Amended and Restated Certification of Designation

On February 28, 2017, the Company filed an Amended and Restated Certificate of Designation with the Secretary of State of the state of Delaware, decreasing the number of shares of the Company’s preferred stock designated as Series A Convertible Preferred Stock to 10,097,330 shares.

Authorized Shares

The Company is authorized to issue up to 80,000,000 shares of common stock, $0.01 par value per share effective September 30, 2013. As of December 31, 2017 and 2016, there were 43,067,546 and 42,915,379 shares of common stock issued, and 43,063,135 and 42,910,968 shares outstanding, respectively.

The Company is authorized to issue up to 11,000,000 shares of preferred stock, $0.01 par value per share, of which 10,097,330 shares are designated as Series A convertible preferred stock, and 902,670 shares are designated as Series B convertible preferred stock. As of December 31, 2017, and 2016, there were 902,670 and 0 shares, respectively, of Series B preferred stock outstanding. There were no shares of Series A preferred stock outstanding at December 31, 2017 or 2016, and no additional shares of Series A preferred stock are available to be issued.

Equity Incentive Plans

The Company’s 2008 Equity Incentive Plan, as amended (the “2008 Plan”), was approved by the Company’s Board and stockholders on August 25, 2008. The 2008 Plan provides for grants for the purchase of up to an aggregate 9,000,000 shares, including incentive and non-qualified stock options, restricted and unrestricted stock, loans and grants, and performance awards. As of December 31, 2017, there are 2,060,735 shares available for issuance under the 2008 Plan.

On July 11, 2016, the Board of Directors adopted the 2016 Stock Option Plan (the “2016 Plan”), which was approved by the Company’s shareholders on September 28, 2017. Under the 2016 Plan, 1,224,308 shares of common stock of the Company are authorized for issuance, with an automatic annual increase on January 1 of each year equal to 2.5% of the total number of shares of common stock outstanding on such date, on a fully diluted basis. During the year ended December 31, 2017 and 2016, options for the exercise of 1,395,000 and 900,000 shares have been granted under the 2016 plan, and as of December 31, 2017, there are 2,082 shares available for issuance under the 2016 Plan. On January 1, 2018, the number of shares available under the plan was automatically increased by 1,076,689 shares for a total of 1,078,771 shares available.

Under all plans, (1) awards may be granted to employees, consultants, independent contractors, officers and directors; (2) the maximum term of any award shall be ten years from the date of grant; (3) the exercise price of any award shall not be less than the fair value on the date of grant.

Series B Preferred Stock

On February 28, 2017, the Company filed a Certificate of Designation with the Secretary of State of the state of Delaware, designating 902,670 shares of the Company’s preferred stock as Series B Convertible Preferred Stock (“Series B”) at a par value of $0.01 per share.

The Series B shares were offered for sale to accredited investors pursuant to a private placement memorandum dated March 1, 2017. The offering ended on December 4, 2017. During the year ended December 31, 2017, the Company sold 775,931 shares of Series B at $10.00 per share for gross proceeds of $7,759,500 and issued 126,739 shares of Series B in connection with the conversion of certain convertible promissory notes (see Note 12 – Debt Obligations).

The Series B stockholders are entitled to cumulative cash dividends at an annual rate of 8% of the Series B liquidation value (equal to face value of $10 per share), as defined, payable when, as and if declared by the Board of Directors. Cumulative dividends earned by the Series B stockholders were $345,079 during the year ended December 31, 2017. On July 12, 2017, the Board declared a $60,515 dividend on the Series B preferred stock. Cumulative unpaid dividends in arrears related to the Series B totaled $284,564 as of December 31, 2017.

Each share of Series B stock is entitled the number of votes determined by dividing $10 by the fair market value of the Company’s common stock on the date that the Series B shares were issued, up to a maximum of ten votes per share of Series B stock.

Each Series B share is convertible at the option of the holder into 10 shares of the Company’s common stock and is automatically converted into common stock upon the uplisting of the Company’s common stock to a national securities exchange. On the second anniversary of the December 4, 2017 termination of the Series B offering, if the Series B has not previously automatically converted to common stock upon the uplisting of the Company’s common stock to a national exchange, the Company will redeem all then-outstanding Series B shares at a price equal to the liquidation value of $10 per share, plus all unpaid accrued and accumulated dividends. As a result of this redemption feature and the fact that the Series B shares contain a substantive conversion option, the Series B shares are classified as temporary equity.

Common Stock

On January 1, 2016, the Company issued 37,700 shares of the Company’s common stock at $2.00 per share in exchange for principal and interest of $75,433 due under the 12.5% Notes (see Note 12 – Debt Obligations).

On March 31, 2016, the Company issued 30,700 shares of common stock at $2.50 per share to settle its 2015 obligation, (an aggregate of $76,750 representing the Company’s 401(k) matching contributions), to the Company’s 401(k) profit-sharing plan.

During 2016, the Company issued 1,608,200 shares of common stock at $2.50 per share and 1,538,675 shares of common stock at $2.00 per share for aggregate cash proceeds of $7,097,862.

On June 1, 2016, the Company issued an additional 470,771 common shares for no consideration, to investors who had purchased shares between December 2015 and May 2016 at a price of $2.50 per share, in order to effectively reduce the per share price to $2.00 per share. The Company recorded a charge of $941,530 related to the issuance of these shares during the year ended December 31, 2016, which is recorded as common stock price modification expense in the accompanying consolidated statements of operations.

On January 7, 2017, the Company issued 25,000 shares of common stock at $2.00 per share for gross cash proceeds of $50,000 and paid $5,000 of placement agent fees and issued warrants to purchase 2,500 shares of common stock at an exercise price of $2.00 per share related to this transaction.

On or about January 17, 2017, at the request of the investor, the Company cancelled 2,500 shares of its common stock previously issued to one accredited investor and refunded the investor the full purchase price of the securities, which was $5,000. Warrants to purchase 250 shares of common stock and commissions in the amount of $500 were returned by DPEC Capital, Inc. to the Company.

On March 31, 2017, the Company issued 67,770 shares of common stock at $1.09 per share to settle its 2016 obligation, (an aggregate of $73,868) representing the Company’s 401(k) matching contributions) to the Company’s 401(k) profit-sharing plan.

On July 1, 2017, the Company issued 62,270 shares of its common stock valued in the aggregate at $124,539 to refund a real estate lot sale deposit in the amount of $82,500, which had been recorded as deferred revenue, and recorded $42,039 of interest expense related to this transaction.

Restricted Stock Awards

On January 11, 2016, the Company issued 350,000 shares of restricted stock with a grant date value of $875,000 to Maxim Group, LLC (“Maxim”), in connection with entering into an agreement with Maxim for general financial advisory and investment banking services see Note 17 – Commitments and Contingencies, Consulting Agreements). The shares vested 11.11% in connection with the execution of the agreement, and vest 11.11% monthly thereafter. The shares are marked to market when they vest, and unvested shares are marked to market at each reporting period, with the current fair value expensed over the vesting period. During the year ended December 31, 2016, the Company recognized $797,222 of stock-based compensation expense related to the vesting of this award, which is included in general and administrative expenses in the accompanying consolidated statement of operations. The shares are fully vested and there is no unrecognized stock-based compensation expense related to these shares as of December 31, 2016. On or about October 28, 2016, the Company terminated its agreement with Maxim.

Accumulated Other Comprehensive Loss

For the years ended December 31, 2017 and 2016, the Company recorded $336,568 and $867,968, respectively, of foreign currency translation adjustments as accumulated other comprehensive loss.

Warrants

During 2016, in connection with the sale of its common stock, the Company issued five-year warrants to CAP, who acted as placement agent, for the purchase of 194,694 shares of the Company’s common stock at $2.00 per share and 172,307 shares of the Company’s common stock at $2.50 per share. CAP, in turn, awarded such warrants to its registered representatives and recorded $262,113 of stock-based compensation expense for the year ended December 31, 2016, which is recorded within discontinued operations in the accompanying statements of operations (see Note 4 – Discontinued Operations).

On January 7, 2017, in connection with the sale of its equity securities, the Company issued five-year warrants to its subsidiary, DPEC Capital who acted as placement agent, for the purchase of 2,500 shares of its common stock at $2.00 per share. On January 17, 2017, due to the refund to an investor, warrants to purchase 250 shares of common stock and commissions in the amount of $500 were returned by DPEC Capital, Inc. to the Company. CAP, in turn, awarded such warrants to its registered representatives and recorded $1,105 of stock-based compensation for the year ended December 31, 2017, within discontinued operations in the accompanying statement of operations (see Note 4 – Discontinued Operations).

Pursuant to the Company’s Investor Relations Consulting Agreement (see Note 17 – Commitments and Contingencies – Consulting Agreements), the Company granted five-year warrants for the purchase of 75,000 shares of the Company’s common stock to MZHCI LLC (“MZHCI”) on April 18, 2016 and granted five-year warrants for the purchase of an additional 75,000 shares of the Company’s common stock on October 18, 2016 (collectively, the “IR Warrants”). The warrants, as granted, had an exercise price of $2.50 per share, and vested three months from the date of grant. As of the effective date of the agreement, the IR Warrants had an aggregate value of $103,500, and the unvested warrants are subject to mark to market adjustments at each reporting and vest date, and which is amortized through the vesting period for each respective grant. During the years ended December 31, 2017 and 2016, the Company recorded $137 and $73,393 of stock-based compensation related to the amortization of the IR Warrants, which is recorded within general and administrative expense in the consolidated statement of operations. On October 8, 2016, the IR Warrants were amended such that the exercise price was adjusted from $2.50 per share to $2.00 per share. The Company recorded warrant modification expense of $21,001 related to the modification of the IR Warrants.

Warrants granted during 2017 and 2016 had a weighted average grant date value of $0.52 and $0.80, respectively, and were valued using the Black-Scholes pricing model, with the following assumptions:

The expected term of warrants represents the contractual term of the warrant. Given that the Company’s shares were not publicly traded through September 23, 2016, the Company developed an expected volatility based on a review of the historical volatilities, over a period of time equivalent to the contractual term of the warrant, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the contractual term of the warrants.

A summary of warrants activity during the years ended December 31, 2017 and 2016 is presented below:

A summary of outstanding and exercisable warrants as of December 31, 2017 is presented below:

Modification of CAP Warrants

On June 1, 2016, in connection with the issuance of common stock for the purpose of modifying the investor price per share see Common Stock, above), the Company modified CAP Warrants granted between December 2015 and May 2016, such that the exercise price was adjusted from $2.50 per share to $2.00 per share, and the aggregate number of shares available to be purchased in connection with the warrants was increased from 198,807 to 245,883 shares. The Company recorded warrant modification expense of $68,548 related to the modification of the CAP Warrants.

Stock Options

On July 19, 2016, the Company granted five-year options to purchase a total of 400,000 shares of common stock at an exercise price of $2.20 to two members of the Company’s Board of Directors pursuant to the 2016 Plan. The options vested one-third on the date of grant and one-third on each of the two anniversaries subsequent to the date of grant. The options had an aggregate grant date value of $239,421.

On October 20, 2016, the Company granted five-year options for the purchase of 100,000 shares of the Company’s common stock to an employee of the Company and five-year options for the purchase of an aggregate 400,000 shares of the Company’s common stock to Company consultants, under the 2016 Plan. The options had an exercise price of $2.20 and vested 25% at the date of grant and 25% on each of the three anniversaries subsequent to the date of the grant. The options had an aggregate grant date fair value of $302,025, of which options granted to an employee had a grant date fair value of $60,405, which will be recognized ratably over the vesting period, and options granted to consultants had an aggregate grant date fair value of $241,620 which will be re-measured on financial reporting dates and vesting dates until the service period is complete.

On November 17, 2017, the Company granted five-year options for the purchase of 1,395,000 shares of the Company’s common stock under the 2016 Plan, of which options for the purchase of an aggregate of 940,000 shares of common stock were granted to certain employees of the Company, options for the purchase of an aggregate of 100,000 shares of common stock were granted to two members of the Board of Directors, and options for the purchase 355,000 shares of common stock were granted to Company consultants. The options had an exercise price of $1.10 per share and vest 25% at the first anniversary of date of grant, with the remaining shares vesting ratably on a quarterly basis over the following three years. The options had an aggregate grant date fair value of $452,120, of which options granted to employees and members of the Board of Directors had a grant date fair value of $337,064, which will be recognized ratably over the vesting period, and options granted to consultants had an aggregate grant date fair value of $115,056, which will be re-measured on financial reporting dates and vesting dates until the service period is complete.

The Company has computed the fair value of options granted using the Black-Scholes option pricing model. In applying the Black-Scholes option pricing model, the Company used the following assumptions:

Until September 23, 2016, there was no public trading market for the shares of AWLD common stock underlying the Company’s 2001 Plan and 2008 Plan and 2016 Plan. Accordingly, the fair value of the AWLD common stock was estimated by management based on observations of the cash sales prices of AWLD equity securities. Forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period. This estimate will be adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate, when it is material. The expected term of options granted to consultants represents the contractual term, whereas the expected term of options granted to employees and directors was estimated based upon the “simplified” method for “plain-vanilla” options. Given that the Company’s shares were not publicly traded, the Company developed an expected volatility based on a review of the historical volatilities, over a period of time equivalent to the expected term of the options, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the options. The Company estimated forfeitures related to options at an annual rate of 5% for options outstanding at December 31, 2017. There were 1,395,000 and 900,000 stock options granted during the years ended December 31, 2017 and 2016, respectively.

The weighted average grant date fair value per share of options granted during the years ended December 31, 2017 and 2016 was $0.32 and $0.60, respectively.

During the years ended December 31, 2017 and 2016, the Company recorded stock-based compensation expense of $622,665 and $795,550, respectively, related to stock option grants, which is reflected as general and administrative expenses (classified in the same manner as the grantees’ wage compensation) in the consolidated statements of operations. As of December 31, 2017, there was $1,436,888 of unrecognized stock-based compensation expense related to stock option grants that will be amortized over a weighted average period of 1.8 years, of which $149,829 of unrecognized expense is subject to non-employee mark-to-market adjustments.

A summary of options activity during the years ended December 31, 2017 and 2016 is presented below:

The following table presents information related to stock options as of December 31, 2017: