Note E - Preferred Stock and Warrants

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Preferred Stock [Text Block]

E. Preferred Stock and Warrants

Authorized, Issued, and Outstanding Preferred Stock

As of

March 31, 2019,

the Company had

10,000,000

shares of authorized preferred stock, of which 

9,578

shares were designated as Series A Preferred Stock, 

9,577

shares of which were issued in the fiscal year ended

December 31, 2018 

and

3,337

shares of which were outstanding as of

December 31, 2018

and 

March 31, 2019.

In

October 

2018,

the Company entered into the Exchange Agreement. Under the Exchange Agreement the Company issued to the Holders

9,577

shares of Series A Preferred Stock. Each share of Series A Preferred Stock has an aggregate stated value of

$1,000

and is convertible into shares of common stock at a price equal to

$3.00

per share (subject to adjustment to reflect stock splits and similar events). Immediately following the exchange, there were an aggregate of

3,192,334

shares of common stock issuable upon conversion of the Series A Preferred Stock (without giving effect to the limitation on conversion described below). The Series A Preferred Stock is convertible at any time at the option of the Holders, provided that the Holders are prohibited from converting shares of Series A Preferred Stock into shares of common stock if, as a result of such conversion, such Holders (together with certain affiliates and “group” members) would beneficially own more than

4.985%

of the total number of shares of the Company's common stock then issued and outstanding. The Series A Preferred Stock is

not

redeemable. In the event of the Company’s liquidation, dissolution or winding up, the Holders will receive an amount equal to

$0.0001

per share of Series A Preferred Stock, plus any declared but unpaid dividends, and thereafter will share ratably in any distribution of the Company’s assets with holders of common stock on an as-converted basis. With respect to rights upon liquidation, the Series A Preferred Stock ranks senior to the common stock and junior to existing and future indebtedness. Except as otherwise required by law (or with respect to approval of certain actions involving the Company’s organizational documents that materially and adversely affect the holders of Series A Preferred Stock), the Series A Preferred Stock does

not

have voting rights. The Series A Preferred Stock is

not

subject to any price-based anti-dilution protections and does

not

provide for any accruing dividends, but provides that the holders of Series A Preferred Stock will participate in any dividends on the common stock on an as-converted basis (without giving effect to the limitation on conversion described above). The Certificate of Designation also provides for partial liquidated damages in the event that the Company fails to timely convert shares of Series A Preferred Stock into common stock in accordance with the Certificate of Designation. As of

March 31, 2019, 

6,240

shares of Series A Preferred Stock have been converted into

2,080,000

shares of common stock.

As of 

March 31, 2019,

the Company has

3,337

shares of Series A Preferred Stock outstanding, which are convertible into

1,112,334

shares of common stock.

Refer to Note C for a further discussion of the Exchange Agreement.