XML 46 R22.htm IDEA: XBRL DOCUMENT v3.20.2
Equity Compensation Plans
 6 Months Ended
Jun. 30, 2020
Share-based Payment Arrangement [Abstract]  
Equity Compensation Plans

16. Equity Compensation Plans

 

2017 Equity Incentive Plan

 

The Purple Innovation, Inc. 2017 Equity Incentive Plan (the "2017 Incentive Plan") provides for grants of stock options, stock appreciation rights, restricted stock and other stock-based awards. Directors, officers and other employees and subsidiaries and affiliates, as well as others performing consulting or advisory services for the Company and its subsidiaries, will be eligible for grants under the 2017 Incentive Plan. The aggregate number of shares of Common Stock which may be issued or used for reference purposes under the 2017 Incentive Plan or with respect to which awards may be granted may not exceed 4.1 million shares. As of June 30, 2020, approximately 2.0 million shares remain available under the 2017 Incentive Plan.

  

Class A Common Stock Awards

 

In March 2020, the Company granted a restricted stock award under the Company's 2017 Equity Incentive Plan to the Company's independent Board advisor and GPAC observer. The stock award vests in March 2021. As this award includes a service condition, the estimated fair value of the restricted stock is measured on the grant date and is recognized over the service period. The Company determined that the fair value of the restricted stock on the grant date was immaterial.

 

In May 2020, the Company granted restricted stock awards under the Company's 2017 Equity Incentive Plan to the Certain employees of the Company. The stock awards vest over 3 to 4 years. The estimated fair value of the restricted stock is measured on the grant date and is recognized over the vesting period. The Company determined that the fair value of the restricted stock on the grant dates were $0.7 million.

 

Employee Stock Options

 

During the six months ended June 30, 2020, the Company granted stock options under the Company's 2017 Equity Incentive Plan to certain management of the Company. The stock options have an exercise price ranging from of $12.76 to $15.12 per option. The stock options expire in five years and vest over a four-year period. The estimated fair value of the stock options, less expected forfeitures, is amortized over the options vesting period on a straight-line basis. The Company determined the fair value of the options granted during the six months ended June 30, 2020 using the Black Scholes method with the following assumptions:

 

Fair market value   $ 8.02 – 15.12  
Exercise price   $ 12.76 – 15.12  
Risk free interest rate     0.21 - 0.61 %
Expected term in years     2.50 - 3.56  
Expected volatility     38.28 – 54.45 %
Expected dividend yield     —  

 

The following table summarizes the Company's total stock option activity for the six months ended June 30, 2020:

 

   

Options

(in thousands)

    

Weighted

Average

Exercise

Price

    

Weighted

Average

Remaining

Contractual

Term in

Years

    

Intrinsic

Value $

  
As of June 30, 2020:                        
Options outstanding as of January 1, 2020     2,136     $ 6.95       4.3     $

3,752

  
Granted     309       13.11       —       —  
Exercised     (14 )      6.51       —       —  
Forfeited/cancelled     (20 )     6.51       —       —  
Options outstanding as of June 30, 2020     2,411     $ 7.75       3.9     $ 24,719  

 

Outstanding and exercisable stock options as of June 30, 2020 are as follows:

 

    Options Outstanding   Options Exercisable 
Exercise Prices    

Number of

Options

Outstanding
(in thousands)

    

Weighted
Average
Remaining Life

(Years)

    

Number of

Options

Exercisable
(in thousands)

    Weighted
Average
Remaining Life (Years)		    Intrinsic Value 
$5.75    250    3.64    83   $3.64   $1,021 
 5.95    538    3.25    224    3.25    2,701 
 6.51    325    3.89    92    3.89    1,059 
 6.65    200    3.86    54    3.86    615 
 7.99    28    4.42    9    4.42    86 
 8.07    8    4.16    —    —    — 
 8.17    325    4.25    102    4.25    998 
 8.32    250    4.00    —    —    — 
 8.55    179    4.25    —    —    — 
 12.76    25    4.70    —    —    — 
 13.12    281    4.69    17    3.88    83 
 15.12    3    4.88    —    —    — 

 

The estimated fair value of the Company stock options, less expected forfeitures, is amortized over the options vesting period on the straight-line basis. The Company recognized $0.4 million and $0.1 million in stock-based compensation expenses related to stock options during the three months ended June 30, 2020 and 2019, respectively. The Company recognized $0.6 million and $0.2 million in stock-based compensation expenses related to stock options during the six months ended June 30, 2020 and 2019, respectively.

 

As of June 30, 2020, there was $3.7 million of total unrecognized stock compensation cost with a remaining recognition period of 2.85 years.

 

InnoHold Incentive Units

 

In January 2017, pursuant to the 2016 Equity Incentive Plan approved by InnoHold and Purple LLC that authorized the issuance of 12.0 million incentive units, Purple LLC granted 11.3 million incentive units to Purple Team LLC, an entity for the benefit of certain employees who were participants in that plan. In conjunction with the Business Combination, Purple Team LLC was merged into InnoHold with InnoHold being the surviving entity and the Purple Team LLC incentive units were cancelled and new incentive units were issued by InnoHold under its own limited liability company agreement (the "InnoHold Agreement"). On February 8, 2019, InnoHold initiated a tender offer to each of these incentive unit holders, some of which are current employees of Purple LLC, to distribute to each a pro rata number of 2.5 million Paired Securities held by InnoHold in exchange for the cancellation of their ownership interests in InnoHold. All InnoHold incentive unit holders accepted the offer, and the terms and distribution of each transaction were finalized and closed on June 25, 2019. At the closing of the tender offer, those incentive unit holders received, based on their pro rata holdings of InnoHold Class B Units, a portion of 2.5 million Paired Securities held by InnoHold. The distribution by InnoHold to current employees of Purple LLC as of the distribution date resulted in the recognition of non-cash stock compensation expense for Purple LLC in the amount of $6.3 million which represented the fair value of the Paired Securities as of the distribution date in 2019. As of June 30, 2020, 0.8 million of the Paired Securities remain to be exchanged for Class A Stock by the incentive unit holders. A small number of Paired Securities remain subject to vesting contingent upon such current employees' continued employment with the Company.

 

Aggregate Non-Cash Stock-Based Compensation

 

The Company has accounted for all stock-based compensation under the provisions of ASC 718 Compensation—Stock Compensation. This standard requires the Company to record a non-cash expense associated with the fair value of stock-based compensation over the requisite service period. The table below summarizes the aggregate non-cash stock-based compensation recognized in the statement of operations for stock awards, employee stock options and the distribution by InnoHold of Paired Securities.

 

(in thousands)  Three Months Ended
June 30,		   Six Months Ended
June 30,		 
Non-Cash Stock-Based Compensation  2020   2019   2020   2019 
                 
Cost of revenues  $45   $453   $80   $465 
Marketing and sales   88    2,883    148    2,883 
General and administrative   507    2,881    659    2,942 
Research and development   322    516    325    516 
Total non-cash stock-based compensation  $962   $6,733   $1,212   $6,806