NOTE 5. STOCKHOLDERS’ EQUITY (DEFICIT)

Reverse Split

In April 2017, the Company’s Board of Directors and stockholders approved a 0.6-for-1.0 reverse split of the Company’s common stock, which was effected on April 20, 2017 (the “Reverse Split”). In connection with the reverse split, each share of the Company’s issued and outstanding common stock was converted and combined into 0.6 shares of common stock. No fractional shares were issued in connection with the reverse split, and any fractional shares resulting from the Reverse Split will be cashed out. The Company has reflected the effect of the Reverse Split in these financial statements as if it had occurred at the beginning of the earliest period presented. As a result of the Reverse Split, the conversion price of each series of preferred stock was proportionally increased.

Common Stock

As of March 31, 2017 and December 31, 2016, the Company had authorized 38,500,000 shares of common stock, $0.001 par value per share. During the three months ended March 31, 2017, the Company issued an aggregate of 120,000 shares of common stock to the Bridge Loan Lenders upon execution of the Note Purchase Agreement and an aggregate of 45,000 shares of common stock in connection with the $2,000 borrowing in March 2017. Also, the Company issued 1,500 shares of restricted common stock to an employee under the 2014 Stock Option/Stock Issuance Plan.

Dispute Settlement

On December 23, 2016, the Company entered into a settlement agreement and release relating to certain claims by a former employee, pursuant to which the Company paid to the former employee a lump sum cash payment of $350 on January 4, 2017, which included a payment to the former employee to repurchase 7,500 shares of the Company’s common stock in the amount of $56, representing the fair value of such stock at that time. In addition, pursuant to the settlement agreement, Chad Steelberg, the Company’s Chairman of the Board, Chief Executive Officer and majority stockholder, purchased all of the former employee’s membership interests in VIF I, LLC, a minority stockholder in the Company.

Stock-Based Compensation

In 2014, the Company’s Board of Directors and its stockholders adopted the 2014 Stock Option/Stock Issuance Plan (the “2014 Plan”), which was amended in March 2015 and October 2016. The Plan is administered by the compensation committee of the Board of Directors, which determines the recipients and the terms of the awards granted. The Plan provides that awards granted may be options, restricted stock or restricted stock units (collectively the “Awards”). Stock option awards may be either incentive stock options or non-qualified options. The Awards may be granted to eligible employees, directors and consultants. As of March 31, 2017, an aggregate of up to 3,426,822 shares of common stock were reserved for issuance under the Plan. The Company recognizes compensation expense relating to Awards ratably over the requisite service period, which is generally the vesting period.

The Company’s stock-based compensation expense recognized for the periods presented was as follows:

Restricted Stock

Under the Plan, the Company has granted restricted stock that generally vests over four years from the date of the grant, unless the participant’s service with the Company is terminated earlier. The fair value of the restricted stock grants was the estimated value per share of common stock at the date of grant determined by using both the option-pricing method and probability-weighted expected return method.

Restricted stock activity for the periods presented was as follows:

At March 31, 2017, total unrecognized compensation cost related to restricted stock was $816. This is expected to be recognized over a period of 3.1 years.

Stock Options

Under the Plan, the Company has granted stock options at exercise prices equal to or greater than the fair value of the common stock on the grant date. These options expire ten years after the grant date and generally vest over a period of four years of continuous service following the vesting commencement date of such option, unless the optionee’s continuous service with the Company is terminated earlier, with stock-based compensation expense recognized evenly over the requisite service period. There were no options granted during the three months ended March 31, 2017.

The Company’s stock option activity for the period presented was as follows:

The aggregate intrinsic value in the table above represents the difference between the fair value of the Company’s common stock and the average option exercise price multiplied by the number of in-the-money options. At March 31, 2017, total unrecognized compensation expense related to stock options was $521. This is expected to be recognized over a weighted average period of 3.3 years.