12.	Stock-Based Compensation

2008 Equity Incentive Plan

The Company’s 2008 Equity Incentive Plan, as amended, (the “2008 Plan”) provides for the Company to sell or issue common stock or restricted common stock, or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the board of directors and consultants of the Company. The 2008 Plan is administered by the board of directors, or at the discretion of the board of directors, by a committee of the board. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or their committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of stock option may not be greater than ten years.

Stock options granted to employees and directors under the 2008 plan typically vest over four years. Stock options granted to non-employees under the 2008 plan typically vest over periods ranging from six months to four years, depending on the period during which the services are being provided.

On February 9, 2016, the Company’s 2016 Stock Option and Incentive Plan (the “2016 Plan”) became effective and no further stock options or other awards will be made under the 2008 Plan. Shares of common stock underlying any awards that are forfeited, canceled, repurchased or are otherwise terminated by the Company under the 2016 Plan and the 2008 Plan will be added back to the shares of common stock available for issuance under the 2016 Plan.

2016 Stock Option and Incentive Plan

On February 3, 2016, the Company’s stockholders approved the 2016 Stock Option and Incentive Plan (the “2016 Plan”), which became effective on February 9, 2016. The 2016 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock units, restricted stock awards and other stock-based awards. The number of shares initially reserved for issuance under the 2016 Plan is 1,581,839 shares. The number of shares of common stock that may be issued under the 2016 Plan will automatically increase on each January 1, beginning on January 1, 2017, by the lesser of 3% of the shares of the Company’s common stock outstanding on the immediately preceding December 31 or an amount determined by the Company’s board of directors or the compensation committee of the board of directors.

Stock options granted under the 2016 Plan vest based on the grantee’s continued service with the Company during a specified period following the grant. Awards granted to employees generally vest ratably over four years, with a 25% cliff vesting at the one-year anniversary for new employee awards. Stock options granted to directors generally vest ratably over three years. All awards are exercisable for a period of ten years from the grant date.

2016 Employee Stock Purchase Plan

On February 3, 2016, the Company’s stockholders approved the 2016 Employee Stock Purchase Plan (the “2016 ESPP”), which became effective in connection with the completion of the Company’s IPO. A total of 138,757 shares of common stock were reserved for issuance under this plan. In addition, the number of shares of common stock that may be issued under the 2016 ESPP will automatically increase on each January 1, beginning on January 1, 2017 and ending on January 1, 2026, by the least of (i) 138,757 shares of common stock, (ii) 1% of the Company’s shares of common stock outstanding on the immediately preceding December 31 and (iii) an amount determined by the Company’s board of directors or the compensation committee of the board of directors. No shares were issued under this plan during the year ended December 31, 2016. During the year ended December 31, 2017, 10,829 shares were issued under this plan.

Stock option grants and shares to non-employees

Prior to 2013, the Company issued options to purchase 203,964 shares of common stock to non-employees, primarily members of the Company’s scientific advisory board, that vest upon the achievement of specified development and clinical milestones. As of December 31, 2017 and 2016, options for the purchase of 83,250 shares held by non-employees remained unvested, pending achievement of the specified milestones, and had an aggregate fair value of $0.3 million per year. During the years ended December 31, 2017, 2016 and 2015, the Company did not grant any options to non-employees under this plan.

On October 28, 2015, the Company made a one-time grant of options to a non-employee to purchase 9,250 shares of our common stock with an exercise price of $2.38 per share which were granted outside of the 2008 Stock Option Plan. The options were fully vested upon the grant date as such the Company calculated the fair value of the options on the date of the grant. The Company calculated fair value at $12.23 per option utilizing the Black-Scholes option pricing model with the following inputs used to determine the fair value (i) Risk-free interest rate of 0.0 %; (ii) Expected term (in years) of 0.08 years; (iii) Expected volatility of 60.28 % and (iv) Expected dividend yield of 0.0 %. The Company recognized $0.1 million of stock compensation expense within general and administrative expenses for the year ended December 31, 2015. The Company received cash proceeds of less than $0.1 million for the option exercise during the year ended December 31, 2015. The aggregate intrinsic value of the stock option exercised during the year ended December 31, 2015 was $0.1 million.

Stock-based compensation expense for the three months ended June 30, 2015 was reduced by $0.5 million for the cumulative correction of immaterial errors associated with the recognition of stock-based compensation for certain stock options with performance-based vesting conditions. Of this amount, $0.2 million related to years prior to 2015 and $0.3 million related to the three months ended March 31, 2015. Based upon its evaluation of relevant factors, the Company concluded that the uncorrected errors in its previously issued financial statements for any of the periods affected are immaterial and that the impact of recording the cumulative correction during the six months ended June 30, 2015 is not material to the Company’s results for the year ending December 31, 2015.

Stock Option Valuation

The assumptions that the Company used to determine the fair value of the stock options granted to employees and directors were as follows, presented on a weighted average basis:

	Year Ended December 31,
	2017			2016			2015
Risk-free interest rates		2.00	%		1.35	%		1.68	%
Expected term (in years)		5.96			6.09			5.99
Expected volatility		75.18	%		73.19	%		56.86	%
Expected dividend yield		—			—			—

Stock Options

The following table summarizes the Company’s stock option activity since December 31, 2016 (in thousands except share and per share amounts):

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
						(Years)
Outstanding at December 31, 2016		2,030,517		$	7.29		8.42	$	10,510
Granted		1,201,789			6.88
Exercised		(11,714	)		2.68
Forfeited		(382,034	)		10.59
Outstanding at December 31, 2017		2,838,558		$	6.69		8.10	$	3,213
Vested and expected to vest at December 31, 2017		2,755,308		$	6.82		8.25	$	2,926
Options exercisable at December 31, 2017		1,054,350		$	6.29		7.18	$	1,404

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. The aggregate intrinsic value of stock options exercised during the year ended December 31, 2017 and 2016 was less than $0.1 million and $0.4 million, respectively.

The Company received cash proceeds from the exercise of stock options of less than $0.1 million, $0.3 million and $0.1 million during the years ended December 31, 2017, 2016 and 2015.

The weighted average grant-date fair value of stock options granted during the years ended December 31, 2017, 2016 and 2015 was $4.57, $5.47 and $7.13, respectively.

The total fair value of options vested during the years ended December 31, 2017, 2016 and 2015 was $2.5 million, $1.1 million and $0.5 million, respectively.

Stock-based Compensation

Stock-based compensation expense was classified in the statements of operations and comprehensive loss as follows:

	Year Ended December 31,
	2017		2016		2015
Research and development	$	1,326	$	556	$	72
General and administrative		2,406		1,608		400
	$	3,732	$	2,164	$	472

As of December 31, 2017, total unrecognized compensation cost related to the unvested stock-based awards was $6.6 million, which is expected to be recognized over weighted average period of 2.57 years.