Capital Stock

12 Months Ended

Dec. 31, 2018

Equity [Abstract]

Capital Stock

NOTE 9 – CAPITAL STOCK

Common Stock - At-the-Market Offering

In July 2017, the Company entered into an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with WestPark Capital, Inc. (“WestPark Capital”) pursuant to which the Company could sell, at its option, up to an aggregate of $5 million in shares of its common stock through WestPark Capital, as sales agent. Sales of shares under the Sales Agreement (the “2017 ATM Offering”) were made, in accordance with one or more placement notices delivered by the Company to WestPark Capital, which notices set parameters under which shares could be sold. The 2017 ATM Offering was made pursuant to a shelf registration statement by methods deemed to be “at the market,” as defined in Rule 415 promulgated under the Securities Act of 1933. The Company paid WestPark a commission in cash equal to 3% of the gross proceeds from the sale of shares in the 2017 ATM Offering. Additionally, the Company reimbursed WestPark Capital for $25,000 of expenses incurred in connection with the 2017 ATM Offering. During the year ended December 31, 2017, the Company sold an aggregate of 7,817,157 shares in the 2017 ATM Offering and received proceeds, net of commissions and expenses, of $4,101,013.

In October 2018, the Company entered into another Sales Agreement with WestPark Capital pursuant to which the Company could sell, at its option, up to an aggregate of $1.9 million in shares of its common stock through WestPark Capital, as sales agent. Sales of shares under the Sales Agreement (the “2018 ATM Offering”) were made, in accordance with one or more placement notices delivered by the Company to WestPark Capital, which notices shall set parameters under which shares could be sold. The 2018 ATM Offering was made pursuant to a shelf registration statement by methods deemed to be “at the market,” as defined in Rule 415 promulgated under the Securities Act of 1933. The Company will pay WestPark a commission in cash equal to 3% of the gross proceeds from the sale of shares in the 2018 ATM Offering. Additionally, the Company reimbursed WestPark Capital for $18,000 of expenses incurred in connection with the 2018 ATM Offering.

During the year ended December 31, 2018, in connection with the 2017 and 2018 ATM Offerings, the Company sold an aggregate of 2,433,963 shares of its common stock and received net proceeds of $747,205, net of commissions and expenses of $40,956.

Preferred Stock

The Company has authorized 10,000,000 shares of preferred stock with a par value of $0.001. The Board of Directors shall determine the designations, rights, preferences, privileges and voting rights of the preferred stock as well as any restrictions and qualifications thereon. As of December 31, 2018, the Company had 1,085 shares of 12.0% Series A Convertible Preferred Stock and 835 shares of 12.0% Series B Convertible Preferred Stock issued and outstanding.

Series A Convertible Preferred Stock

In January 2017, the Company issued 1,200 shares of 12% Series A Convertible Preferred Stock (the “Series A Preferred Stock”) for aggregate gross proceeds of $1.2 million. The Series A Preferred Stock (i) accrues a cumulative dividend, commencing July 1, 2017, at 12% payable, if and when declared, quarterly; (ii) is convertible at the option of the holder into shares of common stock at a conversion price of $0.20 per share, (iii) has a liquidation preference of $1,000 per share plus accrued and unpaid dividends; and (iv) is redeemable at the Company’s option, commencing on the second anniversary of the issue date, at a premium to issue price, which premium decreases from 12% to 0% following the fifth anniversary of the issue date, plus accrued and unpaid dividends.

During 2018 and 2017, respectively, the Company paid $132,900 and $70,500 of dividends on its Series A Preferred Stock.

During 2018 and 2017, respectively, 90 shares and 25 shares of Series A Preferred Stock were converted to 450,000 shares and 125,000 shares of Common Stock. At December 31, 2018, there were 1,085 shares of Series A Preferred Stock issued and outstanding.

Series B Convertible Preferred Stock

In May 2017, the Company received $909,600 from the sale of 909.6 Units (the “Units”), each Unit consisting of one share of 12.0% Series B Convertible Preferred Stock (the “Series B Preferred Stock”) and a Warrant (the “Series B Warrant”).

The Series B Preferred Stock (i) accrues a cumulative dividend at 12% payable, if and when declared, quarterly; (ii) is convertible at the option of the holder into shares of common stock at a conversion price of $0.36 per share, (iii) has a liquidation preference of $1,000 per share plus accrued and unpaid dividends; and (iv) is redeemable at the Company’s option, commencing on the second anniversary of the issue date, at a premium to issue price, which premium decreases from 12% to 0% following the fifth anniversary of the issue date, plus accrued and unpaid dividends.

During 2018 and 2017, respectively, the Company paid $106,050 and $81,920 of dividends on its Series B Preferred Stock.

During 2018 and 2017, respectively, 60 shares and 14.6 shares of Series B Preferred Stock were converted to 166,667 shares and 40,556 shares of Common Stock. At December 31, 2018, there were 835 shares of Series B Preferred Stock issued and outstanding.

Warrants

Series B Warrants. The Series B Warrants, issued as part of Units along with Series B Preferred Stock, are exercisable, for a period of 9 months, expiring February 3, 2018, to purchase an aggregate of 3,001,680 shares of common stock at $0.43 per share. The relative value of the warrants were valued on the date of grant at $194,934 using the Black-Scholes option-pricing model with the following parameters: (1) risk-free interest rate of 1.10%; (2) expected life in years of 0.75; (3) expected stock volatility of 92.36%; and (4) expected dividend yield of 0%.

Bridge Loan Warrants. The Bridge Loan Warrants, issued in conjunction with the Bridge Loan Notes, are exercisable, for a period of one year, expiring June 23, 2018, to purchase an aggregate of 600,000 shares of common stock at $0.50 per share. The relative fair value of the warrants were valued on the date of grant at $128,734 using the Black Scholes option-pricing model with the following parameters: (1) risk free interest rate of 1.20%; (2) expected life in years of 1.00; (3) expected stock volatility of 93.67%; and (4) expected dividend yield of 0%. The relative fair value of the warrants was recorded as debt discount of the Bridge Loan Notes and is amortized over the life of the notes.

Consultant Warrants. In September 2017, the Company issued warrants (the “Consultant Warrants”) to a consultant. The Consultant Warrants were exercisable to purchase 50,000 shares of common stock at $0.55 per share and expire December 31, 2021. The Consultant Warrants are first exercisable, subject to continuing provision of services under a services agreement, as to 12,500 shares on each of December 6, 2017, September 6, 2018, September 6, 2019 and September 6, 2020. The consultant was terminated in May 2018, resulting in the termination of the unvested portion of the warrant as to 37,500 shares. The relative value of the warrants were valued on the date of grant at $16,132 using the Black-Scholes option-pricing model with the following parameters: (1) risk-free interest rate of 1.63%; (2) expected life in years of 4.32; (3) expected stock volatility of 99.75%; and (4) expected dividend yield of 0%. The Company recognized $1,770 and $1,811, respectively, of stock-based compensation expense related to the vesting of the Consultant Warrants during the years ended December 31, 2018 and 2017.

A summary of warrant activity and related information for 2018 is presented below:

	Warrants			Weighted-Average Exercise Price		Aggregate Intrinsic Value
Outstanding at January 1, 2017		—		$	—
Issued		3,651,680			0.44
Exercised		—			—
Expired		—			—
Outstanding at January 1, 2018		3,651,680		$	0.44
Issued		—			—
Exercised		—			—
Expired		(3,601,680	)		0.44
Outstanding at December 31, 2018		50,000		$	0.55	$	—
Exercisable at December 31, 2018		12,500		$	0.55	$	—