Stockholders' Equity |
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Oct. 02, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity | Stockholders' Equity Common Stock
The Company is authorized to issue 100,000,000 shares of common stock with a par value of $0.0001 per share. Holders of the Company’s common stock are entitled to one vote for each share. At October 2, 2023 and January 2, 2023, there were 26,805,474 shares and 22,257,772 shares of common stock outstanding, respectively.
In addition to the CEO Awards, as defined below, as contemplated by the Bachmann Employment Agreement (as defined below) and as an inducement to employment, effective as of July 10, 2023, the Company issued the CEO 63,500 shares of the Company’s common stock, which such shares are subject to Rule 144 of the Securities Act of 1933, as amended.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. As of October 2, 2023 and January 2, 2023, there were 2,120,000 shares of preferred stock outstanding.
On February 24, 2023, the Company filed an amended and restated certificate of designation, (the “A&R CoD”), which among other matters, added a provision providing that in the event the Company fails to timely redeem any shares of Series A Preferred Stock on November 3, 2027, the applicable dividend rate shall automatically increase to the lesser of (A) the sum of 10% plus the 2% applicable default rate (with such aggregate rate increasing by an additional 0.35% per quarter from and after November 3, 2027), or (B) the maximum rate that may be applied under applicable law, unless waived in writing by a majority of the outstanding shares of Series A Junior Preferred Stock.
The A&R CoD also added a provision providing that in the event the Company fails to timely redeem any shares of Series A Junior Preferred Stock in connection with a Qualified Financing (as defined in the A&R CoD) on November 3, 2027 (a “Default”), the Company agrees to promptly commence a debt or equity financing transaction or sale process to solicit proposals for the sale of the Company and its subsidiaries (or, alternatively, the sale of material assets) designed to yield the maximum cash proceeds to the Company available for redemption of the Series A Junior Preferred Stock as promptly as practicable, but in any event, within 12 months from the date of the Default. If on or after November 3, 2026, the Company is aware that it is reasonably unlikely to have sufficient cash to timely effect the redemption in full of the Series A Junior Preferred Stock when first due, the Company shall, prior to such anticipated due date, take reasonable steps to engage an investment banking firm of national standing (and other appropriate professionals) to conduct preparatory work for such a financing transaction and sale process of the Company and its subsidiaries to provide for such transaction to occur as promptly as possible after any failure for a timely redemption of the Series A Junior Preferred Stock.
The Series A Junior Preferred Stock ranks senior to the common stock and may be redeemed at the option of the Company at any time and must be redeemed by the Company in limited circumstances. The Series A Junior Preferred Stock shall not have voting rights or conversion rights.
Warrants and Options
As of October 2, 2023, the Company had the following warrants and options outstanding: 15,063,800 warrants outstanding, each exercisable for one share of common stock at an exercise price of $11.50 including 11,468,800 in public warrants, 3,000,000 in private placement warrants (“private warrants”), 445,000 in Private Warrants and 150,000 in Working Capital Warrants, and 75,000 Unit Purchase Option units that are each exercisable for (i) one share of common stock at an exercise price of $10.00 and (i) one warrant exercisable for one share of common stock at an exercise price of $11.50. The public warrants expire in December 2025.
Warrant Liability
The Company has private warrants, which include provisions that affect the settlement amount. Such variables are outside of those used to determine the fair value of a fixed-for-fixed instrument, and as such, the warrants are accounted for as liabilities in accordance with ASC 815-40, Derivatives and Hedging, with changes in fair value included in the accompanying consolidated statements of operations.
The warrant liability was $0.4 million and $0.2 million at October 2, 2023 and January 2, 2023, respectively, and is included in other non-current liabilities on the accompanying consolidated balance sheets. The change in fair value of warrant liabilities for the quarter and nine months ended October 2, 2023 resulted in a gain of $0.2 million and a loss of $0.2 million, respectively, and is recognized in the accompanying consolidated statements of operations. The gain on change in the fair value of warrant liabilities for the quarter and nine months ended October 3, 2022 was $0.7 million and $2.1 million, respectively, and is recognized in the accompanying consolidated statements of operations.
The following is an analysis of changes in the warrant liability:
The fair value of the warrants are determined using the publicly-traded price of our common stock on the valuation dates of $1.14 on October 2, 2023 and $1.26 on January 2, 2023. See Note 13, “Fair Value Measurements.”
Share-Based Compensation
The Company has the ability to grant stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), restricted stock units with performance conditions (“PSUs”), other share-based awards and performance compensation awards to current or prospective employees, directors, officers, consultants or advisors under the Company’s 2020 Omnibus Equity Incentive Plan (the “Plan”).
On January 5, 2023, the Company filed a Registration Statement with the SEC to register 1,112,889, additional shares of common stock, $0.0001 par value per share, of the Company under the Plan, pursuant to the “evergreen” provision of the Plan providing for an automatic increase in the number of shares reserved for issuance under the Plan.
As of October 2, 2023 and January 2, 2023, there were approximately 400,000 and 600,000 shares of common stock available for future grants under the Plan, respectively.
RSU and PSU Awards under the Plan
The following table summarizes activity RSUs and PSUs during the nine months ended October 2, 2023:
Share-based compensation expense recognized for awards under the Plan during the quarter and nine months ended October 2, 2023 was $0.1 million and $5.3 million, respectively. Share-based compensation expense recognized during the quarter and nine months ended October 3, 2022 was approximately $1.0 million and $9.3 million, respectively. As of October 2, 2023, there was approximately $6.6 million of total unrecognized compensation cost related to unvested RSUs or PSUs under the Plan to be recognized over a weighted average period of 1.2 years.
Restricted Stock Unit Awards - Inducement Awards
On July 10, 2023, the Company issued awards of RSUs and PSUs to the Chief Executive Officer (“CEO Awards”) and the Chief Financial Officer (“CFO Awards”) as part of an inducement to enter into employment agreements with the Company (“Inducement Awards”). The Inducement Awards are not part of the Plan, and no common shares are currently reserved for issuance as of October 2, 2023. Terms of the Inducement Awards are as follows:
•The CEO Awards are comprised of 500,000 time based RSUs which, subject to continuous employment, vest in equal tranches of 100,000 units per year, and 500,000 PSUs, which, subject to continuous employment and the achievement of certain performance criteria, vest in equal tranches of 100,000 units per year.
•The CFO Awards are comprised of 200,000 time based RSUs which, subject to continuous employment, vest in equal tranches of 40,000 units per year, and 200,000 PSUs, which, subject to continuous employment and the achievement of certain performance criteria, vest in equal tranches of 40,000 units per year.
Vesting for the Inducement Awards is over a year period. Share based compensation expense related to the Inducement Awards recognized during the quarter and nine months ended October 2, 2023 was $0.1 million. There was no share-based compensation expense recognized during the quarter and nine months ended October 3, 2022. As of October 2, 2023, there was approximately $2.0 million of total unrecognized compensation cost related to unvested Inducement Awards to be recognized over a weighted average period of 3.5 years.
Share-based compensation expense recognized for awards under the Plan and the Inducement Awards during the quarter and nine months ended October 2, 2023 was $0.2 million and $5.4 million, respectively. As of October 2, 2023, there was approximately $8.6 million of total unrecognized compensation cost related to unvested RSUs or PSUs under the Plan and Inducement Awards to be recognized over a weighted average period of 2.3 years.
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