Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 21, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | FC Global Realty Inc | |
Entity Central Index Key | 711,665 | |
Document Type | 10-Q | |
Trading Symbol | FCRE | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 11,868,619 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 2,184 | $ 948 |
Prepaid expenses and other current assets | 425 | 646 |
Total current assets | 2,609 | 1,594 |
Non-current assets: | ||
Investment properties | 2,055 | 2,055 |
Investment in other company, net | 1,806 | 1,806 |
Property and equipment, net | 5 | 5 |
Other assets, net | 318 | 334 |
Total non-current assets | 4,184 | 4,200 |
Total assets | 6,793 | 5,794 |
Current liabilities: | ||
Notes payable | 577 | 778 |
Accounts payable | 514 | 612 |
Accrued compensation and related expenses | 573 | 467 |
Other accrued liabilities | 2,760 | 2,450 |
Total current liabilities | 4,424 | 4,307 |
Non-current liabilities: | ||
Option to purchase Redeemable Convertible Preferred Stock (Note 5) | 3,986 | 4,390 |
Note payable, net of current portion | 453 | 454 |
Total non-current liabilities | 4,439 | 4,844 |
Total liabilities | 8,863 | 9,151 |
Commitment and contingencies (Note 4) | ||
Redeemable Convertible Preferred Stock Series B, $.01 par value; 15,000,000 shares authorized at March 31, 2018 (unaudited) and December 31, 2017; 3,725,000 and 1,500,000 issued and outstanding at March 31, 2018 (unaudited) and December 31, 2017, respectively, net of amount allocated to option to purchase additional shares; Aggregate liquidation preference $3,807 and $1,503 at March 31, 2018 (unaudited) and December 31, 2017, respectively (Note 5) | 5,036 | 87 |
Stockholders' deficit (Note 5): | ||
Common Stock, $.01 par value, 500,000,000 shares authorized at March 31, 2018 (unaudited) and December 31, 2017; 11,868,619 shares issued and outstanding at March 31, 2018 (unaudited) and December 31, 2017 | 119 | 119 |
Additional paid-in capital | 132,460 | 132,446 |
Accumulated deficit | (138,718) | (135,022) |
Accumulated other comprehensive loss | (1,141) | (1,162) |
Total stockholders' deficit attributable to FC Global Realty Incorporated | (7,279) | (3,618) |
Noncontrolling interest | 173 | 174 |
Total stockholders' deficit | (7,106) | (3,444) |
Total liabilities, redeemable convertible preferred stock and stockholders' deficit | 6,793 | 5,794 |
Preferred A Stock [Member] | ||
Stockholders' deficit (Note 5): | ||
Preferred Stock | $ 1 | $ 1 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Common stock, par value (in dollars per share) | $ .01 | $ 0.01 |
Common stock, authorized | 500,000,000 | 500,000,000 |
Common stock, issued | 11,868,619 | 11,868,619 |
Common stock, outstanding | 11,868,619 | 11,868,619 |
Preferred A Stock [Member] | ||
Preferred stock, par value (in dollars per share) | $ .01 | $ 0.01 |
Preferred stock, authorized | 3,000,000 | 3,000,000 |
Preferred stock, issued | 123,668 | 123,668 |
Preferred stock, outstanding | 123,668 | 123,668 |
Redeemable Convertible Series B Preferred Stock [Member] | ||
Redeemable Convertible Preferred Stock Series B, par value (in dollars per share) | $ .01 | $ .01 |
Redeemable Convertible Preferred Stock Series B, authorized | 15,000,000 | 15,000,000 |
Redeemable Convertible Preferred Stock Series B, issued | 3,725,000 | 1,500,000 |
Redeemable Convertible Preferred Stock Series B, outstanding | 3,725,000 | 1,500,000 |
Redeemable Convertible Preferred Stock Series B, aggregate liquidation preference | $ 3,807 | $ 1,503 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | ||
Operating expenses: | |||
General and administrative | $ 1,210 | ||
Operating loss | (1,210) | ||
Revaluation of option to purchase redeemable convertible preferred stock (Note 5) | 273 | ||
Interest and other financing expense, net | 34 | ||
Loss from continuing operations, before income taxes | (1,517) | ||
Income tax provision | 212 | ||
Loss from continuing operations | (1,729) | ||
Discontinued operations: | |||
Gain (loss) from discontinued operations (Note 2) | 79 | (1,849) | |
Net loss including portion attributable to noncontrolling interest | (1,650) | (1,849) | |
Loss attributable to noncontrolling interest | 1 | ||
Net loss | (1,649) | ||
Dividend on redeemable convertible preferred stock | [1] | (79) | |
Accretion of redeemable convertible preferred stock to redemption value | [2] | (1,968) | |
Net loss attributable to common stockholders | $ (3,696) | $ (1,849) | |
Basic and diluted net loss per share (Note 3): | |||
Continuing operations (in dollars per share) | $ (0.29) | ||
Discontinued operations (in dollars per share) | 0.01 | (0.44) | |
Basic and diluted net loss per share (in dollars per share) | $ (0.28) | $ (0.44) | |
Shares used in computing basic and diluted net loss per share (in shares) | 11,868,619 | 4,237,517 | |
Other comprehensive loss: | |||
Reclassification of cumulative translation adjustment | $ 3,021 | ||
Foreign currency translation adjustments | 21 | 102 | |
Total other comprehensive income | 21 | 3,123 | |
Comprehensive income (loss) | $ (1,628) | $ 1,274 | |
[1] | The net loss used for the computation of basic and diluted net loss per share for three months ended March 31, 2018, includes the preferred dividend requirement of 8% per share per annum for the Series B Preferred Stock, compounded annually which shall be distributed to stockholders in case of distributable assets determined in the Company's certificate of designation under the liquidation preference right (see also Note 5). | ||
[2] | Based on the rights and privileges of Series B Preferred Stock, since the Company did not obtain shareholder approval at March 31, 2018, the then outstanding Series B Preferred Stock became redeemable at the option of OFI. |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT (unaudited) - 3 months ended Mar. 31, 2018 - USD ($) $ in Thousands | Redeemable Convertible Preferred Stock Series B [Member] | Common Stock | Series A Preferred Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Accumulated Other Comprehensive Loss [Member] | Noncontrolling Interest [Member] | Total | |
Balance at beginning at Dec. 31, 2017 | $ 87 | $ 119 | $ 1 | $ 132,446 | $ (135,022) | $ (1,162) | $ 174 | $ (3,444) | |
Balance at beginning (in shares) at Dec. 31, 2017 | 1,500,000 | 11,868,619 | 123,668 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Stock based compensation | 14 | 14 | |||||||
Issuance of Series B redeemable convertible preferred stock and embedded option | $ 2,225 | ||||||||
Issuance of Series B redeemable convertible preferred stock and embedded option (in shares) | 2,225,000 | ||||||||
Exercise of series B redeemable convertible preferred stock written call option (Note 5) | $ 677 | 677 | |||||||
Dividend on Series B redeemable convertible preferred stock (Note 5) | 79 | (79) | (79) | [1] | |||||
Accretion of Series B redeemable convertible preferred stock to redemption value (Note 5) | 1,968 | (1,968) | (1,968) | [2] | |||||
Foreign currency translation adjustment | 21 | 21 | |||||||
Net Loss | (1,649) | (1) | (1,650) | ||||||
Balance at ending at Mar. 31, 2018 | $ 5,036 | $ 119 | $ 1 | $ 132,460 | $ (138,718) | $ (1,141) | $ 173 | $ (7,106) | |
Balance at ending (in shares) at Mar. 31, 2018 | 3,725,000 | 11,868,619 | 123,668 | ||||||
[1] | The net loss used for the computation of basic and diluted net loss per share for three months ended March 31, 2018, includes the preferred dividend requirement of 8% per share per annum for the Series B Preferred Stock, compounded annually which shall be distributed to stockholders in case of distributable assets determined in the Company's certificate of designation under the liquidation preference right (see also Note 5). | ||||||||
[2] | Based on the rights and privileges of Series B Preferred Stock, since the Company did not obtain shareholder approval at March 31, 2018, the then outstanding Series B Preferred Stock became redeemable at the option of OFI. |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | ||
Cash Flows From Operating Activities: | |||
Net loss | $ (1,649) | ||
Adjustments to reconcile loss to net cash provided by (used in) operating activities related to continuing operations: | |||
Stock-based compensation | 14 | ||
Revaluation of option to purchase redeemable convertible preferred stock (Note 5) | 273 | ||
Other assets, net | 16 | ||
Changes in operating assets and liabilities: | |||
Prepaid expenses and other current assets | 220 | ||
Accounts payable | (98) | ||
Accrued compensation and related expenses | 106 | ||
Other accrued liabilities | 310 | ||
Adjustments related to continuing operations | (887) | ||
Adjustments related to discontinued operations | 79 | (2,673) | |
Net cash used in operating activities | (808) | (2,673) | |
Cash Flows From Investing Activities: | |||
Purchases of property and equipment | |||
Net cash used in investing activities - continuing operation | |||
Net cash provided by investing activities - discontinued operations | 3,262 | ||
Net cash (used in) provided by investing activities | 3,262 | ||
Cash Flows From Financing Activities: | |||
Proceeds from issuance of redeemable convertible preferred stock and embedded option (Note 5) | 2,225 | ||
Payment of notes payable | (202) | ||
Net cash provided by financing activities - continuing operation | 2,023 | ||
Net cash provided by (used in) financing activities | 2,023 | ||
Effect of exchange rate changes on cash and cash equivalents | 21 | 98 | |
Change in cash and cash equivalents | 1,236 | 687 | |
Cash and cash equivalents at the beginning of period | 948 | 2,335 | |
Cash and cash equivalents at the end of period | 2,184 | 3,022 | |
Supplemental disclosure of non-cash activities: | |||
Cash paid for income taxes | 12 | ||
Cash paid for interest | 34 | ||
Receivable from acquirer of group of assets | 5,750 | ||
Partial exercise of written call option on redeemable convertible preferred stock (Note 5) | 677 | ||
Dividend on redeemable convertible preferred stock (Note 5) | [1] | 79 | |
Accretion of redeemable convertible preferred stock to redemption value (Note 5) | [2] | $ 1,968 | |
[1] | The net loss used for the computation of basic and diluted net loss per share for three months ended March 31, 2018, includes the preferred dividend requirement of 8% per share per annum for the Series B Preferred Stock, compounded annually which shall be distributed to stockholders in case of distributable assets determined in the Company's certificate of designation under the liquidation preference right (see also Note 5). | ||
[2] | Based on the rights and privileges of Series B Preferred Stock, since the Company did not obtain shareholder approval at March 31, 2018, the then outstanding Series B Preferred Stock became redeemable at the option of OFI. |
Background
Background | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Background | Note 1 Background: FC Global Realty Incorporated (and its subsidiaries) (the “Company”), re-incorporated in Nevada on December 30, 2010, originally formed in Delaware in 1980, is, since earlier in 2017, a real estate development and asset management company concentrated primarily on investments in high quality income producing assets, hotel and resort developments, residential developments and other opportunistic commercial properties. Until the recent sale of the Company’s last significant business unit (its consumer products division which was sold to ICTV Brands, Inc. on January 23, 2017), the Company was a Global Skin Health company providing integrated disease management and aesthetic solutions to dermatologists, professional aestheticians and consumers. The Company provided proprietary products and services that addressed skin diseases and conditions including psoriasis, acne, actinic keratosis (a precursor to certain types of skin cancer), photo damage and unwanted hair. On March 31, 2017, the Company entered into an Interest Contribution Agreement with First Capital Real Estate Operating Partnership, L.P. (the “Contributor”), First Capital Real Estate Trust Incorporated (the “Contributor Parent”), and FC Global Realty Operating Partnership, LLC, the Company’s wholly-owned subsidiary (the “Acquiror”). The parties entered into amendments to the Interest Contribution Agreement on August 3, 2017, October 11, 2017 and December 22, 2017. Pursuant to the Interest Contribution Agreement, as amended (collectively, the “Contribution Agreement”), the Contributor contributed certain real estate assets to the Acquiror. In exchange, the Contributor received shares of the Company’s common stock and newly designated Series A Convertible Preferred Stock. This transaction closed on May 17, 2017. As a result of the Contribution Agreement, the Company has primarily become a real estate asset management and development company for the purpose of investing in a diversified portfolio of quality commercial and residential real estate properties and other real estate investments located in the United States. Liquidity and Going Concern: As of March 31, 2018, the Company had an accumulated deficit of $138.7 million and the Company incurred a net loss attributable to common stockholders (including deemed dividend as accretion to redemption value of Series B Preferred Stock) for the three months ended March 31, 2018 of $3.7 million. Subsequent to the sale of the Company’s last significant business unit, the consumer products division as described above, and to date, the Company has dedicated most of its financial resources to general and administrative expenses associated with its ongoing business of real estate development and asset management. As of March 31, 2018, the Company’s cash and cash equivalents amounted to $2,184. While the Company is a party to a Securities Purchase Agreement (the “OFI Purchase Agreement”) with Opportunity Fund I-SS, LLC (“OFI”), and has raised certain funds under that agreement in both 2017 and in 2018 through the date of the financial statements (see also Note 5), OFI has no obligation to continue to invest in the Company, and there are restrictions placed by OFI on the use of these funds. The Company has historically financed its activities with cash from operations, the private placement of equity and debt securities, borrowings under lines of credit and, in the most recent periods with sales of certain assets and business units. The Company will be required to obtain additional liquidity resources in order to support its ongoing operations. On January 24, 2018, the Company and OFI completed a second closing under the OFI Purchase Agreement, pursuant to which OFI provided $2,225 to us in exchange for 2,225,000 additional Series B Shares (see also Note 5). At this time, there is no guarantee that the Company will be able to obtain an adequate level of financial resources required for the short and long-term support of its operations or that the Company will be able to obtain additional financing as needed, or meet the conditions of such financing, or that the costs of such financing may not be prohibitive. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on recoverability of assets and classification of liabilities that may result from the outcome of this uncertainty. |
Discontinued Operations
Discontinued Operations | 3 Months Ended |
Mar. 31, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | Note 2 Discontinued Operations: On January 23, 2017, the Company sold its last significant business unit (its consumer products division) to ICTV Brands, Inc. This business was a substantial business unit of the Company and the sale brought a strategic shift in focus of management. The Company accordingly classified this former business as held for sale and discontinued operations in accordance with ASC 360 “Impairment or disposal of long-lived assets” during the fourth quarter of the year ended December 31, 2016. The accompanying consolidated financial statements as of and for the three months ended March 31, 2017 have been retrospectively adjusted to reflect the operating results of the consumer business as discontinued operations separately from continuing operations. The Company recognized a net loss from discontinued operations of $1,849, including the loss on the sale of the discontinued operations in the three months ended March 31, 2017, which represents the difference between the adjusted net purchase price and the carrying value of the disposal group. The Company recognized a gain of $79 related to the discontinued operations during the three months ended March 31, 2018, as a result of the sale of residual inventory to third parties. The following is a summary of loss from discontinued operations for the three months ended March 31, 2018 and 2017: For the Three Months Ended March 31, 2018 2017 Revenues: $ — $ 3,539 Cost of revenues — 100 Gross profit — 3,439 Operating expenses: Engineering and product development — 143 Selling and marketing — 620 General and administrative — 2,342 Income (loss) from discontinued operations before interest and other financing expense, net — 334 Interest and other financing expense, net — (77 ) Income (loss) from discontinued operations before income taxes — 257 Income tax benefit allocated to discontinued operations — (21 ) Income (loss) from discontinued operations — 236 Gain (loss) from disposal of discontinued operations, net of taxes 79 (2,085 ) Net Gain (loss) from discontinued operations $ 79 $ (1,849 ) |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 3 Summary of Significant Accounting Policies: Accounting Principles The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in Amendment No. 1 to our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2017. The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) related to interim financial statements. As permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly the results of the Company’s financial position and operating results for the interim periods. All such adjustments are of a normal recurring nature. The accompanying condensed consolidated balance sheet as of December 31, 2017 has been derived from the consolidated financial statements contained in Amendment No. 1 to our Annual Report on Form 10-K/A. The results for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any other interim period in the future. Principles of Consolidation The consolidated financial statements include the accounts of the Company and the wholly and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Entities in which the Company directly or indirectly owns more than 50% of the outstanding voting securities, and for which other interest holders do not possess the right to affect significant management decisions, are generally accounted for under the voting interest consolidation method of accounting. Participation of other interest holders in the net assets and in the earnings or losses of a consolidated subsidiary is reflected in the line items “Noncontrolling Interest” in the Company’s consolidated balance sheets and “net income (loss) attributable to the noncontrolling interest” in the Company consolidated statements of comprehensive loss. Noncontrolling interest adjusts the Company’s consolidated results of operations to reflect only the Company’s share of the earnings or losses of the consolidated subsidiary. Any changes in the Company’s ownership interest in a consolidated subsidiary, through additional equity issuances by the consolidated subsidiary or from the Company acquiring the shares from existing shareholders, in which the Company maintains control is recognized as an equity transaction, with appropriate adjustments to both the Company’s additional paid-in capital and the corresponding noncontrolling interest. Use of Estimates The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect amounts reported of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates and be based on events different from those assumptions. As part of these financial statements, the more significant estimates include (1) stock-based compensation; (2) identification of and measurement of instruments in equity and mezzanine transactions; (3) impairment of investment properties and investment in other company; (4) evaluation of going concern; and (5) contingencies. Loss per Share The Company computes net loss per share in accordance with ASC 260, “Earnings per share” Diluted loss per common share is computed similar to basic earnings per share, except that the denominator is increased to include the number of additional potential common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Potential common shares are excluded from the computation for a period in which a net loss is reported or if their effect is anti-dilutive. The Company’s potential common shares consist of stock options, stock warrants and restricted stock awards issued under the Company’s stock incentive plans and their potential dilutive effect is considered using the treasury method and of convertible Series A Preferred Stock and Series B Preferred Stock which their potential dilutive effect is considered using the “if-converted method”. The net loss from continuing operations and the weighted average number of shares used in computing basic and diluted net loss per share from continuing operations for the three months ended March 31, 2018 and 2017, is as follows: Three Months Ended March 31, 2018 2017 Numerator: Net loss $ 1,650 $ 1,849 Net gain (loss) from discontinued operations attributable to common stockholders 79 (1,849 ) Accretion of Series B Preferred Stock to redemption value (*) 1,968 — Preferred dividend on Series B Preferred Stock (**) 79 — Participation of stockholders of Series A Preferred Stock in the net loss from continuing operations (357 ) — Net loss from continuing operations attributable to common stockholders $ 3,419 $ — Denominator: Shares of common stock used in computing basic and diluted net loss per share 11,868,619 4,237,517 Net loss per share of common stock from continuing operations, basic and diluted $ 0.29 $ — (*) Based on the rights and privileges of Series B Preferred Stock, since the Company did not obtain shareholder approval at March 31, 2018, the then outstanding Series B Preferred Stock became redeemable at the option of OFI. (**) The net loss used for the computation of basic and diluted net loss per share for three months ended March 31, 2018, includes the preferred dividend requirement of 8% per share per annum for the Series B Preferred Stock, compounded annually which shall be distributed to stockholders in case of distributable assets determined in the Company’s certificate of designation under the liquidation preference right (see also Note 5). For the three month period ended March 31, 2018, diluted loss per share excludes the impact of stock options, Series A Preferred Stock, Series B Preferred Stock and common stock to be issued upon written call option totaling 9,149,221 shares, as the effect of their inclusion would be anti-dilutive. For the three month period ended March 31, 2017, diluted loss per share excludes the impact of stock options totaling 175,365 shares. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 4 Commitments and Contingencies: Leases The Company has entered into a non-cancelable operating lease agreement for real property, which expires on December 31, 2018. Rent expense was $18 and $17 for the three months ended March 31, 2018 and 2017, respectively. For the year ended 31, 2018, the future annual minimum payment under this lease, relating to the Company’s continuing operations are as follows: Year Ending December 31, 2018 $ 52 Litigation JFURTI The Company is a party to JFURTI, LLC, et al v. Suneet Singal, et al, filed in the United States District Court for the Southern District of New York. The suit names as defendants Suneet Singal, an officer of various First Capital companies as well as the Company’s former Chief Executive Officer and former member of the Company’s Board of Directors, Frank Grant and Richard Leider, board members of First Capital Real Estate Investments, LLC, First Capital Real Estate Advisors, LP, Presidential Realty Corporation, Presidential Realty Operating Partnership, Downey Brand LLP and now the Company (under its previous name, PhotoMedex Inc.), as well as nominal derivative defendants First Capital Real Estate Trust Incorporated and First Capital Real Estate Operating Partnership, L.P. Mr. Leider is also on the Board of Directors of the Company. The suit is the ninth filed by Jacob Frydman and/or JFURTI, LLC in a dispute between the plaintiffs and the First Capital group of companies, which entered into a series of agreements with Mr. Frydman beginning in September 2015. Mr. Frydman had founded, sponsored, and taken public United Realty Trust Incorporated, a Real Estate Investment Trust (“REIT”). Mr. Frydman was the CEO and Chairman of the REIT as well as the owner of various other United Realty branded companies affiliated with the REIT business. In September 2015, Mr. Frydman and Mr. Singal negotiated and agreed to a transaction between various First Capital branded companies, on the one hand, and the United Realty branded companies affiliated with the REIT business, on the other hand, as a result of which the REIT was rebranded as the Contributor Parent. After the September 2015 transaction was concluded, several disputes arose between the parties. The first action, titled JFURTI, LLC and Jacob Frydman v. Forum Partners Investment Management LLC et al., No. 16 Civ. 8633 (the “Prior Action”), commenced on November 7, 2016 and asserted, inter alia, derivative RICO and securities fraud claims. The court dismissed the action in a decision and order dated April 27, 2017. Following dismissal of the Prior Action, Mr. Frydman sent letters to each member of the Contributor Parent’s Board of Directors (the “Demand Letter”), demanding that the Board investigate and remediate the dissipation of assets as alleged by plaintiffs. In particular, the Demand Letter questioned (i) a letter of intent with Presidential Realty Corporation (“Presidential”) announced in an 8-K filed by the Contributor Parent on or about July 18, 2016; (ii) the Contributor Parent’s use of funds raised between September 15, 2015 and February 28, 2016; (iii) an interest contribution agreement with Presidential entered into on or about December 16, 2016; (iv) the Contributor Parent’s failure to file quarterly and annual reports; (iv) the Contribution Agreement entered into on March 31, 2017 with the Company; and (v) other purportedly fraudulent acts such as publishing an artificially inflated net asset value, defaulting on certain mortgage loans, misrepresentations by Mr. Singal with respect to certain properties contributed to the Contributor Parent through the Master Agreement executed on September 15, 2015, and various loan agreements with Forum Partners Investment Management LLC (“Forum”). The Demand Letter also demanded inspection of certain corporate documents pursuant to Md. Code § 2-512. The Contributor Parent commenced such an investigation, and offered such an inspection, but Mr. Frydman and JFURTI failed to wait for the results of the investigation or make any inspection, and instead brought suit in the same court as the Prior Action. The suit alleges, among other claims, violations of § 10(b) of the Exchange Act of 1934, as amended, and Rule 10b-5 (1) against Mr. Singal and First Capital Real Estate Investments LLC for misrepresentations in connection with the Master Agreement entered into on September 15, 2015 and related agreements; (2) against Downey Brand for failure to file certain deeds; (3) against First Capital defendants (except Grant and Leider), Forum defendants, and Presidential defendants for a fraudulent scheme to sell Contributor Parent assets to Presidential; and (4) against First Capital defendants, Forum defendants, and our company for the transfer of the Contributor Parent and Contributor assets to us in exchange for allegedly worthless shares. There are also claims under state law for common law fraud, conversion, fraudulent conveyance, waste and mismanagement, accounting, injunctive relief, and violation of Cal. Bus. & Prof. Code § 17-200. Many of the claims asserted in the complaint, including the securities fraud claims, were never raised in the Demand Letter, as required by law. The suit seeks damages against all defendants for the failure of the Contributor Parent to respond to the Demand Letter, and an injunction against the sale of the assets to the Presidential defendants. The parties submitted a motion for an order (i) staying all proceedings in this action for 60 days, or until the end of 2017, and (ii) extending the defendants time to respond to the complaint, or to make a motion with respect to the complaint, until 45 days after the Contributor Parent’s response to the Demand Letter. The court granted that motion on October 31, 2017. Upon completion of their investigation, the Contributor Parent provided a response to the Demand Letter, denying all claims made in the letter. A Motion to Dismiss this action was filed with the court on behalf of all plaintiffs. On April 12, 2018, plaintiffs filed an Amended Complaint in this matter. The Company intends to defend itself vigorously against this suit. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case has only been initiated and no discovery has been conducted to determine the validity of any claim or claims made by plaintiffs. Therefore, the Company has not recorded any reserve or contingent liability related to these particular legal matters. However, in the future, as the cases progress, the Company may be required to record a contingent liability or reserve for these matters Avalon On January 12, 2018, the Company received a copy of a complaint, dated November 17, 2017, that was filed by Alpha Alpha, LLC in the Thirteenth Judicial District Court in the County of Valencia in the State of New Mexico against Avalon Jubilee, LLC, the holding company that owns the property in Los Lunas, New Mexico, HiTex, LLC, MCBB, LLC, Land Strategies, LLC, Ronald R. Cobb and John Does 1–5. The suit asked the court to, among other things, determine whether there have been unauthorized transfers of interest in Avalon Jubilee LLC; and declare who are the holders of interests in Avalon Jubilee LLC. Although the complaint did not name the Company or any of its subsidiaries or specifically question the Company’s interest in Avalon Jubilee LLC, it raised questions about whether the transfers of interest leading to the Company’s acquisition of its interest in Avalon Jubilee LLC were properly made in accordance with the Avalon Jubilee operating agreement. On April 27, 2018, the Company, and certain of its subsidiaries, entered into an agreement with Alpha Alpha LLC and Presidential Realty Corporation and certain of its subsidiaries, under which the Company’s subsidiary, First Capital Avalon Jubilee LLC, was recognized as a 17.9133% member in Avalon Jubilee, LLC, and the operating agreement and other documents were so amended to reflect that acknowledgement. In 2017, the Company recognized an impairment expense of $1,439 to account for our estimate of the impact that the described litigation may have on the operations and fair value of the underlying asset. The settlement and recognition of the Company’s ownership interest was viewed as a favorable outcome. Other litigation The Company and certain subsidiaries are, and have been, involved in other miscellaneous litigation and legal actions, including product liability, consumer, commercial, tax and governmental matters, which can arise from time to time in the ordinary course of our business. The Company believes that these other litigations and claims will likely be resolved without a material effect on our consolidated financial position, results of operations or liquidity. However, litigation and legal actions are inherently unpredictable, and excessive verdicts can result in such situations. Although the Company believes it has or will have substantial defenses in these matters, it may, in the future, incur judgments or enter into settlements of claims that could have a material adverse effect on results of operations in a particular period. Registration Rights Agreement with OFI As a condition to the first closing under the OFI Purchase Agreement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with OFI, pursuant to which the Company agreed to register all shares of common stock that may be issued upon conversion of the Series B Preferred Stock (the “Registrable Securities”) under the Securities Act of 1933, as amended (the “Securities Act”). The Company agreed to file a registration statement covering the resale of such Registrable Securities within 30 days of the first closing and cause such registration statement to be declared effective under the Securities Act as soon as possible but, in any event, no later than 120 days following the filing date if such registration statement is filed on Form S-3 or 150 days if such registration statement is filed on Form S-1. If such registration statement is not filed or declared effective by the SEC on or prior to such dates, or if after such registration statement is declared effective, without regard for the reason thereunder or efforts therefor, such registration statement ceases for any reason to be effective for more than an aggregate of 30 trading days during any 12-month period, which need not be consecutive, then in addition to any other rights the holders of Series B Preferred Stock may have under the Registration Rights Agreement or under applicable law, the Company shall pay to each holder an amount in cash, as partial liquidated damages and not as a penalty, equal to 1% of the product obtained by multiplying (x) $1.00 by (y) the number of shares of Registrable Securities held by the holder (such product being the “OFI Investment Amount”); provided that, in no event will the Company be liable for liquidated damages in excess of 1% of the OFI Investment Amount in any single month and that the maximum aggregate liquidated damages payable to the holders under the Registration Rights Agreement shall be 10% of the OFI Investment Amount. On January 23, 2018, the Company filed a registration statement on Form S-3 to register the shares issued to OFI in the first closing. OFI waived its right to liquidated damages in connection with the late filing of such registration statement. Registration Rights Agreements with Payout Note Holders On October 12, 2017, the Company issued secured convertible promissory notes (the “Payout Notes”) to Dr. Dolev Rafaeli, the Company’s former Chief Executive Officer, Dennis M. McGrath, the Company’s former President and Chief Financial Officer, and Dr. Yoav Ben-Dror, the former director of the Company’s foreign subsidiaries (collectively, the “Note Holders”) in the principal amounts of $3,134, $978 and $1,515, respectively. The Payout Notes were due on October 12, 2018, carried a 10% interest rate, payable monthly in arrears commencing on December 1, 2017, and were convertible into shares of the Company’s Common Stock at maturity. The Company agreed to register the shares underlying the Payout Notes within 30 days of issuance with best efforts to cause the registration statement covering such shares to become effective within 120 days of issuance. On November 14, 2017, the Company filed a registration statement on Form S-3 (the “First Registration Statement”) to register all shares that may be issued upon conversion of the Payout Notes. On December 22, 2017, the Company and the Note Holders entered into a stock grant agreement (the “Stock Grant Agreement”) to, among other things, cause the early conversion of the Payout Notes into an aggregate of 5,628,291 shares of the Company’s Common Stock (the “Payout Shares”) and provide for the issuance of an aggregate of 1,857,336 additional shares of Common Stock to the Note Holders as consideration for the various agreements of the Note Holders contained in the Stock Grant Agreement (the “Additional Shares”), subject to stockholder approval. On January 23, 2018, the First Registration Statement was amended to include the Payout Shares issued under the Stock Grant Agreement. In connection with the Stock Grant Agreement, the Company entered into a registration rights agreement (the “Payout Registration Rights Agreement”) with the Note Holders, pursuant to which the Company agreed to register the shares of common stock under the Additional Shares under the Securities Act. The Company agreed to file a registration statement covering the resale of the Additional Shares within 30 days of the Stock Grant Agreement and cause such registration statement to be declared effective under the Securities Act as soon as possible but, in any event, no later than 120 days following the filing date if such registration statement is filed on Form S-3 or 150 days if such registration statement is filed on Form S-1. If such registration statement is not filed or declared effective by the SEC on or prior to such dates, or if after such registration statement is declared effective, without regard for the reason thereunder or efforts therefor, such registration statement ceases for any reason to be effective for more than an aggregate of 30 trading days during any 12-month period, which need not be consecutive, then in addition to any other rights the Note Holders may have under the Payout Registration Rights Agreement or under applicable law, the Company shall pay to each Note Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to 1% of the product obtained by multiplying (x) $1.00 by (y) the number of shares of common stock held by the Note Holder included in the registration statement (such product being the “Payout Investment Amount”); provided that, in no event will the Company be liable for liquidated damages in excess of 1% of the Payout Investment Amount in any single month and that the maximum aggregate liquidated damages payable to the Note Holders under the Payout Registration Rights Agreement shall be 10% of the Payout Investment Amount. The registration rights provision contained in the Payout Notes was incorporated by reference into the Payout Registration Rights Agreement, except that the Note Holders waived the breach by the Company for failure to timely file the First Registration Statement and agreed that they are not entitled to liquidated damages as a result of such failure. Under the Payout Registration Rights Agreement, the Note Holders are entitled to liquidated damages if the First Registration Statement is not declared effective within 120 days following the date of the Payout Notes, but the Note Holders subsequently agreed to waive their rights to such liquidated damages until May 31, 2018. On January 23, 2018, the Company filed a registration statement on Form S-3 for the Additional Shares. The Note Holders waived their rights to liquidated damages in connection with the late filing of such registration statement and in connection with the effectiveness deadline for such registration statement until May 31, 2018. Amended and Restated Separation Agreement On February 12, 2018, the Company entered into an Amended and Restated Separation Agreement with Mr. Stephen Johnson, its former Chief Financial officer, pursuant to which the Company has agreed to pay Mr. Johnson an amount of $123 in 11 installments as follows: the first six installments of $10 each, and the following five installments of $12.5 each. The first payment was made on February 15, 2018, and subsequent payments are to be made on or before the 15th day of each succeeding month, with the final installment to be paid on or before December 15, 2018. The Company will also provide a health (medical, dental and/or vision) insurance reimbursement payment for Mr. Johnson and his family, for a period of 11 months, in the agreed upon amount of $3 per month. In addition, the Company has agreed to issue to Mr. Johnson 271,000 shares of the Company’s common stock, subject to appropriate adjustment for any stock splits, stock or business combinations, recapitalizations or similar events occurring after the date of the agreement. Those shares will be issued on any business day during the period commencing on the date that is six months after the date of the agreement and ending on the date that is three business days after such six-month anniversary. As of March 31, 2018, the aforesaid shares were not issued to Mr. Johnson. As of March 31, 2018, the balance payable, included in accrued compensation and related expenses, is $382, inclusive of an additional expense of $3 incurred in the current quarter due to the amendment of the agreement. |
Redeemable Convertible Preferre
Redeemable Convertible Preferred Stock and Stockholders' Deficit | 3 Months Ended |
Mar. 31, 2018 | |
Stockholders' Equity Note [Abstract] | |
Redeemable Convertible Preferred Stock and Stockholders' Deficit | Note 5 Redeemable Convertible Preferred Stock and Stockholders’ Deficit: Common Stock The Company’s common stock confer upon their holders the following rights: ▪ The right to participate and vote in the Company’s stockholder meetings, whether annual or special. Each share will entitle its holder, when attending and participating in the voting in person or via agent or letter, to one vote; ▪ The right to a share in the distribution of dividends, whether in cash or in the form of bonus shares, the distribution of assets or any other distribution pro rata to the par value of the shares held by them; and ▪ The right to a share in the distribution of the Company’s excess assets upon liquidation pro rata to the par value of the shares held by them. Convertible Series A Preferred Stock The terms of the Convertible Series A Preferred Stock are governed by a certificate of designation (the “Series A Certificate of Designation”) filed by the Company with the Nevada Secretary of State on May 15, 2017. Pursuant to the Series A Certificate of Designation, the Company designated 3,000,000 shares of the Company’s preferred stock as “Series A Convertible Preferred Stock.” The Company issued 123,668 shares of Convertible Series A Preferred Stock in connection with the Contribution Agreement. Following is a summary of the material terms of the Series A Convertible Preferred Stock: ▪ Dividends ▪ Liquidation pari passu ▪ Voting ▪ Conversion Redeemable Convertible Series B Preferred Stock The terms of the Redeemable Convertible Series B Preferred Stock are governed by a certificate of designation (the “Series B Certificate of Designation”) filed by the Company with the Nevada Secretary of State on December 22, 2017. Pursuant to the Series B Certificate of Designation, the Company designated 15,000,000 shares of the Company’s preferred stock as “Series B Preferred Stock”. As more fully described below, the Company has issued a total of 3,725,000 shares of Redeemable Convertible Series B Preferred Stock in connection with the OFI Purchase Agreement during 2017 and 2018. Following is a summary of the material terms of the Redeemable Convertible Series B Preferred Stock: ▪ Dividends ▪ Liquidation pari passu pari passu pari passu As of March 31, 2018, the aggregate liquidation preference amounted to $3,807 (unaudited). The foregoing dollar amount does not include dividends, as the Company’s Board of Directors has not declared any dividends since inception. ▪ Voting Rights ▪ Conversion ▪ Redemption Securities Purchase Agreement On December 22, 2017, the Company entered into the OFI Purchase Agreement with OFI, under which OFI may, but is not obligated to, invest up to $15,000 in the Company in a series of closings over a period prior to December 31, 2018, in exchange for which OFI will receive shares of the Company’s Redeemable Convertible Series B Preferred Stock (“Series B Shares) at a purchase price of $1.00 per share (the “Option”). On December 22, 2017 (the “Initial Date”), the Company and OFI completed the first closing under the OFI Purchase Agreement, pursuant to which OFI exercised a portion of the Option and provided $1,500 to the Company in exchange for 1,500,000 Series B Shares. On January 24, 2018 (the “Second Date”), the Company and OFI completed a second closing under the OFI Purchase Agreement, pursuant to which OFI provided $2,225 to us in exchange for 2,225,000 Series B Shares. Under the OFI Purchase Agreement, the proceeds from the first closing were to be used for working capital and general corporate purposes, the proceeds from the second closing were to be used to perform due diligence and invest in Income Generating Properties (as defined in the OFI Purchase Agreement) that have been approved by our Board of Directors, and proceeds from subsequent closings were be used to invest in Income Generating Properties (as defined in the OFI Purchase Agreement) that have been approved by our Board of Directors or as otherwise agreed to between us and OFI in writing prior to such subsequent closings. On March 16, 2018, the Company and OFI entered into a letter agreement, pursuant to which OFI agreed that the Company may use all proceeds for the purposes and uses described in a budget agreed to between us and OFI at the time the letter agreement was signed. In connection with such letter agreement, the Company agreed to provide OFI, on a quarterly basis, on or prior to 15 days after the end of each quarter, a report that describes, in reasonable detail, the actual expenses incurred and payments made during such period compared to the expenses and payments specified in the budget for such period, certified by our Chief Financial Officer. Under ASC 480, “Distinguishing Liabilities from Equity,” preferred stock that is not redeemable or is redeemable solely at the option of the issuer shall be included in stockholders’ equity. If the instrument meets any of the following criteria, mezzanine classification between liabilities and stockholders’ equity would be required: ▪ It is redeemable at a fixed or determinable price on a fixed or determinable date or dates; ▪ It is redeemable at the option of the holder; or ▪ It has conditions for redemption which are not solely within the control of the issuer, such as stocks which must be redeemed out of future earnings. In addition, per ASC 480, deemed liquidation events that require (or permit at the holders’ options) the redemption of only one or more of a particular class of equity instrument for cash or other assets cause those instruments to be considered contingently redeemable and therefore, subject to mezzanine classification. Since the Series B Shares have conditional redemption provisions which are outside of the control of the Company and also contain a deemed liquidation preference, the Series B Shares were classified as mezzanine financing at the Initial Date at the residual amount, which is the difference between the total proceeds received and the fair value of the Option. Subsequent measurement is unnecessary if it is not probable that the instrument will become redeemable. If it is probable that the equity instrument will become redeemable the following measurement methods shall be applied in accordance with either of the following methods and shall be applied in a consistent manner: ▪ Accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument using an appropriate methodology, usually the interest method. Changes in the redemption value are considered to be changes in accounting estimates. ▪ Recognize changes in the redemption value (for example, fair value) immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the instrument. Under ASC 480, the aforementioned written call Option is considered freestanding, as the Company believes it is legally detachable and separately exercisable. As the option is exercisable for shares subject to possible redemption at the option of the holder, as of the Initial Date, the Option was measured at fair value and recorded as a non-current financial liability on the consolidated balance sheet. Excess of the initial value of the option liability over the proceeds received was charged immediately into the consolidated statement of comprehensive loss as financing expenses in the fourth quarter of 2017. The Option is marked to market in each reporting period until it is exercised or expired, as earlier, when changes in the fair value of the Option are charged into statement of comprehensive loss. For the three month period ended March 31, 2018, the Company recorded expenses in total amount of $273 due to revaluation of Option to purchase redeemable convertible B preferred stock. In addition, at the Initial Date, the Company incurred de minimis direct and incremental issuance costs which were charged immediately into the consolidated statement of comprehensive loss as finance expenses, as the Option was presented at fair value. At the Initial Date, each Series B Share was convertible into 1.24789 shares of common stock valued at $1.00 per share. As a result, Beneficial Conversion Feature (the “BCF”) amounting to approximately $372 was measured assuming full conversion. However, the conversion of the Preferred Stock is subject to certain contingencies, which impact the timing and amount of the BCF. At the Initial Date which is also the commitment date, the Company should record a BCF for the Preferred Stock for any shares convertible at that time without requiring stockholder approval through the planned proxy statement. However, as no residual proceeds were allocable to the Series B Shares at the Initial Date, no BCF was recognized with respect to the first closing. In conjunction with the Second Date, OFI partially exercised the written call option present in the OFI Purchase Agreement and therefore upon exercise, the pro-rata share of this liability amounting to $677 was reclassified in the condensed consolidated balance sheet from Option to purchase redeemable convertible preferred stock into redeemable convertible preferred stock Series B. On the Second Date, each Series B Share (exclusive of dividends) was convertible into 1.24789 shares of common stock valued at $1.00 per share. As a result of the reclassification of the exercised written call option, there was no additional BCF measured. The fair value of the Option was based on management estimates and values derived from a calculation to provide an approximate indication of value. The fair value of Option is estimated at each reporting and exercise date, including, December 31, 2017, January 24, 2018 and March 31, 2018 by using hybrid method that includes scenario of conversion and scenario liquidation and the Black-Scholes option pricing model. In the first scenario, the Series B Preferred Stock price applied in the model was assumed based on the as-converted price on the date of estimation. Expected volatility was estimated by using a group of peers in the real estate development, homebuilding and income-producing properties sectors, and applying a 75% percentile ranking based on the total capitalization of the Company. In the second scenario, the Option was estimated based on the value of the Option in a proposed liquidation scenario. A probability weighting was applied to determine the expected value of the Option. The Company measured the fair value of the Option on a recurring basis in accordance with ASC 820, “Fair Value Measurement and Disclosures” (primary inputs classified at level 3). The following are the key underlying assumptions that were used: December 31, 2017 January 24, 2018 March 31, 2018 Dividend yield (%) 0 0 0 Expected volatility (%) 36.9 37.9 39.4 Risk free interest rate (%) 1.74 1.75 1.99 Strike price 1.00 1.00 1.00 Series B Preferred Stock price 1.13 1.10 1.18 Probability of if-converted scenario (%) 90 90 90 Probability assumed liquidation scenario (%) 10 10 10 Expected term of Option (years) 1.0 0.9 0.8 Option’s fair value $ 0.33 $ 0.30 $ 0.35 The following tabular presentation reflects the activity in the Option to purchase Redeemable Convertible B Preferred Stock during the three months ended March 31, 2018 - Fair value of Option to Unaudited Opening balance, December 31, 2017 $ 4,390 Partial exercise of series B redeemable convertible preferred stock written call option (677 ) Revaluation of option to purchase redeemable convertible B preferred stock 273 Closing balance, March 31, 2018 $ 3,986 In the absence of voluntary conversion and assuming no breaches as described above under “ Redemption” March 31, 2018 Unaudited Opening balance, December 31, 2017 $ 87 Proceeds from issuance of Series B Shares 2,225 Accretion of Series B Preferred Stock to redemption value 1,968 Partial exercise of Series B Preferred Stock written call option 677 Dividend on Series B Preferred Stock 79 Closing balance, March 31, 2018 $ 5,036 In addition, pursuant to the OFI Purchase Agreement, the Company agreed that so long as the Series B Shares purchased by OFI are outstanding, the Company’s debt (as defined by U.S. generally accepted accounting principles) should not exceed 45% of its fixed assets without the prior written consent of the Requisite Holders. As of March 31, 2018, the Company has met the covenant. Common Stock Options The Company’s Amended and Restated 2000 Non-Employee Director Stock Option Plan authorized 1,250,000 shares. As of March 31, 2018, the number of shares available for future issuance pursuant to this plan is 240,018; all other shares had either been issued or reserved for issuance upon exercise of stock options. The Company’s Amended and Restated 2005 Equity Compensation Plan authorized 3,500,000 shares. As of March 31, 2018, there are no further shares available for future issuance pursuant to this plan; all other shares had either been issued or reserved for issuance upon exercise of stock options. On January 2, 2018, the Company granted an option to purchase 100,000 shares of stock to its new Chief Executive Officer and an option to purchase 47,088 shares of stock to its new Chief Financial Officer and Chief Investment Officer, each at an exercise price of $0.98 per share. The options become vested over a three-year period from the date of grant. The options shall vest 1/4 in each of the first two years from the grant date and the remaining 1/2 on the third year from the grant date. The Company used the Black-Scholes-Merton pricing model to estimate the fair value. The Black-Sholes-Merton pricing model assumptions used are as follows: expected dividend yield of 0%; risk-free interest rate of 2.5%; expected volatility of 36.9%, and expected term of 10 years. The fair value of the options at the grant date was $74. During the three-month period ended March 31, 2018, as result of such grant, the Company recognized compensation expense of $9, and there was $65 of unrecognized compensation expense related to non-vested option grants. A summary of stock option transactions under these plans during the three months ended March 31, 2018 are as follows: Number of Stock Weighted Weighted Average Remaining Term (in years) Aggregate Outstanding at January 1, 2018 79,890 $ 94.51 4.1 $ — Granted/vested 147,088 $ 0.98 9.8 $ — Exercised — — — — Expired/cancelled — — — — Outstanding at March 31, 2018 226,978 $ 33.90 7.8 $ — Exercisable at March 31, 2018 79,890 $ 94.51 4.1 $ — (*) The aggregate intrinsic value represents the total intrinsic value (the difference between the deemed fair value of the Company’s Ordinary Shares on the last day of first quarter of 2018 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2018. This amount is impacted by the changes in the fair value of the Company’s shares. A summary of non-vested restricted stock during the three months ended March 31, 2018 are as follows: Shares of Weighted Average Non-vested at January 1, 2018 11,500 $ 9.02 Granted Forfeited/cancelled (9,250 ) 8.97 Non-vested at March 31, 2018 2,250 $ 9.25 The total equity-based compensation expense related to the Company’s equity-based awards, recognized during the three months ended March 31, 2018 and 2017, total the amounts of $14 (unaudited) and $811 (unaudited), respectively. The amount related to the three months ended March 31, 2017 is included in discontinued operations. As of March 31, 2018, there was $86 (unaudited) of total unrecognized compensation cost related to non-vested stock awards that based on their original vesting terms was expected to be recognized. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 6 Income Taxes: On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; creating a new limitation on deductible interest expense; changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017; and changing limitations on the deductibility of certain executive compensation. In December 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), which addresses situations where the accounting is incomplete for the income tax effects of the Act. SAB 118 directs taxpayers to consider the impact of the act as “provisional” when the Company does not have the necessary information available, prepared or analyzed (including computations) to finalize the accounting for the change in tax law. Companies are provided a measurement period of up to one year to obtain, prepare, and analyze information necessary to finalize the accounting for provisional amounts or amounts that cannot be estimated. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which the related temporary difference becomes deductible. The benefit of tax positions taken or expected to be taken in the Company’s income tax returns are recognized in the consolidated financial statements if such positions are more likely than not of being sustained. Included in other accrued liabilities at March 31, 2018 is $1.5 million of net provisions related to corporate international unrecognized tax benefits. Taxes, which may apply in the event of a disposal of investments in subsidiaries, have not been included in computing the deferred taxes, as the Company anticipates it would liquidate those subsidiaries that can be closed on a tax free basis. The Company files corporate income tax returns in the United States, both in the Federal jurisdiction and in various State jurisdictions. The Company is subject to Federal income tax examination for calendar years 2014 through 2017 and is also generally subject to various State income tax examinations for calendar years 2014 through 2017. Photo Therapeutics Limited files in the United Kingdom. Radiancy (Israel) Limited files in Israel. The Israeli subsidiary is subject to tax examination for calendar years 2013 through 2017. In the period ended March 31, 2018, the Company recognized an income tax provision of $212 relating to adjustments of accruals and prepaid tax assets. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 7 Subsequent Events Notice of Delisting On April 10, 2018, the Company received written notification (the “Notice”) from The NASDAQ Stock Market LLC (“NASDAQ”) that the Company’s stockholders’ equity reported on its Form 10-K for the period ended December 31, 2017 had fallen below the minimum requirement of $2.5 million, and that as of April 9, 2018, the Company does not meet the alternatives of market value of listed securities or net income from continuing operations. The Company is therefore not in compliance with the requirements for continued listing on the NASDAQ Capital Market under NASDAQ Marketplace Rule 5550(b)(1). The Notice provides the Company with a period of 45 calendar days, or until May 25, 2018, to submit a plan to regain compliance with the listing rules. The Company will file that plan by May 25, 2018, but cannot assess the likelihood, or guarantee, that NASDAQ will grant an extension to the Company. If the Company’s plan is accepted, NASDAQ may grant an extension of up to 180 days from the date of the Notice in which to regain compliance. If the Company does not regain compliance, or if the plan is not accepted by NASDAQ, the Company expects that NASDAQ would provide notice that its securities are subject to delisting from the NASDAQ Capital Market. Supplemental Agreement On April 20, 2018, the Company and OFI entered into a supplemental agreement (the “Supplemental Agreement”) to clarify certain voting and conversion limitations with respect to the Series B Preferred Stock in response to comments from the staff of NASDAQ. Pursuant to the Series B Certificate of Designation, on any matter presented to stockholders for their action or consideration, each holder of Series B Preferred Convertible Stock was entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Series B Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter (subject to certain conversion limitations described below). Pursuant to the Supplemental Agreement, OFI agreed that the voting rights of the Series B Preferred Stock shall be limited to the number of votes that is equal to the quotient of the aggregate investment amount invested to purchase Series B Preferred Stock divided by $1.12, the market value of the Company’s common stock on December 21, 2017, or approximately 0.893 votes per share (subject to certain conversion limitations described below). The Certificate of Designation also provided that, if the Company has not obtained approval from stockholders, then the Company may not issue, upon conversion of the Series B Preferred Stock, a number of shares of Common Stock which would exceed 19.99% of the issued and outstanding shares of common stock on the date of conversion. Pursuant to the Supplemental Agreement, OFI agreed that, until stockholder approval is obtained, such conversion limitation shall be equal to 2,372,536 shares, or 19.99% of the 11,868,619 outstanding shares of common stock as of December 22, 2017, the date of the initial closing under the OFI Purchase Agreement. Cancellation and Exchange Agreement On April 20, 2018, the Company and OFI entered into a Cancellation and Exchange Agreement (the “Exchange Agreement”), pursuant to which OFI agreed to provide an additional $2,000 to the Company in exchange for 2,000,000 shares of the Company’s Series B Preferred Stock, subject to certain conditions set forth in the Exchange Agreement, including, among other things, the cancellation of 95,770 shares of the Company’s Series A Preferred Stock held by OFI in exchange for 5,382,274 shares of the Company’s common stock (the “OFI Shares”). Under the Exchange Agreement, closing of this additional investment shall occur promptly following the filing of the Information Statement (as defined below) with the SEC and mailing of the Information Statement to the stockholders of the Company, and in any event within 3 days thereafter. In accordance with the Exchange Agreement, the Company has obtained the irrevocable written consent of at least a majority of the stockholders of the Company (excluding OFI) that is final and binding (the “Stockholder Consent”) approving the issuance of the OFI Shares and the issuance of Common Stock upon conversion of all of the Series B Preferred Stock held by OFI or issuable under the OFI Purchase Agreement. The Stockholder Consent shall become effective on the 20th day following the filing and mailing of a definitive information statement on Schedule 14C (the “Information Statement”), at which time stockholder approval of such issuances shall become effective (“Stockholder Approval”). Pursuant to the Exchange Agreement, the Company agreed to issue the OFI Shares as soon as practicable after obtaining Stockholder Approval and in any event within 3 business days of obtaining Stockholder Approval. Pursuant to the Exchange Agreement, the Company agreed that the OFI Shares shall constitute “Registrable Securities” under the registration rights agreement between the Company and OFI, dated December 22, 2017, and the Company shall use commercially reasonable efforts to promptly amend the registration statement filed by the Company on January 23, 2018 to include the OFI Shares and any other shares of common stock of the Company that are issuable to OFI upon conversion of Series B Preferred Convertible Stock of OFI that are not already included in such registration statement. The Company also agreed that, as soon as OFI identifies two director nominees to the Company, the Company’s nominating committee will commence its customary vetting process. On or prior to the closing of the additional investment, the Company agreed to appoint such director nominees to its board of directors. Finally, the Exchange Agreement amends the OFI Purchase Agreement to remove Section 4.6, which required the Company to amend the conversion price of the Company’s Series A Preferred Stock. The parties agreed that the Company has no obligation to amend the conversion price. Submission of Matters to a Vote of Security Holders On April 18, 2018, stockholders collectively holding 8,592,972 shares consented in writing to approve (i) an amendment to the Company’s amended and restated articles of incorporation to change the name of the Company to Kona International Group, Inc. and (ii) the FC Global Realty Incorporated 2018 Equity Incentive Plan. Such shares represented approximately 60.34% of the Company’s outstanding shares eligible to vote on this matter. On April 18, 2018, stockholders collectively holding 6,220,436 shares consented in writing to approve the issuance of shares of common stock to OFI upon the conversion of shares of Series B Preferred Stock issued and issuable to OFI in accordance with the terms of the OFI Purchase Agreement and the issuance of the OFI Shares in accordance with the terms of the Exchange Agreement. Such shares represented approximately 52.41% of the Company’s outstanding shares eligible to vote on this matter. On April 20, 2018, a Preliminary Information Statement regarding these proposals was filed. The Company has received comments from the SEC and will file an amendment to the Preliminary Information Statement. Stockholder approval of these actions shall become effective on the 20th day following the mailing of a Definitive Information Statement. Acquisition of Medical Office Building On April 26, 2018, the Company’s subsidiary, RETPROP I, LLC, completed the acquisition of a 7,738 square-foot medical office building in Dayton, Ohio for a $322 purchase price, paid in cash consideration. The building’s former owner, and current tenant, a medical practice, has entered into a lease with the Company to continue its occupancy through April 2022, with the option to renew that lease for two additional five-year terms. |
Summary of Significant Accoun14
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Accounting Principles | Accounting Principles The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in Amendment No. 1 to our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2017. The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) related to interim financial statements. As permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly the results of the Company’s financial position and operating results for the interim periods. All such adjustments are of a normal recurring nature. The accompanying condensed consolidated balance sheet as of December 31, 2017 has been derived from the consolidated financial statements contained in Amendment No. 1 to our Annual Report on Form 10-K/A. The results for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any other interim period in the future. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and the wholly and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Entities in which the Company directly or indirectly owns more than 50% of the outstanding voting securities, and for which other interest holders do not possess the right to affect significant management decisions, are generally accounted for under the voting interest consolidation method of accounting. Participation of other interest holders in the net assets and in the earnings or losses of a consolidated subsidiary is reflected in the line items “Noncontrolling Interest” in the Company’s consolidated balance sheets and “net income (loss) attributable to the noncontrolling interest” in the Company consolidated statements of comprehensive loss. Noncontrolling interest adjusts the Company’s consolidated results of operations to reflect only the Company’s share of the earnings or losses of the consolidated subsidiary. Any changes in the Company’s ownership interest in a consolidated subsidiary, through additional equity issuances by the consolidated subsidiary or from the Company acquiring the shares from existing shareholders, in which the Company maintains control is recognized as an equity transaction, with appropriate adjustments to both the Company’s additional paid-in capital and the corresponding noncontrolling interest. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect amounts reported of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates and be based on events different from those assumptions. As part of these financial statements, the more significant estimates include (1) stock-based compensation; (2) identification of and measurement of instruments in equity and mezzanine transactions; (3) impairment of investment properties and investment in other company; (4) evaluation of going concern; and (5) contingencies. |
Loss Per Share | Loss per Share The Company computes net loss per share in accordance with ASC 260, “Earnings per share” Diluted loss per common share is computed similar to basic earnings per share, except that the denominator is increased to include the number of additional potential common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Potential common shares are excluded from the computation for a period in which a net loss is reported or if their effect is anti-dilutive. The Company’s potential common shares consist of stock options, stock warrants and restricted stock awards issued under the Company’s stock incentive plans and their potential dilutive effect is considered using the treasury method and of convertible Series A Preferred Stock and Series B Preferred Stock which their potential dilutive effect is considered using the “if-converted method”. The net loss from continuing operations and the weighted average number of shares used in computing basic and diluted net loss per share from continuing operations for the three months ended March 31, 2018 and 2017, is as follows: Three Months Ended March 31, 2018 2017 Numerator: Net loss $ 1,650 $ 1,849 Net gain (loss) from discontinued operations attributable to common stockholders 79 (1,849 ) Accretion of Series B Preferred Stock to redemption value (*) 1,968 — Preferred dividend on Series B Preferred Stock (**) 79 — Participation of stockholders of Series A Preferred Stock in the net loss from continuing operations (357 ) — Net loss from continuing operations attributable to common stockholders $ 3,419 $ — Denominator: Shares of common stock used in computing basic and diluted net loss per share 11,868,619 4,237,517 Net loss per share of common stock from continuing operations, basic and diluted $ 0.29 $ — (*) Based on the rights and privileges of Series B Preferred Stock, since the Company did not obtain shareholder approval at March 31, 2018, the then outstanding Series B Preferred Stock became redeemable at the option of OFI. (**) The net loss used for the computation of basic and diluted net loss per share for three months ended March 31, 2018, includes the preferred dividend requirement of 8% per share per annum for the Series B Preferred Stock, compounded annually which shall be distributed to stockholders in case of distributable assets determined in the Company’s certificate of designation under the liquidation preference right (see also Note 5). For the three month period ended March 31, 2018, diluted loss per share excludes the impact of stock options, Series A Preferred Stock, Series B Preferred Stock and common stock to be issued upon written call option totaling 9,149,221 shares, as the effect of their inclusion would be anti-dilutive. For the three month period ended March 31, 2017, diluted loss per share excludes the impact of stock options totaling 175,365 shares. |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of financial statements | The following is a summary of loss from discontinued operations for the three months ended March 31, 2018 and 2017: For the Three Months Ended March 31, 2018 2017 Revenues: $ — $ 3,539 Cost of revenues — 100 Gross profit — 3,439 Operating expenses: Engineering and product development — 143 Selling and marketing — 620 General and administrative — 2,342 Income (loss) from discontinued operations before interest and other financing expense, net — 334 Interest and other financing expense, net — (77 ) Income (loss) from discontinued operations before income taxes — 257 Income tax benefit allocated to discontinued operations — (21 ) Income (loss) from discontinued operations — 236 Gain (loss) from disposal of discontinued operations, net of taxes 79 (2,085 ) Net Gain (loss) from discontinued operations $ 79 $ (1,849 ) |
Summary of Significant Accoun16
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of basic and diluted loss per common share using weighted-average shares outstanding | The net loss from continuing operations and the weighted average number of shares used in computing basic and diluted net loss per share from continuing operations for the three months ended March 31, 2018 and 2017, is as follows: Three Months Ended March 31, 2018 2017 Numerator: Net loss $ 1,650 $ 1,849 Net gain (loss) from discontinued operations attributable to common stockholders 79 (1,849 ) Accretion of Series B Preferred Stock to redemption value (*) 1,968 — Preferred dividend on Series B Preferred Stock (**) 79 — Participation of stockholders of Series A Preferred Stock in the net loss from continuing operations (357 ) — Net loss from continuing operations attributable to common stockholders $ 3,419 $ — Denominator: Shares of common stock used in computing basic and diluted net loss per share 11,868,619 4,237,517 Net loss per share of common stock from continuing operations, basic and diluted $ 0.29 $ — (*) Based on the rights and privileges of Series B Preferred Stock, since the Company did not obtain shareholder approval at March 31, 2018, the then outstanding Series B Preferred Stock became redeemable at the option of OFI. (**) The net loss used for the computation of basic and diluted net loss per share for three months ended March 31, 2018, includes the preferred dividend requirement of 8% per share per annum for the Series B Preferred Stock, compounded annually which shall be distributed to stockholders in case of distributable assets determined in the Company’s certificate of designation under the liquidation preference right (see also Note 5). |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future annual minimum payments under leases | The future annual minimum payment under this lease, relating to the Company’s continuing operations are as follows: Year Ending December 31, 2018 $ 52 |
Redeemable Convertible Prefer18
Redeemable Convertible Preferred Stock and Stockholders' Deficit (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Stockholders' Equity Note [Abstract] | |
Schedule of key underlying assumptions | The following are the key underlying assumptions that were used: December 31, 2017 January 24, 2018 March 31, 2018 Dividend yield (%) 0 0 0 Expected volatility (%) 36.9 37.9 39.4 Risk free interest rate (%) 1.74 1.75 1.99 Strike price 1.00 1.00 1.00 Series B Preferred Stock price 1.13 1.10 1.18 Probability of if-converted scenario (%) 90 90 90 Probability assumed liquidation scenario (%) 10 10 10 Expected term of Option (years) 1.0 0.9 0.8 Option’s fair value $ 0.33 $ 0.30 $ 0.35 |
Schedule of reflects the components of the Option to purchase Redeemable Convertible B Preferred Stock | The following tabular presentation reflects the activity in the Option to purchase Redeemable Convertible B Preferred Stock during the three months ended March 31, 2018 - Fair value of Option to Unaudited Opening balance, December 31, 2017 $ 4,390 Partial exercise of series B redeemable convertible preferred stock written call option (677 ) Revaluation of option to purchase redeemable convertible B preferred stock 273 Closing balance, March 31, 2018 $ 3,986 |
Schedule of mezzanine financing | Activity in the account redeemable convertible preferred stock Series B for the three months ended March 31, 2018, is outlined in the below table - March 31, 2018 Unaudited Opening balance, December 31, 2017 $ 87 Proceeds from issuance of Series B Shares 2,225 Accretion of Series B Preferred Stock to redemption value 1,968 Partial exercise of Series B Preferred Stock written call option 677 Dividend on Series B Preferred Stock 79 Closing balance, March 31, 2018 $ 5,036 |
Schedule of stock options | A summary of stock option transactions under these plans during the three months ended March 31, 2018 are as follows: Number of Stock Weighted Weighted Average Remaining Term (in years) Aggregate Outstanding at January 1, 2018 79,890 $ 94.51 4.1 $ — Granted/vested 147,088 $ 0.98 9.8 $ — Exercised — — — — Expired/cancelled — — — — Outstanding at March 31, 2018 226,978 $ 33.90 7.8 $ — Exercisable at March 31, 2018 79,890 $ 94.51 4.1 $ — (*) The aggregate intrinsic value represents the total intrinsic value (the difference between the deemed fair value of the Company’s Ordinary Shares on the last day of first quarter of 2018 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2018. This amount is impacted by the changes in the fair value of the Company’s shares. |
Schedule of nonvested restricted stock | A summary of non-vested restricted stock during the three months ended March 31, 2018 are as follows: Shares of Weighted Average Non-vested at January 1, 2018 11,500 $ 9.02 Granted Forfeited/cancelled (9,250 ) 8.97 Non-vested at March 31, 2018 2,250 $ 9.25 |
Background (Detail Narrative)
Background (Detail Narrative) - USD ($) $ in Thousands | Jan. 24, 2018 | Dec. 22, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 |
Accumulated deficit | $ (138,718) | $ (135,022) | |||
Net loss | (3,696) | $ (1,849) | |||
Cash and cash equivalents | 2,184 | ||||
Proceeds from redeemable convertible preferred stock | $ 2,225 | $ 1,458 | |||
Redeemable Convertible Series B Preferred Stock [Member] | |||||
Number of shares issued | |||||
Securities Purchase Agreement [Member] | Opportunity Fund I-SS, LLC (Investor) [Member] | Redeemable Convertible Series B Preferred Stock [Member] | |||||
Number of shares issued | 2,225,000 | 1,500,000 | |||
Proceeds from redeemable convertible preferred stock | $ 2,225 | $ 1,500 |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | ||
Revenues: | $ 3,539 | |
Cost of revenues | 100 | |
Gross profit | 3,439 | |
Operating expenses: | ||
Engineering and product development | 143 | |
Selling and marketing | 620 | |
General and administrative | 2,342 | |
Income (loss) from discontinued operations before interest and other financing expense, net | 334 | |
Interest and other financing expense, net | (77) | |
Income (loss) from discontinued operations before income taxes | 257 | |
Income tax benefit allocated to discontinued operations | (21) | |
Income (loss) from discontinued operations | 236 | |
Gain (loss) from disposal of discontinued operations, net of taxes | 79 | (2,085) |
Net Gain (loss) from discontinued operations | $ 79 | $ (1,849) |
Discontinued Operations (Deta21
Discontinued Operations (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Loss from discontinued operations attributable to parent | $ 79 | $ (1,849) |
Discontinued Operations, Held-for-sale [Member] | ||
Loss from discontinued operations attributable to parent | $ (1,849) |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | ||
Numerator: | |||
Net loss | $ 1,650 | $ 1,849 | |
Net gain (loss) from discontinued operations attributable to common stockholders | 79 | (1,849) | |
Accretion of Series B Preferred Stock to redemption value | [1] | 1,968 | |
Preferred dividend on Series B Preferred Stock | [2] | 79 | |
Participation of stockholders of series A preferred stock in the net loss from continuing operations | (357) | ||
Net loss from continuing operations attributable to common stockholders | $ 3,419 | ||
Denominator: | |||
Shares of common stock used in computing basic and diluted net loss per share (in shares) | 11,868,619 | 4,237,517 | |
Net loss per share of common stock from continuing operations, basic and diluted (in dollars per share) | $ 0.29 | ||
[1] | Based on the rights and privileges of Series B Preferred Stock, since the Company did not obtain shareholder approval at March 31, 2018, the then outstanding Series B Preferred Stock became redeemable at the option of OFI. | ||
[2] | The net loss used for the computation of basic and diluted net loss per share for three months ended March 31, 2018, includes the preferred dividend requirement of 8% per share per annum for the Series B Preferred Stock, compounded annually which shall be distributed to stockholders in case of distributable assets determined in the Company's certificate of designation under the liquidation preference right (see also Note 5). |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income tax provision | $ 212 | |
Stock Options [Member] | ||
Anti-dilutive shares | 9,149,221 | 175,365 |
Series B Preferred Stock [Member] | ||
Percentage of distribution of dividends to stockholders | 8.00% |
Commitments and Contingencies24
Commitments and Contingencies (Details) $ in Thousands | Mar. 31, 2018USD ($) |
Annual minimum payments under operating lease [Abstract] | |
2,018 | $ 52 |
Commitments and Contingencies25
Commitments and Contingencies (Details Narrative) - USD ($) | Apr. 27, 2018 | Feb. 12, 2018 | Jan. 24, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Dec. 22, 2017 | Oct. 12, 2017 |
Loss Contingencies [Line Items] | ||||||||
Rent expense | $ 18,000 | $ 17,000 | ||||||
Interest rate | 10.00% | |||||||
Common stock, authorized | 500,000,000 | 500,000,000 | ||||||
Common stock, issued | 11,868,619 | 11,868,619 | ||||||
Mr. Dr. Dolev Rafaeli [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Principal amount | $ 3,134,000 | |||||||
Mr. Dennis M. McGrath [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Principal amount | 978,000 | |||||||
Mr. Dr. Yoav Ben-Dror [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Principal amount | $ 1,515,000 | |||||||
Subsequent Event [Member] | Avalon Jubilee LLC [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Impairment expense | $ 1,439,000 | |||||||
Percentage of operating agreement | 17.9133% | |||||||
Stock Grant Agreement [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Common stock, authorized | 5,628,291 | |||||||
Common stock, issued | 1,857,336 | |||||||
Amended and Restated Separation Agreement [Member] | Mr. Stephen Johnson [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Common stock, authorized | 271,000 | |||||||
Payment of installments | $ 123,000 | |||||||
Payment of first six installments | 10,000 | |||||||
Payment of last five installments | $ 12,500 | |||||||
Payment terms | 11 installments as follows: the first six installments of $10 each, and the following five installments of $12.5 each. The first payment was made on February 15, 2018, and subsequent payments are to be made on or before the 15th day of each succeeding month, with the final installment to be paid on or before December 15, 2018. | |||||||
Accrued compensation and related expenses | $ 382,000 | |||||||
Additional accrued compensation and related expenses | $ 3,000 |
Redeemable Convertible Prefer26
Redeemable Convertible Preferred Stock and Stockholders' Deficit (Details) - $ / shares | Jan. 24, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Dividend yield (%) | 0.00% | 0.00% | 0.00% |
Expected volatility (%) | 37.90% | 39.40% | 36.90% |
Risk free interest rate (%) | 1.75% | 1.99% | 1.74% |
Strike price | $ 1 | $ 1 | $ 1 |
Probability of if-converted scenario (%) | 90.00% | 90.00% | 90.00% |
Probability assumed liquidation scenario (%) | 10.00% | 10.00% | 10.00% |
Expected term of Option (years) | 10 months 24 days | 9 months 18 days | 1 year |
Option's fair value | $ 0.33 | $ 0.35 | $ 0.33 |
Series B Preferred Stock [Member] | |||
Strike price | $ 1.10 | $ 1.18 | $ 1.13 |
Redeemable Convertible Prefer27
Redeemable Convertible Preferred Stock and Stockholders' Deficit (Details 1) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | ||
Opening balance | $ (3,618) | ||
Partial exercise of Series B Preferred Stock written call option | 677 | ||
Accretion of Series B Preferred Stock to redemption value | [1] | 1,968 | |
Closing balance | (7,279) | ||
Redeemable Convertible Preferred Stock Series B [Member] | |||
Opening balance | 4,390 | ||
Partial exercise of Series B Preferred Stock written call option | (677) | ||
Accretion of Series B Preferred Stock to redemption value | 273 | ||
Closing balance | $ 3,986 | ||
[1] | Based on the rights and privileges of Series B Preferred Stock, since the Company did not obtain shareholder approval at March 31, 2018, the then outstanding Series B Preferred Stock became redeemable at the option of OFI. |
Redeemable Convertible Prefer28
Redeemable Convertible Preferred Stock and Stockholders' Deficit (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | ||
Opening balance | $ (3,618) | |||
Proceeds from issuance of Series B Shares | 2,225 | $ 1,458 | ||
Accretion of Series B Preferred Stock to redemption value | [1] | 1,968 | ||
Preferred dividend on Series B Preferred Stock | [2] | 79 | ||
Closing balance | (7,279) | (3,618) | ||
Series B Preferred Stock [Member] | ||||
Opening balance | 87 | |||
Proceeds from issuance of Series B Shares | 2,225 | |||
Accretion of Series B Preferred Stock to redemption value | 1,968 | |||
Partial exercise of Series B Preferred Stock written call option | 677 | |||
Preferred dividend on Series B Preferred Stock | 79 | |||
Closing balance | $ 5,036 | $ 87 | ||
[1] | Based on the rights and privileges of Series B Preferred Stock, since the Company did not obtain shareholder approval at March 31, 2018, the then outstanding Series B Preferred Stock became redeemable at the option of OFI. | |||
[2] | The net loss used for the computation of basic and diluted net loss per share for three months ended March 31, 2018, includes the preferred dividend requirement of 8% per share per annum for the Series B Preferred Stock, compounded annually which shall be distributed to stockholders in case of distributable assets determined in the Company's certificate of designation under the liquidation preference right (see also Note 5). |
Redeemable Convertible Prefer29
Redeemable Convertible Preferred Stock and Stockholders' Deficit (Details 3) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |||
Outstanding, beginning of year | 79,890 | ||
Granted | 147,088 | ||
Exercised | |||
Expired/cancelled | |||
Outstanding, end of year | 226,978 | 79,890 | |
Exercisable, end of year | 79,890 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | |||
Outstanding, beginning of year | $ 94.51 | ||
Granted | 0.98 | ||
Exercised | |||
Expired/cancelled | |||
Outstanding, end of year | 33.90 | $ 94.51 | |
Exercisable, end of year | $ 94.51 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Life [Roll Forward] | |||
Outstanding, beginning of year | 7 years 9 months 18 days | 4 years 1 month 6 days | |
Granted/vested | 9 years 9 months 18 days | ||
Outstanding, end of year | 7 years 9 months 18 days | 4 years 1 month 6 days | |
Exercisable, end of year | 4 years 1 month 6 days | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Aggregate Intrinsic Value [Roll Forward] | |||
Outstanding. beginning of year | [1] | $ 0 | |
Exercised | [1] | 0 | |
Outstanding. ending of year | [1] | 0 | $ 0 |
Exercisable, end of year | [1] | $ 0 | |
[1] | The aggregate intrinsic value represents the total intrinsic value (the difference between the deemed fair value of the Company's Ordinary Shares on the last day of first quarter of 2018 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2018. This amount is impacted by the changes in the fair value of the Company's shares. |
Redeemable Convertible Prefer30
Redeemable Convertible Preferred Stock and Stockholders' Deficit (Details 4) - Nonvested Restricted Stock [Member] | 3 Months Ended |
Mar. 31, 2018$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Outstanding, beginning of year | shares | 11,500 |
Granted | shares | |
Forfeited/cancelled | shares | (9,250) |
Outstanding, end of year | shares | 2,250 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward] | |
Outstanding, beginning of year | $ / shares | $ 9.02 |
Granted | $ / shares | |
Forfeited/cancelled | $ / shares | 8.97 |
Outstanding, end of year | $ / shares | $ 9.25 |
Redeemable Convertible Prefer31
Redeemable Convertible Preferred Stock and Stockholders' Deficit (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Jan. 24, 2018 | Dec. 22, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 |
Common stock, voting rights | The Company’s common stock confer upon their holders the following rights: ■ The right to participate and vote in the Company’s stockholder meetings, whether annual or special. Each share will entitle its holder, when attending and participating in the voting in person or via agent or letter, to one vote; ■ The right to a share in the distribution of dividends, whether in cash or in the form of bonus shares, the distribution of assets or any other distribution pro rata to the par value of the shares held by them; ■ The right to a share in the distribution of the Company’s excess assets upon liquidation pro rata to the par value of the shares held by them. | ||||
Common stock, par value (in dollars per share) | $ .01 | $ 0.01 | |||
Common stock, authorized | 500,000,000 | 500,000,000 | |||
Proceeds from redeemable convertible preferred stock | $ 2,225 | $ 1,458 | |||
General and administrative expenses | $ 1,210 | $ 10,817 | |||
Stock Grant Agreement [Member] | Payout Notes [Member] | |||||
Notes payment terms | The Company also agreed to make 12 monthly payments | ||||
Notes frequency periodic payment | monthly payments | ||||
Date of first required payment | Jan. 1, 2018 | ||||
Number of shares issued | 1,857,336 | ||||
Stock Grant Agreement [Member] | Payout Notes [Member] | Mr. Dennis M. McGrath [Member] | |||||
Notes periodic payment | $ 21 | ||||
Stock Grant Agreement [Member] | Payout Notes [Member] | Mr. Dolev Rafaeli [Member] | |||||
Notes periodic payment | 7 | ||||
Stock Grant Agreement [Member] | Payout Notes [Member] | Mr. Yoav Ben-Dror [Member] | |||||
Notes periodic payment | 10 | ||||
Securities Purchase Agreement [Member] | Opportunity Fund I-SS, LLC (Investor) [Member] | |||||
Principal amounts | $ 15,000,000 | ||||
Shares issued price per share (in dollars per share) | $ 1 | ||||
Preferred A Stock [Member] | |||||
Preferred stock, shares authorized (in shares) | 3,000,000 | 3,000,000 | |||
Preferred stock, shares issued (in shares) | 123,668 | 123,668 | |||
Preferred stock, voting rights | Except as otherwise provided in the Series A Certificate of Designation or as otherwise required by law, the Convertible Series A Preferred Stock shall have no voting rights. However, as long as any shares of Convertible Series A Preferred Stock are outstanding, we shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Convertible Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Convertible Series A Preferred Stock or alter or amend the Series A Certificate of Designation, (b) amend the Company’s articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (c) increase the number of authorized shares of Convertible Series A Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing. | ||||
Preferred stock, dividend payment terms | Except for stock dividends or distributions for which adjustments are to be made, holders shall be entitled to receive, and the Company shall pay, dividends on shares of Convertible Series A Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Convertible Series A Preferred Stock. | ||||
Redeemable convertible preferred stock series B, redemption value | $ 273 | ||||
Preferred stock, par value (in dollars per share) | $ .01 | $ 0.01 | |||
Preferred stock, authorized | 3,000,000 | 3,000,000 | |||
Number of shares issued | |||||
Redeemable Convertible Series B Preferred Stock [Member] | |||||
Redeemable convertible preferred stock series B, shares authorized (in shares) | 15,000,000 | 15,000,000 | |||
Redeemable convertible preferred stock series B, voting rights | Each holder of the Series B Shares shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series B Shares held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter subject to certain conversion limitations. | ||||
Redeemable convertible preferred stock series B, conversion basis | Each Series B Share shall be convertible at the option of the holder thereof, at any time after the date of issuance of such share, into such number of fully paid and non-assessable Common Stock as is determined by dividing the original issue price plus accrued, but unpaid, dividends by the applicable conversion price at that time in effect for such Series B Share. The Series B Shares are automatically converted to Common Stock on May 31, 2018 should voluntary conversion or redemption not occur prior to that time. | ||||
Redeemable convertible preferred stock series B, dividend payment terms | Holders of the Series B Shares shall receive cumulative dividends, pro rata among such holders, prior to and in preference to any dividend on the Company’s outstanding Common Stock and Series A Convertible Preferred Stock, at the per annum rate of 8% of the Series B Original Issue Price ($1.00). | ||||
Redeemable convertible preferred stock series B, redemption price per share (in dollars per share) | $ 1 | $ 1.33 | |||
Redeemable convertible preferred stock series B, liquidation preference, value | $ 3,807 | $ 1,503 | |||
Number of shares issued | |||||
Redeemable Convertible Series B Preferred Stock [Member] | Securities Purchase Agreement [Member] | Opportunity Fund I-SS, LLC (Investor) [Member] | |||||
Number of shares issued upon conversion | 1.24789 | 1.24789 | |||
Number of shares issued | 2,225,000 | 1,500,000 | |||
Proceeds from redeemable convertible preferred stock | $ 2,225 | $ 1,500 | |||
Conversion price (in dollars per share) | $ 1 | $ 1 | |||
Beneficial conversion feature | $ 677 | $ 372 |
Redeemable Convertible Prefer32
Redeemable Convertible Preferred Stock and Stockholders' Deficit (Details Narrative 1) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
General and administrative expenses | $ 1,210 | $ 10,817 | |
Restricted Stock [Member] | |||
Equity-based compensation expense | 14 | $ 811 | |
Unrecognized compensation cost related to non-vested stock awards | $ 86 | ||
Non-Employee Director Stock Option Plan [Member] | |||
Number of shares authorized (in shares) | 1,250,000 | ||
Number of shares reserved for issuance (in shares) | 240,018 | ||
Equity Compensation Plan ("2005 Equity Plan") [Member] | |||
Number of shares authorized (in shares) | 3,500,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Income Taxes Details Narrative | |
Unrecognized tax benefits | $ 1,500 |
Income tax provision | $ 212 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) $ in Thousands | Apr. 27, 2018 | Apr. 20, 2018 | Apr. 18, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 |
Proceeds from redeemable convertible preferred stock | $ 2,225 | $ 1,458 | ||||
Subsequent Event [Member] | ||||||
Lease term | 5 years | |||||
Lease term renewal | 2 years | |||||
Redeemable Convertible Series B Preferred Stock [Member] | ||||||
Number of shares issued | ||||||
Opportunity Fund I-SS, LLC (Investor) [Member] | Redeemable Convertible Series B Preferred Stock [Member] | Subsequent Event [Member] | ||||||
Shares holding with stockholders | 6,220,436 | |||||
Ownership percentage | 5241.00% | |||||
Cancellation and Exchange Agreement [Member] | Opportunity Fund I-SS, LLC (Investor) [Member] | Redeemable Convertible Series B Preferred Stock [Member] | Subsequent Event [Member] | ||||||
Number of shares issued | 2,000 | |||||
Proceeds from redeemable convertible preferred stock | $ 2,000,000 | |||||
Cancellation and Exchange Agreement [Member] | Opportunity Fund I-SS, LLC (Investor) [Member] | Redeemable Convertible Series A Preferred Stock [Member] | Subsequent Event [Member] | ||||||
Proceeds from redeemable convertible preferred stock | $ 5,382,274 | |||||
Cancellation of Shares | 95,770 | |||||
Amended and Restated Separation Agreement [Member] | Subsequent Event [Member] | Kona International Group Inc [Member] | ||||||
Shares holding with stockholders | 8,592,972 | |||||
Ownership percentage | 60.34% |