Equity Incentive Plan | 12. Equity Incentive Plan In August 2014, Prior Kura adopted the Prior Kura 2014 Equity Incentive Plan. In connection with the Merger as discussed in Note 1, at the Effective Time of the Merger, we adopted the Prior Kura 2014 Equity Incentive Plan and approved the amendment and restatement of the Prior Kura 2014 Equity Incentive Plan pursuant to the 2014 Plan, which became effective April 13, 2015. Under the 2014 Plan, a total of 5,975,000 shares were initially reserved for issuance. As of December 31, 2015, there were 478,272 shares of common stock reserved for future stock awards under the 2014 Plan. The number of shares available for future grant under our 2014 Plan will automatically increase on January 1 of each year by 4% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, subject to the ability of our board of directors to take action to reduce the size of the increase in any given year. On January 1, 2016, the initial automatic increase pursuant to the 2014 Plan occurred, resulting in 854,822 additional shares available for future grant under the 2014 Plan. In addition, as of December 31, 2015, we had 25,000 shares of common stock reserved for future issuance under our 2015 Employee Stock Purchase Plan, or ESPP, which has not been implemented as of December 31, 2015. The number of shares of our common stock reserved for issuance under the ESPP will automatically increase on January 1 of each calendar year by the lesser of 1% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year and 2,000,000 shares, subject to the ability of our board of directors to take action to reduce the size of the increase in any given year. Stock Options The exercise price of all stock options granted was equal to no less than the estimated fair market value of such stock on the date of grant. Stock options generally vest over a three to four-year period. The maximum contractual term for all options is ten years. The following is a summary of stock option activity for the year ended December 31, 2015, in thousands (except per share and years data): Number of Shares Weighted-Average Exercise Price per Share Weighted-Average Remaining Contractual Term (years) Aggregate Intrinsic Value Outstanding at December 31, 2014 — Granted 630 $ 8.85 Canceled/forfeited (56 ) $ 6.32 Outstanding at December 31, 2015 574 $ 9.10 9.1 $ 761 Exercisable at December 31, 2015 24 $ 6.62 2.3 $ 48 The assumptions used to estimate the fair value of stock options granted to employees in the year ended December 31, 2015 using the Black-Scholes option pricing model were as follows: Weighted-average grant date fair value per share $ 4.16 Expected volatility 70.8% — 72.8% Expected term (in years) 6.00 — 6.08 Risk free interest rate 1.7% — 1.8% Expected dividend yield — There were no stock options granted for the period from August 22, 2014 (Inception) to December 31, 2014. In estimating fair value for stock options issued under the 2014 Plan, expected volatility was based on historical volatility of comparable publicly-traded companies because our common stock has only been publicly traded since September 16, 2015. Due to the lack of historical option exercise data, we estimated the expected term using the simplified method. The risk-free interest rates are based on the U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The expected dividend yield of zero reflects that we have not paid cash dividends since inception and do not intend to pay cash dividends in the foreseeable future. We apply an estimate of forfeitures at the time of grant based on historical experience and revise our estimate in subsequent periods if actual forfeitures differ from those estimates. For the year ended December 31, 2015 and period from August 22, 2014 (Inception) to December 31, 2014, we recognized $399,000 and zero expense related to options, respectively. As of December 31, 2015, unrecognized estimated compensation expense related to options was $1.9 million, which is expected to be recognized over the weighted-average remaining requisite service period of approximately 3.2 years. Restricted Stock Awards Restricted stock awards were granted at a price equal to the estimated fair market value on the date of grant. The restricted stock awards generally vest over four years from the original vesting date, with certain grants subject to one-year cliff vesting. The vesting provisions of individual awards may vary as approved by our Board of Directors. In connection with the issuance of restricted common stock, we maintain a repurchase right where shares of restricted common stock are released from such repurchase right over a period of time of continued service by the recipient. The repurchase price for unvested stock awards will be the lower of (i) the fair market value of the shares of common stock on the date of repurchase or (ii) their original purchase price. As of December 31, 2015, there were 3,232,350 The following is a summary of restricted stock awards activity for the year ended December 31, 2015 and period from August 22, 2014 (Inception) to December 31, 2014, in thousands (except per share data): Number Shares Employee Non-employee Weighted-Average Grant Date Fair Value Unvested at August 22, 2014 (Inception) — — — $ — Granted 4,944 4,096 848 $ 0.002 Vested (411 ) (322 ) (89 ) $ 0.002 Unvested at December 31, 2014 4,533 3,774 759 $ 0.002 Granted — — — $ — Vested (1,279 ) (1,036 ) (243 ) $ 0.002 Forfeited (21 ) (21 ) — $ 0.011 Unvested at December 31, 2015 3,233 2,717 516 $ 0.002 Vested at December 31, 2015 1,690 1,358 332 $ 0.002 For the year ended December 31, 2015 and period from August 22, 2014 (Inception) to December 31, 2014, we recognized expense related to restricted stock awards totaling $1.9 million and $237,000, respectively, of which $1.7 million and $237,000 in expense related to non-employee restricted stock awards, respectively. As of December 31, 2015, unrecognized estimated compensation expense related to employee restricted stock awards was $360,000, which is expected to be recognized over the weighted-average remaining requisite service period of approximately 2.7 years. The following table summarizes share-based compensation expense for all share-based compensation arrangements, in thousands: Period From August 22, 2014 Year Ended (Inception) to December 31, 2015 December 31, 2014 Research and development $ 1,916 $ 233 General and administrative 343 4 Total share-based compensation expense $ 2,259 $ 237 |