SERIES A CONVERTIBLE PREFERRED STOCK

9 Months Ended

Sep. 30, 2020

Series A Preferred Stock [Member]

Class of Stock [Line Items]

SERIES A CONVERTIBLE PREFERRED STOCK

NOTE 6 — SERIES A CONVERTIBLE PREFERRED STOCK

As of September 30, 2020 and December 31, 2019, the Company had 100,000 and 105,000 shares of Series A Convertible Preferred Stock (the “Preferred Stock”) outstanding, respectively, which Preferred Stock was issued at $10 per share, accrues 5% in a cumulative annual dividend, and is convertible into the Company’s common stock at a price of $4.385 per share. For the nine months ended September 30, 2020, preferred stockholders collectively earned, but were not paid, approximately $38,000 in quarterly dividends, which is equivalent to 8,709 shares of common stock based on a conversion price of $4.385 per share. As of September 30, 2020 and December 31, 2019, cumulative and unpaid dividends were approximately $271,000 and approximately $245,000, respectively, which is equivalent to 61,823 and 55,927 shares of common stock, respectively, based on a conversion price of $4.385 per share.

On any matter presented to the stockholders of the Company for vote, holders of Preferred Stock are entitled to cast the number of votes equal to the number of shares of common stock into which their shares of Preferred Stock are convertible as of the record date to vote on such matter. As long as any shares of Preferred Stock are outstanding, the Company has certain restrictions on share repurchases and amendments to the Certificate of Incorporation in a manner that adversely affects any rights of the holders of Preferred Stock.

In addition, the holders of Preferred Stock have a liquidation preference for purposes of which the Preferred Stock would be valued at $10 per share plus accrued cumulative annual dividends. At September 30, 2020 and December 31, 2019, the liquidation preference was valued at $1,271,000 and $1,295,000, respectively. In the event of any liquidity event, holders of Preferred Stock shall be entitled to be paid their liquidation preference out of the assets of the Company legally available before any sums shall be paid to holders of common stock.