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Stockholders' Equity

3 Months Ended

Mar. 31, 2019

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' EQUITY

NOTE 7 – STOCKHOLDERS' EQUITY

Common Stock

In February 2018, pursuant to the sale of the Company's legacy yeast beta glucan assets to the Company's former CEO, Mr. McLaughlin, 2,000,000 shares of common stock of Mr. McLaughlin's shares were cancelled.

In March 2018, the Company issued 500,000 shares of common stock valued at $120,000 to a consultant. In May 2018, the Company amended the agreement with the consultant whereby the Company rescinded the 500,000 shares of common stock and reissued 250,000 shares of common stock. The 250,000 shares of common stock issued on May 14, 2018, were valued at $62,500. The Company is recognizing the expense at the time of issuance.

In May 2018, the Company issued 1,000,000 shares of common stock valued at $230,000 to JLS Ventures, LLC, a company controlled by our CEO, Justin Schreiber, for services. These 1,000,000 shares serve as the compensation for Mr. Schreiber for his services as CEO of the Company.

In May 2018, the Company issued 200,000 shares of common stock valued at $56,000 to a consultant for services over a three-month term. The Company is recognizing the expense at the time of issuance.

During the year end December 31, 2018, the Company had convertible note holders convert 1,498,442 shares at a conversion price of $0.23 per share, resulting in a decrease to the aggregate amount of outstanding convertible debt of approximately $344,641 during the year.

On January 1, 2019, in connection with the Company's agreement with JLS Ventures, LLC, the Company issued 1,000,000 shares of restricted stock to JLS Ventures, LLC.

On February 27, 2019, the Company entered into a short-term note agreement for $100,000 that was repaid prior to the quarter end. As part of the note agreement, the Company issued 100,000 shares of common stock to the note holder valued at $16,000.

Noncontrolling Interest

For the three months ended March 31, 2019 and 2018, the net (loss) income of Conversion Labs PR attributed the Company amounted to approximately ($69,000) and $13,000, respectively.

On May 29, 2018, Conversion Labs PR acquired a 51% interest in LegalSimpli, which operates a marketing-driven software solutions business.

Stock Options

On February 9, 2019, Robert Kalkstein the former Chief Financial Officer of the Company, tendered his resignation to the Company's Board of Directors, effective March 31, 2019. In connection with Mr. Kalkstein's resignation, the Company agreed to amend certain options granted to Mr. Kalkstein by decrease the exercise price of 500,000 options to purchase the Company's common stock previously granted to Mr. Kalkstein from $0.40 per share to $0.28 per share; accelerate the vesting of 150,000 Options with such options to vest on March 31, 2019; and cancel 200,000 unvested options, the vesting of which was not accelerated.

On March 15, 2019 the Company granted Mr. Piñeiro options to purchase 500,000 shares of the Company's common stock at an exercise price of $0.23.

A Summary of the outstanding service-based options are as follows:

		Number of
		Options
Balance at December 31, 2017			10,960,800
Issued			3,400,000
Expired			(550,000	)
Exercised			(40,800	)

Balance at December 31, 2018			13,820,000
Issued			500,000
Balance at March 31, 2019			14,320,000

All outstanding options are exercisable and have a cashless exercise provision, and certain options provide for accelerated vesting provisions and modifications, as defined, if the Company is sold or acquired. The intrinsic value of options outstanding and exercisable at March 31, 2019 and December 31, 2018 amounted to $0 and $1,210,342, respectively.

During the three months ended, the significant assumptions used to determine the fair values of options issued, using a Black-Scholes option-pricing model are as follows:

Significant assumptions:
Risk-free interest rate at grant date			2.38	%
Expected stock price volatility			184.78	%
Expected dividend payout			-
Expected option life-years			6.5 years
Weighted average grant date fair value		$	0.15
Forfeiture rate			0.01	%

The following is a summary of outstanding service-based options at March 31, 2019:

Exercise Price				Number of Options				Weighted Average Remaining Contractual Life
$	0.20 - $0.25				8,620,000			3.9 years
$	0.30 - $0.35				3,825,000			8.5 years
$	0.40				1,875,000			4.7 years
	Total				14,320,000

Performance-Based Stock Options

Vested

During 2017, the Company granted performance-based options to purchase 250,000 shares of common stock at an exercise prices of $0.40 per share. These options expire in 2027 and are exercisable upon the Company achieving annual sales revenue of $5,000,000. These options are valued at $55,439. During the year ended December 31, 2017, the Company met the performance criteria.

Unvested

During the year ended December 31, 2017, the Company granted performance-based options to purchase 6,000,000 shares of common stock with an exercise prices of $0.35 per share to JLS Ventures, LLC, a related party. The options expire in 10 years and are exercisable upon cash received by Conversion Labs, Inc. from Conversion Labs PR between $4,000,000 and $7,000,000. The aggregate fair value of these performance-based options is $1,688,212.

During the third quarter of 2017, the Company granted performance-based options to purchase 3,750,000 shares of common stock with an exercise prices of $0.25 and $0.35 per share. The options expire in 10 years and are exercisable upon the company achieving pre-tax earnings benchmarks between $4,000,000 and $7,000,000. The aggregate fair value of these performance-based options is $1,152,849.

Warrants

The following is a summary of outstanding and exercisable warrants:

		Number of Shares				Weighted Average Exercise Price				Year of Expiration

Balance at December 31, 2017			3,089,119			$	0.40				2018 - 2020
Issued			(354,891	)		$	0.44				2018
Exercised			2,491,305			$	0.29				2023 - 2028
Balance at December 31, 2018 and March 31, 2019			5,225,533			$	0.35				2019 - 2028

In March 2018, the Company issued 100,000 warrants to purchase shares of common stock with an exercise price of $0.50 per share, in relation to royalty license agreement. These warrants are fully vested and expire in ten years.

In May 2018, the Company issued 2,391,305 warrants to purchase shares of common stock with an exercise price of $0.28 per share, in relation to an issuance of convertible notes payable. These warrants are fully vested and expire in five years.

Warrants outstanding and exercisable amounted to 5,225,533 at March 31, 2019 and December 31, 2018, respectively. The weighted average exercise price of warrants outstanding at March 31, 2019 and December 31, 2018 is $0.35. The warrants expire at various times between September 2019 and March 2028.

Stock Based Compensation

The total stock-based compensation expense related to Service-Based Stock Options, Performance-Based Stock Options and Warrants issued for service amounted to $181,108 and $84,313 for the three months ended March 31, 2019 and 2018, respectively. Such amounts are included in compensation and related expenses in the consolidated statement of operations.