Stockholders' Equity And Stock-Based Compensation

6 Months Ended

Jun. 30, 2021

Stockholders' Equity And Stock-Based Compensation [Abstract]

Stockholders' Equity And Stock-Based Compensation

6. Stockholders’ Equity and Stock-Based Compensation

Private Placement Securities Purchase Agreement

On June 30, 2021, the Company entered into a Securities Purchase Agreement with Robert W. Duggan, the Company’s largest stockholder and Board Chairman, pursuant to which the Company issued and sold to Mr. Duggan 3,048,780 shares of the Company’s common stock, par value $0.001 per share, in a private placement (the “Private Placement”), at a price per share of $16.40, which was the market closing price on the date of the transaction. These shares were paid for through (i) the conversion of $41 million aggregate principal amount, together with all accrued and unpaid interest outstanding, owed to Mr. Duggan under the Loan Agreement by and between the Company and Mr. Duggan (Note 8), and (ii) cash in the amount of approximately $8.4 million. Upon the closing of this Private Placement and satisfaction of the outstanding debt, the Loan Agreement terminated, without any early termination fees or penalties being owed by the Company, and no additional amounts were owed to Mr. Duggan under the Loan Agreement. As of June 30, 2021, the Company had not yet received the approximately $8.4 million cash amount and recorded the balance as other receivable on the balance sheet. However, the cash proceeds from the sale were subsequently received by the Company in July 2021.

As of June 30, 2021, and after giving effect to this Private Placement, Mr. Duggan is the beneficial owner of approximately 51% of the Company’s outstanding common stock.

At-the-Market Equity Offering

On February 4, 2021, the Company entered into a sales agreement (Sales Agreement) with Stifel, Nicolaus & Company, Inc. (Stifel) as sales agent, pursuant to which the Company may offer and sell, from time to time, through Stifel, up to $60.0 million in shares of common stock, by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Company has no obligation to make any sales of its common stock pursuant to such Sales Agreement. During the six-month period ended June 30, 2021, the Company issued and sold 288,490 shares of common stock under the Sales Agreement. The shares were sold at a weighted average price of $27.73 per share for aggregate net proceeds of approximately $7.4 million, after deducting sales commissions and offering costs payable by the Company. During the three-month period ended June 30, 2021, the Company issued and sold 130,748 shares of common stock under the Sales Agreement. The shares were sold at a weighted average price of $19.82 per share for aggregate net proceeds of approximately $2.5 million, after deducting sales commissions and offering costs payable by the Company.

Rights Offering

In June 2020, the Company completed a rights offering to purchase up to $30 million of units, each unit consisting of one share of the Company’s common stock, par value $0.001 per share, and 0.15 warrants to purchase shares of common stock (the Units) at a price of $7.01 per Unit (the Rights Offering). The common stock and warrants comprising the Units separated upon the closing of the Rights Offering and were issued separately.

A total of 4,279,600 shares of common stock and 641,571 warrants (Rights Offering Warrants) were issued and sold in the Rights Offering for net proceeds of approximately $29.4 million. Each warrant was exercisable for one share of the Company’s common stock at an exercise price equal to $7.01, the subscription price for the Units. The Rights Offering Warrants were exercisable immediately and expired on the fifth anniversary of the completion of the Rights Offering, or June 16, 2025, subject to certain redemption rights by the Company. The Rights Offering Warrants were subject to redemption by the Company, on or after December 16, 2020, six months after the issue date, for $0.01 per warrant, with not less than 30 days written notice, if the volume weighted average price of our common stock equaled or exceeded 200% of the exercise price for the Rights Offering Warrants for 10 consecutive trading days.

Common Stock Warrants

In connection with a private placement in November 2014 of the Company’s common stock, par value $0.001 per share, the Company issued warrants as compensation to the placement agent to purchase a total of 299,625 shares of its common stock at an exercise price of $2.67 per share (Private Placement Warrants). The Private Placement Warrants are exercisable for period of seven years from issuance. In March 2021, warrants to purchase 45,638 shares of common stock were net exercised, resulting in the issuance of 40,563 shares of common stock. As of June 30, 2021, there were Private Placement Warrants to purchase up to 600 shares of common stock still outstanding.

In connection with the closing of the Company’s initial public offering in May 2016, the Company issued warrants as compensation to its underwriters, to purchase a total of 574,985 shares of its common stock at an exercise price of $5.00 per share (IPO Warrants). The IPO Warrants were exercisable for a period of five years from issuance. In March 2021, warrants to purchase 85,385 shares of common stock were net exercised, resulting in the issuance of 68,958 shares of common stock. As of June 30, 2021, there were no IPO Warrants outstanding.

In connection with the Rights Offering, the Company issued warrants to purchase a total of 641,571 shares of its common stock at an exercise price of $7.01. On December 31, 2020, the Company met the requirements for redemption of these warrants and delivered a notice of redemption to redeem all of the outstanding warrants that remained unexercised at February 5, 2021, for the redemption price of $0.01 per warrant. Pursuant to the redemption, the Company redeemed 5,139 warrants. Prior to the February 5, 2021 redemption date, 636,432 warrants were exercised, generating approximately $4.5 million of total gross proceeds to the Company. As of June 30, 2021, there were no Rights Offering Warrants outstanding.

Equity Plans

2017 Equity Incentive Plan and 2017 Inducement Equity Incentive Plan

The Board of Directors of the Company (the “Board”) previously adopted, and the Company’s stockholders approved, the Company’s 2017 Equity Incentive Plan (the “2017 Plan”).

The 2017 Plan has a 10-year term, and provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and performance shares to employees, directors and consultants of the Company and any parent or subsidiary of the Company, as the Compensation Committee of the Board may determine. Subject to an annual evergreen increase and adjustment in the case of certain capitalization events, the Company initially reserved 1,500,000 shares of the Company’s common stock for issuance pursuant to awards under the 2017 Plan. In addition, shares remaining available under the Company’s 2015 Equity Incentive Plan, as amended (the “2015 Plan”), and shares reserved but not issued pursuant to outstanding equity awards that expire or terminate without being exercised or that are forfeited or repurchased by the Company will be added to the shares of common stock available for issuance under the 2017 Plan. The 2017 Plan is administered by the Board’s Compensation Committee. Effective January 1, 2021, the Company’s Board authorized an increase in the number of shares of common stock available under the 2017 Plan by 1,022,002 shares pursuant to the evergreen provision of the 2017 Plan. Pursuant to the 2017 Plan, the 2021 share increase is determined based on the least of (i) 1,200,000 shares, (ii) 4% of the Company’s common stock outstanding at December 31 of the immediately preceding year, or (iii) such number of shares as determined by the Board. As of June 30, 2021, 634,902 shares of common stock remained available for issuance under the 2017 Plan.

During November 2017, the Board adopted the 2017 Inducement Equity Incentive Plan (the “Inducement Plan”) and reserved 1,000,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. The Inducement Plan was adopted without stockholder approval. The Inducement Plan has a 10-year term, and provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the 2017 Plan, including with respect to treatment of equity awards in the event of a “merger” or “change in control” as defined under the Inducement Plan. Options issued under the Inducement Plan may have a term up to ten years and have variable vesting provisions. New hire grants generally vest 25% per year starting upon the first anniversary of the grant. Equity-based awards issued under the Inducement Plan are only issuable to individuals not previously engaged as employees or as non-employee directors of the Company prior to the Inducement Plan’s adoption date. In May 2021, the Board approved an amendment to the Inducement Plan to reserve an additional 1,000,000 shares of the Company’s common stock for issuance pursuant to the Inducement Plan. As of June 30, 2021, 1,030,846 shares of common stock remained available for issuance under the Inducement Plan.

Certain stock options awarded to the Company’s executives and other key employees contain performance conditions related to certain financial measures and achievements of strategic/operational milestones (performance options). As of June 30, 2021, not all of the performance conditions are probable to be achieved. Compensation expense has only been recognized for those conditions that are assumed to be probable.

During February 2021, Management and the Compensation Committee approved of a modification to certain vesting conditions of outstanding performance options. The Company had not recognized any compensation expense in relation to these performance options as the performance condition was previously deemed to be improbable. However, upon modification those specific performance conditions are now deemed probable and fully vested. As such, during the six-month period ended June 30, 2021, the full expense in relation to the amended performance conditions was recognized resulting in $4.2 million of additional stock-compensation expense.

A summary of stock option activity under the 2015 Plan, 2017 Plan and Inducement Plan for the six-months ended June 30, 2021 is presented below:

	Stock Options Outstanding
			Weighted
	Number		average
	of shares		exercise price
Balances — December 31, 2020	5,039,194	$	14.26
Options granted	976,078
Options exercised	(44,981)
Options canceled	(80,029)
Options expired	(62,738)
Balances — June 30, 2021	5,827,524	$	15.64
Exercisable — June 30, 2021	3,042,982	$	16.00

2017 Employee Stock Purchase Plan

The Board previously adopted and the stockholders approved the Company’s 2017 Employee Stock Purchase Plan (the “2017 ESPP”).

The 2017 ESPP is a broad-based plan that provides employees of the Company and its designated affiliates with the opportunity to become stockholders through periodic payroll deductions that are applied towards the purchase of Company common shares at a discount from the then-current market price. Subject to adjustment in the case of certain capitalization events, a total of 250,000 common shares of the Company were available for purchase at adoption of the 2017 ESPP. Pursuant to the 2017 ESPP, the annual share increase pursuant to the evergreen provision is determined based on the least of (i) 450,000 shares, (ii) 1.5% of the Company’s common stock outstanding at December 31 of the immediately preceding year, or (iii) such number of shares as determined by the Board. Effective January 1, 2021, pursuant to the evergreen provision of the 2017 ESPP, the number of shares of common stock available under the 2017 ESPP was increased by 383,250 shares. During the six-month period ended June 30, 2021, the Company issued 66,525 shares of common stock under the 2017 ESPP. As of June 30, 2021, 673,949 shares of common stock remained available for issuance under the 2017 ESPP.

Stock-based Compensation

Total stock-based compensation expense consisted of the following (in thousands):

	Three-Month Periods Ended				Six-Month Periods Ended
	June 30,				June 30,
	2021		2020		2021		2020
Research and development	$	1,002	$	897	$	4,168	$	1,774
Sales and marketing		500		280		2,261		590
General and administrative		946		1,235		2,984		2,674
Total stock-based compensation expense	$	2,448	$	2,412	$	9,413	$	5,038

The Company estimated the fair value of employee stock options on the grant date using the Black-Scholes option pricing model. The estimated fair value of employee stock options is amortized on a straight-line basis over the requisite service period of the awards. The Company reviews, and when deemed appropriate, updates the assumptions used on a periodic basis. Due to the limited trading history of the Company’s common stock, the Company utilizes a portfolio of comparable companies to estimate volatility. The fair value of employee stock options was estimated using the following weighted-average assumptions:

‎

	Three-Month Periods Ended June 30,		Six-Month Periods Ended June 30,
	2021	2020	2021	2020
Expected term in years	5.3 - 6.1	5.3 - 6.1	5.3 - 6.1	5.3 - 6.1
Expected volatility	78%	70%	78%	70%
Risk-free interest rate	0.9 - 1.0%	0.4 - 0.5%	0.9 - 1.1%	0.4 - 0.5%
Dividend yield	—	—	—	—

The Company estimated the fair value of ESPP on the grant date using the Black-Scholes option pricing model. The estimated fair value of ESPP is amortized on a straight-line basis over the requisite service period of the awards. The Company reviews, and when deemed appropriate, updates the assumptions used on a periodic basis. The Company utilizes its estimated volatility in the Black-Scholes option pricing model to determine the fair value of ESPP. The fair value of ESPP was estimated using the following weighted-average assumptions:

	Three-Month Periods Ended June 30,		Six-Month Periods Ended June 30,
	2021	2020	2021	2020
Expected term in years	0.5 - 1.0	0.5 - 1.0	0.5 - 1.0	0.5 - 1.0
Expected volatility	78%	70%	78%	70%
Risk-free interest rate	0.07 - 0.08%	0.9 - 1.0%	0.07 - 0.1%	0.9 - 1.0%
Dividend yield	—	—	—	—