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Stockholders' Equity | 9 Months Ended
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Sep. 30, 2020
Stockholders' Equity Note [Abstract] |
Stockholders' Equity | NOTE 5 – STOCKHOLDERS’ EQUITY The Company has authorized the issuance of up to 100,000,000 shares of common stock, $0.01 par value, and 5,000,000 shares of preferred stock, $0.0001 par value, of which 5,000 shares are designated as Series B Convertible Preferred Stock and 4,995,000 shares of preferred stock remain undesignated. Series B Convertible Preferred Stock On August 27, 2020, the Secretary of State of the State of Delaware delivered confirmation of the effective filing of the Company’s Certificate of Designations of the Series B Convertible Preferred Stock, which established 5,000 shares of the Company’s Series B Preferred Stock, having such designations, rights and preferences as set forth therein (the “Series B Designations”). The shares of Series B Preferred Stock have a stated value of $1,000 per share (the “Series B Stated Value”) and are convertible into Common Stock at the election of the holder of the Series B Preferred Stock, at a price of $3.25 per share ($0.65 pre-split), subject to adjustment (the “Conversion Price”). Each holder of Series B Preferred Stock shall be entitled to receive, with respect to each share of Series B Preferred Stock then outstanding and held by such holder, dividends at the rate of thirteen percent (13%) per annum (the “Preferred Dividends”). The Preferred Dividends shall accrue and be cumulative from and after the date of issuance of any share of Series B Preferred Stock on a daily basis computed on the basis of a 365-day year and compounded quarterly. The Preferred Dividends are payable only when, as, and if declared by the Board of Directors of the Company (the “Board”) and the Company has no obligation to pay such Preferred Dividends; provided, however, if the Board determines to pay any Preferred Dividends, the Company shall pay such dividends in kind in a number of additional shares of Series B Preferred Stock (the “PIK Shares”) equal to the quotient of (i) the aggregate amount of the Preferred Dividends being paid by the Company in respect of the shares of Series B Preferred Stock held by such holder, divided by (ii) the Series B Issue Price (as defined in the Series B Designations); provided, further, that, at the election of the purchasers holding a majority of the shares of Series B Preferred Stock then outstanding, in their sole discretion, such Preferred Dividends shall be paid in cash or a combination of cash and PIK Shares. Notwithstanding the foregoing, the Preferred Dividends may be paid in cash at the election of the Company if, and only if, (A) the purchasers holding a majority of the shares of Series B Preferred Stock then outstanding consent in writing to the payment of any specific dividend in cash, or (B) at any time following the twenty-four (24) month anniversary of the Closing, (i) the prevailing VWAP of the Common Stock over the trailing ninety (90)-day period is equal to or greater than $3.00 per share (subject to adjustments for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, reverse stock splits or other similar events), and (ii) the average trading volume of the Common Stock over the trailing ninety (90)-day period is equal to or greater than 40,000 shares (200,000 pre-split) of Common Stock per day, or (C) at any time following the thirty-six (36) month anniversary of the Closing. The holders of Series B Preferred Stock rank senior to the Common Stock with respect to payment of dividends and rights upon liquidation and will vote together with the holders of the Common Stock on an as-converted basis, subject to beneficial ownership limitations, on each matter submitted to a vote of holders of Common Stock (whether at a meeting of shareholders or by written consent). In addition, as further described in the Series B Designations, if at least 30% of the number of shares of Series B Preferred Stock sold at the Closing are outstanding, the Company will not take certain corporate actions without the affirmative vote at a meeting (or the written consent with or without a meeting) of the purchasers holding a majority of the shares of Series B Preferred Stock then outstanding. If at any time following the twelve (12)-month anniversary of the Closing (A) the prevailing VWAP (as defined in the Series B Designations) of the Common Stock over the trailing ninety (90)-day period is equal to or greater than $15.00 per share ($3.00 pre-split)(subject to adjustments for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, reverse stock splits or other similar events), and (B) the average trading volume of the Common Stock over the trailing ninety (90)-day period is equal to or greater than 40,000 shares (200,000 pre-split) of Common Stock per day, the Company shall have the right, but not the obligation, in its sole discretion, to elect to convert all, but not less than all, of the then-outstanding shares of Series B Preferred Stock into Common Stock by delivering written notice of such election (the “Forced Conversion Notice”) to the holders of the Series B Preferred Stock within ten (10) Business Days following the satisfaction of the criteria of clauses (A) and (B) above (a “Forced Conversion”). On the Forced Conversion Date (as defined in the Series B Designations), each share of Series B Preferred Stock shall be converted into the number of fully paid and non-assessable shares of Common Stock equal to the quotient of: (x) the sum of (1) the Series B Issue Price, plus (2) any accrued but unpaid dividends on such share of Series B Preferred Stock as of immediately prior to the conversion thereof, including the Preferred Dividends, divided by (y) the Conversion Price of such share of Series B Preferred Stock in effect at the time of conversion. The Forced Conversion Notice shall state (i) the number of shares of Series B Preferred Stock held by such Holder that are proposed to be converted, and (ii) the date on which such Forced Conversion shall occur, which date shall be the thirtieth (30th) day following the date such Forced Conversion Notice is deemed given (a “Forced Conversion Date”). In the event of a Forced Conversion, a holder may elect, in its sole discretion and in lieu of the Forced Conversion, to have each then-outstanding share of Series B Preferred Stock held by such holder be redeemed by the Company (a “Forced Conversion Redemption”) by delivering written notice to the Company (a “Forced Conversion Redemption Notice” and the date such Holder delivers such notice to the Corporation, a “Forced Conversion Redemption Notice Date”) prior to the Forced Conversion Date, which notice shall state (A) the number of shares of Series B Preferred Stock that are to be redeemed, (B) the date on which such Forced Conversion Redemption shall occur, which date shall be the tenth (10th) Business Day following the applicable Forced Conversion Redemption Notice Date (the “Forced Conversion Redemption Date”) and (C) the wire instructions for the payment of the applicable amount owed to such holder. Each share of Series B Preferred Stock that is the subject of a Forced Conversion Redemption shall be redeemed by the Company in cash at a price per share equal to the sum of (1) the Series B Issue Price, plus (2) any accrued but unpaid dividends on such share of Series B Preferred Stock, including the Preferred Dividends (the “Per Share Forced Conversion Redemption Price”). At any time (A) after December 31, 2020, if a sufficient number of shares of Common Stock are not available to effect the conversion of the Series B Preferred Stock outstanding into Common Stock and the exercise of the Warrants, or (B) after the three (3) year anniversary of the closing, each holder shall have the right, in its sole and absolute discretion (in addition to and not to the exclusion of any remedy such holder may have at law or in equity), to require that the Company redeem (an “Optional Redemption”), to the fullest extent permitted by law and out of funds lawfully available therefor, all or any portion of such holder’s Series B Preferred Stock then outstanding by delivering written notice thereof; provided, however, that right of the holders to cause an Optional Redemption under clause (B) above shall expire at such time as (i) the Company’s Common Stock is listed for trading on a National Securities Exchange (as defined in the Series B Designations) and (ii) the VWAP of the Common Stock over any ninety (90)-day period is equal to or greater than $10.00 per share ($2.00 pre-split), subject to adjustment. Securities Purchase Agreement On August 28, 2020, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an investor (the “Investor”), to purchase from the Company an aggregate of 3,500 units (the “Units”), at a purchase price of $1,000 per Unit, each consisting of (i) one share of Series B Convertible Preferred Stock, and (ii) a warrant to purchase 400 shares of common stock of the Company. The aggregate purchase price for the Units is $3,500,000, of which (i) $2,892,500 is being paid in cash at the closing of the transaction and (ii) $607,500, is being paid by the conversion of the outstanding principal and interest due on the Secured Convertible Promissory Note (the “Note”) issued by the Company to the Investor on July 27, 2020. The Purchase Agreement provides that the Investor may not sell, transfer or otherwise dispose of the Series B Preferred Stock or warrants (or the shares of Common Stock issuable thereunder) for a period of one year following the closing. As a result of the Purchase Agreement, the Company recorded a deemed dividend to the holders of the Series B Preferred Stock of $3,500,000 for the value of the warrants and beneficial conversion feature in excess of the purchase price. Additionally, the company recorded a put liability of $3,500,000 for the value of the Series B Preferred Stock redemption feature. This liability was increased by $41,137 for the 13% dividend accrued for the Series B Preferred stockholders for a balance of $3,541,137 as of September 30, 2020. Consulting Agreement On August 31, 2020, the Company entered into a consulting agreement (the “CL1 Consulting Agreement”) with a consultant (“CL1” or “Consultant”), to which Consultant will assist the Company with, among other things, general operations of the business, marketing and branding, and recruiting talent in connection with the Company’s men’s sexual health, hair loss and PDF businesses (the “Services”). As compensation for the Services, Consultant shall receive from the Company two warrants (“Consulting Warrant 1” and “Consulting Warrant 2” collectively, the “Consulting Warrants”), that entitle Consultant to purchase up to an aggregate of 750,000 of Common Stock of the Company according to the terms and conditions outlined therein, including any restrictions on exercisability. During the five-year term of Consulting Warrant 1, Consultant may purchase up to an aggregate of 500,000 shares of Common Stock, at an exercise price equal to the closing price of the Common Stock immediately prior to the Closing of $5.20 per share, and Consulting Warrant 1 becomes exercisable as to such shares of Common Stock in 18 equal monthly installments beginning on the date that is six months following the issue date or immediately prior to the consummation of a change of control of the Company. During the five-year term of Consulting Warrant 2, Consultant may purchase up to an aggregate of 250,000 shares of Common Stock, at an exercise price of $5.75 per share, and Consulting Warrant 2 becomes exercisable as to such shares of Common Stock on the date that is 24 months following the issue date or immediately prior to the consummation of a change of control of the Company. Warrant Purchase Agreement Concurrently, the Company entered into a warrant purchase agreement (the “Warrant Purchase Agreement”) with CL1 to purchase from the Company (i) a warrant to purchase 500,000 shares of Common Stock, at an exercise price equal to the closing price of the Common Stock immediately prior of $5.20 per share ($1.04 per share on a pre-split basis) (the “Class A Warrant”), for a purchase price of $15,000, and (ii) a warrant to purchase 250,000 shares of Common Stock, at an exercise price of $5.75 per share (the “Class B Warrant” and, together with the Class A Warrant, the “Purchased Warrants”), for a purchase price of $10,000. Each of the Purchased Warrants have a five-year term. Each of the Purchase Warrants is immediately exercisable as to fifty percent (50%) of the shares issuable thereunder and the remaining fifty percent (50%) shall become exercisable on the date that is six months following the issue date of each Purchased Warrant, subject to a repurchase right in favor of the Company. The fair value of the warrants above (Consulting Warrants and Purchase Warrants) was approximately $9,467,767, which was determined by the Black-Scholes Pricing Model with the following assumptions: dividend yield of 0%, term of 5 years, volatility of 161.4%, and risk-free rate of 0.28%. Total amortization for the three- and nine-months ending September 30, 2020 was $394,283 and is reflected in stock-based compensation, with unamortized costs of $9,068,504 remaining at September 30, 2020. Common Stock In March 2020, Alpha and Brio exercised their warrants in a cashless exercise for an aggregate of 367,231 shares of common stock warrants to obtain 147,858 shares of common stock. In May 2020, the Company issued a total of 843,242 shares of common stock for the cashless exercise of warrants. In May 2020, the Company issued 294,120 shares of common stock to an investor for $250,000 in cash consideration. During the nine months ended September 30, 2020 (specifically three months ended June 30, 2020), the Company issued 50,000 shares for services valued at approximately $35,200. During the nine months ended September 30, 2020 (specifically the three months ended June 30, 2020), the Company issued 2,196,740 shares of common stock for share liability of $1,726,000. In September 2020, the company received aggregate proceeds of $25,000 for the sale of warrants from the Warrant Purchase Agreement. During the three months ended September 30, 2020, the Company issued a total of 379,957 shares of common stock from the exercise of warrants and cash proceeds of $622,763. During the three months ended September 30, 2020, the Company issued a total of 335,600 shares of common stock from the exercise of stock options with cash proceeds of $300,400. During the three months ended September 30, 2020, the Company issued a total of 331,270 shares of common stock from the cashless exercise of stock options. During the three months ended September 30, 2020, the Company issued a total of 375,447 shares of common stock for share liability totaling $413,472. As of September 30, 2020, the Company has $218,848 in cash from investors which is recorded as a liability to issue shares until such time as the shares are issued. Noncontrolling Interest For the three months ended September 30, 2020 and 2019, the net loss attributed to the non-controlling interest amounted to $201,233 and $160,838, respectively. For the nine months ended September 30, 2020 and 2019, the net loss attributed to the non-controlling interest amounted to $408,180 and $375,540, respectively. During the nine months ended September 30, 2020 and 2019, the Company paid distributions to non-controlling shareholders of $121,223 and $61,625, respectively. On April 25, 2019, the Company entered into an LLC Membership Unit purchase agreement with entities owned by the Company’s Chief Executive Officer and Chief Technology Officer, and Conversion Labs PR, and simultaneously purchased the remaining 21.8% interest of Conversion Labs PR from the Company’s Chief Executive officer and Chief Technology Officer. Subsequent to the agreement’s closing, the Company now wholly-owns 100% of Conversion Labs PR. In order to consummate this transaction, the Company agreed to issue 1,000,000 shares of common stock based on the issuance price of $0.90 per share, equal to $900,000 to the Company’s Chief Executive Officer and Chief Technology Officer. The shares were issued on August 6, 2019. The difference between the value of the stock issued and net book value of the transfer to accumulated deficit was recognized in non-controlling interest in 2019 for a charge of $412,377. Stock Options On January 20, 2020, the Company approved the transition of its Chief Acquisition Officer, to the role of President of LegalSimpli (“President”). In connection with this change in role , the Company amended that certain services agreement entered into on July 23, 2018, by and between the Company and its President, to (i) decrease the number of options to purchase the Company’s common stock previously granted from 1,000,000 options to 500,000 options , 130,000 of which are fully vested as of the effective date and (ii) amend the vesting schedule for the remaining 370,000 performance options to include four performance metrics that, if met, each trigger the vesting of 92,500 options. As a result of amendment, the Company cancelled 500,000 service based options with an exercise price of $1.50. During the nine months ended September 30, 2020, the Company issued 480,000 stock options to three employees, two advisory board members, and one vendor of the Company. These stock options have a contractual term of 10 years and vest in in increments which fully vest the options over a two to three year period, dependent on the specific agreements’ terms. The following is a summary of outstanding service-based options activity for the nine months ended September 30, 2020:
|  | Options Outstanding Number of Shares |  |  | Exercise Price per Share |  |  | Weighted Average Remaining Contractual Life |  |  | Weighted Average Exercise Price per Share |
Balance, December 31, 2019 |  |  | 3,009,000 |  |  | $ | 1.00 - 2.00 |  |  |  | 4.22 years |  |  | $ | 1.50 |
Granted |  |  | 2,480,000 |  |  |  | 1.15 - 7.50 |  |  |  | 7.04 years |  |  |  | 2.85 |
Exercised |  |  | (779,039 | ) |  |  | 0.90 - 1.00 |  |  |  | 2.90 years |  |  |  | 0.95 |
Cancelled/Forfeited/Expired |  |  | (451,561 | ) |  | $ | 1.50 |  |  |  | 6.76 years |  |  |  | 1.45 |
Balance at September 30, 2020 |  |  | 2,258,400 |  |  | $ | 0.90 - 7.50 |  |  |  | 4.81 years |  |  | $ | 1.95 |
Exercisable December 31, 2019 |  |  | 2,361,083 |  |  | $ | 1.00 - 2.00 |  |  |  | 3.76 years |  |  | $ | 1.25 |
Exercisable at September 30, 2020 |  |  | 1,718,000 |  |  | $ | 1.00 - 2.00 |  |  |  | 4.40 years |  |  | $ | 1.40 |
The following is a summary of outstanding performance-based options activity for the nine months ended September 30, 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 |  |  | 1,365,000 |  |  | $ | 1.25 – 2.00 |  |  |  | 5.34 years |  |  | $ | 1.70 |
Granted |  |  | 20,000 |  |  |  | 7.50 |  |  |  | 9.25 years |  |  |  | 7.50 |
Exercised |  |  | (64,814 | ) |  |  | 1.50 |  |  |  |  |  |  |  |  |
Cancelled/Expired |  |  | (155,186 | ) |  |  | 1.50 |  |  |  | 8.06 years |  |  |  | 1.50 |
Balance at September 30, 2020 |  |  | 1,165,000 |  |  | $ | 1.25 – 7.50 |  |  |  | 5.22 years |  |  | $ | 1.80 |
Exercisable December 31, 2019 |  |  | 635,000 |  |  | $ | 1.25 – 2.00 |  |  |  | 2.63 years |  |  | $ | 2.00 |
Exercisable at September 30, 2020 |  |  | 635,000 |  |  | $ | 1.25 – 2.00 |  |  |  | 1.63 years |  |  | $ | 2.00 |
Warrants The following is a summary of outstanding and exercisable warrants activity during the nine months ended September 30, 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 |  |  | 2,265,324 |  |  | $ | 1.00 – 2.50 |  |  |  | 5.77 years |  |  | $ | 1.25 |
Granted |  |  | 2,608,543 |  |  |  | 0.65 – 5.75 |  |  |  | 3.67 years |  |  |  | 0.60 |
Exercised/Expired |  |  | (2,366,109 | ) |  |  | 0.65 - 0.70 |  |  |  | 1.11 years |  |  |  | 0.85 |
Balance at September 30, 2020 |  |  | 2,507,758 |  |  | $ | 0.65 – 2.50 |  |  |  | 4.25 years |  |  | $ | 3.80 |
Exercisable December 31, 2019 |  |  | 2,066,049 |  |  | $ | 1.00 – 2.50 |  |  |  | 6.24 years |  |  | $ | 1.55 |
Exercisable September 30, 2020 |  |  | 1,149,122 |  |  | $ | 0.65 – 2.50 |  |  |  | 4.25 years |  |  | $ | 1.70 |
August 2020 Warrant Inducement During August 2020, the Company offered an inducement to all 26 warrant holders of our $2.00 strike price warrants, which total 526,846 common stock warrants outstanding, by offering a reduced exercise price of $1.75 (a $0.25 discount) for these warrants if they are immediately exercised. For the three and nine months ended September 30, 2020, there were 379,957 of these warrants exercised, and none forfeited or adjusted. The Company accounted for the warrant inducement as a deemed dividend based on the difference in the Black-Scholes value of the warrants immediately before and immediately after the inducement. The significant assumptions used in the Company included common stock volatility of 148.49%, risk free rate of 0.14%, a weighted average term of 1.6 years and the current stock price of the Company as of the date of inducement. Based on the Black-Scholes valuation method the Company recorded a deemed dividend to additional paid in capital and retained earnings on the inducement of approximately $73,636 and received proceeds from the warrants exercised of approximately $623,000 during the three and nine months ended September 30, 2020. As of September 30, 2020, and to the date of this Form 10Q, a vast majority of the respective warrant holders have exercised the inducement related discount. Alpha Capital Anstalt (“Alpha”) Warrants On February 25, 2020, the Company and Alpha entered into a Note Repayment and Warrant Amendment Agreement (the “2018 Alpha Amendment”) whereby the Company agreed to (i) repay the outstanding balance of the convertible promissory note issued in favor of Alpha, effective on May 29, 2018, in the amount of $224,145, including principal and interest (the “2018 Alpha Note”) and (ii) amend the exercise price of the warrant (the “2018 Alpha Warrant”) issued to Alpha in connection with the 2018 Alpha Note on May 29, 2018. The 2018 Alpha Warrant originally provided for the purchase of up to 391,304 shares of the Company’s common stock at an exercise price of $1.40 per share, none of which have been exercised 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 $1.40 per share to $0.68 per share and increased the number of shares issuable under the Alpha 2018 Warrant from 391,304 to 811,594 shares. On February 25, 2020, the Company and Alpha entered into a Note Repayment and Warrant Amendment Agreement (the “2019 Alpha Amendment”) 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 (the “August 2019 Alpha Note”) and (ii) amend the exercise price of the August 2019 Warrant issued to Alpha in connection with the 2019 Alpha Note on August 15, 2019. The August 2019 Warrant issued to Alpha originally provided for the purchase of up to 365,217 shares of the Company’s common stock at an exercise price of $1.40 per share, none of which have been exercised 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 from $1.40 to $1.15, subject to further adjustment. 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 757,488 shares of the Company’s common stock. On May 7, 2020 , the Company agreed to further amend August 2019 Warrant issued to Alpha on August 15, 2019, as amended on February 25, 2020 (the “Second Alpha Warrant Amendment”). Specifically, pursuant to anti-dilution provisions contained therein, the Company agreed to amend the August 2019 Warrant issued to Alpha in order to increase the amount of shares able to be purchased thereunder by an additional 331,401 shares of the Company’s common stock or an aggregate of up to 1,088,889 shares (the “Alpha Warrant Shares”). On the same day, Alpha exercised, on a cashless basis, all of the August 2019 Warrants issued to Alpha, as amended, resulting in the issuance of 391,466 shares of the Company’s common stock to Alpha, with no effect on the Company’s statement of operations. Upon Alpha’s cashless exercise, the August 2019 Warrants issued to Alpha are no longer in force or effect and no additional issuances will be due or owing. As a result of the above transactions, the Company has recorded a deemed dividend to Alpha for the price adjustments of the August 2019 Warrant issued to Alpha 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 267,223 common stock warrants to obtain 90,231 shares 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 86,957 shares of the Company’s common stock at an exercise price of $1.40 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 $1.40 per share to $0.68 per share and increased the number of shares issuable under the 2018 Brio Warrant from 86,957 to 93,398 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 114,130 shares of the Company’s common stock at an exercise price of $1.40 per share, none of which have been exercised 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 $1.40 to $1.15, subject to further adjustment. 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 236,715 shares of the Company’s common stock. On May 7, 2020 , the Company agreed to further amend those certain warrants issued to Brio on August 15, 2019, as amended on February 25, 2020. Specifically, pursuant to anti-dilution provisions therein, the Company agreed to amend the 2019 Brio Warrant in order to increase the amount of shares able to be purchased thereunder by an additional 103,562 shares of the Company’s common stock or an aggregate of up to 340,278. On the same day, Brio exercised on a cashless basis the Brio Warrants in full resulting in the issuance of 103,562 shares of the Company’s common stock to Brio with no effect on the Company’s statement of operations. Upon Brio’s cashless exercise, the 2019 Brio Warrants are no longer in force or effect and no additional issuances will be due or owing. As a result of the above transactions, the Company has recorded a deemed dividend to Brio for the price adjustments of the Brio 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 100,000 common stock warrants to obtain 57,547 shares of common stock. Amended Consulting Agreement On September 29, 2020 (the “Effective Date”), the parties entered into an amendment to the Consulting Agreement (the “Amended Consulting Agreement”) with Blue Horizon Consulting, LLC (“Blue Horizon”) primarily to change the compensation for services provided by the Consultant. Under the Amended Consulting Agreement, Blue Horizon may receive an aggregate of up to 2,000,000 shares of the Company’s common stock, subject to adjustment, upon the Company reaching certain revenue milestones. Happy Walters, a member of the Company’s Board, is the sole owner of Blue Horizon. The Amended Consulting Agreement was approved by the Company’s disinterested directors. As a result of the Amended Consulting Agreement, the Company recorded stock compensation expense of $15,900,000 during the three and nine months ended September 30, 2020, representing the fair value of the 2,000,000 shares of common stock earned under the Amended Consulting Agreement. No shares remain unearned under the Amended Consulting Agreement as of September 30, 2020. A total of 800,000 common shares of the total 2,000,000 shares earned were issued under the Amended Consulting Agreement on October 16, 2020. Stock-based Compensation The total stock-based compensation expense related to common stock issued for services, Service-Based Stock Options, Performance-Based Stock Options and Warrants issued for service amounted to approximately $16,364,000 and $167,000 for the three months ended September 30, 2020 and 2019, respectively, and approximately $16,899,000 and $540,000 for the nine months ended September 30, 2020 and 2019, respectively. Such amounts are included in general and administrative expenses in the unaudited consolidated statement of operations.

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(e)(1)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.3-04) -URI http://asc.fasb.org/extlink&oid=120397183&loc=d3e187085-122770 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 + Details
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