General form of registration statement for all companies including face-amount certificate companies

Equity Instruments

v3.21.2
Equity Instruments
 6 Months Ended 12 Months Ended
Jun. 30, 2021
Dec. 31, 2020
Equity [Abstract]    
Equity Instruments Equity Instruments
Redeemable Convertible Preferred Stock
Redeemable convertible preferred stock consisted of the following:
As of June 30, 2021 and December 31, 2020
(In thousands, except share and per share data)
Shares Original issue
price per share		 Liquidation
Preference		 Carrying
value
Authorized Issued and
Outstanding
Series A 8,906,694  6,726,134  $ 2.928  $ 19,696  $ 17,030 
Series B 10,385,804  8,386,456  $ 3.851  32,300  32,176 
Series C 8,848,760  8,399,058  $ 5.524  46,400  39,378 
Series D 97,278,007  94,222,735  $ 0.375  35,366  35,120 
125,419,265  117,734,383  $ 133,762  $ 123,704 
As of June 30, 2021 and December 31, 2020, redeemable convertible preferred stock totaling 117,734,383 shares were convertible into 147,876,672 shares of common stock.
Conversion of Redeemable Convertible Preferred Stock into Common Stock at a conversion ratio of 3:1 and Issuance of Series D Redeemable Convertible Preferred Stock
In March and early April 2020, the Company notified the existing holders of the redeemable convertible preferred stock of (i) a planned initial closing of Series D redeemable convertible preferred stock and (ii) the amount assigned to each of them based on their pro rata holdings in the Company’s outstanding equity on a fully diluted basis. In addition, these existing holders are notified that, as a condition of the Series D redeemable convertible preferred stock financing, the Company would amend its articles to implement a special mandatory conversion provision if the holders failed to invest their pro rata amount in such initial financing of Series D redeemable convertible preferred stock.
On April 13, 2020, in connection with the Company’s issuance of Series D redeemable convertible preferred stock, the Company amended its articles to implement the special mandatory conversion provision and, contemporaneously, certain existing holders of redeemable convertible preferred stock who failed to invest their full pro rata amount or did not participate in the financing were automatically converted into the Company’s common stock at a conversion ratio of three to one. The amendment and forced conversion were recognized as an extinguishment of the redeemable convertible preferred stock.
As a result, 2,167,198 shares of Series A redeemable convertible preferred stock, 1,999,348 shares of Series B redeemable convertible preferred stock and 289,702 shares of Series C redeemable convertible preferred stock were converted into 1,485,413 shares of common stock. The carrying value of the converted shares of the redeemable convertible preferred stock is $13.3 million, whereas the fair value of the shares of common stock issued in the conversion was $0.2 million. Because the fair value of the consideration transferred (i.e., the fair value of the shares of common stock issued) was less than the carrying amount of the shares of the redeemable convertible preferred stock surrendered, the Company recognized an extinguishment of the redeemable convertible preferred stock converted in the amount of $13.1 million. The $13.1 million was a deemed capital contribution to the holders of the Company’s common stock that was a decrease to the net loss attributable to common stockholders and a decrease to accumulated deficit. Accordingly, the Company recorded a decrease of $13.3 million to redeemable convertible preferred stock, and a corresponding increase of $0.2 million in additional paid-in capital and a decrease of $13.1 million in accumulated deficit.
In addition, on April 13, 2020, the Company issued 44,794,885 shares of Series D redeemable convertible preferred stock at $0.37534 per share for gross proceeds of $16.8 million.
Common stock
The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders but are not entitled to cumulative voting rights, have the right to appoint two directors to the Company’s Board of Directors, are entitled to receive ratably such dividends as may be declared by the Company’s Board of Directors out of funds legally available therefor subject to preferences that may be applicable to any shares of redeemable convertible preferred stock currently outstanding or issued in the future, are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preference of any then outstanding redeemable convertible preferred stock in the event of the Company’s liquidation, dissolution, or winding up, have no preemptive rights and no right to convert their common stock into any other securities, and have no redemption or sinking fund provisions applicable to the common stock.
Common Stock Reserved for Future Issuance
Shares of common stock reserved for issuance on an “as if converted” basis were as follows:
June 30, December 31,
2021 2020
(share data)
Redeemable convertible preferred 147,876,672  147,876,672 
Convertible promissory note 6,756,757  — 
Redeemable convertible preferred stock warrants 408,729  408,729 
Common stock warrants 293,856  262,638 
Common stock options issued and outstanding 26,997,994  26,347,331 
Shares available for future grant under 2014 Stock Option Plan 6,370,750  7,223,913 
Total shares of common stock reserved
188,704,758  182,119,283 
Stock Warrants
Warrants for shares of common stock consisted of the following:
June 30, 2021
Issue Date Expiration
Date		 Number of
Warrant		 Exercise
Price		 Fair Value on
Issue Date per warrant
Common stock 12/02/2015 12/02/2025 13,660  $ 0.71  $ 0.57 
Common stock 07/02/2018 07/02/2028 49,961  $ 2.01  $ 1.63 
Common stock 12/17/2020 12/17/2030 199,017  $ 0.15  $ 0.14 
Common stock 02/18/2021 02/18/2031 6,244  $ 0.15  $ 5.28 
Common stock 03/26/2021 03/26/2031 12,487  $ 0.15  $ 5.28 
Common stock 04/26/2021 04/26/2031 12,487  $ 0.15  $ 5.28 
Total outstanding 293,856 
Warrants for common stock of 293,856 and 262,638 were convertible 1-to-1 as of June 30, 2021 and December 31, 2020, respectively. During the six months ended June 30, 2021, the issuance of common stock warrants was related to the additional equipment loan per the agreement dated December 17, 2020. Per the agreement, each additional borrowing included an issuance of common stock warrants to the lender.
Warrants on common stock are equity classified and recorded at fair value on the issue date without further remeasurement. The level 3 fair value assumptions used in the Black-Scholes model to calculate fair value of the warrant for common stock granted during the six months ended June 30, 2021 were as follows: volatility of 55.0% to 60.0%, term of 0.2 years, and risk-free rate of 1.00%.
Warrants for shares of Series A and Series C redeemable convertible preferred stock consisted of the following (dollars in thousands, except share and per share amounts):
As of June 30, 2021 and December 31, 2020
Issue Date Expiration
Date		 Number of
Warrant		 Exercise Price
per Warrant		 Fair Value on
Issue Date per Warrant
Series A redeemable convertible preferred stock 11/14/2014 11/13/2024 13,362 $1.12 $1.25
Series C redeemable convertible preferred stock 04/18/2019 04/18/2029 160,000 $5.52 $1.05
Total outstanding 173,362
Warrants for redeemable convertible preferred stock of 173,362 as of June 30, 2021 and December 31, 2020 were convertible into 408,729 shares of common stock after the impact of dilution triggered by the issuance of Series D Preferred stock.
Warrants on redeemable convertible preferred stock were issued to lenders in connection with borrowings. The fair value on the date of issue is recorded as a debt issue cost (contra-liability) and a liability because the warrant was liability classified. The fair value of the warrants are remeasured each reporting period using Level 3 inputs with the increase or decrease recorded in other income or expense in the statements of operations.
The liability for warrants on redeemable convertible preferred stock (carried at fair value) was as follows for the six months ended June 30, 2021 and 2020:
Rollforward of the liability for warrants on redeemable convertible preferred stock:
(in thousands)
Balance as of December 31, 2019
$ 185 
Change in fair value (Other income (expense), net) (7)
Balance as of June 30, 2020 (Other noncurrent liabilities)
$ 178 
Balance as of December 31, 2020
 $ 181 
Change in fair value (Other income (expense), net) 1,741 
Balance as of June 30, 2021 (Other noncurrent liabilities)
$ 1,922 
As of June 30, 2021, the fair value of the warrants for shares of Series A and Series C redeemable convertible preferred stock was $13.79 and $10.86, respectively. The fair value of the redeemable convertible preferred stock warrant liability was estimated using an option pricing model that takes into account the contract terms as well as multiple unobservable inputs such as the aggregate equity value, risk-free interest rates, and expected volatility. The level 3 fair value assumptions used in the Black-Scholes model for the recurring valuation of the redeemable convertible preferred stock warrant liability were as follows:
Six months ended June 30,
2021 2020
Expected volatility
55% – 65%
35% – 45%
Risk-free interest rate
0.1% – 0.5%
0.1% – 0.8%
Dividend yield —  — 
The expected term for the Series A warrants and the Series C warrants for the six months ended June 30, 2021 was 0.2 years for both warrants, respectively.
The expected term for the Series A warrants and the Series C warrants for the six months ended June 30, 2020 was 1.6 years and 9.0 years, respectively.
 Equity Instruments
Redeemable Convertible Preferred Stock
Redeemable convertible preferred stock consisted of the following:
December 31, 2020
(In thousands, except share and per share data)
Shares
Original issue
price per share
Liquidation
Preference
Carrying
value
Authorized
Issued and
Outstanding
Series A 8,906,694  6,726,134  $ 2.928  $ 19,696  $ 17,030 
Series B 10,385,804  8,386,456  $ 3.851  32,300  32,176 
Series C 8,848,760  8,399,058  $ 5.524  46,400  39,378 
Series D 97,278,007  94,222,735  $ 0.375  35,366  35,120 
125,419,265  117,734,383  $ 133,762  $ 123,704 
December 31, 2019
(In thousands, except share and per share data)
Shares
Original issue
price per share
Liquidation
Preference
Carrying
value
Authorized
Issued and
Outstanding
Series A 8,906,694  8,893,332  $ 2.928  $ 26,042  $ 21,004 
Series B 10,385,804  10,385,804  $ 3.851  40,000  39,876 
Series C 8,848,760  8,688,760  $ 5.524  48,000  40,978 
28,141,258  27,967,896  $ 114,042  $ 101,858 
As of December 31, 2020, redeemable convertible preferred stock totaling 117,734,383 shares were convertible into 147,876,672 shares of common stock after adjusting for the impact of dilution triggered by the issuance of Series D redeemable convertible preferred stock. As of December 31, 2019, redeemable convertible preferred stock was convertible using a 1-to-1 ratio into common stock.
Special Issuance of Series C Redeemable Convertible Preferred Stock
In April 2019, the Company issued additional shares of its Series C redeemable convertible preferred stock to its existing investors redeemable convertible preferred stock at the original issue price of $5.52438 per share for cash proceeds of $18.0 million.
In an effort to incentivize existing investors of the redeemable convertible preferred stock to participate in the financing, for each share of Series C redeemable convertible preferred stock purchased by an investor over its assigned amount based on the pro rata holding of the Company’s equity, such investor would additionally receive five shares of the Company’s common stock with no additional cash consideration. As such, the Company issued 3,258,288 shares of Series C redeemable convertible preferred stock and 9,227,960 shares of common stock to participating investors for total proceeds of $18.0 million. The proceeds in the special issuance were allocated to the Series C redeemable convertible preferred stock and common stock based on their relative fair values on an investor-by-investor basis.
Conversion of Series A Redeemable Convertible Preferred Stock into Common Stock
In February 2019, an investor voluntarily exercised its option to convert 893,260 Series A redeemable convertible preferred stock into 893,260 shares of common stock at a conversion ratio of one to one pursuant to the original conversion terms of the Series A redeemable convertible preferred stock. Thus, the Series A redeemable convertible preferred stock was converted into shares of common stock with no effect on retained earnings and the $1.0 million into carrying amount of the Series A redeemable convertible preferred stock was reclassified to common stock and additional paid-in capital.
Conversion of Redeemable Convertible Preferred Stock into Common Stock at a conversion ratio of 3:1 and Issuance of Series D Redeemable Convertible Preferred Stock
In March and early April 2020, the Company notified the existing holders of the redeemable convertible preferred stock of (i) a planned initial closing of Series D redeemable convertible preferred stock and (ii) the amount assigned to each of them based on their pro rata holdings in the Company’s outstanding equity on a fully diluted basis. In addition, these existing holders are notified that, as a condition of the Series D redeemable convertible preferred stock financing, the Company would amend its articles to implement a special mandatory conversion provision if the holders failed to invest their pro rata amount in such initial financing of Series D redeemable convertible preferred stock.
On April 13, 2020, in connection with the Company’s issuance of Series D redeemable convertible preferred stock, the Company amended its articles to implement the special mandatory conversion provision and, contemporaneously, certain existing holders of redeemable convertible preferred stock who failed to invest their full pro rata amount or did not participate in the financing were automatically converted into the Company’s common
stock at a conversion ratio of three to one. The amendment and forced conversion were recognized as an extinguishment of the redeemable convertible preferred stock.
As a result, 2,167,198 shares of Series A redeemable convertible preferred stock, 1,999,348 shares of Series B redeemable convertible preferred stock and 289,702 shares of Series C redeemable convertible preferred stock were converted into 1,485,413 shares of common stock. The carrying value of the converted shares of the redeemable convertible preferred stock is $13.3 million, whereas the fair value of the shares of common stock issued in the conversion was $0.2 million. Because the fair value of the consideration transferred (i.e., the fair value of the shares of common stock issued) was less than the carrying amount of the shares of the redeemable convertible preferred stock surrendered, the Company recognized an extinguishment of the redeemable convertible preferred stock converted in the amount of $13.1 million. The $13.1 million was a deemed capital contribution to the holders of the Company’s common stock that was a decrease to the net loss attributable to common stockholders and a decrease to accumulated deficit. Accordingly, the Company recorded a decrease of $13.3 million to redeemable convertible preferred stock, and a corresponding increase of $0.2 million in additional paid-in capital and a decrease of $13.1 million in accumulated deficit.
In addition, on April 13, 2020, the Company issued 44,794,885 shares of Series D redeemable convertible preferred stock at $0.37534 per share for gross proceeds of $16.8 million.
Rights, Preferences and Privileges of Redeemable Convertible Preferred Stock
The rights, preferences and privileges of the Company’s redeemable convertible preferred stock are as follows for all series unless otherwise noted:
Dividend provisions — The holders of the outstanding shares of redeemable convertible preferred stock are entitled to receive, when and if declared by the Company’s Board of Directors, a noncumulative dividend at the annual rate of 6%, adjustable for certain events, such as stock splits and combinations. In addition, holders of redeemable convertible preferred stock participate in any distribution in excess of preferred dividends on an as converted basis. The Company has declared no dividends during the years ended December 31, 2020 and 2019.
Liquidation preference — In the event of any liquidation, dissolution, winding up, or change of control of the Company, whether voluntary or involuntary, the holders of Series A, B, C and D redeemable convertible preferred stock, before any payment shall be made to the holders of common stock by reason of their ownership thereof, the holders of shares of each series of redeemable convertible preferred stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to its stockholders, an amount per share equal to the greater of (a) the original issue price per share for such series of redeemable convertible preferred stock, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all shares of such series of redeemable convertible preferred stock been converted into common stock immediately prior to such liquidation, dissolution, winding up or change of control of the Company. If upon any such liquidation, dissolution, winding up or change of control of the Company, the funds and assets available for distribution to the stockholders of the Company shall be insufficient to pay the holders of shares of redeemable convertible preferred stock the full amounts to which they are entitled, the holders of shares of redeemable convertible preferred stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of redeemable convertible preferred stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
Payments to holder of common stock, in the event of any liquidation, dissolution, winding, or change of control of the Company, whether voluntary or involuntary, shall be entitled to receive the remaining funds and assets available for distribution to the stockholders of the Company shall be distributed among the holders of shares of common stock, pro rata based on the number of shares of common stock held by each such holder.
Conversion rights — Each share of Series A, Series B, Series C, and Series D redeemable convertible preferred stock are convertible, at the option of the holder thereof, at any time after the date of issuance of such share, into such number of fully paid and non-assessable shares of common stock as is determined by dividing the Original Issue Price for such series of redeemable convertible preferred stock by the Conversion Price for such series of Preferred Stock in effect at the time of conversion. The Series A, Series B, Series C and Series D Original Issue
Price was $2.928, $3.851, $5.524, and $0.375, respectively. Each series of Redeemable Convertible Preferred Stock contain anti-dilution provisions that result in conversion price adjustments when common stock is issued or deemed to be issued at prices that are below the then existing conversion prices of the relevant series. These provisions resulted in conversion price adjustments to the shares of Series A, B and C redeemable convertible preferred stock that were not converted into shares of common stock in connection with the Series D financing.
As a result, the conversion ratio for each of Series A, Series B, Series C, and Series D redeemable convertible preferred stock into common stock was 2.178, 2.273, 2.371 and 1.000, respectively, as of December 31, 2020 and 1:1 for all Series as of December 31, 2019.
The Company’s policy is to record beneficial conversion features (“BCF's”) on the basis of the intrinsic value (based on the revised accounting conversion prices when the contingency is resolved) and the original commitment date stock price. The above noted conversion price adjustments did not trigger the recognition of a contingent BCF because the accounting conversion prices for each series (as adjusted) were greater than the original commitment date stock prices.
The Redeemable Convertible Preferred Stock will automatically convert into shares of common stock at the then effective conversion price for each such share immediately upon the Company’s sale of its common stock in a firm commitment underwritten initial public offering pursuant to a registration statement under the Securities Act of 1933, as amended, which results in aggregate gross proceeds to the Company of not less than $50.0 million (net of underwriting discounts, commissions, and expenses). The Merger (as defined below in Note 18, Subsequent Events) will cause this automatic conversion to occur.
Voting rights — The holders of each share of redeemable convertible preferred stock are entitled to the number of votes equal to the number of shares of common stock into which such shares of redeemable convertible preferred stock could be converted. The holder of each share of common stock shall have the right to one vote for each such share and shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Company. Holders of Series A, Series B, and Series D redeemable convertible preferred stock have the right to appoint one director to the Company’s Board of Directors, respectively. In addition, the holders of the redeemable convertible preferred stock, exclusive and as a single class, have the right to appoint one director to the Company’s Board of Directors.
Anti-dilution Provisions — The conversion price of the Company’s redeemable convertible preferred stock is subject to adjustment to prevent dilution in the event that the Company issues additional shares of preferred stock, common stock or common stock equivalents at a purchase price less than the then-effective conversion price, as provided in the agreements. The Series D financing during the year-ended December 31, 2020 triggered these provisions as described within “Conversion rights” above.
While the redeemable convertible preferred stock does not have mandatory redemption provisions, the deemed liquidation provisions of the redeemable convertible preferred stock are considered contingent redemption provisions that are not solely within the Company’s control. These elements primarily relate to deemed liquidation events such as a change of control. Accordingly, the Company’s Redeemable Convertible Preferred Stock has been presented outside of permanent equity in the mezzanine section on the balance sheets.
Common stock
The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders but are not entitled to cumulative voting rights, have the right to appoint two directors to the Company’s Board of Directors, are entitled to receive ratably such dividends as may be declared by the Company’s Board of Directors out of funds legally available therefor subject to preferences that may be applicable to any shares of redeemable convertible preferred stock currently outstanding or issued in the future, are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preference of any then outstanding redeemable convertible preferred stock in the event of the Company’s liquidation, dissolution, or winding up, have no preemptive rights and no right to convert their common stock into any other securities, and have no redemption or sinking fund provisions applicable to the common stock.
Common Stock Reserved for Future Issuance
Shares of common stock reserved for issuance on an “as if converted” basis were as follows:
December 31,
2020 2019
(share data)
Redeemable convertible preferred stock 147,876,672  27,967,896 
Convertible promissory note —  4,006,668 
Redeemable convertible preferred stock warrants 408,729  173,362 
Common stock warrants 262,638  63,621 
Common stock options issued and outstanding 26,347,331  5,946,782 
Shares available for future grant under 2014 Stock Option Plan 7,223,913  3,093,095 
Total shares of common stock reserved 182,119,283  41,251,424 
Stock Warrants
Warrants for shares of common stock consisted of the following:
December 31, 2020
Issue Date
Expiration
Date
Number of
Warrants
Exercise Price
per Warrant
Fair Value on
Issue Date
per Warrant
Common stock 12/02/2015 12/02/2025 13,660  $ 0.71  $ 0.57 
Common stock 07/02/2018 07/02/2028 49,961  $ 2.01  $ 1.63 
Common stock 12/17/2020 12/17/2030 199,017  $ 0.15  $ 0.14 
Total outstanding 262,638 
December 31, 2019
Issue Date
Expiration
Date
Number of
Warrants
Exercise Price
per Warrant
Fair Value on
Issue Date
per Warrant
Common stock 12/02/2015 12/02/2025 13,660  $ 0.71  $ 0.57 
Common stock 07/02/2018 07/02/2028 49,961  $ 2.01  $ 1.63 
Total outstanding 63,621 
Warrants for common stock of 262,638 and 63,621 were convertible 1-to-1 as of December 31, 2020 and 2019, respectively.
Warrants on common stock are equity classified and recorded at fair value on the issue date without further remeasurement. The level 3 fair value assumptions used in the Black-Scholes model to calculate fair value of the warrant for common stock granted in December 2020 were as follows: volatility of 108%, term of 10 years, and risk-free rate of 0.9%.
Warrants for shares of Series A and Series C redeemable convertible preferred stock consisted of the following (dollars in thousands, except share and per share amounts):
December 31, 2020
Issue Date
Expiration
Date
Number of
Warrants
Exercise Price
per Warrant
Fair Value on
Issue Date
per Warrant
Series A redeemable convertible preferred stock 11/14/2014 11/13/2024 13,362  $ 1.12  $ 1.25 
Series C redeemable convertible preferred stock 04/18/2019 04/18/2029 160,000  $ 5.52  $ 1.05 
Total outstanding 173,362 
December 31, 2019
Issue Date
Expiration
Date
Number of
Warrants
Exercise Price
per Warrant
Fair Value on
Issue Date
per Warrant
Series A redeemable convertible preferred stock 11/14/2014 11/13/2024 13,362  $ 1.12  $ 1.25 
Series A redeemable convertible preferred stock 04/18/2019 04/18/2029 160,000  $ 5.52  $ 1.05 
Total outstanding 173,362 
Warrants for redeemable convertible preferred stock of 173,362 as of December 31, 2020 were convertible into 408,729 shares of common stock after the impact of dilution triggered by the issuance of Series D Preferred stock. Warrants for redeemable convertible preferred stock of 173,362 as of December 31, 2019 were convertible 1-to-1 into shares of common stock.
Warrants on redeemable convertible preferred stock were issued to lenders in connection with borrowings. The fair value on the date of issue is recorded as a debt issue cost (contra-liability) and a liability because the warrant was liability classified. The fair value of the warrants are remeasured each reporting period using Level 3 inputs with the increase or decrease recorded in other income or expense in the statements of operations.
The liability for warrants on redeemable convertible preferred stock (carried at fair value) was as follows for the years ended December 31, 2020 and 2019:
Rollforward of the liability for warrants on redeemable convertible preferred stock:
(in thousands)
Balance as of January 1, 2019 $ 17 
Issuance of new warrant 168 
Change in fair value (5)
Balance as of December 31, 2019
 180 
Change in fair value (3)
Balance as of December 31, 2020
 $ 177 
The fair value of the redeemable convertible preferred stock warrant liability was estimated using an option pricing model that takes into account the contract terms as well as multiple unobservable inputs such as the aggregate equity value, risk-free interest rates, and expected volatility. The level 3 fair value assumptions used in the
Black-Scholes model for the recurring valuation of the redeemable convertible preferred stock warrant liability were as follows:
Year ended December 31,
2020 2019
Expected volatility
35% – 45%
41% – 54%
Risk-free interest rate
0.1% – 0.8%
1.6% – 1.9%
Dividend yield —  — 
The expected term for the Series A warrants and the Series C warrants for the year ended December 31, 2020 was 0.9 and 8.3 years, respectively. The expected term for the Series A warrants and the Series C warrants for the year ended December 31, 2019 was 1.9 and 9.3 years, respectively.