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Stockholders' Equity

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

10. Stockholders’ Equity

The Company has authorized 100,000,000 shares of common stock, $0.01 par value, of which 30,975,206 and 28,516,009 shares were issued and outstanding as of June 30, 2018 and December 31, 2017, respectively.

Restricted Stock Awards

On August 11, 2016, management and employees of Subsidiary in conjunction with the incorporation on July 22, 2016 received 12,209,677 shares of common stock as adjusted for the Recapitalization exchange ratio of 4.13607. These shares were subject to a Company option to buy back the shares at the original cash consideration paid, which totaled $2,952 or approximately $0.0002 per share. Pursuant to the achievement of the Unique User Performance Condition, the employees vest their ownership in these shares over a three-year period beginning August 1, 2016 with one-third vesting on August 1, 2017 and the balance monthly over the remaining two years. Because these shares require continued service to the Company the estimated fair value is recognized as compensation expense over the vesting period of the award.

As of December 31, 2017, the Unique User Performance Condition was determined based on 4,977,144 unique users accessing Maven channels in November 2017. Based on this level of unique users 56% of the shares subject to the performance condition were released and 1,927,641 of the escrow shares were subject to the Company’s buy-back right. The Company’s Board of Directors made a determination on March 12, 2018 to waive the buy-back right. This waiver of the buy-back right related to 1,927,641 shares is a modification of the terms of the restricted stock awards and will result in incremental compensation cost of approximately $2.8 million that will be recognized over a period of approximately 1.3 years, with a total of $2.2 million to be recognized in 2018, of which $

225,000 and $

1.5 million was recognized in the three and six months ended June 30, 2018.

At June 30, 2018, total compensation cost, including the effect of the waiver of the buy-back right, related to restricted stock awards but not yet recognized was $3.0 million. This cost will be recognized over a period of approximately 1.3 years with a total of $1.13 million remaining to be recognized in 2018.

Stock Options

On March 28, 2018, the Board of Directors approved an increase in the total number of shares reserved from 3,000,000 to 5,000,000. The Plan is administered by the Board of Directors, and there were no grants prior to the formation of the Plan. Shares of common stock that are issued under the Plan or subject to outstanding incentive awards will be applied to reduce the maximum number of shares of common stock remaining available for issuance under the Plan, provided, however, that that shares subject to an incentive award that expire will automatically become available for issuance. Options issued under the Plan may have a term of up to ten years and may have variable vesting provisions.

In conjunction with the Recapitalization, the Company assumed 175,000 fully-vested options, 25,000 were exercised in 2017 and 125,000 were exercised in 2018 and 25,000 are still outstanding, in connection with the Recapitalization with an exercise price of $0.17 per share, which expire on May 15, 2019.

The estimated fair value of stock-based awards is recognized as compensation expense over the vesting period of the award. The fair value of restricted stock awards is determined based on the number of shares granted and the quoted price of the Company’s common stock on the date of grant. The fair value of stock option awards is estimated at the grant date as calculated using the Black-Scholes option-pricing model. The Black-Scholes model requires various highly judgmental assumptions including expected volatility and option life. The fair values of our stock option grants were estimated with the following average assumptions:

The fair value of stock options granted during 2018 were estimated with the following assumptions:

First Quarter:

Expected life	6.0 years
Risk-free interest rate		2.60	%
Expected annual volatility		113.87	%
Dividend yield		0.00	%

Second Quarter:

Expected life	6.0 years
Risk-free interest rate		2.77	%
Expected annual volatility		108.59	%
Dividend yield		0.00	%

For the six months ended June 30, 2018 option activity was as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2018		2,176,637		$	1.25		9.00

Granted		2,001,250			1.74		9.53
Exercised		(125,000	)		.17		5.87
Forfeited		(45,000	)		1.61		9.75

Outstanding at June 30, 2018		4,007,887		$	1.53		9.28	$	90,000

Exercisable at June 30, 2018		752,146		$	1.33		8.48	$	31,000

The Company has granted 3,3982,887 options under the Plan. In the three months ended June 30, 2018, the Company recorded stock-based compensation of $275,867 related to the grants. Of the total stock-based compensation, $214,038 was expensed in General and Administrative and Research and Development expenses and $61,829 was capitalized as Website Development Costs. In the six months ended June 30, 2018, the Company recorded stock-based compensation of $542,175 related to the grants. Of the total stock-based compensation, $433,424 was expensed in General and Administrative and Research and Development expenses and $108,751 was capitalized as Website Development Costs.

At June 30, 2018, total compensation cost related to stock options granted under the Plan but not yet recognized was $3,726,000. This cost will be amortized on a straight-line method over a period of approximately 1.98 years. The aggregate intrinsic value represents the difference between the exercise price of the underlying options and the quoted price of our common stock for the number of options that were in-the-money at June 30, 2018.

The following table summarizes certain information about stock options for the six months ended June 30, 2018:

Weighted average grant-date fair value for options granted during the period	$	1.74

Vested options in-the-money at June 30, 2018		752,146

Aggregate intrinsic value of options exercised during the period	$	124,000

The following table summarizes the common shares reserved for future issuance under the Plan as of June 30, 2018:

Stock options outstanding			3,982,887
Stock options available for future grant			1,017,113
			5,000,000

Common Stock Warrants – Channel Partner Program

On December 19, 2016, the Company’s Board of Directors approved a program to be administered by management that authorized the Company to issue up to 5,000,000 common stock warrants to provide equity incentive to its Channel Partners to motivate and reward them for their services to the Company and to align the interests of the Channel Partners with those of stockholders of the Company. The following table summarizes the activity in Channel Partner Warrants during the six months ended June 30, 2018:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2018		1,303,832		$	1.48		4.50
Granted		225,000			1.84		4.90
Exercised		-			-
Forfeited		(83,986	)		1.91		4.50

Outstanding at June 30, 2018		1,444,846		$	1.51		4.79	$	-

Exercisable at June 30, 2018		-		$	-		-	$	-

In the six months ended June 30, 2018, the Company issued 225,000 common stock warrants to 13 of the Channel Partners. The warrants have a performance condition and vest over three years and expire in five years from issuance. The exercise prices range from $1.15 to $1.99 with a weighted average of $1.84. The performance conditions are generally based on the average number of unique visitors on the Channel operated by the Channel Partner generated during the six-month period from the launch of the Channel Partners operations on theMaven Network or the revenue generated during the period from issuance date through December 31, 2021 Equity grants with performance conditions that do not have sufficiently large disincentive for non-performance may be measured at fair value that is not fixed until performance is complete. The Company recognizes expense for equity-based payments to non-employees as the services are received. The Company has specific objective criteria, such as the date of launch of a Channel on the Company’s platform, for determination of the period over which services are received and expense is recognized. In the three and six months ended June 30, 2018, the Company recorded stock-based compensation of zero and $136,587 related to these warrants

, respectively.

Other Warrants

On November 4, 2016, in accordance with the Investment Banking Advisory Agreement more fully described in Note 12, Integrated issued warrants to MDB Capital Group, LLC to purchase 1,169,607 shares of Parent common stock in conjunction with the Recapitalization. On April 30, 2018 the holders exercised 842,117 warrants under the cash-less exercise provisions and received 736,852 shares of common stock upon the exercise when the stock price was $1.60 per share. A total of 328,153 warrants remain outstanding as of June 30, 2018. The warrants have an exercise price of $0.20 per share and expire on November 4, 2021. The aggregate intrinsic value of the 328,153 warrants at June 30, 2018 is $328,000.

Private Placement of Common Stock

In January 2018 and March 2018, the Company raised pursuant to a private placement $3,000,000 and $1,250,000, respectively. The $3 million was received prior to December 31, 2017 and was classified as Restricted Cash in the December 31, 2017 balance sheet and then subsequently reclassified to Cash in January 2018 upon completion of the private placement subscription documents. In addition, the investment was classified as Investor Demand Payable in the December 31, 2017 balance sheet and then subsequently reclassified to equity in January 2018.

Stock-based Compensation

The impact on our results of operations of recording stock-based compensation expense for the three months ended June 30, 2018 was as follows:

	Restricted				Channel
	Stock at		Stock		Partner
	Inception		Options		Warrants		Total
Cost of revenue	$	-	$	-	$	-	$	-
Research and development		-		1,184		-		1,184
General and administrative		381,287		179,032		-		560,319
	$	381,287	$	180,216		-	$	561,503

In addition, during the three months ended June 30, 2018 stock-based compensation totaling $907,978 during the application and development stage was capitalized for website development.

The impact on our results of operations of recording stock-based compensation expense for the three months ended June 30, 2017 was as follows:

	Restricted				Channel
	Stock at		Stock		Partner
	Inception		Options		Warrants		Warrants		Total
Cost of revenue	$	-	$	-	$	80,000	$	-	$	80,000
Research and development		-		-		-		-		-
General and administrative		269,341		176,016		-		32,335		477,692
	$	269,341	$	176,016		80,000		32,335	$	557,692

In addition, during the three months ended June 30, 2017 stock-based compensation totaling $212,156 during the application and development stage was capitalized for website development.

The impact on our results of operations of recording stock-based compensation expense for the six months ended June 30, 2018 was as follows:

	Restricted				Channel
	Stock at		Stock		Partner
	Inception		Options		Warrants		Total
Cost of revenue	$	-	$	-	$	136,586	$	136,586
Research and development		-		1290		-		1,290
General and administrative		1,393,862		380,656		-		1,774,518
	$	1,393,862	$	381,946		136,586	$	1,912,394

In addition, during the six months ended June 30, 2018 stock-based compensation totaling $907,978 during the application and development stage was capitalized for website development.

The impact on our results of operations of recording stock-based compensation expense for the six months ended June 30, 2017 was as follows:

	Restricted				Channel
	Stock at		Stock		Partner
	Inception		Options		Warrants		Warrants		Total
Cost of revenue	$	-	$	-	$	-	$	-	$	-
Research and development		-		-		-		-		-
General and administrative		539,994		191,512		80,000		32,335		843,841
	$	539,994	$	191,512		80,000		32,335	$	843,841

In addition, during the six months ended June 30, 2017 stock-based compensation totaling $444,841 during the application and development stage was capitalized for website development.