Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.20.2
Stock-Based Compensation
6 Months Ended
Jun. 30, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation

NOTE 10 - STOCK-BASED COMPENSATION

 

Stock Option Plans

 

In connection with the Company’s acquisition of Pointer Telocation Ltd., the Company previously approved the grants of options to purchase 350,000 shares of the Company’s common stock to Mr. Wolfe and options to purchase 150,000 shares of the Company’s common stock to Mr. Mavrommatis on March 13, 2019 (the “Signing Bonus Options”) and the grants of additional options to purchase 350,000 shares of the Company’s common stock to Mr. Wolfe and additional options to purchase 150,000 shares of the Company’s common stock to Mr. Mavrommatis on October 3, 2019 (the “Closing Bonus Options” and together with the Signing Bonus Options, the “Original Bonus Options”). The Original Bonus Options were subject to the terms of the Company’s 2018 Incentive Plan (the “2018 Plan”), vested upon the attainment of adjusted EBITDA targets for the fiscal years ending December 31, 2020 and December 31, 2021 and became exercisable 180 days after vesting, subject to acceleration in the event of certain change of control transactions. The Signing Bonus Options had an exercise price of $6.28 per share and the Closing Bonus Options had an exercise price of $6.00 per share.

 

In response to the impact of COVID-19, the Board terminated and cancelled the Original Bonus Options and approved the following grants to replace the Original Bonus Options: (i) options to purchase 350,000 shares of the Company’s common stock to Mr. Wolfe and options to purchase 150,000 shares of the Company’s common stock to Mr. Mavrommatis (the “New Signing Options”), which options are subject to the terms of the 2018 Plan, have an exercise price of $6.28 per share, and will vest and become exercisable in full on December 31, 2022 if the volume weighted average price of the Company’s common stock during a consecutive 30 trading day period (the “30 Day VWAP”) reaches $12.00 at any point prior to December 31, 2022, and (ii) options to purchase 350,000 shares of the Company’s common stock to Mr. Wolfe and options to purchase 150,000 shares of the Company’s common stock to Mr. Mavrommatis (the “New Closing Options”), which options are subject to the terms of the 2018 Plan, have an exercise price of $6.00 per share, and will vest and become exercisable immediately upon the Company achieving a 30 Day VWAP of $10.00.

 

[A] Stock options:

 

The following table summarizes the activity relating to the Company’s stock options for the six-month period ended June 30, 2020:

 

December 31, 2019   Options     Weighted-
Average
Exercise
Price
    Weighted-
Average
Remaining
Contractual
Term
    Aggregate
Intrinsic
Value
 
                         
Outstanding at beginning of year     4,078     $ 5.79                  
Granted     1,160       6.10                  
Exercised     (140 )     4.28                  
Forfeited or expired     (1,305 )     6.04                  
                                 
Outstanding at end of period     3,793     $ 5.85       9 years     $ 161  
                                 
Exercisable at end of period     925     $ 5.64       6 years     $ 56  

 

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:

 

    June 30,  
    2019     2020  
             
Expected volatility     24.2 %     44.7 %
Expected life of options (in years)     3       6  
Risk free interest rate     1.41 %     1.17 %
Dividend yield     0 %     0 %
Weighted average fair value of options granted during the period   $ 2.72     $ 2.58  

 

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 valued the New Signing Options and the New Closing Options market-based performance stock option awards using a Monte Carlo simulation model using a daily price forecast over ten years until expiration utilizing Geometric Brownian Motion that considers a variety of factors including, but not limited to, the Company’s common stock price, risk-free rate (0.70%), and expected stock price volatility (47%) over the expected life of awards (6 years). The weighted average fair value of options granted during the period was $1.27.

 

The Company recorded stock-based compensation expense of $161 and $297 for the three- and six-month periods ended June 30, 2019, respectively, and $411 and $843 for the three- and six-month periods ended June 30, 2020, respectively, in connection with awards made under the stock option plans.

 

The fair value of options vested during the six-month periods ended June 30, 2019 and 2020 was $271 and $1,012, respectively. The total intrinsic value of options exercised during the six-month periods ended June 30, 2019 and 2020 was $112 and 225, respectively.

 

As of June 30, 2020, there was approximately $4,672 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 4.24 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 June 30, 2020 is as follows:

 

    Number of Non-vested Shares     Weighted-
Average Grant Date Fair Value
 
             
Restricted stock, non-vested, beginning of year     877     $ 6.17  
Granted     318       4.97  
Vested     (252 )     6.16  
Forfeited     (50 )     6.24  
                 
Restricted stock, non-vested, end of period     893     $ 5.75  

 

The Company recorded stock-based compensation expense of $440 and $887, respectively, for the three- and six-month periods ended June 30, 2019 and $499 and $1,048, respectively, for the three- and six-month periods ended June 30, 2020, in connection with restricted stock grants. As of June 30, 2020, there was $4,001 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 2.4 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 June 30, 2020:

 

    Number of Restricted Stock Units     Weighted-
Average Grant Date Fair Value
 
             
Restricted stock units, non-vested, beginning of year     253     $ 5.60  
Granted     -       -  
Vested     (127 )     5.60  
Forfeited     (5 )     5.60  
                 
Restricted stock units, non-vested, end of period     121     $ 5.60  

 

The Company recorded stock-based compensation expense of $-0- and $-0-, respectively, for the three- and six-month periods ended June 30, 2019 and $67 and $195, respectively, for the three- and six-month periods ended June 30, 2020, in connection with the RSUs. As of June 30, 2020, there was $500 of total unrecognized compensation cost related to non-vested RSUs. That cost is expected to be recognized over a weighted-average period of 1.70 years.