Stockholders' Equity |
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| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity | Stockholders' Equity Common Stock
The Company is authorized to issue 100,000,000 shares of common stock with a par value of $0.0001 per share. Holders of the Company’s common stock are entitled to one vote for each share. At April 1, 2024 and January 1, 2024, there were 27,042,213 shares and 26,832,691 shares of common stock outstanding, respectively.
In addition to the CEO Awards, as defined below, as contemplated by the Bachmann Employment Agreement (as defined below) and as an inducement to employment, effective as of July 10, 2023, the Company issued the CEO 63,500 shares of the Company’s common stock, which such shares are subject to Rule 144 of the Securities Act of 1933, as amended.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. As of April 1, 2024 and January 1, 2024, there were 2,120,000 shares of preferred stock outstanding.
On February 24, 2023, the Company filed an amended and restated certificate of designation, (the “A&R CoD”), which among other matters, added a provision providing that in the event the Company fails to timely redeem any shares of Series A Preferred Stock on November 3, 2027, the applicable dividend rate shall automatically increase to the lesser of (A) the sum of 10.0% plus the 2.0% applicable default rate (with such aggregate rate increasing by an additional 0.35% per quarter from and after November 3, 2027), or (B) the maximum rate that may be applied under applicable law, unless waived in writing by a majority of the outstanding shares of Series A Junior Preferred Stock.
The A&R CoD also added a provision providing that in the event the Company fails to timely redeem any shares of Series A Junior Preferred Stock in connection with a Qualified Financing (as defined in the A&R CoD) on November 3, 2027 (a “Default”), the Company agrees to promptly commence a debt or equity financing transaction or sale process to solicit proposals for the sale of the Company and its subsidiaries (or, alternatively, the sale of material assets) designed to yield the maximum cash proceeds to the Company available for redemption of the Series A Junior Preferred Stock as promptly as practicable, but in any event, within 12 months from the date of the Default. If on or after November 3, 2026, the Company is aware that it is reasonably unlikely to have sufficient cash to timely effect the redemption in full of the Series A Junior Preferred Stock when first due, the Company shall, prior to such anticipated due date, take reasonable steps to engage an investment banking firm of national standing (and other appropriate professionals) to conduct preparatory work
for such a financing transaction and sale process of the Company and its subsidiaries to provide for such transaction to occur as promptly as possible after any failure for a timely redemption of the Series A Junior Preferred Stock.
The Series A Junior Preferred Stock ranks senior to the common stock and may be redeemed at the option of the Company at any time and must be redeemed by the Company in limited circumstances. The Series A Junior Preferred Stock shall not have voting rights or conversion rights.
Interests in a Consolidated Joint Venture
On February 29, 2024, the Company formed a joint venture with a third party for the development and operation of BurgerFi’s flagship corporate store in New York City, which opened during the quarter ended April 1, 2024. The Company holds an 80% interest in the joint venture and consolidates a $0.5 million 20% contribution to the joint venture from the non-controlling owner.
Warrants and Options
As of April 1, 2024, the Company had the following warrants and options outstanding: 15,063,800 warrants outstanding, each exercisable for one share of common stock at an exercise price of $11.50 including 11,468,800 in public warrants, 3,000,000 in Private Placement Warrants, 445,000 in Private Warrants (“private warrants”) and 150,000 in Working Capital Warrants. The public warrants expire in December 2025.
Warrant Liability
The Company has private warrants, which include provisions that affect the settlement amount. Such variables are outside of those used to determine the fair value of a fixed-for-fixed instrument, and as such, the warrants are accounted for as liabilities in accordance with ASC 815-40, Derivatives and Hedging, with changes in fair value included in the accompanying consolidated statements of operations.
The warrant liability was $0.04 million and $0.2 million at April 1, 2024 and January 1, 2024, respectively. The change in fair value of warrant liabilities for the quarters ended April 1, 2024 and April 3, 2023 resulted in a gain of $0.1 million and a loss of $0.1 million, respectively, and is recognized in the accompanying consolidated statements of operations.
The following is an analysis of changes in the warrant liability:
The fair value of the warrants are determined using the publicly-traded price of our common stock on the valuation dates of $0.5990 on April 1, 2024 and $0.86 on December 29, 2023, the last trading day before January 1, 2024. See Note 13, “Fair Value Measurements.”
Share-Based Compensation
The Company has the ability to grant stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and performance compensation awards to current or prospective employees, directors, officers, consultants or advisors under the Company’s 2020 Omnibus Equity Incentive Plan (the “Plan”). Accordingly, the Plan provides for the granting of Non-qualified Stock Options, Incentive Stock Options, RSU Awards, Restricted Stock Awards, Stock Appreciation Rights, Performance Stock Awards, Performance Unit Awards, Unrestricted Stock Awards, Distribution Equivalent Rights or any combination of the foregoing.
As of April 1, 2024 and January 1, 2024, there were approximately 1,400,000 and 400,000 shares of common stock available for future grants under the Plan, respectively.
The Company grants RSUs with service conditions, PSUs with performance and market conditions and unrestricted stock awards. RSUs granted with service conditions generally vest over 4 years. Performance conditions are based on key performance indicators, and market conditions include an index to the market value of the stock price of the Company. The fair value of the RSUs and PSUs granted is determined using the fair market value of the Company’s common stock on the date of grant, as set forth in the applicable Plan document.
RSU and PSU Awards under the Plan
The following table summarizes activity of RSUs and PSUs during the quarter ended April 1, 2024:
Share-based compensation expense recognized for awards under the Plan during the quarters and ended April 1, 2024 and April 3, 2023 was $0.8 million and $4.7 million, respectively. As of April 1, 2024, there was approximately $5.7 million of total unrecognized compensation cost related to unvested RSUs or PSUs under the Plan to be recognized over a weighted average period of 1.1 years.
Restricted Stock Unit Awards - Inducement Awards
On July 10, 2023, the Company issued awards of RSUs and PSUs to the Chief Executive Officer (“CEO Awards”) and the Chief Financial Officer (“CFO Awards”) as part of an inducement to enter into employment agreements with the Company (“Inducement Awards”). The Inducement Awards are not part of the Plan. Vesting for the Inducement Awards is over a five year period. Share based compensation expense related to the Inducement Awards recognized during the quarter ended April 1, 2024 was $0.2 million. As of April 1, 2024, there was approximately $1.8 million of total unrecognized compensation cost related to unvested Inducement Awards to be recognized over a weighted average period of 3.2 years.
Terms of the Inducement Awards are as follows:
•The CEO Awards are comprised of 500,000 time based RSUs which, subject to continuous employment, vest in equal tranches of 100,000 units per year, and 500,000 PSUs, which, subject to continuous employment and the achievement of certain performance criteria, vest in equal tranches of 100,000 units per year.
•The CFO Awards are comprised of 200,000 time based RSUs which, subject to continuous employment, vest in equal tranches of 40,000 units per year, and 200,000 PSUs, which, subject to continuous employment and the achievement of certain performance criteria, vest in equal tranches of 40,000 units per year.
Share-based compensation expense recognized for awards under the Plan and the Inducement Awards during the quarters ended April 1, 2024 and April 3, 2023 was $1.0 million and $4.7 million, respectively. As of April 1, 2024, there was approximately $7.5 million of total unrecognized compensation cost related to unvested RSUs or PSUs under the Plan and Inducement Awards to be recognized over a weighted average period of 2.1 years.
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