Stockholders’ Equity

Preferred Stock

The total number of shares of preferred stock, $.001 par value, that the Company is authorized to issue is 5,000,000.

The Board of Directors may, without further action by the stockholders, issue a series of preferred stock and fix the rights and preferences of those shares, including the dividend rights, dividend rates, conversion rights, exchange rights, voting rights, terms of redemption, redemption price or prices, liquidation preferences, the number of shares constituting any series and the designation of such series.

As of June 30, 2018 and December 31, 2017 there were no shares of preferred stock issued and outstanding.

Common Stock

The total number of shares of common stock, $0.001 par value, that the Company is authorized to issue is 100,000,000.

The Company issued shares of common stock of 1,075,893 and 1,013,763 related to restricted stock awards during the six months ended June 30, 2018 and the year ended December 31, 2017, respectively. The Company issued 131,051 shares related to stock option exercises during the six months ended June 30, 2018. The Company issued 2,080,648 shares related to exercises of stock options and 675,000 related to the exercise of warrants in the year ended December 31, 2017.

Stock-Based Compensation

The fair values of share-based payments are estimated on the date of grant using the Black-Scholes option pricing model, based on weighted average assumptions. Expected volatility is based on historical volatility of the Company’s common stock. The risk-free rate is based on the U.S. Treasury yield curve in effect over the expected term at the time of grant. Compensation expense is recognized on a straight-line basis over the requisite service period of the award. The Company uses the simplified method to determine the expected option term since the Company’s stock option exercise experience does not provide a reasonable basis upon which to estimate the expected option term.

The Company began granting restricted stock awards (“RSAs”) to its employees in April 2013. The cost of the RSAs is determined using the fair value of the Company’s common stock on the date of grant. Stock-based compensation expense for RSAs is amortized on a straight-line basis over the requisite service period. RSAs generally vest over a three-year period with 33% vesting at the end of one year and the remaining vesting annually thereafter.

The Company began granting performance shares (“PSUs”) to certain employees in April 2018. Performance shares are based on a relative Total Shareholder Return (“TSR”) metric over a performance period spanning three years from the grant date of the performance share award. PSU awards will vest at the end of the performance period and will be paid immediately in shares of common stock. PSU awards are forfeited if the participant is no longer employed on the third anniversary of the grant date except in the event of an involuntary termination, death, disability or change in control. The Company estimated the fair value of the PSU awards using a Monte-Carlo simulation model utilizing several key assumptions including expected Company and Russell 2000 Peer Group share price volatility, correlation coefficients between peers, the risk-free rate of return, the expected dividend yield and other award design features.

The assumptions used in calculating the fair value of stock-based awards represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future.

Stock-based compensation expense includes incremental stock-based compensation expense and is allocated on the condensed consolidated statements of operations and comprehensive income as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Sales and marketing	$	112,222	$	101,035	$	230,769	$	202,304
Product development and content	1,161,863		1,428,743		2,275,930		1,930,043
General and administrative	816,785		838,414		1,753,096		1,370,003
Total stock-based compensation expense	$	2,090,870	$	2,368,192	$	4,259,795	$	3,502,350

As of June 30, 2018, there was approximately $2.8 million, $11.2 million and $1.7 million of total unrecognized compensation cost which is expected to be recognized over a weighted-average vesting period of approximately of 1.7 years, 2.2 years and 2.8 years relating to stock options, RSAs and PSUs, respectively.

Stock Compensation Plans

2018 Omnibus Incentive Plan

On June 1, 2018, the Company’s stockholders approved the 2018 Omnibus Incentive Plan (the “2018 Plan”), providing for the issuance of up to 8.8 million shares of the Company’s common stock, including approximately 0.3 million shares previously approved by the Company’s stockholders under the Company’s Amended and Restated 2012 Omnibus Incentive Plan (the “2012 Plan”), less one share of common stock for every one share of common stock that was subject to an option granted after April 9, 2018 but before June 1, 2018 under the 2012 Plan, plus an additional number of shares of common stock equal to the number of options previously granted under the 2012 Plan and the Amended and Restated 2006 Stock Incentive Plan (the “2006 Stock Plan”) that either terminate, expire, or are forfeited after April 9, 2018 and any restricted stock awards that either terminate, expire, or are forfeited equal to the number of awards granted under the 2012 Plan and 2006 Stock Plan multiplied by the fungible ratio of 1.4. As of June 30, 2018, there were approximately 7.1 million shares of common stock available for grant.

Restricted Stock Awards Under 2018 Plan

A summary of RSA activity under the 2018 Plan during the six months ended June 30, 2018 is as follows:



RSAs	Number of RSAs	Weighted-Average Stock Price
Outstanding at December 31, 2017	—	$	—
Granted	1,522,034	4.18
Vested	—	—
Forfeited or expired	—	—
Outstanding and unvested at June 30, 2018	1,522,034	$	4.18

Shares are forfeited if not vested within three years from the date of grant and vest in three equal annual increments. The Company recorded stock-based compensation expense related to RSAs of approximately $0.1 million for the three and six months ended June 30, 2018, respectively.

Amended and Restated 2012 Omnibus Incentive Plan

On December 16, 2016, the Company’s stockholders approved the 2012 Plan, providing for the issuance of up to 10.5 million shares of the Company’s common stock, including approximately 2.1 million shares previously approved by the Company’s stockholders under the Company’s 2006 Stock Plan, less one share of common stock for every one share of common stock that was subject to an option or other award granted after December 31, 2011 under the 2006 Stock Plan, plus an additional number of shares of common stock equal to the number of shares previously granted under the 2006 Stock Plan that either terminate, expire, or are forfeited after December 31, 2011. As of June 1, 2018, grants are no longer issued from the 2012 Plan.

A summary of stock option activity under the 2012 Plan during the six months ended June 30, 2018 is as follows:



Options	Number of Stock Options		Weighted- Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at December 31, 2017	3,724,892		$	3.07
Granted	—		—
Exercised	(131,051	)	1.77
Forfeited or expired	(95,867	)	3.49
Outstanding at June 30, 2018	3,497,974		$	3.11	7.3	$	5,301,183
Exercisable at June 30, 2018	2,695,101		$	2.75	6.9	$	4,895,933

The total intrinsic values of options exercised were $0.2 million during each of the six months ended June 30, 2018 and 2017. The Company recorded stock-based compensation expense related to options of approximately $0.4 million and $0.7 million for the three months ended June 30, 2018 and 2017 and $0.8 million and $1.1 million for the six months ended June 30, 2018 and 2017, respectively.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for the six months ended June 30, 2018 and 2017:



	Six Months Ended June 30,
	2018	2017
Risk-free interest rate	—%	1.89%
Expected term (in years)	0	6.0
Expected dividend yield	—	—
Expected volatility	—%	83%

Restricted Stock Awards Under 2012 Omnibus Incentive Plan

A summary of RSA activity under the 2012 Plan during the six months ended June 30, 2018 is as follows:



RSAs	Number of RSAs		Weighted-Average Stock Price
Outstanding at December 31, 2017	2,292,308		$	3.77
Granted	449,500		2.17
Vested	(954,529	)	3.72
Forfeited or expired	(209,600	)	2.99
Outstanding and unvested at June 30, 2018	1,577,679		$	3.45

Shares are forfeited if not vested within three years from the date of grant and vest in three equal annual increments. The Company recorded stock-based compensation expense related to RSAs of approximately $1.1 million and $1.0 million for the three months ended June 30, 2018 and 2017 and $2.2 million and $1.6 million for the six months ended June 30, 2018 and 2017, respectively.

Performance Share Awards Under 2012 Omnibus Incentive Plan

The Company granted 615,500 PSUs during the six months ended June 30, 2018 based on a relative TSR metric over a performance period spanning three years from the grant date of the PSU. PSUs will vest at the end of the performance period and will be paid immediately in shares of common stock. PSUs are forfeited if the participant is no longer employed on the third anniversary of the grant date except in the event of an involuntary termination, death, disability or change in control.

PSU share payouts range from a threshold of 0% to a maximum of 170% based on the relative ranking of the Company’s TSR as compared to the TSR of the companies in the Russell 2000 Peer Group. The PSU award stipulates certain limitations to the payout in the event the payout reaches a defined ceiling level or the Company’s TSR is negative. The estimated fair value of the PSU awards at the date of grant was $1.8 million. The Company estimated the fair value of the PSU awards using a Monte-Carlo simulation model utilizing several key assumptions including expected Company and Russell 2000 Peer Group share price volatility, correlation coefficients between peers, the risk-free rate of return, the expected dividend yield and other award design features.

A summary of performance share awards under the 2012 Plan during the six months ended June 30, 2018 is as follows:



PSUs	Number of PSUs	Weighted-Average Stock Price
Outstanding at December 31, 2017	—	$	—
Granted	615,500	2.94
Vested	—	—
Forfeited or expired	—	—
Outstanding at June 30, 2018	615,500	$	2.94

The Company recorded stock-based compensation expense related to PSUs of approximately $0.1 million for the three and six months ended June 30, 2018, respectively.

2006 Stock Incentive Plan

On June 27, 2007, the Company’s stockholders approved the 2006 Stock Plan, providing for the issuance of up to 3.7 million shares of common stock plus an additional number of shares of common stock equal to the number of shares previously granted under the 1998 Stock Option Plan that either terminate, expire, or lapse after the date of the Board of Directors’ approval of the 2006 Stock Plan. All options granted and outstanding have been fully expensed prior to 2016.

A summary of stock option activity under the 2006 Stock Plan during the six months ended June 30, 2018 is as follows:



Options	Number of Stock Options		Weighted- Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at December 31, 2017	1,194,081		$	4.08
Granted	—		—
Exercised	—		—
Forfeited or expired	(96,000	)	5.06
Outstanding at June 30, 2018	1,098,081		$	3.99	3.3	$	564,307
Exercisable at June 30, 2018	1,053,902		$	4.00	3.4	$	529,848

The total intrinsic values of options exercised were $6.3 million during the six months ended June 30, 2017. No options were exercised during the six months ended June 30, 2018.

Amended and Restated 2016 Inducement Omnibus Incentive Plan

On October 3, 2016, in connection with the closing of the acquisition of Skout, the Company’s Board of Directors adopted the 2016 Inducement Omnibus Incentive Plan in accordance with NASDAQ Listing Rule 5635(c)(4). At the closing of the acquisition of Skout, the Company granted stock options to purchase an aggregate of up to 355,000 shares of its common stock to 25 former Skout employees as an inducement material to becoming non-executive employees of the Company. On February 27, 2017, the Company amended and restated the 2016 Inducement Omnibus Incentive Plan (as so amended and restated, the “2016 Stock Plan”) and authorized an additional 2,000,000 shares of common stock under the 2016 Stock Plan. At the closing of the if(we) Acquisition, the Company granted options to purchase an aggregate of up to 75,000 shares of its common stock and restricted stock awards representing an aggregate of 717,500 shares of common stock to 83 former if(we) employees as an inducement material to becoming non-executive employees of the Company. At the closing of the Lovoo Acquisition, the Company granted restricted stock awards representing an aggregate of 531,500 shares of common stock to 96 former Lovoo employees as an inducement material to becoming non-executive employees of the Company.

Options Under The 2016 Stock Plan

A summary of stock option activity under the 2016 Stock Plan during the six months ended June 30, 2018 is as follows:



Options	Number of Stock Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at December 31, 2017	734,168		$	5.18
Granted	—		—
Exercised	—		—
Forfeited or expired	(248,332	)	5.16
Outstanding at June 30, 2018	485,836		$	5.19	8.6	$	—
Exercisable at June 30, 2018	272,502		$	5.27	8.6	$	—

The Company recorded stock-based compensation expense related to options of approximately $0.1 million and $0.2 million for the three months ended June 30, 2018 and 2017 and $0.2 million and $0.4 million for the six months ended June 30, 2018 and 2017, respectively.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for the three months ended June 30, 2018 and 2017:



	Six Months Ended June 30,
	2018	2017
Risk-free interest rate	—%	1.89%
Expected term (in years)	0	6.0
Expected dividend yield	—	—
Expected volatility	—%	84%

Restricted Stock Awards Under The 2016 Stock Plan

A summary of RSA activity under the 2016 Stock Plan during the six months ended June 30, 2018 is as follows:



RSAs	Number of RSAs		Weighted-Average Stock Price
Outstanding at December 31, 2017	1,242,250		$	4.62
Granted	—		—
Vested	(240,540	)	5.36
Forfeited or expired	(295,877	)	5.39
Outstanding and unvested at June 30, 2018	705,833		$	4.05

Shares are forfeited if not vested within three years from the date of grant, and vest in three equal annual increments. The Company recorded stock-based compensation expense related to RSAs of approximately $0.3 million and $0.4 million for the three months ended June 30, 2018 and 2017 and $0.7 million and $0.5 million for the six months ended June 30, 2018 and 2017, respectively.