Stock-Based Compensation

6 Months Ended

Dec. 31, 2020

Stock-Based Compensation [Abstract]

Stock-Based Compensation

13.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 18 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2020.

Stock option and restricted stock activity

Options

The following table summarizes stock option activity for the six months ended December 31, 2020 and 2019:

			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, 2020			1,331,651	5.83	7.56	-	2.01
	Granted - August 2020		150,000	3.50	3.00	166	1.11
	Granted - November 2020		560,000	3.01	10.00	691	1.23
	Exercised		(5,834)	3.07	-	21	-
	Forfeited		(456,033)	7.03	-	-	2.26
		Outstanding - December 31, 2020	1,579,784	4.28	8.04	2,104	1.59
Outstanding - June 30, 2019			864,579	7.81	7.05	-	2.62
	Granted – October 2019		561,000	3.07	10.00	676	1.20
		Outstanding - December 31, 2019	1,425,579	5.94	7.81	365	2.07

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. The Company awarded 560,000 and 561,000 stock options to employees during the three and six months ended December 31, 2020 and 2019, respectively. During the six months ended December 31, 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. Employees forfeited 205,999 stock options during the three and six months ended December 31, 2020. No stock options were forfeited during the three and six months ended December 31, 2019.

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 six months ended December 31, 2020 and 2019:

	Six months ended
	December 31,
		2020		2019
Expected volatility		62	%	57	%
Expected dividends		0	%	0	%
Expected life (in years)		3		3
Risk-free rate		0.19	%	1.57	%

13.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 December 31, 2020:

	Number of shares	Weighted average exercise price ($)	Weighted average remaining contractual term (in years)	Aggregate intrinsic value ($’000)
Vested and expecting to vest - December 31, 2020	1,579,784	4.28	8.04	2,104

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

The following table presents stock options that are exercisable as of December 31, 2020:

	Number of shares	Weighted average exercise price ($)	Weighted average remaining contractual term (in years)	Aggregate intrinsic value ($’000)
Exercisable - December 31, 2020	472,299	6.37	7.17	274

During the three months ended December 31, 2020, ,181333 stock options became exercisable. No stock options became exercisable during the three months ended December 31, 2019. During the six months ended December 31, 2020 and 2019, respectively, 337,666 and 170,335 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, 2020 and 2019:

				Number of shares of restricted stock	Weighted average grant date fair value ($’000)
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				(510,200)	(1,766)
		Non-vested – December 31, 2020		294,000	994
Non-vested – June 30, 2019				583,908	3,410
			Non-vested – December 31, 2019	583,908	3,410

During the six months ended December 31, 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 66,800 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 ,510200 shares of restricted stock that were forfeited during the six months ended December 31, 2020, includes 375,200 shares of restricted stock forfeited by the Company’s former chief executive officer upon his separation from the Company and 30,000 shares of restricted stock forfeited by an executive officer as the market condition (related to share price performance) was not achieved.

13.Stock-based compensation (continued)

Stock-based compensation charge and unrecognized compensation cost

The Company recorded a stock-based compensation charge, net during the three months ended December 31, 2020 and 2019, of $0.2 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 December 31, 2020
	Stock-based compensation charge		$	246	$	-	$	246
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(14)		-		(14)
		Total - three months ended December 31, 2020	$	232	$	-	$	232
Three months ended December 31, 2019
	Stock-based compensation charge		$	436	$	-	$	436
		Total - three months ended December 31, 2019	$	436	$	-	$	436

The Company recorded a stock-based compensation charge, net during the six months ended December 31, 2020 and 2019, of $0.6 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
Six months ended December 31, 2020
	Stock-based compensation charge		$	928	$	-	$	928
	Reversal of stock compensation charge related to stock options and restricted stock forfeited		$	(297)	$	-	$	(297)
		Total - six months ended December 31, 2020	$	631	$	-	$	631
Six months ended December 31, 2019
	Stock-based compensation charge		$	823	$	-	$	823
		Total - six months ended December 31, 2019	$	823	$	-	$	823

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 December 31, 2020, the total unrecognized compensation cost related to stock options was approximately $1.3 million, which the Company expects to recognize over approximately three years. As of December 31, 2020, the total unrecognized compensation cost related to restricted stock awards was approximately $0.7 million, which the Company expects to recognize over approximately two years.

As of December 31, 2020, and June 30, 2020, respectively, the Company recorded a deferred tax asset of approximately $0.04 million and $0.4 million, related to the stock-based compensation charge recognized related to employees of Net1. As of December 31, 2020, and June 30, 2020, respectively, the Company recorded a valuation allowance of approximately $0.04 million and $0.4 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.