Equity-Based Compensation

9 Months Ended

Sep. 28, 2024

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

5.	Equity-Based Compensation

At September 28, 2024, Intevac had equity-based awards outstanding under the 2020 Equity Incentive Plan, the 2012 Equity Incentive Plan, the 2022 Inducement Equity Incentive Plan (the “Inducement Plan”) (together, the “Plans”) and the 2003 Employee Stock Purchase Plan (the “ESPP”). Intevac’s stockholders approved the 2020 Equity Incentive Plan, the 2012 Equity Incentive Plan and the ESPP. 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.

On January 19, 2022, Intevac’s Board of Directors (the “Board”) adopted 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. On July 1, 2024, the Board amended the Inducement Plan to increase the shares of common stock reserved for issuance thereunder by 600,000 shares. 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.

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 50% of their base earnings withheld to purchase Intevac common stock (not to exceed $25,000 per year).

Compensation Expense

The effect of recording equity-based compensation for the three and nine months ended September 28, 2024 and September 30, 2023 was as follows:


	Three Months Ended					Nine Months Ended
	September 28, 2024		September 30, 2023			September 28, 2024		September 30, 2023
	(In thousands)
Equity-based compensation by type of award:
Stock options	$	18	$	(3	)	$	26	$	(14	)
RSUs		589		221			1,710		1,576
PRSUs		329		35			840		1,367
ESPP purchase rights		98		63			364		464

Total equity-based compensation	$	1,034	$	316		$	2,940	$	3,393

Included in the table above is:

(a)

Equity-based compensation reported in discontinued operations of ($260,000) for the nine months ended September 30, 2023. (See Note

2. Divestiture and Discontinued Operations.)

Stock Options and ESPP

The fair value of stock options and ESPP awards is estimated at the grant date using the Black-Scholes option valuation model. The determination of the fair value of stock options and ESPP awards on the date of grant using an option-pricing model is affected by Intevac’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual employee stock option exercise behavior. Intevac accounts for forfeitures as they occur, rather than estimating expected forfeitures.

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


	Three Months Ended			Nine Months Ended
	September 28, 2024			September 28, 2024
Weighted-average fair value of grants per share	$	1.21		$	1.53
Expected volatility		43.56	%		48.02	%
Risk-free interest rate		3.72	%		4.41	%
Expected term (in years)		3.14			3.37
Dividend yield		None			None

Option activity as of September 28, 2024 and changes during the nine months ended September 28, 2024 were as follows:


	Shares			Weighted-Average Exercise Price
Options outstanding at December 30, 2023		142,000		$	6.57
Options granted		51,500		$	3.91
Options cancelled and forfeited		(31,000	)	$	11.43

Options outstanding at September 28, 2024		162,500		$	4.80

Options exercisable at September 28, 2024		111,000		$	5.22

Intevac issued 319,360 shares of common stock under the ESPP during the nine months ended September 28, 2024.

Intevac estimated the weighted-average fair value of ESPP purchase rights using the following weighted-average assumptions:


	Three Months Ended						Nine Months Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
ESPP Purchase Rights:
Weighted-average fair value of grants per share	$	1.11		$	0.63		$	1.32		$	0.91
Expected volatility		42.09	%		41.61	%		46.05	%		40.33	%
Risk-free interest rate		4.62	%		5.29	%		4.55	%		5.15	%
Expected term of purchase rights (in years)		0.75			1.09			0.93			1.08
Dividend yield		None			None			None			None

The computation of the expected volatility assumptions used in the Black-Scholes calculations for ESPP purchase rights is based on the historical volatility of Intevac’s stock price, measured over a period equal to the expected term of the purchase right. The risk-free interest rate is based on the yield available on U.S. Treasury Strips with an equivalent remaining term. The expected term of purchase rights represents the period of time remaining in the current offering period. The dividend yield assumption is based on Intevac’s history of not paying dividends and the assumption of not paying dividends in the future.

RSUs

RSU activity as of September 28, 2024 and changes during the nine months ended September 28, 2024 were as follows:


	Shares			Weighted-Average Grant Date Fair Value
Non-vested RSUs at December 30, 2023		915,087		$	4.89
Granted		495,176		$	3.88
Vested		(374,730	)	$	5.00
Cancelled and forfeited		(10,320	)	$	5.55

Non-vested RSUs at September 28, 2024		1,025,213		$	4.36

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 or four years. Time-based RSUs granted in May 2022 or later generally vest over a three-year period, with 33% vesting at the end of one year and the remaining vesting quarterly thereafter. 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.

PRSUs

PRSU activity as of September 28, 2024 and changes during the nine months ended September 28, 2024 were as follows:


	Shares		Weighted-Average Grant Date Fair Value
Non-vested PRSUs at December 30, 2023		1,160,293	$	4.04
Granted		822,000	$	3.84

Non-vested PRSUs at September 28, 2024		1,982,293	$	3.96

In June 2024 (and August 2024, in connection with the appointment of our Chief Financial Officer), we granted to members of our senior management awards of performance-based restricted stock units (the “2024 PRSU Awards”) covering an aggregate of 339,000 shares and 72,000 shares, respectively, of Intevac common stock at target performance, and 678,000 shares and 144,000 shares, respectively, of Intevac common stock at maximum performance. The 2024 PRSU Awards are eligible to be earned based on achievement of (i) a cumulative number of TRIO units shipped and the satisfaction of an operating profit requirement, both measured during a three-year performance period commencing on June 20, 2024 and ending on December 26, 2026 (the last day of our 2026 fiscal year) (the “TRIO Unit Award”), or (ii) an operating profit percentage, measured during a

one-year

performance period commencing on December 28, 2025 and ending on December 26, 2026, and satisfaction of a TRIO units shipped requirement as of December 26, 2026 (the “OPP Award”), with 50% of the target number of the 2024 PRSU Awards allocated to each of the TRIO Unit Award and the OPP Award. The number of shares that can be earned under the TRIO Unit Award will be 0%, 50%, 100% or 200% of the target number of shares, and the number of shares that can be earned under the OPP Award will range from 0% to 200% of the target number of shares. If a performance goal is not achieved within the applicable performance period, the corresponding PRSUs will not vest, and all unvested PRSUs at the end of the applicable performance period will immediately be forfeited. Stock compensation expense is recorded based on the probability of achievement of the performance conditions specified in the agreement governing the applicable 2024 PRSU Awards.

In May 2023, we granted to members of our senior management awards of performance-based restricted stock units (the “2023 PRSU Awards”) covering an aggregate of 525,656 shares of Intevac common stock (at maximum performance). The 2023 PRSU Awards are eligible to be earned based on achievement of five strategic goals during a three-year performance period commencing on May 18, 2023 and ending on May 31, 2026 (the “2023 Performance Period”). The 2023 PRSU Awards will vest, if at all, in five possible tranches. Each of the five tranches will vest only if the applicable strategic goal is achieved within the 2023 Performance Period, and each tranche may only be achieved once during the 2023 Performance Period. If a strategic goal is not achieved within the 2023 Performance Period, the corresponding PRSUs will not vest, and all unvested PRSUs at the end of the 2023 Performance Period will immediately be forfeited. Stock compensation expense is recorded based on the probability of achievement of the performance conditions specified in the PRSU grant.

The Company evaluated the performance and strategic goals under the 2024 PRSU Awards and 2023 PRSU Awards in the context of the Company’s long-range financial plan and product development roadmap and determined the probability of achieving each goal for accounting purposes commencing in the quarter awards were granted. Management expectations related to the achievement of performance goals associated with PRSUs with performance conditions are assessed regularly to determine whether such grants are expected to vest. The fair value of each PRSU is the Company’s stock price on the date of grant. Over the applicable performance period, the number of shares expected to be issued may be adjusted upward or downward based upon the probability of achievement of the performance conditions.