Note 17: Stock Options

On September 18, 2015, the Company adopted the Genius Brands International, Inc. 2015 Incentive Plan (the “2015 Plan”). The total number of shares that can be issued under the 2015 Plan is 2,167,667 shares.

On September 1, 2020, the Company adopted the Genius Brands International, Inc. 2020 Incentive Plan (the “2020 Plan”). On August 4, 2020, the Board of Directors voted to adopt the 2020 Plan. The shares available for issuance under the 2020 Plan was approved by stockholders on August 27, 2020. The 2020 Plan as approved by the stockholders increased the maximum number of shares available for issuance up to an aggregate of 32,167,667 shares of common stock.

During the three months ended March 31, 2022, the Company granted options to purchase 875,000 shares of common stock to employees with a fair market value of $603,750. The options were granted on March 17, 2022, with a three-year vesting period and a five-year term.

As part of the Wow Acquisition, the Company granted replacement options to purchase 1,733,100 shares of the Company’s common stock to Wow employees who would continue to provide services to the Company. 676,415 options to purchase common stock were also granted to certain departing Wow shareholders to replace their previously vested Wow options. These options were cancelled after 30 days of the grant date if not exercised. The fair market value of $1.5 million was determined utilizing assumptions as of the replacement date of April 6, 2022 and were valued using the BSM option pricing model. The number of shares granted was determined by using an exchange ratio calculated by a third party based on the intrinsic value of the Wow common stock purchased as part of the acquisition and the value of the Company’s common stock as of the agreement date. The vesting terms of the replacement options remained the same as the Wow options for which they were exchanged. All shares that replaced previously vested Wow shares were included as part of the purchase price based on the calculated fair value on the acquisition date of $1.2 million for 1,967,528 shares. The remaining options to vest with a fair value of $0.3 million will be expensed over the remaining requisite period. The options expire within 3 years from the replacement option grant date or the original Wow option, whichever is greater.

During the three months ended June 30, 2022, the Company also granted 500,000 options to purchase shares of common stock to a former employee of Wow, as a new employee of the Company after the acquisition date. The options vest evenly over three years and expire 10 years from the grant date of June 23, 2022.

The fair value of the options granted during the three months ended June 30, 2022 was calculated using the BSM option pricing model based on the following assumptions:

The following table summarizes the stock option activity during the six months ended June 30, 2022:

During the three months ended June 30, 2022 and 2021, the Company recognized $0.4 million and $0.8 million, respectively, in share-based compensation expense related to stock options. During the six months ended June 30, 2022 and 2021, the Company recognized $0.8 million and $1.9 million, respectively, in share-based compensation expense related to stock options. The unrecognized share-based compensation expense related to stock options at June 30, 2022 of $1.8 million will be recognized through the second quarter of 2025 based on the remaining vesting periods, assuming the options are not cancelled or forfeited. As of June 30, 2022 there was $159,311 of aggregate intrinsic value related to outstanding unvested options. The weighted average fair value per option granted during the three months ended June 30, 2022 was $0.64.