STOCKHOLDERS EQUITY

12 Months Ended

Dec. 31, 2024

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

NOTE 12 – STOCKHOLDERS’ EQUITY

Issuance of Common Stock

On January 25, 2023, the holders of 1,692,672 shares of Series D Preferred stock converted the preferred shares and the Company issued 1,692,672 shares of common stock.  The Company also paid the holders $787,730 for cumulative dividends payable as declared on November 28, 2022. 1,590,672 shares of the 1,692,672 shares of Series D Preferred stock that were converted and $740,261 of the $787,730 of dividends paid related to the estate of John Lawrence, who was the prior President and Chairman of the Company.

On January 26, 2023, in conjunction with its share repurchase plan, the Company returned to treasury and cancelled 418,696 of its common shares which were repurchased prior to December 31, 2022 for $202,980.

During the year ended December 31, 2024, the Company issued 800,000 shares of its common stock in conjunction with the vesting of Restricted Stock Units. See the “Share-Based Compensation” section below for further details.

Sale of Common Stock

In the fourth quarter of 2024, the Company sold 2.3 million shares of its common stock in an “at the market offering” at a weighted average price of $1.27 for gross proceeds of $2,925,069. A total of $165,388 of direct issuance costs were incurred related to this sale.

The Company also issued 2,204,000 shares of its common stock in the fourth quarter of 2024 related to the exercise of warrants. See the “Common Stock Warrants” section below for further details.

Share-Based Compensation

In December 2023, the shareholders of the Company approved our 2023 Equity Incentive Plan (“the Plan”), which provides for the grant of incentive stock options and non-qualified stock options to purchase shares of our common stock and other types of awards. The general purpose of the Plan is to provide a means whereby eligible employees, officers, directors and other service providers develop a sense of proprietorship and personal involvement in our development and financial success, and to encourage them to devote their best efforts to our business, thereby advancing our interests and the interests of our shareholders. By means of the Plan, we seek to retain the services of such eligible persons and to provide incentives for such persons to exert maximum efforts for our success and the success of our subsidiaries. The maximum number of shares of common stock available for issuance in connection with options and other awards granted under the Plan is 8,700,000.

The Company had no equity awards outstanding during fiscal year 2023. During the year ended December 31, 2024, stock option and RSU awards were granted in accordance with the Plan. The Company recognized $568,588 and $nil during the years ended December 31, 2024 and 2023, respectively, of share-based compensation expense arising from stock option and RSU grants as follows:

	For The Years Ended December 31,
	2024		2023
Share-based compensation expense:
Stock options	$	219,968	$	-
RSUs	$	348,620	$	-
Total share-based compensation expense	$	568,588	$	-

For the year ended December 31, 2024, the Company recognized in its Consolidated Statements of Operations $363,195 of share-based compensation expense in “General and administrative” expenses, $198,891 of share-based compensation expense in “Salaries and benefits” expenses, and $6,502 of share-based compensation expense in “Professional fees.”

Stock options:

Stock options granted have either a 3-year or 10-year contractual term and are subject to either service or performance-based vesting conditions. The following table shows the annual weighted-average assumptions used to value options granted during the year ended December 31, 2024:

	For The Year Ended
Grant-Date Weighted-Average Assumptions	December 31, 2024
Expected term (in years)		4.5
Risk-free interest rate		4.3%
Expected dividend yield		0.0%
Expected volatility		136.0%
Fair value per share of options granted	$	0.18

Expected term – The expected term represents the period of time that options are expected to be outstanding. As the Company does not have sufficient historical exercise behavior, it uses the contractual term of the option for the expected term assumption.

Risk-free interest rate – The risk-free interest rate is based on the U.S. Treasury rate in effect at the time of the grant with an equivalent term approximating the expected term of the options.

Expected dividend yield—The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends.

Expected volatility – The expected volatility is based on the historical volatility of our stock price over the expected term of the stock option.

Activity with respect to stock options is summarized as follows:

					Weighted-Average
			Weighted-Average		Remaining		Aggregate
			Exercise Price		Contractual		Intrinsic
	Shares		Per Share		Term (in years)		Value
Options outstanding, December 31, 2023		-		-		-		-
Granted		4,330,000	$	0.23		-		-
Exercised		-		-		-		-
Forfeited		-		-		-		-
Expired		-		-		-		-
Options outstanding, December 31, 2024		4,330,000	$	0.23		3.7	$	6,652,700
Nonvested options, December 31, 2024		4,257,500	$	0.23		3.6	$	6,547,800
Vested and exercisable options, December 31, 2024		72,500	$	0.32		9.6	$	104,900

At December 31, 2024, total unrecognized share-based compensation expense related to stock options was $575,938, which is expected to be recognized over a weighted-average remaining period of 1.9 years.

Restricted stock units:

Activity with respect to RSUs is summarized as follows:

				Weighted-Average
				Grant-Date
				Fair Value
	Shares			Per Share
Nonvested shares at December 31, 2023		-			n/a
Granted		2,890,000		$	0.24
Vested		(800,000	)	$	0.22
Forfeited		-			n/a
Nonvested shares at December 31, 2024		2,090,000		$	0.24

At December 31, 2024, total unrecognized share-based compensation expense related to RSUs was $331,131, which is expected to be recognized over a weighted-average remaining period of 1.7 years. The weighted-average remaining contractual term of the nonvested RSU shares was 1.5 years at December 31, 2024.

Common Stock Warrants

During the fourth quarter of 2024, the Company issued 2,204,000 shares of common stock related to the exercise of warrants and received gross proceeds, at a weighted average exercise price of $0.67, of $1,481,840. No other warrants were exercised during the years ended December 31, 2024 and 2023. Also, no warrants were issued or expired during the years ended December 31, 2024 and 2023.

Following is a summary of the Company’s warrant activity:

	Number of			Weighted Average
	warrants			Exercise Price
Balance outstanding at December 31, 2023 and 2022		12,346,215		$	0.75
Exercised		(2,204,000	)		0.67
Balance outstanding at December 31, 2024		10,142,215		$	0.77

Each warrant represents one share of the Company’s common stock. The composition of the Company’s warrants outstanding at December 31, 2024 was as follows:

Number of warrants		Exercise Price		Expiration Date	Remaining life (years)
	2,085,715	$	0.46	1/27/2026		1.07
	7,250,000	$	0.85	8/3/2026		1.59
	806,500	$	0.85	2/1/2026		1.09
	10,142,215

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

In 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, 2024 and 2023, 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, 2024 and 2023, cumulative dividends in arrears on the outstanding Series B shares were $225,000 and $217,500, respectively.

Series C

In 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, or $97,847 in total.