4. STOCK‑BASED COMPENSATION

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

 

 

In December 2014, we entered into a severance agreement with our former CEO. As part of the severance arrangement we offered, we extended the date to which our former CEO had the right to exercise his vested options within 90 days from his termination date as was stipulated under his option agreement to the end of the contractual term of the options, of which the remaining contractual term for the most recently granted options is nine years. In addition, we also accelerated the vesting period of certain of his unvested stock options. As a result of these modifications, we recorded incremental stock-based compensation expense of approximately $1.5 million in the fourth quarter of 2014 (see Note 11).  This amount is included as part of “General and administrative expense” in the accompanying Statement of Operations.

In September 2013, we announced that we had reduced our workforce by 18%, or 30 positions, in connection with efforts to prioritize projects and conserve our working capital. As part of the severance arrangement we offered the terminated employees, we extended the date to which the terminated employees had to exercise their vested options to June 30, 2014, rather than 90 days from the termination date as was stipulated under the employee’s option agreements. In addition, we also accelerated the vesting period of certain unvested stock options for one terminated employee. As a result of these modifications, we recorded non‑cash stock‑based compensation expense of $239,000 in the third quarter of 2013. This expense was classified under “Restructuring expense” in the accompanying Statements of Operations.

Employee Stock Option Plans

We have three stock option plans, our 2011 Equity Incentive Plan (2011 Plan), 2000 Equity Incentive Plan (2000 Plan) and 2000 Non‑Employee Directors Stock Option Plan (Directors’ Plan), that provide for granting to our officers, directors and all other employees and consultants options to purchase shares of our common stock. 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, 2015, a total of 10,864,592 shares of common stock were authorized for issuance under the 2011 Plan. There were 214,295 options to purchase shares exercised during the year ended December 31, 2015 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, 2015, a total of 12,299,675 shares of common stock were authorized for issuance under the 2000 Plan. There were no options to purchase shares exercised during the year ended December 31, 2015 under the 2000 Plan. Options under the Directors’ Plan may be granted for a maximum term 10 years. The exercise price of options under the Directors’ Plan is equal to the fair market value of the common stock on the date of grant. As of December 31, 2015, a total of 1,188,182 shares of common stock were authorized for issuance under the Directors’ Plan. There were no options to purchase shares exercised during the year ended December 31, 2015 under the Directors’ Plan.

Pursuant to FASB ASC 718, we are required to estimate the amount of expected forfeitures when calculating compensation costs. We estimated the forfeiture rate using our historical experience of actual forfeitures. We adjust our stock‑based compensation expense as actual forfeitures occur, review our estimated forfeiture rates each quarter and make changes to our estimate as appropriate.

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:

The following table summarizes the weighted‑average assumptions relating to options granted pursuant to our equity incentive plans for the years ended December 31, 2015, 2014 and 2013:

 

 

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, 2015, options to purchase 5,245,977 shares of common stock were available for grant and 24,352,449 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:

 

 

Of the 3,875,170 common stock options granted during 2015, 1,175,000 shares were related to performance-based stock option awards which will vest upon the achievement of a corporate performance-based milestone related to the progress of the Phase 3 clinical program of fostamatinib in ITP.  Of the 3,467,120 common stock options granted during 2014, 950,000 shares were related to performance-based stock option awards, of which only 700,000 shares remain outstanding due to the cancellation of the 250,000 shares in the fourth quarter of 2014.  These remaining shares will vest upon the achievement of certain corporate performance-based milestones related to the progress and success of the Phase 3 clinical program of fostamatinib in ITP. Weighted‑average grant date fair value of options granted during 2015, 2014 and 2013 was $1.40,  $2.32 and $3.34, respectively.

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, 2015. At December 31, 2015 and 2014, we had 4,017,340 and 2,726,779, respectively, of nonvested stock options, with approximately $2.2 million and $24,000 intrinsic value at December 31, 2015 and 2014, respectively. During the years ended December 31, 2015 and 2014, aggregate intrinsic value of options exercised under our stock option plans was approximately $252,000 and $10,000, respectively, determined as of the date of the stock option exercise.

As of December 31, 2015, there was approximately $4.3 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested stock‑based compensation arrangements granted under our stock option plans and approximately $276,000 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 0.9 years and 0.4 years, respectively. For the years ended December 31, 2015 and 2014, there were 2,326,021 and 2,456,622 shares vested, respectively, with weighted‑average exercise price of $3.13 and $4.74, respectively.

Details of our stock options by exercise price are as follows as of December 31, 2015:

 

 

Employee Stock Purchase Plan

Our Employee Stock Purchase Plan (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 576,537,  505,877 and 383,717 shares of common stock during 2015, 2014 and 2013, respectively, pursuant to the Purchase Plan at an average price of $2.03,  $2.24 and $2.74, respectively. For 2015, 2014 and 2013, the weighted average fair value of awards granted under our Purchase Plan was $1.05,  $1.42 and $2.05, respectively. As of December 31, 2015, we had 3,001,616 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 twenty‑four 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, 2014 because the fair market value of our stock on December 31, 2013 was lower than the fair market value of our stock on July 1, 2013, the first day of the 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 will recognize the related stock‑based compensation expense according to FASB ASC Subtopic No. 718‑50, Employee Share Purchase Plan. The total incremental fair value for this Purchase Plan “reset” was approximately $577,000, that will be recognized from January 2, 2014 to December 31, 2015. On January 2, 2015, we had another “reset” 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 the relevant guidance and determined that the incremental fair value associated with this Purchase Plan “reset” was approximately $792,000 that will be recognized from January 2, 2015 to December 31, 2016. 

The following table summarizes the weighted‑average assumptions related to our Purchase Plan for the years ended December 31, 2015, 2014 and 2013. 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.