Annual report pursuant to Section 13 and 15(d)

Stockholders' Deficit

v3.19.1
Stockholders' Deficit
12 Months Ended
Dec. 31, 2018
Equity [Abstract]  
Stockholders' Deficit

11. Stockholders' Deficit

 

Reverse Capitalization

 

Pursuant to the Merger Agreement, upon consummation of the Merger, each share of CDx's capital stock issued and outstanding immediately prior to the Merger was converted into the right to receive one (1) share of Company common stock, par value $0.001 per share. Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, the Company assumed all of CDx's options and warrants issued and outstanding immediately prior to the Merger, 6,069,960 and 7,571,395 shares of common stock, respectively.

 

Prior to and as a condition to the closing of the Merger, each then-current Company stockholder agreed to sell certain shares of common stock held by such holder to the Company and the then-current Company stockholders retained an aggregate of 1,990,637 shares of common stock.

 

Preferred Stock

 

On September 30, 2016, the Company filed a Certificate of Amendment to Articles of Incorporation with the Secretary of State of the State of Nevada to authorize for issuance ten million (10,000,000) shares of blank check preferred stock, par value $0.001 ("Blank Check Preferred Stock") as included on Form 8-K filed with the SEC on October 4, 2016.

 

Series A Preferred Stock

 

As of December 31, 2018, and December 31, 2017, the Company has designated 51 shares of Series A Preferred Stock par value $0.001 and 51 shares are issued and outstanding. The Series A Preferred Stock can convert into common stock at a 1:1 ratio. Each one (1) share of the Series A Preferred shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding shares of Common Stock eligible to vote at the time of the respective vote (the "Numerator"), divided by (y) 0.49, minus (z) the Numerator. For purposes of illustration only, if the total issued and outstanding shares of Common Stock eligible to vote at the time of the respective vote is 5,000,000, the voting rights of one share of the Series A Preferred Stock shall be equal to 102,036 (0.019607 x 5,000,000) / 0.49) – (0.019607 x 5,000,000) = 102,036). On December 23, 2016 the 51 shares were issued to Mr. Yazbeck, the Company's sole officer and the sole member of the Board. Mr. Yazbeck, via his ownership of the 51 shares of the Series A Preferred, has control of the majority of the Company's voting stock.

 

Series B Preferred Stock

 

The Series B Preferred is convertible into shares of Common Stock at a conversion price of $0.0001. Holders of the Series B Preferred are entitled to receive dividends annually equal to $0.10 for each share of Series B Preferred held. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of Series B Preferred then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of Common Stock. Until such time as there are fewer than 20,000 shares of Series B Preferred outstanding, the Company needs to obtain the majority votes of the holders of Series B Preferred with regard to certain actions. Holders of Series B Preferred shares are entitled to one vote for each share held, are entitled to elect up to two members to the Board, and, absent such election, are provided certain voting and veto rights with regard to any vote by the Board.

 

During the year ended December 31, 2017 an investor converted 3,300 shares of Series B Preferred stock in to 33,000,000 shares of common stock.

 

On July 30, 2018, the Company agreed to eventually issue 45,355 shares of Series B Preferred at a value of $1.00 per Series B Preferred share to settle outstanding vendor liability. The shares of Series B Preferred Stock will be issued upon an increase in the authorized shares of Series B Preferred. The Company also agreed to the right to purchase seven and one half percent (7.5%) of the Company's shares of Common Stock issued and outstanding at the time of exercise and having an exercise price of $0.001 per share. This form of warrant is referred to herein as the "7.5% Warrant." The 7.5% Warrant has an expiration date of July 31, 2020. The Company currently does not have enough authorized shares to issue the Series B Preferred shares and therefore, have recorded them as a liability at their fair value of $1,587,425.

 

On July 31, 2018, the Company agreed to eventually issue 38,272 shares of Series B Preferred at a value of $1.00 per Series B Preferred share to settle outstanding vendor liability. The shares of Series B Preferred will be issued upon an increase in the authorized shares of Series B Preferred. The Company also agreed to the assignment or issuance of three 7.5% Warrants. The Company agreed to the assignment of one previously issued 7.5% Warrant to an entity related to BCI Advisors. This 7.5% Warrant expired on January 15, 2019. In addition, the Company also agreed to the assignment of another previously issued 7.5% Warrant to an entity related to BCI Advisors and agreed to extend the expiration date from March 1, 2019 to July 31, 2020. Finally, the Company agreed to issue a new 7.5% Warrant which will expire on July 31, 2020. The Company currently does not have enough authorized shares to issue the Series B Preferred shares and therefore, have recorded them as a liability at their fair value of $1,262,976.

 

In connection to the agreements to issue the 83,627 shares of Series B Preferred the Company recorded a loss on settlement of vendor liability of $5,239,627.

 

During the year ended December 31, 2018 investors converted 189,700 shares of Series B Preferred stock in to 1,897,000,000 shares of common stock.

 

Common Stock

 

On September 30, 2016, the Company amended articles of incorporation to increase the number of authorized commons shares to 10,000,000,000 as included on Form 8-K filed with the SEC on October 4, 2016.

 

During the year ended December 31, 2017, the Company issued 143,977,273 shares of common stock in exchange for services at a fair value of $668,695. During the year ended December 31, 2016, the Company issued 16,654,214 shares of common stock in exchange for services at a fair value of $378,345.

 

On March 16, 2017, the Company entered into a securities purchase agreement ("SPA") with TLG, Inc, and TRD, Inc. ("Investors") pursuant to which the Company agreed to sell 25,000,000 restricted shares of the Company's common stock, in an above market transaction at a purchase price of $0.004 per share for a total of $100,000. As part of the SPA, the Company granted the Investors the option, within the next 60 days, to purchase an additional 25,000,000 of restricted shares of the Company's common stock at a purchase price of $0.006 per share for a total of $150,000. The shares of Common Stock issued pursuant to the Subscription Agreement have not been registered under the Securities Act of 1933, as amended (the "Securities Act") and are "restricted securities" as that term is defined by Rule 144 promulgated under the Securities Act. Pursuant to the securities purchase agreement, the Investors agreed not to sell more than three hundred and seventy-five thousand shares per day (subject to adjustment for forward and reverse stock splits that occur after the date hereof) or more than seven million five hundred thousand shares per month (subject to adjustment for forward and reverse stock splits that occur after the date hereof) of the securities purchased pursuant to the SPA. On May 1, 2017, the Company entered into an amendment to the TLG, Inc SPA. The modification allowed TLG, Inc to purchase a total of 25,000,000 of restricted shares of the Company's common stock at a purchase price of $0.006 per share for a total of $150,000. TLG exercised all of these options on May 2, 2017.

 

On January 24, 2018, the Company issued 5,000,000 shares common stock to settle outstanding vendor liabilities of $30,000. In connection with this transaction the Company also recorded a gain on settlement of vendor liabilities of $4,500.

 

During the years ended December 31, 2018, the Company issued 113,430,735 shares of common stock in exchange for services at a fair value of $375,750.

 

During the year ended December 31, 2018, the Company issued 4,285,714 shares of its restricted common stock to consultants in exchange for services at a fair value of $13,286. These shares were recorded as common stock issued for prepaid services and will be expensed over the life of the consulting contract to share based payments. During the year ended December 31, 2018 the Company recorded $13,286 to share based payments.

 

Total stock-based compensation expense, for both employee and non-employee options, recognized by the Company for the year ended December 31, 2018 was $1,971. No tax benefits were recognized in the year ended December 31, 2018.

 

During the year ended December 31, 2018 a noteholder converted $114,783 of principal into 26,086,956 shares of the Company's common stock. In connection with the conversion the Company recorded a loss on extinguishment of debt of $4,581.

 

Common Stock Warrants

 

A summary of the Company's stock warrants for the years ended December 31, 2018 and 2017 was as follows:

 

    Shares     Weighted- Average Exercise Price     Average
Remaining
Contractual
Life (Years)
 
Outstanding as of December 31, 2016     7,571,395     $ 1.10          
Granted     252,773,754       0.001          
Exercised     -       -          
Forfeited or cancelled     -       -          
Outstanding as of December 31, 2017     260,345,149       0.033       0.50  
Granted     2,636,010,639       0.001       2.00  
Exercised     -       -          
Forfeited or cancelled     (252,773,751 )     0.001          
Outstanding and as of December 31, 2018     2,643,582,033     $ 0.004       1.68  
Exercisable as of December 31, 2018     1,789,319,326                  

 

During the year ended December 31, 2018, a total of 1,171,560,284 warrants were issued to settle vendor liabilities (See Note 10 above). The warrants have a grant date fair value of $3,517,578 using a Monte Carlo option-pricing model.

 

During the year ended December 31, 2018, a total of 585,780,142 warrants were issued to as part of a settlement agreement with our former Chief Executive Officer. The warrants have a grant date fair value of $ 2,221,888 using a Monte Carlo option-pricing model.

 

The Company re-valued the warrants as of December 31, 2018 and recorded a fair value adjustment of $344,897.

 

In accordance with the Business Valuation Standards of the American Society of Appraisers, "fair market value," as used herein, represents the price at which the property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm's length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.

 

2017 Equity Incentive Plan

 

The Company adopted the MyDx, Inc. 2017 Equity Incentive Plan (the "2017 Plan"), and to date, has reserved 150,000,000 shares of common stock for issuance under the 2017 Plan. Under the 2017 Plan, employees, directors or consultants may be granted nonstatutory stock options, stock appreciation rights, restricted stock and restricted stock units to purchase shares of MyDx's common stock. Employees, non-employee directors and consultants are eligible to receive incentive stock options to purchase common stock. Vesting and exercise provisions are determined by the Board of Directors at the time of grant.

 

A summary of the Company's stock option plan for the years ended December 31, 2018 and 2017 was as follows:

 

    Shares     Weighted- Average Exercise Price    

Average

Remaining

Contractual

Life (Years)

 
Outstanding as of December 31, 2016     4,626,245     $ 0.39          
Granted     125,000       0.57          
Exercised     -       -          
Forfeited or cancelled     (3,254,995 )     0.36          
Outstanding as of December 31, 2017     1,496,250       0.48       3.8  
Granted     -       -          
Exercised     -       -          
Forfeited or cancelled     -       -          
Outstanding and exercisable as of December 31, 2018     1,496,250     $ 0.27      

5.87

 

 

The aggregate intrinsic value of options exercised was $0 and $0 for the year ended December 31, 2018 and 2017, respectively.

 

Information regarding options outstanding and exercisable as of December 31, 2018, is as follows:

 

      Options Outstanding and Exercisable  
Exercise Price     Number Outstanding     Average Remaining Contractual Life
(Years)
 
$ 0.08       900,000       5.51  
$ 0.55       515,000       6.28  
$ 0.57       81,250       7.22  
$ 0.27       1,496,250       5.87  

 

Total stock-based compensation expense, both employee and non-employee, recognized by the Company for the year ended December 31, 2018 and 2017 was $1,971 and $11,909 respectively. No tax benefits were recognized in the year ended December 31, 2018 and 2017.