Quarterly report pursuant to Section 13 or 15(d)

Note 9 - Stockholders' Equity

v3.20.2
Note 9 - Stockholders' Equity
9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
NOTE
9—
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 have a term of
5
years and are exercisable at
$0.50
per share. Subsequent, to the public offering the underwriter exercised its over-allotment option and paid approximately
$198,000
for
567,400
additional shares of common stock and
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 at the time also Chief Executive Officer and Director of Wand Dental, a wholly owned subsidiary of Milestone Scientific. The warrants have a term of
5
years and are exercisable at
$0.50
per share.
 
In the
second
quarter of
2020,
the Company completed
two
public offerings. In
April 2020,
a Common Stock offering generating gross proceeds of approximately
$5.1
 million (
5,420,000
common shares and
2,710,000
warrants). The combined price of the shares and warrants was
$0.95
per share. The warrants are exercisable at a price of
$1.20
per share and have an expiration of
three
(
3
) years from the issue date. In
June 2020,
the Company completed a
second
Common Stock offering generating gross proceeds of approximately
$14.6
million (
6,770,000
common shares and
3,749,000
warrants). The combined price of the shares and warrants was 
$2.15
per share. The warrants are exercisable at
$2.60
and expire
three
(
3
) years from the issue date.
 
WARRANTS
 
The following table summarizes information about shares issuable under warrants outstanding as of
September 30, 2020 :
 
   
Warrant shares outstanding
   
Weighted Average exercise price
   
Weighted Average remaining life
   
Intrinsic value
 
                                 
Outstanding at January 1, 2020
   
1,074,171
    $
0.50
    $
4.10
     
956,012
 
Issued
   
6,459,000
     
2.01
     
3.00
     
-
 
Exercised    
(1,133,975
)    
0.87
     
-
     
-
 
Expired or cancelled
   
-
     
-
     
-
     
-
 
Outstanding and exercisable at September 30, 2020
   
6,399,196
    $
1.95
    $
2.73
     
880,449
 
                                 
 
The following table summarizes information about shares issuable under warrants outstanding as of 
September 30, 2019
 
   
Warrant shares outstanding
   
Weighted Average exercise price
   
Weighted Average remaining life
   
Intrinsic value
 
                                 
Outstanding at January 1, 2019
   
1,592,775
    $
2.55
    $
0.21
     
-
 
Issued
   
1,749,171
     
0.50
     
4.35
     
560,199
 
Exercised
   
(57,750
)    
0.50
     
-
     
-
 
Expired or cancelled
   
-
     
-
     
-
     
-
 
Outstanding and exercisable at September 30, 2019
   
3,284,196
    $
1.49
    $
2.30
     
560,199
 
 
PREFERRED STOCK
 
 
In
May 2014,
Milestone completed a private placement, which raised gross proceeds 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 were 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 were mandatory convertible on
May 14, 2019,
into the number of shares of common stock equal to the stated value divided by
$2.54
 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.
 
On
May 14, 2019,
the mandatory conversion date, the Preferred Stock was converted at a rate of
$1.17
per common share resulting in the issuance of
5,982,906
shares of common stock.
 
SHARES TO BE ISSUED
 
As of
September 30, 2020
and
2019,
there were
2,202,229
and
2,294,734
shares to be issued whose issuance has been deferred to the Chief Executive Officer, Chief Financial Officer, and other employees of Milestone Scientific, respectively.  
 
As of
September 30, 2020,
and
2019,
there were
149,498
and
351,612
shares, respectively, to be issued to non-employees,  that will be issued for services rendered. The number of shares was fixed at the date of grant and were fully vested upon grant date.
 
The following table summarizes information about shares to be issued on
September 30, 2020
and
2019,
respectively.
 
   
September 30, 2020
   
September 30, 2019
 
                 
Shares-to-be-issued, outstanding January 1, 2020 and 2019, respectively
   
2,375,762
     
2,470,566
 
Granted in current period
   
363,956
     
1,392,460
 
Issued in current period
   
(387,991
)    
(1,216,680
)
Shares-to be issued outstanding September 30, 2020 and 2019, respectively
   
2,351,727
     
2,646,346
 
 
OUTSTANDING EQUITY INSTRUMENTS IN EXCESS OF AUTHORIZED SHARES
 
As a result of the shares and warrants issued in the public and private offerings as well as other issuance of common stock during
2019,
the Company did
not
have a sufficient number of authorized shares of common stock to cover the exercise and issue of all outstanding equity instruments. Therefore, as of
September 30, 2019,
the warrants issued in the public and private placement were classified as liabilities. As long as the warrants remained liability-classified, they were continued 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 initial fair value of the warrants was determined using a Black-Scholes option pricing model. The following assumptions were used to value the warrants at the reclassification date in
2019:
 
                 
   
2016 Warrants
   
2019 Warrants
 
Fair Value of Common Stock    
$.36- $.83
    $
0.33
 
Expected Term (years)
 
.25-.5 years
   
4.9 years
 
Volatility
   
86%
-
100%
     
83
%
Dividend yield
   
0
%    
0
%
Exercise Price
  $
2.55
    $
0.50
 
Risk-free interest rate
   
1.88%
-
2.09%
     
2.30
%
Weighted average fair value of warrants granted
  $
-
    $
0.19
 
Number of shares underlying warrants granted
   
1,512,067
     
1,749,171
 
 
On the date of issuance and reclassification the fair value of the warrants was approximately
$376,000.
 
As these warrants are liability-classified, they were revalued on
September 30, 2019  
using the following assumptions:
   
2016 Warrants
   
2019 Warrants
 
Fair Value of Common Stock   $
0.83
    $
0.08
 
Expected Term (years)
 
.02 years
   
4.4 years
 
Volatility
   
86
%    
86
%
Dividend yield
   
0
%    
0
%
Exercise Price
  $
2.55
    $
0.50
 
Risk-free interest rate
   
1.88
%    
1.55
%
Weighted average fair value of warrants granted
  $
-
     
61.00
%
Number of shares underlying warrants granted
  $
1,512,067
    $
1,691,421
 
 
For the
three
and
nine
months ended
September 30, 2019
the loss on the liability classified warrants was approximately
$680,542
and
$674,792,
respectively.
 
Additionally, approximately
2.6
million of shares to be issued  are classified as liabilities until there are sufficient number of authorized shares of common stock to cover the issuance of such shares. These shares were valued at the trading price of a share of the Company's common stock (
$0.83
as of
September 30, 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. For the
three
and
nine
months ended
September 30, 2019
the loss on the liability classified shares to be issued was approximately
$1.2
million, respectively.  
 
On
December 17, 2019,
the Company's shareholders approved an increase to the authorized share limit to
75,000,000.
On
December 17, 2019,
the Company reclassified all derivative liabilities related to the insufficient number of authorized shares to stockholders' equity. As such, there were
no
derivative liabilities during the
nine
 months ended
September 30, 2020.