Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.20.2
Stockholders' Equity
9 Months Ended
Sep. 30, 2020
Equity [Abstract]  
Stockholders' Equity

4. Stockholders’ Equity

 

Preferred Stock

 

The Company is authorized to issue 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 of its Series A Convertible Preferred Stock with the Delaware Secretary of State to amend the Company’s certificate of incorporation. The Company has designated a total of 350,000 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, Preferences, Rights and Limitations. 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. As of September 30, 2020 and December 31, 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 September 30, 2020 and December 31, 2019. The Company has the right to redeem the Series A Convertible Preferred Stock up to the fifth anniversary of their respective closing dates (March 17, 2015 and January 21, 2016) at a price per share equal to $50.00. Accordingly, as of September 30, 2020, the Company has the right to redeem the 175,000 shares of Series A Convertible Preferred Stock that were issued on January 21, 2016 at an aggregate cash redemption value of $8,750,000. The Series A Convertible Preferred Stock has no right to cash, except with respect to the payment of the aforementioned dividend based on the generation of revenues by the Company. The shares of Series A Convertible Preferred Stock do not have any registration rights.

 

Based on the attributes of the Series A Convertible Preferred Stock as previously described, 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 a total of 100,000,000 shares of common stock, par value $0.0001 per share. As of September 30, 2020 and December 31, 2019, the Company had 67,045,814 shares of common stock issued and outstanding.

 

Common Stock Warrants

 

A summary of common stock warrant activity during the nine months ended September 30, 2020 is presented below.

 

    Number of Shares     Weighted Average
Exercise Price
   

Weighted Average

Remaining

Contractual

Life (in Years)

 
                   
Warrants outstanding at December 31, 2019     9,000,000     $ 1.000          
Issued                    
Exercised                    
Expired                    
Warrants outstanding at September 30, 2020     9,000,000     $ 1.000       2.42  

 

At September 30, 2020, all outstanding warrants are exercisable at $1.000 per common share.

 

Based on a fair market value of $1.17 per share on September 30, 2020, the intrinsic value attributable to exercisable but unexercised in-the-money common stock warrants on that date was $1,530,000.

 

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