Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.19.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2019
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation

NOTE 11 - STOCK-BASED COMPENSATION

 

Stock Option Plans

 

In June 2018, the Company’s stockholders approved the 2018 Incentive Plan (the “2018 Plan”) pursuant to which the Company may grant stock options, restricted stock and other equity-based awards with respect to up to an aggregate of 1,500,000 shares of common stock with a vesting period of approximately four to five years. There were 257,000 shares available for future issuance under the 2018 Plan at March 31, 2019. Upon the adoption of the 2018 Plan, the Company’s 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.

 

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.

 

The following table summarizes the activity relating to the Company’s stock options for the three-month period ended March 31, 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     869,000       6.20              
Exercised     -       -              
Forfeited or expired     -       -              
                             
Outstanding at end of period     2,089,000     $ 5.71     7 years   $ 764,000  
                             
Exercisable at end of period     794,000     $ 5.16     5 years   $ 624,000  

 

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:

 

    March 31,  
    2018     2019  
             
Expected volatility     -       42.1 %
Expected life of options (in years)     -       6  
Risk free interest rate     -       2.5 %
Dividend yield     -       0 %
Weighted average fair value of options granted during the period     -     $ 2.67  

 

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 $100,000 and $136,000, respectively, for the three-month periods ended March 31, 2018 and 2019, in connection with awards made under the stock option plans.

 

The fair value of options vested during the three-month periods ended March 31, 2018 and 2019 was $216,000 and $201,000, respectively. The total intrinsic value of options exercised during the three-month periods ended March 31, 2018 and 2019 was $62,000 and $-0-, respectively.

 

As of March 31, 2019, there was approximately $1,644,000 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 3.09 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.

 

Restricted Stock

 

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 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 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, 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     81,000       6.05  
Vested     (90,000 )     6.79  
Forfeited     -       -  
                 
Restricted stock, non-vested, end of period     559,000     $ 6.54  

 

The Company recorded stock-based compensation expense of $431,000 and $447,000, respectively, for the three-month periods ended March 31, 2018 and 2019, in connection with restricted stock grants. As of March 31, 2019, there was $2,661,000 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 2.72 years.

 

Performance Shares – Transaction-Related Awards

 

In connection with the Merger Transactions, on March 13, 2019, the Company’s Board of Directors approved the grant of options to purchase 350,000 shares of the Company’s common stock to Chris Wolfe, the Company’s Chief Executive Officer, and the grant of options to purchase 150,000 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, provided that the options will not accelerate upon the consummation of the Pointer Merger Agreement. The options will automatically expire upon the termination of the Investment Agreement and the Pointer Merger Agreement.

 

The Company’s Board of Directors also approved the grant of options to purchase an aggregate of 500,000 shares of Parent’s common stock, which will consist of grants to Chris Wolfe and Ned Mavrommatis in amounts to be determined and approved by the Company’s Board of Directors or the Compensation Committee of the Company’s Board of Directors. The options will be subject to the terms of the 2018 Plan, will have an exercise price equal to the higher of $6.00 per share or the closing price of the Company’s common stock on the closing date of the Merger Transactions, 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 consummation of the Merger Transactions. The options will automatically expire upon the failure to obtain stockholder approval of an amendment to the 2018 Plan to increase the number of shares available under such plan within one year.