9. Stockholders’ Equity

Convertible Preferred Stock (in thousands, except share amounts)


	December 31, 2013		December 31, 2012

Preferred stock, $0.01 par value; 61,617,516 total shares authorized at December 31, 2013 and December 31, 2012:

Series A convertible preferred stock, 17,006,275 shares designated at December 31, 2013 and December 31, 2012; 16,525,086 and 16,317,747 shares issued and outstanding at December 31, 2013 and December 31, 2012; aggregate liquidation preference of $17,599 and $17,371 at December 31, 2013 and December 31, 2012.	$	17,402	$	17,181

Series B convertible preferred stock, 16,410,526 shares designated at December 31, 2013 and December 31, 2012; 16,394,324 shares issued and outstanding at December 31, 2013 and December 31, 2012; aggregate liquidation preference of $12,167 at December 31, 2013 and December 31, 2012.		12,164		12,164

Series C convertible preferred stock, 15,621,609 shares designated at December 31, 2013 and December 31, 2012; 15,621,609 shares issued and outstanding at December 31, 2013 and December 31, 2012; aggregate liquidation preference of $24,490 at December 31, 2013 and December 31, 2012.		24,388		24,388

Series D convertible preferred stock, 9,007,678 shares designated at December 31, 2013 and December 31, 2012; 9,007,678 shares issued and outstanding at December 31, 2013 and December 31, 2012; aggregate liquidation preference of $32,044 at December 31, 2013 and December 31, 2012.		31,943		31,943

Series E convertible preferred stock, 3,571,428 shares designated at December 31, 2013 and December 31, 2012; 2,500,000 shares issued and outstanding at December 31, 2013 and December 31, 2012; aggregate liquidation preference of $17,500 at December 31, 2013 and December 31, 2012.		17,347		17,347

	$	103,244	$	103,023

In June 2012, we issued via private placement 2.5 million shares of Series E convertible at $7.00 per share for aggregate gross cash consideration of $17.5 million. The shares are convertible into shares of our common stock, par value $0.01 per share, initially on a one-for-one basis, as adjusted from time to time pursuant to the anti-dilution provisions of the LC certificate of incorporation. The two investors in the Series E convertible preferred stock were KPCB Holdings, Inc., as nominee (“KPCB”), and John J. Mack, a member of the Company’s Board of Directors (“Board”). In conjunction with the Series E financing, the Board appointed Mary Meeker, General Partner of KPCB, as a member of the Company’s Board. In connection with our private placement of Series E convertible preferred stock, we incurred transaction expenses of $0.2 million that were recorded as a reduction to gross proceeds.

In connection with the sale of Series E convertible preferred stock in June 2012, we filed an Amended and Restated Certificate of Incorporation with the State of Delaware, which reduced the total number of shares that we are authorized to issue from 158,046,088 shares to 151,617,516 shares, 90,000,000 shares of which are designated as common stock, and 61,617,516 shares of which are designated as preferred stock. Of the total shares of preferred stock, 17,006,275 shares are designated as Series A Preferred Stock, 16,410,526 shares are designated as Series B Preferred Stock, 15,621,609 shares are designated as Series C Preferred Stock, 9,007,678 shares are designated as Series D Preferred Stock and 3,571,428 shares are designated as Series E Preferred Stock. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding) by the affirmative vote of the holders of a majority of LC’s Preferred Stock and Common Stock (voting together as a single class on an as-converted to Common Stock basis).

The outstanding shares of convertible preferred stock are not mandatorily or otherwise redeemable. The sale of all, or substantially all, of LC’s assets, a consolidation or merger with another company, or a transfer of voting control in excess of fifty percent (50%) of LC’s voting power are all events which are deemed to be a liquidation and would trigger the payment of liquidation preferences under the preferred stock agreements. All such events require approval of the Board. However, in such events all holders of equal or more subordinate equity instruments would also be entitled to also receive the same form of consideration after any liquidation preferences. Therefore, based on the guidance of ASC 480-10-S99, the non-redeemable convertible preferred stock has been classified within stockholders’ equity on the consolidated balance sheet. See further discussion of the revision to the classification of LC’s preferred stock from temporary equity to permanent stockholders’ equity in Note 2 – Summary of Significant Accounting Policies – Reclassifications. The significant terms of outstanding Series A, Series B, Series C, Series D and Series E convertible preferred stock are as follows:

Conversion – Each share of convertible preferred stock is convertible, at the option of the holder, initially, into one share of common stock (subject to adjustments for events of dilution). Each share of convertible preferred stock will automatically be converted upon the earlier of: (i) the closing of an underwritten public offering of our common stock with aggregate gross proceeds that are at least $30.0 million; or (ii) the consent of the holders of a 55% majority of outstanding shares of convertible preferred stock, voting together as a single class, on an as-converted to common stock basis. LC’s preferred stock agreements contain certain anti-dilution provisions, whereby if LC issues additional shares of capital stock for an effective price lower than the conversion price for a series of preferred stock immediately prior to such issue, then the existing conversion price of such series of preferred stock will be reduced. LC determined that while its convertible preferred stock contains certain anti-dilution features, the conversion feature embedded within its convertible preferred stock does not require bifurcation under the guidance of ASC 815, Derivatives and Hedging Activities.

Liquidation preference – Upon any liquidation, winding up or dissolution of us, whether voluntary or involuntary (a “Liquidation Event”), before any distribution or payment shall be made to the holders of any common stock, the holders of convertible preferred stock shall, on a pari passu basis, be entitled to receive by reason of their ownership of such stock, an amount per share of Series A convertible preferred stock equal to $1.065 (as adjusted for stock splits, recapitalizations and the like) plus all declared and unpaid dividends (the “Series A Preferred Liquidation Preference”), an amount per share of Series B convertible preferred stock equal to $0.7483 (as adjusted for stock splits, recapitalizations and the like) plus all declared and unpaid dividends (the “Series B Preferred Liquidation Preference”), an amount per share of Series C convertible preferred stock equal to $1.5677 (as adjusted for stock splits, recapitalizations and the like), an amount per share of Series D convertible preferred stock equal to $3.5574 and an amount per share of Series E convertible preferred stock equal to $7.00 (as adjusted for stock splits, recapitalizations and the like). However, if upon any such Liquidation Event, our assets shall be insufficient to make payment in full to all holders of convertible preferred stock of their respective liquidation preferences, then the entire assets of ours legally available for distribution shall be distributed with equal priority between the preferred holders based upon the amounts such series was to receive. Any excess assets, after payment in full of the liquidation preferences to the convertible preferred stockholders, are then allocated to the holders of common and preferred stockholders, pro-rata, on an as-if-converted to common stock basis.

Dividends – If and when declared by the Board, the holders of Series A, Series B, Series C, Series D and Series E convertible preferred stock, on a pari passu basis, will be entitled to receive non-cumulative dividends at a rate of 6% per annum in preference to any dividends on common stock (subject to adjustment for certain events). The holders of Series A, Series B, Series C, Series D and Series E convertible preferred stock are also entitled to receive with common stockholders, on an as-if-converted basis, any additional dividends issued by us. As of December 31, 2013, we have not declared any dividends.

Voting rights – Generally, preferred stockholders have one vote for each share of common stock that would be issuable upon conversion of preferred stock. Voting as a separate class, and on an as-if-converted to common stock basis, the Series A convertible preferred stockholders are entitled to elect two members of the Board, the holders of Series B convertible preferred stockholders are entitled to elect one member of the Board. The Series C and Series D convertible preferred stockholders are not entitled to elect a member of the Board. The Series E convertible preferred stockholders are entitled to nominate members to the Board, any nominee is subject to the vote of all convertible preferred stockholders. The holders of common stock, voting as a separate class, are entitled to elect one member of the Board. The remaining directors are elected by the preferred stockholders and common stockholders voting together as a single class on an as-if-converted to common stock basis.

Common Stock

As of December 31, 2013, we have shares of common stock authorized and reserved for future issuance as follows:


Options to purchase common stock			10,828,682
Options available for future issuance			1,939,123
Convertible preferred Series A stock warrants			408,940
Common stock warrants			195,235

Total common stock authorized and reserved for future issuance			13,371,980

During the year ended December 31, 2013, we issued 2,232,969 shares of common stock in exchange for proceeds of $1.7 million upon the exercise of employee stock options.

Convertible preferred Series A stock warrants are fully exercisable with an exercise price of $1.065 and $1.07 per share. The warrants may be exercised at any time on or before April 2018.

Common stock warrants are fully exercisable with exercise prices of $0.01 and $1.5677 per share. The warrants may be exercised at any time on or before February 2021.

During the year ended December 31, 2013, we issued 207,339 shares of Preferred A stock in exchange for proceeds of $0.2 million upon the exercises of Preferred A warrants and 239,469 common shares for proceeds of $0.2 million upon the exercise of common stock warrants.

Accumulated Deficit

We have incurred operating losses since our inception through December 31, 2012. For the year ended December 31, 2013, we had net income of $7.3 million. For the nine months ended December 31, 2012 we had net losses of $4.2 million. We have an accumulated deficit of $50.3 million and stockholders’ equity of $68.1 million, at December 31, 2013.