Equity-Based Compensation

12 Months Ended

Jan. 01, 2022

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Equity-Based Compensation

4. Equity-Based Compensation

Intevac accounts for share-based awards in accordance with the provisions of the accounting guidance which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, consultants and directors based upon the grant-date fair value of those awards. The estimated fair value of Intevac’s equity-based awards is amortized over the awards’ service periods using the graded vesting attribution method.

Descriptions of Plans

Equity Incentive Plans

At January 1, 2022, Intevac had equity-based awards outstanding under the 2020 Equity Incentive Plan and the 2012 Equity Incentive Plan (the “Plans”) and the 2003 Employee Stock Purchase Plan (the “ESPP”). Intevac’s stockholders approved all of these plans.

The Plans are a broad-based, long-term retention program intended to attract and retain qualified management and employees, and align stockholder and employee interests. The Plans permit the grant of incentive or non-statutory stock options, performance-based stock options (“PSOs”), restricted stock, stock appreciation rights, restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”) and performance shares. Option price, vesting period, and other terms are determined by the administrator of the Plans, but the option price shall generally not be less than 100% of the fair market value per share on the date of grant. As of January 1, 2022, 2.9 million shares of common stock were authorized for future issuance under the Plans. The 2020 Equity Incentive Plan expires no later than May 13, 2030.

On January 19, 2022, the Board of Directors adopted the 2022 Inducement Equity Incentive Plan (the “Inducement Plan”) and, subject to the adjustment provisions of the Inducement Plan, reserved 1,200,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. The Inducement Plan provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the Company’s 2020 Equity Incentive Plan. The Inducement Plan was adopted without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. In accordance with that rule, awards under the Inducement Plan may only be made to individuals not previously employees or non-employee directors of the Company (or following such individuals’ bona fide period of non-employment with the Company), as an inducement material to the individuals’ entry into employment with the Company.

2003 Employee Stock Purchase Plan

The ESPP provides that eligible employees may purchase Intevac’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market value at the entry date of the applicable offering period or at the end of each applicable purchase interval. Offering periods are generally two years in length, and consist of a series of six-month purchase intervals. Eligible employees may join the ESPP at the beginning of any six-month purchase interval. Under the terms of the ESPP, employees can choose to have up to 15% of their base earnings withheld to purchase Intevac common stock. Beginning August 1, 2020, under the terms of the ESPP, employees can choose to have up to 50% of their base earnings withheld to purchase Intevac common stock (not to exceed $25,000 per year). As of January 1, 2022, 729,000 shares remained available for issuance under the ESPP.

The effect of recording equity-based compensation for fiscal 2021 and 2020 was as follows (in thousands):

	2021		2020
Equity-based compensation by type of award:
Stock options	$198		$504
RSUs		2,819		1,936
Employee stock purchase plan		986		949
Total equity-based compensation *	$	4,003	$	3,389

*Included in the table above, equity based compensation reported in discontinued operations of $1.2 million and $1.0 million for fiscal years 2021 and 2020, respectively.

Equity-based compensation expense is based on awards which vest. Intevac accounts for forfeitures as they occur, rather than estimating expected forfeitures.

Stock Options

The exercise price of each stock option equals the market price of Intevac’s stock on the date of grant. Most options are scheduled to vest over three and/or four years and expire no later than ten years after the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Intevac’s employee stock options have characteristics significantly different from those of publicly traded options. The weighted-average assumptions used in the model are outlined in the following table:

	2021		2020
Stock Options:
Weighted-average fair value of grants per share		—	$	1.82
Expected volatility		—		46.06	%
Risk free interest rate	—		0.44%
Expected term of options (in years)		—		4.39
Dividend yield		—		None

The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on historical volatility of Intevac’s stock price. The risk-free interest rate is based on the yield available on U.S. Treasury Strips with an equivalent remaining term. The expected life of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The dividend yield assumption is based on Intevac’s history of not paying dividends and the assumption of not paying dividends in the future.

A summary of the stock option activity is as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Options outstanding at January 2, 2021		1,814,467		$	6.66		3.08	$	2,520,722
Options cancelled and forfeited		(280,261	)	$	7.44
Options exercised		(76,619	)	$	5.74
Options outstanding at January 1, 2022		1,457,587		$	6.55		2.31	$	7,622
Options exercisable at January 1, 2022		1,267,664		$	6.74		2.08	$	3,513

The total intrinsic value of options exercised during fiscal years 2021 and 2020 was $101,000 and $110,000, respectively. At January 1, 2022, Intevac had $78,000 of total unrecognized compensation expense related to stock option plans that will be recognized over the weighted-average period of 0.72 years.

RSUs

A summary of the RSU activity is as follows:

	Shares			Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Non-vested RSUs at January 2, 2021		901,634		$	5.30		1.50	$	6,500,781
Granted		606,705		$	6.03
Vested		(382,747	)	$	5.71
Cancelled		(92,156	)	$	4.79
Non-vested RSUs at January 1, 2022		1,033,436		$	5.59		1.39	$	4,867,484

Time-based RSUs are converted into shares of Intevac common stock upon vesting on a one-for-one basis. Time-based RSUs typically are scheduled to vest over three and/or four years. Vesting of time-based RSUs is subject to the grantee’s continued service with Intevac. The compensation expense related to these awards is determined using the fair market value of Intevac common stock on the date of the grant, and the compensation expense is recognized over the vesting period. At January 1, 2022, Intevac had $3.0 million of total unrecognized compensation expense related to RSUs that will be recognized over the weighted-average period of 1.39 years.

In May 2021, we granted 126,320 performance-based restricted stock units (“PRSUs”) to members of our senior management. The number of PRSUs that will vest is determined by our common stock achieving a certain Total Shareholder Return (“TSR”) for the Company, relative to the TSR of a specified peer group over a measurement period of two years from the time of grant. The fair value of each PRSU award was estimated on the date of grant using a Monte Carlo simulation. PRSU activity is included in the above RSU table. At the end of the performance measurement period, the Compensation Committee of the Board of Directors (the “Compensation Committee”) will determine the achievement against the performance objectives. Depending on the Company’s TSR relative to the peer group TSR, the actual number of shares that will be vested for each PRSU grant can range from zero to 200% of the initial grant.

Intevac estimated the weighted-average fair value of PRSUs using the following weighted-average assumptions:

	2021
Weighted-average fair value of grants per share	$	7.65
Expected volatility		56.26	%
Risk-free interest rate		0.15	%
Dividend yield		None

In May 2020, we granted 109,465 PRSUs to members of our senior management. The PRSUs were issued collectively in four separate tranches with individual one-year performance periods beginning in May 2020, 2021, 2022 and 2023, respectively. Vesting of the PRSUs is based on the performance of our common stock relative to the performance of a specified peer group. The fair value of each PRSU award was estimated on the date of grant using a Monte Carlo simulation. PRSU activity is included in the above RSU tables. At the end of each performance measurement period, the Compensation Committee will determine the achievement against the performance objectives. Any earned PRSU awards will vest 100% after the end of the applicable performance measurement period. The first performance measurement period ended in May 2021 and the metric was not achieved.

Intevac estimated the weighted-average fair value of PRSUs using the following weighted-average assumptions:

	2020
Weighted-average fair value of grants per share	$	3.16
Expected volatility		46.7	%
Risk-free interest rate		0.25	%
Dividend yield		None

ESPP

The fair value of the employee stock purchase right is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	2021			2020
Stock Purchase Rights:
Weighted-average fair value of grants per share	$	2.59		$	2.20
Expected volatility		60.88	%		51.49	%
Risk free interest rate		0.08	%		0.14	%
Expected term of purchase rights (in years)		0.91			1.24
Dividend yield		None			None

The expected life of purchase rights is the period of time remaining in the current offering period.

The ESPP activity during fiscal 2021 and 2020 is as follows:

	2021		2020
	(in thousands, except per share amounts)
Shares purchased		435		392
Weighted-average purchase price per share	$	5.05	$	4.01
Aggregate intrinsic value of purchase rights exercised	$	671	$	765

As of January 1, 2022, Intevac had $215,000 of total unrecognized compensation expense related to purchase rights that will be recognized over the weighted-average period of 0.5 years.