Annual report pursuant to Section 13 and 15(d)

Stockholders' Deficit

v3.7.0.1
Stockholders' Deficit
12 Months Ended
Dec. 31, 2016
Stockholders' Deficit [Abstract]  
Stockholders' Deficit
10. 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.

 

Settlement Agreement

 

On December 23, 2016, the Company entered into a settlement and release agreement (the “Yazbeck Settlement”) with Daniel R. Yazbeck, the Chief Executive Officer and Director of the Company (“Yazbeck”), relating to certain bona fide, outstanding, and past-due liabilities of the Company in the aggregate principal amount of approximately $321,000 for certain unpaid base salary and bonus obligations that remained deferred and/or outstanding, due and owing to Yazbeck.

 

Under the terms of the Yazbeck Settlement, Yazbeck agreed to forgo and release any claims against the Company under that certain Employment Agreement, by and between Yazbeck and the Company, dated October 15, 2014 (the “Employment Agreement”) in exchange for (1) the issuance of fifty-one (51) shares of the Company’s Series A Preferred Stock (defined below); (2) the issuance of three hundred thousand (300,000) shares of the Company’s Series B Preferred Stock (defined below); (3) a warrant for fifteen percent (15%) of the common shares of the Company issued and outstanding as of January 3, 2017, at an exercise price of $0.001 per share, with an expiration date of January 3, 2019; and (4) the issuance of thirty million (30,000,000) shares of the Company’s restricted 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.

Common Stock

 

On February 23, 2015, the Company effected a 5-for-1 forward stock split of its issued and outstanding shares of common stock. All share and per share amounts for all periods that have been presented in the consolidated financial statements and notes thereto have been adjusted retrospectively, where applicable, to reflect the forward stock split. The Company filed a Certificate of Amendment to its Certificate of Incorporation which made the forward stock split effective and increased the authorized common shares to 375,000,000 shares with a par value $0.001 per share.

 

In April 2015, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with CDx Merger Inc., a Nevada corporation and wholly owned subsidiary of the Company (“Merger Sub”), and CDx, Inc. (“CDx”), a Delaware corporation. Pursuant to the Merger Agreement, Merger Sub merged with and into CDx with CDx surviving the merger as the Company’s wholly owned subsidiary (the “Merger”).

 

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 (the “Common Stock”). 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. Therefore, following the Merger, CDx’s former stockholders now hold 19,855,295 shares of Company common stock which is approximately 91% of the Company common stock outstanding.

 

Pursuant to the Merger Agreement, each party has made certain customary representations and warranties to the other parties thereto. The Merger was conditioned upon approval by CDx’s stockholders and certain other customary closing conditions.

 

On April 24, 2015, in anticipation of closing the Merger, the Company changed its name to MyDx, Inc. On April 30, 2015, the Merger was consummated. Upon consummation of the Merger, the Company expanded its board of directors (the “Board”) from one to seven directors, each of whom will be directors designated by CDx.

 

The Merger is being treated as a reverse acquisition of the Company, a public shell company, for financial accounting and reporting purposes. As such, CDx is treated as the acquirer for accounting and financial reporting purposes while the Company is treated as the acquired entity for accounting and financial reporting purposes. Further, as a result, the historical financial statements that will be reflected in the Company’s future financial statements filed with the United States Securities and Exchange Commission (“SEC”) will be those of CDx, and the Company’s assets, liabilities and results of operations will be consolidated with the assets, liabilities and results of operations of CDx.

 

Each share of common stock has the right to one vote. The holders of common stock are entitled to dividends when funds are legally available and when declared by the board of directors.

 

As a result of the Merger, the Company issued a total of 19,855,295 share of common stock to the shareholders of CDx.

 

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. During the year ended December 31, 2015, the Company issued 1,863,241 shares of common stock in exchange for services at a fair value of $1,192,893.

 

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.

 

Common Stock Warrants

 

During the year ended December 31, 2016, the Company did not issue any warrants to purchase shares of common stock. During the year ended December 31, 2015, the Company converted warrants to purchase 4,974,567 shares of Series B preferred stock into warrants to common stock. No common stock warrants have been exercised or have expired and warrants to purchase 7,571,395 shares of common stock were outstanding as of December 31, 2016.

 

2015 Equity Incentive Plan

 

In connection with the Merger on April 30, 2015, the Company adopted the MyDx, Inc. 2015 Equity Incentive Plan (the “2015 Plan”), and to date, has reserved 6,200,000 shares of common stock for issuance under the 2015 Plan. Under the 2015 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. Only employees are eligible to receive incentive stock options (“ISO”) to purchase common stock. Vesting and exercise provisions are determined by the Board of Directors at the time of grant. The options generally expire ten years from the date of grant. ISOs granted to a participant who, at the time the ISO is granted, has more than 10% of the voting power between all classes of stock, will expire five years from the date of grant. Options vest at various rates ranging from immediately to three years. As of December 31, 2016, options to purchase 1,573,755 shares were available under the 2015 Plan for issuance. 

 

A summary of the Company’s stock option plan for the year ended December 31, 2016 was as follows:

 

    Shares     Weighted-
Average Exercise
Price
 
Outstanding as of January 1, 2015     1,937,979     $ 0.08  
Granted     4,639,234     $ 0.57  
Exercised     (33,333 )   $ 0.08  
Forfeited or cancelled     (1,917,635 )   $ 0.52  
Outstanding as of December 31, 2015     4,626,245     $ 0.39  
Options exercisable as of December 31, 2015     2,916,801     $ 0.31  
Granted     125,000     $ 0.57  
Exercised     -     $ -  
Forfeited or cancelled     (3,261,245 )   $ 0.36  
Outstanding as of December 31, 2016     1,490,000     $ 0.48  
Options exercisable as of December 31, 2016     1,279,583     $ 0.22  

 

The aggregate intrinsic value of options exercised was $0 and $15,667 for the years ended December 31, 2016 and 2015, respectively.

 

Information regarding options outstanding and exercisable as of December 31, 2016, is as follows:

 

      Options Outstanding     Options Exercisable  
Exercise
Price
    Number
Outstanding
    Average Remaining
Contractual
Life (Years)
    Weighted-Average
Exercise
Price
    Number
Outstanding
    Weighted-Average
Exercise
Price
 
$ 0.08       900,000       7.5     $ 0.08       900,000     $ 0.08  
$ 0.55       515,000       8.2     $ 0.55       323,333     $ 0.55  
$ 0.57       75,000       8.1     $ 0.57       56,250     $ 0.57  
          1,490,000       7.9     $ 0.27       1,279,583     $ 0.22  

 

Total unrecognized compensation expense from employee stock options as of December 31, 2016 was $378,597 and will be recognized over a weighted average recognition period of 1.35 years.

 

Total stock-based compensation expense, both employee and non-employee, recognized by the Company for the year ended December 31, 2016 and 2015 was $380,587 and $378,597, respectively. Stock-based compensation expense related to stock options granted to non-employees for the year ended December 31, 2016 and 2015 was $82,996 and $192,410, respectively. No tax benefits were recognized in the year ended December 31, 2016 and 2015.

 

For the year ended December 31, 2016, the Company granted options to non-employees to purchase 125,000 shares of common stock at an exercise price of $0.57 per share as compared to 579,864 shares of common stock at an exercise price of $0.60 per share for the year ended December 31, 2015. The Company believes the fair value of the stock options is more reliably measurable than the fair value of the consulting services received. The fair value of the stock options granted is calculated at each reporting date.

 

Additional Stock Plan Information

 

The Company’s fair value calculations for stock-based awards under the 2015 Plan were made using the Black-Scholes option pricing model with the weighted-average assumptions set forth in the following table. Volatility is based on historical volatility rates obtained for certain public companies that operate in the same or related businesses as that of the Company since there is no market for or historical volatility data for the Company’s common stock. he risk-free interest rate is determined by using a U.S. Treasury rate for them any uses a simplified method for “plain vanilla” share options in determining the expected term of an employee share option as its equity shares are not publicly traded. 

 

The following assumptions were used in the estimated grant date fair value calculations for options granted to employees and consultants during the year ended December 31, 2016 and 2015:

 

    Years Ended  
    December 31,  
    2016     2015  
Dividend yield     0.0 %     0.0 %
Volatility     50% - 252  %     52.5 %
Average risk-free rate     1.04% - 2.50 %     1.65% - 1.91 %
Expected term, in years     2.27 - 10.00       5.00 - 5.77  

 

The weighted-average grant date fair value for stock options granted during the year ended December 31, 2016 and 2015 was zero and $0.27 per share.