11. Stock-Based Payments

2016 Stock Incentive Plan

The 2016 Stock Incentive Plan (the “2016 Plan”) was adopted by the board of directors on December 15, 2015 and approved by the stockholders on June 17, 2016 and became effective upon the Company’s closing of the IPO, or July 6, 2016. The 2016 Plan replaced the 2012 Equity Incentive Plan (the "2012 Plan"). Any options or awards outstanding under the 2012 Plan remained outstanding and effective. Under the 2016 Plan, the Company may grant incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. The Company initially reserved 3,218,742 shares of common stock for the issuance of awards under the 2016 Plan, which will be cumulatively increased on January 1 of each calendar year by the least of 6,000,000 shares of common stock, 4.0% of the outstanding shares of common stock as of such date, or such lesser amount as specified by the compensation committee of the Company’s board of directors. This number is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. At December 31, 2016, 2,669,252 shares remained available for future issuance under the 2016 Plan. Under the 2016 Plan, stock options may not be granted at less than fair value on the date of grant.

Terms of stock option agreements, including vesting requirements, are determined by the Company’s board of directors, subject to the provisions of the 2016 Plan. Stock option awards granted by the Company generally vest over four years, with 25% vesting on the one year anniversary of the vesting commencement date and 75% vesting ratably, on a monthly basis, over the remaining three years. Such awards are exercisable from the date of grant for a period of ten years. The Company may grant performance-based stock option awards for which vesting accelerates upon the achievement of performance-based milestones. For certain of such awards, notwithstanding any vesting in accordance with the achievement of performance-based milestones, such awards may vest in full on the sixth anniversary of the vesting commencement date.

2016 Employee Stock Purchase Plan

The 2016 Employee Stock Purchase Plan (the “2016 ESPP”) was adopted by the board of directors on December 15, 2015 and approved by the stockholders on June 17, 2016 and became effective on July 6, 2016 upon the closing of the IPO. The 2016 ESPP initially will provide participating employees with the opportunity to purchase up to an aggregate of 586,666 shares of the Company’s common stock. The number of shares of the Company’s common stock reserved for issuance under the 2016 ESPP will automatically increase on the first day of each fiscal year, commencing on January 1, 2017 and ending on December 31, 2025, in an amount equal to the least of (i) 1,173,333 shares of the Company’s common stock, (ii) 1.0% of the total number of shares of the Company’s common stock outstanding on the first day of the applicable year, and (iii) an amount determined by the Company’s board of directors.

Stock Options

Performance-Based Stock Options

The Company has granted stock options to management for which the vesting of such stock options accelerates upon the achievement of performance-based criteria. Milestone events are specific to the Company’s corporate goals, including but not limited to certain preclinical and clinical development milestones and the Company’s ability to execute on its corporate development and financing strategies. Stock-based compensation expense associated with these performance-based stock options is recognized based on the accelerated attribution model. Management evaluates when the achievement of a performance-based milestone is probable based on the expected satisfaction of the performance conditions as of the reporting date. Notwithstanding any vesting in accordance with the achievement of performance-based milestones, such awards vest in full on the sixth anniversary of the vesting commencement date. For the year ended December 31, 2016 and 2015, the Company recorded additional stock-based compensation expense of $0.2 million and $26,000, respectively, related to the achievement of certain performance-based milestones. As of December 31, 2016, there was $1.0 million of unrecognized stock-based compensation expense related to the performance-based stock options granted to management.

During the year ended December 31, 2016, the Company granted 75,000 stock options to an advisor for which the vesting of such stock options accelerates upon the achievement of performance-based criteria. As of December 31, 2016, no such performance-based criteria were achieved.

A summary of the status of stock options as of December 31, 2015 and December 31, 2016 and changes during the year ended December 31, 2016 is presented below:

 

The intrinsic value of options exercised during the years ended December 31, 2016, 2015 and 2014 was $2.4 million, $2.0 million, and $6,000, respectively.

Cash received from option exercises during the years ended December 31, 2016, 2015, and 2014 was $0.4 million, $0.4 million, and $14,000, respectively.

Restricted Common Stock

From time to time, upon approval by the Company’s board of directors, certain employees and advisors have been granted restricted shares of common stock with time- and performance-based vesting criteria. These shares of restricted stock are subject to repurchase rights. Accordingly, the Company has recorded the proceeds from the issuance of restricted stock as a liability in the consolidated balance sheets included as a component of accrued expenses or other long term liabilities based on the scheduled vesting dates. The restricted stock liability is reclassified into stockholders’ equity (deficit) as the restricted stock vests over time or upon the achievement of performance.

A summary of the status of unvested restricted common stock as of December 31, 2015 and December 31, 2016 and changes during the year ended December 31, 2016 is presented below:

 

The total fair value of restricted stock vested during the years ended December 31, 2016, 2015, and 2014 was $0.1 million, $0.1 million, and $0.1 million, respectively, based upon the number of restricted stock awards vested multiplied by the fair vale of the Company’s common stock on the grant date.

Certain shares of restricted stock vest upon the achievement of specified performance objectives as well as continued service to the Company. As of December 31, 2016, management determined that certain milestones were achieved, and the Company recorded additional stock-based compensation expense of $1.0 million, related to the achievement of certain performance-based milestones.

Stock-based Compensation Expense

The fair value of each stock option granted was estimated on the date of grant using the Black-Scholes option-pricing model based on the following weighted-average assumptions:

 

The weighted‑average grant date fair value per share of options granted in the years ended December 31, 2016, 2015 and 2014 was $8.58,  $4.88 and $1.46, respectively.

The following table summarizes the stock-based compensation expense for stock options and restricted common stock granted to employees and non-employees recorded in the Company’s statements of operations:

 

As of December 31, 2016, there was $8.8 million of total unrecognized compensation cost related to non-vested stock options granted to employees, which is expected to be recognized over a weighted-average period of 3.0 years. Additionally, as of December 31, 2016, there was $0.8 million of total unrecognized compensation cost related to non-vested stock options granted to non-employees. Due to an operating loss, the Company does not record tax benefits associated with stock‑based compensation or option exercises. Tax benefits will be recorded when realized.