Preferred Stock, Common Stock and Stockholders' Equity (Deficit)

9 Months Ended

Sep. 30, 2013

Preferred Stock, Common Stock and Stockholders' Equity (Deficit)

Preferred Stock, Common Stock and Stockholders' Equity (Deficit)

10.  Preferred Stock, Common Stock and Stockholders’ Equity (Deficit)

Reverse Stock Split

On June 13, 2013, the Company’s board of directors and stockholders approved an amendment and restatement of the Company’s amended and restated certificate of incorporation effecting a 1-for-1.5 reverse stock split of the Company’s issued and outstanding shares of common stock, preferred stock and the renaming of the Series I common stock to common stock.  The par value of the common stock was not adjusted as a result of the reverse stock split.  The original issue prices for all series of preferred stock were proportionately adjusted to reflect the reverse stock split.  All authorized, issued and outstanding shares of common stock, preferred stock and per share amounts presented in the unaudited interim consolidated financial statements have been retroactively adjusted to reflect this reverse stock split and the renaming of the “Series I common stock” to “common stock” for all periods presented.

Amended and Restated Certificate of Incorporation

On July 2, 2013, the Company’s board of directors and stockholders approved an amendment and restatement of the Company’s amended and restated certification of incorporation to, among other things, (i) increase the total number of shares of the Company’s common stock which the Company is authorized to issue to 250,000,000 shares, (ii) eliminate all references to the various series of preferred stock that were previously authorized (including certain protective measures held by the various series of preferred stock), except for the reference to 10,000,000 shares of undesignated preferred stock that may be issued, and with terms to be set, by the Company’s board of directors, which rights could be senior to those of the Company’s common stock, and (iii) eliminate all references to the series II common stock.

Preferred Stock

As of December 31, 2012, the authorized capital stock of the Company consists of 32,742,929 shares of preferred stock, $0.0001 par value per share.

As of September 30, 2013, there were no outstanding shares of preferred stock, refer to note 2.

Preferred stock consists of the following as of December 31, 2012: 

Series	Issued	Authorized	Issued andOutstanding	OriginalIssuePrice		LiquidationPreference		CarryingValueas ofDecember 31, 2012
Series A	September 2006	6,861,975	6,826,451	$	1.2669	$	8,648	$	8,402
Series B	December 2007	3,500,732	3,500,729	$	3.1422	$	11,000	10,949
Series B-1	May 2008	548,032	514,102	$	4.8629	$	2,500	2,479
Series C	February and	5,308,216	5,276,554	$	3.7904	$	20,000	19,932
Series D	April 2010	5,453,975	5,453,970	$	7.3341	$	40,000	39,931
Series E	December 2010	238,000	236,108	$	8.0051	$	1,890	1,890
Series 1	December 2010	979,333	947,711	$	2.4575	$	2,329	5,217
Series 2	December 2010	1,822,000	1,821,455	$	4.1387	$	7,538	12,404
Series 3	December 2010	937,333	928,054	$	5.7507	$	5,337	7,517
Series 4	December 2010	3,093,333	3,092,932	$	2.7548	$	8,520	17,722
Series F	September 2011	4,000,000	3,965,126	$	9.3314	$	37,000	36,023
		32,742,929	32,563,192					$	162,466

Dividends

The holders of preferred stock, which are no longer outstanding as of September 30, 2013, were entitled to receive, when and if declared by the Board of Directors out of funds legally available, dividends at the following annual rates:

Series	Dividend Rate
Series A	$	0.10140
Series B	$	0.25140
Series B-1	$	0.38910
Series C	$	0.30330
Series D	$	0.58680
Series E	$	0.64035
Series 1	$	0.19665
Series 2	$	0.33105
Series 3	$	0.46005
Series 4	$	0.22035
Series F	$	0.74655

The terms of the preferred stock, which are no longer outstanding as of September 30, 2013, provided that no dividends or other distributions would be made with respect to common stock until all declared dividends on the preferred stock had been paid.  No dividends have been declared or paid by the Company through the date of this report.

Conversion

All shares of preferred stock, which are no longer outstanding as of September 30, 2013, automatically converted into common stock upon the closing of the Company’s IPO on July 2, 2013 (refer to note 2).  Except for the Series B-1 and Series F preferred stock, all preferred stock converted on a one for one basis.  The Series B-1 preferred stock converted into common stock on a 1:1.04719 basis and the Series F preferred stock converted into common stock in accordance with the Series F preferred stock ratchet provision described below under the heading “Series F Preferred Stock Ratchet Provision.”

Liquidation Preferences

The preferred stock, which is no longer outstanding as of September 30, 2013, entitled its holders to a liquidation preferences over common stockholders based on the series of preferred stock held.  In the event of liquidation, dissolution, or winding up of the Company, each holder of preferred stock was entitled to be paid out of available assets on a pro-rata basis based on the liquidation preference of each series plus all declared but unpaid dividends.  After the preferential amounts had been distributed by the Company, the holders of preferred stock would then participate with the common stockholders in the distribution of remaining available assets.

Voting

Each holder of a share of outstanding preferred stock, which are no longer outstanding as of September 30, 2013, was entitled to the number of votes equal to the number of shares of common stock into which the shares of convertible preferred stock so held could be converted.

Series F Preferred Stock Ratchet Provision

The terms of the Series F preferred stock, which are no longer outstanding as of September 30, 2013, provided that the ratio at which each share of such series automatically converted into shares of common stock would increase, from a 1:1 basis, if a qualified IPO price was below $13.997 per share, which represents the original issue price of $9.3314 (the “conversion price”) adjusted for other anti-dilution provisions pursuant to the terms of the Series F preferred stock.  The Company therefore concluded that such conversion ratio and conversion price are contingently adjustable based on a future event and such effects will not be recognized in earnings until such contingency has been resolved, in this case July 2, 2013.

Based on the Company’s IPO price of $10.00 per share, the conversion ratio automatically increased to a 1:1.3997 basis, with the conversion price automatically adjusting and decreasing to $6.6667 (the “adjusted conversion price”).  As a result, on July 2, 2013 upon the closing of the Company’s IPO, the outstanding shares of Series F preferred stock automatically converted into an aggregate total of 5,549,989 shares of common stock, which included 1,584,863 additional shares of common stock related to the ratchet provision described above.

As the fair value of the common stock to be received upon conversion (the IPO price of $10.00 per share) of the Series F preferred stock was greater than the adjusted conversion price, the conversion of the Series F preferred stock resulted in a beneficial conversion feature, analogous to a preferred stock dividend.  The beneficial conversion feature was calculated as the difference between the number of shares of common stock each holder of such series would receive upon the automatic conversion and the number of shares contingently issuable just prior to the automatic conversion based on the initial conversion price multiplied by the IPO price of $10.00 per share, which represents the fair value of the common stock on the date of conversion.  On July 2, 2013, the Company recorded a one-time $15,849 non-cash preferred stock deemed dividend related to the issuance of additional common shares resulting from the ratchet provision.  Such non-cash preferred stock deemed dividend results in an increase to net loss to arrive at net loss attributable to common stockholders and, consequently, results in an adjustment to the Company’s computation of net loss attributable to common stockholders per share.

Common Stock

As of December 31, 2012, the Company had two classes of $0.0001 par value common stock as follows:

	Authorized	Outstanding
	as of	as of
Series	December 31, 2012	December 31, 2012
Common stock	50,000,000	6,674,905
Series II	2,333,333	1,047,357
Total common stock	52,333,333	7,722,262

The Company’s two classes of common stock were identical in all significant respects.  Each share was entitled to one vote and both classes of shares were subordinate to the preferred stock in the payment of dividends and liquidation preferences.  The Series II common stock automatically converted into common stock upon the closing of the Company’s IPO on July 2, 2013 (refer to note 2).  Following the Company’s IPO, the Company has one class of common stock.

As of September 30, 2013, the authorized capital stock of the Company consists of 250,000,000 shares of common stock, with 49,638,808 shares of common stock outstanding as of such date.