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Stockholders' Equity
 6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Stockholders' Equity

10. Stockholders' Equity

 

The Paltalk, 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 121,930 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 Paltalk, 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, 2020, there were 768,217 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 $500,000 of its common stock for cash. The repurchase plan expired on April 29, 2020. The Company had purchased 9,950 shares of its common stock under the repurchase plan as of April 29, 2020 and has classified them as treasury shares.

 

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 six months ended June 30, 2020:

 

Expected volatility   188.0%
Expected life of option (in years)   5.3 
Risk free interest rate   0.59%
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 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 table summarizes stock option activity during the six months ended June 30, 2020:

 

       Weighted 
   Number of   Average
Exercise		 
   Options   Price 
Stock Options:        
Outstanding at January 1, 2020   1,021,243   $4.82 
Granted   24,000    0.80 
Forfeited or canceled, during the period   (268,914)   3.65 
Expired, during the period   (68,511)   3.52 
Outstanding at June 30, 2020   707,818   $5.25 
Exercisable at June 30, 2020   522,154   $6.11 

 

At June 30, 2020, there was $233,968 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 1.5 years.

 

On June 30, 2020, the aggregate intrinsic value of stock options that were outstanding and exercisable was $7,200 and $3,600, respectively. On June 30, 2019, the aggregate intrinsic value of stock options that were outstanding and exercisable was $154,514 and $99,340, 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, 2020, the Company granted options to members of the Board of Directors to purchase an aggregate 24,000 shares of common stock at an exercise price of $0.80 per share. The options vest in four equal quarterly installments on the last day of each calendar quarter in 2020 and have a term of ten years.

 

The aggregate fair value for the options granted during the six months ended June 30, 2020 and 2019 was $18,664 and $337,598, respectively.

 

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

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2020   2019   2020   2019 
Cost of revenue  $378   $363   $751   $724 
Sales and marketing expense   20    45    40    90 
Product development expense   3,839    10,065    11,220    99,809 
General and administrative expense   52,946    247,814    134,378    424,815 
Total stock compensation expense  $57,183   $258,287   $146,389   $525,438