10. Stockholders' Equity | 12 Months Ended |
Dec. 31, 2013 |
Equity [Abstract] | ' |
10. Stockholders' Equity | ' |
Authorized Capital |
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The Company has 500,000,000 authorized shares of Common Stock at $0.0001 par value and 100,000,000 authorized shares of Preferred Stock at a par value of $0.0001. |
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On October 1, 2012, the Company filed a certificate of designation with the Secretary of State of Nevada to designate 5,000 shares of Series B Non-convertible Preferred Stock, at $0.0001 par value per share. The Series B shares do not include any voting rights and allow for monthly dividends in an amount equal to the sum of 1) 10% of the amount of gross sales in excess of $1 million collected in the ordinary course of business, not to exceed $150,000, and 2) 15% of the amount of gross sales in excess of $2.5 million collected in the ordinary course of business. |
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On October 7, 2012, the Company filed a certificate of designation with the Secretary of State of Nevada to designate 1,000,000 shares of Series C Convertible Preferred Stock, at $0.0001 par value per share. The Series C shares were convertible into shares of Common Stock by the quotient of 1 divided by the product of 0.80 multiplied by the market price of the Company’s Common Stock at the date of conversion. The Series C shares also included voting rights of 25 votes for every share of Series C Preferred Stock and were entitled to dividends at the same time any dividend was paid or declared on any shares of the Company’s Common Stock. |
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Preferred Stock |
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During the year ended December 31, 2012, the Company issued 5,000 shares of Series B Preferred Stock to executives as compensation. The shares were valued at par totaling $1 and charged to operations. |
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During the year ended December 31, 2012, the Series B Preferred shareholders agreed to limit their dividend for 2012 to a total of $50,000. The dividend was paid on December 6, 2012. If the dividend had not been limited, the Series B shareholders would have received $281,430. During the year ended December 31, 2013, the Series B preferred shareholders earned dividends totaling $2,601,298, of which $360,726 was due and payable at December 31, 2013. |
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During the year ended December 31, 2012, the Company issued 1,000,000 shares of Series C Preferred Stock in exchange for $926,675 of repurchase agreements and cancelled 16,580,575 shares of treasury stock. Under the terms of the certificate of designation, the 1,000,000 shares of Series C preferred shares were mandatorily converted into 203,233 shares of the Company’s common stock on December 31, 2013. |
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Common Stock |
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During the year ended December 31, 2011, the Company offered promissory notes in the total amount of $1,484,475 to a number of shareholders in exchange for retiring a total of 27,114,175 shares of common stock. Some of these shares had been returned and were listed as treasury stock at December 31, 2011. The promissory notes were recorded as other liabilities on the balance sheet. As the notes were paid off, the associated treasury stock was cancelled. |
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During the year ended December 31, 2011, the Company paid a total of $172,600 on the promissory notes and cancelled 2,300,500 shares of the treasury stock at a value of $150,100. |
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During the year ended December 31, 2012, the Company paid a total of $385,200 on the promissory notes and cancelled 8,233,100 shares of treasury stock at a value of $407,700. Also during the year ended December 31, 2012, the Company exchanged the remaining $926,675 of the promissory notes for 1,000,000 shares of Series C preferred stock and cancelled 16,580,575 shares of the treasury stock at a value of $926,675. |
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During the year ended December 31, 2012, the Company issued 80,000 shares of its restricted Common Stock for corporate advisory and investment banking services in connection with an additional funding at a value of the services received of $200,000. Also during the same period, the Company repurchased and cancelled 40,000 shares of the restricted Common Stock from the lender for a total of $100,000. |
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During the year ended December 31, 2012, the Company issued 20,128 shares of its restricted Common Stock in conversion of a note payable of $50,317. |
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During the year ended December 31, 2012, the Company issued 22,500 shares of its restricted Common Stock for consulting services at a value of $225. |
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During the year ended December 31, 2012, the Company issued 23,500,000 shares of its restricted Common Stock for compensation to executives at a value of $235,000. |
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During the year ended December 31, 2013, the Company issued Units consisting of a total of 46,400 shares of its restricted Common Stock and warrants to purchase an additional 46,400 shares of restricted Common Stock at an exercise price of $2.50 to nine investors for $116,000 cash ($2.50 per unit) in private placements. |
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During the year ended December 31, 2013, the Company issued 68,000 shares of its restricted Common Stock to two investors for $170,000 cash ($2.50 per share) in private placements. |
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During the year ended December 31, 2013, the Company repurchased the remaining 40,000 shares of its Common Stock from the Lender for $100,000 and cancelled the shares. |
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During the year ended December 31, 2013, the Company issued 25,000 shares of its restricted common stock to an employee in lieu of cash compensation. The shares were valued at $2.50 per share, based on the price of shares sold to investors, for a total of $62,500. |
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During the year ended December 31, 2013, the Company issued an aggregate of 160,000 shares of its restricted Common Stock to the former shareholders of its subsidiary, Medical Billing Choices, Inc. (“MBC”) in accordance with an amendment to the Agreement dated August 22, 2011, pursuant to which the Company had acquired MBC. See Note 13 – Business Combinations. The shares were valued at $2.50 per share, based on the price of shares sold to investors, for a total of $400,000. |
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During the year ended December 31, 2013, pursuant to the terms of the certificate of designation, the Company issued 203,233 shares of its restricted Common Stock in the mandatory conversion of the 1,000,000 shares of its Series C preferred stock. |
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2013 Equity Plan |
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On September 25, 2013, the Company’s board of directors approved and adopted the Medytox Solutions, Inc. 2013 Incentive Compensation Plan (the “2013 Plan”). The 2013 Plan was approved by a majority of stockholders of the Company on November 22, 2013. The 2013 Plan provides for the grant of shares of common stock, options, performance shares, performance units, restricted stock, stock appreciation rights and other awards. No awards of any kind under the 2013 Plan have been granted as of December 31, 2013. |
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Stock Options |
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The following summarizes option activity for the years ended December 31, 2013 and 2012: |
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| | | | | | | | | | | Weighted | | | | | | | | | | | | | | | |
| | Common Stock Options Outstanding | | | average | | | | | | | | | | | | | | | |
| | Employees and | | | | | | | | | exercise | | | | | | | | | | | | | | | |
| | Directors | | | Non-employees | | | Total | | | price | | | | | | | | | | | | | | | |
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Outstanding at December 31, 2011 | | | – | | | | 400,000 | | | | 400,000 | | | | 4.5 | | | | | | | | | | | | | | | |
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Options granted | | | 19,300,000 | | | | 3,020,000 | | | | 22,320,000 | | | $ | 5.66 | | | | | | | | | | | | | | | |
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Options exercised | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | |
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Options cancelled or expired | | | (1,000,000 | ) | | | (400,000 | ) | | | (1,400,000 | ) | | | 3.43 | | | | | | | | | | | | | | | |
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Outstanding at December 31, 2012 | | | 18,300,000 | | | | 3,020,000 | | | | 21,320,000 | | | | 5.79 | | | | | | | | | | | | | | | |
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Options granted | | | 1,850,000 | | | | – | | | | 1,850,000 | | | | 3.24 | | | | | | | | | | | | | | | |
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Options exercised | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | |
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Options cancelled or expired | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | |
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Balance at December 31, 2013 | | | 20,150,000 | | | | 3,020,000 | | | | 23,170,000 | | | $ | 5.33 | | | | | | | | | | | | | | | |
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The following table summarizes information with respect to stock options outstanding and exercisable by employees and directors at December 31, 2013: |
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| | | | Options outstanding | | | Options vested and exercisable | |
| | | | | | | | Weighted | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | average | | | Weighted | | | | | | | | | | | Weighted | | | | | |
| | | | | | | | remaining | | | average | | | Aggregate | | | | | | | average | | | Aggregate | |
| | | | Number | | | contractual | | | exercise | | | intrinsic | | | | Number | | | exercise | | | intrinsic | |
Exercise price | | | outstanding | | | life (years) | | | price | | | value | | | | vested | | | price | | | value | |
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$ | 2.5 | | | | 7,550,000 | | | | 3.66 | | | $ | 2.5 | | | $ | – | | | | 7,450,000 | | | $ | 2.5 | | | $ | – | |
$ | 5 | | | | 6,600,000 | | | | 3.97 | | | $ | 5 | | | | – | | | | 6,500,000 | | | $ | 5 | | | | – | |
$ | 10 | | | | 6,000,000 | | | | 9.01 | | | $ | 10 | | | | – | | | | 6,000,000 | | | $ | 10 | | | | – | |
| | | | | 20,150,000 | | | | | | | $ | 5.55 | | | $ | – | | | | 19,950,000 | | | $ | 5.57 | | | $ | – | |
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During the year ended December 31, 2012, the Company issued 19,300,000 options to employees with a grant date fair value of $0.00 as there was no market value for the stock. 1,000,000 options were cancelled during the year ended December 31, 2012. All of the options granted were fully vested upon their grant. Stock option expense for employees was $0 for the year ended December 31, 2012. |
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The Company estimated the fair value of employee stock options using the Black-Scholes Option Pricing Model. The fair value of employee stock options is expensed upon vesting of the awards. The fair value of employee stock options was estimated using the following assumptions: |
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Stock price | $0.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected term | 1 to 5 years | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected volatility | 29 to 30% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk-free interest rate | 0.25 to 0.72% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dividend yield | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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During the year ended December 31, 2013, the Company issued options to purchase a total of 600,000 shares of the Company’s common stock to two directors. These options have contractual lives of four years and were valued at an average grant date fair value of $0.20 per option, or $120,000, using the Black-Scholes Option Pricing Model with the following assumptions: |
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Stock price | $2.50 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contractual term | 4 years | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected volatility | 26.48% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk free interest rate | 0.54% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dividend yield | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The stock price was based on the price of shares sold to investors and volatility was based on comparable volatility of other companies since the Company had no significant historical volatility. Vested amount of the options of $80,000 was expensed as stock-based compensation for the year ended December 31, 2013. As of December 31, 2013, there was unrecognized compensation costs of $40,000 related to these stock options. The Company expects to recognize those costs over a weighted average period of .55 years as of December 31, 2013. Future option grants will increase the amount of compensation expense to be recorded in these periods. |
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During the year ended December 31, 2013, the Company issued options to purchase a total of 1,250,000 shares of the Company’s common stock to an employee. These options have contractual lives of three to five years and were valued at an average grant date fair value of $0.30 per option, or $372,500, using the Black-Scholes Option Pricing Model with the following assumptions: |
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Stock price | $2.50 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contractual term | 3 to 5 years | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected volatility | 29.50% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk free interest rate | 0.32% to 0.47% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dividend yield | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The stock price was based on the price of shares sold to investors and volatility was based on comparable volatility of other companies since the Company had no significant historical volatility. All of the options were fully vested upon their grant and the fair value of the options of $372,500 was expensed as stock-based compensation for the year ended December 31, 2013. |
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The following table summarizes information with respect to stock options outstanding and exercisable by non-employees at December 31, 2013: |
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| | | | Options outstanding | | | Options vested and exercisable | |
| | | | | | | | Weighted | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | average | | | Weighted | | | | | | | | | | | Weighted | | | | | |
| | | | | | | | remaining | | | average | | | Aggregate | | | | | | | average | | | Aggregate | |
| | | | Number | | | contractual | | | exercise | | | intrinsic | | | | Number | | | exercise | | | intrinsic | |
Exercise price | | | outstanding | | | life (years) | | | price | | | value | | | | vested | | | price | | | value | |
$ | 2.5 | | | | 1,020,000 | | | | 3.94 | | | $ | 2.5 | | | $ | – | | | | 1,020,000 | | | $ | 2.5 | | | $ | – | |
$ | 5 | | | | 1,000,000 | | | | 4 | | | $ | 5 | | | | – | | | | 1,000,000 | | | $ | 5 | | | | – | |
$ | 10 | | | | 1,000,000 | | | | 9.01 | | | $ | 10 | | | | – | | | | 1,000,000 | | | $ | 10 | | | | – | |
| | | | | 3,020,000 | | | | | | | $ | 5.81 | | | $ | – | | | | 3,020,000 | | | $ | 5.81 | | | $ | – | |
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During the year ended December 31, 2012, the Company issued 3,020,000 options to non-employees with a grant date fair value of $0.00 as there was no market value for the stock. 400,000 options were cancelled during the year ended December 31, 2012. All of the options granted were fully vested upon their grant. Stock option expense for non-employees was $0 and $0 for the years ended December 31, 2013 and 2012. |
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The Company estimated the fair value of non-employee stock options using the Black-Scholes Option Pricing Model. The fair value of non-employee stock options is expensed upon vesting of the awards. The fair value of non-employee stock options was estimated using the following assumptions: |
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Stock price | $0.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected term | 2 to 10 years | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected volatility | 29 - 30% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk-free interest rate | 0.25 – 1.78%% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dividend yield | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Warrants |
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The following table summarizes warrant transactions for the year ended December 31, 2013: |
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| | | | | | | | Weighted | | | | | | | | | | | | | | | | | | |
| | | | | Weighted | | | average | | | | | | | | | | | | | | | | | | |
| | | | | average | | | remaining | | | Aggregate | | | | | | | | | | | | | | | |
| | Number | | | exercise | | | contractual | | | intrinsic | | | | | | | | | | | | | | | |
| | of warrants | | | price | | | term (years) | | | value | | | | | | | | | | | | | | | |
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Outstanding at December 31, 2012 | | | – | | | $ | – | | | | | | | $ | – | | | | | | | | | | | | | | | |
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Granted in 2013 | | | 346,400 | | | $ | 3.22 | | | | | | | | | | | | | | | | | | | | | | | |
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Outstanding at December 31, 2013 | | | 346,400 | | | $ | 3.22 | | | | 0.94 | | | $ | – | | | | | | | | | | | | | | | |
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Exercisable at December 31, 2013 | | | 346,400 | | | $ | 3.22 | | | | 0.94 | | | $ | – | | | | | | | | | | | | | | | |
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Weighted Average Grant Date Fair Value | | | | | | $ | 0.25 | | | | | | | | | | | | | | | | | | | | | | | |
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During the year ended December 31, 2013, the Company issued warrants to purchase a total of 46,400 shares of the Company’s common stock in conjunction with sales of Units. These warrants have contractual lives of one year and were valued at a grant date fair value of $-0- per warrant using the Black-Scholes Option Pricing Model with the following assumptions: |
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Stock price | $0.01 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contractual term | 1 year | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected volatility | 29.13% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk free interest rate | 0.15% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dividend yield | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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During the year ended December 31, 2013, the Company issued warrants to purchase a total of 300,000 shares of the Company’s common stock to two individuals in connection with obligations entered into by the Company’s subsidiaries. These warrants have contractual lives of two years and were valued at an average grant date fair value of $0.283 per warrant, or $85,000, using the Black-Scholes Option Pricing Model with the following assumptions: |
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Stock price | $2.50 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contractual term | 2 years | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected volatility | 29.13% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk free interest rate | 0.27% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dividend yield | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The stock price was based on the price of shares sold to investors and volatility was based on comparable volatility of other companies since the Company had no significant historical volatility. The $85,000 was expensed as stock-based consulting fees for the year ended December 31, 2013. |