Upon consummation of the LLC Conversion, the Company issued one share of common stock to the Managing Member of the LLC. The voting, dividend and liquidation rights of the holders of the Company’s common stock is subject to and qualified by the rights, powers and preferences of the holders of the preferred stock as set forth below.

The holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders (and written actions in lieu of meetings), and there are not any cumulative voting rights. The number of authorized shares of common stock may be increased or decreased by the affirmative vote of the holders of shares of capital stock of the Company; however, the issuance of common stock may be subject to the vote of the holders of one or more series of preferred stock that may be required by terms of the Certificate of Incorporation.

The Company had authorized 7,033,971 shares of common stock available for grant under the Company’s 2018 Equity Incentive Plan (see Note 11). The summary of plan activity for shares issued and outstanding and the number of shares remaining available for grant under the plan are as follows:

As of June 30, 2020, there were 2,801,859 shares of common stock that were vested of the 6,658,878 shares of common stock granted under the 2018 Equity Incentive Plan.

At June 30, 2020 and December 31, 2019, preferred stock consisted of the following:

(in thousands, except share amounts)	Preferred Stock Authorized		Preferred Stock Issued and Outstanding		Carrying Value		Liquidation Value		Common Stock Issuable Upon Conversion
Series A1 Preferred Stock		20,000,000		—	$	—	$	—		—
Series A2 Preferred Stock		20,000,000		20,000,000		29,775		30,000		13,420,970
Series A3 Preferred Stock		22,453,987		22,453,987		19,364		33,681		15,067,706
Series A4 Preferred Stock		2,066,666		2,066,666		3,065		3,100		1,386,831
Series B Preferred Stock		14,877,697		14,877,697		120,923		121,253		9,983,632
Total		79,398,350		59,398,350	$	173,127	$	188,034		39,859,139

The holders of Series A1, A2, A3, and A4 Preferred Stock (collectively referred to as “holders of Series A Preferred Stock” unless noted) and Series B Preferred Stock, have the following rights and preferences:

The holders of preferred stock are entitled to the same voting rights as the holders of common stock, with a number of votes equal to the number of common stock into which such preferred stock would be converted. The holders of a majority of the then outstanding preferred stock shall have the right to vote upon any matter submitted to the shareholders for a vote. Except for holders of Series A4 Preferred Stock, which is non-voting.

Certain matters, prior to being able to be undertaken by the Company, require the affirmative vote of the holders of preferred stock, voting separately as a single class. These matters include amending the Certificate of Incorporation, authorizing new shares of stock, liquidating the business, selling or licensing material assets, changing Board of Director composition and other matters. In addition, certain matters require the affirmative vote of the holders of Series B Preferred Stock, including the amendment of the Certificate of Incorporation or Bylaws in a manner that adversely affects the powers, preferences, rights or privileges of the Series B Preferred Stock, certain purchases or redemptions of capital stock and any changes in the number of authorized shares of Series B Preferred Stock.

At the option of the holder, all preferred stock is convertible into common stock at any time after the date of issuance. The initial conversion price is equal to the original issue price per share ($1.50 for Series A Preferred Stock and $8.15 for Series B Preferred Stock) and is subject to adjustment as disclosed in Certificate of Incorporation. Each preferred stock will automatically convert into common stock at an applicable conversion rate upon either (a) the affirmative election of the required holders or (b) the closing of an underwritten public offering on the New York Stock Exchange or NASDAQ with gross proceeds of at least $100.0 million.

As of June 30, 2020, the applicable conversion price of the Preferred Stock is $2.24 for the Series A Preferred Stock and $12.15 for the Series B Preferred Stock.

The holders of preferred stock are entitled to non-cumulative dividends of 8% of the original issue price, payable when, and if, declared by the Board of Directors. Dividends for Series A Preferred Stock are only paid after payment in full of dividends for Series B Preferred Stock.

In the event of a liquidation of the Company, the holders of Series B Preferred Stock shall be paid, in preference to Series A Preferred Stock and common stock, the greater of 1) the Series B Preferred Stock original issue price of $8.15 per share, plus any dividends declared but unpaid or 2) the amount per share that would have been payable had all shares of Series B Preferred Stock been converted into common stock at the time of the liquidation (the “Series B Liquidation Preference”). If amounts upon liquidation are insufficient to pay the Series B Preferred Stock, the holders of Series B Preferred Stock will share ratably in the distribution of the assets based on the distribution that would have otherwise been paid in full.

In the event of a liquidation of the Company, after payment of the Series B Liquidation Preference, the holders of Series A Preferred Stock shall be paid, in preference to common stock, the greater of 1) the Series A Preferred Stock original issue price of $1.50 per share, plus any dividends declared but unpaid or 2) the amount per share that would have been payable had all shares of Series A Preferred Stock been converted into common stock at the time of the liquidation (the “Series A Liquidation Preference”). If amounts upon liquidation are insufficient to pay the Series A Preferred Stock, the holders of Series A Preferred Stock will share ratably in the distribution of the assets based on the distribution that would have otherwise been paid in full.

The Company has determined that all series of preferred stock are redeemable, based on the Certificate of Incorporation that states upon the occurrence of a deemed liquidation event, the holders of preferred stock are entitled to receive cash or other assets. Additionally, the deemed liquidation events are not in the sole control of the Company and the preferred stock does not meet any limited exceptions under ASC 480, Distinguishing Liabilities From Equity. As such, the Company classified its preferred stock outside of permanent equity and into mezzanine equity.

Upon the occurrence of a decrease in the Company’s cash or on the occurrence of a crossover round, the Company is required to issue additional preferred stock and ElevateBio is required to purchase such shares with an aggregate purchase price of $20.0 million, with the number of shares imputed based on the estimated fair value per share at that time. The Company evaluated whether this feature represented an embedded derivative or a freestanding financial instrument and concluded that the obligation to issue additional shares represents a contingent forward that should be accounted for at fair value. The Company concluded that the fair value at issuance and at December 31, 2018 was de minimis based on the probabilities of such events occurring at such dates. The contingent forward was settled on May 8, 2019 in conjunction with the issuance of Series B Preferred Stock.

The preferred stock agreements contain various make whole provisions upon the occurrence of certain events, such as stock splits, recapitalizations, etc. The Company evaluated whether these features represent embedded derivatives or free standing financial instruments and concluded that the features represent a derivative embedded within the agreement which requires bifurcation and to be recorded at fair value. At issuance and at June 30, 2020 and December 31, 2019, the Company concluded that the fair value was de minimis based on the probabilities of such events occurring at such dates. The Company will reassess the fair value of such embedded derivative each reporting period and any changes in fair value will be recorded in the condensed consolidated statements of operations and comprehensive loss.