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Stock-Based Compensation

3 Months Ended

Sep. 30, 2021

12.Stock-based compensation

The Company’s Amended and Restated 2015 Stock Incentive Plan and the vesting terms of certain stock-based awards granted are described in Note 16 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2021.

Stock option and restricted stock activity

Options

The following table summarizes stock option activity for the three months ended September 30, 2021 and 2020:


			Number of shares	Weighted average exercise price ($)	Weighted average remaining contractual term (in years)	Aggregate intrinsic value ($'000)	Weighted average grant date fair value ($)

Outstanding - June 30, 2021			1,294,832	3.93	7.68	1,624	1.45
	Forfeited		(85,000)	3.48	-	-	1.34
		Outstanding - September 30, 2021	1,209,832	3.96	7.63	1,445	1.46

Outstanding - June 30, 2020			1,331,651	5.83	7.56	-	2.01
	Granted – August 2020		150,000	3.50	3.00	166	1.11
	Forfeited		(250,034)	8.79	-	-	2.71
		Outstanding - September 30, 2020	1,231,617	4.97	7.56	163	1.76

No stock options were awarded during the three months ended September 30, 2021. On August 5, 2020, the Company granted one of its non-employee directors, Mr. Ali Mazanderani, in his capacity as a consultant to the Company, 150,000 stock options with an exercise price of $3.50. These stock options are subject to the non-employee director’s continuous service through the applicable vesting date, and half of the options vest on each of the first and second anniversaries of the grant date.

Employees forfeited 85,000 stock options during the three months ended September 30, 2021. During the three months ended September 30, 2020, the Company’s former chief executive officer forfeited 250,034 stock options with strike prices ranging from $6.20 to $11.23 per share following his separation from the Company.

The fair value of each option is estimated on the date of grant using the Cox Ross Rubinstein binomial model that uses the assumptions noted in the following table. The estimated expected volatility is calculated based on the Company’s 750-day volatility. The estimated expected life of the option was determined based on historical behavior of employees who were granted options with similar terms.

The table below presents the range of assumptions used to value stock options granted during the three months ended September 30, 2020:

	Three months ended
	September 30,
		2020
Expected volatility		62	%
Expected life (in years)		2
Risk-free rate		0.11	%

12.Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Options (continued)

The following table presents stock options vested and expected to vest as of September 30, 2021:

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Vested and expecting to vest - September 30, 2021

1,209,832

3.96

7.63

1,445

These options have an exercise price range of $3.01 to $11.23.

The following table presents stock options that are exercisable as of September 30, 2021:

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Exercisable - September 30, 2021

401,677

5.18

6.42

199

During the three months ended September 30, 2021 and 2020, respectively, 231,333 and ,156333 stock options became exercisable. The Company issues new shares to satisfy stock option exercises.

Restricted stock

The following table summarizes restricted stock activity for the three months ended September 30, 2021 and 2020:

				Number of shares of restricted stock	Weighted average grant date fair value ($’000)




Non-vested – June 30, 2021				384,560	1,123
	Granted – July 2021			234,608	963
	Granted – August 2021			44,986	192
		Non-vested – September 30, 2021		664,154	2,610

Non-vested – June 30, 2020				1,115,500	5,354
Total vested				(311,300)	(1,037)
		Vested – August 2020		(244,500)	(812)
		Vested – September 2020 - accelerated vesting		(66,800)	(225)
	Forfeitures			(480,200)	(1,618)
			Non-vested – September 30, 2020	324,000	1,102

12.Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Restricted stock (continued)

On June 30, 2021, the Company entered into employment agreements with Mr. Chris G.B. Meyer, under which Mr. Meyer was appointed Group Chief Executive Officer of the Company effective July 1, 2021. Mr. Meyer was awarded 117,304 shares of restricted stock on July 1, 2021, which were subject to time-based vesting and vest in full on June 30, 2024, subject to Mr. Meyer’s continued service to the Company through June 30, 2024. In addition, under the terms of Mr. Meyer’s engagement, the Company’s Remuneration Committee also awarded Mr. Meyer 117,304 shares of restricted stock which include performance conditions and which only vest on June 30, 2024 if the performance conditions are met and Mr. Meyer remains employed with the Company through June 30, 2024. Vesting of half of these awards, or 58,652 shares of restricted stock, is subject to the Company achieving its three-year financial services plan during the specific measurement period from June 30, 2021, to June 30, 2024, and the other half is subject to share price growth targets, and only vest if the Company’s share price is $8.14 or higher on June 30, 2024. In August 2021, the Company awarded 44,986 shares of restricted stock to an employee which have time-based vesting conditions.

No shares of restricted stock vested during the three months ended September 30, 2021.

During the three months ended September 30, 2020, 244,500 shares of restricted stock with time-based vesting conditions vested. In connection with the Company’s former chief executive officer’s separation, the Company agreed to accelerate the vesting of ,66800 shares of restricted stock which were granted in February 2020, and which were subject to time-based vesting. These shares of restricted stock vested on September 30, 2020. The 480,200 shares of restricted stock that were forfeited during the three months ended September 30, 2020, included 375,200 shares of restricted stock forfeited by the Company’s former chief executive officer upon his separation from the Company.

Stock-based compensation charge and unrecognized compensation cost

The Company recorded a stock-based compensation charge, net during the three months ended September 30, 2021 and 2020, of $0.3 million and $0.4 million, respectively, which comprised:

			Total charge		Allocated to cost of goods sold, IT processing, servicing and support		Allocated to selling, general and administration
Three months ended September 30, 2021
	Stock-based compensation charge		$	344	$	-	$	344
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(35)		-		(35)
		Total - three months ended September 30, 2021	$	309	$	-	$	309

Three months ended September 30, 2020
	Stock-based compensation charge		$	682	$	-	$	682
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(283)		-		(283)
		Total - three months ended September 30, 2020	$	399	$	-	$	399

The stock-based compensation charges have been allocated to selling, general and administration based on the allocation of the cash compensation paid to the relevant employees.

As of September 30, 2021, the total unrecognized compensation cost related to stock options was approximately $0.6 million, which the Company expects to recognize over approximately two years. As of September 30, 2021, the total unrecognized compensation cost related to restricted stock awards was approximately $2.2 million, which the Company expects to recognize over approximately three years.

As of September 30, 2021, and June 30, 2021, respectively, the Company recorded a deferred tax asset of approximately $0.4 million and $0.1 million, related to the stock-based compensation charge recognized related to employees of Net1. As of September 30, 2021, and June 30, 2021, respectively, the Company recorded a valuation allowance of approximately $0.4 million and $0.1 million, related to the deferred tax asset because it does not believe that the stock-based compensation deduction would be utilized as it does not anticipate generating sufficient taxable income in the United States. The Company deducts the difference between the market value on the date of exercise by the option recipient and the exercise price from income subject to taxation in the United States.