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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2015
Stock-Based Compensation |
Stock-Based Compensation | 7. Stock‑Based Compensation Equity Plans 2015 Equity Incentive Plan General. Our board of directors adopted our 2015 Equity Incentive Plan, or our 2015 Plan, in June 2015. Our 2015 Plan replaced our 2007 Stock Plan. However, awards outstanding under the 2007 Plan will continue to be governed by the terms of the 2007 plan. Share Reserve. The initial number of shares of our common stock available for issuance under our 2015 Plan was 3,451,495 shares. As of December 31, 2015, 3,743,382 shares were available for issuance under the 2015 plan which includes unissued and forfeited shares from the 2007 plan. The number of shares reserved for issuance under the 2015 Plan will be increased automatically on the first business day of each of our fiscal years, commencing in 2016, by a number equal to the smallest of:
| · |  | 3,500,000 shares;
| · |  | 4% of the shares of common stock outstanding on the last business day of the prior fiscal year; or
| · |  | the number of shares determined by our board of directors.
In general, to the extent that any awards under the 2015 Plan are forfeited, terminate, expire or lapse without the issuance of shares, or if we repurchase the shares subject to awards granted under the 2015 Plan, those shares will again become available for issuance under the 2015 Plan, as will shares applied to pay the exercise or purchase price of an award or to satisfy tax withholding obligations related to any award. Eligibility. Employees, non-employee directors, consultants and advisors are eligible to participate in our 2015 Plan. Under our 2015 Plan, the aggregate grant date fair value of awards granted to our non-employee directors may not exceed $500,000 in any one fiscal year, except that the grant date fair value of awards granted to newly appointed non-employee directors may not exceed $1,000,000 in the fiscal year in which such non-employee director is initially appointed to our board of directors. Types of Awards. Our 2015 Plan provides for the following types of awards:
| · |  | incentive and nonstatutory stock options;
| · |  | stock appreciation rights;
| · |  | restricted shares;
| · |  | stock units; and
| · |  | performance cash awards.
Options and Stock Appreciation Rights. The exercise price for options granted under the 2015 Plan may not be less than 100% of the fair market value of our common stock on the grant date. Optionees may pay the exercise price in cash or, with the consent of the compensation committee by other approved methods. An optionee who exercises a stock appreciation right receives the increase in value of our common stock over the base price. The base price for stock appreciation rights may not be less than 100% of the fair market value of our common stock on the grant date. The settlement value of a stock appreciation right may be paid in cash, shares of our common stock or a combination. Options and stock appreciation rights vest as determined by the compensation committee. In general, they will vest over a four-year period following the date of grant. Options and stock appreciation rights expire at the time determined by the compensation committee but in no event more than ten years after they are granted. These awards generally expire earlier if the participant's service terminates earlier. No participant may be granted stock options or stock appreciation rights under our 2015 Plan covering more than 1,725,000 shares in any fiscal year, except that a new employee may receive stock options or stock appreciation rights covering up to 350,000 additional shares in the fiscal year in which employment commences. Restricted Shares and Stock Units. Restricted shares and stock units may be awarded under the 2015 Plan in return for any lawful consideration, and participant who receive restricted shares or stock units generally are not required to pay cash for their awards. In general, these awards will be subject to vesting. Vesting may be based on length of service, the attainment of performance-based milestones or a combination of both, as determined by the compensation committee. No participant may be granted restricted share awards or stock units with performance-based vesting covering more than 1,500,000 shares during any fiscal year, except that a new employee may receive restricted shares or stock units covering up to 300,000 additional shares in the fiscal year in which employment commences. Settlement of vested stock units may be made in the form of cash, shares of common stock or a combination. Performance Cash Awards. Performance cash awards may be granted under the 2015 Plan that qualify as performance-based compensation that is not subject to the income tax deductibility limitations imposed by Section 162(m) of the Internal Revenue Code, if the award is approved by our compensation committee and the grant or vesting of the award is tied solely to the attainment of performance goals during a designated performance period. No participant may be paid more than $5,000,000 in cash in any calendar year pursuant to a performance cash award granted under the 2015 Plan. To the extent a performance award is not intended to comply with Section 162(m) of the Internal Revenue Code, the compensation committee may select other measures of performance. Corporate Transactions. In the event we are a party to a merger, consolidation or certain change in control transactions, outstanding awards granted under the 2015 Plan, and all shares acquired under the 2015 Plan, will be subject to the terms of the definitive transaction agreement (or, if there is no such agreement, as determined by our compensation committee). The compensation committee is not required to treat all awards, or portions thereof, in the same manner. The vesting of an outstanding award may be accelerated by the administrator upon the occurrence of a change in control, whether or not the award is to be assumed or replaced in the transaction, or in connection with a termination of service following a change in control transaction. Changes in Capitalization. In the event of certain changes in our capital structure without our receipt of consideration, such as a stock split, reverse stock split or dividend paid in common stock, proportionate adjustments will automatically be made to the maximum number and kind of shares available for issuance under the 2015 Plan and outstanding stock award, if any as applicable. In the event that there is a declaration of an extraordinary dividend payable in a form other than our common stock in an amount that has a material effect on the price of our common stock, a recapitalization, a spin-off or a similar occurrence, the compensation committee may make such adjustments to any of the foregoing as it deems appropriate, in its sole discretion. Amendments or Termination. Our board of directors may amend or terminate the 2015 Plan at any time. If our board of directors amends the 2015 Plan, it does not need stockholder approval of the amendment unless required by applicable law, regulation or rules. The 2015 Plan will terminate automatically 10 years after the later of the date when our board of directors adopted the 2015 Plan or approved the latest share increase that was also approved by our stockholders. 2007 Stock Plan General. Our board of directors adopted our 2007 Plan in January 2007, and it was approved by our stockholders. No further awards have been made under our 2007 Plan after July 1, 2015, the date of our initial public offering; however, awards outstanding under our 2007 Plan will continue to be governed by their existing terms. Share Reserve. As of December 31, 2015, we reserved 15,258,947 shares of our common stock for issuance under the 2007 Plan, all of which may be issued as incentive stock options. As of December 31, 2015, options to purchase 8,621,395 shares of common stock, at exercise prices ranging from $0.0065 to $12.8501 per share, or a weighted-average exercise price of $3.27 per share, were outstanding under the 2007 Plan. Administration. The compensation committee of our board of directors administer s the 2007 Plan and the administrator ha s complete discretion to make all decisions relating to the 2007 Plan and outstanding awards. Eligibility. Employees, non-employee members of our board of directors, consultants and advisors were eligible to participate in our 2007 Plan. Types of Awards. Our 2007 Plan provide s for the following types of awards:
| · |  | incentive and nonstatutory stock options; and
| · |  | restricted shares.
Options. The exercise price for stock options granted under our 2007 Plan may not be less than 100% of the fair market value of our common stock on the grant date. Optionees may pay the exercise price in cash or cash equivalents or in one, or by any combination of, the following forms of payment, as permitted by the administrator in its sole discretion:
| · |  | by delivery of a full-recourse promissory note, with the shares pledged as security against the principal and accrued interest on the note;
| · |  | with shares of common stock that the optionee already owns;
| · |  | by an immediate sale of the shares through a broker approved by us, if shares of our common stock are publicly traded;
| · |  | by instructing us to withhold a number of shares having an aggregate fair market value that does not exceed the exercise price; or
| · |  | by other methods permitted by applicable law.
Options vest as determined by the administrator. In general, we granted options that vest over a four-year period following the date of grant. In most cases, options granted prior to 2011 (and prior to 2012 with respect to our executive officers) were immediately exercisable, subject to our right to repurchase unvested shares. Options expire at the time determined by the administrator, but in no event more than ten years after they we re granted, and generally expire earlier if the optionee's service terminates earlier. Restricted Shares. Restricted shares could be awarded or sold under the 2007 Plan in return for cash or cash equivalents or, as permitted by the administrator in its sole discretion, in exchange for services rendered to us, by delivery of a full-recourse promissory note or through any other means permitted by applicable law. Restricted shares vest as determined by the administrator. Corporate Transactions. In the event that we are a party to a merger or consolidation, shares acquired under the 2007 Plan will be subject to the agreement of merger or consolidation. Such agreement will provide for one or more of the following with respect to outstanding options:
| · |  | the continuation, assumption or substitution of the option by the surviving entity or its parent;
| · |  | full exercisability and vesting of the option, followed by cancellation if not exercised; or
| · |  | cancellation of the option in exchange for a payment equal to the excess, if any, of the value that the holder of a share of our common stock receives in the transaction over the exercise price per share of the option. Such payment may be subject to vesting based on the optionee's continuing service, generally in accordance with the vesting schedule applicable to the option.
The administrator is not obligated to treat all awards in the same manner. The administrator has the discretion, at any time, to provide that an award granted under the 2007 Plan will vest on an accelerated basis if we are subject to a change of control or if the participant is subject to an involuntary termination. Changes in Capitalization. In the event of certain specified changes in the capital structure of our common stock, such as a stock split, reverse stock split, stock dividend, reclassification or any other increase or decrease in the number of issued shares of stock effective without receipt of consideration by us, proportionate adjustments will automatically be made in each of the number of shares covered by each outstanding option under the 2007 Plan and the exercise price per share subject to each outstanding option. In the event of an extraordinary cash dividend that has a material effect on the fair market value of our common stock, a recapitalization, spin-off, or other similar occurrence, the administrator at its sole discretion may make appropriate adjustments in one or more of the number of shares covered by each outstanding option under our 2007 Plan and the exercise price per share subject to each outstanding option. Amendments or Termination. The administrator may at any time amend, suspend or terminate the 2007 Plan, subject to stockholder approval if the amendment increases the number of shares available for issuance or materially changes the class of persons eligible to receive incentive stock options. The 2007 Plan will terminate automatically 10 years after the later of the date when our board of directors adopted the 2007 Plan or approved the latest share increase that was also approved by our stockholders. 2015 Employee Stock Purchase Plan General. Our 2015 Employee Stock Purchase Plan, or 2015 ESPP, was adopted by our board of directors in June 2015 and our stockholders approved it in June 2015. The first offering period under our 2015 ESPP started on December 15, 2015. Our 2015 ESPP is intended to qualify under Section 423 of the Internal Revenue Code. Share Reserve. We have reserved 893,548 shares of our common stock for issuance under the 2015 ESPP. The number of shares reserved for issuance under the 2015 ESPP will automatically be increased on the first business day of each of our fiscal years, commencing in 2016, by a number equal to the least of:
| · |  | 880,000 shares;
| · |  | 1% of the shares of common stock outstanding on the last business day of the prior fiscal year; or
| · |  | the number of shares determined by our board of directors.
The number of shares reserved under the 2015 ESPP will automatically be adjusted in the event of a stock split, stock dividend or a reverse stock split (including an adjustment to the per-purchase period share limit). Administration. The compensation committee of our board of directors will administer the 2015 ESPP. Eligibility. All of our employees are eligible to participate if we employ them for more than 20 hours per week and for five or more months per year. Eligible employees may begin participating in the 2015 ESPP at the start of any offering period. Offering Periods. Each offering period will last a number of months determined by the compensation committee, not to exceed 27 months. A new offering period will begin periodically, as determined by the compensation committee. Offering periods may overlap or may be consecutive. Unless otherwise determined by the compensation committee, two offering periods of six months' duration will begin in each year on May 1 and November 1. However, if so determined by the compensation committee, the first offering period started on December 15, 2015 and will end on April 30, 2016, with the first purchase date occurring on April 29, 2016. Amount of Contributions. Our 2015 ESPP permits each eligible employee to purchase common stock through payroll deductions. Each employee's payroll deductions may not exceed 15% of the employee's cash compensation. Each participant may purchase up to the number of shares determined by our board of directors on any purchase date, not to exceed 5,000 shares. The value of the shares purchased in any calendar year may not exceed $25,000. Participants may withdraw their contributions at any time before stock is purchased. Purchase Price. The price of each share of common stock purchased under our 2015 ESPP will not be less than 85% of the lower of the fair market value per share of common stock on the first day of the applicable offering period (or, in the case of the first offering period, the price at which one share of common stock is offered to the public in this offering) or the fair market value per share of common stock on the purchase date. Other Provisions. Employees may end their participation in the 2015 ESPP at any time. Participation ends automatically upon termination of employment with us. If we experience a change in control, our 2015 ESPP will end and shares will be purchased with the payroll deductions accumulated to date by participating employees. Our board of directors or our compensation committee may amend or terminate the 2015 ESPP at any time. Early Exercise of Employee Options As of December 31, 2015, the Company had approximately 1.3 million exercised and unvested shares outstanding that are subject to a repurchase right held by the Company at the original issuance price in the event that the optionee’s employment is terminated, either voluntarily or involuntarily. Effective in the year ended December 31, 2015, pursuant to the agreements with the option holders, the Company changed its estimated expiration of the Company’s repurchase right for 1.3 million exercised and unvested shares outstanding that are subject to repurchase right held by the Company through the 210 days after the date of the prospectus filed in connection with the Company’s IPO. Accordingly the unrecognized compensation expense is being accelerated over a shorter performance period through January 2016. As a result of this acceleration, the Company recorded an additional $1.3 million in stock-based compensation expense during the year ended December 31, 2015. Stock Options The following table summarizes option activity for the years ended December 31, 2015, 2014 and 2013:
|  | Outstanding Options |
|  |  |  |  |  |  |  | Weighted- |  |  |
|  |  |  |  |  | Weighted- |  | Average |  |  |
|  | Shares |  |  |  | Average |  | Remaining |  | Aggregate |
|  | Available for |  | Number of |  | Exercise |  | Contractual |  | Intrinsic |
(in thousands, except for contractual life and exercise price) |  | Grant |  | Shares |  | Price |  | Life |  | Value |
|  |  |  |  |  |  |  |  | (In years) |  |  |
Balance at December 31, 2014 |  | 294 |  | 8,463 |  | $ | 2.28 |  | 8.83 |  | $ | 43,659 |
Additional shares authorized |  | 4,985 |  | — |  |  |  |  |  |  |  |  |
Options granted |  | (2,181) |  | 2,181 |  | $ | 10.16 |  |  |  |  |  |
Options exercised |  | — |  | (683) |  | $ | 1.72 |  |  |  |  |  |
Options forfeited |  | 645 |  | (645) |  | $ | 5.25 |  |  |  |  |  |
Balance at December 31, 2015 |  | 3,743 |  | 9,316 |  | $ | 3.96 |  | 8.31 |  | $ | 63,713 |
Exercisable at December 31, 2015 |  |  |  | 5,602 |  | $ | 1.90 |  | 5.31 |  | $ | 49,880 |
Vested and expected to vest at December 31, 2015 |  |  |  | 8,414 |  | $ | 3.72 |  | 7.32 |  | $ | 59,529 |
The total intrinsic value of stock options exercised during the years ended December 31, 2015, 2014 and 2013 was $6.9 million, $1.2 million and $0.7 million, respectively. The total fair value of stock options vested during the years ended December 31, 2015, 2014 and 2013 was $4.5 million $4.1 million and $1.0 million, respectively. The weighted-average grant date fair value of options granted during the years ended December 31, 2015, 2014 and 2013 was $7.29, $3.28 and $0.99 per share, respectively. Stock‑Based Compensation Expense Employee and non‑employee stock‑based compensation expense was calculated based on awards ultimately expected to vest and have been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates. The following table presents the effect of employee and non‑employee stock‑based compensation expense on selected statements of operations line items for the years ended December 31, 2015, 2014 and 2013.
|  | Year ended December 31, |
|  | 2015 |  | 2014 |  | 2013 |
|  | Employee |  | Non-Employee |  | Total |  | Employee |  | Non-Employee |  | Total |  | Employee |  | Non-Employee |  | Total |
|  | (in thousands) |
Cost of revenues |  | $ | 351 |  | $ | 241 |  | $ | 592 |  | $ | 262 |  | $ | 29 |  | $ | 291 |  | $ | 55 |  | $ | 7 |  | $ | 62 |
Research and development |  |  | 1,566 |  |  | 9 |  |  | 1,575 |  |  | 1,563 |  |  | 30 |  |  | 1,593 |  |  | 612 |  |  | 4 |  |  | 616 |
Selling, general and administrative |  |  | 4,993 |  |  | 166 |  |  | 5,159 |  |  | 3,180 |  |  | 93 |  |  | 3,273 |  |  | 970 |  |  | 9 |  |  | 979 |
Total |  | $ | 6,910 |  | $ | 416 |  | $ | 7,326 |  | $ | 5,005 |  | $ | 152 |  | $ | 5,157 |  |  | 1,637 |  | $ | 20 |  | $ | 1,657 |
As of December 31, 2015, approximately $14.7 million of unrecognized compensation expense, adjusted for estimated forfeitures, related to unvested stock options will be recognized over a weighted‑average period of approximately 1.96 years. Valuation of Stock Option Grants to Employees The Company estimates the fair value of its stock options granted to employees on the grant date using the Black‑Scholes option‑pricing model. The fair value of employee stock options is amortized on a straight‑line basis over the requisite service period of the awards, generally the vesting period. The fair value of employee stock options was estimated using the following assumptions:
|  | Year ended December 31,
|  | 2015 |  |  | 2014 |  |  | 2013 |
Expected term |  | 5.6 |  | — | 10.0 |  |  | 4.91 |  | — | 7.06 |  |  | 6.0 |
Expected volatility |  | 69.7 | % | — | 78.8 | % |  | 73.4 | % | — | 87.0 | % |  | 63.7 | % | — | 85.7 | %
Expected dividend rate |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | %
Risk-free interest rate |  | 1.56 | % | — | 2.32 | % |  | 1.65 | % | — | 2.04 | % |  | 0.44 | % | — | 2.86 | %
Expected Term: The expected term of options represents the period of time that options are expected to be outstanding. The Company's historical stock option exercise experience does not provide a reasonable basis upon which to estimate an expected term due to a lack of sufficient data. For granted "at-the-money" stock options, the Company estimates the expected term by using the simplified method permitted by the Securities and Exchange Commission. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options. For stock options that are not granted "at-the-money," the Company uses the binomial lattice model to calculate the expected term. Expected Volatility: The Company derived the expected volatility from the average historical volatilities of comparable publicly traded companies within its peer group over a period approximately equal to the expected term. Expected Dividend Rate: The Company has not paid and does not anticipate paying any dividends in the near future. Risk-Free Interest Rate: The risk-free interest rate assumption is based on U.S. Treasury yield in effect at the time of grant for zero coupon U. S. Treasury notes with maturities approximately equal to the expected term. Valuation of Stock Option Grants to Non-Employees Total options outstanding as of December 31, 2015, include 0.2 million options that were granted to non-employees, of which 0.1 million options are unvested. Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock option is earned and the services are rendered. The Company believes that the estimated fair value of the stock options is more readily measurable than the fair value of the services rendered. The fair value of the stock options granted to non-employees is calculated at each reporting date using the Black-Scholes options-pricing model with the following assumptions:
|  | Year ended December 31,
|  | 2015 |  |  | 2014 |  |  | 2013 |
Expected term |  | 4.9 |  | — | 9.8 |  |  | 4.4 |  | — | 10.0 |  |  | 8.4 |
Expected volatility |  | 70.2 | % | — | 75.4 | % |  | 71.9 | % | — | 80.2 | % |  | 75.6 | % | — | 81.5 | %
Expected dividend rate |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | %
Risk-free interest rate |  | 1.74 | % | — | 2.24 | % |  | 1.41 | % | — | 2.61 | % |  | 1.44 | % | — | 2.51 | %

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51659978&loc=d3e25284-112666 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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