XML 12 R12.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Stockholders' Deficit
9 Months Ended
Sep. 30, 2019
Equity [Abstract]  
Stockholders' Deficit

Note 6 — Stockholders' Deficit

 

Series A Convertible Preferred Stock

 

The Company is authorized to issue up to 10,000,000 shares of preferred stock, $0.001 par value, all of which has been designated as Series A Convertible Preferred Stock ("Series A Preferred Stock") and has a stated value of $2.50 per share. As of September 30, 2019, 8,930,000 shares are issued and outstanding. The Series A Preferred Stock ranks senior to common stock with respect to dividends rights and liquidation preferences and has full voting rights. The Series A Preferred Stock accrues a dividend at a rate of 6% per annum, and such amount aggregated $1,497,226 and $728,350 as of September 30, 2019 and December 31, 2018, respectively. The Company recorded $258,635 and $768,875 of preferred dividends for the three and nine months ended September 30, 2019, respectively, and $219,498 and $505,516 for the three months ended September 30, 2018 and for the period from January 24, 2018 through September 30, 2018, respectively.

 

Pursuant to the Company's amended and restated certificate of incorporation, holders of the Series A Preferred Stock have the following methods of conversion: (i) automatic conversion into common stock upon the consummation of an IPO at a conversion price of 50% of the IPO price, (ii) automatic conversion into common stock upon the consummation of a subsequent private placement of securities at a conversion price of 50% of the purchase price of the securities being sold by the Company approved by the holders of the Series A Preferred Stock, and (iii) at any time after the issuance date and until ten calendar days prior to the consummation of an IPO, each holder shall be entitled to convert into common stock at a conversion price of $2.50 per share.

 

The Series A Preferred Stock automatically converted to common shares upon completion of the IPO in October 2019. The conversion share calculation was based on the $2.50 initial issue price for the Series A Preferred Stock plus any accrued but unpaid dividends and automatically converted into shares of the Company's common stock using a stated divisor conversion price equal to 50% of the IPO price to the public which was $5.00 per share. In accordance with  relevant accounting literature, since the terms of the conversion option did not permit the Company to compute the additional number of shares that it would need to issue upon conversion of the Series A Preferred when the contingent event occurred, the Company recorded the beneficial conversion amount as a deemed dividend at the date of the settlement of the IPO in October 2019.

 

In addition to these methods of conversion, the agreement contained a feature that would have required the Company to repurchase all of the outstanding shares of the Series A Preferred Stock on July 1, 2020 at a redemption price of the product of two multiplied by the aggregate stated value of all of the Series A Preferred Stock then held by each holder, plus all accrued but unpaid dividends through the date of payment, if it was still outstanding as of that date.