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Stockholders' Equity
 6 Months Ended
Jun. 30, 2023
Stockholders' Equity [Abstract]  
Stockholders' Equity

6. 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 28,964 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, 2023, there were 762,406 shares available for future issuance under the 2016 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 six months ended June 30, 2023:

 

Expected volatility   161.44%
Expected life of option (in years)   5.2 – 6.2 
Risk free interest rate   3.58 – 3.59%
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 adjusts to reflect actual forfeitures as the stock-based awards vest.

 

The following table summarizes stock option activity during the six months ended June 30, 2023:

 

       Weighted 
       Average 
   Number of   Exercise 
   Options   Price 
Stock Options:        
Outstanding at January 1, 2023   622,074   $3.71 
Granted during the period   49,000    1.94 
Cancelled/Forfeited, during the period   (21,935)   1.62 
Expired, during the period   (2,584)   21.24 
Outstanding at June 30, 2023   646,555   $3.58 
Exercisable at June 30, 2023   499,780   $3.93 

 

At June 30, 2023, there was $300,353 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 2.05 years.

 

On June 30, 2023, the aggregate intrinsic value of stock options that were outstanding and exercisable was $26,010 and $24,323, respectively. On June 30, 2022, the aggregate intrinsic value of stock options that were outstanding and exercisable was $45,840 and $38,340, respectively. The intrinsic value of 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, 2023, 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 $1.94 per share. The stock options vest in four equal quarterly installments on the last day of each calendar quarter in 2023 and have a term of ten years. During the six months ended June 30, 2023, the Company also granted options to employees to purchase an aggregate of 25,000 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 $1.94. The aggregate fair value for the options granted during the six months ended June 30, 2023 and 2022 was $90,380 and $636,957, 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     Six Months Ended  
    June 30,     June 30,  
    2023     2022     2023     2022  
Cost of revenue   $ 3,151     $ 2,192     $ 5,366     $ 15,056  
Sales and marketing expense     842       637       1,481       756  
Product development expense     7,616       7,270       14,489       10,739  
General and administrative expense     45,561       49,050       90,975       185,069  
Total stock compensation expense   $ 57,170     $ 59,149     $ 112,311     $ 211,620  

 

Treasury Shares

 

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”), effective as of March 29, 2022, which expired on March 29, 2023, the one-year anniversary of such date. Under the Stock Repurchase Plan, shares were 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. The actual timing, number and value of shares repurchased was determined by a committee of the Board of Directors at its discretion and depended 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 June 30, 2023 and December 31, 2022, the Company had 641,963, and 636,771, shares of its common stock, respectively, classified as treasury shares on the Company’s consolidated balance sheets. During the six months ended June 30, 2023, 5,192 shares of common stock had been repurchased by the Company pursuant to the Stock Repurchase Plan at an average purchase price of $1.39.