Annual report pursuant to Section 13 and 15(d)

Stock and Employee Benefit Plans

v3.8.0.1
Stock and Employee Benefit Plans
 12 Months Ended
Dec. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock and employee benefit plans
Stock and employee benefit plans
In December 2014, the Company adopted the 2014 Employee, Director and Consultant Equity Incentive Plan, (the “2014 Plan”) which provides for the grant of stock options to certain designated employees of the Company, non-employee directors of the Company and certain other persons performing significant services for the Company as designated by the Compensation Committee of the Board of Directors. The 2014 Plan was terminated on June 28, 2016 when the Company adopted the 2016 Employee, Director and Consultant Equity Incentive Plan, (the “2016 Plan”). Therefore, no options were granted under the 2014 Plan and no options are available for future grant after this date.
The 2016 Plan provides for the grant of stock options, restricted and unrestricted stock awards, and other stock-based awards to employees of the Company, non-employee directors of the Company, and certain other consultants performing services for the Company as designated by either the Board of Directors or the Compensation Committee of the Board of Directors. The 2016 Plan authorizes the issuance of up to 3,750,000 shares of common stock plus awards canceled or expired under the 2014 Plan, if any. Shares which are vested or continue to vest can still be exercised under the 2014 Plan. The 2016 Plan does not provide for an “evergreen” provision. The vesting periods of equity incentives issued under the 2016 Plan are determined by the Compensation Committee of the Company´s Board of Directors, with stock options generally vesting over a four-year period.
The Company’s stock options have a maximum term of 10 years from the date of grant. Stock options granted under the 2014 Plan or 2016 Plan may be either incentive stock options or nonqualified stock options. The exercise price of stock options granted under the 2014 Plan and 2016 Plan must be at least equal to the fair market value of the common stock on the date of grant. The Company’s general policy is to issue common shares upon the exercise of stock options.
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:
 
 
Years Ended December 31,
 
 
2017
 
2016
Risk free interest rate
 
1.77% - 2.22%
 
1.13% - 2.08%
Expected term
 
5.00 - 5.73 years
 
5.00 - 5.73 years
Dividend yield
 
—
 
—
Expected volatility
 
75.1% - 78.9%
 
74.9% - 76.0%

The weighted-average fair value of the 1,852,682 and 1,873,047 options granted during the years ended December 31, 2017 and 2016 was $2.47 and $1.00, respectively.
Total stock-based compensation expense is recorded in operating expenses based upon the functional responsibilities of the individuals holding the respective options as follows (in thousands):
 
 
Years Ended
December 31,
 
 
2017
 
2016
Research and development
 
$
844

 
$
599

General and administrative
 
2,202

 
1,306

Total stock-based compensation
 
$
3,046

 
$
1,905


As of December 31, 2017, there were 1,612,514 shares available for future grant under the 2016 Plan, including 194,542 shares which were forfeited under the 2014 Plan.
The following table summarizes stock option activity for employees and nonemployees (shares in thousands):
 
Number of
Options
 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Life
 
Aggregate
Intrinsic
Value
(in thousands)
Outstanding, December 31, 2016
4,423

 
$
1.99

 
 
 
$
—

Granted
1,853

 
3.23

 
 
 
4

Exercised
(552
)
 
2.34

 
 
 
886

Canceled
(280
)
 
2.78

 
 
 
277

Outstanding, December 31, 2017
5,444

 
$
2.33

 
8.07 years
 
$
28,395

Vested or expected to vest, December 31, 2017
5,444

 
$
2.33

 
8.07 years
 
$
28,395

Exercisable, December 31, 2017
3,067

 
$
1.96

 
7.32 years
 
$
17,141


Periodically, the Company grants options outside of the 2014 and 2016 Plans as inducement options, which are material awards to the executive officers or other personnel entering senior leadership roles with the Company. These awards are excluded from the table above. The following table summarizes stock option activity for these inducement options (in thousands):
 
Number of
Options
 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Life
 
Aggregate
Intrinsic
Value
(in thousands)
Outstanding, December 31, 2016
1,000

 
$
2.41

 
 
 
$
—

Granted
625

 
$
5.24

 
 
 
$
—

Canceled
(94
)
 
$
1.45

 
 
 
$
572

Outstanding, December 31, 2017
1,531

 
$
3.62

 
8.79 years
 
$
6,015

Vested or expected to vest
1,531

 
$
3.62

 
8.79 years
 
$
6,015

Exercisable, December 31, 2017
688

 
$
2.23

 
8.39 years
 
$
3,657


The compensation expense with all inducement options was $0.8 million of which $0.3 million is included in research and development expense and $0.5 million is included in general and administration expense for the year ended December 31, 2017. The compensation expense for inducement options for the year ended December 31, 2016 was $0.3 million and is included in research and development expense.
As of December 31, 2017, the total unrecognized compensation cost related to non-vested awards was $6.4 million of which $2.4 million are for inducement options. The Company expects to recognize the compensation cost over a remaining weighted-average period of 3.28 years.
401(k) Savings plan
In 2015, the Company established a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers all U.S. based employees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pretax basis. The Company made matching contributions to participants in this plan which totaled $45 thousand and $32 thousand for the years ended December 31, 2017 and 2016, respectively.