Stock-Based Compensation

6 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

We currently maintain two stock incentive plans, the 2007 Omnibus Incentive Plan and the 2016 Omnibus Incentive Plan (the “2016 Plan”). Of these plans, we may only grant future awards from the 2016 Plan. The 2016 Plan allows for the issuance of stock options, stock appreciation rights, restricted stock, time-restricted stock units (“RSUs"), performance-based restricted stock units ("PSUs”), cash incentive awards and other stock-based awards. At September 30, 2021, there were approximately 4,018,967 shares of common stock available for grant or issuance under the 2016 Plan. Total stock options vested and expected to vest were approximately 5.1 million as of September 30, 2021.

Stock Options

A summary of activity with respect to our stock options for the six months ended September 30, 2021 is as follows:


	Options	Weighted Average Exercise Price Per Share
	(In thousands)
Options outstanding at March 31, 2021	5,623	$	4.10
Granted	40	6.67
Exercised	(488)	2.89
Forfeited	(73)	4.84
Options outstanding at September 30, 2021	5,102	4.23

Restricted Stock Units

A summary of activity with respect to our RSUs, which entitle the holder to receive one share of our common stock for each RSU upon vesting, for the six months ended September 30, 2021 is as follows:


	# of Shares	Weighted Average Price Per Share
	(In thousands)
RSUs outstanding at March 31, 2021	448	$	4.08
Granted	73	5.51
Vested	(142)	4.83
Forfeited	—	—
RSUs outstanding at September 30, 2021	379	4.07

Performance Stock Units

The Company has granted a total "target" number of 132,403 PSUs to our executive officers. Between 0% and 160% of the PSUs will be eligible to vest based on average annual performance during the three-year performance period relative to the revenues per share and cash flow from operations objectives to be established by the Compensation Committee at the beginning of each year. In addition, the final PSU vesting based on the revenues per share and cash flow from operations performance will be subject to a modifier between .75x-1.25x based on the Company's total shareholder return relative to the Russell 2000 during the performance period, for a maximum achievement percentage of 200% of the "target" number of PSUs. The PSUs are amortized over a derived service period of 3 years. The value and the derived service period of the PSUs were estimated using the Monte-Carlo simulation model. The following table summarizes the details of the performance stock units:


	# of Shares	Weighted Average Price Per Share
	(In thousands)
PSUs outstanding at March 31, 2021	68	$	5.47
Granted	64	7.26
PSUs outstanding at September 30, 2021	132	6.34

As of September 30, 2021, 22,759 PSUs had vested but not been issued as the three-year performance period has not yet elapsed. If cessation of service should occur prior to the end of the three-year period, these vested PSUs will be issued as shares if earned under the terms of the grant.

Stock-Based Compensation Expense

The following table presents stock-based compensation expense that is included in each line item on our unaudited condensed consolidated statements of operations:


	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021		2020
	(In thousands)				(In thousands)
Cost of revenues	$	51	$	47	$	108	$	93
General and administrative expense	659		560		1,275		1,092
Sales and marketing	73		35		143		54
Research and development expense	51		25		102		50
Restructuring costs	—		—		—		42
Income (loss) from discontinued operations before gain on sale, net of tax	—		—		—		(57)
Total stock-based compensation	$	834	$	667	$	1,628	$	1,274

As of September 30, 2021, there was approximately $3.5 million, $1.1 million and $0.6 million of unrecognized compensation expense related to unvested stock options, RSUs and PSUs, respectively. This expense is currently expected to be recognized over a weighted average period of approximately 2.4 years for stock options, 2.3 years for RSUs and 2.4 years for PSUs. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional stock options, RSUs or other stock-based awards.

Other Stock-Based Compensation Plans

We currently maintain an Employee Stock Purchase Plan (“ESPP”) which allows employees to have a percentage of their base compensation withheld to purchase the Company’s common stock at 95% of the lower of the fair market at the beginning of the offering period and on the last trading day of the offering period. There are two offering periods during a calendar year, which consist of the six months beginning each January 1 and July 1. Employees may contribute 1-15% of their eligible gross pay up to a $25,000 annual stock value limit. In June 2021 and June 2020, no shares were purchased for the first offering periods of Fiscal 2022 and 2021. In July 2021, 44,449 shares related to the first offering period of Fiscal 2022 were purchased. In July 2020, 41,679 shares related to the first offering period of Fiscal 2021 were purchased. The ESPP is considered a non-compensatory plan and accordingly, no compensation expense is recorded in connection with this benefit.

Deferred Compensation Plan

Effective October 1, 2020, the Company adopted the Iteris, Inc. Deferred Compensation Plan (the "DC Plan"). The DC Plan consists of two plans, one that is intended to be an unfunded arrangement for eligible employees who are part of a select group of management or highly compensated employees of the Company within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, and one for the benefit of non-employee members of our board of directors. Key employees, including our executive officers, and our non-employee directors who are notified regarding their eligibility to participate and delivered the DC Plan enrollment materials are eligible to participate in the DC Plan. Under the DC Plan, we will provide participants with the opportunity to make annual elections to defer a percentage of their eligible cash compensation and equity awards. A participant is always 100% vested in his or her own elective cash deferrals and any earnings thereon. Elective deferrals of equity awards are credited to a bookkeeping account established in the name of the participant with respect to an equivalent number of shares of our common stock, and such credited shares are subject to the same vesting conditions as are applicable to the equity award subject to the election. The Company established a rabbi trust to finance our obligations under the DC Plan with corporate-owned life insurance policies on participants.

Employment Inducement Incentive Award Plan

On December 4, 2020, the Board approved the Iteris, Inc. 2020 Employment Inducement Incentive Award Plan (the “Inducement Plan”). The terms of the Inducement Plan are substantially similar to the terms of the Company’s 2016 Omnibus Incentive Plan with the exception that incentive stock options may not be granted under the Inducement Plan. The Inducement Plan was adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.

The Board initially reserved 300,000 shares of the Company’s common stock for issuance pursuant to awards granted under the Inducement Plan. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, awards under the Inducement Plan may only be made to an employee who has not previously been an employee or member of the Board or any parent or subsidiary, or following a bona fide period of non-employment by the Company or a parent or subsidiary, and only if he or she is granted such award in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary.

There were no awards granted under the Inducement Plan during the six months ended September 30, 2021. No further awards will be granted under the Inducement Plan, although the outstanding awards under the Inducement Plan remain outstanding in accordance with their terms.