Stockholders' Equity (Deficit) | 9 Months Ended |
Sep. 30, 2013 |
Equity [Abstract] | ' |
Stockholders' Equity (Deficit) | ' |
7. Stockholders’ Equity (Deficit) |
Common Stock |
During 2005, the Company sold 727,273 shares of common stock to founders for approximately $6,000. During 2006, the Company sold 181,818 shares of common stock to founders for approximately $45,000, subject to certain restrictions that have since been released. |
In July 2013, the Company implemented a 1-for-8.25 reverse stock split of its outstanding common stock. The accompanying condensed consolidated financial statements give effect to the reverse split for all periods presented. |
In July 2013, the Company completed the IPO of 6,000,000 shares of common stock at an offering price of $11.00 per share. The Company received net proceeds of approximately $59.0 million, after deducting underwriting discounts, commissions and offering-related transaction costs. |
Convertible Preferred Stock |
Between August 2005 and July 2006, the Company borrowed from certain officers and investors an aggregate principal amount of $1,200,000 under convertible promissory notes. The convertible promissory notes had an annual interest rate of 8% and a conversion premium on principal and accrued interest of 15%. The principal, accrued interest and conversion premium under the convertible promissory notes converted into shares of Series A convertible preferred stock (Series A Preferred Stock) in October 2006, in connection with the initial closing of the Series A Preferred Stock financing. |
During 2006, the Company entered into agreements with the founding officers and several investors who collectively purchased 10,160,885 shares of Series A Preferred Stock at $0.75 per share for $5,500,000 in cash, the conversion of the bridge financing noted above, plus related accrued interest and conversion premium of $261,439, and the issuance of preferred stock to employees of approximately $659,224 for services (Initial Closing). Additionally, the Company issued 333,333 shares of the Series A Preferred Stock in satisfaction of its initial license payment to Roche Palo Alto LLC and F. Hoffman-La Roche Ltd. (collectively, Roche) (Note 8). |
In May 2007, the Company closed the second round of its Series A Preferred Stock financing, providing the Company with $22,000,000 in gross proceeds from the issuance of an additional 29,333,334 shares of Series A Preferred Stock (Second Closing). Additionally, the Company’s Board of Directors determined that the Company had obtained satisfactory completion of certain preclinical studies of its product candidate, which was licensed from Roche, which triggered an additional $3,500,000 payment in cash and $2,000,000, in the form of the issuance of an additional 2,666,666 shares of Series A Preferred Stock to Roche. |
The holders of the Series A Preferred Stock were entitled to receive noncumulative dividends at a rate of $0.06 per share per annum. The Series A Preferred Stock dividends were payable when and if declared by the Company’s Board of Directors. As of September 30, 2013, the Company’s Board of Directors had not declared any dividends. The Series A Preferred Stock dividends were payable in preference and in priority to any dividends on common stock. |
Included in the terms of the Series A Preferred Stock agreement were certain rights granted to the holders of the Series A Preferred Stock issued in the Initial Closing which obligated the Company to deliver additional shares of Series A Preferred Stock at a specified price in the future at the potential Second Closing based on the achievement of a milestone or at the option of the holders of the Series A Preferred Stock (the Tranche Right). The Series A Preferred Stock, based on its “deemed liquidation” terms, was classified outside of stockholder’s deficit. Accordingly, the Tranche Right to purchase additional shares was valued and classified as a liability in 2006 and 2007. The carrying value was adjusted at each reporting date for any material changes in its estimated fair value. The estimated fair value was determined using a valuation model which considered the probability of achieving a milestone, if any, the entity’s cost of capital, the estimated time period the Tranche Right would be outstanding, consideration received for the instrument with the Tranche Right, the number of shares to be issued to satisfy the Tranche Right, and at what price and any changes in the fair value of the underlying instrument to the Tranche Right. At December 31, 2006, the change in fair value of the Tranche Right was immaterial. In 2007, the change in fair value of the Tranche Right of $530,977 was recorded as other financing expense and the adjusted carrying value of the Tranche Right of $1,827,784 was reclassified to convertible preferred stock on the balance sheet upon the Second Closing in May 2007. |
In February 2011, the Company closed the first round of its Series B convertible preferred stock (Series B Preferred Stock) financing, providing the Company with $20,000,000 in gross proceeds from the issuance of 22,222,223 shares of Series B Preferred Stock. Upon the first closing, 5,861,667 shares of Series B Preferred Stock were issued upon the conversion of convertible bridge notes and related accrued interest under the terms of the convertible bridge financing agreement. In March 2011, the Company completed an additional closing to a new investor of its Series B Preferred Stock financing, providing the Company with $7,500,000 in gross proceeds from the issuance of an additional 8,333,334 shares of Series B Preferred Stock. |
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The holders of the Series B Preferred Stock were entitled to receive noncumulative dividends at a rate of $0.072 per share per annum. The Series B Preferred Stock dividends were payable when and if declared by the Company’s Board of Directors. As of September 30, 2013, the Company’s Board of Directors had not declared any dividends. The Series B Preferred Stock dividends were payable in preference and in priority to any dividends on common stock and Series A Preferred Stock. |
The Series B Preferred Stock, based on its “deemed liquidation” terms, was classified outside of stockholders’ deficit. |
On May 30, 2013, 15,576,789 shares of the Company’s convertible preferred stock were converted into 1,557,678 shares of common stock (188,808 shares on a post-reverse split basis) as a result of one preferred stock investor not purchasing a pro rata share of the 2013 Notes. As a result of this transaction, a gain on the extinguishment of preferred stock was recognized as income applicable to common stockholders and an addition to additional paid-in capital in the amount of $11,491,043, which represented the difference between the carrying value of the 15,576,789 shares of convertible preferred stock and the fair value of the 188,808 shares of common stock. |
In connection with the IPO in July 2013, all 63,334,653 outstanding shares of convertible preferred stock converted into an aggregate of 7,676,914 shares of common stock. |
Warrants |
The Company issued warrants to purchase a total of 2,333,320 shares of Series A Preferred Stock in conjunction with a convertible bridge financing in 2010 and issued the 2013 Warrants and Lender Warrants in conjunction with a convertible bridge financing and Credit Facility funding in 2013. The Company initially accounted for the warrants as liabilities because they were exercisable for shares of preferred stock that was classified outside of permanent equity. The convertible preferred stock warrant liability was required to be recorded at fair value at the grant date of the warrants and the carrying value adjusted at each reporting date. The Company revalued the warrants at July 30, 2013 (date of IPO closing) and September 30, 2012, and recorded the change in the value of the warrants of $139,328 for the three months ended September 30, 2013 and $3,457,184 for the nine months ended September 30, 2013 as other financing expense. The Company recorded the change in the value of the warrants of $56,700 for the three months ended September 30, 2012 and $91,793 for the nine months ended September 30, 2012 as other financing expense. The Series A warrants converted to 280,675 shares of common stock as a result of the net exercise of such warrants at the IPO. Upon the completion of the IPO, the 2013 Warrants and the Lender Warrants became exercisable for an aggregate of 149,704 shares of common stock at an exercise price of $7.43 per share. Following the IPO, the 2013 Warrants and Lender Warrants were reclassified into equity at their fair value at the time of the completion of the IPO. |
Common Stock |
The following shares of common stock are reserved for future issuance at September 30, 2013: |
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Convertible common stock warrants | | | 149,704 | | | | | |
Stock options issued and outstanding | | | 730,590 | | | | | |
Authorized for future option grants | | | 827,278 | | | | | |
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| | | 1,707,572 | | | | | |
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The following table summarizes the Company’s stock option activity under all stock option plans for the nine months ended September 30, 2013: |
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| | Total Options | | | Weighted- | |
Average |
Exercise |
Price |
Balance at December 31, 2012 | | | 690,223 | | | $ | 0.8 | |
Granted | | | 226,935 | | | | 9.43 | |
Exercised | | | (174,447 | ) | | | 0.24 | |
Cancelled | | | (12,121 | ) | | | 0.09 | |
| | | | | | | | |
Balance at September 30, 2013 | | | 730,590 | | | $ | 3.63 | |
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The Company recorded stock-based compensation of $75,463 and $28,677 for the three months ended September 30, 2013 and 2012, respectively, and $101,379 and $105,751 for the nine months ended September 30, 2013 and 2012, respectively. |