Stock-based Compensation

August 21, 2014,

the Company’s Board of Directors superseded the

2006

Equity Incentive Plan (the

“2006

Plan”) with the

2014

Equity Incentive Plan (the

“2014

Plan”), and the

2014

Employee Stock Purchase Plan (the

“2014

ESPP”). On

October 3, 2014,

the stockholders approved these plans. The stockholders also approved an amendment to the

2014

Plan on

July 31, 2017.

The Plans provide for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock and stock unit awards, performance units, stock grants and qualified performance-based awards. Under the

2006

Plan,

new stock compensation awards will be granted subsequent to the completion of the Company’s IPO. The Company initially reserved

704,000

shares of Common Stock for issuance under the

2014

Plan. The

2014

Plan provides that the number of shares reserved and available for issuance under the

2014

Plan will automatically increase each

January 1,

beginning

January 1, 2015

four

percent of the outstanding shares of Common Stock on the immediately preceding

December 31

or such lesser number of shares as determined by the Company’s Board of Directors prior to each such

January

1st.

Terms of the stock awards, including vesting requirements, are determined by the Board of Directors, subject to the provisions of the Plans. Options granted by the Company typically vest over

three

four

years. Certain awards provide for accelerated vesting if there is a change in control as defined in the Plans. Stock options outstanding under the

2006

Plan are exercisable from the date of grant for a period of

ten

years. Stock options granted under the

2014

Plan are exercisable only upon vesting. For options granted to date, the exercise price equaled the fair value of the Common Stock as determined by the Board of Directors on the date of grant.

Stock-based compensation expense

Total stock-based compensation expense is recognized for stock options granted to employees and non-employees and has been reported in the Company’s consolidated statements of operations as follows (in thousands):

	Year Ended December 31,
	2018		2017		2016

Research and development	$	1,142	$	1,109	$	1,114
General and administrative		2,287		2,118		2,229
Total	$	3,429	$	3,227	$	3,343

The Company estimates the fair value of each employee stock award on the grant date using the Black-Scholes option-pricing model based on the following assumptions regarding the fair value of the underlying Common Stock on each measurement date:

	Year Ended December 31,
	2018			2017			2016
Weighted average expected volatility		93.5	%		94.5	%		84.4	%
Expected term (in years)		6.07			6.06			6.05
Risk free interest rate		2.55	%		2.09	%		1.45	%
Expected dividend yield		0	%		0	%		0	%

Stock options issued to non-employees are accounted for using the fair value method of accounting; they are periodically revalued as the options vest and are recognized as expense over the related service period. The total expense related to all options granted to non-employees was

for the years ended

December 31, 2018,

2017

and

2016.

Stock Options

The following table summarizes stock option activity for employees and non-employees:

	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value

Outstanding at December 31, 2017		2,681,072		$	7.18		6.8	$	121
Granted		2,041,600		$	2.61
Exercised		-
Forfeited		(83,433	)	$	5.82
Expired		(42,013	)	$	13.30
Outstanding at December 31, 2018		4,597,226		$	5.12		7.4	$	404
Exercisable at December 31, 2018		2,067,356		$	7.57		5.7	$	241
Vested or expected to vest at December 31, 2018 (1)		4,597,226		$	5.12		7.4	$	404

__________________

(

) Represents the number of vested options at

December 31, 2018

plus the number of unvested options expected to vest based on the unvested options outstanding at

December 31, 2018.

During the year ended

December 31, 2018,

the Company granted stock options to purchase an aggregate of

2,041,600

shares of its Common Stock with a weighted-average grant date fair value of

$2.61.

During the year ended

December 31, 2017,

the Company granted stock options to purchase an aggregate of

719,337

shares of its Common Stock with a weighted-average grant date fair value of

$1.99.

During the year ended

December 31, 2016,

the Company granted stock options to purchase an aggregate of

132,495

shares of its Common Stock with a weighted-average exercise price of

$7.11

and a weighted-average grant date fair value of

$5.08.

The total intrinsic value of options exercised in the years ended

December 31, 2018

and

2017

was

and

$27,000

respectively. As of

December 31, 2018,

and

2017

there was

$4.6

million and

$4.2

million, respectively of total unrecognized compensation cost related to employee non-vested stock options. The total unrecognized compensation cost for employee awards will be adjusted for future forfeitures. The Company expects to recognize its remaining stock-based compensation expense over a weighted-average period of

2.40

years.

Employee Stock Purchase Plan

The

2014

Employee Stock Purchase Plan (“ESPP”) initially authorized the issuance of up to

140,500

shares of Common Stock. The number of shares increases each

January 1,

commencing on

January 1, 2015

and ending on (and including)

January 1, 2024,

by an amount equal to the lesser of

one

percent of the outstanding shares as of the end of the immediately preceding fiscal year,

281,000

shares or any lower amount determined by the Company’s Board of Directors prior to each such

January

1st.

The Company’s Board of Directors determined there was to be

increase on

January 1, 2018.

As of

December 31, 2018,

the

2014

ESPP authorized the issuance of up to

304,991

shares of Common Stock. The

seventh

offering under the

2014

ESPP began on

January 1, 2018

and ended on

June 30, 2018

and the

eight

offering began on

July 1, 2018

and ended on

December 31, 2018.

During the years ended

December 31, 2018

and

2017,

74,343

and

100,358

shares, respectively, were issued under the

2014

ESPP. The Company incurred

$0.1

million in stock-based compensation expense related to the

2014

ESPP for the years ended

December 31, 2018,

2017,

and

2016.