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Stockholders' Equity
12 Months Ended
Dec. 31, 2018
Equity [Abstract]  
Stockholders' Equity

Note 11 — Stockholders’ Equity

Equity Incentive Plan

Our amended and restated 2004 Equity Incentive Plan (the “2004 Plan”) provides for us to grant incentive stock options, nonstatutory stock options, restricted stock, stock appreciation rights, restricted stock units, performance shares and performance units to employees, directors and consultants. We may grant options for terms of up to ten years at prices not lower than 100% of the fair market value of our common stock on the date of grant. Options granted to new employees generally vest 25% after one year and monthly thereafter over a period of four years. Options granted to existing employees generally vest monthly over a period of four years. As of December 31, 2018, we have 2.4 million shares of common stock reserved and available for issuance under the 2004 Plan.

Stock option activity in 2018 was as follows:

 

Stock Options

Outstanding

 

 

Weighted

Average Exercise

Price per Share

 

 

Weighted

Average

Remaining

Contractual Life (in years)

 

 

Aggregate

Intrinsic Value

(in thousands)

 

Balance at December 31, 2017

 

5,957,458

 

 

$

9.19

 

 

 

 

 

 

 

 

 

Granted

 

1,804,047

 

 

 

8.04

 

 

 

 

 

 

 

 

 

Exercised

 

(422,819

)

 

 

7.51

 

 

 

 

 

 

 

 

 

Forfeited

 

(884,649

)

 

 

11.06

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

6,454,037

 

 

$

8.72

 

 

 

6.6

 

 

$

412

 

Exercisable at December 31, 2018

 

4,461,463

 

 

$

8.72

 

 

 

5.7

 

 

$

411

 

 

We expect all outstanding options to vest. The intrinsic value of stock options exercised, calculated based on the difference between the market value at the date of exercise and the exercise price, was $0.7 million for 2018 and $1.8 million for 2017. The intrinsic value of stock options outstanding at December 31, 2017 was $4.3 million.

Restricted stock and Performance unit activity in 2018 was as follows:

 

 

Number of

Restricted Stock Units

 

 

Weighted

Average Award

Date Fair Value

per Share

 

Balance at December 31, 2017

 

 

456,752

 

 

$

9.08

 

Granted

 

 

466,500

 

 

$

7.80

 

Released

 

 

(301,000

)

 

$

8.29

 

Forfeited

 

 

(75,752

)

 

$

8.29

 

Balance at December 31, 2018

 

 

546,500

 

 

$

8.53

 

 

Restricted stock units generally vest monthly over three to four years. For 2018, the fair value of restricted stock and performance units vested, calculated based on the units vested multiplied by the closing price of our common stock on the date of vesting, was $2.3 million.

During 2015, we granted 685,000 Performance Units with a grant date fair value of $7.00 per share. In 2017, performance criteria for 342,500 Performance Units were met, 171,250 of those units vested.  In March 2018, the remaining 171,250 of these Performance Units vested. In 2017, the other 342,500 Performance Units granted in 2015 were forfeited when we determined that the performance criteria for those Performance Units would not be met.

Employee Stock Purchase Plan

Under our 2015 Employee Stock Purchase Plan (the “ESPP”), employees may purchase common stock up to a specified maximum amount at a price equal to 85% of the fair market value at certain plan-defined dates.

We issued 144,822 shares at an average price of $6.40 during 2018 and 120,959 shares at an average price of $9.65 in 2017 pursuant to the ESPP. At December 31, 2018, we have 253,617 shares of common stock reserved for issuance under the ESPP.

Stock-Based Compensation Expense

We use the Black-Scholes option pricing model to determine the fair value of stock option grants to employees and directors and employee stock purchase plan shares. The fair value of share-based payments was estimated on the date of grant based on the following assumptions:

 

 

Year Ended December 31, 2018

 

 

Year Ended December 31, 2017

 

 

 

Options

 

 

ESPP

 

 

Options

 

 

ESPP

 

Risk-free interest rate

 

2.3% to 3.0%

 

 

1.5% to 2.5%

 

 

2.2%

 

 

1.3%

 

Volatility

 

73% to 74%

 

 

73% to 74%

 

 

74%

 

 

74%

 

Expected term in years

 

 

6.5

 

 

 

0.5

 

 

 

6.5

 

 

 

0.5

 

Expected dividend yield

 

0%

 

 

0%

 

 

0%

 

 

0%

 

 

We use the U.S. Treasury zero-coupon issues with remaining terms similar to the expected terms of the options for the risk-free interest rate. We use our own volatility history based on its stock’s trading history and our own historical exercise and forfeiture activity to estimate expected term for option grants. We do not anticipate paying dividends in the foreseeable future and use an expected dividend yield of zero.

We reviewed the impact of estimating forfeitures on our stock-based compensation, determined the impact was immaterial and stopped estimating forfeitures in 2018. Prior to 2018, we estimated forfeitures at the time of grant and revised those estimates in subsequent periods if actual forfeitures differ from our estimates using historical forfeiture data and recorded stock-based compensation expense on those awards that were expected to vest.

We measure compensation expense for restricted stock units at fair value on the date of grant and recognizes the expense over the expected vesting period. We recognize stock-based compensation expense on a straight-line basis over the requisite service period, generally the vesting period of the award for share-based awards. Stock-based compensation expense for 2018 and 2017 was as follows (in thousands):

 

Years Ended December 31,

 

 

2018

 

 

2017

 

Research and development

$

5,101

 

 

$

5,656

 

General and administrative

 

4,660

 

 

 

3,372

 

 

$

9,761

 

 

$

9,028

 

 

Non-cash stock-based compensation expense for share-based awards to non-employees was $0.1 million in 2018 and $0.5 million in 2017.

As of December 31, 2018, we expect to recognize $13.8 million of unrecognized compensation cost related to unvested stock options over a weighted-average period of 2.4 years and $3.5 million of unrecognized compensation cost related to unvested restricted stock over a weighted-average period of 1.8 years.

Warrants

Pursuant to the Loan Agreement described in Note 8 “Long-Term Debt,” we issued warrants to purchase 65,189 shares of our common stock at an exercise price of $6.90 per share and additional warrants to purchase 68,285 shares of our common stock at an exercise price of $6.59 per share. In 2017, we issued 16,126 shares of common stock related to cashless exercises of some of these warrants. In August 2018, we issued 42,253 warrants with a weighted average of $7.10 per share. At December 31, 2018, 142,359 warrants with a weighted average exercise price of $6.85 per share were outstanding.

In June 2012, we issued warrants with expiration in June 2017 pursuant to public offerings of our securities in 2012. In 2017, we issued 3,450,122 shares of common stock for exercise of these warrants, respectively.

Controlled Equity Offering

During 2017, we issued 2,425,625 shares of common stock under a Controlled Equity Offering Sales Agreement, an at-the-market issuance sales agreement, for net proceeds of $29.9 million and completed the offering.