Quarterly report pursuant to Section 13 or 15(d)

EQUITY TRANSACTIONS

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EQUITY TRANSACTIONS
9 Months Ended
Sep. 30, 2022
Equity [Abstract]  
EQUITY TRANSACTIONS

Note 5 - Equity Transactions

 

In January 2022, the Company offered certain warrant holders the opportunity to receive an additional warrant to purchase the Company’s Common Stock at $14.00 per share, for a period of five (5) years from issuance for the exercise by March 31, 2022 of each existing warrant originally issued in April 2020. As of September 30, 2022, the Company had eleven warrant holders exercise an aggregate of 83,579 warrants at $14.00 per share resulting in cash proceeds of approximately $1,170,000 to the Company.

 

On June 10, 2022, the Company amended (the “Amendment”) its Articles of Incorporation to effectuate a one-for-one thousand reverse stock split (the “Reverse Split”) of its common stock. The Reverse Split was approved by FINRA on June 10, 2022 and effectuated on June 13, 2022. Pursuant to the Amendment, the Company also reduced the authorized shares of common stock to 500,000,000. As a result of the Reverse Split, the Company has approximately 477,610 shares of common stock outstanding and 438,776,170 shares of Series A Preferred Stock outstanding. As a result of the Reverse Stock Split, the Series A Preferred Stock is convertible at a ratio of one thousand shares of Series A Preferred Stock into one share of common stock. Accordingly, the 438,776,170 outstanding shares of Series A Preferred Stock are now convertible into an aggregate of 438,776 shares of common stock.

 

 

The following table summarizes the Company’s common and preferred stock outstanding by class. The number of common stock shares has been adjusted to reflect a one-for-one thousand reverse stock split that became effective on June 13, 2022.

 

    September 30, 2022     December 31, 2021  
Common Stock     477,610       166,394  
Series A Preferred Stock     438,776,170       501,887,534  

 

Series A Preferred Stock

 

During the three and nine months ended September 30, 2022, 55,802,949 and 63,111,364 shares of Series A Preferred Stock were converted to 55,805 and 63,114 shares of Common Stock at the request of certain Series A Preferred Shareholders, respectively.

 

Voting Rights

 

Holders of Series A Preferred Stock (“Series A Holders”) have the right to receive notice of any meeting of holders of common stock and to vote upon any matter submitted to a vote of the holders of common stock. Each Series A Holder shall vote on each matter on an as converted basis submitted to them with the holders of common stock.

 

Conversion

 

Series A Preferred Stock converts to common stock at a one-for-one thousand ratio immediately upon request of the Series A Holder.

 

Liquidation

 

Series A Preferred Stock does not have preferential treatment over common stock shareholders if the Company liquidates or dissolves.

 

Share-Based Compensation Plan

 

The Company utilizes the Black-Scholes valuation method to recognize stock-based compensation expense over the vesting period. The expected life represents the period that the stock-based compensation awards are expected to be outstanding.

 

 

Stock Option Activity

 

On April 1, 2021, the Board of Directors of the Company approved and granted to certain directors and officers of the Company an aggregate of 54,750 stock options of which 4,750 were immediately vested on the date of grant. Each option granted has an exercise price of $70.00 per share and an expiration date of ten years from the date of grant. These options are not included in the Company’s current stock option plan as they were granted outside of the plan.

 

The Board of Directors decided not to renew the former CEO’s (Robert Greif) employment contract; therefore, the unvested shares were forfeited resulting in a reduction of share-based compensation of approximately $205,000 for the period ended September 30, 2021 that was recognized during the period ended June 30, 2021.

 

On June 10, 2022, the Company amended its Articles of Incorporation to effectuate a one-for-one thousand reverse stock split of its common stock. The Reverse Split was approved by FINRA on June 10, 2022 and effectuated on June 13, 2022.

 

At September 30, 2022, 29,635 options were outstanding and 20,510 were vested. At September 30, 2021, 29,635 options were outstanding and 14,802 were vested. For the three months and nine months ended September 30, 2022, the Company recognized approximately $61,000 and $246,000 in stock-based compensation expense, respectively, which is included in share based compensation. For the three months and nine months ended September 30, 2021, the Company recognized approximately $162,000 and $1,024,000 in stock-based compensation expense, respectively, which is included in share based compensation. At September 30, 2022, the Company has approximately $206,000 of unrecognized compensation costs related to non-vested stock options, which is expected to the recognized over a weighted average period of approximately 2.17 years.

 

Inputs used in the valuation models are as follows:

 

2021 Grants
Option value   $ 54.00       to     $ 56.00  
Risk Free Rate     0.90 %     to       1.37 %
Expected Dividend- yield     -       to       -  
Expected Volatility     173.99 %     to       176.04 %
Expected term (years)     5       to       7  

 

The following is a summary of stock option activity for the nine months ended September 30, 2021 and 2022:

 

    Shares    

Weighted

Average

Exercise

Price

    Weighted
Average Remaining
Term (Years)
 
Outstanding at December 31, 2020     410     $ 1,390.00       6.72  
Granted     54,750       70.00       9.50  
Expired/Cancelled     (25,525 )     70.00        
Outstanding at September 30, 2021     29,635     $ 100.00       9.41  
                         
Exercisable at September 30, 2021     14,802     $ 100.00       9.41  
                         
Outstanding at December 31, 2021     29,635     $ 86.48       9.20  
Granted                  
Outstanding at September 30, 2022     29,635     $ 86.48       8.46  
                         
Exercisable at September 30, 2022     20,510     $ 93.81       8.44  

 

 

The following is a summary of the Company’s non-vested shares for the nine months ended September 30, 2021 and 2022:

 

    Shares    

Weighted

Average Grant

Date Fair Value

 
Non-vested at December 31, 2020     -     $ -  
Granted     54,750       30.00  
Vested     (14,417 )     50.00  
Forfeited     (25,500 )     70.00  
Non-vested at September 30, 2021     14,833     $ 110.00  
                 
Non-vested at December 31, 2021     14,250     $ 60.00  
Vested     (5,125 )     54.56  
Non-vested at September 30, 2022     9,125     $ 55.61  

 

Net Loss Per Share

 

Basic loss per share is computed on the basis of the weighted average number of shares outstanding for the reporting period. Diluted loss per share is computed on the basis of the weighted average number of common shares plus dilutive potential common shares outstanding using the treasury stock and if-converted methods, as applicable. Any potentially dilutive securities are antidilutive due to the Company’s net losses.

 

The Company excluded the following securities from the calculation of basic and diluted net loss per share as the effect would have been antidilutive:

 

    2022     2021  
    For the Nine Months Ended September 30,  
    2022     2021  
Warrants to purchase common stock (in the money)     56,250       385,033  
Series A Preferred Stock convertible to common stock     438,776       515,874  
Total     495,026       900,907  

 

Excluded from the above table are 384,788 warrants and 29,635 stock options for the nine months ended September 30, 2022 and 22,608 warrants and 29,635 stock options for the nine months ended September 30, 2021 as they are out of the money (exercise price greater than the stock price). Inclusion of such would be anti-dilutive. As a result of the Reverse Stock Split, the Series A Preferred Stock is convertible at a ratio of one thousand shares of Series A Preferred Stock into one share of common stock. Accordingly, the 438,776,170 outstanding shares of Series A Preferred Stock are convertible into an aggregate of 438,776 shares of common stock at September 30, 2022.