Stockholders' Equity

12 Months Ended

Dec. 31, 2018

Equity [Abstract]

Stockholders' Equity

7. Stockholders’ Equity

The 2011 Plan was terminated as to future awards on May 16, 2016. A total of 181,604 shares of the Company’s common stock may be delivered pursuant to outstanding options awarded under the 2011 Plan; however, no additional awards may be granted under such plan. The 2016 Plan was adopted by the Company’s stockholders on May 16, 2016 and permits the Company to award stock options (both incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other stock-based awards and cash-based incentive awards to its employees (including an employee who is also a director or officer under certain circumstances), non-employee directors and consultants. The maximum number of shares of common stock that may be issued pursuant to awards under the 2016 Plan is 1,300,000 shares, 100% of which may be issued pursuant to incentive stock options. In addition, the maximum number of shares of common stock that may be issued under the 2016 Plan may be increased by an indeterminate number of shares of common stock underlying outstanding awards issued under the 2011 Plan that are forfeited, expired, cancelled or settled in cash. As of December 31, 2018, there were 438,238 shares available for future issuance under the 2016 Plan.

Stock Options

The following table summarizes the assumptions used in the Black-Scholes pricing model to estimate the fair value of the options granted during the years ended:

	December 31,
	2018			2017
Expected volatility		159.0-167.0	%		116.1-159.0	%
Expected life of option		5.2-6.2			5.0-7.0
Risk free interest rate		2.3-2.9	%		1.7-2.2	%
Expected dividend yield		0.0	%		0.0	%

The expected life of the options is the period of time over which employees and non-employees are expected to hold their options prior to exercise. The expected life of options has been determined using the “simplified” method as prescribed by Staff Accounting Bulletin 110, which uses the midpoint between the vesting date and the end of the contractual term. The volatility of the Company’s common stock is calculated using the Company’s historical volatilities beginning at the grant date and going back for a period of time equal to the expected life of the award. The Company estimates potential forfeitures of stock awards and adjusts recorded stock-based compensation expense accordingly. The Company estimates pre-vesting forfeitures primarily based on the Company’s historical experience and is adjusted to reflect actual forfeitures as the stock based awards vest.

The following tables summarize stock option activity during the year ended December 31, 2018:

	Number of Options			Weighted Average Exercise Price
Outstanding at January 1, 2018		980,588		$	5.02
Granted		120,130			6.02
Exercised during period		(6,363	)		4.43
Expired or canceled, during the period		(1,429	)		42.35
Forfeited, during the period		(55,129	)		4.54
Outstanding at December 31, 2018		1,037,797		$	5.12
Exercisable at December 31, 2018		611,810		$	5.89

On May 22, 2018, the Compensation Committee of the Company’s Board of Directors awarded Eric Sackowitz, Chief Technology Officer, a stock option representing the right to purchase 15,000 shares of common stock at an exercise price equal to $5.70 per share. The shares underlying these stock options vest in four equal installments on each anniversary of the date of grant. Stock compensation expense recognized for this performance award for the year ended December 31, 2018 was $16,464.

During the year ended December 31, 2018, stock options representing the right to purchase 6,363 shares of common stock were exercised, with total proceeds of $28,210.

On December 31, 2018, the aggregate intrinsic value of stock options that were outstanding and exercisable was $725,604 and $365,861, respectively. The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the fair value of such awards as of the period-end date.

During the year ended December 31, 2018, the Company granted options to employees to purchase an aggregate of 120,130 shares of common stock. These options vest between one and four years and have a term of ten years and have a weighted average exercise price of $6.02.

The aggregate fair value for the options granted during the years ended December 31, 2018 and 2017 was $708,501 and $1,740,578, respectively.

At December 31, 2018, there was $1,186,251 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 1.84 years.

Stock-based compensation expense for the Company’s stock options included in the consolidated statements of operations is as follows:

	Year ended December 31,
	2018		2017
Cost of revenue	$	2,398	$	4,302
Sales and marketing expense		985		1,784
Product development expense		27,919		166,783
General and administrative expense		819,325		665,556
Total stock-based compensation expense	$	850,627	$	838,425

Restricted Stock Awards

The following table summarizes restricted stock award activity for the year ended December 31, 2018:

	Number of Restricted Stock Awards			Weighted Average Grant Date Fair Value
Unvested at January 1, 2018		158,571		$	20.29
Granted		-			-
Surrender for tax withholding, during the period		(20,000	)		20.29
Vested		(59,286	)		20.29
Unvested at December 31, 2018		79,286		$	20.29

At December 31, 2018, there was $556,122 of total unrecognized compensation expense related to restricted stock, which is expected to be recognized over a weighted average period of 0.8 years.

Stock-based compensation expense relating to restricted stock awards for the years ended December 31, 2018 and 2017 was $741,494 and $741,496, respectively, which is included in general and administrative expense in the consolidated financial statements.

Lerner Restricted Stock Award Agreements

On June 15, 2018, in connection with Clifford Lerner’s resignation as an officer and employee of the Company, the Company entered into amendments to (i) a restricted stock award agreement, dated March 3, 2016, as amended, related to the original award of 142,858 shares of restricted common stock to Mr. Lerner and (ii) a restricted stock award agreement, dated December 14, 2011, as amended, related to the original award of 121,429 shares of restricted common stock to Mr. Lerner (together, the “Restricted Stock Award Amendments”).

On October 7, 2018, 79,285 shares of Mr. Lerner’s restricted stock vested. Pursuant to the Restricted Stock Award Amendments, the Company was required, in order to assist Mr. Lerner in satisfying his tax withholding obligations with respect to the vesting restricted shares, to withhold 20,000 shares of vesting restricted common stock. The remaining amount of the tax withholding obligation was paid by Mr. Lerner and Mr. Lerner’s unvested shares of restricted common stock will continue to vest as scheduled. The remaining 79,286 shares will vest on October 7, 2019.