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Stockholders' Equity | 9 Months Ended
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Sep. 30, 2021
Stockholders' Equity Note [Abstract] |
Stockholders' Equity |
8. | 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 September 30, 2021, there were 958,063 shares available for future issuance under the 2016 Plan. August 2021 Underwritten Public Offering On August 5, 2021, the Company announced the pricing and closing of an underwritten public offering (the “August 2021 Offering”), in which the Company sold an aggregate of 1,333,310 shares of the Company’s common stock (which includes 173,910 shares sold to the underwriter pursuant to the full exercise of the underwriter’s over-allotment option) at a public offering price of $3.00 per share. The August 2021 Offering was made pursuant to the Company’s Registration Statement on Form S-1 (File No. 333-257036), initially filed with the SEC on June 11, 2021, and was subsequently amended and declared effective on August 2, 2021. Gross proceeds received by the Company from the August 2021 Offering were approximately $4.0 million, before deducting underwriting discounts and commissions and other estimated offering expenses of approximately $769,200. These costs were recorded in stockholders’ equity as a reduction of additional paid-in capital in connection with Staff Accounting Bulletin 5A. In connection with the August 2021 Offering, the Company’s common stock was approved for listing on The Nasdaq Capital Market under the symbol “PALT” and began trading on The Nasdaq Capital Market on August 3, 2021. 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 on the Company’s condensed consolidated balance sheets. 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 nine months ended September 30, 2021:
Expected volatility |  | 178%-197 | %
Expected life of option (in years) |  | 5.0-5.5 |
Risk free interest rate |  | 0.81-0.88 | %
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 nine months ended September 30, 2021:
|  |  |  |  | Weighted |
|  |  |  |  | Average |
|  | Number of |  |  | Exercise |
|  | Options |  |  | Price |
Stock Options: |  |  |  |  |  |  |  |
Outstanding at January 1, 2021 |  |  | 622,036 |  |  | $ | 5.53 |
Granted |  |  | 37,932 |  |  |  | 3.77 |
Forfeited or canceled, during the period |  |  | (128,569 | ) |  |  | 4.06 |
Expired, during the period |  |  | (13,427 | ) |  |  | 5.01 |
Outstanding at September 30, 2021 |  |  | 517,972 |  |  | $ | 5.78 |
Exercisable at September 30, 2021 |  |  | 446,527 |  |  | $ | 6.37 |
At September 30, 2021, there was $103,205 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 1.7 years. On September 30, 2021, the aggregate intrinsic value of stock options that were outstanding and exercisable was $3,186,961 and $2,578,975, respectively. On September 30, 2020, the aggregate intrinsic value of stock options that were outstanding and exercisable was $7,200 and $5,400, 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 nine months ended September 30, 2021, the Company granted stock options to members of the Board of Directors to purchase an aggregate of 24,000 shares of common stock at an exercise price of $3.20 per share. The stock options vest in four equal quarterly installments on the last day of each calendar quarter in 2021 and have a term of ten years. During the nine months ended September 30, 2021, the Company also granted options to employees to purchase an aggregate of 13,932 shares of common stock. These options vest between the grant date and up to four years, have a term of ten years and have an exercise price of $3.20 to $4.90. During the nine months ended September 30, 2021, an unvested executive performance award was forfeited and an expense reversal of $218,679 was recorded under general and administrative expense in the condensed consolidated statements of operations. The aggregate fair value for the stock options granted during the nine months ended September 30, 2021 and 2020 was $145,522 and $18,664, respectively. Stock-based compensation expense for the Company’s stock options included in the condensed consolidated statements of operations is as follows:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Cost of revenue |  | $ | 67,000 |  |  | $ | 386 |  |  | $ | 67,182 |  |  | $ | 1,137 |
Sales and marketing expense |  |  | 95 |  |  |  | 21 |  |  |  | 198 |  |  |  | 61 |
Product development expense |  |  | 2,755 |  |  |  | 4,118 |  |  |  | 8,539 |  |  |  | 15,338 |
General and administrative expense |  |  | 23,580 |  |  |  | 43,182 |  |  |  | (143,463 | ) |  |  | 177,560 |
Total stock compensation expense |  | $ | 93,430 |  |  | $ | 47,707 |  |  | $ | (67,544 | ) |  | $ | 194,096 |

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 13 -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 14 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496171-112644 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 14 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496171-112644 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.3-04) -URI http://asc.fasb.org/extlink&oid=120397183&loc=d3e187085-122770 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 18 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496189-112644 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (g) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644 Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 18 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496189-112644 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (h) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 14 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496171-112644 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 18 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496189-112644 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 16 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496180-112644 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (i) -URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644 Reference 15: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(e)(1)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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