under the Note Agreement for total gross proceeds of $14,716,370, and incurred issuance costs totaling $1,697,800. The redeemable preferred stock matures on August 16, 2018. The maturity
date may be extended at the option of the holders to ten trading days after the curing of a triggering event (as defined), or ten business days after the consummation of a change of control. In addition, the redeemable preferred stock agreements
require that we reserve a sufficient number of common shares to cover at least 150% of the common shares expected to be issued upon the conversion of the redeemable preferred stock at the then current conversion price, and the exercises of common
stock warrants issued in connection with the redeemable preferred stock.
The rights, preferences, and privileges of redeemable preferred stock are
summarized below:
Voting
Holders of redeemable preferred stock have no voting rights, except as required by law.
Dividends
Holders of redeemable preferred stock are entitled to participate in dividends, when and if declared by our board of directors, on an
as converted basis at the initial conversion price of $2.67 per share, not to exceed the maximum ownership percentages (as defined).
Optional
conversion
Holders of redeemable preferred stock have the option to convert redeemable preferred stock into shares of common stock, rounded up to the nearest whole shares, at any time, not to exceed the maximum ownership percentages (as
defined), at the conversion rate calculated as (1) whole shares of redeemable preferred shares to be converted at $1,000 per share, plus any accrued but unpaid dividends, and any accrued but unpaid late charges, divided by (2) the
conversion price which is $2.67 per share initially, or as adjusted for any dilutive events and down rounds.
Mandatory conversion
If for
any ten consecutive trading days after the redeemable preferred stock issuance date, the weighted average price of our common stock equals or exceeds 200% of the then current conversion price (initially $2.67 per share, subject to adjustment for
stock dividends, stock splits, or a stock combination), we have the option to require all holders of redeemable preferred stock to convert all or a pro rata portion of their outstanding unconverted redeemable preferred stock (plus accrued and unpaid
dividends and accrued and unpaid late charges) into common stock at the then current conversion rate (initially $2.67 per share), up to the maximum ownership percentage (as defined).
Triggering event conversion
Upon a triggering event, holders of redeemable preferred stock may elect to convert all, or a portion of, the
outstanding conversion amount at the triggering event conversion price determined based on the lowest of (1) the conversion price then in effect (initially $2.67 per share), (2) 75% of the lowest VWAP during the
20-day
period prior to the triggering event conversion date, and (3) 75% of the VWAP on the triggering event conversion date, adjusted for any share dividend, share split, or share combination.
Installment
On each of the nine specified installment dates beginning in December 2017 through maturity, we are required to convert, redeem, or
a combination,
one-ninth
of the originally issued number of redeemable preferred shares at their stated value of $1,000 per share, for an aggregate value of $1,739,524 at each installment. If we elect to
convert the installment shares, the conversion price is determined based on the lowest of (i) the then applicable conversion price (initially $2.67 per share), (ii) 85% of the average of the three lowest weighted-average prices of the common
stock during the ten trading days up to the installment date, and (iii) 85% of the weighted average price of common stock on the trading day immediately before the installment date. If we elect cash redemption, the redemption amount is $1,000 per
share, plus any accrued but unpaid dividends and any accrued but unpaid late charges.
Liquidation preference
In the event of a voluntary or
involuntary liquidation, dissolution, or winding up of business involving substantially all of our assets, holders of redeemable preferred stock are entitled to receive cash payments in priority to holders of common stock in the amount that equals
the sum of any outstanding shares at $1,000 per share, plus any accrued and unpaid dividends, and any accrued and unpaid late charges. If
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