9. Convertible Preferred Stock

In March 2018, the Company issued 3,000,581 shares of Series A convertible preferred stock to an existing investor through the 2018 Direct Registered Offering at a price of $8.31per share (see Note 8). At the date of the financing, because the effective conversion rate of the preferred stock was less than the market value of the Company’s common stock, a beneficial conversion feature of $2.7 million has been recorded as a discount to the convertible preferred stock and an increase to additional paid in capital. Because the preferred stock is perpetual and is convertible at the option of the holder at any time, the Company fully amortized the discount related to the beneficial conversion feature as a deemed dividend which was recognized as an increase to accumulated deficit and net loss attributable to common stockholders.

Except as set forth below, each share of Series A convertible preferred stock has the same rights and privileges as a share of common stock, and ranks equally with a share of common stock with respect to any dividend, liquidation, winding up or dissolution of the Company. The rights, privileges and preferences of Series A convertible preferred stock as of March 31, 2018 were as follows:

Voting Rights

The holders of Series A convertible preferred stock have no voting rights with respect to the election or composition of the Company’s Board of Directors. On all other matters, they are entitled to vote, together with the holders of common stock as a single class on an as converted to common stock basis.

Conversion Rights

Each share of Series A convertible preferred stock is convertible by holders into a fully paid and non-assessable share of common stock on a one-for-one basis, subject to anti-dilution adjustments (the “Conversion Rate”).

Anti-dilution Adjustments of Conversion Rate

In the event the Company declares and pays a dividend or makes a distribution on common stock payable in common stock, the Conversion Rate in effect immediately prior to the record date for that dividend or distribution will be adjusted by multiplying that Conversion Rate by a fraction:

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the numerator of which shall be the sum of the number of shares of common stock outstanding immediately prior to the record date for such dividend or distribution and the total number of shares of common stock constituting such dividend or distribution; and

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the denominator of which shall be the number of shares of common stock outstanding immediately prior to the record date for such dividend or distribution.

In the event the Company subdivides or splits the outstanding shares of common stock into a greater number of shares, or combines or reclassifies the outstanding shares of common stock into a smaller number of shares, the Conversion Rate in effect immediately prior to the effective date of such subdivision, split, combination or reclassification will be adjusted by multiplying such Conversion rate by a fraction:

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the numerator of which shall be the number of shares of common stock outstanding immediately after such subdivision, split, combination or reclassification; and

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the denominator of which shall be the number of shares of common stock outstanding immediately prior to such subdivision, split, combination or reclassification.

In the event of any consolidation or merger of the Company pursuant to which the Company’s common stock will be converted into cash, securities or other property, any sale, transfer lease or conveyance to another person of all or substantially all of the Company’s property and assets, any reclassification of the common stock into securities, including securities other than the Company’s common stock, and any statutory exchange of the outstanding shares of common stock for securities of another person (other than in connection with a merger or acquisition), each share of Series A convertible preferred stock outstanding immediately prior to such event will, without the consent of the holders thereof, become convertible into the kind and amount of securities, cash and other property receivable in such event that the holder would have been entitled to receive if the Series A convertible preferred stock had been converted into common stock immediately prior to such event.

Dividends

Holders of Series A convertible preferred stock rank equally with the common stockholders and are not entitled to any cumulative or noncumulative dividends in preference to the common stockholders. In the event dividends are paid on common stock, dividends will also be paid on all outstanding shares of Series A convertible preferred stock ratably on an as-converted basis.

Liquidation Preferences

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, company assets will be distributed pro rata among the holders of Series A convertible preferred stock and common stock, treating all convertible preferred stock as if it were converted to common stock.

Redemption

The Series A convertible preferred stock is not redeemable.

Conversion

As of April 19, 2018, all 3,000,581 shares of Series A convertible preferred stock had been converted into an equal number of shares of common stock, and no shares of Series A convertible preferred stock were outstanding.