9. Share‑Based Compensation

Share-based compensation expense was included in general and administrative and research and development expenses as follows in the accompanying condensed statements of comprehensive loss (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
		2019		2018		2019		2018
General and administrative	$	276	$	861	$	835	$	2,008
Research and development		165		766		517		1,548
Total share-based compensation	$	441	$	1,627	$	1,352	$	3,556

In April 2015, the Company adopted the 2015 Equity Incentive Plan (the 2015 Plan) under which 320,615 shares of the Company’s common stock were reserved for issuance to employees, directors and consultants. The 2015 Plan permits the grant of incentive and non‑statutory stock options, appreciation rights, restricted stock, restricted stock units, performance stock and cash awards, and other stock‑based awards.

Amended and Restated 2015 Equity Incentive Plan

In April 2016, the Company’s board of directors approved the Company’s amended and restated 2015 Plan (the A&R 2015 Plan). The Company’s stockholders also approved the A&R 2015 Plan in April 2016 and the A&R 2015 Plan became effective immediately upon the execution and delivery of the underwriting agreement related to the IPO. The A&R 2015 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards and other forms of equity awards, as well as performance cash awards.

Under the A&R 2015 Plan, the number of shares of common stock reserved for issuance thereunder automatically increases on January 1st of each year, for a period of 10 years commencing on January 1, 2017 and ending on (and including) January 1, 2026, to an amount equal to 20% of the Company’s fully-diluted shares as of December 31st of the preceding calendar year. Notwithstanding the foregoing, the Company’s board of directors may act prior to January 1st of a given year to provide that there will be no January 1st increase in the shares reserved for such year, or that the increase in shares reserved for such year will be less than would have otherwise been allowed under the provision. Effective January 1, 2019, 501,001 shares were added to the A&R 2015 Plan under the share reserve provision. As a result, the total shares available under the A&R 2015 Plan for future issuance was 581,100 shares as of September 30, 2019.

Inducement Plan

In September 2016, the Company’s board of directors approved the Company’s Inducement Plan (the Inducement Plan). The Company initially reserved 300,000 shares of its common stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules. The Plan was approved by the Company’s board of directors without stockholder approval pursuant to Rule 5635(c)(4), and the terms and conditions of the Plan are substantially similar to the Company’s stockholder-approved A&R 2015 Plan. The total shares available under the Inducement Plan for future issuance was 268,667 shares as of September 30, 2019.

2016 Employee Stock Purchase Plan

In April 2016, the Company’s board of directors approved the 2016 Employee Stock Purchase Plan (the ESPP) in order to enable eligible employees to purchase shares of the Company’s common stock at a discount following the effective date of the IPO. The Company’s stockholders also approved the ESPP in April 2016 and the ESPP became effective immediately upon the execution and delivery of the underwriting agreement related to the IPO. The Company initially reserved 150,000 shares of common stock for issuance under the ESPP. As of September 30, 2019, no shares have been purchased under the ESPP.

Restricted Stock Awards

During the three and nine months ended September 30, 2019, the Company granted 607,000 restricted stock awards (RSAs) to officers, directors and employees. The RSAs vest immediately upon the close of that merger (See Note 3 – Merger Agreement). The grant date fair value of the RSAs was $0.72 per share. As of September 30, 2019, all 607,000 RSAs remain unvested and none were forfeited. The Company did not grant any RSAs during the comparable periods in the prior year.

Stock Options

During the three months ended September 30, 2019 and 2018, the Company did not grant any stock options. During the nine months ended September 30, 2019 and 2018, zero and 822,000 stock options were granted, respectively, under the A&R 2015 Plan and the Inducement Plan to its officers, directors, employees and consultants, generally vesting over a four-year period. The weighted average grant date fair value for option shares granted during the three and nine months ended September 30, 2018 was zero and $5.07 per share, respectively.

The Company measures the fair value of stock options to employees, consultants and directors on the date of grant with service‑based and performance‑based vesting criteria using the Black‑Scholes option pricing model and market-based vesting criteria using a Monte Carlo simulation model. The Company does not have sufficient history to support a calculation of volatility and expected term. As such, the Company has used a weighted‑average volatility considering the volatilities of several guideline companies.

For purposes of identifying similar entities, the Company considered characteristics such as industry, length of trading history, and stage of life cycle. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The average expected life of the options was determined based on the mid‑point between the vesting date and the end of the contractual term according to the “simplified method” as described in Staff Accounting Bulletin 110. The risk‑free interest rate is determined by reference to implied yields available from U.S. Treasury securities with a remaining term equal to the expected life assumed at the date of grant. The Company records forfeitures when they occur.

The weighted‑average assumptions used in the Black‑Scholes option‑pricing and Monte Carlo simulation models are as follows:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018

Expected stock price volatility	—	—	—	66.3%
Expected life of options (years)	—	—	—	5.8
Expected dividend yield	—	—	—	0%
Risk free interest rate	—	—	—	2.7%

During the three months ended September 30, 2019 and 2018, 76,818 and 279,924 stock options vested, respectively, and 242,952 and 587,334 stock options vested during the nine months ended September 30, 2019 and 2018, respectively. During the three months ended September 30, 2019 and 2018, 176,705 and 307,121 stock options were forfeited, respectively, and 254,505 and 422,010 stock options were forfeited during the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, 2,546,268 stock options were outstanding, 1,994,357 stock options were vested and 849,767 shares in the aggregate were available for future issuance under the A&R 2015 and Inducement Plans.

Unrecognized share‑based compensation cost for stock options issued under the A&R 2015 Plan and the Inducement Plan was $2.3 million for the stock options and $0.4 million for the RSAs as of September 30, 2019. The unrecognized share‑based expense is expected to be recognized over a weighted average period of 0.2 years for both the stock options and RSAs taking into account the anticipated accounting treatment of such awards upon the closing of the Merger.