Quarterly report pursuant to Section 13 or 15(d)

Note 8 - Stockholders' Equity

v3.19.1
Note 8 - Stockholders' Equity
3 Months Ended
Mar. 31, 2019
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
NOTE
8—
STOCKHOLDERS’ EQUITY
 
PUBLIC OFFERING AND PRIVATE PLACEMENT
 
In
February 2019,
Milestone Scientific consummated a public offering and a private placement of Common Stock. The public offering generated gross proceeds of approximately
$2.0
million for the issuance of
5,715,000
shares of common stock and warrants to purchase
1,428,750
shares of common stock. The warrants term is
5
 years and they are exercisable at
$.50.
Subsequent to the public offering the underwriter exercised its overallotment option and paid approximately
$198,000
for  
567,400
additional shares of common stock and as well as
141,850
warrants.
 
Also, in
February 2019,
the Company generated gross proceeds from a private placement of approximately
$250,000
for
714,286
shares of common stock and warrants to purchase
178,571
shares of common stock from  
Bp4
 S.p.A., a principal stockholder of Milestone Scientific, that exercised its right to participate on a pro-rata basis on the recent public offering.
Bp4’s
CEO is a director of Milestone Scientific and also Chief Executive Officer and Director of Wand Dental, a wholly owned subsidiary of Milestone Scientific. The warrants term is
5
 years and they are exercisable at
$.50.
 
WARRANTS
 
The following table summarizes information about shares issuable under warrants outstanding at
March 31, 2019:
 
   
Warrant shares outstanding
   
Weighted Average exercise price
   
Weighted Average remaining life
   
Intrinsic value
 
Outstanding at January 1, 2018
   
1,500,000
    $
2.55
     
0.73
     
-
 
Issued
   
1,749,171
    $
0.50
     
4.85
     
-
 
Exercised
   
-
     
-
     
-
     
-
 
Expired or cancelled
   
-
     
-
     
-
     
-
 
Outstanding and exercisable at March 31, 2019
   
3,249,171
    $
1.45
     
2.94
    $
 
 
                                 
Exercisable at March 31, 2019
   
3,249,171
    $
1.45
     
2.94
    $
-
 
 
PREFERRED STOCK
 
 
In
May
of
2014,
Milestone completed a private placement, which raised gross proceeds in the total of
$10
million, from the sale of
$3
million of Milestone Scientific common stock (
two million
shares at
$1.50
per share) and
$7
million of our Series A Convertible Preferred Stock ("preferred stock") (
7,000
shares at
$1,000
per share).  These shares are convertible, at the option of the holder, into the number of shares of common stock equal to the stated value divided by
$2.545,
subject to anti-dilution adjustments, at any time before
May 14, 2019.
These shares are mandatory convertible on
May 14, 2019,
into the number of shares of common stock equal to the stated value divided by
$2.545
per share or
$1.50
per share if the common stock does
not
trade at
$3.15
for period of time, as defined by the agreements, both subject to anti-dilution adjustment.
 
The conversion ratio and anti-dilution adjustment becomes effective if a triggering event occur such as; issuance of stock dividends or distributions, subdivisions, splits, issuance of stock purchase rights, debt and distributions, cash dividends or distributions, self-tender offers and exchange offers, rights plans and issuance below the conversion price, as defined in the Investment Agreement. Generally, each share of preferred stock entitles the holder to vote together with the holders of Milestone Scientific common stock, as a single class, on all matters submitted for the approval of the holders of Milestone Scientific common stock and has the number of votes equal to the number of shares of our common stock into which they are then convertible.  In addition, preferred stock is also entitled to share, pari passu, in any cash dividends declared on Milestone Scientific common stock on a converted basis.
 
As of
March 31, 2019,
the Preferred Stock would be converted at a value of
$1.17
per share resulting in
5,982,906
shares of common stock at the mandatory conversion  date,
May 14, 2019,
provided that there are
no
other issuance of common stock that would require further adjustment to the forced conversion price.
 
SHARES TO BE ISSUED
 
As of
March 31, 2019
and
December 31, 2018,
there were
2,127,843
 and
1,908,813
shares, respectively, whose issuance has been deferred under the terms of an employment agreements with the Chief Executive Officer, Chief Financial Officer and other employees of Milestone Scientific. Such shares will be issued to each party upon termination of their employment. As of
March 31, 2019
and
December 31, 2018,
there were
679,867
 and
561,752
 shares, respectively, that will be issued to non-employee for services rendered. The number of shares was fixed at the date of grant and were fully vested upon grant date.
 
SHARES AND WARRANTS IN EXCESS OF AUTHORIZED SHARES
 
On
February 6, 2019,
as a result of the shares and warrants issued in the public and private offerings, the Company does
not
have a sufficient number of authorized shares of common stock to cover the exercise and issue of approximately
1,840,000
outstanding equity instruments. Therefore, the warrants issued in the public and private placement are classified as liabilities and will continue to be liability-classified until there are sufficient number of authorized shares of common stock to cover the shares issuable upon exercise of the warrants. As long as the warrants are liability-classified, they will continue to be re-measured each reporting period, with any increase or decrease in value recorded as a loss or gain in the condensed consolidated statement of operations. 
 
The fair value of the warrants are determined using a Black-Scholes option pricing model.  The following assumptions were used to value the warrants at the grant date:
 
   
Warrants
 
Expected Term
 
5 years
 
Volatility
   
85
%
Dividend yield
   
0.00
%
Exercise Price
  $
0.50
 
Risk-free interest rate
   
2.50
%
Weighted average fair value of warrants granted
  $
0.22
 
Number of shares underlying warrants granted
   
1,749,171
 
 
As these warrants are liability-classified, they were revalued at
March 31, 2019
using the following assumptions:
 
   
Warrants
 
Expected Term
   
4.9
 
Volatility
   
85
%
Dividend yield
   
0.00
%
Exercise Price
  $
0.50
 
Risk-free interest rate
   
2.23
%
Weighted average fair value of warrants granted
  $
0.19
 
 
Additionally, approximately
90,000
of the shares to be issued  are also classified as liability until there are sufficient number of authorized shares of common stock to cover the issuance of the shares. These shares were valued at the trading price of a share of the Company’s common stock (
$0.33
 upon the creation of the liability and as of
March 31, 2019)
and they will continue to be re-measured each reporting period, with any increase or decrease in value recorded as a loss or gain in the condensed consolidated statement of operations. The Company plans to seek shareholder approval to increase the number of authorized shares of Common Stock at the next Shareholder’s meeting.