|9 Months Ended|
Nov. 01, 2020
|Stockholders' Equity Note [Abstract]|
NOTE 8 – STOCKHOLDERS’ EQUITY
Common Stock Warrants
In fiscal 2020, the Company issued 18,166 warrants to a third party in connection with previous equity raise. These warrants were valued using the Black-Scholes model. The warrants had a fair value of approximately $130,000. Of these warrants, 17,396 were exercised on May 14, 2019.
The warrants may be exercised at any time following the date of issuance during the period prior to their expiration date. The fair value of each warrant is estimated on the date of grant using the Black-Scholes model. Expected volatilities are based on comparable companies’ historical volatility, with consideration of the Company’s volatility, which management believes represents the most accurate basis for estimating expected future volatility under the current circumstances. The risk-free rate is based on the U.S. treasury yield in effect at the time of the grant.
The following represents warrant activity during the thirty-nine weeks ended November 1, 2020 and November 3, 2019:
The majority of the 46,521 warrants exercised in fiscal 2020 and all of the 246,622 warrants exercised in fiscal 2021 were cashless, whereby the holders received fewer shares of common stock in lieu of a cash payment to the Company, which resulted in the issuance of 27,246 and 136,834 common shares in fiscals 2020 and 2021, respectively.
Equity Incentive Plans
The Company adopted the 2017 Equity Incentive Plan (the “Plan”) which provides for Awards in the form of Options, Stock Appreciation rights, Restricted Stock Awards, Restricted Stock Units, Performance shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards. All awards shall be granted within 10 years from the effective date of the Plan.
In June 2019, the Company granted 495,366 non-statutory stock options to certain officers of the Company with an option price of $38.10 per share. 100% of the stock options are subject to vesting on the first trading day after the date on which the closing price of the Company’s stock price has been at least $75 for 60 consecutive trading days so long as this goal has been attained by June 5, 2022 or the options will terminate. These options were valued using a Monte Carlo simulation model to account for the path dependent market conditions that stipulate when and whether or not the options shall vest.
The 495,366 stock options were modified to extend the term of the options through June 5, 2024. The modification of the option term resulted in approximately $0.4 million in additional equity compensation expense recorded during the thirteen weeks ended November 1, 2020.
In December 2019, SAC LLC distributed the shares of the Company’s common stock it held. In connection with the distribution, officers of the Company agreed to exchange and modify options that were held at SAC LLC for shares of vested common stock of the Company. Pursuant to the exchange, SAC LLC transferred 175,478 shares of common stock to the Company and the Company immediately cancelled these shares. The Company then issued to the former option holders an equivalent number of shares under the Plan and withheld 73,507 shares to satisfy taxes associated with the issuance.
In June 2020, the stockholders of the Company approved an amendment to the Plan that increased the number of shares of common stock reserved for issuance under the Plan by 690,000 shares of common stock. The number of shares of common stock reserved for issuance under the Plan increased from 1,414,889 to 2,104,889 shares of common stock.
A summary of the status of our stock options as of November 1, 2020, and the changes during the thirty-nine weeks ended November 1, 2020 is presented below:
A summary of the status of our unvested restricted stock units as of November 1, 2020, and changes during the thirty-nine weeks then ended, is presented below:
Equity based compensation expense was approximately $1.1 million and $2.6 million and for the thirteen and thirty-nine weeks ended November 1, 2020 and $0.6 million and $4.0 million and for the thirteen and thirty-nine weeks ended November 3, 2019, respectively. In the thirty-nine weeks ended November 3, 2019, all the unvested restricted stock units for certain senior executives of the Company vested according to the accelerated vesting trigger in their restricted stock unit agreements. The triggering event was the market capitalization of the Company post-IPO, exceeding $300 million for 60 consecutive trading days and the expiration of the lockup period. This accelerated vesting resulted in equity-based compensation in the amount of $2.9 million.
The total unrecognized restricted stock unit compensation cost related to non-vested awards was approximately $5.5 million as of November 1, 2020 and will be recognized in operations over a weighted average period of 2.41 years.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef