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Stockholders' Equity
 3 Months Ended
Mar. 31, 2022
Stockholders' Equity Note [Abstract]  
Stockholders' Equity

7. 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 36,402 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 March 31, 2022, there were 734,614 shares available for future issuance under the 2016 Plan.

 

Stock Repurchase Plan

 

On March 21, 2022, the Board of Directors of the Company approved a stock repurchase plan for up to $1,750,000 of the Company’s outstanding common stock (the “Stock Repurchase Plan”). The Stock Repurchase Plan is effective as of March 29, 2022 and expires on the one-year anniversary of such date. Shares may be repurchased from time-to-time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b5-1 programs, and the Stock Repurchase Plan may be suspended or discontinued at any time. The actual timing, number and value of shares repurchased will be determined by a committee of the Board of Directors at its discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, alternative investment opportunities and other corporate considerations. As of March 31, 2022, no shares of common stock had been repurchased by the Company pursuant to the Stock Repurchase 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 three months ended March 31, 2022:

 

Expected volatility     173%-182% %
Expected life of option (in years)     5.2-6.2  
Risk free interest rate     2.53 %
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 three months ended March 31, 2022:

 

       Weighted 
       Average 
   Number of   Exercise 
   Options   Price 
Stock Options:        
Outstanding at January 1, 2022   435,770   $5.31 
Granted   248,500    2.66 
Expired, during the period   (4,755)   54.51 
Outstanding at March 31, 2022   679,515   $4.00 
Exercisable at March 31, 2022   448,264   $4.76 

 

At March 31, 2022, there was $551,390 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 3.76 years.

 

On March 31, 2022, the aggregate intrinsic value of stock options that were outstanding and exercisable was $118,415 and $88,040, respectively. On March 31, 2021, the aggregate intrinsic value of stock options that were outstanding and exercisable was $272,363 and $167,879, 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 three months ended March 31, 2022, 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 $2.66 per share. The stock options vest in four equal quarterly installments on the last day of each calendar quarter in 2022 and have a term of ten years. During the three months ended March 31, 2022, the Company also granted options to employees to purchase an aggregate of 224,500 shares of common stock. These options have varying vesting dates ranging between the grant date and up to four years, have a term of ten years and have an exercise price of $2.66. The aggregate fair value for the options granted during the three months ended March 31, 2022 and 2021 was $636,957 and $78,522, respectively.

 

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

 

   Three Months Ended 
   March 31, 
   2022   2021 
Cost of revenue  $12,864   $182 
Sales and marketing expense   119    7 
Product development expense   3,469    3,044 
General and administrative expense   136,019    28,135 
Total stock compensation expense  $152,471   $31,368 

 

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. In addition, during the year ended December 31, 2021, the Company retained 22,013 in treasury shares as part of a net share exercise of stock options by former employees. As of December 31, 2021 and March 31, 2022, the Company had 31,963 shares of its common stock classified as treasury shares on the Company’s condensed consolidated balance sheets.