Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.7.0.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2017
Stockholders' Equity [Abstract]  
Stockholders' Equity



7.  Stockholders’ Equity



Common Stock



2016



On January 15, 2016, we acquired all of the outstanding capital stock of LiveLenz in consideration of our issuance of 1,000,000 shares (“Consideration Shares”) of our common stock to the LiveLenz stockholders and our issuance of an additional 15,000 share of our common stock in satisfaction of certain liabilities of LiveLenz. The LiveLenz stockholders have agreed that 100% of the Consideration Shares will be escrowed for a period of 18 months and subject to forfeiture based on indemnification claims by us or the final determination of LiveLenz’s working capital as of the closing date. The Consideration Shares were valued using the closing price on the acquisition closing date of $0.70 per share for a total acquisition purchase price of $710,500.



In March 2016, we conducted the private placement of 3,256,000 shares of our common stock, at a price of $0.60 per share, for the gross proceeds of $1,953,600. The offering was conducted by our management and no commission or other selling fees were paid by us. Pursuant to the terms of the offering, we entered into registration rights agreement with the investors pursuant to which we agreed to file with the SEC a resale registration statement covering the common shares. The registration statement was declared effective by the SEC on August 8, 2016.



On October 31,2016, we issued 3,329,990 shares of our common stock, at a price of $0.70 per share, for the gross proceeds of $2,330,993.  



As of March 31, 2017 and December 31, 2016 we had an equity payable balance of $100,862.



Stock-based Plans



Stock Option Activity



The following table summarizes stock option activity for the year ended December 31, 2016 and for the three months ended March 31, 2017:







 

 



 

 

   

   

Options

Outstanding at December 31, 2015

   

5,043,228 

Granted

   

1,771,500 

Exercised

   

 -

Forfeit/canceled

 

(577,817)

Expired

   

(479,031)

Outstanding at December 31, 2016

   

5,757,880 

Granted

   

322,500 

Exercised

   

 -

Forfeit/canceled

 

(760,728)

Expired

   

(55,703)

Outstanding at March 31, 2017

   

5,263,949 



 

 



The weighted average exercise price of stock options granted during the period was $0.72 and the related weighted average grant date fair value was $0.52 per share.



2016



On January 15, 2016, the Company granted four employees 167,500 options to purchase shares of the Company common stock at the closing price as of January 15, 2016 of $0.70 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until January 15, 2026. The total estimated value using the Black-Scholes Model, based on a volatility rate of 114% and a call option value of $0.59 was $98,825.



On January 19, 2016, the Company granted one employee 500,000 options to purchase shares of the Company common stock at the closing price as of January 19, 2016 of $0.70 per share. The options vest 300,000 in equal monthly installments over 48 months, 100,000 upon a four-year cliff or $13 million in annual reported revenue, whichever is earlier to occur, and 100,000 upon a four-year cliff or $22 million in annual reported revenue, whichever is earlier to occur and are exercisable until January 15, 2026. The total estimated value using the Black-Scholes Model, based on a volatility rate of 114% and a call option value of $0.59 was $295,000.



On March 24, 2016, the Company granted nine employees 258,000 options to purchase shares of the Company common stock at the closing price as of March 24, 2016 of $0.70 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until March 24, 2026. The total estimated value using the Black-Scholes Model, based on a volatility rate of 114% and a call option value of $0.59 was $152,220.



On August 23, 2016, the Company granted four employees 695,000 options to purchase shares of the Company common stock at the closing price as of August 23, 2016 of $0.75 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until August 23, 2026. The total estimated value using the Black-Scholes Model, based on a volatility rate of 114% and a call option value of $0.63 was $440,573.



On November 17, 2016, the Company granted three employees 150,000 options to purchase shares of the Company common stock at the closing price as of November 17, 2016 of $0.70 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until November 17, 2026. The total estimated value using the Black-Scholes Model, based on a volatility rate of 114% and a call option value of $0.59 was $89,048.



2017



On March 23, 2017, the Company granted seven employees 322,500 options to purchase shares of the Company common stock at the closing price as of March 23, 2017 of $.72 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until March 23, 2027. The total estimated value using the Black-Scholes Model, based on a volatility rate 86% and an option value of $0.52 was $167,700.



Stock-Based Compensation Expense from Stock Options and Warrants



The impact on our results of operations of recording stock-based compensation expense for the three months ended March 31, 2017 and 2016 were as follows:







 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

Three Months Ended

 



 

March 31,

 



 

2017

 

2016

 

General and administrative

 

$

222,543 

 

$

239,504 

 

Sales and marketing

 

 

59,822 

 

 

51,704 

 

Engineering, research, and development

 

 

(7,472)

 

 

27,900 

 



 

$

274,893 

 

$

319,108 

 



Valuation Assumptions



The fair value of each stock option award was calculated on the date of grant using the Black-Scholes option pricing model. The following weighted average assumptions were used for the three months ended March 31, 2017 and 2016.







 

 

 

 

 

 



 

 

 

 

 

 

   

   

Three Months Ended



 

March 31,

   

   

2017

 

2016

Risk-free interest rate

   

2.04 

%

 

1.56 

%

Expected life (years)

   

6.00 

 

 

6.00 

 

Expected dividend yield

   

 -

%

 

 -

%

Expected volatility

   

86 

%

 

114 

%



The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of our employee stock options.



The expected life of the stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards.



The dividend yield assumption is based on our history of not paying dividends and no future expectations of dividend payouts.



The expected volatility in 2017 and 2016 is based on the historical publicly traded price of our common stock.



Restricted stock units



The following table summarizes restricted stock unit activity under our stock-based plans for the year ended December 31, 2016 and for the three months ended March 31, 2017:



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

   

 

Shares

 

Weighted Average
Grant Date Fair Value

 

Weighted Average
Remaining
Contractual Term
(Years)

 

Aggregate
Intrinsic Value

Outstanding at December 31, 2015

 

 

653,937 

 

$

0.32 

 

 

0.08 

 

$

305,572 

Awarded

 

 

340,480 

 

$

0.72 

 

 

0.70 

 

$

 -

Released

 

 

 -

 

$

 -

 

 

 -

 

$

 -

Canceled/forfeited/expired

 

 

 -

 

$

 -

 

 

 -

 

$

 -

Outstanding at December 31, 2016

 

 

994,417 

 

$

0.72 

 

 

0.70 

 

$

731,845 

Awarded

 

 

112,845 

 

$

0.72 

 

 

 -

 

$

 -

Released

 

 

 -

 

$

 -

 

 

 -

 

$

 -

Canceled/forfeited/expired

 

 

 -

 

$

 -

 

 

 -

 

$

 -

Outstanding at March 31, 2017

 

 

1,107,262 

 

$

0.48 

 

 

0.75 

 

$

863,664 



 

 

 

 

 

 

 

 

 

 

 

 

Expected to vest at March 31, 2017

 

 

1,107,262 

 

$

 -

 

 

 -

 

$

863,664 

Exercisable at March 31, 2017

 

 

862,232 

 

$

 -

 

 

 -

 

$

672,541 

Unvested at March 31, 2017

 

 

245,030 

 

$

 -

 

 

 -

 

$

191,123 

Unrecognized expense at March 31, 2017

 

$

162,687 

 

 

 

 

 

 

 

 

 



2016



On April 1, 2016 the Company granted five independent directors a total of 116,070 restricted stock units.  The units were valued at $81,249, or $0.70 per share, based on the closing stock price on the date of grant. All units vest equally in 12 monthly installments beginning April 1, 2016. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) April 1, 2019, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.



On August 23, 2016 the Company granted five independent directors a total of 108,335 restricted stock units.  The units were valued at $81,251, or $0.75 per share, based on the closing stock price on the date of grant. All units vest equally in 12 monthly installments beginning August 23, 2016. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) August 23, 2019, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.



On November 17, 2016 the Company granted five independent directors a total of 116,075 restricted stock units.  The units were valued at $81,253, or $0.70 per share, based on the closing stock price on the date of grant. All units vest equally in 12 monthly installments beginning November 17, 2016. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) November 17, 2019, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.



2017



On March 23, 2017 the Company granted five independent directors a total of 112,845 restricted stock units.  The units were valued at $81,248, or $0.72 per share, based on the closing stock price on the date of grant. All units vest equally in 12 monthly installments beginning March 23,2017. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) March 23, 2020, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.



Stock Based Compensation from Restricted Stock



The impact on our results of operations of recording stock-based compensation expense for restricted stock units for the three months ended March 31, 2017 and 2016 was as follows: 







 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,



 

2017

 

2016

General and administrative

 

$

62,524 

 

$

37,501 



 

$

62,524 

 

$

37,501 



As of March 31, 2017, there was unearned restricted stock unit compensation as described in the tables above. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase or cancel all or a portion of the remaining unearned restricted unit compensation expense. Future unearned restricted unit compensation will increase to the extent we grant additional equity awards.





Warrants Issued to Investors and Placement Agents



At March 31, 2017, we have warrants to purchase 9,058,328 shares of common stock at $1.20 per share and 1,210,370 at $1.00 per share, respectively, which are outstanding. Of this amount, warrants to purchase 5,525,736 shares expire in 2018, warrants to purchase 3,116,712 shares expire in 2019, and warrants to purchase 1,626,250 shares expire in 2020.