Quarterly report pursuant to Section 13 or 15(d)

Equity

v3.10.0.1
Equity
9 Months Ended
Sep. 30, 2018
Stockholders' Equity Note [Abstract]  
Equity

3. Equity

 

Authorized and Outstanding Capital Stock

 

The Company has authorized 100,000,000 shares of common stock, par value $0.001, of which 44,131,842 are currently issued and outstanding; an additional 1,019,600 shares were purchased but not issued and 43,602 shares were authorized for consulting fees but not issued as of September 30, 2018. The Company currently has 9,999,000 shares of “blank check” preferred stock, and 1,000 shares of Series A Preferred Stock which are issued and outstanding.

 

Common Stock

 

The holders of common stock are entitled to one vote per share. In addition, the holders of the common stock will be entitled to receive ratably dividends, if any, declared by the board of directors out of legally available funds; however, the current policy of the board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of common stock will be entitled to share ratably in all assets that are legally available for distribution. The holders of common stock will have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock, which may be designated solely by action of the board of directors and issued in the future.

  

The following table illustrates the common stock transactions for the nine months ended September 30, 2018:

 

    Preferred     Common  
Category   Shares     Shares  
Cash, common shares     0       1,083,671  
Services     0       1,953,134  
Services, authorized but not issued     0       43,602  
                 
Patents     0       200,000  
Cash, common shares purchased but not issued as of 
the statement date
    0       1,019,600  
Total     0       4,300,007  

 

On July 1, 2018 the Company issued 417 shares to Dr. Harlan Ribnik, Board Director, per letter agreement dated February 12, 2018. In connection with the appointment of Dr. Ribnik, the Board authorized to pay Dr. Ribnik compensation as a member of the Board of the Corporation a quarterly fee of shares of the Corporation’s Common Stock in an amount equal to One Thousand Five Hundred Dollars ($1,500) based on the market price per share of the Corporation’s Common Stock on the last trading day of each quarter.

 

On July 1, 2018 the Company issued 417 shares to Steve Farkas, Board Director, per letter agreement dated February 12, 2018. In connection with the appointment of Mr. Farkas, the Board authorized to pay Mr. Farkas compensation as a member of the Board of the Corporation as follows: (i) a monthly fee of One Thousand Dollars ($1,000); and (ii) a quarterly fee of shares of the Corporation’s common stock, par value $0.001 per share (the “Common Stock”), in an amount equal to One Thousand Five Hundred Dollars ($1,500) based on the market price per share of the Corporation’s Common Stock on the last trading day of each quarter.

 

On July 1, 2018 the Company issued 5,000 shares to Luis Toledo-Bayouth, Non-Executive Board Advisory Consultant, per letter agreement dated April 17, 2018. In connection with the appointment of Mr. Toledo-Bayouth, the Board authorized to pay Mr. Toledo-Bayouth compensation as a member of the Advisory Board of the Corporation as follows: 5,000 restricted shares of common stock, par value $0.001 per share (the “Common Stock”) every quarter for the duration of his term as Non-Executive Board Advisory Consultant.

 

On July 1, 2018 the Company issued 5,000 shares to Juan Bauza Salas, Non-Executive Board Advisory Consultant, per letter agreement dated April 17, 2018. In connection with the appointment of Mr. Salas, the Board authorized to pay Mr. Salas compensation as a member of the Advisory Board of the Corporation as follows: (i) a monthly fee of Three Thousand Dollars ($3,000); and (ii) 5,000 restricted shares of common stock, par value $0.001 per share (the “Common Stock”) every quarter for the duration of his term as Non-Executive Board Advisory Consultant.

 

On July 1, 2018 the Company issued 1,750 shares to Jeffrey Jump, Non-Executive Board Advisory Consultant, per letter agreement dated May 31, 2018. In connection with the appointment of Mr. Jump, the Board authorized to pay Mr. Jump compensation as a member of the Advisory Board of the Corporation as follows: 1,750 restricted shares of common stock, par value $0.001 per share (the “Common Stock”) every quarter for the duration of his term as Non-Executive Board Advisory Consultant.

  

On July 17, 2018, the Company authorized the issuance of 5,000 shares of common stock at $3.02 to John Grainer for services rendered to the Company.

 

On July 17, 2018, the Company authorized the issuance of 20,000 shares of common stock at $3.02 to Gustavo Pinto for services rendered to the Company.

 

On July 17, 2018, the Company authorized the issuance of 5,000 shares of common stock at $3.02 to Michael Dillingham for services rendered to the Company.

 

On July 17, 2018, the Company authorized the issuance of 1,000 shares of common stock at $3.02 to Jolene Enns for services rendered to the Company.

 

On July 17, 2018, the Company authorized the issuance of 1,000 shares of common stock at $3.02 to Ryan Moser for services rendered to the Company.

 

On July 17, 2018, the Company authorized the issuance of 1,000 shares of common stock at $3.02 to Jennifer McClain for services rendered to the Company.

 

On July 17, 2018, the Company authorized the issuance of 500 shares of common stock at $3.02 to Allee Picatccio for services rendered to the Company.

 

On July 17, 2018, the Company authorized the issuance of 1,000 shares of common stock at $3.02 to Mark Young for services rendered to the Company.

 

On July 17, 2018, the Company authorized the issuance of 1,000 shares of common stock at $3.02 to Sara Moody for services rendered to the Company.

 

On September 30, 2018, the Company authorized the issuance of 15,000 shares of common stock at $1.62 to Peach Management, LLC (Note 7) for services rendered to the Company.

 

On September 30, 2018, the Company authorized the issuance of 15,000 shares of common stock at $1.62 to Thomas Gingerich, Chief Financial Officer (Note 7), for services rendered to the Company.

 

On September 30, 2018 the Company issued 926 shares to Dr. Harlan Ribnik, Board Director, per letter agreement dated February 12, 2018. In connection with the appointment of Dr. Ribnik, the Board authorized to pay Dr. Ribnik compensation as a member of the Board of the Corporation a quarterly fee of shares of the Corporation’s Common Stock in an amount equal to One Thousand Five Hundred Dollars ($1,500) based on the market price per share of the Corporation’s Common Stock on the last trading day of each quarter.

 

On September 30, 2018 the Company issued 926 shares to Steve Farkas, Board Director, per letter agreement dated February 12, 2018. In connection with the appointment of Mr. Farkas, the Board authorized to pay Mr. Farkas compensation as a member of the Board of the Corporation as follows: (i) a monthly fee of One Thousand Dollars ($1,000); and (ii) a quarterly fee of shares of the Corporation’s common stock, par value $0.001 per share (the “Common Stock”), in an amount equal to One Thousand Five Hundred Dollars ($1,500) based on the market price per share of the Corporation’s Common Stock on the last trading day of each quarter.

 

On September 30, 2018 the Company issued 5,000 shares to Luis Toledo-Bayouth, Non-Executive Board Advisory Consultant, per letter agreement dated April 17, 2018. In connection with the appointment of Mr. Toledo-Bayouth, the Board authorized to pay Mr. Toledo-Bayouth compensation as a member of the Advisory Board of the Corporation as follows: 5,000 restricted shares of common stock, par value $0.001 per share (the “Common Stock”) every quarter for the duration of his term as Non-Executive Board Advisory Consultant.

  

On September 30, 2018 the Company issued 5,000 shares to Juan Bauza Salas, Non-Executive Board Advisory Consultant, per letter agreement dated April 17, 2018. In connection with the appointment of Mr. Salas, the Board authorized to pay Mr. Salas compensation as a member of the Advisory Board of the Corporation as follows: (i) a monthly fee of Three Thousand Dollars ($3,000); and (ii) 5,000 restricted shares of common stock, par value $0.001 per share (the “Common Stock”) every quarter for the duration of his term as Non-Executive Board Advisory Consultant.

 

On September 30, 2018 the Company issued 1,750 shares to Jeffrey Jump, Non-Executive Board Advisory Consultant, per letter agreement dated May 31, 2018. In connection with the appointment of Mr. Jump, the Board authorized to pay Mr. Jump compensation as a member of the Advisory Board of the Corporation as follows: 1,750 restricted shares of common stock, par value $0.001 per share (the “Common Stock”) every quarter for the duration of his term as Non-Executive Board Advisory Consultant.

 

Series A Preferred Stock

 

The holder of Series A Preferred Stock shall have full voting rights and shall vote together as a single class with the holders of the Company’s common stock. The holder of Series A Preferred Stock is entitled to fifty-one percent (51%) of the total votes on all matters brought before shareholders of the Company, regardless of the actual number of shares of Series A Preferred Stock then outstanding. In addition, the Company is prohibited from issuing any other class of preferred stock without first obtaining the prior approval of the holders of Series A Preferred Stock. All Series A Preferred stock issued and outstanding is held by Peach Management, LLC. (Note 7).

 

Blank Check Preferred Stock

 

The board of directors will be authorized, subject to any limitations prescribed by law, without further vote or action by the common stockholders, to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock will have the number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

 

Warrants

 

As of September 30, 2018, the Company had outstanding warrants to purchase 6,808,596 shares of common stock (the “Warrants”). Each Warrant represents the right to purchase one share of common stock at various exercise prices per share for a period of three (3) years from the date of issuance.

 

      Warrants Issued     Exercise Price     Expiration Date
May 11, 2017       6,038,462     $ 0.50     May 11, 2020
February 23, 2018       232,334     $ 6.00     February 23, 2021
October 5, 2018       537,800     $ 2.50     October 5, 2018
Total       6,808,596              

  

The Company may issue warrants to non-employees in capital raising transactions or for services. In accordance with guidance in ASC Topic 718, the cost of warrants issued to non-employees is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option pricing model. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period.

 

All of the outstanding warrants granted were fully vested on the grant date.

 

2018 Stock Offering

 

On February 23, 2018, the Company entered into a subscription agreement (the “February Agreement”) with selected accredited investors. Pursuant to the terms of the February Agreement, the Company sold in a private placement (the “February Offering”) an aggregate of 155,167 units (each, a “Unit” and collectively, the “Units”) at a purchase price of $3.00 per Unit. The Offering resulted in $465,500 total gross proceeds. Each Unit consists of (i) one (1) share of the Company’s common stock, par value $0.001 per share (the “Shares”); and (ii) one (1) warrant to purchase shares of the Company’s common stock, par value $0.001 per share. Each Warrant shall be exercisable at any time on or after the date of issuance for a period of three (3) years at an exercise price per share equal to $6.00 per share, subject to adjustment as provided in the Warrant agreement.

 

April 2018 Stock Offering

 

In April and May 2018, the Company entered into a subscription agreement (the “April Agreement”) with selected accredited investors. Pursuant to the terms of the April Agreement, the Company offered up to $10,000,000 of shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $3.50 per share (the “April Offering”). In the April Offering, the Company sold an aggregate of 738,504 shares of common stock, par value $0.001 per share, resulting in total gross proceeds of $2,584,765 The Offering closed on June 7, 2018.

 

June 2018 Stock Offering

 

In June and July 2018, the Company entered into a subscription agreement (the “June Agreement”) with selected accredited investors. Pursuant to the terms of the June Agreement, the Company offered up to $2,000,000 of shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $2.50 per share (the “June Offering”). In the June Offering, the Company sold an aggregate of 190,000 shares of common stock, par value $0.001 per share, resulting in total gross proceeds of $475,000. The June Offering closed on July 18, 2018.

 

August 2018 Stock Offering

 

In August, September and October 2018, the Company entered into a subscription agreement (the “August Agreement”) with selected accredited investors. Pursuant to the terms of the August Agreement, the Company offered up to $1,500,000 in units (each, a “Unit” and collectively, the “Units”) at a purchase price of $1.25 per Unit (the “August Offering”). Each Unit consisted of (i) one (1) share of the Company’s common stock, par value $0.001 per share (the “Shares”); and (ii) warrants to purchase shares of the Company’s common stock, par value $0.001 per share (the “Warrants”). The number of shares underlying each Warrant was equal to 50% of the number of Shares subscribed for by such Investor. The Warrants are exercisable at any time on or after the date of issuance for a period of two (2) years at an exercise price per share equal to $2.50. In the August Offering, the Company sold an aggregate of 1,035,600 Units, resulting in total gross proceeds of $1,294,500. As a result, the Company issued to the investors a total of 1,035,600 Shares and 517,800 Warrants. The August Offering closed on October 5, 2018.

 

Non-Controlling Interests

 

Non-controlling interest is shown as a component of stockholders’ equity on the consolidated balance sheets and the share of net income (loss) attributable to non-controlling interest is shown as a component of net income (loss) in the consolidated statements of operations.

 

The following schedule discloses the effects of changes in the Company’s ownership interest in its subsidiaries on the Company’s equity:

 

    For the Three Months 
Ending 
September 30, 2018
    For the Nine Months 
Ending 
September 30, 2018
 
Net loss attributable to GSRX Industries Inc.   $ (1,655,745 )   $ (13,647,636 )
Decrease in additional paid in capital related to Recognition of Non-Controlling Interest Attributable to Spirulinex     (622,721 )     (622,721 )
Change in net loss attributable to GSRX Industries Inc. and transfers to Non-Controlling Interest   $ (2,318,466 )   $ (14,310,357 )