Stock – Based Compensation |
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| STOCK – BASED COMPENSATION | STOCK – BASED COMPENSATION Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). The Company has issued stock-based awards through several plans that are described in detail below. Stock-based compensation recognized under these plans was included within the following consolidated statements of operations line items for the three and six months ended July 3, 2026: $10.3 million and $10.9 million in general and administrative expenses, respectively, $3.6 million and $3.6 million in research and development expenses, respectively, and $0.3 million and $0.3 million in cost of goods sold, respectively. Stock-based compensation expense for the three and six months ended June 30, 2025 was included in general and administrative expenses. Stock-based compensation by award type is as follows (in thousands):
Restricted Stock Awards The Company granted restricted stock awards to employees under the 2025 Equity Incentive Plan, which was adopted on April 1, 2025, and assumed by the Company's 2026 Equity Incentive Plan on April 17, 2026. During the year ended December 31, 2025, the Company granted 530,890 shares of restricted stock to employees that included service-based vesting conditions and vest over a period of to three years, subject to a cliff and potential acceleration upon a qualifying liquidity event, which in some circumstances included an initial public offering. The aggregate grant date fair value of restricted stock granted during the year ended December 31, 2025 with service-based vesting conditions was $4.6 million. In connection with the IPO, the vesting of 73,500 shares of restricted stock accelerated. During the year ended December 31, 2025, the Company granted 80,000 shares of restricted stock to employees that vest solely based on a performance-based vesting condition tied to a liquidity event, which in some circumstances included an initial public offering, which is not probable until it occurs. In connection with the IPO, the 80,000 shares of restricted stock with performance-based vesting conditions accelerated and the Company recognized $0.9 million of stock-based compensation expense during the three months ended July 3, 2026. In total, the Company recognized approximately $2.1 million and approximately $2.8 million of stock-based compensation expense related to restricted stock awards during the three and six months ended July 3, 2026, respectively. The Company recognized approximately $0.4 million and approximately $0.4 million of stock-based compensation expense related to restricted stock awards during the three and six months ended June 30, 2025, respectively. The following table summarizes changes in restricted stock activity, excluding awards with performance-based vesting conditions, during the six months ended July 3, 2026:
The total fair value of 73,500 restricted stock awards that vested during the six months ended July 3, 2026 was $0.8 million. As of July 3, 2026, there was approximately $1.3 million of total unrecognized compensation cost related to unvested restricted stock awards, which is expected to be recognized over a weighted-average period of 1.1 years. Restricted Stock Units In connection with the IPO, the Company adopted the 2026 Equity Incentive Plan, which permits the Company to issue stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other types of awards (collectively, “awards”) to employees, consultants, or directors as compensation for services. The Company is permitted to issue up to a maximum number of shares of common stock underlying the awards of (A) 3,616,003 shares, plus (B) an increase commencing on January 1, 2027 and continuing annually on each anniversary thereof through and including January 1, 2036, equal to the lesser of (i) 3.0% of the shares of common stock outstanding on the last day of the immediately preceding calendar year and (ii) such smaller number of shares of common stock as determined by the board of directors. Restricted stock units generally vest over a period ranging from to five years of service, and restricted stock units and stock appreciation rights granted under the Plan have a maximum contractual term of 10 years from the date of grant. Shares issued upon the exercise of stock options or stock appreciation rights, or upon the vesting of restricted stock units, are issued from authorized but unissued shares of common stock. The Company accounts for forfeitures of awards as they occur, which is applied on an entity-wide basis to all awards outstanding under the 2026 Equity Incentive Plan. The Company measures the fair value of stock options and stock appreciation rights using the Black-Scholes option-pricing model. Restricted stock units are measured at the closing price of the Company’s common stock on the date of grant. For the three and six months ended July 3, 2026, the Company recognized approximately $0.8 million and $0.8 million, respectively, of stock-based compensation related to restricted stock units. The following table summarizes changes in restricted stock unit activity, during the six months ended July 3, 2026:
As of July 3, 2026, there was approximately $8.0 million of total unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 1.7 years. Stock Appreciation Rights The Company previously granted unit appreciation rights (“UARs”) in a consolidated subsidiary to certain employees which entitle the employees to cash payments upon the occurrence of a qualifying liquidity event. The Company accounted for these awards as a cash-settled profit-sharing bonus arrangement. For the three and six months ended June 30, 2025, no compensation expense was recorded in these consolidated financial statements related to the unit appreciation rights, as the Company determined that a qualifying liquidity event was not probable. During the three and six months ended July 3, 2026, in connection with the Reorganization, the Company modified the UARs and issued replacement awards in the form of 987,700 stock appreciation rights (“SARs”) with an exercise price of $0.91 per SAR. Because the UARs were not probable of vesting and no compensation cost had been recognized prior to the modification, the Company measured the incremental compensation cost of the modification as the entire modification-date fair value of the replacement SARs. The SARs are accounted for as stock-based compensation and vest based upon a performance-based vesting condition tied to a qualifying liquidity event, including an initial public offering, which is not probable until it occurs. Upon the occurrence of the initial public offering, 677,280 SARs were settled with common stock (“equity-settled SARs”) and the remaining 310,420 SARs were settled in cash (“cash settled SARs’). The equity-settled SARs had a modification date fair value was approximately $7.2 million. The fair value of the equity-settled SARs was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions: expected term of 0.58 years, expected volatility of 44.7%, expected dividend yield of 0%, and a risk-free interest rate of 3.77%. Expected volatility was based on the implied volatility of a group of guideline public companies, as the Company does not have sufficient trading history in its own common stock. The cash settled SARs are classified as liability awards and the associated compensation cost is recognized based upon the fair value of the SARs when the performance-based vesting condition is probable of being met. In connection with the IPO, all outstanding SARs vested and the Company recognized approximately $11.2 million of stock-based compensation expense related to stock appreciation rights during the three and six months ended July 3, 2026, of which $4.1 million was settled in cash. As all outstanding SARs vested in connection with the IPO, there was no unrecognized compensation cost related to the SARs as of July 3, 2026.
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