4. STOCK‑BASED COMPENSATION

Total stock‑based compensation expense related to all of our stock‑based awards was as follows (in thousands):

 

In 2017 and 2016, we entered into severance agreements. As part of the severance arrangements we offered, we extended the date through which certain employee(s) had the right to exercise their vested options. In addition, we also accelerated the vesting period of certain unvested stock options. As a result of these modifications, we recorded an incremental stock-based compensation expense of approximately $1.4 million and $1.1 million during the years ended December 31, 2017and 2016, respectively.  The incremental compensation expenses were computed based on the fair values of the modified awards on the respective modification dates.  These amounts are included as part of “General and administrative expense” in the accompanying 2017 Statement of Operations and “General and administrative expense” and “Restructuring charges” in the accompanying 2016 Statement of Operations.

Employee Stock Option Plans

We have four stock option plans, our 2011 Equity Incentive Plan (2011 Plan), 2000 Equity Incentive Plan (2000 Plan), 2000 Non‑Employee Directors Stock Option Plan (Directors’ Plan) and Inducement Plan. The 2011 Plan, 2000 Plan and Directors’ Plan provide for granting to our officers, directors and all other employees and consultants options to purchase shares of our common stock. The Inducement Plan is intended mainly to provide an inducement material for certain individuals to enter into employment with the Company. 

Options granted under our 2011 Plan expire no later than ten years from the date of grant. Options may be granted with different vesting terms from time to time, ranging from zero to five years. As of December 31, 2017, a total of 16,174,599 shares of common stock were authorized for issuance under the 2011 Plan. Options under the 2000 Plan may be granted with different vesting terms from time to time, ranging from zero to five years. As of December 31, 2017, a total of 12,142,055 shares of common stock were authorized for issuance under the 2000 Plan. Options under the Directors’ Plan may be granted for a maximum term of 10 years. As of December 31, 2017, a total of 1,988,182 shares of common stock were authorized for issuance under the Directors’ Plan. Options granted under our Inducement Grant expire no later than ten years from the date of grant and may be granted with different vesting terms from time to time. As of December 31, 2017, a total of 1,800,000 shares of common stock were authorized for issuance under the Inducement Plan.

The fair value of each option award is estimated on the date of grant using the Black‑Scholes option pricing model. We have segregated option awards into the following three homogenous groups for the purposes of determining fair values of options: officers and directors, all other employees, and consultants.

We determined weighted‑average valuation assumptions separately for each of these groups as follows:

In connection with the adoption of ASU No. 2016-09 on January 1, 2017, we have elected to account for forfeitures as they occur and its adoption did not have a material impact on our financial statements.

 

The following table summarizes the weighted‑average assumptions relating to options granted pursuant to our equity incentive plans for the years ended December 31, 2017, 2016 and 2015:

 

 

The exercise price of stock options is determined to be the market price of our common stock on the date immediately preceding the date of grant. These stock options become exercisable at varying dates and generally expire ten years from the date of grant. At December 31, 2017, options to purchase 11,696,696 shares of common stock were available for grant and 32,104,836 reserved shares of common stock were available for future issuance under our stock option plans.

Stock‑Based Compensation Award Activity

Option activity under our equity incentive plans was as follows:

 

 

We granted options to purchase 4,048,675,  5,251,185 and 3,875,170 shares of common stock during the years ended December 31, 2017, 2016 and 2015, respectively.  The weighted‑average grant date fair value of options granted during 2017, 2016 and 2015 was $1.48,  $1.72 and $1.40, respectively. In 2016, we had 700,000 options related to performance-based stock option awards with a grant date fair value of $1.1 million which will vest upon the achievement of a corporate performance-based milestone. We considered the achievement of the corresponding corporate-based milestone as probable as of December 31, 2016.  Accordingly, we recognized the $1.1 million as stock-based compensation expense during 2016.  As of December 31, 2017, we have 1,460,000 shares related to outstanding performance-based stock option awards with a grant date fair value of $2.2 million and will vest upon achievement of certain corporate performance-based milestones. Of this amount, 1,160,000 shares related to performance-based stock option awards wherein the achievement of the corresponding corporate-based milestones was probable as of December 31, 2017.  Accordingly, we recognized $1.1 million as stock-based compensation expense during 2017.  As of December 31, 2017, there were approximately $993,000 unrecognized compensation cost related to these outstanding performance stock options.

 

The aggregate intrinsic value of the stock options in the table above is calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock for the options that were in‑the‑money at December 31, 2017. At December 31, 2017 and 2016, we had 4,665,624 and 3,668,891, respectively, of nonvested stock options, with approximately $5.4 million and $31,000 intrinsic value at December 31, 2017 and 2016, respectively. During the years ended December 31, 2017 and 2016, aggregate intrinsic value of options exercised under our stock option plans was approximately $1.2 million and $253,000, respectively, determined as of the date of the stock option exercise.

 

As of December 31, 2017, there was approximately $6.2 million of total unrecognized compensation cost related to nonvested stock‑based compensation arrangements granted under our stock option plans and approximately $91,000 of total unamortized compensation cost related to our Purchase Plan. The unamortized compensation cost related to our stock option plans and our Purchase Plan is expected to be recognized over a weighted‑ average period of approximately 2.3 years and 0.5 years, respectively. For the years ended December 31, 2017 and 2016, there were 2,844,690 and 4,215,058 shares vested, respectively, with weighted‑average exercise price of $2.86 and $2.70, respectively.

Details of our stock options by exercise price are as follows as of December 31, 2017:

 

 

Employee Stock Purchase Plan

Our Purchase Plan permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods. The price at which the stock is purchased is equal to the lesser of 85% of the fair market value of the common stock on the first day of the offering or 85% of the fair market value of our common stock on the purchase date. The initial offering period commenced on the effective date of our initial public offering. We issued 403,302,  482,746 and 576,537 shares of common stock during 2017, 2016 and 2015, respectively, pursuant to the Purchase Plan at an average price of $1.87,  $1.89 and $2.03, respectively. For 2017, 2016 and 2015, the weighted average fair value of awards granted under our Purchase Plan was $0.99,  $0.98 and $1.05, respectively. As of December 31, 2017, we had 2,115,568 reserved shares of common stock available for future issuance under the Purchase Plan.

The fair value of awards granted under our Purchase Plan is estimated on the date of grant using the Black‑Scholes option pricing model, which uses weighted‑ average assumptions. Our Purchase Plan provides for a 24- month offering period comprised of four six‑month purchase periods with a look‑back option. A look‑back option is a provision in our Purchase Plan under which eligible employees can purchase shares of our common stock at a price per share equal to the lesser of 85% of the fair market value on the first day of the offering period or 85% of the fair market value on the purchase date. Our Purchase Plan also includes a feature that provides for a new offering period to begin when the fair market value of our common stock on any purchase date during an offering period falls below the fair market value of our common stock on the first day of such offering period. This feature is called a “reset.” Participants are automatically enrolled in the new offering period. We had a “reset” on January 2, 2015 because the fair market value of our stock on December 31, 2014 was lower than the fair market value of our stock on July 1, 2014, the first day of another offering period. We applied modification accounting in accordance with ASC Topic No. 718, Stock Compensation, to determine the incremental fair value associated with this Purchase Plan “reset” and recognized the related stock‑based compensation expense according to FASB ASC Subtopic No. 718‑50, Employee Share Purchase Plans. The total incremental fair value associated with this Purchase Plan “reset” was approximately $792,000 which was recognized as expense during the period from January 2, 2015 to December 31, 2016.  We had another “reset” on July 1, 2016 because the fair market value of our stock on June 30, 2016 was lower than the fair market value of our stock on January 5, 2015, the first day of the offering period. We applied modification accounting in accordance with the relevant accounting guidance.  The total incremental fair value associated with this Purchase Plan “reset” was approximately $1.0 million and will be recognized as expense from the period from July 1, 2016 to June 30, 2018.

The following table summarizes the weighted‑average assumptions related to our Purchase Plan for the years ended December 31, 2017, 2016 and 2015. Expected volatilities for our Purchase Plan are based on the two‑year historical volatility of our stock. Expected term represents the weighted‑ average of the purchase periods within the offering period. The risk‑free interest rate for periods within the expected term is based on U.S. Treasury constant maturity rates.