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Redeemable Convertible Preferred Stock - Series A

9 Months Ended

Sep. 30, 2018

Temporary Equity Disclosure [Abstract]

Redeemable Convertible Preferred Stock - Series A

Note 5 — Redeemable Convertible Preferred Stock — Series A

The Company has 10,000,000 authorized shares of $0.001 par value preferred stock as per its Amended and Restated Certificate of Incorporation. In June 2017, the Company issued 6,685,082 Series A Preferred at a price of $3.00 per share and all shares remained outstanding as of December 31, 2017 and September 30, 2018. The gross proceeds were $20,055 from the Series A Preferred stock offering. The Series A Preferred stockholders or their permitted transferees, are entitled to rights with respect to the registration under the Securities Act of 1933, as amended (the “Securities Act”), of their shares that are converted to common stock, including demand registration rights and piggyback registration rights. These rights are provided under the terms of a registration rights agreement between the Company and the investors.

As of December 31, 2017, the liquidation value of the mezzanine Series A Preferred was $20,698, which consisted of the issuance amount of $20,055 plus accrued dividends of $643. As of September 30, 2018, the liquidation value of the mezzanine Series A Preferred was $21,598, which consisted of the issuance amount of $20,055 plus accrued dividends of $1,543.

The Series A Preferred automatically converted to common shares upon completion of the IPO in November 2018. The conversion share calculation was based on the $3.00 initial issue price for the Series A Preferred plus any accrued but unpaid dividends and automatically converted into shares of the Company’s common stock using a stated divisor conversion price equal to 50% of the IPO price to the public which was $6.00 per share. In accordance with relevant accounting literature, since the terms of the conversion option did not permit the Company to compute the additional number of shares that it would need to issue upon conversion of the Series A Preferred when the contingent event occurred, the Company recorded the beneficial conversion amount as a deemed dividend at the date of the IPO in November 2018.

As a result of the Series A Preferred having a possible cash redemption feature in the event that an IPO or alternate financing was not available by December 31, 2018, the Series A Preferred is classified as temporary equity and not included as part of Company’s stockholders’ deficit. In accordance with that classification, the $2,534 of issuance costs associated with the Series A Preferred offering are being ratably accreted as a deemed dividend using the effective interest method over its expected term.

The Series A Preferred was automatically converted to the Company’s common shares upon completion of the IPO in November 2018 (see Note 12).

The following is a reconciliation of the carrying value of the Series A Preferred (in thousands):

	December 31, 2017			September 30, 2018
Gross proceeds from Series A Preferred offering	$	20,055		$	20,055
Issuance costs – cash		(2,055	)		(2,055	)
Issuance costs – common stock warrants		(479	)		(479	)
Accrued dividends on Series A Preferred		643			1,543
Deemed dividends for accretion of Series A Preferred issuance costs		840			2,097
Balance as of the end of the period	$	19,004		$	21,161