SHAREHOLDERS’ EQUITY

12 Months Ended

Dec. 31, 2018

Equity [Abstract]

SHAREHOLDERS’ EQUITY

              Preferred Stock

                On December 19, 2016, the Company filed an amendment to its Certificate of Incorporation to authorize the issuance of 20,000,000 shares of blank-check preferred stock at $0.001 par value, of which 3,825,000 shares were reserved for the Amalgamation Agreement. The Board of Directors will be authorized to fix the designations, rights, preferences, powers and limitations of each series of the preferred stock.

The Company filed a Certificate of Designations effective on December 30, 2016 which sets aside 5,000,000 shares of Preferred Stock as Series A Preferred Stock. The Series A Preferred Stock holders have no voting rights and have an aggregate liquidation value of $11,800,316 at December 31, 2018. The Series A Preferred Stock also carries a coupon payment obligation of 1.5% of the liquidation value per share ($3.03) per year in cash or additional Series A Preferred Stock, calculated by taking the 30-day average closing price for a share of common stock for the month immediately preceding the coupon payment date which is made annually. For the years ended December 31, 2018 and 2017, the annual coupon is $172,015 and $169,281, respectively, which has been added to the liquidation value of the preferred stock. The 2017 coupon is higher than that disclosed in the 2017 10-K due to a misapplication of the intended calculation of the coupon rate. The Series A Preferred Stock have no voting or conversion rights. If purchased, redeemed, or otherwise acquired (other than conversion), the preferred stock may be reissued. In April 2019, the Company will pay the annual coupon for the year ended December 31, 2017.

            Common Stock

In November 2016, the majority shareholders approved an amendment to the Company’s Certificate of Incorporation to increase the Company’s authorized shares of common stock from 1,100,000 to 25,000,000, to issue up to 2,000,000 shares of blank check preferred stock and to make effective, a reverse stock split at a range of 1 for 500 through 1 for 3,000 immediately followed by a forward split of the outstanding common stock at an exchange rate of 50 for 1 through 300 for 1 to reduce the number of authorized shares of the Company’s common stock, subject to the Board of Directors’ discretion.

In January 2017, the Company completed a reverse split of 1-for 3,000 immediately followed by a forward split of 300 for 1. As a result of the split every ten shares of common stock outstanding were consolidated into one share, reducing the number of common shares outstanding on the effective date from 10,989,608 to 1,098,960. All share and per share information on this Form 10-K has been retroactively adjusted to reflect the reverse stock split. As a result of the round up during the reverse split followed by the forward split the Company reduced its shares outstanding by 303 shares.

The Company has authorized and reserved for future issuance 480,880 shares of common stock and 3,347,304 shares of preferred stock with respect to the remaining exchangeable shares to be issued as a result of the ShipTime acquisition.

Share Repurchase

During 2017, the Company entered into three agreements to repurchase exchangeable shares of ShipTime common stock. Each ShipTime exchangeable share exchanges into 311 preferred shares and 45 common shares of the Company. The total shares exchanged in these transactions were 14,535 common shares and 100,453 preferred shares. The allocated discount on the repurchase of the preferred stock was $1.77 per share of preferred stock and has been recorded in accumulated deficit, and reduced the net loss available to common shareholders in accordance with ASC 260-10-S99-2. The repurchase of the common shares was recorded at an allocated cost of $1.83 per share.

In January 2018, the Company entered into an agreement to repurchase 109 exchangeable shares of ShipTime common stock. The total shares exchanged in this transaction were 4,905 common shares and 33,899 preferred shares of the Company. The allocated discount on the repurchase of the preferred stock was $1.87 per share and has been recorded in accumulated deficit, and reduced the net loss available to common shareholders. The repurchase of the common shares was recorded at an allocated cost of $1.59 per share. In April 2018, the Company entered in a second agreement with a shareholder to purchase 120 exchangeable shares of ShipTime common stock. The total shares exchanged in this transaction were 5,400 common shares and 37,320 preferred shares of the Company. The discount on the repurchase of preferred stock was $1.90 per share and has been recorded in accumulated deficit, and reduced the net loss available to common shareholders. The repurchase of the common shares was recorded at an allocated cost of $1.58 per share. In August 2018, the Company entered in an additional agreement with a shareholder to purchase 200 exchangeable shares of ShipTime common stock. The total shares exchanged in this transaction were 9,000 common shares and 62,200 preferred shares of the Company. The discount on the repurchase of preferred stock was $1.87 per share and has been recorded in accumulated deficit, and was added to the net loss available to common shareholders. The repurchase of the common shares was recorded at an allocated cost of $1.58 per share.

Share-based Incentive Plans

During the years ended December 31, 2018 and 2017, the Company had three stock option plans that include both incentive and non-qualified options to be granted to certain eligible employees, non-employee directors, or consultants of the Company. In 2017 there were 37,500 stock options granted to board members. The options vested immediately and expire if not exercised within ten years, the exercise price is $3.30 per share. As a result of the issuance during 2017, the Company recorded a share-based compensation expense of $118,572.

On March 23, 2018, the Board of Directors voted to approve the 2018 Stock Option Plan which reserves 450,000 non-qualified stock options to be granted to employees. The Company has three additional stock option plans that include both incentive and non-qualified stock options to be granted to certain eligible employees, non-employee directors, or consultants of the Company. The Company granted 183,700 stock options to employees and consultants during the quarter ended March 31, 2018 and an additional 31,477 during the quarter ended December 31, 2018. The options have vesting periods of immediately and over a two-year period, they expire if not exercised within ten years from grant date, and the exercise price is $4.10 and $3.50, respectively per share. During 2018, the Board of Directors voted to approve Executive Compensation by means of issuance of 193,584 preferred shares valued at $24,628. In total, during the years ended December 31, 2018 and 2017, the Company recorded share-based compensation expense of $599,799 and $118,572, respectively. During 2018, as a result of the resignation of one employee the Company recorded 23,333 expired options and an additional 16,667 that were cancelled.

Active Plans:

2018 Plan

On March 23, 2018, the Company adopted the 2018 Non-Qualified Stock Option Plan (the "2018 Plan"). The purpose of the 2018 Plan is to provide long-term incentives and rewards to those employees of the Company, and any other individuals, whether directors, consultants or advisors who are in a position to contribute to the long-term success and growth of the Company. The options granted have a 10-year contractual term and have a vesting period that ranges from one hundred percent on the date of grant to fully vest over a two-year period. There are currently 274,823 shares reserved for future issuance under this plan. Information with respect to stock options granted under this plan during the year ended December 31, 2018 is as follows:

	Number of shares		Weighted average exercise price per share
Options outstanding at January 1, 2018		-	$	-
Granted		215,177		4.01
Cancelled		(16,667)		4.10
Expired		(23,333)		4.10
Options outstanding at December 31, 2018		175,177	$	3.99

2012 Plan

On October 15, 2012, the Company adopted the 2012 Non-Qualified Stock Option Plan (the "2012 Plan"). The purpose of the 2012 Plan is to provide long-term incentives and rewards to those employees of the Company, and any other individuals, whether directors, consultants or advisors who are in a position to contribute to the long-term success and growth of the Company. The options granted have a 10-year contractual term and vest one hundred percent on the date of grant. There are no shares reserved for future issuance under this plan. Information with respect to stock options granted under this plan during the year ended December 31, 2018 is as follows:

	Number of shares		Weighted average exercise price per share
Options outstanding at January 1, 2018		36,000	$	0.98
Granted		-		-
Cancelled		-		-
Exercised		-		-
Options outstanding at December 31, 2018		36,000	$	0.98

2011 Plan

On February 1, 2011, the Company adopted the 2011 Non-Qualified Stock Option Plan (the "2011 Plan"). Under the 2011 Plan, employees and consultants may elect to receive their gross compensation in the form of options, exercisable at $0.98 per share, to acquire the number of shares of the Company's common stock equal to their gross compensation divided by the fair value of the stock on the date of grant. The options granted have a 10-year contractual term and have vesting periods that range from one hundred percent on the date of grant to one-third immediately, one-third vesting in 18 months and the final one-third vesting in 36 months from the date of the grant. There are no shares reserved for issuance under this plan. Information with respect to stock options granted under this plan during the year ended December 31, 2018 is as follows:

	Number of shares		Weighted average exercise price per share
Options outstanding at January 1, 2018		43,000	$	3.00
Granted		-		-
Cancelled		-		-
Exercised		-		-
Options outstanding at December 31, 2018		43,000	$	3.00

2002 Plan

The 2002 Stock Option Plan (“2002 Plan”) provides for the award of qualified and non-qualified options for up to 60,000 shares. The options granted have a ten-year contractual term and have a vesting schedule of either immediately, two years, or four years from the date of grant. There are no shares reserved for issuance under this plan. Information with respect to stock options granted under this plan during the year ended December 31, 2018 is as follows:

	Number of shares		Weighted average exercise price per share
Options outstanding at January 1, 2018		16,000	$	23.33
Granted		-		-
Cancelled		-		-
Exercised		-		-
Options outstanding at December 31, 2018		16,000	$	23.33

        Fair value of issuances

The fair value of the Company's option grants under the 2018, 2012, 2011, and 2002 Plans was estimated at the date of grant using the Black-Scholes-Merton model with the following weighted average assumptions:

	2018
Expected term (based upon historical experience)	5.6 years
Expected volatility	218	%
Expected dividends	None
Risk free interest rate	2.68	%

For the years ended December 31, 2018 and 2017, the Company recorded share-based compensation expense related to stock options of $575,171 and $118,572, respectively, and are included in general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

The Company has unrecognized share-based compensation expense of $180,941 for options outstanding as of December 31, 2018 which will be recognized in fiscal year 2019.

Information pertaining to options outstanding and exercisable at December 31, 2018 is as follows:

Options Outstanding						Options Exercisable
Exercise Prices		Number of shares		Weighted Average Remaining contractual Life (In Years)		Number of shares		Weighted Average Remaining contractual Life (In Years)
$	0.98		52,500		4.93		52,500		4.93
$	3.30		37,500		8.75		37,500		8.75
$	3.50		31,477		9.76		10,492		9.76
$	4.10		143,700		9.23		67,900		9.23
$	72.50		5,000		2.86		5,000		2.86
			270,177		8.27		173,392		7.67

Summary of all stock option plans during the year ended December 31, 2018 is as follows:

	Number of Shares		Weighted Average Price		Weighted Average Remaining Contractual Life (In Years)		Aggregate Intrinsic Value
Options exercisable at January 1, 2018		95,000	$	5.66
Granted		215,177		4.01
Cancelled		(16,667)		4.10
Expired		(23,333)		4.10
Options outstanding at December 31, 2018		270,177	$	4.58	8.27	$	112,088
Options exercisable at December 31, 2018		173,392	$	4.92	7.67	$	112,088

The aggregate intrinsic value of options is calculated as the difference between the exercise price of options and the fair value of the Company’s common stock.  

Warrants

From time to time, the Company issues warrants to purchase share of the Company’s common stock to investors, note holders and to non-employees for service rendered or to be rendered in the future.

A summary of the warrant activity during the year ended December 31, 2018 is as follows:

	Number of Shares Subject to Warrants Outstanding		Weighted Average Exercise Price
Warrants outstanding - January 1, 2018		34,425	$	0.87
Granted		-	$	-
Exercised		-	$	-
Warrants outstanding and exercisable - December 31, 2018		34,425	$	0.87
Weighted average remaining contractual life of the outstanding warrants in years		3.0 years