Note E - Preferred Stock and Warrants

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Preferred Stock [Text Block]

E. Preferred Stock and Warrants

Authorized, Issued, and Outstanding Preferred Stock

As of

September 30, 2020

and

December 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,

1,576

shares were designated as Series B-

1

Preferred Stock and

27,000

shares were designated as Series B-

2

Preferred Stock. Of the designated preferred stock

9,577

 shares of Series A Preferred Stock and

1,576

 shares of Series B-

1

Preferred Stock were issued as of

September 30, 2020

and

December 31, 2019

.

No

shares of Series A Preferred Stock or Series B-

1

Preferred Stock were outstanding as of

September 30, 2020

and

December 31, 2019

.

No

shares of Series B-

2

Preferred Stock were issued or outstanding as of

September 30, 2020

and

December 31, 2019

.

In

October 

2018,

the Company entered into the

October 2018

Exchange Agreement. Under the

October 2018

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 under the

October 2018

Exchange Agreement, there were an aggregate of

3,192,333

 shares of common stock issuable upon conversion of the Series A Preferred Stock (without giving effect to the limitation on conversion described below), and as of

September 30, 2020

all issued shares of Series A Preferred Stock had been converted into shares of common stock.

In

September 2019,

the Company entered into the

September 2019 

Exchange Agreement. Under the

September 2019

Exchange Agreement the Company issued to the Holders

1,576

 shares of Series B-

1

 Preferred Stock. Each share of Series B-

1

 Preferred Stock had an aggregate stated value of

$1,000

and was convertible into shares of common stock at a price equal to the greater of (i)

$0.9494,

or (ii) the average of the volume-weighted average price of the Common Stock on the Nasdaq Capital Market on each of the

15

trading days immediately preceding such exchange (subject to adjustment to reflect stock splits and similar events). Immediately following the exchange under the

September 2019

Exchange Agreement, there were an aggregate of

1,659,996

shares of common stock issuable upon conversion of the Series B-

1

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

4.985%

of the total number of shares of common stock then issued and outstanding. The Series B 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, plus any declared but unpaid dividends, and thereafter will share ratably in any distribution of the Company's assets with holders of common stock and with the holders of any shares of any other class or series of capital stock of the Company entitled to share in such remaining assets of the Company (including Series A Preferred Stock on an as-converted basis. With respect to rights upon liquidation, the Series B Preferred Stock ranks senior to the common stock, on parity with the Series A Preferred Stock, if any is then outstanding, 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 B Preferred Stock), the Series B Preferred Stock does

not

have voting rights. The Series B Preferred Stock is

not

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

not

provide for any accruing dividends, but provides that holders of Series B 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 Series B-

1

 Certificate of Designation and the Series B-

2

 Certificate of Designation also provide for partial liquidated damages in the event that the Company fails to timely convert shares of Series B-

1

 Preferred Stock or Series B-

2

 Preferred Stock, respectively, into Common Stock in accordance with the applicable Certificate of Designation. As of

September 30, 2020

 all issued shares of Series B-

1

 Preferred Stock have been converted into shares of common stock.