Quarterly report pursuant to Section 13 or 15(d)

Note 8 - Stockholders' Equity

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Note 8 - Stockholders' Equity
6 Months Ended
Jun. 30, 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
$0.50.
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
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’ terms are 
5
 years and they are exercisable at
$0.50
 
WARRANTS
 
The following table summarizes information about shares issuable under warrants outstanding at
June 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
    $
0.48
     
-
 
Issued
   
1,749,171
    $
0.50
    $
4.60
     
-
 
Exercised
   
-
     
-
     
-
     
-
 
Expired or cancelled
   
-
     
-
     
-
     
-
 
Outstanding and exercisable at June 30, 2019    
3,341,946
    $
1.48
    $
2.60
     
-
 
 
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 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 occurs 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 as converted basis.
 
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 issuances of
5,982,906
shares of common stock.
 
SHARES TO BE ISSUED
 
As of
June 30, 2019  
2,185,910
shares to be issued  to employees were classified as liability until there are sufficient number of authorized shares of common stock to cover the issuance of the shares.   As of
December 31, 2018,
there were   
1,908,813
shares, 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
June 30, 2019,
717,456
 shares to be issued to non-employees were classified as liability until there are sufficient number of authorized shares of common stock to cover the issuance of the shares. As of
December 31, 2018,
there were
561,752
 shares, respectively, that will be issued to non-employees 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
 
As a result of the shares and warrants issued in the public and private offerings as well as other issuances of common stock during
2019,
the Company does
not
have a sufficient number of authorized shares of common stock to cover the exercise and issue of approximately
4,850,000
 outstanding equity instruments. Therefore, the warrants issued in the public and private placements during
2019
and
2016
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 is determined using a Black-Scholes option pricing model.  The following assumptions were used to value the warrants at the reclassification to liability date:
 
   
2016 Warrants
   
2019 Warrants
 
Expected Term
 
0.4 years
   
5 years
 
Volatility
   
100
%    
85
%
Dividend yield
   
0.00
%    
0.00
%
Exercise Price
  $
2.55
    $
0.50
 
Risk-free interest rate
   
2.09
%    
2.50
%
Weighted average fair value of warrants granted
   
-
    $
0.22
 
Number of shares underlying warrants granted
   
201,044
     
1,749,171
 
 
As these warrants are liability-classified, they were revalued at
June 30, 2019
using the following assumptions:
 
   
2016 Warrants
   
2019 Warrants
 
Expected Term
 
0.4 years
   
4.6 years
 
Volatility
   
100
%    
84
%
Dividend yield
   
0.00
%    
0.00
%
Exercise Price
  $
2.55
    $
0.50
 
Risk-free interest rate
   
2.09
%    
1.76
%
Weighted average fair value of warrants granted
  $
-
    $
0.21
 
 
For the
three
and
six
months ended
June 30, 2019
the gain(loss) on the liability classified warrants was approximately (
$34,000
) and
$6,000,
respectively.
 
Additionally, approximately
2,900,000
 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 ( 
$0.36
as of
June 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
six
months ended
June 30, 2019
the gain(loss) on the liability classified shares to be issued was approximately
$47,000,
respectively.  The Company plans to seek shareholder approval to increase the number of authorized shares of Common Stock at the next Shareholder’s meeting.