Stockholders' Members' Equity (Deficit) and Stock-Based Compensation Plans
|9 Months Ended|
Sep. 30, 2022
|Stockholders' / Members' Equity (Deficit) and Stock-Based Compensation Plans|
|Stockholders' / Members' Equity (Deficit) and Stock-Based Compensation Plans||
Note 9 — Stockholders’ / Members’ Equity (Deficit) and Stock-Based Compensation Plans
Prior to the Organizational Transactions, DDH LLC was authorized to issue common units, Class A Preferred Units and Class B Preferred Units. In connection with the acquisition of Orange142, DDH LLC issued 5,637 common units, 3,500 Class A Preferred Units and 7,046 Class B Preferred Units. The common units were valued at $4,294,041 and Class A andPreferred Units were valued at a total of $9,913,940. In December 2021, DDH LLC redeemed all of the Class A Preferred Units.
As of December 31, 2021, the total number of outstanding common units of DDH LLC was 34,182 units. The common units have voting rights, as well as certain redemption features at the option of the Company. In accordance with ASC 480, as of December 31, 2021, the Company classified the preferred units as a liability in the consolidated balance sheets.
Stockholders’ Equity – Initial Public Offering
Following the completion of the Organizational Transactions, DDH LLC’s limited liability company agreement was amended and restated to, among other things, appoint the Company as the sole managing member of DDH LLC and effectuate a recapitalization of all outstanding preferred units and common units into (i) economic nonvoting units of DDH LLC held by the Company and, through their indirect ownership of DDM, our Chairman and Chief Executive Officer and our President, and (ii) noneconomic voting units of DDH LLC, 100% of which are held by the Company. In August 2022, a Class B common stockholder tendered 100,000 of its limited
liability company units to the Company in exchange for newly issued shares of Class A common stock of the Company on a one-for-one basis. In connection with this exchange, an equivalent number of the holder’s shares of Class B common stock were cancelled. As of September 30, 2022, DDM held 11,278,000 shares of Class B common stock.
The Company is authorized to issue 160,000,000 shares of Class A common stock, par value $0.001 per share, 20,000,000 shares of Class B common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.
On February 15, 2022, the Company completed its initial public offering of 2,800,000 units (“Units”), each consisting of (i) one share of our Class A common stock and (ii) one warrant entitling the holder to purchase one share of our Class A Common Stock at an exercise price of $5.50 per share. The warrants became immediately exercisable upon issuance and are exercisable for a period of five years after the issuance date. The shares of Class A Common Stock and warrants may be transferred separately immediately upon issuance. At September 30, 2022, 2,800,000 of these warrants are outstanding and the intrinsic value of these warrants is $0. The underwriters in our initial public offering were granted a 45-day option to purchase up to an additional 420,000 shares and/or warrants, or any combination thereof, to cover over-allotments, which they initially exercised, in part, electing to purchase warrants to purchase an additional 420,000 shares of Class A Common Stock. As of September 30, 2022, 420,000 of these warrants are outstanding. In connection with our initial public offering, we issued to the underwriters of the offering a unit purchase option to purchase (i) an additional 140,000 Units at a per Unit exercise price of $6.60, which was equal to 120% of the public offering price per Unit sold in the initial public offering, and (ii) warrants to purchase 21,000 shares of Class A Common Stock at a per warrant exercise price of $0.012, which was equal to 120% of the public offering price per warrant sold in the offering. The underwriters have not exercised this option as of September 30, 2022.
The Units were sold at a price of $5.50 per Unit, and the net proceeds from the offering were $10,167,043, after deducting underwriting discounts and commissions and offering expenses payable by the Company. The offering expenses recorded in accrued liabilities are approximately $1,000,000 as of September 30, 2022, and the Company intends to pay these amounts throughout the remainder of 2022. DDH LLC used the proceeds, together with pre-existing cash and cash equivalents, to purchase all of the remaining 5,637 common units and 7,046 Class B Preferred Units held indirectly by Woolford for an aggregate purchase price of approximately $14,246,251, of which $10,284,089 was paid on the closing date of the initial public offering. On July 28, 2022, DDH LLC entered into the Redemption Agreement Amendment with USDM Holdings, Inc. that amends the previously disclosed Redemption Agreement by and between DDH LLC and USDM Holdings, Inc. dated a of November 14, 2021 (the “Original Redemption Agreement”), as amended by the Amendment to Redemption Agreement dated as of February 15, 2022. The Redemption Agreement Amendment, among other things, amended the remainder of the principal and interest for the Common Units Redemption Price to be $3,998,635, which was paid in full on July 28, 2022.
The warrants had a fair value of $0 that was calculated using the Black-Scholes option -pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.94% based on the applicable U.S. Treasury bill rate, (2) expected life of 5 years, (3) expected volatility of approximately 66% based on the trading history of similar companies, and (4) zero expected dividends.
The following table summarizes warrant activity as of September 30, 2022:
Stock-Based Compensation Plans
In connection with our IPO, the Company adopted the 2022 Omnibus Incentive Plan (“2022 Omnibus Plan”) to facilitate the grant of equity awards to our employees, consultants and non-employee directors. The 2022 Omnibus Plan reserved 1,500,000 shares of Class A common stock for issuance in equity awards. On June 10, 2022, our board of directors initially granted 264,850 stock options and 363,614 RSUs to employees and non-employee directors. Information on activity for both the stock options and RSUs is detailed below.
As of September 30, 2022, the Company recognized $85,437 of stock-based compensation expense in the consolidated statement of operations.
Options to purchase shares of common stock vest annually on the grant date anniversary over a period of three years and expire 10 years following the date of grant. The following table summarizes the stock option activity under the 2022 Omnibus Plan as of September 30, 2022:
As of September 30, 2022, all stock options remain unvested with related unamortized stock-based compensation expense totaling $238,527 and the weighted-average period over which such stock-based compensation expense will be recognized is 2.71 years.
Restricted Stock Units
RSUs vest annually on the grant date anniversary over a period of three years. A summary of RSU activity and related information is as follows:
As of September 30, 2022, unrecognized stock-based compensation of $539,812 related to unvested RSUs will be recognized on a straight- line basis over a period of 2.7 years.
The entire disclosure for shareholders' equity and share-based payment arrangement.
No definition available.