on the last trading day of each offering period, subject to limits imposed by the Internal Revenue Code. The purchase price of the shares may not be less than 85% of the fair market value on the first or last trading day of the offering period, whichever is lower. The first ESPP offering period began on March 1, 2017. At inception of the ESPP, a total of 173,076 shares of common stock were authorized and reserved for future issuance under the ESPP. The number of shares of common stock that may be issued under the ESPP will automatically increase on the first day of each calendar year, beginning in 2017 and ending in and including 2026, by an amount equal to the lesser of: (i) 1% of the number of shares of the Company’s common stock outstanding on the last day of the applicable preceding calendar year and (ii) such smaller number of shares as is determined by the Company’s Board of Directors. During the six months ended June 30, 2020 and 2019, the number of shares of common stock that may be issued under the ESPP was increased by 863,254 shares and 224,717 shares, respectively. During the six months ended June 30, 2020, the Company issued 78,583 shares of common stock under the ESPP. As of June 30, 2020, 1,532,077 shares remain available for future issuance under the ESPP. For each of the three and six months ended June 30, 2020 and 2019, the Company recognized less than $0.1 million of stock-based compensation expense under the ESPP. The Company recorded stock-based compensation expense related to stock option awards, restricted stock units and the ESPP in the following expense categories of its consolidated statements of operations and comprehensive loss (in thousands):
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Research and development | $ | 618 |  |  | $ | 445 |  |  | $ | 1,241 |  |  | $ | 964 |
General and administrative | 863 |  |  | 806 |  |  | 1,649 |  |  | 1,467 |
Total stock-based compensation expense | $ | 1,481 |  |  | $ | 1,251 |  |  | $ | 2,890 |  |  | $ | 2,431 |

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