XML 33 R20.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Note N - Equity | 12 Months Ended
--- | ---
Dec. 31, 2017
Notes to Financial Statements |
Stockholders' Equity Note Disclosure [Text Block] | NOTE N — EQUITY 1. Preferred Stock Within the limits and restrictions provided in the Company ’s Certificate of Incorporation, the Board of Directors has the authority, without further action by the shareholders, to issue up to 5,000,000 shares of preferred stock, $.0001 par value per share, in one or more series, and to fix, as to any such series, any dividend rate, redemption price, preference on liquidation or dissolution, sinking fund terms, conversion rights, voting rights, and any other preference or special rights and qualifications. As of December 31, 2017, 100,000 shares of preferred stock have been designated as Series A- 1 Convertible Preferred Stock, of which 62,596 shares are issued and outstanding, and 105,000 shares of preferred stock have been designated as Series B- 1 Convertible Preferred Stock, all of which are outstanding. Series A- 1 Convertible Preferred Stock On October 22 and 29, 2015, the Company issued 84,500 shares of Series A- 1 Convertible Preferred Stock at a purchase price of $100.00 per share, for aggregate gross proceeds of $8,450,000. On November 11, 2015, 5,500 additional shares of Series A- 1 Convertible Preferred Stock were issued at a purchase price of $100.00 per share, for gross cash proceeds of $550,000. Shares of the Series A- 1 Convertible Preferred Stock are convertible at any time at the option of the holder into shares of common stock by dividing the Series A- 1 Original Issue Price by the conversion price of $3.60 per share, subject to adjustment for stock dividends, stock splits, combinations, and reclassifications of the Company ’s capital stock, and subject to a “blocker provision” which prohibits conversion if such conversion would result in the holder being the beneficial owner of in excess of 9.99% of the Company’s common stock. These provisions have been waived on 61 days’ written notice which have been received from Series A- 1 holder on August 7, 2017. The Series A- 1 Shares accrue dividends at the rate of 6% per annum payable quarterly on April 1, July, 1, October 1, and January 1 of each year. Until October 1, 2017, the dividends are payable in cash provided that if payment in cash would be prohibited under applicable Delaware corporation law or cause the Company to breach any agreement for borrowed money, such dividends are payable in kind through the issuance of additional shares of common stock having a value equal to the volume weighted average trading price of the Company’s common stock for the ten ( 10 ) days preceding the applicable dividend payment date. Commencing January 1, 2018, dividends are payable at the option of the Company in cash or kind through the issuance of additional shares of common valued as described above. The holders of the Series A- 1 shares are entitled to designate one person to serve on the Board of Directors of the Company. The holders of the Series A- 1 Shares are entitled to vote on an as converted to common stock basis together with the holders of common stock on all matters presented to the Company ’s stockholders. Upon any liquidation or dissolution of the Company, any merger or consolidation involving the Company or any subsidiary of the Company in which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation do not represent immediately following such merger or consolidation at least a majority of the voting power of the capital stock of the resulting or surviving corporation, or the sale of all or substantially all assets in a single transaction or a series of related transactions, unless the holders of at least a majority of the outstanding Series A- 1 Shares elect otherwise, holders of Series A- 1 Shares shall be entitled to receive prior to any payment to any holders of the Company’s common stock an amount per share equal to $100.00 per share plus any declared and unpaid dividends (pari-passu with the Series B- 1 holders). On September 22, 2017, the holder of the Series A- 1 Shares elected to convert $540,000 in accrued dividends payable into 150,000 shares of common stock at a conversion price of $3.60. On October 17, 2017, t he holder of the Series A- 1 Shares converted 27,404 Series A- 1 Shares into 761,222 shares of common stock at a conversion price of $3.60 As of December 31, 2017, $2 36,658 was accrued for the holder of the Series A- 1 Shares, for October 1, 2017 and January 1, 2018 dividends. As of December 31, 2016, $270,000 of dividends were accrued for the holder of the Series A- 1 shares for October 1, 2016 and January 1, 2017 dividends. The Series A- 1 Preferred Stock contains options that based on an evaluation of FASB ASC 815 - 15, “Embedded Derivatives” and FASB ASC 815 - 40 - 15, “Contracts in Entity’s Own Equity - Scope and Scope Exceptions,” are considered embedded features: Preferred Stock’s conversion option: The Series A- 1 Preferred Stock is convertible at the holder’s option at any time at the fixed conversion price of $3.60 per share; Quarterly Dividend Conversion Option: From issuance until December 31, 2017, the holders of a majority of the outstanding Series A- 1 Shares had the right to elect to have the quarterly dividend payment made in shares of Common Stock, having a value equal to the volume weighted average trading price of the Common Stock during the ten ( 10 ) trading day period preceding the applicable dividend payment date. These features were analyzed by the Company and determined that they were not required to be bifurcated from the preferred stock and recorded as derivatives as they are clearly and closely related to an equity host. Series B- 1 Convertible Preferred Stock On November 11, 2015, the Company issued 105,000 shares of Series B- 1 Convertible Preferred Stock at a purchase price of $100.00 per share, for gross proceeds of $10,500,000. Shares of the Series B- 1 Convertible Preferred Stock are convertible at any time at the option of the holder into shares of common stock by dividing the Series B- 1 Original Issue Price by the conversion price of $3.60 per share, subject to adjustment for stock dividends, stock splits, combinations, and reclassifications of the Company’s capital stock, and subject to a “blocker provision” which prohibits conversion if such conversion would result in the holder being the beneficial owner of in excess of 9.99% of the Company’s common stock. The Series B- 1 Shares accrue dividends at the rate of 2.5% per annum payable quarterly on April 1, July, 1, October 1, and January 1 of each year payable in cash provided that if payment in cash would be prohibited under applicable Delaware corporation law or cause the Company to breach any agreement for borrowed money, or if the holders of a majority of the outstanding shares of the Series B- 1 Shares elect otherwise, such dividends are payable in kind through the issuance of additional shares of common stock having a value equal to the volume weighted average trading price of the Company’s common stock for the ten ( 10 ) days preceding the applicable dividend payment date. The holders of the Series B- 1 Shares are entitled to designate one person to serve on the Board of Directors of the Company. The holders of the Series B- 1 Shares are entitled to vote on an as converted to common stock basis together with the holders of our common stock on all matters presented to the Company ’s stockholders. Upon any liquidation or dissolution of the Company, any merger or consolidation involving the Company or any subsidiary of the Company in which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation do not represent immediately following such merger or consolidation at least a majority of the voting power of the capital stock of the resulting or surviving corporation, or the sale of all or substantially all assets in a single transaction or a series of related transactions, unless the holders of at least a majority of the outstanding Series B- 1 Shares elect otherwise, holders of Series B- 1 Shares shall be entitled to receive prior to any payment to any holders of the Company’s common stock an amount per share equal to $100.00 per share plus any declared and unpaid dividends (pari-passu with the Series A- 1 holders). As of December 31, 2017, $393,750 was accrued for the holders of the Series A- 1 Shares, for October 1, 2016, January 1, 2017, April 1, 2017, July 1, 2017, October 1, 2017 and January 1, 2018 dividends. As of December 31, 2016 $131,250 of dividends were accrued for the holders of the Series B- 1 shares for October 1, 2016 and January 1, 2017 dividends. The Series B- 1 Preferred Stock contains options that based on an evaluation of FASB ASC 815 - 15, “Embedded Derivatives” and FASB ASC 815 - 40 - 15, “Contracts in Entity’s Own Equity - Scope and Scope Exceptions,” are considered embedded features: Preferred Stock’s conversion option: The Series B- 1 Preferred Stock is convertible at the holder’s option at any time at the fixed conversion price of $3.60 per share; Quarterly Dividend Conversion Option: The holders of the majority of the outstanding Series B- 1 shares may elect to have the Stock’s Quarterly dividend payment made in shares of Common Stock, having a value equal to the volume weighted average trading price of the Common Stock during the ten ( 10 ) trading day period preceding the applicable dividend payment date. These features were analyzed by the Company and determined that they were not required to be bifurcated from the preferred stock and recorded as derivatives as they are clearly and closely related to an equity host. Stock Issuance Costs Costs of approximately $8 0,000 were incurred during 2017 in relation to the issuance of common and preferred stock. 2. Common Stock Effective December 29, 2016, the Company implemented a reverse stock split of its outstanding common stock at a ratio of 1 -for- 12. The number of authorized shares and the par value of the Company's common stock and preferred stock were not affected by the reverse stock split. Stockholders who otherwise would be entitled to receive fractional shares were rounded up to the nearest whole share. Holders of common stock have equal rights to receive dividends when, as and if declared by the Board of Directors, out of funds legally available therefor. Holders of common stock have one vote for each share held of record and do not have cumulative voting rights. Holders of common stock are entitled, upon liquidation of the Company, to share ratably in the net assets available for distribution, subject to the rights, if any, of holders of any preferred stock then outstanding. Shares of common stock are not redeemable and have no preemptive or similar rights. All outstanding shares of common stock are fully paid and nonassessable. Issuances of Common Stock Pursuant to a Securities Purchase Agreement, dated November 11, 2016, by and between the Company and Wong Kwok Fong the Company issued 516,667 shares of common stock for aggregate gross proceeds of $1,860,000. On April 28, 2017, the Company issued to Wong Kwok Fong, a director, executive officer and principal stockholder of the Company, 277,778 shares of common stock at a purchase price of $3.60 per share for gross cash proceeds of $1,000,000. On May 2, 2017, the Company entered into a committed equity facility pursuant to which it may issue and sell up to $5.0 million worth of shares of common stock, subject to certain limitations and satisfaction of certain conditions, over a 36 -month term following the effectiveness of a registration statement covering the public resale of the shares of common stock issued under the facility. As of December 31, 2017, the registration statement has not been filed. From time to time over the term of the facility, the Company may issue requests to the investor to purchase a specified dollar amount of shares up to a maximum of $100,000 over a five trading day period based on the daily volume weighted average price of the Company’s common stock (VWAP) to the extent the VWAP equals or exceeds the greater of a formula amount or $3.83 per share. The per share purchase price for the shares issued under the facility will be equal to 94% of the lowest VWAP that equals or exceeds $3.83 per share. Aggregate sales under the facility are limited to 19.99% of the total outstanding shares of the Company’s common stock as of May 2, 2017, unless stockholder approval is obtained, and sales under the facility are prohibited if such a sale would result in beneficial ownership by the investor of more than 9.99% of the Company’s common stock. On September 22, 2017, the Company issued to Wong Kwok Fong, a director, executive officer and principal stockholder of the Company, 427,778 shares of common stock and warrants to purchase 138,889 shares of common stock for an aggregate purchase price of $1,540,000, or $3.60 per share. The purchase price was paid via a cash payment of $1,000,000 for 277,778 shares and conversion of an accrued dividend payable on the Company’s Series A- 1 Convertible Preferred Stock of $540,000 into 150,000 shares. Also on September 22, 2017, Wong Kwok Fong converted 27,404 Series A- 1 Shares into 761,222 shares of common stock at a conversion price of $3.60 Issuances to Directors, Executive Officers and Consultants On March 15, 2017, the Company issued 1,895 shares of common stock to its directors in payment of board fees, valued at $5,003. On May 11, 2017, the Company issued 1,925 shares of common stock to its directors in payment of board fees, valued at $5,005. In May 2017, the Company issued 55,000 shares of common stock in payment of a commitment fee for the equity facility of $198,000. The Company immediately expensed the fee as it relates to the contingent use of the equity committed equity facility. In May 2017, the Company issued 61,667 shares of common stock to a consultancy firm in lieu of payment for services with respect to the equity facility agreement. The fair value at issuance averaged $2.54 per share, with the total amount of $156,584. The Company deferred the cost to prepaid expense and is amortizing the expense over the length of the consultancy service agreement which has been fully amortized as of December 31, 2017. On August 9, 2017, the Company issued 5,148 shares of common stock to its directors in payment of board fees valued at $18, 017. On November 13, 2017, the Company issued 2,276 shares of common stock to its directors in payment of board fees valued at $4, 005. During the year ended December 31, 2016, the Company issued 18,914 shares of common stock to its directors in lieu of payment of board fees, valued at $45,000, and issued 8,334 shares of common stock to the Chief Executive Officer as compensation, valued at $17,000. During the year ended December 31, 2016 , the Company issued 41,667 shares of common stock to a consultancy firm in lieu of payment for services. The fair value at issuance was calculated at $2.52 per share, with the total amount of $105,000 to be expensed over the period of the services. Employees ’ exercise options During 2017, 4,167 employee stock options were exercised resulting in the cashless issuance of 1,610 shares of common stock. There were no stock options exercised during 2016. Derivative Liabilities In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company early-adopted the new provisions issued July 2017, for derivative liability instruments under FASB ASU 2017 - 11, Earnings Per Share (Topic 260 ), Distinguishing Liabilities from Equity (Topic 480 ) and Derivatives and Hedging (Topic 815 ): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception. Under ASU 2017 - 11, down round features do not meet the criteria for derivative accounting and no liability is to be recorded until an actual issuance of securities triggers the down-round feature. Prior to these provisions, the liabilities were recorded without the actual issuance of the securities triggering the down-round feature. A) Securities Purchase Agreements dated October 25, 2013 and November 8, 2013 Pursuant to a series of Private Investors Securities Purchase Agreements, on October 25, 2013 and November 8, 2013, the Company issued to certain private investors an aggregate of 1,026,972 units consisting of 1,026,972 shares of common stock and warrants to purchase an additional 1,026,972 shares of common stock for an aggregate purchase price of $3,697,100. The warrants were immediately exercisable at an exercise price of $6.00 per share, and had a term of three years which expired in 2016. In connection with the share issuances described above, and pursuant to a placement agency letter agreement, the Company paid the placement agent cash commissions equal to 8% of the gross proceeds of the offering, reimbursed the placement agent for its reasonable out of pocket expenses, and issued to the placement agent warrants to purchase an aggregate of 82,158 shares of common stock. The placement agent warrants have substantially the same terms as the warrants issued to the investors, except the placement agent warrants were immediately exercisable on a cashless basis. The cashless exercise features contained in the warrants were considered to be derivatives and the Company recorded warrant liabilities on the consolidated balance sheet. The Company initially recorded the warrant liabilities equal to their estimated fair value of $325,891. Such amount was also recorded as a reduction of additional paid-in capital. The Company is required to mark-to-market the warrant liabilities at the end of each reporting period. For the year ended December 31, 2016, the Company recorded a gain on the change in the fair value of the cashless exercise feature of $7,478. As of December 31, 2016, the fair value of the cashless exercise features was $0 as the underlying warrants expired during the fourth quarter of 2016. B) Securities Purchase Agreement dated November 13, 2014 Pursuant to a Securities Purchase Agreement, dated November 13, 2014, by and between the Company and a number of private and institutional investors (the “November 2014 Private Investor SPA”), the Company issued to certain private investors 664,584 shares of common stock and warrants to purchase an additional 996,877 shares of common stock for aggregate gross proceeds of $1,595,000. The common stock had a purchase price reset feature. If at any time prior to the two year anniversary of the effective date of the registration statement covering the public resale of such shares ( January 29, 2015), the Company sold or issued shares of common stock or securities that are convertible into common stock at a price lower than $2.40 per share, the Company would have been required to issue additional shares of common stock for no additional consideration. Based on an evaluation as discussed in FASB ASC 815 - 15, “Embedded Derivatives” and FASB ASC 815 - 40 - 15, “Contracts in Entity ’s Own Equity - Scope and Scope Exceptions,” the Company determined that the purchase price reset feature on the common stock issued was not considered indexed to its own stock because neither the occurrence of a sale of equity securities by the issuer at market nor the issuance of another equity contract with a lower strike price is an input to the fair value of a fixed-for-fixed option or forward on equity shares. As such, the purchase price reset feature should be bifurcated from the common stock and accounted for as a derivative liability. The Company valued the purchase price reset feature using a Monte Carlo simulation at the date of issuance, and at quarterly reporting intervals until the expiration of the feature in January 2017, and determined that the purchase price reset feature had no value as the Company issued Series A- 1 and Series B- 1 preferred stock in October and November of 2015, at a conversion price of $3.60, and issued common stock in November 2016 and April 2017 also at a price of $3.60. The warrants have a term of five years and an exercise price of $3.60 per share, and have been fully exercisable since February 2015. The warrants have customary anti-dilution protections including a “full ratchet” anti-dilution adjustment provision which are triggered in the event the Company sells or grants any additional shares of common stock, options, warrants or other securities that are convertible into common stock at a price lower than $3.60 per share. The anti-dilution adjustment provision is not triggered by certain “exempt issuances” which among other issuances, includes the issuance of shares of common stock, options or other securities to officers, employees, directors, consultants or service providers. As a result of the early adoption of ASU 2017 - 11 referred to in Note A – Recently Issued Accounting Pronouncements, the “full ratchet” anti-dilution feature is no longer a determinant for derivative liability accounting. As the “full ratchet” anti-dilution feature was determined to have no value in the past, the adoption had no effect on the balance sheets or statements of operations. C) Securities Purchase Agreement dated September 23, 2015 On September 23, 2015, the Company issued a warrant to purchase 69,445 shares of common stock in connection with the issuance of a promissory note. The warrants are immediately exercisable at an exercise price of $3.60 per share and have a term of five years. The warrants have customary anti-dilution protections including a "full ratchet" anti-dilution adjustment provision which are triggered in the event the Company sells or grants any additional shares of common stock, options, warrants or other securities that are convertible into common stock at a price lower than $3.60 per share. The anti-dilution adjustment provision is not triggered by certain "exempt issuances" which among other issuances, includes the issuance of shares of common stock, options or other securities to officers, employees, directors, consultants or service providers. As a result of the early adoption of ASU 2017 - 11 referred to in Note A – Recently Issued Accounting Pronouncements, the “full ratchet” anti-dilution feature is no longer a determinant for derivative liability accounting. As the “full ratchet” anti-dilution feature was determined to have no value in the past, the adoption had no effect on the balance sheets or statements of operations. The cashless exercise features contained in the warrants were initially considered to be derivatives and the Company recorded a warrant liability of $92,199 on the consolidated balance sheet. The warrants issued by the Company were valued using an option-pricing model. The Company marked-to-market the warrant liabilities at the end of each reporting period. During 2016, the Company determined the cashless exercise features did not meet the criteria for recording a warrant liability. Accordingly, the grant date fair value of the warrant liability was transferred to additional paid-in capital and the cumulative loss due to change in the recorded fair value of the liability was reversed during the period. For the year ended December 31, 2016 the Company recorded income of $4,607 in order to reverse the net cumulative loss on the warrant liability that had been previously recorded. 3. Warrants The Company has issued warrants to certain creditors, investors, investment bankers and consultants. A summary of warrant activity is as follows:
|  | Total Warrants |  |  | Weighted average exercise price |  |  | Weighted average remaining life (in years) |  |  | Aggregate intrinsic value |
Outstanding, as of January 1, 2016 |  |  | 1,704,628 |  |  |  | 4.40 |  |  |  | 3.02 |  |  |  |  |
Granted |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Exercised |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Forfeited |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Expired |  |  | (444,548 | ) |  |  | 6.00 |  |  |  |  |  |  |  |  |
Outstanding, as of December 31, 2016 |  |  | 1,260,080 |  |  |  | 3.84 |  |  |  | 2.78 |  |  |  | — |
Granted |  |  | 138,889 |  |  |  | 3.60 |  |  |  |  |  |  |  |  |
Exercised |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Forfeited |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Expired |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Outstanding, as of December 31, 2017 |  |  | 1,398,969 |  |  |  | 3.81 |  |  |  | 2.06 |  |  |  | — |
Vested or expected to vest at December 31, 2017 |  |  | 1,398,969 |  |  |  | 3.81 |  |  |  | 2.06 |  |  |  | — |
Exercisable at December 31, 2017 |  |  | 1,398,969 |  |  |  | 3.81 |  |  |  | 2.06 |  |  |  | — |
On September 22, 2017, the Company issued to Wong Kwok Fong, a director and executive officer of the Company, warrants to purchase 138,889 shares of Common Stock in connection with the purchase of 427,778 shares of common stock by Mr. Fong. The warrants are immediately exercisable at an exercise price of $3.60 per share and have a term of five years.

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/presentationRef -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