Equity Agreements and Incentive Equity Plans

6 Months Ended

Jun. 25, 2021

Share-based Payment Arrangement [Abstract]

Equity Agreements and Incentive Equity Plans

Parent Incentive Plan — In October 2017, Crackle Holdings, L.P. (the “Parent”) approved the Class B Unit Incentive Plan, which established the terms and provided for grants of certain incentive units to employees, officers, directors, consultants, and advisors of the Company containing service-based and/or market-based vesting criteria. Class B-1 Incentive Units (“B-1 Units”) become vested in installments over a five-year period, subject to the grantee’s continued employment or service. Class B-2 Incentive Units (“B-2 Units”) have both service-based and market-based vesting conditions, as they are subject to the same service conditions as the B-1 Units, but also require the achievement of a specified return hurdle in order to vest.

The Company estimated a discount for lack of marketability (“DLOM”) using a put option model. The DLOM reflects the lower value placed on securities that are not freely transferable, as compared to those that trade frequently in established markets.

The summary of the Company’s incentive unit activity as of June 25, 2021 is as follows:


	B-1 Incentive Units			B-2 Incentive Units
	Number of Units (in 000’s)	Weighted- Average Grant-Date Fair Value		Number of Units (in 000’s)	Weighted- Average Grant-Date Fair Value
Outstanding units-December 25, 2020	70,739	$	0.34	19,822	$	0.06
Units granted	1,200	0.51		—	—
Units forfeited	3,353	0.39		—	—
Outstanding units-June 25, 2021	68,586	$	0.34	19,822	$	0.06
Vested units-June 25, 2021	34,916	$	0.31	—	—
Nonvested units-June 25, 2021	33,670	$	0.37	19,822	$	0.06

During the six months ended June 25, 2021, 3,366 B-1 Units vested with a total grant-date fair value of $962. There were no grants during the three months ended June 25, 2021. The Company recognized $1,178 and $1,185 of compensation expense within selling, general and administrative expenses in the accompanying condensed consolidated statements of operations during the three months ended June 25, 2021 and June 26, 2020, respectively. The Company

recognized $2,238 and $2,547 of compensation expense within selling, general and administrative expenses in the accompanying condensed consolidated statements of operations during the six months ended June 25, 2021 and June 26, 2020, respectively.

As of June 25, 2021, there was approximately $11,546 of unrecognized compensation expense related to outstanding incentive units, which is expected to be recognized subsequent to June 25, 2021, over a weighted-average period of approximately four years.

Control4 Equity Awards — In connection with the acquisition of Control4 Corporation in 2019, the Company agreed to a settlement of Control4 equity awards that were outstanding immediately prior to the acquisition date, consisting of stock options (“C4 Stock Options”) and restricted stock units (“C4 RSUs” and, together with C4 Stock Options, “C4 Equity Awards”). As of the acquisition date, 2,998 shares of C4 Equity Awards were cancelled and converted into rights to receive cash payments (the “Replacement Awards”). During the three months ended June 25, 2021, Replacement Awards forfeited were 1. As of June 25, 2021, 126 unvested Replacement Award units remain outstanding. There were no vested Replacement Award units outstanding as of June 25, 2021.

The Company recognized $818 and $2,266 of compensation expense relating to the Replacement Awards within selling, general and administrative expenses in the accompanying condensed consolidated statement of operations during the three months ended June 25, 2021 and June 26, 2020, respectively. The Company recognized $2,544 and $5,068 of compensation expense relating to the Replacement Awards within selling, general and administrative expenses in the accompanying condensed consolidated statement of operations during the six months ended June 25, 2021 and June 26, 2020, respectively.

There was approximately $2,572 of unrecognized compensation expense related to the nonvested Replacement Awards, which is expected to be recognized subsequent to June 25, 2021 over a weighted- average period of approximately 1 year. Total unrecognized compensation expense will be adjusted for future forfeitures.