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Stock-Based Compensation

9 Months Ended

Mar. 31, 2023

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 nine months ended March 31, 2023 and 2022:

			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		(147,326)	3.04	-	190	-
	Forfeited		(66,959)	3.66	-	-	1.64
		Outstanding - March 31, 2023	711,940	4.41	5.42	670	1.67

Outstanding - June 30, 2021			1,294,832	3.93	7.68	1,624	1.45
	Granted – February 2022		137,620	4.87	10.00	235	1.71
	Exercised		(249,521)	3.05	-	470	-
	Forfeited		(188,332)	4.14	-	-	1.50
		Outstanding - March 31, 2022	994,599	4.25	6.86	1,884	1.64

No stock options were awarded during the three and nine months ended March 31, 2023. The Company awarded 137,620 stock options to employees during the three and nine months ended March 31, 2022. Employees forfeited 66,959 and 94,404 stock options during the three months ended March 31, 2023 and 2022, respectively. Employees forfeited 66,959 and 188,332 stock options during the nine months ended March 31, 2023 and 2022, respectively.

During the three and nine months ended March 31, 2023, an employee delivered 23,934 shares of the Company’s common stock to exercise 37,500 stock options with an aggregate strike price of $0.1 million. These 23,934 shares of common stock have been included in the Company’s treasury stock. The employee also elected to deliver 6,105 shares of the Company’s common stock to settle income taxes arising upon exercise of the stock options, and these shares have also been included in the Company’s treasury stock. During the nine months ended March 31, 2023, the Company received approximately $0.4 million from the exercise of 147,326 stock options. During the three and nine months ended March 31, 2022, the Company received approximately $0.02 million and $0.8 million from the exercise of ,6668 and 249,521 stock options, respectively.

The following table presents stock options vested and expected to vest as of March 31, 2023:

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Vested and expecting to vest - March 31, 2023

711,940

4.41

5.42

670

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 March 31, 2023:

Number of

Weighted average exercise price

($)

Weighted average remaining contractual term

(in years)

Aggregate intrinsic value

($’000)

Exercisable - March 31, 2023

531,479

4.63

4.56

474

During the three months ended March 31, 2023, 35,649 stock options became exercisable. No stock options became exercisable during the three months ended March 31, 2022. During the nine months ended March 31, 2023 and 2022, respectively, 327,965 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 nine months ended March 31, 2023 and 2022:

				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			1,062,153	4,287
		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 – January 2023		11,806	57
		Granted – December 2022, with performance conditions		257,868	596
	Total vested			(234,159)	1,098
		Vested – July 2022		(78,801)	410
		Vested – November 2022		(59,833)	250
		Vested – December 2022		(7,060)	29
		Vested – February 2023		(19,179)	83
		Vested – March 2023		(69,286)	326
	Total granted and vested - December 2022			-	-
		Granted - December 2022		300,000	1,365
		Vested - December 2022		(300,000)	1,365
Forfeitures				(18,798)	9,235
		Non-vested – March 31, 2023		3,194,463	14,822

Non-vested – June 30, 2021				384,560	1,123
	Total Granted			893,831	4,433
		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
		Granted – February 2022		29,920	146
		Granted – March 2022		207,859	1,097
Total granted and vested - November and December 2021				-	-
		Granted - November and December 2021		71,647	393
		Vested - November and December 2021		(71,647)	393
	Forfeitures			(30,000)	(160)
			Non-vested – March 31, 2022	1,248,391	5,867

12.Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Restricted stock (continued)

Grants

In July 2022, December 2022 and January 2023, the Company awarded 32,582, ,430399, and 11,806 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, December 2021, February 2022 and March 2022, the Company awarded 44,986, 50,300, 29,920 and 207,859 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 32,405 and 19,443 shares to an advisor during the nine months ended March 31, 2023 and 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, December 2022 and February 2023, an aggregate of 86,072 shares of restricted stock granted to employees vested and they elected for 38,008 shares to be withheld to satisfy the withholding tax liability on the vesting of these shares. These 73,468 (35,460 plus 38,008) shares have been included in our treasury shares.

Forfeitures

During the three and nine months ended March 31, 2023, employees forfeited 18,798 shares of restricted stock following their termination of employment with the Company. During the three and nine months ended March 31, 2022, 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 March 31, 2023 and 2022, of $1.6 million and $0.6 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 March 31, 2023
	Stock-based compensation charge		$	1,667	$	-	$	1,667
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(23)		-		(23)
		Total - three months ended March 31, 2023	$	1,644	$	-	$	1,644

Three months ended March 31, 2022
	Stock-based compensation charge		$	619	$	-	$	619
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(5)		-		(5)
		Total - three months ended March 31, 2022	$	614	$	-	$	614

The Company recorded a stock-based compensation charge, net during the nine months ended March 31, 2023 and 2022, of $6.0 million and $1.7 million respectively, which comprised:

a				Total charge		Allocated to cost of goods sold, IT processing, servicing and support		Allocated to selling, general and administration
	Nine months ended March 31, 2023
		Stock-based compensation charge		$	5,978	$	-	$	5,978
		Reversal of stock compensation charge related to stock options forfeited			(23)		-		(23)
			Total - nine months ended March 31, 2023	$	5,955	$	-	$	5,955

	Nine months ended March 31, 2022
		Stock-based compensation charge		$	1,751	$	-	$	1,751
		Reversal of stock compensation charge related to stock options and restricted stock forfeited			(40)		-		(40)
			Total - nine months ended March 31, 2022	$	1,711	$	-	$	1,711

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 March 31, 2023, 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 March 31, 2023, 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 March 31, 2023, 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 March 31, 2023, 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.