| STOCKHOLDERS' EQUITY | NOTE 7 – STOCKHOLDERS’ EQUITY Preferred Stock The Company is authorized to issue up to 10,000,000 shares of preferred stock, $ 0.01 par value. Series A Cumulative Convertible Preferred Stock On May 8, 2019, the Company filed a certificate of designation with the Nevada Secretary of State pursuant to which the Company designated 4,000,000 shares of its preferred stock as Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”). The Series A Preferred Stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions: Ranking . The Series A Preferred Stock ranks, as to dividend rights and rights upon our liquidation, dissolution, or winding up, senior to the Common Stock and pari passu with the Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock (as defined below). The terms of the Series A Preferred Stock will not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series A Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up. Dividend Rate and Payment Dates . Dividends on the Series A Preferred Stock are cumulative and payable monthly in arrears to all holders of record on the applicable record date. Holders of Series A Preferred Stock will be entitled to receive cumulative dividends in the amount of $ 0.017 per share each month, which is equivalent to the rate of 8 % of the $ 2.50 liquidation preference per share. Dividends on shares of Series A Preferred Stock will continue to accrue even if any of the Company’s agreements prohibit the current payment of dividends or the Company does not have earnings. During the nine months ended September 30, 2023 and 2022, the Company paid dividends of $ 269,633 and $ 282,778 , respectively. Liquidation Preference . The liquidation preference for each share of Series A Preferred Stock is $ 2.50 . Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series A Preferred Stock will be entitled to receive, before any payment or distribution is made to the holders of Common Stock and on a pari passu basis with holders of Series B Preferred Stock and Series C Preferred Stock, the liquidation preference with respect to their shares plus an amount equal to any accrued but unpaid dividends (whether or not declared) to, but not including, the date of payment with respect to such shares. Stockholder Optional Conversion . Each share of Series A Preferred Stock is convertible, at any time and from time to time, at the option of the holder thereof and without the payment of additional consideration, into that number of shares of Common Stock determined by dividing the liquidation preference of such share by the conversion price then in effect. The conversion price is initially equal to $ 2.50 , subject to adjustment as set forth in the certificate of designation. In addition, if at any time the trading price of the Common Stock is greater than the liquidation preference of $ 2.50 , the Company may deliver a written notice to all holders to cause each holder to convert all or part of such holders’ Series A Preferred Stock. Company Call and Stockholder Put Options . Commencing on the fifth anniversary of the initial issuance of shares of Series A Preferred Stock and continuing indefinitely thereafter, the Company will have a right to call for redemption the outstanding shares of Series A Preferred Stock at a call price equal to $3.75, or 150 % of the original issue price of the Series A Preferred Stock, and correspondingly, each holder of shares of Series A Preferred Stock shall have a right to put the shares of Series A Preferred Stock held by such holder back to the Company at a put price equal to $3.75, or 150 % of the original issue purchase price of such shares . During the nine months ended September 30, 2023 and 2022, the Company recorded a put option value accretion of $ 342,281 and $ 353,472 , respectively. Voting Rights . The Company may not authorize or issue any class or series of equity securities ranking senior to the Series A Preferred Stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior securities) or amend the Company’s articles of incorporation (whether by merger, consolidation, or otherwise) to materially and adversely change the terms of the Series A Preferred Stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of the outstanding shares of Series A Preferred Stock, voting together as a class. Otherwise, holders of the shares of Series A Preferred Stock do not have any voting rights. As of September 30, 2023 and December 31, 2022, there were 1,826,000 shares of Series A Preferred Stock issued and outstanding. As of September 30, 2023, the Series A Preferred Stock balance was made up of Series A Preferred Stock totaling $ 4,565,000 and accretion of put options totaling $ 1,885,197 . As of December 31, 2022, the Series A Preferred Stock balance was made up of Series A Preferred Stock totaling $ 4,565,000 and accretion of put options totaling $ 1,542,916 . Series B Cumulative Redeemable Preferred Stock On December 2, 2019, the Company filed a certificate of designation with the Nevada Secretary of State pursuant to which the Company designated 1,000,000 shares of its preferred stock as Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”). The Series B Preferred Stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations, or restrictions: Ranking . The Series B Preferred Stock rank, as to dividend rights and rights upon liquidation, dissolution, or winding up, senior to the Common Stock and pari passu with the Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock. The terms of the Series B Preferred Stock will not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series B Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up. Dividend Rate and Payment Dates . Dividends on the Series B Preferred Stock are cumulative and payable monthly in arrears to all holders of record on the applicable record date. Holders of Series B Preferred Stock will be entitled to receive cumulative dividends in the amount of $ 0.067 per share each month, which is equivalent to the annual rate of 8 % of the $ 10.00 liquidation preference per share; provided that upon an event of default (generally defined as the Company’s failure to pay dividends when due or to redeem shares when requested by a holder), such amount shall be increased to $0.083 per month, which is equivalent to the annual rate of 10 % of the $ 10.00 liquidation preference per share. During the nine months ended September 30, 2023 and 2022, the Company paid dividends of $ 448,995 and $ 455,355 , respectively. Liquidation Preference . The liquidation preference for each share of Series B Preferred Stock is $ 10.00 . Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series B Preferred Stock will be entitled to receive, before any payment or distribution is made to the holders of Common Stock and on a pari passu basis with holders of Series A Preferred Stock and Series C Preferred Stock, the liquidation preference with respect to their shares plus an amount equal to any accrued but unpaid dividends (whether or not declared) to, but not including, the date of payment with respect to such shares. Company Call and Stockholder Put Options . Commencing on the fifth anniversary of the initial issuance of shares of Series B Preferred Stock and continuing indefinitely thereafter, the Company will have a right to call for redemption the outstanding shares of Series B Preferred Stock at a call price equal to $15.00, or 150 % of the original issue price of the Series B Preferred Stock, and correspondingly, each holder of shares of Series B Preferred Stock shall have a right to put the shares of Series B Preferred Stock held by such holder back to the Company at a put price equal to $15.00, or 150 % of the original issue purchase price of such shares. The Company recorded a put option value accretion of $ 544,812 and $ 527,980 during the nine months ended September 30, 2023 and 2022. Voting Rights . The Company may not authorize or issue any class or series of equity securities ranking senior to the Series B Preferred Stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior securities) or amend the Company’s articles of incorporation (whether by merger, consolidation, or otherwise) to materially and adversely change the terms of the Series B Preferred Stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of outstanding shares of Series B Preferred Stock, voting together as a class. Otherwise, holders of the shares of Series B Preferred Stock do not have any voting rights. No Conversion Right . The Series B Preferred Stock is not convertible into shares of Common Stock. As of September 30, 2023 , there were 747,951 shares of Series B Preferred Stock issued and outstanding and the Series B Preferred Stock balance was made up of Series B Preferred Stock, net of commissions, totaling $ 7,079,716 and accretion of put options totaling $ 2,587,314 . As of December 31, 2022, there were 747,951 shares of Series B Preferred Stock issued and outstanding and the Series B Preferred Stock balance was made up of Series B Preferred Stock, net of commissions, totaling $ 7,079,716 and accretion of put options totaling $ 2,042,502 . Series C Cumulative Redeemable Preferred Stock On May 24, 2021, the Company filed an amended and restated certificate of designation with the Nevada Secretary of State pursuant to which the Company designated 47,000 shares of its preferred stock as Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”). The Series C Preferred Stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions: Ranking . The Series C Preferred Stock ranks, as to dividend rights and rights upon liquidation, dissolution, or winding up, senior to Common Stock and pari passu with Series A Preferred Stock, Series B Preferred Stock and Series D Preferred Stock. The terms of the Series C Preferred Stock do not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series C Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up. Stated Value . Each share of Series C Preferred Stock has an initial stated value of $ 1,000 , subject to appropriate adjustment in relation to certain events, such as recapitalizations, stock dividends, stock splits, stock combinations, reclassifications or similar events affecting the Series C Preferred Stock. Dividend Rate and Payment Dates . Dividends on the Series C Preferred Stock are cumulative and payable monthly in arrears to all holders of record on the applicable record date. Holders of Series C Preferred Stock are entitled to receive cumulative monthly cash dividends at a per annum rate of 7 % of the stated value (or $5.83 per share each month based on the initial stated value). Dividends on each share begin accruing on, and are cumulative from, the date of issuance and regardless of whether the board of directors declares and pays such dividends. Dividends on shares of Series C Preferred Stock will continue to accrue even if any of the Company’s agreements prohibit the current payment of dividends or the Company does not have earnings. During the nine months ended September 30, 2023 and 2022, the Company paid dividends of $ 1,288,445 and $ 484,521 , respectively. Due to timing of payments, accrued dividends of $ 203,195 and $ 112,695 are presented in accrued liabilities on the balance sheet as of September 30, 2023 and 2022, respectively. Liquidation Preference . Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series C Preferred Stock are entitled to receive, before any payment or distribution is made to the holders of Common Stock and on a pari passu basis with holders of Series A Preferred Stock and Series B Preferred Stock, a liquidation preference equal to the stated value per share, plus accrued but unpaid dividends thereon. Redemption Request at the Option of a Holder . Once per calendar quarter, a holder will have the opportunity to request that the Company redeem that holder’s Series C Preferred Stock. The board of directors may, however, suspend cash redemptions at any time in its discretion if it determines that it would not be in the best interests of the Company to effectuate cash redemptions at a given time because the Company does not have sufficient cash, including because the board believes that the Company’s cash on hand should be utilized for other business purposes. Redemptions will be limited to four percent ( 4 %) of the total outstanding Series C Preferred Stock per quarter and any redemptions in excess of such limit or to the extent suspended, shall be redeemed in subsequent quarters on a first come, first served, basis. The Company will redeem shares at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon, less the applicable redemption fee (if any). As a percentage of the aggregate redemption price of a holder’s shares to be redeemed, the redemption fee shall be: • 11 % if the redemption is requested on or before the first anniversary of the original issuance of such shares; • 8 % if the redemption is requested after the first anniversary and on or before the second anniversary of the original issuance of such shares; • 5 % if the redemption is requested after the second anniversary and on or before the third anniversary of the original issuance of such shares; and • after the third anniversary of the date of original issuance of shares to be redeemed, no redemption fee shall be subtracted from the redemption price. Optional Redemption by the Company . The Company has the right (but not the obligation) to redeem shares of Series C Preferred Stock at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon; provided, however, that if the Company redeems any shares of Series C Preferred Stock prior to the fourth (4 th ) anniversary of their issuance, then the redemption price shall include a premium equal to ten percent ( 10 %) of the stated value. Mandatory Redemption by the Company . The Company must redeem the outstanding shares of Series C Preferred Stock on the fourth (4 th ) anniversary of their issuance at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon. Voting Rights. The Series C Preferred Stock has no voting rights. No Conversion Right . The Series C Preferred Stock is not convertible into shares of Common Stock. In accordance with ASC 480-10, the Series C Preferred Stock is treated as a liability and is presented net of unamortized debt issuance costs on the balance sheet because the Company has an unconditional obligation to redeem the Series C Preferred Stock and dividends on the Preferred C Stock are included in interest expense. On June 11, 2021, the Company launched a new offering under Regulation A of Section 3(6) of the Securities Act of 1933, as amended (the “Securities Act”) for Tier 2 offerings, pursuant to which the Company is offering up to 47,000 shares of Series C Preferred Stock at an offering price of $ 1,000 per share for a maximum offering amount of $ 47,000,000 . During the nine months ended September 30, 2023 , the Company sold an aggregate of 5,345 shares of Series C Preferred Stock for total proceeds of $ 5,344,917 , net of aggregate redemptions of $ 326,250 . After deducting a placement fee and broker dealer commissions, the Company received net proceeds of $ 4,983,279 . In addition to the placement fee and broker dealer commissions, the Company capitalized an additional $ 43,785 of other issuance costs associated with the offering which, net of amortization expense, offset with the net proceeds on the balance sheet. During the nine months ended September 30, 2022 , the Company sold an aggregate of 10,260 shares of Series C Preferred Stock for total gross proceeds of $ 10,253,917 . After deducting a placement fee and other expenses, the Company received net proceeds of $ 9,573,085 . In addition to the placement fee and broker dealer commissions, the Company capitalized an additional $ 18,383 of other issuance costs associated with the offering which, net of amortization expense, offset with the net proceeds on the balance sheet. As of September 30, 2023 there were 26,929 shares of Series C Preferred Stock issued and outstanding and the Series C Preferred Stock balance was made up of Series C Preferred Stock gross proceeds totaling $ 26,928,919 net of total unamortized debt issuance costs of $ 1,485,510 . As of December 31, 2022 there were 21,584 shares of Series C Preferred Stock issued and outstanding and the Series C Preferred Stock balance was made up of Series C Preferred Stock gross proceeds totaling $ 21,584,002 net of total unamortized debt issuance costs of $ 1,406,815 . Series D Cumulative Redeemable Preferred Stock On April 10, 2023, the Company filed a certificate of designation with the Nevada Secretary of State pursuant to which the Company designated 75,000 shares of its preferred stock as Series D Cumulative Redeemable Preferred Stock (the “Series D Preferred Stock”). The Series D Preferred Stock has the following voting powers, designations, preferences and relative rights, qualifications, limitations, or restrictions: Ranking . The Series D Preferred Stock ranks, as to dividend rights and rights upon liquidation, dissolution, or winding up, senior to the Common Stock and pari passu with the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock. The terms of the Series D Preferred Stock will not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of Series D Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up. Stated Value . Each share of Series D Preferred Stock has an initial stated value of $ 1,000 , subject to appropriate adjustment in relation to certain events, such as recapitalizations, stock dividends, stock splits, stock combinations, reclassifications or similar events affecting the Series D Preferred Stock. Dividend Rate and Payment Dates . Dividends on the Series D Preferred Stock are cumulative and payable monthly in arrears to all holders of record on the applicable record date. Holders of Series D Preferred Stock are entitled to receive cumulative monthly cash dividends at a per annum rate of 9.5 % of the stated value (or $ 7.81 per share each month based on the initial stated value); provided that upon an event of default (generally defined as the Company’s failure to pay dividends when due or to redeem shares when requested by a holder), such amount shall be increased to 10.5 % of the stated value (or $ 8.63 per month based on the initial stated value). During the nine months ended September 30, 2023, the Company paid dividends of $ 28,057 . Exit Premium . Holders of Series D Preferred Stock are entitled to receive upon redemption or repurchase, or upon a liquidation, dissolution or winding up of the Company, a premium equal to 1 % of the stated value per share, accruing upon each anniversary of issuance for the first five years from issuance and shall be payable to the recordholder of such stock at the time of redemption, repurchase, liquidation, dissolution or winding up of the Company (the “Exit Premium”). Liquidation Preference . Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series D Preferred Stock will be entitled to receive, before any payment or distribution is made to the holders of Common Stock and on a pari passu basis with holders of Series A Preferred Stock, Series B Stock and Series C Preferred Stock, a liquidation preference equal to the stated value per share, plus any accrued but unpaid dividends and the Exit Premium. Redemption Request at the Option of a Holder . Once per calendar quarter, a holder will have the opportunity to request that the Company redeem that holder’s Series D Preferred Stock. The board of directors may, however, suspend cash redemptions at any time in its discretion if it determines that it would not be in the best interests of the Company to effectuate cash redemptions at a given time because the Company does not have sufficient cash, including because the board believes that the Company’s cash on hand should be utilized for other business purposes. Redemptions occurring prior to the fifth (5 th ) anniversary from the date of issuance will be limited to five percent ( 5 %) of the total outstanding Series D Preferred Stock per quarter and any redemptions in excess of such limit or to the extent suspended, shall be redeemed in subsequent quarters on a first come, first served, basis. The Company will redeem shares at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon and the Exit Premium, less the applicable redemption fee (if any) specified below: (i) 10 % discount to stated value on shares redeemed on or before the first anniversary of the original issuance date of the shares; (ii) 10 % discount to stated value on shares redeemed after the first anniversary and on or before the second anniversary of the original issuance date of the shares; (iii) 8 % discount to stated value on shares redeemed after the second anniversary and on or before the third anniversary of the original issuance date of the shares; (iv) 6 % discount to stated value on shares redeemed after the third anniversary and on or before the fourth anniversary of the original issuance date; (v) 4 % discount to stated value on shares redeemed after the fourth anniversary and on or before the fifth anniversary of the original issuance date; and (vi) 0 % discount to stated value on shares redeemed after the fifth anniversary of the original issuance date. Optional Redemption by the Company . The Company has the right (but not the obligation) to redeem shares of Series D Preferred Stock at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon and the Exit Premium. Optional Repurchase Upon Death or Total Disability of a Holder . Within sixty (60) days of the death or Total Permanent Disability (as defined in the certificate of designation) of a holder, the holder or the estate of such holder (in the event of death) may request that the Company repurchase, in whole but not in part, without penalty, the Series D Preferred Stock held by such holder at a redemption price equal to the stated value of such redeemed shares, plus any accrued but unpaid dividends thereon. Voting Rights . The Series D Preferred Stock has no voting rights relative to matters submitted to a vote of stockholders (other than as required by law). However, the Company may not, without the affirmative vote or written consent of the holders of a majority of the then issued and outstanding Series D Preferred Stock: (i) amend or waive any provision of the certificate of designation or otherwise take any action that modifies any powers, rights, preferences, privileges or restrictions of the Series D Preferred Stock (other than an amendment solely for the purpose of changing the number of shares of Series D Preferred Stock designated for issuance as provided in the certificate of designation); (ii) authorize, create or issue shares of any class of stock having rights, preferences or privileges as to dividends or distributions upon a liquidation that are superior to the Series D Preferred Stock; or (iii) amend the Company’s articles of incorporation in a manner that adversely and materially affects the rights of the Series D Preferred Stock. No Conversion Right . The Series D Preferred Stock is not convertible into shares of Common Stock. As of September 30, 2023, there were 3,143 shares of Series D Preferred Stock issued and outstanding and the Series D Preferred Stock balance was made up of Series D Preferred Stock, net of commissions, totaling $ 2,842,004 and accretion of put options totaling $ 4,056 . During the nine months ended September 30, 2023, the Company sold an aggregate of 3,143 shares of Series D Preferred Stock for total gross proceeds of $ 3,142,774 . After deducting a placement fee and other expenses, the Company received net proceeds of $ 2,842,004 . Common Stock The Company is authorized to issue up to 200,000,000 shares of Common Stock, par value $ 0.01 per share. As of September 30, 2023 and December 31, 2022, there were 12,493,012 shares of Common Stock issued and outstanding. No shares of Common Stock were issued during the nine months ended September 30, 2023. During the nine months ended September 30, 2022, the Company issued 74,332 shares of Common Stock upon employee exercise of stock options for total exercise price of $ 743 . Equity Incentive Plan In December 2017, the Board of Directors, with the approval of a majority of the stockholders of the Company, adopted the Manufactured Housing Properties Inc. Stock Compensation Plan (the “Plan”) which is administered by the Compensation Committee. As of September 30, 2023 , there were 538,842 shares granted and 461,158 shares remaining available under the Plan. The Company has issued options to directors, officers, and employees under the Plan. During the nine months ended September 30, 2023 and 2022 , the Company issued 50,000 and 145,000 options and recorded stock option expense of $ 218,106 and $ 105,884 , respectively. With the exception of 50,000 options issued in January 2023 and an additional 50,000 options issued in December 2022, all options were granted at a price of $ 0.01 per share, which represents a price that may be deemed to be below the market value per share of the Company’s common stock as defined by the Plan. The 50,000 options issued in January 2023 were forfeited in July 2023. The following table summarizes the stock options outstanding as of September 30, 2023:
Number of Weighted Weighted
Outstanding at December 31, 2022 538,842 $ 0.01 6.6
Granted 50,000 1.32 —
Exercised — — —
Forfeited / cancelled / expired ( 50,000 ) 1.32 —
Outstanding at September 30, 2023 538,842 $ 0.06 6.1
Exercisable at September 30, 2023 423,842 0.03 5.4 As of September 30, 2023, there were 538,842 “in-the-money” options with an aggregate intrinsic value of $ 535,896 . The aggregate intrinsic value represents the total intrinsic value (the difference between the Company’s closing stock price at fiscal year-end and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holder had all options holders exercised their options on September 30, 2023. The following table summarizes information concerning options outstanding as of September 30, 2023.
Strike Price Outstanding Weighted Weighted Vested stock Weighted
$ 0.01 288,675 4.9 $ 0.01 288,675 $ 0.01
$ 0.01 13,500 7.0 $ 0.01 13,500 $ 0.01
$ 0.01 50,000 8.0 $ 0.01 50,000 $ 0.01
$ 0.01 – 0.50 186,667 8.3 $ 0.14 71,667 $ 0.12 The table below presents the weighted average expected life in years of options granted under the Plan as described above. The risk-free rate of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant, which corresponds with the expected term of the option granted. The fair value of stock options was estimated using the Black Scholes option pricing model with the following assumptions for grants made during the periods indicated.
Stock option assumptions September 30, September 30,
Risk-free interest rate 1.40 - 2.84 % 1.40 - 2.84 %
Expected dividend yield 0.00 % 0.00 %
Expected volatility 237.85 - 249.77 % 237.85 - 249.77 %
Expected life of options (in years) 6.5 - 7 6.5 - 7 |
