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Stockholders' Equity

12 Months Ended

Dec. 31, 2019

Stockholders' Equity Note [Abstract]

Stockholders' Equity

NOTE 9 – 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 In May 2018, the Company amended the agreement with the consultant whereby the Company rescinded the 500,000 shares of common stock and reissued 250,000 shares of common stock.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. The Company also committed to issue an additional 1,000,000 shares of common stock on January 1, 2019 valued in the aggregate amount of $230,000 if JLS Ventures met the service requirement specified in the agreement. These 2,000,000 shares serve as the compensation for Mr. Schreiber for his services as CEO of the Company. The Company is recognizing the expense for the issuances over the twenty-four-month term of the agreement. For the year ended December 31, 2019 and 2018, the Company recognized $ $172,500 has been expensed and included in compensation and related expenses on the consolidated statement of operations.

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. For the year ended December 31, 2018, $56,000 has been expensed and included in compensation and related expenses on the consolidated statement of operations.

During the year ended December 31, 2018, certain convertible note holders were issued 1,498,442 shares at a conversion price of $0.23 per share in connection with the conversion of $344,641 of principal and interest of their notes, resulting in a decrease to the aggregate amount of outstanding convertible debt of approximately $344,641 during the year.

During the year ended December 31, 2019, the Company issued 1,521,344 shares of common stock to various third-party investors, the Company received $350,001 in cash for these shares. In conjunction with one of the stock purchases, the Company issued warrants valued at $20,825 which based on the terms of the warrants, the Company has bifurcated and treated as equity. In addition to the above stock issued, the Company has issued 100,000 shares of common stock to a consultant for services rendered; which were valued at $16,000.

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 convertible notes of approximately $344,641 during the year.

Noncontrolling Interest

For the years ended December 31, 2019 and 2018, the net loss attributed to the non-controlling amounted to $391,055 and $119,262, respectively.

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

On April 25, 2019, the Company entered into a membership purchase agreement with entities owned by the Company’s Chief Executive officer and Chief Technology Officer, Conversion Labs PR, whereby the Company acquired the remaining 21.8% interest of Conversion Labs PR from the Company’s Chief Executive officer and Chief Technology Officer. As such, the Company now wholly-owns 100% of Conversion labs PR. In order to consummate this transaction, the Company agreed to issue 5 million shares of common stock based on the issuance price of $0.18 per share, or for a total of $900,000 to the Company’s Chief Executive officer and Chief Technology Officer. As part of this transaction, the Company recognized $1.3 million in accumulated deficit and $417,046 to reverse the Company’s non-controlling interest related to CVLB PR.

On May 31, 2019, the Company entered into the operating agreement of CVLB Rx, by and among the Company, Conversion Labs PR, Harborside Advisors, LLC, Happy Walters, an individual (“Walters”), and David Hanig, an individual (“Hanig”, and together with Conversion Labs PR, Harborside and Walters, each a “Member” and together the “Members”). Pursuant to the Operating Agreement, the Company, through Conversion Labs PR, owns 51% of the membership interests of CVLB Rx. The Operating Agreement governs the operations of CVLB Rx and provides for CVLB Rx’s management by a Board of Managers of at least three members. Among the provisions of the Operating Agreement are limitations and restrictions on the disposition of membership interests by a Member, including right of first refusal of the Members and an option for both the Company and the Members to purchase membership interests that are being offered by a Member.

Service-Based 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 decreasing the exercise price of 500,000 options for 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. The Company determined that the additional compensation expense for this transaction was approximately $3,000, which was recognized in March of 2019.

On March 15, 2019 the Company granted Mr. Piñeiro, the Chief Financial Officer of the Company, options to purchase 500,000 shares of the Company’s common stock at an exercise price of $0.23. The Company valued the estimated compensation expense for these options as approximately $73,000, using a Black-Scholes option-pricing model

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	%

The following is a summary of outstanding service-based options at December 31, 2019 and 2018:

		Options Outstanding Number of Shares				Exercise Price per Share				Weighted Average Remaining Contractual Life				Weighted Average Exercise Price per Share

Balance at December 31, 2017			10,960,800				0.20 - 0.40				3.41 years			$	0.26
Granted			3,400,000				0.30 - 0.40				6.9 years				0.39
Expired			(550,000	)			–				–				0.20
Exercised			40,800				0.2				3.41 years				0.20
Balance at December 31, 2018			13,820,000				$ 0.20 - 0.40				4.34 years			$	0.26
Granted			1,425,000				$ 0.23 - 1.50				9.55 years				0.72
Cancelled			(200,000	)		$	0.40				7.75 years				0.40
Expired			–				–				–				–
Balance at September 30, 2019			15,045,000				$ 0.20 - 0.40				4.78 years			$	0.3

Exercisable December 31, 2018			10,805,416				$ 0.20 - 0.40				3.63 years			$	0.24
Exercisable December 31, 2019			11,805,416				$ 0.20 - 0.40				3.76 years			$	0.25

Performance-Based Stock Options

The following is a summary of outstanding service-based options at December 31, 2019 and 2018:

Options Outstanding Number of Shares

Exercise Price per Share

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price per Share

Balance at December 31, 2017

–

–

–

–

Granted

15,425,000

$ 0.25 - 0.40

5.46 years

$

0.27

Cancelled

–

–

–

–

Expired

–

–

–

–

Balance at December 31, 2018

15,425,000

$ 0.25 - 0.40

5.46 years

$

0.27

Granted

–

–

–

–

Cancelled

(8,600,000

)

0.25 - 0.40

7.32 years

0.31

Expired

–

–

–

–

Balance at December 31, 2019

6,825,000

$ 0.25 - 0.40

3.11 years

$

0.23

Exercisable December 31, 2018

3,175,000

$ 0.25 - 0.40

2.63 years

$

0.40

Exercisable December 31, 2019

3,175,000

$ 0.25 - 0.40

2.63 years

$

0.40

Restricted Stock and Options

The Company has entered into two agreements on April 1, 2016 with two consultants of CVLB PR for business development, marketing and sales related services (the “Consultant Agreements”). The consultants are treated as employees for accounting purposes. Upon signing, each consultant was issued 1,000,000 restricted shares of Conversion Labs, Inc. common stock. In addition, each consultant shall receive an additional 150,000 restricted shares of Conversion Labs, Inc. common stock for each $500,000 distributed by CVLB PR to the Company. For each consultant, the amount of shares to be issued by the Company to the consultants shall be capped at 1,500,000 restricted shares when CVLB PR has transferred $5,000,000 to the Company, for a combined capped total of 3,000,000 restricted shares. For the year ended December 31, 2017, 2,300,000 restricted shares of common stock have been issued related to these agreements. The Company valued the shares at their grant date for a value of $0.30 per share for a total of $690,000 to be expensed over the estimated service period. A total of $300,000 and $306,667 was expensed during the year ended December 31, 2019 and 2018.

In addition, the Consulting Agreements provided that each consultant shall receive a bonus of an additional 750,000 restricted shares of Conversion Labs, Inc. common stock, plus an option to buy 1,000,000 shares of Conversion Labs, Inc. common stock at $0.20/share (including a cashless exercise feature) when CVLB PR has transferred to the Company at each of the following three (3) thresholds: $1,250,000, $2,000,000 and $3,000,000 for a total of 2,250,000 of restricted shares of Conversion Labs, Inc. common stock and options to purchase up to 3,000,000 shares of Conversion Labs, Inc. common stock at $0.20/share. As of December 31, 2018 no bonus shares have been issued and no options have been granted under this agreement.

Warrants

The following is a summary of outstanding and exercisable warrants:

		Warrants Outstanding Number of Shares				Exercise Price per Share				Weighted Average Remaining Contractual Life				Weighted Average Exercise Price per Share
Balance at December 31, 2017			3,089,119			$	0.20 - 0.40				1.5 years				0.4
Warrants Granted			2,491,305				0.28 - 0.40				7.5 years				0.29
Warrants Exercised			–				–				–				–
Warrants Expired			(354,891	)			0.40 - 0.50				0 years				0.44
Balance at December 31, 2018			5,225,533			$	0.20 - 0.50				2.99 years			$	0.35
Warrants Granted			6,201,088			$	0.28				9.84 years				0.28
Warrants Exercised			–				–				–				–
Warrants Expired			(100,000	)			0.20 - 0.50				–				0.35
Balance at December 31, 2019			11,326,621			$	0.20 - 0.50				6.69 years			$	0.34

Exercisable December 31, 2018			5,225,533			$	0.20 - 0.50				2.99 years			$	0.31
Exercisable December 31, 2019			10,330,244			$	0.20 - 0.50				6.24 years			$	0.31

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 and 3,089,119 at December 31, 2019 and 2018, respectively. The weighted average exercise price of warrants outstanding at December 31, 2019 and 2018 is $0.35 and $0.40, respectively. The warrants expire at various times between December 2017 and September 2019.

On October 25, 2018, the Company’s board of directors unanimously decided to amend warrants with a two-year term issued to warrant holders issued between January 2017 and March 2017 with an exercise price of $0.40 per share. The Company amended the warrants to provide for an additional three-year term to warrant holders as consideration for them entering into a call agreement with the Company, so that when the Company’s common stock trades above or over $0.75 per share for at least ten consecutive days. The Company has repriced the grant date fair value during 2018 and recognized additional expense as stock-based compensation of approximately $128,000.

In May 2019, the Company issued 1,086,957 warrants to purchase shares of common stock with an exercise price of $0.28 to Bertrand Velge, a board member. The warrants will vest monthly over a four year period and expire in five years.

On August 15, 2019, the Company entered into securities purchase agreements with three accredited investors (each an “Investor,” collectively, the “Investors”). Pursuant to the terms of the Purchase Agreements, the Company issued and sold to the Investors convertible promissory notes for the aggregate original principal amount of $1,291,500 (the “Notes”), and warrants to purchase up to 4,679,348 shares of the Company’s common stock (the “Warrants,”). The Warrants are immediately exercisable and have a term of ten years. The Warrants are exercisable at a price per share of $0.28, subject to adjustment as described herein and contain a cashless exercise mechanism.

The fair value of warrants granted (or extended) during the years ended December 31, 2019 and 2018, was estimated on the date of grant (or extension) using the Black-Scholes option-pricing model with the following weighted-average assumptions:

		2019				2018
Expected volatility			123.4% - 195.7%				191% - 196%
Risk free interest rate			1.42% - 2.58%				2.44% - 2.58%
Expected dividend yield			-				-
Expected warrant term (in years)			2.0 - 5.0				3.0 - 5.0
Weighted average grant date fair value		$	0.22				$0.21 – 0.22

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 $733,215 and $834,191 for the years ended December 31, 2019 and 2018, respectively. Such amounts are included in general and administrative expenses in the consolidated statement of operations.