5. SHAREHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2019

Stockholders' Equity Note [Abstract]

SHAREHOLDERS' EQUITY

Preferred Stock

On October 11, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series C Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 100,000 shares of Series C Preferred Stock, par value $10.00. The Series C Preferred Stock was entitled to accruing dividends (payable, at the Company’s options, in either cash or stock) of 5% per annum until October 10, 2016, and 3% per annum until October 10, 2018.

In February and March 2018, the Company issued 1,005,677 shares of Common Stock for the conversion of 85,561 shares of Series C Convertible Preferred Stock and $1,050,468 of related Series C dividends. As of March 31, 2019, there were no shares of Series C Preferred Stock outstanding and all accrued dividends were converted to Common Stock in the first quarter of 2018.

Series C Preferred dividends were $0 and $28,061 ended March 31, 2019 and March 31, 2018, respectively. As an inducement to encourage the Series C Preferred Stock shareholders to convert their Series C Preferred Stock to Common Stock prior to October 10, 2018, the Company offered to apply the full dividend, (accelerated to October 10, 2018) upon the shareholders exercise of their conversion. The fair value of the extra shares of Common Stock issued to Series C Stock shareholders was $103,197 for dividends that would have accrued from the date of their conversion through October 10, 2018.

The Company evaluated the Series C preferred stock under FASB ASC 815 and determined that they do not qualify as derivative liabilities. The Company then evaluated the Series C preferred stock for beneficial conversion features under FASB ASC 470-30 and determined that none existed.

On March 13, 2019, the Company established a new series of preferred stock consisting of 1,200,000 shares of Series F Convertible Preferred Stock, par value of $10.00 per share. Each share of Series F Convertible Preferred Stock may be converted at the option of the holder, at any time, into 2 shares of common stock. Additionally, each holder of Series F Convertible Preferred Stock is entitled to vote on all matters submitted for a vote of the Company’s shareholders with votes equal to the number of shares of common stock into which such holder’s Series F shares could then be converted. The Series F Convertible Preferred Stock is senior to the Company’s common stock as to the payment of dividends (if any) and the distribution of assets. Upon liquidation of the Company, holders of Series F Convertible Preferred Stock are entitled to a liquidation preference of $5 per share. As of March 31, 2019, there were 1,136,815 shares of the Series F Preferred stock issued and outstanding.

Common Stock

On March 6, 2018, the Company issued 226,514 shares of Common Stock for the conversion of $1,200,000 in Related Party convertible debt and $385,594 in accrued interest. In February and March 2018, the Company issued 1,005,677 shares of Common Stock for the conversion of 85,561 shares of Series C Convertible Preferred Stock and $1,050,468 of related Series C dividends.

Warrants

At December 31, 2018 and March 31, 2019 there were no warrants outstanding.

Stock Options

A summary of the status of the stock options granted for the three-month period ended March 31, 2019, and changes during the period then ended is presented below: 

	For the Three-months Ended March 31, 2019
	Options		Weighted Average Exercise Price
Outstanding at beginning of period		15,500	$	6.00
Granted		-		-
Exercised		-		-
Forfeited		2,000	$	6.00
Expired		-		-
Outstanding at end of period		13,500	$	6.00

As of March 31, 2019						As of March 31, 2019
Stock Options Outstanding						Stock Options Exercisable
Exercise Price		Number Outstanding		Weighted-Average Remaining Contract Life		Weighted- Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$	6.00		13,500		3.58	$	6.00		3,833	$	6.00

On December 31, 2017, the Company granted a total of 11,500 options to five employees. The shares vest in equal annual amounts over three years and the aggregate fair value of the awards was determined to be $61,322. As of the date of this filing no expense has been recognized. On April 13, 2018, the Company granted a total of 2,000 options to one employee and one contractor. The shares vest in equal annual amounts over three years and the aggregate fair value of the awards was determined to be $8,943 which will be expensed over the three-year vesting period. On August 31, 2018 the Company granted a total of 2,000 options to one employee. The shares vest in equal annual amounts over three years and the aggregate fair value of the awards was determined to be $16,405 which will be expensed over the three-year vesting period.

During the three-month period ending March 31, 2019, option expense of $1,056 was recognized.