Authorized Shares

 

Pursuant to the Company’s Amended and Restated Certificate of Incorporation, the Company is authorized to issue up to 80,000,000 shares of common stock, $0.01 par value per share. As of December 31, 2014 and 2013, 35,741,420 and 23,757,025 shares of common stock were outstanding, respectively.

 

The Company is authorized to issue up to 11,000,000 shares of Series A Preferred, $0.01 par value per share. As of December 31, 2013, 6,871,363 shares of preferred stock were outstanding. There were no shares of preferred stock outstanding as of December 31, 2014.

 

Convertible Preferred Stock

 

During the years ended December 31, 2014 and 2013, the Company issued 2,748,995 and 1,561,534 shares of Series A Preferred to accredited investors in a private placement transaction for gross proceeds of $6,322,677 and $3,591,524, respectively.

 

During the year ended December 31, 2013, 130,435 shares of the Company’s common stock were converted into Series A Preferred. In addition, convertible debt obligations aggregating $876,910 and $1,450,154 were converted to 476,972 and 795,077 shares of Series A Preferred valued at $1,097,036 and $1,828,678 during the years ended December 31, 2014, and 2013, respectively (see Note 12 – Convertible Debt Obligations). The Company recognized loss on extinguishment of debt related to these conversions of $220,126 and $378,523 during the years ended December 31, 2014 and 2013, respectively, which is recorded in the consolidated statements of operations.

 

On July 14, 2014, the Company’s Registration Statement on Form 10 filed on May 14, 2014, as amended on July 3, 2014 and August 13, 2014, September 12, 2014, October 23, 2014 and December 12, 2014 with the SEC became effective with the result that the Company became subject to the reporting requirements under Section 13 of the Securities Exchange Act of 1934. As a result, the 10,097,330 outstanding shares of Series A Preferred were automatically converted into 10,097,330 aggregate shares of common stock. As a result of the conversion, the investors were no longer eligible for dividends payments, and all liquidation preferences were extinguished.

 

Common Stock

 

In March 2013, the Company issued 34,723 shares of common stock to settle its 2012 contribution obligation to the Company’s 401(k) profit-sharing plan.

 

In January 2014, the Company issued 10,485 shares of common stock to settle certain accounts payable for $23,591 or an average of $2.25 per share of common stock.

 

In February 2014, the Company issued 166,305 shares of common stock to settle cashless exercised options to purchase 566,946 shares of common stock at an exercise price of $1.59 per share and 31,421 shares of common stock to settle an exercised option for a purchase price of $49,959 or $1.59 per share of common stock.

 

In March 2014, the Company issued 21,454 shares of common stock at $2.25 per share to settle its 2013 obligation (an aggregate of $48,272 representing the combination of employee contributions and Company matching contributions) to the Company’s 401(k) profit-sharing plan.

 

On April 9, 2014, the Company engaged a financial advisor for a six month term (subject to immediate termination by either party) for consideration comprised of a $15,000 cash fee and the issuance of 50,000 shares of common stock.

 

During April 2014, the Company issued 320,713 shares of its common stock at $2.00 in exchange for the settlement of loans payable and related accrued interest of $550,000 and $91,427, respectively.

 

On September 11, 2014, the Company issued 63,338 shares of its common stock at $2.00 in exchange for the settlement of a loan payable and related accrued interest of $125,000 and $1,676, respectively.

 

During the year ended December 2014, the Company issued 1,223,349 shares of its common stock for $2.00 per share for $2,446,697 of gross proceeds.

 

See Note 17 – Stockholders’ Equity – Convertible Preferred stock for details associated with the conversion of Series A Preferred into common stock.

 

Accumulated Other Comprehensive Loss

 

For the years ended December 31, 2014 and 2013, the Company recorded $1,567,513 and $2,661,850, respectively, of foreign currency translation adjustment as accumulated other comprehensive loss.

 

Warrants

 

During 2014 and 2013, in connection with the sale of Series A Preferred, the Company issued five-year warrants to its subsidiary DPEC Capital, Inc., who acted as placement agent, to purchase 349,444 and 235,666 shares, respectively, of Series A Preferred at an exercise price of $2.30 per share as well as warrants for the purchase of 50,000 and 0 shares, respectively of the Company’s common stock at an exercise price of $2.00 per share. DPEC Capital, Inc., in turn, awarded such warrants to its registered representatives and recorded $285,147 and $208,040 of stock-based compensation expense for the years ended December 31, 2014 and 2013, respectively, within general and administrative expense in the consolidated statements of operations.

 

A summary of warrants activity during the years ended December 31, 2014 and 2013 is presented below:

 

 

A summary of outstanding and exercisable warrants as of December 31, 2014 is presented below:

 

Equity Incentive Plans

 

The Company’s 2001 Equity Incentive Plan, as amended (the “2001 Plan”), and the 2008 Equity Incentive Plan, as amended (the “2008 Plan”), were approved by the Company’s Board and shareholders on June 21, 2001 and August 25, 2008, respectively. The plans provide for grants to purchase up to an aggregate of 342,700 shares, and 9,000,000 shares, respectively. Both equity plans permit the granting of incentive and non-qualified stock options, restricted and unrestricted stock, loans and grants, and performance awards. 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. On June 21, 2011, the 2001 Plan expired, such that no new awards may be granted from the 2001 Plan, but all outstanding awards continue to run their course. The Company intends to issue new shares of common stock to satisfy any plan obligations.

 

Stock Options

 

The Company has computed the fair value of options granted using the Black-Scholes option pricing model. There is currently no public trading market for the shares of AWLD common stock underlying the Company’s 2008 Equity Incentive Plan (the “2008 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 are not publicly traded, the Company developed an expected volatility figure based on a review of the historical volatilities, over a period of time, 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.

 

On January 13, 2013, the Company granted a five-year option to purchase 50,000 shares of common stock at an exercise price of $2.48 to an employee of the Company, pursuant to the 2008 Equity Incentive Plan. The option vests over a four year period with one-fourth vesting on the one year anniversary of the date of grant and the remainder vesting quarterly thereafter. The $45,200 grant date fair value is being amortized ratably over the vesting period.

 

On April 15, 2013, the Company granted five-year options to purchase an aggregate of 75,000 shares of common stock at an exercise price of $2.48 to directors of the Company, pursuant to the 2008 Plan. The options vest quarterly over a one year period from the date of grant. The $56,261 aggregate grant date fair value is being amortized over the vesting period.

 

On June 30, 2013, the Company granted five-year options to purchase 2,955,000, 25,000, and 10,000 shares of immediately vested common stock at exercise prices of $2.48, $3.50 and $3.85 to employees and consultants of the Company, pursuant to the 2008 Equity Incentive Plan. The $1,994,608 grant date fair value was recognized immediately.

 

On August 27, 2014, the Company granted five-year options to purchase an aggregate of 2,649,000 shares of common stock at an exercise price of $2.48 to employees, officers, directors and consultants of the Company, pursuant to the 2008 Plan. The options vest as follows: (i) 550,000 shares vest over a five year period with one-fourth vesting on August 27, 2015 and the remainder vesting quarterly thereafter; (ii) 1,115,000 shares vest over a four year period with one-fourth vesting on August 27, 2015 and the remainder vesting quarterly thereafter; (iii) 1,000 shares vest over a four year period with one-fourth vesting on August 27, 2015 and the remainder vesting yearly thereafter; (iv) 483,000 shares vest on August 27, 2015; and (v) 500,000 shares vest over a four year period with one-sixteenth vesting on November 27, 2014 and the remainder vesting quarterly thereafter. The options had an aggregate grant date value of $1,489,951, of which, options granted to employees, officers and directors had an aggregate grant date fair value of $1,191,308, which will be recognized ratably over the vesting period, while options granted to consultants had an aggregate grant date value of $298,643, which will be re-measured on financial reporting dates and vesting dates until the service period is complete.

 

In applying the Black-Scholes option pricing model, the Company used the following weighted average assumptions:

 

		For The Years Ended
		December 31,
		2014				2013
Risk free interest rate			1.14	%			0.71	%
Expected term (years)			3.54				3.09
Expected volatility			46.4	%			48.4	%
Expected dividends			0	%			0	%
Forfeiture rate			5.0	%			5.0	%

 

The weighted average estimated fair values of the stock options granted during the years ended December 31, 2014 and 2013 were $0.56 and $0.67 per share, respectively.

 

During the years ended December 31, 2014 and 2013, the Company recorded stock-based compensation expense of $568,022 and $2,563,343 respectively, related to stock option grants, which is reflected as general and administrative expenses in the consolidated statements of operations. As of December 31, 2014, there was $1,491,290 of unrecognized stock-based compensation expense related to stock option grants that will be amortized over a weighted average period of 3.2 years, of which $278,089 of unrecognized expense is subject to non-employee mark-to-market adjustments.

 

A summary of options activity during the years ended December 31, 2014 and 2013 is presented below:

 

								Weighted
					Weighted			Average
					Average			Remaining
		Number of			Exercise			Life				Intrinsic
		Options			Price			In Years				Value
Outstanding, December 31, 2012			4,541,095		$	3.55
Granted			3,115,000			2.49
Exercised			-			-
Cancelled			(519,859)			6.75
Forfeited			-			-
Outstanding, December 31, 2013			7,136,236			2.85
Granted			2,649,000			2.48
Exercised			(598,367)			1.59
Cancelled			(784,965)			2.67
Forfeited			(595,068)			2.79
Outstanding, December 31, 2014			7,806,836		$	2.85				3.2		$	144,827
Exercisable, December 31, 2014			4,872,421		$	2.98				2.4		$	156,610

 

The following table presents information related to stock options at December 31, 2014:

 

		Options Outstanding						Options Exercisable
		Weighted						Weighted			Weighted
Range of		Average			Outstanding			Average			Average		Exercisable
Exercise		Exercise			Number of			Exercise			Remaining Life		Number of
Price		Price			Options			Price			In Years		Options
$1.59 - $2.00		$	1.59			381,975		$	1.59		0.1			381,975
$2.01 - $2.50		$	2.48			5,279,000		$	2.48		3.5			2,661,250
$2.51 - $3.50		$	2.72			251,232		$	2.72		0.5			251,232
$3.51 - $4.50		$	3.85			1,859,000		$	3.85		1.6			1,542,335
$4.51 - $9.50		$	8.03			19,868		$	8.03		0.3			19,868
$9.51 - $41.78		$	33.94			15,761		$	33.94		0.3			15,761
$1.59 - $41.78		$	2.85			7,806,836		$	2.98		2.4			4,872,421