While the 16.25 million Series C and the 25 million Series C-2 preferred shares are issued and outstanding, they are not entitled to divvies. The Series C-3 preferred shares to be issued and outstanding, somewhere between 4 and 10 million shares inclusive, will also not be entitled to divvies. Mr. Golisano is obviously a good soul for foregoing dividends and holding pat with his investment.
Sulax refers to the 2 classes of preferred that do earn divvies, and which the company is in arrears on paying. Per the 10Q for 3Q15 filed on Nov. 4, 2015, of 3.3 million Class A shares authorized, only 565,721 are outstanding, and only 557,012 are eligible for future divvies. The cumulative dividends payable on them are approx. $2,351,000 as of Sept. 30, 2015. Interestingly, the board at their discretion, can settle this payable amount, in part or in aggregate, by issuing more Preferred A instead of cash at a rate of 1 share for $ 4. So one way the divvies can be settled is to issue up to approx. 587,750 more A shares. These are convertible one-to-one into common, which means each common share squaring the dividend is costing a Series A holder $ 4 a share.
The Series B is a much smaller amount i.e.. $344,000 dividends payable accrued from 67,500 B shares outstanding. The company can similarly settle these divvies with more Series B but at a higher cost of $ 5 per share to the B holder, which are convertible one-to-one into common ultimately, so 68,800 common shares.
Preferred stock, whether dividend paying or not, is a very prevalent form of capital in the developmental stage tech space, both in private equity and public markets. It gives the investors a liquidation preference over common holders but also allows management to grow company return on equity faster.
