Stockholders’ Equity

2019 Equity Incentive Plan

On June 15, 2019 the Company's board of directors approved, and on August 1, 2019 the Company's stockholders approved, the Company's 2019 Equity Incentive Plan (the "2019 Plan"). The 2019 Plan is intended as the successor to and continuation of the Company's 2012 Equity Incentive Plan. The number of shares authorized for issuance under the 2019 Plan may be increased by (a) the shares subject to outstanding stock awards granted under the Company’s 2009 Equity Incentive Plan (the “2009 Plan”) and the Company’s 2012 Equity Incentive Plan (together the with 2009 Plan, the “Prior Plans”) that on or after the effective date of the 2019 Plan (i) expire or terminate for any reason prior to exercise or settlement; (ii) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company, or (iii) are reacquired, withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award. No further grants will be made under the Prior Plans. In addition, on January 22, 2020, an additional 4,166,860 shares of common stock became available for issuance under the 2019 Plan pursuant to the second and final closing under the May 2019 SPA. Further, on January 1^st of each year, for a period of not more than ten years, beginning on January 1, 2021 and continuing through January 1, 2029, the number of shares authorized for issuance under the 2019 Plan will increase by 5.0% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by our Board of Directors.

As of March 31, 2020, 1,571,199 shares of common stock were available for new equity award grants under the 2019 Plan and 1,762,220 shares of common stock are reserved for issuance pursuant to equity awards outstanding as of March 31, 2020.

Private Placement of Common Stock, Non-Voting Convertible Preferred Stock and Warrants

On May 3, 2019, we entered into the May 2019 SPA with certain institutional and other accredited investors, including certain directors, executive officers and employees of the Company (the “Purchasers”), pursuant to which we agreed to sell and issue shares of our common stock, shares of our newly designated non-voting convertible preferred stock, and warrants to purchase common stock, in up to two closings, in a private placement transaction (the “Private Placement”).

At an initial closing under the May 2019 SPA that occurred on May 7, 2019 (the “Initial Closing”), we sold and issued to the Purchasers (i) 9,730,534 shares of common stock and accompanying warrants to purchase up to an aggregate of 9,730,534 shares of common stock at a combined purchase price of $1.205 per share, and (ii) 415,898 shares of non-voting Class A-1 convertible preferred stock, in lieu of shares of common stock, at a price of $10.80 per share, and accompanying warrants to purchase an aggregate of 4,158,980 shares of common stock at a price of $0.125 for each share of common stock underlying such warrants. Total gross proceeds from the Initial Closing were approximately $16.7 million, which does not include any proceeds that may be received upon exercise of the warrants. Each share of non-voting Class A-1 convertible preferred stock is convertible into 10 shares of Common Stock, subject to certain beneficial ownership conversion limitations. The warrants are exercisable for a period of five years following the date of issuance and have an exercise price of $1.08 per share, subject to proportional adjustments in the event of stock splits or combinations or similar events. The warrants are exercisable on a net exercise "cashless" basis. An aggregate of 526,083 shares of common stock and warrants to purchase up to 526,083 shares of common stock were purchased for $0.6 million by certain directors and executive officers of the Company under the Initial Closing.

Pursuant to the May 2019 SPA, in the event our Board of Directors unanimously resolves to recommence our Phase 1 multiple ascending dose clinical trial of our RGLS4326 product candidate for the treatment of ADPKD (the “Phase 1 Trial”) based on correspondence from the U.S. Food and Drug Administration’s Division of Cardiovascular and Renal Products, and thereafter but on or before December 31, 2019 we make a public announcement of our plan to recommence the Phase 1 Trial (the “Public Announcement”), we may sell and the Purchasers may purchase, at a second closing under the May 2019 SPA (“Milestone Closing”), shares of our non-voting convertible preferred stock and accompanying warrants to purchase shares of Common Stock. On December 15, 2019, the Company’s Board of Directors unanimously resolved to recommence the Phase 1 Trial based on correspondence from the U.S. Food & Drug Administration’s Division of Cardiovascular and Renal Products and on December 16, 2019, we made the related Public Announcement, triggering the Milestone Closing, which occurred on December 24, 2019. At the Milestone Closing, we sold and issued to the Purchasers 3,288,390 shares of non-voting Class A-2 convertible preferred stock and accompanying warrants to purchase an aggregate of 32,883,900 shares of common stock for an aggregate purchase price of approximately $26.0 million. Net proceeds to the Company from the Milestone Closing were approximately $24.6 million. Each share of non-voting Class A-2 convertible preferred stock is convertible into 10 shares of Common Stock, subject to certain beneficial ownership conversion limitations. The warrants will be exercisable for a period of five years following the date of issuance and have an exercise price of $0.666 per share, subject to proportional adjustments in the event of stock splits or combinations or similar events. The warrants are exercisable on a net exercise “cashless” basis. An aggregate of 121,581 shares of Class A-2 convertible preferred stock and warrants to purchase up to 1,215,810 shares of common stock were purchased for approximately $1.0 million by certain directors and executive officers of the Company under the Milestone Closing.

We evaluated the non-voting Class A-1 convertible preferred stock and common stock warrants sold in the Initial Closing and the Class A-2 convertible preferred stock and common stock warrants sold in the Milestone Closing under ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, and determined permanent equity treatment was appropriate for these freestanding financial instruments. The Initial Closing and Milestone Closing did not include any embedded features that required bifurcation. The non-voting Class A-2 convertible preferred stock and warrants issuable under the Milestone Closing were not subject to accounting recognition until the Milestone Closing occurred, as the terms of the Milestone Closing did not provide a right or an obligation on either the Company nor the Purchasers.

A total of 656,682 shares of Class A-2 convertible preferred stock were converted into 6,566,820 shares of common stock during the three months ended March 31, 2020. No shares of Class A-1 convertible preferred stock were converted and no warrants were exercised during the three months ended March 31, 2020.

ATM Offering

On December 12, 2018, we entered into a Common Stock Sales Agreement (the “Stock Sales Agreement”) with H.C. Wainwright & Co., LLC (“HCW”), pursuant to which we may sell and issue shares of our common stock from time to time through HCW, as our sales agent (the “ATM Offering”). We have no obligation to sell any shares of common stock in the ATM Offering, and may at any time suspend offers under the Stock Sales Agreement or terminate the Stock Sales Agreement. Subject to the terms and conditions of the Stock Sales Agreement, HCW will use its commercially reasonable efforts to sell shares of our common stock from time to time based upon our instructions (including any price, time or size limits or other parameters or conditions the we may impose). We will pay HCW a commission of 3.0% of the gross sales price of any shares sold under the Stock Sales Agreement. No shares were sold during the three months ended March 31, 2020. A total of 1,903,880 shares were sold for proceeds of $2.1 million (net of approximately $0.1 million in commissions) under the ATM Offering during the three months ended March 31, 2019.

Shares Reserved for Future Issuance

The following shares of common stock were reserved for future issuance as of March 31, 2020 (in thousands):



Class A-1 convertible preferred stock outstanding (as-converted)	4,159
Class A-2 convertible preferred stock outstanding (as-converted)	26,317
Initial Closing warrants	13,890
Milestone Closing warrants	32,884
Common stock options outstanding	6,116
RSUs outstanding	89
Common stock available for future grant under 2019 Equity Incentive Plan	1,571
Employee Stock Purchase Plan	190
Total common shares reserved for future issuance	85,216

The following table summarizes our stock option and RSU activity (together Stock Awards) under all equity incentive plans for the three months ended March 31, 2020 (shares in thousands):



	Number of options		Weighted average exercise price		Number of RSUs		Weighted average grant date fair value
Stock Awards outstanding at December 31, 2019	3,098		$	1.17	129		$	1.50
Granted	3,073		$	1.31	—		$	—
Exercised (options) or Vested (RSUs)	(1	)	$	0.95	(21	)	$	1.50
Canceled/forfeited/expired	(54	)	$	1.78	(19	)	$	1.50
Stock Awards outstanding at March 31, 2020	6,116		$	1.24	89		$	1.50

Stock-Based Compensation

The following table summarizes the weighted average assumptions used to estimate the fair value of stock options and performance stock awards granted to employees under our 2012 Equity Incentive Plan, 2015 Inducement Plan and 2019 Equity Incentive Plan and the shares purchasable under our Employee Stock Purchase Plan during the periods presented:



	Three months ended March 31,
	2020		2019
Stock options and performance stock options
Risk-free interest rate	1.4	%	2.6	%
Volatility	95.4	%	93.8	%
Dividend yield	—		—
Expected term (years)	6.1		6.1
Employee stock purchase plan shares
Risk-free interest rate	1.4	%	2.4	%
Volatility	105.9	%	119.4	%
Dividend yield	—		—
Expected term (years)	0.5		0.5

The following table summarizes the allocation of our stock-based compensation expense for all stock awards during the periods presented (in thousands):



	Three months ended March 31,
	2020		2019
Research and development	$	157	$	471
General and administrative	666		488
Total	$	823	$	959