Stockholders' Equity (Deficit) | 6 Months Ended |
Jun. 30, 2014 |
Equity [Abstract] | ' |
Stockholders' Deficit | ' |
7. Stockholders’ Equity (Deficit) |
Capital Structure |
Prior to the IPO (Note 1), the Company had outstanding 75,643,683 shares of Series A-2 convertible preferred stock, 18,565,794 shares of Series B-2 convertible preferred stock, 12,903,226 shares of Series C-2 convertible preferred stock, and 15,269,294 shares of Series D-2 convertible preferred stock. Each share of convertible preferred stock was convertible to one share of common stock upon receipt of the required consent of preferred stockholders or upon conclusion of qualified IPO. |
In March 2014, the Company’s board of directors and stockholders adopted an amendment to the Company’s certificate of incorporation to effect a reverse stock split of the Company's outstanding common stock at a ratio of 4:1. Accordingly, on April 3, 2014, the reverse stock split was effected such that, (i) each 4 shares of the then-outstanding common stock was reduced to one share of common stock; (ii) the number of shares issuable upon exercise of outstanding options and warrants to purchase common stock was proportionately reduced; and (iii) the exercise price of all outstanding warrants or stock options to purchase common stock was proportionately increased. |
On April 3, 2014, immediately prior to the effectiveness of the Company’s registration statement filed with the SEC and the reverse stock split being effected, all shares of the Company's outstanding convertible preferred stock converted into common stock on a 1:1 basis. Upon the consummation of the IPO and the 4:1 reverse stock split on April 3, 2014, all then-outstanding convertible preferred stock converted into 30,595,477 shares of common stock. |
In connection with the Company's IPO, the Company amended and restated its certificate of incorporation ("Amended and Restated Certificate of Incorporation"), pursuant to which the Company is authorized to issue 450,000,000 shares of common stock and 5,000,000 shares of preferred stock, both with a par value of $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. |
As of June 30, 2014, there were 48,405,953 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding. |
Common Stock Subject to Repurchase or Forfeiture |
In connection with employment and service agreements entered into in connection with the Company’s acquisition of SoCoCare 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 June 30, 2014. For the three and six months ended June 30, 2014, $0.2 million and $0.4 million, respectively, 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 is recorded as a liability. The liability is reclassified as equity as the award vests. As of June 30, 2014, a liability of $0.1 million related to 19,550 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 were included in issued and outstanding shares of common stock as of June 30, 2014. |
Warrants |
As of June 30, 2014, the Company had outstanding warrants to purchase 359,596 shares of common stock with a weighted-average exercise price of $5.59 per share, which expire on various dates between November 2016 and February 2024. During the three and six months ended June 30, 2014, 161,979 shares and 203,536 shares of common stock, respectively, were issued as a result of exercises of common stock warrants at an exercise price of $0.652 per share. |
Prior to the IPO, the Company had issued Series A-2 and Series D-2 convertible preferred stock warrants and common stock warrants to certain investors and lenders in connection with its debt agreements. |
Series A-2 Convertible Preferred Stock Warrants — Prior to the preferred stock conversion and the reverse stock split effected in connection with the Company’s IPO, the Company had outstanding warrants to purchase 1,335,041 shares of Series A-2 convertible preferred stock with an exercise price of $0.163 per share, which expire on various dates between February 2015 and June 2020. |
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 — Prior to the preferred stock conversion and the reverse stock split effected in connection with the Company’s IPO, the Company had an outstanding warrant to purchase 52,054 shares of Series D-2 convertible preferred stock with an exercise price of $1.441 per share that expires in October 2023. |
Upon the preferred stock conversion and the 4:1 reverse stock split on April 3, 2014, all then-outstanding Series A-2 and Series D-2 convertible preferred stock warrants became warrants to purchase 346,764 shares of common stock. Subsequent to the IPO and through June 30, 2014, warrants to purchase 165,040 shares of common stock, which were formerly warrants to purchase Series A-2 convertible preferred stock, were fully exercised, some of which pursuant to the cashless exercise method. Upon such exercises, the Company issued 161,979 shares of common stock. |
Common Stock Warrants - As of June 30, 2014 and 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. In February 2014, these warrants were vested with respect to 118,577 shares of common stock. |
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 April 3, 2014 and December 31, 2013 was determined using the Black-Scholes option-pricing model with the following assumptions: |
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| | IPO Date | | 31-Dec-13 | | | | | | | | |
3-Apr-14 | | | | | | | | |
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. | | | | | | | | |
On April 3, 2014, upon the effectiveness of the Company's registration statement filed with the SEC for the IPO, the fair value of the Company’s convertible preferred stock warrants and liability-classified common stock warrants of $2.6 million was reclassified from liability to additional paid-in capital in the condensed consolidated balance sheets. Fair value of these warrants on the date of the re-classification was equal to their carrying value. |
Common Stock Reserved for Future Issuance |
Shares of common stock reserved for future issuance related to outstanding warrants, stock options and restricted stock units were as follows (in thousands): |
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| | June 30, 2014 | | | | | | | | | | | | | |
Stock options outstanding | | 7,145 | | | | | | | | | | | | | | |
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Restricted stock units outstanding | | 262 | | | | | | | | | | | | | | |
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Shares available for future grant under 2014 Plan | | 5,276 | | | | | | | | | | | | | | |
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Shares available for future issuance under ESPP | | 880 | | | | | | | | | | | | | | |
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Common stock warrants outstanding | | 360 | | | | | | | | | | | | | | |
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Total shares of common stock reserved | | 13,923 | | | | | | | | | | | | | | |
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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. In March 2014, the Company’s stockholders and board of directors approved an increase in the shares of common stock reserved under the 2004 Plan by 100,000 shares (on a post-reverse stock split basis). |
Under the terms of the 2004 Plan, the Company has the ability to grant incentive and nonstatutory stock options. Incentive stock options could only be granted to Company employees. Nonstatutory stock options could be granted to Company employees, directors and consultants. Such options are 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 ten 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 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. 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. The 2014 Plan became effective on April 3, 2014. Upon the Company’s IPO, no future grants will be made under the 2004 Plan. All shares reserved under the 2004 Plan became available for grant under the 2014 Plan. Any forfeited or expired shares that would otherwise return to the 2004 Plan after the IPO will instead return to the 2014 Plan. |
The 2014 Plan allows the Company to grant stock options, restricted stock units ("RSU"), restricted stock awards, performance stock awards, stock appreciation rights, performance cash awards, and other stock awards. To date, the Company has granted stock options and RSUs under the 2014 Plan. Stock options are granted under the 2014 Plan in general at a price not less than 100% of the fair market value of the common stock on the date of grant and vest over four years. The Company's stock options expire ten years from the date of grant. Each RSU granted under the 2014 Plan represents a right to receive one share of the Company’s common stock when the RSU vests. RSUs generally vest over one to four years. |
Stock Options |
A summary of the Company’s stock option activities during the six months ended June 30, 2014 is as follows (in thousands, except years and 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 $5.91 per share) | | 441 | | | 11.02 | | | | | | | | |
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Options exercised | | (655 | ) | | 1.1 | | | | | | | | |
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Options forfeited or expired | | (274 | ) | | 3.44 | | | | | | | | |
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Outstanding as of June 30, 2014 | | 7,145 | | | $ | 3.97 | | | 7.17 | | $ | 28,019 | | | | |
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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 the fair market value of the Company’s common stock of $7.20 as of June 30, 2014 for all in-the-money options outstanding. As of June 30, 2014, there was $10.9 million of unrecognized compensation cost related to unvested stock options, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 3.2 years. |
Restricted Stock Units |
The Company commenced granting RSUs to employees upon the effectiveness of the 2014 Plan on April 3, 2014. During the three months ended June 30, 2014, 262,438 RSUs were granted with a weighted-average grant date fair value of $7.19 per share. During the three months ended June 30, 2014, no RSUs vested. As of June 30, 2014, there was $1.4 million of unrecognized compensation cost related to unvested RSUs, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 1.6 years. |
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. |
Except for the initial offering period after the IPO, an offering period under the ESPP is 12 months commencing on May 16 of each year and includes two 6-month purchase periods, with purchases on November 15 and May 15. The initial offering period commenced on April 3, 2014 with two purchases on November 15, 2014 and May 15, 2015. 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 initial 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. |
As of June 30, 2014, no purchases have been made under the ESPP. As of June 30, 2014, there was $0.8 million of unrecognized compensation cost related to purchase rights under the ESPP, which is expected to be recognized over a weighted-average period of 0.9 years. |
Stock-Based Compensation |
Stock-based compensation expenses for the three and six months ended June 30, 2014 and 2013 are as follows (in thousands): |
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| | Three Months Ended | | Six Months Ended |
| | 30-Jun-14 | | 30-Jun-13 | | 30-Jun-14 | | 30-Jun-13 |
Cost of revenue | | $ | 121 | | | $ | 44 | | | $ | 208 | | | $ | 76 | |
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Research and development | | 471 | | | 49 | | | 821 | | | 102 | |
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Sales and marketing | | 368 | | | 134 | | | 694 | | | 239 | |
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General and administrative | | 763 | | | 77 | | | 1,196 | | | 151 | |
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Total stock-based compensation | | $ | 1,723 | | | $ | 304 | | | $ | 2,919 | | | $ | 568 | |
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The Company recognizes stock-based compensation expense that is calculated based upon awards ultimately expected to vest and, thus, stock-based compensation 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. |
All stock-based compensation for equity awards granted to employees and directors is measured based on the grant date fair value of the award. Prior to the IPO, 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. Upon the effectiveness of the IPO, the fair value of the Company's common stock is the closing market price of the Company's common stock as of the measurement date. |
The Company values RSUs at the fair value of the Company’s common stock on the date of grant. |
The Company estimates the fair value of each stock option and purchase right under the ESPP granted to employees 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 awards is based on U.S. Treasury zero-coupon issues at the time of grant. The weighted-average assumptions used to value stock options and purchase rights under the ESPP granted during the three and six months ended June 30, 2014 and 2013 were as follows: |
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Stock Options | | Three Months Ended | | Six Months Ended | | | | | | | | |
| | June 30, 2014 | | June 30, 2013 | | 30-Jun-14 | | 30-Jun-13 | | | | | | | | |
Expected term (years) | | 6.1 | | 6.1 | | 6.1 | | 6.1 | | | | | | | | |
Volatility | | 56% | | 60% | | 56% | | 60% | | | | | | | | |
Risk-free interest rate | | 1.90% | | 1.00% | | 1.80% | | 1.10% | | | | | | | | |
Dividend yield | | — | | — | | — | | — | | | | | | | | |
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ESPP | | Three Months Ended | | Six Months Ended | | | | | | | | |
| | June 30, 2014 | | June 30, 2013 | | 30-Jun-14 | | 30-Jun-13 | | | | | | | | |
Expected term (years) | | 0.8 | | * | | 0.8 | | * | | | | | | | | |
Volatility | | 39% | | * | | 39% | | * | | | | | | | | |
Risk-free interest rate | | 0.10% | | * | | 0.10% | | * | | | | | | | | |
Dividend yield | | — | | * | | — | | * | | | | | | | | |
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* The ESPP was effective on April 3, 2014. | | | | | | | | |