Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 14, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | CONVERSION LABS, INC. | |
Entity Central Index Key | 0000948320 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Reporting Status Current | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 71,063,444 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2020 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Current Assets | ||
Cash | $ 336,151 | $ 1,106,624 |
Accounts receivable, net | 436,025 | 97,448 |
Product deposit | 281,143 | 150,000 |
Inventory, net | 808,846 | 950,059 |
Other current assets | 328,922 | 442,971 |
Total Current Assets | 2,191,087 | 2,747,102 |
Non-current assets | ||
ROU Asset | 19,990 | 23,625 |
Capitalized Software, net | 305,576 | |
Intangible assets, net | 507,646 | 675,452 |
Total non-current assets | 833,212 | 699,077 |
Total Assets | 3,024,299 | 3,446,179 |
Current Liabilities | ||
Accounts payable and accrued expenses | 5,789,399 | 3,051,156 |
Notes payable, net | 1,070,945 | 814,734 |
Contract liabilities | 303,670 | 109,552 |
Total Current Liabilities | 7,164,014 | 3,975,442 |
Long-term Liabilities | ||
Lease Liability | 28,917 | 29,978 |
Contingent consideration on purchase of LegalSimpli | 100,000 | 500,000 |
Liability to issue common stock | 540,972 | |
Deferred tax liability | 70,000 | 70,000 |
Total Liabilities | 7,903,903 | 4,575,420 |
Stockholders’ Equity (Deficit) | ||
Common stock, $0.01 par value; 100,000,000 shares authorized, 71,063,440 and 53,404,045 shares issued, 70,548,248 and 52,888,845 outstanding as of June 30, 2020 and December 31, 2019, respectively | 710,631 | 534,037 |
Additional paid-in capital | 18,747,862 | 15,236,396 |
Accumulated (deficit) | (23,705,170) | (16,594,917) |
Equity | (4,246,675) | (824,484) |
Treasury stock, 515,200 and 515,200 shares, at cost | (163,701) | (163,701) |
Total Conversion Labs, Inc. Stockholders’ (Deficit) | (4,410,376) | (988,185) |
Non-controlling interest | (469,226) | (141,056) |
Total Stockholders’ (Deficit) | (4,879,602) | (1,129,241) |
Total Liabilities and Stockholders’ (Deficit) | $ 3,024,299 | $ 3,446,179 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 71,063,440 | 53,404,045 |
Common stock, shares outstanding | 70,548,248 | 52,888,845 |
Treasury stock, shares | 515,200 | 515,200 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Total revenues, net | $ 9,089,783 | $ 2,698,407 | $ 13,394,595 | $ 5,397,397 |
Cost of revenues | 2,190,208 | 655,211 | 3,949,847 | 1,333,184 |
Gross Profit | 6,899,575 | 2,043,196 | 9,444,748 | 4,064,213 |
Expenses | ||||
Selling & marketing expenses | 8,394,331 | 2,215,913 | 11,140,213 | 4,206,894 |
General and administrative expenses | 1,338,549 | 372,853 | 2,507,527 | 707,859 |
Operating expenses | 203,260 | 95,477 | 327,751 | 181,263 |
Customer service expenses | 89,482 | 141,278 | 257,667 | 268,216 |
Development Costs | 92,325 | 50,838 | 170,467 | 96,515 |
Total expenses | 10,117,947 | 2,876,360 | 14,403,625 | 5,460,747 |
Operating Loss | (3,218,372) | (833,164) | (4,958,877) | (1,396,534) |
Interest (expense), net | (228,875) | (129,826) | (1,021,914) | (300,020) |
Loss from continuing operations before provision for income taxes | (3,447,247) | (962,990) | (5,980,791) | (1,696,554) |
Income taxes (Benefit) | ||||
Net Income (Loss) | (3,447,247) | (962,990) | (5,980,791) | (1,696,554) |
Net (loss) income attributable to noncontrolling interests | (68,131) | (144,887) | (206,947) | (214,702) |
Net Income (loss) attributable to Conversion Labs, Inc. | $ (3,379,116) | $ (818,103) | $ (5,773,844) | $ (1,481,852) |
Basic loss per share attributable to Conversion Labs, Inc. from continuing operation | $ (0.06) | $ (0.02) | $ (0.10) | $ (0.04) |
Diluted loss per share attributable to Conversion Labs, Inc. from continuing operation | $ (0.06) | $ (0.02) | $ (0.10) | $ (0.04) |
Weighted Average number of common shares outstanding | ||||
Basic | 61,743,697 | 46,882,305 | 57,616,266 | 46,844,736 |
Diluted | 61,743,697 | 46,882,305 | 57,616,266 | 46,844,736 |
Product Revenues, Net [Member] | ||||
Total revenues, net | $ 7,869,813 | $ 2,307,909 | $ 10,825,614 | $ 4,729,435 |
Cost of revenues | 2,118,001 | 589,690 | 3,462,161 | 1,199,866 |
Software Revenues, Net [Member] | ||||
Total revenues, net | 1,219,970 | 390,498 | 2,568,981 | 667,962 |
Cost of revenues | 72,207 | 65,521 | 487,686 | 133,318 |
Service Revenues, Net [Member] | ||||
Total revenues, net |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Deficit - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated (Deficit) [Member] | Treasury Stock [Member] | Conversion Labs, Inc. Stockholders' (Deficit) [Member] | Noncontrolling Interest [Member] | Total |
Balance at Dec. 31, 2018 | $ 457,822 | $ 12,744,249 | $ (12,140,670) | $ (163,701) | $ 897,700 | $ (77,962) | $ 819,738 |
Balance, shares at Dec. 31, 2018 | 45,782,305 | ||||||
Stock issued for services | $ 1,000 | 15,000 | 16,000 | 16,000 | |||
Stock issued for services, shares | 100,000 | ||||||
Stock compensation | $ 10,000 | 144,600 | 154,600 | 154,600 | |||
Stock compensation, shares | 1,000,000 | ||||||
Distribution to non-controlling interest | (34,298) | (34,298) | |||||
Net (loss) | (663,747) | (663,747) | (69,816) | (733,563) | |||
Balance at Mar. 31, 2019 | $ 468,822 | 12,903,849 | (12,804,418) | (163,701) | 404,552 | (182,075) | 222,477 |
Balance, shares at Mar. 31, 2019 | 46,882,305 | ||||||
Balance at Dec. 31, 2018 | $ 457,822 | 12,744,249 | (12,140,670) | (163,701) | 897,700 | (77,962) | 819,738 |
Balance, shares at Dec. 31, 2018 | 45,782,305 | ||||||
Stock compensation | 373,000 | ||||||
Net (loss) | (1,696,554) | ||||||
Balance at Jun. 30, 2019 | $ 468,822 | 13,122,309 | (14,941,929) | (163,701) | (1,514,499) | 85,416 | (1,429,083) |
Balance, shares at Jun. 30, 2019 | 46,882,305 | ||||||
Balance at Mar. 31, 2019 | $ 468,822 | 12,903,849 | (12,804,418) | (163,701) | 404,552 | (182,075) | 222,477 |
Balance, shares at Mar. 31, 2019 | 46,882,305 | ||||||
Stock compensation | 218,460 | 218,460 | 218,460 | ||||
Agreement to issue shares for non-controlling interest in CVLB PR | (1,319,407) | (1,319,407) | 412,377 | (907,030) | |||
Net (loss) | (818,104) | (818,104) | (144,886) | (962,990) | |||
Balance at Jun. 30, 2019 | $ 468,822 | 13,122,309 | (14,941,929) | (163,701) | (1,514,499) | 85,416 | (1,429,083) |
Balance, shares at Jun. 30, 2019 | 46,882,305 | ||||||
Balance at Dec. 31, 2019 | $ 534,037 | 15,236,396 | (16,594,919) | (163,701) | (988,187) | (141,056) | (1,129,241) |
Balance, shares at Dec. 31, 2019 | 53,403,649 | ||||||
Stock compensation | 95,900 | 95,900 | 95,900 | ||||
Distribution to non-controlling interest | (36,000) | (36,000) | |||||
Cashless exercise of warrants | $ 7,389 | (7,389) | |||||
Cashless exercise of warrants, shares | 739,291 | ||||||
Deemed distribution from down-round provision in common stock shares yet to be issued | (106,519) | (106,519) | (106,519) | ||||
Deemed distribution from warrant price adjustments | 1,142,385 | (1,142,385) | |||||
Net (loss) | (2,394,728) | (2,394,728) | (138,816) | (2,533,544) | |||
Balance at Mar. 31, 2020 | $ 541,426 | 16,467,292 | (20,238,551) | (163,701) | (3,393,534) | (315,872) | (3,709,406) |
Balance, shares at Mar. 31, 2020 | 54,142,940 | ||||||
Balance at Dec. 31, 2019 | $ 534,037 | 15,236,396 | (16,594,919) | (163,701) | (988,187) | (141,056) | (1,129,241) |
Balance, shares at Dec. 31, 2019 | 53,403,649 | ||||||
Stock compensation | 535,000 | ||||||
Net (loss) | (5,980,791) | ||||||
Balance at Jun. 30, 2020 | $ 710,631 | 18,747,862 | (23,705,170) | (163,701) | (4,410,378) | (469,226) | (4,879,602) |
Balance, shares at Jun. 30, 2020 | 71,063,440 | ||||||
Balance at Mar. 31, 2020 | $ 541,426 | 16,467,292 | (20,238,551) | (163,701) | (3,393,534) | (315,872) | (3,709,406) |
Balance, shares at Mar. 31, 2020 | 54,142,940 | ||||||
Stock issued for services | $ 2,500 | 32,700 | 35,200 | 35,200 | |||
Stock issued for services, shares | 250,000 | ||||||
Stock compensation | 438,575 | 438,575 | 438,575 | ||||
Distribution to non-controlling interest | (85,223) | (85,223) | |||||
Cashless exercise of warrants | $ 42,162 | (42,162) | |||||
Cashless exercise of warrants, shares | 4,216,200 | ||||||
Deemed distribution from down-round provision in common stock shares yet to be issued | (87,503) | (87,503) | (87,503) | ||||
Purchase of common stock | $ 14,706 | 235,294 | 250,000 | 250,000 | |||
Purchase of common stock, shares | 1,470,600 | ||||||
Shares issued for share liability | $ 109,837 | 1,616,163 | 1,726,000 | 1,726,000 | |||
Shares issued for share liability, shares | 10,983,700 | ||||||
Net (loss) | (3,379,116) | (3,379,116) | (68,131) | (3,447,247) | |||
Balance at Jun. 30, 2020 | $ 710,631 | $ 18,747,862 | $ (23,705,170) | $ (163,701) | $ (4,410,378) | $ (469,226) | $ (4,879,602) |
Balance, shares at Jun. 30, 2020 | 71,063,440 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net (Loss) income | $ (5,980,791) | $ (1,696,554) |
Adjustments to reconcile net (loss) income to net cash provided by (used) in operating activities | ||
Amortization of debt discount | 739,324 | 86,268 |
Amortization of capitalized software | 11,585 | |
Amortization of intangibles | 167,806 | 167,807 |
Acceleration of debt discount | 500,145 | |
Operating Lease Payments | 2,574 | 3,453 |
Liability to issue shares for services | 32,500 | 242,969 |
Stock issued for services | 35,200 | 16,000 |
Stock compensation expense | 534,475 | 373,060 |
Changes in Assets and Liabilities | ||
Accounts receivable | (338,577) | (4,218) |
Product deposit | (131,143) | (98,275) |
Inventory | 141,213 | 319,330 |
Other current assets | 114,047 | 144,241 |
Deferred revenue | 194,118 | (3,871) |
Deferred tax liability | (4,000) | |
Accounts payable and accrued expenses | 2,880,243 | 1,113,972 |
Net cash (used in) provided by operating activities | (1,097,281) | 640,182 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Payment to seller for contingent consideration | (277,161) | (500,000) |
Proceeds from sale of legacy business | (400,000) | |
Net cash used in investing activities | (677,161) | (500,000) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Shares issued for cash | 250,000 | |
Cash receipts from investors for unissued shares | 1,639,000 | |
Debt issuance costs | (15,000) | |
Distributions to non-controlling interest | (121,223) | (34,298) |
Proceeds from notes payable | 1,750,000 | 50,000 |
Repayment of notes payable | (2,498,808) | (70,870) |
Net cash provided by (used in) financing activities | 1,003,969 | (55,168) |
Net increase in cash | (770,473) | 85,014 |
Cash at beginning of the period | 1,106,624 | 180,093 |
Cash at end of the period | 336,151 | 265,107 |
Supplemental Disclosure of Cash Flow Information | ||
Cash paid during the period for interest | 4,383 | 4,383 |
Agreement to issue shares for non-controlling interest in CVLB PR | 907,031 | |
Cashless exercise of warrants | 49,551 | |
Deemed distribution from down-round provision | 1,142,385 | |
Stock yet to be issued for capitalized costs | 40,000 | |
Deemed distribution from down-round provision on unissued shares | 194,022 | |
Shares issued for share liability | (1,726,000) | |
Debt issuance costs for liability to issue shares | $ 219,450 |
Nature of the Organization and
Nature of the Organization and Business | 6 Months Ended |
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of the Organization and Business | NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS Nature of Business Conversion Labs, Inc., was formed in the State of Delaware on May 24, 1994, under our prior name, Immudyne, Inc. We changed our name to Conversion Labs, Inc. on June 22, 2018. Further, in connection with changing its name, the Company changed its trading symbol to CVLB. On April 1, 2016, our majority-owned subsidiary, Immudyne PR LLC (“Immudyne PR”), which was initially formed for the purpose of a joint venture with the original owners of one of our skincare products, amended and restated its operating agreement whereby we increased our ownership and voting interest in Immudyne PR to 78.2%. Concurrent with the name change of the parent company to Conversion Labs, Inc. completed in 2018, Immudyne PR was renamed to Conversion Labs PR LLC (now known as “Conversion Labs PR”). On April 25, 2019, the operating agreement of Conversion Labs PR was amended and restated in its entirety after acquiring the remaining minority interest in the Conversion Labs PR, which is now a wholly-owned subsidiary of the Company. In June 2018, Conversion Labs closed the strategic acquisition of 51% of LegalSimpli Software, LLC, a software as a service (SaaS) application for converting, editing, signing and sharing PDF documents. In addition to LegalSimpli Software’s growth business model, this acquisition added deep search engine optimization and search engine marketing expertise to the Company. In early 2019, the Company also launched a service-based business under the name Conversion Labs Media LLC, which was to be used to run e-commerce marketing campaigns for other online businesses. However, this business was discontinued in 2019 in order to focus on its core business as well the expansion of our telehealth opportunities. In June 2019, a strategic joint venture with GoGoMeds.com (GoGoMeds) was formed in order to help facilitate the launch of our telemedicine business. GoGoMeds is a nationwide pharmacy licensed to dispense prescription medications directly to consumers in all 50 states and the District of Columbia. The Company is a direct to consumer response healthcare company that provides a convenient, cost-effective and smarter way for consumers to access high quality Over The Counter (OTC) products and prescription medications. The U.S. healthcare system is undergoing a paradigm shift largely due to new technologies and the emergence of direct-to-consumer healthcare. We believe the traditional model of visiting a doctor’s office, receiving a physical prescription, visiting a neighborhood pharmacy, and returning to see a doctor for follow up care or prescription refills is inefficient, costly to patients, and discourages many patients from seeking much needed medical care. Direct-to-consumer telemedicine companies, like our Company, offer patients immediate and virtual treatment from licensed physicians, and the home delivery of prescription medications, devices and diagnostics bundled with over-the counter wellness products. We have built a platform that allows us to efficiently launch telehealth and wellness product lines wherever we determine there is a market need. Our platform is supported by a driven team of digital marketing and branding experts, data analysts, designers, and engineers focused on building enduring brands. Unless otherwise indicated, the “Company” refers Conversion Labs, Inc. (formerly known as Immudyne, Inc.), our wholly subsidiary Conversion Labs PR, LLC (formerly Immudyne PR LLC, now “Conversion Labs PR”), a Puerto Rico limited liability company (“Conversion Labs PR”) and our majority-owned subsidiaries LegalSimpli Software, LLC, a Puerto Rico limited liability company (“LegalSimpli”), and Conversion Labs PR, LLC (formerly Immudyne PR LLC, now “Conversion Labs PR”), a Puerto Rico limited liability company (“Conversion Labs PR”). Unless otherwise specified, all dollar amounts are expressed in United States dollars. Liquidity The Company has funded operations in the past through the sales of its products, issuance of common stock and through loans and advances from officers and directors. The Company’s continued operations are dependent upon obtaining an increase in its sales volume and the continued financial support from officers and directors, obtaining funding from third-party sources or the issuance of additional shares of common stock. The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes the realization of assets and the satisfaction of liabilities in the normal course of business. As of June 30, 2020, the Company has an accumulated deficit approximating $23.7 million and has experienced significant losses from continuing operations. Based on the Company’s cash balance as of June 30, 2020, and projected cash needs, management estimates that it will need an additional $4.0 million through the next 12 months, either from increasing sales revenue and/or raising additional capital via the sale of common stock or other equity securities, or obtaining debt financing. Although management has been successful to date in raising necessary funding, there can be no assurance that sales revenue will substantially increase or that any required future financing can be successfully completed on a timely basis, or on terms acceptable to the Company. Based on these circumstances, management has determined that these conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The Company evaluates the need to consolidate affiliates based on standards set forth in ASC 810 Consolidation (“ASC 810”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Conversion Labs PR and its majority owned subsidiary, LegalSimpli. The non-controlling interest in LegalSimpli represents the 49% equity interest held by other members of the subsidiary. All significant consolidated transactions and balances have been eliminated in consolidation. Use of Estimates The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates required to be made by management include the determination of reserves (if necessary) for accounts receivable, returns and allowances, useful life of intangible and right of use assets, the valuation of inventory and inputs into the provision for lease liabilities and stockholders’ equity-based transactions. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to conform the prior year’s data to the current presentation. These reclassifications have no effect on previously reported operations, stockholders’ equity (deficit) or cash flows. Given the increase in the Company’s software business and to conform the Company’s presentation of operating results to industry standards, the Company has changed their categories for reporting operations, as result the Company has made reclassifications to the prior year presentation in order to conform it to the current presentation. Revenue Recognition The Company records revenue under the adoption of ASC 606 by analyzing exchanges with its customers using a five-step analysis: 1. Identify the contract 2. Identify performance obligations 3. Determine the transaction price 4. Allocate the transaction price 5. Recognize revenue For the Company’s product-based contracts with customers, the Company has determined that there is one performance obligation and the delivery of this performance obligation is transferred at a point in time. The Company generally records sales of finished products once the customer places and pays for the order and the product is simultaneously shipped by a third-party fulfillment service provider, but in limited cases if title does not pass until the product reaches the customer’s delivery site, then recognition of revenue should be deferred until that time, however the Company does not have a process to properly record the recognition of revenue if orders are not immediately shipped. Delivery is considered to have occurred when title and risk of loss have transferred to the customer, which is usually upon shipment of the product. The Company does sell a subscription based service which is based on the recurring shipment of products and billed as if the Company were receiving recurring revenues and orders each month, therefore, the Company records these upon each shipment to the customer. The Company records an estimate for provisions of discounts, returns, allowances, customer rebates and other adjustments for each shipment, and are netted with gross sales. The Company’s discounts and customer rebates are known at the time of sale and the Company appropriately debits net product revenues for these transactions based on the known discount and customer rebates. The Company estimates for customer returns and allowances based on estimates of historical transactions and accounts for such provisions during the same period in which the related revenues are earned. The Company has determined that the population of contracts with customers tends to be homogenous, so that review of the contracts and estimate of various revenue related adjustments can be applied to the entire portfolio population. Customer discounts, returns and rebates on product revenues during the three months ended June 30, 2020 and 2019 approximated $857,000 and $161,000, respectively. Customer discounts, returns and rebates on product revenues during the six months ended June 30, 2020 and 2019 approximated $1,334,000 and $713,000, respectively. The Company began testing trial offers with the Shapiro MD products in late 2018. The Company was unable to adequately implement a process to report any trial-based sales and the related impact on inventory. Given the relatively new trail period being offered, the Company has not been able to estimate the historical effect to determine how this will change the recording of revenue or expected reserve for return rates. The Company, through its majority-owned subsidiary LegalSimpli, offers a suite of software to customers as a monthly subscription based service. This suite of software allows the user or subscriber to convert almost any type of document to other editable document type formats for easy editing. For these subscription-based contracts with customers, the Company offers a 14-day trial period which is billed at $1.95 for an initial period, a monthly subscription, or a yearly subscription to the Company’s software. The Company has estimated that there is one product and performance obligation that is delivered over time, as the Company allows the subscriber to access the service for the time period purchased. The Company allows the customer to cancel at any point during the billing cycle, in which case the customers subscription will not be renewed for the following month or year depending on the original subscription. The Company records the sales over the customers subscription period for monthly and yearly subscribers or at the end of the initial 14 day service period for customers who purchased the initial subscription. The Company offers a discount for the purchase of the monthly and yearly subscriptions, which must be paid at the initiation of the contract term, so that the Contract price is fixed at the contract initiation. Yearly and monthly subscriptions for the subscription are recorded net of the Company’s known discount rates. As of June 30, 2020 and December 31, 2019, the Company has accrued contract liabilities of approximately $304,000 and $110,000, respectively, which represent obligations on in-process monthly or yearly contracts with customers and yet to be recognized initial 14-day trial periods. For the six months ended June 30, 2020 and 2019, the Company had the following disaggregated revenue : Six Months Ended June 30, 2020 % 2019 % Product revenues by Brand for Conversion Labs PR: Shapiro MD $ 8,156,378 61 % $ 4,413,157 82 % Rex MD 2,515,560 19 % - - iNR Wellness 119,254 1 % 233,594 4 % Purpurex 30,317 0 % 10,232 0 % Scarology 4,105 0 % 18,726 0 % Innate 0 0 % 4,081 0 % Total product revenue for Conversion Labs PR $ 10,825,614 81 % $ 4,679,790 86 % Software revenue for LegalSimpli 2,568,981 19 % 717,607 14 % Total net revenue $ 13,394,595 100 % $ 5,397,397 100 % Accounts Receivable Accounts receivable are carried at original sales amount less an estimate made for returns, chargebacks, and discounts. Accounts receivables mainly consist of receivables from third-party merchant processors which are settled with a couple of days. Management determines the need, if any, for an allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions and sets up an allowance for doubtful accounts when collection is uncertain. Customers’ accounts are written off when all attempts to collect have been exhausted. Recoveries of accounts receivable previously written off are recorded as income when received. As of June 30, 2020 and 2019, the Company had determined that an allowance for doubtful accounts reserve was not necessary. As of June 30, 2020 and December 31, 2019, the reserve for sales returns and allowances was approximately $351,000 and $82,000, respectively. Inventory As of June 30, 2020 and December 31, 2019, inventory consisted primarily of finished cosmetic products. Inventory is maintained at the Company’s third-party warehouse location, which is owned by a related party, in Pennsylvania and at Amazon fulfillment centers. Inventory is valued at the lower of cost or net realizable value with cost determined on a first-in, first-out (“FIFO”) basis. Management compares the cost of inventory with the net realizable value and an allowance is made for writing down inventory to net realizable, if lower. As of June 30, 2020 and December 31, 2019, the Company recorded an inventory reserve in the amount of $34,657 and $12,500, respectively. The increase in our inventory reserve mainly is attributable to the lack of marketability for our INR Wellness product line. As of June 30, 2020 and December 31, 2019, the Company’s inventory consisted of the following: June 30, 2020 December 31, 2019 Raw materials and packaging components $ 291,033 $ 37,542 Finished products 517,813 912,517 Total net inventory $ 808,846 $ 950,059 Product Deposit Many of our vendors require deposits when a purchase order is placed for goods or fulfillment services. These deposits typically ranging from 10% to 33% of the total purchased amount. Our vendors issue a credit memo when sending their final invoice, reducing the amount the Company owes for the deposit amount previously paid to the vendors. The Company capitalizes these product deposits until the inventory is received at the Company’s fulfillment centers. As of June 30, 2020 and December 31, 2019, the Company has approximately $281,000 and $150,000, respectively, of product deposits with multiple vendors for the purchase of raw materials or finished for products we sell online. As of June 30, 2020 and December 31, 2019, the vast majority of these product deposits are with one vendor that manufacturers the Company’s finished goods inventory for its Shapiro hair care product line. Capitalized Software Costs The Company capitalizes certain payroll and third-party costs related to internally developed software and amortize these costs using the straight-line method over the estimated useful life of the software, generally two years. The Company does not sell internally developed software other than through the use of subscription service. Certain development costs not meeting the criteria for capitalization, in accordance with Accounting Standards Codification (“ASC”) ASC 350-40 Internal-Use Software Intangible Assets Intangible assets are comprised of customer relationship asset and purchased licenses with estimated useful lives of three years and indefinite lived, respectively. Intangible assets are amortized over their estimated lives using the straight-line method. Costs incurred to renew or extend the term of recognized intangible assets are capitalized and amortized over the useful life of the asset. Impairment of Long-Lived Assets Long-lived assets are evaluated for impairment whenever events or changes in circumstances have indicated that an asset may not be recoverable and are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities (asset group). If the sum of the projected undiscounted cash flows (excluding interest charges) of an asset group is less than its carrying value and the fair value of an asset group is also less than its carrying value, the assets will be written down by the amount by which the carrying value of the asset group exceeded its fair value. However, the carrying amount of a finite-lived intangible asset can never be written down below its fair value. Any loss would be recognized in income from continuing operations in the period in which the determination is made. Liability to Issue Common Stock Liability to issue common stock represents liabilities of the Company for failing to issue shares of common stock timely to various consultants and or third-party investors in conjunction with various consulting, service, warrant or stock purchase agreements. As of June 30, 2020, the Company has a liability to issue 2,627,635 shares of common stock for $541,972 in fair value. During the six months ended June 30, 3020, the Company received $1,639,000 in cash from investors which was recorded as a liability to issue shares until such time as the shares were issued. The yet to be issued shares of common stock are valued based on the fair market value of the common stock price on the date of agreement or the purchase price specified in the stock purchase agreement. Income Taxes The Company files corporate federal and state tax returns. Conversion Labs PR and LegalSimpli file tax returns in Puerto Rico, both are limited liability companies and file separate tax returns with any tax liabilities or benefits passing through to its members. The Company records current and deferred taxes in accordance with Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes.” This ASC requires recognition of deferred tax assets and liabilities for temporary differences between tax basis of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted rates in effect for the year in which the differences are expected to reverse. The Company establishes a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. The Company periodically assesses the value of its deferred tax asset, a majority of which has been generated by a history of net operating losses and determines the necessity for a valuation allowance. ASC 740 also provides a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken in a tax return. Using this guidance, a company may recognize the tax benefit from an uncertain tax position in its financial statements only if it is more likely-than-not (i.e., a likelihood of more than 50%) that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company’s tax returns for all years since December 31, 2016, remain open to taxing authorities. Stock-Based Compensation The Company follows the provisions of ASC 718, “Share-Based Payment”. Under this guidance compensation cost generally is recognized at fair value on the date of the grant and amortized over the respective vesting or service period. The fair value of options at the date of grant is estimated using the Black-Scholes option pricing model. The expected option life is derived from assumed exercise rates based upon historical exercise patterns and represents the period of time that options granted are expected to be outstanding. The expected volatility is based upon historical volatility of the Company’s common stock shares using weekly price observations over an observation period that approximates the expected life of the options. The risk-free rate approximates the U.S. Treasury yield curve rate in effect at the time of grant for periods similar to the expected option life. Due to limited history of forfeitures, the estimated forfeiture rate included in the option valuation was zero. Many of the assumptions require significant judgment and any changes could have a material impact in the determination of stock-based compensation expense. Earnings (Loss) Per Share Basic earnings (loss) per common share is based on the weighted average number of shares outstanding during each period presented. Warrants and options to purchase common stock are included as common stock equivalents only when dilutive. Potential common stock equivalents are excluded from dilutive earnings per share when the effects would be antidilutive. Common stock equivalents comprising shares underlying 17,498,953 options and warrants for the three and six months ended June 30, 2020 have not been included in the loss per share calculations as the effects are anti-dilutive. Fair Value of Financial Instruments The carrying value of the Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued expenses and the face amount of notes payable approximate fair value for all periods. Concentrations of Risk The Company grants credit in the normal course of business to its customers. The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk. The Company monitors its positions with, and the credit quality of, the financial institutions with which it invests. The Company, at times, maintains balances in various operating accounts in excess of federally insured limits. We are dependent on certain third-party manufacturers, although we believe that other contract manufacturers could be quickly secured if any of our current manufacturers cease to perform adequately. As of June 30, 2020 and December 31, 2019, we utilized two (2) suppliers for fulfillment services, two (2) suppliers for manufacturing finished goods, one (1) supplier for packaging and bottles and one (1) supplier for labeling. For the three and six months ended June 30, 2020 and the year ended December 31, 2019, we purchased 100% of our finished goods from two (2) manufacturers. Recently Adopted Accounting Pronouncements In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” that expands the scope of ASC Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of ASC Topic 718 to nonemployee awards except for certain exemptions specified in the amendment. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. We do not expect the implementation of this new pronouncement to have a material impact on our consolidated financial statements. In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815)- Accounting for Certain Financial Instruments with Down Round Features” (“ASU 2017-11”). Equity-linked instruments, such as warrants and convertible instruments may contain down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings. Under ASU 2017-11, a down round feature will no longer require a freestanding equity-linked instrument (or embedded conversion option) to be classified as a liability that is remeasured at fair value through the income statement (i.e. marked-to-market). However, other features of the equity-linked instrument (or embedded conversion option) must still be evaluated to determine whether liability or equity classification is appropriate. Equity classified instruments are not marked-to-market. For earnings per share (“EPS”) reporting, the ASU requires companies to recognize the effect of the down round feature only when it is triggered by treating it as a dividend and as a reduction of income available to common shareholders in basic EPS. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This standard was adopted on January 1, 2020 and did not have a material impact on the Company’s financial position, results of operations or cash flows. Recent Accounting Pronouncements All other accounting standards updates that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. |
Intangible Assets
Intangible Assets | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | NOTE 3 – INTANGIBLE ASSETS As of June 30, 2020, the Company has the following amounts related to intangible assets: Gross Carrying Amount Accumulated Amortization Amortizable intangible assets Customer relationship asset $ 1,006,840 $ (699,194 ) Indefinite lived intangible assets Purchased licenses 200,000 - $ 1,206,840 $ (699,194 ) As of December 31, 2019 the Company has the following amounts related to intangible assets: Gross Carrying Amount Accumulated Amortization Amortizable intangible assets: Customer relationship asset $ 1,006,840 $ (531,388 ) Indefinite lived intangible assets: Purchased licenses 200,000 - $ 1,206,840 $ (531,388 ) The aggregate amortization expense of the Company’s intangible assets for the three months ended June 30, 2020 and 2019 was approximately $83,903 and $83,903, respectively. The aggregate amortization expense of the Company’s intangible assets for the six months ended June 30, 2020 and 2019 was approximately $167,806 and $167,806, respectively. Estimated amortization expense for 2020 and 2021 is approximately $336,000 and $140,000, respectively. |
Notes Payable
Notes Payable | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 4 – NOTES PAYABLE On May 29, 2018, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Alpha Capital Anstalt (“Alpha”) and Brio Capital Master Fund Ltd. (“Brio”). Pursuant to the terms of the Purchase Agreement, the Company issued and sold to them senior secured convertible notes in the aggregate original principal amount of $550,000 (collectively, the “Alpha and Brio Notes”), and warrants to purchase up to 2,391,305 shares of the Company’s common stock (collectively the “Alpha and Brio Warrants”). The Alpha and Brio Notes matured on May 2019. Interest on the outstanding principal amount of the Alpha and Brio Notes compounded annually at the annual rate of twelve percent (12%), subject to adjustments. The Alpha and Brio Notes are convertible into the Company’s common stock, at the option of the holder, at any time following issuance, unless the conversion or share issuance under the conversion would cause the holder to beneficially own in excess of 4.99% of the Company’s common stock. The conversion price for the principal and interest, if any, in connection with voluntary conversion by the Holder shall be $0.23 per share of Common Stock, subject to adjustment as defined in the Alpha and Brio Notes. Alpha and Brio have converted $344,642 of these notes including $9,922 of interest as of December 31, 2019 and 2018. As of June 30, 2020, these notes have been paid off. On August 15, 2019, the Company entered into securities purchase agreements (the “August Purchase Agreements”) with three accredited investors, including Alpha and Brio. Pursuant to the terms of the August Purchase Agreements, the Company issued and sold to the investors convertible promissory notes for the aggregate original principal amount of $1,291,500 (collectively the “August 2019 Notes”), and warrants to purchase up to 4,679,348 shares of the Company’s common stock (the “August 2019 Warrants”). The August 2019 Notes mature on August 15, 2020 and accrue interest at a rate of twelve percent (12%) per annum, subject to adjustments as defined therein. The August 2019 Notes may be converted into shares of the Company’s common stock, at the discretion of the holder, at any time following issuance, unless the conversion or share issuance under the conversion would cause the holder to beneficially own shares in excess of 4.99% of the Company’s common stock. The conversion price for the principal and interest, if any, in connection with voluntary conversion by the investors shall be $0.23 per share of common stock, subject to adjustment as defined therein. In conjunction with the August 2019 Notes, the Company issued the August 2019 Warrants with an exercise price of $0.28 per share. The fair value of August 2019 Warrants was determined to be $569,147 based on using the Black-Scholes pricing model. The August 2019 Warrants were evaluated by management and deemed to be equity-linked awards subject to ASC 810, Derivatives and Hedging. On February 25, 2020, the Company entered into a Note Repayment and Warrant Amendment Agreement with Alpha and Brio, whereby the Company agreed to repay the outstanding balance of Alpha and Brio’s August 2019 Notes in the amount of $1,291,000, including principal and interest. As a result of this transaction, the Company accelerated debt discounts for warrants, issuance costs and original issue discount of $500,145, which was recognized through interest expense on the accompanying consolidated statement of operations. As of June 30, 2020 and December 31, 2019, the gross balance payable for these notes was $0 and $1,291,000, respectively. As of June 30, 2020 and December 31, 2019, the Company has cumulatively amortized $568,322 and $404,393 of the debt discounts costs including debt issuance costs, original issue discount, and discount for warrants issued in connection with the debt transaction, all of which is included in interest expense on the accompanying consolidated statement of operations. As of June 30, 2020 and December 31, 2019, the net balance payable for these notes was $0 and $627,426, respectively. On February 18, 2020, the Company entered into two purchase agreements (the “C6 Purchase Agreements”) for the purchase and sale of future revenue with C6 Capital, LLC (“C6”). Pursuant to the terms of the C6 Purchase Agreements, the Company issued and sold to C6 two loan agreements in the aggregate original principal amount of $1,020,000. These loans contain an original purchase discount of 18%, or $270,000, in total, or $135,000 per agreement. C6 paid $375,000 per loan agreement for a total of $750,000. The Company paid debt issuance costs to C6 of $7,500 per agreement, or $15,000 in total, which was placed as a contra-debt account and will be amortized over the life of the loan. The loan agreements require the Company to pay all future receipts of the Company without recourse until such time as the purchased amount has been repaid. The loan agreements require the Company to make a daily average payment of $8,094 during the term of such agreements. As of June 30, 2020, the Company has made $161,904 in principal payments under these loan agreements. As of June 30, 2020, the gross balance payable for these loan agreements was $858,000, and the balance of the loan net of discounts was $600,424. For the three months ended March 31, 2020, the Company has amortized $27,329 of debt discount through interest expense on the accompanying statement of operations. Beginning May 21, 2020 through May 27, 2020 the Company, issued convertible promissory notes (the “May 2020 Notes”) to six (6) 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 are due and payable six months from the date of issuance. The May 2020 Notes entitle each holder to 12% interest upon Maturity. 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 $0.50 per share, subject to adjustment. As an inducement to enter into the transaction, the Company issued an aggregate of 665,000 shares of the Company’s restricted common stock to the May 2020 Investors. In the event of a default the outstanding balance of the May 2020 Notes shall increase to 130% and shall become immediately due and payable upon notice to the Company. Total interest expense on notes payable, inclusive of amortization of debt discounts, amounted to $1,021,914 and $300,000 for the six months ended June 30, 2020 and 2019, respectively. Total interest expense on notes payable, inclusive of amortization of debt discounts, amounted to $228,875 and $129,826 for the three months ended June 30, 2020 and 2019, respectively. In June 2020, the Company and its subsidiaries received loans in the aggregate amount of approximately $242,000 (the “PPP Loan”) under the new Paycheck Protection Program legislation administered by the U.S. Small Business Administration. These loans bear interest at one percent per annum (1.0%) and mature five years from the date of the first disbursement. The proceeds of the PPP Loan must be used for payroll costs, lease payments on agreements before February 15, 2020 and utility payments under agreements before February 1, 2020. At least 60% of the proceeds must be used for payroll costs and certain other expenses and no more than 40% may be used on non-payroll expenses. Proceeds from the PPP Loan used by the Company for the approved expense categories may be fully forgiven by the Small Business Administration if the Company satisfies applicable employee headcount and compensation requirements. The Company currently believes that a majority of the PPP Loan proceeds will qualify for debt forgiveness; however, there can be no assurance that the Company will qualify for forgiveness from the Small Business Administration until it occurs. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 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. 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. 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. As of June 30, 2020, the Company received $540,972 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 June 30, 2020 and 2019, the net loss attributed to the non-controlling interest amounted to $68,131 and $144,887, respectively. During the three months ended June 30, 2020 and 2019, the Company paid distributions to non-controlling shareholders of $85,223 and $0, respectively. For the six months ended June 30, 2020 and 2019, the net loss attributed to the non-controlling interest amounted to $246,947 and $214,742, respectively. During the six months ended June 30, 2020 and 2019, the Company paid distributions to non-controlling shareholders of $121,223 and $34,298, respectively. On April 25, 2019, the Company entered into an membership purchase agreement with entities owned by the Company’s Chief Executive officer and Chief Technology Officer, Conversion Labs PR, and purchased the remaining 21.8% interest of Conversion Labs PR from the Company’s Chief Executive officer and Chief Technology Officer. As such, the Company now wholly-owns 100% of Conversion labs PR. In order to consummate this transaction, the Company agreed to issue 5 million shares of common stock based on the issuance price of $0.18 per share, equal to $900,000 to the Company’s Chief Executive Officer and Chief Technology Officer. The shares were not issued until August 6, 2019, and, as such, the Company has recorded a liability on the Company’s balance sheet as of June 30, 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 for a charge of $412,377. 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. During the six months ended June 30, 2020 the Company issued 2.4 million 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 1/3 increments over a two to three year period. The following is a summary of outstanding service-based options activity for the three months ended June 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 15,045,000 $ 0.20 - 0.40 4.78 years $ 0.30 Granted 2,400,000 0.23-1.50 7.29 years 0.57 Cancelled (1,875,000 ) $ 0.30 7.50 years 0.30 Expired – – – – Balance at June 30, 2020 16,070,000 $ 0.16 - 1.50 4.56 years $ 0.34 Exercisable December 31, 2019 11,805,416 $ 0.20 - 0.40 3.76 years $ 0.25 Exercisable at June 30, 2020 14,430,416 $ 0.20 - 0.40 4.38 years $ 0.26 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 June 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 6,825,000 $ 0.25 - 0.40 5.59 years $ 0.34 Granted 100,000 1.50 9.25 1.50 Cancelled (650,000 ) 0.30- 0.30 8.06 years 0.30 Expired – – – – Balance at June 30, 2020 6,275,000 $ 0.25 – 1.50 5.39 years $ 0.36 Exercisable December 31, 2019 3,175,000 $ 0.25 - 0.40 2.63 years $ 0.40 Exercisable at June 30, 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 June 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 11,326,621 $ 0.20 - 0.50 6.02 years $ 0.25 Warrants Granted 5,642,715 0.13 - 0.14 5.49 years 0.12 Warrants Exercised (9,930,759 ) 0.13 - 0.14 1.45 years 0.14 Warrants Expired - - - - Balance at June 30, 2020 7,038,181 $ 0.13 - 0.50 5.59 years $ 0.31 Exercisable December 31, 2019 10,330,244 $ 0.20 - 0.50 6.24 years $ 0.31 Exercisable June 30, 2020 5,745,608 $ 0.13 - 0.50 5.62 $ 0.34 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 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 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 (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 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 was 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 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 1,336,155 common stock warrants to obtain 451,159 share of 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 1,657,005 shares of the Company’s common stock or an aggregate of up to 5,444,444 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 1,957,331 shares of the Company’s common stock to Alpha. 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. 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. 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 517,814 shares of the Company’s common stock or an aggregate of up to 1,701,389. On the same day, Brio exercised on a cashless basis the Brio Warrants in full resulting in the issuance of 611,666 shares of the Company’s common stock to Brio. 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. 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 approximately $439,000 and $191,000 for the three months ended June 30, 2020 and 2019, respectively. The total stock-based compensation expense related to Service-Based Stock Options, Performance-Based Stock Options and Warrants issued for service amounted to $535,000 and $373,000 for the six months ended June 30, 2020 and 2019, respectively. Such amounts are included in general and administrative expenses in the consolidated statement of operations. |
Leases
Leases | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Leases | NOTE 6– LEASES The Company primarily leases office space and other equipment using month to month terms. Conversion Labs PR utilizes office space in Puerto Rico which is subleased from Mr. Schreiber (the Company’s President and CEO) on a month to month basis and incurs expense of approximately $4,000 a month for this office space. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes all existing guidance on accounting for leases in ASC Topic 840. ASU 2016-02 is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. ASU 2016-02 will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We have reviewed ASC 842 and have determined the following impact on our financial statements: 2020 Right of Use Asset 19,990 Lease liability 28,917 In February 2018, the Company entered into a 3-year agreement to lease office space in Huntington Beach, California beginning on March 2, 2018. The rent is payable on a monthly basis in the amount of $2,106 for the first twelve months, $2,149 for the second twelve months and $2,235 for the third twelve months. A security deposit of $2,235 was paid for this lease. The Company has classified this as an operating lease and have recorded the straight-line lease expense in the accompanying statement of operations. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 7 - COMMITMENTS AND CONTINGENCIES Royalty Agreements During 2016, Conversion Labs PR entered into a sole and exclusive license, royalty and advisory agreement with Pilaris Laboratories, LLC (“Pilaris”) relating to Pilaris’ PilarisMax shampoo formulation and conditioner. The term of the agreement will be the life of the US Patent held by Pilaris. As consideration for granting Conversion Labs PR this license, Pilaris will receive on quarterly basis, 10% of the net income collected by the licensed products based on the following formula: Net Income = total income – cost of goods sold – advertising and operating expenses directly related to the marketing of the licensed products. In addition, Conversion Labs PR shall pay Pilaris a performance fee of $50,000 on the 180-day anniversary of the agreement and an additional $50,000 performance fee on the 365-day anniversary of the agreement. For the year ended December 31, 2018, the Company capitalized the license fee in the amount of $100,000, as the purchase of the fee is deemed an asset purchase under ASC 805. In April 2017, the Company issued 217,390 shares of common stock and 108,696 warrants, pursuant to a subscription agreement, for the stated consideration and satisfaction of obligation to pay $50,000 on the 180-day anniversary of the execution of this agreement. As of June 30, 2020 and December 31, 2019, the $0 and $0, respectively was included in accounts payable and accrued expenses in regard to this agreement. During 2018, the Company entered into a license agreement (the “Alphabet Agreement”) with M.ALPHABET, LLC (“Alphabet”), pursuant to which Alphabet agreed to license its PURPUREX business which consists of methods and compositions developed by Alphabet for the treatment of purpura, bruising, post-procedural bruising and traumatic bruising (the “Product Line”). Pursuant to the license granted under the Alphabet Agreement, Conversion Labs PR obtains an exclusive license to incorporate (i) any intellectual property rights related to the Product Line and (ii) all designs, drawings, formulas, chemical compositions and specifications used or useable in the Product Line into one or more products manufactured, sold, and/or distributed by Alphabet for the treatment of purpura, bruising, post-procedural bruising and traumatic bruising and for all other fields of use or purposes (the “Licensed Product(s)”), and to make, have made, advertise, promote, market, sell, import, export, use, offer to sell and distribute the Licensed Product(s) throughout the world with the exception of China, Hong Kong, Japan, and Australia (the “License”). The Company shall pay Alphabet a royalty equal to 13% of Gross Receipts (as defined in the Agreement) realized from the sales of Licensed Products. Further, so long as the Agreement is not previously terminated, the Company, also agreed to pay Alphabet $50,000 on the 120-day anniversary of the Agreement and an additional $50,000 on the 360-day anniversary of the Agreement. Upon execution of the Alphabet Agreement, Alphabet was granted a 10-year option to purchase 100,000 shares of the Company’s common stock at an exercise price of $0.50. Further, if Licensed Products have gross receipts of $7,500,000 in any calendar year, the Company will grant Alphabet an option to purchase 100,000 shares of the Company’s common stock at an exercise price of $0.50; (ii) if Licensed Products have gross receipts of $10,000,000 in any calendar year, the Company will grant Alphabet an additional option to purchase 100,000 shares of the Company’s common stock at an exercise price of $0.50 and (iii) If Licensed Products have gross receipts of $20,000,000 in any calendar year, the Company will grant Alphabet an option to purchase 200,000 shares of the Company’s common stock at an exercise price of $0.75. Employment and Consulting Agreements The Company has entered into various agreements with officers, directors, employees and consultants that expire in one to five years. Legal Matters In the normal course of business operations, the Company may become involved in various legal matters. As of June 30, 2020, the Company’s management does not believe that there are any potential legal matters that could have an adverse effect on the Company’s financial position. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 8 – RELATED PARTY TRANSACTIONS Chief Executive Officer Conversion Labs PR utilizes office space in Puerto Rico which is subleased from Mr. Schreiber (President and CEO) incurs expense of approximately $4,000 to $5,000 a month for this office space for which the Company and the CEO do not have a written lease agreement. Payments to JLS Ventures, an entity wholly owned by our Chief Executive Officer, Mr. Schreiber, for rent on Conversion Labs PR’s Puerto Rico office space amounted to $15,000 and $12,000 for the three months ended June 30, 2020 and 2019, respectively. Conversion Labs PR utilizes BV Global Fulfillment, owned by a related person of the Company’s current Chief Executive Officer to warehouse a majority of the Company’s finished goods inventory and for fulfillment services. The Company pays a monthly fee of $13,000 to $16,000 for fulfillment services and reimburses BV Global Fulfillment for their direct costs associated with shipping the Company’s products. As of June 30, 2020 and December 31, 2019, the Company owed BV Global Fulfillment $161,823 and $53,026, respectively, which are included in accounts payable and accrued liabilities on the accompany consolidated balance sheets. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 9 – SUBSEQUENT EVENTS The Company has evaluated subsequent events through the date these financial statements were issued and has identified the following: On July 27, 2020, the Company issued a secured convertible promissory Note in the principal amount of up to $1,500,000, to an accredited investor. The Company received $600,000 in aggregate gross proceeds. Any additional advances under this note would require the approval of the lender in its sole discretion. This note accrues interest at a rate of one and one-quarter percent (1.25%) per month and matures on January 24, 2021. Upon the closing of a Qualified Financing prior to repayment of this note, upon the written election by the investor, the outstanding principal and all accrued but unpaid interest thereon shall convert into fully paid and nonassessable shares of the preferred stock, par value $0.001 per share, of the Company issued and sold by the Company at the closing of a Qualified Financing. Upon such written election by the lender, this note shall convert into the number of shares of preferred stock (including fractional shares) equal to the quotient of (i) the outstanding principal and accrued but unpaid interest on this note, divided by Qualified Financing During August 2020, the Company offered an inducement to all warrant holders of our $0.40 warrants for a total 2,634,228 common stock warrants outstanding by offering a $0.05 discount on the exercise price of these warrants if they immediately exercised. The adjusted exercise price of these warrants would become $0.35. To date, a vast majority of our warrant holders have exercised this discount, but the Company is still in the process of completing the inducement. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The Company evaluates the need to consolidate affiliates based on standards set forth in ASC 810 Consolidation (“ASC 810”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Conversion Labs PR and its majority owned subsidiary, LegalSimpli. The non-controlling interest in LegalSimpli represents the 49% equity interest held by other members of the subsidiary. All significant consolidated transactions and balances have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates required to be made by management include the determination of reserves (if necessary) for accounts receivable, returns and allowances, useful life of intangible and right of use assets, the valuation of inventory and inputs into the provision for lease liabilities and stockholders’ equity-based transactions. Actual results could differ from those estimates. |
Reclassifications | Reclassifications Certain reclassifications have been made to conform the prior year’s data to the current presentation. These reclassifications have no effect on previously reported operations, stockholders’ equity (deficit) or cash flows. Given the increase in the Company’s software business and to conform the Company’s presentation of operating results to industry standards, the Company has changed their categories for reporting operations, as result the Company has made reclassifications to the prior year presentation in order to conform it to the current presentation. |
Revenue Recognition | Revenue Recognition The Company records revenue under the adoption of ASC 606 by analyzing exchanges with its customers using a five-step analysis: 1. Identify the contract 2. Identify performance obligations 3. Determine the transaction price 4. Allocate the transaction price 5. Recognize revenue For the Company’s product-based contracts with customers, the Company has determined that there is one performance obligation and the delivery of this performance obligation is transferred at a point in time. The Company generally records sales of finished products once the customer places and pays for the order and the product is simultaneously shipped by a third-party fulfillment service provider, but in limited cases if title does not pass until the product reaches the customer’s delivery site, then recognition of revenue should be deferred until that time, however the Company does not have a process to properly record the recognition of revenue if orders are not immediately shipped. Delivery is considered to have occurred when title and risk of loss have transferred to the customer, which is usually upon shipment of the product. The Company does sell a subscription based service which is based on the recurring shipment of products and billed as if the Company were receiving recurring revenues and orders each month, therefore, the Company records these upon each shipment to the customer. The Company records an estimate for provisions of discounts, returns, allowances, customer rebates and other adjustments for each shipment, and are netted with gross sales. The Company’s discounts and customer rebates are known at the time of sale and the Company appropriately debits net product revenues for these transactions based on the known discount and customer rebates. The Company estimates for customer returns and allowances based on estimates of historical transactions and accounts for such provisions during the same period in which the related revenues are earned. The Company has determined that the population of contracts with customers tends to be homogenous, so that review of the contracts and estimate of various revenue related adjustments can be applied to the entire portfolio population. Customer discounts, returns and rebates on product revenues during the three months ended June 30, 2020 and 2019 approximated $857,000 and $161,000, respectively. Customer discounts, returns and rebates on product revenues during the six months ended June 30, 2020 and 2019 approximated $1,334,000 and $713,000, respectively. The Company began testing trial offers with the Shapiro MD products in late 2018. The Company was unable to adequately implement a process to report any trial-based sales and the related impact on inventory. Given the relatively new trail period being offered, the Company has not been able to estimate the historical effect to determine how this will change the recording of revenue or expected reserve for return rates. The Company, through its majority-owned subsidiary LegalSimpli, offers a suite of software to customers as a monthly subscription based service. This suite of software allows the user or subscriber to convert almost any type of document to other editable document type formats for easy editing. For these subscription-based contracts with customers, the Company offers a 14-day trial period which is billed at $1.95 for an initial period, a monthly subscription, or a yearly subscription to the Company’s software. The Company has estimated that there is one product and performance obligation that is delivered over time, as the Company allows the subscriber to access the service for the time period purchased. The Company allows the customer to cancel at any point during the billing cycle, in which case the customers subscription will not be renewed for the following month or year depending on the original subscription. The Company records the sales over the customers subscription period for monthly and yearly subscribers or at the end of the initial 14 day service period for customers who purchased the initial subscription. The Company offers a discount for the purchase of the monthly and yearly subscriptions, which must be paid at the initiation of the contract term, so that the Contract price is fixed at the contract initiation. Yearly and monthly subscriptions for the subscription are recorded net of the Company’s known discount rates. As of June 30, 2020 and December 31, 2019, the Company has accrued contract liabilities of approximately $304,000 and $110,000, respectively, which represent obligations on in-process monthly or yearly contracts with customers and yet to be recognized initial 14-day trial periods. For the six months ended June 30, 2020 and 2019, the Company had the following disaggregated revenue : Six Months Ended June 30, 2020 % 2019 % Product revenues by Brand for Conversion Labs PR: Shapiro MD $ 8,156,378 61 % $ 4,413,157 82 % Rex MD 2,515,560 19 % - - iNR Wellness 119,254 1 % 233,594 4 % Purpurex 30,317 0 % 10,232 0 % Scarology 4,105 0 % 18,726 0 % Innate 0 0 % 4,081 0 % Total product revenue for Conversion Labs PR $ 10,825,614 81 % $ 4,679,790 86 % Software revenue for LegalSimpli 2,568,981 19 % 717,607 14 % Total net revenue $ 13,394,595 100 % $ 5,397,397 100 % |
Accounts Receivable | Accounts Receivable Accounts receivable are carried at original sales amount less an estimate made for returns, chargebacks, and discounts. Accounts receivables mainly consist of receivables from third-party merchant processors which are settled with a couple of days. Management determines the need, if any, for an allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions and sets up an allowance for doubtful accounts when collection is uncertain. Customers’ accounts are written off when all attempts to collect have been exhausted. Recoveries of accounts receivable previously written off are recorded as income when received. As of June 30, 2020 and 2019, the Company had determined that an allowance for doubtful accounts reserve was not necessary. As of June 30, 2020 and December 31, 2019, the reserve for sales returns and allowances was approximately $351,000 and $82,000, respectively. |
Inventory | Inventory As of June 30, 2020 and December 31, 2019, inventory consisted primarily of finished cosmetic products. Inventory is maintained at the Company’s third-party warehouse location, which is owned by a related party, in Pennsylvania and at Amazon fulfillment centers. Inventory is valued at the lower of cost or net realizable value with cost determined on a first-in, first-out (“FIFO”) basis. Management compares the cost of inventory with the net realizable value and an allowance is made for writing down inventory to net realizable, if lower. As of June 30, 2020 and December 31, 2019, the Company recorded an inventory reserve in the amount of $34,657 and $12,500, respectively. The increase in our inventory reserve mainly is attributable to the lack of marketability for our INR Wellness product line. As of June 30, 2020 and December 31, 2019, the Company’s inventory consisted of the following: June 30, 2020 December 31, 2019 Raw materials and packaging components $ 291,033 $ 37,542 Finished products 517,813 912,517 Total net inventory $ 808,846 $ 950,059 |
Product Deposit | Product Deposit Many of our vendors require deposits when a purchase order is placed for goods or fulfillment services. These deposits typically ranging from 10% to 33% of the total purchased amount. Our vendors issue a credit memo when sending their final invoice, reducing the amount the Company owes for the deposit amount previously paid to the vendors. The Company capitalizes these product deposits until the inventory is received at the Company’s fulfillment centers. As of June 30, 2020 and December 31, 2019, the Company has approximately $281,000 and $150,000, respectively, of product deposits with multiple vendors for the purchase of raw materials or finished for products we sell online. As of June 30, 2020 and December 31, 2019, the vast majority of these product deposits are with one vendor that manufacturers the Company’s finished goods inventory for its Shapiro hair care product line. |
Capitalized Software Costs | Capitalized Software Costs The Company capitalizes certain payroll and third-party costs related to internally developed software and amortize these costs using the straight-line method over the estimated useful life of the software, generally two years. The Company does not sell internally developed software other than through the use of subscription service. Certain development costs not meeting the criteria for capitalization, in accordance with Accounting Standards Codification (“ASC”) ASC 350-40 Internal-Use Software |
Intangible Assets | Intangible Assets Intangible assets are comprised of customer relationship asset and purchased licenses with estimated useful lives of three years and indefinite lived, respectively. Intangible assets are amortized over their estimated lives using the straight-line method. Costs incurred to renew or extend the term of recognized intangible assets are capitalized and amortized over the useful life of the asset. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Long-lived assets are evaluated for impairment whenever events or changes in circumstances have indicated that an asset may not be recoverable and are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities (asset group). If the sum of the projected undiscounted cash flows (excluding interest charges) of an asset group is less than its carrying value and the fair value of an asset group is also less than its carrying value, the assets will be written down by the amount by which the carrying value of the asset group exceeded its fair value. However, the carrying amount of a finite-lived intangible asset can never be written down below its fair value. Any loss would be recognized in income from continuing operations in the period in which the determination is made. |
Liability to Issue Common Stock | Liability to Issue Common Stock Liability to issue common stock represents liabilities of the Company for failing to issue shares of common stock timely to various consultants and or third-party investors in conjunction with various consulting, service, warrant or stock purchase agreements. As of June 30, 2020, the Company has a liability to issue 2,627,635 shares of common stock for $541,972 in fair value. During the six months ended June 30, 3020, the Company received $1,639,000 in cash from investors which was recorded as a liability to issue shares until such time as the shares were issued. The yet to be issued shares of common stock are valued based on the fair market value of the common stock price on the date of agreement or the purchase price specified in the stock purchase agreement. |
Income Taxes | Income Taxes The Company files corporate federal and state tax returns. Conversion Labs PR and LegalSimpli file tax returns in Puerto Rico, both are limited liability companies and file separate tax returns with any tax liabilities or benefits passing through to its members. The Company records current and deferred taxes in accordance with Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes.” This ASC requires recognition of deferred tax assets and liabilities for temporary differences between tax basis of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted rates in effect for the year in which the differences are expected to reverse. The Company establishes a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. The Company periodically assesses the value of its deferred tax asset, a majority of which has been generated by a history of net operating losses and determines the necessity for a valuation allowance. ASC 740 also provides a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken in a tax return. Using this guidance, a company may recognize the tax benefit from an uncertain tax position in its financial statements only if it is more likely-than-not (i.e., a likelihood of more than 50%) that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company’s tax returns for all years since December 31, 2016, remain open to taxing authorities. |
Stock-Based Compensation | Stock-Based Compensation The Company follows the provisions of ASC 718, “Share-Based Payment”. Under this guidance compensation cost generally is recognized at fair value on the date of the grant and amortized over the respective vesting or service period. The fair value of options at the date of grant is estimated using the Black-Scholes option pricing model. The expected option life is derived from assumed exercise rates based upon historical exercise patterns and represents the period of time that options granted are expected to be outstanding. The expected volatility is based upon historical volatility of the Company’s common stock shares using weekly price observations over an observation period that approximates the expected life of the options. The risk-free rate approximates the U.S. Treasury yield curve rate in effect at the time of grant for periods similar to the expected option life. Due to limited history of forfeitures, the estimated forfeiture rate included in the option valuation was zero. Many of the assumptions require significant judgment and any changes could have a material impact in the determination of stock-based compensation expense. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic earnings (loss) per common share is based on the weighted average number of shares outstanding during each period presented. Warrants and options to purchase common stock are included as common stock equivalents only when dilutive. Potential common stock equivalents are excluded from dilutive earnings per share when the effects would be antidilutive. Common stock equivalents comprising shares underlying 17,498,953 options and warrants for the three and six months ended June 30, 2020 have not been included in the loss per share calculations as the effects are anti-dilutive. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying value of the Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued expenses and the face amount of notes payable approximate fair value for all periods. |
Concentrations of Risk | Concentrations of Risk The Company grants credit in the normal course of business to its customers. The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk. The Company monitors its positions with, and the credit quality of, the financial institutions with which it invests. The Company, at times, maintains balances in various operating accounts in excess of federally insured limits. We are dependent on certain third-party manufacturers, although we believe that other contract manufacturers could be quickly secured if any of our current manufacturers cease to perform adequately. As of June 30, 2020 and December 31, 2019, we utilized two (2) suppliers for fulfillment services, two (2) suppliers for manufacturing finished goods, one (1) supplier for packaging and bottles and one (1) supplier for labeling. For the three and six months ended June 30, 2020 and the year ended December 31, 2019, we purchased 100% of our finished goods from two (2) manufacturers. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” that expands the scope of ASC Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of ASC Topic 718 to nonemployee awards except for certain exemptions specified in the amendment. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. We do not expect the implementation of this new pronouncement to have a material impact on our consolidated financial statements. In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815)- Accounting for Certain Financial Instruments with Down Round Features” (“ASU 2017-11”). Equity-linked instruments, such as warrants and convertible instruments may contain down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings. Under ASU 2017-11, a down round feature will no longer require a freestanding equity-linked instrument (or embedded conversion option) to be classified as a liability that is remeasured at fair value through the income statement (i.e. marked-to-market). However, other features of the equity-linked instrument (or embedded conversion option) must still be evaluated to determine whether liability or equity classification is appropriate. Equity classified instruments are not marked-to-market. For earnings per share (“EPS”) reporting, the ASU requires companies to recognize the effect of the down round feature only when it is triggered by treating it as a dividend and as a reduction of income available to common shareholders in basic EPS. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This standard was adopted on January 1, 2020 and did not have a material impact on the Company’s financial position, results of operations or cash flows. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements All other accounting standards updates that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Schedule of Disaggregated Revenue | For the six months ended June 30, 2020 and 2019, the Company had the following disaggregated revenue : Six Months Ended June 30, 2020 % 2019 % Product revenues by Brand for Conversion Labs PR: Shapiro MD $ 8,156,378 61 % $ 4,413,157 82 % Rex MD 2,515,560 19 % - - iNR Wellness 119,254 1 % 233,594 4 % Purpurex 30,317 0 % 10,232 0 % Scarology 4,105 0 % 18,726 0 % Innate 0 0 % 4,081 0 % Total product revenue for Conversion Labs PR $ 10,825,614 81 % $ 4,679,790 86 % Software revenue for LegalSimpli 2,568,981 19 % 717,607 14 % Total net revenue $ 13,394,595 100 % $ 5,397,397 100 % |
Summary of Inventory | As of June 30, 2020 and December 31, 2019, the Company’s inventory consisted of the following: June 30, 2020 December 31, 2019 Raw materials and packaging components $ 291,033 $ 37,542 Finished products 517,813 912,517 Total net inventory $ 808,846 $ 950,059 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | As of June 30, 2020, the Company has the following amounts related to intangible assets: Gross Carrying Amount Accumulated Amortization Amortizable intangible assets Customer relationship asset $ 1,006,840 $ (699,194 ) Indefinite lived intangible assets Purchased licenses 200,000 - $ 1,206,840 $ (699,194 ) As of December 31, 2019 the Company has the following amounts related to intangible assets: Gross Carrying Amount Accumulated Amortization Amortizable intangible assets: Customer relationship asset $ 1,006,840 $ (531,388 ) Indefinite lived intangible assets: Purchased licenses 200,000 - $ 1,206,840 $ (531,388 ) |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Schedule of Warrant Outstanding and Exercisable | The following is a summary of outstanding and exercisable warrants activity during the three months ended June 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 11,326,621 $ 0.20 - 0.50 6.02 years $ 0.25 Warrants Granted 5,642,715 0.13 - 0.14 5.49 years 0.12 Warrants Exercised (9,930,759 ) 0.13 - 0.14 1.45 years 0.14 Warrants Expired - - - - Balance at June 30, 2020 7,038,181 $ 0.13 - 0.50 5.59 years $ 0.31 Exercisable December 31, 2019 10,330,244 $ 0.20 - 0.50 6.24 years $ 0.31 Exercisable June 30, 2020 5,745,608 $ 0.13 - 0.50 5.62 $ 0.34 |
Service-Based Stock Options [Member] | |
Schedule of Option Activity | The following is a summary of outstanding service-based options activity for the three months ended June 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 15,045,000 $ 0.20 - 0.40 4.78 years $ 0.30 Granted 2,400,000 0.23-1.50 7.29 years 0.57 Cancelled (1,875,000 ) $ 0.30 7.50 years 0.30 Expired – – – – Balance at June 30, 2020 16,070,000 $ 0.16 - 1.50 4.56 years $ 0.34 Exercisable December 31, 2019 11,805,416 $ 0.20 - 0.40 3.76 years $ 0.25 Exercisable at June 30, 2020 14,430,416 $ 0.20 - 0.40 4.38 years $ 0.26 |
Performance-Based Stock Options [Member] | |
Schedule of Option Activity | The following is a summary of outstanding performance-based options activity for the three months ended June 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 6,825,000 $ 0.25 - 0.40 5.59 years $ 0.34 Granted 100,000 1.50 9.25 1.50 Cancelled (650,000 ) 0.30- 0.30 8.06 years 0.30 Expired – – – – Balance at June 30, 2020 6,275,000 $ 0.25 – 1.50 5.39 years $ 0.36 Exercisable December 31, 2019 3,175,000 $ 0.25 - 0.40 2.63 years $ 0.40 Exercisable at June 30, 2020 3,175,000 $ 0.25 - 0.40 2.63 years $ 0.40 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Schedule of Leases | We have reviewed ASC 842 and have determined the following impact on our financial statements: 2020 Right of Use Asset 19,990 Lease liability 28,917 |
Nature of the Organization an_2
Nature of the Organization and Business (Details Narrative) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2018 | Apr. 01, 2016 |
Accumulated deficit | $ (23,705,170) | $ (16,594,917) | ||
Through the Next 12 Months [Member] | ||||
Additional cash | $ 4,000,000 | |||
Immudyne PR LLC [Member] | ||||
Percentage of ownership equity interest | 78.20% | |||
LegalSimpli Software, LLC [Member] | ||||
Percentage of purchase business acquired | 51.00% |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Subscription price per share | $ 1.95 | $ 1.95 | |||
Accrued contract liabilities | $ 303,670 | $ 303,670 | $ 109,552 | ||
Accounts receivable reserve | 351,000 | 351,000 | 82,000 | ||
Inventory reserve | 34,657 | 34,657 | 12,500 | ||
Product deposit | 281,143 | 281,143 | $ 150,000 | ||
Capitalized software costs | 317,160 | $ 0 | 317,160 | $ 0 | |
Amortization of capitalized software | $ 11,585 | ||||
Liability to issuance of common stock | 2,627,635 | ||||
Common stock fair value | 541,972 | $ 541,972 | |||
Cash receipts from investors for unissued shares | $ 1,639,000 | ||||
Two Manufacturers [Member] | |||||
Concentration risk, percentage | 100.00% | 100.00% | |||
Options and Warrants [Member] | |||||
Antidilutive securities excluded from computation of earnings per share | 17,498,953 | ||||
Capitalized Stock-Based Compensation [Member] | |||||
Capitalized software costs | 40,000 | $ 40,000 | |||
Minimum [Member] | |||||
Deposits percentage | 10.00% | ||||
Maximum [Member] | |||||
Deposits percentage | 33.00% | ||||
Product Revenues, Net [Member] | |||||
Customer discounts, returns and rebates | $ 857,000 | $ 161,000 | $ 1,334,000 | $ 713,000 | |
LegalSimpli Software, LLC [Member] | |||||
Non-controlling interest rate | 49.00% |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Disaggregated Revenue (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Product Revenues, Net [Member] | CVLB PR [Member] | ||
Total net revenue | $ 10,825,614 | $ 4,679,790 |
Net revenue, percentage | 81.00% | 86.00% |
Product Revenues, Net [Member] | Shapiro MD [Member] | CVLB PR [Member] | ||
Total net revenue | $ 8,156,378 | $ 4,413,157 |
Net revenue, percentage | 61.00% | 82.00% |
Product Revenues, Net [Member] | Rex MD [Member] | CVLB PR [Member] | ||
Total net revenue | $ 2,515,560 | |
Net revenue, percentage | 19.00% | |
Product Revenues, Net [Member] | iNR Wellness [Member] | CVLB PR [Member] | ||
Total net revenue | $ 119,254 | $ 233,594 |
Net revenue, percentage | 1.00% | 4.00% |
Product Revenues, Net [Member] | Purpurex [Member] | CVLB PR [Member] | ||
Total net revenue | $ 30,317 | $ 10,232 |
Net revenue, percentage | 0.00% | 0.00% |
Product Revenues, Net [Member] | Scarology [Member] | CVLB PR [Member] | ||
Total net revenue | $ 4,105 | $ 18,726 |
Net revenue, percentage | 0.00% | 0.00% |
Product Revenues, Net [Member] | Innate [Member] | CVLB PR [Member] | ||
Total net revenue | $ 0 | $ 4,081 |
Net revenue, percentage | 0.00% | 0.00% |
Software Revenues, Net [Member] | LegalSimpli Software, LLC [Member] | ||
Total net revenue | $ 2,568,981 | $ 717,607 |
Net revenue, percentage | 19.00% | 14.00% |
Service Revenues, Net [Member] | Conversion Labs Media, LLC [Member] | ||
Total net revenue | $ 13,394,595 | $ 5,397,397 |
Net revenue, percentage | 100.00% | 100.00% |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Summary of Inventory (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Accounting Policies [Abstract] | ||
Raw materials and packaging components | $ 291,033 | $ 37,542 |
Finished products | 517,813 | 912,517 |
Total net inventory | $ 808,846 | $ 950,059 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense | $ 83,903 | $ 83,903 | $ 167,806 | $ 167,807 |
Amortization expense 2020 | 336,000 | 336,000 | ||
Amortization expense 2021 | $ 140,000 | $ 140,000 |
Intangible Assets - Schedule of
Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Gross Carrying Amount | $ 1,206,840 | $ 1,206,840 |
Accumulated Amortization | (699,194) | (531,388) |
Customer Relationship Asset [Member] | ||
Gross Carrying Amount | 1,006,840 | 1,006,840 |
Accumulated Amortization | (699,194) | (531,388) |
Purchased Licenses [Member] | ||
Gross Carrying Amount | 200,000 | 200,000 |
Accumulated Amortization |
Notes Payable - (Details Narrat
Notes Payable - (Details Narrative) - USD ($) | May 27, 2020 | Feb. 18, 2020 | Aug. 15, 2019 | May 29, 2018 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2020 | Feb. 25, 2020 | Feb. 15, 2020 |
Repayments of notes payable | $ 2,498,808 | $ 70,870 | |||||||||||
Proceeds from note payable | 1,750,000 | 50,000 | |||||||||||
Convertible Note Payable [Member] | |||||||||||||
Interest expense on notes payable | $ 228,875 | $ 129,826 | 1,021,914 | 300,000 | |||||||||
6 Accredited Investors [Member] | May 2020 Notes [Member] | |||||||||||||
Debt instrument, interest rate | 12.00% | ||||||||||||
Debt, voluntary conversion price per share | $ 0.50 | ||||||||||||
Aggregate principal amount | $ 1,000,000 | ||||||||||||
Proceeds from convertible promissory notes | $ 1,000,000 | ||||||||||||
Restricted common stock | 665,000 | ||||||||||||
Increase outstanding notes percentage | 130.00% | ||||||||||||
Securities Purchase Agreement [Member] | Three Accredited Investors [Member] | |||||||||||||
Debt instrument, face amount | $ 1,291,500 | ||||||||||||
Debt instrument, interest rate | 12.00% | ||||||||||||
Debt instrument, conversion rate | 4.99% | ||||||||||||
Debt, voluntary conversion price per share | $ 0.23 | ||||||||||||
Debt interest, maturity date | Aug. 15, 2020 | ||||||||||||
Original issue discount, percentage | 20.00% | ||||||||||||
Original issue discount, value | $ 215,250 | ||||||||||||
Proceeds from note payable | 1,291,500 | ||||||||||||
Debt issuance costs | $ 284,070 | ||||||||||||
Securities Purchase Agreement [Member] | Three Accredited Investors [Member] | In Conjuction with Convertible Notes Payable [Member] | |||||||||||||
Warrants exercise price per share | $ 0.28 | ||||||||||||
Value of warrants | 569,147 | ||||||||||||
Securities Purchase Agreement [Member] | Three Accredited Investors [Member] | Maximum [Member] | |||||||||||||
Number of warrants to purchase common stock | 4,679,348 | ||||||||||||
Securities Purchase Agreement [Member] | Alpha Capital Anstalt and Brio Capital Master Fund Ltd. [Member] | |||||||||||||
Debt instrument, face amount | $ 550,000 | ||||||||||||
Number of warrants to purchase common stock | 2,391,305 | ||||||||||||
Debt instrument, interest rate | 12.00% | ||||||||||||
Debt instrument, conversion rate | 4.99% | ||||||||||||
Debt, voluntary conversion price per share | $ 0.23 | ||||||||||||
Debt conversion, converted value | $ 344,642 | $ 344,642 | |||||||||||
Debt conversion, interest value | 9,922 | $ 9,922 | |||||||||||
Debt interest, maturity date | May 31, 2019 | ||||||||||||
Note Repayment and Warrant Amendment Agreement [Member] | Alpha Capital Anstalt and Brio Capital Master Fund Ltd. [Member] | |||||||||||||
Debt instrument, face amount | $ 1,291,000 | ||||||||||||
Original issue discount, value | 568,322 | 568,322 | 404,393 | ||||||||||
Debt issuance costs | $ 500,145 | ||||||||||||
Note payable | 0 | 0 | 1,291,000 | ||||||||||
Notes payable, current | 0 | 0 | $ 627,426 | ||||||||||
C6 Purchase Agreements [Member] | C6 Capital, LLC [Member] | |||||||||||||
Debt instrument, face amount | $ 1,020,000 | ||||||||||||
Repayments of notes payable | $ 750,000 | ||||||||||||
Original issue discount, percentage | 18.00% | ||||||||||||
Original issue discount, value | $ 270,000 | ||||||||||||
Debt issuance costs | 15,000 | ||||||||||||
C6 Purchase Agreements [Member] | C6 Capital, LLC [Member] | Daily Average Payment [Member] | |||||||||||||
Repayments of notes payable | 8,094 | ||||||||||||
C6 Purchase Agreements [Member] | C6 Capital, LLC [Member] | Per Agreement [Member] | |||||||||||||
Original issue discount, value | 135,000 | ||||||||||||
C6 Purchase Agreement One [Member] | C6 Capital, LLC [Member] | |||||||||||||
Repayments of notes payable | 375,000 | ||||||||||||
C6 Purchase Agreement Two [Member] | C6 Capital, LLC [Member] | |||||||||||||
Repayments of notes payable | 375,000 | ||||||||||||
C6 Purchase Agreements One [Member] | C6 Capital, LLC [Member] | |||||||||||||
Debt issuance costs | 7,500 | ||||||||||||
C6 Purchase Agreements Two [Member] | C6 Capital, LLC [Member] | |||||||||||||
Debt issuance costs | $ 7,500 | ||||||||||||
Two C6 Purchase Agreements [Member] | C6 Capital, LLC [Member] | |||||||||||||
Debt instrument, face amount | 161,904 | 161,904 | |||||||||||
Original issue discount, value | 600,424 | 600,424 | |||||||||||
Note payable | $ 858,000 | $ 858,000 | |||||||||||
Debt instrument, unamortized discount, net | $ 27,329 | ||||||||||||
Paycheck Protection Program Loan [Member] | US Small Business Administration [Member] | |||||||||||||
Debt instrument, face amount | $ 242,000 | $ 242,000 | |||||||||||
Debt instrument, interest rate | 1.00% | 1.00% | 60.00% | ||||||||||
Non-payroll expenses percentage | 40.00% |
Stockholder's Equity (Details N
Stockholder's Equity (Details Narrative) - USD ($) | May 07, 2020 | Feb. 25, 2020 | Jan. 20, 2020 | Apr. 25, 2019 | Feb. 29, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 |
Cash consideration | $ 250,000 | |||||||||||
Cash receipts from investors for unissued shares | $ 1,639,000 | |||||||||||
Net loss attributed to non-controlling interest | (68,131) | $ (144,887) | (206,947) | (214,702) | ||||||||
Distributions to non-controlling interest | 72,000 | 72,000 | (121,223) | (34,298) | ||||||||
Accumulated deficit | (23,705,170) | (23,705,170) | $ (16,594,917) | |||||||||
Deemed distribution from warrant price adjustments | ||||||||||||
Value of shares issued for compensation | $ 438,575 | $ 95,900 | $ 218,460 | $ 154,600 | $ 535,000 | $ 373,000 | ||||||
Brio Capital Master Fund Ltd. [Member] | 2019 Brio Warrant [Member] | ||||||||||||
Issuance of common stock, shares | 611,666 | |||||||||||
Additional shares of common stock | 517,814 | |||||||||||
Maximum [Member] | Brio Capital Master Fund Ltd. [Member] | 2019 Brio Warrant [Member] | ||||||||||||
Issuance of common stock, shares | 1,701,389 | |||||||||||
Service-Based Stock Options [Member] | ||||||||||||
Number of shares cancelled during period | 1,875,000 | |||||||||||
Stock options issued | 16,070,000 | 16,070,000 | 15,045,000 | |||||||||
Note Repayment and Warrant Amendment Agreement [Member] | Alpha Capital Anstalt [Member] | ||||||||||||
Issuance of common stock, shares | 451,159 | |||||||||||
Cashless exercise of warrants, shares | 1,336,155 | |||||||||||
Deemed distribution from warrant price adjustments | $ 915,479 | |||||||||||
Note Repayment and Warrant Amendment Agreement [Member] | Alpha Capital Anstalt [Member] | 2018 Alpha Note [Member] | ||||||||||||
Convertible promissory note | $ 224,145 | |||||||||||
Warrant exercise price | $ 0.28 | |||||||||||
Note Repayment and Warrant Amendment Agreement [Member] | Alpha Capital Anstalt [Member] | 2019 Alpha Note [Member] | ||||||||||||
Options to purchase shares of common stock | 1,826,087 | |||||||||||
Convertible promissory note | $ 520,000 | |||||||||||
Warrant exercise price | $ 0.28 | |||||||||||
Warrant exercise price description | The exercise price were actually reduced to $0.135 and thereafter increased to $0.23. | |||||||||||
Note Repayment and Warrant Amendment Agreement [Member] | Brio Master Fund [Member] | ||||||||||||
Issuance of common stock, shares | 287,736 | |||||||||||
Cashless exercise of warrants, shares | 500,000 | |||||||||||
Deemed distribution from warrant price adjustments | $ 226,906 | |||||||||||
Note Repayment and Warrant Amendment Agreement [Member] | Brio Master Fund [Member] | Brio 2019 Warrant [Member] | ||||||||||||
Convertible promissory note | $ 162,500 | |||||||||||
Warrant exercise price | $ 0.28 | |||||||||||
Warrant exercise price description | 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. | |||||||||||
Note Repayment and Warrant Amendment Agreement [Member] | Maximum [Member] | Alpha Capital Anstalt [Member] | 2018 Alpha Note [Member] | ||||||||||||
Options to purchase shares of common stock | 1,956,522 | |||||||||||
Note Repayment and Warrant Amendment Agreement [Member] | Maximum [Member] | Brio Master Fund [Member] | Brio 2018 Warrant [Member] | ||||||||||||
Options to purchase shares of common stock | 434,783 | |||||||||||
Warrant exercise price | $ 0.28 | |||||||||||
Note Repayment and Warrant Amendment Agreement [Member] | Maximum [Member] | Brio Master Fund [Member] | Brio 2019 Warrant [Member] | ||||||||||||
Options to purchase shares of common stock | 570,652 | |||||||||||
2018 Alpha Amendment [Member] | Maximum [Member] | Alpha Capital Anstalt [Member] | 2018 Alpha Warrant [Member] | ||||||||||||
Warrant exercise price | $ 0.135 | |||||||||||
Warrant | 4,057,972 | |||||||||||
2018 Alpha Amendment [Member] | Minimum [Member] | Alpha Capital Anstalt [Member] | 2018 Alpha Warrant [Member] | ||||||||||||
Warrant exercise price | $ 0.28 | |||||||||||
Warrant | 1,956,522 | |||||||||||
2019 Alpha Amendment [Member] | Alpha Capital Anstalt [Member] | 2019 Alpha Warrant [Member] | ||||||||||||
Deemed warrant exercise price | $ 0.135 | |||||||||||
2019 Alpha Amendment [Member] | Maximum [Member] | Alpha Capital Anstalt [Member] | 2019 Alpha Warrant [Member] | ||||||||||||
Warrant exercise price | $ 0.23 | |||||||||||
Warrant to purchase of common stock | 3,787,439 | |||||||||||
2019 Alpha Amendment [Member] | Minimum [Member] | Alpha Capital Anstalt [Member] | 2019 Alpha Warrant [Member] | ||||||||||||
Warrant exercise price | $ 0.28 | |||||||||||
Second Alpha Warrant Amendment [Member] | August 2019 Warrant [Member] | ||||||||||||
Issuance of common stock, shares | 1,957,331 | |||||||||||
Additional shares of common stock | 1,657,005 | |||||||||||
Second Alpha Warrant Amendment [Member] | Maximum [Member] | August 2019 Warrant [Member] | ||||||||||||
Issuance of common stock, shares | 5,444,444 | |||||||||||
2018 Brio Warrant Amendment [Member] | Maximum [Member] | Brio Master Fund [Member] | 2018 Brio Warrant [Member] | ||||||||||||
Warrant exercise price | $ 0.135 | |||||||||||
Warrant | 466,989 | |||||||||||
2018 Brio Warrant Amendment [Member] | Minimum [Member] | Brio Master Fund [Member] | 2018 Brio Warrant [Member] | ||||||||||||
Warrant exercise price | $ 0.28 | |||||||||||
Warrant | 434,783 | |||||||||||
2019 Brio Amendment [Member] | Maximum [Member] | Brio Master Fund [Member] | Brio 2019 Warrant [Member] | ||||||||||||
Warrant exercise price | $ 0.28 | |||||||||||
Deemed warrant exercise price | $ 0.23 | |||||||||||
Warrant to purchase of common stock | 1,183,575 | |||||||||||
2019 Brio Amendment [Member] | Minimum [Member] | Brio Master Fund [Member] | Brio 2019 Warrant [Member] | ||||||||||||
Warrant exercise price | $ 0.23 | |||||||||||
Deemed warrant exercise price | $ 0.135 | |||||||||||
Third Investor [Member] | Stock Purchase Agreement [Member] | ||||||||||||
Issuance of common stock, shares | 4,000,000 | |||||||||||
Cash consideration | $ 640,000 | |||||||||||
Third-Party Investors [Member] | Stock Purchase Agreement [Member] | ||||||||||||
Issuance of common stock, shares | 1,250,000 | |||||||||||
Share issue price per share | $ 0.16 | |||||||||||
Cash consideration | $ 200,000 | |||||||||||
Alpha and Brio [Member] | ||||||||||||
Issuance of common stock, shares | 739,291 | |||||||||||
Cashless exercise of warrants, shares | 1,836,155 | |||||||||||
Company Chief Executive Officer [Member] | Purchase Agreement [Member] | ||||||||||||
Issuance of common stock, shares | 5,000,000 | |||||||||||
Share issue price per share | $ 0.18 | |||||||||||
Cash consideration | $ 900,000 | |||||||||||
Purchased remaining interest percentage | 21.80% | |||||||||||
Ownership percentage | 100.00% | |||||||||||
Accumulated deficit | $ 412,377 | |||||||||||
Chief Technology Officer [Member] | Purchase Agreement [Member] | ||||||||||||
Issuance of common stock, shares | 5,000,000 | |||||||||||
Cash consideration | $ 900,000 | |||||||||||
Mr.Sean Fitzpatrick [Member] | Services Agreement [Member] | Service-Based Stock Options [Member] | ||||||||||||
Stock based compensation description | 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. | |||||||||||
Options to purchase shares of common stock | 5,000,000 | |||||||||||
Options granted fully vested | 650,000 | |||||||||||
Remaining performance options | 1,850,000 | |||||||||||
Trigger the vesting of options | 462,500 | |||||||||||
Number of shares cancelled during period | 1,850,000 | |||||||||||
Purchase of common stock exercise price | $ 0.30 | |||||||||||
Mr.Sean Fitzpatrick [Member] | Services Agreement [Member] | Service-Based Stock Options [Member] | Maximum [Member] | ||||||||||||
Options to purchase shares of common stock | 2,500,000 | |||||||||||
Mr.Sean Fitzpatrick [Member] | Services Agreement [Member] | Performance-Based Stock Options [Member] | ||||||||||||
Stock based compensation description | 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. | |||||||||||
Options to purchase shares of common stock | 5,000,000 | |||||||||||
Options granted fully vested | 650,000 | |||||||||||
Remaining performance options | 1,850,000 | |||||||||||
Trigger the vesting of options | 462,500 | |||||||||||
Number of shares cancelled during period | 1,850,000 | |||||||||||
Purchase of common stock exercise price | $ 0.30 | |||||||||||
Mr.Sean Fitzpatrick [Member] | Services Agreement [Member] | Performance-Based Stock Options [Member] | Maximum [Member] | ||||||||||||
Options to purchase shares of common stock | 2,500,000 | |||||||||||
Three Employees, Two Advisory Board Members and One Vendor [Member] | ||||||||||||
Stock based compensation description | These stock options have a contractual term of 10 years and vest in 1/3 increments over a two to three year period. | |||||||||||
Stock options issued | 2,400,000 | 2,400,000 | ||||||||||
Contractual term | 10 years |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of Option Activity (Details) | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Service-Based Stock Options [Member] | |
Number of Options, Beginning Balance | shares | 15,045,000 |
Number of Shares, Granted | shares | 2,400,000 |
Number of Shares, Cancelled | shares | (1,875,000) |
Number of Shares, Expired | shares | |
Number of Options, Ending balance | shares | 16,070,000 |
Number of Options, Exercisable, Beginning | shares | 11,805,416 |
Number of Options, Exercisable, Ending | shares | 14,430,416 |
Exercise Price per Share, Cancelled | $ 0.30 |
Exercise Price per Share, Expired | |
Weighted Average Remaining Contractual Life, Beginning | 4 years 9 months 11 days |
Weighted Average Remaining Contractual Life, Granted | 7 years 3 months 15 days |
Weighted Average Remaining Contractual Life, Cancelled | 7 years 6 months |
Weighted Average Remaining Contractual Life, Expired | 0 years |
Weighted Average Remaining Contractual Life, Ending | 4 years 6 months 21 days |
Weighted Average Remaining Contractual Life, Exercisable, Beginning | 3 years 9 months 3 days |
Weighted Average Remaining Contractual Life, Exercisable, ending | 4 years 4 months 17 days |
Weighted Average Exercise Price per Share, Beginning balance | $ 0.30 |
Weighted Average Exercise Price per Share, Granted | 0.57 |
Weighted Average Exercise Price per Share, Cancelled | 0.30 |
Weighted Average Exercise Price per Share, Expired | |
Weighted Average Exercise Price per Share, Ending balance | 0.34 |
Weighted Average Exercise Price per Share, Exercisable, Beginning | 0.25 |
Weighted Average Exercise Price per Share, Exercisable, Ending | 0.26 |
Service-Based Stock Options [Member] | Minimum [Member] | |
Exercise Price per Share, Beginning balance | 0.20 |
Exercise Price per Share, Granted | 0.23 |
Exercise Price per Share, Ending balance | 0.16 |
Exercise Price per Share, Exercisable, Beginning | 0.20 |
Exercise Price per Share, Exercisable, Ending | 0.20 |
Service-Based Stock Options [Member] | Maximum [Member] | |
Exercise Price per Share, Beginning balance | 0.40 |
Exercise Price per Share, Granted | 1.50 |
Exercise Price per Share, Ending balance | 1.50 |
Exercise Price per Share, Exercisable, Beginning | 0.40 |
Exercise Price per Share, Exercisable, Ending | $ 0.40 |
Performance-Based Stock Options [Member] | |
Number of Options, Beginning Balance | shares | 6,825,000 |
Number of Options, Ending balance | shares | 6,275,000 |
Number of Options, Exercisable, Beginning | shares | 3,175,000 |
Number of Options, Exercisable, Ending | shares | 3,175,000 |
Weighted Average Exercise Price per Share, Beginning balance | $ 0.34 |
Weighted Average Exercise Price per Share, Ending balance | 0.36 |
Weighted Average Exercise Price per Share, Exercisable, Beginning | 0.40 |
Weighted Average Exercise Price per Share, Exercisable, Ending | 0.40 |
Performance-Based Stock Options [Member] | Maximum [Member] | |
Exercise Price per Share, Beginning balance | 0.40 |
Exercise Price per Share, Cancelled | 0.30 |
Exercise Price per Share, Ending balance | 1.50 |
Exercise Price per Share, Exercisable, Beginning | 0.40 |
Exercise Price per Share, Exercisable, Ending | $ 0.40 |
Stockholders' Equity - Schedu_2
Stockholders' Equity - Schedule of Warrant Outstanding and Exercisable (Details) - Warrant [Member] | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Number of Warrants, Beginning balance | shares | 11,326,621 |
Number of Warrants, Granted | shares | 5,642,715 |
Number of Warrants, Exercised | shares | (9,930,759) |
Number of Warrants, Expired | shares | |
Number of Warrants, Ending balance | shares | 7,038,181 |
Number of Warrants, Exercisable, Beginning | shares | 10,330,244 |
Number of Warrants, Exercisable, Ending | shares | 5,745,608 |
Exercise Price per Share, Expired | |
Weighted Average Remaining Contractual Life, Beginning | 6 years 7 days |
Weighted Average Remaining Contractual Life, Granted | 5 years 5 months 27 days |
Weighted Average Remaining Contractual Life, Exercised | 1 year 5 months 12 days |
Weighted Average Remaining Contractual Life, Expired | 0 years |
Weighted Average Remaining Contractual Life, Ending | 5 years 7 months 2 days |
Weighted Average Remaining Contractual Life, Exercisable, Beginning | 6 years 2 months 27 days |
Weighted Average Remaining Contractual Life, Exercisable, Ending | 5 years 7 months 13 days |
Weighted Average Exercise Price per Share, Beginning balance | $ 0.25 |
Weighted Average Exercise Price per Share, Granted | 0.12 |
Weighted Average Exercise Price per Share, Exercised | 0.14 |
Weighted Average Exercise Price per Share, Expired | |
Weighted Average Exercise Price per Share, Ending balance | 0.31 |
Weighted Average Exercise Price per Share, Exercisable, Beginning | 0.31 |
Weighted Average Exercise Price per Share, Exercisable, Ending | 0.34 |
Minimum [Member] | |
Exercise Price per Share, Beginning balance | 0.20 |
Exercise Price per Share, Granted | 0.13 |
Exercise Price per Share, Exercised | 0.13 |
Exercise Price per Share, Ending balance | 0.13 |
Exercise Price per Share, Exercisable, Beginning | 0.20 |
Exercise Price per Share, Exercisable, Ending | 0.13 |
Maximum [Member] | |
Exercise Price per Share, Beginning balance | 0.50 |
Exercise Price per Share, Granted | 0.14 |
Exercise Price per Share, Exercised | 0.14 |
Exercise Price per Share, Ending balance | 0.50 |
Exercise Price per Share, Exercisable, Beginning | 0.50 |
Exercise Price per Share, Exercisable, Ending | $ 0.50 |
Leases (Details Narrative)
Leases (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Feb. 28, 2018 | |
Monthly payment for first twelve months | $ 2,106 | |
Monthly payment for second twelve months | 2,149 | |
Monthly payment for third twelve months | 2,235 | |
Security deposit for lease | 2,235 | |
Lease Agreement [Member] | ||
Lease term | 3 years | |
Justin Schreiber [Member] | ||
Rent expenses | $ 4,000 |
Leases - Schedule of Leases (De
Leases - Schedule of Leases (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Right of Use Asset | $ 19,990 | $ 23,625 |
Lease liability | $ 28,917 | $ 29,978 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | 1 Months Ended | 6 Months Ended | 12 Months Ended | |||
Apr. 30, 2017 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2016 | Dec. 31, 2019 | |
Proceeds from common stock | $ 250,000 | |||||
Subscription Agreement [Member] | ||||||
Number of share issued for common stock | 217,390 | |||||
Warrants issued for common stock | 108,696 | |||||
Accounts payable and accrued expenses | $ 0 | $ 0 | ||||
Employment and Consulting Agreement [Member] | ||||||
Expiring agreement description | The Company has entered into various agreements with officers, directors, employees and consultants that expire in one to five years. | |||||
180 Day Anniversary Agreement [Member] | Subscription Agreement [Member] | ||||||
Performance fee | $ 50,000 | |||||
Pilaris Laboratories, LLC [Member] | ||||||
Percentage of net income | 10.00% | |||||
Pilaris Laboratories, LLC [Member] | CVLB PR [Member] | ||||||
Agreements of performance fees, description | As consideration for granting Conversion Labs PR this license, Pilaris will receive on quarterly basis, 10% of the net income collected by the licensed products based on the following formula: Net Income = total income - cost of goods sold - advertising and operating expenses directly related to the marketing of the licensed products. In addition, Conversion Labs PR shall pay Pilaris a performance fee of $50,000 on the 180-day anniversary of the agreement and an additional $50,000 performance fee on the 365-day anniversary of the agreement. | |||||
Pilaris Laboratories, LLC [Member] | CVLB PR [Member] | 180 Day Anniversary Agreement [Member] | ||||||
Performance fee | $ 50,000 | |||||
Pilaris Laboratories, LLC [Member] | CVLB PR [Member] | 365 Day Anniversary Agreement [Member] | ||||||
Performance fee | $ 50,000 | |||||
License fee | $ 100,000 | |||||
M.Alphabet, LLC [Member] | ||||||
Agreements of performance fees, description | The Company shall pay Alphabet a royalty equal to 13% of Gross Receipts (as defined in the Agreement) realized from the sales of Licensed Products. Further, so long as the Agreement is not previously terminated, the Company, also agreed to pay Alphabet $50,000 on the 120-day anniversary of the Agreement and an additional $50,000 on the 360-day anniversary of the Agreement. | |||||
Percentage for royalty | 13.00% | |||||
Option term | 10 years | |||||
Number of stock options issued | 100,000 | |||||
Option to purchase common stock exercise price | $ 0.50 | |||||
M.Alphabet, LLC [Member] | Common Stock One [Member] | ||||||
Number of stock options issued | 100,000 | |||||
Option to purchase common stock exercise price | $ 0.50 | |||||
Proceeds from common stock | $ 7,500,000 | |||||
M.Alphabet, LLC [Member] | Common Stock Two [Member] | ||||||
Number of stock options issued | 100,000 | |||||
Option to purchase common stock exercise price | $ 0.50 | |||||
Proceeds from common stock | $ 10,000,000 | |||||
M.Alphabet, LLC [Member] | Common Stock Three [Member] | ||||||
Number of stock options issued | 200,000 | |||||
Option to purchase common stock exercise price | $ 0.75 | |||||
Proceeds from common stock | $ 20,000,000 | |||||
M.Alphabet, LLC [Member] | 120 Day Anniversary Agreement [Member] | ||||||
Performance fee | 50,000 | |||||
M.Alphabet, LLC [Member] | 360 Day Anniversary Agreement [Member] | ||||||
Performance fee | $ 50,000 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Mr. Schreiber [Member] | Minimum [Member] | Office Space [Member] | |||
Payment for rent | $ 4,000 | ||
Mr. Schreiber [Member] | Maximum [Member] | Office Space [Member] | |||
Payment for rent | 5,000 | ||
JLS Ventures, LLC [Member] | Puerto Rico Office Space [Member] | |||
Payment for rent | 15,000 | $ 12,000 | |
BV Global Fulfillment [Member] | Current Chief Executive Officer [Member] | Accounts Payable and Accrued Liabilities [Member] | |||
Due to related party | 161,823 | $ 53,026 | |
BV Global Fulfillment [Member] | Current Chief Executive Officer [Member] | Minimum [Member] | |||
Payment of related party | 13,000 | ||
BV Global Fulfillment [Member] | Current Chief Executive Officer [Member] | Maximum [Member] | |||
Payment of related party | $ 16,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - USD ($) | Jul. 27, 2020 | Aug. 31, 2020 |
Convertible promissory note | $ 1,500,000 | |
Interest rate percentage | 1.25% | |
Debt instrument maturity date | Jan. 24, 2021 | |
Preferred stock, par value | $ 0.001 | |
Preferred stock value | $ 2,500,000 | |
Adjusted exercise price | $ 0.35 | |
Warrants to purchase common stock | 2,634,228 | |
Offering discount price | $ 0.05 | |
Warrant Holders [Member] | ||
Adjusted exercise price | $ 0.40 |