Concentration of Credit Risks
The Company maintains its cash with several financial institutions in Hawaii and New Zealand. Balances maintained with the US institutions are occasionally in excess of US FDIC insurance limits. As of December 31, 2017 and 2016, the Company had balances of $3,557,316 and $1,189,316, respectively, in excess of US federally insured limits of $250,000 per financial institution. The Company also maintained cash in a New Zealand bank with balances of $267,049 and $1,144,304 at December 31, 2017 and 2016, respectively. The New Zealand government does not provide any insurance for financial institution account losses. The Company has never experienced any losses related to these balances.
Concentration in Market Area
The Company manages hotel properties in Hawaii and New Zealand, and is dependent on the visitor industries in these geographic areas.
Fair Value of Financial Instruments
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, may be used to measure fair value. As of December 31, 2017 and 2016, there are no assets or liabilities measured at fair value on a recurring basis. The carrying values of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate fair value due to the relatively short-term maturities of these financial instruments. The carrying values of notes receivable and notes payable approximate fair value as these notes have interest rates or imputed interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
23
Long-Lived Assets
The Company regularly evaluates whether events or circumstances have occurred that indicate the carrying value of long-lived assets may not be recoverable. When factors indicate the asset may not be recoverable, the Company compares the related undiscounted future net cash flows to the carrying value of the asset to determine if impairment exists. If the expected undiscounted future net cash flows are less than the carrying value, an impairment charge is recognized based on the fair value of the asset. No impairments were indicated or recorded during the years ended December 31, 2017 and 2016.
Investment in Limited Liability Company
On July 23, 2010, the Company acquired a 7.0% common series interest in a limited liability corporation that owns a hotel located in Hawaii. The investment is accounted for as an equity method investment since the Company has significant influence over the investee. During the years ended December 31, 2017 and 2016, the Company recognized $48,714 and $75,525, respectively, in income resulting from the portion of net income attributable to its common series ownership interest. For the year ended December 31, 2017, the investee had sales of $812,915, gross profit of $735,053 and net income of $737,605. For the year ended December 31, 2016, the investee had sales of $856,896, gross profit of $768,111 and net income of $775,914. The Company does not anticipate that the amount of income from this investment will exceed 20% of its pretax income in future years.
Foreign Currency Translation and Transaction Gains/Losses
The US dollar is the functional currency of the Companys consolidated entities operating in the United States. The functional currency for the Companys consolidated entities operating outside of the United States is generally the currency of the country in which the entity primarily generates and expends cash. For consolidated entities whose functional currency is not the U.S. dollar, the Company translates its financial statements into U.S. dollars. Assets and liabilities are translated at the exchange rate in effect as of the financial statement date, and the line items of the results of operations are translated using the weighted average exchange rate for the year. Translation adjustments resulting from these translations are included as a separate component of stockholders equity in accumulated other comprehensive income (loss). Gains and losses resulting from foreign currency transactions are included in the consolidated statements of comprehensive income (loss).
Reclassifications
The Company has reclassified certain prior-period amounts to conform to the current-period presentation.
The Company reclassified food and beverage operating revenues and expenses into separate lines on the consolidated statements of comprehensive income in order to more accurately depict the results of operations.
Adoption of New Accounting Pronouncements
Deferred taxes In November 2015, FASB issued ASU no. 2015-17, Balance Sheet Classification of Deferred Taxes. The ASU simplifies the presentation of deferred taxes on a classified statement of financial position by classifying all deferred taxes and liabilities as noncurrent. The effective date of this change for public companies is for fiscal years beginning after December 15, 2016 with early application available to all entities as of the beginning of an interim or annual period. This update may be applied either prospectively or retrospectively to all periods presented. The Company chose to early adopt this change in accounting principle as of June 30, 2016.
In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The objective of this update is to simplify several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows and forfeiture rate calculations. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted ASU 2016-09 effective January 1, 2017, and plan to track forfeitures as they occur. The adoption of ASU 2016-09 did not have a material impact on our financial condition or results of operations.
In August 2016, the FASB issued ASU 2016-15, 2 which amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. An entity is required to make an accounting policy election to classify distributions received from equity method investees under either of the following methods:
Cumulative-earnings approach Under this approach, distributions are presumed to be returns on investment and classified as operating cash inflows. However, if the cumulative distributions received, less distributions received in prior periods that were determined to be returns of investment, exceed the entitys cumulative equity in earnings, such excess is a return of capital and should be classified as cash inflows from investing activities.
Nature of the distribution approach Under this approach, each distribution is evaluated on the basis of the source of the payment and classified as either operating cash inflows or investing cash inflows.
24
We adopted ASU 2016-15 effective January 1, 2017 using the cumulative earnings approach and elected to classify distributions received from equity method investees under the Cumulative-earnings approach.
Accounting Pronouncements Not Yet Adopted
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Companys financial statements upon adoption.
In May 2014, the FASB issued ASU 2014
‑
09,
Revenue from Contracts with Customers (Topic 606) (
ASU 2014
‑
09
). The FASB and the International Accounting Standards Board (
IASB
) initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would: (i) remove inconsistencies and weaknesses in revenue requirements; (ii) provide a more robust framework for addressing revenue issues; (iii) improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; (iv) provide more useful information to users of financial statements through improved disclosure requirements; and (v) simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. To meet those objectives, the FASB amended the FASB Accounting Standards Codification (
Codification
) and created a new Topic 606, Revenue from Contracts with Customers. The core principle of the guidance in ASU 2014
‑
09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance in this ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry specific guidance throughout the Industry Topics of the Codification. The ASU is effective for fiscal years beginning after December 15, 2017 (and interim periods within that period).
In periods subsequent to the initial issuance of this ASU, the FASB has issued additional ASUs clarifying items within Topic 606, as follows:
-
In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," which defers by one year the effective date of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.
-
In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (ASU 2016-08). The amendments in ASU 2016-08 serve to clarify the implementation guidance on principal vs. agent considerations.
-
In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (ASU 2016-10). The purpose of ASU 2016-10 is to clarify two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance (while retaining the related principles for those areas).
-
In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606) (ASU 2016-12). The purpose of ASU 2016-12 is to address certain issues identified to improve Topic 606 by enhancing guidance on assessing collectability, presentation of sales taxes and other similar taxes collected from customers, noncash consideration and completed contracts and contract modifications at transition.
-
In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which amends certain aspects of the Boards new revenue standard, ASU 2014-09. This ASU addresses thirteen specific issues pertaining to Topic 606, Revenue from Contracts with Customers.
Our qualitative evaluation of ASU 2014-09 included identifying the potential differences in the timing and/or method of revenue recognition for our contracts and, ultimately, the expected impact on our business processes, systems and controls. As part of this evaluation, we have reviewed our customer contracts and applied the five-step model of the new standard to each contact type identified thats associated to our material revenue streams and have compared the results to our current accounting practices. Areas of impact will include the timing of revenue recognition during the calendar year of certain incentive fees which we receive from one of our managed properties. The timing of our revenue recognition for this contract will have no effect on our annual financial statements, however it may impact our quarterly interim financial statement as we will accelerate the recognition of our incentive fee on a pro-rated basis over the fiscal year if it is determined that this incentive fee shall be earned during the fiscal year.
We have adopted this standard on January 1, 2018, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard using the retrospective adoption method. Based on our assessment, the impact that ASU 2014-09 will have on our financial statements is expected to remain substantially unchanged.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The
25
new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company has $634,780 of operating lease obligations as of December 31, 2017 (see Note 4) and upon adoption of this standard it will record a ROU asset and lease liability for the present value of these leases which will have a material impact on the balance sheet. However, the statement of income recognition of lease expenses is not expected to change from the current methodology.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). The objective of this update is to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those annual periods and is to be applied utilizing a retrospective approach. Early adoption is permitted. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test, which required a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which the reporting units carrying value exceeds its fair value, limited to the carrying value of the goodwill. ASU 2017-04 is effective for financial statements issued for fiscal years, and interim periods beginning after December 15, 2019. Upon adoption, we will follow the guidance in this standard for the goodwill impairment testing.
2. Related Party Transactions
Hanalei Bay International Investors (HBII)
As disclosed in Note 3, the Company has a receivable of $490,459 from Hanalei Bay International Investors (HBII) and this note is fully reserved. The Chairman and CEO of the Company is the sole shareholder of HBII Management, Inc., the managing General Partner of HBII. During the years ended December 31, 2017 and December 31, 2016, the Company collected $108,230 and $390,635, respectively.
Investment in LLC
In July 2010, the Company acquired a 7.0% interest in a limited liability company that purchased one of the properties managed by the Company. After the purchase, the chief financial officer of Castle Resorts & Hotels, Inc. was appointed treasurer of a subsidiary of the limited liability company that owns the property (see Note 1).
Related Party Loans
In 2002, the Companys Chairman and CEO advanced $117,316 to the Company for general working capital. During 2017, the Company made payments against the note of $37,919 and also made payments of $2,085 in interest accrued on the note. The note was paid in full in December 2017.
In 2004, as part of the Companys purchase of real estate in New Zealand, the seller of the real estate provided an interest free loan on a portion of the total purchase price (see Note 6). The sellers of the real estate collectively own 0.7% of the outstanding common stock of the Company as of December 31.2017. The loan does not carry interest and the Company has imputed interest expense of $186,000 and $200,040 for the years ended December 31, 2017 and 2016. The New Zealand real estate loan matures on March 31, 2019. An additional extension to March 31, 2024 is available if the Company remains current with its obligations in connection with the purchase of the New Zealand real estate.
Rental of Unit
In September of 2013, an entity which is 57% owned by the Companys Chairman and CEO purchased the front office unit at one of the managed properties, and the Company entered into a rental agreement for the front office unit. The unit was previously owned by the Association of Apartment Owners of the property and was purchased in order to secure the Companys rental of the space which is necessary for the Companys operations at the property. The rental agreement is on the same terms as the previous owner and there were no increases in rent or other charges. The agreement expires on September 30, 2021 and the Company has the option to extend the agreement for two periods of five years each after September 30, 2021. The agreement calls for monthly rental payments of $6,000 plus Hawaii general excise tax. For each of the years ended December 31, 2017 and 2016, the Company made rental payments of $75,000 for the unit.
26
3. Notes Receivable
|
|
| |
Notes receivable at December 31 consisted of the following:
|
2017
|
|
2016
|
Note receivable from HBII, which is secured through an assignment of HBIIs
right to receive proceeds through its financial interest in an unrelated real estate development company (see Notes 2 and 4).
|
$ 490,459
|
|
$ 598,689
|
|
|
|
|
Less Reserve for Uncollectible Notes
|
(490,459)
|
|
(598,689)
|
|
|
|
|
Note receivable from Oceanfront Realty, a third party, at an interest rate of 2%.
Note is payment for the sale of one of the Companys management contracts. Payments are payable based on 30% of the net profits originating from the contract.
|
184,900
|
|
188,878
|
Notes Receivable, Total
|
184,900
|
|
188,878
|
Less Current Portion
|
(15,000)
|
|
(15,000)
|
|
|
|
|
Notes Receivable, Non-current
|
$ 169,900
|
|
$ 173,878
|
4. Commitments and Contingencies
Leases
The Company leases two office spaces that expire on October 31, 2019 and February 28, 2020. The Company also leases office space at one of its managed properties from a related party that expires September 30, 2021. For the years ended December 31, 2017 and 2016, the Company paid $401,326 and $402,291, respectively, in lease expense for these leases. As of December 31, 2017, the future minimum rental commitment under these leases was $916,030.
| |
Year
|
Amount
|
2018
|
$ 399,770
|
2019
|
366,205
|
2020
|
93,805
|
2021
|
56,250
|
Total
|
$ 916,030
|
Management Contracts
The Company manages several hotels and resorts under management agreements expiring at various dates. Several of these management agreements contain automatic extensions for periods of 1 to 10 years.
In addition, the Company has sales, marketing and reservations agreements with other hotels and resorts expiring at various dates through December 2022. Several of these agreements contain automatic extensions for periods of one month to five years. Fees received are based on revenues, net available cash flows or commissions as defined in the respective agreements.
Contractor Settlement
The Company owns the Podium unit in New Zealand, and there was a claim made against the contractor by the Body Corporate (that represents all the unit owners, similar to an association of apartment owners in the United States) for defective work on the outer waterproofing skin of the building. A settlement was reached and the amounts recovered from the contractor were not sufficient to cure the waterproofing defect. As a result the Body Corporate imposed a special assessment on all the owners of units in the building. During 2017, the Company had paid NZ $323,347 (US $229,641) which represented the amount due under the initial special assessment. At a meeting of the Body Corporate held in November of 2017, the Body Corporate determined that the amounts collected were not sufficient to remedy the defect and as a result, the Body Corporate imposed an additional special assessment in the amount of NZ $1,041,113 (US$739,398), payable in 20 monthly installments of NZ $52,056 (US $36,969), representing the Companys share of the total special assessment. Payment of this special assessment began in November 2017. These payments were capitalized by the Company since the repairs are expected to improve and extend the life of the property. At December 31, 2017, the Company has paid a total of NZ $413,879 (US $293,937) for the initial and additional special assessment classifying this as construction in progress on the accompanying balance sheet. The Company also recorded present value of the balance of the assessment for the additional $646,493 that is to be paid in 2018 and 2019 in construction in progress with an offsetting $430,995 recorded as other current liabilities and $215,498 as other long term liabilities. Construction will commence in the first quarter of 2018.
27
Litigation
From time to time, there are claims and lawsuits pending against the Company involving complaints, which are normal and reasonably foreseeable in light of the nature of the Companys business. The ultimate liability of the Company, if any, cannot be determined at this time. Based upon consultation with counsel, management does not expect that the aggregate liability, if any, resulting from these proceedings would have a material effect on the Companys consolidated financial position, results of operations or liquidity.
5. Employee Benefits
The Company has a 401(k) Profit Sharing Plan (the Plan) available for its USA employees. Any employee with one-year of continuous service and 1,000 credited hours of service, who is at least twenty-one years old, is eligible to participate. For the years ended December 31, 2017 and 2016, the Company made no contributions.
The Company has a mandated retirement plan in New Zealand. All employees are automatically enrolled in this program when hired but have two to four weeks to opt out at their discretion. Employees elect to contribute between thee to eight percent of their gross earnings and the Company is required to also contribute a minimum of three percent for each enrolled employee. For the years ended December 31, 2017 and 2016, the Company made contributions of $34,036 and $36,211, respectively.
In November 2017, the Company, as part of an amendment to the employment contracts with its Chief Executive Officer and Chief Operating Officer, granted a total of 1,750,000 fully vested warrants (see note 8). The contracts also called for deferred compensation of $1,000,000 payable to the Chief Executive Officer in ten annual installments of $100,000 beginning November 1, 2027, and $500,000 payable to the Chief Operating Officer in ten annual installments of $50,000 beginning November 1, 2027. The deferred compensation was valued using a sinking fund approach and the Company expensed $9,200 as an expense and as a long term liability as of December 31, 2017. The deferred compensation vests to the employee over the term of their employment contracts (ten years for the Chief Executive Officer and five years for the Chief Operating Officer). The Company is amortizing the net present value of the deferred compensation over the length of the employment contracts.
28
6. Long Term Debt
|
|
| |
Long term debt at December 31 consisted of the following:
|
2017
|
|
2016
|
|
|
|
|
Note dated 12/31/02 from the Companys CEO, with interest at 10%, due on or before 12/31/17 with monthly payments of $3,334 commencing January 2015, unsecured.
|
$ -
|
|
$ 37,919
|
Less current portion
|
-
|
|
37,919
|
|
|
|
|
Long term debt to related parties, net of current portion
|
$ -
|
|
$ -
|
|
|
|
|
Related party note dated 12/31/04, payable in New Zealand dollars, with an original face value of NZ $8.6 million and secured by real estate in New Zealand and a general security agreement over the assets of the Companys New Zealand subsidiary, with the Company as guarantor. The note calls for payments of NZ $20,000 (US $14,204 at 12/31/17) per month. The maturity date is March 31, 2019 with an extension to March 31, 2024 available if the Company is not in default. The agreement does not provide for interest to be paid on this note payable so the Company has imputed interest of $186,000 and $200,040 for the years ended December 31, 2017 and 2016, respectively, so that the combined imputed interest rate on the note payable at December 31, 2017 and 2016 is approximately 5.4%.
|
3,321,463
|
|
3,531,705
|
|
|
|
|
Note dated 12/31/04, payable to a New Zealand bank, Westpac, for a loan in favor of Mocles at the banks prime rate plus 2% which as of December 31, 2017 and 2016 was 5.2% and 5.4%, respectively. The note calls for monthly interest payments and payments against principal of NZ $20,000 (US $14,204). The maturity date is March 31, 2019 with an extension to March 31, 2024 available if the Company is not in default.
|
1,381,339
|
|
1,513,550
|
|
|
|
|
Revolving line of credit with a bank for up to $600,000 as of December 31, 2017 and 2016, respectively. The line is secured by a general security interest in the Companys assets. Draws against the line will bear interest at the banks base lending rate plus 1.5%. The line has a termination date of October 31, 2017 and was not renewed. The Company made no draws against this line in 2017 or 2016.
|
-
|
|
-
|
|
|
|
|
Term loan with a local bank dated June 19, 2015 with an original face value of $200,000 secured by a general security interest in the Companys assets. The note calls for sixty monthly payments of $3,855 to be applied to principal and interest at a fixed rate of 5.875%. The maturity date is June 19, 2020. The Company fully paid off the term loan in December 2017.
|
-
|
|
145,892
|
|
|
|
|
Equipment loan with a local bank dated March 31, 2016. The loan is secured by vehicles purchased by the Company for one of its properties. The note calls for sixty monthly payments of $749 to be applied to Principal and interest at a fixed rate of 4.43%. The maturity date is March 31, 2021. The Company fully paid off the loan in December 2017.
|
-
|
|
34,715
|
|
|
|
|
Revolving line of credit with a bank for up to NZ $150,000 (US$103,905). The line is secured by a general security interest in the Companys assets in New Zealand. Draws against the line will bear interest at the banks base lending rate plus 2%. The line is cancellable at any time by the bank.
|
-
|
|
-
|
|
|
|
|
Subtotal
|
$ 4,702,802
|
|
$ 5,225,862
|
Less Current Portion
|
340,896
|
|
378,694
|
Notes Payable, Non-current
|
$ 4,361,906
|
|
$ 4,847,168
|
29
The five year payout schedule for long term debt, is as follows (assuming extensions of the maturity date of the related party note and Westpac note to March 31, 2024):
| |
Year
|
Amount
|
2018
|
$ 340,896
|
2019
|
340,896
|
2020
|
340,896
|
2021
|
340,896
|
2022
|
340,896
|
Thereafter
|
2,998,322
|
Total
|
$ 4,702,802
|
7. Preferred Stock
In 1999 and 2000, the Company issued a total of 11,050 shares of $100 par value preferred stock to certain officers and directors. Dividends are cumulative from the date of original issue and are payable semi-annually, when, and if declared by the board of directors beginning July 15, 1999, at a rate of $7.50 per annum per share. At December 31, 2017, undeclared and unpaid dividends on these shares were $1,513,551 or $136.97 per preferred share. At December 31, 2016, undeclared and unpaid dividends on these shares were
$1,430,358 or $129.44 per preferred share. These dividends are not accrued as a liability, as no declaration has occurred. However dividends are considered for basic and diluted earnings per share computation (see Note 1). The shares are nonvoting, and each share of preferred stock is convertible into 33.33 shares of the Companys common stock at an exercise price of $3.00 per share. As of January 15, 2001, the preferred stock is redeemable at the option of the Company at a redemption price of $100 per share plus accrued and unpaid dividends.
8. Common Stock
Common Stock Options and Warrant
s
The Company does not have Stock Based Incentive, Stock Purchase or Stock Option or Warrant Plans; however there were warrants granted to employees of the Company in November 2017, as discussed below.
In November 2017, the Company, as part of an amendment to the employment contracts with its Chief Executive Officer and Chief Operating Officer, granted a total of 1,750,000 fully vested warrants. The employment contracts were filed on the Companys Form 8-K, filed on November 13, 2017. The warrants expire at various expiration dates and at various stock prices. Using the Black-Scholes model, the warrants were valued as shown in the table below. The total expense of $47,300 was recorded as an expense and an increase of the same amount to Additional Paid in Capital. No warrants were exercised as of December 31, 2017. Black-Scholes inputs included: Volatility 68.63%, expected term 5-10 years, Risk free rate 0.85%, Dividend yield 0%.
Per share using
Warrants Issued
Exercise Price
Expiration
Black-Scholes
Total
750,000
$ 5.00
10/31/2022
$ 0.0151
$11,340
500,000
7.00
10/31/2024
0.0261
13,060
500,000
10.00
10/31/2027
0.0458
22,900
In December 2016, the Company granted a total of 200,000 warrants to purchase the Companys common stock at a price of $1.00 per share, exercisable on or before December 12, 2021 by issuing 50,000 warrants to each of four employees. Using the Black-Scholes model, the warrants were valued as shown in the table below. The total fair value of the warrants of $29,054 was recorded as an expense and an increase of the same amount to Additional Paid-in Capital. Black-Scholes inputs included: Volatility 75.32%, Expected Term 5 years, Risk Free Rate 1.9%, Dividend Yield 0%.
Per share using
Warrants Issued
Exercise Price
Expiration
Black-Scholes
Total
200,000
$1.00
12/12/2021
$ 0.14527
$29,054
C
hanges in warrants were as follows:
|
|
|
|
| |
|
|
|
|
|
|
|
Number of
Shares
|
Weighted Average
Exercise Price
|
Remaining Contractual Term (in Years)
|
Intrinsic
Value
|
|
Outstanding and exercisable at January 1, 2016
|
400,000
|
$ 1.00
|
2.42
|
$ -
|
|
Granted
|
200,000
|
1.00
|
3.95
|
-
|
|
Outstanding and exercisable at December 31, 2016
|
600,000
|
$ 1.00
|
3.26
|
-
|
|
Granted
|
1,750,000
|
7.00
|
6.83
|
-
|
|
Outstanding and exercisable at December 31, 2017
|
2,350,000
|
$ 5.47
|
5.31
|
$ -
|
|
The following table summarizes information about compensatory warrants outstanding at December 31, 2017: