Stockholders' Equity

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

9. Stockholders’ Equity

The Company has authorized 100,000,000 shares of common stock, $0.01 par value, of which 28,516,009 and 22,047,531 shares were issued and outstanding as of December 31, 2017 and December 31, 2016, respectively.

Restricted Stock Awards

On August 11, 2016, management and employees of Subsidiary in conjunction with the incorporation on July 22, 2016 received 12,209,677 shares of common stock as adjusted for the Recapitalization exchange ratio of 4.13607. These shares are subject to a Company option to buy back the shares at the original cash consideration paid, which totaled $2,952 or approximately $0.0002 per share. A total of 7,966,070 shares were subject to the Company buy back right as of August 1, 2016 and 4,094,708 were made subject to the Company buy-back right on November 4, 2016 in conjunction with the Recapitalization. The employees vest their ownership in these shares over a three-year period beginning August 1, 2016 with one-third vesting on August 1, 2017 and the balance monthly over the remaining two years. The fair value of these shares of Subsidiary stock was estimated on the date of the award using the exchange value used by Integrated and the Subsidiary to establish the relative voting control ratio in the Recapitalization (See Note 8). Because these shares require continued service to the Company the estimated fair value is recognized as compensation expense over the vesting period of the award.

On October 13, 2016, Subsidiary granted 62,041 shares of common stock to an employee. On October 16, 2016 an additional 245,434 shares of Subsidiary common stock were granted to a director. The fair value of these shares of Subsidiary stock was estimated on the date of the awards based on the quoted closing stock price on November 4, 2016 since the Recapitalization was pending. These shares are subject to a Company option to buy back the shares at the original cash consideration paid.

As a condition of the Recapitalization, a total of 4,094,708 shares were required to be placed into an escrow arrangement for purposes of enforcement of the Company option to buy back shares for the balance of the three-year service period. A total of 4,381,003 shares, which includes 35% of the 4,094,708 shares added to the buy-back option, were escrowed and subject to a performance condition requiring the Company to achieve certain operating metrics regarding monthly unique users by December 31, 2017 (“Unique User Performance Condition”). Pursuant to a negotiated schedule the performance condition could be satisfied in partial increments up to the full number of shares escrowed. The Company, used a Monte Carlo simulation model to determine the number of shares expected to be released from the performance condition escrow up to the expiration date of the performance condition, which was December 31, 2017. At December 31, 2016 it was estimated that 72.5% of the shares subject to the performance condition would be released. Pursuant to FASB ASC 718, escrowed share arrangements in a capital raising transaction are considered to be compensatory, as such, the shares subject to these escrow provisions were remeasured as of November 4, 2016, the date of the Recapitalization. The estimated fair value of these shares was determined based on the quoted closing stock price on November 4, 2016. Because these shares require continued service to the Company the estimated fair value is recognized as compensation expense over the vesting period of the award.

Restricted stock award activity for the period from July 22, 2016 (Inception) to December 31, 2016 was as follows:

	Shares		Shares Remeasured			Weighted- Average Price
Stock awards granted at Inception		12,209,677					0.20
Granted October 13, 2016		62,041					0.70
Granted October 16, 2016		245,434					0.70
Remeasurement at November 4, 2016		-		5,837,788	^*		0.43
Vested		-					-
Forfeited		-					-
		-
Unvested at December 31, 2016		12,517,152					0.41

*	The number of shares Remeasured as of November 4, 2016 reflect the effect of the Monte Carlo simulation determination of the estimated number of shares expected to be released from the performance condition escrow.

Restricted stock award activity for the year ended December 31, 2017 was as follows:

	Shares		Weighted- Average Price
Unvested at December 31, 2016		12,517,152	$	0.41
Vested		(5,537,556)		0.41
Forfeited		-		-
Unvested at December 31, 2017		6,979,596		0.41
Vested at December 31, 2017		5,537,556	$	0.41

As of December 31, 2017, the Unique User Performance Condition was determined based on 4,977,144 unique users accessing Maven channels in November 2017. Based on this level of unique users 56% of the of the shares subject to the performance condition will be released and 1,927,641 of the escrow shares were subject to the Company’s buy-back right. The Company’s Board of Directors made a determination on March 12, 2018 to waive the buy-back right. This waiver of the buy-back right related to 1,927,641 shares is a modification of the terms of the restricted stock awards and will result in incremental compensation cost of approximately $3.5 million that will be recognized over a period of approximately 1.6 years, with a total of $2.8 million recognized in 2018.

At December 31, 2017, total compensation cost, including the effect of the waiver of the buy-back right, related to restricted stock awards but not yet recognized was $5.6 million. This cost will be recognized over a period of approximately 1.6 years with a total of $4.1 million recognized in 2018.

Stock Options

On December 19, 2016, the Company’s Board of Directors approved the 2016 Stock Incentive Plan (“Plan”) and reserved 1,670,867 shares of common stock for issuance under the Plan, including options and restricted performance stock awards. On June 28, 2017, the Board of Directors approved an increase in the total number of shares reserved from 1,670,867 to 3,000,000. The Plan is administered by the Board of Directors, and there were no grants prior to the formation of the Plan. Shares of common stock that are issued under the Plan or subject to outstanding incentive awards will be applied to reduce the maximum number of shares of common stock remaining available for issuance under the Plan, provided, however, that that shares subject to an incentive award that expire will automatically become available for issuance. Options issued under the Plan may have a term of up to ten years and may have variable vesting provisions.

The estimated fair value of stock-based awards is recognized as compensation expense over the vesting period of the award. The fair value of restricted stock awards is determined based on the number of shares granted and the quoted price of the Company’s common stock on the date of grant. The fair value of stock option awards are estimated at the grant date as calculated using the Black-Scholes option-pricing model. The Black-Scholes model requires various highly judgmental assumptions including expected volatility and option life. The fair values of our stock option grants were estimated with the following average assumptions:

The fair value of stock options granted during 2017 and 2016 were estimated with the following assumptions:

	2017			2016
Expected life		5.7 years			6.0 years
Risk-free interest rate		2.01	%		2.17	%
Expected annual volatility		115.13	%		113.79	%
Dividend yield		0.00	%		0.00	%

For the year ended December 31, 2017 and the period from July 22, 2016 (Inception) to December 31, 2016 option activity was as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Intrinsic Value

Outstanding at July 22, 2016 (Inception)		-	$	-		-	$	-
Assumed through Recapitalization		175,000		0.17		2.38
Granted		100,137		1.02		9.99
Exercised		-		-
Forfeited		-		-

Outstanding at December 31, 2016		275,137		0.48		5.15		157,000

Granted		2,101,500		1.36		9.75
Exercised		(25,000)		0.17		2.5
Forfeited		(175,000)		1.53		9.5

Outstanding at December 31, 2017		2,176,637	$	1.25		9.25	$	1,573,000

Vested and expected to vest at December 31, 2017		2,176,637	$	1.25		9.25	$	1,573,000

Exercisable at December 31, 2017		267,500	$	0.76		8.0	$	305,000

During 2016 the Company granted 100,137 options under the Plan at an exercise price of $1.02 per share, with an expiration of December 28, 2026, and vests over three years. None of these options vested in 2016.

During 2017 the Company granted 2,101,500 options under the Plan at an average exercise price of $1.36 per share, with expiration dates in 2027, and that generally vest over three years In 2017, the Company recorded stock-based compensation of $618,761 related to these grants. At December 31, 2017, total compensation cost related to stock option granted under the Plan but not yet recognized was $1,169,000. This cost will be amortized on a straight-line method over a period of approximately 1.5 years. The aggregate intrinsic value represents the difference between the exercise price of the underlying options and the quoted price of our common stock for the number of options that were in-the-money at year end.

In addition, the Company assumed 175,000 fully-vested options, 25,000 were exercised in 2017 and 150,000 are still outstanding, in connection with the Recapitalization with an exercise price of $0.17 per share, which expire on May 15, 2019.

The following table summarizes certain information about stock options:

	2017		2016

Weighted average grant-date fair value for options granted during the year	$	1.34	$	0.88

Vested options in-the-money at December 31		300,879		175,000

Aggregate intrinsic value of options exercised during the year	$	27,750	$	-

The following table summarizes the common shares reserved for future issuance under the Plan as of December 31, 2017 with the increase in the authorized number of shares on March 28, 2018:

Stock options outstanding			2,176,637
Stock options available for future grant			2,823,363
			5,000,000

The Plan was initially adopted on December 19, 2016 by the board of directors and approved by the shareholders on December 13, 2017. The number of shares under the Plan was increased on March 28, 2018 to 5,000,000.

Common Stock Warrants – Channel Partner Program

On December 19, 2016, the Company’s Board of Directors approved a program to be administered by management that authorized the Company to issue up to 5,000,000 common stock warrants to provide equity incentive to its Channel Partners to motivate and reward them for their services to the Company and to align the interests of the Channel Partners with those of stockholders of the Company. The warrants associated with the Channel Partner Program are equity classified awards.

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Intrinsic Value

Outstanding at July 22, 2016 (Inception)		-	$	-		-	$
Granted		350,000		1.05		4.98
Exercised		-		-
Forfeited		-		-

Outstanding at December 31, 2016		350,000	$	1.05		4.98	$	-

In December 2016, the Company issued 350,000 common stock warrants to six of the Channel Partners. The warrants have a performance condition and vest over three years and expire in five years from issuance. The exercise prices range from $0.95 to $1.09 with a weighted average of $1.05. The performance conditions are generally based on the average number of unique visitors on the Channel operated by the Channel Partner generated during the period from July 1, 2017 to December 31, 2017 or the revenue generated during the period from issuance date through June 30, 2019. Equity grants with performance conditions that do not have sufficiently large disincentive for non-performance may be measured at fair value that is not fixed until performance is complete. The Company recognizes expense for equity-based payments to non-employees as the services are received. The Company has specific objective criteria, such as the date of launch of a Channel on the Company’s platform, for determination of the period over which services are received and expense is recognized and are classified in stockholders’ equity.

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Intrinsic Value

Outstanding at December 31, 2016		350,000	$	1.05		4.98	$	-
Granted		3,650,500		1.36		5.0
Exercised		-		-
Forfeited		2,696,668		1.29		4.1

Outstanding at December 31, 2017		1,303,832	$	1.48		4.35	$	583,000

Vested and expected to vest at December 31, 2017		1,303,832	$	1.48		4.35	$	583,000

Exercisable at December 31, 2017		679,255	$	1.60		4.35	$	233,000

During 2017, the Company issued 3,650,500 common stock warrants to 73 of the Channel Partners. The warrants have a performance condition and vest over three years and expire in five years from issuance. The exercise prices range from $0.95 to $2.20 with a weighted average of $1.36. The performance conditions are generally based on the average number of unique visitors on the Channel operated by the Channel Partner generated during the period from July 1, 2017 to December 31, 2017, or during the first six months from the Channel Partners launch on our platform or the revenue generated during the period from issuance date through June 30, 2019. Equity grants with performance conditions that do not have sufficiently large disincentive for non-performance may be measured at fair value that is not fixed until performance is complete. The Company recognizes expense for equity-based payments to non-employees as the services are received. The Company has specific objective criteria, such as the date of launch of a Channel on the Company’s platform, for determination of the period over which services are received and expense is recognized.

The Company reevaluated Channel Partner performance each quarter end during 2017 and determined the final outcome of the performance conditions for certain Channel Partners on December 31, 2017. The Company recorded approximately $230,000 of compensation related to Channel Partner warrants in 2017 and zero in 2016.

In accordance with the Investment Banking Advisory Agreement more fully described in Note 11, on November 4, 2016 Integrated issued warrants to MDB Capital Group, LLC to purchase 1,169,607 shares of Parent common stock. The warrants have an exercise price of $0.20 per share and expire on November 4, 2021. The aggregate intrinsic value of the warrants at December 31, 2017 is $1,988,000.

In accordance with the Investment Banking Advisory Agreement more fully described in Note 11, on October 19, 2017 Maven issued warrants to MDB Capital Group, LLC to purchase 119,565 shares of Parent common stock. The warrants have an exercise price of $1.15 per share and expire on October 19, 2022. The aggregate intrinsic value of the warrants at December 31, 2017 is $90,000.

Common Stock to be Issued

The Company agreed to compensate its four non-management directors by issuing common stock in addition to cash for services rendered in 2016. Two of these directors are affiliated with the advisory services firm that provided investment banking services to the Company. The number of shares issued to each director was determined based upon the equivalent cash compensation accrued divided by the quoted closing price of the Company’s common stock on the date the compensation is fully earned each quarter, which is the last day of such quarter. The Company recorded stock-based compensation of $6,250 for the period subsequent to the Recapitalization, which was recorded as common stock to be issued as of December 31, 2016.

Common Stock – Private Placement of Common Stock

On April 4, 2017, the Company completed a private placement of its common stock, selling 3,765,000 shares at $1.00 per share, for total gross proceeds of $3,765,000. In connection with the offering, the Company paid $188,250 and issued 162,000 shares of common stock to MDB Capital Group LLC, which acted as placement agent. The transaction costs of $446,000, including $201,000 of non-cash expenses, have been recorded as a reduction in paid-in capital. The shares issued through this offering have registration rights, and a registration statement was filed within approximately forty-five days of the offering completion date.

On October 19, 2017, the Company completed a private placement of its common stock, selling 2,391,304 shares at $1.15 per share, for total gross proceeds of $2,734,205. In connection with the offering, the Company issued 119,565 shares of common stock and 119,565 common stock warrants to MDB Capital Group LLC, which acted as placement agent. The approximate transaction costs of $296,000, including $282,000 of non-cash expenses, have been recorded as a reduction in paid-in capital. The net cash proceeds were approximately $2.7 million. The shares issued through this offering have registration rights, and a registration statement was filed within approximately forty-five days of the offering completion date.

Stock-based Compensation

The impact on our results of operations of recording stock-based compensation expense was as follows:

	For the Period from July 22, 2016 (Inception) to December 31, 2016
	Restricted Stock at Inception		Stock Options		Channel Partner Warrants		Common Stock to be Issued		Total
Research and development	$	67,842	$	-	$	-	$	-	$	67,842
General and administrative		1,026,135		5,542		-		6,250		1,037,927
	$	1,093,977	$	5,542	$	-	$	6,250	$	1,105,769

In addition, during 2016 stock-based compensation totaling $139,375 during the application and development stage was capitalized for website development.

	For the Year Ended December 31, 2017
	Restricted Stock at Inception		Stock Options		Channel Partner Warrants		Common Stock to be Issued		Total
Research and development	$	-	$	-	$	-	$	-	$	-
General and administrative		777,206		618,761		229,720		-		1,625,687
	$	777,206	$	618,761	$	229,720			$	1,625,687

In addition, during 2017 stock-based compensation totaling $614,573 during the application and development stage was capitalized for website development.