Note 9 - Redeemable Convertible Preferred Stock

12 Months Ended

Dec. 31, 2014

Redeemable Convertible Preferred Stock [Abstract]

Redeemable Convertible Preferred Stock [Text Block]

9. Redeemable Convertible Preferred Stock

Upon the closing of the Company’s IPO on October 27, 2014, all outstanding shares of the Company’s Preferred Stock were automatically converted into 8,651,805 shares of Common Stock. As of December 31, 2014, the Company has 10,000,000 shares of Preferred Stock authorized for issuance with none issued or outstanding.

As of December 31, 2013, the authorized capital stock of the Company included 71,852,775 shares of redeemable convertible preferred stock, par value $0.001 per share, of which: (i) 22,638,465 shares were designated as Series A Preferred Stock, (ii) 10,909,091 shares were designated as Series A-1 Preferred Stock, (iii) 20,754,461 shares were designated as Series B Preferred Stock and (iv) 17,550,758 shares were designated as Series C Preferred Stock.

Shares of Preferred Stock may be issued from time to time in one or more series, each of such series to have such powers, designations, preferences, and relative, participating, optional, or other special rights, if any, and such qualifications and restrictions, if any, as are stated or expressed in the resolutions of the Board of Directors providing for such series of Preferred Stock. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purposes of voting by classes unless expressly provided in such resolution.

In May 2014, the Company issued 42,469,626 shares of Series D Preferred Stock at a price of $0.588656 per share for gross proceeds of $25.0 million. In connection with the issuance of the Series D Preferred Stock, the holders received certain tranche rights to purchase additional shares of Series D Preferred Stock at $0.588656 per share. These investor rights represented freestanding financial instruments which were recorded as liabilities upon issuance. Changes in the fair value of these investor rights subsequent to issuance were recorded in other income (expense) in the consolidated statements of operations and comprehensive loss. The estimated fair value of the tranche rights was determined upon issuance and immediately before the IPO using a Black-Scholes option pricing model with the following inputs:

	Upon Issuance			Immediately before IPO
Expected term (in years)	1.84	-	3.50		0.001
Expected volatility	63.0%	-	86.0%	63.0%	-	71.0%
Risk-free interest rate	0.44%	-	1.12%	0.35%	-	1.05%
Expected dividend yield		0%			0%

Upon issuance and immediately before the IPO, the investor rights and obligations had a fair value of $6.6 million and $1.4 million, respectively. The change in fair value of the investor rights of $5.2 million was recorded in other income in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2014. The Series D Preferred Stock investor rights were either exercised or extinguished upon the closing of the Company’s IPO.

The Company recorded the following amounts in 2014 in connection with the Series D investors’ rights and obligations (in thousands):

	Amount
Fair value of tranche right liability upon issuance May 13, 2014	$	6,639
Issuance costs allocated to tranche right liability		(80	)
Adjustment to fair value recorded in other income during 2014		(5,151	)
Reclassified to equity upon exercise on October 21, 2014		(1,408	)
Balance at December 31, 2014	$	-

The Company incurred approximately $0.5 million in costs related to the issuance of the Series D Preferred Stock which were allocated to the shares issued to date and the tranche right liability. The $0.4 million of issuance costs allocated to the shares issued in May 2014 were recorded as a discount on the Series D Preferred Stock and were to be accreted over five years to the earliest redemption date of the Series D Preferred Stock. The remaining $0.1 million of issuance costs were allocated to the second and third tranche right liability.