Stockholders' Deficit | 3 Months Ended |
Mar. 31, 2014 |
Equity [Abstract] | ' |
Stockholders' Deficit | ' |
6. Stockholders’ Deficit |
Convertible Preferred Stock |
As of March 31, 2014, the Company had outstanding Series A-2 convertible preferred stock (“Series A-2”), Series B-2 convertible preferred stock (“Series B-2”), Series C-2 convertible preferred stock (“Series C-2”) and Series D-2 convertible preferred stock (“Series D-2”). |
During the three months ended March 31, 2014, the Company received a notice for the cashless exercise of warrants to purchase 175,582 shares of Series A-2 convertible preferred stock. Accordingly, the Company issued 166,228 shares of Series A-2 preferred stock. The following table summarizes the Company's convertible preferred stock authorized and issued and outstanding as of March 31, 2014 (in thousands): |
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Convertible Preferred Stock | | Shares | | Shares | | Net | | Aggregate |
Authorized | Issued and | Proceeds | Liquidation |
| Outstanding | | Preference |
Series A-2 | | 76,989 | | | 75,644 | | | $ | 12,667 | | | $ | 12,330 | |
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Series B-2 | | 18,566 | | | 18,566 | | | 7,908 | | | 8,000 | |
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Series C-2 | | 12,903 | | | 12,903 | | | 11,875 | | | 12,000 | |
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Series D-2 | | 16,657 | | | 15,269 | | | 21,794 | | | 22,000 | |
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| | 125,115 | | | 122,382 | | | $ | 54,244 | | | $ | 54,330 | |
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Each share of preferred stock was convertible to one share of common stock. During the quarter ended March 31, 2014, the preferred stockholders elected to convert all of the outstanding preferred stock into common stock prior to the effectiveness of the Company’s registration statement filed with the SEC in connection with the IPO. On April 3, 2014, prior to the reverse stock split being effected (Note 1), all outstanding shares of preferred stock were converted to common stock on a 1:1 basis. |
Common Stock |
Common Stock - At March 31, 2014, there were 200,000,000 shares of common stock authorized, and 6,069,530 shares issued and outstanding. Holders of common stock are entitled to dividends, if and when declared by the board of directors. |
On March 12, 2014, the Company’s board of directors approved an amended and restated certificate of incorporation (Note 11), under which the total number of shares of all classes of capital stock that the Company is authorized to issue is 455,000,000 shares including 450,000,000 shares of common stock and 5,000,000 shares of preferred stock, par value $0.001 per share. The amended and restated certificate of incorporation was filed with the Delaware Secretary of State, and became effective, on April 8, 2014. |
Common Stock Subject to Repurchase or Forfeiture - In connection with employment and service agreements entered into in connection with the Company’s acquisition of Face It, Corp. in October 2013 ("Acquisition Date"), the Company issued 118,577 shares of unvested restricted common stock, the vesting of which is contingent upon continuing employment or services and subject to forfeiture. The forfeiture rights lapse 50% on the first anniversary of the Acquisition Date and an additional 50% on the second anniversary of the Acquisition Date. These shares were valued at $1.0 million, based on the Acquisition Date fair value of the Company’s common stock. This amount is being recorded as stock-based compensation on a straight-line basis over the two-year requisite service period. The 118,577 shares that are subject to forfeiture are included in issued and outstanding shares of common stock as of March 31, 2014. For the three months ended March 31, 2014, $0.2 million was included as stock-based compensation expense related to these shares. |
In addition, the Company has the right to repurchase, at the original exercise price, unvested common shares issued pursuant to the early exercise of stock options upon termination of service of an employee. The consideration received for an early exercise of an unvested option is considered to be a deposit of the exercise price, and the related dollar amount recorded as a liability. The liability is reclassified as equity as the award vests. As of March 31, 2014, a liability of $0.2 million related to 22,534 unvested shares of common stock has been included in 'Accrued and other current liabilities' in the condensed consolidated balance sheets. These exercised but unvested shares are included in issued and outstanding shares as of March 31, 2014. |
Warrants |
Series A-2 Convertible Preferred Stock Warrants — The following table summarizes activities related to the Company’s convertible preferred stock warrants during the three months ended March 31, 2014 (in thousands, except per share data): |
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| | Number of Shares | | Exercise Price | | Expiration Date | | | | | |
Outstanding as of December 31, 2013 | | 1,511 | | | $ | 0.163 | | | | | | | | |
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Exercised | | (176 | ) | | 0.163 | | | | | | | | |
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Outstanding as of March 31, 2014 | | 1,335 | | | 0.163 | | | February 2015 - June 2020 | | | | | |
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In March 2014, warrants to purchase 175,582 shares of Series A-2 convertible preferred stock were fully exercised under the cashless exercise method available under the warrant. Upon such exercise, the Company issued 166,228 shares of Series A-2 convertible preferred stock. Consequently, these instruments were no longer accounted for as liabilities. These preferred stock warrants were remeasured to their fair value as of the exercise date and the applicable fair value related to these warrants of $0.5 million was reclassified from liability to 'Additional paid-in capital' in the condensed consolidated balance sheets. |
Series D-2 Convertible Preferred Stock Warrants — As of March 31, 2014 and December 31, 2013, there was a warrant outstanding for 52,054 shares of Series D-2 convertible preferred stock with an exercise price of $1.441 that expires in October 2023. |
In connection with the closing of the IPO and the 4:1 reverse stock split on April 3, 2014, all outstanding Series A-2 convertible preferred stock warrants automatically converted into warrants to purchase 333,751 (post-reverse stock split) shares of common stock at a fixed exercise price of $0.65 per share. Further, all outstanding warrants to purchase Series D-2 convertible preferred stock automatically converted into warrants to purchase 13,013 (post-reverse stock split) shares of common stock at $5.76 per share on April 3, 2014. |
Common Stock Warrants - As of December 31, 2013, the Company had outstanding warrants to purchase 7 shares of common stock with an exercise price of $3,800.00 per share, which expire on various dates between November 2016 and August 2017. |
In February 2014, in connection with the 2014 Loan and Security Agreement, the Company issued warrants to purchase up to 177,865 shares of common stock, to the extent vested, with an exercise price of $10.12 per share, which expire in February 2024. As of March 31, 2014, these warrants were vested with respect to 118,577 shares of common stock (Note 5). The vested warrants were classified as a liability. |
Fair Value of Warrants |
The Company estimates the fair value of each liability-classified warrant on the date of issuance and at each reporting date using the Black-Scholes option-pricing model and using the assumptions noted in the below table. Expected volatility is based upon the historical and implied volatility of a peer group of publicly traded companies. The expected term of warrants represents the contractual term of the warrants. The risk-free rate for the expected term of the warrants is based on the U.S. Treasury Constant Maturity at the time of issuance. |
The fair value of the convertible preferred stock warrants and the liability-classified common stock warrants at March 31, 2014 and December 31, 2013 was determined using the Black-Scholes option-pricing model with the following assumptions: |
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| | 31-Mar-14 | | 31-Dec-13 | | | | | | |
Fair value of Series A-2 preferred stock | | $ | 1.75 | | -1 | $ | 2.69 | | | | | | | |
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Fair value of Series D-2 preferred stock | | $ | 1.75 | | -1 | $ | 2.81 | | | | | | | |
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Fair value of common stock | | $ | 7 | | -1 | * | | | | | | |
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Risk-free interest rate | | 0.13% to 2.73% | | 0.33% to 2.60% | | | | | | |
Expected life | | Remaining | | Remaining | | | | | | |
contractual life | contractual life | | | | | | |
Expected dividends | | — | | — | | | | | | |
Volatility | | 40% - 50% | | 45.00% | | | | | | |
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(1) Fair value of the underlying stock is based on the Company's initial public offering price of $7.00 per share calculated on a pre-reverse split basis for preferred stock and post-reverse split basis for common stock. | | | | | | |
* There were no liability-classified common stock warrants at December 31, 2013. | | | | | | |
Common Stock Reserved for Future Issuance |
Shares of common stock reserved for future issuance related to outstanding convertible preferred stock, warrants and stock options, on an as converted, post-reverse stock split basis, are as follows (in thousands): |
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| | March 31, 2014 | | | | | | | | | | | |
Series A-2 convertible preferred stock (on an as converted, post-reverse split basis) | | 18,910 | | | | | | | | | | | | |
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Series B-2 convertible preferred stock (on an as converted, post-reverse split basis) | | 4,642 | | | | | | | | | | | | |
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Series C-2 convertible preferred stock (on an as converted, post-reverse split basis) | | 3,226 | | | | | | | | | | | | |
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Series D-2 convertible preferred stock (on an as converted, post-reverse split basis) | | 3,817 | | | | | | | | | | | | |
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Stock options outstanding | | 7,345 | | | | | | | | | | | | |
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Shares available for future grant under 2004 Plan | | 117 | | | | | | | | | | | | |
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Shares available for future grant under 2014 Plan | | 5,300 | | | | | | | | | | | | |
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Shares available for future issuance under ESPP | | 880 | | | | | | | | | | | | |
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Conversion of convertible preferred and common stock warrants (on an as converted, post-reverse split basis) | | 525 | | | | | | | | | | | | |
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Total shares of common stock reserved | | 44,762 | | | | | | | | | | | | |
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Equity Incentive Plans |
Prior to the IPO, the Company granted stock options under its Amended and Restated 2004 Equity Incentive Plan, as amended (the “2004 Plan”). The 2004 Plan was adopted in June 2004 and most recently amended in March 2014 to increase the total stock options available for issuance to 11,982,832 to eligible employees, non-employee consultants and directors. Under the terms of the 2004 Plan, the Company has the ability to grant incentive and nonstatutory stock options. Incentive stock options may be granted only to Company employees. Nonstatutory stock options may be granted to Company employees, directors and consultants. Such options are to be exercisable at prices, as determined by the board of directors, generally equal to the fair value of the Company’s common stock at the date of grant. Options granted to employees generally vest over a four-year period, with an initial vesting period of 12 months for 25% of the shares, and the remaining 75% of the shares vesting monthly on a ratable basis over the remaining 36 months. Options generally expire 10 years after the grant date and are generally exercisable upon vesting. Vested options generally expire 90 days after termination of the optionee’s employment or relationship as a consultant or director, unless otherwise extended by the terms of the stock option agreement. Any unvested options or expired options are returned to the 2004 Plan. |
In March 2014, the Company’s stockholders and board of directors voted to increase the shares of common stock reserved under the 2004 Plan by 100,000 shares. As of March 31, 2014, 116,632 shares were available for grant under the 2004 Plan. |
In March 2014, the Company’s stockholders and the board of directors approved the 2014 Equity Incentive Plan (“2014 Plan”) and 5,300,000 shares of common stock were authorized for issuance under the 2014 Plan. The 2014 Plan became effective on April 3, 2014. In addition, on the first day of each year beginning in 2015 and ending in 2024, the 2014 Plan provides for an annual automatic increase to the shares reserved for issuance. After the IPO, the Company will grant stock options only under the 2014 Plan. |
Upon the Company’s IPO, the 2004 Plan terminated. All shares reserved under the 2004 Plan became available for grant under the Company’s 2014 Equity Incentive Plan. Any forfeited shares that would otherwise return to the 2004 Plan after the IPO will instead return to the 2014 Plan. |
A summary of the Company’s stock option activities during the three months ended March 31, 2014 is as follows (in thousands, except per share data): |
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| | Number of | | Weighted | | Weighted | | Aggregate | |
Shares | Average | Average | Intrinsic | |
Outstanding | Exercise | Remaining | Value | |
| Price | Contractual | | |
| | Life | | |
| | (Years) | | |
Outstanding as of December 31, 2013 | | 7,633 | | | $ | 3.3 | | | | | | |
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Options granted (weighted average grant date fair value of $6.51 per share) | | 356 | | | 12.14 | | | | | | |
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Options exercised | | (576 | ) | | 1.14 | | | | | | |
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Options forfeited or expired | | (68 | ) | | 4.41 | | | | | | |
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Outstanding as of March 31, 2014 | | 7,345 | | | $ | 3.89 | | | 7.62 | | $ | 28,343 | | |
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The Company has computed the aggregate intrinsic value amounts disclosed in the above table based on the difference between the original exercise price of the options and management’s estimate of the fair value of the Company’s common stock of $7.00 as of March 31, 2014 for all in-the-money options outstanding. |
Stock-based compensation expense for the three months ended March 31, 2014 and 2013 is as follows (in thousands): |
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| | Three Months Ended | | | | | | |
| | March 31, 2014 | | March 31, 2013 | | | | | | |
Cost of revenue | | $ | 87 | | | $ | 32 | | | | | | | |
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Research and development | | 350 | | | 53 | | | | | | | |
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Sales and marketing | | 326 | | | 105 | | | | | | | |
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General and administrative | | 433 | | | 74 | | | | | | | |
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Total stock-based compensation | | $ | 1,196 | | | $ | 264 | | | | | | | |
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As of March 31, 2014, there was $11.7 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 3.4 years. |
Stock-Based Awards to Employees — All stock-based compensation for equity awards granted to employees and directors is measured at the grant date fair value of the award. The Company estimated the fair value of its common stock utilizing periodic contemporaneous valuations prepared by an independent third-party appraiser based upon several factors, including its operating and financial performance, progress and milestones attained in its business, and past sales of convertible preferred stock. |
The Company estimates the fair value of each option award on the date of grant using the Black-Scholes option-pricing model and using the assumptions noted in the below table. Expected volatility is based upon the historical volatility of a peer group of publicly traded companies. The expected term of options granted is estimated by taking the average of the vesting term and the contractual term of the option. The risk-free rate for the expected term of the options is based on U.S. Treasury zero-coupon issues at the time of grant. The weighted-average assumptions used to value stock options granted during the three months ended March 31, 2014 and 2013 were as follows: |
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| | Three Months Ended | | | | | | | | | | |
| | March 31, 2014 | | March 31, 2013 | | | | | | | | | | |
Expected term (years) | | 6.1 | | 6.1 | | | | | | | | | | |
Volatility | | 56% | | 60% | | | | | | | | | | |
Risk-free interest rate | | 1.80% | | 1.10% | | | | | | | | | | |
Dividend yield | | — | | — | | | | | | | | | | |
The Company recognizes employee stock-based compensation expense that is calculated based upon awards ultimately expected to vest and, thus, this expense is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. |
Stock-Based Awards to Non-employees — The Company grants options to purchase shares of common stock to non-employees in conjunction with services performed. For non-employees the Company revalues the unvested portion of non-employee stock options using the Black-Scholes option-pricing model until performance is complete. As a result, the stock-based compensation will fluctuate as the fair value of the Company’s common stock fluctuates. During the three months ended March 31, 2014, the Company did not grant stock options to any non-employees. The assumptions used to value stock options granted to non-employees during the periods indicated are as follows: |
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| | Three Months Ended | | | | | | | | | | |
| | 31-Mar-14 | | 31-Mar-13 | | | | | | | | | | |
Contractual life (in years) | | * | | 10 | | | | | | | | | | |
Volatility | | * | | 58% | | | | | | | | | | |
Risk-free interest rate | | * | | 2.50% | | | | | | | | | | |
Dividend yield | | * | | — | | | | | | | | | | |
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* There were no stock options granted to non-employees during this period. | | | | | | | | | | |
For the three months ended March 31, 2014 and 2013, stock-based compensation expense to non-employees was $54.0 thousand and $11.0 thousand, respectively, and is included in total stock-based compensation expense in the table above. |
Employee Stock Purchase Plan |
In March 2014, the Company’s stockholders and the board of directors adopted the 2014 Employee Stock Purchase Plan (“ESPP”), and the shares authorized for issuance thereunder. The ESPP became effective on April 3, 2014. |
Each offering period under the ESPP is 12 months commencing on November 16 of each year and includes two 6-month purchase periods, with purchases on May 15 and November 15. |
The ESPP permits eligible employees to purchase shares of the Company’s common stock through payroll deductions with up to 15% of their pre-tax earnings subject to certain Internal Revenue Code limitations. In addition, no participant may purchase more than 1,500 shares of common stock in each purchase period. The purchase price of the shares is 85% of the lower of the fair market value of the Company’s common stock on the first day of an offering period or the date of purchase. For the first offering period after the IPO, the purchase price of the shares is 85% of the lower of the Company’s IPO price of $7.00 per share or the market price on the date of purchase. |
The number of shares of common stock reserved for issuance under the ESPP is 880,000 shares, which will increase automatically each year, beginning on January 1, 2015 and continuing through January 1, 2024, by the lesser of (i) 1% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year; (ii) 1,000,000 shares of common stock (subject to adjustment to reflect any split or combination of our common stock); or (iii) such lesser number as determined by the Company’s board of directors. |