Stockholders' Equity

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Stockholders' Equity

NOTE 8 - STOCKHOLDERS’ EQUITY

On August 26, 2016, the Company affected a one-for-four reverse stock split of the Company’s common stock. No fractional shares of the Company’s common stock were issued as a result of the reverse stock split. Instead, stockholders of record who otherwise would have been entitled to receive fractional shares were entitled to a rounding up of their fractional share to the nearest whole share, except in the case of any stockholder that owned less than four shares of the Company’s common stock immediately preceding the reverse stock split. In such case, such stockholder received cash for such fractional share in an amount equal to the product obtained by multiplying: (x) the closing sale price of the common stock on August 25, 2016 as reported on the NYSE MKT, by (y) the amount of the fractional share. As a result, the Company issued 1,166 common shares for shares due as a result of the rounding up feature and paid an aggregate of $92 to buy-out the fractional shares of holders with less than four shares immediately preceding the reverse stock split. All references in these financial statements to the number of shares of our common stock and to related per-share prices (including references to periods prior to the effective date of the reverse stock split) reflect this reverse stock split.

Sales of Equity – On December 29, 2016, the Company completed the sale of 300,000 shares of its common stock and a warrant to purchase up to 200,000 shares of the Company’s common stock at an exercise price of $1.00 per share for an aggregate purchase price of $225,000 pursuant to a securities purchase agreement. The warrants had an estimated aggregate fair value of approximately $87,000 which was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 86.4%, a risk free rate of return of 1.96% and zero dividend and forfeiture estimates. The Company was assessed $25,000 in listing fees by the NYSE MKT for equity issuances during 2016.

Between September 15, 2015 and September 24, 2015, the Company entered into securities purchase agreements with certain accredited investors for the sale of an aggregate of 1,079,545 shares of common stock at a purchase price of $0.88 per share, for a total purchase price of $950,000. In addition to the common stock, the purchasers received four-year warrants to purchase up to an aggregate of 215,910 additional shares of common stock at an exercise price of $1.60 per share and for a term of four years after the first six months from the warrant’s issuance date. The warrants had an estimated aggregate fair value of approximately $105,000 which was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 81.4%, a risk free rate of return between of 1.45% and 1.60%, and zero dividend and forfeiture estimates. Between October 5, 2015 and October 21, 2015, the Company entered into securities purchase agreements with certain accredited investors for the sale of an aggregate of 284,091 shares of common stock at a purchase price of $0.88 per share, for a total purchase price of $250,000. In addition to the common stock, the purchasers received four-year warrants to purchase up to an aggregate of 56,818 additional shares of common stock at an exercise price of $1.60 per share and for a term of four years after the first six months from the warrant’s issuance date. The warrants had an estimated aggregate fair value of approximately $28,000 which was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 81.4%, a risk free rate of return between of 1.35% and 1.36%, and zero dividend and forfeiture estimates.

On February 23, 2015, the Company amended two of its debt obligations that, among other things, extended the maturity dates of the notes, instituted principal payments for the notes, and eliminated a conversion feature on one of the notes. In conjunction with these agreements, the Company issued an aggregate of 25,000 shares of its common stock with a grant date fair value of $41,000.

Stock Warrants – On November 29, 2016, in consideration of the financing described in Note 8 the Company issued a five-year warrant to purchase up to 750,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The warrants had an estimated aggregate fair value of approximately $199,000 which was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 86.4%, a risk free rate of return between of 1.78% and zero dividend and forfeiture estimates. The Company recorded $198,000 of stock based compensation in the fourth quarter of 2016 in conjunction with these warrants.

The Company issued five-year warrants to purchase up to 200,000 shares of the Company’s common stock as part of the December 29, 2016 equity sale at an exercise price of $1.00 per share.

The Company issued warrants to purchase 272,728 shares of the Company’s common stock as part of its offering to accredited investors from September 15, 2015 through October 21, 2015, at an exercise price of $1.60 per share.

The following is a summary with respect to warrants outstanding and exercisable at December 31, 2016 and 2015 and activity during the years then ended:

	2016				2015
			Weighted					Weighted
			Average					Average
			Exercise					Exercise
	Warrants		Price		Warrants			Price
Outstanding at January 1:		1,862,515	$	16.40		1,641,596		$	18.80
Granted during the year		950,000		1.00		272,728			1.60
Lapsed/terminated		-		-		(51,809	)		14.08
Outstanding at December 31:		2,812,515	$	11.20		1,862,515		$	16.40
Exercisable at December 31:		2,812,515	$	11.20		1,589,788		$	16.40
Weighted average months remaining
				34.6					34.3

Stock Options - On June 20, 2013 the Company’s shareholders adopted the 2013 Employee, Director and Consultant Equity Incentive Plan (the “2013 Plan”). The 2013 Plan provides for the issuance of up to a total of 6,000,000 shares of common stock authorized to be issued for grants of options, restricted stock and other forms of equity to employees, directors and consultants. Under the terms of the 2013 Plan, options granted thereunder may be designated as options which qualify for incentive stock option treatment (“ISOs”) under Section 422A of the Internal Revenue Code, or options which do not qualify (“NQSOs”).

The following is a summary with respect to options outstanding at December 31, 2016 and 2015 and activity during the years then ended:

	2016							2015
	Number of Options			Weighted Average Exercise Price		Weighted Average Life Remaining		Number of Options			Weighted Average Exercise Price		Weighted Average Life Remaining
							(in years)							(in years)
Outstanding at January 1:		1,106,140			11.56				1,232,073			11.68
Granted		37,500			1.00				13,388			2.40
Lapsed/terminated		(508,043	)		13.56				(139,321	)		11.80
Outstanding at December 31:		635,597			9.33		3.7		1,106,140			11.56		4.0
Exercisable at December 31:		610,611			10.85		3.7		907,124			11.08		4.6
Expected to vest at December 31:		25,000			1.00		4.3		86,516			8.00		3.2
Aggregate intrinsic value of outstanding options at December 31:	$	-						$	-
Aggregate intrinsic value of exercisable options at December 31:	$	-						$	-
Aggregate intrinsic value of options expected to vest at December 31:	$	-						$	-

The weighted-average grant date fair value of options granted during the year ended December 31, 2016 was $0.10 ($0.12 -2015). The aggregate grant date fair value of options that vested during the year was approximately $71,000 ($988,000 -2015). There were no options exercised during 2016 or 2015.

The fair value of each option award is estimated on the date of grant utilizing the Black-Scholes-Merton Option Pricing Model. The Company estimated the expected volatility of the Company’s common stock at the grant date using the historical volatility of the Company’s common stock over the most recent period equal to the expected stock option term. In March 2016, three of the Company’s senior management voluntarily cancelled an aggregate of 75,000 options to purchase shares of the Company’s common stock with exercise prices of $12.00 per share, of which 41,667 of the options were unvested on the date of cancellation resulting in a reversal of previously recognized stock based compensation expense of approximately $36,000.

The following table shows our weighted average assumptions used to compute the share-based compensation expense for stock options and warrants granted during the years ended December 31, 2016 and 2015:

	Years Ended December 31,
	2016			2015
Volatility		85.6	%		72.6	%
Expected option term		3.5 years			2.9 years
Risk-free interest rate		1.3	%		1.7	%
Expected forfeiture rate		0.0	%		0.0	%
Expected dividend yield		0.0	%		0.0	%

Restricted Stock - Restricted common stock may be issued under the Company’s 2013 Plan for services to be rendered which may not be sold, transferred or pledged for such period as determined by our Compensation Committee and Management Resources. Restricted stock compensation cost is measured as the stock’s fair value based on the quoted market price at the date of grant. The restricted shares issued reduce the amount available under the employee stock option plans. Compensation cost is recognized only on restricted shares that will ultimately vest. The Company estimates the number of shares that will ultimately vest at each grant date based on historical experience and adjust compensation cost and the carrying amount of unearned compensation based on changes in those estimates over time. Restricted stock compensation cost is recognized ratably over the requisite service period which approximates the vesting period. An employee may not sell or otherwise transfer unvested shares and, in the event that employment is terminated prior to the end of the vesting period, any unvested shares are surrendered to us. The Company has no obligation to repurchase any restricted stock.

During 2016, the Company issued 6,250 shares of restricted common stock to a consultant providing marketing services to the Company. The restricted shares vested on May 2, 2016 and had an aggregate grant date fair value of approximately $6,250. In addition, during 2016 the Company issued an aggregate of 224,750 shares of restricted stock to members of the Company’s management which will vest on May 17, 2017 and had an aggregated grant date fair value of approximately $124,000. In January 2015, the Company issued an aggregate of 7,500 shares of restricted common stock to certain members of the Company’s board in exchange for agreements by the board members to reduce their cash compensation for the fiscal year of 2015. The restricted shares vested on August 15, 2015 and had an aggregate grant date fair value of approximately $11,000. In November 2015, the Company issued 31,250 restricted shares to a consultant in exchange for media advertising services agreement. The restricted shares vested over a 90-day period and had a grant date fair value of $27,500. On January 12, 2017, the Company issued an aggregate of 150,000 shares of restricted stock to members of the Company’s management which will vest on May 17, 2017 and had an aggregated grant date fair value of approximately $126,000.

The following is a summary of activity of restricted stock during the years ended at December 31, 2016 and 2015:

	Shares			Weighted- average Grant Date Fair Value
Restricted shares outstanding, December 31, 2014		66,085		$	2.80
Restricted shares granted		38,750			1.00
Restricted shares vested		(89,835	)		2.36
Restricted shares outstanding, December 31, 2015		15,000		$	0.88
Restricted shares granted		231,000			0.56
Restricted shares vested		(15,000	)		0.88
Restricted shares outstanding, December 31, 2016		231,000		$	0.56

Stock-Based Compensation - The Company records stock-based payment expense related to these options based on the grant date fair value in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. During 2016, the Company had stock compensation expense of approximately $329,000 or $0.03 basic earnings per share ($974,000; $0.12 basic earnings per share - 2015). As of December 31, 2016, there was approximately $89,000 of total unrecognized compensation costs related to options and restricted stock granted under the Company’s stock option plans, which the Company expects to recognize over the weighted average period of six months.