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Stockholders' Equity

6 Months Ended

Jun. 30, 2019

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 issued 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, 2019, there were 418,346 shares available for future issuance under the 2016 Plan.

On April 29, 2019, we implemented a stock repurchase plan to repurchase up to $500 thousand of our common stock for cash. The repurchase plan expires on April 29, 2020. There were no repurchased shares of our common stock as of June 30, 2019.

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,
		2019
Expected volatility			165.0 - 175.0	%
Expected life of option			5.0-5.5
Risk free interest rate			2.2 - 2.5	%
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 Staff Accounting Bulletin 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 adjusts pre-vesting forfeitures to reflect actual forfeitures as the stock-based awards vest.

The following table summarizes stock option activity during the six months ended June 30, 2019:

						Weighted
		Number of				Average Exercise
		Options				Price
Stock Options:
Outstanding at January 1, 2019			1,037,797			$	5.36
Granted			193,294				3.71
Forfeited or canceled, during the period			(152,215	)			4.47
Expired, during the period			(21,187	)			4.55
Outstanding at June 30, 2019			1,057,689			$	4.96
Exercisable at June 30, 2019			712,118			$	5.50

On May 7, 2019, in connection with Judy Krandel’s resignation as an officer and employee of the Company, the Company (i) entered into an option cancellation and release agreement, pursuant to which the Company canceled Ms. Krandel’s option award agreement, dated November 15, 2016, related to the award of a stock option representing the right to purchase 142,857 shares of common stock and (ii) entered into a revised option agreement granting Ms. Krandel a stock option representing the right to purchase up to 142,857 shares of common stock at an exercise price equal to $3.55 per share (the “Revised Option Agreement”). The stock option subject to the Revised Option Agreement vests: (i) 50% on the date of grant, (ii) 25% on May 15, 2019 and (iii) 25% in 12 equal installments on the 15th day of each month, with the first tranche vesting on June 15, 2019 and the last tranche vesting on May 15, 2020. The Company accounted for these agreements as an option modification and recognized approximately $115,000 of stock compensation expense in connection with the agreements.

At June 30, 2019, there was $810,526 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 1.3 years.

On June 30, 2019, the aggregate intrinsic value of stock options that were outstanding and exercisable was $154,514 and $99,340, respectively. 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. 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, 2019, the Company granted options to employees to purchase an aggregate 193,294 shares of common stock at exercise prices ranging from $3.55 to $4.55 per share. The options vest on the grant date or between one 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, 2019 was $337,598. The aggregate fair value for the options granted during the six months ended June 30, 2018 was $522,774.

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,
		2019				2018				2019				2018
Cost of revenue		$	363			$	651			$	724			$	1,341
Sales and marketing expense			45				971				90				2,221
Product development expense			10,065				12,873				99,809				19,260
General and administrative expense			247,814				203,518				424,815				399,030
Total stock compensation expense		$	258,287			$	218,013			$	525,438			$	421,852

Restricted Stock Awards

The following table summarizes restricted stock award activity for the six months ended June 30, 2019:

						Weighted
						Average
		Number of				Grant Date
		RSAs				Fair Value
Restricted Stock Awards:
Unvested at January 1, 2019			79,286			$	20.29
Granted			-				-
Expired or canceled, during the period			-				-
Forfeited, during the period			-				-
Unvested at June 30, 2019			79,286			$	20.29

At June 30, 2019, there was $185,374 of total unrecognized compensation expense related to unvested restricted stock awards, which is expected to be recognized over a weighted average period of 0.3 years.

Stock-based compensation expense relating to restricted stock awards included in general and administrative expense for the three and six months ended June 30, 2019 was $185,374 and $370,748, respectively, as compared to $185,374 and $370,746 for the three and six months ended June 30, 2018, respectively.