Equity Transactions | Note 7 - Equity Transactions Common Stock Issuance In February 2020, the Company issued LilyCon Investments $ 35,000 0.32 109,375 On April 23, 2020, Horne Management, LLC agreed to convert the related notes plus accrued interest into (i) 4,368,278 ten-year 0.014 On July 28, 2020, the Company issued an aggregate of 17,893,076 On July 29, 2020, the Company filed its Second Amended and Restated Certificate of Incorporation (the “Amended COI”). The Amended COI provides for the issuance of up to 1,600,000,000 shares of Common Stock and 1,000,000,000 shares of Preferred Stock, of which 800,000,000 shares are designated as Series A Preferred Stock and eliminates the previously authorized classes of preferred stock. The Amended COI also delineates the rights of the Series A Preferred Stock. Series A Preferred Stock On September 11, 2020, the registered Rights Offering (Registration No. 333-239629) of the Company expired. Pursuant to the Rights Offering, on September 24, 2020, the Company issued (i) 15,235,381 0.014 203,049,643 3,055,985 Additionally, on September 24, 2020, the Company issued an aggregate of 323,844,416 shares of its Series A Preferred Stock to the holders of outstanding promissory notes, issued in April 2020, in the aggregate principal amount and accrued interest of $ 4,483,617 . The notes were converted pursuant to a mandatory conversion triggered by the completion of the Rights Offering (for further discussion, see Note 9-“Equity Transactions” to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K). During the three and six months ended June 30, 2021, 8,123,691 and 17,803,525 shares of Series A Preferred Stock were converted to Common Stock at the request of certain Series A Preferred Shareholders. 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 1:1 ratio Liquidation Series A Preferred Stock does not have preferential treatment over common stock shareholders if the Company liquidates or dissolves. Share -Based Compensation The Company utilizes the Black-Scholes valuation method to recognize share-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 54,750,000 stock options of which 4,750,000 were immediately vested on the date of grant. Each option granted has an exercise price of $ 0.07 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. For the six months ended June 30, 2020, all outstanding stock options were fully vested, and related compensation expense recognized. For the six months ended June 30, 2021, 55,135,000 options were outstanding and 5,718,133 were vested. As of June 30, 2021, the Company recognized $ 862,000 in stock-based compensation expense and has approximately $ 2,150,000 of unrecognized compensation costs related to non-vested stock options, which is expected to be recognized over a weighted average period of approximately 3.24 years. Inputs used in the valuation models are as follows: SCHEDULE OF ASSUMPTIONS USED TO CALCULATE FAIR VALUE OF STOCK OPTIONS 2021 Grants Option value $ 0.054 to $ 0.056 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 six months ended June 30, 2020 and 2021: SUMMARY OF STOCK OPTION ACTIVITY Shares Weighted Average Exercise Price Weighted Average Remaining Term (Years) Outstanding at December 31, 2019 425,000 $ 1.38 7.71 Granted — — — Expired/Cancelled (15,000 ) 1.35 — Outstanding and exercisable at June 30, 2020 410,000 $ 1.39 7.23 Outstanding at December 31, 2020 410,000 $ 1.39 6.72 Granted 54,750,000 0.07 9.75 Expired/Cancelled (25,000 ) 2.16 — Outstanding at June 30, 2021 55,135,000 $ 0.08 9.73 Exercisable at June 30, 2021 5,718,333 $ 0.16 9.52 The following is a summary of the Company’s non-vested shares for the six months ended June 30, 2021: SUMMARY OF STOCK OPTION ACTIVITY NON-VESTED Shares Weighted Average Grant Date Fair Value Non-vested at December 31, 2020 - $ - Granted 54,750,000 0.06 Vested (5,333,333 ) 0.05 Forfeited - - Non-vested at June 30, 2021 49,416,667 $ 0.06 Non-Controlling Interest For the six months ended June 30, 2021 and 2020, the Company consolidated the results for LI Dallas, LI Nashville, LI Pittsburgh, and LI Scottsdale as VIEs. The Company owns no portion of any of these four entities, however, the Company maintains control through their management role for each of the clinics, in accordance with each clinic’s respective management services agreement. Based on these agreements, the Company has the responsibility to run and make decisions on behalf of the clinics, except for medical care and procedures. Beginning in January 2018, the Company adopted the policy, for all of the VIEs, that the management fee charged by the Company would equal the amount of net income from each VIE on a monthly basis, bringing the amount of the net income to $0 each month for the VIEs. Due to this change in policy, there was no change in the non-controlling interest for the six months ended June 30, 2021 or 2020 related to the net income (loss) as it was $ 0 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 method. 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: SCHEDULE OF ANTIDILUTIVE SECURITIES OF BASIC AND DILUTED NET LOSS PER SHARE For the Six Months Ended June 30, 2021 2020 Options to purchase common stock (in the money) 4,977,273 410,000 Warrants to purchase common stock (in the money) 386,908,082 404,821,082 Series A Preferred Stock convertible to common stock 520,305,884 - Series B & D Preferred Stock convertible to common stock - 38,308,600 Total 912,191,239 443,539,682 Excluded from the above table are 23,149,370 385,000 0.08 |