Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.19.2
Stockholders' Equity
6 Months Ended
Jun. 30, 2019
Equity [Abstract]  
Stockholders' Equity

4. Stockholders’ Equity

 

Preferred Stock

 

The Company has authorized a total of 10,000,000 shares of preferred stock, par value $0.0001 per share. On March 17, 2015, the Company filed a Certificate of Designations, Preferences, Rights and Limitations (the “Certificate of Designations”) of its Series A Convertible Preferred Stock with the Delaware Secretary of State to amend the Company’s certificate of incorporation. The Company designated 175,000 shares as Series A Convertible Preferred Stock, which are non-voting and are not subject to increase without the written consent of a majority of the holders of the Series A Convertible Preferred Stock or as otherwise set forth in the Certificate of Designations. The holders of each tranche of 175,000 shares of the Series A Convertible Preferred Stock are entitled to receive a per share dividend equal to 1% of the annual net revenue of the Company divided by 175,000, until converted or redeemed.

 

Effective January 28, 2016, the Series A Convertible Preferred Stock Certificate of Designations was amended to increase the authorized shares of Series A Convertible Preferred Stock from 175,000 shares to 350,000 shares. Accordingly, as of June 30, 2019, 9,650,000 shares of preferred stock were undesignated and may be issued with such rights and powers as the Board of Directors may designate.

 

Each share of Series A Convertible Preferred Stock may be converted, at the option of the holder, into 12.5 shares of common stock (subject to customary anti-dilution provisions) and the Series A Convertible Preferred Stock is subject to mandatory conversion at the conversion rate in the event of a merger or sale transaction resulting in gross proceeds to the Company of at least $21,875,000. The Series A Convertible Preferred Stock has a liquidation preference based on its assumed conversion into shares of common stock. The Series A Convertible Preferred Stock does not have a cash liquidation preference.

 

If fully converted, the 350,000 outstanding shares of Series A Convertible Preferred Stock would convert into 4,375,000 shares of common stock at June 30, 2019. The Company has the right to redeem the Series A Convertible Preferred Stock up to the fifth anniversary of the respective closing dates at a price per share equal to $50.00. The Series A Convertible Preferred Stock has no right to cash, except for the payment of the aforementioned dividend based on the generation of revenues by the Company and does not have any registration rights.

 

Based on the attributes of the Series A Convertible Preferred Stock described above, the Company determined to account for the Series A Convertible Preferred Stock as a permanent component of stockholders’ equity.

 

Common Stock

 

The Company is authorized to issue up to 100,000,000 shares of common stock (par value $0.0001). As of June 30, 2019 and December 31, 2018, the Company had 67,045,814 shares of common stock issued and outstanding.

 

Common Stock Warrants

 

A summary of common stock warrant activity, including warrants to purchase common stock that were issued in conjunction with the Company’s private placements, during the six months ended June 30, 2019 is presented below.

 

   

Number of

Shares

    Weighted Average
Exercise Price
    Weighted Average Remaining Contractual Life (in Years)  
                   
Warrants outstanding at December 31, 2018     9,000,000     $ 1.000          
Issued                    
Exercised                    
Expired                    
Warrants outstanding at June 30, 2019     9,000,000     $ 1.000       3.42  

 

At June 30, 2019, all outstanding warrants are exercisable at $1.000 per common share.

 

Based on a fair market value of $1.00 per share on June 30, 2019, there were no exercisable but unexercised in-the-money common stock warrants on that date. Accordingly, there was no intrinsic value attributed to exercisable but unexercised common stock warrants at June 30, 2019.

 

Information with respect to the issuance of common stock in connection with various stock-based compensation arrangements is provided at Note 6.