Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.19.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2019
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
Note 10. Stockholders’ Equity
 
The December 31, 2018 common share and additional paid-in capital amounts have been restated to reflect the share exchange in connection with the Acquisition and a subsequent one-for-nineteen reverse stock split.
 
Transfer of Common Shares to Consultants
 
On or about February 1, 2019, the Company’s Founder and CEO as well as the President, transferred an aggregate of approximately 1,379,000 and 144,000 common shares, respectively to certain consultants of the Company, of which approximately 983,000 and 144,000 common shares were sold to consultants in exchange for promissory notes.  The Company accounted for these share transfers as stock-based compensation expense based upon the black-scholes model as if these were stock option grants made by the Company.  The Company used the following inputs in the black-scholes option pricing model, expected life of 5 years, risk-free interest rate of 2.51%, volatility 92% and dividend yield of 0%.  As a result, the Company recognized approximately $3.6 million of stock-based compensation expense related to these share transfers.  Additionally, approximately 396,000 shares on common stock were transferred by the Founder and CEO to contractors for no consideration.  The Company accounted for these share transfers as stock based compensation based upon the underlying common share price of $0.23 as of the date of transfer.  The Company recognized $1.7 million of stock-based compensation expense related to these transfers.
 
Stock Option Plan
 
In connection with the acquisition, the Company adopted the Alliance MMA 2016 Stock Option Plan as Amended. The Alliance MMA 2016 Equity Incentive Plan allows the Company to grant shares of the Company’s common stock to the Company’s directors, officers, employees and consultants. On January 30, 2019, the Alliance MMA shareholders approved the amendment of the Alliance MMA 2016 Stock Option Plan to increase the number of shares of common stock available for issuance thereunder to 3,000,000 shares of common stock, on a post-split basis.
 
On February 13, 2019, the Board of Directors of the Company granted an aggregate of 425,000 restricted stock units (“RSUs”) under the Amended Alliance MMA 2016 Stock Option Plan, of which an aggregate 
325,000
were granted to management and vest quarterly over the next three years, and 100,000 were issued to a consultant and vest quarterly over one year. Upon the effectiveness under the Securities Act of 1933 of an S-8 Registration Statement with respect to the shares covered by the Plan, these RSUs vest in twelve equal quarterly installments, commencing on the grant date of February 13, 2019 and had a grant date fair value of $2.7 million. The Company also granted an additional 525,000 RSUs which are subject to performance vesting, of which an aggregate of 225,000 were issued to our management and 300,000 were issued to a consultant. Additionally, the board of directors awarded stock options under the plan to each of the four independent board members to acquire an aggregate of 53,572 shares of the Company’s common stock and to an employee to acquire 25,000 shares. The stock options have a term of five years, an exercise price of $6.49 per share, vest quarterly over four quarters beginning on the grant date of February 13, 2019 and had a grant date fair value of $431,000. The Company determined the fair value of the stock options using the Black-Scholes model with the following inputs, expected life 10 years, risk-free interest rate 0.25%, dividend yield 0%, expected volatility 90%.
  
The number of shares of the Company’s common stock that are issuable pursuant to warrant and stock option grants with time-based vesting as of March 31, 2019 are:
 
Reflective of one-for-nineteen reverse stock split
 
 
 
Warrant Grants
 
 
Stock Option Grants
 
 
 
Number of
Shares
Subject to
Warrants
 
 
Weighted-Average
Exercise Price Per
Share
 
 
Number of
Shares
Subject
to Options
 
 
Weighted-Average
Exercise Price
Per Share
 
Balance at December 31, 2018
 
 
236,825
 
 
$
27.84
 
 
 
135,023
 
 
$
7.70
 
Granted
 
 
34,395
 
 
 
-
 
 
 
53,572
 
 
 
5.49
 
Exercised
 
 
(61,023
)
 
 
5.51
 
 
 
-
 
 
 
-
 
Cancelled/Forfeited
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Balance at March 31, 2019
 
 
210,197
 
 
$
2.33
 
 
 
188,595
 
 
$
2.22
 
Exercisable at March 31, 2019
 
 
210,197
 
 
$
2.33
 
 
 
188,595
 
 
$
2.22
 
 
As of March 31, 2019 and December 31, 2018, the total unrecognized expense for unvested stock options and restricted stock awards, net of actual forfeitures, was approximately $3.8 million and $0 respectively, to be recognized over a three year period for restricted stock awards and one year for option grants.
 
 
Stock-based compensation expense for the three months ended March 31, 2019 and 2018 is as follows:
 
 
 
Three Months
Ended March 31,
 
 
 
2019
 
 
2018
 
Stock-based compensation expense
 
$
5,629,833
 
 
$
-
 
 
 
Stock-based compensation expense categorized by the equity components for the three months ended March 31, 2019 and 2018 is as follows:
 
 
 
Three Months
Ended March 31,
 
 
 
2019
 
 
2018
 
Stock option awards
 
$
49,018
 
 
$
-
 
Warrants
 
 
-
 
 
 
-
 
Common stock
 
 
257,885
 
 
 
-
 
Transfer of common stock by founders to contractors
 
 
5,322,930
 
 
 
-
 
 
 
$
5,629,833
 
 
$
-