Stockholders' Equity | 13. Stockholders’ Equity As of September 30, 2018, the authorized stock of the Company was 300.0 million shares of common stock, $0.0001 par value per share, and 10.0 million shares of preferred stock, $0.0001 par value per share. Common Stock Holders of common stock are entitled to one vote per share and, upon liquidation, dissolution, or winding up of the Company, are entitled to receive all assets available for distribution to stockholders. The holders have no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares. Pursuant to the automatic increase provisions of our 2017 Incentive Award Plan (“the 2017 Plan”) and 2017 Employee Stock Purchase Plan (“ESPP”), 829,606 additional shares were reserved for future issuance under the 2017 Plan and 207,401 additional shares under the ESPP on January 1, 2018. Shares of common stock reserved for future issuance were as follows (in thousands): September 30, 2018 Common stock awards outstanding 2,171 Common stock awards available for grant under the ESPP 376 Common stock awards available for grant under the 2017 Plan 1,123 Total shares of common stock reserved for future issuance 3,670 Convertible Preferred Stock As of September 30, 2018, there was no convertible preferred stock outstanding. In connection with the Company’s IPO, all outstanding shares of convertible preferred stock were automatically converted into 12.8 million shares of common stock. In April 2017, the Company issued an aggregate of 3.0 million shares of Series B convertible preferred stock at a price per share of $12.24 for aggregate proceeds of $36.5 million, exclusive of 0.4 million shares of Series B convertible preferred stock issued upon conversion of the Series B Bridge Notes. See Note 8 “Convertible Notes”. All of the Company’s outstanding Series B convertible preferred stock was automatically converted into common stock in connection with the IPO. ATM Offering Program In August 2018, the Company entered into a sales agreement with Cowen pursuant to which the Company may sell from time to time, at its option, up to $75.0 million of the Company’s common stock through ATM Offering Program, under which Cowen will act as sales agent. The aggregate compensation payable to Cowen shall be 3% of the gross sales price of the common stock sold by Cowen pursuant to the Sales Agreement. During the three months ended September 30, 2018, the Company issued 340,307 shares of its common stock through its ATM Offering Program and received net proceeds of approximately $5.0 million, after deducting commissions of $0.2 million and other offering expenses of $0.4 million. Stock Awards and Stock-Based Compensation In July 2017, the Company’s board of directors approved the 2017 Plan, which became effective upon the completion of the IPO on August 1, 2017. The 2017 Plan serves as the successor incentive award plan to the Company’s 2010 Equity Incentive Plan, or the 2010 Plan, and has 1.2 million shares of common stock available for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and other stock-based awards, plus shares of common stock that were reserved for issuance pursuant to future awards under the 2010 Plan at the time the 2017 Plan became effective, plus shares represented by awards outstanding under the 2010 Plan that are forfeited or lapse unexercised and which following the effective date of the 2017 Plan are not issued under the 2010 Plan. In addition, the 2017 Plan reserve increased on January 1, 2018 and will increase on each subsequent anniversary through 2027, by an amount equal to the lesser of (a) four percent of the shares of stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (b) such smaller number of shares of stock as determined by our board of directors; provided, however, that no more than 12.0 million shares of stock may be issued upon the exercise of incentive stock options. The terms of awards pursuant to the 2017 Plan are determined by the administrator of the 2017 Plan. The 2017 Plan is administered by the compensation committee of the Company’s board of directors unless the Company’s board of directors assumes authority for administration. In addition, the Company’s board of directors has delegated authority to grant awards to employees other than executive officers and certain senior executives of the Company to a committee consisting of the Company’s chief executive officer. Stock options granted pursuant to the 2017 Plan must have an exercise price of not less than the fair market value of the Company’s common stock on the date of grant, except that incentive stock options granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of the Company’s capital stock (a “10% Holder”), must have an exercise price of at least 110% of the fair market value of a share of common stock on the date of grant. Stock options granted under the 2017 Plan generally expire ten years from the date of the grant, except that incentive stock options granted to a 10% Holder must not be exercisable after five years from the date of grant. The Company’s stock awards under the 2017 Plan vest based on terms in the stock award agreements and generally vest over four years. Following the Company’s IPO and in connection with the effectiveness of the Company’s 2017 Plan, the 2010 Plan terminated and no further awards will be granted under that plan. However, all outstanding awards under the 2010 Plan will continue to be governed by their existing terms. The fair value of each employee award granted during 2018 and 2017 was estimated on the grant date using the Black-Scholes option-pricing model. The fair value of each non-employee Nine Months Ended September 30, 2018 Year Ended December 31, 2017 Expected stock price volatility 65.40%–74.21% 59.13%–64.09% Expected dividend yield —% —% Expected term (in years) 5.0–6.1 5.3–10.0 Risk-free interest rate 2.55%–2.96% 1.77%–2.60% Due to limited historical data, the Company estimates stock price volatility based on the actual volatility of comparable publicly traded companies over the expected life of the award. The Company has never paid and does not expect to pay dividends in the foreseeable future. The expected term represents the average time that awards that vest are expected to be outstanding. For employee awards that have an early exercise provision, the Company has sufficient information to utilize four years as an expected term. For awards without an early exercise provision, the Company does not have sufficient history of stock option exercises to estimate the expected term and, thus, calculates expected term using the simplified method, based on the midpoint between the average vesting date and the contractual term. For all non-employees, The table below summarizes the stock option activity for the nine months ended September 30, 2018: Number of Shares (in thousands) Weighted Average Exercise Price Per Share Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2017 1,159 $ 8.19 $ 11,795 Granted 1,235 16.49 Exercised (37 ) 11.04 Cancelled (186 ) 11.74 Outstanding at September 30, 2018 2,171 $ 12.56 $ 7,497 Exercisable at September 30, 2018 455 $ 6.53 $ 3,925 The aggregate intrinsic value of the options outstanding is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock as of September 30, 2018. The Company did not grant any non-employee Total compensation cost recorded in the condensed consolidated statements of operations and comprehensive loss, which includes non-cash non-cash Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 Research and development $ 368 $ 201 $ 1,099 $ 279 General and administrative 1,127 540 2,292 776 $ 1,495 $ 741 $ 3,391 $ 1,055 As of September 30, 2018, there was $15.0 million of unrecognized compensation expense related to unvested employee stock award agreements, which is expected to be recognized over a weighted-average period of approximately 3.39 years. For stock option awards subject to graded vesting, we recognize compensation cost on a straight-line basis over the service period for the entire award. The weighted-average grant date fair value of all stock options granted during the nine months ended September 30, 2018 was $10.55. The weighted-average remaining contractual life of options outstanding at September 30, 2018 is 9.0 years. The total fair value of the shares vested during the nine months ended September 30, 2018 was $2.2 million. Additionally, stock compensation expense includes $3,000 and $0.3 million, $0.4 million and $0.5 million related to non-employee Prior to its termination in connection with the effectiveness of the 2017 Plan, the 2010 Plan allowed the Company to grant to employees the right to exercise stock options in exchange for cash before the requisite service was provided (e.g., before the award is vested under its original terms); however, such arrangements permit the Company to subsequently repurchase such shares at the exercise price if the employee ceases to be a service provider. Such an exercise is not substantive for accounting purposes. Therefore, the payment received for the exercise price is recognized as an early exercise liability in the condensed consolidated balance sheets and will be transferred to common stock and additional paid in capital as such shares vest. As of September 30, 2018 and December 31, 2017, 0.4 million and 0.5 million unvested shares, respectively, were legally issued but are not considered outstanding for accounting purposes and are therefore excluded from basic and diluted net loss per share until the repurchase right lapses and the shares are no longer subject to the repurchase feature. In connection with these unvested shares, the Company has recorded an early exercise liability as of September 30, 2018 and December 31, 2017, of $0.3 million and $0.5 million, respectively, of which $0.2 million and $0.2 million is included in current liabilities, and $0.1 million and $0.3 million is included in non-current 2017 Employee Stock Purchase Plan The Company adopted the ESPP, which became effective upon the completion of the IPO on August 1, 2017. The ESPP is designed to allow the Company’s eligible employees to purchase shares of the Company’s common stock, at semi-annual intervals, with their accumulated payroll deductions. Under the ESPP, participants are offered the option to purchase shares of the Company’s common stock at a discount during a series of successive offering periods. The option purchase price will be the lower of 85% of the closing trading price per share of the Company’s common stock on the first trading date of an offering period in which a participant is enrolled or 85% of the closing trading price per share on the purchase date, which will occur on the last trading day of each offering period. The Company began the first offering period on December 31, 2017. The ESPP is structured to qualify under Section 423 of the U.S. Internal Revenue Service Code of 1986, as amended. The maximum number of the Company’s common stock which will be authorized for sale under the ESPP is equal to the sum of (a) 198,883 shares of common stock and (b) an annual increase on the first day of each year beginning in 2018 and ending in 2027, equal to the lesser of (i) 1% of the shares of common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (ii) such number of shares of common stock as determined by the Company’s board of directors; provided, however, no more than 3.0 million shares of the Company’s common stock may be issued under the ESPP. The Company recognized $0.1 million and $0.2 million in compensation expense related to the ESPP for the three and nine months ended September 30, 2018. During the nine months ended September 30, 2018, 30,486 shares of common stock were issued under the ESPP. |