Common Stock Purchase Warrants:   In 2016, the Company issued warrants to acquire 375,510 shares of common stock, 202,500 issued further to the Offering and 140,501 issued in connection with the conversion of preferred stock and bridge loans upon closing of the Offering. In March and April 2016, the Company issued 17,100 warrants to purchase shares of common stock at $20.00 per share in connection with the issuance of restricted stock. In May 2017, 3,939 warrants to purchase common stock at $0.052 were exercised, in a cashless exercise, in exchange for the net equivalent shares of common stock. In June 2016, 10,204 warrants to purchase shares of common stock at $20.00 per share were issued in connection with the conversion of debt to equity. From July to August 2017, 53,860 warrants to purchase shares of common stock at $20.00 per share were issued in connection with the issuance of convertible promissory notes.

 

The Company filed Tender Offer Statements with the Securities and Exchange Commission on October 13, 2017, offering the Company’s warrant holders the opportunity to purchase one share of common stock for each warrant held at a price of $4.50. The Company filed a definitive Proxy Statement with the Securities and Exchange Commission on October 12, 2017 to obtain shareholder approval for the Tender Offer and such approval was obtained. In November 2017 warrant holders exercised 288,750 warrants and the Company received net proceeds of approximately $1,190,000 after commission and fees. The Company considers the warrant amendment to be of an equity nature as the amendment allowed the warrant holder to exercise a warrant and receive a common share which represents an equity for equity exchange. Therefore, the change in the fair value before and after the modification of approximately $896,000 will be treated as a change in additional paid-in capital (APIC) as an inducement charge.  The cash received upon exercise in excess of par is also accounted through APIC. As of December 31, 2017, and 2016 warrants to purchase 154,416 and 399,101 shares of common stock, respectively, were outstanding. Unexercised warrants expire from 2021 to 2022.

 

Restricted Shares:  In August 2016, the Company authorized the issuance of 4,000 shares of restricted common stock pursuant to a services agreement with an investment relations firm and recognized $7,000 and $28,000 of compensation expense related to restricted shares in 2017. In addition, the Company authorized the issuance of 12,500 shares of restricted common stock to Jawahar Tandon pursuant to a consulting agreement and recognized the full $563,000 of compensation expense related to the restricted shares during the year ended December 31, 2016.

 

In November 2016, the Company entered into a securities purchase agreement providing for the issuance and sale to an investor of 33,333 shares of the Company’s common stock. The shares issued in this private placement were sold at a purchase price per share of $15.00, for aggregate gross proceeds to the Company of approximately $500,000 and aggregate net proceeds to the Company, after deducting for placement agent fees and expenses, of approximately $446,000. The investor was issued an additional 8,000 shares in May 2017 in a non-cash transaction. The additional share issuance was intended to adjust the aggregate shares awarded to the investor in relation to future investment rounds that were transacted at $11.50 per share. Under the same private placement memorandum, the Company issued 15,151 shares of restricted common stock to its Chairman of the Board at a purchase price of $16.50 per share for gross proceeds of $250,000 and net proceeds of approximately $226,000.

 

In March 2017, the Company issued 22,600 shares of common stock at $15.00 per share in a private offering for aggregate gross proceeds of $339,000 and net proceeds, after deducting for commission and placement agent fees and expenses, of approximately $307,000. These shareholders were issued an additional 4,748 shares in July 2017 in a non-cash transaction to adjust the aggregate shares awarded to those investors in relation to a future investment round at $11.50. In April 2017, the Company issued an additional 11,600 shares at $11.50 for aggregate gross proceeds of $133,400 and net proceeds, after deducting for commission, of approximately $112,000.

 

On June 23, 2017, the Company issued 17,241 shares of common stock at $5.80 per share in exchange for a $100,000 promissory note dated June 7, 2017 due to GSB Holdings, Inc., a family owned company of David Clarke, who at the time was the Company’s CEO and Chairman of the Board. The issuance price was $0.50 greater than the closing price of the Company’s common stock on the issuance date.

 

During the second quarter of 2017, the Company issued 8,750 fully vested shares of restricted common stock and recognized $56,150 of non-cash, stock-based compensation at the time of issuance. The Company issued 1,500 of the 8,750 shares for product marketing, 1,250 shares pursuant to an employee severance agreement, 2,500 additional shares to its investor relations firm and 3,500 shares as compensation for the activities of a special committee of its Board.

 

Also, during the second quarter of 2017, the Company issued 9,500 shares of restricted common stock to certain employees. The Company recognized $22,000 of non-cash, stock-based compensation in 2017. Another $45,000 of stock-based compensation remains to be amortized over 16 months.

 

During the third quarter of 2017, the Company issued 3,000 shares of restricted common stock to the three independent members of its Board, recognizing $33,000 of non-cash, stock-based compensation in 2017 with no remaining amount to be amortized.

 

During the fourth quarter of 2017, the Company issued 7,000 shares of restricted common stock to three officers and one board member and issued 10,000 shares of restricted common stock to its Chairman and CEO, recognizing $76,188 of non-cash, stock-based compensation in 2017. Another $41,113 of stock-based compensation remains to be amortized over 22 months.

 

Preferred Stock: In March 2016, the Company issued a confidential Private Placement Memorandum (“PPM”) for a maximum of 3,000,000 shares of Series A Convertible Preferred Stock, with a purchase price of $1.00 per share and convertible into one share of the Company’s common stock and having an 8%, noncumulative dividend. Pursuant to the PPM, as of June 30, 2016, 2,802,430 shares of Series A Preferred Stock were subscribed for net proceeds of approximately $2.4 million. In July 2016, the Company completed the Offering in which all shares of Series A Preferred Stock was converted into 62,276 shares of common stock and 62,276 warrants at the public offering price of $45.00 per share and the issuance of 13,404 shares of common stock further to the conversion.