Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.20.4
Stock-Based Compensation
12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation

NOTE 10 - 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 545 shares available for future issuance under the 2018 Plan as of December 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 Company’s acquisition of Pointer, 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

 

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, 2018, 2019 and 2020 and changes during the years then ended, is presented below:

 

    2018     2019     2020  
    Number of Shares     Weighted- Average Exercise Price     Number of
Shares
    Weighted- Average
Exercise
Price
    Number
of Shares
    Weighted-
Average
Exercise
Price
 
                                     
Outstanding at beginning of year     1,290     $ 5.33       1,220     $ 5.37       4,078     $ 5.79  
Share-based payments assumed     -               127       4.35       -          
Granted     120       6.41       2,829       5.99       1,230       6.08  
Exercised     (169 )     5.73       (59 )     3.79       (199 )     4.72  
Forfeited or expired     (21 )     5.96       (39 )     6.22       (1,485 )     6.02  
                                                 
Outstanding at end of year     1,220     $ 5.37       4,078     $ 5.79       3,624     $ 5.85  
                                                 
Exercisable at end of year     695     $ 5.07       847     $ 5.71       1,247     $ 5.60  

 

The following table summarizes information about stock options at December 31, 2020.

 

    Options Outstanding     Options Exercisable  
Exercise Prices ($)  

Number

Outstanding

   

Weighted- Average Remaining

Contractual Life in Years

   

Weighted-

Average

Exercise Price

   

Number

Outstanding

   

Weighted-

Average

Exercise Price

 
                               
2.33 - 3.63     16       3     $ 2.33       16     $ 2.33  
3.64 - 4.93     276       6       4.64       168       4.63  
4.94 - 6.23     2,767       8       5.89       1,063       5.81  
6.24 - 7.54     565       9       6.33       -       0.00  
                                         
      3,624       8     $ 5.85       1,247     $ 5.60  

 

    As of December 31, 2020  
   

Aggregate

Intrinsic Value

   

Weighted -

Average

Remaining

Contractual Life

in Years

 
             
Options outstanding   $ 6,055       8  
Options exercisable   $ 2,392       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:

 

    Year Ended December 31,  
    2018     2019     2020  
                   
Expected volatility     42.8 %     42.1 %     47.1 %
Expected life of options     4.4 years       6.7 years       6.3 years  
Risk free interest rate     2.72 %     1.64 %     0.93 %
Dividend yield     0 %     0 %     0 %
Weighted-average fair value of options granted during year   $ 2.46     $ 2.20     $ 2.69  

 

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.

 

For the years ended December 31, 2018, 2019 and 2020, the Company recorded $397, $1,516 and $1,587, 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, 2018, 2019 and 2020 was $413, $476 and $1,974, respectively. The total intrinsic value of options exercised during the years ended December 31, 2018, 2019 and 2020 was $162, $119 and $313, respectively.

 

As of December 31, 2020, there was $3,823 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 4.07 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, 2018, 2019 and 2020 is as follows:

 

   

Number of

Non-Vested

Shares

   

Weighted -

Average

Grant Date

Fair Value

 
             
Non-vested, at January 1, 2018     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  
Granted     463       4.88  
Vested     (389 )     6.01  
Forfeited     (145 )     6.01  
                 
Non-vested, at December 31, 2020     806       5.54  

 

For the years ended December 31, 2018, 2019 and 2020, the Company recorded $1,803, $2,061, and $2,272 respectively, of stock-based compensation expense in connection with the restricted stock grants. As of December 31, 2020, there was $2,975 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 1.96 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 years ended December 31, 2019 and 2020:

 

   

Number of

Restricted

Stock Units

   

Weighted -

Average

Grant Date

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  
Vested     (148 )     5.60  
Forfeited     (30 )     5.60  
                 
Restricted stock-units, non-vested, December 31, 2020     75     $ 5.60  

 

For the years ended December 31, 2019 and 2020 the Company recorded $217 and $283 respectively, of stock-based compensation expense in connection with the RSUs. As of December 31, 2020, there was $261 of total unrecognized compensation cost related to non-vested RSUs. That cost is expected to be recognized over a weighted-average period of 1.30 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, 2018, 2019 and 2020:

 

    Number of Non-Vested Shares     Weighted - Average Grant Date Fair Value  
             
Performance shares, non-vested, at January 1, 2018     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, at December 31, 2019     -       -  
Granted     -       -  
Vested     -       -  
Forfeited     -       -  
Performance shares, non-vested, at December 31, 2020     -       -  

 

For the years ended December 31, 2018, 2019 and 2020, the Company recorded $(37), $-0-, and $-0- respectively, of stock-based compensation expense in connection with the performance shares.