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Stockholders Deficit

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Stockholders Deficit

NOTE 11 STOCKHOLDERS DEFICIT

(A) Common Stock

For the three-months ended March 31, 2018 and year ended December 31, 2017, the Company issued the following Common Stock:

Transaction Type						Quantity (shares)				Valuation ($)				Range of Value Per Share

2017 Equity Transactions
Common Stock Offering			(1)				69,667			$	209,000				3.00

Common Stock Issued per Exercise of Warrants			(2)				1,666,667				5,000,000				3.00

Common Stock Issued per Exercise of Options			(3)				30,000				78,000				2.60

Common Stock Issued for the cashless exercise of Warrants			(4)				4,132,068				0				0.0

Total 2017 Equity Transactions							5,898,402			$	5,287,000			$	2.60-3.00

Common Stock Issued per Employment Agreement			(5)				240,000				720,000				3.00

Total 2018 Equity Transactions							240,000			$	720,000			$	3.00

The following is a more detailed description of the Company’s stock issuance from the table above:

(1) Shares Issued for Common Stock

During the nine-months ended September 30, 2017, the Company received gross proceeds of $209,000 from the sale of 69,667 shares of its Common Stock at $3.00 per share to three new Company employees. In connection therewith, the Company issued five-year options to purchase up to 315,000 shares of Common Stock at an exercise price of $3.00 per share.

(2) Shares Issued Pursuant to Warrants Exercised

In March 2017, the Company issued 1,666,667 shares of Common Stock upon exercise in full of a warrant having an exercise price of $3.00 per share, and the Company received gross proceeds of $5,000,000.

(3) Shares Issued Pursuant to Options Exercised

In April 2017, the Company issued 30,000 shares of Common Stock upon exercise in full of an option having an exercise price of $2.60 per share, and the Company received gross proceeds of $78,000.

(4) Common Stock Issued for the cashless Exercise of Warrants

In November 2017, the Company issued 4,132,068 shares of Common Stock upon the cashless exercise of Warrants.

(5) Common Stock Issued pursuant to Employment Agreements

In March 2018, the Company issued 120,000 shares of Common Stock, with a total fair market value of $720,000, to each of Mr. Campi and Mr. Wells, which vested pursuant to their respective employment agreements.

(B) Preferred Stock

The following is a summary of the Company’s Preferred Stock activity:

Transaction Type		Quantity				Valuation				Range of Value per Share

2016 Preferred Stock Transactions

Preferred Stock Issued per August 2016 Election			13,056,936			$	44,393,569			$	3.40

Total 2016 Preferred Stock Transactions			13,056,936			$	44,393,569			$	3.40

2017 Preferred Stock Transactions

Preferred Stock Issued per August 2016 Election			400,000			$	1,360,000			$	3.40

Total 2017 Preferred Stock Transactions			400,000			$	1,360,000				3.40

Total 2018 Preferred Stock Transactions			0			$	0

In accordance with the August 2016 Elections (see Note 8(B)), the Company has issued 13,456,932 shares of 6% Preferred Stock in exchange for Notes having a principal balance of $3,364,234. The Preferred Stock will be convertible upon the election of the holder thereof. Shares of the Preferred Stock may be repurchased by the Company upon 30 days’ prior written notice, in whole or in part, for USD $3.50 per share, provided that during such notice period the holder will continue to have the option and right to convert its shares of Preferred Stock into shares of Common Stock. Holders also have a put option, allowing them to sell their shares of Preferred Stock back to the Company at USD $0.25 per share, the Note conversion price, and therefore the stock is classified as Mezzanine equity rather than permanent equity. The stock was valued based upon the value of shares of Common Stock publicly traded nearest the conversion date. During the year ended December 31, 2017 the Company paid dividends in the amount of $149,737 to the Preferred Stock shareholders.

Redeemable preferred stock subject to redemption: $0 par value; 20,000,000 shares authorized; 13,456,932 and 13,056,932 shares issued and outstanding at December 31, 2017 and March 31, 2018, respectively

(C) Stock Options

The following is a summary of the Company’s stock option activity:

							Weighted Average				Weighted Average Remaining Contractual Life				Aggregate Intrinsic
			Options				Exercise Price				(In Years)				Value
Balance, December 31, 2016				1,350,000			$	0.767				7.81			$	3,015,000
Exercised				(30,000)				2.60				—				(78,000)
Granted				3,555,000				1.307				7.47				6,230,250
Forfeited/Cancelled				—				—				—				—
Balance, December 31, 2017				4,875,000			$	1.150				7.40			$	9,167,250
Exercised				—				—				—				—
Granted				—				—				—				—
Forfeited/Cancelled				—				—				—				—
Balance, March 31, 2018				4,875,000			$	1.150				6.91			$	9,167,250

The Company has issued, or the Company’s Board of Directors has authorized grants of, options, some of which have vested, to purchase shares of Common Stock through its 2015 Plan. The Company has issued options to purchase, in the aggregate, up to 4,875,000 shares of options to purchase shares of Common Stock, in conjunction with its 2015 Plan, agreements or otherwise. The Company has reserved 4,875,000 shares with the transfer agent for the future issuance for shares of Common Stock associated with options issued.

During the three-months ended March 31, 2018, the Company recognized $181,068 of compensation expense related to the vesting of options. The expense computation is based on 61,667 shares of options at $3.00. The fair value of stock option is estimated using the Binomial valuation method of $2.9362.

(D) Warrants Issued

The following is a summary of the Company’s stock option activity:

			Number of Warrants				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (in Years)
Balance, December 31, 2016				13,555,651			$	0.72				1.5
Issued				898,040				3.31				4.63
Exercised				(6,033,767)				(3.00)				—
Cancelled/Forfeited				—				—				—
Balance, December 31, 2017				8,419,924			$	1.64				2.42

Issued				—				—				—
Exercised				—				—				—
Cancelled/Forfeited				—				—				—
Balance, March 31, 2018				8,419,924			$	1.117				1.15

(E) 2015 Stock Plan

On April 27, 2015, the Board approved the Company’s 2015 Stock Incentive Plan (the “2015 Plan”). Under the 2015 Plan, the Board has the sole authority to implement, interpret, and/or administer the 2015 Plan unless the Board delegates all or any portion of its authority to implement, interpret, and/or administer the 2015 Plan to a committee of the Board, or (ii) the authority to grant and administer awards under the 2015 Plan to an officer of the Company. The 2015 Plan relates to the issuance of up to 5,000,000 shares of Common Stock, subject to adjustment, and shall be effective for ten (10) years, unless earlier terminated. Certain options to be granted to employees under the 2015 Plan are intended to qualify as Incentive Stock Options (“ISOs”) pursuant to Section 422 of the Internal Revenue Code of 1986, as amended, while other options granted under the 2015 Plan will be nonqualified options not intended to qualify as Incentive Stock Options ISOs (“Nonqualified Options”), either or both as provided in the agreements evidencing the options described.

The 2015 Plan further provides that awards granted under the 2015 Plan cannot be exercised until a majority of the Company’s shareholders have approved the 2015 Plan. The 2015 Plan became effective July 31, 2016.