Certain employees of the Company participate in Recro’s stock-based compensation plan, which provides for the grants of stock options and RSUs. The expense associated with the Company’s employees who participate in the plan is included in the accompanying combined statements of operations. A portion of these costs have been allocated out of the Company as they relate to employees responsible for corporate level activities that historically were incurred by the entity that represents the Company. Additionally, the entity that represents the Company historically incurred the costs related to the board of directors, which has also been partially allocated out of the Company.  

In October 2013, Recro established the 2013 Equity Incentive Plan (the 2013 Plan), which allows for the grant of stock options, stock appreciation rights and stock awards for a total of 600,000 shares of common stock. In June 2015, Recro’s shareholders approved the Amended and Restated Equity Incentive Plan (the A&R Plan), which amended and restated the 2013 Plan and increased the aggregate amount of shares of common stock available for issuance to 2,000,000. On December 1st of each year, pursuant to the “Evergreen” provision of the A&R Plan, the number of shares available under the plan may be increased by the Recro Board by an amount equal to 5% of the outstanding common stock on December 1st of that year. In December 2018 and 2017 the number of shares available for issuance under the A&R Plan was increased by 1,082,972 and 956,341, respectively. The total number of shares authorized for issuance under the A&R plan as of September 30, 2019 is 8,119,709.  Stock options are exercisable generally for a period of 10 years from the date of grant and generally vest over four years. As of September 30, 2019, 2,524,235 shares are available for future grants under Recro’s A&R Plan.

All shares described herein represent shares of Recro. The share information included in this disclosure includes 100% of the shares issued to Baudax Bio employees, corporate employees and Board members of Recro; however, a portion of the expenses related to the corporate employees and Board members of Recro have been allocated out of share-based compensation expense in these carve out financial statements using an allocation methodology similar to the allocation methodology used to allocate cash compensation expense.

The weighted average grant-date fair value of the options awarded to employees during the nine months ended September 30, 2019 and 2018 was $5.53 and $6.18, respectively. The fair value of the options was estimated on the date of grant using a Black-Scholes option pricing model with the following assumptions:

The following table summarizes stock option activity during the nine months ended September 30, 2019:

Included in the table above are 482,876 options outstanding as of September 30, 2019 that were granted outside the plan. The grants were made pursuant to the NASDAQ inducement grant exception in accordance with NASDAQ Listing Rule 5635(c)(4).

As a result of the Company’s reduction in workforce announced in April 2019, the Company cancelled approximately 600,000 unvested stock options upon termination, which are reflected in the table above.

The following table summarizes restricted stock units (RSUs), activity during the nine months ended September 30, 2019.

Included in the table above are 18,625 time-based RSUs outstanding as of September 30, 2019 that were granted outside the plan. The grants were made pursuant to the NASDAQ inducement grant exception in accordance with NASDAQ Listing Rule 5635(c)(4).

As a result of the Company’s reduction in workforce announced in April 2019, the Company cancelled approximately 300,000 shares related to RSUs upon termination, which is reflected in the table above.

Stock-based compensation expense for the nine months ended September 30, 2019 and 2018 was $4,254 and $3,370, respectively.

As of September 30, 2019, there was $7,532 of unrecognized compensation expense related to unvested options and time-based RSUs that are expected to vest and will be expensed over a weighted average period of 2.0 years. As of September 30, 2019, there was $1,621 of unrecognized compensation expense related to unvested performance-based RSUs and will be expensed if the performance criteria are met.

The aggregate intrinsic value represents the total amount by which the fair value of the common stock subject to options exceeds the exercise price of the related options. As of September 30, 2019, the aggregate intrinsic value of the vested and unvested options was $7,514 and $3,331, respectively.