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Stock-Based Compensation

6 Months Ended

Dec. 31, 2022

12.Stock-based compensation

The Company’s Amended and Restated 2015 Stock Incentive Plan (“2015 Plan”) and the vesting terms of certain stock-based awards granted are described in Note 17 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2022.

On September 7, 2022, the Company’s Board further amended and restated the Company’s 2015 Plan, and on November 16, 2022, the Company’s shareholders approved the Amended and Restated 2022 Stock Incentive Plan (“2022 Plan”). Amendments included: (1) increasing the number of shares available for issuance by 2,500,000; (2) extending the term of the plan to September 7, 2032; (3) addressed the treatment of equity awards upon a change in control; (4) clarified that all equity awards will generally have a vesting period of at least one year; (5) included an explicit prohibition on the payment of dividends and dividend equivalents on unvested full value awards; (6) clarified and updated repricing restrictions; (7) included mandatory application of our clawback policy to equity awards under the 2022 Plan; and (8) removed deadwood provisions related to the “performance based compensation” exemption under Section 162(m) of the Internal Revenue Code of 1986, as amended.

Stock option and restricted stock activity

Options

The following table summarizes stock option activity for the six months ended December 31, 2022 and 2021:

			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, 2022			926,225	4.14	6.60	1,249	1.60
	Exercised		(109,826)	3.04	-	126	-
		Outstanding - December 31, 2022	816,399	4.29	5.94	689	1.64

Outstanding - June 30, 2021			1,294,832	3.93	7.68	1,624	1.45
	Exercised		(242,853)	3.05	-	457	-
	Forfeited		(85,000)	3.48			1.34
		Outstanding - December 31, 2021	966,979	4.19	6.76	1,056	1.53

No stock options were awarded during the three and six months ended December 31, 2022 and 2021. No stock options were forfeited during the three and six months ended December 31, 2022, and during the three months ended December 31, 2021. Employees forfeited 85,000 stock options during the six months ended December 31, 2021.

During the three and six months ended December 31, 2022, the Company received approximately $0.3 million and $0.3 million from the exercise of 107,826 and 109,826 stock options, respectively. During each of the three and six months ended December 31, 2021, the Company received approximately $0.7 million from the exercise of 242,853 stock options.

The following table presents stock options vested and expected to vest as of December 31, 2022:

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Vested and expecting to vest - December 31, 2022

816,399

4.29

5.94

689

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

12.Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Options (continued)

The following table presents stock options that are exercisable as of December 31, 2022:

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Exercisable - December 31, 2022

563,163

4.42

4.83

173

During the three months ended December 31, 2022 and 2021, respectively, 217,316 and 145,015 stock options became exercisable. During the six months ended December 31, 2022 and 2021, respectively, 292,316 and 376,348 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 six months ended December 31, 2022 and 2021:

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




Non-vested – June 30, 2022				2,385,267	11,879
	Total granted			1,050,347	4,230
		Granted – July 2022		32,582	172
		Granted – August 2022		179,498	995
		Granted – November 2022		150,000	605
		Granted – December 2022		430,399	1,862
		Granted – December 2022, with performance conditions		257,868	596
	Total vested			(145,694)	689
		Vested – July 2022		(78,801)	410
		Vested – November 2022		(59,833)	250
		Vested – December 2022		(7,060)	29
	Total granted and vested - December 2022			-	-
		Granted - December 2022		300,000	1,365
		Vested - December 2022		(300,000)	1,365
		Non-vested – December 31, 2022		3,289,920	15,232

Non-vested – June 30, 2021				384,560	1,123
	Total Granted			656,052	3,190
		Granted – July 2021		234,608	963
		Granted – August 2021		44,986	192
		Granted – November and December 2021		326,158	1,766
		Granted – December 2021		50,300	269
Total granted and vested - November and December 2021				-	-
		Granted - November and December 2021		71,647	393
		Vested - November and December 2021		(71,647)	393
			Non-vested – December 31, 2021	1,010,612	4,629

12.Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Restricted stock (continued)

Grants

In July 2022 and December 2022, the Company awarded 32,582 and ,430399 shares of restricted stock, respectively, to employees and an executive officer which have time -based vesting conditions. In December 2022, the Company awarded 257,868 shares of restricted stock to executive officers which contained time and performance-based (market conditions related to share price performance) vesting conditions. The Company also agreed to match, on a one-for-one basis, (1) an employee’s purchase of up to $1.0 million worth of the Company’s shares of common stock in open market purchases, and in August 2022, the Company granted 179,498 shares of restricted stock to the employee, and (2) another employee’s purchase of up to 150,000 shares of the Company’s common stock, and in November 2022, the Company granted 150,000 shares of restricted stock to the employee. These shares of restricted stock contain time-based vesting conditions. The Company awarded 300,000 shares to an executive officer on December 31, 2022, which vested on the date of the award.

The 257,868 shares of restricted stock awarded to executive officers are subject to a time-based vesting condition and a market condition and vest in full only on the date, if any, that the following conditions are satisfied: (1) a compounded annual 10% appreciation in the Company’s stock price off a base price of $4.94 over the measurement period commencing on December 1, 2022 through December 1, 2025, and (2) the recipient is employed by the Company on a full-time basis when the condition in (1) is met. If either of these conditions is not satisfied, then none of the shares of restricted stock will vest and they will be forfeited. The Company’s closing price on December 1, 2022, was $4.08.

The appreciation levels (times and price) and vesting percentages as of each period ended are as follows:

 Prior to the first anniversary of the grant date: 0%;

 Fiscal 2024, stock price as of December 1, 2023 is 1.1 times higher (i.e. $5.43 or higher) than $4.94: 33%;

 Fiscal 2025, stock price as of December 1, 2024 is 1.21 times higher (i.e. $5.97 or higher) than $4.94: 67%;

 Fiscal 2026, stock price as of December 1, 2025 is 1.331 times higher (i.e. $6.57) than $4.94:100 %.

The fair value of these shares of restricted stock was calculated using a Monte Carlo simulation.

In scenarios where the shares do not vest, the final vested value at maturity is zero. In scenarios where vesting occurs, the final vested value on maturity is the share price on vesting date. In its calculation of the fair value of the restricted stock, the Company used an equally weighted volatility of 50.1% for the closing price (of $4.08), a discounting based on U.S. dollar overnight indexed swap rates for the grant date, and no future dividends. The equally weighted volatility was extracted from the time series for closing prices as the standard deviation of log prices for the three years preceding the grant date.

On July 1, 2021, the Company granted its Group Chief Executive Officer, 117,304 shares of restricted stock, which are subject to time-based vesting conditions and vest in full on June 30, 2024, subject to Mr. Meyer’s continued service to the Company through June 30, 2024. Mr. Meyer was also awarded 117,304 shares of restricted stock which include performance-based 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 contained time and performance-based (market conditions related to share price performance) vesting conditions.

In August 2021 and December 2021, the Company awarded 44,986 and 50,300 shares of restricted stock, respectively, to employees which have time and performance-based (market conditions related to share price performance) vesting conditions.

Upon joining the Company, each of Messrs. Chris G.B. Meyer and Lincoln C. Mali, were entitled to receive an award of shares of restricted stock which were subject to them purchasing an agreed value of shares (“matching awards”) in the market during a prescribed period of time. The executives acquired shares during November and December 2021, and the Company granted the executives 326,158 matching awards and 71,647 top up awards. The shares vest ratably over three years on the applicable vesting date based on the anniversary of each executive’s date of joining the Company.

As fully described in Note 17 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2022, the Company granted a further 12,962 and 32,405 shares to an advisor during the three and six months ended December 31, 2022, respectively, which were ineligible for transfer until the earlier of December 31, 2022, or the occurrence of the agreed event.

12.Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Restricted stock (continued)

Vesting

In July 2022, 78,801 shares of restricted stock granted to Mr. Meyer vested and he elected for 35,460 shares to be withheld to satisfy the withholding tax liability on the vesting of these shares. In November and December 2022, an aggregate of 66,893 shares of restricted stock granted to employees vested and they elected for 30,102 shares to be withheld to satisfy the withholding tax liability on the vesting of these shares. These 65,562 (35,460 plus 30,102) shares have been included in our treasury shares.

Except as discussed above, no shares of restricted stock vested during the three months ended December 31, 2021. During the three and six months ended December 31, 2021, 30,000 shares of restricted stock were forfeited by an executive officer as the market condition (related to share price performance) was not achieved.

Stock-based compensation charge and unrecognized compensation cost

The Company recorded a stock-based compensation charge, net during the three months ended December 31, 2022 and 2021, of $2.9 million and $0.8 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 December 31, 2022
	Stock-based compensation charge		$	2,849	$	-	$	2,849
		Total - three months ended December 31, 2022	$	2,849	$	-	$	2,849

Three months ended December 31, 2021
	Stock-based compensation charge		$	788	$	-	$	788
		Total - three months ended December 31, 2021	$	788	$	-	$	788

The Company recorded a stock-based compensation charge, net during the six months ended December 31, 2022 and 2021, of $4.3 million and $1.1 million respectively, which comprised:

a				Total charge		Allocated to cost of goods sold, IT processing, servicing and support		Allocated to selling, general and administration
	Six months ended December 31, 2022
		Stock-based compensation charge		$	4,311	$	-	$	4,311
		Reversal of stock compensation charge related to stock options forfeited			-		-		-
			Total - six months ended December 31, 2022	$	4,311	$	-	$	4,311

	Six months ended December 31, 2021
		Stock-based compensation charge		$	1,132	$	-	$	1,132
		Reversal of stock compensation charge related to stock options and restricted stock forfeited			(35)		-		(35)
			Total - six months ended December 31, 2021	$	1,097	$	-	$	1,097

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.

12.Stock-based compensation (continued)

As of December 31, 2022, the total unrecognized compensation cost related to stock options was approximately $0.3 million, which the Company expects to recognize over approximately two years. As of December 31, 2022, the total unrecognized compensation cost related to restricted stock awards was approximately $11.5 million, which the Company expects to recognize over approximately three years.

As of December 31, 2022, and June 30, 2022, respectively, the Company recorded a deferred tax asset of approximately $0.5 million and $0.3 million, related to the stock-based compensation charge recognized related to employees of Lesaka. As of December 31, 2022, and June 30, 2022, respectively, the Company recorded a valuation allowance of approximately $0.5 million and $0.3 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.