CarParts.com, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity and Share-Based Compensation

Stockholders' Equity and Share-Based Compensation

3 Months Ended

Apr. 04, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stockholders' Equity and Share-Based Compensation

Stockholders’ Equity and Share-Based Compensation

Non-Controlling Interest

Non-controlling interests represent equity interests in consolidated subsidiaries that are not attributable, either directly or indirectly, to the Company (i.e., minority interests). Non-controlling interests include the minority equity holders' proportionate share of the equity of AutoMD.

Ownership interests in subsidiaries held by parties other than the Company are presented as non-controlling interests within stockholders' equity, separately from the equity held by the Company. Revenues, expenses, net loss and other comprehensive income are reported in the consolidated financial statements at the consolidated amounts, which includes amounts attributable to both the Company's interest and the non-controlling interests in AutoMD. Net loss and other comprehensive income is then attributed to the Company's interest and the non-controlling interests. Net loss to non-controlling interests is deducted from net loss in the consolidated statements of comprehensive operations to determine net loss attributable to the Company's common stockholders.

The table below presents the changes in the Company's ownership interest in AutoMD on the Company's equity:



	Common stock amount		Preferred stock amount		Additional Paid-in- Capital			Common Stock Dividend Distributable			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity			Noncontrolling Interest			Total
Balance, January 3, 2015	$	33	$	4	$	174,369		$	—		$	360		$	(155,489	)	$	19,277		$	2,946		$	22,223
Net loss	—		—		—			—			—			(60		)	(60		)	(256		)	(316		)
Issuance of shares in connection with stock option exercise	—		—		13			—			—			—			13			—			13
Statutory tax withholding on RSUs	1		—		(359		)	—			—			—			(358		)	—			(358		)
Statutory tax withholding on options exercised	—		—		(80		)	—			—			—			(80		)	—			(80		)
Share-based compensation	—		—		549			—			—			—			549			—			549
Issuance of shares related to dividends on preferred stock	—		—		60			(60		)	—			—			—			—			—
Common stock dividend distributable on Series A Preferred Stock	—		—		—			60			—			(60		)	—			—			—
Effect of changes in foreign currencies	—		—		—			—			(10		)	—			(10		)	—			(10		)
Balance, April 4, 2015	$	34	$	4	$	174,552		$	—		$	350		$	(155,609	)	$	19,331		$	2,690		$	22,021

Common Stock

The Company has 100,000 shares of common stock authorized. We have never paid cash dividends on our common stock. The following issuances of common stock were made during the thirteen weeks ended April 4, 2015:


•	The Company issued 51 shares of common stock from option exercises under its various share-based compensation plans.


•	The Company issued 247 shares of common stock from restricted stock units that vested during the period.


•	The Company issued 27 shares of common stock in payment of the quarterly dividend on the Series A Preferred on the dividend payment date of March 31, 2015 in the aggregate amount of $59.

Share-Based Compensation Plan Information

The following table summarizes the Company’s stock option activity for the thirteen weeks ended April 4, 2015, and details regarding the options outstanding and exercisable at April 4, 2015:



	Shares (in thousands)		Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value ⁽¹⁾
Options outstanding, January 3, 2015	5,281		$2.85
Granted	905		$2.25
Exercised	(142	)	$1.44
Expired	(15	)	$3.75
Forfeited	(27	)	$2.51
Options outstanding, April 4, 2015	6,002		$2.79	6.54	$	1,499
Vested and expected to vest at April 4, 2015	5,205		$2.90	6.14	$	1,317
Options exercisable, April 4, 2015	3,590		$3.27	4.87	$	847


(1)	These amounts represent the difference between the exercise price and the closing price of U.S. Auto Parts Network, Inc. common stock on April 4, 2015 as reported on the NASDAQ Stock Market, for all options outstanding that have an exercise price currently below the closing price.

The weighted-average fair value of options granted during the thirteen weeks ended April 4, 2015 and March 29, 2014 was $1.18 and $1.19, respectively. The intrinsic value of stock options at the date of exercise is the difference between the fair value of the stock at the date of exercise and the exercise price. During the thirteen weeks ended April 4, 2015 and March 29, 2014, the total intrinsic value of the exercised options was $211 and $14, respectively. The Company had $1,773 of unrecognized share-based compensation expense related to stock options outstanding as of April 4, 2015, which expense is expected to be recognized over a weighted-average period of 2.91 years.

In November 2014, AutoMD adopted the 2014 Equity Incentive Plan ("AMD Plan") which became effective on November 19, 2014 when approved by the stockholders. Under the AMD Plan, AutoMD is authorized to issue 1,950 shares of common stock under various instruments. Options granted under the AMD Plan generally expire no later than ten years from the date of grant and generally vest over a period of four years. The exercise price of all option grants must be equal to 100% of the fair market value on the date of grant.

The following table summarizes the Company’s stock option activity under the AMD Plan for the thirteen weeks ended April 4, 2015, and details regarding the options outstanding and exercisable at April 4, 2015:



	Shares (in thousands)	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Options outstanding, January 3, 2015	180	$1.00
Granted	990	$1.00
Exercised	—	—
Expired	—	—
Forfeited	—	—
Options outstanding, April 4, 2015	1,170	$1.00	9.80	$	—
Vested and expected to vest at April 4, 2015	870	$1.00	9.81	$	—
Options exercisable, April 4, 2015	—	—	0.00	$	—

At April 4, 2015, 780 shares were available for future grants under the AMD Plan.

The weighted-average fair value of options granted during the thirteen weeks ended April 4, 2015 and March 29, 2014 was $0.54 and $0, respectively. The intrinsic value of stock options at the date of exercise is the difference between the fair value of the stock at the date of exercise and the exercise price. During the thirteen weeks ended April 4, 2015 and March 29, 2014, the options had $0 intrinsic value as none were exercisable. The Company had $450 of unrecognized share-based compensation expense related to stock options outstanding as of April 4, 2015, which expense is expected to be recognized over a weighted-average period of 3.8 years.

Options exercised under all share-based compensation plans are granted net of the minimum statutory withholding requirements that we pay in cash to the appropriate taxing authorities on behalf of our employees. For those employees who elect not to receive shares net of the minimum statutory withholding requirements, the appropriate taxes are paid directly by the employee. During the thirteen weeks ended April 4, 2015, we withheld 27 shares to satisfy $80 of employees' tax obligations and 64 shares related to the net settlement of the stock options.

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit ("RSU") activity for the thirteen weeks ended April 4, 2015, and details regarding the awards outstanding and exercisable at April 4, 2015 (in thousands):



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Awards outstanding, January 3, 2015	880		$	—
Awarded	399		$	—
Vested	(398	)	$	—
Forfeited	(16	)	$	—
Awards outstanding, April 4, 2015	865		$	—	0.84	$	1,825
Vested and expected to vest at April 4, 2015	785		$	—	0.83	$	1,657

During the first thirteen weeks of 2015, 398 RSUs vested, of which 221 were time-based and 177 were performance-based. For the majority of RSUs awarded, the number of shares issued on the date the RSUs vest is net of the minimum statutory withholding requirements that we pay in cash to the appropriate taxing authorities on behalf of our employees. For those employees who elect not to receive shares net of the minimum statutory withholding requirements, the appropriate taxes are paid directly by the employee. During the thirteen weeks ended April 4, 2015, we withheld 151 shares to satisfy $358 of employees' tax obligations. Although shares withheld are not issued, they are treated as a common stock repurchase in our consolidated financial statements, as they reduce the number of shares that would have been issued upon vesting.

For the thirteen weeks ended April 4, 2015, we recorded compensation expense of $237. As of April 4, 2015, there was unrecognized compensation expense of $1,109 related to unvested RSUs based on awards that are expected to vest. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 0.84 years.

Warrants

As of April 4, 2015, warrants to purchase 50 shares of common stock were outstanding and exercisable, 30 of which have an exercise price of $2.14 per share and expire on May 5, 2016, and 20 of which have an exercise price of $8.32 per share and expire on April 27, 2017. The warrants were issued in connection with the financial advisory services provided by a consultant to the Company. All warrants became fully vested in fiscal year 2012, and no warrants were exercised during the thirteen weeks ended April 4, 2015. The aggregate intrinsic value of outstanding and exercisable warrants was $0 as of April 4, 2015, which was calculated as the difference between the exercise price of underlying awards and the closing price of the Company’s common stock for warrants that were in-the-money.

Share-Based Compensation Expense

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions for each of the periods ended:



	Thirteen Weeks Ended
	April 4, 2015	March 29, 2014
Expected life	5.3 - 5.4 years	5.3 years
Risk-free interest rate	1.3% - 1.4%	1.5%
Expected volatility	59.1% - 59.5%	68.3%
Expected dividend yield	—%	—%

Share-based compensation from options, warrants and stock awards, is included in our consolidated statements of comprehensive operations, as follows (in thousands):



	Thirteen Weeks Ended
	April 4, 2015		March 29, 2014
Marketing expense	$	92	$	81
General and administrative expense	315		237
Fulfillment expense	63		39
Technology expense	40		19
Total share-based compensation expense	$	510	$	376

The share-based compensation expense is net of amounts capitalized to internally-developed software of $39 during each of the thirteen weeks ended April 4, 2015 and March 29, 2014.

Under ASC 718, forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures significantly differ from those estimates. The Company’s estimated forfeiture rates are calculated based on actual historical forfeitures experienced under our equity plans. The Company’s forfeiture rates were 16% to 34% for stock options for both the thirteen weeks ended April 4, 2015 and March 29, 2014, and the rate for stock awards was 10% to 20% for the thirteen weeks ended April 4, 2015, while no forfeiture rate was applied for thirteen weeks ended March 29, 2014.