Annual report pursuant to Section 13 and 15(d)

Note 11 - Preferred Stock

v3.20.4
Note 11 - Preferred Stock
12 Months Ended
Dec. 31, 2020
Notes to Financial Statements  
Preferred Stock [Text Block]
11.
Preferred Stock
 
Series A Convertible Preferred Stock
 
In connection with the closing of a public offering, on
November 26, 2019,
the Company filed the Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of the State of Delaware. The Series A Certificate of Designation provides for the issuance of the shares of Series A convertible preferred stock. The shares of Series A convertible preferred stock rank on par with the shares of the common stock, in each case, as to dividend rights and distributions of assets upon liquidation, dissolution or winding up of the Company.
 
With certain exceptions, as described in the Series A Certificate of Designation, the shares of Series A convertible preferred stock have
no
voting rights.
 
Each share of Series A convertible preferred stock is convertible at any time at the holder's option into
one
share of common stock, which conversion ratio will be subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations and other similar transactions as specified in the Series A Certificate of Designation.
 
A total of
547,345
shares of Series A convertible preferred stock were issued in the
November 2019
Offering. In
November
and
December
of
2019,
the holders of Series A convertible preferred stock converted
362,127
shares into common stock and as of
December 31, 2019,
185,218
shares of Series A convertible preferred stock were remaining and outstanding. In
January
and
February
of
2020,
the holders of Series A convertible preferred stock converted the remaining
185,218
shares into common stock.
 
On
December 16, 2020,
the Company filed a Certificate of Elimination with the Delaware Secretary of State with respect to the authorized shares of Series A convertible preferred stock. As of the date of the filing of the Certificate of Elimination,
no
shares of Series A convertible preferred stock were outstanding. Upon filing the Certificate of Elimination, the
547,345
authorized shares of Series A convertible preferred stock were returned to the status of authorized but unissued shares of preferred stock of the Company, without designation as to series or rights, preferences, privileges or limitations.
 
Series B Convertible Preferred Stock
 
As previously reported (see Note
7
– Note Payable), the CRG debt obligations converted into
31,300
shares of the newly authorized Series B convertible preferred stock and warrants to purchase up to
989,379
shares of common stock were also issued.
 
In connection with the CRG debt conversion, on
November 26, 2019,
the Company filed the Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (the “Series B Certificate of Designation”) with the Secretary of State of the State of Delaware. The Series B Certificate of Designation provides for the issuance of the shares of Series B convertible preferred stock. The holders of Series B convertible preferred stock are entitled to receive compounding dividends at a rate of
12.5%
per annum payable quarterly at the Company's option through additional paid in-kind shares of Series B convertible preferred stock or in cash. During the year ended
December 31, 2019,
the Company paid dividend in-kind of an additional
378
shares of Series B convertible preferred stock and a cash dividend of approximately
$2,000
for the remaining fractional shares. During the year ended
December 31, 2020,
the Company paid dividend in-kind of an additional
4,141
shares of Series B convertible preferred stock and a cash dividend of approximately
$8,000
for the remaining fractional shares. As of
December 31, 2020,
there were
35,819
shares of Series B convertible preferred stock outstanding. The shares of Series B convertible preferred stock have
no
voting rights and rank senior to all other classes and series of our equity in terms of repayment and certain other rights. 
 
We have paid approximately
$10,000
in cash and issued a total of
4,519
shares of Series B convertible preferred stock as preferred dividend to the holders of Series B convertible preferred stock through
December 31, 2020.
 
The Series B convertible preferred stock provides that for so long as any shares are outstanding, the consent of the holders of the Series B convertible preferred stockholders would be required to amend the Company's organizational documents, approve any merger, sale of assets, or other major corporate transaction, or incur additional indebtedness, among other items. 
 
The fair value of the Series B convertible preferred stock was determined in connection with the CRG debt conversion as part of the accounting for that transaction as a troubled debt restructuring. Based on our valuation analysis, as of
November 26, 2019,
the date of issuance, the estimated fair value of the Series B convertible preferred stock was
$1,023.23
per share or a total value of approximately
$32,027,000
for the
31,300
shares of Series B convertible preferred stock that were issued. (See Note
7
– Note Payable.)
 
Under the terms of the Series B Preferred Stock and Warrant Purchase Agreement, as amended, CRG will
not
convert the Series B convertible preferred stock or exercise the warrants until the Company's stockholders act to authorize additional number of shares of common stock sufficient to cover the conversion shares.