How does Amerispec Inspection Services recognize compensation expense for time vesting Units?
Amerispec_Inspection_Services Franchise · 2025 FDDAnswer from 2025 FDD Document
ompany had issued and outstanding 29,669 and 29,200 Class A Units, respectively. Each Class A Unit has one voting right and all distributions will be made pro rata commensurate with each members' ownership interest. Class B Units issued with the equity incentive plan are nonvoting.
Equity Incentive Plan
The Company accounts for stock-based awards in accordance with ASC 718 - Stock Compensation ("ASC 718"). ASC 718 requires compensation costs related to share-based payments, including profits interest units ("Units") and other equity awards, to be measured based on the grant date fair value of the award.
The Company issued certain time and performance vesting Units pursuant to the TCB Services Management, LLC Equity Incentive Plan (the "Equity Plan"). The Company has accounted for the Units within its consolidated financial statements as the Unit holders are providing services directly related to the Company and its subsidiaries. The aggregate number of units that may be issued or transferred under the Equity Plan is 2,000 Units. Units granted under the plan have been allocated into two groups based on their vesting criteria: time vesting and performance vesting Units.
Time vesting Units are equity classified awards, vest over a 5-year period and will vest 20% on each anniversary date of the date of grant. The Company recognizes compensation expense over a straight-line period of 5 years and has recorded compensation expense of approximately $96,000 and $51,000 for the year ended December 31, 2024 and period ended December 31, 2023. This expense is included in Salaries and wages on the statements of comprehensive loss.
Performance vesting Units are equity classified awards, and vest subject to a liquidation event in which a return amount greater than two times is achieved by the equity holders of the Company, provided that the Participant's continuous service has not terminated prior to such vesting date. A liquidation event was not considered probable at the date of issuance or as of December 31, 2024 and 2023, as a result, no compensation expense has been recorded based on this criterion.
No portion of the Units shall vest after the date the Participant's continuous service terminates for any reason, however Units vested prior to termination without cause may be purchased by the Company at fair value within a prescribed time-period. Unvested Units are forfeited in accordance with the Equity Plan upon termination of employment from the Company. The Company accounts for forfeitures in the period they occur resulting in a reversal of all previously recognized compensation expense for awards forfeited. There were no forfeitures of time or performance vesting Units during the period ended December 31, 2024 and 2023.
Source: Item 23 — Receipts (FDD pages 47–172)
What This Means (2025 FDD)
According to Amerispec Inspection Services's 2025 Franchise Disclosure Document, the company addresses stock-based awards, including profits interest units, following ASC 718 guidelines, which requires measuring compensation costs based on the grant date fair value of the award. The company issued time vesting Units that are equity classified awards, vesting over a 5-year period with 20% vesting on each anniversary of the grant date. Amerispec Inspection Services recognizes compensation expense for these units over a straight-line period of 5 years.
For the year ended December 31, 2024, Amerispec Inspection Services recorded approximately $96,000 in compensation expense, and for the period ended December 31, 2023, the expense was approximately $51,000. These expenses are included under Salaries and wages on the statements of comprehensive loss. As of December 31, 2024 and 2023, the total unrecognized compensation cost related to non-vested time-based awards granted under the Equity Plan was approximately $332,000 and $429,000, respectively, which is expected to be recognized over a weighted average period of approximately 3.5 years.
If a participant's service terminates for any reason, no further portion of the Units shall vest. However, Units vested prior to termination without cause may be purchased by Amerispec Inspection Services at fair value within a prescribed time-period. Unvested Units are forfeited upon termination of employment, and Amerispec Inspection Services accounts for these forfeitures in the period they occur, reversing all previously recognized compensation expense for the forfeited awards. There were no forfeitures of time or performance vesting Units during the periods ended December 31, 2024 and 2023.