Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2018 | |
Document and Entity Information [Abstract] | |
Entity Registrant Name | PeerStream, Inc. |
Entity Central Index Key | 1,355,839 |
Trading Symbol | PEER |
Amendment Flag | false |
Document Type | S1 |
Document Period End Date | Sep. 30, 2018 |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | true |
Entity Emerging growth company | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets: | |||
Cash and cash equivalents | $ 7,217,354 | $ 4,137,050 | $ 4,162,596 |
Credit card holdback receivable | 99,643 | 140,789 | 172,169 |
Accounts receivable, net of allowance for doubtful accounts of $37,821 and $42,006, respectively | 326,290 | 479,148 | 958,695 |
Prepaid expense and other current assets | 503,154 | 228,296 | 1,047,483 |
Total current assets | 8,146,441 | 4,985,283 | 6,340,943 |
Property and equipment, net | 579,519 | 622,712 | 793,305 |
Goodwill | 13,086,472 | 13,086,472 | 14,304,667 |
Intangible assets, net | 2,656,879 | 3,920,443 | 5,605,193 |
Digital tokens | 832,892 | ||
Other receivables | 52,267 | 82,435 | |
Other assets | 115,861 | 97,270 | 397,608 |
Total assets | 25,418,064 | 22,764,447 | 27,524,151 |
Current liabilities: | |||
Accounts payable | 2,224,486 | 2,374,253 | 1,665,831 |
Accrued expenses and other current liabilities | 771,145 | 405,646 | 472,406 |
Deferred subscription revenue | 2,173,290 | 2,553,826 | 2,828,827 |
Deferred technology service revenue | 4,827,765 | ||
Total current liabilities | 9,996,686 | 5,333,725 | 4,967,064 |
Deferred rent, net of current portion | 261,286 | ||
Deferred tax liability | 1,452,339 | ||
Total liabilities | 9,996,686 | 5,333,725 | 6,680,689 |
Commitments and Contingencies | |||
Stockholders' equity: | |||
Common stock, $0.001 par value, 25,000,000 shares authorized; and 6,888,679 shares and 6,881,794 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively | 6,889 | 6,882 | 6,715 |
Additional paid-in capital | 19,580,800 | 18,346,914 | 15,865,568 |
(Accumulated deficit) retained earnings | (4,166,311) | (923,074) | 4,971,179 |
Total stockholders' equity | 15,421,378 | 17,430,722 | 20,843,462 |
Total liabilities and stockholders' equity | $ 25,418,064 | $ 22,764,447 | $ 27,524,151 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | |||
Allowance for doubtful accounts | $ 37,821 | $ 42,006 | |
Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 25,000,000 | 25,000,000 | 25,000,000 |
Common stock, shares issued | 6,888,679 | 6,881,794 | 6,714,915 |
Common stock, shares outstanding | 6,888,679 | 6,881,794 | 6,714,915 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Revenues: | ||||||
Subscription revenue | $ 4,906,640 | $ 5,447,119 | $ 15,317,865 | $ 17,413,511 | $ 22,898,530 | $ 18,647,855 |
Advertising revenue | 330,817 | 480,356 | 966,997 | 1,472,505 | 1,942,753 | 2,340,574 |
Technology service revenue | 1,448,330 | 3,540,362 | ||||
Total revenues | 6,685,787 | 5,927,475 | 19,825,224 | 18,886,016 | 24,841,283 | 20,988,429 |
Costs and expenses: | ||||||
Cost of revenue | 1,190,061 | 1,228,198 | 3,581,794 | 3,753,522 | 4,861,315 | 5,015,565 |
Sales and marketing expense | 1,383,567 | 1,944,488 | 4,266,434 | 6,310,931 | 7,847,235 | 5,099,956 |
Product development expense | 1,978,285 | 2,217,777 | 6,052,098 | 6,635,561 | 8,918,409 | 8,600,688 |
General and administrative expense | 2,169,849 | 2,549,112 | 6,679,349 | 6,735,737 | 8,874,389 | 4,016,068 |
Total costs and expenses | 6,721,762 | 7,939,575 | 20,579,675 | 23,435,751 | 30,501,348 | 22,732,277 |
Loss from operations | (35,975) | (2,012,100) | (754,451) | (4,549,735) | (5,660,065) | (1,743,848) |
Interest income, net | 28,603 | 7,765 | 48,313 | 39,643 | 41,717 | (60,030) |
Other expense, net | (17,910) | (46,933) | 351,102 | |||
Impairment loss on digital tokens | (575,831) | (2,535,235) | ||||
Loss before provision for income taxes | (583,203) | (2,004,335) | (3,241,373) | (4,528,002) | (5,665,281) | (1,452,776) |
Benefit (provision) for income taxes | 13,636 | (1,864) | (228,972) | |||
Net loss | $ (569,567) | $ (2,004,335) | $ (3,243,237) | $ (4,528,002) | $ (5,894,253) | $ (1,452,776) |
Net loss per share of common stock: | ||||||
Basic and diluted | $ (0.08) | $ (0.31) | $ (0.47) | $ (0.7) | $ (0.91) | $ (0.26) |
Weighted average number of shares of common stock used in calculating net loss per share of common stock: | ||||||
Basic and diluted | 6,886,051 | 6,452,292 | 6,883,575 | 6,449,572 | 6,452,581 | 5,577,856 |
Condensed Consolidated Statem_2
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($) | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total |
Balance at Dec. 31, 2015 | $ 5,229 | $ 6,872,868 | $ 6,423,955 | $ 13,302,052 |
Balance, shares at Dec. 31, 2015 | 5,228,617 | |||
Issuance of shares and options in connection with the AVM Merger | $ 1,486 | 8,639,580 | 8,641,066 | |
Issuance of shares and options in connection with the AVM Merger, shares | 1,486,298 | |||
Stock-based compensation expense | 353,120 | 353,120 | ||
Net loss | (1,452,776) | (1,452,776) | ||
Balance at Dec. 31, 2016 | $ 6,715 | 15,865,568 | 4,971,179 | 20,843,462 |
Balance, shares at Dec. 31, 2016 | 6,714,915 | |||
Stock-based compensation expense for restricted stock awards and stock options | 1,579,921 | 1,579,921 | ||
Shares issued for consulting services | $ 12 | 39,588 | 39,600 | |
Shares issued for consulting services, shares | 12,000 | |||
Shares issued in connection with Security Purchase Agreement | $ 200 | 999,800 | 1,000,000 | |
Shares issued in connection with Security Purchase Agreement, shares | 200,000 | |||
Cancellation of common stock | $ (45) | (137,963) | (138,008) | |
Cancellation of common stock, shares | (45,121) | |||
Net loss | (5,894,253) | (5,894,253) | ||
Balance at Dec. 31, 2017 | $ 6,882 | 18,346,914 | (923,074) | 17,430,722 |
Balance, shares at Dec. 31, 2017 | 6,881,794 | |||
Stock-based compensation expense for restricted stock awards and stock options | 1,205,682 | 1,205,682 | ||
Reconciliation of shares issued in stock-based compensation arrangement | $ 1 | 1 | ||
Reconciliation of shares issued in stock-based compensation arrangement, shares | 522 | |||
Issuance of common stock for stock option exercises | $ 6 | 28,204 | 28,210 | |
Issuance of common stock for stock option exercises, shares | 6,363 | |||
Net loss | (3,243,237) | (3,243,237) | ||
Balance at Sep. 30, 2018 | $ 6,889 | $ 19,580,800 | $ (4,166,311) | $ 15,421,378 |
Balance, shares at Sep. 30, 2018 | 6,888,679 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities: | ||||
Net loss | $ (3,243,237) | $ (4,528,002) | $ (5,894,253) | $ (1,452,776) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||
Depreciation of property and equipment | 292,214 | 355,348 | 447,746 | 568,028 |
Amortization of intangible assets | 1,263,564 | 1,263,563 | 1,684,750 | 834,505 |
Loss on disposal of property and equipment | 17,074 | 17,074 | ||
Stock-based compensation expense | 1,205,682 | 1,033,143 | 1,579,921 | 353,120 |
Common stock issued for consulting services | 19,800 | 39,600 | ||
Reconciliation of shares issued in stock-based compensation arrangement | 1 | |||
Cancellation of common stock | (1,716) | (138,008) | ||
Bad debt expense | 8,552 | 79,486 | 137,615 | |
Digital tokens received as payment for services | (3,368,127) | |||
Impairment loss on digital tokens | 2,535,235 | |||
Change in fair value of contingent liability | (134,000) | |||
Changes in operating assets and liabilities: | ||||
Credit card holdback receivable | 41,146 | 14,919 | 31,380 | 138,971 |
Accounts receivable | 144,306 | 349,616 | 341,932 | 66,433 |
Prepaid expenses and other current assets | (274,858) | 574,799 | 819,187 | 221,644 |
Other assets and other receivables | 33,676 | 25,136 | (10,555) | (36,115) |
Accounts payable, accrued expenses and other current liabilities | 215,732 | 575,510 | 717,223 | (1,257,735) |
Deferred subscription revenue | (380,536) | (438,953) | (509,145) | (479,847) |
Deferred tax asset | 754,535 | |||
Deferred technology service revenue | 4,827,765 | 4,775 | 145,046 | |
Deferred tax | (128,460) | |||
Net cash provided by (used in) operating activities | 3,301,115 | (660,277) | (730,758) | (406,651) |
Cash flows from investing activities: | ||||
Purchases of property and equipment | (249,021) | (214,277) | (294,227) | (345,070) |
Return of Security Deposit | 75,000 | 75,000 | ||
Cash acquired in the AVM Merger, net of payment of note payable | (1,739,506) | |||
Net cash used in investing activities | (249,021) | (139,277) | (219,227) | (2,084,576) |
Cash flows from financing activities: | ||||
Payments of capital lease obligations | (62,775) | (75,561) | (22,734) | |
Proceeds in connection with Security Purchase Agreement | 1,000,000 | |||
Proceeds from issuance of common stock for stock option exercises | 28,210 | |||
Net cash provided by (used in) financing activities | 28,210 | (62,775) | 924,439 | (22,734) |
Net increase (decrease) in cash and cash equivalents | 3,080,304 | (862,329) | (25,546) | (2,513,961) |
Balance of cash and cash equivalents at beginning of period | 4,137,050 | 4,162,596 | 4,162,596 | 6,676,557 |
Balance of cash and cash equivalents at end of period | 7,217,354 | 3,300,267 | 4,137,050 | 4,162,596 |
Supplemental disclosure of cash flow information: | ||||
Cash paid in interest | 12,899 | 12,899 | ||
Cash paid for income taxes | $ 26,210 | 26,210 | ||
Measurement period adjustments: | ||||
Goodwill | 1,218,198 | |||
Deferred tax liability | 1,452,339 | |||
Deferred subscription revenue | 234,144 | |||
Acquisition: | ||||
Cash and cash equivalents | 1,460,494 | |||
Term note payable (intercompany) | (200,000) | |||
Note payable, net of discount (intercompany) | $ (3,000,000) |
Organization and Basis of Prese
Organization and Basis of Presentation | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Organization and Basis of Presentation | 1. Organization and Basis of Presentation The accompanying condensed consolidated financial statements include PeerStream, Inc. and its wholly owned subsidiaries, A.V.M Software, Inc., Paltalk Software Inc., Paltalk Holdings, Inc., Tiny Acquisition Inc., Camshare, Inc., Fire Talk LLC, PeerStream Mobile Limited (UK) and Vumber LLC (collectively, the “Company,” “we,” “our” or “us”). Effective March 12, 2018, the Company changed its name from “Snap Interactive, Inc.” to “PeerStream, Inc.” In connection with the name change, the Company also changed its trading symbol on the OTCQB Marketplace from “STVI” to “PEER.” The Company is a global internet solutions provider pioneering the real-world adoption of emerging blockchain technologies by developing software, services and applications for corporate clients and consumers. The Company’s business solutions unit (“PeerStream Business Solutions”) is able to provide advisory and implementation services to enterprise clients to help them meet strategic objectives using blockchain technology. The Company is also able to offer support to enterprise clients seeking to transition to blockchain-based technologies through the licensing of proprietary blockchain software, such as the Company’s PeerStream Protocol (“PSP”), a protocol for decentralized multimedia communications and live video streaming that is currently in development. The condensed consolidated financial statements included in this report have been prepared on a going concern basis in accordance with generally accepted accounting principles in the United States (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. The Company has not included certain information and notes required by GAAP for complete financial statements pursuant to those rules and regulations, although it believes that the disclosure included herein is adequate to make the information presented not misleading. The condensed consolidated financial statements contained herein should be read in conjunction with the Company’s audited consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 22, 2018 (the “Form 10-K”). In the opinion of management, the accompanying unaudited condensed consolidated financial information contains all normal and recurring adjustments necessary to fairly present the condensed consolidated balance sheet, results of operations, cash flows and changes in the stockholders’ equity of the Company for the interim periods presented. The Company’s historical results are not necessarily indicative of future operating results and the results for the nine months ended September 30, 2018 are not necessarily indicative of results for the year ending December 31, 2018, or for any other period. Reclassifications Certain prior period amounts have been reclassified for comparative purposes to conform to the current presentation. These reclassifications have no impact on the previously reported net loss. | 1. Organization and Description of Business On October -held Under U.S. generally accepted accounting principles (“GAAP”), the AVM Merger is treated as a “reverse merger” under the acquisition method of accounting. For accounting purposes, AVM is considered to have acquired PeerStream. Consequently, the historical financial statements reflect the operations and financial condition of AVM and operating results of PeerStream are reported beginning on the closing date of the AVM Merger (collectively, the “Company” or “we”). The Company is an Internet software company. Under its registered trademarks, the Company develops and operates computer software that enables spontaneous global real time audio/video conversation via the internet and operates a portfolio of dating applications. Reverse Stock Split The Company completed a 1 -for-35 -share Terminated LiveXLive Merger Agreement On September On October -time |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies For a detailed discussion about the Company’s significant accounting policies, see the Form 10-K. During the nine months ended September 30, 2018, other than the following, there were no significant changes made to the Company’s significant accounting policies. Significant Estimates and Assumptions The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates relied upon in preparing these financial statements include the estimates used to determine the fair value of the stock options issued in share based payment arrangements, collectability of the Company’s accounts receivable, revenue recognition under time based service contracts and the valuation allowance on deferred tax assets. Management evaluates these estimates on an ongoing basis. Changes in estimates are recorded in the period in which they become known. The Company bases estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from the Company’s estimates. Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) In June 2018, the FASB issued an ASU to simplify several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of Topic 718, Compensation—Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. The amendments in this ASU are effective for the Company on January 1, 2019. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements. Revenue In accordance with ASC 606, revenue from contracts with customers is recognized when control of the promised services is transferred to our customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Sales tax is excluded from reported revenue. Subscription Revenue The Company generates subscription revenue primarily from monthly premium subscription services. Subscription revenues are presented net of refunds, credits, and known and estimated credit card chargebacks. Subscriptions are generally offered in durations of one-, three-, six- and twelve- month terms. All subscription fees, however, are paid by credit card at the origination of the subscription regardless of the term of the subscription, therefore determining the fixed transaction price. Revenues from multi-month subscriptions are recognized on a straight-line basis over the period where the service is offered to our customer, indicated by length of the subscription term purchased. The unearned portion of subscription revenue is presented as deferred revenue in the accompanying condensed consolidated balance sheets. The deferred revenue at December 31, 2017 was $2,553,826, of which approximately $1,925,104 was subsequently recognized as subscription revenue during the nine months ended September 30, 2018. The ending balance of deferred revenue at September 30, 2018 was $2,173,290. In addition, the Company offers virtual gifts and micro-transactions to its users. Users may purchase credits in $5, $10 or $20 increments that can be redeemed for a host of virtual gifts such as a rose, a beer or a car, among other items. These gifts are given among users to enhance communication and are typically redeemed within the month of purchase. Upon purchase, the virtual gifts are credited to the users’ account and is under the users’ control. Virtual gift and micro-transaction revenue are recognized upon the users’ utilization of the virtual gift at the fixed transaction price on a gross basis and included in subscription revenue in the accompanying condensed consolidated statements of operations. Virtual gift and micro-transaction revenue was approximately $1,883,582 and $5,636,505 for the three and nine months ended September 30, 2018, respectively. Advertising Revenue The Company generates advertising revenue from the display of advertisements on its products through contractual agreements with third parties that are based on the number of advertising impressions delivered. When a customer clicks an advertisement (CPC basis), views an advertisement impression (CPM basis), or registers for an external website via an advertisement by clicking on or through the application (CPA basis), the amount earned is recognized as revenue. Revenue related to fixed fee arrangements is recognized ratably over the service period. In determining whether an arrangement exists, the Company ensures that an agreement has been fully executed. Advertising revenue is dependent upon traffic as well as the advertising inventory placed on the Company’s products. Technology Service Revenue Revenue related to the technology services agreement with ProximaX Limited (“ProximaX”), which is a fixed-price contract, is recognized as the services are performed and payment is earned. The Company accounts for a contract when it has approval and commitment from all parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and the collectability of the consideration is probable. Accordingly, revenue under the technology services agreement with ProximaX is recognized based upon proportional performance using labor hours as the unit of measurement. The contractual upfront fee included $5.0 million and was paid in the Ethereum cryptocurrency and subsequently converted into U.S. dollars. The upfront fee also included 216.0 million tokens related to our familiarization with the client’s technology and the build-out of a roadmap used to fulfill the contract. The total upfront fee is recognized as revenue under the input method based on proportional performance using labor hours as the unit of measurement. The unearned portion is presented as deferred technology service revenue in the accompanying condensed consolidated balance sheets. Revisions to the Company’s estimates may result in increases or decreases to revenues and income and are reflected in the consolidated financial statements in the periods in which they are first identified. If the Company’s estimates indicate that a contract loss will be incurred, a loss provision is recorded in the period in which the loss first becomes probable and reasonably estimable. Contract losses are determined to be the amount by which the estimated costs of the contract exceed the estimated total revenues that will be generated by the contract and are included in cost of revenues in the Company’s condensed consolidated statement of operations. There were no contract losses for the periods presented. The remaining $5.0 million in payments under the technology services agreement will be recognized as revenue upon the Company’s fulfillment of contractually defined milestones. Digital Tokens Digital tokens consist of XPX tokens received in connection with the technology services agreement with ProximaX. Given that there is limited precedent regarding the classification and measurement of cryptocurrencies and other digital tokens under current GAAP, the Company has determined to account for these tokens as indefinite-lived intangible assets in accordance with ASC 350: Intangibles—Goodwill and Other for the period covered by this report and in future reports unless and until further guidance is issued by the FASB. Indefinite-lived intangible assets are recorded at cost and are not subject to amortization, but shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If, at the time of an impairment test, the carrying amount of an intangible asset exceeds its fair value, an impairment loss in an amount equal to the excess is recognized. Fair value of the digital tokens is based on the quoted market prices on the Kryptono Exchange. The Company recorded an impairment charge in the amount of $575,831 and $2,535,235, which is reported as a component of other income and expenses in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2018, respectively. The Company previously accounted for these tokens as financial assets under ASC 825: Financial Instruments for the quarter ended June 30, 2018. Management performed the review required by Staff Accounting Bulletins (“SAB”) 108 and SAB 99 on the error and determined the error had no material impact on the financial statements of the Company as of and for the period ended June 30, 2018. The amount of the charge has not changed as a result of the correction. The description of the account has changed from “Changes in fair value of digital tokens” to “Impairment loss on digital tokens” on the statements of operations and cash flows. In addition, the error did not have an effect on the net loss from operations, net loss and related net loss per share for any of the prior 2018 interim periods. Since the previously-issued financial statements are not materially misstated, the error is corrected prospectively. | 2. Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and were prepared in conformity with GAAP and with the requirements of the Security and Exchange Commission (“SEC”). All intercompany balances and transactions have been eliminated upon consolidation. Significant Estimates and Assumptions The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates relied upon in preparing these financial statements include the estimates used to determine the fair value of the Company’s common stock up until the time of the AVM Merger, and stock options issued in share based payment arrangements, acquisition accounting, collectability of the Company’s accounts receivable and the valuation allowance on deferred tax assets. Management evaluates these estimates on an ongoing basis. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Actual results may differ from the estimates. Revenue Recognition The Company recognizes revenue on arrangements in accordance with Accounting Standards Codification (“ASC”) No. 605, Revenue Recognition. In all cases, revenue is recognized when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured. The Company has revenue streams consisting of subscriptions and advertisements. The Company recognizes revenue from monthly premium subscription services beginning in the month in which the subscriptions are originated. Revenues are presented net of refunds, credits, and known and estimated credit card chargebacks. During the years ended December 31, 2017 and 2016, subscriptions were offered in durations of one-, three-, six-, twelve-, and fifteen- month terms. All subscription fees, however, are paid by credit card at the origination of the subscription regardless of the term of the subscription. Revenues from multi-month subscriptions are recognized on a straight-line basis over the length of the subscription period. The unearned portion of subscription revenue is presented as deferred revenue in the accompanying Consolidated Balance Sheets. The Company generates advertising revenue from advertising agreements with third parties. Advertising revenue is dependent upon traffic as well as the advertising inventory placed on our products. The Company recognizes advertising revenue as earned on a click-through, impression, registration or subscription basis. When a user clicks an advertisement (CPC basis), views an advertisement impression (CPM basis), registers for an external website via an advertisement by clicking on or through our application (CPA basis), or clicks on an offer to subscribe to premium features on the application, the amount earned is recognized as revenue. In addition, the Company offers virtual gifts and micro-transactions to its users. Users may purchase credits in $5, $10 or $20 increments that can be redeemed for a host of virtual gifts such as a rose, a beer, a car, among other items. These gifts are given among users to enhance communication and are typically redeemed within the month of purchase. Micro-transactions allow users to increase the visibility of their profile and messages by paying for such services. Virtual gift and micro-transaction revenue are recognized at the point of sale and included in subscription revenue in the accompanying consolidated statements of operations. The Company’s payment processors have established reserve accounts to secure the performance of the Company’s obligations under its service agreements, which is standard practice within the payment processing industry. These reserve accounts withhold a small percentage of the Company’s sales in a segregated account. These funds are classified as credit card holdback receivables and totaled $140,789 and $172,169 as of December 31, 2017 and December 31, 2016, respectively. Cost of revenue Cost of revenue consists primarily of compensation (including stock-based compensation) and other employee-related costs of personnel engaged in data center and customer care functions, credit card processing fees, hosting fees, and data center rent and bandwidth costs. Sales and marketing Sales and marketing expense is expensed as incurred and consists primarily of advertising expenditures and compensation (including stock-based compensation) and other employee related costs for personnel engaged in sales, and sales support functions. Sales and marketing spend includes search engine marketing and partner-related payments to those who direct traffic to our brands. Total advertising expense for the year ended December 31, 2017 was approximately $6,994,700, and $4,591,900 for the year ended December 31, 2016. Product development Product development expense, which relates to the development of technology for our applications, consists primarily of compensation (including stock-based compensation) and other employee-related costs that are not capitalized for personnel engaged in the design, testing and enhancement of service offerings as well as amortization of capitalized website development costs. General and administrative General and administrative expense consists primarily of compensation (including stock-based compensation) and other employee-related costs for personnel engaged in executive management, finance, legal, tax, human resources, and fees for professional services. General and administrative also includes depreciation of fixed assets and amortization of intangible assets. Reportable Segment The Company operates in one reportable segment, and management assesses the Company’s financial performance and makes operating decisions based on a single operating segment. Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred taxes in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties would be included on the related tax liability line in the accompanying Consolidated Balance Sheets. Stock-Based Compensation In accordance with ASC No. 718, Compensation – Stock Compensation (“ASC 718”), the Company measures the compensation costs of stock-based compensation arrangements based on the grant date fair value of granted instruments and recognizes the costs in the financial statements over the period during which employees are required to provide services. Stock-based compensation arrangements include stock options and restricted stock awards. Equity instruments (“instruments”) issued to non-employees are recorded on the basis of the fair value of the instruments, as required by ASC 718. ASC No. 505, Equity Based Payments to Non-Employees (“ASC 505”), defines the measurement date and recognition period for such instruments. In general, the measurement date is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete and (ii) the instruments are vested. The measured fair value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in ASC 505. The fair value of each option granted under the Company’s Amended and Restated 2011 Long-Term Incentive Plan (the “2011 Plan”) and 2016 Long-Term Incentive Plan (the “2016 Plan”) was estimated using the Black-Scholes option-pricing model (see Note 8 for further details). Using this model, fair value is calculated based on assumptions with respect to the (i) expected volatility of the Company’s common stock price, (ii) expected life of the award, which for options is the period of time over which employees and non- employees are expected to hold their options prior to exercise, (iii) expected dividend yield on the Company’s common stock, and (iv) a risk-free interest rate, which is based on quoted U.S. Treasury rates for securities with maturities approximating the expected term. Expected volatility is estimated based on the Company’s historical volatilities. The expected life of options has been determined using the “simplified” method as prescribed by Staff Accounting Bulletin (“SAB”) No. 110, an amendment to SAB No. 107, which uses the midpoint between the vesting date and the end of the contractual term. The expected dividend yield is zero as the Company has never paid dividends and does not currently anticipate paying dividends in the foreseeable future. Net Income (Loss) Per Share Basic net income (loss) per common share is determined using the two-class method and is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period as defined by ASC No. 260, Earnings Per Share. The two-class method is an earnings allocation formula that determines income (loss) per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. The two-class method treats a participating security as having rights to earnings that otherwise would have been available to common shareholders. According to the contractual terms of participating securities, such securities do not participate in losses. Diluted net income (loss) per common share reflects the more dilutive earnings per share amount calculated using the treasury stock method or the two-class method, taking into account any potentially dilutive shares outstanding during the period. Potentially dilutive shares consist of shares issuable upon the exercise of stock options and unvested shares of restricted common stock (using the treasury stock method). To the extent stock options are antidilutive, they are excluded from the calculation of diluted income per share. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market funds. The Company maintains cash in bank accounts which, at times, may exceed federally insured limits. As part of its cash management process, the Company periodically reviews the relative credit standing of these banks. The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible. Receivables Accounts receivables are composed of amounts due from our advertising partners and from credit card processing companies following the initiation of subscription arrangements originated by our subscribers, which subscribers pay by credit cards. These receivables are unsecured and are typically settled by the payment processing company within several days of transaction processing accordingly, no allowance for doubtful accounts is considered. On December 31, 2017, the Company had accounts receivable from advertising partners and payment processing companies in the amount of $479,148, as compared to $958,695 on December 31, 2016. As of December 31, 2017, three advertising partners accounted for 45% of accounts receivable. As of December 31, 2016, three advertising partners and one payment processing company accounted for 37% of accounts receivable. Property and equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of those assets, as follows: Computers and equipment 5 years Website development 3 years Furniture and fixtures 7 years Leasehold improvements Shorter of estimated useful life or remaining lease term Repairs and maintenance costs are expensed as incurred. The Company’s property and equipment assets include computers and office equipment, furniture and fixtures and leasehold improvements, which are subject to depreciation or amortization over the useful life of the asset. Property and equipment also includes website development cost which is incurred during the development stage. See website development costs policy details. Property and equipment is evaluated for recoverability whenever events or changes in circumstances indicate that the carrying amounts of the assets might not be recoverable. In evaluating an asset for recoverability, the Company estimates the future cash flow expected to result from the use and eventual disposition of the asset. If the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized. No impairment losses were recorded on property and equipment for the periods presented in these consolidated financial statements. Website Development Costs In accordance with ASC 350-50, Website Development Costs Goodwill The Company evaluates its goodwill for impairment in accordance with ASC 350, Intangibles – Goodwill and Other The Company tests the recorded amount of goodwill for impairment on an annual basis on December 31 of each fiscal year or more frequently if there are indicators that the carrying amount of the goodwill exceeds its carried value. The Company has one reporting unit. The Company performed a qualitative assessment and concluded that no impairment existed as of December 31, 2017 and 2016. Intangible Assets The Company acquired amortizable intangibles assets as part of two asset purchase agreements consisting of trademarks and non-compete agreements. The Company also holds patents. The Company’s intangible assets, net represents definite lived intangible assets, which are being amortized on a straight-line basis over their estimated useful lives as follows: Patents 20 years Trade names, trademarks, product names, URLs 5-10 years Internally developed software 5-6 years Non-compete agreements 3 years Subscriber/customer relationships 3-12 years Lead pool 2 years The Company reviews intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows. No impairments were recorded on intangible assets as no impairment indicators were noted for the periods presented in these consolidated financial statements. Business Combinations The AVM Merger was made at a price above the fair value of the assets acquired and liabilities assumed including deferred tax liability, resulting in goodwill, based on the Company’s expectations of synergies and other benefits of combining the acquired business. Significant judgment is required in estimating the fair value of intangible assets and in assigning their respective useful lives. The Company is responsible for determining the fair values of the assets acquired and liabilities assumed in connection with the AVM Merger. These fair values were based on estimates as of October 7, 2016, the closing date of the acquisition, and were based on a number of factors, including a valuation from an independent third party. Net assets acquired are recorded at their fair values on the date of acquisition. Fair Value of Financial Instruments The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, credit card holdback receivable, accounts payable, approximate fair value due to the short-term nature of these instruments. Adoption of Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued accounting guidance on the recognition of revenue from contracts with customers, which will supersede nearly all existing revenue recognition guidance under generally accepted accounting principles (GAAP). Under the new revenue standards, entities will recognize revenue to depict the transfer of goods and services to customers in amounts that reflect the payment to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows from an entity’s contracts with customers. The Company has completed its analysis of the new revenue standards and has concluded that the measurement of revenue and the timing of recognizing revenue is not expected to change for our subscription and advertising revenues. The Company has adopted the new revenue standards on January 1, 2018 using the modified retrospective approach. Based on our analysis, we did not identify a cumulative-effect adjustment to retained earnings at January 1, 2018. Our future financial statements, beginning with the three months ended March 31, 2018, will include additional disclosures as required by the new revenue standards. In March 2016, the FASB issued ASU No. 2016-09, which revises the guidance in ASC 718, Compensation - Stock Compensation In August 2016, the FASB issued ASU No. 2016-15, which revises the guidance in ASC 230, Statement of Cash Flows In December 2016, the FASB issued ASU 2016-19, Technical Corrections and Improvements The FASB has issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes In January 2017, the FASB issued an ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) |
Business Combination
Business Combination | 12 Months Ended |
Dec. 31, 2017 | |
Business Combinations [Abstract] | |
Business Combination | 3. Business Combination On October 7, 2016, AVM completed the AVM Merger with PeerStream, pursuant to which SAVM Acquisition Corporation, PeerStream’s former wholly owned subsidiary, merged with and into AVM, with AVM surviving as a wholly owned subsidiary of PeerStream. As a result of the AVM Merger, the former shareholders of A.V.M. Software, Inc. received shares of PeerStream, Inc.’s common stock representing approximately 77.9% of the outstanding shares of common stock of the post-AVM Merger combined company, and PeerStream, Inc.’s former shareholders retained approximately 22.1% of the outstanding shares of common stock of the post-AVM Merger combined company, in each case including shares of unvested restricted stock in the total number of shares of PeerStream, Inc. common stock outstanding. Consideration in this transaction consisted of the issuance of 1,486,298 shares of PeerStream, Inc. to the former shareholders of A.V.M. Software, Inc., which was based on the Exchange Ratio (as defined in the AVM Merger Agreement). The shares were valued at the market price per share of common stock as of the closing date, which was $5.60. The fair value of the vested PeerStream options at the time of AVM Merger was estimated using the Black-Sholes pricing model. Consideration Shares Value PeerStream shares 1,486,298 $ 8,322,852 PeerStream options 130,965 $ 318,214 $ 8,641,066 The estimated fair value of the assets acquired and liabilities assumed is as follows: Accounts Amount Cash and cash equivalents $ 1,460,494 Credit card holdback receivable 161,140 Accounts receivable 192,490 Other receivable 190,000 Prepaid expense and other current assets 61,248 Fixed assets, net 98,552 Notes receivable 82,452 Long term security deposits 279,410 Intangibles assets, net 3,952,000 Goodwill 9,960,017 Accounts payable (1,380,336 ) Accrued expenses and other current liabilities (460,719 ) Deferred subscription revenue (1,045,856 ) Term note payable (200,000 ) Note payable, net of discount (3,000,000 ) Deferred rent, net of current portion (116,240 ) Capital lease obligations, net of current portion (12,786 ) Deferred tax liability (1,580,800 ) Total consideration $ 8,641,066 As part of the original valuation analysis, the Company identified intangible assets, including subscriber relationships, trade names, trademarks, product names, URLs, internally developed software and lead pool. The fair value of identifiable intangible assets is determined primarily using the “income approach,” which requires a forecast of all of the expected future cash flows. Final allocation was determined by a third party valuation specialist hired by management. The following table summarizes the fair value of the identifiable intangible assets and their respective useful lives: Estimated Estimated Subscriber relationships $ 1,940,000 3 Trade names, trademarks, product names, URLs 1,000,000 5 Internally developed software 730,000 5 Lead pool 282,000 2 Total acquired assets $ 3,952,000 The Company finalized the original valuation and as part of a revision for the AVM Merger, the Company made an adjustment to increase the fair value of the deferred revenue at the acquisition date by $234,144, offset by a decrease in deferred tax liability of $1,452,339, with a corresponding decrease to goodwill reflected in the accompanying condensed consolidated financial statements. Additionally, the change to the provisional amount resulted in amortization of deferred revenue of $65,000 during the year ended December 31, 2017. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 3. Fair Value Measurements The fair value framework under the FASB’s guidance requires the categorization of assets and liabilities into three levels based upon the assumptions used to measure the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, would generally require significant management judgment. The three levels for categorizing assets and liabilities under the fair value measurement requirements are as follows: ● Level 1: Fair value measurement of the asset or liability using observable inputs such as quoted prices in active markets for identical assets or liabilities; ● Level 2: Fair value measurement of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and ● Level 3: Fair value measurement of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability. The Company reviews the appropriateness of fair value measurements including validation processes, and the reconciliation of period-over-period fluctuations based on changes in key market inputs. All fair value measurements are subject to the Company’s analysis. Review and approval by management is required as part of the validation process. The following tables show the Company’s cash and investments by significant investment category as of September 30, 2018: Adjusted Cost Change in Fair Value Fair Value Cash and Cash Equivalents Cash $ 649,074 $ - $ 649,074 $ 649,074 Level 1: Money market funds 302,663 - 302,663 302,663 U.S. Treasury securities 6,265,617 - 6,265,617 6,265,617 Subtotal 6,568,280 - 6,568,280 6,568,280 Total $ 7,217,354 $ - $ 7,217,354 $ 7,217,354 Fair Value Methods The accounting guidance for financial instruments requires disclosures of the estimated fair value of certain financial instruments and the methods and significant assumptions used to estimate their fair value. Cash equivalents consist primarily of money market instruments and U.S. Treasury bills, and represent highly liquid investments with maturities of three months or less at purchase. The carrying value of cash equivalents is assumed to approximate fair value due to its short duration and generally negligible credit risk. The Company validates this assumption using quoted market prices where available. |
Property and Equipment, Net
Property and Equipment, Net | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Property and Equipment, Net | 4. Property and Equipment, Net Property and equipment, net consisted of the following at September 30, 2018 and December 31, 2017: September 30, December 31, (unaudited) Computer equipment $ 3,706,017 $ 3,706,017 Website development 2,591,463 2,342,442 Furniture and fixtures 89,027 89,027 Leasehold improvements 32,726 32,726 Total property and equipment 6,419,233 6,170,212 Less: Accumulated depreciation (5,839,714 ) (5,547,500 ) Total property and equipment, net $ 579,519 $ 622,712 Depreciation expense for the three and nine months ended September 30, 2018 was $86,076 and $292,214, respectively, as compared to $101,801 and $355,348, respectively, for the three and nine months ended September 30, 2017. The Company only holds property and equipment in the United States. | 4. Property and Equipment Property and equipment consists of the following: December 31, 2017 2016 Computer equipment $ 3,706,017 $ 3,720,985 Website development 2,342,442 2,050,980 Furniture and fixtures 89,027 89,027 Leasehold improvements 32,726 32,726 Total property and equipment 6,170,212 5,893,718 Less: Accumulated depreciation (5,547,500 ) (5,100,413 ) Total property and equipment, net $ 622,712 $ 793,305 Depreciation expense, which includes amortization of website development costs, for the years ended December 31, 2017 and 2016 was $447,746 and $568,028, respectively. The Company only holds property and equipment in the United States. |
Intangible Assets, Net
Intangible Assets, Net | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Intangible Assets, Net | 5. Intangible Assets, Net Intangible assets, net consisted of the following at September 30, 2018 and December 31, 2017: September 30, December 31, 2018 2017 (unaudited) Gross Accumulated Net Gross Accumulated Net Patents $ 50,000 $ (23,125 ) $ 26,875 $ 50,000 $ (21,250 ) $ 28,750 Trade names, trademarks product names, URLs 1,555,000 (777,104 ) 777,896 1,555,000 (585,479 ) 969,521 Internally developed software 2,720,000 (2,202,697 ) 517,303 2,720,000 (1,900,696 ) 819,304 Subscriber/customer relationships 4,219,000 (2,884,195 ) 1,334,805 4,219,000 (2,221,882 ) 1,997,118 Lead pool 282,000 (282,000 ) - 282,000 (176,250 ) 105,750 Total intangible assets $ 8,826,000 $ (6,169,121 ) $ 2,656,879 $ 8,826,000 $ (4,905,557 ) $ 3,920,443 Amortization expense for the three and nine months ended September 30, 2018 was $421,188 and $1,263,564, respectively, as compared to $421,188 and $1,263,563, respectively, for the three and nine months ended September 30, 2017. The estimated aggregate amortization expense for the last quarter of 2018 and each of the next four years and thereafter will be $336,155 in 2018, $1,087,333 in 2019, $592,681 in 2020, $444,167 in 2021 and $196,543 in 2022. | 5. Intangible Assets Intangible assets consist of the following: December 31, 2017 2016 Gross Accumulated Net Gross Accumulated Net Patents $ 50,000 $ (21,250 ) $ 28,750 $ 50,000 $ (18,750 ) $ 31,250 Trade names, trademarks, product names, URLs 1,555,000 (585,479 ) 969,521 1,555,000 (329,979 ) 1,225,021 Internally developed software 2,720,000 (1,900,697 ) 819,303 2,720,000 (1,498,029 ) 1,221,971 Subscriber/customer relationships 4,219,000 (2,221,882 ) 1,997,118 4,219,000 (1,338,799 ) 2,880,201 Lead pool 282,000 (176,250 ) 105,750 282,000 (35,250 ) 246,750 Total intangible assets $ 8,826,000 $ (4,905,558 ) $ 3,920,442 $ 8,826,000 $ (3,220,807 ) $ 5,605,193 Subscriber/customer relationships, trade names, trademarks, product names, URLs, Internally developed software and lead pool included an aggregate of $3,952,000 of intangible assets acquired as part of the business combination completed on October 7, 2016 as described in Note 3. Amortization expense for the years ended December 31, 2017 and 2016 was $1,684,750 and $834,505, respectively. The estimated aggregate amortization expense for each of the next five years and thereafter will be $1,599,718 in 2018, $1,087,333 in 2019, $592,681 in 2020, $444,167 in 2021 and $196,543 thereafter. |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Payables and Accruals [Abstract] | ||
Accrued Expenses and Other Current Liabilities | 6. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following at September 30, 2018 and December 31, 2017: September 30, December 31, 2018 2017 (unaudited) Compensation, benefits and payroll taxes $ 388,500 $ 310,775 Other accrued expenses 382,645 94,871 Total accrued expenses and other current liabilities $ 771,145 $ 405,646 | 7. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following: December 31, 2017 2016 Compensation, benefits and payroll taxes $ 310,775 $ 311,845 Other accrued expenses 94,871 160,561 Total accrued expenses and other current liabilities $ 405,646 $ 472,406 |
Income Taxes
Income Taxes | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Income Taxes | 7. Income Taxes The Company’s provision for income taxes consists principally of state and local taxes in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. For the three and nine months ended September 30, 2018, the Company recorded an income tax benefit of $13,636 and an income tax expense of $1,864, respectively. The effective tax rate for the three and nine months ended September 30, 2018 was 2.34% and (0.06%), respectively. The effective tax rate differs from the statutory rate of 21% as no benefit has been provided to current year pre-tax losses as the Company concluded its deferred tax assets are not realizable on a more-likely-than-not basis. | 6. Income Taxes The Company's provision for income taxes is comprised of the following: Years ended December 31, 2017 2016 Current: Federal $ - $ - State and local 228,972 - Total current provision 228,972 - Deferred: Federal - - State and local - - Total deferred provision - - Total provision $ 228,972 $ - Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows: December 31, 2017 2016 Deferred tax assets: Net operating losses $ 4,327,027 $ 1,847,247 Share-based compensation 868,222 2,521,303 Amortization of intangible assets 432,335 - Tax credits 62,969 - Other 12,755 - Subtotal 5,703,308 4,368,550 Less valuation allowance: (5,649,582 ) (4,307,813 ) Total deferred tax assets 53,726 60,737 Deferred tax liabilities: Intangibles - (1,452,340 ) Property and equipment (53,726 ) - Other - (60,736 ) Total deferred tax liabilities (53,726 ) (1,513,076 ) Net deferred tax liabilities $ - $ (1,452,339 ) During 2017, the Company adjusted its deferred tax liability by $1,452,339 with an offset to goodwill in connection with the business combination accounting related to the AVM merger. In assessing the Company’s ability to recover its deferred tax assets, the Company evaluated whether it is more likely than not that some portion or the entire deferred tax asset will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. The Company considered all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Based on these factors the Company determined that its deferred tax assets are not realizable on a more-likely-than-not basis and has recorded a valuation allowance against its net deferred tax assets. The valuation allowance on our total deferred tax assets was $5,649,582 and $4,307,813 for the years ended December 31, 2017 and 2016, respectively. The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is determined in future periods that portions of the Company’s deferred income tax assets satisfy the realization standards, the valuation allowance will be reduced accordingly. As of December 31, 2017, the Company had federal net operating loss carryforwards of approximately $19.1 million which are set to expire beginning in 2028 through 2037 if not utilized. These net operating losses may be subject to an annual limitation under IRC Section 382. The Company’s effective tax rate differs from the U.S. federal statutory income tax rate of 34% as follows: Years ended December 31, 2017 2016 Income tax (expense) benefit at federal statutory rate 34.0 % 34.0 % State and local taxes (2.6 )% 11.0 % Federal tax reform (55.0 )% - % Valuation allowance 25.3 % 185.7 % Payable true-up (3.8 )% - % Other (1.9 )% (0.8 )% NOL adjustment - % (229.9 )% Effective tax rate (4.0 )% 0.0 % The U. S. Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and introduces significant changes to U.S. income tax law. Among other things, the TCJA (1) reduces the US statutory corporate income tax rate from 34% to 21% effective January 1, 2018 (2) eliminates the corporate alternative minimum tax (3) eliminates the Section 199 deduction (4) changes rules related to uses and limitations of net operating loss carryforwards beginning after December 31, 2017. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted. The Tax Act reduces the U.S. statutory corporate tax rate to 21%, effective January 1, 2018. The Company has recorded a provisional decrease in its deferred tax assets and liabilities of $3,116,794 with an offsetting adjustment to our valuation allowance. On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As we collect and prepare necessary data and interpret the Tax Act and any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially impact our provision for income taxes and effective tax rate in the period in which the adjustments are made. The accounting for the tax effects of the Tax Act will be completed in 2018. The Company applies the applicable authoritative guidance which prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the Company has taken or expects to take on a tax return. As of December 31, 2017 the Company has no uncertain tax positions. There are no uncertain tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months from December 31, 2017. The Company files federal income tax returns and income tax returns in various state tax jurisdictions. Tax years 2014 through 2017 remain open to examination by the IRS. The states have varying statutes of limitations. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Equity [Abstract] | ||
Stockholders' Equity | 8. Stockholders’ Equity The PeerStream, Inc. Amended and Restated 2011 Long-Term Incentive Plan (the “2011 Plan”) was terminated as to future awards on May 16, 2016. A total of 181,604 shares of the Company’s common stock may be delivered pursuant to outstanding options awarded under the 2011 Plan; however, no additional awards may be granted under such plan. The PeerStream, Inc. 2016 Long-Term Incentive Plan (the “2016 Plan”) was adopted by the Company’s stockholders on May 16, 2016 and permits the Company to award stock options (both incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other stock-based awards and cash-based incentive awards to its employees (including an employee who is also a director or officer under certain circumstances), non-employee directors and consultants. The maximum number of shares of common stock that may be issued pursuant to awards under the 2016 Plan is 1,300,000 shares, 100% of which may be issued pursuant to incentive stock options. In addition, the maximum number of shares of common stock that may be issued under the 2016 Plan may be increased by an indeterminate number of shares of common stock underlying outstanding awards issued under the 2011 Plan that are forfeited, expired, cancelled or settled in cash. As of September 30, 2018, there were 408,508 shares available for future issuance under the 2016 Plan. Stock Options The following table summarizes the assumptions used in the Black-Scholes pricing model to estimate the fair value of the options granted during the following period: Nine Months September 30, 2018 Expected volatility 159.0-167.0 % Expected life of option (years) 5.2-6.3 Risk free interest rate 2.3-2.9 % Expected dividend yield 0.0 % The expected life of the options is the period of time over which employees and non-employees are expected to hold their options prior to exercise. The expected life of the options has been determined using the “simplified” method, which uses the midpoint between the vesting date and the end of the contractual term. The volatility of the Company’s common stock is calculated using the Company’s historical volatilities beginning at the grant date and going back for a period of time equal to the expected life of the award. The Company estimates potential forfeitures of stock awards and adjusts recorded stock-based compensation expense accordingly. The Company estimates pre-vesting forfeitures primarily based on the Company’s historical experience and is adjusted to reflect actual forfeitures as the stock-based awards vest. The following tables summarize stock option activity during the nine months ended September 30, 2018: Weighted Number of Average Options Price Stock Options: Outstanding at January 1, 2018 980,588 $ 5.02 Granted 120,130 5.95 Exercised, during period (6,363 ) 4.43 Expired or canceled, during the period (1,429 ) 42.35 Forfeited, during the period (25,399 ) 4.45 Outstanding at September 30, 2018 1,067,527 $ 5.10 Exercisable at September 30, 2018 559,232 $ 6.05 On September 30, 2018, the aggregate intrinsic value of stock options that were outstanding and exercisable was $1,752,348 and $825,048, respectively. On September 30, 2017, the aggregate intrinsic value of stock options that were outstanding and exercisable was $17,565 and $9,972, respectively. The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the fair value of such awards as of the period-end date. During the nine months ended September 30, 2018, the Company granted options to employees to purchase an aggregate 120,130 shares of common stock at exercise prices ranging from $5.10 to $6.99. The options vest between one, three and four years and have a term of ten years. The aggregate fair value for the options granted during the nine months ended September 30, 2018 was $708,501. The aggregate fair value for the options granted during the nine months ended September 30, 2017 was $966,560. Stock-based compensation expense for the Company’s stock options included in the condensed consolidated statements of operations is as follows: Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Cost of revenue $ 529 $ 333 $ 1,870 $ 3,279 Sales and marketing expense 981 1,039 3,202 908 Product development expense 14,380 3,396 33,640 36,628 General and administrative expense 211,818 148,714 610,848 436,206 Total stock compensation expense $ 227,708 $ 153,482 $ 649,560 $ 477,021 At September 30, 2018, there was $1,625,919 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 2.1 years. Restricted Stock Awards The following table summarizes restricted stock award activity for the nine months ended September 30, 2018: Weighted Average Number of Grant Date RSAs Fair Value Restricted Stock Awards: Unvested at January 1, 2018 158,571 $ 20.29 Granted - - Expired or canceled, during the period - - Forfeited, during the period - - Unvested at September 30, 2018 158,571 $ 20.29 At September 30, 2018, there was $741,496 of total unrecognized compensation expense related to unvested restricted stock awards, which is expected to be recognized over a weighted average period of 1.0 years. Stock-based compensation expense relating to restricted stock awards for the three and nine months ended September 30, 2018 was $185,374 and $556,122, respectively, as compared to $185,374 and $556,122, respectively, for the three and nine months ended September 30, 2017. Lerner Restricted Stock Award Agreements On June 15, 2018, in connection with Clifford Lerner’s resignation as an officer and employee of the Company, the Company entered into amendments to (i) a restricted stock award agreement, dated March 3, 2016, as amended, related to the original award of 142,858 shares of restricted common stock to Mr. Lerner and (ii) a restricted stock award agreement, dated December 14, 2011, as amended, related to the original award of 121,429 shares of restricted common stock to Mr. Lerner (together, the “Restricted Stock Award Amendments”). On October 7, 2018, 79,285 shares of Mr. Lerner’s restricted stock vested. Pursuant to the Restricted Stock Award Amendments, the Company was required, in order to assist Mr. Lerner in satisfying his tax withholding obligations with respect to the vesting restricted shares, to withhold 20,000 shares of vesting restricted common stock. The remaining amount of the tax withholding obligation was paid by Mr. Lerner and Mr. Lerner’s unvested shares of restricted common stock will continue to vest as scheduled. | 8. Stockholders’ Equity The 2011 Plan was terminated as to future awards on May 16, 2016. A total of 181,604 shares of the Company’s common stock may be delivered pursuant to outstanding options awarded under the 2011 Plan; however, no additional awards may be granted under such plan. The 2016 Plan was adopted by the Company’s stockholders on May 16, 2016 and permits the Company to award stock options (both incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other stock-based awards and cash-based incentive awards to its employees (including an employee who is also a director or officer under certain circumstances), non-employee directors and consultants. The maximum number of shares of common stock that may be issued pursuant to awards under the 2016 Plan is 1,300,000 shares, 100% of which may be issued pursuant to incentive stock options. In addition, the maximum number of shares of common stock that may be issued under the 2016 Plan may be increased by an indeterminate number of shares of common stock underlying outstanding awards issued under the 2011 Plan that are forfeited, expired, cancelled or settled in cash. As of December 31, 2017, there were 501,810 shares available for future issuance under the 2016 Plan. Stock Options The following table summarizes the assumptions used in the Black-Scholes pricing model to estimate the fair value of the options granted during the years ended: December 31, 2017 2016 Expected volatility 116.1-159.0 % 76.6-139.2 % Expected life of option 5.0-7.0 5.5 Risk free interest rate 1.7-2.2 % 1.1-1.8 % Expected dividend yield 0.0 % 0.0 % The expected life of the options is the period of time over which employees and non-employees are expected to hold their options prior to exercise. The expected life of options has been determined using the "simplified" method as prescribed by Staff Accounting Bulletin 110, which uses the midpoint between the vesting date and the end of the contractual term. The volatility of the Company’s common stock is calculated using the Company’s historical volatilities beginning at the grant date and going back for a period of time equal to the expected life of the award. The Company estimates potential forfeitures of stock awards and adjusts recorded stock-based compensation expense accordingly. The Company estimates pre-vesting forfeitures primarily based on the Company’s historical experience and is adjusted to reflect actual forfeitures as the stock based awards vest. The following tables summarize stock option activity during the year ended December 31, 2017: Number of Weighted Outstanding at January 1, 2017 573,110 $ 6.94 Granted 611,522 3.75 Expired or canceled, during the period (191,027 ) 6.64 Forfeited, during the period (13,017 ) 6.00 Outstanding at December 31, 2017 980,588 $ 5.02 Exercisable at December 31, 2017 448,890 $ 8.36 During the year ended December 31, 2017, the Company entered into option cancellation and release agreements with three employees, pursuant to which each of the parties agreed to cancel outstanding options to purchase an aggregate of 77,312 shares of common stock of the Company at exercise prices ranging from $4.55 to $21.00 per share. In exchange for the cancellation of the options, the Company granted the employees replacement options to purchase an aggregate of 64,600 shares of common stock of the Company at exercise prices ranging from $3.36 to $6.00 per share. The incremental value of the modified options compared to the original options, both valued on the respective modification date, of $55,055 is being recognized over the vesting terms of the options. On April 13, 2017, the Company’s Board of Directors awarded Alexander Harrington, Chief Executive Officer, (i) a stock option representing the right to purchase 80,000 shares of common stock at an exercise price equal to $3.63 per share, with the shares underlying this stock option vesting 25% on the six month anniversary of the date of grant and the remaining three tranches vesting on each of the first, second and third anniversaries of the first vesting date, and (ii) a stock option representing the right to purchase 24,000 shares of common stock at an exercise price equal to $3.63 per share, with the shares underlying this stock option vesting based on the Company’s achievement of certain performance goals related to its annual revenues. In addition, on April 13, 2017, the Company’s Board of Directors awarded Jason Katz, Chief Operating Officer and Chairman of the Board of Directors, a stock option representing the right to purchase 70,000 shares of common stock at an exercise price equal to $3.63 per share, with (i) 17,500 of the underlying shares vesting based on the Company’s achievement of certain performance goals related to its earnings before interest, tax, depreciation, and amortization and (ii) 52,500 of the underlying shares vesting based on the Company’s achievement of certain performance goals related to its annual revenues. Stock compensation expense recognized for these performance awards for the year ended December 31, 2017 was $50,114. On May 5, 2017, the Compensation Committee of the Company’s Board of Directors awarded each of Mr. Harrington and Eric Sackowitz, Chief Technology Officer, a stock option representing the right to purchase 28,571 shares of common stock at an exercise price equal to $3.36 per share. The shares underlying these stock options vest in four equal installments on each anniversary of the date of grant. On December 31, 2017, the aggregate intrinsic value of stock options that were outstanding and exercisable was $3,063,208 and $1,175,244, respectively. The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the fair value of such awards as of the period-end date. During the year ended December 31, 2017, the Company granted options to employees to purchase an aggregate of 611,522 of common stock. These options vest between one and four years and have a term of ten years and have a weighted average exercise price of $3.75. The aggregate fair value for the options granted during the years ended December 31, 2017 and 2016 was $1,740,578 and $682,740, respectively. At December 31, 2017, there was $1,581,586 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 2.68 years. Stock-based compensation expense for the Company’s stock options included in the consolidated statements of operations is as follows: Year ended 2017 2016 Cost of revenue $ 4,302 $ 117,147 Sales and marketing expense 1,784 - Product development expense 166,783 - General and administrative expense 665,556 50,599 Total stock-based compensation expense $ 838,425 $ 167,746 Restricted Stock Awards The following table summarizes restricted stock award activity for the year ended December 31, 2017: Number of Weighted Outstanding at January 1, 2017 264,286 $ 20.29 Granted - - Forfeited or canceled, during the period (43,405 ) 20.29 Vested (62,310 ) 20.29 Outstanding at December 31, 2017 158,571 $ 20.29 At December 31, 2017, there was $1,297,617 of total unrecognized compensation expense related to restricted stock, which is expected to be recognized over a weighted average period of 1.8 years. Stock-based compensation expense relating to restricted stock awards for the years ended December 31, 2017 and 2016 was $741,496 and $185,374, respectively, which is included in general and administrative expense in our consolidated financial statements. On October 7, 2017, an aggregate of 105,715 shares of restricted stock held by Clifford Lerner, a member of the Company’s Board of Directors, vested. Pursuant to the terms of Mr. Lerner’s restricted stock awards, the Company withheld and subsequently canceled an aggregate of 43,405 of the vesting shares of restricted stock to satisfy Mr. Lerner’s tax withholding obligations incurred in connection with the vesting of the shares of restricted stock. Common Stock On April 7, 2017, the Company executed and filed with the Secretary of State of the State of Delaware an amendment to the Company’s Certificate of Incorporation, as amended, to increase the total number of shares of common stock authorized for issuance to 25,000,000. On December 19, 2017, the Company entered into a securities purchase agreement with Hershey Strategic Capital, LP, pursuant to which we issued and sold 200,000 shares of our common stock to Hershey Capital for an aggregate purchase price of $1,000,000, or $5.00 per share, in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. The Company intends to use the proceeds from the offering for general corporate purposes, including the development of our blockchain product initiatives. |
Net Loss Per Share
Net Loss Per Share | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Earnings Per Share [Abstract] | ||
Net Loss Per Share | 9. Net Loss Per Share Basic net loss per share of common stock is computed based upon the number of weighted average shares of common stock outstanding as defined by ASC Topic 260, Earnings Per Share. Diluted net loss per share of common stock includes the dilutive effects of stock options and stock equivalents. To the extent stock options are antidilutive, they are excluded from the calculation of diluted net loss per share of common stock. For the nine months ended September 30, 2018, 1,067,527 shares upon the exercise of outstanding stock options and 158,571 shares of unvested restricted stock were not included in the computation of diluted net loss per share because their inclusion would be antidilutive. For the three and nine months ended September 30, 2017, 817,020 shares upon the exercise of outstanding stock options and 264,286 shares of unvested restricted stock were not included in the computation of diluted net loss per share because their inclusion would be antidilutive. | 9. Net (Loss) Income Per Share Basic and diluted net (loss) income per common share are computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per share includes the determinants of basic net (loss) income per share and, in addition, gives effect to the common stock potentially issuable under vested and unvested stock options, except where the effect of including them is anti-dilutive. The following table summarizes the net loss per share calculation: Years Ended 2017 2016 Net loss - basic and diluted $ (5,894,253 ) $ (1,452,776 ) Weighted average shares outstanding – basic and diluted 6,452,581 5,577,856 Per share data: Basic and diluted $ (0.91 ) $ (0.26 ) For the periods where the Company reported losses, all common stock equivalents are excluded from the computation of diluted loss per share, since the result would be anti-dilutive. Common stock equivalents not included in the calculations of diluted loss per share because to do so would have been anti-dilutive, include stock options of 980,588 and 573,110 for the years ended December 31, 2017 and 2016, respectively. |
Commitments and contingencies
Commitments and contingencies | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Commitments and contingencies | 10. Commitments Operating Lease Agreements On January 18, 2016, the Company entered into a lease agreement for office space located at 122 East 42nd Street in New York, NY and paid a security deposit in the amount of $37,000. The term of the lease runs until May 30, 2019. The Company’s monthly office rent payments under the lease are currently approximately $12,300 per month and escalate on an annual basis for each year of the term of the lease thereafter. On June 7, 2016, the Company entered into a lease agreement with Jericho Executive Center LLC for office space at 30 Jericho Executive Plaza in Jericho, New York which commenced on September 1, 2017 and runs through November 30, 2021. The Company’s monthly office rent payments under the lease are currently approximately $5,900 per month. On September 18, 2017, the Company entered into a lease agreement for a second office space located at 122 East 42nd Street in New York, NY and paid a security deposit in the amount of $8,000. The term of the lease runs until July 31, 2019. The Company’s monthly office rent payments under the lease are currently approximately $4,000 per month. On October 27, 2017, the Company entered into a lease agreement for an office space located at Sparks-Ledesma House 1306 East 7th Street in Austin, TX that expires on October 31, 2018. The Company’s monthly office rent payments under the lease are currently approximately $1,129 per month. Legal Proceedings On December 16, 2016, a wholly owned subsidiary of the Company, Paltalk Holdings, Inc., filed a patent infringement lawsuit in Delaware against Riot Games, Inc. and Valve Corporation for infringement of U.S. Patent Nos. 5,822,523 and 6,226,686 with respect to their online games League of Legends and Defense of the Ancients 2. These two patents were previously asserted against, and then licensed to, Microsoft, Sony, and Activision. In 2018, Valve Corporation moved to transfer the litigation from Delaware to the Western District of Washington. Such motion was granted by the court. Riot Games, Inc. has filed a total of four inter partes The Company may be included in legal proceedings, claims and assessments arising in the ordinary course of business. The Company evaluates the need for a reserve for specific legal matters based on the probability of an unfavorable outcome and the reasonability of an estimable loss. No reserve was deemed necessary as of September 30, 2018. | 10. Commitments and contingencies Operating Lease Agreements As result of the Merger, the Company entered into a lease for office space located at 320 W 37th Street, 13th Floor, New York, NY 10018. The term of the lease originally ran until March 4, 2022. The Company’s monthly office rent payments under the lease were approximately $26,000 per month. On March 3, 2017, the Company entered into an agreement to terminate the lease for this office space. Under the terms of the lease termination agreement, the Company vacated the offices by May 31, 2017 and agreed to forfeit its security deposit of $200,659. On January 18, 2016, the Company entered into a lease agreement for office space located at 122 East 42nd Street in New York, NY and paid a security deposit in the amount of $37,000. The term of the lease runs until May 30, 2019. The Company’s monthly office rent payments under the lease are currently approximately $12,300 per month and escalate on an annual basis for each year of the term of the lease thereafter. On June 7, 2016, the Company entered into a lease agreement with Jericho Executive Center LLC for office space at 30 Jericho Executive Plaza in Jericho, New York which commenced on September 1, 2016 and runs through November 30, 2021. The Company’s monthly office rent payments under the lease are currently approximately $5,900 per month. On September 18, 2017, the Company entered into a lease agreement for a second office space located at 122 East 42nd Street in New York, NY and expires in July 31, 2019 and paid a security deposit in the amount of $8,000. The term of the lease runs until July 31, 2019. Our monthly office rent payments under the lease are currently approximately $4,000 per month. On October 27, 2017, the Company entered into a lease agreement for an office space located at Sparks-Ledesma House 1306 East 7th Street in Austin, TX and expires in October 31, 2018. Our monthly office rent payments under the lease are currently approximately $1,129 per month. The Company accounts for rent expense using the straight line method of accounting, deferring the difference between actual rent due and the straight line amount. On December 31, 2017, future minimum payments under non-cancelable operating leases were as follows: For the years ending December 31, Amount 2018 $ 264,697 2019 228,493 2020 71,070 2021 65,148 Total $ 629,408 Legal Proceedings On December 16, 2016, a wholly owned subsidiary of the Company, Paltalk Holdings, Inc., filed a patent infringement lawsuit in Delaware against Riot Games, Inc. and Valve Corporation for infringement of U.S. Patent Nos. 5,822,523 and 6,226,686 with respect to their online games League of Legends and Defense of the Ancients 2. These two patents were previously asserted against, and then licensed to, Microsoft, Sony, and Activision. In 2018, Valve Corporation made a motion to move the litigation from Delaware to the Western District of Washington which was granted by the court. Riot Games, Inc. has filed a total of four inter partes The Company may be included in legal proceedings, claims and assessments arising in the ordinary course of business. The Company evaluates the need for a reserve for specific legal matters based on the probability of an unfavorable outcome and the reasonability of an estimable loss. No reserve was deemed necessary as of December 31, 2017. |
ProximaX Agreement
ProximaX Agreement | 9 Months Ended |
Sep. 30, 2018 | |
Proximax Agreement | |
ProximaX Agreement | 11. ProximaX Agreement On March 21, 2018, as a first step in providing services through PeerStream Business Solutions, the Company entered into a technology services agreement with ProximaX whereby the Company agreed to provide certain development and related services to ProximaX to facilitate the implementation of PSP into ProximaX’s proprietary blockchain protocol that is currently under development. Pursuant to the terms of the agreement, ProximaX agreed to pay the Company up to an aggregate of $10.0 million either in cash or in certain highly liquid cryptocurrencies in exchange for the Company’s services, with $5.0 million due upon the successful consummation of a future initial coin offering by ProximaX and up to an additional $5.0 million due upon the Company’s achievement of certain development milestones set forth in the agreement. In addition, ProximaX agreed to issue the Company a number of tokens equal to 2.4% of all outstanding tokens on the date of the planned initial coin offering and to reserve an additional 2% of such tokens to be issued as payment for future services provided by the Company, subject, in each case, to such initial coin offering generating aggregate gross proceeds of at least $30.0 million. On April 30, 2018, ProximaX closed its initial coin offering, which generated aggregate gross proceeds in excess of $30.0 million for purposes of the technology services agreement. On May 6, 2018, as agreed under the terms of the technology services agreement, ProximaX paid the Company the $5.0 million fee due upon consummation of its initial coin offering in Ethereum, which the Company immediately converted into cash. The Company recorded approximately $113.0 thousand in transaction and conversion fees for the three months ended June 30, 2018 associated with the conversion of Ethereum into U.S. dollars. On June 2, 2018, the Company received 216.0 million XPX tokens from ProximaX, representing 2.4% of the XPX tokens issued by ProximaX in its initial coin offering, generating contract revenue of approximately $3.4 million. XPX tokens began trading on the Kryptono Exchange on June 2, 2018 and the quoted market price of $0.01559 was used to determine the initial fair value of tokens. As of September 30, 2018 at approximately 5:00 PM, Eastern Time, during the impairment period, XPX tokens were trading at a price equal to $0.00386 per token, and our 216.0 million XPX tokens had an aggregate fair value of approximately $0.8 million. The fair value change of the digital tokens of $2,535,235 was reflected as impairment loss on digital tokens in the statement of operations. |
Subsequent Events
Subsequent Events | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Subsequent Events [Abstract] | ||
Subsequent Events | 12. Subsequent Events | 11. Subsequent Events Name Change Effective March 12, 2018, the Company changed its name from “Snap Interactive, Inc.” to “PeerStream, Inc.” In connection with the name change, the Company also changed its trading symbol on the OTCQB Marketplace from “STVI” to “PEER.” The new brand is intended to honor the Company’s legacy of empowering consumers to meet new people and connect with peers via social video applications, while also referencing the anticipated importance of peer-to-peer networks and multimedia streaming in the Company’s future. ProximaX Agreement On March 21, 2018, as a first step in providing services through PeerStream Business Solutions, the Company entered into a technology services agreement with ProximaX Limited (“ProximaX”) whereby the Company agreed to provide certain development and related services to ProximaX to facilitate the implementation of PSP into ProximaX’s proprietary blockchain protocol that is currently under development. Pursuant to the terms of the agreement, ProximaX agreed to pay the Company up to an aggregate of $10.0 million of cash in exchange for the Company’s services, with $5.0 million due upon the successful consummation of a future initial coin offering by ProximaX and up to an additional $5.0 million due upon the Company’s achievement of certain development milestones set forth in the agreement. In addition, ProximaX agreed to issue the Company a number of tokens equal to 2.4% of all outstanding tokens on the date of the planned initial coin offering and to reserve an additional 2% of such tokens to be issued as payment for future services provided by the Company, subject, in each case, to such initial coin offering generating aggregate gross proceeds of at least $30.0 million. If the planned initial coin offering does not raise at least $30.0 million or ProximaX fails to pay the Company the upfront cash payment of $5.0 million by June 1, 2018, the Company and ProximaX have agreed to negotiate alternative compensation for the Company’s services in good faith. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and were prepared in conformity with GAAP and with the requirements of the Security and Exchange Commission (“SEC”). All intercompany balances and transactions have been eliminated upon consolidation. | |
Significant Estimates and Assumptions | Significant Estimates and Assumptions The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates relied upon in preparing these financial statements include the estimates used to determine the fair value of the stock options issued in share based payment arrangements, collectability of the Company’s accounts receivable, revenue recognition under time based service contracts and the valuation allowance on deferred tax assets. Management evaluates these estimates on an ongoing basis. Changes in estimates are recorded in the period in which they become known. The Company bases estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from the Company’s estimates. | Significant Estimates and Assumptions The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates relied upon in preparing these financial statements include the estimates used to determine the fair value of the Company’s common stock up until the time of the AVM Merger, and stock options issued in share based payment arrangements, acquisition accounting, collectability of the Company’s accounts receivable and the valuation allowance on deferred tax assets. Management evaluates these estimates on an ongoing basis. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Actual results may differ from the estimates. |
Revenue | Revenue In accordance with ASC 606, revenue from contracts with customers is recognized when control of the promised services is transferred to our customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Sales tax is excluded from reported revenue. Subscription Revenue The Company generates subscription revenue primarily from monthly premium subscription services. Subscription revenues are presented net of refunds, credits, and known and estimated credit card chargebacks. Subscriptions are generally offered in durations of one-, three-, six- and twelve- month terms. All subscription fees, however, are paid by credit card at the origination of the subscription regardless of the term of the subscription, therefore determining the fixed transaction price. Revenues from multi-month subscriptions are recognized on a straight-line basis over the period where the service is offered to our customer, indicated by length of the subscription term purchased. The unearned portion of subscription revenue is presented as deferred revenue in the accompanying condensed consolidated balance sheets. The deferred revenue at December 31, 2017 was $2,553,826, of which approximately $1,925,104 was subsequently recognized as subscription revenue during the nine months ended September 30, 2018. The ending balance of deferred revenue at September 30, 2018 was $2,173,290. In addition, the Company offers virtual gifts and micro-transactions to its users. Users may purchase credits in $5, $10 or $20 increments that can be redeemed for a host of virtual gifts such as a rose, a beer or a car, among other items. These gifts are given among users to enhance communication and are typically redeemed within the month of purchase. Upon purchase, the virtual gifts are credited to the users’ account and is under the users’ control. Virtual gift and micro-transaction revenue are recognized upon the users’ utilization of the virtual gift at the fixed transaction price on a gross basis and included in subscription revenue in the accompanying condensed consolidated statements of operations. Virtual gift and micro-transaction revenue was approximately $1,883,582 and $5,636,505 for the three and nine months ended September 30, 2018, respectively. Advertising Revenue The Company generates advertising revenue from the display of advertisements on its products through contractual agreements with third parties that are based on the number of advertising impressions delivered. When a customer clicks an advertisement (CPC basis), views an advertisement impression (CPM basis), or registers for an external website via an advertisement by clicking on or through the application (CPA basis), the amount earned is recognized as revenue. Revenue related to fixed fee arrangements is recognized ratably over the service period. In determining whether an arrangement exists, the Company ensures that an agreement has been fully executed. Advertising revenue is dependent upon traffic as well as the advertising inventory placed on the Company’s products. Technology Service Revenue Revenue related to the technology services agreement with ProximaX Limited (“ProximaX”), which is a fixed-price contract, is recognized as the services are performed and payment is earned. The Company accounts for a contract when it has approval and commitment from all parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and the collectability of the consideration is probable. Accordingly, revenue under the technology services agreement with ProximaX is recognized based upon proportional performance using labor hours as the unit of measurement. The contractual upfront fee included $5.0 million and was paid in the Ethereum cryptocurrency and subsequently converted into U.S. dollars. The upfront fee also included 216.0 million tokens related to our familiarization with the client’s technology and the build-out of a roadmap used to fulfill the contract. The total upfront fee is recognized as revenue under the input method based on proportional performance using labor hours as the unit of measurement. The unearned portion is presented as deferred technology service revenue in the accompanying condensed consolidated balance sheets. Revisions to the Company’s estimates may result in increases or decreases to revenues and income and are reflected in the consolidated financial statements in the periods in which they are first identified. If the Company’s estimates indicate that a contract loss will be incurred, a loss provision is recorded in the period in which the loss first becomes probable and reasonably estimable. Contract losses are determined to be the amount by which the estimated costs of the contract exceed the estimated total revenues that will be generated by the contract and are included in cost of revenues in the Company’s condensed consolidated statement of operations. There were no contract losses for the periods presented. The remaining $5.0 million in payments under the technology services agreement will be recognized as revenue upon the Company’s fulfillment of contractually defined milestones. | Revenue Recognition The Company recognizes revenue on arrangements in accordance with Accounting Standards Codification (“ASC”) No. 605, Revenue Recognition. In all cases, revenue is recognized when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured. The Company has revenue streams consisting of subscriptions and advertisements. The Company recognizes revenue from monthly premium subscription services beginning in the month in which the subscriptions are originated. Revenues are presented net of refunds, credits, and known and estimated credit card chargebacks. During the years ended December 31, 2017 and 2016, subscriptions were offered in durations of one-, three-, six-, twelve-, and fifteen- month terms. All subscription fees, however, are paid by credit card at the origination of the subscription regardless of the term of the subscription. Revenues from multi-month subscriptions are recognized on a straight-line basis over the length of the subscription period. The unearned portion of subscription revenue is presented as deferred revenue in the accompanying Consolidated Balance Sheets. The Company generates advertising revenue from advertising agreements with third parties. Advertising revenue is dependent upon traffic as well as the advertising inventory placed on our products. The Company recognizes advertising revenue as earned on a click-through, impression, registration or subscription basis. When a user clicks an advertisement (CPC basis), views an advertisement impression (CPM basis), registers for an external website via an advertisement by clicking on or through our application (CPA basis), or clicks on an offer to subscribe to premium features on the application, the amount earned is recognized as revenue. In addition, the Company offers virtual gifts and micro-transactions to its users. Users may purchase credits in $5, $10 or $20 increments that can be redeemed for a host of virtual gifts such as a rose, a beer, a car, among other items. These gifts are given among users to enhance communication and are typically redeemed within the month of purchase. Micro-transactions allow users to increase the visibility of their profile and messages by paying for such services. Virtual gift and micro-transaction revenue are recognized at the point of sale and included in subscription revenue in the accompanying consolidated statements of operations. The Company’s payment processors have established reserve accounts to secure the performance of the Company’s obligations under its service agreements, which is standard practice within the payment processing industry. These reserve accounts withhold a small percentage of the Company’s sales in a segregated account. These funds are classified as credit card holdback receivables and totaled $140,789 and $172,169 as of December 31, 2017 and December 31, 2016, respectively. |
Cost of revenue | Cost of revenue Cost of revenue consists primarily of compensation (including stock-based compensation) and other employee-related costs of personnel engaged in data center and customer care functions, credit card processing fees, hosting fees, and data center rent and bandwidth costs. | |
Sales and marketing | Sales and marketing Sales and marketing expense is expensed as incurred and consists primarily of advertising expenditures and compensation (including stock-based compensation) and other employee related costs for personnel engaged in sales, and sales support functions. Sales and marketing spend includes search engine marketing and partner-related payments to those who direct traffic to our brands. Total advertising expense for the year ended December 31, 2017 was approximately $6,994,700, and $4,591,900 for the year ended December 31, 2016. | |
Product development | Product development Product development expense, which relates to the development of technology for our applications, consists primarily of compensation (including stock-based compensation) and other employee-related costs that are not capitalized for personnel engaged in the design, testing and enhancement of service offerings as well as amortization of capitalized website development costs. | |
General and administrative | General and administrative General and administrative expense consists primarily of compensation (including stock-based compensation) and other employee-related costs for personnel engaged in executive management, finance, legal, tax, human resources, and fees for professional services. General and administrative also includes depreciation of fixed assets and amortization of intangible assets. | |
Reportable Segment | Reportable Segment The Company operates in one reportable segment, and management assesses the Company’s financial performance and makes operating decisions based on a single operating segment. | |
Income Taxes | Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred taxes in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties would be included on the related tax liability line in the accompanying Consolidated Balance Sheets. | |
Stock-Based Compensation | Stock-Based Compensation In accordance with ASC No. 718, Compensation – Stock Compensation (“ASC 718”), the Company measures the compensation costs of stock-based compensation arrangements based on the grant date fair value of granted instruments and recognizes the costs in the financial statements over the period during which employees are required to provide services. Stock-based compensation arrangements include stock options and restricted stock awards. Equity instruments (“instruments”) issued to non-employees are recorded on the basis of the fair value of the instruments, as required by ASC 718. ASC No. 505, Equity Based Payments to Non-Employees (“ASC 505”), defines the measurement date and recognition period for such instruments. In general, the measurement date is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete and (ii) the instruments are vested. The measured fair value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in ASC 505. The fair value of each option granted under the Company's Amended and Restated 2011 Long-Term Incentive Plan (the “2011 Plan”) and 2016 Long-Term Incentive Plan (the “2016 Plan”) was estimated using the Black-Scholes option-pricing model (see Note 8 for further details). Using this model, fair value is calculated based on assumptions with respect to the (i) expected volatility of the Company's common stock price, (ii) expected life of the award, which for options is the period of time over which employees and non- employees are expected to hold their options prior to exercise, (iii) expected dividend yield on the Company's common stock, and (iv) a risk-free interest rate, which is based on quoted U.S. Treasury rates for securities with maturities approximating the expected term. Expected volatility is estimated based on the Company's historical volatilities. The expected life of options has been determined using the "simplified" method as prescribed by Staff Accounting Bulletin (“SAB”) No. 110, an amendment to SAB No. 107, which uses the midpoint between the vesting date and the end of the contractual term. The expected dividend yield is zero as the Company has never paid dividends and does not currently anticipate paying dividends in the foreseeable future. | |
Net Income (Loss) Per Share | Net Income (Loss) Per Share Basic net income (loss) per common share is determined using the two-class method and is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period as defined by ASC No. 260, Earnings Per Share. The two-class method is an earnings allocation formula that determines income (loss) per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. The two-class method treats a participating security as having rights to earnings that otherwise would have been available to common shareholders. According to the contractual terms of participating securities, such securities do not participate in losses. Diluted net income (loss) per common share reflects the more dilutive earnings per share amount calculated using the treasury stock method or the two-class method, taking into account any potentially dilutive shares outstanding during the period. Potentially dilutive shares consist of shares issuable upon the exercise of stock options and unvested shares of restricted common stock (using the treasury stock method). To the extent stock options are antidilutive, they are excluded from the calculation of diluted income per share. | |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market funds. The Company maintains cash in bank accounts which, at times, may exceed federally insured limits. As part of its cash management process, the Company periodically reviews the relative credit standing of these banks. The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible. | |
Receivables | Receivables Accounts receivables are composed of amounts due from our advertising partners and from credit card processing companies following the initiation of subscription arrangements originated by our subscribers, which subscribers pay by credit cards. These receivables are unsecured and are typically settled by the payment processing company within several days of transaction processing accordingly, no allowance for doubtful accounts is considered. On December 31, 2017, the Company had accounts receivable from advertising partners and payment processing companies in the amount of $479,148, as compared to $958,695 on December 31, 2016. As of December 31, 2017, three advertising partners accounted for 45% of accounts receivable. As of December 31, 2016, three advertising partners and one payment processing company accounted for 37% of accounts receivable. | |
Property and equipment | Property and equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of those assets, as follows: Computers and equipment 5 years Website development 3 years Furniture and fixtures 7 years Leasehold improvements Shorter of estimated useful life or remaining lease term Repairs and maintenance costs are expensed as incurred. The Company's property and equipment assets include computers and office equipment, furniture and fixtures and leasehold improvements, which are subject to depreciation or amortization over the useful life of the asset. Property and equipment also includes website development cost which is incurred during the development stage. See website development costs policy details. Property and equipment is evaluated for recoverability whenever events or changes in circumstances indicate that the carrying amounts of the assets might not be recoverable. In evaluating an asset for recoverability, the Company estimates the future cash flow expected to result from the use and eventual disposition of the asset. If the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized. No impairment losses were recorded on property and equipment for the periods presented in these consolidated financial statements. | |
Website Development Costs | Website Development Costs In accordance with ASC 350-50, Website Development Costs | |
Goodwill | Goodwill The Company evaluates its goodwill for impairment in accordance with ASC 350, Intangibles – Goodwill and Other The Company tests the recorded amount of goodwill for impairment on an annual basis on December 31 of each fiscal year or more frequently if there are indicators that the carrying amount of the goodwill exceeds its carried value. The Company has one reporting unit. The Company performed a qualitative assessment and concluded that no impairment existed as of December 31, 2017 and 2016. | |
Intangible Assets | Intangible Assets The Company acquired amortizable intangibles assets as part of two asset purchase agreements consisting of trademarks and non-compete agreements. The Company also holds patents. The Company’s intangible assets, net represents definite lived intangible assets, which are being amortized on a straight-line basis over their estimated useful lives as follows: Patents 20 years Trade names, trademarks, product names, URLs 5-10 years Internally developed software 5-6 years Non-compete agreements 3 years Subscriber/customer relationships 3-12 years Lead pool 2 years The Company reviews intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows. No impairments were recorded on intangible assets as no impairment indicators were noted for the periods presented in these consolidated financial statements. | |
Business Combinations | Business Combinations The AVM Merger was made at a price above the fair value of the assets acquired and liabilities assumed including deferred tax liability, resulting in goodwill, based on the Company’s expectations of synergies and other benefits of combining the acquired business. Significant judgment is required in estimating the fair value of intangible assets and in assigning their respective useful lives. The Company is responsible for determining the fair values of the assets acquired and liabilities assumed in connection with the AVM Merger. These fair values were based on estimates as of October 7, 2016, the closing date of the acquisition, and were based on a number of factors, including a valuation from an independent third party. Net assets acquired are recorded at their fair values on the date of acquisition. | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of the Company's cash and cash equivalents, accounts receivable, credit card holdback receivable, accounts payable, approximate fair value due to the short-term nature of these instruments. | |
Adoption of Recent Accounting Pronouncements | Adoption of Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued accounting guidance on the recognition of revenue from contracts with customers, which will supersede nearly all existing revenue recognition guidance under generally accepted accounting principles (GAAP). Under the new revenue standards, entities will recognize revenue to depict the transfer of goods and services to customers in amounts that reflect the payment to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows from an entity’s contracts with customers. The Company has completed its analysis of the new revenue standards and has concluded that the measurement of revenue and the timing of recognizing revenue is not expected to change for our subscription and advertising revenues. The Company has adopted the new revenue standards on January 1, 2018 using the modified retrospective approach. Based on our analysis, we did not identify a cumulative-effect adjustment to retained earnings at January 1, 2018. Our future financial statements, beginning with the three months ended March 31, 2018, will include additional disclosures as required by the new revenue standards. In March 2016, the FASB issued ASU No. 2016-09, which revises the guidance in ASC 718, Compensation - Stock Compensation In August 2016, the FASB issued ASU No. 2016-15, which revises the guidance in ASC 230, Statement of Cash Flows In December 2016, the FASB issued ASU 2016-19, Technical Corrections and Improvements The FASB has issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes In January 2017, the FASB issued an ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) In June 2018, the FASB issued an ASU to simplify several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of Topic 718, Compensation—Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. The amendments in this ASU are effective for the Company on January 1, 2019. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements. | Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) |
Digital Tokens | Digital Tokens Digital tokens consist of XPX tokens received in connection with the technology services agreement with ProximaX. Given that there is limited precedent regarding the classification and measurement of cryptocurrencies and other digital tokens under current GAAP, the Company has determined to account for these tokens as indefinite-lived intangible assets in accordance with ASC 350: Intangibles—Goodwill and Other for the period covered by this report and in future reports unless and until further guidance is issued by the FASB. Indefinite-lived intangible assets are recorded at cost and are not subject to amortization, but shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If, at the time of an impairment test, the carrying amount of an intangible asset exceeds its fair value, an impairment loss in an amount equal to the excess is recognized. Fair value of the digital tokens is based on the quoted market prices on the Kryptono Exchange. The Company recorded an impairment charge in the amount of $575,831 and $2,535,235, which is reported as a component of other income and expenses in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2018, respectively. The Company previously accounted for these tokens as financial assets under ASC 825: Financial Instruments for the quarter ended June 30, 2018. Management performed the review required by Staff Accounting Bulletins (“SAB”) 108 and SAB 99 on the error and determined the error had no material impact on the financial statements of the Company as of and for the period ended June 30, 2018. The amount of the charge has not changed as a result of the correction. The description of the account has changed from “Changes in fair value of digital tokens” to “Impairment loss on digital tokens” on the statements of operations and cash flows. In addition, the error did not have an effect on the net loss from operations, net loss and related net loss per share for any of the prior 2018 interim periods. Since the previously-issued financial statements are not materially misstated, the error is corrected prospectively. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Schedule of property plant and equipment useful life | Computers and equipment 5 years Website development 3 years Furniture and fixtures 7 years Leasehold improvements Shorter of estimated useful life or remaining lease term |
Schedule of finite lived intangible assets useful life | Patents 20 years Trade names, trademarks, product names, URLs 5-10 years Internally developed software 5-6 years Non-compete agreements 3 years Subscriber/customer relationships 3-12 years Lead pool 2 years |
Business Combination (Tables)
Business Combination (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Business Combinations [Abstract] | |
Schedule of transaction consideration | Consideration Shares Value PeerStream shares 1,486,298 $ 8,322,852 PeerStream options 130,965 $ 318,214 $ 8,641,066 |
Schedule of fair value of the assets acquired and liabilities assumed | Accounts Amount Cash and cash equivalents $ 1,460,494 Credit card holdback receivable 161,140 Accounts receivable 192,490 Other receivable 190,000 Prepaid expense and other current assets 61,248 Fixed assets, net 98,552 Notes receivable 82,452 Long term security deposits 279,410 Intangibles assets, net 3,952,000 Goodwill 9,960,017 Accounts payable (1,380,336 ) Accrued expenses and other current liabilities (460,719 ) Deferred subscription revenue (1,045,856 ) Term note payable (200,000 ) Note payable, net of discount (3,000,000 ) Deferred rent, net of current portion (116,240 ) Capital lease obligations, net of current portion (12,786 ) Deferred tax liability (1,580,800 ) Total consideration $ 8,641,066 |
Schedule of fair value of the identifiable intangible assets | Estimated Estimated Subscriber relationships $ 1,940,000 3 Trade names, trademarks, product names, URLs 1,000,000 5 Internally developed software 730,000 5 Lead pool 282,000 2 Total acquired assets $ 3,952,000 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of cash and investments by significant investment category | Adjusted Cost Change in Fair Value Fair Value Cash and Cash Equivalents Cash $ 649,074 $ - $ 649,074 $ 649,074 Level 1: Money market funds 302,663 - 302,663 302,663 U.S. Treasury securities 6,265,617 - 6,265,617 6,265,617 Subtotal 6,568,280 - 6,568,280 6,568,280 Total $ 7,217,354 $ - $ 7,217,354 $ 7,217,354 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Schedule of property and equipment, net | September 30, December 31, (unaudited) Computer equipment $ 3,706,017 $ 3,706,017 Website development 2,591,463 2,342,442 Furniture and fixtures 89,027 89,027 Leasehold improvements 32,726 32,726 Total property and equipment 6,419,233 6,170,212 Less: Accumulated depreciation (5,839,714 ) (5,547,500 ) Total property and equipment, net $ 579,519 $ 622,712 | December 31, 2017 2016 Computer equipment $ 3,706,017 $ 3,720,985 Website development 2,342,442 2,050,980 Furniture and fixtures 89,027 89,027 Leasehold improvements 32,726 32,726 Total property and equipment 6,170,212 5,893,718 Less: Accumulated depreciation (5,547,500 ) (5,100,413 ) Total property and equipment, net $ 622,712 $ 793,305 |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Schedule of intangible assets, net | September 30, December 31, 2018 2017 (unaudited) Gross Accumulated Net Gross Accumulated Net Patents $ 50,000 $ (23,125 ) $ 26,875 $ 50,000 $ (21,250 ) $ 28,750 Trade names, trademarks product names, URLs 1,555,000 (777,104 ) 777,896 1,555,000 (585,479 ) 969,521 Internally developed software 2,720,000 (2,202,697 ) 517,303 2,720,000 (1,900,696 ) 819,304 Subscriber/customer relationships 4,219,000 (2,884,195 ) 1,334,805 4,219,000 (2,221,882 ) 1,997,118 Lead pool 282,000 (282,000 ) - 282,000 (176,250 ) 105,750 Total intangible assets $ 8,826,000 $ (6,169,121 ) $ 2,656,879 $ 8,826,000 $ (4,905,557 ) $ 3,920,443 | December 31, 2017 2016 Gross Accumulated Net Gross Accumulated Net Patents $ 50,000 $ (21,250 ) $ 28,750 $ 50,000 $ (18,750 ) $ 31,250 Trade names, trademarks, product names, URLs 1,555,000 (585,479 ) 969,521 1,555,000 (329,979 ) 1,225,021 Internally developed software 2,720,000 (1,900,697 ) 819,303 2,720,000 (1,498,029 ) 1,221,971 Subscriber/customer relationships 4,219,000 (2,221,882 ) 1,997,118 4,219,000 (1,338,799 ) 2,880,201 Lead pool 282,000 (176,250 ) 105,750 282,000 (35,250 ) 246,750 Total intangible assets $ 8,826,000 $ (4,905,558 ) $ 3,920,442 $ 8,826,000 $ (3,220,807 ) $ 5,605,193 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of income taxes provision | Years ended December 31, 2017 2016 Current: Federal $ - $ - State and local 228,972 - Total current provision 228,972 - Deferred: Federal - - State and local - - Total deferred provision - - Total provision $ 228,972 $ - |
Schedule of deferred tax assets and liabilities | December 31, 2017 2016 Deferred tax assets: Net operating losses $ 4,327,027 $ 1,847,247 Share-based compensation 868,222 2,521,303 Amortization of intangible assets 432,335 - Tax credits 62,969 - Other 12,755 - Subtotal 5,703,308 4,368,550 Less valuation allowance: (5,649,582 ) (4,307,813 ) Total deferred tax assets 53,726 60,737 Deferred tax liabilities: Intangibles - (1,452,340 ) Property and equipment (53,726 ) - Other - (60,736 ) Total deferred tax liabilities (53,726 ) (1,513,076 ) Net deferred tax liabilities $ - $ (1,452,339 ) |
Schedule of effective income tax rate | Years ended December 31, 2017 2016 Income tax (expense) benefit at federal statutory rate 34.0 % 34.0 % State and local taxes (2.6 )% 11.0 % Federal tax reform (55.0 )% - % Valuation allowance 25.3 % 185.7 % Payable true-up (3.8 )% - % Other (1.9 )% (0.8 )% NOL adjustment - % (229.9 )% Effective tax rate (4.0 )% 0.0 % |
Accrued Expenses and Other Cu_2
Accrued Expenses and Other Current Liabilities (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Payables and Accruals [Abstract] | ||
Schedule of accrued expenses and other current liabilities | September 30, December 31, 2018 2017 (unaudited) Compensation, benefits and payroll taxes $ 388,500 $ 310,775 Other accrued expenses 382,645 94,871 Total accrued expenses and other current liabilities $ 771,145 $ 405,646 | December 31, 2017 2016 Compensation, benefits and payroll taxes $ 310,775 $ 311,845 Other accrued expenses 94,871 160,561 Total accrued expenses and other current liabilities $ 405,646 $ 472,406 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Equity [Abstract] | ||
Schedule of assumptions used in Black-Scholes pricing model to estimate the fair value of the options granted | Nine Months September 30, 2018 Expected volatility 159.0-167.0 % Expected life of option (years) 5.2-6.3 Risk free interest rate 2.3-2.9 % Expected dividend yield 0.0 % | December 31, 2017 2016 Expected volatility 116.1-159.0 % 76.6-139.2 % Expected life of option 5.0-7.0 5.5 Risk free interest rate 1.7-2.2 % 1.1-1.8 % Expected dividend yield 0.0 % 0.0 % |
Schedule of stock option activity | Weighted Number of Average Options Price Stock Options: Outstanding at January 1, 2018 980,588 $ 5.02 Granted 120,130 5.95 Exercised, during period (6,363 ) 4.43 Expired or canceled, during the period (1,429 ) 42.35 Forfeited, during the period (25,399 ) 4.45 Outstanding at September 30, 2018 1,067,527 $ 5.10 Exercisable at September 30, 2018 559,232 $ 6.05 | Number of Weighted Outstanding at January 1, 2017 573,110 $ 6.94 Granted 611,522 3.75 Expired or canceled, during the period (191,027 ) 6.64 Forfeited, during the period (13,017 ) 6.00 Outstanding at December 31, 2017 980,588 $ 5.02 Exercisable at December 31, 2017 448,890 $ 8.36 |
Schedule of stock-based compensation expense | Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Cost of revenue $ 529 $ 333 $ 1,870 $ 3,279 Sales and marketing expense 981 1,039 3,202 908 Product development expense 14,380 3,396 33,640 36,628 General and administrative expense 211,818 148,714 610,848 436,206 Total stock compensation expense $ 227,708 $ 153,482 $ 649,560 $ 477,021 | Year ended 2017 2016 Cost of revenue $ 4,302 $ 117,147 Sales and marketing expense 1,784 - Product development expense 166,783 - General and administrative expense 665,556 50,599 Total stock-based compensation expense $ 838,425 $ 167,746 |
Schedule of restricted stock award activity | Weighted Average Number of Grant Date RSAs Fair Value Restricted Stock Awards: Unvested at January 1, 2018 158,571 $ 20.29 Granted - - Expired or canceled, during the period - - Forfeited, during the period - - Unvested at September 30, 2018 158,571 $ 20.29 | Number of Weighted Outstanding at January 1, 2017 264,286 $ 20.29 Granted - - Forfeited or canceled, during the period (43,405 ) 20.29 Vested (62,310 ) 20.29 Outstanding at December 31, 2017 158,571 $ 20.29 |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Earnings Per Share [Abstract] | |
Schedule of net loss per share | Years Ended 2017 2016 Net loss - basic and diluted $ (5,894,253 ) $ (1,452,776 ) Weighted average shares outstanding – basic and diluted 6,452,581 5,577,856 Per share data: Basic and diluted $ (0.91 ) $ (0.26 ) |
Commitments and contingencies (
Commitments and contingencies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum payments under non-cancelable operating leases | For the years ending December 31, Amount 2018 $ 264,697 2019 228,493 2020 71,070 2021 65,148 Total $ 629,408 |
Organization and Basis of Pre_2
Organization and Basis of Presentation (Details) - USD ($) | Jan. 05, 2017 | Oct. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Reverse stock split, description | 1-for-35 reverse stock split | |
One-time expenses | $ 452,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) | 12 Months Ended |
Dec. 31, 2017 | |
Website development [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and equipment, estimated useful life | 3 years |
Computers and equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and equipment, estimated useful life | 5 years |
Leasehold improvements [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and equipment, estimated useful life | Shorter of estimated useful life or remaining lease term |
Furniture and fixtures [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and equipment, estimated useful life | 7 years |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) | 12 Months Ended |
Dec. 31, 2017 | |
Patents [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets estimated useful lives | 20 years |
Lead Pool [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets estimated useful lives | 2 years |
Trade names, trademarks, product names, URLs [Member] | Minimum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets estimated useful lives | 5 years |
Trade names, trademarks, product names, URLs [Member] | Maximum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets estimated useful lives | 10 years |
Internally developed software [Member] | Minimum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets estimated useful lives | 5 years |
Internally developed software [Member] | Maximum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets estimated useful lives | 6 years |
Non-compete agreements [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets estimated useful lives | 3 years |
Subscriber/customer relationships [Member] | Minimum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets estimated useful lives | 3 years |
Subscriber/customer relationships [Member] | Maximum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets estimated useful lives | 12 years |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Summary of Significant Accounting Policies (Textual) | ||||||
Percentage of accounts receivable | 45.00% | 37.00% | ||||
Total advertising expense | $ 6,994,700 | $ 4,591,900 | ||||
Accounts receivable amount | 479,148 | 958,695 | ||||
Credit card holdback receivables | $ 99,643 | $ 99,643 | $ 140,789 | 172,169 | ||
Description of income tax | (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. | |||||
Deferred revenue | 2,173,290 | 2,173,290 | $ 2,553,826 | |||
Subscription revenue | 4,906,640 | $ 5,447,119 | $ 15,317,865 | $ 17,413,511 | 22,898,530 | $ 18,647,855 |
Purchase credits, description | Users may purchase credits in $5, $10 or $20 increments that can be redeemed for a host of virtual gifts such as a rose, a beer or a car, among other items. | |||||
Virtual gift and micro-transaction revenue | 1,883,582 | $ 5,636,505 | ||||
Deferred revenue, new | $ 234,144 | |||||
Remaining payment revenue | 5,000,000 | 5,000,000 | ||||
Upfront payment of tokens | 216,000,000 | |||||
Contractual upfront fee | 5,000,000 | |||||
Impairment charge | $ 575,831 | 2,535,235 | ||||
Subscription Revenue [Member] | ||||||
Summary of Significant Accounting Policies (Textual) | ||||||
Subscription revenue | $ 1,925,104 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Cash, Adjusted Cost | $ 649,074 |
Cash, Change in Fair Value | |
Cash, Fair Value | 649,074 |
Cash, Cash and Cash Equivalents | 649,074 |
Adjusted Cost | 7,217,354 |
Change in Fair Value | |
Fair Value | 7,217,354 |
Cash and Cash Equivalents | 7,217,354 |
Level 1 [Member] | |
Adjusted Cost | 6,568,280 |
Change in Fair Value | |
Fair Value | 6,568,280 |
Cash and Cash Equivalents | 6,568,280 |
Level 1 [Member] | Money market funds [Member] | |
Adjusted Cost | 302,663 |
Change in Fair Value | |
Fair Value | 302,663 |
Cash and Cash Equivalents | 302,663 |
Level 1 [Member] | U.S. Treasury securities [Member] | |
Adjusted Cost | 6,265,617 |
Change in Fair Value | |
Fair Value | 6,265,617 |
Cash and Cash Equivalents | $ 6,265,617 |
Business Combination (Details)
Business Combination (Details) | Dec. 31, 2017USD ($)shares |
Business Combinations [Abstract] | |
PeerStream, Value | $ 8,322,852 |
PeerStream, Shares | shares | 1,486,298 |
PeerStream options, Value | $ 318,214 |
PeerStream options, Shares | shares | 130,965 |
Total consideration | $ 8,641,066 |
Business Combination (Details 1
Business Combination (Details 1) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Oct. 07, 2016 |
Fair value of assets acquired and liabilities assumed | ||||
Intangibles assets, net | $ 3,952,000 | |||
Goodwill | $ 13,086,472 | 13,086,472 | $ 14,304,667 | |
Total consideration | $ 8,641,066 | |||
Business Combination [Member] | ||||
Fair value of assets acquired and liabilities assumed | ||||
Cash and cash equivalents | $ 1,460,494 | |||
Credit card holdback receivable | 161,140 | |||
Accounts receivable | 192,490 | |||
Other receivable | 190,000 | |||
Prepaid expense and other current assets | 61,248 | |||
Fixed assets, net | 98,552 | |||
Notes receivable | 82,452 | |||
Long term security deposits | 279,410 | |||
Intangibles assets, net | 3,952,000 | |||
Goodwill | 9,960,017 | |||
Accounts payable | (1,380,336) | |||
Accrued expenses and other current liabilities | (460,719) | |||
Deferred subscription revenue | (1,045,856) | |||
Term note payable | (200,000) | |||
Note payable, net of discount | (3,000,000) | |||
Deferred rent, net of current portion | (116,240) | |||
Capital lease obligations, net of current portion | (12,786) | |||
Deferred tax liability | (1,580,800) | |||
Total consideration | $ 8,641,066 |
Business Combination (Details 2
Business Combination (Details 2) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Business Acquisition [Line Items] | |
Total acquired assets, Estimated Fair Value | $ 3,952,000 |
Subscriber relationships [Member] | |
Business Acquisition [Line Items] | |
Total acquired assets, Estimated Fair Value | $ 1,940,000 |
Estimated Useful Life in Years | 3 years |
Trade names, trademarks, product names, URLs [Member] | |
Business Acquisition [Line Items] | |
Total acquired assets, Estimated Fair Value | $ 1,000,000 |
Estimated Useful Life in Years | 5 years |
Internally developed software [Member] | |
Business Acquisition [Line Items] | |
Total acquired assets, Estimated Fair Value | $ 730,000 |
Estimated Useful Life in Years | 5 years |
Lead pool [Member] | |
Business Acquisition [Line Items] | |
Total acquired assets, Estimated Fair Value | $ 282,000 |
Estimated Useful Life in Years | 2 years |
Business Combination (Details T
Business Combination (Details Textual) - USD ($) | Oct. 07, 2016 | Dec. 31, 2017 |
Business Combination (Textual) | ||
Merger, description | The former shareholders of A.V.M. Software, Inc. received shares of PeerStream, Inc.’s common stock representing approximately 77.9% of the outstanding shares of common stock of the post-AVM Merger combined company, and PeerStream, Inc.’s former shareholders retained approximately 22.1% of the outstanding shares of common stock of the post-AVM Merger combined company, in each case including shares of unvested restricted stock in the total number of shares of PeerStream, Inc. common stock outstanding. | |
SNAP shares | 1,486,298 | |
Market share price | $ 5.60 | |
Fair value of deferred revenue | $ 234,144 | |
Decrease in deferred tax liability | 1,452,339 | |
Amortization of deferred revenue | $ 65,000 |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Line Items] | |||
Total property and equipment | $ 6,419,233 | $ 6,170,212 | $ 5,893,718 |
Less: Accumulated depreciation | (5,839,714) | (5,547,500) | (5,100,413) |
Total property and equipment, net | 579,519 | 622,712 | 793,305 |
Computer equipment [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment | 3,706,017 | 3,706,017 | 3,720,985 |
Website development [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment | 2,591,463 | 2,342,442 | 2,050,980 |
Furniture and fixtures [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment | 89,027 | 89,027 | 89,027 |
Leasehold improvements [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment | $ 32,726 | $ 32,726 | $ 32,726 |
Property and Equipment, Net (_2
Property and Equipment, Net (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Property and Equipment, Net (Textual) | ||||||
Depreciation expense | $ 86,076 | $ 101,801 | $ 292,214 | $ 355,348 | $ 447,746 | $ 568,028 |
Intangible Assets, Net (Details
Intangible Assets, Net (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | $ 8,826,000 | $ 8,826,000 | $ 8,826,000 |
Accumulated Amortization | (6,169,121) | (4,905,557) | (3,220,807) |
Net Carrying Amount | 2,656,879 | 3,920,443 | 5,605,193 |
Patents [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 50,000 | 50,000 | 50,000 |
Accumulated Amortization | (23,125) | (21,250) | (18,750) |
Net Carrying Amount | 26,875 | 28,750 | 31,250 |
Trade names, trademarks, product names, URLs [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 1,555,000 | 1,555,000 | 1,555,000 |
Accumulated Amortization | (777,104) | (585,479) | (329,979) |
Net Carrying Amount | 777,896 | 969,521 | 1,225,021 |
Internally developed software [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 2,720,000 | 2,720,000 | 2,720,000 |
Accumulated Amortization | (2,202,697) | (1,900,696) | (1,498,029) |
Net Carrying Amount | 517,303 | 819,304 | 1,221,971 |
Subscriber/customer relationships [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 4,219,000 | 4,219,000 | 4,219,000 |
Accumulated Amortization | (2,884,195) | (2,221,882) | (1,338,799) |
Net Carrying Amount | 1,334,805 | 1,997,118 | 2,880,201 |
Lead pool [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 282,000 | 282,000 | 282,000 |
Accumulated Amortization | (282,000) | (176,250) | (35,250) |
Net Carrying Amount | $ 105,750 | $ 246,750 |
Intangible Assets, Net (Detai_2
Intangible Assets, Net (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Intangible Assets, Net (Textual) | ||||||
Amortization expense | $ 421,188 | $ 421,188 | $ 1,263,564 | $ 1,263,563 | $ 1,684,750 | $ 834,505 |
Estimated aggregate amortization expense for 2018 | 336,155 | 336,155 | 1,599,718 | |||
Estimated aggregate amortization expense for 2019 | 1,087,333 | 1,087,333 | 1,087,333 | |||
Estimated aggregate amortization expense for 2020 | 592,681 | 592,681 | 592,681 | |||
Estimated aggregate amortization expense for 2021 | 444,167 | 444,167 | 444,167 | |||
Estimated aggregate amortization expense for 2022 | $ 196,543 | $ 196,543 | 196,543 | |||
Aggregate of intangible assets acquired | $ 3,952,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Current: | ||||
Federal | ||||
State and local | 228,972 | |||
Total current provision | 228,972 | |||
Deferred: | ||||
Federal | ||||
State and local | ||||
Total deferred provision | ||||
Total provision | $ (13,636) | $ 1,864 | $ 228,972 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred tax assets: | ||
Net operating losses | $ 4,327,027 | $ 1,847,247 |
Share-based compensation | 868,222 | 2,521,303 |
Amortization of intangible assets | 432,335 | |
Tax credits | 62,969 | |
Other | 12,755 | |
Subtotal | 5,703,308 | 4,368,550 |
Less valuation allowance: | (5,649,582) | (4,307,813) |
Total deferred tax assets | 53,726 | 60,737 |
Deferred tax liabilities: | ||
Intangibles | (1,452,340) | |
Property and equipment | (53,726) | |
Other | (60,736) | |
Total deferred tax liabilities | (53,726) | (1,513,076) |
Net deferred tax liabilities | $ (1,452,339) |
Income Taxes (Details 2)
Income Taxes (Details 2) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||||
Income tax (expense) benefit at federal statutory rate | 21.00% | 21.00% | 34.00% | 34.00% |
State and local taxes | (2.60%) | 11.00% | ||
Federal tax reform | (55.00%) | |||
Valuation allowance | 25.30% | 185.70% | ||
Payable true-up | (3.80%) | |||
Other | (1.90%) | (0.80%) | ||
NOL adjustment | (229.90%) | |||
Effective tax rate | (0.06%) | 2.34% | (4.00%) | 0.00% |
Income Taxes (Details Textual)
Income Taxes (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Dec. 22, 2017 | Sep. 30, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Deferred tax liability | $ 1,452,339 | ||||
Valuation allowance of deferred tax assets | 5,649,582 | 4,307,813 | |||
Operating loss carryforward, net | $ 19,100,000 | ||||
Operating loss carry forwards expiring date | 2028 through 2037 | ||||
Deferred tax assets and liabilities | $ 3,116,794 | ||||
US statutory corporate income tax rate | 21.00% | ||||
Income tax provision | $ (13,636) | $ 1,864 | $ 228,972 | ||
Effective tax rate | (0.06%) | 2.34% | (4.00%) | 0.00% | |
Statutory rate | 21.00% | 21.00% | 34.00% | 34.00% | |
Minimum [Member] | |||||
US statutory corporate income tax rate | 21.00% | ||||
Maximum [Member] | |||||
US statutory corporate income tax rate | 34.00% |
Accrued Expenses and Other Cu_3
Accrued Expenses and Other Current Liabilities (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Payables and Accruals [Abstract] | |||
Compensation, benefits and payroll taxes | $ 388,500 | $ 310,775 | $ 311,845 |
Other accrued expenses | 382,645 | 94,871 | 160,561 |
Total accrued expenses and other current liabilities | $ 771,145 | $ 405,646 | $ 472,406 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - Stock Options [Member] | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected life of option (years) | 5 years 6 months | ||
Expected dividend yield | 0.00% | 0.00% | 0.00% |
Minimum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected volatility | 159.00% | 116.10% | 76.60% |
Expected life of option (years) | 5 years 2 months 12 days | 5 years | |
Risk free interest rate | 2.30% | 1.70% | 1.10% |
Maximum [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected volatility | 167.00% | 159.00% | 139.20% |
Expected life of option (years) | 6 years 3 months 19 days | 7 years | |
Risk free interest rate | 2.90% | 2.20% | 1.80% |
Stockholders' Equity (Details 1
Stockholders' Equity (Details 1) - Stock Options [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Stock Options: | ||
Number of Options, Outstanding, Beginning balance | 980,588 | 573,110 |
Number of Options, Granted | 120,130 | 611,522 |
Number of Options, Exercised | (6,363) | |
Number of Options, Expired or canceled, during the period | (1,429) | (191,027) |
Number of Options, Forfeited, during the period | (25,399) | (13,017) |
Number of Options, Outstanding, Ending balance | 1,067,527 | 980,588 |
Number of Options, Exercisable | 559,232 | 448,890 |
Weighted Average Exercise Price, Outstanding, Beginning balance | $ 5.02 | $ 6.94 |
Weighted Average Exercise Price, Granted | 5.95 | 3.75 |
Weighted Average Exercise Price, Exercised | 4.43 | |
Weighted Average Exercise Price, Expired or canceled, during the period | 42.35 | 6.64 |
Weighted Average Exercise Price, Forfeited, during the period | 4.45 | 6 |
Weighted Average Exercise Price, Outstanding, Ending balance | 5.10 | 5.02 |
Weighted Average Exercise Price, Exercisable | $ 6.05 | $ 8.36 |
Stockholders' Equity (Details 2
Stockholders' Equity (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ||||||
Stock-based compensation expense | $ 1,205,682 | $ 1,033,143 | $ 1,579,921 | $ 353,120 | ||
Cost of revenue [Member] | ||||||
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ||||||
Stock-based compensation expense | $ 529 | $ 333 | 1,870 | 3,279 | 4,302 | 117,147 |
Sales and marketing expense [Member] | ||||||
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ||||||
Stock-based compensation expense | 981 | 1,039 | 3,202 | 908 | 1,784 | |
Product development expense [Member] | ||||||
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ||||||
Stock-based compensation expense | 14,380 | 3,396 | 33,640 | 36,628 | 166,783 | |
General and administrative expense [Member] | ||||||
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ||||||
Stock-based compensation expense | 211,818 | 148,714 | 610,848 | 436,206 | 665,556 | 50,599 |
Total stock compensation expense [Member] | ||||||
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ||||||
Stock-based compensation expense | $ 227,708 | $ 153,482 | $ 649,560 | $ 477,021 | $ 838,425 | $ 167,746 |
Stockholders' Equity (Details 3
Stockholders' Equity (Details 3) - Restricted Stock [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Restricted Stock Awards: | ||
Number of RSAs, Unvested, Beginning balance | 158,571 | 264,286 |
Number of RSAs, Granted | ||
Number of RSAs, Expired or canceled, during the period | ||
Number of RSAs, Forfeited or canceled, during the period | (43,405) | |
Number of Restricted Stock Awards, Vested | (62,310) | |
Number of RSAs, Unvested, Ending balance | 158,571 | 158,571 |
Weighted Average Grant Date Fair Value, Unvested, Beginning balance | $ 20.29 | $ 20.29 |
Weighted Average Grant Date Fair Value, Granted | ||
Weighted Average Grant Date Fair Value, Expired or canceled, during the period | ||
Weighted Average Grant Date Fair Value, Forfeited or canceled, during the period | 20.29 | |
Weighted Average Grant Date Fair Value, Vested | 20.29 | |
Weighted Average Grant Date Fair Value, Unvested, Ending balance | $ 20.29 | $ 20.29 |
Stockholders' Equity (Details T
Stockholders' Equity (Details Textual) - USD ($) | Oct. 07, 2018 | Jun. 15, 2018 | Oct. 07, 2017 | May 05, 2017 | Apr. 13, 2017 | Dec. 19, 2017 | May 16, 2016 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Apr. 07, 2017 |
Stockholders' Equity (Textual) | ||||||||||||||
Stock-based compensation expense | $ 1,205,682 | $ 1,033,143 | $ 1,579,921 | $ 353,120 | ||||||||||
Incremental modified compensation cost | $ 55,055 | |||||||||||||
Aggregate purchase price | $ 1,000,000 | |||||||||||||
Common stock, shares sold | 200,000 | |||||||||||||
Increase total number of shares of common stock authorized for issuance | 25,000,000 | |||||||||||||
Agreements amendments, description | (i) a restricted stock award agreement, dated March 3, 2016, as amended, related to the original award of 142,858 shares of restricted common stock to Mr. Lerner and (ii) a restricted stock award agreement, dated December 14, 2011, as amended, related to the original award of 121,429 shares of restricted common stock to Mr. Lerner (together, the “Restricted Stock Award Amendments”). | |||||||||||||
Purchase price, per share | $ 5 | |||||||||||||
Subsequent Event [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Agreements amendments, description | 79,285 shares of Mr. Lerner’s restricted stock vested. Pursuant to the Restricted Stock Award Amendments, the Company was required, in order to assist Mr. Lerner in satisfying his tax withholding obligations with respect to the vesting restricted shares, to withhold 20,000 shares of vesting restricted common stock. The remaining amount of the tax withholding obligation was paid by Mr. Lerner and Mr. Lerner’s unvested shares of restricted common stock will continue to vest as scheduled.<b> </b>The remaining 79, 286 shares will vest on October 7, 2019. | |||||||||||||
Maximum [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Options to purchase aggregate common stock exercise price, cancelled | $ 21 | |||||||||||||
Options to purchase aggregate common stock exchanged exercise price per share | 6 | |||||||||||||
Minimum [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Options to purchase aggregate common stock exercise price, cancelled | 4.55 | |||||||||||||
Options to purchase aggregate common stock exchanged exercise price per share | $ 3.36 | |||||||||||||
Harrington [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Stock options, exercise price | $ 3.36 | |||||||||||||
Stock option right to purchase | 28,571 | |||||||||||||
Chief Executive Officer [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Stock option transaction description | (i) a stock option representing the right to purchase 80,000 shares of common stock at an exercise price equal to $3.63 per share, with the shares underlying this stock option vesting 25% on the six month anniversary of the date of grant and the remaining three tranches vesting on each of the first, second and third anniversaries of the first vesting date, and (ii) a stock option representing the right to purchase 24,000 shares of common stock at an exercise price equal to $3.63 per share, with the shares underlying this stock option vesting based on the Company's achievement of certain performance goals related to its annual revenues. In addition, on April 13, 2017, the Company's Board of Directors awarded Jason Katz, Chief Operating Officer and Chairman of the Board of Directors, a stock option representing the right to purchase 70,000 shares of common stock at an exercise price equal to $3.63 per share, with (i) 17,500 of the underlying shares vesting based on the Company's achievement of certain performance goals related to its earnings before interest, tax, depreciation, and amortization and (ii) 52,500 of the underlying shares vesting based on the Company's achievement of certain performance goals related to its annual revenues. | |||||||||||||
Clifford Lerner [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Vesting shares of restricted stock | 105,715 | |||||||||||||
Stock Compensation Plan [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Number of shares issued under plan | 1,300,000 | |||||||||||||
Percentage of common stock delivered pursuant to incentive stock options | 100.00% | 100.00% | ||||||||||||
Number of stock available for future issuance | 408,508 | 408,508 | 501,810 | |||||||||||
Terminated date of future awards | May 16, 2016 | May 16, 2016 | ||||||||||||
Stock-based compensation expense | $ 741,496 | 185,374 | ||||||||||||
Restricted Stock [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Total unrecognized compensation expense | $ 741,496 | $ 741,496 | $ 1,297,617 | |||||||||||
Weighted average expected recognition period of unrecognized compensation expense | 1 year | 1 year 9 months 18 days | ||||||||||||
Stock-based compensation expense | 185,374 | $ 185,374 | $ 556,122 | 556,122 | ||||||||||
Vesting shares of restricted stock | 43,405 | |||||||||||||
Restricted Stock [Member] | Clifford Lerner [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Vesting shares of restricted stock | 43,405 | |||||||||||||
Stock Option [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Aggregate intrinsic value of stock options, outstanding | 1,752,348 | 17,565 | $ 1,752,348 | 17,565 | $ 3,063,208 | |||||||||
Aggregate intrinsic value of stock options, exercisable | 825,048 | $ 9,972 | 825,048 | 9,972 | 1,175,244 | |||||||||
Aggregate fair value of options granted | 708,501 | $ 966,560 | 1,740,578 | $ 682,740 | ||||||||||
Total unrecognized compensation expense | $ 1,625,919 | $ 1,625,919 | $ 1,581,586 | |||||||||||
Weighted average expected recognition period of unrecognized compensation expense | 2 years 1 month 6 days | 2 years 8 months 5 days | ||||||||||||
Stock-based compensation expense | $ 50,114 | |||||||||||||
Options to purchase aggregate common stock shares, cancelled | 77,312 | |||||||||||||
Stock option transaction description | These options vest between one and four years and have a term of ten years. | The options vest between one, three and four years and have a term of ten years. | ||||||||||||
Aggregate purchase of common stock, shares | 120,130 | 611,522 | ||||||||||||
Repurchased aggregate shares of common stock | 64,600 | |||||||||||||
Weighted average exercise price | $ 4.43 | |||||||||||||
Stock Option [Member] | Maximum [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Stock options, exercise price | 6.99 | |||||||||||||
Stock Option [Member] | Minimum [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Stock options, exercise price | $ 5.10 | |||||||||||||
2011 Plan [Member] | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Number of shares issued under plan | 181,604 | 181,604 |
Net Loss Per Share (Details)
Net Loss Per Share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Earnings Per Share [Abstract] | ||||||
Net loss - basic and diluted | $ (569,567) | $ (2,004,335) | $ (3,243,237) | $ (4,528,002) | $ (5,894,253) | $ (1,452,776) |
Weighted average shares outstanding - basic and diluted | 6,886,051 | 6,452,292 | 6,883,575 | 6,449,572 | 6,452,581 | 5,577,856 |
Per share data: | ||||||
Basic and diluted | $ (0.08) | $ (0.31) | $ (0.47) | $ (0.7) | $ (0.91) | $ (0.26) |
Net Loss Per Share (Details Tex
Net Loss Per Share (Details Textual) - shares | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Net (Loss) Income Per Share (Textual) | |||||
Shares exercise excluded from computation of diluted net loss per share | 817,020 | 1,067,527 | 817,020 | 980,588 | 573,110 |
Unvested restricted stock | 264,286 | 158,571 | 264,286 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) | Dec. 31, 2017USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,018 | $ 264,697 |
2,019 | 228,493 |
2,020 | 71,070 |
2,021 | 65,148 |
Total | $ 629,408 |
Commitments and Contingencies_3
Commitments and Contingencies (Details Textual) - USD ($) | Dec. 16, 2016 | Jun. 07, 2016 | Oct. 27, 2017 | Sep. 18, 2017 | Jan. 18, 2016 | Dec. 31, 2017 | Mar. 03, 2017 |
Commitments and Contingencies (Textual) | |||||||
Monthly rent payment | $ 5,900 | $ 1,129 | $ 4,000 | $ 12,300 | $ 26,000 | ||
Security deposit | $ 8,000 | $ 37,000 | $ 200,659 | ||||
Operating lease, description | Commenced on September 1, 2017 and runs through November 30, 2021. | The term of the lease runs until July 31, 2019. | The term of the lease runs until May 30, 2019. | The term of the lease originally ran until March 4, 2022. | |||
Expires date | Oct. 31, 2018 | ||||||
Patents rights, description | Wholly owned subsidiary of the Company, Paltalk Holdings, Inc., filed a patent infringement lawsuit in Delaware against Riot Games, Inc. and Valve Corporation for infringement of U.S. Patent Nos. 5,822,523 and 6,226,686 with respect to their online games League of Legends and Defense of the Ancients 2. |
ProximaX Agreement (Details)
ProximaX Agreement (Details) - USD ($) | Jun. 02, 2018 | Apr. 30, 2018 | Mar. 21, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 |
ProximaX Agreement (Textual) | ||||||||
Business technology services agreement | The Company received 216.0 million XPX tokens from ProximaX, representing 2.4% of the XPX tokens issued by ProximaX in its initial coin offering, generating contract revenue of approximately $3.4 million. XPX tokens began trading on the Kryptono Exchange on June 2, 2018 and the quoted market price of $0.01559 was used to determine the initial fair value of tokens. As of September 30, 2018 at approximately 5:00 PM, Eastern Time, during the impairment period, XPX tokens were trading at a price equal to $0.00386 per token, and our 216.0 million XPX tokens had an aggregate fair value of approximately $0.8 million. | Pursuant to the terms of the agreement, ProximaX agreed to pay the Company up to an aggregate of $10.0 million of cash in exchange for the Company’s services, with $5.0 million due upon the successful consummation of a future initial coin offering by ProximaX and up to an additional $5.0 million due upon the Company’s achievement of certain development milestones set forth in the agreement. In addition, ProximaX agreed to issue the Company a number of tokens equal to 2.4% of all outstanding tokens on the date of the planned initial coin offering and to reserve an additional 2% of such tokens to be issued as payment for future services provided by the Company, subject, in each case, to such initial coin offering generating aggregate gross proceeds of at least $30.0 million. If the planned initial coin offering does not raise at least $30.0 million or ProximaX fails to pay the Company the upfront cash payment of $5.0 million by June 1, 2018, the Company and ProximaX have agreed to negotiate alternative compensation for the Company’s services in good faith. | ||||||
Initial coin offering, description | ProximaX closed its initial coin offering, which generated aggregate gross proceeds in excess of $30.0 million for purposes of the technology services agreement. On May 6, 2018, as agreed under the terms of the technology services agreement, ProximaX paid the Company the $5.0 million fee due upon consummation of its initial coin offering in Ethereum, which the Company immediately converted into cash. | |||||||
Transaction and conversion fees | $ 113,000 | |||||||
Fair value change of the digital tokens | $ 575,831 | $ 2,535,235 |
Subsequent Events (Details)
Subsequent Events (Details) | Jun. 02, 2018 | Mar. 21, 2018 |
Business technology services agreement, description | The Company received 216.0 million XPX tokens from ProximaX, representing 2.4% of the XPX tokens issued by ProximaX in its initial coin offering, generating contract revenue of approximately $3.4 million. XPX tokens began trading on the Kryptono Exchange on June 2, 2018 and the quoted market price of $0.01559 was used to determine the initial fair value of tokens. As of September 30, 2018 at approximately 5:00 PM, Eastern Time, during the impairment period, XPX tokens were trading at a price equal to $0.00386 per token, and our 216.0 million XPX tokens had an aggregate fair value of approximately $0.8 million. | Pursuant to the terms of the agreement, ProximaX agreed to pay the Company up to an aggregate of $10.0 million of cash in exchange for the Company’s services, with $5.0 million due upon the successful consummation of a future initial coin offering by ProximaX and up to an additional $5.0 million due upon the Company’s achievement of certain development milestones set forth in the agreement. In addition, ProximaX agreed to issue the Company a number of tokens equal to 2.4% of all outstanding tokens on the date of the planned initial coin offering and to reserve an additional 2% of such tokens to be issued as payment for future services provided by the Company, subject, in each case, to such initial coin offering generating aggregate gross proceeds of at least $30.0 million. If the planned initial coin offering does not raise at least $30.0 million or ProximaX fails to pay the Company the upfront cash payment of $5.0 million by June 1, 2018, the Company and ProximaX have agreed to negotiate alternative compensation for the Company’s services in good faith. |