12. STOCKHOLDERS’ EQUITY

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.

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 Redeemable Preferred Stock (“Series B”) at a par value of $0.01 per share.

The Series B shares are offered for sale to accredited investors pursuant to a private placement memorandum dated March 1, 2017. The offering ends on August 31, 2017. During the six months ended June 30, 2017, the Company sold 353,921 shares, respectively, of Series B at $10.00 per share for gross proceeds of $3,539,214 and issued 126,700 of Series B in connection with the conversion of certain convertible promissory notes (see Note 9 – Debt Obligations).

The Series B stockholders are entitled to cumulative cash dividends at an annual rate of 8% of the Series B liquidation value, as defined, payable when, as and if declared by the Board of Directors. Each share of Series B 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. Cumulative dividends in arrears related to the Series B totaled $51,336 as of June 30, 2017. On July 12, 2017, the Board declared a $60,515 dividend on the Series B preferred stock.

Each Series B share is convertible at the option of the holder into 10 shares of the Company’s common stock. All outstanding Series B shares will be automatically converted into common stock upon the uplisting of the Company’s common stock to a national securities exchange. Upon the conversion of Series B shares into common stock, all cumulative dividends with respect to such converted shares, which have not been declared by the Board of Directors, will be canceled.

On the second anniversary of the termination of the Series B offering, the Company will redeem all then-outstanding shares of Series B shares at a price equal to the liquidation value per share, plus all unpaid accrued and accumulated dividends. As a result of this redemption feature, the Series B are classified as temporary equity. At each reporting date, the Company assesses the probability of redemption of the Series B stock. At June 30, 2017, the Company has concluded that redemption is not probable. If the Company were to determine that redemption was probable, the carrying value of the Series B would be increased by periodic accretions so that the carrying value would equal the redemption amount at the redemption date.

Common Stock

On March 31, 2017, the Company issued 36,933 shares of common stock at $2.00 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.

During the three and six months ended June 30, 2017, the Company issued 22,500 shares of common stock at $2.00 per share for gross proceeds of $45,000 and paid $4,500 of placement agent fees related to this transaction.

Accumulated Other Comprehensive Loss

For three and six months ended June 30, 2017, the Company recorded $(196,492) and $3,768, respectively, of foreign currency translation adjustment as accumulated other comprehensive income (loss) and for the three and six months ended June 30, 2016, the Company recorded $(129,742) and $(535,465), respectively, of foreign currency translation adjustment as accumulated other comprehensive income (loss).

Warrants

Pursuant to the Company’s Investor Relations Consulting Agreement, the Company granted five-year warrants for the purchase of 75,000 shares of the Company’s common stock 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 have 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 $100,501, and the unvested warrants are subject to mark to market adjustments at each reporting and vest date, and which was amortized through the vesting period for each respective grant. During the three and six months ended June 30, 2016, the Company recorded $58,197 of stock-based compensation related to the amortization of the IR Warrants, which is recorded within general and administrative expense in the condensed consolidated statements of operations.

During the three and six months ended June 30, 2016, in connection with the sale of its equity securities, the Company issued vested five-year warrants (the “CAP Warrants”) to its subsidiary CAP, who acted as placement agent, to purchase 86,722 and 185,100 shares of its common stock, with a weighted average grant date value of $1.00 and $1.01 per share, respectively. CAP, in turn, awarded such warrants to its registered representatives and recorded $73,420 and $157,525 of stock-based compensation expense for three and six months ended June 30, 2016, respectively, which is recorded within discontinued operations in the accompanying statements of operations (see Note 4 - Discontinued Operations). Warrants granted between January 1, 2016 and May 31, 2016 were granted with an exercise price of $2.50 per share and warrants granted during June of 2016 had an exercise price of $2.00 per share. On June 1, 2016, the exercise price of warrants granted from December 2015 through May 2016 was reduced to $2.00 per share and the quantity of shares available to be issued pursuant to the warrants was increased, in the aggregate, by 47,076 shares (the “Warrant Modification”). The Company recorded warrant modification expense of $68,548 related to the Warrant Modification.

During the six months ended June 30, 2017, in connection with the sale of its equity securities, the Company issued vested five-year warrants to its subsidiary, CAP for the purchase of 2,250 shares of its common stock at $2.00 per share with a grant date value of $0.52 per share. CAP, in turn, awarded such warrants to its registered representatives and recorded $0 and $1,105 of stock-based compensation expense for three and six months ended June 30, 2017 and 2016, respectively, which is recorded within discontinued operations in the accompanying statements of operations (see Note 4 – Discontinued Operations).

Warrants granted during the three and six months ended June 30, 2017 and 2016 were valued using a Black Scholes valuation model with the following weighted-average 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 30, 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 six months ended June 30, 2017 is presented below:

A summary of outstanding and exercisable warrants of June 30, 2017 is presented below:

Stock Options

The Company has computed the fair value of options granted using the Black-Scholes option pricing model. 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 used to compute the fair value of options granted prior to September 2016 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 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. The Company estimated forfeitures related to options at an annual rate of 5% for options outstanding at June 30, 2017. There were no stock options granted during the three and six months ended June 30, 2017 and 2016.

During the three and six months ended June 30, 2017, the Company recorded stock-based compensation expense of $149,597 and $313,021 respectively, and during the three and six months ended June 30, 2016, the Company recorgnized $127,449 and $277,436, respectively, related to stock option grants, which is reflected as general and administrative expenses in the condensed consolidated statements of operations. As of June 30, 2017, there was $956,107 of unrecognized stock-based compensation expense related to stock option grants that will be amortized over a weighted average period of 1.7 years, of which $63,347 of unrecognized expense is subject to non-employee mark-to-market adjustments.

A summary of options activity during the six months ended June 30, 2017 is presented below:

The following table presents information related to stock options at June 30, 2017: