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Stockholders' Equity

12 Months Ended

Dec. 31, 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 December 31, 2019, there were 454,792 shares available for future issuance under the 2016 Plan.

Treasury Shares

On April 29, 2019, the Company implemented a stock repurchase plan to repurchase up to $500 thousand of its common stock for cash. The repurchase plan expires on April 29, 2020. The Company has purchased 1,900 shares of its common stock under the repurchase plan as of December 31, 2019 and has classified them as treasury shares.

Shares issued for consulting services

On January 15, 2019 and October 1, 2019, we issued 6,000 and 4,225 shares of our common stock, respectively, to PCG Advisory, Inc. as consideration for investor relations services. The total expense for these grants was $29,005 and is included in general and administrative expense in the consolidated financial statements.

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 years ended:

		December 31,
		2019				2018
Expected volatility			171.0-177.0	%			159.0-167.0	%
Expected life of option			5.0-6.3				5.2-6.2
Risk free interest rate			1.7-2.5	%			2.3-2.9	%
Expected dividend yield			0.0	%			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 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 is adjusted to reflect actual forfeitures as the stock-based awards vest.

The following tables summarize stock option activity during the year ended December 31, 2019:

		Number of Options				Weighted Average Exercise Price
Outstanding at January 1, 2019			1,037,797			$	4.17
Granted			268,294				3.17
Exercised during period			-				4.55
Forfeited or canceled, during the period			(263,661	)			4.34
Expired, during the period			(21,187	)			4.55
Outstanding at December 31, 2019			1,021,243			$	4.82
Exercisable at December 31, 2019			764,400			$	5.34

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 December 31, 2019, there was $635,013 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 1.78 years.

On December 31, 2019, there was no aggregate intrinsic value of stock options that were outstanding and exercisable. On December 31, 2018, the aggregate intrinsic value of stock options that were outstanding and exercisable was $725,604 and $365,861, 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 year ended December 31, 2019, the Company granted options to employees to purchase an aggregate of 268,294 shares of common stock. These options vest between one and four years and have a term of ten years and have a weighted average exercise price of $3.17.

The aggregate fair value for the options granted during the years ended December 31, 2019 and 2018 was $469,179 and $708,501, respectively.

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

		Year Ended December 31,
		2019				2018
Cost of revenue		$	1,478			$	2,398
Sales and marketing expense			130				985
Product development expense			117,375				27,919
General and administrative expense			710,013				819,325
Total stock-based compensation expense		$	828,996			$	850,627

Restricted Stock Awards

The following table summarizes restricted stock award activity for the year ended December 31, 2019:

		Number of Restricted Stock Awards				Weighted Average Grant Date Fair Value
Unvested at January 1, 2019			158,571			$	20.29
Granted			-				-
Expired or canceled, during the period			(20,000	)			20.29
Forfeited, during the period			(138,571	)			20.29
Unvested at December 31, 2019			-			$	-

At December 31, 2019, there was no unrecognized compensation expense related to unvested restricted stock awards.

Stock-based compensation expense relating to restricted stock awards for the years ended December 31, 2019 and 2018 was $556,122 and $741,494, respectively, which is included in general and administrative expense in the consolidated financial statements.