Convertible Preferred Stock, Common Stock and Stockholders' Equity (Deficit) | 12 Months Ended |
Dec. 31, 2013 |
Equity [Abstract] | ' |
Convertible Preferred Stock, Common Stock and Stockholders' Equity (Deficit) | ' |
|
7. Convertible Preferred Stock, Common Stock and Stockholders’ Equity (Deficit) |
|
Convertible Preferred Stock |
|
The Company’s convertible preferred stock has been classified as temporary equity in the accompanying balance sheets instead of in stockholders’ equity (deficit) in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities. Upon certain change in control events that are outside of the Company’s control, including liquidation, sale or transfer of control of the Company, holders of the convertible preferred stock were able to cause its redemption. |
|
During June and October 2007, the Company sold an aggregate of 4,000,000 shares of Series A Convertible Preferred Stock at $1.50 per share for gross proceeds of $6,000,000 in cash. In addition, $250,000 in convertible promissory notes issued in an earlier bridge financing and $42,538 in accrued interest thereon converted into 195,067 shares of Series A Convertible Preferred Stock. In connection with the Series A Convertible Preferred Stock issuance, $848,257 of the proceeds were allocated to the preferred stock purchase right liability, and the Company incurred $218,037 of offering costs. |
|
As part of the October 2007 Series A Convertible Preferred Stock transaction, the preferred stock purchase right liability for the second closing was revalued with the $4,132 increase in fair value recorded as other expense on the statement of operations and the then fair value of $80,819 was reclassified to Series A Convertible Preferred Stock. At December 31, 2007, the preferred stock purchase right liability for the third closing was revalued with the $68,955 increase in fair value recorded as other expense on the statement of operations. |
|
During November 2008, the Company sold an additional 4,000,000 shares of Series A Convertible Preferred Stock for gross proceeds of $6,000,000 in cash. In connection with this financing, the Company incurred $1,855 of offering costs. As part of the Series A Convertible Preferred Stock transaction, the preferred stock purchase right liability for the third closing was revalued with the $115,500 increase in fair value recorded as other expense on the statement of operations and the then fair value of $956,025 was reclassified to Series A Convertible Preferred Stock. |
|
During June 2010, the Company sold an additional 4,000,001 shares of Series A Convertible Preferred Stock for gross proceeds of $6,000,002 in cash. In connection with this financing, the Company incurred $36,069 of offering costs. |
|
The holders of the Series A Convertible Preferred Stock were entitled to receive noncumulative dividends at a rate of $0.12 per share per annum. The preferred stock dividends were payable when and if declared by the board of directors. As of December 31, 2012 and June 30, 2013, the board of directors had not declared any dividends. The Series A Convertible Preferred Stock dividends were payable in preference and in priority to any dividends on common stock. At the time of the conversion of the Series A Convertible Preferred Stock, no dividends had been declared. |
|
The holders of the Series A Convertible Preferred Stock were entitled to receive liquidation preferences at the rate of $1.50 per share, plus all declared and unpaid dividends. Liquidation payments to the holders of Series A Convertible Preferred Stock had priority and were made in preference to any payments to the holders of common stock. |
|
The shares of Series A Convertible Preferred Stock were convertible into one share of common stock for each five shares of preferred stock, at the option of the holder, subject to certain anti-dilutive adjustments. Each share of Series A Convertible Preferred Stock was automatically converted into common stock immediately upon the earlier of (i) the Company’s sale of its common stock in a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act of 1933, as amended, in which the per share price is at least $22.50 (as adjusted), and the gross cash proceeds are at least $25,000,000 or (ii) the date specified by written consent or agreement of the holders of not less than 66.66% of the then outstanding shares of Series A Convertible Preferred Stock. |
|
|
|
The holders of Series A Convertible Preferred Stock were entitled to one vote for each share of common stock into which such Series A Convertible Preferred Stock could then be converted; and with respect to such vote, such holder had full voting rights and powers equal to the voting rights and powers of the holders of common stock. |
|
The holders of the Series A Convertible Preferred Stock with greater than 250,000 shares were entitled to elect one member each to the Company’s board of directors. |
|
As of December 31, 2013, there were no shares of Series A Convertible Preferred Stock issued or outstanding as all shares, totaling 2,439,002 of Series A Convertible Preferred Stock, converted to 2,439,002 shares of common stock immediately prior to the completion of the IPO. |
|
Under the Company’s amended and restated certificate of incorporation as of December 31, 2013, the Company is authorized to issue 5,000,000 shares of preferred stock with a $0.0001 par value. |
|
Common Stock |
|
As of December 31, 2013, there were 6,096,752 shares of common stock outstanding. Each share of common stock is entitled to one vote. The holders of the common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors of the Company. To date, no dividends have been declared. |
|
Stock Options |
|
The Company adopted the 2007 Equity Incentive Plan (the “2007 Plan”) in May 2007 under which 450,000 shares of common stock were reserved for issuance to employees, nonemployee directors and consultants of the Company. As of December 31, 2012 no options were available for future grant under this plan. In August 2013, the Company adopted the 2013 Equity Incentive Award Plan (the “2013 Plan”) as a successor to the 2007 Plan. |
|
Under the 2013 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other awards to individuals who are then employees, officers, non-employee directors or consultants of the Company. A total of 510,000 shares of common stock were initially reserved for issuance under the 2013 Plan. In addition, the number of shares of common stock available for issuance under the 2013 Plan will be annually increased on the first day of each fiscal year during the term of the 2013 Plan, beginning with the 2014 fiscal year, by an amount equal to the least of: (i) 300,000 shares; (ii) four percent of the outstanding shares of common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the Company’s board of directors may determine. As of December 31, 2013, 8,500 options remain available for future grant under the 2013 Plan. |
|
Options granted under the 2007 Plan and 2013 Plan have terms ranging from seven to ten years from the date of grant and generally vest over a three to four year period. The exercise price of all options granted during the years ended December 31, 2013, 2012 and 2011 was equal to the market value per share of the Company’s common stock on the date of grant. |
|
A summary of the Company’s stock option activity under the 2007 Plan and 2013 Plan is as follows: |
|
|
| | | | | | | | | | | | | | | | |
| | Shares | | | Weighted | | | Weighted | | | Aggregate | |
Average | Average | Intrinsic |
Exercise | Remaining | Value |
Price | Contractual | |
| Term | |
| (Years) | |
Outstanding at December 31, 2012 | | | 123,250 | | | $ | 0.4 | | | | 7.84 | | | $ | 578 | |
Granted | | | 501,500 | | | $ | 9.39 | | | | 9.88 | | | | — | |
Exercised | | | — | | | | — | | | | — | | | | — | |
Canceled/Forfeited | | | — | | | | — | | | | — | | | | — | |
Outstanding at December 31, 2013 | | | 624,750 | | | $ | 7.61 | | | | 8.41 | | | $ | 869,490 | |
Exercisable at December 31, 2013 (1) | | | 90,540 | | | $ | 0.39 | | | | 5.01 | | | $ | 638,881 | |
Vested or expected to vest at December 31, 2013 | | | 624,750 | | | $ | 7.61 | | | | 8.41 | | | $ | 869,490 | |
|
|
-1 | Includes awards with early exercise provisions that permit optionee to exercise unvested options. | | | | | | | | | | | | | | | |
|
The intrinsic values above represent the aggregate value of the total pre-tax intrinsic value based upon a common stock price of $7.45 and $0.40 at December 31, 2013 and 2012, respectively, and the contractual exercise prices. |
|
|
|
The 2007 Plan permits the early exercise of options, but the Company has the option to repurchase any unvested shares at the original purchase price (the exercise price paid by the Purchaser) upon any voluntary or involuntary termination (“Repurchase Option”). The shares of common stock issued from the exercise of stock options are restricted and vest over time or on the achievement of certain milestones. Any unvested shares immediately vest in the event of termination for reasons other than cause, and vesting accelerates in the event of a merger, sale, or other change in control of the Company. Of the total 326,750 stock options exercised, 230,500 and 215,500 were vested as of December 31, 2013 and 2012, respectively. |
|
The total intrinsic value of stock options exercised was $0 for the years ended December 31, 2013, 2012 and 2011, respectively, as there were no options exercised during these years. |
|
Stock-Based Compensation |
|
The estimated fair value of each option award granted was determined on the date of grant using the Black-Scholes option-pricing valuation model with the following weighted-average assumptions for options grants during the three years ended December 31, 2013: |
|
|
| | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | | | | | | | |
| | 2013 | | 2012 | | | 2011 | | | | | | | | |
Stock Options | | | | | | | | | | | | | | | | |
Risk free interest rate | | 1.75% - 1.8% | | | — | | | 2.33% | | | | | | | | |
Expected option term | | 6.0 years | | | — | | | 5.0 years | | | | | | | | |
Expected volatility of common stock | | 70.8% - 79.4% | | | — | | | 80.00% | | | | | | | | |
Expected dividend yield | | —% | | | — | | | —% | | | | | | | | |
|
The risk-free interest rate assumption was based on the yield of an applicable rate for U.S. Treasury instruments with maturities similar to those of the expected term of the award being valued. The assumed dividend yield was based on the Company never paying cash dividends and having no expectation of paying cash dividends in the foreseeable future. The weighted average expected term of options was calculated using the simplified method as prescribed by accounting guidance for stock-based compensation. This decision was based on the lack of relevant historical data due to the Company’s limited historical experience. In addition, due to the Company’s limited historical data, the estimated volatility was calculated based upon the Company’s historical volatility, supplemented with historical volatility of comparable companies in the biotechnology industry whose share prices are publicly available for a sufficient period of time. |
|
The weighted average grant date fair value per share of employee stock options granted during the years ended December 31, 2013, 2012 and 2011 was $6.33, $0 and $0.05, respectively. |
|
The Company recognized non-cash stock-based compensation expense to employees and directors in its research and development and its general and administrative functions as follows: |
|
|
| | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | | Period from | |
January 29, |
2007 |
(Inception) to |
December 31, |
| | 2013 | | | 2012 | | | 2011 | | | 2013 | |
Research and development | | $ | 39,638 | | | $ | 10,004 | | | $ | 15,360 | | | $ | 93,435 | |
General and administrative | | | 106,328 | | | | 2,501 | | | | 7,345 | | | | 142,243 | |
| | | | | | | | | | | | | | | | |
Total stock-based compensation expense | | $ | 145,966 | | | $ | 12,505 | | | $ | 22,705 | | | $ | 235,678 | |
| | | | | | | | | | | | | | | | |
|
As of December 31, 2013 and 2012, there was approximately $3,055,000 and $26,000, respectively, of unrecognized compensation costs related to outstanding employee and board of director options, which is expected to be recognized over a weighted average period of 1.84 and 2.0 years, respectively. |
|
Employee Stock Purchase Plan |
|
On June 13, 2013, the Company’s board of directors adopted the Employee Stock Purchase Plan (the “ESPP”), and the Company’s stockholders approved the ESPP on August 29, 2013. The ESPP became effective on the day prior to the effectiveness of the IPO. The ESPP permits participants to purchase common stock through payroll deductions of up to 20% of their eligible compensation. A total of 30,000 shares of common stock will initially be reserved for issuance under the ESPP. In addition, the number of shares of common stock available for issuance under the ESPP will be annually increased on the first day of each fiscal year during the term of the ESPP, beginning with the 2014 fiscal year, by an amount equal to the least of: (i) 30,000 shares; (ii) one percent of the outstanding shares of common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the Company’s board of directors may determine. No shares of common stock have been issues under the ESPP. |
|
Common Stock Reserved for Future Issuance |
|
Common stock reserved for future issuance consists of the following at December 31, 2013 and 2012: |
|
|
| | | | | | | | | | | | | | | | |
| | December 31, | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | |
Conversion of preferred stock | | | — | | | | 2,439,002 | | | | | | | | | |
Stock options issued and outstanding | | | 624,750 | | | | 123,250 | | | | | | | | | |
Authorized for future option grants | | | 8,500 | | | | — | | | | | | | | | |
Warrants for convertible preferred stock | | | — | | | | 14,000 | | | | | | | | | |
Warrants for common stock | | | 106,000 | | | | — | | | | | | | | | |
Authorized for Employee Stock Purchase Plan | | | 330,000 | | | | — | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total common stock reserved for future issuance | | | 1,069,250 | | | | 2,576,252 | | | | | | | | | |
| | | | | | | | | | | | | | | | |