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Convertible Preferred Stock | 9 Months Ended
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Sep. 30, 2019
Temporary Equity Disclosure [Abstract] |
Convertible Preferred Stock | 9. Convertible Preferred Stock During March, June and November 2017, the Company raised approximately $15.0 million through the issuance of 8,691,179 shares of its Series B convertible preferred stock at $1.73 per share to new and existing investors. No convertible preferred stock was issued in 2018 or in the nine months ended September 30, 2019. In June 2018, the Company redeemed and retired 1,202,196 shares of Series B convertible preferred stock from a former employee pursuant to its contractual right of first refusal at a purchase price of $2.5 million. The difference of $425,000 between the purchase price (at $2.04 per share) and the carrying value (at $1.73 per share) has been recorded as a dividend in accumulated deficit as of December 31, 2018. In conjunction with the above convertible preferred stock redemption, certain stockholders purchased convertible preferred stock and common stock from the same former employee at the same price per share. In connection with the transactions above, an outstanding severance liability was settled. As the total paid by the stockholders to the former employee was in excess of the common stock and preferred stock fair value, this premium was deemed consideration paid on behalf of the Company for the settlement of the severance liability. As such, the Company has accounted for this excess paid of $414,000 as a non-cash contribution in additional paid in capital. The authorized, issued and outstanding shares, and liquidation preference of the Company’s convertible preferred stock as of the dates indicated were as follows (in thousands, except for share and per share data):
|  | As of September 30, 2019
|  | Authorized Shares |  | Issued and Outstanding Shares |  | Aggregate Liquidation Preference
Preferred Stock: |  |  |  |  |  |
Series A Preferred |  | 69,930,070 |  | 15,384,798 |  | $ 20,000
Series B Preferred |  | 245,000,000 |  | 50,043,290 |  | 86,369
Total |  | 314,930,070 |  | 65,428,088 |  | 106,369
|  | As of December 31, 2018
|  | Authorized Shares |  | Issued and Outstanding Shares |  | Aggregate Liquidation Preference
Preferred Stock: |  |  |  |  |  |
Series A Preferred |  | 69,930,070 |  | 15,384,798 |  | $ 20,000
Series B Preferred |  | 245,000,000 |  | 50,043,290 |  | 86,369
Total |  | 314,930,070 |  | 65,428,088 |  | 106,369
As of September 30, 2019 and December 31, 2018, the holders of the Series A convertible preferred stock (‘‘Series A Preferred’’) and Series B convertible preferred stock (‘‘Series B Preferred’’ together the ‘‘Series Preferred’’) had the following rights and preferences: Dividends The holders of the Series A Preferred and the Series B Preferred shall be entitled to receive noncumulative dividends in preference to any dividend on the Company’s common stock at the rate of 8% of their respective “Original Issuance Price” ($1.30 per share for the Series A Preferred and $1.73 per share for the Series B Preferred) per annum, when and as declared by the Board of Directors. The holders of Series Preferred also shall be entitled to participate pro rata in any dividends paid on the common stock on an as-if-converted basis. Liquidation Preference In the event of any liquidation or winding up of the Company, the holders of the Series Preferred shall be entitled to receive in preference to the holders of the common stock a per share amount equal to the greater of (a) their respective Original Issuance Price plus any declared but unpaid dividends or (b) the amount payable to them had they converted their Series Preferred into common stock immediately prior to the liquidation event. After the payment of the liquidation preference to the holders of the Series Preferred, the remaining assets shall be distributed ratably to the holders of the common stock. A merger or consolidation in which the stockholders of the Company do not own a majority of the outstanding shares of the surviving corporation, a sale, lease, transfer, or other disposition of substantially all of the assets of the Company and an exclusive license of substantially all of the Company’s intellectual property shall be deemed to be a liquidation unless the holders of at least 60% of the Series Preferred elect otherwise. Due to the concentration of convertible preferred stock ownership interest and Board of Directors representation of the convertible preferred stockholders, the above liquidation preference represents a liquidation right not solely within the Company’s control and as such, the Company has classified its convertible preferred stock outside of stockholders’ equity. During 2018 and the nine months ended September 30, 2019, the Company did not adjust the carrying value of the convertible preferred stock to the deemed liquidation value of such shares as a qualifying liquidation event was not probable. Subsequent adjustments to increase the carrying values to the ultimate redemption values will be made only when it becomes probable that such a deemed liquidation event will occur. Conversion The holders of the Series Preferred shall have the right to convert each share of Series Preferred, at any time, into shares of common stock. The conversion price for each series of convertible preferred stock shall initially be the Original Issuance Price of such series of convertible preferred stock and shall be adjusted in accordance with conversion provisions contained in the Company’s Amended and Restated Certificate of Incorporation. The conversion rate of the Series Preferred is 1:1 and is subject to certain anti-dilution adjustments. The Series Preferred is automatically converted into common stock, at the then-applicable conversion rate, in the event that the holders of at least 75% the outstanding Series Preferred consent to such conversion voting as a single class on an as- converted basis, or (ii) upon the event of a public offering of the Company’s common stock based upon a value of the Company of at least $150 million and which results in net proceeds of at least $40 million. Voting Rights The Series Preferred will vote together with the common stock as a single class except as specifically provided herein or as otherwise required by law. Each share of Series Preferred shall have a number of votes equal to the number of shares of common stock then issuable upon conversion of such share of Series Preferred. Each series of convertible preferred stock is entitled to elect two directors of the Company. The common stock is entitled to elect one director. All stockholders voting together as a single class on an as-converted basis are entitled to elect the remaining directors. The directors elected by the Series A Preferred are entitled to two votes on all matters to be voted upon by the Board of Directors. The Series B Directors and all other directors are entitled to one vote on all matters to be voted upon the Board of Directors.

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