9.	Preferred Stock

Preferred Stock

As of December 31, 2015, the Company had 10,000,000 shares of preferred stock authorized with a par value of $0.001. No shares of preferred stock were outstanding as of December 31, 2015.

Convertible and Redeemable Convertible Preferred Stock

On January 10, 2014, the Company issued 344,664 shares of Series C redeemable convertible preferred stock at a price per share $5.215. Of the total shares, 261,737 were issued for cash proceeds of $1.4 million and 82,927 were issued on the conversion of a note payable to MSF (see Note 6) with principal and accrued interest totaling $0.4 million.

On April 17, 2014, the Company issued 11,409,360 shares of Series D redeemable convertible preferred stock at a price of $5.215 per share for net cash proceeds of $56.2 million, net of issuance costs of $3.3 million.

During the year ended December 31, 2015, the Company issued an aggregate of 481,671 shares of redeemable convertible preferred stock upon the cash exercise of the Company’s Series B-1 and Series C redeemable convertible preferred stock warrants, consisting of 444,286 shares of Series B-1 redeemable convertible preferred stock and 37,385 shares of Series C redeemable convertible preferred stock.

In addition, during the year ended December 31, 2015, the Company issued an aggregate of 390,032 shares of redeemable convertible preferred stock upon the net exercise of the Company’s Series B, Series B-1 and Series C redeemable convertible preferred stock warrants, consisting of 5,850 shares of Series B redeemable convertible preferred stock, 291,165 shares of Series B-1 redeemable convertible preferred stock and 93,017 shares of Series C redeemable convertible preferred stock.

On July 21, 2015 (closing date of the IPO), all outstanding shares of Series A convertible preferred stock converted into 252,817 shares of common stock and all outstanding shares of Series B, Series B-1, Series C and Series D redeemable convertible preferred stock converted into 18,109,136 shares of common stock. The convertible and redeemable convertible preferred stock as of December 31, 2014 consisted of the following:


	December 31, 2014
	Shares Authorized		Shares Issued and Outstanding		Net Carrying Value		Liquidation Price Per Share		Aggregate Liquidation Preference		Redemption Value
	(in thousands, except share and per share data)
Convertible Preferred Stock:
Series A		1,843,894		224,564	$	2,543	$	11.324	$	2,543	$	—

Redeemable Convertible Preferred Stock:
Series B		13,134,880		1,752,634	$	19,504	$	12.268	$	21,502	$	19,504
Series B-1		16,122,618		1,392,300		6,979		3.656		5,091		6,979
Series C		19,812,349		2,487,770		21,052		5.642		14,035		21,052
Series D		85,000,000		11,409,360		94,297		5.510		62,865		94,297

Total redeemable convertible preferred stock		134,069,847		17,042,064	$	141,832			$	103,493	$	141,832

Total preferred stock		135,913,741		17,266,628	$	144,375			$	106,036	$	141,832

On issuance, the Company’s convertible and redeemable convertible preferred stock was recorded at fair value or the amount of allocated proceeds, net of issuance costs.

The Company’s Series A convertible preferred stock (convertible preferred stock) was classified outside of stockholders’ equity (deficit) from issuance through the closing of the IPO, because, in the event of certain “liquidation events” that are not solely within the Company’s control (including merger, acquisition, or sale of all or substantially all of the Company’s assets), the shares would have become redeemable at the option of the holders. The carrying value of the convertible preferred stock was the liquidation value.

The Company’s Series B, B-1, C and D redeemable convertible preferred stock (collectively, redeemable convertible preferred stock) was classified outside of stockholders’ equity (deficit) from issuance through the closing of the IPO, because the stocks contain redemption features that commence at any time on or after December 31, 2018 at the election of the Series B, B-1, C and D redeemable convertible preferred stockholders. The Company adjusted the carrying amount of the redeemable convertible preferred stock to equal the redemption value at the end of each reporting period. Due to the absence of retained earnings, adjustments to redemption value were recorded against additional paid-in capital, if any, and then to accumulated deficit. The following table sets forth the total adjustment to redemption value of each series of redeemable convertible preferred stock recognized during the following periods:


	Year Ended December 31,
	2015		2014		2013
	(in thousands)
Redeemable Convertible Preferred Stock
Series B	$	46,976	$	6,447	$	—
Series B-1		36,961		2,836		28
Series C		52,832		2,449		5,685
Series D		237,246		38,117		—

Total adjustment to redemption value on redeemable convertible preferred stock	$	374,015	$	49,849	$	5,713

As the redemption value for the redeemable convertible preferred stock was at times based on fair market value, the Company determined the fair value of the redeemable convertible preferred stock using a combination of the OPM and/or the PWERM models, or the fair value of the Company’s common stock. At July 21, 2015 (closing date of the IPO), the fair value of redeemable convertible preferred stock was estimated based on the underlying value of the Company’s common stock. Prior to the Company’s IPO, the holders of the convertible and redeemable convertible preferred stock (collectively, Preferred Stock) had various rights, preferences, and privileges as follows:

Optional Conversion Rights

Each share of Preferred Stock was convertible at the option of the holder at any time into the number of shares of common stock based on the conversion price then in effect. The conversion rate was obtained by dividing the Series A, B, B-1, C and D original issuance prices of $11.324, $7.45, $2.6075, $5.215 and $5.215 per share by the preferred conversion price for each series in effect. The conversion prices for each series were adjusted on a broad-based weighted-average basis in connection with certain dilutive issuances. However, the articles of incorporation provide that in no event shall the conversion price for the Series A be less than $10.0575 per share or the conversion price for the Series B be less than $6.705 per share. The conversion price per share for the Preferred Stock was adjusted for certain recapitalizations, splits, combinations, common stock dividends or similar events, as discussed below.

Automatic Conversion Rights

Each share of Preferred Stock was automatically converted into shares of common stock based on the then-effective conversion price upon either the affirmative vote or consent of the holders of at least a majority of the outstanding shares of the Preferred Stock or upon the closing of a Qualified IPO. A Qualified IPO was defined as the closing of a firm underwritten initial public offering pursuant to an effective registrant statement under the Securities Act of 1933, in which the aggregate cash proceeds to the Company (before underwriting discounts, commissions and fees) are at least $50.0 million and if it covers the offer and sale of the Company’s common stock at a price per share of (i) at least 1.6 times the Series D original issue price ($8.344 per share) if such closing occurred on or before April 17, 2015; and (ii) at least 2.0 times the Series D original issue price ($10.43 per share) if such closing occurred after April 17, 2015. Upon such automatic conversion, any unpaid accruing dividends and any other accrued and unpaid dividends on the Preferred Stock was also paid.

Voting Rights

Each share of Preferred Stock had a number of votes equal to the number of shares of common stock into which it was convertible. The holders of the Series B and C redeemable convertible preferred stock each had the right to elect one director to the Board. The holders of the Series D redeemable convertible preferred stock had the right to elect two directors to Board. The holders of the common stock and Preferred Stock, voting together on an as-converted basis, elect the three remaining directors.

A separate vote of a majority of the Series A, B, B-1, C and D preferred stockholders, determined on the basis of the number of shares of common stock into which it was convertible, was required to authorize, effect or validate any action which altered or changed the rights, preferences or privileges or increased the number of authorized shares of each respective series of Preferred Stock.

Dividend Rights

The holders of the outstanding shares of Series B, B-1, C and D redeemable convertible preferred stock were entitled to receive cumulative accruing dividends at a rate of 8.0% per annum of the original issuance price per share, compounded annually (accruing dividends). The accruing dividends accrued from day to day, whether or not declared, and were cumulative. The accruing dividends were deemed declared annually and payable upon the earliest to occur of (i) the date determined by the Board, (ii) the liquidation of the Company (including a Deemed Liquidation Event) and (iii) the conversion or redemption of at least a majority of the outstanding shares of the Series B, B-1, C and D redeemable convertible preferred stock. At December 31, 2014, cumulative unpaid accruing dividends in arrears totaled $14.4 million and consisted of $8.4 million for the Series B, $1.5 million for the Series B-1, $1.1 million for the Series C and $3.4 million for the Series D redeemable convertible preferred stock.

In the event of a qualified IPO, the holders were entitled to 50% of the then accrued but unpaid accruing dividends in cash and the remaining 50% were forfeited. If a Qualified IPO had occurred as of December 31, 2014, the Company would have paid accruing dividends in the aggregate amount of $7.2 million to the Series B, B-1, C and D redeemable convertible preferred stockholders.

The holders of the Series A convertible preferred stock, in preference to the holders of the common stock, were entitled to first receive, or simultaneously receive, when and as declared by the board, but only out of funds that were legally available therefore, a dividend in an amount of at least equal to $0.79268 per share of the Series A convertible preferred stock. Such dividends were not cumulative.

After payment of these dividends, any dividends declared by the board out of funds legally available were shared equally among all outstanding shares on an as-converted basis.

Amendment to Dividend Rights

On June 11, 2015, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation to modify the terms of the cumulative accruing dividends on the outstanding shares of the Company’s Series C and Series D redeemable convertible preferred stock. Under the terms of the amended certificate of incorporation, upon conversion of the Company’s redeemable convertible preferred stock into common stock in connection with an IPO, the Company was required to pay 50% of the then accrued but unpaid accruing dividends on shares of the Series C and Series D redeemable convertible preferred stock in shares of the Company’s common stock instead of payment in cash and the remaining 50% of the then accrued but unpaid accruing dividends was to be forfeited. The settlement of the accrued but unpaid accruing dividends in shares of common stock was required to be at the original issue price of the Series C and Series D redeemable convertible preferred stock of $5.215 per share. The terms of the dividends payable on the Series B and Series B-1 preferred stock were not modified.

Settlement of Cumulative Dividends

On July 21, 2015 (closing date of the IPO), the Company had total cumulative unpaid dividends in arrears of $18.9 million, which consisted of $9.4 million for the Series B, $1.7 million for the Series B-1, $1.7 million for the Series C and $6.1 million for the Series D redeemable convertible preferred stock. During the year ended December 31, 2015, the Company paid in cash accruing dividends in the aggregate amount of $5.5 million to the Series B and B-1 redeemable convertible preferred stockholders, consisting of $4.7 million for the Series B and $0.8 million for the Series B-1 redeemable convertible preferred stockholders. In addition, during the year ended December 31, 2015, the Company issued an aggregate of 750,946 shares of common stock to the Series C and D redeemable convertible preferred stockholders with an aggregate fair value of $20.4 million in settlement of the Series C and Series D redeemable convertible preferred stock cumulative dividends in accordance with the June 11, 2015 amendment discussed above, consisting of 161,536 shares of common stock with a fair value of $4.4 million to the Series C redeemable convertible preferred stockholders and 589,410 shares of common stock with a fair value of $16.0 million to the Series D redeemable convertible preferred stockholders.

Liquidation Rights

In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the corporation, the holders of the Series A, Series B, Series B-1, Series C and Series D preferred stock were entitled to liquidation preferences in the amount of $11.324 per share for the Series A, $12.268 per share for the Series B, $3.656 per share for the Series B-1, $5.642 per share for the Series C and $5.510 per share for the Series D at December 31, 2014 (adjusted to reflect stock splits, stock dividends, and recapitalizations), plus all unpaid accruing dividends, whether or not declared, together with any other dividends declared but unpaid. Following distribution of the liquidation preferences to the preferred stockholders, the remaining assets of the Company available for distribution to shareholders were distributed among the holders of the Series B, B-1, C and D redeemable convertible preferred stock and common stock pro rata based on the number of shares of common stock held by each on an as-converted basis.

A Deemed Liquidation Event is defined as any acquisition of the corporation by means of merger or other form of corporate reorganization in which the outstanding shares of the corporation are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring corporation or its subsidiary (other than a reincorporation transaction) or a sale of all or substantially all of the assets of the Company shall be treated as a liquidation, dissolution, or winding-up of the corporation and shall entitle the holders of preferred stock and common stock to receive at the closing the amounts specified above in cash, securities or other property.

Redemption Rights

The Series A convertible preferred stock did not contain any fixed or determinable redemption features. At any time on or after December 31, 2018, upon the election of the holders of the then-outstanding Series B, B-1, C and D redeemable convertible preferred stock, voting as a separate class, the Company might be required to redeem in cash the then-outstanding shares of Series B, B-1, C and D redeemable convertible preferred stock. The Company shall effect any such redemption in three annual installments with the first to occur on the date sixty days after the date on which the Company receives notice of the redemption election. The redemption price for the Series B and B-1 redeemable convertible preferred stock was equal to the greater of (a) 150% of the liquidation preference for such series; provided, however, that any sum in excess of the purchase price shall be paid out of the retained earnings of the Company; or, (b) the fair market value per share as determined by an appraisal plus all declared or accrued but unpaid accruing dividends.

At December 31, 2013, due to the absence of retained earnings, the redemption value of the Series B redeemable convertible preferred stock was determined under criterion (a) and was the original issuance price of $7.45 per share. At December 31, 2014 and on the closing of the IPO, the redemption value of the Series B redeemable convertible preferred stock was determined under criterion (b) and was the fair value market value per share plus all unpaid accruing dividends. At December 31, 2013 and 2014 and on the closing of the IPO, the redemption price of the Series B-1 redeemable convertible preferred stock was determined under criterion (b) and was the fair market value per share plus all unpaid accruing dividends. The redemption price for the Series C and D redeemable convertible preferred stock was equal to the greater of (a) 150% of the liquidation preference of such series; or, (b) the fair market value per share as determined by an appraisal, plus all declared or accrued but unpaid accruing dividends. At December 31, 2013 and 2014 and on the closing of the IPO, the redemption value for Series C and D redeemable convertible preferred stock was determined under criterion (a) and is 150% of the liquidation preference for the Series C and D redeemable convertible preferred stock.

MSF and MEDC Redemption Rights

Prior to the closing of the IPO, the Company was required to redeem certain shares of its Series B, B-1, and C redeemable convertible preferred stock held by MSF and the Michigan Economic Development Corporation (MEDC) upon the occurrence of a deemed triggering event. If a triggering event occurred, MSF and MEDC both had the option to elect for the Company to redeem their shares in cash for a period of 60 days after the occurrence of the triggering event for the shares of Series B redeemable convertible preferred stock and a period of 120 days after the triggering event occurs for the shares of Series B-1 and C redeemable convertible preferred stock. The option expired if not exercised within the given timeframe. If a triggering event had occurred and the option to redeem the respective shares of Series B, B-1 and C redeemable convertible preferred stock had been exercised by both MSF and MEDC at December 31, 2014, the cash redemption amount of the respective shares would have amounted to $5.4 million. On April 1, 2015, the Company notified MSF and MEDC that a triggering event had occurred.

On June 11, 2015, the Company and the Michigan Strategic Fund (MSF) and the Michigan Economic Development Corporation (MEDC) entered into an amendment to equity conversion agreements previously entered into by the parties. The amendment modified the terms of the equity conversion agreements that permit the MSF and MEDC to require the Company to repurchase shares of their preferred stock in certain circumstances, referred to as “put options.” The modification to the put options (i) suspended the exercisability of the put options during the period prior to and through the completion of the IPO and (ii) further provided that the put options would expire upon the completion of the IPO. However, in the event the IPO had not been completed by December 31, 2015 or was abandoned by the Company prior to that date, the MSF and MEDC would have the right to exercise the put options for a period of 120 days following the earlier to occur of such dates.