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Stock-Based Compensation
 12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation
22. Stock–Based Compensation

 

Common Stock Awards

 

2016 Plan – On December 19, 2016, the Board adopted the 2016 Stock Incentive Plan (the “2016 Plan”). The purpose of the 2016 Plan is to advance the interests of the Company and its stockholders by enabling the Company and its subsidiaries to attract and retain qualified individuals through opportunities for equity participation in the Company, and to reward those individuals who contribute to the Company’s achievement of its economic objectives. The 2016 Plan allows the Company to grant statutory and non-statutory common stock options, and restricted stock awards (collectively the “common stock awards”) to acquire shares of the Company’s common stock to the Company’s employees, directors and consultants. Shares subject to an award that lapse, expire, are forfeited or for any reason are terminated unexercised or unvested will automatically again become available for issuance under the 2016 Plan. Stock awards issued under the 2016 Plan may have a term of up to ten years and may have variable vesting provisions consisting of time-based and performance-based.

 

On March 28, 2018, the Board approved an increase in the number of shares of the Company’s common stock reserved for grant pursuant to the 2016 Plan from 3,000,000 shares to 5,000,000 shares. On August 23, 2018, the Board increased the authorized number of shares of common stock under the 2016 Plan from 5,000,000 shares to 10,000,000 shares. The Company’s stockholders approved the increase in the number of shares authorized under the 2016 Plan on April 3, 2020. The issuance of common stock awards under the 2016 Plan is administered by the Company and approved by the Board.

 

The estimated fair value of the common stock awards is recognized as compensation expense over the vesting period of the award.

 

The fair value of common stock awards granted during the year ended December 31, 2020 were calculated using the Black-Scholes option pricing model under the Probability Weighted Scenarios utilizing the following assumptions:

 

    Up-list     No Up-list  
Risk-free interest rate     0.45 %     0.45 %
Expected dividend yield     0.00 %     0.00 %
Expected volatility     71.00 %     132.00 %
Expected life     6.0 years       6.0 years  

 

A summary of the common stock award activity during the years ended December 31, 2020 and 2019 is as follows:

 

                Weighted  
                Average  
          Weighted     Remaining  
    Number     Average     Contractual  
    of     Exercise     Life  
    Shares     Price     (in Years)  
Common stock awards outstanding at January 1, 2019     9,405,541     $ 0.61       9.30  
Exercised     (25,000 )     0.17          
Forfeited     (1,197,776 )     0.73          
Expired     (118,204 )     1.09          
Common stock awards outstanding at December 31, 2019     8,064,561       0.62       8.34  
Granted     234,000       0.90          
Exercised     (6,944 )     0.56          
Forfeited     (601,179 )     1.09          
Expired     (788,101 )     0.53          
Common stock awards outstanding at December 31, 2020     6,902,337       0.86       7.50  
Common stock awards exercisable at December 31, 2020     6,027,418       0.90       7.47  
Common stock awards not vested at December 31, 2020     874,919                  
Common stock awards available for future grants at December 31, 2020     3,097,663                  

 

The aggregate grant date fair value of common stock awards granted during the years ended December 31, 2020 was $117,000.

 

The intrinsic value of exercisable but unexercised in-the-money common stock awards as of December 31, 2020 was approximately $185,413 based on a fair market value of the Company’s common stock of $0.60 per share on December 31, 2020.

 

The exercise prices under the 2016 Plan for the common stock awards outstanding and exercisable are as follows as of December 31, 2020:

 

Exercise     Outstanding     Exercisable  
Price     (Shares)     (Shares)  
  Under $1.00       4,825,750       3,982,816  
$ 1.01 to $1.25       780,751       779,843  
$ 1.51 to $1.75       250,000       229,479  
$ 1.76 to $2.00       924,169       913,613  
$ 2.01 to $2.25       121,667       121,667  
          6,902,337       6,027,418  

 

Information with respect to stock-based compensation expense and unrecognized stock-based compensation expense related to the common stock awards is provided under the heading Stock-Based Compensation.

 

Common Equity Awards

 

2019 Plan – On April 4, 2019, the Board adopted the 2019 Equity Incentive Plan (the “2019 Plan”). The purpose of the 2019 Plan is to retain the services of our directors, employees, and consultants and align the interests of these individuals with the interests of our stockholders through awards of stock options, restricted stock awards, unrestricted stock awards, and stock appreciation rights (collectively the “common equity awards”). Certain common equity awards require the achievement of certain price targets of the Company’s common stock. Shares subject to a common equity award that lapse, expire, are forfeited or for any reason are terminated unexercised or unvested will automatically again become available for issuance under the 2019 Plan. Common stock options issued under the 2019 Plan may have a term of up to ten years and may have variable vesting provisions consisting of time-based, performance-based, or market-based.

 

The Company’s stockholders approved the 2019 Plan and the maximum number of shares authorized of 85,000,000 under the 2019 Plan on April 3, 2020 (further details subsequent to the issuance date of these consolidated financial statements are provided under the heading 2019 Equity Incentive Plan in Note 27). The issuance of common equity awards under the 2019 Plan is administered by the Company and approved by the Board. Prior to December 18, 2020, the Company did not have sufficient authorized but unissued shares of common stock to allow for the exercise of these common equity awards granted; accordingly, any common equity awards granted were considered unfunded and were not exercisable until sufficient common shares were authorized (further details are provided in Note 21).

 

The estimated fair value of the common equity awards is recognized as compensation expense over the vesting period of the award.

 

The fair value of common equity awards granted during the years ended December 31, 2020 and 2019 were calculated using the Black-Scholes option pricing model for the time-based and performance-based awards by an independent appraisal firm under the Probability Weighted Scenarios utilizing the following assumptions:

 

    December 31, 2020     December 31, 2019  
    Up-list     No Up-list     Up-list     No Up-list  
Expected life     0.20% - 0.79 %     0.20% - 0.79 %     1.51% - 2.59 %     1.51% - 2.59 % 
Risk-free interest rate     0.00 %     0.00 %     0.00 %     0.00 %
Volatility factor     61.00% - 91.00 %     61.00% - 142.00 %     69.00% - 95.00 %     119.00% - 149.00 %
Dividend rate     3.0 – 6.7 years       3.0 – 6.7 years       3.0 – 6.0 years       3.0 – 6.0 years  

 

The fair value of common equity awards granted during the year ended December 31, 2019 were calculated using the Monte Carlo model for the market-based awards by an independent appraisal firm under the Probability Weighted Scenarios utilizing the following assumptions:

 

    Up-list     No Up-list  
Expected life     2.20% - 2.70 %     2.16% - 2.71 %
Risk-free interest rate     0.00 %     0.00 %
Volatility factor     140.00% - 146.00 %     110.00 %
Dividend rate     10.0 years       10.0 years  

 

A summary of the common equity award activity during the years ended December 31, 2020 and 2019 is as follows:

 

                Weighted  
                Average  
          Weighted     Remaining  
    Number     Average     Contractual  
    of     Exercise     Life  
    Shares     Price     (in Years)  
Common equity awards outstanding at January 1, 2019     -     $ -       -  
Granted     68,180,863       0.53          
Forfeited     (3,167,218 )     0.53          
Common equity awards outstanding at December 31, 2019     65,013,645       0.53       9.43  
Granted     25,393,768       0.71          
Forfeited     (8,342,377 )     0.61          
Expired     (2,722 )     0.56          
Common equity awards vested at December 31, 2020     82,062,314       0.58       8.65  
Common equity awards exercisable at December 31, 2020     13,608,686       0.54       8.49  
Common equity awards not vested at December 31, 2020     68,453,628                  
Common equity awards available for future grants at December 31, 2020     2,937,686                  

 

The aggregate grant date fair value for the common equity awards granted during the years ended December 31, 2020 and 2019 was $11,180,642 and $30,864,185, respectively.

 

The intrinsic value of exercisable but unexercised in-the-money common equity awards as of December 31, 2020 was approximately $1,416,000 based on a fair market value of the Company’s common stock of $0.60 per share on December 31, 2020.

 

The exercise prices under the 2019 Plan for the common equity awards outstanding and exercisable are as follows as of December 31, 2020:

 

Exercise   Outstanding     Exercisable  
Price   (Shares)     (Shares)  
No exercise price     250,000       250,000  
Under $1.00     81,812,314       13,358,686  
      82,062,314       13,608,686  

 

Information with respect to stock-based compensation expense and unrecognized stock-based compensation expense related to the common equity awards is provided under the heading Stock-Based Compensation.

 

Outside Options

 

The Company granted stock options outside the 2016 Plan and 2019 Plan during the year ended December 31, 2020 to certain officers, directors and employees of the Company as approved by the Board and administered by the Company (the “outside options”). The stock options were to acquire shares of the Company’s common stock and were subject to: (1) time-based vesting; (2) certain performance-based targets; and (3) certain performance achievements. Options to purchase common stock issued pursuant to the Outside Plan may have a term of up to ten years. The issuance of outside options is administered by the Company and approved by the Board. Prior to December 18, 2020, the Company did not have sufficient authorized but unissued shares of common stock to allow for the exercise of these outside options granted; accordingly, any common stock options granted were considered unfunded and were not exercisable until sufficient common shares were authorized (further details are provided in Note 21).

 

The fair value for the outside options granted during the year ended December 31, 2019 were calculated using the Black-Scholes option pricing model for the time-based and performance-based awards by an independent appraisal firm under the Probability Weighted Scenarios utilizing the following assumptions:

 

    Up-list     No Up-list  
Risk-free interest rate     2.49% –2.57 %     2.49% – 2.57 %
Expected dividend yield     0.00 %     0.00 %
Expected volatility     74.00% – 95.00 %     122.00% – 142.00 %
Expected life     3.0 – 5.8 years       3.0 – 5.8 years  

 

A summary of outside option activity during the years ended December 31, 2020 and 2019 is as follows:

 

                Weighted  
                Average  
          Weighted     Remaining  
    Number     Average     Contractual  
    of     Exercise     Life  
    Shares     Price     (in Years)  
Outside options outstanding at January 1, 2019     2,414,000     $ 0.36       9.94  
Granted     1,500,000       0.57          
Exercised     (2,000 )     0.35          
Forfeited     (180,000 )     0.35          
Expired     (7,333 )     0.35          
Outside options outstanding at December 31, 2019     3,724,667       0.21       9.04  
Forfeited     (195,333 )     0.46          
Expired     (477,334 )     0.39          
Outside options outstanding at December 31, 2020     3,052,000       0.46       8.07  
Outside options exercisable at December 31, 2020     2,376,333       0.43       6.20  
Outside options not vested at December 31, 2020     675,667                  

 

The aggregate grant date fair value of outside options granted during the year ended December 31, 2019 was $675,000.

 

The intrinsic value of exercisable but unexercised in-the-money outside options as of December 31, 2020 was approximately $401,583 based on a fair market value of the Company’s common stock of $0.60 per share on December 31, 2020.

 

The exercise prices of outside options outstanding and exercisable are as follows as of December 31, 2020:

 

Exercise   Outstanding     Exercisable  
Price   (Shares)     (Shares)  
 Under $1.00     3,052,000       2,376,333  
                 

 

Information with respect to stock-based compensation expense and unrecognized stock-based compensation expense related to the outside options is provided under the heading Stock-Based Compensation.

 

Publisher Partner Warrants

 

On December 19, 2016, as amended on August 23, 2017, and August 23, 2018, the Board approved the Channel Partner Warrant Program to be administered by management that authorized the Company to grant Publisher Partner Warrants. As of December 31, 2020, Publisher Partner Warrants to purchase up to 2,000,000 shares of the Company’s common stock were reserved for grant.

 

The Publisher Partner Warrants had certain performance conditions. Pursuant to the terms of the Publisher Partner Warrants, the Company would notify the respective Publisher Partner of the number of shares earned, with one-third of the earned shares vesting on the notice date, one-third of the earned shares vesting on the first anniversary of the notice date, and the remaining one-third of the earned shares vesting on the second anniversary of the notice date. The Publisher Partner Warrants had a term of five years from issuance and could also be exercised on a cashless basis. Performance conditions are generally based on the average of number of unique visitors on the channel operation by the Publisher Partner generated during the six-month period from the launch of the Publisher Partner’s operations on the Company’s technology platform or the revenue generated during the period from the issuance date through a specified end date.

 

A summary of the Publisher Partner Warrants activity during the years ended December 31, 2020 and 2019 is as follows:

 

                Weighted  
                Average  
          Weighted     Remaining  
    Number     Average     Contractual  
    of     Exercise     Life  
    Shares     Price     (in Years)  
Publisher Partner Warrants outstanding at January 1, 2019     1,017,140     $ 1.47       3.26  
Forfeited     (77,599 )     1.62          
Publisher Partner Warrants outstanding at December 31, 2019     939,541       1.46       2.57  
Forfeited     (150,000 )                
Publisher Partner Warrants outstanding at December 31, 2020     789,541       1.34       1.50  
Publisher Partner Warrants exercisable at December 31, 2020     463,041       1.31       1.52  
Publisher Partner Warrants not vested at December 31, 2020     326,500                  
Publisher Partner Warrants available for future grants at December 31, 2020     1,210,459                  

 

During the year ended December 31, 2020, the Company recognized incremental compensation costs as a result of the Exchange of $27,754 (see Note 21).

 

There was no intrinsic value of exercisable but unexercised in-the-money Publisher Partner Warrants since the fair market value of $0.60 per share of the Company’s common stock was lower than the exercise prices on December 31, 2020.

 

The exercise prices of the Publisher Partner Warrants outstanding and exercisable are as follows as of December 31, 2020.

 

Exercise     Outstanding     Exercisable  
Price     (Shares)     (Shares)  
  Under $1.00       40,000       40,000  
$ 1.01 to $1.25       465,419       275,419  
$ 1.26 to $1.50       68,277       68,277  
$ 1.51 to $1.75       110,318       27,818  
$ 1.76 to $2.00       104,449       50,449  
$ 2.01 to $2.25       1,078       1,078  
          789,541       463,041  

 

Information with respect to compensation expense and unrecognized compensation expense related to the Publisher Partner Warrants is provided below.

 

Restricted Stock Units

 

On May 31, 2019, the Company issued 2,399,997 restricted stock units to certain employees in settlement of the true-up provisions of the restricted stock awards issued at the time of the HubPages merger. Each restricted stock unit represented the right to receive a number of the shares of the Company’s common stock pursuant to a grant agreement, subject to certain terms and conditions, and was to be credited to a separate account maintained by the Company in certain circumstances. All amounts credited to the separate account will be part of the general assets of the Company. The restricted stock units were to vest in accordance with the grant agreement in six equal installments at four-month intervals on the first of each month, starting on June 1, 2019, with the final vesting date on February 1, 2021. In addition to the vesting schedule as aforementioned, the restricted stock units would not vest until the Company increased its authorized shares of the Company’s common stock. Each restricted stock unit granted and credited to the separate account for the employee will be issued by the Company upon the authorized shares of the Company’s common stock increased (further details are provided in Note 21). Further, unless otherwise specified in an employee’s grant agreement, vesting will cease upon the termination of the employees continuous service.

 

The fair value of a restricted stock award is determined based on the number of shares granted and the quoted price of the Company’s common stock on the date issued during the year ended December 31, 2019.

 

A summary of the restricted stock unit activity during the years ended December 31, 2020 and 2019 is as follows:

 

    Number of Shares     Weighted Average Grant-Date  
    Unvested     Vested     Fair Value  
Restricted stock units outstanding at January 1, 2019     -       -     $ -  
Granted     2,399,997       -       0.45  
Restricted stock units outstanding at December 31, 2019     2,399,997       -       0.45  
Forfeited     (2,399,997 )     -          
Restricted stock units outstanding at December 31, 2020     -       -       -  

 

As aforementioned (see Note 12), the restricted stock units were forfeited on December 31, 2020.

 

Information with respect to stock-based compensation expense and unrecognized stock-based compensation expense related to the restricted stock units is included within the Restricted Stock Awards caption under the heading Stock-Based Compensation.

 

ABG Warrants

 

In connection with the Sports Illustrated Licensing Agreement and issuance of the ABG Warrants to purchase up to 21,989,844 shares of the Company’s common stock, the Company recorded the issuance of the warrants as stock-based compensation with the fair value of the warrants measured at the time of issuance and expensed over the requisite service period.

 

The fair value of the ABG Warrants issued during the year ended December 31, 2019 were calculated using the Monte Carlo model by an independent appraisal firm under the Probability Weighted Scenarios utilizing the following assumptions:

 

    Up-list     No Up-list  
Risk-free interest rate     2.00% – 2.10 %     2.00% – 2.10 %
Expected dividend yield     0.00 %     0.00 %
Expected volatility     51.00% – 52.00 %     121.00% – 123.00 %
Expected life     6.0 – 7.3 years       6.2 – 7.3 years  

 

A summary of the ABG Warrant activity during the years ended December 31, 2020 and 2019 is as follows:

 

    Number of Shares    

Weighted Average

Exercise

     Weighted Average Remaining Contractual Life  
    Unvested     Vested     Price     (in years)  
ABG Warrants outstanding at January 1, 2019     -       -     $ -          
Issued     21,989,844       -       0.63          
ABG Warrants outstanding at December 31, 2019     21,989,844       -       0.63       9.46  
Vested     (2,198,985 )     2,198,985       0.63          
ABG Warrants outstanding at December 31, 2020     19,790,859       2,198,985       0.63       8.46  

 

The aggregate issue date fair value of the ABG Warrants issued during the year ended December 31, 2019 was $5,458,979.

 

The intrinsic value of exercisable but unexercised in-the-money ABG Warrants as of December 31, 2020 was approximately $197,909 based on a fair market value of the Company’s common stock of $0.60 per share on December 31, 2020.

 

Information with respect to compensation expense and unrecognized compensation expense related to the ABG Warrants is provided under the heading Stock-Based Compensation.

 

Stock-Based Compensation

 

Stock–based compensation and equity-based expense charged to operations or capitalized during the years ended December 31, 2020 and 2019 are summarized as follows:

 

    Year Ended December 31, 2020  
    Restricted     Common     Common           Publisher              
    Stock     Stock     Equity     Outside     Partner     ABG        
    Awards     Awards     Awards     Options     Warrants     Warrants     Totals  
Cost of revenue   $ 163,181     $ 156,043     $ 3,975,625     $ 8,394     $ 36,673     $ -     $ 4,339,916  
Selling and marketing     1,486,722       114,640       2,454,432       272,431       -       -       4,328,225  
General and administrative     317,982       615,604       3,439,803       150,577       -       1,449,074       5,973,040  
Total costs charged to operations     1,967,885       886,287       9,869,860       431,402       36,673       1,449,074       14,641,181  
Capitalized platform development     361,519       178,284       1,062,792       6,400       -       -       1,608,995  
Total stock-based compensation   $ 2,329,404       1,064,571     $ 10,932,652     $ 437,802     $ 36,673     $ 1,449,074     $ 16,250,176  

 

    Year Ended December 31, 2019  
    Restricted     Common     Common           Publisher              
    Stock     Stock     Equity     Outside     Partner     ABG        
    Awards     Awards     Awards     Options     Warrants     Warrants     Totals  
Cost of revenue   $ 122,192     $ 44,520     $ 774,632     $ 1,580     $ 50,828     $ -     $ 993,752  
Selling and marketing     34,393       100,388       455,280       242,399       -       -       832,460  
General and administrative     2,541,468       1,660,607       3,383,338       157,359       -       795,803       8,538,575  
Total costs charged to operations     2,698,053       1,805,515       4,613,250       401,338       50,828       795,803       10,364,787  
Capitalized platform development     535,004       175,837       590,618       5,931       -       -       1,307,390  
Total stock-based compensation   $ 3,233,057       1,981,352     $ 5,203,868     $ 407,269     $ 50,828     $ 795,803     $ 11,672,177  

 

Unrecognized compensation expense related to the stock-based compensation awards and equity-based awards as of December 31, 2020 was as follows:

 

    As of December 31, 2020  
    Restricted Stock Awards     Common Stock Awards     Common Equity Awards     Outside Options     Publisher Partner Warrants     ABG Warrants     Totals  
Unrecognized compensation expense   $ 81,620     $ 371,932     $ 19,874,675     $ 283,388     $ -     $ 3,214,102     $ 23,825,717  
Weighted average period expected to be recognized (in years)     0.95       0.67       1.87       1.18       -       2.38       1.91