Vistaprint 2007 Annual Report Download - page 86

VISTAPRINT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Years Ended June 30, 2007, 2006 and 2005
(in thousands, except share and per share data)
Conversion Rights
Prior to conversion into common shares, the Series B Shares initially were convertible into
common shares at any time at a conversion ratio determined based upon the original per share
issuance price of the Series B Shares of $4.11 per share divided by an initial conversion price of
$4.11. The conversion ratio was subject to certain adjustments in the event of future issuances of
dilutive securities or sales of shares at below current market price. The Series B Shares provided
that upon the earlier of (a) the closing of an underwritten public offering of shares at a price per
share that was not less than $12.33 and which resulted in gross proceeds to the Company of not
less than $35,000 or (b) the date upon which at least a majority of the Series B Shares elected to
convert to common shares, all then-outstanding Series B Shares were to be automatically
converted.
On May 17, 2005, the terms of the Series B Shares were amended. As a result of this
amendment, the automatic conversion provisions were revised to provide that upon the earlier of
(a) the closing of an underwritten public offering of shares at a price per share of at least $8.00
per share and which resulted in gross proceeds to the Company of at least $35,000 or (b) the
date on which at least a majority of the Series B Shares elected to convert to common shares, all
then-outstanding Series B Shares were to be automatically converted, provided that if a
mandatory conversion had not occurred prior to December 31, 2005, the price per share set forth
in clause (a) above were to be increased to $12.33 after such date. In addition, the amendment
provided that if the Company effected a public offering described in clause (a) above prior to
December 31, 2005 at a price per share greater than $8.00 per share but less than $10.00 per
share, then the conversion price for the Series B shares would be reduced immediately prior to
the closing of the public offering by multiplying the conversion price then in effect by a fraction,
the numerator of which would be the offering price and the denominator of which would be
$10.00. The Company effected its initial public offering at a price per share equal to $12.00, so no
adjustment in the conversion price occurred.
Redemption Rights
Prior to conversion into common shares, the Series B Shares were classified outside of
shareholders’ equity due to a redemption provision that existed prior to the conversion into
common shares. The provision stated that on August 19, 2008, 2009 and 2010, upon receipt of
requests from holders of a majority of the shares of the Series B Shares, the Company would
redeem the Series B Shares, in three equal installments by paying in cash a total amount equal to
100% of the original purchase price plus accrued and unpaid dividends.
Prior to conversion into common shares, the Series B Preferred Shares were being accreted
to their redemption value, which included undeclared annual cumulative dividends of 8%, using
the effective interest rate method over the period from issuance through the dates of redemption.
9. Initial Public Offering
On September 29, 2005, the Company effected its IPO in which the Company sold 5,500,000
common shares at a price to the public of $12.00 per share. The net proceeds of the IPO to the
Company, which the Company received on October 5, 2005, were approximately $61,400 after
deducting underwriting discounts. Upon the closing of the IPO, all of the Company’s outstanding
convertible preferred shares converted into an aggregate of 22,720,543 common shares.
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