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STOCKHOLDERS’ EQUITY | 12 Months Ended
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Dec. 31, 2021
Equity [Abstract] |
STOCKHOLDERS’ EQUITY | NOTE 7 – 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, 1,610,000 are designated as Series A Preferred Stock and 3,385,000 shares of preferred stock remain undesignated. On October 9, 2020, the Company effectuated the Reverse Split of the Company’s issued and outstanding shares of common stock that became effective in the market on October 14, 2020 (see Note 1). In connection with the Reverse Split, the Company issued approximately 632 shares for rounding. On June 8, 2021, the Company filed the 2021 Shelf. Under the 2021 Shelf at the time of effectiveness, the Company had the ability to raise up to $150 million by selling common stock, preferred stock, debt securities, warrants and units. In conjunction with the 2021 Shelf, the Company also entered into the ATM Sales Agreement whereby the Company may offer and sell, from time to time, shares of common stock having an aggregate offering price of up to $60 million. Under the 2021 Shelf, the Company had the ability to raise up to $150 million, of which $58.5 million was utilized during the year ended December 31, 2021. The Company has approximately $59.5 million available under the ATM Sales Agreement and $32 million available under the 2021 Shelf as of December 31, 2021. Series A Preferred Stock As noted above, in September 2021, the Company entered into the Preferred Underwriting Agreement and the Common Underwriting Agreement with B.Riley. Pursuant to the Preferred Underwriting Agreement, the Company agreed to sell 1,400,000 shares of its Series A Preferred Stock under the Preferred Stock Offering. In addition, the Company granted the underwriters an option to purchase up to an additional 210,000 shares of Series A Preferred Stock within 30 days. The option was not exercised. Pursuant to the Common Underwriting Agreement, the Company agreed to sell to B. Riley 3,833,334 Common Shares under the Common Stock Offering. The offerings, closed on October 4, 2021. Net proceeds after deducting the underwriting discounts and commissions, the structuring fee and estimated offering expenses payable by the Company, but before repayment of debt, from the Offerings was approximately $55.3 million. The Series A Preferred Stock ranks senior to the Company’s common stock with respect to the payment of dividends and liquidation rights. The Company will pay cumulative distributions on the Series A Preferred Stock, from the date of original issuance, in the amount of $2.21875 per share each year, which is equivalent to 8.875% of the $25.00 liquidation preference per share. Dividends on the Series A Preferred Stock will be payable quarterly in arrears, on or about the 15th day of January, April, July and October of each year. The first dividend on the Series A Preferred Stock sold in this offering was declared on December 23, 2021 to holders of record as of January 4, 2022 and was paid on January 14, 2022. The first dividend is included is the Company’s results of operations for the year ended December 31, 2021. Holders of the Series A Preferred Stock have no voting rights except in the case of certain dividend nonpayments. If dividends on the Series A Preferred Stock are in arrears, whether or not declared, for six or more quarterly periods, whether or not these quarterly periods are consecutive, holders of Series A Preferred Stock and holders of all other classes or series of parity preferred stock with which the holders of Series A Preferred Stock are entitled to vote together as a single class will be entitled to vote, at a special meeting called by the holders of record of at least 10% of any series of preferred stock as to which dividends are so in arrears or at the next annual meeting of shareholders, for the election of two additional directors to serve on our Board until all dividend arrearages have been paid. If and when all accumulated dividends on the Series A Preferred Stock for all past dividend periods shall have been paid in full, holders of shares of Series A Preferred Stock shall be divested of the voting rights set forth above. The Series A Preferred Stock is perpetual and has no maturity date. The Series A Preferred Stock will be redeemable at our option, in whole or in part, at the following redemption prices, plus any accrued and unpaid dividends up to, but not including, the date of redemption: 1) on and after October 15, 2022 and prior to October 15, 2023, at a redemption price equal to $25.75 per share, 2) on and after October 15, 2023 and prior to October 15, 2024, at a redemption price equal to $25.50 per share, 3) on and after October 15, 2024 and prior to and prior to October 15, 2025 at a redemption price equal to $25.25 per share and 4) on and after October 15, 2025 at a redemption price equal to $25.00 per share. In addition, upon the occurrence of a delisting event or change of control, we may, subject to certain conditions, at our option, redeem the Series A Preferred Stock, in whole or in part within 90 days after the first date on which such delisting event occurred or within 120 days after the first date on which such change of control occurred, as applicable, by paying $25.00 per share, plus any accumulated and unpaid dividends up to, but not including, the redemption date. Upon the occurrence of a delisting event or a change of control, each holder of Series A Preferred Stock will have the right unless we have provided or provide notice of our election to redeem the Series A Preferred Stock, to convert some or all of the shares of Series A Preferred Stock held by such holder into a number of shares of our common stock (or equivalent value of alternative consideration) per share of Series A Preferred Stock, or the “Common Stock Conversion Consideration”. In the case of a delisting event or change of control, pursuant to which shares of common stock shall be converted into cash, securities or other property or assets (the “Alternative Form Consideration”), a holder of shares of Series A Preferred Stock shall receive upon conversion of such shares of Series A Preferred Stock the kind and amount of Alternative Form Consideration which such holder would have owned or been entitled to receive upon the delisting event or change of control, had such holder held a number of shares of common stock equal to the Common Stock Conversion Consideration immediately prior to the effective time of the delisting event or change of control. 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, 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 $15.00 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 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 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 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, 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. The Series B Preferred Stock contains certain Change of Control provisions that preclude permanent equity classification. 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 warrants are exercisable immediately upon issuance, have a 5 year term, an exercise price of $4.60 per share, and provide for a cashless exercise. 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 this instrument in the mezzanine section of the accompanying consolidated balance sheet of $3,500,000 for the value of the Series B Preferred Stock redemption feature. This balance was increased by $155,822 for the 13% dividend accrued for the Series B Preferred stockholders for a balance of $3,655,822 as of December 31, 2020. Total dividends accrued for the year ended December 31, 2021 were $455,000 and are included in interest expense on the consolidated statement of operations. The balance for the Series B Preferred Stock was $4,110,822 as of December 31, 2021. Consulting Agreement – August 2020 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 (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 Purchased Warrants was approximately $4,743,893, 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 of the Consulting Warrants for the years ended December 31, 2021 and 2020 was $2,371,947 and $790,649, respectively, and is reflected in stock-based compensation, with unamortized costs of $1,581,298 remaining at December 31, 2021. Private Placement Offering – November 2020 On November 3, 2020, the Company consummated an initial closing of a private placement offering (the “Offering”), whereby pursuant to the securities purchase agreement (the “November 2020 Purchase Agreement”) entered into by the Company and certain accredited investors on October 30, 2020 (each an “Investor” and collectively, the “Investors”) the Company sold to such Investors an aggregate of 3,044,529 shares (the “Shares”) of the Company’s common stock, par value $0.01 per share (the “Common Stock”), for an aggregate purchase price of approximately $14.46 million (the “Purchase Price”). The Purchase Price was funded on November 3, 2020 (the “Closing Date”) and resulted in net proceeds to the Company of approximately $13.5 million. Pursuant to the November 2020 Purchase Agreement, the Company agreed, for a period of 90 days from the closing date, not to issue or enter into any agreement to issue any shares of common stock or common stock equivalents with the exception of certain exempt issuances as provided therein. BTIG, LLC (the “Placement Agent”) acted as exclusive placement agent for the Offering and received cash compensation equal to 6% of the Purchase Price and warrants to purchase 91,336 shares of the Company’s common stock, at an initial exercise price of $4.75 per share, subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split, or other similar transaction (the “PA Warrants”). The PA Warrants may be exercised on a “cashless” basis and will expire on November 3, 2025. On November 19, 2020, the Company consummated the second and final closing (“Final Closing”) of the Offering, whereby pursuant to the November 2020 Purchase Agreement entered into by the Company and an accredited investor on November 19, 2020 (the “Investor”) the Company sold to the Investor 323,892 shares (the “Shares”) of the Company’s common stock for a purchase price of approximately $1.54 million (the “Purchase Price”). The Purchase Price was funded on November 19, 2020 (the “Closing Date”) and resulted in net proceeds to the Company of approximately $1.4 million. The aggregate gross proceeds to the Company from the Offering was $16 million. Pursuant to the November 2020 Purchase Agreement, the Company agreed, for a period of 90 days from the closing date, not to issue or enter into any agreement to issue any shares of common stock or common stock equivalents with the exception of certain exempt issuances as provided therein. BTIG, LLC (the “Placement Agent”) acted as exclusive placement agent for the Offering and received cash compensation equal to 6% of the Purchase Price. In connection with the Final Closing the Placement Agent received warrants to purchase 9,717 shares of the Company’s common stock, at an initial exercise price of $4.75 per share, subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split, or other similar transaction (the “PA Warrants”). The PA Warrants expire on November 19, 2025 and may be exercised on a “cashless” basis. Convertible Promissory Notes Beginning May 21, 2020 through May 27, 2020 the Company issued convertible promissory notes (the “May 2020 Notes”) to five (5) accredited investors (each a “May 2020 Investor”, and collectively, the “May 2020 Investors”). The aggregate principal amount of the May 2020 Notes is $1,000,000 for which the Company received gross proceeds of $1,000,000. The May 2020 Notes may be converted into shares of the Company’s common stock at any time following the date of issuance at a conversion price of $2.50 per share, subject to adjustment. During the week ended November 6, 2020, all accredited investors agreed to convert the May 2020 Notes (the “Note Conversions”) pursuant to the terms therein. On November 24, 2020, the Company issued an aggregate of 447,763 shares of common stock related to the Note Conversions at $2.50 per share, resulting in the total principal and interest conversion of $1,119,408. Options and Warrants During the year ended December 31, 2021, the Company issued an aggregate of 375,000 shares of common stock related to the exercise of options for total proceeds of $670,750. During the year ended December 31, 2021, the Company issued an aggregate of 873,047 shares of common stock related to cashless exercise of options. During the year ended December 31, 2021, the Company issued an aggregate of 162,033 shares of common stock related to the exercise of warrants for total proceeds of $480,609. During the year ended December 31, 2020, the Company issued an aggregate of 535,600 shares of common stock related to the exercise of options for total proceeds of $302,400. During the year ended December 31, 2020, the Company issued an aggregate of 534,774 shares of common stock related to cashless exercise of options. During the year ended December 31, 2020, the Company issued an aggregate of 1,472,556 shares of common stock related to cashless exercise of warrants. During the year ended December 31, 2020, the Company issued a total of 379,957 shares of common stock from the exercise of warrants and cash proceeds of $622,763. Membership Interest Purchase Agreement On July 31, 2019 the Company entered into a certain membership interest purchase agreement (the “MIPA”) by and between the Company, Conversion Labs PR, a majority owned subsidiary, Taggart International Trust, an entity controlled by the Company’s Chief Executive Officer, Mr. Justin Schreiber, and American Nutra Tech LLC, a company controlled by its Chief Technology and Operating Officer, Mr. Stefan Galluppi (Mr. Schreiber, Taggart International Trust, Mr. Galluppi and American Nutra Tech LLC each a “Related Party” and collectively, the “Related Parties”). Pursuant to the MIPA, the Company purchased 21.83333% of the membership interests (the “Remaining Interests”) of Conversion Labs PR from the Related Parties, bringing the Company’s ownership of Conversion Labs PR to 100%. As consideration for the Company’s purchase of the Remaining Interests from the Related Parties, Mr. Schreiber and Mr. Galluppi agreed to cancel all potential issuances of restricted stock and or options related to their employment with the Company, in exchange for the immediate issuance of 500,000 shares of the Company’s restricted common stock to each of Mr. Schreiber and Mr. Galluppi (the “Initial Issuances”) (equal to 1,000,000 shares in the aggregate). Mr. Schreiber and Mr. Galluppi were also entitled to additional issuances pursuant to certain milestones as follows: (i) 500,000 shares of the Company’s Common Stock to each of Mr. Schreiber and Mr. Galluppi (1,000,000 shares in the aggregate) on the business day following a consecutive ninety (90) day period, during which the Company’s Common Stock shall have traded at an average price per share equal to or higher than $2.50 (the “First Milestone”), and (ii) an additional 500,000 shares of the Company’s Common Stock to each of Mr. Schreiber and Mr. Galluppi (1 million shares in the aggregate) following a consecutive ninety (90) day period during which the Common Stock shall have traded at an average price per share equal to or higher than $3.75 (the “Second Milestone” and, together with the First Milestones, the “Milestones”). Having achieved the Milestones, the Company, on December 9, 2020, issued an aggregate of 1,000,000 shares of the Company’s Common Stock to each of Mr. Schreiber and Mr. Galluppi (the “Milestone Shares”) (2,000,000 shares in the aggregate). The Milestone Shares are subject to the previously disclosed 180 day Lock-Up Agreement each of Mr. Schreiber and Mr. Galluppi signed on November 3, 2020. The Company recorded an aggregate expense of $18,060,000 reflected in general and administrative expenses during the year ended December 31, 2020 for the issuance of these 2,000,000 shares. Common Stock Common Stock Transactions During the Year Ended December 31, 2021 On February 11, 2021, the Company consummated the closing of the February 2021 Offering, whereby pursuant to the February 2021 Purchase Agreement entered into by the Company and certain accredited investors on February 11, 2021 the investors purchased 608,696 shares of the Company’s common stock par value $0.01 per share at a purchase price of $23.00 per share for aggregate gross proceeds of approximately $14.0 million. The Purchase Price was funded on the closing date and resulted in net proceeds to the Company of approximately $13.5 million after deducting fees payable to the placement agent and other estimated offering expenses payable by the Company. As noted above, in September 2021, the Company entered into the Common Underwriting Agreement with B.Riley. Pursuant to the Common Underwriting Agreement, the Company agreed to sell to B. Riley 3,833,334 Common Shares under the Common Stock Offering which closed on October 4, 2021. The Common Stock Offering resulted in net proceeds to the Company of approximately $21.8 million after deducting the underwriting discounts and commissions, the structuring fee and estimated offering expenses payable by the Company, but before repayment of debt. During the year ended December 31, 2021, the Company issued an aggregate of 1,347,875 shares of common stock for services rendered. During the year ended December 31, 2021, the Company sold 70,786 shares of common stock under the ATM Sales Agreement for net proceeds of $493,481. Common Stock Transactions During the Year Ended December 31, 2020 During the year ended December 31, 2020, the Company issued an aggregate of 2,900,000 shares of common stock related to stock issued for services totaling $18,305,000. In September 2020, the Company received aggregate proceeds of $25,000 for the sale of warrants from the Warrant Purchase Agreement. In May 2020, the Company issued 294,120 shares of common stock to an investor for $250,000 in cash consideration. During the year ended December 31, 2020, the Company issued 2,722,187 shares of common stock for share liability of $2,181,453. On November 24, 2020, the Company issued an aggregate of 447,763 shares of common stock related to the Note Conversions at $2.50 per share, totaling $1,119,408. On October 7, 2020, the Company issued a noteholder, who is also a director, 96,923 common shares in connection with a Debt Exchange Agreement dated September 22, 2020 (See Note 10). Effective October 14, 2020, the Company issued an aggregate of approximately 632 shares for rounding in connection with the Reverse Split. WorkSimpli Software Restructuring Transaction Effective January 22, 2021 (the “WSS Effective Date”), the Company consummated the WSS Restructuring. To effect the WSS Restructuring the Company’s wholly-owned subsidiary Conversion Labs PR, entered into a series of membership interest exchange agreements, pursuant to which, Conversion Labs PR exchanged that certain promissory note, dated May 8, 2019 with an outstanding balance of $375,823 (the “CVLBPR Note”), issued by WSS in favor of Conversion Labs PR, for 37,531 newly issued membership interests of WSS (the “Exchange”). Upon consummation of the Exchange the CVLBPR Note was extinguished. Concurrently, in furtherance of the WSS Restructuring, Conversion Labs PR entered into two Membership Interest Purchase Agreements (the “Founding Members MIPAs”) with two founding members of WSS (the “Founding Members”) whereby Conversion Labs PR purchased from the Founding Members an aggregate of 2,183 membership interests of WSS for an aggregate purchase price of $225,000, paid in December 2020. In furtherance of the WSS Restructuring, Conversion Labs PR entered into a Membership Interest Purchase Agreement with WSS, (the “CVLB PR MIPA”), pursuant to which Conversion Labs PR purchased 12,000 membership interests of WSS for an aggregate purchase price of $300,000. The CVLB PR MIPA provides that the transaction may be completed in three (3) tranches with a purchase price of $100,000 per tranche to be made at the sole discretion of Conversion Labs PR. Payment for the first tranche of $100,000 was made upon execution of the CVLB PR MIPA in January 2021. Payments for the second and third tranches were made on the 60-day anniversary and the 120-day anniversary of the WSS Effective Date. Following the consummation of the WSS Restructuring, Conversion Labs PR increased its ownership of WSS from 51% to approximately 85.58% on a fully diluted basis. WSS entered into an amendment to its operating agreement (the “WSS Operating Agreement Amendment”) to reflect the change in ownership. Concurrently with the WSS Restructuring, Conversion Labs PR entered into option agreements with Sean Fitzpatrick (the “Fitzpatrick Option Agreement”) and Varun Pathak (the “Pathak Option Agreement” together with Fitzpatrick Option Agreement the “Option Agreements”), pursuant to which Conversion Labs PR granted options to purchase membership interest units of WSS. Upon vesting, the Fitzpatrick Options and the Pathak Options provide for the potential re-purchase of up to an additional 13.25% of WSS by Fitzpatrick and Pathak in the aggregate with Conversion Labs PR ownership ratably reduced to approximately 72.98%. The Fitzpatrick Option Agreement grants Sean Fitzpatrick the option to purchase 10,300 membership interest units of WSS for an exercise price of $1.00 per membership interest unit. The Fitzpatrick Options vest in accordance with the following (i) 3,434 membership interests upon WSS achieving $2,500,000 of gross sales in any fiscal quarter (ii) 3,434 membership interests upon WSS achieving $4,000,000 of gross sales in any fiscal quarter, and (iii) 3,434 membership interests upon WSS achieving $8,000,000 of gross sales with a ten percent (10%) net profit margin in any fiscal quarter. The Pathak Options shall vest in accordance with the following (i) 700 membership interests upon WSS achieving $2,500,000 of gross sales in any fiscal quarter (ii) 700 membership interests upon WSS achieving $4,000,000 of gross sales in any fiscal quarter, and (iii) 700 membership interests upon WSS achieving $8,000,000 of gross sales with a ten percent (10%) net profit margin in any fiscal quarter. The first two tranches of performance options granted to Sean Fitzpatrick and Varun Pathak vested immediately after the consummation of the restructuring transaction and therefore have been recorded as part of the acquisition through equity. The third tranche is not deemed probable and therefore has not been recognized to date. Stock Options 2020 Equity Incentive Plan (the “2020 Plan”) On January 8, 2021, the Company approved the 2020 Plan. Approval of the 2020 Plan was included as Proposal 1 in the Company’s definitive proxy statement for its Special Meeting of Shareholders filed with the Securities and Exchange Commission on December 7, 2020. The 2020 Plan is administered by the Compensation Committee of the Board and initially provided for the issuance of up to 1,500,000 shares of Common Stock. The number of shares of Common Stock available for issuance under the Plan automatically increases by 150,000 shares of Common Stock on January 1st of each year, for a period of not more than ten years, commencing on January 1, 2021 and ending on (and including) January 1, 2030. As of January 1, 2021, the 2020 Plan provided for the issuance of up to 1,650,000 shares of Common Stock. Awards under the 2020 Plan can be granted in the form of stock options, non-qualified and incentive options, stock appreciation rights, restricted stock, and restricted stock units. On June 24, 2021, at the Annual Meeting of Stockholders, the stockholders of the Company approved an amendment to the 2020 Plan to increase the maximum number of shares of the Company’s common stock available for issuance under the 2020 Plan by 1,500,000 shares. As of December 31, 2021, total authorization under the 2020 Plan was 3,150,000 shares. As of January 1, 2022, the Plan provided for the issuance of up to 3,300,000 shares of Common Stock. Remaining authorization under the 2020 Plan was 633,250 shares as of December 31, 2021. The forms of award agreements to be used in connection with awards made under the 2020 Plan to the Company’s executive officers and non-employee directors are:
● | Form of Non-Qualified Option Agreement (Non-Employee Director Awards)
● | Form of Non-Qualified Option Agreement (Employee Awards); and
● | Form of Restricted Stock Award Agreement.
Previously, the Company had granted service-based stock options and performance-based stock options separate from this plan. On January 20, 2020, the Company approved the transition of its Chief Acquisition Officer, to the role of President of WorkSimpli (“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 year ended December 31, 2021, the Company issued an aggregate of 1,844,500 stock options to employees and advisory board members under the 2020 Plan and the prior plan. These stock options have contractual terms of 5 years to 10 years and vest in increments which fully vest the options over a two-to-three-year period, dependent on the specific agreements’ terms. A summary of outstanding options activity under our 2020 Plan is as follows: SCHEDULE OF OPTION ACTIVITY
|  | Options Outstanding Number of Shares |  |  | Exercise Price per Share |  |  | Weighted Average Remaining Contractual Life |  |  | Weighted Average Exercise Price per Share |
Balance, December 31, 2019 |  |  | - |  |  | $ | - |  |  |  |  |  |  | $ | - |
Granted |  |  | 720,000 |  |  |  | 7.21 – 8.81 |  |  |  | 9.76 years |  |  |  | 7.73 |
Balance, December 31, 2020 |  |  | 720,000 |  |  |  | 7.21 – 8.81 |  |  |  | 9.76 years |  |  |  | 7.73 |
Granted |  |  | 1,354,500 |  |  |  | 4.57 – 21.02 |  |  |  | 8.99 years |  |  |  | 10.34 |
Exercised |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |
Cancelled/Forfeited/Expired |  |  | (11,000 | ) |  |  | 13.74 |  |  |  | 9.48 years |  |  |  | 13.74 |
Balance at December 31, 2021 |  |  | 2,063,500 |  |  | $ | 4.57 – 21.02 |  |  |  | 8.04 years |  |  | $ | 9.41 |
Exercisable at December 31, 2020 |  |  | 63,750 |  |  | $ | 7.21 – 8.81 |  |  |  | 9.79 years |  |  | $ | 8.09 |
Exercisable at December 31, 2021 |  |  | 636,229 |  |  | $ | 4.57 – 21.02 |  |  |  | 8.95 years |  |  | $ | 9.18 |
The total fair value of the options granted was approximately $19,101,661, which was determined by the Black-Scholes Pricing Model with the following assumptions: dividend yield of 0%, expected term of 4 – 6.5 years, volatility of 165.44% – 376.18%, and risk-free rate of 0.66% – 1.29%. Total compensation expense under the 2020 Plan options above was approximately $5,566,981 and $341,729 for the years ended December 31, 2021 and 2020, respectively, with unamortized expense remaining of approximately $13,418,283 as of December 31, 2021. A summary of outstanding service-based options activity (prior to the establishment of our 2020 Plan above) is as follows: SCHEDULE OF OPTION ACTIVITY
|  | Options Outstanding Number of Shares |  |  | Exercise Price per Share |  |  | Weighted Average Remaining Contractual Life |  |  | Weighted Average Exercise Price per Share |
Balance, December 31, 2019 |  |  | 3,114,000 |  |  | $ | 0.88 – 7.50 |  |  |  | 4.11 years |  |  | $ | 1.60 |
Granted |  |  | 824,000 |  |  |  | 0.80 – 7.95 |  |  |  | 7.95 years |  |  |  | 4.62 |
Exercised |  |  | (1,175,600 | ) |  |  | 0.88 – 2.00 |  |  |  | 2.97 years |  |  |  | 1.11 |
Cancelled/Expired/Forfeited |  |  | (305,000 | ) |  |  | 1.00 – 2.00 |  |  |  | 6.52 years |  |  |  | 1.54 |
Balance, December 31, 2020 |  |  | 2,457,400 |  |  |  | 0.80 - 7.95 |  |  |  | 5.25 years |  |  |  | 2.30 |
Granted |  |  | 490,000 |  |  |  | 3.78 – 19.61 |  |  |  | 6.53 years |  |  |  | 11.64 |
Exercised |  |  | (1,122,000 | ) |  |  | 0.80 – 2.00 |  |  |  | 2.22 years |  |  |  | 1.38 |
Cancelled/Forfeited/Expired |  |  | (166,667 | ) |  |  | 1.50 – 7.50 |  |  |  | 8.74 years |  |  |  | 4.51 |
Balance at December 31, 2021 |  |  | 1,658,733 |  |  | $ | 1.00 – 19.61 |  |  |  | 5.85 years |  |  | $ | 5.45 |
Exercisable December 31, 2020 |  |  | 1,595,791 |  |  | $ | 0.80 – 7.95 |  |  |  | 2.50 years |  |  | $ | 2.46 |
Exercisable at December 31, 2021 |  |  | 1,019,164 |  |  | $ | 1.00 – 19.61 |  |  |  | 5.21 years |  |  | $ | 3.60 |
The total fair value of the options granted was approximately $5,269,769, which was determined by the Black-Scholes Pricing Model with the following assumptions: dividend yield of 0%, expected term of 4 – 6.5 years, volatility of 126.64% – 412.48%, and risk-free rate of 0.28% – 1.55%. Total compensation expense under the above service-based option plan was approximately $2,013,749 and $559,512 for the years ended December 31, 2021 and 2020, respectively, with unamortized expense remaining of approximately $4,693,484 as of December 31, 2021. Of the total service-based options exercised during the year ended December 31, 2021, 747,000 options were exercised on a cashless basis which resulted in 657,170 shares issued and 375,000 options were exercised for cash. A summary of outstanding performance-based options activity is as follows: SCHEDULE OF OPTION ACTIVITY
|  | Options Outstanding Number of Shares |  |  | Exercise Price per Share |  |  | Weighted Average Remaining Contractual Life |  |  | Weighted Average Exercise Price per Share |
Balance, December 31, 2019 |  |  | 1,375,000 |  |  | $ | 1.25 – 2.50 |  |  |  | 5.11 years |  |  | $ | 1.71 |
Cancelled/Expired |  |  | (220,000 | ) |  |  | 1.50 – 2.00 |  |  |  | 6.01 years |  |  |  | 1.70 |
Balance at December 31, 2020 |  |  | 1,155,000 |  |  |  | 1.25 – 2.50 |  |  |  | 4.94 years |  |  |  | 1.71 |
Granted |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |
Exercised |  |  | (235,000 | ) |  |  | 2.00 |  |  |  | 0.03 years |  |  |  | 2.00 |
Cancelled/Forfeited/Expired |  |  | (385,000 | ) |  |  | 1.25 – 2.00 |  |  |  | 3.94 years |  |  |  | 1.67 |
Balance at December 31, 2021 |  |  | 535,000 |  |  | $ | 1.25 – 2.50 |  |  |  | 5.59 years |  |  | $ | 1.60 |
Exercisable December 31, 2020 |  |  | 425,000 |  |  | $ | 2.00 |  |  |  | 1.18 years |  |  | $ | 2.00 |
Exercisable at December 31, 2021 |  |  | 100,000 |  |  | $ | 1.75 – 2.50 |  |  |  | 1.96 years |  |  | $ | 2.01 |
Total compensation expense under the above performance-based option plan was approximately $222,897 for the year ended December 31, 2021. No compensation expense was recognized on the performance-based option plan above for the year ended December 31, 2020 as the performance terms had not been met or were not probable. All of the performance-based options exercised during the year ended December 31, 2021, were exercised on a cashless basis which resulted in 215,877 shares issued. Restricted Stock Units (RSUs) (under 2020 Plan) A summary of outstanding RSU activity under our 2020 Plan is as follows: SCHEDULE OF WARRANT AND RESTRICTED STOCK OUTSTANDING AND EXERCISABLE
|  | RSU Outstanding Number of Shares |
Balance, December 31, 2019 |  |  | - |
Granted |  |  | - |
Balance at December 31, 2020 |  |  | - |
Granted |  |  | 459,250 |
Vested |  |  | (77,875 | )
Forfeited |  |  | (6,000 | )
Balance at December 31, 2021 |  |  | 375,375 |
The total fair value of the 459,250 RSUs granted was approximately $5,106,320 which was determined using the fair value of the quoted market price on the date of grant. Total compensation expense under the above 2020 Plan RSUs above was approximately $1,001,536 and $0 for the years ended December 31, 2021 and 2020, respectively, with unamortized expense remaining of approximately $4,063,864 as of December 31, 2021. During the year ended December 31, 2021, 77,875 RSUs vested, of which 41,875 RSUs were issued. RSUs (outside of 2020 Plan) The Company granted 620,000 RSUs outside of the 2020 Plan during the year ended December 31, 2021. The total fair value of these RSUs was approximately $6,867,600. Total compensation expense for RSUs outside of the 2020 Plan was $846,600 and $16,217,000 for the years ended December 31, 2021 and 2020, respectively, with unamortized expense remaining of approximately $6,021,000. During the year ended December 31, 2021, 20,000 RSUs vested and were issued. On October 21, 2020 and November 6, 2020, the Board of the Company, appointed two new directors to the Board. In connection with the appointments to the Board, the directors each received a one-time grant of 20,000 shares of the Company’s common stock outside of the 2020 Plan. Appointment of Chief Compliance Officer On November 20, 2020, the Board of the Company appointed a new Chief Compliance Officer and General Counsel (our “CCO”). In connection with the CCO appointment, our CCO entered into an employment agreement with the Company, which includes stock options to purchase up to 200,000 shares of the Company’s common stock with an aggregate value of $1,765,837. Appointment of Chief Operating Officer On November 27, 2020, we appointed a new Chief Operating Officer (“COO”). In connection with the appointment, our COO entered into an employment agreement dated December 21, 2020 (the “Amended and Restated Employment Agreement”) with the Company. In connection with his appointment, our COO was granted: (i) Stock Options (the “Stock Options”) to purchase up to 200,000 shares of the Company’s common stock, with 35,000 of the Stock Options scheduled to vest upon the Company’s shareholders approving a bona fide employee stock option plan (the “Plan”), and the remaining 165,000 Stock Options to vest in equal monthly tranches, based on the passage of time, over the 30 months following the approval of the Plan; and (ii) upon the approval of the Plan, a grant of 10,000 restricted stock units of the Company’s common stock in the form of RSUs, which vested on the one-year anniversary of the Amended and Restated Employment Agreement. The aggregate value of the Stock Options was $1,384,883. On June 29, 2021, the Company and our COO entered into a Second Amendment (the “Second Amendment”) to the Amended and Restated Employment Agreement dated December 21, 2020 to provide that our COO is eligible to receive up to 300,000 RSUs, which will vest subject to the Company’s Telehealth Brands (as defined in the Second Amendment) achieving certain revenue milestones. The RSUs will also vest upon a Change of Control (as defined in the Second Amendment). Appointment of Chief Acquisition Officer On December 8, 2020, the Company entered into an Amended and Restated Employment Agreement (the “Amended CAO Employment Agreement”) with the Company’s current Chief Acquisition Officer, (our “CAO”), amending and restating in its entirety the Employment Agreement between the Company and our CAO, dated July 26, 2018. Pursuant to the Amended CAO Employment Agreement, our CAO has been granted options to purchase up to 200,000 shares of Common Stock of the Company (the “CAO Options”), which shall vest at a rate of 5,555 options each month for thirty-five (35) consecutive months beginning on the Effective Date, with the final 5,575 shares vesting on December 8, 2023. The aggregate value of these options was $1,497,885. Additionally, under the Amended CAO Employment Agreement, our CAO is eligible to receive up to three hundred thousand (300,000) RSUs, subject to the Company’s Telehealth Brands (as defined in the Amended CAO Employment Agreement) achieving certain revenue milestones. The RSUs, if, and to the extent issued, will vest upon the earlier of a Change of Control (as defined in the Amended CAO Employment Agreement) or December 8, 2023. Warrants A summary of outstanding and exercisable warrant activity is as follows: SCHEDULE OF WARRANT AND RESTRICTED STOCK OUTSTANDING AND EXERCISABLE
|  | 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 |  |  | 4,209,596 |  |  |  | 0.65 – 5.75 |  |  |  | 5.56 years |  |  |  | 3.87 |
Exercised/Expired |  |  | (2,924,449 | ) |  |  | 0.65 – 0.70 |  |  |  | 0.82 years |  |  |  | 0.96 |
Balance at December 31, 2020 |  |  | 3,550,471 |  |  |  | 1.40 – 5.75 |  |  |  | 5.58 years |  |  |  | 4.56 |
Granted |  |  | 500,000 |  |  |  | 12.00 |  |  |  | 4.67 years |  |  |  | 12.00 |
Exercised |  |  | (162,033 | ) |  |  | 1.75 – 4.75 |  |  |  | 1.83 years |  |  |  | 2.97 |
Balance at December 31, 2021 |  |  | 3,888,438 |  |  | $ | 1.40 – 12.00 |  |  |  | 4.94 years |  |  | $ | 5.59 |
Exercisable December 31, 2020 |  |  | 2,144,700 |  |  | $ | 1.40 – 5.75 |  |  |  | 7.67 years |  |  | $ | 4.29 |
Exercisable December 31, 2021 |  |  | 2,621,307 |  |  | $ | 1.40 – 12.00 |  |  |  | 6.36 years |  |  | $ | 5.98 |
Total compensation expense on the above warrants for services was approximately $2,419,896 and $1,582,984 for the years ended December 31, 2021 and 2020, respectively, with unamortized expense remaining of approximately $7,917,938. 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 year ended December 31, 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 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 year ended December 31, 2020. 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 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 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 year ended December 31, 2020, representing the fair value of the 2,000,000 shares of common stock earned under the Amended Consulting Agreement during the year. No shares remained unearned under the Amended Consulting Agreement as of December 31, 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, with the remaining 1,200,000 shares issued on February 24, 2021. Stock-based Compensation The total stock-based compensation expense related to common stock issued for services, service-based stock options, performance-based stock options, warrants and RSUs amounted to approximately $12,071,659 and $36,961,141 for the years ended December 31, 2021 and 2020, respectively. Such amounts are included in general and administrative expenses in the consolidated statement of operations. Unamortized expense remaining related to service-based stock options, performance-based stock options, warrants and RSUs was approximately $36,114,569 as of December 31, 2021.

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