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Stockholders' Equity
 12 Months Ended
Dec. 31, 2015
Stockholders' Equity Note [Abstract]  
Stockholders' Equity

NOTE 8 - STOCKHOLDERS’ EQUITY

 

Sales of Equity - Between September 15, 2015 and September 24, 2015, the Company entered into securities purchase agreements with certain accredited investors for the sale of an aggregate of 4,318,181 shares of common stock at a purchase price of $0.22 per share, for a total purchase price of $950,000. In addition to the common stock, the purchasers received four-year warrants to purchase up to an aggregate of 863,638 additional shares of common stock at an exercise price of $0.40 per share and for a term of four years after the first six months from the warrant’s issuance date. The warrants had an estimated aggregate fair value of approximately $105,000 which was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 81.4%, a risk free rate of return between of 1.45% and 1.60%, and zero dividend and forfeiture estimates. Between October 5, 2015 and October 21, 2015, the Company entered into securities purchase agreements with certain accredited investors for the sale of an aggregate of 1,136,363 shares of common stock at a purchase price of $0.22 per share, for a total purchase price of $250,000. In addition to the common stock, the purchasers received four-year warrants to purchase up to an aggregate of 227,273 additional shares of common stock at an exercise price of $0.40 per share and for a term of four years after the first six months from the warrant’s issuance date. The warrants had an estimated aggregate fair value of approximately $28,000 which was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 81.4%, a risk free rate of return between of 1.35% and 1.36%, and zero dividend and forfeiture estimates.

  

The securities offered were made pursuant to prospectus supplements to the prospectus dated November 1, 2013, pursuant to the Company’s shelf registration statement on Form S-3 that was filed with the Securities and Exchange Commission on October 11, 2013 and became effective on November 1, 2013. The offering closed on December 31, 2015. No placement agent or underwriter was involved in the offering.

 

On February 23, 2015, the Company amended two of its debt obligations that, among other things, extended the maturity dates of the notes, instituted principal payments for the notes, and eliminated a conversion feature on one of the notes. In conjunction with these agreements, the Company issued an aggregate of 100,000 shares of its common stock with a grant date fair value of $41,000.

 

Stock Warrants – The Company issued warrants to purchase 1,090,911 shares of the Company’s common stock as part of its offering to accredited investors from September 15, 2015 through October 21, 2015, at an exercise price of $0.40 per share.

 

The following is a summary with respect to warrants outstanding and exercisable at December 31, 2015 and 2014 and activity during the years then ended:

 

    2015     2014  
          Weighted           Weighted  
          Average           Average  
          Exercise           Exercise  
    Warrants     Price     Warrants     Price  
                         
Outstanding January 1     6,566,385     $ 4.70       6,875,586     $ 4.64  
Granted during the year     1,090,911       0.40       100,000       1.56  
Exercised/transferred     -       -       (80,645 )     3.10  
Lapsed/terminated     (207,235 )     3.52       (328,556 )     2.91  
                                 
Outstanding at December 31     7,450,061     $ 4.10       6,566,385     $ 4.70  
Exercisable at December 31     6,359,150     $ 4.10       6,535,274     $ 4.71  
Weighted average months remaining             34.3               40.0  

 

Stock Options - On June 20, 2013 the Company’s shareholders adopted the 2013 Employee, Director and Consultant Equity Incentive Plan (the “2013 Plan”). The 2013 Plan provides for the issuance of up to a total of 6,000,000 shares of common stock authorized to be issued for grants of options, restricted stock and other forms of equity to employees, directors and consultants. Under the terms of the 2013 Plan, options granted thereunder may be designated as options which qualify for incentive stock option treatment (“ISOs”) under Section 422A of the Internal Revenue Code, or options which do not qualify (“NQSOs”).

 

The following is a summary with respect to options outstanding at December 31, 2015 and 2014 and activity during the years then ended:

 

    2015     2014  
    Number of
Options		     Weighted
Average
Exercise Price		     Weighted
Average Life
Remaining		     Number of
Options		     Weighted
Average
Exercise Price		     Weighted
Average Life
Remaining		  
                (in years)                 (in years)  
Outstanding at January 1:     4,928,291       2.92               4,073,898       3.25          
Granted     53,550       0.60               1,172,197       1.96          
Exercised     -       -               -       -          
Lapsed/terminated     (557,282 )     2.95               (317,804 )     3.56          
Outstanding at December 31:     4,424,559       2.89       4.0       4,928,291       2.92       4.0  
Exercisable at December 31:     3,628,495       2.77       4.6       2,806,696       2.94       5.0  
Expected to vest at December 31:     346,064       2.00       3.2       1,660,169       2.46       5.8  
                                                 
Aggregate intrinsic value of outstanding options at December 31:   $ -                     $ -                  
Aggregate intrinsic value of exercisable options at December 31:   $ -                     $ -                  
Aggregate intrinsic value of options expected to vest at December 31:   $ -                     $ -                  

 

Included in these amounts are earn-out options issued to the previous owners of ExtraDev with a contractual term of 5 years, to purchase an aggregate of 450,000 shares of common stock at an exercise price of $4.50 per share that will be vested if the Company’s Digital division achieves certain annual revenue targets by the end of fiscal year 2016. The fair value of the earn-out options amounted to $594,000. If the annual revenue targets are met or are deemed probable to occur, then the Company will record stock based compensation expense. As of December 31, 2015, vesting is considered remote. All options granted to the owners of ExtraDev were classified as compensation for post combination services since the vesting of each grant is based on length of employment, with all unvested options forfeiting upon termination of employment, therefore, the fair value of these equity instruments was not considered a component of the purchase price of the ExtraDev acquisition.

 

The weighted-average grant date fair value of options granted during the year ended December 31, 2015 was $0.12 ($0.71 -2014). The aggregate grant date fair value of options that vested during the year was approximately $988,000 ($1,145,000 -2014). There were no options exercised during 2015 or 2014.

 

The fair value of each option award is estimated on the date of grant utilizing the Black-Scholes-Merton Option Pricing Model. The Company estimated the expected volatility of the Company’s common stock at the grant date using the historical volatility of the Company’s common stock over the most recent period equal to the expected stock option term. In January 2015, the Company issued an aggregate of 53,550 options to purchase shares of the Company’s common stock with an exercise price of $0.60 per share to certain members of the Company’s board in exchange for agreements by the board members to reduce their cash compensation for the fiscal year of 2015. The options vested on August 15, 2015 and had an aggregate grant date fair value of approximately $6,000. The aggregate fair value of these options was determined by utilizing the Black-Scholes-Merton option pricing model with a volatility of 72.6%, a risk free rate of return of 1.66% and zero dividend and forfeiture estimates.

 

On March 5, 2014, the Company issued an aggregate of 1,138,697 options to purchase the Company’s common stock at $2.00 per share with a term of 5 years to its employees covered under the 2013 Plan. The options vest pro-ratably as follows: 1/3 on the grant date, 1/3 on the first anniversary of the grant date and 1/3 on the second anniversary of the grant date as long as the employee is employed on such dates. The options were valued at approximately $833,000 using the Black-Scholes-Merton option pricing model with a volatility of 67.0%, a risk free rate of return of 0.92% and zero dividend and forfeiture estimates. On March 13, 2014, the Company issued an aggregate of 84,025 shares of common stock to three of its directors to pay approximately $134,000 of accrued director’s fees. In December 2014, the Company issued 33,500 options to purchase the Company’s common stock at $0.60 per share with a term of 5 years to members of the Company’s executive management in exchange for an agreement by each employee to reduce his cash compensation for the fiscal year of 2015. The options vested on August 15, 2015 and had a grant date fair value of $6,643. The options were valued using the Black-Scholes-Merton option pricing model with a volatility of 72.6%, a risk free rate of return of 1.66% and zero dividend and forfeiture estimates.

 

The following table shows our weighted average assumptions used to compute the share-based compensation expense for stock options and warrants granted during the years ended December 31, 2015 and 2014:

 

    2015     2014  
Volatility     72.6 %     67.1 %
Expected option term     2.9 years       3.5 years  
Risk-free interest rate     1.7 %     0.9 %
Expected forfeiture rate     0.0 %     0.0 %
Expected dividend yield     0.0 %     0.0 %

 

Restricted Stock - Restricted common stock may be issued under the Company’s 2013 Plan for services to be rendered which may not be sold, transferred or pledged for such period as determined by our Compensation Committee and Management Resources. Restricted stock compensation cost is measured as the stock’s fair value based on the quoted market price at the date of grant. The restricted shares issued reduce the amount available under the employee stock option plans. Compensation cost is recognized only on restricted shares that will ultimately vest. The Company estimates the number of shares that will ultimately vest at each grant date based on historical experience and adjust compensation cost and the carrying amount of unearned compensation based on changes in those estimates over time. Restricted stock compensation cost is recognized ratably over the requisite service period which approximates the vesting period. An employee may not sell or otherwise transfer unvested shares and, in the event that employment is terminated prior to the end of the vesting period, any unvested shares are surrendered to us. The Company has no obligation to repurchase any restricted stock.

 

In January 2015, the Company issued an aggregate of 30,000 shares of restricted common stock to certain members of the Company’s board in exchange for agreements by the board members to reduce their cash compensation for the fiscal year of 2015. The restricted shares vested on August 15, 2015 and had an aggregate grant date fair value of approximately $11,000. In November 2015, the Company issued 125,000 restricted shares to a consultant in exchange for media advertising services agreement. The restricted shares vested over a 90 period and had a grant date fair value of $27,500. In December 2014, the Company issued an aggregate of 243,750 shares of restricted common stock to certain members of the Company’s executive and senior management in exchange for agreements by the employees to reduce their cash compensation for the fiscal year of 2015. The restricted shares vested on August 15, 2015 and had an aggregate grant date fair value of $117,000.

 

The following is a summary of activity of restricted stock during the years ended at December 31, 2015 and 2014:

 

    Shares     Weighted- average
Grant Date Fair
Value		  
                 
Restricted shares outstanding, December 31, 2013     41,176     $ 3.33  
Restricted shares granted     243,750       0.48  
Restricted shares vested     (20,588 )     3.33  
Restricted shares outstanding, December 31, 2014     264,338     $ 0.70  
Restricted shares granted     155,000       0.25  
Restricted shares vested     (359,338 )     0.59  
Restricted shares outstanding, December 31, 2015     60,000     $ 0.22  

 

Stock-Based Compensation - The Company records stock-based payment expense related to these options based on the grant date fair value in accordance with FASB ASC 718. Stock-based compensation includes expense charges for all stock-based awards to employees, directors and consultants. Such awards include option grants, warrant grants, and restricted stock awards. During 2015, the Company had stock compensation expense of approximately $974,000 or $0.02 basic earnings per share ($1,355,000; $0.03 basic earnings per share - 2014). As of December 31, 2015, there was approximately $147,000 of total unrecognized compensation costs related to options and restricted stock granted under the Company’s stock option plans, which the Company expects to recognize over the weighted average period of six months. This amount excludes $536,000 of potential stock based compensation for stock options that vest upon the occurrence of certain events which the Company does not believe are likely.