Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
1 – Organization, Basis of Presentation and Significant Accounting Policies
Organization
Digipath,
Inc. was incorporated in Nevada on October 5, 2010. Digipath, Inc. and its subsidiaries (“Digipath,” the “Company,”
“we,” “our” or “us”) is a service-oriented independent testing laboratory, data analytics
and media firm focused on the developing cannabis and hemp markets, and supports the cannabis industry’s best practices
for reliable testing, cannabis education and training. Our business units are described below.
|
Ø
|
Digipath
Labs, Inc
. Digipath Labs’ mission is to provide pharmaceutical-grade analysis and testing to the cannabis industry,
under ISO-17025:2017 guidelines, to ensure consumers and patients know exactly what is in the cannabis they ingest and to
help maximize the quality of our clients’ products through research, development, and standardization. Digipath has
been operating a cannabis-testing lab in Nevada since 2015 and has plans to open labs in other states and countries that have
legalized the sale of cannabis, beginning with California.
|
|
|
|
|
Ø
|
The
National Marijuana News Corp
. provides a balanced and unbiased approach to cannabis news, interviews and education with
a news/talk podcast, national marijuana news website and social media presence focusing on the political, economic, medicinal,
scientific, and cultural dimensions of the rapidly evolving—and profoundly controversial—medicinal and recreational
marijuana industry.
|
|
|
|
|
Ø
|
GroSciences,
Inc
. Launched during the first fiscal quarter of 2019 to capitalize on the extensive data we have collected from cannabis
through the testing process. GroSciences plans to develop and license specific formulations to other producers and product
makers in the industry.
|
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America (“GAAP”). Intercompany accounts and transactions have been eliminated.
The
unaudited condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report
on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Condensed Consolidated
Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Condensed Consolidated Financial
Statements, and the accompanying notes, are prepared in accordance with GAAP and do not contain certain information included in
the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018. The interim Condensed Consolidated
Financial Statements should be read in conjunction with that Annual Report on Form 10-K. Results for the interim periods presented
are not necessarily indicative of the results that might be expected for the entire fiscal year.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the following entities, all of which were under common
control and ownership at March 31, 2019:
|
|
Jurisdiction
of
|
|
|
Name
of Entity
(1)
|
|
Incorporation
|
|
Relationship
|
Digipath,
Inc.
(2)
|
|
Nevada
|
|
Parent
|
Digipath
Labs, Inc.
|
|
Nevada
|
|
Subsidiary
|
TNM
News, Inc.
|
|
Nevada
|
|
Subsidiary
|
GroSciences,
Inc.
(3)
|
|
Colorado
|
|
Subsidiary
|
Digipath Labs S.A.S.
(4)
|
|
Colombia
|
|
Subsidiary
|
(1)
All entities are in the form of a corporation.
(2)
Holding company, which owns each of the wholly-owned subsidiaries. All subsidiaries shown above are wholly-owned by Digipath,
Inc., the parent company.
(3)
Commenced operations during the first fiscal quarter of 2019, but has not incurred income to date.
(4)
Formed during the first
fiscal quarter of 2019, but has not yet commenced operations.
The
consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. All significant
inter-company transactions have been eliminated in the preparation of these financial statements. The parent company and subsidiaries
will be collectively referred to herein as the “Company”, “Digipath” or “DIGP”. The Company’s
headquarters are located in Las Vegas, Nevada and substantially all of its customers are within the United States.
DIGIPATH,
INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
These
statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary
for fair presentation of the information contained therein.
Segment
Reporting
ASC
Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting.
The management approach model is based on the way a company’s management organizes segments within the company for making
operating decisions and assessing performance. The Company operates as a single segment and will evaluate additional segment disclosure
requirements as it expands its operations.
Fair
Value of Financial Instruments
Under
FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant
measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements
as reflected herein. The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses reported on the
balance sheets are estimated by management to approximate fair value primarily due to the short term nature of the instruments.
Revenue
Recognition
Effective
January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes
revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following
steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the
transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue
when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be
reported under ASC 606 — Revenue Recognition. Under ASC 606, revenue is recognized when the following criteria are met:
(1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has
occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably
assured.
There
was no impact on the Company’s financial statements as a result of adopting ASC 606 for the six months ended March 31, 2019,
or the twelve months ended September 30, 2018.
Revenue
is primarily generated through our subsidiary, Digipath Labs, Inc., which recognizes revenue from the analytical testing of cannabis
products to licensed producers and cultivators within the state of Nevada on a determinable fixed fee per test, or panel of tests
basis. Revenue from the performance of those services is recognized upon completion of the tests, at which time test results are
delivered to the customer, provided collectability of the fee is reasonably assured. We typically require payment within thirty
days of the delivery of results. Management estimates an allowance for doubtful accounts based on the aging of its receivables.
The
Company also recognizes revenue through our subsidiary, TNM News Corp., which primarily recognizes revenue from advertisements
through partnered merchants. Payment for ad revenues are received prior to the distribution of the ad campaign, and the revenues
are recognized ratably over the campaign. The Company defers any revenue for which the term of the campaign has not yet been realized.
To date, these revenues have not been materially significant.
Stock-Based
Compensation
The
Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC
718) and Equity-Based Payments to Non-employees pursuant to ASC 505-50 (ASC 505-50). All transactions in which goods or services
are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration
received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the
fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete
or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently
large disincentives for nonperformance.
Recent
Accounting Pronouncements
In
August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2018-13,
Fair Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement
,
which modify the disclosure requirements of Topic 820. The new guidance is effective for all entities for annual periods, and
interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted. The Company does
not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
DIGIPATH,
INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
In
February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
. ASU 2016-02 requires lessees to recognize assets and liabilities
for most leases. ASU 2016-02 is effective for public entity financial statements for annual periods beginning after December 15,
2018, and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. ASU
2016-02 was further clarified and amended within ASU 2018-01, ASU 2018-10, ASU 2018-11 and ASU 2018-20 which included provisions
that would provide us with the option to adopt the provisions of the new guidance using a modified retrospective transition approach,
without adjusting the comparative periods presented. The Company is currently evaluating ASU 2016-02 and its impact on its consolidated
financial statements.
There
are no other recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material
effect on its financial position, results of operations, or cash flows.
Note
2 – Going Concern
As
shown in the accompanying condensed consolidated financial statements, the Company has incurred recurring losses from operations
resulting in an accumulated deficit of $14,063,967, and as of March 31, 2019, the Company’s cash on hand may not
be sufficient to sustain operations. These factors raise substantial doubt about the Company’s ability to continue as a
going concern. Management is actively pursuing new customers to increase revenues. In addition, the Company is currently seeking
additional sources of capital to fund short term operations. Management believes these factors will contribute toward achieving
profitability. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern.
The
consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the
Company’s ability to continue as a going concern. These financial statements also do not include any adjustments relating
to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going concern.
DIGIPATH,
INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
3 – Fair Value of Financial Instruments
Under
FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation
framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements
and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50
details the disclosures that are required for items measured at fair value.
The
Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial
assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level
1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability
to access at the measurement date.
Level
2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability
(e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market
data by correlation or other means (market corroborated inputs).
Level
3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset
or liability.
DIGIPATH,
INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets
as of March 31, 2019 and September 30, 2018, respectively:
|
|
Fair Value Measurements at March 31, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
514,018
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
|
|
|
514,018
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable, net of discounts of $57,978
|
|
|
-
|
|
|
|
-
|
|
|
|
442,022
|
|
Total liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
442,022
|
|
|
|
$
|
514,018
|
|
|
$
|
-
|
|
|
$
|
(442,022
|
)
|
|
|
Fair Value Measurements at September 30, 2018
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
176,027
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
|
|
|
176,027
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
176,027
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The
fair value of our intellectual properties are deemed to approximate book value, and are considered Level 3 inputs as defined by
ASC Topic 820-10-35.
Level
3 liabilities consist of a total of $442,022 of convertible debentures, net of discounts of $57,978 as of March 31, 2019.
There
were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the six months ended March
31, 2019 or the year ended September 30, 2018.
Note
4 – Note Receivable
On
March 8, 2019 and February 15, 2019, we loaned Big Valley Analytical Labs, Inc. $25,000 and $20,000, respectively. The loans bear
interest at an annual rate of 15%, are evidenced by secured demand notes, and are secured by a lien on the borrower’s
assets. The principal was subsequently repaid in full on April 1, 2019.
On
December 28, 2018, we loaned Northwest Analytical Labs, Inc. $50,000. The loan bears interest at an annual rate of 10%, is evidenced
by a secured demand note, which is secured by a lien on the borrower’s assets.
Note
5 – Accounts Receivable
Accounts
receivable was $190,450 and $167,734 at March 31, 2019 and September 30, 2018, respectively, net of allowance for doubtful accounts
of $64,730 and $14,900 at March 31, 2019 and September 30, 2018, respectively.
DIGIPATH,
INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
6 – Fixed Assets
Fixed
assets consist of the following at March 31, 2019 and September 30, 2018:
|
|
March 31,
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Software
|
|
$
|
123,492
|
|
|
$
|
123,492
|
|
Office equipment
|
|
|
56,252
|
|
|
|
54,877
|
|
Furniture and fixtures
|
|
|
28,486
|
|
|
|
28,486
|
|
Lab equipment
|
|
|
1,110,930
|
|
|
|
1,110,930
|
|
Leasehold improvements
|
|
|
489,147
|
|
|
|
489,147
|
|
|
|
|
1,808,307
|
|
|
|
1,806,932
|
|
Less: accumulated depreciation
|
|
|
(978,595
|
)
|
|
|
(849,824
|
)
|
Total
|
|
$
|
829,712
|
|
|
$
|
957,108
|
|
Depreciation
and amortization expense totaled $128,771 and $141,696 for the six months ended March 31, 2019 and 2018, respectively.
Note
7 – Convertible Notes Payable
Convertible
notes payable consist of the following at March 31, 2019 and September 30, 2018, respectively:
|
|
March 31,
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
On November 8, 2018, the Company received proceeds of $350,000 on a senior secured convertible note that carries an 8% interest rate, which matures on December 31, 2020. The principal and interest are convertible into shares of common stock at the discretion of the note holder at a fixed conversion price of $0.14 per share. The Company’s obligations under this Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc. A total of $4,066 of interest was repaid during the six months ended March 31, 2019.
|
|
$
|
350,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
On November 5, 2018, the Company received proceeds of $150,000 on a senior secured convertible note that carries an 8% interest rate, which matures on December 31, 2020. The principal and interest are convertible into shares of common stock at the discretion of the note holder at a fixed conversion price of $0.14 per share. The Company’s obligations under this Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc.
|
|
|
150,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable
|
|
|
500,000
|
|
|
|
-
|
|
Less: unamortized debt discounts
|
|
|
(57,978
|
)
|
|
|
-
|
|
Convertible notes payable
|
|
$
|
442,022
|
|
|
$
|
-
|
|
In
addition, the Company recognized and measured the embedded beneficial conversion feature present in the convertible notes by allocating
a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the
feature was calculated on the commitment date using the effective conversion price of the convertible notes. This intrinsic value
is limited to the portion of the proceeds allocated to the convertible debt.
The
aforementioned accounting treatment resulted in a total debt discount equal to $70,964 during the six months ended March 31, 2019.
The discount is amortized on a straight-line basis from the dates of issuance until the earlier of the stated redemption
date of the debts, as noted above or the actual settlement date. During the six months ended March 31, 2019, the Company recorded
debt amortization expense in the amount of $12,986, attributed to the aforementioned debt discount.
All
of the convertible notes limit the maximum number of shares that can be owned by each note holder as a result of the conversions
to common stock to 4.99% of the Company’s issued and outstanding shares.
The
Company recorded interest expense pursuant to the stated interest rates on the convertible notes in the amount of $15,770 for
the six months ended March 31, 2019.
DIGIPATH,
INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Note
8 - Changes in Stockholders’ Equity
Convertible
Preferred Stock
The
Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001 per share, of which 6,000,000 have
been designated as Series A Convertible Preferred Stock (“Series A Preferred”), with the remaining 4,000,000 shares
available for designation from time to time by the Board as set forth below. As of March 31, 2019, there were 1,325,942 shares
of Series A Preferred issued and outstanding. The Board of Directors is authorized to determine any number of series into which
the undesignated shares of preferred stock may be divided and to determine the rights, preferences, privileges and restrictions
granted to any series of the preferred stock. Each share of Series A Preferred is currently convertible into five shares of common
stock.
The
conversion price is adjustable in the event of stock splits and other adjustments in the Company’s capitalization, and in
the event of certain negative actions undertaken by the Company. At the current conversion price, the 1,325,942 shares of Series
A Preferred outstanding at March 31, 2019 are convertible into 6,629,710 shares of the common stock of the Company. No holder
is permitted to convert its shares of Series A Preferred if such conversion would cause the holder to beneficially own more than
4.99% of the issued and outstanding common stock of the Company immediately after such conversion, unless waived by such holder
by providing at least sixty-five days’ notice.
Preferred
Stock Conversions
On
December 31, 2018, a total of 100,000 Series A Preferred shares were converted into 500,000 shares of common stock. The stock
was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Common
Stock
Common
stock consists of $0.001 par value, 90,000,000 shares authorized, of which 47,609,716 shares were issued and outstanding as of
March 31, 2019.
Common
Stock Sales
On
February 7, 2019, the Company sold 1,000,000 shares of its common stock in exchange for proceeds of $200,000.
On
February 1, 2019, the Company sold 250,000 shares of its common stock in exchange for proceeds of $50,000.
On
January 31, 2019, the Company sold 625,000 shares of its common stock in exchange for proceeds of $125,000.
On
January 24, 2019, the Company sold 1,250,000 shares of its common stock in exchange for proceeds of $250,000.
Common
Stock Issued for Services
On March 29, 2019, the Company issued 475,000
shares of common stock to the estate of our former CEO in exchange for the cancellation of 4,750,000 common stock options. The
aggregate fair value of the options exceeded the fair value of the common stock at issuance, therefore there was no additional
expense as a result of the modification of the equity awards.
On
March 25, 2019, the Company issued 29,268 shares of common stock to its President and CEO for services rendered pursuant to his
employment agreement. The aggregate fair value of the common stock was $6,000 based on the closing price of the Company’s
common stock on the date of grant, and was expensed over the requisite service period.
On
March 25, 2019, the Company issued 73,171 shares of common stock to its CFO for services rendered pursuant to his employment agreement.
The aggregate fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the
date of grant, and was expensed over the requisite service period.
On
March 25, 2019, a total of 50,000 shares of common stock were issued to a consultant that was engaged to assist the Company with
acquisition activities. The fair value of the common stock was $10,250 based on the closing price of the Company’s common
stock on the date of grant, and was expensed over the requisite service period.
On
February 25, 2019, a total of 50,000 shares of common stock were issued to a consultant that was engaged to assist the Company
with acquisition activities. The fair value of the common stock was $12,300 based on the closing price of the Company’s
common stock on the date of grant, and was expensed over the requisite service period.
DIGIPATH,
INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
On
January 25, 2019, a total of 50,000 shares of common stock were issued to a consultant that was engaged to assist the Company
with acquisition activities. The fair value of the common stock was $10,500 based on the closing price of the Company’s
common stock on the date of grant, and was expensed over the requisite service period.
On
December 25, 2018, the Company issued 46,261 shares of common stock to its President and CEO for services rendered pursuant to
his employment agreement. The aggregate fair value of the common stock was $6,000 based on the closing price of the Company’s
common stock on the date of grant, and was expensed over the requisite service period.
On
December 25, 2018, the Company issued 115,652 shares of common stock to its CFO for services rendered pursuant to his employment
agreement. The aggregate fair value of the common stock was $15,000 based on the closing price of the Company’s common stock
on the date of grant, and was expensed over the requisite service period.
On
December 25, 2018, a total of 150,000 shares of common stock were issued to three consultants that were engaged to assist the
Company with acquisition activities. The aggregate fair value of the common stock was $19,455 based on the closing price of the
Company’s common stock on the date of grant, and was expensed over the requisite service period.
On
November 25, 2018, a total of 150,000 shares of common stock were issued to three consultants that were engaged to assist the
Company with acquisition activities. The aggregate fair value of the common stock was $24,000 based on the closing price of the
Company’s common stock on the date of grant, and was expensed over the requisite service period.
On
October 30, 2018, the Company issued 400,000 shares of common stock to another consultant for business development services to
be performed from November 1, 2018 through April 30, 2019. The fair value of the common stock was $54,120 based on the closing
price of the Company’s common stock on the date of grant, and is being expensed over the requisite service period.
On
October 25, 2018, a total of 150,000 shares of common stock were issued to three consultants that were engaged to assist the Company
with acquisition activities. The aggregate fair value of the common stock was $23,250 based on the closing price of the Company’s
common stock on the date of grant, and was expensed over the requisite service period.
Amortization
of Stock-Based Compensation
A
total of $14,740 of stock-based compensation expense was recognized during the six months ended March 31, 2019 as a result of
the issuance of 200,000 shares of common stock to one of our directors, Bruce Raben, on September 12, 2018, as amortized over
the requisite service period. As of March 31, 2019, a total of $14,822 of unamortized expenses are expected to be expensed during
the remaining fiscal year ended September 30, 2019.
A
total of $88,794 of stock-based compensation expense was recognized from the amortization of options over their vesting period
during the six months ended March 31, 2019.
Note
9 – Common Stock Options
Stock
Incentive Plan
On
June 21, 2016, we amended and restated our 2012 Stock Incentive Plan (the “2012 Plan”), which was originally adopted
on March 5, 2012 and previously amended on May 20, 2014. As amended, the 2012 Plan provides for the issuance of up to 11,500,000
shares of common stock pursuant to the grant of options or other awards, including stock grants, to employees, officers or directors
of, and consultants to, the Company and its subsidiaries. Options granted under the 2012 Plan may either be intended to qualify
as incentive stock options under the Internal Revenue Code of 1986, or may be non-qualified options, and are exercisable over
periods not exceeding ten years from date of grant.
A
total of 5,105,000 options were outstanding as of March 31, 2019. During the six months ended March 31, 2019, options to purchase
an aggregate total of 27,500 shares of common stock at a weighted average exercise price of $0.26 per share expired.
DIGIPATH,
INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Options
Issued to Officers and Directors for Services
On January 7, 2019, we granted options to
purchase 500,000 shares of common stock as compensation for services to our Chief Science Officer. The options vest immediately
as to 125,000 shares and as to an additional 125,000 shares on each of April 7, 2019, July 7, 2019, and October 7, 2019, and are
exercisable for a ten-year period at an exercise price of $0.13 per share, based on the most recent closing stock price. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 107% and a call option value of $0.1019, was $50,934.
The options are being expensed over the vesting period, resulting in $15,485 of stock-based compensation expense during the
six months ended March 31, 2019. As of March 31, 2019, a total of $35,449 of unamortized expenses are expected to be expensed
over the vesting period.
On January 7, 2019, we granted options
to purchase 500,000 shares of common stock as compensation for services to Bruce Raben, one of our directors.
The options vest immediately as to 125,000 shares and as to an additional 125,000 shares on each of April 7, 2019, July 7,
2019, and October 7, 2019, and are exercisable for a ten-year period at an exercise price of $0.13 per share. The estimated
value using the Black-Scholes Pricing Model, based on a volatility rate of 107% and a call option value of $0.1019, was
$50,934. The options are being expensed over the vesting period, resulting in $15,485 of stock-based compensation expense
during the six months ended March 31, 2019. As of March 31, 2019, a total of $35,449 of unamortized expenses are expected to
be expensed over the vesting period.
Options Exchanged for Common Stock
On March 29, 2019, the Company issued 475,000
shares of common stock to the estate of our former CEO in exchange for the cancellation of 4,750,000 common stock options. The
aggregate fair value of the options exceeded the fair value of the common stock at issuance, therefore there was no additional
expense as a result of the modification of the equity awards.
Re-Priced
Options Issued to Officers and Directors for Services
On
January 7, 2019, the board amended the following options to reduce their exercise price to $0.13 per share, based on the most
recent closing stock price. All other terms were unchanged. The modification of these equity awards resulted in an additional
expense of $36,764.
On December 25, 2018, we granted fully vested
options to purchase an aggregate of 345,000 shares of common stock as compensation for services to a total of fourteen of our
employees. The options are exercisable over a ten-year period at an exercise price of $0.13 per share. The estimated value using
the Black-Scholes Pricing Model, based on a volatility rate of 107% and a call option value of $0.1017, was $35,078. The options
are being expensed over the vesting period, resulting in $9,226 of stock-based compensation expense during the six months
ended March 31, 2019. As of March 31, 2019, a total of $25,852 of unamortized expenses are expected to be expensed over
the vesting period.