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Note N - Equity | 12 Months Ended
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Dec. 31, 2018
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, 2018, 100,000 shares of preferred stock have been designated as Series A- 1 Convertible Preferred Stock, of which 90,000 were issued in 2015 and 0 remain outstanding as of December 31, 2018, and 105,000 shares of preferred stock have been designated as Series B- 1 Convertible Preferred Stock, of which 105,000 were issued in 2015 and 0 remain outstanding as of December 31, 2018. 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 (“Series A- 1 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 Stock were issued at a purchase price of $100.00 per share, for gross cash proceeds of $550,000. Shares of Series A- 1 Stock were 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 an initial 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. In connection with the request of the sole holder of the Series A- 1 Stock, on August 7, 2017 the Company waived a standstill agreement to permit the holder to increase his conversion cap to 35% effective 61 days after such waiver request. The Series A- 1 Stock accrued 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 were 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 would be 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 were 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 Stock were entitled to designate one person to serve on the Board of Directors of the Company. The holders of the Series A- 1 Stock were entitled to vote on an as converted to common stock basis together with the holders of our common stock on all matters presented to our 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 Stock elected otherwise, holders of Series A- 1 Stock would have been 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). Between September 22, 2017 and May 31, 2018, the holder of the Series A- 1 Stock converted all shares of Series A- 1 Stock into an aggregate of 2,500,000 shares of common stock and purchased an aggregate of 248,893 shares of common stock in consideration of the conversion of $896,015 of accrued dividends payable on the Series A- 1 Stock As a result of the forgoing conversions, there are no longer any issued and outstanding shares of Series A- 1 Stock as of December 31, 2018. Overall balances and conversion of Series A- 1 shares and accrued dividends into common stock has been as follows:
|  | Series A-1 |  |  | Accrued Dividends |
Balance – January 1, 2017 |  |  | 90,000 |  |  | $ | 270,000 |
Accrual of dividends – Q1 2017 |  |  |  |  |  |  | 135,000 |
Accrual of dividends – Q2 2017 |  |  |  |  |  |  | 135,000 |
Accrual of dividends – Q3 2017 |  |  |  |  |  |  | 135,000 |
Conversion into common stock – September 2017 |  |  | - |  |  |  | (540,000 | )
Conversion into common stock – October 2017 |  |  | (27,404 | ) |  |  | - |
Accrual of dividends – Q4 2017 |  |  |  |  |  |  | 101,658 |
Balance – December 31, 2017 |  |  | 62,596 |  |  | $ | 236,658 |
Accrual of dividends – Q1 2018 |  |  |  |  |  |  | 93,894 |
Conversion into common stock – April 2018 |  |  | (39,088 | ) |  |  | (330,552 | )
Accrual of dividends – Q2 2018 (until final conversion) |  |  |  |  |  |  | 25,463 |
Conversion into common stock – May 2018 |  |  | (23,508 | ) |  |  | (25,463 | )
Balance – December 31, 2018 |  |  | - |  |  | $ | - |
The Series A- 1 Stock contained 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 Stock was 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 majority of holders could have elected 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 (the “Series B- 1 Stock”) at a purchase price of $100.00 per share, for gross proceeds of $10,500,000. Shares of the Series B- 1 Stock were 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 an initial 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. During a conversion detailed in the table below, the Company waived a standstill provision to permit a holder of Series B- 1 Stock to increase its conversion limitation to 19.99% of the Company's issued and outstanding shares of common stock to be effective 61 days after such waiver. The Series B- 1 Stock accrued 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 majority of the outstanding shares of the Series B- 1 Stock elected otherwise, such dividends were 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 Stock were entitled to designate one person to serve on the Board of Directors of the Company. The holders of the Series B- 1 Stock were entitled to vote on an as converted to common stock basis together with the holders of our common stock on all matters presented to our 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 Stock elected otherwise, holders of Series B- 1 Stock would have been 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). Between March 23, 2018 and May 23, 2018, holders of shares of Series B- 1 Stock converted all shares of Series B- 1 Stock into an aggregate of 2,916,668 shares of common stock and purchased an aggregate of 131,229 shares of common stock in consideration of the conversion of $472,426 of accrued dividends payable on the Series B- 1 Stock. As a result of the forgoing conversions, there are no longer any issued and outstanding shares of Series B- 1 Stock as of December 31, 2018. Overall balances and conversion of Series B- 1 shares and accrued dividends into common stock has been as follows:
|  | Series B-1 |  |  | Accrued Dividends |
Balance – January 1, 2017 |  |  | 105,000 |  |  | $ | 131,250 |
Accrual of dividends – Q1 2017 |  |  |  |  |  |  | 65,625 |
Accrual of dividends – Q2 2017 |  |  |  |  |  |  | 65,625 |
Accrual of dividends – Q3 2017 |  |  |  |  |  |  | 65,625 |
Accrual of dividends – Q4 2017 |  |  |  |  |  |  | 65,625 |
Balance – December 31, 2017 |  |  | 105,000 |  |  |  | 393,750 |
Conversion into common stock – March 2018 |  |  | (60,420 | ) |  |  | (417,084 | )
Accrual of dividends – Q1 2018 |  |  |  |  |  |  | 62,268 |
Accrual of dividends – Q2 2018 (until final conversion) |  |  |  |  |  |  | 16,408 |
Conversion into common stock – May 2018 |  |  | (44,580 | ) |  |  | (55,342 | )
Balance – December 31, 2018 |  |  | - |  |  | $ | - |
The Series B- 1 Stock contained 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 Stock was convertible at the holder’s option at any time at the fixed conversion price of $3.60 per share; Quarterly Dividend Conversion Option: The majority of holders could have 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. 2. Common Stock 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 On March 23, 2018, the holders of Series B- 1 Stock converted shares and accrued dividends payable into a total of 1,794,190 shares of common stock. On April 3, 2018, the holder of Series A- 1 Stock converted shares and accrued dividends payable into a total of 1,177,598 shares of common stock. On May 23, 2018, the holders of Series B- 1 Stock converted shares and accrued dividends payable into a total of 1,253,707 shares of common stock. On May 31, 2018, the holder of Series A- 1 Stock converted shares and accrued dividends payable into a total of 660,073 shares of common stock. On August 22, 2018, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group LLC (the “Underwriter”) with respect to the issuance and sale of an aggregate of 1,200,000 units (“Units”) with each unit consisting of one share of common stock and a warrant to purchase 0.75 shares of common stock at an exercise price of $1.50 per share, in an underwritten public offering pursuant to the Underwriting Agreement. Each Unit was sold for a price of $1.50. The Warrants have a term of five years and are immediately exercisable. Pursuant to the Underwriting Agreement, the Company granted the Underwriters a 45 -day option to purchase up to an additional 180,000 shares of Common Stock and/or 135,000 Warrants to cover over-allotments, if any (the “Over-Allotment”). On August 22, 2018, the Underwriter exercised its Over-Allotment option in full on both the Common Stock and the Warrants. Pursuant to this agreement, 1,380,000 shares of common stock and warrants to purchase 1,035,000 shares of stock were issued on August 24, 2018 for aggregate gross proceeds of $2,070,000. The gross proceeds were reduced by a 7% commission ( $144,900 ) and $50,000 of underwriting expenses to net to $1,875,100 cash received. Costs of $143,945 were incurred during 2018 in relation to the issuance of common stock. Issuances to Directors, Executive Officers and Consultants During the year ended December 31, 2018, the Company issued 20,976 shares of common stock to its directors in lieu of payment of board fees, valued at $37,532. During the year ended December 31, 2017, the Company issued 11,244 shares of common stock to its directors in lieu of payment of board fees, valued at $32,030. During the year ended December 31, 2017, the Company issued 117,849 shares of common stock to consultancy firms in lieu of payment for services. The fair value at issuance was $354,585 and was expensed over the period of the services. Employees’ exercise options During 2018, no employee stock options were exercised. There were 4,167 employee stock options exercised resulting in the cashless issuance of 1,610 shares of common stock during 2017. 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. 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 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 warrants have a term of five years and an initial 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. Pursuant to the Underwriting Agreement with Maxim Group, on August 24, 2018 the Company issued Common Stock and Warrants to investors at a purchase price of $1.50 per unit which triggered the anti-dilution protection provision under this Securities Purchase Agreement. Due to this provision, the total number of outstanding and fully vested warrants was increased from 996,877 to 2,392,502, and the exercise price was reduced from $3.60 to $1.50 per share. The Company recognized a non-cash deemed dividend of $1,288,139 in connection with these adjustments. As a result of the early adoption of ASU 2017 - 11, 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. 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 initial 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. Pursuant to the Underwriting Agreement with Maxim Group, on August 24, 2018 the Company issued Common Stock and Warrants to the investors at a purchase price of $1.50 per unit which triggered the anti-dilution protection provision under this Securities Purchase Agreement. Due to this provision, the total number of outstanding and fully vested warrants for the investor was increased from 69,445 to 166,668, and the exercise price was reduced from $3.60 to $1.50 per share. The Company recognized a non-cash deemed dividend of $140,827 in connection with these adjustments. As a result of the early adoption of ASU 2017 - 11, 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. 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 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 |  |  |  | — |
Granted |  |  | 1,035,000 |  |  |  | 1.50 |  |  |  |  |  |  |  |  |
Increase due to trigger of anti-dilution provision feature |  |  | 1,492,848 |  |  |  | 1.50 |  |  |  |  |  |  |  |  |
Exercised |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Forfeited |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Expired |  |  | (145,841 | ) |  |  | 6.00 |  |  |  |  |  |  |  |  |
Outstanding, as of December 31, 2018 |  |  | 3,780,976 |  |  |  | 1.59 |  |  |  | 2.05 |  |  |  | — |
Vested or expected to vest at December 31, 2018 |  |  | 3,780,976 |  |  |  | 1.59 |  |  |  | 2.05 |  |  |  | — |
Exercisable at December 31, 2018 |  |  | 3,780,976 |  |  |  | 1.59 |  |  |  | 2.05 |  |  |  | — |

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- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 + Details
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