Stockholders' Equity | 12 Months Ended |
Sep. 30, 2014 |
Equity [Abstract] | ' |
Stockholders' Equity | ' |
NOTE 9 – STOCKHOLDERS’ EQUITY |
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Common Stock - Common stock consists of $0.001 par value, 900,000,000 shares authorized, 58,756,400 shares issued and outstanding as of September 30, 2014. Effective as of April 4, 2014, the authorized shares of the Registrant’s common stock was increased from 50,000,000 to 900,000,000. |
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In October 2010, the Company issued 5,000,000 shares of its common stock to the Company’s President, for services performed. In January 2011, the Company issued 10,000 shares of its common stock for services. On March 23, 2011, the Company completed a private placement offering to certain investors (“Investors”) pursuant to which the Company sold an aggregate of 286,750 shares of the Company’s common stock resulting in gross proceeds of $28,675 to the Company. From July 1, 2011 to September 30, 2014, the Company issued 209,650 shares of its common stock for services received by an unrelated party. |
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On March 5, 2012, the Company and Steven Barbee entered into a Restricted Stock Award Agreement under which the Company issued to Mr. Barbee 2,500,000 shares of DigiPath, Inc. restricted common stock (“Restricted Stock”) for $0.10 per share. Fifty percent of the Restricted Stock vests on February 14, 2013 and fifty percent of the Restricted Stock vests on February 14, 2014. In the event of Mr. Barbee’s termination the Restricted Stock shall be forfeited and reacquired by the Company for $0.10 per share. The Company loaned Mr. Barbee $250,000 to pay for the Restricted Stock through a recourse loan agreement. The loan has an interest rate of 5% and is secured against the Restricted Stock and all of Mr. Barbee’s assets. The note expires on March 4, 2016. This loan was transferred to DigiPath, Corp. on March 24, 2014 and offsets the Company’s additional paid in capital. |
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On March 5, 2012, Eric Stoppenhagen, the Company’s president, cancelled his ownership of 2,500,000 shares of DigiPath, Inc. common stock. |
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On May 14, 2014, the Company completed a private placement offering to certain accredited investors pursuant to which the Company sold an aggregate of 44,200,000 shares of the Company’s common stock resulting in gross proceeds of $2,210,000 to the Company. |
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For the year ended September 30, 2014, the Company approved the issuance of 15,000,000 million shares of the Company’s common stock. Of these 1.5 million shares have vested and issued and 13.5 million shares have not vested and not issued. The Company recorded a stock compensation expense of $67,500 associated with these issuances for the vesting portion and $25,000 as issuance to the service providers. |
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During the quarter ended June 30, 2014, the Company issued 10,000 shares associated with the exercise of 10,000 options at $0.33 and received $3,300 cash. |
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During the year ended September 30, 2014, the Company approved the issuance of 1,055,000 million shares of the Company’s common stock. The Company recorded a stock compensation expense of $92,788 associated with these issuances for the vesting portion plus a compensation expense of $101,188 for the vesting of prior period awards. |
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For the quarter ended September 30, 2014, a total of 150,000 shares of preferred stock were converted into 7,500,000 shares of common stock. |
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Preferred Stock - The articles of incorporation of the Company authorize 10,000,000 shares of preferred stock with a par value of $0.001 per share. As of September 30, 2014, there are 5,850,000 shares of the preferred stock issued and outstanding. The Board of Directors is authorized to determine any number of series into which shares of preferred stock may be divided and to determine the rights, preferences, privileges and restrictions granted to any series of the preferred stock. Effective as of April 4, 2014, the designations, rights and preferences of the preferred shares changed to blank check preferred. |
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On April 9, 2014, the Registrant entered into various Series A Convertible Preferred Stock Purchase Agreements with certain accredited investors pursuant to which the Company agreed to issue 6,000,000 shares, in the aggregate, of a newly formed Series A Convertible Preferred Stock (the “Series A Preferred”) in exchange for $6,000,000, in the aggregate, which consisted of money paid by investors from subscription and advances made to the Company by such Investors prior to December 31, 2013 (each agreement, a “Securities Purchase Agreement” and collectively, the “Securities Purchase Agreements”). All the Securities Purchase Agreements have the same terms, whereby the shares of Series A Preferred are convertible after years from the date of issue based on a conversion formula equal to the price per share ($1.00) divided by a conversion price equal to the lesser of (A) $0.02 and (B) seventy percent (70%) of the average of the three (3) lowest daily volume weighted average prices (“VWAPs”) occurring during the twenty (20) consecutive trading days immediately preceding the applicable conversion date on which the Holder elects to convert any shares of Series A Preferred Stock. The conversion price is further 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 a conversion price equal to $0.02 per share, the Series A Preferred are convertible into 300,000,000 shares of the common stock of the Company. No holder is permitted to convert its shares of Series A Preferred Stock 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. |
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The additional terms of the Series A Preferred include the following: |
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| ● | The shares of Series A Preferred are entitled to dividends when, as and if declared by the Board as to the shares of the common stock of the Company, but only with respect to the shares under the beneficial ownership limitation described above. | | | | | | | | | | | | | | | | | | | | |
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| ● | Upon the liquidation or dissolution of the Company, or any merger or sale of all or substantially all of the assets, the shares of Series A Preferred are entitled to receive, prior to any distribution to the holders of common stock, 100% of the purchase price plus all accrued but unpaid dividends. | | | | | | | | | | | | | | | | | | | | |
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| ● | The Series A Preferred plus all declared but unpaid dividends thereon automatically will be converted into common stock, at the then applicable conversion rate, upon the affirmative vote of 50% of the outstanding shares of Series A Preferred. | | | | | | | | | | | | | | | | | | | | |
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| ● | Each share of Series A Preferred will carry a number of votes equal to the number of shares of common stock then issuable upon its conversion into common stock, e.g., only with respect to the shares under the beneficial ownership limitation described above. The Series A Preferred generally will vote together with the common stock and not as a separate class, except as provided below. | | | | | | | | | | | | | | | | | | | | |
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| ● | Consent of the holders of the outstanding Series A Preferred will be required in order for the Company to: (i) amend or change the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the Series A Preferred; (ii) authorize, create or issue shares of any class of stock having rights, preferences, privileges or powers superior to the Series A Preferred; (iii) reclassify any outstanding shares into shares having rights, preferences, privileges or powers superior to the Series A Preferred; or (iv) amend the Company’s Articles of Incorporation or Bylaws in a manner that adversely affects the rights of the Series A Preferred. | | | | | | | | | | | | | | | | | | | | |
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| ● | Holders of Series A Preferred will be entitled to unlimited “piggyback” registration rights on registrations by the Company, subject to pro rata cutback at any underwriter’s discretion. The registration rights may be transferred to a transferee who acquires all of the Series A Preferred. | | | | | | | | | | | | | | | | | | | | |
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Stock Incentive Plan |
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On March 5, 2012, the action to adopt our 2012 Stock Incentive Plan (the “2012 Plan”) was approved by written consent of holders representing approximately 91% of the outstanding shares of our common stock. On March 5, 2012, our board of directors approved the 2012 Plan. |
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The approval of the 2012 Plan required such board approval and the affirmative vote of a majority of our outstanding shares of common stock. Such requirements have been met so no vote or further action of our stockholders is required to approve the adoption of the 2012 Plan. Our board of directors approved the 2012 Plan to ensure that we have adequate ways in which to provide stock based compensation to our directors, officers, employees and consultants. Our board of directors believes that the ability to grant stock-based compensation, such as stock options and stock grants, is important to our future success. The grant of such stock-based compensation can motivate high levels of performance and provide an effective means of recognizing employee and consultant contributions to our success. In addition, stock-based compensation can be valuable in recruiting and retaining highly qualified technical and other key personnel who are in great demand, as well as rewarding and providing incentives to our current employees and consultants. |
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Because awards under the 2012 Plan are discretionary, benefits or amounts that will hereinafter be received by or allocated to our chief executive officer, our named executive officers, our current executive officers as a group, our non-executive directors as a group, and our employees who are not executive officers, are not presently determinable. |
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The principal terms and features of the 2012 Plan are summarized below. The following is a summary description of the salient terms, conditions and features of the 2012 Plan and is qualified by the text of the plan. |
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General; Types of Awards; Number of Shares |
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The 2012 Plan provides for the grant of options to purchase shares of common stock, restricted stock, stock appreciation rights (“SARs”) and restricted stock units (rights to receive, in cash or stock, the market value of one share of our commons stock). Incentive stock options (“ISOs”) may be granted only to employees. Nonstatutory stock options and other stock-based awards may be granted to officers, employees, non-employee directors and consultants. A total of 5,000,000 shares of our common stock are reserved for issuance upon exercise of awards granted under the 2012 Plan. The 2012 Plan will terminate as to grants of awards after 10 years from the effective date, unless it is terminated earlier by our board of directors. |
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The 2012 Plan will be administered by our board of directors or a committee of our board of directors (the “Administrator”) as provided in the 2012 Plan. The Administrator will have the authority to select the eligible participants to whom awards will be granted, to determine the types of awards and the number of shares covered and to set the terms, conditions and provisions of such awards, to cancel or suspend awards under certain conditions, and to accelerate the exercisability of awards. The Administrator will be authorized to interpret the 2012 Plan, to establish, amend, and rescind any rules and regulations relating to the 2012 Plan, to determine the terms of agreements entered into with recipients under the 2012 Plan, and to make all other determinations that may be necessary or advisable for the administration of the 2012 Plan. |
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Options and other awards may be granted under the 2012 Plan to directors, officers, employees and consultants of our company and any of our subsidiaries, provided that the services of such consultants are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for our securities. At the date of this prospectus, all of our officers, directors and employees would have been eligible to receive awards under the 2012 Plan. |
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The exercise price per share of our common stock purchasable upon exercise of any stock option or SAR will be determined by the Administrator, but cannot in any event be less than 100% of the fair market value of our common stock on the date the award is granted. The Administrator will determine the term of each stock option or SAR (subject to a maximum term of 10 years) and each option or SAR will be exercisable pursuant to a vesting schedule determined by the Administrator. The grants and the terms of ISOs will be restricted to the extent required for qualification as ISOs by the U.S. Internal Revenue Code of 1986, as amended. Subject to approval of the Administrator, options or SARs may be exercised by payment of the exercise price in cash, shares of common stock or pursuant to a “cashless exercise” through a broker-dealer under an arrangement approved by the Administrator. The Administrator may require the grantee to pay to us any applicable withholding taxes that we are required to withhold with respect to the grant or exercise of any option. The withholding tax may be paid in cash or, subject to applicable law, the Administrator may permit the grantee to satisfy these obligations by the withholding or delivery of shares of our common stock. We may withhold from any shares of our common stock that may be issued pursuant to an option or from any cash amounts otherwise due from us to the recipient of the option an amount equal to such taxes. |
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Restricted shares may be sold or awarded for consideration determined by the Administrator, including cash, full-recourse promissory notes, as well as past and future services. Any award of restricted shares will be subject to a vesting schedule determined by the Administrator. Any restricted shares that are not vested will be subject to rights of repurchase, rights of first refusal or other restrictions as determined by the Administrator. In general, holders of restricted shares will have the same voting, dividend and other rights as our other stockholders. |
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In the event of any change affecting shares of our common stock by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distribution to stockholders other than cash dividends, the Administrator will make substitutions or adjustments in the aggregate number of shares that may be distributed under the 2012 Plan, and in the number and types of shares subject to, and the exercise prices under, outstanding awards granted under the 2012 Plan, in accordance with Section 10 and other provisions of the 2012 Plan. |
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Unless otherwise permitted by the 2012 Plan and approved by the Administrator as permitted by the 2012 Plan, no award will be assignable or otherwise transferable by the grantee other than by will or the laws of descent and distribution and, during the grantee’s lifetime, an award may be exercised only by the grantee. |
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Our board of directors may amend the 2012 Plan in any and all respects without stockholder approval, except as such stockholder approval may be required under applicable law or pursuant to the listing requirements of any national market system or securities exchange on which our equity securities may be listed or quoted. |
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Unless sooner terminated by our board of directors, the 2012 Plan will terminate as to further grants of awards on March 5, 2022. Awards under the 2012 Plan will be made by the Administrator. The Administrator does not currently have plans to grant stock options or other awards to any individual or group of individuals under the 2012 Plan. |
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On May 30, 2014, the Registrant amended its 2012 Stock Incentive Plan (“Amendment”) to increase the maximum aggregate number of Shares which may be issued pursuant to awards granted under the plan is Thirty Million (30,000,000) shares. |
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Non-Plan Options |
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During the year ended September 30, 2014, the Company issued the following non-plan options: 15,300 options with an exercise price of $0.33 per share and recorded an expense associated with these options of $10,377; 3,000,000 options with and exercise price of $0.02 vesting quarterly over a period of one year. The value the Company associated with these options was $22,502; and 1,000,000 options with an exercise price of $0.05 vesting quarterly over a period of one year. The value the Company associated with these options was $31,794. |
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The weighted-average grant date fair value of options granted during the years ended September 30, 2014 and 2013 was $0.016 and $0.33, respectively. The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. For purposes of determining the expected life of the option, an average of the estimated holding period is used. The risk-free rate for periods within the contractual life of the options is based on the U. S. Treasury yield in effect at the time of the grant. |
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| | Year ended September 30, | | | | | | | | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | | | | | | | |
Expected volatility | | | 103.82 | % | | | 68.16 | % | | | | | | | | | | | | | | |
Expected dividends | | | — | | | | — | | | | | | | | | | | | | | | |
Expected average term (in years) | | | 3 | | | | 3 | | | | | | | | | | | | | | | |
Risk free rate - average | | | 0.81 | % | | | 0.79 | % | | | | | | | | | | | | | | |
Forfeiture rate | | | 0 | % | | | 0 | % | | | | | | | | | | | | | | |
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A summary of option activity as of September 30, 2014 and changes during the two years then ended is presented below: |
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| | Shares | | | Weighted-Average | | | Weighted-Average | | | Aggregate | | | | | | | |
Exercise Price | Remaining | Intrinsic | | | | | | |
| Contractual | Value | | | | | | |
| Terms (Years) | | | | | | | |
Outstanding at October 1, 2012 | | | - | | | $ | - | | | | | | | | | | | | | | | |
Granted | | | 62,318 | | | $ | 0.33 | | | | | | | | | | | | | | | |
Exercised | | | - | | | $ | - | | | | | | | | | | | | | | | |
Forfeited or expired | | | - | | | $ | - | | | | | | | | | | | | | | | |
Outstanding at September 30, 2013 | | | 62,318 | | | $ | 0.33 | | | | | | | | | | | | | | | |
Granted | | | 4,015,300 | | | $ | 0.03 | | | | | | | | | | | | | | | |
Exercised | | | (10,000 | ) | | $ | 0.33 | | | | | | | | | | | | | | | |
Forfeited or expired | | | - | | | $ | - | | | | | | | | | | | | | | | |
Outstanding at September 30, 2014 | | | 4,067,618 | | | $ | 0.03 | | | | 2.5 | | | $ | 122,029 | | | | | | | |
Exercisable at September 30, 2014 | | | 1,775,951 | | | $ | 0.04 | | | | 2.5 | | | $ | 35,519 | | | | | | | |
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As of September 30, 2014, the aggregate intrinsic values of $122,029 and $35,519 were calculated as the difference between the market price and the exercise price of the Company’s stock, which was $0.06 as of September 30, 2014. |
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A summary of the status of the Company’s nonvested shares granted under the Company’s stock option plan as of September 30, 2014 and changes during the year then ended is presented below: |
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| | | | | Weighted- | | | | | | | | | | | | | | | |
| | | | | Average | | | | | | | | | | | | | | | |
| | | | | Grant Date | | | | | | | | | | | | | | | |
| | Shares | | | Fair Value | | | | | | | | | | | | | | | |
Nonvested at September 30, 2013 | | | - | | | $ | - | | | | | | | | | | | | | | | |
Granted | | | 4,015,300 | | | $ | 0.03 | | | | | | | | | | | | | | | |
Vested | | | (1,723,633 | ) | | $ | 0.03 | | | | | | | | | | | | | | | |
Forfeited | | | - | | | $ | - | | | | | | | | | | | | | | | |
Nonvested at September 30, 2014 | | | 2,291,667 | | | $ | 0.04 | | | | | | | | | | | | | | | |
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Additional information regarding options outstanding as of September 30, 2014 is as follows: |
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| | | Options Outstanding at September 30, 2014 | | | Options Exercisable at | |
30-Sep-14 |
Range of Exercise Price | | | Number of | | | Weighted | | | Weighted | | | Number of | | | Weighted | |
Options | Average | Average | Shares | Average |
Outstanding | Remaining | Exercise Price | Exercisable | Exercise Price |
| Contractual | | | |
| Life (years) | | | |
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$ | 0.02 | | | | 3,000,000 | | | | 2.5 | | | $ | 0.02 | | | | 1,375,000 | | | $ | 0.02 | |
$ | 0.05 | | | | 1,000,000 | | | | 2.5 | | | $ | 0.05 | | | | 333,333 | | | $ | 0.05 | |
$ | 0.33 | | | | 67,618 | | | | 1.5 | | | $ | 0.33 | | | | 67,618 | | | $ | 0.33 | |
| | | | | 4,067,618 | | | | | | | | | | | | 269,083 | | | | | |
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Subsidiary Warrants |
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On April 19, 2014, DigiPath, Corp., a subsidiary of DigiPath, Inc. which is dedicated to digital microscopy granted a five year Common Stock Purchase (“Warrants”) to both Steven Barbee and Eric Stoppenhagen (the “Consultant”). The Warrant will entitle the Consultant to purchase 3,000,000 shares of common stock at an exercise price of $0.10. No equity or debt shall be issued in DigiPath, Corp. or its subsidiaries without the expressed written consent of Consultant, which shall not be unreasonably withheld. To the extent the issuance could be dilutive the Consultant shall be made whole. The Warrants shall vest immediately and are considered to be earned in full. Warrants shall have a cashless provision. |
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In the event that there is ever a Change in Control, and at such time the DigiPath, Corp’s value exceeds $1,600,000, as measured by the fair market value of the greater of DigiPath, Corp or its assets, Consultant shall be paid $300,000. Change in Control of DigiPath, Corp shall be deemed to have occurred if: (i) any “Person,” as such term is used in Section 13(d) and 14(d) of the Exchange Act (other than DigiPath, Corp, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the stockholders of DigiPath, Corp in substantially the same proportions as their ownership of stock of the Company), is or becomes the “beneficial owner’ (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of DigiPath, Corp’s then outstanding securities; (ii) during any 12-month period (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the company to effect a transaction described in sub clauses (i), (iii) or (iv) of this Section 4.3) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least 66 2/3 % of the members of the Board then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (iii) the DigiPath, Corp’s stockholders approve a merger or consolidation of DigiPath, Corp with any other corporation, other than: (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (B) a merger or consolidation effected to implement a recapitalization of DigiPath, Corp (or similar transaction) in which no Person acquires more than 50% of the combined voting power of DigiPath, Corp’s then outstanding securities; or (iv) the stockholders of DigiPath, Corp approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by DigiPath, Corp of all or substantially all of DigiPath, Corp’s assets. |
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Mr. Stoppenhagen’s Warrants shall not be able to be converted into more than 4.99% of the Company’s common stock without giving a 65 days’ notice to void such provision. |
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The Company recorded a total of total of $343,533 expense associated with warrants and recorded as a non-controlling interest because the warrants are issued by the subsidiary. |