Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.19.3
Stock-Based Compensation
9 Months Ended
Sep. 30, 2019
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation

NOTE 11 - STOCK-BASED COMPENSATION

 

Stock Option Plans

 

In June 2018, I.D. Systems’ stockholders approved the I.D. Systems, Inc. 2018 Incentive Plan (as amended the “2018 Plan”) pursuant to which I.D. Systems may grant stock options, restricted stock and other equity-based awards with respect to up to an aggregate of 1,500,000 shares of I.D. Systems’ common stock with a vesting period of approximately four to five years. There were 58,000 shares available for future issuance under the 2018 Plan at September 30, 2019. Upon the adoption of the 2018 Plan, I.D. Systems’ 2009 Non-Employee Director Equity Compensation Plan and the 2015 Equity Compensation Plan were frozen, and no new awards can be issued pursuant to such plans. In connection with the completion of the Transactions, I.D. Systems assigned to PowerFleet and PowerFleet assumed all obligations of I.D. Systems pursuant to the 2018 Plan, which was amended to, among other things, increase the number of shares available for issuance thereunder by 3,000,000 shares and to rename the plan to the PowerFleet, Inc. 2018 Incentive Plan.

 

The 2018 Plan is administered by the Compensation Committee of the Company’s Board of Directors, which has the authority to determine, among other things, the term during which an option may be exercised (not more than 10 years), the exercise price of an option and the vesting provisions.

 

The Company recognizes all employee share-based payments in the statement of operations as an operating expense, based on their fair values on the applicable grant date.

 

Performance Shares - Transaction-Related Awards

 

In connection with the Transactions, on March 13, 2019, I.D. Systems’ Board of Directors approved the grant of options to purchase 350,000 shares of I.D. Systems’ common stock to Chris Wolfe, I.D. Systems’ Chief Executive Officer, and the grant of options to purchase 150,000 shares of I.D. Systems’ common stock to Ned Mavrommatis, I.D. Systems’ Chief Financial Officer. The options are subject to the terms of the 2018 Plan, have an exercise price of $6.28 per share, vest upon the attainment of adjusted EBITDA targets for the fiscal years ending December 31, 2020 and December 31, 2021 and become exercisable 180 days after vesting. Vesting of the options will accelerate in the event of certain change of control transactions, provided that the options will not accelerate upon the completion of the Transactions.

 

The following table summarizes the activity relating to I.D. Systems’ stock options for the nine-month period ended September 30, 2019:

 

                Weighted-        
          Weighted-     Average        
          Average     Remaining     Aggregate  
          Exercise     Contractual     Intrinsic  
    Options     Price     Term     Value  
                         
Outstanding at beginning of year     1,220,000     $ 5.37                  
Granted     894,000       6.20                  
Exercised     (50,000 )     3.54                  
Forfeited or expired     (4,000 )     5.34                  
                                 
Outstanding at end of period     2,060,000     $ 5.77       7 years     $ 404,000  
                                 
Exercisable at end of period     1,298,000     $ 5.68       7 years     $ 8,000  

 

The fair value of each option grant on the date of grant is estimated using the Black-Scholes option-pricing model reflecting the following weighted-average assumptions:

 

    September 30,  
    2018     2019  
             
Expected volatility     42.8 %     24.2 %
Expected life of options (in years)     4       3  
Risk free interest rate     2.72 %     1.41 %
Dividend yield     0 %     0 %
Weighted average fair value of options granted during the period   $ 2.46     $ 2.72  

 

Expected volatility is based on historical volatility of I.D. Systems’ common stock and the expected life of options is based on historical data with respect to employee exercise periods.

 

I.D. Systems recorded stock-based compensation expense of $104,000 and $299,000 for the three- and nine-month periods ended September 30, 2018, respectively and $161,000 and $458,000 for the three- and nine-month periods ended September 30, 2019, respectively, in connection with awards made under the stock option plans.

 

The fair value of options vested during the nine-month periods ended September 30, 2018 and 2019 was $352,000 and $363,000, respectively. The total intrinsic value of options exercised during the nine-month periods ended September 30, 2018 and 2019 was $117,000 and $112,000, respectively.

 

As of September 30, 2019, there was approximately $1,381,000 of unrecognized compensation cost related to non-vested options granted under I.D. Systems’ stock option plans. That cost is expected to be recognized over a weighted-average period of 2.68 years.

 

I.D. Systems estimates forfeitures at the time of valuation and reduces expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.

 

Restricted Stock

 

I.D. Systems grants restricted stock to employees, whereby the employees are contractually restricted from transferring the shares until they are vested. The stock is unvested stock at the time of grant and, upon vesting, there are no contractual restrictions on the stock. The fair value of each share is based on I.D. Systems’ closing stock price on the date of the grant. A summary of all non-vested restricted stock for the nine-month period ended September 30, 2019 is as follows:

 

          Weighted-  
    Number of     Average  
    Non-vested     Grant Date  
    Shares     Fair Value  
             
Restricted stock, non-vested, beginning of year     568,000     $ 6.65  
Granted     255,000       5.74  
Vested     (246,000 )     6.52  
Forfeited     (5,000 )     6.91  
                 
Restricted stock, non-vested, end of period     572,000     $ 6.30  

 

I.D. Systems recorded stock-based compensation expense of $465,000 and $1,396,000, respectively, for the three- and nine-month periods ended September 30, 2018 and $387,000 and $1,274,000, respectively, for the three- and nine-month periods ended September 30, 2019, in connection with restricted stock grants. As of September 30, 2019, there was $2,947,000 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 2.17 years.