Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.20.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation

NOTE 10 - 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 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 766 shares available for future issuance under the 2018 Plan as of March 31, 2020.

 

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.

 

[A] Stock options:

 

The following table summarizes the activity relating to the Company’s stock options for the three-month period ended March 31, 2020:

 

                Weighted-        
          Weighted-     Average        
          Average     Remaining     Aggregate  
          Exercise     Contractual     Intrinsic  
    Options     Price     Term     Value  
                         
Outstanding at beginning of year     4,078     $ 5.79                  
Granted     88       6.62                  
Exercised     (90 )     4.27                  
Forfeited or expired     (63 )     6.03                  
                                 
Outstanding at end of period     4,013     $ 5.83       8 years     $ 9,133  
                                 
Exercisable at end of period     1,159     $ 5.57       65 years     $ 2,943  


 

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:

 

    March 31,  
    2019     2020  
             
Expected volatility     42.1 %     41.5 %
Expected life of options (in years)     6       6  
Risk free interest rate     2.5 %     1.7 %
Dividend yield     0 %     0 %
Weighted average fair value of options granted during the period     2.67     $ 2.83  

 

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.

 

The Company recorded stock-based compensation expense of $136 and $432, respectively, for the three-month periods ended March 31, 2019 and 2020, in connection with awards made under the stock option plans.

 

The fair value of options vested during the three-month periods ended March 31, 2019 and 2020 was $201 and $1,008, respectively. The total intrinsic value of options exercised during the three-month periods ended March 31, 2019 and 2020 was $-0- and $196, respectively.

 

As of March 31, 2020, there was approximately $3,520 of unrecognized compensation cost 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 5.0 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 all non-vested restricted stock for the three-month period ended March 31, 2020 is as follows:

 

          Weighted-  
    Number of     Average  
    Non-vested     Grant Date  
    Shares     Fair Value  
             
Restricted stock, non-vested, beginning of year     877     $ 6.17  
Granted     41       6.84  
Vested     (170 )     6.41  
Forfeited     (33 )     6.40  
                 
Restricted stock, non-vested, end of period     715     $ 6.15  

 

The Company recorded stock-based compensation expense of $447 and $549, respectively, for the three-month periods ended March 31, 2019 and 2020, in connection with restricted stock grants. As of March 31, 2020, there was $3,327 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 2.9 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 three-month period ended March 31, 2020:

 

          Weighted-  
    Number of     Average  
    Restricted     Grant Date  
    Stock Units     Fair Value  
             
Restricted stock, non-vested, beginning of year     253     $ 5.60  
Vested     (110 )     5.60  
Forfeited     -       -  
                 
Restricted stock units, non-vested, end of period     143     $ 5.60  

 

The Company recorded stock-based compensation expense of $-0- and $128, respectively, for the three-month periods ended March 31, 2019 and 2020, in connection with the RSUs. As of March 31, 2020, there was $626 of total unrecognized compensation cost related to non-vested RSUs. That cost is expected to be recognized over a weighted-average period of 1.8 years.