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Stockholders' Equity

12 Months Ended

Dec. 31, 2017

Equity [Abstract]

Stockholders' Equity

NOTE 9 - STOCKHOLDERS’ EQUITY

On August 26, 2016, the Company affected a one-for-four reverse stock split of the Company’s common stock. All references in this report to the number of shares of our common stock and to related per-share prices (including references to periods prior to the effective date of the reverse stock split) reflect this reverse stock split.

Sales of Equity – On August 30, 2017, the Company sold 1,200,000 shares of unregistered common stock and five-year warrants to purchase up to an aggregate of 240,000 additional shares of the Company’s common stock at an exercise price of $1.00 to a total of two related party accredited investors for an aggregate purchase price of $900,000, of which $300,000 was receivable as of December 31, 2017. On September 7, 2017, the Company sold 133,333 shares of unregistered common stock and five-year warrants to purchase up to an aggregate of 26,667 additional shares of the Company’s common stock at an exercise price of $1.00 to two related party accredited investors for an aggregate purchase price of $100,000. In conjunction with these transactions, the Company recorded $62,000 in related costs for placement agent fees and stock listing fees. The warrants had an estimated aggregate fair value of approximately $112,000 which was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 89.3%, a risk free rate of return of 1.7% and zero dividend and forfeiture estimates.

On September 12, 2017, the Company and Hengfai Business Development Pte Ltd. (“HBD”) entered into a Securities Exchange Agreement whereby the Company agreed to issue and sell to HBD 683,000 shares of its common stock, which had a market value on that date of $484,930, in exchange for 21,196,552 ordinary shares and an existing three-year warrant to purchase up to 105,982,759 of common shares at an exercise price of SGD$0.040 (US$0.0298) per share of Singapore eDevelopment Limited (“SED”), a company incorporated in Singapore and publicly-listed on the Singapore Exchange Limited. The SED shares and warrants were owned by HBD. The cost of the investment was the fair value of the Company’s common stock issued in the transaction which was determined to have the most readily determinable fair value. In conjunction with these transactions, the Company recorded $13,660 in stock listing fees. As of December 31, 2017, the investment is carried at cost of approximately $485,000.

On November 1, 2017, the Company issued 500,000 shares of its common stock, and a three-year warrant to purchase up to 125,000 additional shares of the Company’s common stock at an exercise price of $1.00 per share, along with a cash payment of $125,000, to Nix, Patterson & Roach LLP (“NPR”), a law firm, for the purpose of settling all accrued and outstanding billed and unbilled invoices for expenses owed by the Company to NPR of approximately $714,000 in connection with various litigation matters handled by NPR on behalf of the Company. The warrants had an estimated aggregate fair value of approximately $40,000 which was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 89.1%, a risk free rate of return of 2.0% and zero dividend and forfeiture estimates. The aggregate estimated fair value of the cash payment and equity instruments issued to NPR was approximately $495,000 which resulted in a reduction of approximately $219,000 of legal expense recorded by the Company, and presented in general and administrative expenses on the Company’s financial statements, in conjunction with the agreement.

On December 29, 2016, the Company completed the sale of 300,000 shares of its common stock and a warrant to purchase up to 200,000 shares of the Company’s common stock at an exercise price of $1.00 per share for an aggregate purchase price of $225,000 pursuant to a securities purchase agreement. The warrants had an estimated aggregate fair value of approximately $87,000 which was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 86.4%, a risk free rate of return of 1.96% and zero dividend and forfeiture estimates. The Company was assessed $25,000 in listing fees by the NYSE American for equity issuances during 2016.

Stock Warrants – During 2017, the Company received an aggregate of approximately $336,000 in proceeds from the exercise of warrants for 394,091 shares of the Company’s common stock. On November 29, 2016, in consideration of the financing described in Note 8 the Company issued a five-year warrant to purchase up to 750,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The warrants had an estimated aggregate fair value of approximately $199,000 which was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 86.4%, a risk free rate of return between of 1.78% and zero dividend and forfeiture estimates. The Company recorded $198,000 of stock based compensation in the fourth quarter of 2016 in conjunction with these warrants.

The Company issued five-year warrants to purchase up to 200,000 shares of the Company’s common stock as part of the December 29, 2016 equity sale at an exercise price of $1.00 per share.

The following is a summary with respect to warrants outstanding and exercisable at December 31, 2017 and 2016 and activity during the years then ended:

		2017								2016
						Weighted								Weighted
						Average								Average
						Exercise								Exercise
		Warrants				Price				Warrants				Price

Outstanding at January 1:			2,812,515			$	11.20				1,862,515				16.40
Granted during the year			391,667				1.00				950,000				1.00
Exercised/lapsed/terminated			(559,092	)			5.11				-				-

Outstanding at December 31:			2,645,090			$	10.98				2,812,515				11.20
Exercisable at December 31:			2,645,090			$	10.98				2,812,515				11.20
Weighted average months remaining							24.3								34.6

Stock Options - On June 20, 2013 the Company’s shareholders adopted the 2013 Employee, Director and Consultant Equity Incentive Plan (the “2013 Plan”). The 2013 Plan provides for the issuance of up to a total of 1,500,000 shares of common stock authorized to be issued for grants of options, restricted stock and other forms of equity to employees, directors and consultants. Under the terms of the 2013 Plan, options granted thereunder may be designated as options which qualify for incentive stock option treatment (“ISOs”) under Section 422A of the Internal Revenue Code, or options which do not qualify (“NQSOs”).

The following is a summary with respect to options outstanding at December 31, 2017 and 2016 and activity during the years then ended:

		2017												2016
		Number of Options				Weighted Average Exercise Price				Weighted Average Life Remaining				Number of Options				Weighted Average Exercise Price				Weighted Average Life Remaining
										(in years)												(in years)
Outstanding at January 1:			635,597				9.33								1,106,140				11.56
Granted			-				-								37,500				1.00
Lapsed/terminated			(152,930	)			9.67								(508,043	)			13.56
Outstanding at December 31:			482,667				10.72				3.3				635,597				9.33				3.7
Exercisable at December 31:			478,500				9.29				3.3				610,611				10.85				3.7
Expected to vest at December 31:			4,167				1.00				3.3				25,000				1.00				4.3

Aggregate intrinsic value of outstanding options at December 31:		$	10,000											$	-
Aggregate intrinsic value of exercisable options at December 31:		$	6,667											$	-
Aggregate intrinsic value of options expected to vest at December 31:		$	3,333											$	-

There were no options granted in 2017. The weighted-average grant date fair value of options granted during the year ended December 31, 2016 was $0.10. The aggregate grant date fair value of options that vested during 2017 was approximately $417 ($71,000 -2016). There were no options exercised during 2017 or 2016.

The fair value of each option award is estimated on the date of grant utilizing the Black-Scholes-Merton Option Pricing Model. The Company estimated the expected volatility of the Company’s common stock at the grant date using the historical volatility of the Company’s common stock over the most recent period equal to the expected stock option term. In March 2016, three of the Company’s senior management voluntarily cancelled an aggregate of 75,000 options to purchase shares of the Company’s common stock with exercise prices of $12.00 per share, of which 41,667 of the options were unvested on the date of cancellation resulting in a reversal of previously recognized stock based compensation expense of approximately $36,000.

The following table shows our weighted average assumptions used to compute the share-based compensation expense for stock options and warrants granted during the year ended December 31, 2016. There were no options or warrants granted for compensation during the year ended December 31, 2017.

Volatility			85.6	%
Expected option term			3.5 years
Risk-free interest rate			1.3	%
Expected forfeiture rate			0.0	%
Expected dividend yield			0.0	%

Restricted Stock - Restricted common stock may be issued under the Company’s 2013 Plan for services to be rendered which may not be sold, transferred or pledged for such period as determined by our Compensation Committee and Management Resources. Restricted stock compensation cost is measured as the stock’s fair value based on the quoted market price at the date of grant. The restricted shares issued reduce the amount available under the employee stock option plans. Compensation cost is recognized only on restricted shares that will ultimately vest. The Company estimates the number of shares that will ultimately vest at each grant date based on historical experience and adjust compensation cost and the carrying amount of unearned compensation based on changes in those estimates over time. Restricted stock compensation cost is recognized ratably over the requisite service period which approximates the vesting period. An employee may not sell or otherwise transfer unvested shares and, in the event that employment is terminated prior to the end of the vesting period, any unvested shares are surrendered to us. The Company has no obligation to repurchase any restricted stock.

On January 12, 2017, the Company issued an aggregate of 150,000 shares of restricted stock to members of the Company’s management team of which 100,000 vested on May 17, 2017 and had an aggregated grant date fair value of approximately $126,000. The remaining 50,000 vested if the Company achieved adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of at least $500,000 and a stock trading price of at least $1.00 per share by the close of the fourth quarter of 2017, both of which were achieved.

During 2016, the Company issued 6,250 shares of restricted common stock to a consultant providing marketing services to the Company. The restricted shares vested on May 2, 2016 and had an aggregate grant date fair value of approximately $6,250. In addition, during 2016 the Company issued an aggregate of 224,750 shares of restricted stock to members of the Company’s management which will vest on May 17, 2017 and had an aggregated grant date fair value of approximately $124,000.

The following is a summary of activity of restricted stock during the years ended at December 31, 2017 and 2016:

		Shares				Weighted - average Grant Date Fair Value
Restricted shares outstanding, December 31, 2015			15,000			$	0.88
Restricted shares granted			231,000				0.56
Restricted shares vested			(15,000	)			0.88
Restricted shares outstanding, December 31, 2016			231,000			$	0.56
Restricted shares granted			150,000				0.84
Restricted shares vested			(331,000	)			0.64
Restriced shares outstanding, December 31, 2017			50,000			$	0.64

Stock-Based Compensation - The Company records stock-based payment expense related to these options based on the grant date fair value in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. During 2017, the Company had stock compensation expense of approximately $215,000 or $0.01 basic earnings per share ($329,000; $0.03 basic earnings per share - 2016). As of December 31, 2017, there was approximately $1,700 of total unrecognized compensation costs related to options and restricted stock granted under the Company’s stock option plans, which the Company expects to recognize over the weighted average period of six months.