10. Stockholders’ Equity

Preferred Stock

Our authorized preferred stock includes 10,000,000 shares of preferred stock with a par value of $0.001, of which no shares have been issued or are outstanding as of December 31, 2015 and 2014.

Common Stock

Our authorized common stock includes 200,000,000 shares of common stock with a par value of $0.001, of which 111,788,225 and 111,601,304 shares were issued and outstanding as of December 31, 2015 and 2014, respectively.

During the year ended December 31, 2015, we issued shares of common stock as follows:

	Common Stock
	Shares		Amount
Shares issued for vested restricted stock units		56,500	$	—
Shares issued for Employee Stock Purchase Plan options		130,421		110,066
		186,921	$	110,066

Shares issued for vested restricted stock units –

On March 5, 2015, we issued 56,500 shares to an employee related to restricted stock units that vested and were expensed during fiscal year 2014.

Shares issued for Employee Stock Purchase Plan offering –

On May 15, 2015, we issued 57,134 shares to employees for $60,705 under our 2014 Employee Stock Purchase Plan (“ESPP”) for options that vested and were exercised.

On November 15, 2015, we issued 73,287 shares to employees for $49,361 under our 2014 ESPP for options that vested and were exercised.

During the year ended December 31, 2014, we issued shares of common stock as follows:

	Common Stock
	Shares		Amount
Sale of common stock and warrants, net of issuance costs		10,192,500	$	18,577,018
Note and accrued interest conversions		5,573,831		11,130,261
Common stock issued for services		20,408		50,000
		15,786,739	$	29,757,279

Sale of common stock and warrants –

On April 18, 2014, we issued an aggregate of 1,192,500 units (the “Units”) to accredited investors, for an aggregate purchase price of $2,385,000, with each Unit consisting of one share of our common stock and a warrant to purchase one share of our common stock for $2.00 per share. Additionally, we issued an additional 248,500 warrants to third parties for services provided related to the issuance.

On September 24, 2014, we issued an aggregate of 9,000,000 shares of our common stock at a price per share of $1.99, together with warrants to purchase 9,000,000 shares of our common stock at a price per warrant of $0.01, for a total of $2.00 for one share and one warrant, generating $18,000,000 in gross proceeds.

Note and interest conversions –

The holders of the Sellers Notes converted $11,000,000 of principal, plus accrued interest through September 24, 2014 of $101,260, into 5,550,630 shares of our common stock. See Note 6 for a discussion of the conversion.

During the year ended December 31, 2014, $25,000 of principal and $4,001 of interest were converted into 23,201 shares of our common stock.

Common stock for services –

We issued 20,408 shares of common stock to consultants for $50,000 of services during the year ended December 31, 2014.

Warrants

During the year ended December 31, 2015, we did not issue any warrants, no holders exercised warrants, and a third party forfeited 1,200,000 contingent warrants. Due to the uncertainty of attaining any of the performance conditions, we did not recognize any additional expense for the non-vested warrants. As these warrants related to internally developed software, we did not capitalize any costs or recognize any expense for the year ended December 31, 2015. During the year ended December 31, 2014, we issued 12,991,000 warrants, no holders exercised warrants, and no warrants expired. There were 11,791,000 exercisable warrants and no contingent warrants outstanding as of December 31, 2015. There were 11,241,000 exercisable warrants and 1,750,000 contingent warrants outstanding as of December 31, 2014.

Warrants issued in conjunction with sale of common stock –

On April 18, 2014, we issued 1,192,500 warrants to accredited investors, each to purchase one share of our common stock for $2.00 per share as part of a Unit that included a share of our common stock. Additionally, we issued an additional 248,500 warrants to third-parties for services provided related to the issuance. Each warrant may be exercised by the holder thereof, in such holder’s sole discretion, in whole or in part, any time prior to April 1, 2017.

On September 24, 2014, we issued 9,000,000 warrants to purchase 9,000,000 shares of our common stock at a price per warrant of $0.01, as part of the sale of 9,000,000 shares of common stock. We also granted to the underwriters a 45-day option to acquire up to 700,000 additional shares of common stock and/or additional warrants to acquire up to 700,000 shares of common stock. On October 20, 2014, the underwriters exercised their option and acquired an additional 700,000 warrants. The warrants may be exercised for a period of five years to purchase common stock at an exercise price of $2.50 per share.

Warrants for services –

On May 7, 2014, we issued to a third party for services rendered an aggregate of 200,000 warrants to purchase 200,000 shares of our common stock for $2.65 per share. Of the 200,000 warrants, 100,000 were exercisable immediately and the remaining become exercisable one year from the date of grant based on the achievement of performance conditions. We recorded stock-based compensation expense of $144 and $195,814 related to these warrants for the years ended December 31, 2015 and 2014, respectively. See Note 8 for a discussion of our Black-Scholes-Merton valuation assumptions.

On May 28, 2014, we issued to a third party for services rendered an aggregate of 1,650,000 contingent warrants to purchase 1,650,000 shares of our common stock for $4.31 per share. The warrants become exercisable at various times after achieving future performance conditions related to services and revenue targets for Earth911.

As these warrants related to internally developed software, we recorded $174,109 to intangible assets for the year ended December 31, 2014 as the third party satisfied the first vesting condition. We measured the 450,000 vested warrants during the year ended December 31, 2014 at fair value by applying the Black-Scholes-Merton valuation model, which utilizes Level 3 inputs. The assumptions used in the Black-Scholes-Merton option valuation for the warrants were as follows: volatility of 93.5%; risk free interest rate of 0.5%; expected term of 2.0 years; and expected dividend yield of 0%. The fair value of the warrant described above as of December 31, 2014 was $0.39 per warrant. We based the risk free interest rate on U.S. Treasury rates with maturity dates approximating the expected term of the warrants. We determined the historical volatility using the historical changes in the market price of our common stock and applicable comparison companies.

Due to the uncertainty of attaining any of the remaining performance conditions, we did not recognize any additional activity for the remaining warrants for the year ended December 31, 2015. See Note 8 for a discussion of our Black-Scholes-Merton valuation assumptions.

The following table summarizes the warrants issued and outstanding as of December 31, 2015:

Warrants Issued and Outstanding as of December 31, 2015
	Date of		Exercise		Shares of
Description	Issuance	Expiration	Price		Common Stock
Exercisable warrants
Warrants	04/18/2014	04/01/2017	$	2.00		1,441,000
Warrant	05/07/2014	05/07/2017	$	2.65		200,000
Warrant	05/28/2014	10/31/2016	$	4.31		450,000
Warrants	09/24/2014	09/24/2019	$	2.50		9,000,000
Warrants	10/20/2014	10/20/2019	$	2.50		700,000
Total exercisable warrants						11,791,000
Contingent warrants
Warrants	05/28/2014	10/31/2018	$	4.31		1,200,000
Less warrants cancelled						(1,200,000	)
Total contingent warrants						—
Total warrants issued and outstanding						11,791,000

Incentive Compensation Plan

In October 2012, we adopted our 2012 Incentive Compensation Plan (the “2012 Plan”) as the sole plan for providing equity-based incentive compensation to our employees, non-employee directors, and other service providers. The plan allows for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, and other incentive awards to our employees, non-employee directors, and other service providers who are in a position to make a significant contribution to our success and our affiliates. The purposes of the plan are to attract and retain individuals, further align employee and stockholder interests, and closely link compensation with our performance. The plan is administered by the compensation committee of our board of directors. Our policy is to fulfill any exercise of options from common stock that is authorized and unissued. The maximum number of shares of common stock available for grant under the plan is 7,500,000. Stock compensation expense prior to October 2012 related to options granted prior to the Earth911 Merger that was superseded by the 2012 Plan at the time of the Earth911 Merger. The number of shares available for award under the plan is subject to adjustment for certain corporate changes in accordance with the provisions of the plan.

Restricted Stock Units

During April 2014, we granted restricted stock units representing 132,600 shares of common stock under the 2012 Plan. The restricted stock units vest based on a combination of financial performance factors and continued service. The financial performance factors are based on the revenue generated by new business activity of one of our subsidiaries. All payouts of restricted stock units that vest will be exercisable immediately and will be paid in the form of common stock. While we do not anticipate issuing dividends, the restricted stock unit awards will not participate in any dividends prior to vesting.

We determined the fair value of the restricted stock unit awards granted based on the market value of our common stock on the date of grant, which was $3.75 per share. We recorded $211,875 of stock-based compensation expense for the year ended December 31, 2014 related to these restricted stock units as the grantee satisfied the first vesting condition. Due to the uncertainty of attaining any of the remaining performance conditions, we recorded no additional stock-based compensation expense for the remaining performance conditions for the year ended December 31, 2015. We issued 56,500 shares during the year ended December 31, 2015 related to the restricted stock units that vested and were expensed during 2014. The remaining 76,100 restricted stock unit awards were forfeited during December 2015 upon the grantee’s termination. As of December 31, 2015 and 2014, outstanding restricted stock units totaled nil and 132,600, respectively.

Employee Stock Purchase Plan

On September 17, 2014, our stockholders approved the ESPP. We recorded expense of $61,023 and $4,683 related to the ESPP during the years ended December 31, 2015 and 2014, respectively.

Stock Options

The following table summarizes the stock option activity from January 1, 2014 through December 31, 2015:

	Stock Options
					Weighted-
				Exercise	Average
	Number			Price Per	Exercise Price
	of Shares			Share	Per Share
Outstanding at January 1, 2014		4,141,948		$2.00 — $3.25	$	2.48
Granted		1,305,000		$1.45 — $3.75	$	2.77
Canceled/Forfeited		(440,416	)	$2.05 — $2.10	$	2.09
Outstanding at December 31, 2014		5,006,532		$1.45 — $3.75	$	2.66
Granted		2,242,625		$0.78 — $1.46	$	0.83
Canceled/Forfeited		(1,305,249	)	$1.28 — $3.75	$	2.52
Outstanding at December 31, 2015		5,943,908		$0.78 — $3.75	$	2.04

The weighted-average grant-date fair value of options granted was $0.55 and $1.41 for the years ended December 31, 2015 and 2014, respectively.

For the years ended December 31, 2015 and 2014, the intrinsic value of options outstanding was nil and nil, respectively, and the intrinsic value of options exercisable was nil and nil, respectively.

The following additional information applies to options outstanding at December 31, 2015:

Ranges of

Exercise

Prices

Outstanding at

December 31,

2015

Weighted-

Average

Remaining

Contractual

Life

Weighted-

Average

Exercise

Price

Exercisable at

December 31,

2015

Weighted-

Average

Exercise

Price

$0.78 - $3.75

5,943,908

6.8

2.04

3,643,718

2.44

The following additional information applies to options outstanding at December 31, 2014:

Ranges of

Exercise

Prices

Outstanding at

December 31,

2014

Weighted-

Average

Remaining

Contractual

Life

Weighted-

Average

Exercise

Price

Exercisable at

December 31,

2014

Weighted-

Average

Exercise

Price

$1.45 - $3.75

5,006,532

6.5

2.66

3,301,532

2.58

Stock-based compensation expense for stock based incentive awards was $1,315,530 and $1,085,217 for the years ended December 31, 2015 and 2014, respectively. At December 31, 2015, the balance of unearned stock-based compensation to be expensed in future periods related to unvested share-based awards, as adjusted for expected forfeitures, was approximately $2,408,855. The weighted-average period over which the unearned stock-based compensation is expected to be recognized is approximately one year.

Stock-Based Compensation - We account for all stock-based payment awards made to employees and directors, including stock options and employee stock purchases, based on estimated fair values. We estimate the fair value of share-based payment awards on the date of grant using an option-pricing model and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period, net of forfeitures.

We use the Black-Scholes-Merton option-pricing model as our method of valuation. The fair value is amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The fair value of share-based payment awards on the date of grant as determined by the Black-Scholes-Merton model is affected by our stock price as well as other assumptions. These assumptions include the expected stock price volatility over the term of the awards, the actual and projected employee stock option exercise behaviors, and an estimated forfeiture rate.

The weighted-average estimated value of employee stock options granted during the years ended December 31, 2015 and 2014 were estimated using the Black-Scholes-Merton option pricing model with the following weighted-average assumptions:

	Years Ended December 31,
	2015			2014
Expected volatility		94	%		94	%
Risk-free interest rate		1.45	%		0.92	%
Expected dividends		0.00	%		0.00	%
Expected term in years		4.3			3.4