Stockholders' equity

9 Months Ended

Sep. 30, 2014

Stockholders' Equity Note [Abstract]

Stockholders' equity

Stock Options

On January 8, 2013, our Board of Directors approved the adoption of the SpendSmart Payments Company 2013 Equity Incentive Plan (the “2013 Plan”).  The 2013 Plan was approved by the Company’s shareholders on February 15, 2013. On April 21, 2014, our Board of Directors approved an amendment to our 2013 Plan to increase the total number of shares of common stock that may be issued pursuant to stock awards under the 2013 Plan from 3,000,000 to 10,000,000 shares of common stock.  On June 16, 2014, the 2013 Plan was amended by a vote of the Company’s stockholders to increase the total number of shares of common stock that may be issued pursuant to stock awards under the 2013 Plan from 3,000,000 to 10,000,000 shares of common stock.  The 2013 Plan provides for granting of stock-based awards including: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock.  On August 4, 2011, our Board of Directors approved the adoption of the SpendSmart Payments Company 2011 Equity Incentive Plan (the “2011 Plan”).  The 2011 Plan provides for granting of stock-based awards including: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock.  The total number of shares of common stock that may be issued pursuant to stock awards under the Plan shall not exceed in the aggregate 1,666,667 shares of the common stock of our Company.  We also have a stockholder-approved Plan (the IdeaEdge, Inc. 2007 Equity Incentive Plan - the “2007 Plan”, previously approved by our shareholders).  The 2007 Plan has similar provisions and purposes as the 2011 Plan.  The total number of shares of common stock that may be issued pursuant to stock awards under the 2007 Plan (as amended) shall not exceed in the aggregate 266,667 shares of the common stock of our Company.  With shareholder approval of the 2013 Plan, our Board has expressed its intentions to issue no more shares under the 2011 and 2007 Plans.

Through September 30, 2014, we have outstanding and vested a total of 7,374,667 and 4,214,630, respectively, of incentive and nonqualified stock options granted under the Plans, all of which we have estimated will eventually vest.  All of the options have terms of five years with expiration dates ranging from July 2016 to September 2019.

Stock Option Plans

The Company’s stock option plans are administered by the Board of Directors, which determines the terms and conditions of the options granted, including exercise price, number of options granted and vesting period of such options.

For the three and nine months ended September 30, 2014, we issued 1,163,000 and 5,918,000 options, as follows.  On March 19, 2014, our Company granted options to purchase up to 405,000 shares of our common stock to members of our Board of Directors. The options vest immediately; have an exercise price of $0.87 per share; and expire five years after the date of grant.  Each of the following Board members received 45,000 options each related to this issuance:  Joe Proto, Isaac Blech, Alex Minicucci, William Hernandez, Cary Sucoff, Patrick Kolenik, Chris Leong, Jerold Rubinstein, and Mike McCoy.  The fair value at grant date of these options was $247,939 and the entire amount was expensed during the period ended March 31, 2014.

In addition, the Company granted options to purchase up to 1,850,000 shares of our common stock to members of our Board of Directors on March 19, 2014.  One half of the options vest immediately with the remaining options vesting on the one year anniversary of the grant date; have an exercise price of $0.87 per share; and expire five years after the date of grant.  These options were issued as follows:  Joe Proto received 500,000 options, Isaac Blech received 500,000 options, William Hernandez received 300,000 options, Cary Sucoff received 250,000 options, Patrick Kolenik received 200,000 options, and Mike McCoy received 100,000 options.  The fair value at grant date of these options was $1,068,350 and the amount expensed for the three and nine months ended September 30, 2014 was $139,436 and $583,293, respectively.

In March 2014, our Company granted options to purchase up to 350,000 shares of our common stock to Alex Minicucci. One fourth of the options vest immediately with the remaining options vesting over the next three years; have an exercise price of $1.15 per share; and expire five years after the date of grant.  The fair value at grant date of these options was $193,925 and the amount expensed for the three and nine months ended September 30, 2014 was $13,923 and $86,426, respectively.

In March 2014, our Company granted options to purchase up to 400,000 shares of our common stock to William Hernandez.  One fourth of the options vest immediately with the remaining options vesting over the next three years; have an exercise price of $1.15 per share; and expire five years after the date of grant.  The fair value at grant date of these options was $221,629 and the amount expensed for the three and nine months ended September 30, 2014 was $15,912 and $98,773, respectively.

In March 2014, our Company granted options to purchase up to 1,410,000 shares of our common stock, of which 1,370,000 remain outstanding, to twenty-four employees.  The options vest over three years; have an exercise price of $1.15 per share; and expire five years after the date of grant.  The fair value at grant date of these options was $781,243 and the amount expensed for the three and nine months ended September 30, 2014 was $54,499 and $345,953, respectively.

On August 1, 2014, our Company granted options to purchase up to 900,000 shares of our common stock to our Board of Directors and Chord Advisors. The options vest immediately; have an exercise price of $1.14 per share; and expire five years after the date of grant.  Each of the following Board members received options as follows:  Joe Proto was issued 200,000 shares, Isaac Blech was issued 225,000 shares, Cary Sucoff was issued 175,000 shares, Patrick Kolenik was issued 175,000 shares, and Jerold Rubinstein was issued 100,000 shares, and Chord Advisors was issued 25,000 shares.  The fair value at grant date of these options was $732,146 and the entire amount was expensed during the period ended September 30, 2014.

Warrants

For the period ended September 30, 2014, we have not issued any warrants to advisors, consultants and in connection with the purchase of intellectual property.  Warrants to purchase up to 90,668 shares of common stock have expired.  Warrants to purchase up to 3,717,324 shares of common stock remain outstanding at September 30, 2014, of which 3,498,807 have vested.

For the three and nine months ended September 30, 2014, we issued 0 and 16,489,704 warrants to new investors.

From inception through September 30, 2014, we have issued warrants to purchase up to 22,835,591 shares of our common stock to investors (and as compensation to third parties in connection with investments) related to the sale of our common stock, 21,985,895 of which remain outstanding net of exercises, cancellations and expirations (all of which are fully vested). 

The numbers and exercise prices of all options and warrants outstanding at September 30, 2014 are as follows:

Shares Outstanding		Weighted Average Exercise Price		Expiration Period
	81,978		7.77	4th Qtr, 2014
	78,099		7.81	1st Qtr, 2015
	10,599		10.02	2nd Qtr, 2015
	83,917		3.99	3rd Qtr, 2015
	479,245		7.54	4th Qtr, 2015
	872,800		7.24	1st Qtr, 2016
	961,032		6.41	2nd Qtr, 2016
	1,263,960		6.84	3rd Qtr, 2016
	521,811		7.78	4th Qtr, 2016
	859,749		6.20	1st Qtr, 2017
	1,076,476		7.66	2nd Qtr, 2017
	1,932,539		6.66	3rd Qtr, 2017
	862,339		6.56	4th Qtr, 2017
	133,333		1.95	4th Qtr, 2018
	22,293,675		1.09	1st Qtr, 2019
	270,000		1.15	2nd Qtr, 2019
	1,163,000		1.16	3rd Qtr, 2019
	133,334		7.05	4th Qtr, 2022
	33,077,886

Stock-based Compensation

During the three and nine months ended September 30, 2014, we recognized stock-based compensation expense totaling $1,412,601 and $4,505,546 in connection with the issuance of stock options and warrants issued to employees, directors, advisors and consultants (not including shares of stock issued directly for services).  For purposes of accounting for stock-based compensation, the fair value of each award is estimated on the date of grant (or performance of the contracted services as appropriate) using the Black-Scholes-Merton option pricing model. The following weighted average assumptions were utilized for the calculations of newly issued options and warrants during the nine months ended September 30, 2014:

Expected life (in years)	4.23 years
Weighted average volatility	90.14%
Forfeiture rate	11.43%
Risk-free interest rate	1.41%
Expected dividend rate	0%

At September 30, 2014, the weighted average exercise price of vested options and warrants outstanding (issued in connection with stock-based compensation) was $2.49 per share while the corresponding weighted average remaining contractual period was approximately 42.6 months.  As of September 30, 2014, $2,300,874 of total unrecognized compensation expense related to unvested stock-based compensation is expected to be recognized through September 2018.