Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.20.1
Stock-Based Compensation
12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation

NOTE 11 - STOCK-BASED COMPENSATION

 

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 shares of I.D. Systems’ common stock with a vesting period of approximately four to five years. Upon the adoption of the 2018 Plan, the I.D. Systems, Inc. 2009 Non-Employee Director Equity Compensation Plan and the I.D. Systems, Inc. 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 shares to 4,500 and to rename the plan to the PowerFleet, Inc. 2018 Incentive Plan. There were 823 shares available for future issuance under the 2018 Plan as of December 31, 2019.

 

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.

 

In connection with the Transactions, on March 13, 2019, I.D. Systems’ board of directors approved the grant of options to purchase 350 shares of the Company’s common stock to Chris Wolfe, the Company’s Chief Executive Officer, and the grant of options to purchase 150 shares of the Company’s common stock to Ned Mavrommatis, the Company’s 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.

 

On October 3, 2019, in connection with the completion of the Transactions, the Company’s board of directors approved the grant of additional options to purchase 350 shares of the Company’s common stock to Mr. Wolfe and the grant of additional options to purchase 150 shares of the Company’s common stock to Mr. Mavrommatis. Such additional options are subject to the terms of the 2018 Plan, have an exercise price of $6.00 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.

 

In connection with Mr. David Mahlab’s retirement from his role as the Chief Executive Officer International of the Company, the Company modified the vesting and exercise period of all unvested restricted stock, stock options and restricted stock units previously granted to Mr. Mahlab. Due to the modification of the terms of Mr. Mahlab’s stock options, restricted stock and restricted stock units, the Company recognized additional stock based compensation expense of $1,261 for the year ended December 31, 2019.

  

[A] Stock options:

 

A summary of the status of the Company’s stock options as of December 31, 2017, 2018 and 2019 and changes during the years then ended, is presented below:

 

    2017     2018     2019  
          Weighted -           Weighted -           Weighted -  
          Average           Average           Average  
    Number of     Exercise     Number of     Exercise     Number of     Exercise  
    Shares     Price     Shares     Price     Shares     Price  
                                     
Outstanding at beginning of year     1,243     $ 5.08       1,290     $ 5.33       1,220     $ 5.37  
Share-based payments assumed     -       -       -       -       127       4.35  
Granted     350       6.00       120       6.41       2,829       5.99  
Exercised     (271 )     4.72       (169 )     5.73       (59 )     3.79  
Forfeited or expired     (32 )     8.26       (21 )     5.96       (39 )     6.22  
                                                 
Outstanding at end of year     1,290     $ 5.33       1,220     $ 5.37       4,078     $ 5.79  
                                                 
Exercisable at end of year     667     $ 5.11       695     $ 5.07       847     $ 5.71  

 

The following table summarizes information about stock options at December 31, 2019:

 

    Options Outstanding     Options Exercisable  
          Weighted -                    
          Average                    
          Remaining     Weighted-           Weighted-  
Exercise   Number     Contractual     Average     Number     Average  
Prices ($)   Outstanding     Life in Years     Exercise Price     Outstanding     Exercise Price  
                               
2.06 - 4.87     393       5     $ 4.20       242     $ 4.10  
4.88 - 5.70     235       5       5.37       199       5.41  
5.71 - 5.97     1,652       9       5.86       213       5.81  
5.98 - 6.90     1,798       9       6.11       193       6.06  
                                         
      4,078           8     $ 5.79       847     $ 5.71  

 

    As of December 31, 2019  
          Weighted Average Remaining  
    Aggregate Intrinsic Value     Contractual Life in Years  
             
Options outstanding   $ 503       8  
Options exercisable   $ 339       7  

 

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:

 

    December 31,  
    2017     2018     2019  
                   
Expected volatility     42.4 %     42.8 %     42.11 %
Expected life of options     4.0 years       4.4 years       6.7 years  
Risk free interest rate     1.69 %     2.72 %     1.64 %
Dividend yield     0 %     0 %     0 %
Weighted-average fair value of options granted during the year   $ 2.11     $ 2.46     $ 2.2  

 

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

 

For the years ended December 31, 2017, 2018 and 2019, the Company recorded $411, $397 and $1,516, respectively, of stock-based compensation expense in connection with the stock option grants.

 

The fair value of options vested during the years ended December 31, 2017, 2018 and 2019 was $291, $413 and $476, respectively. The total intrinsic value of options exercised during the years ended December 31, 2017, 2018 and 2019 was $375, $162 and $119, respectively.

 

As of December 31, 2019, there was $4,461 of total unrecognized compensation costs related to non-vested options granted under the Company’s stock option plans. That cost is expected to be recognized over a weighted-average period of 3.43 years.

 

The Company 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.

 

[B] Restricted Stock Awards:

 

The Company grants restricted stock to employees, whereby the employees are contractually restricted from transferring the shares until they are vested. The stock is unvested at the time of grant and, upon vesting, there are no legal restrictions on the stock. The fair value of each share is based on the Company’s closing stock price on the date of the grant. A summary of the non-vested shares for the years ended December 31, 2017, 2018 and 2019 is as follows:

 

          Weighted -  
          Average  
    Number of     Grant  
    Non-vested     Date  
    Shares     Fair Value  
             
Non-vested at January 1, 2017     392     $ 5.45  
Granted     240       6.26  
Vested     (194 )     5.42  
Forfeited     (8 )     5.69  
                 
Non-vested at December 31, 2017     430     $ 5.91  
Granted     434       7.02  
Vested     (266 )     6.07  
Forfeited     (30 )     6.54  
                 
Non-vested at December 31, 2018     568     $ 6.65  
Granted     625       5.82  
Vested     (276 )     6.40  
Forfeited     (40 )     5.88  
                 
Non-vested at December 31, 2019     877     $ 6.17  

 

For the years ended December 31, 2017, 2018 and 2019, the Company recorded $1,682, $1,803, and $2,061 respectively, of stock-based compensation expense in connection with the restricted stock grants. As of December 31, 2019, there was $4,134 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 2.96 years.

 

[C] Restricted Stock Units:

 

The Company also grants restricted stock units (RSUs) to employees. The following table summarizes the activity relating to the Company’s restricted stock units for the year ended December 31, 2019:

 

          Weighted-  
    Number of     Average  
    Restricted     Grant Date  
    Stock Units     Fair Value  
             
Pointer share-based payments assumed     260     $ 5.60  
Vested     (7 )     5.60  
Forfeited     -       -  
                 
Restricted stock units, non-vested, December 31, 2019     253     $ 5.60  

 

For the year ended December 31, 2019, the Company recorded $217 of stock-based compensation expense in connection with the RSUs. As of December 31, 2019, there was $843 of total unrecognized compensation cost related to non-vested RSUs. That cost is expected to be recognized over a weighted-average period of 1.71 years.

 

[D] Performance Shares:

 

In January 2016, the Company granted 295,000 performance shares to employees pursuant to the 2015 Equity Compensation Plan. The shares are unvested at the time of grant and, upon vesting, there are no contractual restrictions on the shares. The vesting of the shares is subject to the achievement of performance goals during a two-year period from the date of issuance, with the ability to achieve prorated vesting of the shares during interim annual measurement periods. If the performance goals are not met, the performance shares will not vest and will automatically be returned to the plan. If the performance goals are met, then the shares will be issued to the employees.

 

The following table summarizes the activity relating to the Company’s performance shares for the years ended December 31, 2016, 2017 and 2018:

 

          Weighted-  
    Number of     Average  
    Non-vested     Grant Date  
    Shares     Fair Value  
             
Performance shares, non-vested, at January 1, 2017     261       4.07  
Granted     -     $ -  
Vested     (100 )     4.07  
Forfeited     (50 )     4.07  
Performance shares, non-vested, at December 31, 2017     111       4.07  
Granted     -     $ -  
Vested     (93 )     4.07  
Forfeited     (18 )     4.07  
Performance shares, non-vested, at December 31, 2018     -       -  
Granted     -     $ -  
Vested     -       -  
Forfeited     -       -  
                 
Performance shares, non-vested, December 31, 2019     -     $ -  

 

For the years ended December 31, 2017, 2018 and 2019, the Company recorded $344 $(37) and $-0- respectively, of stock-based compensation expense in connection with the performance shares.