Note 11 - Convertible Preferred Stock and Stockholders’ Equity (Deficit) | 12 Months Ended |
Dec. 31, 2013 |
Stockholders' Equity Note [Abstract] | ' |
Stockholders' Equity Note Disclosure [Text Block] | ' |
11. Convertible Preferred Stock and Stockholders’ Equity (Deficit) |
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Initial Public Offering |
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On August 12, 2013, the Company closed its IPO in which it sold 5,125,000 shares of common stock at a public offering price of $9.00 per share. The aggregate offering price for shares sold in the offering was approximately $46.1 million. Net proceeds were approximately $40.0 million, after deducting underwriting discounts and commissions of $3.2 million and offering expenses of $2.9 million. |
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Convertible Preferred Stock |
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Convertible preferred stock as of December 31, 2012 and immediately prior to the IPO consisted of the following: |
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Convertible Preferred Stock | | Shares Authorized | | | Shares Issued and Outstanding (1) | | | Issuance Price Per Share (1) | | | Carrying Value (2) | | | Liquidation Preference | |
Series A-1 | | | 26,165,827 | | | | 26,165,827 | | | $ | 0.105 | | | $ | 1,341,000 | | | $ | 2,747,000 | |
Series A-2 | | | 22,473,726 | | | | 22,324,696 | | | | 0.2013 | | | | 4,494,000 | | | | 4,494,000 | |
Series B | | | 16,134,433 | | | | 16,134,433 | | | | 0.5476 | | | | 8,777,000 | | | | 8,835,000 | |
Series C | | | 16,404,591 | | | | 16,229,717 | | | | 0.28592 | | | | 4,546,000 | | | | 4,640,000 | |
Series D | | | 24,876,609 | | | | 24,876,609 | | | | 1.00496 | | | | 24,901,000 | | | | 25,000,000 | |
Series D-1 | | | 24,075,053 | | | | 24,075,052 | | | | 1.3137 | | | | 32,132,000 | | | | 31,627,000 | |
| | | 130,130,239 | | | | 129,806,334 | | | | | | | $ | 76,191,000 | | | $ | 77,343,000 | |
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| -1 | Amounts are presented without giving effect to the Company’s 1-for-6 reverse stock split that was effective July 24, 2013, as the number of convertible preferred stock shares did not change. | | | | | | | | | | | | | | | | | | |
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| -2 | Amounts are net of issuance costs. | | | | | | | | | | | | | | | | | | |
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During 2005 and 2006, the Company issued convertible notes (as amended, the “Notes”) to investors with an aggregate underlying principal value of $1.9 million. In July 2006, the Notes converted all underlying principal of approximately $1.9 million into 18,428,593 shares of Series A-1 convertible preferred stock. |
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During July 2006, the Company issued 9,538,416, shares of Series A-1 convertible preferred stock, for $0.105 per share. In December 2010, the Company repurchased 1,801,182 shares of Series A-1 convertible preferred stock for $0.88000 per share. |
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During July 2006, the Company issued a total of 22,324,696 shares of Series A-2 convertible preferred stock for $0.20130 per share. |
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From September 2007 through July 2008, the Company issued a total of 16,134,433 shares of Series B convertible preferred stock for $0.54760 per share. As part of the issuance, the Company incurred approximately $0.1 million in issuance costs. |
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From June 2009 through December 2009, the Company issued a total of 16,229,717 shares of Series C convertible preferred stock for $0.28592 per share. As part of the issuance, the Company incurred approximately $0.1 million in issuance costs. |
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During February 2010, the Company issued 24,876,609 shares of Series D convertible preferred stock for $1.00496 per share. As part of the issuance, the Company incurred approximately $0.1 million in issuance costs. |
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From September 2010 through December 2010, the Company issued 5,328,462 shares of Series D-1 convertible preferred stock for $1.31370 per share. As part of the issuance, the Company incurred approximately $0.1 million in issuance costs. |
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During October 2011, the Company issued an additional 9,134,503 shares of Series D-1 convertible preferred stock for $1.31370 per share. As part of the issuance the Company incurred approximately $0.1 million in issuance costs. |
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During April 2012, the Company issued an additional 7,612,087 shares of Series D-1 convertible preferred stock for $1.31370 per share. |
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During December 2012, the Company issued 2,000,000 shares of Series D-1 convertible preferred stock valued at $1.67 per share for the acquisition of Crowd Science, Inc. |
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Conversion |
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Each share of Series A-1, Series A-2, Series B, Series C, Series D, and Series D-1 convertible preferred stock was convertible into common stock at the stockholder's option, at any time after the date of issuance and prior to the Company’s IPO. The number of shares of common stock was determined by dividing the original issuance price for each series by the applicable conversion price for such series in effect at the date of conversion ("Conversion Rate"). The Conversion Rate in effect at any point in time was subject to adjustment for recapitalizations and certain other dilutive issuances. As of December 31, 2012, the Conversion Rate for Series A-1, Series A-2, Series B, Series C, Series D, and Series D-1 convertible preferred stock was $0.10500 per share, $0.20130 per share, $0.51081 per share, $0.28592 per share, $1.001938 per share, and $1.31370 per share, respectively. As of December 31, 2012, each share of preferred stock was convertible into 0.1667 shares of common stock, except for the Series B preferred stock which was convertible into 0.1787 shares of common stock and the Series D preferred stock which was convertible into 0.1672 shares of common stock. Each share of preferred stock automatically converted into shares of common stock, based on the then effective conversion rate for that class, upon the earlier of (i) written request from the holders of 60% of the shares of preferred stock then outstanding, or (ii) upon the consummation of an initial public offering with aggregate gross proceeds of at least $35 million. Upon the closing of our IPO in August 2013, all convertible preferred stock converted into shares of common stock in accordance with the conversion rates existing as of December 31, 2012. |
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Dividends |
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Holders of Series A-1, Series A-2, Series B, Series C, Series D and Series D-1 preferred stock were entitled to dividends at the annual rate of 8% of the applicable original issue price ($0.10500, $0.20130, $0.54760, $0.28592, $1.00496 and $1.31370 respectively), payable out of funds legally available, prior and in preference to any declaration or payment of any dividend on common stock. Such dividends shall be payable only when, as and if, declared by the board of directors and shall not be cumulative. No dividends on preferred stock were declared prior to the Company’s IPO. |
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Voting |
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The holders of convertible preferred stock were entitled to the number of votes equal to the number of shares of common stock into which each share of preferred stock could be converted. The holders of shares of the preferred stock were entitled to vote on all matters on which the common stock is entitled to vote. The holders of Series A-1, Series A-2, and Series D, each voting as a separate class, were entitled to elect one member of the board of directors. The holders of common stock and preferred stock, voting together as a single class, were entitled to elect any remaining members of the board of directors. |
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Liquidation preference |
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In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the preferred stock would have been entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of any common stock, an amount per share equal to $0.10500, $0.20130, $0.54760, $0.28592, $1.00496 and $1.31370 for Series A-1, A-2, B, C, D and D-1 preferred stock, respectively, plus any declared but unpaid dividends on such shares. Thereafter, the remaining assets of the Company would have been distributed ratably to the holders of common stock. |
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Balance Sheet Presentation |
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The holders of the outstanding shares of convertible preferred stock had redemption rights in the event of a sale of all or substantially all of the Company's assets, the merger or consolidation of the Company, or upon the sale of more than 50% of the voting power of the Company. As a result, the holders of these preferred shares could have required a change in control that would have triggered the redemption of shares. Accordingly, all shares of convertible preferred stock are presented outside of permanent equity on the consolidated balance sheets as of December 31, 2012. |
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Upon the closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 21,840,537 shares of common stock and the carrying value of $76.2 million is included in additional paid-in capital on the consolidated balance sheet as of December 31, 2013. |
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Immediately following the closing of the IPO, the Company’s certificate of incorporation was amended to authorize 20,000,000 shares of undesignated preferred stock and 200,000,000 shares of common stock. |
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Preferred Stock |
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In association with our IPO, our board of directors authorized the Company to issue up to 20,000,000 shares of preferred stock, par value $0.001 per share. As of December 31, 2013 and 2012, no shares of preferred stock were outstanding. |
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Warrants |
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For information on the Company’s warrants see Note 9. |
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Common Stock |
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At December 31, 2013 and 2012 there were 31,933,862 and 4,816,863 shares of common stock issued and outstanding, respectively. The following table summarizes common stock activity during the year ended December 31, 2013: |
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| | Number of Shares | | | | | | | | | | | | | | | | | |
Outstanding at December 31, 2012 | | | 4,816,863 | | | | | | | | | | | | | | | | | |
Option exercises | | | 191,773 | | | | | | | | | | | | | | | | | |
Warrant exercise | | | 24,185 | | | | | | | | | | | | | | | | | |
RSUs vesting, net of RSUs withheld for taxes | | | 2,170 | | | | | | | | | | | | | | | | | |
Conversion of convertible preferred stock | | | 21,840,537 | | | | | | | | | | | | | | | | | |
Common stock issued in connection with IPO | | | 5,125,000 | | | | | | | | | | | | | | | | | |
Treasury stock | | | (66,666 | ) | | | | | | | | | | | | | | | | |
Outstanding at December 31, 2013 | | | 31,933,862 | | | | | | | | | | | | | | | | | |
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Treasury Stock |
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The Company has 66,666 shares of treasury stock related to the acquisition of Crowd Science. Treasury stock is carried at cost and could be re-issued if the Company determined to do so. See Note 3 for additional information on Crowd Science withheld shares. |
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Equity Incentive Plans |
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The Company’s 2004 Stock Plan (the “2004 Plan”), authorized the Company to grant restricted stock awards or stock options to employees, directors and consultants at prices not less than the fair market value at date of grant for incentive stock options and not less than 85% of fair market value for non-statutory options. Option vesting schedules were determined by the board of directors at the time of issuance and they generally vest at 25% on the first anniversary of the grant (or the employment or service commencement date) and monthly over the next 36 months. Options generally expire ten years from the date of grant unless the optionee is a 10% stockholder, in which case the term will be five years from the date of grant. Unvested options exercised are subject to the Company’s repurchase right. Upon the effective date of the registration statement related to the Company’s IPO, the 2004 Plan was amended to cease the grant of any additional awards thereunder, although the Company will continue to issue common stock upon the exercise of stock options previously granted under the 2004 Plan. |
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In July 2013, the Company adopted a 2013 Equity Incentive Plan (the “2013 Plan”) which became effective on August 6, 2013. The 2013 Plan will serve as the successor equity compensation plan to the 2004 Plan. The 2013 Plan will terminate on July 23, 2023. The 2013 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, performance stock awards, restricted stock units and stock bonus awards to employees, directors and consultants. Stock options granted must be at prices not less than 100% of the fair market value at date of grant. Option vesting schedules are determined by the Company at the time of issuance and they generally vest at 25% on the first anniversary of the grant (or the employment or service commencement date) and monthly over the next 36 months. Options generally expire ten years from the date of grant unless the optionee is a 10% stockholder, in which case the term will be five years from the date of grant. Unvested options exercised are subject to the Company’s repurchase right. The Company has reserved 2,000,000 shares of its common stock for issuance under the 2013 Plan, and shares reserved for issuance will increase January 1 of each year by the lesser of (i) 5% of the number of shares issued and outstanding on December 31 immediately prior to the date of increase or (ii) such number of shares as may be determined by the board of directors. |
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Prior to the IPO, the fair value of the common stock underlying the Company’s stock options was determined by the Company’s board of directors, which intended all options granted to be exercisable at a price per share not less than the per-share fair value of the Company’s common stock underlying those options on the date of grant. The valuations of the Company’s common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The assumptions the Company used in the valuation model are based on future expectations combined with management judgment. In the absence of a public trading market, the Company’s board of directors, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of the Company’s common stock as of the date of each option grant. Subsequent to the IPO, the fair value of the common stock underlying the Company’s stock options is the closing price of the Company’s stock as of the grant date. |
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The following table summarizes option activity: |
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| | Number of Shares | | | Weighted-Average Exercise Price | | | Weighted-Average Remaining Contractual Life | | | Aggregate Intrinsic Value (2) | | | | | |
(in thousands) | (years) | (in thousands) | | | | |
Balance at December 31, 2010 | | | 3,449 | | | $ | 1.74 | | | | 7.94 | | | $ | 9,984 | | | | | |
Granted | | | 1,790 | | | $ | 4.62 | | | | | | | | | | | | | |
Exercised | | | (327 | ) | | $ | 1.8 | | | | | | | | | | | | | |
Canceled and forfeited | | | (650 | ) | | $ | 2.4 | | | | | | | | | | | | | |
Balance at December 31, 2011 | | | 4,262 | | | $ | 2.93 | | | | 8.1 | | | $ | 6,906 | | | | | |
Granted | | | 913 | | | $ | 4.86 | | | | | | | | | | | | | |
Exercised | | | (921 | ) | | $ | 0.78 | | | | | | | | | | | | | |
Canceled and forfeited | | | (239 | ) | | $ | 4.44 | | | | | | | | | | | | | |
Balance at December 31, 2012 | | | 4,015 | | | $ | 3.78 | | | | 7.88 | | | $ | 8,659 | | | | | |
Granted | | | 2,069 | | | $ | 8.58 | | | | | | | | | | | | | |
Exercised | | | (192 | ) | | $ | 1.99 | | | | | | | | | | | | | |
Canceled and forfeited | | | (179 | ) | | $ | 5.44 | | | | | | | | | | | | | |
Balance at December 31, 2013 | | | 5,713 | | | $ | 5.53 | | | | 7.31 | | | $ | 13,704 | | | | | |
Vested and exercisable as of December 31, 2013 | | | 2,802 | | | $ | 3.71 | | | | 6.29 | | | $ | 10,607 | | | | | |
Vested as of December 31, 2013 and expected to vest thereafter (1) | | | 5,213 | | | $ | 5.3 | | | | 7.18 | | | $ | 13,359 | | | | | |
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| -1 | Options expected to vest reflect an estimated forfeiture rate. | | | | | | | | | | | | | | | | | | |
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| -2 | The aggregate intrinsic value represents the difference between the Company’s estimated fair value of its common stock and the exercise price of outstanding in-the-money options as of those dates. | | | | | | | | | | | | | | | | | | |
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The weighted average grant date fair value of options granted was $5.89, $3.06 and $2.76 in 2013, 2012 and 2011, respectively. Prior to the Company’s IPO, aggregate intrinsic value represented the difference between the Company’s estimated fair value of its common stock and the exercise price of outstanding, in-the-money options. After the Company’s IPO, aggregate intrinsic value represents the difference between the market value of the Company’s common stock and the exercise price of outstanding, in-the-money options. The total intrinsic value of options exercised was approximately $1.3 million, $3.4 million and $1.3 million for 2013, 2012 and 2011, respectively. |
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The following table summarizes restricted stock award activity: |
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| | Number of Shares | | | Weighted Average Fair Value at Grant | | | | | | | | | | | | | |
Balance at December 31, 2010 | | | 22,142 | | | $ | 0.18 | | | | | | | | | | | | | |
Granted | | | 833 | | | $ | 4.62 | | | | | | | | | | | | | |
Released | | | (22,975 | ) | | $ | 0.36 | | | | | | | | | | | | | |
Balance at December 31, 2011 | | | — | | | $ | — | | | | | | | | | | | | | |
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The Company did not grant any restricted stock in the years ended December 31, 2013 and 2012. |
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The following table summarizes restricted stock unit activity: |
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| | Number of Shares | | | Weighted Average Fair Value at Grant | | | Weighted Average Remaining Contractual Life (years) | | | Aggregate Intrinsic Value (1) (in thousands) | | | | | |
Balance at December 31, 2012 | | | — | | | $ | — | | | | — | | | | — | | | | | |
Granted | | | 41,837 | | | $ | 8.21 | | | | | | | | | | | | | |
Released | | | (3,713 | ) | | $ | 8.89 | | | | | | | | | | | | | |
Balance at December 31, 2013 | | | 38,124 | | | $ | 8.15 | | | | 2.13 | | | $ | 284 | | | | | |
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| -1 | The intrinsic value of RSUs is based on the Company’s closing stock price as reported by the New York Stock Exchange on December 31, 2013. | | | | | | | | | | | | | | | | | | |
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The Company did not grant any RSUs prior to 2013. The total grant date fair value of restricted stock units vested during the year ended December 31, 2013 was $33,000. All of our RSUs that were settled during the year ended December 31, 2013 were net share settled. As such, upon each settlement date, RSUs were withheld to cover the required withholding tax, which is based on the value of the RSU on the settlement date as determined by the closing price of our common stock on the trading day of the settlement date. The remaining amounts are delivered to the recipient as shares of our common stock. |
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Employee Stock Purchase Plan |
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In July 2013, the Company adopted a 2013 Employee Stock Purchase Plan (the “2013 Purchase Plan”) that became effective on August 6, 2013. The 2013 Purchase Plan is designed to enable eligible employees to periodically purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. At the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last day of the offering period. Purchases are accomplished through participation in discrete offering periods. The 2013 Purchase Plan is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. The Company has reserved 500,000 shares of its common stock for issuance under the 2013 Purchase Plan and shares reserved for issuance will increase January 1 of each year by the lesser of (i) a number of shares equal to 1% of the total number of outstanding shares of common stock on December 31 immediately prior to the date of increase or (ii) such number of shares as may be determined by the board of directors. There were no shares purchased by employees under the Company’s ESPP for the year ended December 31, 2013. |
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The expected term of ESPP shares is the average of the remaining purchase periods under each offering period. The assumptions used to value employee stock purchase rights were as follows: |
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| | Year Ended December 31, 2013 | | | | | | | | | | | | | | | | | |
Expected term (years) | | | 0.47 | | | | | | | | | | | | | | | | | |
Volatility | | | 80 | % | | | | | | | | | | | | | | | | |
Risk-free interest rate | | | 0.08 | % | | | | | | | | | | | | | | | | |
Dividend yield | | | — | | | | | | | | | | | | | | | | | |
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Shares Reserved for Future Issuance |
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At December 31, 2013 and 2012, the Company has reserved the following shares of common stock for future issuance: |
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| | December 31, | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | | | | | |
Common stock reserved: | | | | | | | | | | | | | | | | | | | | |
Convertible preferred stock, including anti-dilution shares | | | — | | | | 21,840,537 | | | | | | | | | | | | | |
Convertible preferred stock warrants | | | — | | | | 53,983 | | | | | | | | | | | | | |
Common stock options | | | 5,713,106 | | | | 4,015,088 | | | | | | | | | | | | | |
Restricted stock units | | | 38,124 | | | | — | | | | | | | | | | | | | |
Warrants to purchase common stock | | | 24,838 | | | | — | | | | | | | | | | | | | |
Shares available for future issuance under the 2013 Plan | | | 936,457 | | | | 824,949 | | | | | | | | | | | | | |
Employee stock purchase plan | | | 500,000 | | | | — | | | | | | | | | | | | | |
| | | 7,212,525 | | | | 26,734,557 | | | | | | | | | | | | | |
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Stock-Based Compensation |
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The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock-based compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation including the expected term (weighted-average period of time that the options granted are expected to be outstanding), volatility of the Company’s common stock, a risk-free interest rate, expected dividends, and the estimated forfeitures of unvested stock options. To the extent actual results differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. The Company uses the simplified calculation of expected life, and volatility is based on an average of the historical volatilities of the common stock of a group of entities with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. Expected forfeitures are based on the Company’s historical experience. The Company currently has no history or expectation of paying cash dividends on common stock. |
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The fair value of option grants is determined using the Black-Scholes option valuation model with the following assumptions: |
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| | Years Ended December 31, | | | |
| | 2013 | | | 2012 | | | 2011 | | | |
Expected term (years) | | | 5.51 | - | 6.12 | | | | 5.6 | - | 6.07 | | | | 5.88 | - | 6.08 | | | |
Volatility (%) | | | | 80 | | | | | 65 | - | 90 | | | | 64 | - | 66 | | | |
Risk-free interest rate (%) | | | 1.06 | - | 1.72 | | | | 0.73 | - | 1.09 | | | | 1.03 | - | 2.84 | | | |
Dividend yield | | | | — | | | | | | — | | | | | | — | | | | |
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Stock Options Granted to Non-employees |
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For the year ended December 31, 2012, 8,333 options were granted to non-employees. There were no options granted to non-employees during the years ended December 31, 2013 and 2011. |
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The Company accounts for stock options issued to non-employees in accordance with the provisions of ASC 505-50 using a fair value approach. The measurement of stock based compensation for non-employees is subject to period adjustments as the options vest and the expense is recognized over the period which services are received. The Company believes that the fair value of the stock options is more reliably measurable than the fair value of the services received. The estimated fair value of the stock options granted to non-employees was calculated using the following assumptions: |
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| | Years Ended December 31, | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | | | | | |
Expected term (years) | | | 8.42 | | | | 9.65 | | | | | | | | | | | | | |
Volatility | | | 80 | % | | | 80 | % | | | | | | | | | | | | |
Risk-free interest rate | | | 2.64 | % | | | 1.7 | % | | | | | | | | | | | | |
Dividend yield | | | — | | | | — | | | | | | | | | | | | | |
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The following table summarizes the effects of stock-based compensation related to vesting stock-based awards included in the consolidated statements of operations (in thousands): |
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| | Years Ended December 31, | | | | | | | | | |
| | 2013 | | | 2012 | | | 2011 | | | | | | | | | |
Cost of revenue | | $ | 185 | | | $ | 128 | | | $ | 68 | | | | | | | | | |
Sales and marketing | | | 1,806 | | | | 1,215 | | | | 981 | | | | | | | | | |
Research and development (1) | | | 346 | | | | 184 | | | | 65 | | | | | | | | | |
General and administrative | | | 1,497 | | | | 515 | | | | 354 | | | | | | | | | |
Total stock-based compensation | | $ | 3,834 | | | $ | 2,042 | | | $ | 1,468 | | | | | | | | | |
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| -1 | Excludes $226,000, $79,000 and $74,000 of stock-based compensation expense that was capitalized as part of internal-use software development costs for the years ended December 31, 2013, 2012 and 2011, respectively. | | | | | | | | | | | | | | | | | | |
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No income tax benefit has been recognized relating to stock-based compensation expense and no tax benefits have been realized from exercised stock options during the years ended December 31, 2013, 2012 and 2011.As of December 31, 2013, there was $10.8 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based awards which will be recognized over a weighted average period of 3.1 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. |