Annual report pursuant to Section 13 and 15(d)

Equity Incentive Plans

v3.10.0.1
Equity Incentive Plans
12 Months Ended
Dec. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Equity Incentive Plans

Note 15. Equity Incentive Plans

2017 Equity Incentive Plan

In May 2017, the Board and the Company’s stockholders approved the 2017 Equity Incentive Plan (the “2017 Plan”), which became effective in connection with the IPO. The 2017 Plan provides for the issuance of stock options, restricted stock units and other awards to employees, directors and consultants of the Company. A total of 2,413,659 shares of the Company’s common stock were initially reserved for issuance under the 2017 Plan, which is the sum of (1) 900,000 shares, (2) the number of shares reserved for issuance under the 2005 Plan at the time the 2017 Plan became effective and (3) shares subject to stock options or other stock awards under the 2005 Plan that would have otherwise been returned to the 2005 Plan (up to a maximum of 1,314,752 shares). The number of shares of common stock reserved for issuance under the 2017 Plan will automatically increase on January 1 of each year, beginning on January 1, 2018 by the lesser of (1) 5% of the number of shares of the Company’s capital stock outstanding on December 31st of the preceding calendar year or (2) such number of shares as determined by the Board. In accordance with the evergreen provision, the number of shares of common stock reserved for issuance under our 2017 Plan was automatically increased on January 1, 2018 by 491,356 shares, which was equal to 5% of the total number of shares of capital stock outstanding on December 31, 2017. As a result of the adoption of the 2017 Plan, no further grants may be made under the 2005 Plan.

Incentive Stock Options may only be granted to Company employees and may only be granted with an exercise price not less than the fair value of the common stock, or not less than 110% of fair value when the grant is issued to a person who, at the time of grant, owns stock representing more than 10% of the voting power of all classes of stock. Non-statutory stock options may be granted to Company employees, directors and consultants, and may be granted at a price per share not less than fair value on the date of the grant. The Board determines the fair value of the Company’s common stock.

Options granted under the 2005 Plan and 2017 Plan generally vest over four years and expire no later than 10 years from the grant date. The 2005 Plan and 2017 Plan grants the Board discretion to determine when the options granted will become exercisable. The 2005 Plan and 2017 Plan allows for the exercise of unvested options with repurchase rights over the restricted common stock issued. The Company records proceeds from early exercises as a liability and reclassifies the amount to equity as the repurchase right lapses. At December 31, 2018, 2017, and 2016, there were no unvested options resulting from early exercises.

Aggregate intrinsic value represents the difference between the Company’s estimated or actual fair value of its common stock and the exercise price of outstanding “in-the-money” options. The aggregate intrinsic value of options exercised was $12.6 million, $0.8 million and $23,000 during the years ended December 31, 2018, 2017 and 2016, respectively. Based on the fair market value of the Company’s common stock at December 31, 2018, 2017 and 2016, the total intrinsic value of all outstanding options was $19.3 million, $15.9 million and $2.5 million, respectively.

At December 31, 2018 and 2017, total unrecognized stock-based compensation cost related to unvested stock options was $3.3 million, and $0.8 million, respectively, which will be recognized ratably over a weighted-average period of 3.3 years and 3.2 years for each period.

 

Cash received from the exercise of stock options during the years ended December 31, 2018, 2017 and 2016 was $0.6 million, $55,000 and $25,000, respectively.

No income tax benefits from stock-based compensation arrangements have been recognized in the consolidated statements of operations.

The fair value of stock option grants is set forth below and was determined using the Black-Scholes option pricing model with the following assumptions:

 

 

 

Year Ended December 31,

 

 

2018

 

2017

 

2016

Fair value of common stock

 

$23.72-$47.39

 

$3.06-$19.56

 

$0.85-$3.06

Expected term (in years)

 

6

 

5-6

 

2-10

Risk-free interest rate

 

2.60%-3.00%

 

1.85%-2.29%

 

0.75%-1.77%

Expected volatility

 

64%-67%

 

55%

 

55%

Expected dividend yield

 

 

 

 

In February 2005, the Company adopted the 2005 Stock Plan, as amended in January 2010 and November 2012 (the “2005 Plan”). Under the 2005 Plan provisions, the Company was authorized to grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, and shares of restricted stock.

Following the effectiveness of the 2017 Plan in connection with the IPO, no further grants will be made under the 2005 Plan.

A summary of stock option activities under the 2005 Plan and 2017 Plan during 2016, 2017 and 2018 is as follows:

 

 

 

Number

of Options

Outstanding

 

 

Weighted

Average

Exercise

Price

 

Outstanding at December 31, 2015

 

 

938,250

 

 

$

0.90

 

Granted

 

 

272,769

 

 

$

1.27

 

Exercised

 

 

(33,395

)

 

$

0.75

 

Canceled

 

 

(47,483

)

 

$

4.14

 

Outstanding at December 31, 2016

 

 

1,130,141

 

 

$

0.86

 

Granted

 

 

261,476

 

 

$

5.52

 

Exercised

 

 

(74,984

)

 

$

0.74

 

Canceled

 

 

(22,505

)

 

$

1.52

 

Outstanding at December 31, 2017

 

 

1,294,128

 

 

$

1.79

 

Granted

 

 

157,078

 

 

$

33.70

 

Exercised

 

 

(609,985

)

 

$

0.90

 

Canceled

 

 

(21,035

)

 

$

6.78

 

Outstanding at December 31, 2018

 

 

820,186

 

 

$

8.44

 

 

Stock options outstanding, exercisable and vested were as follows:

 

Outstanding at December 31, 2018

 

 

Weighted-average Remaining Contractual Life (years)

 

Exercisable and Vested as of December 31, 2018

 

 

Weighted-average Remaining Contractual Life (years)

 

Weighted-average Exercise Price

 

820,186

 

 

7.17

 

 

439,927

 

 

5.99

 

1.66

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2017

 

 

Weighted-average Remaining Contractual Life (years)

 

Exercisable and Vested as of December 31, 2017

 

 

Weighted-average Remaining Contractual Life (years)

 

Weighted-average Exercise Price

 

1,294,128

 

 

6.22

 

 

883,959

 

 

5

 

0.85

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2016

 

 

Weighted-average Remaining Contractual Life (years)

 

Exercisable and Vested as of December 31, 2016

 

 

Weighted-average Remaining Contractual Life (years)

 

Weighted-average Exercise Price

 

1,130,141

 

 

6.29

 

 

842,261

 

 

5.32

 

0.74

 

During the year ended December 31, 2018, the company granted non-employee directors restricted stock unit (“RSU”) awards totaling 17,881 shares of common stock, with vesting terms of approximately 12 months. The fair value of $28.45 per unit was calculated using the closing stock price on the date of grants.

 

During the year ended December 31, 2018, the Company granted executive management RSU awards totaling 92,883 shares of common stock, with vesting terms of 35% upon the first anniversary and 21.667% on each of the three subsequent anniversaries. The weighted average fair value of $17.87 per unit was calculated using the closing stock price on the grant dates.

 

 

During the year ended December 31, 2017, the company granted non-employee directors RSU awards totaling 47,312 shares of common stock, with vesting terms of approximately seven to ten months. The fair value of $11.50 to $16.96 per unit was calculated using the closing stock price on the date of grants.

 

At December 31, 2018 and 2017, total unrecognized stock-based compensation cost related to RSUs was $1.4 million, and $0.3 million, respectively, which will be recognized ratably over a weighted-average period of 2.7 years and 0.4 years for each period.

Our equity-based incentive plans include stock options, restricted stock units and other stock awards. The number of shares available for grant under these plans was 1,248,424 as of December 31, 2018.

2017 Employee Stock Purchase Plan

In May 2017, the Board and the Company’s stockholders adopted the 2017 Employee Stock Purchase Plan (“2017 ESPP”), which became effective in connection with the Company’s IPO. The 2017 ESPP allows eligible employees to purchase shares of the Company’s common stock in an offering at a discount of the then-current trading price, up to the lesser of (1) 85% of the fair market value of the common stock on the first day of the IPO or (2) 85% of the fair market value of the common stock on the purchase date. The 2017 ESPP permits the maximum discounted purchase price permitted under U.S. tax rules, including a “lookback.”

The 2017 ESPP initial offering period runs for approximately 24 months in length, and contains four 6-month purchase periods. An employee’s purchase rights terminate immediately upon termination of employment or other withdrawal from the 2017 ESPP. No participant will have the right to purchase shares of common stock in an amount that has a fair market value of more than $25,000 determined as of the first day of the applicable purchase period, for each calendar year.

There are 200,000 shares of common stock reserved for issuance under the 2017 ESPP. In addition, the 2017 ESPP contains a provision which provides for an automatic annual share increase on January 1 of each year, in an amount equal to the lesser of (1) 2% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, (2) 150,000 shares or (3) such number of shares as determined by the Board. In accordance with the evergreen provision, the number of shares of common stock reserved for issuance under our 2017 ESPP was automatically increased on January 1, 2018 by 150,000 shares.

The Company accounts for employee stock purchases made under its 2017 ESPP using the estimate grant date fair value of accounting in accordance with ASC 718, Stock Compensation. The Company values ESPP shares using the Black-Scholes model.

There were 83,605 shares issued during 2018 and 232,262 shares available under the 2017 ESPP as of December 31, 2018.

Total stock-based compensation expense associated with the 2005 Plan, 2017 Plan and 2017 ESPP is recorded in the consolidated statements of operations and was allocated as follows (in thousands):

 

 

 

 

Year Ended December 31,

 

 

 

 

2018

 

 

2017

 

 

2016

 

Costs

 

 

$

316

 

 

$

75

 

 

$

11

 

Sales and marketing

 

 

 

770

 

 

 

133

 

 

 

7

 

Research and development

 

 

 

272

 

 

 

69

 

 

 

18

 

General and administrative

 

 

 

1,110

 

 

 

351

 

 

 

47

 

Total

 

 

$

2,468

 

 

$

628

 

 

$

83

 

 

Stock-based compensation expense is recognized over the award’s expected vesting schedule. Forfeitures are recognized as and when they occur.