SHAREHOLDERS EQUITY

12 Months Ended

Dec. 31, 2022

SHAREHOLDERS EQUITY

SHAREHOLDERS' EQUITY

NOTE 10 – SHAREHOLDERS’ EQUITY

Cancellation of Shares of Common Stock – Several years ago, pursuant to a fully signed settlement agreement (the “Ghourdjian Settlement Agreement”), the Company purchased for $50,000 (the “Purchase”) all of the shares of the Company’s common stock (the “Shares”) owned by Matthew Ghourdjian (“Ghourdjian”) and by the Deborah Sue Ghourdjian Separate Property Trust (“Ghourdjian Trust”).

Prior to the closing of the Purchase, Ghourdjian and the Ghourdjian Trust orally expressed uncertainty as to whether or not certain of the Shares totaling 166,888 shares (the “166,888 Shares”) had already been orally sold by Ghourdjian and the Ghourdjian Trust to a third party. With Ghourdjian and the Ghourdjian Trust being unable to find any evidence of such a sale of the 166,888 Shares but also being unable to locate the physical stock certificates evidencing the 166,888 Shares, the Ghourdjian Settlement Agreement was written so that the Company purchased from Ghourdjian and the Ghourdjian Trust all of the Shares owned by Ghourdjian or by the Ghourdjian Trust, and stipulated that the aggregate number of the Shares without the 166,888 Shares was a minimum of 690,796 shares (the “690,796 Shares”).

At the closing of the Purchase, the Company paid $50,000 for the Shares and Ghourdjian and the Ghourdjian Trust delivered to the Company certificates evidencing the 690,796 Shares.

The 166,888 Shares continued to be shown on the books of Colonial Stock Transfer as being owned by Ghourdjian and the Ghourdjian Trust. On April 2, 2020 the 166,888 Shares were cancelled.

Issuance of Series A Convertible Preferred Stock

The Company has authorized 400,000 shares of its Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock may be converted into 100 shares of common stock. The Series A Convertible Preferred Stock accrues and pays dividends at the rate of 3% annually. The accrued Series A Convertible Preferred Stock dividends are cumulative. The Series A Convertible Preferred Stock dividends shall cease to accrue at such time as the Company’s Common Stock has closed at $3.00 per share or higher for 20 consecutive trading days after the first date that the Series A Registration Statement is effective, and there have been, on average, at least 25,000 shares traded on each of those 20 consecutive trading days. The Series A Convertible Preferred Stock have no voting rights. The holders of the Series A Convertible Preferred Stock shall have voluntary conversion rights. Shares of Series A Convertible Preferred Stock are subject to mandatory conversion (in the discretion of the Company) at such time as the Company’s common stock has closed at $5.00 per share or higher for 20 consecutive trading days after the first date that the Series A Registration Statement is effective, and there have been, on average, at least 50,000 shares traded on each of those 20 consecutive trading days.

Between February 27, 2019 and May 13, 2019, the Company accepted subscriptions from accredited investors to purchase 66,150 shares of newly issued Series A Preferred Stock for an aggregate purchase price of $6,615,000 in cash. These 66,150 shares of Series A Preferred Stock are convertible at the option of the holders into 6,615,000 shares of newly issued common stock of the Company, or $1.00 per share of common stock of the Company. The Series A Preferred Stock will receive an annual 3% dividend, and will be subject to mandatory conversion, under terms and conditions set forth in the Certificate of Designation of the Series A Preferred Stock. On August 2, 2019, the Company filed a Form S-1 Registration Statement covering the shares of newly issued common stock of the Company into which the Series A Convertible Preferred Stock can be converted. On July 6, 2020, the Company filed with the SEC an amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series A Preferred Stock may be converted. On December 10, 2020, the Company filed with the SEC a second amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series A Preferred Stock may be converted. On June 2, 2021, the Company filed with the SEC a third amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series A Preferred Stock may be converted. On July 2, 2021, the Company filed with the SEC a fourth amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series A Preferred Stock may be converted. On July 26, 2021, the Company filed with the SEC a fifth amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series A Preferred Stock may be converted. On August 19, 2021, the Company filed with the SEC a sixth amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series A Preferred Stock may be converted. The Registration Statement was approved deemed effective by the SEC on August 26, 2021. As of December 31, 2022, 61,650 shares of Series A Preferred Stock have been converted into a total of 6,165,000 shares of common stock of the Company, which leaves 4,500 shares of Series A Preferred Stock currently outstanding, convertible into 450,000 shares of common stock of the Company. 

As of December 31, 2022 and December 31, 2021, the Company has accrued a liability of $9,240 and $11,926, respectively, as dividends payable to holders of the Series A Convertible Preferred Stock. The Company fully intends on paying the annual dividends to the holders of the Series A Convertible Preferred Stock, and as such, the Company has accrued the liability on the Series A Convertible Preferred Stock. During the years ended December 31, 2022 and December 31, 2021, $17,147 and $199,187, respectively, of cash dividends were paid to the Series A Convertible Preferred Stock holders.

All of the issuances of securities described above were restricted share issuances and deemed to be exempt from registration in reliance on Rule 506 of Regulation D and/or Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering. Each investor represented that they were accredited investors, as defined in Rule 501 of Regulation D and, there was no general solicitation or general advertising used to market the securities. We made available to each investor disclosure of all aspects of our business, including providing the investor with press releases, access to our auditors, and other financial, business, and corporate information. All securities issued were restricted with an appropriate restrictive legend on certificates for notes and warrants issued stating that the securities (and underlying shares) have not been registered under the Securities Act and cannot be sold or otherwise transferred without an effective registration or an exemption therefrom.

Issuance of Series B Convertible Preferred Stock

The Company has authorized 5,000,000 shares of its Series B Convertible Preferred Stock. Each share of Series B Convertible Preferred Stock may be converted into one shares of common stock. The Series B Convertible Preferred Stock accrues and pays dividends at the rate of 3% annually. The accrued Series B Convertible Preferred Stock dividends are cumulative. The Series B Convertible Preferred Stock dividends shall cease to accrue at such time as the Company’s Common Stock has closed at $7.00 per share or higher for 20 consecutive trading days after the first date that the Series B Registration Statement is effective, and there have been, on average, at least 25,000 shares traded on each of those 20 consecutive trading days. The Series B Convertible Preferred Stock have no voting rights. The holders of the Series B Convertible Preferred Stock shall have voluntary conversion rights. Shares of Series B Convertible Preferred Stock are subject to mandatory conversion (in the discretion of the Company) at such time as the Company’s common stock has closed at $9.00 per share or higher for 20 consecutive trading days after the first date that the Series B Registration Statement is effective, and there have been, on average, at least 50,000 shares traded on each of those 20 consecutive trading days.

Between July 24, 2019 and December 5, 2019, the Company accepted subscriptions from accredited investors to purchase 100,000 shares of newly issued Series B Preferred Stock for an aggregate purchase price of $500,000 in cash. These 100,000 shares of Series B Preferred Stock are convertible at the option of the holder into 100,000 shares of newly issued common stock of the Company. The Series B Preferred Stock will receive an annual 3% dividend, and will be subject to mandatory conversion, under terms and conditions set forth in the Certificate of Designation of the Series B Preferred Stock. On August 2, 2019, the Company filed a Form S-1 Registration Statement covering the shares of newly issued common stock of the Company into which the Series B Convertible Preferred Stock can be converted. On July 6, 2020, the Company filed with the SEC an amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series B Preferred Stock may be converted. On December 10, 2020, the Company filed with the SEC a second amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series B Preferred Stock may be converted. On June 2, 2021, the Company filed with the SEC a third amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series B Preferred Stock may be converted. On July 2, 2021, the Company filed with the SEC a fourth amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series B Preferred Stock may be converted. On July 26, 2021, the Company filed with the SEC a fifth amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series B Preferred Stock may be converted. On August 19, 2021, the Company filed with the SEC a sixth amended Registration Statement on Form S-1/A covering 30% of the common stock shares into which the Series B Preferred Stock may be converted. The Registration Statement was approved deemed effective by the SEC on August 26, 2021. As of December 31, 2022, 60,000 shares of Series B Preferred Stock have been converted into a total of 60,000 shares of common stock of the Company, which leaves 40,000 shares of Series B Preferred Stock currently outstanding, convertible into 40,000 shares of common stock of the Company. 

As of December 31, 2022 and December 31, 2021, the Company has accrued a liability of $1,796 and $1,796, respectively as dividends payable to holders of the Series B Convertible Preferred Stock. The Company fully intends on paying the annual dividends to the holders of the Series B Convertible Preferred Stock, and as such, the Company has accrued the liability on the Series B Convertible Preferred Stock. During the years ended December 31, 2022 and December 31, 2021, $6,000 and $11,844, respectively, of cash dividends were paid to the Series B Convertible Preferred Stock holders.

All of the issuances of securities described above were restricted share issuances and deemed to be exempt from registration in reliance on Rule 506 of Regulation D and/or Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering. Each investor represented that they were accredited investors, as defined in Rule 501 of Regulation D and, there was no general solicitation or general advertising used to market the securities. We made available to each investor disclosure of all aspects of our business, including providing the investor with press releases, access to our auditors, and other financial, business, and corporate information. All securities issued were restricted with an appropriate restrictive legend on certificates for notes and warrants issued stating that the securities (and underlying shares) have not been registered under the Securities Act and cannot be sold or otherwise transferred without an effective registration or an exemption therefrom.

Share-Based Compensation

No stock compensation expense of was recognized during the years ended December 31, 2022 or December 31, 2021. In comparison, during the 2020 Stub Year, the Company recognized $733,499 in share-based compensation related to the issuance of warrants to GJacobs. The Company also recognized $660,149 in share-based compensation related to the issuance of warrants to WJacobs. These warrants were issued to GJacobs and WJacobs pursuant to the June 19, 2019 Compensation Agreement, which authorized the issuance of certain warrants to GJacobs and WJacobs upon the execution of employment agreements, which were signed on February 24, 2020 upon the closing of the acquisition of Lifted. The five-year warrants give GJacobs the right to purchase 250,000 shares of common stock of LIFD exercisable at $5.00 per share. The five-year warrants give WJacobs the right to purchase 225,000 shares of common stock of LIFD exercisable at $5.00 per share. The warrants were valued using the Black-Scholes valuation model as of the date of issuance, assuming an estimated life of 2.5 years and estimated future volatility of 361.49%.

The following is a summary of share-based compensation, stock option and warrant activity as of December 31, 2022 and changes during the year then ended:

	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Exercisable Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants Outstanding, December 31, 2021		2,932,198	$	3.51		3.04	$	3,496,311
Warrants exercised during Q1 2022		50,000
Exercisable Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants Outstanding, December 31, 2022		2,882,198	$	3.55		2.05	$	370,331
Outstanding Options, Warrants, Rights to Purchase Warrants to Purchase Common Stock and Financing Warrants, December 31, 2022		3,627,198	$	3.85		2.07	$	370,331

Upon the execution of GJacobs’ employment agreement on February 24, 2020, the terms of GJacobs’ stock options granted by the Company to purchase shares of common stock of the Company which were set to expire on November 4, 2020 and September 29, 2021 were extended so that all of such stock options may be exercised by GJacobs at any time on or before December 31, 2024. GJacobs owns 471,698 options that were originally set to expire on November 4, 2020, and 605,000 options that were originally to expire on September 29, 2021; the expiration dates for all of these options were extended to December 31, 2024.

Conversions of Series A and Series B Convertible Preferred Stock to Shares of Common Stock

On March 1, 2021, 25,400 shares of Series A Convertible Preferred Stock were converted into 2,540,000 shares of common stock.

On March 2, 2021, 1,000 shares of Series A Convertible Preferred Stock were converted into 100,000 shares of common stock.

On March 5, 2021, 1,000 shares of Series A Convertible Preferred Stock were converted into 100,000 shares of common stock.

On March 9, 2021, 1,000 shares of Series A Convertible Preferred Stock were converted into 100,000 shares of common stock.

On March 18, 2021, 4,000 shares of Series A Convertible Preferred Stock were converted into 400,000 shares of common stock.

On March 18, 2021, 60,000 shares of Series B Convertible Preferred Stock were converted into 60,000 shares of common stock.

On March 22, 2021, 500 shares of Series A Convertible Preferred Stock were converted into 50,000 shares of common stock.

Exercise of Warrant

On April 14, 2021, a non-affiliate shareholder exercised his warrant to purchase 7,021 shares of unregistered common stock for $1 per share.

Settlement with Mark Burrier, Kevin R. Sarsany and RCM Securities

On June 1, 2021, the Company entered into a Settlement Agreement with Mark Burrier, Kevin R. Sarsany and RCM Securities in regard to warrants to purchase 190,500 shares of restricted common stock of the Company which were allocated by the Company in connection with a private offering in 2019 (the “Warrants”). In such Settlement Agreement, the Company agreed to issue a total of 136,071 shares of the Company’s restricted common stock to parties designated by Mr. Burrier, Mr. Burrier released and agreed to indemnify the Company and its affiliates from all associated liabilities, and RCM Securities and Kevin Sarsany approved such settlement.

Conversions of Series A Convertible Preferred Stock to Shares of Common Stock

On May 24, 2021, 27,500 shares of Series A Convertible Preferred Stock were converted into 2,750,000 shares of the Company’s common stock.

Stock Buy-back Transactions with a Non-Affiliate Stockholder and Retirement of 72,000 Shares of Common Stock Held in Treasury

On November 24, 2020, LFTD Partners purchased 36,000 shares of common stock of the Company from a non-affiliate stockholder in a private transaction for $0.95 per share for a total of $34,200. These shares were held in treasury until August 31, 2021, which is when the Company retired them. The retirement of these shares was accounted for under the cost method of accounting.

On January 8, 2021, LFTD Partners Inc. purchased 36,000 shares of common stock of the Company from a non-affiliate stockholder in a private transaction for $0.95 per share for a total of $34,200. These shares were held in treasury until August 31, 2021, which is when the Company retired them. The retirement of these shares was accounted for under the cost method of accounting.

Exercise of Warrants by Gerard M. Jacobs

On August 30, 2021, GJacobs exercised, for an aggregate purchase price of $1, his right to purchase a warrant to purchase an aggregate of 750,000 shares of unregistered common stock of the Company at an exercise price of $0.01 per share, which warrant he immediately exercised. GJacobs also exercised his right to purchase an aggregate of 31,250 shares of unregistered common stock of the Company at an exercise price of $0.03 per share under separate warrants. GJacobs also demanded immediate payment of $8,439 of the bonuses which are currently due and payable by the Company to GJacobs, and GJacobs hereby allocated and applied such $8,439 to pay for the aggregate cost of purchasing and exercising the above warrants.

Exercise of Warrants by Vincent J. Mesolella

On September 13, 2021, lead outside director Vincent J. Mesolella exercised, for an aggregate purchase price of $1.00, his right to purchase a warrant to purchase an aggregate of 500,000 shares of unregistered common stock of the Company at an exercise price of $0.01 per share, which warrant he immediately exercised and paid for, and he also exercised an option to purchase 5,000 shares of unregistered common stock of the Company at an exercise price of $2.00 per share, which he paid.

Exercise of Option by Richard E. Morrissy

On September 15, 2021, director Richard E. Morrissy exercised an option to purchase 5,000 shares of unregistered common stock of the Company at an exercise price of $2.00 per share, which he paid.

Exercise of Option by Joshua A. Bloom

On September 22, 2021, director Joshua A. Bloom exercised an option to purchase 5,000 shares of unregistered common stock of the Company at an exercise price of $2.00 per share, which he paid.

Exercise of Option by a Non-Affiliated Shareholder

On September 26, 2021, a non-affiliated shareholder of the Company exercised an option to purchase 50,000 shares of unregistered common stock of the Company at an exercise price of $2.00 per share, which she paid.

Exercise of Warrant by a Non-Affiliated Shareholder

On December 7, 2021, a non-affiliated shareholder of the Company exercised a warrant to purchase 25,000 shares of unregistered common stock of the Company at an exercise price of $0.01 per share, which he paid.

Exercise of Warrant by a Non-Affiliated Entity

On February 19, 2022, an entity non-affiliated with the Company exercised an option to purchase 50,000 shares of unregistered common stock of the Company at an exercise price of $1.00 per share, which the entity paid.

Stock Buy-back Transactions with a Non-Affiliate Stockholder Stock and Retirement of 100,000 Shares of Common Stock

On March 1, 2022, LFTD Partners signed an agreement to purchase a total of 100,000 shares of common stock of the Company from a non-affiliate stockholder in a private transaction for $1.50 per share for a total purchase price of $150,000. On March 8, 2022, all 100,000 shares were transferred to the Company and immediately cancelled.

Conversion of Series A Preferred Stock by a Non-Affiliated Shareholder

On April 1, 2022, a non-affiliated shareholder of the Company converted his 1,000 shares of Series A Preferred Stock into 100,000 shares of unregistered common stock of the Company.

Conversion of Series A Preferred Stock by a Non-Affiliated Shareholder

On April 14, 2022, a non-affiliated shareholder of the Company converted 250 shares of his Series A Preferred Stock into 25,000 shares of unregistered common stock of the Company.