Annual report pursuant to Section 13 and 15(d)

Convertible Preferred Stock

v3.20.1
Convertible Preferred Stock
12 Months Ended
Dec. 31, 2019
Temporary Equity Disclosure [Abstract]  
Convertible Preferred Stock

8. Convertible Preferred Stock

Preferred Stock

The Company has 10,000,000 shares of authorized preferred stock as of December 31, 2019, none of which is issued or outstanding. The preferred stock is not redeemable and does not have a stated voting, dividend or liquidation preference.

Convertible Preferred Stock

The Company has issued Series A Preferred, Series A-1 Preferred, Series A-2 Preferred, and Series B Preferred (collectively, the Convertible Preferred Stock). The Company classifies Convertible Preferred Stock outside of stockholders’ equity (deficit) because the shares contain deemed liquidation rights that are a contingent redemption feature not solely within the control of the Company. The following table summarizes the Company’s Convertible Preferred Stock:

 

 

 

Series A Preferred

 

 

Series A-1 Preferred

 

 

Series A-2 Preferred

 

 

Series B Preferred

 

 

Total Convertible

Preferred Stock

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

Balance—December 31, 2017

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

Issuance on conversion

   of convertible notes

 

 

 

 

 

 

 

 

2,819,267

 

 

 

9,558

 

 

 

1,873,777

 

 

 

6,352

 

 

 

 

 

 

 

 

 

4,693,044

 

 

 

15,910

 

Issuance on milestone

   closing of convertible

   notes

 

 

 

 

 

 

 

 

4,553,452

 

 

 

15,436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,553,452

 

 

 

15,436

 

Issuance

 

 

3,146,551

 

 

 

12,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,146,551

 

 

 

12,744

 

Issuance costs

 

 

 

 

 

(169

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(169

)

Balance—December 31, 2018

 

 

3,146,551

 

 

 

12,575

 

 

 

7,372,719

 

 

 

24,994

 

 

 

1,873,777

 

 

 

6,352

 

 

 

 

 

 

 

 

 

12,393,047

 

 

 

43,921

 

Issuance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,963,788

 

 

 

50,000

 

 

 

6,963,788

 

 

 

50,000

 

Exchange, including

   deemed dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,405,332

)

 

 

(4,764

)

 

 

1,405,332

 

 

 

10,090

 

 

 

 

 

 

5,326

 

Issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,293

)

 

 

 

 

 

(1,293

)

Conversion to common

   stock

 

 

(3,146,551

)

 

 

(12,575

)

 

 

(7,372,719

)

 

 

(24,994

)

 

 

(468,445

)

 

 

(1,588

)

 

 

(8,369,120

)

 

 

(58,797

)

 

 

(19,356,835

)

 

 

(97,954

)

Balance—December 31, 2019

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

In October 2018, the Company issued 3,146,551 shares of Series A Preferred, resulting in gross proceeds of $12,744. Series A-1 Preferred and Series A-2 Preferred were issued October 2018 upon conversion of the Notes and in connection with the milestone closing of the Notes (Note 6).

In January 2019, the Company’s certificate of incorporation was amended to increase the authorized shares of Convertible Preferred Stock to 20,762,168 shares, and the Company issued 6,963,788 shares of Series B Preferred, resulting in gross proceeds of $50,000. In connection, the Company issued a further 1,405,332 shares of Series B Preferred in exchange for 1,405,332 shares of Series A-2 Preferred. The Company determined the terms of the Series B Preferred to be materially, qualitatively different than the terms of the Series A-2 Preferred and, as such, applied extinguishment accounting with respect to the Series A-2 Preferred received in the exchange resulting in removal of the carrying amount of the Series A-2 Preferred received ($4,764), the addition of the Series B Preferred issued at fair value determined with reference to the contemporaneous issuance of Series B Preferred ($10,090) and the difference ($5,326) determined to be a deemed dividend recorded to additional paid-in capital (to the extent of paid-in capital) and accumulated deficit within stockholders’ deficit on the balance sheet.

The holders of the Convertible Preferred Stock had various rights, preferences and privileges as follows:

Voting Rights

Series A-2 Preferred are non-voting shares. Each share of Series A Preferred, Series A-1 Preferred and Series B Preferred (the Voting Preferred Stock) shall be entitled to cast the number of votes equal to the number of whole shares of common stock into which such shares of Voting Preferred Stock are convertible as of the record date for determining stockholders entitled to vote on such matter holds a number of votes equal to the number of shares of common stock into which it is convertible. Generally, holders of Voting Preferred Stock shall vote together with the holders of common stock as a single class and on an as-converted into common stock basis.

Holders of shares of Series A Preferred and Series A-1 Preferred, exclusively and as a separate class, are entitled to elect three members of the board of directors. Holders of shares of common stock are entitled to elect one member of the board of directors. The holders of common stock and Convertible Preferred Stock, voting together as a single class on an as-converted basis, are entitled to elect the balance (two) of the total number of directors of the Company.

Dividends

The holders of shares of Convertible Preferred Stock shall be entitled to receive, on a pari passu basis, dividends, out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend (other than dividends on shares of common stock payable in shares of common stock) on the common stock, at a rate of (i) $0.24 per annum for each share of Series A Preferred, (ii) $0.1656 per annum for each share of Series A-1 Preferred, (iii) $0.1656 per annum for each share of Series A-2 Convertible Preferred Stock and (iv) $0.4308 per annum for each share of Series B Preferred, in each case, as adjusted for any stock splits, stock dividends, combinations, subdivisions, or other similar recapitalization affecting such shares. Dividends are payable when, as and if declared by the board of directors, and such dividends shall not be cumulative.

The holders of each series of Convertible Preferred Stock can waive any dividend preference that the holders of such series of Convertible Preferred Stock shall be entitled to receive upon the affirmative vote or written consent of the holders of at least a majority of the shares of such series of Convertible Preferred Stock then outstanding, voting together as a separate series, and on an as-converted to common stock basis.

After payment of such dividends on the shares of Convertible Preferred Stock, any additional dividends or distributions shall be distributed among all holders of common stock and Convertible Preferred Stock in proportion to the number of shares of common stock that would be held by each such holder if all shares of Convertible Preferred Stock were converted to common stock at the then effective conversion price.

Optional Conversion Rights

Each share of Convertible Preferred Stock shall be convertible, at the option of the holder, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid shares of common stock as is determined by dividing the applicable original issuance price by the conversion price in effect at the time of conversion. The respective applicable conversion prices for the Convertible Preferred Stock is subject to adjustment upon any future stock split, stock dividend, combination, reclassification or similar event affecting the Convertible Preferred Stock or any series thereof. Such applicable conversion prices for the Convertible Preferred Stock and the rate at which the Convertible Preferred Stock may be converted into shares of common stock, shall be subject to adjustment as provided. In connection with the IPO, each 1.5 outstanding share of Convertible Preferred Stock converted into one share of common stock.

Mandatory Conversion Rights

Each share of Convertible Preferred Stock automatically converts into the number of shares of common stock determined in accordance with the conversion rate upon either: (a) the closing of a public offering of common stock at a price of at least $18.23 per share resulting in at least $50,000 of gross proceeds, or (b) written consent of a majority of the holders of the then outstanding shares of Convertible Preferred Stock.

In the event of a mandatory conversion of Preferred Stock as a result of a Qualified IPO, each holder of Preferred Stock may elect to receive non-voting Common Stock in lieu of all or a portion of such holder’s voting Common Stock. The non-voting shares of Common Stock shall have the same rights and preferences as the Common Stock but shall be non-voting. The Convertible Preferred Stock was converted into 6,495,015 shares of voting Common Stock and 6,409,519 shares of non-voting Common Stock as a result of the Company’s IPO in October 2019. No Convertible Preferred Stock was outstanding as of December 31, 2019.

Liquidation

The holders of Convertible Preferred Stock then outstanding shall be entitled to be paid (a) out of the consideration payable to stockholders in the event of a merger, consolidation, or reorganization involving the Company or a subsidiary or on the sale, lease, transfer, exclusive license or other disposition by the Company or a subsidiary of all or substantially all assets of the not elected otherwise by a requisite of holders of the Series A Preferred, or (b) out of the available proceeds the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of shares of Convertible Preferred Stock then outstanding shall be entitled to be paid, on a pari passu basis, before any payment shall be made to the holders of common stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the applicable original issue price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Convertible Preferred Stock been converted into common stock immediately prior to such event. If upon any such event, the assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of the outstanding shares of Convertible Preferred Stock the full amount to which they shall be entitled, the holders of shares of Convertible Preferred Stock shall share ratably, on a pari passu basis, in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

Anti-Dilution

Holders of Convertible Preferred Stock are afforded certain anti-dilution protection with respect to corporate events such as stock splits and recapitalizations.

Redemption

The Company’s Convertible Preferred Stock is not redeemable but does contain deemed liquidation rights in the event of a merger, consolidation, or reorganization involving the Company or a subsidiary or on the sale, lease, transfer, exclusive license or other disposition by the Company or a subsidiary of all or substantially all assets of the Company, and unless elected otherwise by a requisite of holders of the Series A Preferred.