Stockholders’ Equity

9 Months Ended

Sep. 30, 2023

Stockholders’ Equity [Abstract]

STOCKHOLDERS’ EQUITY

15 STOCKHOLDERS’ EQUITY

a. Common Stock

The Company has total authorized Common Stock of 750,000,000  shares with a par value of $0.0001 each. The Company had 13,030,034 and 12,563,426 shares of Common Stock issued and outstanding as of September 30, 2023 and December 31, 2022, respectively.

On May 19, 2023, in terms of a conversion notice received from a convertible note holder, the Company issued 72,464 shares of Common Stock for the conversion of $25,000 of convertible debt, refer Note 13 above.

On August 16, 2023, in terms of a conversion notice received from a convertible note holder, the Company issued 72,464 shares of Common Stock for the conversion of $25,000 of convertible debt, refer Note 13 above.

On August 24, 2023, in terms of a conversion notice received from a convertible note holder, the Company issued 173,914 shares of Common Stock for the conversion of $60,000 of interest on convertible debt, refer Note 13 above.

On August 30, 2023, the Company effectuated a 1 for 30 reverse stock split, resulting in the issuance of an additional 2,838 shares to existing stockholders due to rounding of existing shareholdings. All share amounts disclosed in the unaudited condensed consolidated financial statements have been adjusted to reflect the Company’s 1 for 30 reverse stock split effectuated on August 30, 2023.

On August 31, 2023, in terms of a conversion notice received from a convertible note holder, the Company issued 144,928 shares of Common Stock for the conversion of $50,000 of convertible debt, refer note 13 above.

b. Restricted stock awards

A summary of restricted stock activity during the period January 1, 2022 to September 30, 2023 is as follows:

	Total restricted shares*		Weighted average fair market value per share*		Total unvested restricted shares*			Weighted average fair market value per share*			Total vested restricted shares*		Weighted average fair market value per share*
Outstanding January 1, 2022		716,500	$	1.47		341,583		$	1.47			374,917	$	1.47
Granted and issued		66,667		1.65		-			-			66,667		1.65
Forfeited/Cancelled		-		-		-			-			-		-
Vested		-		-		(170,791	)		(1.47	)		170,791		1.47
Outstanding December 31, 2022		783,167	$	1.50		170,792		$	1.47			612,375	$	1.50
Granted and issued		-		-		-			-			-		-
Forfeited/Cancelled		-		-		-			-			-		-
Vested		-		-		(170,792	)		(1.47	)		170,792		1.47
Outstanding September 30, 2023		783,167	$	1.50		-		$	-			783,167	$	1.50

* After giving effect to a 1 for 30 reverse stock split on August 30, 2023.

The restricted stock granted, issued and exercisable at September 30, 2023 is as follows:

	Restricted Stock Granted and Vested
Grant date Price	Number Granted*		Weighted Average Fair Value per Share*
$1.47		683,167	$	1.47
$1.50		33,333		1.50
$1.65		66,667		1.65
		783,167	$	1.50

* After giving effect to a 1 for 30 reverse stock split on August 30, 2023.

The Company has recorded an expense of $0 and $172,766 for the three months ended September 30, 2023 and 2022, respectively, and $0 and $298,298 for the nine months ended September 30, 2023 and 2022, respectively. 

c. Preferred Stock

The Company has authorized 25,000,000 shares of preferred stock with a par value of $0.0001 authorized. No preferred stock was issued and outstanding as of September 30, 2023 and December 31, 2022.

d. Warrants

Effective July 8, 2022 (the “Effective Date”), the Company entered into an Endorsement Agreement with Pez-Mar, Inc., a California corporation (“Pez-Mar”), to furnish the services of Mario Lopez (“Lopez”). Pursuant to the Endorsement Agreement, Lopez will act as a Company spokesperson in connection with the promotion, advertisement and endorsement of the Company’s physical and virtual payment processing and money remittance business and the Company’s related products and services.

The Endorsement Agreement has a term of two (2) years from the Effective Date (the “Term”), which is subject to earlier termination on customary terms and conditions. The parties have agreed to certain deliverables of Lopez during the term of the agreement, including with respect to social media posts, television commercials, interviews and photo shoots. The Endorsement Agreement also contains other customary terms, covenants and conditions, including representations and warranties, restrictions on endorsements of competitive products during the term of the agreement, confidentiality, indemnification, and Pez-Mar and Lopez’s independent contractor status.

As compensation for the services provided under the Endorsement Agreement, Lopez or their designees are entitled to the following payments: (i) a cash endorsement fee of Three Hundred Thousand U.S. Dollars ($300,000 USD), payable as follows: (i) One Hundred Twenty-Five Thousand Dollars ($125,000) upon execution of the Endorsement Agreement, (ii) One Hundred Twenty-Five Thousand Dollars ($125,000) quarterly during the Term, beginning on the 90^th day following the Effective Date, and (iii) Fifty Thousand Dollars ($50,000) on or prior to the first anniversary of the Effective Date and (ii) warrants exercisable for an aggregate of Five hundred thousand (500,000) shares of the Common Stock at an exercise price of $1.035 per share. The Warrants shall have a three-year term commencing from the Effective Date. The right to exercise the Warrants shall be subject to vesting during the Term but shall vest in full upon the consummation of a fundamental transaction involving the Company or upon certain termination events provided for in the Endorsement Agreement. The Exercise Price may be payable via “cashless exercise”, unless the underlying Shares are registered under an effective registration statement under the Securities Act of 1933, as amended. The Shares are subject to certain “piggyback” registration rights.

On August 30, 2022, the Company extended the maturity date of the Cavalry/Mercer Notes and agreed to grant each note holder a warrant exercisable for 100,000 shares of Common Stock at an exercise price of $4.50 per share with an expiration date of August 30, 2027.

On December 30, 2022, the Company issued to Frictionless a 5 year warrant to purchase 1,000,000 shares of Common Stock at an exercise price of $0.345 per share. The fair value of these warrants was $348,938 determined by using a Black-Scholes valuation model, which fair value was capitalized to purchased technology on the date of grant. On May 12, 2023, the Company entered into an agreement to cancel this warrant (see note 1(b)).

On December 30, 2022, the Company entered into the December 2022 Note Amendment Transaction, as fully described in note 11 above. In terms of the Note Amendment Transaction the following occurred:

● The warrants issued to Cavalry and Mercer exercisable for 165,798 shares of Common Stock (82,899 for each of Cavalry and Mercer), were exchanged for two promissory notes of $482,000 each, as disclosed in note 11 above;

● The warrants issued to Cavalry and Mercer on August 30, 2022, were subject to repricing and a full rachet increase in the number of warrants issued, resulting in an increase in the number of warrants by 2,408,696 (1,204,348 to each Cavalry and Mercer) and a reset of the exercise price to $0.345 per share. The additional warrants were valued at $841,003 using a Black-Scholes valuation model and was expensed in the statement of operations as a component of the loss on convertible debt.

● An additional 457,895 warrants previously issued to Mercer, Iroquois Master Fund and Bellridge Capital LP were subject to repricing of the exercise price from a range of $1.50 to $4.50 per share to $0.345 per share. The change in the fair value of these warrants of $20,079, using a Black-Scholes valuation model was recorded as a component of the loss on convertible debt.

Between February 13, 2023 and September 14, 2023, the Company entered into Securities Purchase Agreements with 124 accredited investors, as disclosed in note 13 above. In terms of these Securities Purchase Agreements, the Company issued five-year warrants to purchase an aggregate 4,682,093 shares of the Common Stock at an exercise price of $0.345 per share (as adjusted for stock splits, stock combinations, dilutive issuances and similar events). The Company is under no obligation to register the shares of Common Stock underlying the 2023 Notes or the 2023 Warrants for public resale.

The 2023 Warrants contain conversion limitations providing that a holder thereof may not exercise the Warrants to the extent that, if after giving effect to such exercise, the holder or any of its affiliates would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the outstanding shares of the Common Stock immediately after giving effect to such exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61^st day after such notice.

In connection with the formation of IPSIPay Express, the Company issued to each of the other venture partners, Open Path and EfinityPay, IPEX Warrants to purchase an aggregate of 133,334 shares of Common Stock with an exercise of $0.45 per share. The Company is obligated to issue each of open Path and EfinityPay additional IPEX Warrants to purchase 199,999 shares of Common Stock at a price equal to the average public closing price of the Common Stock for the three trading days immediately prior to the funding of the remaining initial Tranche. Simultaneously with the funding of the second Tranche in September 2023, the Company became obligated to issue to each of Open Path and EfinityPay an additional IPEX Warrant to purchase 166,667 shares of Common Stock with an exercise price equal to the average public closing price of the Common Stock for the three trading days immediately prior to the funding of the second Tranche. Simultaneously with the funding of the third Tranche, the Company will issue to each of open Path and EfinityPay an additional IPEX warrant to purchase 166,667 shares of common stock with an exercise price equal to the average public closing price of the Common Stock for the three trading days immediately prior to the funding of the third Tranche. If the full IPSI Capital Contribution is funded, Open Path and EfinityPay will receive IPEX Warrants to purchase an aggregate of 1,333,334 shares of Common Stock. See note 1(b) above.

The fair value of the warrants granted and issued, as described above, were determined by using a Black Scholes valuation model using the following assumptions:

	Nine months ended September 30, 2023
Exercise price	$	0.345
Risk free interest rate		3.77 to 4.42	%
Expected life		5 years
Expected volatility of underlying stock		187.40 to 190.77	%
Expected dividend rate		0	%

A summary of warrant activity during the period January 1, 2022 to September 30, 2023 is as follows:

	Shares Underlying Warrants*			Exercise price per share*		Weighted average exercise price*
Outstanding January 1, 2022		1,243,475		$	1.50 – 5.625	$	3.60
Granted		1,700,000			0.345 – 1.035		0.5478
Increase in warrants due to debt amendment full rachet trigger		2,408,696			0.345		0.345
Cancelled on debt amendment		(165,797	)		4.50		4.50
Exercised		-			-		-
Outstanding December 31, 2022		5,186,374		$	0.345 – 5.625	$	0.9000
Granted		4,982,096			0.345 – 4.50		0.3605
Forfeited		(33,333	)		1.50		1.5000
Cancelled on disposal of investment in Frictionless and Beyond Fintech		(1,000,000	)		0.345		0.3450
Exercised		-			-		-
Outstanding September 30, 2023		9,135,137		$	0.345 – 5.625	$	0.6667

* After giving effect to a 1 for 30 reverse stock split on August 30, 2023.

The warrants outstanding and exercisable at September 30, 2023 are as follows:

		Warrants Outstanding*						Warrants Exercisable*
Exercise Price*		Number Outstanding*		Weighted Average Remaining Contractual life in years		Weighted Average Exercise Price*		Number Exercisable*		Weighted Average Exercise Price*		Weighted Average Remaining Contractual life in years
$	0.345		7,748,686		4.29				7,748,686				4.29
$	0.450		266,668		4.73				266,668				4,73
$	1.035		500,000		1.77				406,250				1.77
$	1.500		33,334		4.87				33,334				4.87
$	4.50		505,560		2.46				505,560				2.46
$	5.625		80,889		2.46				80,889				2.46
			9,135,137		3.97	$	0.6667		9,041,387	$	0.6629		4.07

* After giving effect to a 1 for 30 reverse stock split on August 30, 2023.

The warrants outstanding have an intrinsic value of $0 and $0 as of September 30, 2023 and 2022, respectively.

e. Stock options

On June 18, 2018, the Company established its 2018 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to promote the interests of the Company and the stockholders of the Company by providing directors, officers, employees and consultants of the Company with appropriate incentives and rewards to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The Plan terminates after a period of ten years in June 2028.

The Plan is administered by the Board or a committee appointed by the Board, who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.

The maximum number of securities available under the Plan is 26,667  shares of Common Stock. The maximum number of shares of Common Stock awarded to any individual during any fiscal year may not exceed 100,000 shares of Common Stock.

On October 22, 2021, the Company established its 2021 Stock Incentive Plan (“2021 Plan”). The purpose of the Plan is to promote the interests of the Company and the stockholders of the Company by providing directors, officers, employees and consultants, advisors and service providers of the Company with appropriate incentives and rewards to encourage them to enter into and continue in the employ or service of the Company, to acquire a proprietary interest in the long-term success of the Company and to reward the performance of individuals in fulfilling long-term corporate objectives. The Plan terminates after a period of ten years in August 2031.

The 2021 Plan is administered by the Board or a Compensation Committee appointed by the Board, who have the authority to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan.

The maximum number of securities available under the 2021 Plan is 1,766,667 shares of Common Stock.

Under the 2021 Plan the Company may award the following: (i) non-qualified stock options; (ii)) incentive stock options; (iii) stock appreciation rights; (iv) restricted stock; (v) restricted stock unit; and (vi) other stock-based awards.

On July 11, 2022, the Board approved, granted and issued 500,000 ten-year incentive stock options, with immediate vesting, to the Company’s Chairman and Chief Executive Officer at an exercise price of $4.50 per share. This resulted in an immediate expense of $823,854 for the year ended December 31, 2022.

On September 13, 2022, the Company granted ten-year options exercisable for 6,667 shares of Common Stock, with immediate vesting, to each of its four non-executive directors, totaling options exercisable for 26,668 shares of Common Stock at an exercise price of $1.20 per share. This resulted in an immediate expense of $31,970 for the year ended December 31, 2022.

A summary of option activity during the period January 1, 2022 to September 30, 2023 is as follows:

	Shares Underlying options*		Exercise price per share*		Weighted average exercise price*
Outstanding January 1, 2022		1,017,225		$4.50 to 12.00	$	4.50
Granted		526,668		1.20 – 4.50		4.20
Forfeited/Cancelled		-		-		-
Exercised		-		-		-
Outstanding December 31, 2022		1,543,893		$1.20 to 12.00	$	4.47
Granted		-		-		-
Forfeited/Cancelled		-		-		-
Exercised		-		-		-
Outstanding September 30, 2023		1,543,893		$1.20 to 12.00	$	4.47

* After giving effect to a 1 for 30 reverse stock split on August 30, 2023.

The options outstanding and exercisable at September 30, 2023 are as follows:

		Options Outstanding*						Options Exercisable*
Exercise  Price*		Number Outstanding*		Weighted Average Remaining Contractual life in years		Weighted Average Exercise Price*		Number Exercisable*		Weighted Average Exercise Price*		Weighted Average Remaining Contractual life in years
$	1.20		26,668		8.96				26,668				8.96
$	4.50		1,506,946		8.22				1,354,169				8.48
$	7.20		6,945		7.40				6,945				7.40
$	12.00		3,334		5.25				3,334				5.25
			1,543,893		8.19	$	4.47		1,391,116	$	4.47		8.23

The options outstanding have an intrinsic value of $0 as of September 30, 2023 and 2022.

The option expense was $94,464 and $950,290 for the three months ended September 30, 2023 and 2022, respectively, and $283,392 and $1,139,220 for the nine months ended September 30, 2023 and 2022, respectively.