Stockholders' Equity

12 Months Ended

Sep. 29, 2020

Stockholders' Equity Note [Abstract]

Stockholders' Equity

8. Stockholders’ Equity:

Preferred Stock

The Company has the authority to issue 5,000,000 shares of preferred stock. The Board of Directors has the authority to issue such preferred shares in series and determine the rights and preferences of the shares as may be determined by the Board of Directors.

Common Stock

The Company has the authority to issue 50,000,000 shares of common stock with a par value of $.001. As of September 29, 2020 and September 24, 2019 there were 12,612,852 and 12,541,082 shares outstanding, respectively.

Stock Plans

The Company has traditionally maintained incentive compensation plans that include provision for the issuance of equity-based awards. The Company established the 2008 Omnibus Equity Incentive Compensation Plan in 2008 (the “2008 Plan”) and has outstanding awards that were issued under the 2008 Plan. Subsequently, the 2008 Plan expired in 2018 and the Company established a new plan, the 2018 Omnibus Equity Incentive Plan (the “2018 Plan”) during the third fiscal quarter of 2018, pursuant to shareholder approval. Future awards will be issued under the 2018 plan.

Stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting period of the grant). The Company recognizes the impact of forfeitures as forfeitures occur.

The Company recorded $283,000 and $719,000 in total stock option and restricted stock compensation expense during fiscal years 2020 and 2019, respectively, that was classified as general and administrative costs. The amount for fiscal 2019 includes stock compensation cost associated with the subsequent termination of the Company’s CEO pursuant to a severance and separation agreement totaling $277,000.

Stock Option Awards

The Company measures the compensation cost associated with stock option awards by estimating the fair value of the award as of the grant date using the Black-Scholes pricing model. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s stock options and stock awards granted during fiscal 2020 and fiscal 2019. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the employees who receive equity awards.

During the fiscal year ended September 29, 2020, there were no incentive stock options granted.

During the fiscal year ended September 24, 2019, the Company granted a total of 99,832 incentive stock options, from available shares under its 2018 Plan, with exercise prices between $4.66 and $5.00 and per-share weighted average fair values between $2.68 and $3.16.

In addition to the exercise and grant date prices of the stock option awards, certain weighted average assumptions that were used to estimate the fair value of stock option grants are listed in the following table:

Incentive and Non-Statutory Stock Options
	Fiscal Year
	2019
Expected term (years)		7.5
Expected volatility		70.65% to 70.80%
Risk-free interest rate		3.01% to 3.10%
Expected dividends		0

We estimate expected volatility based on historical weekly price changes of our common stock for a period equal to the current expected term of the options. The risk-free interest rate is based on the United States treasury yields in effect at the time of grant corresponding with the expected term of the options. The expected option term is the number of years we estimate that options will be outstanding prior to exercise considering vesting schedules and our historical exercise patterns.

The following table summarizes stock option activity for fiscal year 2020 under all plans:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Yrs.)
Outstanding-beg of year		703,164		$	3.53
Options exercised		(15,646	)	$	1.48
Forfeited		(48,671	)	$	3.74
Expired		(8,579	)	$	3.45
Outstanding Sept 29, 2020		630,268		$	3.56	5.1
Exercisable Sept 29, 2020		473,051		$	3.38	4.3

As of September 29, 2020, the aggregate intrinsic value of both the outstanding and exercisable options was $5,000. Only options whose exercise price is below the current market price of the underlying stock are included in the intrinsic value calculation.

As of September 29, 2020, the total remaining unrecognized compensation cost related to non-vested stock options was $194,000 and is expected to be recognized over a weighted average period of approximately 1.8 years.

There were 15,646 stock options exercised that resulted in an issuance of 2,413 shares during fiscal 2020 with no proceeds in conjunction with the termination of the Company’s CEO pursuant to a severance and separation agreement. There were 667 stock options exercised during fiscal 2019 with proceeds of approximately $3,000.

Restricted Stock Units

During the fiscal year ended September 29, 2020, the Company granted a total of 60,336 restricted stock units from available shares under its 2018 Plan. 46,336 shares were issued with a grant date fair market value of $1.54 which is equal to the closing price of the stock on the date of the grant. These restricted stock units vest three years following the grant date. 14,000 shares were issued with a grant date fair market value of $1.67 which is equal to the closing price of the stock on the date of the grant. These restricted stock units vested on their grant date.

During the fiscal year ended September 24, 2019, the Company granted a total of 79,988 restricted stock units from available shares under its 2018 Plan. The shares were issued with a grant date fair market value of $3.95 which is equal to the closing price of the stock on the date of the grant. The restricted stock units vest over three years following the grant date.

A summary of the status of non-vested restricted stock as of September 29, 2020 and changes during fiscal 2020 is presented below:

	Shares			Grant Date Fair Value Per Share
Non-vested shares at beg of year		165,275		$2.70 to $3.95
Granted		60,336		$1.54 to $1.67
Forfeited		(8,992	)	$3.55 to $3.95
Vested		(124,015	)	$1.67 to $3.95
Non-vested shares at Sept 29, 2020		92,604		$1.54 to $3.95

As of September 29, 2020, there was $159,000 of total unrecognized compensation cost related to non-vested restricted stock. This cost is expected to be recognized over a weighted average period of approximately .80 years.

Non-controlling Interests

Non-controlling interests are presented as a separate item in the stockholders’ equity section of the consolidated balance sheets. The amount of consolidated net income or loss attributable to non-controlling interests is presented on the face of the consolidated statements of operations. Changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions, while changes in ownership interest that do result in deconsolidation of a subsidiary require gain or loss recognition based on the fair value on the deconsolidation date.

The equity interests of the unrelated limited partners and members are shown on the accompanying consolidated balance sheets in the stockholders’ equity section as a non-controlling interest and is adjusted each period to reflect the limited partners’ and members’ share of the net income or loss as well as any cash contributions or distributions to or from the limited partners and members for the period. The limited partners’ and members’ share of the net income or loss in the subsidiary is shown as non-controlling interest income or expense in the accompanying consolidated statements of operations. All inter-company accounts and transactions are eliminated.

The following table summarizes the activity in non-controlling interests during the year ended September 29, 2020 (in thousands):

	Bad Daddy’s			Good Times			Total
Balance at September 24, 2019	$	1,190		$	332		$	1,522
Income attributable to non-controlling interests	$	493		$	629		$	1,122
Net Distributions to unrelated limited partners*	$	(660	)	$	(691	)	$	(1,351	)
Balance at September 29, 2020	$	1,023		$	270		$	1,293

* Includes $352,000 of distributions reflected on our consolidated balance sheet in other accrued liabilities at September 29, 2020.

Our non-controlling interests consist of one joint venture partnership involving Good Times restaurants and five joint venture partnerships involving five Bad Daddy’s restaurants.