Under the terms of its stock option plans, the Company’s board of directors may grant stock options to employees, directors and service providers. The Company issued stock options under the 2006 Stock Incentive Plan (“2006 Plan”) until April 2015, when the 2015 Stock Incentive Plan (“2015 Plan”) was adopted. The 2006 Plan expired in 2016 and there are no remaining shares available to be granted under the plan. There were 1,397,203 stock options outstanding under the 2006 Plan as of June 30, 2019.

Upon adoption of the 2015 Plan, there were 5,270,095 shares of common stock reserved for issuance. In May 2018, the Company amended the 2015 Plan to increase the number of shares reserved for issuance to 8,211,980. The 2015 plan had 6,260,520 stock options outstanding as of June 30, 2019. The Company’s board of directors determines the terms of stock options granted under the 2015 Plan, including option exercise prices and vesting.

On March 12, 2019, the Company’s board of directors adopted, and the Company’s stockholders approved the Precision BioSciences, Inc. 2019 Incentive Award Plan (“2019 Plan”) and the 2019 Employee Stock Purchase Plan (“2019 ESPP”), both of which became effective upon the effective date of the registration statement on Form S-1 for the Company’s IPO. Upon the effectiveness of the 2019 Plan, the Company ceased granting new awards under the 2015 Plan.

The 2019 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards initially equal to 4,750,000 shares of common stock. The 2019 Plan includes an annual increase of common stock shares on the first day of each calendar year beginning January 1, 2020 and ending on January 1, 2029 by an amount equal to the lesser of (i) 4% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of common stock as determined by the board of directors (but no more than 5,000,000 shares may be issued upon the exercise of incentive stock options), plus any shares that are subject to awards outstanding under the Company’s 2006 Plan and 2015 Plan as of the effective date of the 2019 Plan that expire, lapse, or are terminated, exchanged for cash, surrendered, repurchased, or canceled without having been fully exercised or forfeited, to the extent so unused. The 2019 Plan had 447,759 stock options outstanding as of June 30, 2019.

The 2019 ESPP provides for the option to purchase initially up to 525,000 shares of the Company’s common stock plus an annual increase on the first day of each calendar year beginning January 1, 2020 and ending on and including January 1, 2029 by an amount equal to the lesser of (i) 1% of the shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by our board of directors, provided that no more than 5,250,000 shares of our common stock may be issued under our 2019 ESPP. The purchase price of the shares, in the absence of a contrary designation, will be 85% of the lower of the fair market value of our common stock on the first trading day of the offering period or on the purchase date. As of June 30, 2019, there were no purchase rights outstanding under the 2019 ESPP.

The Company recorded employee and nonemployee share-based compensation expense as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Employee	$	2,138	$	251	$	3,577	$	398
Nonemployee		141		4		251		7
	$	2,279	$	255	$	3,828	$	405

Share-based compensation expense related to stock options is included in the following line items in the condensed consolidated statements of operations (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Research and development	$	1,510	$	176	$	2,516	$	278
General and administrative		769		79		1,312		127
	$	2,279	$	255	$	3,828	$	405

Determining the appropriate fair value model to measure the fair value of the stock option grants on the date of grant and the related assumptions requires judgment. The Company granted 998,177 stock options for the six months ended June 30, 2019. The fair value of each stock option grant is estimated using a Black-Scholes option-pricing model on the date of grant as follows:


	Three Months Ended June 30,			Six Months Ended June 30,
Estimated dividend yield		0.00	%		0.00	%
Weighted-average expected stock price volatility		68.46	%		68.19	%
Weighted-average risk-free interest rate		2.42	%		2.45	%
Expected life of options (in years)		6.82			6.36
Weighted-average fair value per option	$	9.31		$	8.90

The expected volatility rates are estimated based on the actual volatility of comparable public companies over the expected term. The expected life represents the average time that stock options that vest are expected to be outstanding.

The Company does not have sufficient history of exercising stock options to estimate the expected term of employee stock options and thus continues to calculate expected life based on the midpoint between the vesting date and the contractual term which is in accordance with the simplified method. The expected term for share-based compensation granted to nonemployees is the contractual life. The risk-free rate is based on the United States Treasury yield curve during the expected life of the option.

The following table summarizes activity in the Company’s stock option plans for the six months ended June 30, 2019:

	Outstanding Option Shares			Weighted- Average Exercise Price
Balance as of January 1, 2019		7,763,464		$	5.00
Granted		998,177			13.38
Exercised		(376,247	)		1.01
Forfeited/canceled		(279,912	)		9.80
Balance as of June 30, 2019		8,105,482			6.06

The intrinsic value of options exercised was $4.6 million and $0.6 million during the six months ended June 30, 2019 and 2018, respectively.

There was approximately $25.0 million of total unrecognized compensation cost related to unvested stock options as of June 30, 2019, which is expected to be recognized over a weighted-average period of 3.19 years.