Stockholders' Equity | 6 Months Ended |
Jun. 30, 2014 |
Stockholders' Equity | ' |
Stockholders' Equity | ' |
8.Stockholders’ Equity |
In November 2013, the Company sold an aggregate of 2,857,143 shares of Series A preferred stock and warrants to purchase 666,666 shares of common stock at an exercise price of $15.00 per share to Vulcan Capital Growth Equity LLC (“Vulcan”), in a private placement at a price of $10.50 per share, for an aggregate purchase price of $30.0 million. |
Immediately prior to the completion of the Company’s IPO, all of the outstanding shares of the Series A preferred stock automatically converted into 2,857,143 shares of common stock on a one-to-one basis. |
Warrants Issued to USAA |
Beginning in March 2009, the Company entered into various agreements with USAA, an affinity partner and significant stockholder of the Company, which agreements provided for the issuance of warrants to purchase shares of the Company’s common stock if minimum performance milestones, based on the level of vehicle sales, were achieved. The warrants issued to USAA were in exchange for marketing services performed by USAA under the Company’s affinity group marketing program. The purpose of the marketing services performed by USAA is to create awareness and to acquire traffic for, and drive users to, the Company’s auto buying platforms. Warrants issued to USAA are recorded as sales and marketing expenses in the Company’s consolidated statements of comprehensive loss. |
In May 2014, the Company and USAA agreed to an extension of the affinity group marketing agreement with USAA. As part of the agreement, the Company issued to USAA a warrant to purchase 1,458,979 shares of the Company’s common stock, which will be exercisable in two tranches. The first tranche of 392,313 shares has an exercise price of $7.95 per share and the second tranche of 1,066,666 shares has an exercise price of $15.00 per share. The warrant becomes exercisable based on the achievement of performance milestones based on the level of vehicle sales of USAA members through the Company’s auto buying platforms. The warrant terminates on the earlier of the eighth anniversary of the date of issuance, the first anniversary of the termination of the USAA car-buying program or the date on which the Company no longer operates the USAA car-buying program. In addition, the agreement provides for the Company to spend marketing program funds with the actual level of marketing spend to be mutually agreed upon by USAA and the Company, subject to limits based on the number of actual vehicle sales generated through the affinity marketing program (Note 12). |
Warrants to purchase 3,265,168 shares of the Company’s common stock earned from agreements entered into prior to May 2014 were exercised in connection with the Company’s IPO in May 2014 for an aggregate purchase price of $9.5 million. |
For the three months ended June 30, 2014 and 2013, the Company recognized expense of $1.6 million and $0.3 million related to warrants to purchase 201,056 shares and 120,495 shares of common stock that have been earned and are vested, respectively. For the six months ended June 30, 2014 and 2013, the Company recognized expense of $1.9 million and $0.4 million related to warrants to purchase 340,558 shares and 154,294 shares of common stock that have been earned and are vested, respectively. |
Warrants Issued to Third Party Marketing Firm |
On February 25, 2011, the Company entered into a media and marketing services agreement with a direct marketing firm. Under the arrangement, the marketing firm will provide media purchasing, production, advertising, and marketing services in connection with the advertising and marketing of the Company’s services. In addition to cash consideration, the Company agreed to issue a warrant to the marketing firm to purchase up to 1,433,333 shares of the Company’s common stock at a price of $6.02 per share. All shares under the warrant agreement will become exercisable in accordance with the vesting schedule or termination by either party pursuant to the agreement in the event of a default, as defined. The warrant expires eight years from the issuance date and as of June 30, 2014, all warrants have been earned and issued to the marketing firm. |
For the three months ended June 30, 2014 and 2013, the Company recognized expense of $0.4 million and $0.5 million related to 104,992 and 134,400 warrants earned, respectively. For the six months ended June 30, 2014 and 2013, the Company recognized expense of $2.3 million and $0.7 million related to 343,665 and 268,800 warrants earned, respectively. The expense has been reflected as sales and marketing expense on the accompanying consolidated statements of comprehensive loss. |
Warrants Issued to Financial Institution |
On June 13, 2012, in connection with the execution of the amended credit facility (Note 6), the Company entered into a warrant agreement with a financial institution to purchase 26,666 shares of the Company’s common stock, at an exercise price of $11.51 per share if the Company draws on the credit facility at any time after the issuance date. If at any time, the advances to the Company in aggregate principal amount are greater than $4.0 million, the number of shares increases to 66,666. The warrants are immediately vested upon drawing on the line and expire on the earlier of June 13, 2022, or an acquisition of the Company consisting solely of cash and or marketable securities. On June 13, 2013 the Company entered into a second amendment and restated loan and security agreement which reduced the exercise price of the warrants to $7.92. On August 29, 2013, the Company drew down $5.0 million on the credit facility, triggering the issuance of warrants to purchase 66,666 shares of TrueCar’s common stock at an exercise of $7.92 per share. In June 2014, warrants to purchase 66,666 shares of the Company’s common stock were exercised through a net settlement election. The Company issued 27,526 shares of its common stock to the financial institution. |
Warrants Issued to Vulcan |
In November 2013, in the Vulcan private placement, the Company issued to Vulcan a warrant to purchase 666,666 shares of its common stock at an exercise price of $15.00 per share. The warrant is immediately exercisable and expires in November 2015. |
Warrants Issued to Service Provider |
In May 2014, the Company entered into a consulting agreement with an individual to provide marketing services to the Company. The Company agreed to issue a warrant to the individual to purchase up to 333,333 shares of the Company’s common stock at a price of $12.81 per share. All shares under the warrant agreement will become exercisable in accordance with the vesting schedule over a four year period. The warrant expires five years from the issuance date or, if earlier, twelve months following the termination of the consulting agreement. |
For the three and six months ended June 30, 2014, the Company recognized expense of $0.4 million, which has been reflected as sales and marketing expense on the accompanying consolidated statements of comprehensive loss. At June 30, 2014, warrants earned under this agreement totaled 33,333 shares. |
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