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Preferred Stock
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9 Months Ended | ||||||||||
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Sep. 30, 2014
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| Preferred Stock |
At September 30, 2014, the Company is authorized to issue 5 million shares of preferred stock. Series C Preferred Stock Each share of Series C Preferred Stock shall be entitled to receive cumulative dividends payable at a rate per annum of 10% of the Series C Stated Value on the date of issuance (i.e. $1,000). Such dividends shall be payable through the issuance of additional shares of Series C Preferred Stock on each anniversary of the date of issuance, shall not be paid in cash, and will accrue and accumulate daily. Additionally, the Series C Preferred Stock shall share ratably on an as converted basis with the common stock in the payment of all other dividends and distributions. For the nine months and the year ended September 30, 2014 and December 31, 2013, the Company accrued dividends of approximately $758,000 and $1,014,000, respectively.
Series E Preferred Stock Each share of Series E Preferred Stock shall be entitled to receive dividends (the “Series E Dividend”) payable at a rate per annum of 5% of the Series E Stated Value then in effect (the “Series E Dividend Rate”). To the extent funds are legally available and the Company is not contractually prohibited from paying such Series E Dividend, the Series E Dividend must be declared and paid from and including the Original Issue Date on each six-month anniversary of the Original Issue Date. At the holder’s option, such dividends are payable through the issuance of additional shares of Series E Preferred Stock or in cash. To the extent the Company is unable to pay any Series E Dividend (i.e. in the event funds are not legally available or the Company is contractually prohibited from making payment), any such unpaid Series E Dividend shall be cumulative and shall accrue and compound on a quarterly basis at the then applicable Dividend Rate. Such unpaid Series E Dividend shall be paid as soon as funds are legally available or as soon as the Company is no longer contractually prohibited from paying such Series E Dividend, as applicable. Additionally, the Series E Preferred Stock shall share ratably on an as-converted basis with the common stock in the payment of all other dividends and distributions. For the nine months and year ended September 30, 2014 and December 31, 2013, the Company accrued dividends of $190,000 and $218,000, respectively. Series F Preferred Stock Each share of Series F Preferred Stock shall be entitled to receive dividends (the “Series F Dividend”) payable at a rate per annum of 7% of the Series F Stated Value then in effect (the “Series F Dividend Rate”). Such dividends shall be payable in cash or in kind; provided that the Company shall not pay Series F Dividends in kind through the issuance of any shares of Series F Preferred Stock to the extent that such issuance would require prior approval of the stockholders of the Company pursuant to NASDAQ Listing Rule 5636, and in lieu of such issuance shall make such dividend payment in cash. To the extent funds are legally available and the Company is not contractually prohibited from paying such Series F Dividend, the Series F Dividend must be declared and paid from and including the Original Issue Date on each six-month anniversary of the Original Issue Date. At the holder’s option, such dividends are payable through the issuance of additional Series F Shares or in cash. To the extent the Company is unable to pay any Series F Dividend (i.e. in the event funds are not legally available or the Company is contractually prohibited from making payment), any such unpaid Series F Dividend shall be cumulative and shall accrue and compound on a quarterly basis at the then applicable Series F Dividend Rate. Such unpaid Series F Dividend shall be paid as soon as funds are legally available or as soon as the Company is no longer contractually prohibited from paying such Series F Dividend, as applicable. Additionally, the Series F Preferred Stock shall share ratably on an as-converted basis with the common stock in the payment of all other dividends and distributions. For the nine months and year ended September 30, 2014 and December 31, 2013, the Company accrued dividends of $175,000 and $129,000, respectively. The Series F preferred stock was redeemed in connection with the exchange of Series F preferred stock for Series G preferred stock described below. Following the redemption, the Series F preferred stock was cancelled in June 2014. Series G Preferred Stock—The Company designated 18,000 shares of preferred stock as Series G Senior Convertible Redeemable Preferred Stock, par value $0.001 per share (the “Series G Preferred Stock”). On June 30, 2014, Revolution entered into an Exchange Agreement (the “Exchange Agreement”) with Aston Capital, LLC (“Aston”) and RVL and closed the transactions contemplated by the Exchange Agreement. Pursuant to the Exchange Agreement, the Company issued to RVL on 10,956,000 shares of Series G Preferred Stock in exchange for $10,956, the entire outstanding principal amount of, and the accrued and unpaid interest on, that certain promissory note, dated April 17, 2014. Pursuant to the Exchange Agreement, the Company also issued to Aston 1,640 shares of Series G Preferred Stock in exchange for $1,640,085, a portion of the outstanding principal amount of, and the accrued and unpaid interest on, that certain promissory note, dated February 25, 2014. In addition, pursuant to the Exchange Agreement, the Company issued to RVL 5,404 shares of the Company’s newly-created Series G Senior Convertible Redeemable Preferred Stock, $0.001 par value per share in exchange for 5,000 shares (including accrued and unpaid dividends thereon) of the Company’s Series F Preferred Stock , held by RVL. The Series G Preferred Stock is voting and convertible into shares of the Company’s common stock, $0.001 par value per share the Company’s common stock at any time at the option of the holder at a conversion price equal to $2.30 (the “Series G Conversion Price”). In accordance with the Series G Certificate of Designations, the holders of the shares of Series G Preferred Stock have the same consent rights as the Series B, C and E Preferred Stock. The shares of Series G Preferred Stock have a liquidation preference per share equal to the greater of (i) $1,000 (subject to customary adjustments with respect to events affecting the Series G Preferred Stock, the ( “Series G Stated Value”)) plus accrued but unpaid dividends (the “Series G Liquidation Preference”) and (ii) such amount as would have been received had the Series G Preferred Stock converted into common stock immediately prior to the liquidation. For so long as shares of Series G Preferred Stock are outstanding, the Company will be prohibited from taking certain actions specified in the Series G certificate of designations without the consent of the holders of at least a majority of the then outstanding shares of Series G Preferred Stock, including, among other things, authorization of additional shares of capital stock, increases in the size of the Board, declaration of dividends, consummation of certain business combination transactions, and incurrence of indebtedness and liens. The Series G Preferred Stock will have a liquidation preference per share equal to the greater of (i) $1,000 (subject to customary adjustments with respect to events affecting the Series G Preferred Stock) plus accrued but unpaid dividends (the “Series G Liquidation Preference”) and (ii) such amount as would have been received had the Series G Preferred Stock converted into Common Stock immediately prior to the liquidation. The Company has the option to redeem all or any part of the Series G Preferred Stock for cash at any time subject to the Investor’s right to convert and require delivery of shares of common stock. The redemption price to be paid by the Company is the Series G Liquidation Preference per share plus $900,000, if the Company redeems the Series G shares on or prior to the second anniversary of the date of the original issuance of shares of Series G Preferred Stock (the “Original Issue Date”), or the Series G Liquidation Preference, if the Company redeems the Series G shares after the second anniversary of the Original Issue Date. At the option of the holders of two-thirds (2/3rds) of the then-outstanding shares of Series G Preferred Stock, the Company must redeem the number of shares of Series G Preferred Stock so requested for cash at the Series G Liquidation Preference. Such option can only be exercised on or after the third anniversary of the Original Issue Date.
Each share of Series G Preferred Stock shall be entitled to receive cumulative dividends payable at a rate per annum of nine percent (9%) of the Series G Stated Value (as defined in the Series G Certificate of Designations) then in effect (the “Series G Dividend”). At the option of the holder, such dividends shall be payable either (i) in cash or (ii) in kind; provided, the Company shall not make any Series G dividend payments in kind through the issuance of additional Series G Preferred Stock to the extent (and only to the extent) such issuance would require the prior approval of the stockholders of the Company pursuant to NASDAQ Listing Rule 5636, and in lieu of such issuance, the Company will make such Series G dividend payments in cash. To the extent, funds are legally available and the Company is not contractually prohibited from paying such Series G Dividend, the Series G Dividend must be declared and paid from and including the Original Issue Date on each six-month anniversary of the Original Issue Date. For the nine months and year ended September 30, 2014 and December 31, 2013, the Company accrued dividends of $326,000 and $0, respectively. The Company has classified the Series G Preferred Stock as temporary equity in the financial statements as it is subject to mandatory redemption at the option of the holder. The Company has concluded that the Series G Preferred Stock is more akin to a debt-type instrument than an equity-type instrument. The embedded conversion option in the Series G Preferred Stock is not clearly and closely related to a debt-type host; however, it meets the criteria for classification as equity and therefore it has not been separated from the host instrument. The redemption call by the issuer and the redemption put by the holder were deemed to be clearly and closely related to the host contract and therefore were not separated from the host instrument. The call by the issuer was exercisable at the balance sheet date, but was not deemed to be under the control of the Company since the principal holder of the Series G Preferred Stock holds the majority of the Company’s voting rights; accordingly the Series G Preferred Stock was accreted to the redemption amount in effect on the balance sheet date. As the Company’s common stock closing price immediately preceding the issuance date was equal to the Series G Conversion Price, the Company has not recognized a BCF. The exchange transaction was accounted for as an extinguishment of debt and Series F preferred stock in exchange for the issuance of Series G Preferred Stock. The market value of the Series G Preferred Stock was estimated to approximate $18.4 million. The difference between the fair value of the preferred stock and its stated value was attributed to the difference between the stated value of the Series F Preferred Stock exchanged for an equivalent amount of Series G Preferred Stock and its fair market value; accordingly, the Company recorded a charge of approximately $0.4 million to additional paid capital and in earnings applicable to common stockholders. Liquidation Preferences—The following summarize the order of seniority of liquidation preference:
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