Equity

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

Equity

12. Equity

Preferred Stock

As of June 30, 2023, the Company was authorized to issue 20 million shares of preferred stock with a par value of $0.001 per share, of which 600,000 shares had been designated as Series A convertible and 166,000 shares had been issued and are outstanding.

In the event of any liquidation, dissolution or winding up of the Company, the holders of preferred stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of common stock, an amount equal to $10 for each share of preferred stock, plus all unpaid dividends that have been accrued, accumulated or declared. As of June 30, 2023, the total liquidation preference on the preferred stock is $1,689,050. The Company may redeem the preferred stock from the holders at any time following the second anniversary of the closing of the original purchase of the preferred stock. The Series A Convertible Preferred Stock can be converted to common stock at 80% of the prevailing market price over the previous 30-day period at the option of the Company.

Holders of preferred stock are entitled to receive preferential cumulative dividends, only if declared by the board of directors, at a rate of 7% per annum per share of the liquidation preference amount of $10 per share. During the three months ended June 30, 2023 and 2022, the Board of Directors has declared and paid dividends on the preferred stock of $29,050 and $17,558, respectively. During the six months ended June 30, 2023 and 2022, the Board of Directors has declared and paid dividends on the preferred stock of $58,100 and $34,883, respectively. As of both June 30, 2023 and December 31, 2022, preferred dividends are in arrears by $29,050.

December 31, 2021 dividends in arrears were declared and paid in January 2022. March 31, 2022 dividends in arrears were declared and paid in April 2022. June 30, 2022 dividends in arrears were declared and paid in July 2022. September 30, 2022 dividends in arrears were declared and paid in October 2022. December 31, 2022 dividends in arrears were declared and paid in January 2023. March 31, 2023 dividends in arrears were declared and paid in April 2023. June 30, 2023 dividends in arrears were declared and paid in July 2023.

In January 2022, the Company exchanged $20,000 of its notes payable for 2,000 shares of Series A Convertible Preferred Stock at a price of $10.00 per share. On April 30, 2022, the Company issued 65,000 shares of Series A Convertible Preferred Stock for $400,000 cash and exchanged for $250,000 of its notes payable at a price of $10.00 per share. There were no gains or losses on these exchanges.

Common Stock

As of both June 30, 2023 and December 31, 2022, the Company was authorized to issue 100 million shares of common stock with a par value of $0.001 per share, of which 2,905,016 shares were issued and outstanding.

Stock Options

In 2019, the Company’s Board of Directors approved the creation of the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the issuance of incentive stock options to designated employees, certain key advisors and non-employee members of the Board of Directors with the opportunity to receive grant awards to acquire, in the aggregate, up to 300,000 shares of the Corporation’s common stock. The following table summarizes information about employee stock options outstanding at June 30, 2023:

A summary of information regarding the stock options outstanding is as follows:

		Outstanding Options				Vested Options
	Exercise Price	Number Outstanding at June 30, 2023	Weighted Average Remaining Life		Weighted Average Exercise Price	Number Exercisable at June 30, 2023	Weighted Average Remaining Life		Weighted Average Exercise Price
$	0.80	187,400	6.67	$	0.80	187,400	6.67	$	0.80
$	4.50	10,000	9.00		4.50	5,000	9.00		4.50
$	4.95	10,000	4.00		4.95	5,000	4.00		4.95
	Total options	207,400	6.65	$	1.18	197,400	6.66	$	1.00

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Intrinsic Value
Outstanding at December 31, 2022		207,400	$	1.18		7.15 years	$	1,091,236
Issued		—		—		—		—
Exercised		—		—		—		—
Outstanding at June 30, 2023		207,400	$	1.18		6.65 years	$	780,236
Exercisable at June 30, 2023		197,400	$	1.00		6.66 years	$	778,036

On March 1, 2020, 187,400 of the above options were granted to designated Officers and employees. Half of those options vested on March 1, 2021 and the other half vested on March 1, 2022. On June 29, 2022 20,000 of the above options were granted to designated Officers. Half of these options vested on June 29, 2023 and the other half vest on June 29, 2024. During the three months ended June 30, 2023 and 2022, the Company recognized $7,050 and $0, respectively, of stock option expense. During the six months ended June 30, 2023 and 2022, the Company recognized $14,100 and $5,778, respectively, of stock option expense.

The fair value of the stock options originated in 2022 was determined using the Black Scholes Option Pricing Model based on the following assumptions:

Assumptions	$4.50 Strike			$4.95 Strike
(1) dividend yield of		0	%		0	%
(2) expected volatility of		50	%		50	%
(3) risk-free interest rate of		3.10	%		3.10	%
(4) expected life of		10 years			5 years
(5) estimated fair value	$	4.50		$	4.50

Stock Warrants

On April 1, 2020, the Company issued 800,000 of previously authorized warrants for the purchase of common stock that are split into two classes of warrants. The 400,000 Class W4 warrants are issued at $.001 Par Value and exercisable at a strike price of $4 for a period of five (5) years. The 400,000 Class W12 warrants are issued at $.001 Par Value and are exercisable at a strike price of $12 for a period of five (5) years. On June 11, 2021, the Company issued 175,000 previously authorized warrants for the purchase of common stock. The 175,000 Class W4A warrants are issued at $.001 Par Value and exercisable at a strike price of $4 for a period of five (5) years. On June 1, 2022 the Company issued 60,000 of previously authorized warrants for the purchase of common stock. The 60,000 Class W4A warrants are issued at $.0001 Par Value and exercisable at a strike price of $4 for a period of five (5) years. A summary of information regarding the stock options outstanding is as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Intrinsic Value
Outstanding at December 31, 2022		1,035,000	$	7.09		2.6 years	$	1,549,400
Issued		—		—		—		—
Exercised		—		—		—		—
Outstanding at June 30, 2023		1,035,000	$	7.09		2.08 years	$	596,900
Exercisable at June 30, 2023		1,035,000	$	7.09		2.08 years	$	596,900

The above outstanding warrants were issued on June 1, 2022, June 11, 2021 and April 1, 2020, to designated Officers, Directors, and consultants with a total fair value of $10,800, $9,275 and $27,200 on the grant date, respectively. The warrants vested immediately. During the three months ended June 30, 2023 and 2022, the Company recognized $0 and $10,800, respectively, of stock warrant expense. During the six months ended June 30, 2023 and 2022, the Company recognized $0 and $10,800, respectively, of stock warrant expense.

The fair value of the stock options originated in 2022 was determined using the Black Scholes Option Pricing Model based on the following assumptions:

Assumptions	Grant Date
(1) dividend yield of		0	%
(2) expected volatility of		50	%
(3) risk-free interest rate of		2.94	%
(4) expected life of		5 years
(5) estimated fair value	$	1.17