NOTE 9. STOCKHOLDERS’ EQUITY (DEFICIT)

Reverse Split

In April 2017, the Company’s Board of Directors and stockholders approved a 0.6-for-1.0 reverse split of the Company’s common stock, which was effected on April 20, 2017 (the “Reverse Split”). In connection with the Reverse Split, each share of the Company’s issued and outstanding common stock was converted and combined into 0.6 shares of common stock. No fractional shares were issued in connection with the reverse split, and any fractional shares resulting from the Reverse Split were cashed out. The Company has reflected the effect of the Reverse Split in these consolidated financial statements as if it had occurred at the beginning of the earliest period presented. As a result of the Reverse Split, the conversion price of each series of preferred stock was proportionally increased.

Increase in Authorized Shares of Common Stock

In May 2017, the Company’s Board of Directors and stockholders approved the increase in the Company’s authorized common stock to 75,000,000 shares from 38,500,000 shares (par value of $0.001 per share), effective following the closing of the IPO and the filing of the Company’s amended and restated certificate of incorporation.

Issuances of Common Stock

During 2017, the Company issued a total of 13,538,080 shares of common stock, net of 22,243 shares of restricted stock forfeited by employees due to termination of employment, 1,227 shares of common stock withheld in payment of taxes due by employees upon vesting of restricted stock, and 7,500 shares of common stock repurchased by the Company, as follows:

 

(a)

120,000 shares to the Bridge Loan Lenders upon execution of the Note Purchase Agreement in March 2017,

 

(b)

90,000 shares in connection with the $2,000 Bridge Loan borrowings in March 2017 and April 2017,

 

(c)

2,500,000 shares for the IPO,

 

(d)

2,309,135 shares for the conversion of the Series B preferred stock upon the IPO,

 

(e)

2,922,798 shares for the conversion of the Series A preferred stock upon the IPO,

 

(f)

2,150,335 shares for the exercise of the Primary Warrant upon the IPO,

 

(g)

1,523,746 shares for the conversion of the Acacia Note and accrued interest upon the IPO,

 

(h)

590,717 shares for the conversion of the Bridge Loan and accrued interest upon the IPO,

 

(i)

90,000 shares in connection with the $4,000 Bridge Loan borrowing in May 2017,

 

(j)

1,121,250 shares for the follow-on common stock offering in November 2017,

 

(k)

6,000 shares of common stock issued to a consultant for services rendered, and

 

(l)

145,069 shares issued under the Company’s Stock Plans.

Dispute Settlement

On December 23, 2016, the Company entered into a settlement agreement and release relating to certain claims by a former employee, pursuant to which the Company paid to the former employee a lump sum cash payment of $350 on January 4, 2017, which included a payment to the former employee to repurchase 7,500 shares of the Company’s common stock in the amount of $56, representing the fair value of such stock at that time. In connection with the settlement, in 2016, the Company recorded $294 in general and administrative expense. In addition, pursuant to the agreement, Chad Steelberg, the Company’s Chairman of the Board and Chief Executive Officer, purchased all of the former employee’s membership interests in BV16, LLC, a minority stockholder in the Company.

Share Issuance to Existing Stockholders

In April 2016, the Company issued 961,835 shares of the Company’s common stock valued at $1.50 per share to an entity beneficially owned by the Company’s Chief Executive Officer and President, who are also directors and indirect stockholders of the Company (the “Founders”). The shares were issued to the Founders in consideration for services rendered to the Company in the first four months of 2016, and the Company recorded stock-based compensation expense of $1,443 in the year ended December 31, 2016. In April 2016, the Company entered into an agreement with a stockholder who initially dissented to the issuance of shares to the Company’s Founders. Pursuant to the agreement, the Company agreed to issue to such stockholder an aggregate of 106,420 shares of the Company’s common stock and paid to such stockholder an amount equal to an aggregate of $287, representing (i) the estimated taxes for the shares to be issued to such stockholder and (ii) the reimbursement of certain legal fees. In addition, the Company has agreed to indemnify such stockholder for any losses, damages and costs associated with certain matters related to the bankruptcy of the Company that owned ROIM, and for any additional taxes that may be incurred by such stockholder in connection with the issuance to such stockholder of the foregoing 106,420 shares of common stock. In connection with the issuance of these shares, the Company recorded an expense of $159, which was included in general and administrative expense for the year ended December 31, 2016.

Common Stock Warrants

During 2017, the Company issued warrants to purchase 1,122,840 shares of common stock, as listed below:

 

Description		Vesting terms		Life in years				Exercise Price				Number of shares of common stock
10% Warrant		50% on issuance; 50% in May 2018			5			$	13.6088				809,400
Bridge Loan Warrants		Fully vested on issuance			10			$	13.6088				313,440

 

During 2016, the Company issued warrants to purchase 2,552,068 shares of common stock, as listed below:

 

Description		Vesting terms		Life in years				Exercise Price				Number of shares of common stock
Acacia Note Warrants		Fully vested on issuance			4			$	13.6088				154,311
Acacia Primary Warrant		Fully vested on issuance			5			$	13.6088				2,150,335
Westwood One		Upon achievement of performance condition			10			$	8.0833				247,422

The Acacia Primary Warrant was exercised in connection with the Company’s IPO. The warrant issued to Westwood One will vest upon the achievement of a performance condition related to sales of licenses to the Company’s AI platform. As of December 31, 2017 and 2016, achievement of such performance condition was not deemed probable and, therefore, no expense related to this warrant has been recorded in the Company’s consolidated statements of operations and comprehensive loss for the years ended December 31, 2017 and 2016. As of December 31, 2017, the Company had a total of 1,524,573 warrants issued and outstanding.