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Stockholders' Equity

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Stockholders' Equity

8.	Stockholders’ Equity

The PeerStream, Inc. Amended and Restated 2011 Long-Term Incentive Plan (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 PeerStream, Inc. 2016 Long-Term Incentive 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 June 30, 2018, there were 418,889 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 following period:

		Six Months Ended
		June 30,
		2018
Expected volatility			159.0-167.0%
Expected life of option			5.2-6.3
Risk free interest rate			2.3-2.8%
Expected dividend yield			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 the options has been determined using the “simplified” method as prescribed by SAB 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 six months ended June 30, 2018:

						Weighted
		Number of				Average Exercise
		Options				Price
Stock Options:
Outstanding at January 1, 2018			980,588			$	5.02
Granted			85,830				6.11
Expired or canceled, during the period			-				-
Forfeited, during the period			(2,909	)			3.65
Outstanding at June 30, 2018			1,063,509			$	5.13
Exercisable at June 30, 2018			554,196			$	6.59

On June 30, 2018, the aggregate intrinsic value of stock options that were outstanding and exercisable was $2,923,478 and $1,400,918, respectively. On June 30, 2017, the aggregate intrinsic value of stock options that were outstanding and exercisable was $19,302 and $10,960, 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 six months ended June 30, 2018, the Company granted options to employees to purchase an aggregate 85,830 shares of common stock at exercise prices ranging from $5.70 to $6.99. The options vest between one, three and four years and have a term of ten years.

The aggregate fair value for the options granted during the six months ended June 30, 2018 was $522,774. The aggregate fair value for the options granted during the six months ended June 30, 2017 was $956,760.

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

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2018				2017				2018				2017
Cost of revenue		$	651			$	1,124			$	1,341			$	2,240
Sales and marketing expense			971				307				2,221				575
Product development expense			12,873				29,151				19,260				33,231
General and administrative expense			203,518				168,629				399,030				287,493
Total stock compensation expense		$	218,013			$	199,211			$	421,852			$	323,539

At June 30, 2018, there was $1,669,355 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 2.3 years.

Restricted Stock Awards

The following table summarizes restricted stock award activity for the six months ended June 30, 2018:

						Weighted
						Average
		Number of				Grant Date
		RSAs				Fair Value
Restricted Stock Awards:
Outstanding at January 1, 2018		$	158,571			$	20.29
Granted			-				-
Expired or canceled, during the period			-				-
Forfeited, during the period			-				-
Outstanding at June 30, 2018		$	158,571			$	20.29

At June 30, 2018, there was $926,869 of total unrecognized compensation expense related to unvested restricted stock awards, which is expected to be recognized over a weighted average period of 1.2 years.

Stock-based compensation expense relating to restricted stock awards for the three and six months ended June 30, 2018 was $185,374 and $370,746, respectively, as compared to $185,374 and $370,748, respectively, for the three and six months ended June 30, 2017.

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”).

Pursuant to the Restricted Stock Award Amendments, Mr. Lerner’s unvested shares of restricted common stock will continue to vest as scheduled, and the Company is contractually required, in order to assist Mr. Lerner in satisfying his tax withholding obligations with respect to such shares of restricted common stock that vest on the second anniversary of the AVM Merger, to withhold a number of shares of restricted common stock that would otherwise be acquired by Mr. Lerner upon such vesting with a fair market value equal to the lesser of (i) Mr. Lerner’s tax withholding obligation with respect to the vesting shares and (ii) $100,000, with the remaining amount of the tax withholding obligation, if any, payable by Mr. Lerner.