Annual report pursuant to Section 13 and 15(d)

Equity-based Compensation

v3.24.0.1
Equity-based Compensation
 12 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Equity-based Compensation Equity-based Compensation
Incentive Plans
2021 Omnibus Incentive Plan
In September 2021, the Company’s board of directors adopted, and its stockholders approved, the 2021 Omnibus Incentive Plan (the “2021 Plan”) which became effective in connection with the IPO. The 2021 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units and other forms of equity and cash compensation. A total of 408,355 shares of the Company’s common stock, as adjusted for the one-for-12 Reverse Stock Split, were initially reserved for issuance under the 2021 Plan. The number of shares of common stock reserved and available for issuance under the 2021 Plan automatically increases on January 1 of each year by 1% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the compensation committee of the Company’s board of directors. On May 30, 2023, the Company’s stockholders approved an amendment to the 2021 Plan to increase the number of shares available for issuance under the 2021 Plan by 833,333 shares of the Company’s common stock, as adjusted for the one-for-12 Reverse Stock Split. As of December 31, 2023, there were 1,456,396 shares reserved for issuance under the 2021 Plan, as adjusted for the one-for-12 Reverse Stock Split.
2021 Employee Stock Purchase Plan
In September 2021, the Company’s board of directors adopted, and its stockholders approved, the 2021 Employee Stock Purchase Plan (the “ESPP”) which became effective in connection with the IPO. A total of 102,088 shares of the Company’s common stock, as adjusted for the one-for-12 Reverse Stock Split, were initially reserved for issuance under the ESPP. The number of shares reserved and available for issuance under the ESPP automatically increases on January 1 of each year by 1% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the compensation committee of the Company’s board of directors. As of December 31, 2023, there were 316,797 shares reserved for issuance under the ESPP, as adjusted for the one-for-12 Reverse Stock Split.
The offering periods of the ESPP are six months long and are anticipated to be offered twice per year. The price at which common stock is purchased under the ESPP is equal to 85% of the fair market value of a share of the Company’s common stock on the first or last day of the offering period, whichever is lower. The fair value of the discount and the look-back period will be estimated using the Black-Scholes option pricing model.
2018 Stock and Incentive Compensation Plan
Prior to the IPO, the 2018 Stock and Incentive Compensation Plan, as amended (the “2018 Plan”), provided for the issuance of time-based incentive units and performance-based incentive units issued by Excelerate (the predecessor entity of a.k.a. Brands Holding Corp.). In connection with the reorganization transactions and the IPO, all of the equity interests in Excelerate, including outstanding incentive units issued as equity-based compensation under the 2018 Plan, were transferred to New Excelerate. The incentive units issued under the 2018 Plan participate in distributions from New Excelerate, but only after investors receive their return of capital plus a specified threshold amount per unit. The total incentive pool size under the 2018 Plan was 16,475,735 units. The 2018 Plan was terminated in September 2021 in connection with the IPO but continues to govern the terms of outstanding incentive units that were granted prior to the IPO. No further incentive units will be granted under the 2018 Plan.
Grant Activity
Stock Options
The 2021 Plan provides for the issuance of incentive and nonqualified stock options. Under the 2021 Plan, the exercise price of a stock option shall not be less than the fair market value of one share of the Company’s common stock on the date of grant. Stock options have a contractual term, the period during which they are exercisable, not to exceed ten years from the date of grant, and generally vest over time, based on performance or based on the achievement of a market condition. In September 2023, an award, including 416,667 performance-based stock options (the “Bryett Award”), was issued to Wesley Bryett, a member of the Company’s board of directors, co-founder of Princess Polly and the Global CEO of Culture Kings. This award expires after ten years, or upon the termination of Mr. Bryett’s service to the Company, and includes four tranches of stock options that will vest and become exercisable based upon the achievement of various common stock price targets. The weighted average exercise price for the options in the Bryett Award is $109.27. Each tranche of stock options has a different derived service period, the average of which is approximately 5.5 years. As of December 31, 2023, no options issued as part of the Bryett Award had vested, the options held no intrinsic value, and total unrecognized compensation cost related to the Bryett Award was $1.1 million which is expected to be recognized over 5.2 years.
A summary of the Company's time-based stock option activity under the 2021 Plan for the years ended December 31, 2023, 2022 and 2021, as adjusted for the one-for-12 Reverse Stock Split, is as follows:
Number of Options
Weighted Average Exercise Price
Weighted Average Remaining Contractual Term
Aggregate Intrinsic Value
Balance as of December 31, 2021
 22,752  $ 114.00  9.73 $ — 
Granted
 19,536  47.64 
Exercised
 —  — 
Forfeited/Repurchased
 —  — 
Balance as of December 31, 2022
 42,288  83.36  9.04 — 
Granted
 —  — 
Exercised
 —  — 
Forfeited/Repurchased
 (2,468) 114.00 

Balance as of December 31, 2023
 39,820  81.47  8.06 — 
Vested as of December 31, 2023
 22,503  82.70  8.05 — 
As of December 31, 2023, there was $0.7 million of total unrecognized compensation cost related to unvested time-based stock options issued under the 2021 Plan, which is expected to be recognized over a weighted average period of 1.5 years.
The assumptions that the Company used to determine the grant date fair value of time-based stock options granted under the 2021 Plan during the year ended December 31, 2022, were as follows, presented on a weighted-average basis:
Year Ended December 31, 2022
Risk free interest rate
 2.96  %
Expected volatility
 65.34  %
Expected dividend yield
 —  %
Expected term
 5.85 years
Restricted Stock Units
The 2021 Plan provides for the issuance of restricted stock units (“RSUs”). RSUs issued prior to March 31, 2022, vest over four years while all RSUs issued after that date vest over three years.
A summary of the Company's RSU activity under the 2021 Plan for the years ended December 31, 2023, 2022 and 2021, as adjusted for the one-for-12 Reverse Stock Split, is as follows:
Number of Shares
Weighted Average
Grant Date
Fair Value
Balance as of December 31, 2021
 76,290  $ 120.48 
Granted
 325,967  21.36 
Vested
 (21,911) 118.20 
Forfeited/Repurchased
 (12,834) 116.40 
Balance as of December 31, 2022
 367,512  32.81 
Granted
 387,067  7.87 
Vested
 (130,550) 34.20 
Forfeited/Repurchased
 (45,116) 34.79 
Balance as of December 31, 2023
 578,913  $ 15.67 
As of December 31, 2023, there was $8.3 million of total unrecognized compensation cost related to unvested RSUs issued under the 2021 Plan, which is expected to be recognized over a weighted average period of 1.9 years.
Incentive Units
The 2018 Plan provided for the issuance of time-based incentive units and performance-based incentive units. Time-based incentive units generally vest over four years. Performance-based incentive units vested upon the satisfaction of the performance condition as described further below.
Time-Based Incentive Partnership Units
The following table summarizes time-based incentive unit activity under the 2018 Plan for the years ended December 31, 2023, 2022 and 2021:
Number of Units
Weighted Average
Grant Date
Fair value
Weighted Average Participation Threshold
Aggregate Intrinsic Value
Balance as of December 31, 2021
 5,975,813  1.16  36.48  14,162 
Granted
 —  —  — 
Vested
 (2,511,311) 1.15  36.24 
Forfeited/Repurchased
 (100,646) 0.46  21.96 
Balance as of December 31, 2022
 3,363,856  1.43  18.64  — 
Granted
 —  —  — 
Vested
 (1,987,639) 1.37  17.67 
Forfeited/Repurchased
 (16,150) 3.19  22.68 

Balance as of December 31, 2023
 1,360,067  1.50  20.01  — 
Vested as of December 31, 2023
 7,861,220 
As of December 31, 2023, there was $1.7 million of total unrecognized compensation cost related to unvested time-based incentive units issued under the 2018 Plan, which is expected to be recognized over a weighted average period of 0.9 years.
Performance-Based Incentive Units
Performance-based incentive units vest upon the satisfaction of a performance condition and become exercisable upon the satisfaction of the market condition. The performance condition was satisfied upon the occurrence of the IPO. As it was not deemed probable until it occurred, all compensation expense related to these awards was recognized at the date of the IPO. The market condition is satisfied upon the initial investor in Excelerate receiving an aggregate return equal to three times its aggregate investment. As of December 31, 2023, all outstanding performance-based incentive units had been fully expensed.
Transition Agreement
During the year ended December 31, 2020, the Company entered into a transition agreement with a former executive whereby all unvested incentive units were forfeited upon their termination. Pursuant to the terms of this transition agreement, the former executive retained 261,287 vested incentive units following their termination. As permitted by the original terms of the incentive units, the Company exercised its right to repurchase the former executive’s remaining 802,634 vested incentive units for total cash consideration of $1.1 million payable within a certain period following their termination. As of December 31, 2021, the consideration payable was deducted from additional paid-in capital as it did not exceed the fair value of the repurchased incentive units as of the date of repurchase. The units were repurchased in 2022.
ESPP Purchase Rights
A summary of the Company's ESPP activity under the 2021 Plan for the years ended December 31, 2023 and 2022, as adjusted for the one-for-12 Reverse Stock Split, was as follows:
Year Ended December 31,
2023 2022
Shares purchased using ESPP purchase rights
 39,050 12,348
Weighted average purchase price
 $ 4.14  $ 18.36 
Equity-Based Compensation Expense
The Company recognizes compensation expense in general and administrative expenses within operating expenses for stock options, RSUs, ESPP purchase rights and time-based incentive units granted prior to the IPO by amortizing the grant date fair value on a straight-line basis over the expected vesting period to the extent the vesting of the grant is considered probable. The Company recognized compensation expense for performance-based incentive units granted prior to the IPO at the date of IPO. The Company recognizes equity-based award forfeitures in the period such forfeitures occur.
The following table summarizes the Company’s equity-based compensation expense by award type for all Plans:
Year Ended December 31,
2023 2022 2021
Stock options $ 572  $ 495  $ 95 
RSUs 4,256  2,943  655 
ESPP purchase rights 148  188  — 
Time-based incentive units 2,664  3,104  2,390 
Performance-based incentive units —  —  4,903 
Total $ 7,640  $ 6,730  $ 8,043