Stockholders' Equity

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Stockholders' Equity

6. Stockholders’ Equity

Authorized and Outstanding Capital Stock

As of December 31, 2014, the authorized capital stock of the Company included 175,000,000 shares of common stock, par value $0.00001 per share, of which 38,008,933 and 30,662,218 shares are issued and outstanding at June 30, 2016 and December 31, 2015, respectively; and 25,000,000 shares of undesignated preferred stock, par value $0.00001 per share, of which 0 shares are issued and outstanding at June 30, 2016 and December 31, 2015.

Equity Plans

On February 28, 2014, the Company’s Board of Directors adopted its 2014 Incentive Plan (2014 Plan) and its 2014 Employee Stock Purchase Plan (ESPP), which were subsequently approved by its stockholders and became effective upon the closing of the Company’s initial public offering on March 25, 2014. The 2014 Plan replaces the 2008 Equity Incentive Plan (2008 Plan), however, any options or awards outstanding under the 2008 Plan at the time of adoption of the 2014 Plan remain outstanding and effective.

The 2014 Plan allows for the granting of stock options, stock appreciation rights, or SARs, restricted stock, unrestricted stock, stock units, performance awards and other awards convertible into or otherwise based on shares of our common stock. Dividend equivalents may also be provided in connection with an award under the 2014 Plan. The Company’s employees, officers, directors and consultants and advisors are eligible to receive awards under the 2014 Plan. The Company initially reserved 1,785,000 shares of its common stock for the issuance of awards under the 2014 Plan. The 2014 Plan provides that the number of shares reserved and available for issuance under the 2014 Plan will automatically increase annually on January 1^st of each calendar year, by an amount equal to three percent (3%) of the number of shares of stock outstanding on a fully diluted basis as of the close of business on the immediately preceding December 31^st  (2014 Plan Evergreen Provision). The Company’s Board of Directors may act prior to January 1^st of any year to provide that there will be no automatic increase in the number of shares available for grant under the 2014 Plan for that year (or that the increase will be less than the amount that would otherwise have automatically been made). Subject to adjustment, no more than 1,131,937 shares of our common stock may be delivered in satisfaction of incentive stock options awarded under the 2014 Plan.  During the first six months of 2016, the Company granted 849,275 stock options to employees, 402,338 RSUs to employees and 87,500 equity grants were made to directors under the 2014 Plan.  

The ESPP authorizes the initial issuance of up to a total of 262,500 shares of the Company’s common stock to participating employees.  The maximum aggregate number of shares of common stock available for purchase pursuant to the exercise of options granted under the ESPP will be the lesser of (a) 262,500 shares, increased on each anniversary of the adoption of the ESPP by one percent (1%) of the total shares of common stock then outstanding and (b) 739,611 shares (which is equal to five percent (5%) of the total shares of common stock outstanding on the date of the adoption of the ESPP on a fully diluted, as converted basis (ESPP Evergreen Provision). Under the ESPP, each offering period is six months, at the end of which employees may purchase shares of common stock through payroll deductions made over the term of the offering. The per-share purchase price at the end of each offering period is equal to the lesser of 85% of the closing price of our common stock at the beginning or end of the offering period.  

Shares Reserved for Future Issuance

The Company has reserved for future issuance the following number of shares of common stock:

	June 30, 2016		December 31, 2015
Unvested restricted common stock		159,640		216,716
Common stock options and RSU's outstanding		3,150,718		2,231,057
Shares available for issuance under the 2014 Plan (1)		1,305,784		1,318,732
Shares available for issuance under the ESPP (2)		803,105		440,304
Total		5,419,247		4,206,809

⁽¹⁾ On January 1, 2016, the shares reserved for future grants under the 2014 Plan increased by 986,800 shares pursuant to the 2014 Plan Evergreen Provision.

⁽²⁾ On February 28, 2016, the shares reserved for future issuance under the ESPP increased by 379,430 shares pursuant to the ESPP Evergreen Provision.

Stock-Based Compensation

Stock Options

On February 22, 2016, as part of the Company’s annual grant of equity, the Company issued 624,275 stock options to employees. In addition, the Company issues stock options to new hires and occasionally to other employees not in connection with the annual grant process.  Options granted by the Company vest over periods of between 12 and 48 months. Options vest in installments of (i) 25% at the one year anniversary and (ii) in either 36 or 48 equal monthly or 12 equal quarterly installments beginning in the thirteenth month after the initial Vesting Commencement Date (as defined) or grant date, subject to the employee’s continuous service with the Company. Options generally expire ten years after the date of grant. The Company recorded approximately $1.0 million of stock-based compensation expense related to stock options during the three months ended June 30, 2016 and approximately $2.1 million during the six months ended June 30, 2016.

Restricted Stock

On December 23, 2013, the Company issued 450,224 shares of restricted stock to employees and 79,067 shares of restricted stock to non-employees at a grant date fair value of $7.42 per share.  The aggregate grant date fair value for the shares of restricted stock issued on December 23, 2013 totaled approximately $3.9 million. The awards of restricted stock contained a performance condition wherein vesting is contingent upon the Company’s consummation of a liquidity event, as defined, prior to the fifth anniversary of the date of grant. Certain of the awards of restricted stock have a requisite service period that was complete upon grant. The remainder of the awards of restricted stock have a requisite service period of four years whereby the award vests 25% on the one year anniversary of the Vesting Commencement Date (as defined), then ratably on the first day of each calendar quarter for 12 quarters, subject to continuous service by the individual and achievement of the performance target. Due to the nature of the performance condition, the Company had concluded that the performance condition was not probable of achievement and therefore, recognition of compensation cost had been deferred until the occurrence of a liquidity event, as defined.  Compensation expense related to the restricted stock awards is being recognized over the associated requisite service period which commenced on March 25, 2014. The Company recorded approximately $27,000 of stock-based compensation expense related to restricted stock during the three months ended June 30, 2016 and recorded approximately $13,000 during the six months ended June 30, 2016 as a result of mark to market adjustments related to non-employees.  

Restricted Stock Units

On February 22, 2016, as part of the Company’s annual grant of equity, the Company issued 382,338 RSUs to employees.  In addition, the Company occasionally issues RSUs not in connection with the annual grant process to employees.  The RSUs vest 100% on the third year anniversary of the grant date.  Total stock-compensation expense to be recognized over the life of the RSUs is $2.9 million and will be recognized on a straight-line basis over the vesting period. The Company recorded approximately $0.2 million of stock-based compensation expense related to the RSUs during the three months ended June 30, 2016 and approximately $0.3 million during the six months ended June 30, 2016.

ESPP

The first offering period under the ESPP opened on January 2, 2015.  There were 16,629 shares issued during the second quarter of 2016.  The Company recorded approximately $16,000 of stock-based compensation expense related to ESPP during the three months ended June 30, 2016 and approximately $47,000 during the six months ended June 30, 2016.

Compensation Expense Summary

The Company has recognized the following compensation cost related to share-based awards:

	Three Months Ended				Six Months Ended
	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
	(in thousands)				(in thousands)
Research and development	$	365	$	397	$	757	$	962
General and administrative		857		698		1,716		1,261
Total	$	1,222	$	1,095	$	2,473	$	2,223

Compensation expense by type of award:

	Three Months Ended				Six Months Ended
	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
	(in thousands)				(in thousands)
Stock options	$	1,021	$	908	$	2,149	$	1,607
Restricted stock		27		142		13		542
Restricted stock units		158		24		264		32
Employee stock purchase plan		16		21		47		42
Total	$	1,222	$	1,095	$	2,473	$	2,223