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Capital Structure
 6 Months Ended
Jun. 30, 2021
Equity [Abstract]  
Capital Structure

Note 10 - Capital Structure

 

Common Stock - The Company is authorized to issue a total of 100,000,000 shares of common stock with par value of $0.001 and 100,000 shares of preferred stock with par value of $0.001. As of June 30, 2021, and December 31, 2020, 11,496,032 shares and 10,655,833 shares of common stock were issued and outstanding, respectively and no shares of preferred stock were issued and outstanding.

 

Founder Shares

 

During 2018, 5,000,000 shares of the Company’s common stock were issued to the Founders of the Company (“Founder Shares”) for an aggregate amount of $5,000 to the management of the Company, of which $4,550 was collected as of December 31, 2018 and $450 was collected during the year ended December 31, 2019.

 

Subscription Shares

 

During 2018 and 2019, fourteen (14) investors submitted subscription agreements to the Company for the purchase of a total 1,158,000 shares of the Company’s Common Stock by cash payment of total $289,500, or $0.25 per share, of which $239,500 was collected as of December 31, 2018 and $50,000 was collected in 2019. The transaction was independently negotiated between the Company and the investors.

 

Regulation A Offering

 

On June 21, 2019, the Company filed a Form 1-A Regulation A Offering Statement Under the Securities Act of 1933, as amended, and subsequent amendments thereto on July 29, 2019 and August 19, 2019 (the “Form 1-A”). On September 5, 2019, the Form 1-A was qualified by the Securities and Exchange Commission. Pursuant to the Form 1-A, as of December 31, 2019, the Company has sold 735,000 shares of its common stock, $0.001 par value per share, at a purchase price of $1.00 per share, resulting in gross proceeds of $735,000, before deducting offering expenses of $23,000.

 

Year ended December 31, 2020 issuances:

 

Warrant exercise:

 

During 2020, all of the 1,158,000 warrants issued in connection with the sale of the Subscription Shares were exercised for cash of $489,000 and utilization of the cashless exercise feature. As a result, the Company issued a total of 1,146,000 shares of its common stock.

 

Initial Public Offering:

 

On November 3, 2020, the Company completed an initial public offering (“IPO”) of 933,333 units (the “Units”). Each Unit consisted of one share of common stock of the Company, par value $0.001 per share (“Common Stock”), and one warrant of the Company (“Warrant”), with each Warrant entitling the holder thereof to purchase one share of Common Stock for $8.50 per share. The Units were sold at a price of $7.50 per Unit, generating gross proceeds to the Company of approximately $7,000,000. The Company granted the underwriters in the IPO a 45-day option to purchase up to 140,000 additional shares of Common Stock and 140,000 Warrants solely to cover over-allotments, if any. Simultaneously with the closing of the IPO, the Company consummated the sale of the additional 140,000 Warrants that were subject to the underwriters’ over-allotment option at $0.01 per Warrant, generating gross proceeds of $1,400. Net proceeds to the Company after all offering expenses, including legal, accounting and professional fees, registration and other fees and expenses were approximately $5,900,000.

 

Conversion of Convertible Promissory Notes:

 

During 2020, the Company converted $350,000 of convertible promissory notes into 300,000 shares of its common stock. The Notes were converted per the terms of the respective Notes and the Company did not recognize any gain or loss on the conversion. (see Note 7 – Convertible Promissory Notes).

 

Endorsement shares:

 

In connection with the execution of an Endorsement Agreement with Tee-2-Green, the Company issued 50,000 shares of its common stock valued at $3.94 per share (value at date of the 11/10/20 agreement) for total of stock-based compensation of $197,125.

 

Consulting Services shares:

 

During 2020, the Company entered into two Consulting Agreements under the terms of which the Company issued 425,000 shares of its common stock. The shares were issued at their respective fair value based on the Company’s Nasdaq closing price of the shares on the date of the agreements. The Company recognized a total of $1,565,000 as stock-based compensation in the year ended December 31, 2020.

 

 

Whitley Settlement:

 

In connection with the Settlement of creditors of Ms. Whitley, the former owner of Magical Beasts, LLC (see Note 14 Legal proceedings), the Company issued 8,500 shares of its common stock valued at $8,500.

 

Officer Shares:

 

During 2020, the company issued a total of 700,000 shares of its common stock to its Chairman and its CFO of which 400,000 shares valued at $325,000 were recorded as common stock payable and stock-based compensation in 2019. The additional 300,000 shares were valued at $225,000 and recorded as stock-based compensation in 2020. The respective values were determined based upon the last sales of shares of common stock to third parties.

 

SRM Entertainment Shares:

 

In connection with the acquisition of SRM Entertainment, Limited (see Note 13 SRM Acquisition), the Company issued 200,000 shares of its common stock valued at $1,040,000 based on the closing Nasdaq price at date of agreement.

 

Six months ended June 30, 2021 issuances:

 

Conversion of Convertible Promissory Notes:

 

During the six months ended June 30, 2021, the Company converted $525,000 of convertible promissory notes and accrued interest of $35,496 into 186,832 shares of its common stock. The Notes were converted per the terms of the respective Notes and the Company did not recognize any gain or loss on the conversion. (see Note 7 – Convertible Promissory Notes).

 

Exercise of Cashless Stock Options

 

During the six months ended June 30, 2021, a former Director of the Company exercised a portion of his stock options under the cashless provisions and was issued 47,470 shares of the Company’s stock, an officer of the Company exercised a portion of his stock options under the cashless provisions and was issued 15,844 shares of the Company’s stock and Ms. Whitley (see Note 12) exercised her stock options under the cashless provisions and was issued 159,053 shares of the Company’s stock.

 

Shares issued as compensation

 

During the six months ended June 30, 2021, the Company entered into five Consulting Agreements under the terms of which the Company issued 420,000 shares of its common stock. The shares were issued at their respective fair value based on the Company’s Nasdaq closing price of the shares on the date of the agreements. Additionally, the Company issued 11,000 shares of its common stock to an employee. The Company recognized a total of $2,090,720 as stock-based compensation in the six months ended June 30, 2021.

 

The following table sets forth the issuances of the Company’s shares of common stock for the six months ended June 30, 2021 and year ending

 

December 31, 2020:

 

     
Balance December 31, 2019   6,893,000 
Warrant Exercise Shares   1,146,000 
Initial Public Offering Shares   933,333 
Conversion of Promissory Notes   300,000 
Endorsement Shares   50,000 
Consulting Services Shares   425,000 
Whitley Settlement Shares   8,500 
Stock based compensation   700,000 
SRM Entertainment Acquisition Shares   200,000 
Balance December 31, 2020   10,655,833 
Conversion of Promissory Notes   186,832 
Exercise of stock options   222,367 
Stock based compensation   11,000 
Consulting Services Shares   420,000 
Balance June 30, 2021   11,496,032 

 

Common Stock Payable

 

In January 2021, the Company amended the employment agreements of its Officers and a Director to have a portion of their compensation be paid in shares of the Company’s common stock. During the six months ended June 30, 2021, the Company accrued $100,000 of compensation to be paid in stock.

 

The Company entered into three consulting agreement which call for a cash component and a stock component. At June 30, 2021 the Company had accrued a total of $228,450 of stock payable relating to the agreements.

 

Total Common Stock Payable at June 30, 2021 was $328,450. At June 30, 2021, the total number of shares of common stock issuable is 530,732.