XML 31 R21.htm IDEA: XBRL DOCUMENT
v3.20.2

Note 15 - Equity Transaction | 3 Months Ended
--- | ---
Mar. 31, 2020
Notes to Financial Statements |
Stockholders' Equity Note Disclosure [Text Block] | Note 15 - Equity Transaction On January 3, 2020, the Company entered into a stock purchase agreement (the “Purchase Agreement”), pursuant to which the Company agreed to issue and sell, and LF International Pte. Ltd. (the “Investor”), agreed to purchase, up to 500,000 shares of the Company’s newly created Series A Convertible Preferred Stock (“Series A Preferred”), at a purchase price of $10.00 per share, for aggregate gross proceeds of $5,000,000 (the “Offering”). Holders of the Series A Preferred will be entitled to receive quarterly dividends at the annual rate of 8% of the stated value ( $10 per share). Such dividends may be paid in cash or in shares of common stock in the Company’s discretion. In the event of any liquidation, dissolution or winding up of the Company, the holders of record of shares of Series A Preferred will be entitled to receive, in preference to any distribution to the holders of the Company’s other equity securities (including the Company’s common stock), a liquidation preference equal to $10 per share plus all accrued and unpaid dividends. Each holder of Series A Preferred shall have the right to convert the stated value of such shares, as well as accrued but unpaid declared dividends thereon (collectively the “Conversion Amount”) into shares of the Company’s common stock. The number of shares of common stock issuable upon conversion of the Conversion Amount shall equal the Conversion Amount divided by the conversion price of $1.00, subject to certain customary adjustments. Holders of Series A Preferred shall vote together with the holders of the Company’s common stock on an as-if-converted basis, whereby each share of Series A Preferred will be entitled to ten ( 10 ) votes, subject to adjustment. In addition, so long as there are more than 50,000 shares of the Series A Preferred outstanding, the Company will be prohibited from taking certain actions without the consent of the holders of at least 80% of the outstanding shares of Series A Preferred. In addition, the Company shall not, without the affirmative vote of the holders of a majority of the then-outstanding shares of the Series A Preferred, amend its Article of Incorporation, the Series A Certificate of Designation or the by-laws of the Company in any manner to decrease the number of authorized shares of common stock or in any manner that would otherwise adversely affect the rights, preferences or privileges of the holders of the Series A Preferred, except for an amendment to increase the number of authorized shares of common stock. The voting and conversion rights of the Series A Preferred will be restricted prior to the affirmative vote of holders of a majority of the common stock approving the Offering. On January 13, 2020, the Company conducted its first closing of the Offering, selling 250,000 Series A Preferred shares resulting in aggregate gross proceeds of $2,500,000. On February 24, 2020, to permit an interim closing prior to the satisfaction of the relevant closing conditions to, and the consummation of, the Second Closing, the Company and the Investor entered into an amendment to the Purchase Agreement (the “Purchase Agreement Amendment”), pursuant to which the Company agreed to issue and sell, and the Investor agreed to purchase, 70,000 shares of Series A Preferred at a purchase price of $10.00 per share, for aggregate gross proceeds of $700,000 (the “Interim Closing”). As an inducement to enter into the Purchase Agreement Amendment, the Company i) granted to the Investor the right to appoint and elect a second member to the Company’s Board of Directors and ii) agreed to issue to the Investor 140,000 shares of the Company’s common stock. During the first quarter 2020, the Company sold 90,860 additional Series A Preferred to various investors for gross proceeds of $426,600 and conversion of debt of $478,000. In connection with the issuance of the Series A Preferred, the Company paid placement agents a fee equal to ten percent ( 10% ) of the gross proceeds from the Interim Closing and warrants to purchase shares of the Company’s common stock in an amount equal to ten percent ( 10% ) of the common stock issuable upon conversion of the Series A Preferred sold at an exercise price of $1.00 per share. In total, stock issuance costs inclusive of marketing, legal and placement agents of $1,679,000 were incurred and were treated as a reduction of Additional Paid in Capital, via warrants, and via common stock. Beneficial Conversion Features The issuance of the Company’s Series A Preferred Stock generated a beneficial conversion feature (BCF), which arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less than the market price of the underlying stock at the commitment date. The fair value of the common stock into which the Series A Preferred was convertible exceeded the allocated purchase price fair value of the Series A Preferred Stock at the closing dates by approximately $2.2 million as of the closing dates. We recognized this BCF by allocating the intrinsic value of the conversion option, to additional paid-in capital, resulting in a discount on the Series A Preferred Stock. As the Series A Preferred Stock is immediately convertible, the Company accreted the discount on the date of issuance. The accretion was recognized as dividend equivalents. Warrants The Company evaluates outstanding warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. If none of the criteria in the evaluation in these standards are met, the warrants are classified as a component of stockholders’ equity and initially recorded at their grant date fair value without subsequent re-measurement. In connection with the sale of the Series A Preferred, in the first quarter 2020, the Company issued warrants to purchase 612,660 shares of the Company’s common stock. The warrant had an exercise price of $1.00 per share. The Company evaluated the terms of the warrants and concluded that they should be equity-classified. The fair value of the warrants, $753,000, were estimated on the issuance dates using a Black-Scholes pricing model based on the following assumptions: an expected term of 5 years, average expected stock price volatility of approximately 155%, an average risk-free rate of 1.19%, and a dividend yield of 0%. The fair value was treated as stock issuance costs. As of March 31, 2020 and December 31, 2019, the Company reserved the following shares of common stock for issuance of shares resulting from the exercise of outstanding warrants and options, as well as the future conversion of the Series A Preferred Shares:
|  | 3/31/2020 | 12/31/2019
Conversion of Series A Preferred | 5,296,800 | -
Stock Warrants |  | 612,600 | -
Stock Options |  | - | -
|  | 5,909,400 | -

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(e)(1)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.3-04) -URI http://asc.fasb.org/extlink&oid=120397183&loc=d3e187085-122770 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 + Details
Name: | us-gaap_StockholdersEquityNoteDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration