Stock-Based Compensation

3 Months Ended

May 04, 2024

Share-Based Payment Arrangement [Abstract]

6. Stock-Based Compensation

The Company has one active stock-based compensation plan: the 2016 Incentive Compensation Plan (as amended, the “2016 Plan”). A grant of a stock option award or stock appreciation right will reduce the outstanding reserve on a one-for-one basis, meaning one share for every share granted. A grant of a full-value award, including, but not limited to, restricted stock, restricted stock units and deferred stock, will reduce the outstanding reserve by a fixed ratio of 1.9 shares for every share granted. At May 4, 2024, 15,120,538 shares were authorized under the 2016 Plan, of which 1,445,584 shares remained available for grant.

In accordance with the terms of the 2016 Plan, any shares outstanding under the previous 2006 Incentive Compensation Plan (the “2006 Plan”) at August 4, 2016 that subsequently terminate, expire or are cancelled for any reason without having been exercised or paid are added back and become available for issuance under the 2016 Plan, with stock options being added back on a one-for-one basis and full-value awards being added back on a 1 to 1.9 basis. At May 4, 2024, 59,254 stock options remained outstanding under the 2006 Plan.

The 2016 Plan is administered by the Compensation Committee. The Compensation Committee is authorized to make all determinations with respect to amounts and conditions covering awards. Options are not granted at a price less than fair value on the date of the grant. Except with respect to 5% of the shares available for awards under the 2016 Plan, no award will become exercisable unless such award has been outstanding for a minimum period of one year from its date of grant.

The following tables summarize the share activity and stock option activity for the first three months of fiscal 2024:


	RSUs (1)			Deferred shares (2)		Performance Share Units (3)		Fully-Vested Shares (4)			Total number of shares			Weighted- average grant-date fair value
Shares
Outstanding non-vested shares at beginning of year		536,285			435,568		573,000		—			1,544,853		$	3.53
Shares granted		376,416			8,713		—		9,734			394,863		$	3.58
Shares vested and/or issued		(129,112	)		—		—		(9,734	)		(138,846	)	$	4.67
Shares expired		—			—		—		—			—		$	—
Shares forfeited		—			—		—		—			—		$	—
Outstanding non-vested shares at end of quarter		783,589			444,281		573,000		—			1,800,870		$	3.46

(1)

During the first three months of fiscal 2024, the Company granted time-based RSUs under its 2024-2026 LTIP. See Note 5, Long-Term Incentive Plans. As a result of net share settlements, of the 129,112 RSUs that vested, 115,292 shares of common stock were issued.

(2)

The 8,713 shares of deferred stock, with a fair value of $36,246 represent director compensation in lieu of cash, in accordance with the director's irrevocable election. The shares of deferred stock will be issued upon the director's separation from service.

(3)

On August 11, 2023, the Company granted 573,000 performance share units ("PSUs") in connection with the extension of Mr. Kanter's employment agreement. The award consists of nine tranches, with the first tranche vesting if and when the 30-day volume-weighted closing price of the Company's common stock is equal to or greater than $6.50 per share. Each subsequent tranche will vest upon achievement of the 30-day volume-weighted closing price of the Company's common stock in $0.25 increments with the ninth tranche vesting when such price is equal to or greater than $8.50 per share. The PSUs are subject to a one-year minimum vesting period, and any unvested PSUs will expire on August 11, 2026. The $2.4 million fair value is being expensed over the respective derived service periods of each tranche which range from 12 to 13 months. The respective fair value and derived service periods assigned to the PSUs were determined using a Monte Carlo model based on: a weighted historical volatility of 57.8%, a term of 3 years, stock price on the date of grant of $4.98 per share, a risk-free rate of 4.6% and a cost of equity of 11.0%.

(4)

Represented compensation, with a fair value of $40,493, to certain directors, who are required to receive shares, in lieu of cash, in order to satisfy their minimum equity ownership under the Non-Employee Director Compensation Plan. Voluntary shares received, in lieu of cash, are reported below under Non-Employee Director Compensation Plan.


	Number of shares			Weighted- average exercise price per option		Weighted- average remaining contractual term		Aggregate intrinsic value (000's)
Stock Options
Outstanding options at beginning of year		3,180,739		$	0.75		—	$	10,962
Options granted		—			—		—		—
Options exercised		(132,397	)	$	0.58		—		388
Options expired		(16,233	)	$	5.29		—		—
Options forfeited		(1,715	)	$	0.75		—		5
Outstanding options at end of quarter		3,030,394		$	0.73	6.3 years		$	7,761
Options exercisable at end of quarter		2,790,202		$	0.73	6.2 years		$	7,158

For the first three months of fiscal 2024, the Company granted 376,416 restricted stock units, 8,713 shares of deferred stock and 9,734 fully-vested shares. For the first three months of fiscal 2023, the Company granted stock options to purchase an aggregate of 1,316 shares of common stock, 270,867 restricted stock units and 2,844 fully-vested shares.

Non-Employee Director Compensation Plan

The Company granted 8,412 shares of common stock, with a fair value of approximately $34,994, to certain of its non-employee directors as compensation in lieu of cash in the first three months of fiscal 2024. These shares are in addition to any shares that may be granted under the 2016 Plan related to the requirement to receive equity if a director has not yet satisfied his or her minimum equity ownership requirement under the Non-Employee Director Compensation Plan.

Stock Compensation Expense

The Company recognized total stock-based compensation expense of $0.9 million and $0.4 million for the first three months of fiscal 2024 and fiscal 2023, respectively. The total compensation cost related to time-vested stock options, RSU awards, and PSU awards not yet recognized as of May 4, 2024 was approximately $3.9 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 30 months.