14 — Capital Stock

 

Reincorporation

 

Effective April 14, 2014, we reincorporated as a Delaware corporation. As part of this reincorporation, we converted all previously outstanding shares of our Class A Common Stock and Class B Common Stock into a single class of common stock on a 1.75:1 conversion ratio and all previously outstanding shares of our Series A Preferred Stock were split on a 1.75:1 conversion ratio into new Series A Preferred Stock. In accordance with our Certificate of Incorporation, upon the sale of shares pursuant to an initial public offering, which was completed in July 2014, all of our Series A Preferred Stock was automatically converted into common stock on a 1:1 conversion ratio (see Note 1). The table below summarizes the effect of the stock split and conversion on our capital stock that was previously outstanding as of December 31, 2013:

 

 

The effect of this stock split has been retroactively applied to per-share computations, share and option amounts for all periods presented within these financial statements and accompanying notes.

 

As of the effective date of the reincorporation, we were authorized to issue 90,000,000 shares of Common Stock with a par value of $0.0001 per share and 10,000,000 shares of Preferred Stock with a par value of $0.0001. Effective October 30, 2015, after receiving approval by our Board of Directors and a majority of the voting power of our outstanding common stock, we amended our Certificate of Incorporation to decrease the number of authorized shares of our common stock from 90,000,000 to 31,500,000 shares and to decrease the number of authorized shares of preferred stock from 10,000,000 to 3,500,000 shares, of which 800,000 shares will remain designated as Series A Preferred Stock. The purpose of the decrease in authorized shares was to reduce our annual franchise tax costs.

 

The rights and privileges of our Series A Preferred Stock and Common Stock are as follows:

 

Series A Preferred Stock

 

We are authorized to issue 3,500,000 shares of preferred stock, of which 800,000 of these shares shall be designated as Series A Preferred Stock (“Preferred Stock”) with a par value of $0.0001 per share.

 

Voting and Dividends.  The holder of each share of Preferred Stock has the right to one vote for each share of Common Stock into which such Preferred Stock could then be converted. The holders of the Preferred Stock are entitled to receive dividends from legally available assets prior to any declaration or payment of dividends to Common Stock holders. Dividends on each share of Preferred Stock are initially at $0.06429 per year payable when and as declared by the Board and are non-cumulative. After payment of such dividends, any additional dividends or distributions are distributed among all holders of Common Stock and Preferred Stock in proportion to the number of shares of Common Stock that would be held by each holder if all shares of Preferred Stock were converted to Common Stock at the then effective conversion rate. To date, no dividends have been declared.

 

Liquidation.  In the event of any liquidation, dissolution or winding up of our Company, either voluntary or involuntary, the holders of the Preferred Stock are entitled to receive, prior and in preference to any distribution of the proceeds resulting from such liquidation event to holders of the Common Stock, an amount equal to $1.07143 plus declared but unpaid dividends. If, upon occurrence of such liquidation event, the proceeds are insufficient to permit the payment of the aforementioned amount in full, then the entire proceeds shall be distributed ratably among all holders of the Preferred Stock in proportion to the full amount each holder would otherwise receive.

 

Conversion.  Each share of Preferred Stock is convertible at any time, at the option of the holder, into such number of fully paid non-assessable shares of Common Stock as is determined by dividing the original issue price of each share of Preferred Stock by the applicable conversion price. The initial conversion price per share is $1.07143. Adjustments to the initial conversion price may result from a recapitalization event or changes in the number of common shares outstanding. Each share of Preferred Stock automatically converts into shares of fully paid non-assessable shares of Common Stock, at the then applicable conversion rate, upon the date specified by written consent or agreement of the holders of a majority of the then outstanding shares of Preferred Stock, voting as a single class on an as-converted basis.

 

Redemption.  Upon a majority vote of the then outstanding shares of Preferred Stock, we may, at our discretion, redeem or purchase shares of Preferred Stock. We also have a first right of refusal to repurchase shares of the Preferred Stock arising from a holder’s proposal to sell such Preferred Stock.

 

Common Stock

 

We are authorized to issue 31,500,000 shares of Common Stock with a par value of $0.0001 per share.

 

Voting and Dividends.  Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Company for their vote except for matters related to potential amendments to our Certificate of Incorporation or matters that solely relate to the terms of one or more outstanding series of our Preferred Stock. Holders of our Common Stock are entitled to receive, when, as and if declared by the Board, dividends pro rata based on the number of shares of Common Stock held. These dividend rights are junior to those of the Preferred Stock holders’ rights to dividends.

 

Liquidation.  Liquidation preference of the Common Stock holders is junior to that of the Preferred Stock holders.

 

Redemption.  The Common Stock is not redeemable.

 

The table below summarizes our common stock activity (shares):