Stockholder's Equity

12 Months Ended

Dec. 31, 2021

Stockholder's Equity

Stockholder's Equity

9. Stockholders’ Equity

In December 2020, the number of authorized shares of the Company’s common stock increased from 90,000,000 to 150,000,000.

Issuance of Common Stock for Cash

During 2020, the Company sold units consisting of 5,742,858 from sale of shares of its common stock and 5,742,858 warrants to purchase shares of common stock for total proceeds of $2,010,000. Offering costs associated with the sale totaled $196,932.

In February 2021, the Company sold shares of its common stock in two separate transactions: On February 3, 2021, 15,300,000 shares were sold at $0.70 for gross proceeds of $10,710,000; and on February 18, 2021, 10,990,000 shares were sold at $1.30 for gross proceeds of $14,287,000. A total of $1,654,822 of cash issuance costs were incurred on these sales. Total warrants of 10,060,500 were issued in connection with the offerings.

During the years ended December 31, 2021, the Company received proceeds of $1,790,705 from the issuance of shares of its common stock upon the exercise of warrants.

Issuance of Common Stock for Services to Officers and Directors

In June 2020, the Company issued the Board members 295,463 shares of the Company’s common stock for services provided during 2019 which was accrued at December 31, 2019, with a value of $130,483.

During the year ended December 31, 2020, the Company awarded, but did not issue, common stock with a value of $110,000 to its Board of Directors as compensation for their services as directors. In connection with the issuances, the Company recorded $110,000 in director compensation expense and accrued common stock payable as of December 31, 2020. During the year ended December 31, 2021, the Company issued 112,610 shares of common stock to the board of directors to satisfy the directors’ fees payable of $110,000 that were outstanding at December 31, 2020

During the year ended December 31, 2021, the Company awarded, but did not issue, common stock with a value of $112,500 to its Board of Directors as compensation for their services as directors. In connection with the issuances, the Company recorded $112,500 in director compensation expense and accrued common stock payable.

Common Stock Warrants

The Company’s Board of Directors has the authority to issue stock warrants for the purchase of preferred or unregistered common stock to directors and employees of the Company.

At December 31, 2019, warrants for purchase of 250,000 shares of the Company’s common stock for $0.25 per share were outstanding. These warrants were owned by the Company’s previous President and Chairman, John Lawrence. The warrants were exercised on March 18, 2020 in exchange for a reduction in an amount payable to Mr. Lawrence.

In July 2020, warrants for purchase of 5,742,858 shares of the Company’s common stock were sold with shares of common stock. The warrants have an exercise price of $0.46 per share and expire in 2025. The warrants can be exercised on a cashless basis. The warrants contain a repricing provision whereby if the Company raises at least $6,000,000 in gross proceeds from the sale of its common stock at an effective price per share less than the warrants’ exercise price, the exercise price of the warrants will be repriced to the lower price.

In February 2021, concurrent with sale of common stock, the Company issued warrants to purchase 7,650,000 shares of common stock at an exercise price of $0.85 per share. The warrants are initially exercisable six months following issuance and expire five and one-half years from the issuance date. In connection with the February 2021 sales of common stock, the Company also issued 1,606,500 warrants with an exercise price of $0.85 and 804,000 warrants with an exercise price of $0.46 as commission to the placement agent.

Transactions in common stock purchase warrants for the years ended December 31, 2021 and 2020 are as follows:

	Number of Warrants			Exercise Prices
Balance, December 31, 2019		702,041		$0.46 - $0.65
Warrants issued		5,742,858		$	0.65
Warrants exercised		(250,000	)	$	0.25
Balance, December 31, 2020		6,194,899		$	0.65
Warrants issued		10,060,500		0.46 - $0.85
Warrants exercised		(3,765,477	)	$0.46 - $0.65
Balance, December 31, 2021		12,489,922		$	0.75

The composition of the Company’s warrants outstanding at December 31, 2021 is as follows:

Number of warrants		Exercise price		Expiration date	Remaining life (years)
	143,707	$	0.65	8/12/2022		0.61
	2,285,715		0.46	7/31/2025		3.58
	804,000		0.46	1/27/2026		4.08
	7,650,000		0.85	3/8/2026		4.59
	1,606,500		0.85	2/1/2026		4.09
	12,489,922

Preferred Stock

The Company’s Articles of Incorporation authorize 10,000,000 shares of $0.01 par value preferred stock available for issuance with such rights and preferences, including liquidation, dividend, conversion, and voting rights, as the Board of Directors may determine.

Series B

During 1993, the Board established a Series B preferred stock, consisting of 750,000 shares. The Series B preferred stock has preference over the Company’s common stock and Series A preferred stock (none of which are outstanding); has no voting rights (absent default in payment of declared dividends); and is entitled to cumulative dividends of $0.01 per share per year, payable if and when declared by the Board of Directors. During each of the years ended December 31, 2021 and 2020 the Company recognized $7,500 in Series B preferred stock dividend. In the event of dissolution or liquidation of the Company, the preferential amount payable to Series B preferred stockholders is $1.00 per share plus dividends in arrears. No dividends have been declared or paid with respect to the Series B preferred stock. The Series B Preferred stock is no longer convertible to shares of the Company’s common stock. At December 31, 2021 and 2020, cumulative dividends in arrears on the outstanding Series B shares were $202,500 and $195,000, respectively.

Series C

During 2000, the Board established a Series C preferred stock. The Series C preferred stock has preference over the Company’s common stock and has voting rights equal to that number of shares outstanding, but no conversion or dividend rights. In the event of dissolution or liquidation of the Company, the preferential amount payable to Series C preferred stockholders is $0.55 per share.

Series D

During 2002, the Board established a Series D preferred stock, authorizing the issuance of up to 2,500,000 shares. The Series D preferred stock has preference over the Company’s common stock but is subordinate to the liquidation preferences of the holders of the Company’s outstanding Series A, Series B and Series C preferred stock. Series D preferred stock carries voting rights and is entitled to annual dividends of $0.0235 per share. The dividends are cumulative and payable after payment and satisfaction of the Series A, B and C preferred stock dividends. No dividends have been declared or paid with respect to the Series D preferred stock.

During the year ended December 31, 2021, 58,333 shares of Series D preferred stock was converted to 58,333 shares of the Company’s common stock. As part of this conversion, the shareholder was issued 64,184 shares of the Company’s common stock to satisfy cumulative dividends associated with the preferred shares.

At December 31, 2021 and 2020, the cumulative dividends in arrears on the outstanding Series D shares were $747,952 and $707,258, respectively, payable if and when declared by the Board of Directors.

In the event of dissolution or liquidation of the Company, the preferential amount payable to Series D preferred stockholders is $2.50 per share. At December 31, 2021 and 2020, the liquidation preference for Series D preferred stock was $4,979,632 and $5,084,770, respectively. Holders of the Series D preferred stock have the right, subject to the availability of authorized but unissued common stock, to convert their shares into shares of the Company’s common stock on a one-to-one basis without payment of additional consideration and are not redeemable unless by mutual consent. The majority of Series D preferred shares are held by the estate of John Lawrence, the previous President and Chairman of the Company.