Stockholders’ Equity

12 Months Ended

Dec. 31, 2023

Stockholders’ Equity [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 19. STOCKHOLDERS’ EQUITY

2021 Preferred stock offering

On September 10, 2021, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with various accredited investors (the “2021 Investors), pursuant to which we issued and sold Units consisting of Series A Convertible Preferred Stock (“Series A Preferred”) and warrants (the “Preferred Warrants”) to purchase shares of our Common Stock. The total number of Units sold was 1,180. Each Unit consists of one share of Series A Preferred and 354,000 Preferred Warrants. The purchase price of each Unit was $1,000, for an aggregate amount sold of $1,180,000. Each share of Series A Preferred is convertible into 1,000 shares of Common Stock upon the consummation of a capital raise of not less than $5,000,000. The Certificate of Designation of the Series A Preferred Stock (“Certificate of Designation”) was filed with the Secretary of the State of Colorado on September 14, 2021. The Certificate of Designations established the new preferred series entitled “Series A Convertible Preferred Stock” with no par value per share, and sets forth the rights, restrictions, preferences, and privileges of the Series A Preferred, summarized as follows:

● Authorized Number of Shares – 5,000

● Voting Rights – None

● Dividends – 6% per annum, ‘paid in kind’ in shares of Series A Preferred

● Conversion – Each share of Series A Preferred is mandatorily convertible into 1,000 shares of Common Stock upon a minimum capital raise of $5,000,000; sale, merger, or business combination of the Company; or the Company listing on an exchange

● Redemption – No rights of redemption by 2021 Investors, nor mandatory redemption

The Preferred Warrants have a five-year term and an exercise price per Preferred Warrant share of $1.05. The warrants contain an anti-dilution provision pursuant to which upon a future capital raise at less than $1.00 per share, each Preferred Investor will be granted additional Preferred Warrants on a ‘full-ratchet’ basis.

The proceeds received in the sale of the Series A Preferred totaled $1,180,000, for the issuance of 1,180 Series A Preferred, plus 354,000 warrants. The warrants were valued using a Black Scholes model, at $117,131 and per the relative fair value allocation, $1,073,446 was allocated to the Series A proceeds.

As of December 31, 2023 we have recorded accrued dividends of $106,200. As of December 31, 2022 we have recorded accrued dividends of $88,500.

In addition to the Preferred Warrants, the Company has outstanding warrants related to prior equity offerings. The table below summarizes the warrants issued in conjunction with our equity offerings:

					Weighted-
			Weighted-		average
			average		Remaining
	Number of		Exercise Price		Contractual		Aggregate
	Shares		per Share		Term (in years)		Intrinsic Value
Outstanding as of December 31, 2021		7,956,814	$	0.56		4.4	$	—
Granted		—		—
Outstanding as of December 31, 2022		7,956,814		0.56		4.4		—
Granted		—		—
Outstanding and exercisable as of December 31, 2023		7,956,814	$	0.56		3.4	$	—

Warrants with Debt

The Company has also issued warrants in conjunction with debt issuances, as discussed in Note 14. The following summarizes warrants issued in conjunction with our debt issuances:

						Weighted-
				Weighted-		average
				average		Remaining
	Number of			Exercise Price		Contractual		Aggregate
	Shares			per Share		Term (in years)		Intrinsic Value
Outstanding as of December 31, 2021		8,085,529		$	0.58		2.8	$	—
Granted		5,785,721			0.70
Exercised					—
Expired		(1,756,000	)		0.40
Outstanding as of December 31, 2022		12,115,250			0.66		3.5		—
Granted		—			—
Expired		(1,800,000	)		0.40
Outstanding as of December 31, 2023		10,315,250		$	0.49		3.9	$	—

Stock-based Compensation

Stock-based Awards

As of December 31, 2023, the Company has two active plans, the 2020 Omnibus Incentive Plan approved by the Board in November 2020 (“2020 Plan”) and the 2014 Equity Incentive Plan approved by the Board in October 2014 (“2014 Plan” and collectively with the 2020 Plan the “Stock Incentive Plans”) that allow the Board of Directors to grant stock-based awards to eligible employees, non-employee directors, and consultants of the Company and its subsidiaries. Under the Stock Incentive Plans, the Board may grant non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units, performance awards, non-employee director awards, and other stock-based awards. Subject to adjustment, the maximum number of shares of our common stock to be authorized for issuance under the Stock Incentive Plans is 25 million shares. As of December 31, 2023, stock-based awards for approximately 17.5 million shares are available to be issued under the Stock Incentive Plans.

Stock Options

The following summarizes Employee Awards activity for the years ended December 31, 2023 and 2022:

						Weighted-
				Weighted-		average
				average		Remaining
	Number of			Exercise Price		Contractual		Aggregate
	Shares			per Share		Term (in years)		Intrinsic Value
Outstanding as of December 31, 2022		4,936,825		$	1.08		4.4	$	22,000
Forfeited		(140,000	)		0.72
Outstanding as of December 31, 2023		4,796,825		$	1.05		2.3	$	22,000
Exercisable as of December 31, 2023		4,796,825		$	1.05		2.3	$	22,000

The Company recognized $69,071 and $188,330 of expense related to stock-based awards during the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, there was no unrecognized compensation expense related to unvested employee awards.

Restricted Stock Awards

On April 1, 2022 the Company entered into a Restricted Stock Unit Agreement with four participants. The Restricted Stock Units (“2022 RSUs”) were granted pursuant to the Company’s 2020 Omnibus Incentive Plan. Four executives were each granted 300,000 units, for a total grant of 1,200,000 2022 RSUs. The 2022 RSUs were divided into three equal tranches. Each tranche will vest as the market price of the Company’s common stock reaches $1.00, $2.00 and $3.00, respectively, as reported on the OTCQB market. Upon the 2022 RSUs vesting, each participant will be promptly issued shares of the Company’s common stock. If there is a change in control, all unvested 2022 RSUs granted under this agreement will fully vest and be paid out or settled. The fair value of these instruments is $535,976 and was calculated using the Monte Carlo model. The fair value of the 2022 RSUs is recognized over the requisite service period. As the 2022 RSUs do not have a service period, the Company used the requisite service period derived from the valuation of 10 years.

During 2023, the Company granted 1,040,462 Restricted Stock Units pursuant to the 2020 Omnibus Incentive Plan to directors and an employee (“2023 RSUs”). The 2023 RSUs vest seven years from the grant date, or earlier upon certain triggering events as defined in the agreement, and upon vesting convert into one share of the Company’s common stock. The fair value of the 2023 RSUs is determined based on the closing price of the Company’s common stock on the grant date.

The Company recorded $55,074 and $40,506 in compensation expense during the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 none of the RSU’s have vested.

A summary of the Company’s grants of restricted stock units under the 2020 Omnibus Incentive Plan is presented below:

			Weighted-
			Average
	Number of		Grant Date
	Shares		Fair Value
Outstanding as of December 31, 2022		1,200,000	$	0.04
Granted		1,040,462		0.01
Vested		—		—
Forfeited or expired		—		—
Outstanding as of December 31, 2023		2,240,462	$	0.04