Compensation Plans | 11. Compensation Plans The Company provides stock-based compensation in the form of (a) stock awards to employees and directors, comprised of restricted stock awards and restricted stock units (collectively referred to as the “Restricted Stock Awards”), (b) stock option grants to employees, directors and consultants (referred to as the “Common Stock Awards”) (c) stock option awards, restricted stock awards, unrestricted stock awards, and stock appreciation rights to employees, directors and consultants (collectively the “Common Equity Awards”), (d) stock option awards outside of the 2016 Stock Incentive Plan and 2019 Equity Incentive Plan to certain officers, directors and employees (referred to as the “Outside Options”), (e) common stock warrants to the Company’s publisher partners (referred to as the “Publisher Partner Warrants”), and (f) common stock warrants to ABG-SI, LLC (referred to as the “ABG Warrants”). Stock-based compensation and equity-based expense charged to operations or capitalized during the three months ended September 30, 2021 and 2020 are summarized as follows: Summary of Stock-based Compensation Restricted Common Common Publisher Stock Stock Equity Outside Partner ABG Awards Awards Awards Options Warrants Warrants Totals During the Three Months Ended September 30, 2021 Cost of revenue $ 11,808 $ 23,217 $ 1,696,147 $ 967 $ - $ - $ 1,732,139 Selling and marketing - 3,970 1,341,948 75,193 - - 1,421,111 General and administrative 414,163 78,017 4,081,766 - - 745,636 5,319,582 Total costs charged to operations 425,971 105,204 7,119,861 76,160 - 745,636 8,472,832 Capitalized platform development 2,328 - 483,854 2,690 - - 488,872 Total stock-based compensation $ 428,299 $ 105,204 $ 7,603,715 $ 78,850 $ - $ 745,636 $ 8,961,704 During the Three Months Ended September 30, 2020 Cost of revenue $ 35,610 $ 53,149 $ 1,178,276 $ 2,471 $ 992 $ - $ 1,270,498 Selling and marketing 323,164 42,695 734,391 43,900 - - 1,144,150 General and administrative 80,306 127,786 855,390 - - 364,248 1,427,730 Total costs charged to operations 439,080 223,630 2,768,057 46,371 992 364,248 3,842,378 Capitalized platform development 88,619 32,680 267,013 1,188 - - 389,500 Total stock-based compensation $ 527,699 256,310 $ 3,035,070 $ 47,559 $ 992 $ 364,248 $ 4,231,878 Stock-based compensation and equity-based expense charged to operations or capitalized during the nine months ended September 30, 2021 and 2020 are summarized as follows: Restricted Common Common Publisher Stock Stock Equity Outside Partner ABG Awards Awards Awards Options Warrants Warrants Totals During the Nine Months Ended September 30, 2021 Cost of revenue $ 60,838 $ 169,482 $ 4,694,925 $ 4,463 $ - $ - $ 4,929,708 Selling and marketing - 13,899 3,820,996 224,371 - - 4,059,266 General and administrative 559,505 297,283 10,344,247 - - 1,498,217 12,699,252 Total costs charged to operations 620,343 480,664 18,860,168 228,834 - 1,498,217 21,688,226 Capitalized platform development 11,276 5,071 1,324,805 6,472 - - 1,347,624 Total stock-based compensation $ 631,619 $ 485,735 $ 20,184,973 $ 235,306 $ - $ 1,498,217 $ 23,035,850 During the Nine Months Ended September 30, 2020 Cost of revenue $ 108,936 $ 150,915 $ 3,261,542 $ 5,644 $ 36,654 $ - $ 3,563,691 Selling and marketing 920,566 102,206 2,114,595 142,767 - - 3,280,134 General and administrative 238,558 437,614 2,430,553 150,577 - 1,084,826 4,342,128 Total costs charged to operations 1,268,060 690,735 7,806,690 298,988 36,654 1,084,826 11,185,953 Capitalized platform development 234,611 154,445 864,656 5,451 - - 1,259,163 Total stock-based compensation $ 1,502,671 845,180 $ 8,671,346 $ 304,439 $ 36,654 $ 1,084,826 $ 12,445,116 Unrecognized compensation expense and expected weighted-average period to be recognized related to the stock-based compensation awards and equity-based awards as of September 30, 2021 was as follows: Schedule of Unrecognized Compensation Expense Restricted Common Common Publisher Stock Stock Equity Outside Partner ABG Awards Awards Awards Options Warrants Warrants Totals Unrecognized compensation expense $ 2,750,000 $ - $ 54,255,910 $ 135,741 $ - $ 3,788,429 $ 60,930,080 Expected weighted-average period expected to be recognized (in years) 1.68 - 2.14 0.44 - 1.63 2.08 Pursuant to an amendment with ABG-SI, LLC on June 4, 2021, the exercise price related to the ABG Warrants exercisable for up to 10,994,922 0.42 per share from $ 0.84 per share in exchange for additional benefits under the Sports Illustrated licensing agreement. Further details as of the date these condensed consolidated financial statements were issued or were available to be issued are provided under the heading Compensation Plans | 22. Stock-Based Compensation Common Stock Awards 2016 Plan 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 5,000,000 5,000,000 10,000,000 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: Schedule of Fair Value of Stock Options 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 6.0 A summary of the common stock award activity during the years ended December 31, 2020 and 2019 is as follows: Summary of Stock Option Activity 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 0.60 The exercise prices under the 2016 Plan for the common stock awards outstanding and exercisable are as follows as of December 31, 2020: Schedule of Exercise Prices of Common Stock Options Exercise Outstanding Exercisable Price (Shares) (Shares) Under $ 1.00 4,825,750 3,982,816 $ 1.01 1.25 780,751 779,843 $ 1.51 1.75 250,000 229,479 $ 1.76 2.00 924,169 913,613 $ 2.01 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 The Company’s stockholders approved the 2019 Plan and the maximum number of shares authorized of 85,000,000 2019 Equity Incentive Plan 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: Schedule of Fair Value of Stock Options 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 3.0 6.7 3.0 6.0 3.0 6.0 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 10.0 A summary of the common equity award activity during the years ended December 31, 2020 and 2019 is as follows: Summary of Stock Option Activity 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 30,864,185 The intrinsic value of exercisable but unexercised in-the-money common equity awards as of December 31, 2020 was approximately $ 1,416,000 0.60 The exercise prices under the 2019 Plan for the common equity awards outstanding and exercisable are as follows as of December 31, 2020: Schedule of Exercise Prices of Common Stock Options 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: Schedule of Fair Value of Stock Options 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 3.0 5.8 A summary of outside option activity during the years ended December 31, 2020 and 2019 is as follows: Summary of Stock Option Activity 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 0.60 The exercise prices of outside options outstanding and exercisable are as follows as of December 31, 2020: Schedule of Exercise Prices of Common Stock Options 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 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 A summary of the Publisher Partner Warrants activity during the years ended December 31, 2020 and 2019 is as follows: Schedule of Warrants Activity 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 There was no 0.60 The exercise prices of the Publisher Partner Warrants outstanding and exercisable are as follows as of December 31, 2020. Schedule of Exercise Prices of Common Stock Options Exercise Outstanding Exercisable Price (Shares) (Shares) Under $ 1.00 40,000 40,000 $ 1.01 1.25 465,419 275,419 $ 1.26 1.50 68,277 68,277 $ 1.51 1.75 110,318 27,818 $ 1.76 2.00 104,449 50,449 $ 2.01 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 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: Schedule of Restricted Stock Units Activity 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 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: Schedule of Fair Value of Stock Options 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 6.2 7.3 A summary of the ABG Warrant activity during the years ended December 31, 2020 and 2019 is as follows: Schedule of Warrants Activity 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 0.60 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: Summary of Stock-based Compensation 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: Schedule of Unrecognized Compensation Expense 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 |