STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2019

Stockholders' Equity Attributable to Parent [Abstract]

NOTE 8 — STOCKHOLDERS’ EQUITY

Preferred stock

As of March 31, 2019 and December 31, 2018, the Company had 105,000 shares of Series A Convertible Preferred Stock (the “Preferred Stock”), issued at $10 per share, paying a 5% cumulative annual dividend and convertible for common stock at a price of $4.385 per share. For the three months ended March 31, 2019, preferred stockholders earned, but were not paid, $12,945 in annual dividends, or equivalent to 2,952 shares of common stock based on a conversion price of $4.385 per share. As of March 31, 2019 and December 31, 2018, cumulative and unpaid dividends were $205,685 and $192,740, respectively, or equivalent to 46,906 and 43,954 shares of common stock, respectively, based on a conversion price of $4.385 per share, respectively.

On any matter presented to the stockholders of the Company, holders of Preferred Stock are entitled to cast the number of votes equal to the number of shares of common stock into which the shares of Preferred Stock are convertible as of the record date to vote on such matter. As long as any shares of Preferred Stock are outstanding, the Company has certain restrictions on share repurchases or amendments to the Certificate of Incorporation in a manner that adversely affects any rights of the Preferred Stock holders.

In addition, the preferred stockholders have a liquidation preference for purposes of which the Preferred Stock would be valued at $10 per share plus accrued cumulative annual dividend. At March 31, 2019 and December 31, 2018, the liquidation preference was valued at $1,255,685 and $1,242,740, respectively. In the event of any liquidity event, holders of each share of Preferred Stock shall be entitled to be paid out of the assets of the Company legally available before any sums shall be paid to holders of common stock.

Common stock

As of March 31, 2019 and December 31, 2018, the Company had 7,623,227 and 7,579,995 shares of common stock issued and outstanding, respectively.

In January 2019, the Company issued 20,000 shares of its common stock of the Company upon the exercise of options, for proceeds of $19,000. In January and February 2019, the Company issued 10,000 and 1,395 shares of its common stock, respectively, upon the exercise of outstanding warrants to purchase an aggregate of 11,395 shares of common stock, for aggregate proceeds of $23,450. In January and February 2019, the Company issued an aggregate of 11,837 shares of its common stock upon the cashless exercise of outstanding options and outstanding warrants to purchase 17,733 shares of common stock.

Options

As of March 31, 2019 and December 31, 2018, the Company had outstanding options to purchase 880,585 and 997,989 shares of common stock, respectively.

						Weighted				Intrinsic
				Weighted		Average				Value
	Number of			Average		Remaining				of
	Options			Exercise Price		Term		Exercisable		Options
Outstanding at December 31, 2018		997,989		$	4.67		2.14		925,545	$	4,705,220
Granted		28,700			10.55		5.00				-
Exercised		(32,687	)		1.43
Forfeited/Expired		(113,417	)		10.28
Outstanding at March 31, 2019		880,585		$	4.27		2.27		808,057	$	4,785,984

On February 7, 2019, the Company granted an aggregate of 28,700 incentive stock options to employees newly hired since June 4, 2018.

The options to purchase shares of common stock are exercisable at $10.55 per share, have a term of five years, and vest as to 50% of the options at the vesting commencement date, which is generally one year from the date of hire (vesting commencement dates range from June 4, 2019 through January 25, 2020), and vesting as to the remaining 50% of the options, in eight equal quarterly installments commencing on the first day of each calendar quarter following the vesting commencement date and installments continuing on the first day of each of the seven calendar quarters thereafter. All vesting is subject to the employee’s continued service through the vesting date. The exercise price was determined using the closing price of the Company’s common stock on February 7, 2019. The Black-Scholes value on the grant date of the options was $258,392.

Option grants during the three months ended March 31, 2019 were valued using the Black-Scholes pricing model. Significant assumptions used in the valuation include expected term of

3.25

3.50

years, expected volatility of

281.65

% to 292.28%, risk free interest rate of 2.46% to 2.48%, and expected dividend yield of 0%.

For the three months ended March 31, 2019 and 2018, total stock compensation expense related to the options totaled $72,274 and $145,046, respectively. The outstanding unamortized stock compensation expense related to options was $293,475 (which will be recognized through December 2021) as of March 31, 2019.

Warrants

Below is a table summarizing the Company’s outstanding warrants as of March 31, 2019 and December 31, 2018:

						Weighted		Intrinsic
				Weighted		Average		Value
	Number of			Average		Remaining		of
	Warrants			Exercise Price		Term		Warrants
Outstanding at December 31, 2018		1,781,715		$	4.20		2.23	$	8,930,058
Granted		-
Exercised		(16,441	)		2.31
Forfeited/Expired		(22,266	)		2.75
Outstanding at March 31, 2019		1,743,008		$	4.24		2.02	$	9,395,841

For the three months ended March 31, 2019 and 2018, the Company incurred warrant-based compensation expense of $0 and $1,393, respectively. There was no outstanding unamortized stock-based compensation expense related to warrants as of March 31, 2019.

Restricted stock units (“RSUs”)

The following table summarizes the restricted stock unit activity for the three months ended March 31, 2019:

Restricted stock units issued as of December 31, 2018			222,514
Granted			-
Total Restricted stock units issued at March 31, 2019			222,514
Vested at March 31, 2019			167,007
Unvested restricted stock units as of March 31, 2019			55,507

For the three months ended March 31, 2019 and 2018, the Company incurred RSU-based compensation expense of $376,626 and $220,864, respectively. The outstanding unamortized stock-based compensation expense related to RSUs was $111,596 (which will be recognized through April 2019) as of March 31, 2019.