STOCK-BASED COMPENSATION

3 Months Ended

Jun. 30, 2024

Share-Based Payment Arrangement [Abstract]

During the three-month period ended June 30, 2024, the Company granted options to purchase 375 shares of common stock with time-based vesting conditions.

[A] Stock Options:

The following table summarizes the activity relating to the Company’s market-based stock options for the three-month period ended June 30, 2024:


	Options	Weighted- Average Exercise Price	Weighted Average Contractual Remaining Term (years)	Aggregate Intrinsic Values (in thousands)*
Outstanding as of April 1, 2024	5,445	13.39	—	—
Granted	—	—	—	—
Exercised	—	—	—	—

Forfeited	—	—	—	—
Outstanding as of June 30, 2024	5,445	13.39	7.72	$	1,488


Vested as of June 30, 2024	—	—	—	$	—

The following table summarizes the activity relating to the Company’s stock options, excluding the market-based stock options, for the three-month period ended June 30, 2024:


	Options	Weighted- Average Exercise Price	Weighted Average Contractual Remaining Term (years)	Aggregate Intrinsic Values (in thousands)*
Outstanding as of April 1, 2024	1,979	4.68	—	—
Granted	375	4.31	—	—
Exercised	—	—	—	—

Forfeited	(6)	6.10	—	—
Outstanding as of June 30, 2024	2,348	4.62	7.2	$	779


Vested as of June 30, 2024	1,973	4.67	6.6	$	779

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, 2023		June 30, 2024
Expected volatility	55.6	%	60.2	%
Expected life of options	6.1		6.5
Risk free interest rate	3.87	%	4.23	%

Dividend yield	—		—
Weighted-average fair value of options granted during the year	$1.66		$2.66

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 $585 and $1,817 for the three-month periods ended June 30, 2023 and June 30, 2024, respectively, in connection with awards made under the stock option plans. The increase in the recognized expense is due to the approved acceleration of vesting of unvested restricted stock and stock option awards with time-based vesting conditions that are outstanding under the Powerfleet equity plans (including any inducement awards with time-based vesting). The accelerated vesting of the Company’s equity awards is not part of what was acquired in the MiX Combination, nor what was paid for in the MiX Combination because it was for the benefit of the Company’s employees rather than for the benefit of MiX Telematics employees. Therefore, the acceleration of the equity awards was treated as a separate transaction from the MiX Combination and the acceleration of vesting was accounted for immediately upon closing of the MiX Combination on April 2, 2024.

The fair value of options vested during the three-month periods ended June 30, 2023 and 2024 was $562 and $1,457, respectively. There were no option exercises that occurred during the three-month periods ended June 30, 2023 and 2024.

As of June 30, 2024, there was $983 of total unrecognized compensation costs related to non-vested options granted under the Company’s stock option plans excluding the market-based stock options that were granted to certain senior managers, including the Company’s executive officers. That cost is expected to be recognized over a weighted-average period of 1.34 years.

As of June 30, 2024, there was $3,597 of total unrecognized compensation costs related to non-vested options granted under the Company’s stock option plans for the market-based stock options that were granted to certain senior managers, including the Company’s executive officers. That cost is expected to be recognized over a weighted-average period of 7.72 years.

The Company estimates forfeitures at the time of valuation and reduces expenses 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. Some participants have the option to have their shares withheld for their taxes upon vesting. Shares withheld for taxes are treated as a purchase of treasury 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, 2024 is as follows:


	Number of Non-Vested Shares	Weighted- Average Grant Date Fair Value
Non-vested, March 31, 2024	1,370	2.68
Granted	54	5.45
Vested	(1,369)	2.68
Forfeited or expired	—	—
Non-vested, June 30, 2024	55	2.68

The Company recorded stock-based compensation expenses of $267 and $3,095 for the three-month periods ended June 30, 2023 and 2024, respectively, in connection with restricted stock grants. As of June 30, 2024, there was $258 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 0.88 years. The increase in the recognized expense is due to the approved acceleration of vesting of unvested restricted stock and stock option awards with time-based vesting conditions that are outstanding under the Powerfleet equity plans (including any inducement awards with time-based vesting). The accelerated vesting of the Company’s equity awards is not part of what was acquired in the MiX Combination, nor what was paid for in the MiX Combination because it was for the benefit of the Company’s employees rather than for the benefit of MiX Telematics employees. Therefore, the acceleration of the equity awards was treated as a separate transaction from the MiX Combination and the acceleration of vesting was accounted for immediately upon closing of the MiX Combination on April 2, 2024.

[C] Stock Appreciation Rights:

In connection with the closing of the MiX Combination, the Company assumed each of the MiX Telematics’ share plans. MiX Telematics issued equity-classified share incentives under the MiX Telematics Long-Term Incentive Plan (“LTIP”) to directors and certain key employees within the Company.

The LTIP provides for three types of grants to be issued, namely performance shares, restricted share units and stock appreciation rights (“SARs”). On the Implementation Date,the only issued and outstanding equity awards under the LTIP were SARs, and the Company assumed the outstanding SARs in issue. No additional performance shares or restricted share units will be issued or assumed by the Company.

The replacement of MiX Telematics’ share-based payment awards has been treated as a modification under ASC 718, Compensation—Stock Compensation as of the Implementation Date. The fair value of the replacement SARs issued was allocated between pre-combination and post-combination service based on the vesting period. The fair value related to pre-combination service is included as part of the fair value of the consideration in the MiX Combination (see Note 3), and the fair value related to post-combination service is to be recognized as an expense over the remaining vesting period.

The total stock-based compensation expense recognized during the three months ended June 30, 2024 was $1.0 million.

The following table summarizes the activities for the outstanding SARs:


	Number of SARs	Weighted- Average Exercise Price	Weighted Average Contractual Remaining Term (years)	Aggregate Intrinsic Values (in thousands)*
Outstanding as of April 1, 2024	—	—
Acquired through MiX Combination	5,740	2.61
Granted	—	—
Exercised	—	—

Forfeited	—	—
Outstanding as of June 30, 2024	5,740	2.61	3.33


Vested as of June 30, 2024	1,813	2.98	1.80	$	2,881

As of June 30, 2024, there was $7.5 million of unrecognized compensation cost related to unvested SARs. This amount is expected to be recognized over a weighted-average period of 3.26 years.