Convertible Preferred Stock (Notes)

9 Months Ended

Sep. 30, 2016

Equity [Abstract]

Convertible Preferred Stock

CONVERTIBLE PREFERRED STOCK

In March 2016, the Company issued 27,850 shares of Convertible Preferred Stock for cash proceeds of $27.1 million, net of issuance costs of $0.8 million. Shares of the Series A Preferred Stock are convertible at the option of the holders into shares of the Company's common stock, at an initial conversion price of $2.00 per share, subject to customary adjustments in the event of stock splits and certain other changes to the Company’s capitalization. In July 2016, one of the holders of preferred stock converted 1,000 shares of Convertible Preferred Stock into 500,000 shares of the Company's common stock. This transaction resulted in an increase to common stock and additional paid in capital, and a decrease to convertible preferred stock of approximately $1.0 million. The Company has classified the convertible preferred stock as temporary equity in the condensed consolidated balance sheet as of September 30, 2016 due to the existence of certain change in control provisions that are not solely within the Company’s control.       

The convertible preferred stock contains the following terms and conditions: 

• Dividends. The holders are entitled to participate equally and ratably with the Company's common stock in all dividends and distributions on an as-converted basis, subject to certain customary exceptions. The Preferred Stock will also rank senior to the Company's common stock.

• Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or certain change of control transactions, each holder will be entitled to receive a liquidation preference before any distribution or payment is made to holders of the Company's common stock or any other security that ranks junior to the Preferred Stock.

• Voting Rights. Holders will be entitled to vote together as a single class with the holders of the Company's common Stock on all matters submitted for a vote by holders of the Company's common stock, with each such holder of Preferred Stock being entitled to cast a number of votes equal to the number of whole shares of the Company's common stock issuable upon conversion of such Preferred Stock.

• Board Representation. For so long the outstanding shares of Preferred Stock represent at least 5.0% of the Company’s outstanding voting power on an as-converted basis, the holders will have the right to designate a nominee for election to the Company’s Board of Directors, subject to certain exceptions.

• Protective Provisions. For so long as at least 1,392 shares of Preferred Stock remain outstanding, the Company may not, without the approval of the holders of at least two-thirds of the then outstanding shares of Preferred Stock: (i) amend any provision of the Certificate of Designations or the Company’s Amended and Restated Certificate of Incorporation or bylaws so as to adversely affect the rights, preferences or privileges of the Preferred Stock; or (ii) declare or pay any divided on the Company's common stock, subject to certain customary exceptions. In addition, for so long as at least 11,140 shares of Preferred Stock remain outstanding, the Company may not, without the approval of the holders of at least two-thirds of the then outstanding shares of Preferred Stock, create, authorize or issue any equity securities senior to the Preferred Stock.

• Mandatory Conversion. The Company can require the conversion of the outstanding shares of Preferred Stock if either the trading price of the Company's common stock is greater than three times the conversion price before the third anniversary of the Initial Closing or is greater than four times the conversion price thereafter, subject to certain customary conditions.

• Transfer Restrictions. No holder of any shares of Preferred Stock may transfer such shares except to an affiliate of such holder or the Company. If the transfer is to an affiliate, such affiliate must become a party to the Registration Rights Agreements. In addition, if such affiliate would beneficially own five percent or more of the Company’s aggregate voting power after giving effect to the transfer, they must enter into a customary standstill agreement.