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STOCKHOLDERS EQUITY | 12 Months Ended
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Dec. 31, 2023
STOCKHOLDERS EQUITY |
STOCKHOLDERS' EQUITY | NOTE 8 - STOCKHOLDERS’ EQUITY Preferred Stock The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.0001 per share. As of December 31, 2023, and 2022, the Company had 86,000 shares of Series E preferred stock issued and outstanding. Our Series E preferred stock is the only class of our preferred stock that is currently outstanding. Series E preferred stock has a stated value of $20 per share, which is convertible at any time after issuance at the option of the holder, subject to a beneficial ownership limitation of 4.99% or if waived, 9.99%, into common stock based on the stated value per share divided by $4.00 per share, subject to adjustment in the event of stock splits, stock dividends or reverse splits. Holders of Series E Preferred Stock are entitled to vote together with holders of the common stock on an as-converted basis, subject to a beneficial ownership limitation of 4.99% or if waived, 9.99%. If at any time while any shares of Series E Preferred Stock remain outstanding and any triggering event contained in the Certificate of Designation for such series occurs, we shall pay, within three days, to each holder $210 per each $1,000 of the stated value of each such holder’s shares of Series E Preferred Stock. Preferred Stock Penalties On March 31, 2019, we entered into certain agreements with investors pursuant to which we issued convertible preferred stock and warrants, as described above. Each of the series of preferred stock and warrants required us to reserve shares of common stock in the amount equal to two times the common stock issuable upon conversion of the preferred stock and exercise of the warrants. We did not comply in part due to our attempts to manage the Delaware tax which increases to a maximum of $200,000 as the authorized capital increases without the simultaneous increase in the number of shares outstanding. In May 2020 following stockholder approval at a special meeting the Company effected a reincorporation from Delaware to Nevada and a simultaneous increase in our authorized common stock from 31,250,000 shares to 250,000,000 shares. As of December 31, 2019, we estimated that we owed approximately $6 million in penalties (prior to any waivers of penalties) to holders of preferred stock. Subsequent to December 31, 2019, we have received waivers from a substantial number of the preferred shareholders with respect to these penalties. We have agreed to issue to the holders of Series D Preferred Stock an aggregate of 106,134 additional shares of Series D Preferred Stock (valued at $1,929,516) as consideration for the waivers. We accrued this cost during the year ended December 31, 2019. Additionally, certain holders of Series E and Series F Preferred Stock have not waived the penalties. We accrued $308,893 as of December 31, 2019, related to these Series E and Series F Preferred holders. Due to our ongoing liquidity problems, we will be required to cease operations if faced with material payment requests from investors who did not agree to waive the penalties. The total accrued penalty amount of $2,238,314 was included in accrued expenses on the balance sheet during the year ended December 31, 2019. The $1,929,516 accrual was reclassified to equity during the three months ended March 31, 2020, as a result of our issuance of the 106,134 shares of Series D Preferred Stock. As of December 31, 2023, and December 31, 2022, the remaining balance of $308,798 is included in accrued expense on the consolidated balance sheets. Common Stock The Company is authorized to issue 6,666,667 shares of common stock, par value $0.0001 per share. As of December 31, 2023, and December 31, 2022, the Company had 1,433,903 and 1,085,184 shares of common stock outstanding, respectively. Reverse Stock Split On August 4, 2023, the Company approved a one-for-fifteen (1:15) reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). On August 22, 2023, the Company filed a Certificate of Change pursuant to Nevada Revised Statutes with the Nevada Secretary of State to affect a reverse stock split of the Common Stock, and the proportional decrease of the Company’s authorized shares of Common Stock at a ratio of one-for-fifteen (15). All share and per share data have been retrospectively adjusted for the effects of the reserve split. Shares Issued for Cash On August 17, 2023, we entered into a securities purchase agreement with the investor, pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i) 130,000 shares of common stock at a purchase price of $4.662 per Share and accompanying Warrant (2023 Warrant) and (ii) 92,222 pre-funded warrants (the “2023 Pre-Funded Warrants”) to purchase up to an aggregate of 92,222 shares of common stock at a purchase price of $4.6602 per 2023 Pre-Funded Warrant and accompanying Warrant. Additionally, pursuant to the securities purchase agreement, in a concurrent private placement, the Company also agreed to sell and issue to the purchaser warrants (the “2023 Warrants”) to purchase up to 222,222 shares of Common Stock. The 2023 Warrants will be exercisable as of February 21, 2024, at an exercise price of $2.787 per share and will expire five and one-half years from the date of issuance. The total aggregate cash proceeds to the Company were $785,509 after deduction of equity issuance costs of $250,490. Shares issued upon exchange of common stock warrants On January 6, 2022, upon agreement with a warrant holder, the Company issued 7,515 shares of common stock upon the exchange of 7,515 warrants. The shares were valued at approximately $473,000 based on the stock price, while the exchanged warrants had a Black-Scholes value of approximately $321,000, resulting in a loss on exchange and credit to equity of $152,244. Restricted Stock Units On September 18, 2020 the Company awarded to Evan Sohn, our Executive Chairman and CEO, 14,773 restricted stock units (the “RSUs”) subject to and issuable upon the listing of the Company’s common stock on the Nasdaq Capital Market or NYSE American, or any successor of the foregoing (the “Uplisting”). The RSUs will vest over a two-year period from the date of the Uplisting in equal quarterly installments on the last day of each calendar quarter, with the first portion vesting on the last day of the calendar quarter during which the Uplisting takes place, subject to Mr. Sohn serving as an executive officer of the Company on each applicable vesting date, provided that the RSUs shall vest in full immediately upon the termination of Mr. Sohn’s employment by the Company without Cause (as defined in the Employment Agreement). The RSU award has been valued at $1,662,000 and compensation expense will be recorded over the estimated vesting period. We recognized compensation expense of $152,143 and $595,343 during the years ended December 31, 2023 and 2022. The shares began vesting on June 30, 2021, the quarter the Uplisting occurred. On February 2, 2022, 500 RSUs vested and 500 were issued to a vendor for services related to a 2021 agreement. The Company expensed the remaining $27,000 in 2022 as the service period expired. During the three months ended March 31, 2022, 2,133 RSUs were granted to vendors for services. 1,467 RSUs vested immediately and were issued as common stock to the vendor, and the remaining 667 were issued in May 2022. The total 2,133 RSUs were valued at $93,120 and were expensed as of March 31, 2022, based on the service period in the contract. During the three months ended June 30, 2022, 4,255 RSUs were granted to vendors for services. 3,755 RSUs have vested and were issued as common stock to the vendors, and the remaining 500 were vested and issuable as of June 30, 2022. The total 4,255 RSUs were valued at $100,020. During the three months ended September 30, 2022, no RSUs were granted to vendors for services. 500 RSUs were vested and issuable as of September 30, 2022, related to RSUs granted in prior periods. During the year ended December 31, 2022, 6,388 RSUs were granted to vendors for services in total. 5,888 RSUs vested immediately and were issued as common stock to the vendors, and the remaining 500 were vested and issuable as of December 31, 2022. The 6,388 RSUs were valued at $193,140 and were expensed as of December 31, 2022, based on the service period in the contract. Total expense for RSUs for the years ended December 31, 2023, and 2022 was $152,143 and $1,052,865, respectively. Restricted stock grant activity for the two years ended December 31, 2023 is as follows:
|  | Stock Awards |
Outstanding at December 31, 2021 |  |  | 9,733 |
Granted |  |  | 6,388 |
Vested |  |  | (5,888 | )
Vested and issuable |  |  | (500 | )
Forfeited or cancelled |  |  | - |
Outstanding at December 31, 2022 |  |  | 9,733 |
Granted |  |  | - |
Vested and issued |  |  | (7,387 | )
Vested and issuable |  |  | (2,346 | )
Forfeited or cancelled |  |  | - |
Outstanding at December 31, 2023 |  |  | - |

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