Convertible Preferred Stock

9 Months Ended

Oct. 31, 2019

Convertible Preferred Stock

CONVERTIBLE PREFERRED STOCK

NOTE 5 — CONVERTIBLE PREFERRED STOCK

Redemption of Series A Convertible Preferred Stock

On October 16, 2019, the Company issued 9,473,691 shares of common stock in consideration for aggregate proceeds of $9,663,000 in a private placement transaction. Each share of common stock was sold to the purchasers at $1.02 per share. The proceeds from the sale of common stock were used to redeem all 2,895,464 outstanding shares of Series A Convertible Preferred Stock, which were redeemed for a redemption price equal to $2.00 per share for a total redemption payment of $5,813,000 including $22,000 of direct costs associated with the redemption.

Pursuant to the guidance in ASC 260-10-S99-2 for redemptions of preferred stock, the Company compared the difference between the carrying amount of the Series A Convertible Preferred Stock, net of issuance costs, of $8,686,000 to the fair value of the consideration transferred of $5,813,000, which was reduced by the commitment date intrinsic value of the conversion option since the redemption included the reacquisition of a previously recognized beneficial conversion feature of $2,021,000 and added this difference to net income to arrive at income available to common stockholders in the calculation of basic earnings per share. As the carrying value of the Series A Convertible Preferred Stock was $8,686,000 on the date of redemption, the Company reflected the resulting return from the preferred stockholders of $4,894,000 as an adjustment to net income (loss) attributable to common stockholders in the Company’s basic and diluted EPS calculations for the three and nine months ended October 31, 2019. 

Balance at January 31, 2019	$	8,686,000
Redemption of Series A Convertible Preferred Stock		(5,791,000)
Fees paid for redemption of Series A Convertible Preferred Stock		(22,000)
Previously recognized beneficial conversion feature		2,021,000
Return from the preferred stockholders	$	4,894,000

See Note 2 for the Company’s basic and diluted EPS calculations.