STOCKHOLDERS EQUITY

12 Months Ended

Dec. 31, 2022

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

NOTE 14 – STOCKHOLDERS’ EQUITY

On August 24, 2022, the Company issued 132,980 shares of common stock in lieu of cash in consideration of fees for Board of Directors accrued through December 31, 2021.  The number of shares issued was based on the amount of fees due of $62,501 divided by the market price of the Company’s common shares on the date of issuance.

Issuance of Common Stock for Cash

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 year ended December 31, 2021, the Company issued 3,765,477 shares of common stock and 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

During the year ended December 31, 2021, the Company issued 112,610 shares of common stock to the board of directors to satisfy stock payable to directors for services of $110,000 that were outstanding at December 31, 2020.

During the year ended December 31, 2022, the Company issued 132,980 shares of common stock to the board of directors to satisfy stock payable to directors for services of $62,501 that were outstanding at December 31, 2021.

Common stock warrants

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.  There were no warrants exercised during the year ended December 31, 2022.

The Company issued no warrants to purchase common stock during the year ended December 31, 2022.

The following is a summary of the Company’s warrants to purchase shares of common stock activity:

	Number of warrants			Exercise prices
Balance outstanding at December 31, 2020		6,194,899		$	0.65
Issued		10,060,500		$0.46 - $0.85
Exercised		(3,765,477	)	$0.46 - $0.65
Balance outstanding at December 31, 2021		12,489,922		$	0.75
Expired		(143,707	)	$	0.65
Balance outstanding at December 31, 2022		12,346,215		$	0.75

The composition of the Company’s warrants outstanding at December 31, 2022 is as follows:

Number of warrants		Weighted Average Exercise Price		Expiration Date	Weighted Average Remaining life (years)
	2,285,715	$	0.46	7/31/2025		2.58
	804,000		0.46	1/27/2026		3.08
	7,650,000		0.85	8/3/2026		3.59
	1,606,500		0.85	2/1/2026		3.09
	12,346,215	$	0.75			3.31

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, 2022 and 2021, cumulative dividends in arrears on the outstanding Series B shares were $210,000 and $202,500, 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.

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, 2022 and 2021, the cumulative dividends in arrears on the outstanding Series D shares were $787,730 and $747,952, 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, 2022 and 2021, the liquidation preference for Series D preferred stock was $5,019,410 and $4,979,632, 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.

On November 28, 2022, the holders of all 1,692,672 outstanding shares of Series D Preferred stock agreed to convert the preferred shares for 1,692,672 shares of common stock in addition to a cash payment of $787,730 for accrued dividends.  As of December 31, 2022, the balance of $787,730 was declared by the Company’s board of directors but remained unpaid and is included in “dividends payable” on the consolidated balance sheet.  As of December 31, 2022, common shares had not yet been issued in conversion of the preferred shares (Note 18).

Stock repurchase

On November 21, 2022 the Board of Directors of the Company approved a stock repurchase program under which management is authorized to repurchase up to 5,000,000 shares of the Company’s outstanding common stock.  Repurchases under the program may be made from time to time, as the Company deems appropriate, based on a variety of factors such as share price, capital position, liquidity, financial performance, alternative uses of capital and overall market conditions. 

During the year ended December 31, 2022, the Company repurchased $202,980 of its common stock under this repurchase program which represents 418,696 shares.  As of December 31, 2022, repurchased shares were in process and had not yet been returned to treasury and $202,980 is included in ‘shares to be returned to treasury’ on the consolidated balance sheet (Note 18).