Table of Contents
Notes to Consolidated Financial Statements (Continued)
10. Capitalization (Continued)
- then, the remaining assets shall be distributed to all holders of common stock and Class B-1, B-2, C and D preferred stock
ratably based on the number of shares held by each holder.
right to a preferential distribution held by the Class B-1, B-2, C and D preferred stockholders terminates upon the conversion of the preferred stock to common stock upon the
completion of a qualified IPO.
of common stock and Class B-1, B-2, C and D preferred stock vote together as a single class.
Class B-1, B-2, C and D preferred stockholders have certain customary protective provisions that allow them to approve the liquidation, dissolution or merger of the Company,
the payment of dividends, the amendment of the Company's certificate of incorporation, an IPO or offering of the Company's debt securities, capital expenditures above a specified threshold and changes
in the authorized shares or preferences of the Company's capital stock.
Class B-1, B-2, C and D preferred shares are subject to proportional adjustment upon stock splits and stock dividends.
Class B-1, B-2, C and D preferred shares will automatically convert, on a one-for-one basis, into common stock upon a Qualified IPO or the affirmative vote of the holders of
a majority of the issued and outstanding shares of Class B-1, B-2, C and D preferred stock.
Company's certificate of incorporation and the related Class B and C financing documents reference the legal form of the Class B-1, B-2 C and D preferred shares as
"common stock." For GAAP purposes, the Class B-1, B-2, C and D shares have been classified as preferred stock due to the preferential distributions that may be received by the holders of such
Class B-1 and B-2 Preferred Stock
January 30, 2014, the Company entered into a Convertible Note and Class B Stock Purchase Agreement (the "Class B Purchase Agreement")
with PBM Capital Investments, LLC ("PBM"). Under the Class B Purchase Agreement, the Company sold to PBM a $500,000 convertible promissory note (the "Class B Note") (see
Note 11) and granted PBM an option (the "Class B Option") to purchase 586,511 shares of Class B-1 preferred stock at a purchase price of $3.41 per share and a warrant (the
"Class B-2 Warrant") to purchase 94,655 shares of Class B-2 preferred stock at $3.55 per share (the "Class B Stock Closing"). To exercise the Class B Option, PBM was
required to provide written notice of its intent on or before February 28, 2014 after which date the Class B Option would terminate.
the Class B Stock Closing, the Company also agreed to sell and PBM agreed to purchase, on the same terms and conditions, 733,138 additional shares of Class B-1
preferred stock (the "Class B-1 Milestone Shares") and a warrant to purchase 118,318 additional shares of Class B-2 preferred stock (the "Milestone Warrant") on the same terms and
conditions. The Class B-1 Milestone Shares were to be sold and the Milestone Warrant was to be issued within ten days of the date that the Company certified that the data and safety monitoring
board appointed by the FDA had approved the dosing of the 7th patient in the Company's Phase 1 clinical trial.