Our ratio of healthcare services expense to premium revenue (“loss ratio”) decreased by approximately 0.3% from 76.2% in 2016 to 75.9% in 2017. The improved loss ratio impacted 2017 by approximately $26,000 in gross margin. The fully-insured dental HMO/IND and fully-insured dental PPO segments together represent approximately 71.9% of our total dental business.
Our dental and vision products grew by approximately 4,500 members, or 1.2%, from 382,100 members at December 31, 2016 to 386,600 members at December 31, 2017. This membership increase from December 31, 2016 is due to an increase in fully-insured dental PPO membership of approximately 10,300 members, an increase in self-insured dental membership of approximately 1,500 members and an increase in corporate, all other membership of approximately 200 members. This was offset by a decrease in fully-insured dental HMO/IND membership of approximately 7,500 members.
Our fully-insured dental HMO/IND membership decreased by approximately 7,500 in 2017. This membership decrease is attributable to the reduction of approximately 10,000 fully-insured dental HMO members due to the conversion of one employer group from our fully-insured dental HMO/IND product to our self-insured dental product effective January 1, 2017. In addition, a decrease of approximately 9,900 members is the result of employer groups that did not renew with the Company or reduced employee counts of retained employer groups. These decreases were offset by an increase of 10,100 members from new sales with employer groups and 2,300 members from new sales of individual HMO products in 2017. Some of our fully-insured dental HMO/IND membership losses were the result of corporate consolidations and employer groups moving to medical carriers to take advantage of medical/dental packaged savings.
Self-insured dental revenue increased by approximately $360,000 due to new self-insured sales and an increase in membership for existing employer groups. Self-insured revenue increased by approximately $326,000 due to an increase in the self-insured claims revenue on a per member per month basis, as well as an increase of approximately $34,000 in self-insured administrative fee rates on a per member per month basis. The self-insured dental segment represented approximately 27.4% of our total dental business in 2017. The self-insured segment revenue has two components:
Self-Insured Claim Revenue - Self-insured claim revenue increased approximately $326,000 in 2017. The self-insured claim revenue increased by approximately $3,433,000 due to the conversion of fully-insured HMO/IND revenue to the self-insured product. This increase was offset by a decrease of approximately $3,298,000, as a result of the loss of employer groups in 2017. In addition, there was an increase in self-insured claim revenue of approximately $191,000 as a result of an increase in self-insured claim revenue on a PMPM basis in the 2017.
Self-Insured ASO Fees - Self-insured ASO fees increased approximately $34,000 in 2017. Self-insured ASO fees increased by approximately $27,000 due to an increase in the average self-insured ASO fee rates on a PMPM basis in 2017. In addition, there was an increase of approximately $7,000 due to a net membership increase with existing employer groups.
Corporate, all other premium revenue is primarily derived from the non-DCP dental indemnity product, dental PPO product and vision product underwritten by third party insurance carriers. In the aggregate, corporate, all other premium revenue increased by approximately $36,000, to $807,000 in 2017 from $771,000 in 2016.
Investment income decreased approximately $9,000, to $265,000 in 2017 from $274,000 in 2016.
The following table shows membership totals and revenues and expenses for our four business segments for the years ended December 31, 2016 and 2015 (dollars in thousands):
Our fully-insured dental PPO membership increased by approximately 9,700 members in 2016. This membership increase is due to new sales in the Dayton and Central Ohio markets and the Southern Kentucky market of approximately 10,600 members during 2016, offset by the loss of approximately 8,200 members with employer groups that did not renew with the Company or reduced employee counts of retained employer groups in these markets. The remaining increase of approximately 7,300 members is due to new sales of individual and on exchange dental PPO products in 2016.
Fully-insured dental HMO/IND healthcare services expense increased 7.1%. This increase is attributable to an increase in fully-insured dental HMO/IND healthcare services expense on a per member per month basis of approximately $725,000 in 2016 for both existing and new fully-insured dental HMO/IND membership. Fully-insured dental HMO/IND healthcare services expense increased by approximately $196,000 due to fee schedule increases effective January 1, 2016 and by approximately $529,000 due to an increase in dental service utilization by our fully-insured dental HMO/IND members in 2016 compared to 2015. This increase in fully-insured dental HMO/IND healthcare services expense is also the result of an increase of approximately $1,924,000 due to an increase in fully-insured dental HMO/IND member months of 1.8% in 2016 compared to 2015.
Consolidated insurance expenses increased approximately $2,067,000 in 2016. Total insurance expenses as a percentage of total premium revenue, or the insurance expense ratio, was 21.0% for 2016, increasing 0.6% from the 2015 ratio of 20.4%. Salaries and wages increased by approximately $1,255,000 in 2016 primarily due to the addition of new employees. Commissions expense increased approximately $118,000, due to the increase in total premium revenue in 2016 compared to 2015. Other insurance expense increased by approximately $694,000 due to an increase in expenses related to the launch of the individual dental PPO product in Indiana as well as the development of the on exchange dental PPO products for Illinois and Virginia for 2017.
Cash decreased $436,000, or 3.7%, for the year ended December 31, 2016 to approximately $11,221,000 at December 31, 2016 from approximately $11,657,000 at December 31, 2015. This cash decrease is primarily the result of cash flow used in investing activities and financing activities of approximately $2,209,000 and $1,909,000, respectively. These were offset by an increase in cash flow provided from operations of approximately $3,682,000. The change in cash for the years ended December 31, 2017, 2016 and 2015 is summarized as follows (in thousands):
In 2017, approximately $3,608,000 was provided by operating activities. We had net income of approximately $1,829,000. Our non-cash deferred compensation activity was approximately $988,000 primarily due to current year vesting activity and an increase in current book value of our common shares in 2017. Deferred policy acquisition costs decreased by approximately $472,000 primarily as a result of the amortization of significant fully-insured multiyear contracts signed in 2016 offset by the increase in the fully-insured business renewed in January 2017. Other payables and accrued expenses decreased and resulted in a net decrease in cash flow from operating activities of approximately $163,000. A decrease in accounts receivable offset by a decrease in unearned premium revenue resulted in an increase of cash of approximately $168,000 in the 2017 period. We paid $1,376,000 of federal income taxes in the 2017 period that related to our 2016 extension payment and 2017 estimated tax payments. The remaining effects of changes in operating assets and liabilities that represent fluctuations are not significant and are consistent with 2016.
During 2017, we made purchases totaling approximately $4,167,000 of investment grade and non-investment grade corporate bonds, money markets and certificates of deposit in order to improve investment income. Also during 2017, we sold investment grade and non-investment grade corporate bonds, and certificates of deposit and maturities that together totaled approximately $3,967,000. In addition, in September 2017, we sold certain office equipment and computer equipment with a value of approximately $921,000 to a leasing company and entered into a capital lease agreement to lease back these same assets over a four year period. The remaining net cash used in investing activities during 2017 was primarily due to purchases of computer equipment and internally developed software development costs.
In 2016, we made scheduled principal payments of approximately $50,000 related to our office building mortgage and scheduled payments of approximately $311,000 related to our capital leases. During 2016, we repurchased Redeemable Common Shares with a value of approximately $276,000. Also, we repurchased all of our Institutional Preferred Shares with a value of approximately $2,805,000, and including the 5% premium of approximately $119,000 paid to the holders of the 2012(A) and the 2013(A) series, the total price paid was approximately $2,924,000. We also paid dividends of approximately $442,000 to holders of our Redeemable Common Shares and approximately $68,000 to holders of our Redeemable Institutional Preferred Shares in 2016. During 2016, we issued approximately $2,280,000 of new Redeemable Common Shares.
In 2015, we made scheduled principal payments of approximately $49,000 related to our office building mortgage and scheduled payments of approximately $249,000 related to our capital leases. During 2015, we repurchased Redeemable Common Shares with a value of approximately $223,000. We also paid dividends of approximately $346,000 to holders of our Redeemable Common Shares and approximately $135,000 to holders of our Redeemable Institutional Preferred Shares in 2015. In addition, we issued approximately $1,932,000 of new Redeemable Common Shares during 2015.
A mortgage note, secured by the land and the office building, accrues interest based on the 30-day LIBOR rate plus 1.95%. The note requires us to make principal payments of $4,600 per month in 2018 and higher principal payments in subsequent years through 2022 in accordance with the agreed upon loan amortization schedule. At the maturity date of the mortgage note in 2022, the expected outstanding balance of the note of approximately $804,000 must be repaid or refinanced. We also entered into an interest rate swap agreement that effectively changed the interest rate related to the $1,340,000 mortgage note with a commercial bank from a variable rate based on the 30-day LIBOR rate plus 1.95% to a fixed rate of approximately 3.90% for the 10-year period through December 2022. At December 31, 2017, the carrying value of the mortgage note approximates fair value. Under this mortgage, the Company is required to have a minimum tangible net worth equal to or greater than $3,500,000 at the end of each fiscal year and a debt service ratio of at least 1:1. The Company was in compliance with these covenants at December 31, 2017. The Company also entered into a capital lease agreement with a leasing company in 2017 that obligates the Company to pay lease payments over a four year period for each capital lease. Under these capital lease agreements, the Company is required to have a minimum tangible net worth equal to or greater than $2,500,000 at the end of each fiscal year. At December 31, 2017, the Company was in compliance with this minimum tangible net worth requirement.
We have an annually renewable agreement with a commercial bank for a $500,000 working capital line of credit. Interest is payable at a variable rate of LIBOR plus 2.50%. The Company did not have any interest expense for the line of credit in 2017, 2016 or 2015. As of December 31, 2017 and 2016, there was no amount outstanding on this line of credit.
We have an annually renewable agreement with a commercial bank for a $1,000,000 working capital line of credit. Interest is payable at a variable rate of LIBOR plus 2.50%. The Company did not have any interest expense for the line of credit in 2017, 2016 or 2015. As of December 31, 2017 and 2016, there was no amount outstanding on this line of credit.
Most states rely on risk-based capital requirements, or RBC, to define the required levels of equity. RBC is a model developed by the NAIC to monitor an entity’s solvency. This calculation indicates recommended minimum levels of required capital and surplus and signals regulatory measures should actual surplus fall below these recommended levels. RBC has been adopted in the states in which we currently do business. We file our annual statement and RBC reporting with the Ohio Department of Insurance and the NAIC. Dental Care Plus’s statutory annual statements for the year ended December 31, 2017 filed with the Ohio Department of Insurance reflected total adjusted capital in excess of Company Action Level RBC.
Between December 31, 2016 and December 31, 2017, our claims payable liability estimate decreased by approximately $167,400 or 4.5%, primarily due to lower fully-insured dental HMO/IND utilization in December 2017 compared to December 2016 offset by an increase in fully-insured dental PPO membership at December 31, 2017 compared to December 31, 2016.
When developing our estimate for claims payable liability as of December 31, 2017, we considered actual paid claim data from January 2018. As a result, we are able to use the completion factors approach for all historical months in 2017, including December 2017. The table below illustrates how our operating results are impacted when there is a variance between estimated claims expense and actual claims expense. The table shows the sensitivity of the estimated fully-insured incurred claims payable liability to fluctuations in the expected completion factors that were used to estimate the claims payable liability as of December 31, 2017 within variance ranges historically experienced. Based on historical experience, the completion factors we use to estimate outstanding IBNR and reported claims in process are highly reliable for predicting actual claims paid at future times, with a variance range of approximately one-half of one percent, plus or minus.
(a) Reflects estimated potential changes in incurred claims payable liability caused by changes in completion factors for all months prior to December 31, 2017.
Self-Insured-The Company provides administrative and claims processing services, benefit plan design, and access to its provider networks for an administrative fee to self-insured groups. The Company has no underwriting risk arising from the provision or cost of any services provided to the self-insured groups. The Company recognizes and records self-insured premiums on a gross basis because: (i) the Company is the primary obligor in its contractual relationships with self-insured employers and dental service providers, (ii) the Company establishes the pricing for the services provided, (iii) the Company controls the selection of and the relationships with the dental service providers, and (iv) the Company is involved in the determination of dental service specifications. Self-insured premium revenue is recognized upon the payment of claims for self-insured members in accordance with agreements with self-insured employers and is included in premium revenue in the accompanying condensed consolidated statements of comprehensive income.
AS OF DECEMBER 31, 2017 AND 2016 AND FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
State Guarantee Fund Deposits- The Company maintains funds on deposit with state insurance departments in those states where the Company is licensed to do business. These funds amounted to approximately $1,838,000 and $1,850,000 at December 31, 2017 and 2016, respectively. These funds are restricted and not available to the Company for normal operations and are included in other assets in the accompanying consolidated balance sheets.
Fully-Insured-Membership contracts are written on an annual or multi-year basis and are subject to cancellation by the employer group upon thirty days written notice. The Company’s unearned premium revenue was approximately $36,818,000 and $46,955,000 at December 31, 2017 and 2016, respectively, and primarily relates to the estimated premium revenue associated with the remaining contract periods. Related unbilled amounts recorded in accounts receivable were approximately $35,281,000 and $45,687,000 at December 31, 2017 and 2016, respectively. Premiums are due monthly in advance and are recognized evenly as revenue during the period in which the Company is obligated to provide services to members. Any amounts not received by the end of a reporting period are recorded as accounts receivable by the Company. Any premiums received prior to the beginning of a reporting period are recognized as premiums received in advance and are included in unearned premium revenue in the accompanying consolidated balance sheets. Premiums received in advance were approximately $1,537,000 and $1,268,000 at December 31, 2017 and 2016, respectively. Management has determined that as of December 31, 2017 and 2016, respectively, no premium deficiency reserve is required. The Company’s premium deficiency reserve analysis includes an allocation of investment income.
Healthcare Services Expense- Healthcare services expense is recognized on a monthly basis. In the case of the fully-insured dental HMO and indemnity (“dental HMO/IND”) and dental PPO segments, healthcare services expense is calculated by taking the paid claims associated with the fully-insured membership and adjusting this amount for the change in the claims payable liability determined using actuarial estimates. For the self-insured dental segment, the healthcare services expense is based solely on the paid claims for the self-insured membership. The Company incurred claim costs related to dental care providers amounting to approximately $81,608,000, $80,500,000, and $76,684,000, for the years ended December 31, 2017, 2016, and 2015, respectively.
Claims Payable- The Company estimates liabilities for both incurred but not reported (“IBNR”) and reported claims in process by employing actuarial methods that are commonly used by health insurance actuaries. These estimates meet actuarial standards of practice and are also recorded in accordance with GAAP. Management’s estimates of dental services provided are based on the Company’s historical experience and current trends, with assistance from the Company’s consulting actuary. Estimated dental claims payable are reviewed monthly by management and are adjusted based on current information, actual paid claims data, dental utilization statistics and other pertinent information. However, final claim payments may differ from the established reserves. Any resulting adjustments are reflected in current operations in the condensed consolidated statements of comprehensive income.
During 2017, 2016, and 2015, five fully-insured customers accounted for approximately 10%, of the Company’s total premium revenue. Additionally, two self-insured customers accounted for approximately 11% of the Company’s total revenue during each of the years 2017, 2016, and 2015, respectively.
In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. ASU 2017-08 amends guidance on the amortization period of premiums on certain purchased callable debt securities. The amendments shorten the amortization period of premiums on certain purchased callable debt securities to the earliest call date. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment to beginning retained earnings. The effective date of ASU 2017-08 is for interim and annual reporting periods beginning after December 15, 2018. The ASU has not yet been adopted by the Company. Management is currently evaluating the impact on our Company’s consolidated financial position, cash flows and results of operations, but it is not expected to have a significant impact.
The Company owned certificates of deposit insured by the Federal Deposit Insurance Corporation (“FDIC”) with an amortized cost of $1,150,000 and $1,090,000 at December 31, 2017 and 2016. The certificates of deposit included in short-term and fixed maturities investments are classified as available-for-sale and are carried at fair value. The Company also invests in money market funds included in short-term investments and are classified as available-for-sale, with a cost and fair value of approximately $181,000 and $223,000 at December 31, 2017 and 2016, respectively. The Company invested in corporate bonds with an amortized cost of approximately $8,240,000 and $8,025,000 at December 31, 2017 and 2016, respectively. The investment and non-investment grade corporate bonds included in fixed maturity investments are classified as available-for-sale and are carried at fair value.
At December 31, 2017 and, 2016, maturity dates for fixed maturities and short-term investments (excluding the money market funds) were:
The following table provides realized investments gains and losses for the years ended December 31, 2017, 2016 and 2015:
The Company had depreciation expense of approximately $432,000, $484,000, and $449,000 for the years ended December 31, 2017, 2016 and 2015, respectively.
Goodwill and intangible assets were recorded as a result of the acquisition of Adenta, Inc. in 2005 related to goodwill, an acquired contract, memberships and a provider network. Goodwill amounted to approximately $136,000 at December 31, 2017 and 2016. There has not been any impairment on goodwill. Identifiable and amortizable intangible assets amounted to approximately $41,000 net of approximately $199,000 of accumulated amortization at December 31, 2017 and to approximately $50,000 net of approximately $190,000 of accumulated amortization at December 31, 2016. Amortization expense was approximately $9,000, $15,000 and $15,000 for each of the three years ended December 31, 2017, 2016 and 2015. The provider network intangible asset of approximately $41,000 at December 31, 2017 is being amortized over a period of 20 years, a period during which the Company expects that all of these providers will have retired from the network. The membership intangible assets (net of individual memberships written-off in the year of acquisition) has been fully amortized over its 11 year useful life at December 31, 2017. The remaining weighted-average amortization period for these intangible assets is approximately 8 years. Goodwill and intangible assets are included in other assets in the accompanying consolidated balance sheets at December 31, 2017 and 2016.
In February 2017 and 2016, the Board declared a per share cash dividend for all Redeemable Common Shares in the amounts of $42.50 and $40.47 per share, respectively. With the dividend, the holders of restricted share units and phantom shares received an equivalent share based dividend that resulted in an increase in the deferred compensation liability of approximately $115,000 and $102,000 in February 2017 and February 2016, respectively. At December 31, 2017 and 2016, the deferred compensation liability was approximately $4,822,000 and $4,051,000, respectively.
The maximum aggregate number of share based awards that may be issued under the Plans are 15,000 Class B Common Shares. In 2017, the non-employee members of the Board were granted a total of 196 share based awards. In 2017, key employees were granted 99 share based awards. The equivalent share based dividend in February 2017 granted approximately 86 share based awards to individuals. As of December 31, 2017, the Company has granted a total of 4,936 share awards, net of share based dividends, forfeitures and rescinded share awards of which 3,065 are outstanding.
The following is a summary of activity of non-vested awards for the years ended December 31, 2017 and 2016:
The following is a summary of activity of vested awards for the years ended December 31, 2017 and 2016:
The Company enters into sale-leaseback transactions with a leasing company for the sale of fixed assets. There is no gain or loss on any sales. The Company does not retain the benefits and risk to the property sold and risk of ownership is transferred to the leasing company. The Company sold approximately $921,000 and $347,000 in 2017 and 2015, respectively. The Company also enters into capital lease agreements with the leasing company that obligates the Company to pay lease payments related to the respective assets sold. The Company entered into lease payments for sold assets totaling approximately $999,000 and $373,000 in 2017 and 2015, respectively. Under these capital lease agreements, the Company is required to have a minimum tangible net worth equal to or greater than $2,500,000 at the end of each fiscal year.
At December 31, 2017, future required payments under all outstanding capital leases are as follows:
The Company has an annually renewable agreement with a commercial bank for a $500,000 working capital line of credit. Interest is payable at a variable rate of LIBOR plus 2.50%. The Company did not have any interest expense or significant fees for the line of credit for each of the three years ended December 31, 2017. As of December 31, 2017 and 2016, there was no amount outstanding on this line of credit. The $500,000 working capital line of credit expires in July 2018. The Company expects to renew this line of credit at its maturity.
The Company has an additional annually renewable working capital line of credit for $1,000,000. Interest is payable at a variable rate of LIBOR plus 2.50%. The Company did not have any interest expense or significant fees for the line of credit for each of the three years ended December 31, 2017. At December 31, 2017 and 2016, there was no amount outstanding on this line of credit. The $1,000,000 working capital line of credit expires in July 2018. The Company expects to renew this line of credit at its maturity.
Management believes it is more likely than not that deferred tax assets, net of valuation allowance will reduce future income tax payments. Significant factors considered by management in its determination of the probability of the realization of the deferred tax benefits include the historical operating results and the expectations of future earnings. The Company had $38,415, $74,209, and $86,226, of net operating loss carry forwards to utilize in future years at December 31, 2017, 2016, and 2015, respectively. These losses will expire between 2019 and 2025. Net deferred tax assets are included in other assets in the accompanying consolidated balance sheets at December 31, 2017 and 2016.
In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code beginning in 2018, which will reduce the corporate tax rate from 34% to 21%. The rate reduction required a remeasurement of the Company’s net deferred tax asset. These items resulted in an estimated increase in our 2017 tax expense of approximately $692,000.
Employees of the Company are covered by a defined contribution 401(k) plan sponsored by the Company. Discretionary contributions of a certain percentage of each employee’s contribution, which may not exceed a limit set annually by the Internal Revenue Service, are contributed by the Company each year and vest ratably over a five-year period. Company contributions, including administration fees paid by the Company, amounted to approximately $91,000, $89,000, and $83,000 for the years ended December 31, 2017, 2016 and 2015, respectively.
Accumulated other comprehensive income includes changes in unrealized gains and losses on available for sale and other invested assets as follows:
The Company leases space in its building to unrelated parties under non-cancelable leases. The Company did not have any lease income for the year ended December 31, 2017. Income recorded by the Company under non-cancelable leases amounted to approximately $52,000 for the year ended December 31, 2016, and approximately $62,000 for the year ended December 31, 2015. Such amounts are recorded as other income in the accompanying consolidated statements of comprehensive income.
At December 31, 2017, future approximate minimum annual lease payments under non-cancelable operating leases are as follows:
All of the Company’s Class A and Class B shareholders are related parties, either as a participating provider, director or an employee of the Company.
Seven of our Board members are also participating providers and as a group received approximately $183,000, $201,000, and $191,000 in directors’ fees for the years ended December 31, 2017, 2016, and 2015, respectively.
The following table presents for each of the fair value levels, the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2017 and 2016 (amounts in thousands):
The Company measures fair value using the following valuation methodologies. The Company uses quoted market prices to determine the fair value of the money market funds, deferred compensation investments and certain state fund guarantee deposits; such items are classified as Level 1 of the fair value hierarchy. Examples include government securities and mutual fund equity securities. The Company primarily bases fair value for investments in fixed-maturity securities on prices from a pricing vendor, an outside resource that supplies independent securities pricing, dividend, corporate action and descriptive information to support fund pricing, securities operations, research and portfolio management. The Company obtains and reviews the pricing service’s valuation methodologies and validates these prices using various inputs including quotes from other independent regulatory sources. When deemed necessary, the Company validates prices by replicating a sample using a discounted cash flow model. Such items are classified as Level 2 of the fair value hierarchy. The Company obtains a price from an independent vendor to determine the fair value of the interest rate swap. The independent vendor uses a discounted cash flow method whereby the significant observable inputs include the replacement interest rates of similar swap instruments in the market and swap curves; such items are classified as Level 2 of the fair value hierarchy.
Participating providers along with Company directors and employees have the option to purchase one or more voting Class B Redeemable Common Shares of the Company, when offered. Non-provider individuals are eligible to purchase Class C voting Redeemable Common Shares, when offered. The maximum percentage of Class C Common Shares outstanding at any time as a proportion of all voting Common Shares is 40%. The book value of a Common Share was approximately $1,210 and $1,110 at December 31, 2017 and 2016, respectively. In 2017, 2016, and 2015, the Board declared a per share cash dividend for all Class A, Class B and Class C Redeemable Common Shares in the amounts of $42.50, $40.47, and $39.86, respectively.
The Company has 100,000 authorized Class D Redeemable Common Shares, without par value. The Class D Redeemable Common Shares are non-voting redeemable common shares that Preferred Shares may be converted into under certain circumstances. As of December 31, 2017 and 2016, no Class D Redeemable Common Shares were issued or are outstanding.
In 2010, the Company entered into a Preferred Stock Purchase Agreement with an investor for 300 Redeemable Institutional Preferred Shares at a purchase price of $1,000 per share. In 2012 and 2013, the Company entered into additional Stock Purchase Agreements with an investor for the sale of 1,000 Redeemable Institutional Preferred Shares each year at a purchase price of $1,000 per share. In June 2016, Company exercised its right to redeem all of the Preferred Shares and as of December 31, 2017 and 2016 there were no issued or outstanding Preferred Shares.