14. Stock-Based Compensation    

2014 Equity Incentive Plan

The Company’s 2014 Equity Incentive Plan, or the 2014 Plan, is administered by the Company’s Board of Directors or a duly authorized committee thereof, referred to as the Plan administrator. The 2014 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of equity compensation, collectively referred to as Stock Awards. Additionally, the 2014 Plan provides for the grant of performance cash awards. Incentive stock options may be granted only to employees. All other awards may be granted to employees, including officers, non-employee directors, and consultants. No incentive stock options may be granted under the 2014 Plan after the tenth anniversary of the effective date of the 2014 Plan. Stock Awards granted under the 2014 Plan vest at the rate specified by the Plan administrator, which, for employees and non-employee consultants, has generally been 25% on the first anniversary of the date of grant and the balance ratably over the next 36 months. As of January 1, 2016, subsequent grants of Stock Awards made to employees and non-employee consultants vest monthly over a period of four years from the grant date. Stock options initially granted to members of the Company’s Board of Directors vest on the date of the Annual Meeting of Stockholders at which their initial term expires based on the class of Director. Subsequent grants to Directors that are made automatically at Annual Meetings of Stockholders vest fully on the first anniversary of the date of grant. The Plan administrator determines the term of Stock Awards granted under the 2014 Plan up to a maximum of ten years.     

Initially, the aggregate number of shares of the Company’s common stock that may be issued pursuant to Stock Awards under the 2014 Plan was 1,600,000 shares. Additionally, the number of shares of the Company’s common stock reserved for issuance under the 2014 Plan automatically increases on January 1 of each year, beginning on January 1, 2015 and continuing through and including January 1, 2024, by 3% of the total number of shares of the Company’s capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s Board of Directors. On January 1, 2016 and January 1, 2017, the aggregate number of shares of common stock that may be issued pursuant to stock awards under the Company’s 2014 Equity Incentive Plan automatically increased to 3,101,707 and 3,920,613, respectively. The maximum number of shares that may be issued pursuant to the exercise of incentive stock options under the 2014 Plan is 30,000,000 shares.

2004 Stock Incentive Plan

The Company’s 2004 Stock Incentive Plan, or the 2004 Plan, as amended, was adopted by the Company’s Board of Directors and stockholders. Under the 2004 Plan, the Company has granted stock options to selected officers, employees and consultants of the Company. The Company’s Board of Directors administers the 2004 Plan. Options granted under the 2004 Plan have a maximum term of ten years. Options issued generally vest 25% on the first anniversary date of grant and the balance ratably over the next 36 months. Following the effectiveness of the 2014 Plan in January 2014, no additional options or restricted share awards were granted under the 2004 Plan. As of September 30, 2014, the 2004 Plan has expired and no further grants of stock options or restricted stock are allowed.

The Company accounts for stock options granted to employees and non-employee members of the Board of Directors in accordance with ASC 718, Compensation – Stock Compensation. The Company also occasionally grants stock options to non-employee consultants. Such grants are accounted for pursuant to ASC 505-50, Equity-Based Payments to Non-Employees (refer to Note 2, Summary of Significant Accounting Policies - Stock-Based Compensation).

A summary of the Company’s stock option activity related to employees, non-employee members of the Board of Directors and non-employee consultants as of and for the year ended December 31, 2016 is as follows:

 

						Weighted-				Aggregate
		Number of				Average				Intrinsic
		Options				Exercise Price				Value
Outstanding at December 31, 2015			1,658,408			$	10.27
Granted			1,078,000				6.55
Exercised			(42,000	)			2.93
Expired			(32,499	)			11.03
Forfeited			(113,501	)			11.52
Outstanding at December 31, 2016			2,548,408			$	8.75			$	4,144
Weighted average remaining contractual life as of December 31, 2016 (yrs)			8.18
Options exercisable at December 31, 2016			1,007,334			$	9.26			$	1,461
Weighted average remaining contractual life as of December 31, 2016 (yrs)			6.96
Options vested and expected to vest at December 31, 2016			2,417,327			$	8.76			$	3,929
Weighted average remaining contractual life as of December 31, 2016 (yrs)			8.11

The total fair value of options vested during the years ended December 31, 2016, 2015 and 2014 was $3,589, $2,489 and $393, respectively. The intrinsic value of options exercised during the years ended December 31, 2016, 2015 and 2014 was $126, $1,748 and $2,055, respectively.

During the years ended December 31, 2016, 2015 and 2014, the Company granted 1,078,000, 774,000 and 884,000 stock options, respectively, to employees, non-employee members of the Board of Directors or non-employee consultants. The fair values of the stock options granted to those groups were estimated using the Black-Scholes option valuation model with the following ranges of assumptions (see Note 2, Summary of Significant Accounting Policies - Stock-Based Compensation):    

 

		Year Ended December 31,
		2016		2015		2014
Risk-free interest rate		1.19% - 1.93%		1.43% - 1.89%		1.64% - 2.72%
Expected volatility		67.8% - 77.8%		64.0% - 67.4%		64.9% - 71.3%
Expected dividend yield		0%		0%		0%
Expected life of employee and Board of Directors’ options (in years)		6.25		6.25		6.25
Expected life of non-employee options (in years)		10		10		10

The weighted average grant date fair value of options granted to employees, non-employee members of the Board of Directors for their Board service and non-employee consultants during the years ended December 31, 2016, 2015 and 2014 was $4.28, $7.17 and $7.09, respectively.

At the end of each fiscal quarter during the years ended December 31, 2016, 2015 and 2014, the Company used the Black-Scholes option valuation model with the following ranges of assumptions to re-measure the fair value of all outstanding options that had been granted to non-employee consultants during the vesting period of each tranche in accordance with ASC 505-50:

 

		Year Ended December 31,
		2016		2015		2014
Risk-free interest rate		1.35% - 2.38%		1.81% - 2.15%		1.96% - 2.72%
Expected volatility		70.8% - 75.5%		70.6% - 72.2%		69% - 71%
Expected dividend yield		0%		0%		0%
Expected life of non-employee options (in years)		7.08 - 9.60		8.1 - 8.8		6 - 10

Under ASC 505-50, upon re-measurement of each award, income or expense is recognized during its vesting term.

The weighted average fair value of outstanding options that had been granted to nonemployee consultants, as re-measured during the vesting period of each tranche during the years ended December 31, 2016, 2015 and 2014 was $4.81, $10.05 and $10.77, respectively.    

During the years ended December 31, 2016, 2015 and 2014, the Company recognized compensation expense in the accompanying Statements of Comprehensive Loss relating to stock options, as follows:

 

		Year Ended December 31,
		2016				2015				2014
Research and development		$	1,301			$	1,073			$	349
General and administrative			1,499				1,441				1,022
Total stock option expense		$	2,800			$	2,514			$	1,371

As of December 31, 2016, the total compensation expense relating to unvested options granted to employees, non-employee members of the Board of Directors and non-employee consultants that had not yet been recognized was $7,815, which is expected to be realized over a weighted average period of 2.79 years. The Company will issue shares upon exercise of options from common stock reserved.

The Company does not expect to realize any tax benefits from its stock option activity or the recognition of stock-based compensation expense because the Company currently has net operating losses and has a full valuation allowance against its deferred tax assets. Accordingly, no amounts related to excess tax benefits have been reported in cash flows from operations or cash flows from financing activities for the years ended December 31, 2016, 2015 and 2014.