Quarterly report pursuant to Section 13 or 15(d)

Stockholders??? Deficit

v3.22.2.2
Stockholders’ Deficit
 9 Months Ended
Sep. 30, 2022
Equity [Abstract]  
Stockholders’ Deficit

6) Stockholders’ Deficit

 

Preferred Stock

 

We are authorized to issue 1,000,000 shares of preferred stock with a par value of $.01. Of the 1,000,000 shares of preferred stock, the following is outstanding:

 

    September 30, 2022     December 31, 2021  
Series D Convertible Preferred Stock, $.01 par value; 850 shares authorized; 300 shares issued and outstanding on September 30, 2022 and December 31, 2021, respectively (Liquidation value of $300,000)     3       3  
Series G Convertible Preferred Stock, $.01 par value; 240,000 shares authorized; 80,570 shares issued and outstanding on September 30, 2022 and December 31, 2021, respectively     806       806  
Series H Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; 10,000 shares issued and outstanding on September 30, 2022 and December 31, 2021, respectively     100       100  
Series J Convertible Preferred Stock, $.01 par value; 6,250 shares authorized; 3,458 and 3,458 shares issued and outstanding on September 30, 2022 and December 31, 2021, respectively     35       35  
Series K Convertible Preferred Stock, $.01 par value; 15,000 shares authorized; 6,880 shares issued and outstanding on September 30, 2022 and December 31, 2021, respectively     68       68  
Series AA Convertible Preferred Stock, $.01 par value; 10,000 shares authorized; 8,645 and 8,649 shares issued and outstanding on September 30, 2022 and December 31, 2021, respectively     86       87  
Series H2 Convertible Preferred Stock, $.01 par value; 21 shares authorized; 21 shares issued and outstanding on September 30, 2022 and December 31, 2021, respectively
    -       -  

Series A Junior Participating Preferred Stock, $.01 par value, 20,000 shares authorized, no shares outstanding

     -       -  

Series A Convertible Preferred Stock, $.01 par value, 313,960 shares authorized, no shares outstanding

     -       -  
Series B Convertible Preferred Stock, $.01 par value, 279,256 shares authorized, no shares outstanding     -       -  
Series C Convertible Preferred Stock, $.01 par value, 88,098 shares authorized, no shares outstanding     -       -  
Series E Convertible Preferred Stock, $.01 par value, 500 shares authorized, no shares outstanding     -       -  
Total Convertible Preferred Shares   $ 1,098     $ 1,099  

 

Stock Options and Warrants

 

At the Company’s December 30, 2021 Special Meeting, the shareholder’s approved the 2021 Equity Incentive Plan (the “2021 Plan”) pursuant to which 3,000,000 shares of our common stock were reserved for issuance upon exercise of stock options or other equity awards. Consistent with the Company’s existing 2013 Equity Incentive plan (the “2013 plan”), under the 2021 plan, we may award stock options, shares of common stock, and other equity interests in the Company to employees, officers, directors, consultants, and advisors, and to any other persons the Board of Directors deems appropriate. As of September 30, 2022, options to acquire 1,307,822 shares were outstanding under these Plans.

 

As of September 30, 2022, total unrecognized compensation cost related to the unvested stock-based awards was $43,971 which is expected to be recognized over weighted average period of 0.70 years. The aggregate intrinsic value associated with the options outstanding and exercisable, and the aggregate intrinsic value associated with the warrants outstanding and exercisable as of September 30, 2022, based on the September 30, 2022 closing stock price of $1.30, was $751,466.

 

 

The following table summarizes information concerning options and warrants outstanding and exercisable:

 

    Stock Options     Warrants              
    Weighted
Average		     Weighted
Average		              
    Shares     price
per
share		     Shares     price
per
share		     Shares     Total
Exercisable		  
Balance outstanding, December 31, 2021     1,333,101     $ 0.72       16,207,108     $ 3.50       17,540,209       17,308,567  
Granted     -       -       277,500       3.50       277,500          
Exercised     (25,279 )     0.69       -       -       (25,279 )        
Expired/forfeited     -       -       (190,840 )   $ 3.50       (190,840 )        
Balance outstanding, September 30, 2022     1,307,822     $ 0.72       16,293,768     $ 3.50       17,601,590       17,533,679  

 

As of September 30, 2022, the 1,307,822 options outstanding have a $0.72 weighted average exercise price and 6.96 years weighted average remaining term. Of these options, 1,239,911 are currently exercisable.

 

Common Stock and Warrant Issuances

 

As profiled in the following table, for five loans we are obligated to issue common stock if not paid by defined dates.

 

Loan     Loan Issuance Date   Loan Principal     % of Loan Principal Issuable     Defined Date     Shares Issuable Frequency  
                               
Loan 1     July 21, 2020   $ 115,000       0.0435 %     September 30, 2020       Monthly  
Loan 2     September 21, 2020   $ 345,000       0.0362 %     November 16, 2020       Weekly  
Loan 3     October 22, 2020   $ 115,000       0.0652 %     December 1, 2020       Weekly  
Loan 4     October 21, 2021   $ 189,750       0.0435 %     January 2, 2022       Monthly  
Loan 5     November 1, 2021   $ 189,750       0.0435 %     January 2, 2022       Monthly  

 

For the three-month and nine-month period ended September 30, 2022, the Company is obligated to issue 389,500 and 1,172,100 shares of common stock, respectively, for the loans listed in the above table, but has not issued the shares. The Company and the lenders are negotiating in good faith to resolve these loans. During the three-month and nine-month period ended September 30, 2022, the Company accrued $634,305 and $2,196,278, respectively in interest expense for these obligations to issue common stock.

 

During the nine months ended September 30, 2022, the Company issued a total of 3,100,085 shares of restricted common stock to accredited investors and consultants. Shares issued:

 

● 25,279 shares for option exercise for $17,443;
● 190,500 shares for services valued at $312,875;
● 1,028,800 shares for debt extensions value at $1,714,678;
● 140,200 shares for conversion of debt and interest valued at $350,500;
● 4,400 shares for preferred stock conversions from Series AA Convertible Preferred Stock;
● 1,172,100 shares for interest paid-in-kind valued at 2,196,278;
● 368,500 shares for stock issued with debt valued at $512,593, and
● 170,306 shares with a fair value of $306,333 for dividends paid-in-kind.

 

During the nine months ended September 30, 2021, we issued a total of 4,176,796 shares of restricted stock to accredited investors and consultants. Shares issued:

 

● 2,431,182 shares of common stock with a fair value of approximately $5.6 million to lenders for interest paid-in-kind;
● 248,200 shares with a fair value of $579,512 for services rendered;
● 1,035,996 shares with a fair value of $2,589,990 for conversions of debt principal and interest;
● 21,411 shares for stock option exercises (at an exercise price of $0.69 per share);
● 56,067 shares with a fair value of $114,298 for dividends paid-in-kind;
● 347,650 shares with a fair value of $551,198 for new convertible debt issuances, and
● 36,290 shares of common stock for a non-cash warrant exercise.

 

During the nine months ended September 30, 2022, the Company issued a total of 277,500 warrants at a fair value of $280,608, all with a strike price of $3.50 per share and an expiration term ranging from 3 to 5 years. Warrants issued:

 

● 120,000 issued in conjunction with signing of new convertible loans;
  ● 100,000 issued for a debt extension, and
● 57,500 issued for professional services rendered.

 

During the nine months ended September 30, 2021, we issued 1,558,266 warrants (three to five-year term at a $3.50 to $5.00 exercise price) to acquire common stock at a fair value of $2.0 million to lenders in conjunction with signing of new convertible loans and interest paid-in-kind.

 

In this period, we also issued 200 shares of Series AA preferred stock and 200,100 warrants to acquire common stock (five year term and $3.50 exercise price) for settlement of liabilities, including accrued expense, accrued compensation to employees and non-convertible debt and related interest. The relative fair value of these warrants is $245,635. The Company also recognized a $23,004 loss on settlement of liabilities, which is included in losses on extinguishment of liabilities on the consolidated statement of operations. The Company also entered into Securities Purchase Agreements with accredited investors pursuant to which the Company sold an aggregate of 406 shares of Series AA Convertible Preferred Stock, each preferred share convertible into 1,000 shares of the Company’s common stock, par value $0.01 per share, for an aggregate Purchase price of $1,015,000. We issued to the investors warrants to purchase an aggregate 406,000 shares of common stock with an exercise price of $3.50 per share. The Company did not incur any placement agent fees for these transactions.