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Stock-based Compensation Expense
 6 Months Ended
Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-based Compensation Expense

10. Stock-based Compensation Expense

 

2015 Stock Option Plan

 

Prior to the Closing, AutoLotto had the AutoLotto, Inc. 2015 Stock Option/Stock Issuance Plan (the “2015 Plan”) in place. Under the 2015 Plan, incentive stock options could be granted at a price not less than fair market value of the AutoLotto common stock (the “AutoLotto Common Stock”). If the AutoLotto common stock was at the time of grant listed on any stock exchange, then such fair market value would be the closing selling price per share of AutoLotto common stock on the date in question on such stock exchange, as such price is officially quoted in the composite tape of transactions on such stock exchange and published in The Wall Street Journal. If there was no closing selling price for the common stock on the date in question, then the fair market value would be the closing selling price on the last preceding date for which such quotation exists. If the common stock is at the time not listed on any Stock Exchange, then the fair market value would be determined by the Board of Directors or the Committee acting in its capacity as administrator of the Plan after taking into account such factors as the Plan Administrator shall deem appropriate. The maximum number of shares of common stock that could have been issued over the term of the Plan could not exceed Twenty Two Thousand Five Hundred (22,500). Options are exercisable over periods not to exceed 10 years (five years for incentive stock options granted to holders of 10% or more of voting stock) from the date of grant. Shares of AutoLotto common stock issued under the 2015 Plan could, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance or vest in one or more installments over the Participant’s period of service or upon attainment of specified performance objectives. The Plan Administrator could not impose a vesting schedule upon any option grant or the shares of common stock subject to that option which is more restrictive than twenty percent (20%) per year vesting, with the initial vesting to occur not later than one (1) year after the option grant date. However, such limitation shall not be applicable to any option grants made to individuals who are officers of the Corporation, non-employee Board members or independent consultants.

 

2021 Equity Incentive Plan

 

In connection with the Business Combination, our Board of Directors adopted, and our stockholders approved, the Lottery.com 2021 Incentive Plan (the “2021 Plan”) under which 656,518 shares of Class A common stock were initially reserved for issuance. The 2021 Plan allows for the issuance of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock or cash based awards. The number of shares of the Company’s Class A common stock available for issuance under the 2021 Plan increases annually on the first day of each calendar year, beginning on and including January 1, 2022 and ending on and including January 1, 2031 by a number of shares of Company common stock equal to five percent of the total outstanding shares of Company common stock on the last day of the prior calendar year. The maximum number of incentive stock options which can be granted under the 2021 Plan is 656,518. Notwithstanding the foregoing, the Board of Directors may act prior to January 1st of a given year to provide that there will be no such increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares of Company common stock than would otherwise occur pursuant to the preceding sentence.

 

 

Stock Options

 

As of June 30, 2023, there were 10,456 stock options outstanding. The Company did not issue any new stock options during the three months ended June 30, 2023.

 

There was no stock-based compensation expense related to the employee options for the three months ended June 30, 2023 and 2022.

 

Restricted awards

 

The Company awarded restricted stock to employees on October 28, 2021, which was granted with various vesting terms including, service-based vesting, and performance-based vesting. In accordance with ASC 718, the Company has classified the restricted stock as equity.

 

For employee issuances, the measurement date is the date of grant, and the Company recognizes compensation expense for the grant of the restricted shares, over the service period for the restricted shares that vest over a period of multiple months or years and for performance-based vesting awards, the Company recognizes the expense when management believes it is probable the performance condition will be achieved. As of December 31, 2021, the Company had granted 191,622 shares with vesting to begin April 2022.

 

On April 29, 2022, restricted stock awards for certain employees vested and resulted in withholding tax for those employees. Given the limited trading liquidity of the Company’s common shares, the Company withheld 6,527 shares, valued at $47.60 per share (the closing price on April 29, 2022) from the employees, and paid the withholding tax on the employees’ behalf.

 

For the three months ended June 30, 2023, the Company recognized $358,349 of stock compensation expense related to the employee restricted stock grants. As of June 30, 2023, unrecognized stock-based compensation associated with the restricted stock awards is $4,061,294 which will be expensed over the next 2.83 years.

 

 

The Company had restricted stock activity summarized as follows:

 

       Weighted 
       Average 
   Number of   Grant 
   Shares   Fair Value 
To Outstanding at December 31, 2022   191,622   $295.00 
Granted   -    - 
Vested   -    - 
Forfeited/canceled   -    - 
Restricted shares unvested at June 30, 2023   191,622   $295.00