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Stockholders' Equity

3 Months Ended

Mar. 31, 2020

Stockholders' Equity Note [Abstract]

Stockholders' Equity

NOTE 5 – STOCKHOLDERS’ EQUITY

Common Stock

During the month of February 2020 , the Company entered into a stock purchase agreement with a third-party investor for the purchase of 4,000,000 shares of common stock at $0.16 per share for $640,000 in cash consideration. As of March 31, 2020, these shares of common stock had not yet been issued and thus the Company has included the fair value of these shares on the accompanying balance sheet in the liability to issue common stock accrual.

During the month of March 2020, the entered into a stock purchase agreement with a third-party investor for the purchase of 1,250,000 shares of common stock at $0.16 per share for $200,000 in cash consideration. As of March 31, 2020, these shares of common stock had not yet been issued and thus the Company has included the fair value of these shares on the accompanying balance sheet in the liability to issue common stock accrual.

During the month of March 2020, Alpha and Brio exercised their warrants in a cashless exercise for an aggregate of 1,836,155 common stock warrants to obtain 739,291 shares of common stock.

Noncontrolling Interest

For the three months ended March 31, 2020 and 2019, the net loss attributed to the non-controlling interest amounted to $315,872 and $141,056, respectively. During the three months ended March 31, 2020 and 2019, the Company paid distributions to non-controlling shareholders of $36,000 and $34,298, respectively.

Service-Based Stock Options

On January 20, 2020, the Company approved the transition of Mr. Sean Fitzpatrick from the role of the Company’s Chief Acquisition Officer, to the role of President of LegalSimpli. In connection with Mr. Fitzpatrick’s transition, the Company agreed to amend that certain services agreement entered into on July 23, 2018, by and between the Company and Mr. Fitzpatrick, to (i) decrease the number of options to purchase the Company’s common stock previously granted to Mr. Fitzpatrick from 5,000,000 options to 2,500,000 options, 650,000 of which are fully vested as of the effective date and (ii) amend the vesting schedule for the remaining 1,850,000 performance options to include four performance metrics that, if met, each trigger the vesting of 462,500 options. As a result of amendment, the Company cancelled 1,850,000 service based options with an exercise price of $0.30.

The following is a summary of outstanding service-based options activity for the three months ended March 31, 2020:

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

Balance at December 31 2019			15,045,000				$ 0.20 - 0.40				4.78 years			$	0.30
Granted			–				–				–				–
Cancelled			(1,875,000	)		$	0.30				7.50 years				0.30
Expired			–				–				–				–
Balance at March 31, 2020			13,170,000				$ 0.20 - 1.50				4.11 years			$	0.30

Exercisable December 31, 2019			11,805,416				$ 0.20 - 0.40				3.76 years			$	0.25
Exercisable at March 31, 2020			11,805,416				$ 0.20 - 0.40				3.76 years			$	0.25

Performance-Based Stock Options

On January 20, 2020, the Company approved the transition of Mr. Sean Fitzpatrick from the role of the Company’s Chief Acquisition Officer, to the role of President of LegalSimpli. In connection with Mr. Fitzpatrick’s transition, the Company agreed to amend that certain services agreement entered into on July 23, 2018, by and between the Company and Mr. Fitzpatrick, to (i) decrease the number of options to purchase the Company’s common stock previously granted to Mr. Fitzpatrick from 5,000,000 options to 2,500,000 options, 650,000 of which are fully vested as of the effective date and (ii) amend the vesting schedule for the remaining 1,850,000 performance options to include four performance metrics that, if met, each trigger the vesting of 462,500 options. As a result of amendment, the Company cancelled 1,850,000 service based options with an exercise price of $0.30.

The following is a summary of outstanding performance-based options activity for the three months ended March 31, 2020:

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

Balance at December 31, 2019			6,825,000				$ 0.25 - 0.40				6.34 years			$	0.23
Granted			–				–				–				–
Cancelled			(650,000	)			0.30- 0.30				8.81 years				0.31
Expired			–				–				–				–
Balance at March 31, 2020			6,175,000				$ 0.25 - 0.40				6.08 years			$	0.23

Exercisable December 31, 2019			3,175,000				$ 0.25 - 0.40				2.63 years			$	0.40
Exercisable at March 31, 2020			3,175,000				$ 0.25 - 0.40				2.63 years			$	0.40

Warrants

The following is a summary of outstanding and exercisable warrants activity during the three months ended March 31, 2020:

		Warrants Outstanding Number of Shares				Exercise Price per Share				Weighted Average Remaining Contractual Life				Weighted Average Exercise Price per Share
Balance at December 31, 2019			11,326,621				$ 0.20 - 0.50				6.69 years			$	0.34
Warrants Granted			5,142,715				0.13 - 0.14				7.27 years				0.14
Warrants Exercised			(1,836,155	)			0.13 - 0.14				4.16 years				0.14
Warrants Expired			-				-				-				-
Balance at March 31, 2020			14,633,181				$ 0.13 - 0.50				7.66 years			$	0.23

Exercisable December 31, 2019			10,330,244				$ 0.20 - 0.50				6.24 years			$	0.31
Exercisable March 31, 2020			13,772,673				$ 0.13 - 0.50				7.51			$	0.22

Alpha Capital Anstalt (“Alpha”) Warrants

On February 25, 2020, the Company and Alpha entered into a Note Repayment and Warrant Amendment Agreement whereby the Company agreed to (i) repay the outstanding balance of the Convertible Promissory Note issued in favor of Alpha on May 29, 2018 in the amount of $224,145, including principal and interest and (ii) amend the exercise price of the warrant issued to Alpha in connection with the 2018 Alpha Note on May 29, 2018. The 2018 Alpha Warrant originally provides for the purchase of up to 1,956,522 shares of the Company’s common stock at an exercise price of $0.28 per share, none of which have been issued as of the date of the 2018 Alpha Amendment. Pursuant to the terms of the 2018 Alpha Warrant and in connection with the 2018 Alpha Amendment, the Company revised the exercise price of the Alpha 2018 Warrant from $0.28 per share to $0.135 per share and increased the number of shares issuable under the Alpha 2018 Warrant from 1,956,522 to 4,057,972 shares.

On February 25, 2020, the Company and Alpha entered into a Note Repayment and Warrant Amendment Agreement whereby the Company agreed to (i) repay the outstanding balance of the Convertible Promissory Note issued in favor of Alpha on August 15, 2019 in the amount of $520,000, including principal and interest and (ii) amend the exercise price of the warrant issued to Alpha in connection with the 2019 Alpha Note on August 15, 2019. The Alpha 2019 Warrant originally provided for the purchase of up to 1,826,087 shares of the Company’s common stock at an exercise price of $0.28 per share, none of which have been issued as of the date of the 2019 Alpha Amendment. Pursuant to the 2019 Alpha Amendment, Alpha has agreed to the reduction of the exercise price of $0.28 to $0.23. Therefore, effective upon the date of the 2019 Alpha Amendment, the exercise price of the 2019 Alpha Warrant is reduced to $0.23, subject to further adjustment. However, for purposes of calculating additional shares to be issued to Alpha pursuant to the terms of the 2019 Alpha Warrant, the deemed exercise price will be $0.135, as if the exercise price were actually reduced to $0.135 and thereafter increased to $0.23. As a result of the above described reduction of the exercise price and the application of certain provisions of the 2019 Alpha Warrant, the amount of shares that may be purchased upon exercise of the 2019 Alpha Warrant after giving effect to the foregoing is increased to 3,787,439 shares of the Company’s common stock.

As a result of the above transactions, the Company has recorded a deemed distribution to Alpha for the price adjustments of the Alpha warrants of $915,479 which is recorded in the statement of changes in stockholder’s equity as an increase in additional paid in capital and a reduction of accumulated deficit. During the month of March 2020, Alpha exercised a portion of their warrants in a cashless exercise, whereby Alpha exercised 1,336,155 common stock warrants to obtain 451,159 share of common stock.

Brio Master Fund (“Brio”) Warrants

On February 25, 2020, the Company, and Brio entered into a Warrant Amendment Agreement to amend the exercise price of the warrant issued to Brio on May 29, 2018. The Brio 2018 Warrant originally provided for the purchase of up to 434,783 shares of the Company’s common stock at an exercise price of $0.28 per share, none of which have been issued as of the date of the 2018 Brio Warrant Amendment. Pursuant to the 2018 Brio Warrant Amendment, the Company agreed to revise the exercise price of the 2018 Brio Warrant from $0.28 per share to $0.135 per share and increased the number of shares issuable under the 2018 Brio Warrant from 434,783 to 466,989 shares.

On February 25, 2020, the Company, and Brio entered into a Note Repayment and Warrant Amendment Agreement whereby the Company agreed to (i) repay the outstanding balance of the Convertible Promissory Note issued in favor of Brio on August 15 , 2019 in the amount of $162,500, including principal and interest and (ii) amend the exercise price of the warrant issued to Brio in connection with the 2019 Brio Note on August 15, 2019. The Brio 2019 Warrant originally provide for the purchase of up to 570,652 shares of the Company’s common stock at an exercise price of $0.28 per share, none of which have been issued as of the date of the 2019 Brio Amendment. Pursuant to the 2019 Brio Amendment, Brio has agreed to the reduction of the exercise price of $0.28 to $0.23. Therefore, effective upon the date of the 2019 Brio Amendment, the exercise price of the 2019 Brio Warrant is reduced to $0.23, subject to further adjustment. However, for purposes of calculating additional shares to be issued to Brio pursuant to the terms of the 2019 Brio Warrant, the deemed exercise price will be $0.135, as if the exercise price were actually reduced to $0.135 and thereafter increased to $0.23. As a result of the above described reduction of the exercise price and the application of certain provisions of the 2019 Brio Warrant, the amount of shares that may be purchased upon exercise of the 2019 Brio Warrant after giving effect to the foregoing is increased to 1,183,575 shares of the Company’s common stock.

As a result of the above transactions, the Company has recorded a deemed distribution to Alpha for the price adjustments of the Alpha warrants of $226,906 which is recorded in the statement of changes in stockholder’s equity as an increase in additional paid in capital and a reduction of accumulated deficit. During the month of March 2020, Brio exercised a portion of their warrants in a cashless exercise, whereby Alpha exercised 500,000 common stock warrants to obtain 287,736 shares of common stock.

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 $95,900 and $834,191 for the three months ended March 31, 2020 and 2019, respectively. Such amounts are included in general and administrative expenses in the consolidated statement of operations.