Note 7 - Recapitalization

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note 7 – Recapitalization

During the second quarter 2016, the Company executed a series of Exchange Agreements with holders of a majority of its outstanding shares of preferred stock. Under the terms of the agreements, each series of preferred stock held by such holders was exchanged for a combination of cash and shares of common stock in the amounts set forth in the table below.

Series of Preferred Stock	Amount of Cash per Share		Number of Shares of Common Stock Per Share
Convertible Preferred	$	0.165		1.95
Series B	$	0.0825		2.43
Series C	$	2.708		31.27
Series D	$	0.36232		5.072464

The Company entered into a separate exchange agreement (the “SBA Exchange Agreement”) with the United States Small Business Administration (“SBA”), pursuant to which it agreed to pay $250,000 to the SBA in exchange for all shares of preferred stock, all 2,084,167 shares of common stock then owned by the SBA, and the 1,658,540 shares of common stock which would have been issuable to the SBA if it had participated in the Exchange Agreements on the same terms as the other holders of the Company’s preferred stock. On June 16, 2016, the Company conducted closings under the Exchange Agreements and the SBA Exchange Agreement, pursuant to which it issued an aggregate of 4,427,498 shares of common stock and made aggregate cash payments of $509,664. In connection with the closings, the Company issued notices of redemption to holders of the 208,971 remaining issued and outstanding shares of Series B Preferred Stock and the 46,092 remaining issued and outstanding share of Series D Preferred Stock for a combination of cash and shares of common stock on the same terms as the Exchange Agreements (the “Redemption”). We anticipate that the redemption will be completed by the end of the third quarter in 2016.

The Company determined the difference between the fair value of the Company’s common stock and the cash paid to the holders of the preferred stock and the carrying amount of the preferred stock (net of issuance costs of $46,090) which amounted to $1,103,597 and added this amount to net income in the calculation of earnings per share (see Note 4 above). In addition, the discount upon exchange of the preferred stock, net of the related fees, was recorded in accumulated deficit since the discount represents a return from the preferred shareholders. The Company accounted for the purchase and subsequent retirement of the common stock from the SBA as the purchase of treasury stock and was recorded in the amount of $147,451 based on the amount paid to repurchase such shares.

As a result of the approval of the Redemption by the holders of requisite majorities of the Series B Preferred Stock and Series D Preferred Stock, the Company has recorded the discount upon exchange of the preferred stock as of June 30, 2016. Upon redemption of the 208,971 remaining issued and outstanding shares of Series B Preferred Stock and the 46,092 remaining issued and outstanding shares of Series D Preferred Stock, the Company will issue 741,600 additional shares of Common Stock and make aggregate cash payments of $33,941. At June 30, 2016, the Company has recorded an extinguishment liability of $33,941, which is included in accounts payable and accrued expenses on the balance sheet and represents the cash to be paid upon redemption of the remaining preferred stock.