Stock-Based Compensation

9 Months Ended

Mar. 31, 2021

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 nine months ended March 31, 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, 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		(17,335)	3.07	-	35	-
	Forfeited		(466,033)	7.12	-	-	2.31
		Outstanding - March 31, 2021	1,558,283	4.24	7.80	2,860	1.56
Outstanding - June 30, 2019			864,579	7.81	7.05	-	2.62
	Granted – October 2019		561,000	3.07	10.00	676	1.20
	Forfeited		(93,928)	7.50	-	-	2.81
		Outstanding - March 31, 2020	1,331,651	5.83	7.83	-	2.01

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. No stock options were awarded during the three months ended March 31, 2021 and 2020. The Company awarded 560,000 and 561,000 stock options to employees during the nine months ended March 31, 2021 and 2020, respectively. During the nine months ended March 31, 2021, 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 10,000 and 93,928 stock options during the three months ended March 31, 2021 and 2020, respectively. Employees forfeited 205,999 and 93,928 stock options during the nine months ended March 31, 2021 and 2020, respectively.

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 nine months ended March 31, 2021 and 2020:

	Nine months ended
	March 31,
		2021		2020
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 March 31, 2021:

	Number of shares	Weighted average exercise price ($)	Weighted average remaining contractual term (in years)	Aggregate intrinsic value ($’000)
Vested and expecting to vest - March 31, 2021	1,558,283	4.24	7.80	2,860

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

The following table presents stock options that are exercisable as of March 31, 2021:

	Number of shares	Weighted average exercise price ($)	Weighted average remaining contractual term (in years)	Aggregate intrinsic value ($’000)
Exercisable - March 31, 2021	460,798	6.46	6.86	345

No stock options became exercisable during the three months ended March 31, 2021 and 2020. During the nine months ended March 31, 2021 and 2020, 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 nine months ended March 31, 2021 and 2020:

				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 – March 31, 2021		294,000	994
Non-vested – June 30, 2019				583,908	3,410
		Granted – February 2020		568,000	2,300
Total vested				(18,908)	70
		Vested – March 2020		(11,408)	42
		Vested – March 2020 - accelerated vesting		(7,500)	28
	Forfeitures			(17,500)	65
			Non-vested – March 31, 2020	1,115,500	5,354

13.Stock-based compensation (continued)

Stock option and restricted stock activity (continued)

Options (continued)

During the three months ended March 31, 2021, 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 nine months ended March 31, 2021, 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.

The March 31, 2021, non-vested shares of restricted stock presented in the table above includes 164,000 shares of restricted stock forfeited by an executive officer following his resignation from the Company on April 30, 2021. The amount of 164,000 shares of restricted stock comprised 107,200 shares of restricted stock with performance (related to agreed return on net asset value) and time-based vesting conditions, 30,000 shares of restricted stock with a market condition (related to share price performance) and time-based vesting conditions, and 26,800 shares of restricted stock with time-based vesting conditions.

The February 2020 grants comprise 113,600 shares of restricted stock awarded to executive officers that are subject to time-based vesting and 454,400 shares of restricted stock awarded to executive officers that are subject to performance and time-based vesting. During three and nine months ended March 31, 2020, employees forfeited 17,500 shares of restricted stock upon termination and 7,500 shares (50% of the original award) of restricted stock with time-based vesting conditions were forfeited by an executive officer upon the disposal of Net1 Korea. The Company’s Board of Directors accelerated the vesting of the other half of the award and 7,500 shares vested.

On February 5, 2021, the Company entered into an employment agreement with Mr. Mali, under which Mr. Mali was appointed Chief Executive Officer of Net1 SA. The appointment is effective from May 1, 2021. Mr. Mali was awarded 77,040 shares of restricted stock on May 1, 2021. The number of shares granted was calculated using a base amount of ZAR 6.25 million, the Company’s closing share price on the Nasdaq Global Select Market on April 30, 2021, and the April 30, 2021 $ / ZAR closing exchange rate. These shares of restricted stock include time-based vesting conditions and are subject to Mr. Mali’s continuous service to the Company through the applicable vesting date, with one third of the options vesting on each of the first, second and third anniversaries of the grant date, May 1, 2021.

The parties also agreed that, on or about August 1, 2021, the Company will issue such number of shares of restricted stock equal to the aggregate amount of the Company’s common stock purchased by Mr. Mali between May 1, 2021 and July 31, 2021. The number of shares of restricted to stock to be issued will be calculated using a base amount of up to ZAR 6.25 million, in each case, divided by the product of the Fair Market Value (as defined in the Company’s Amended and Restated 2015 Stock Incentive Plan) of the Company’s common stock, multiplied by the $ / ZAR exchange rate on the date of grant. These shares of restricted stock are also expected to include time-based vesting conditions and will be subject to Mr. Mali’s continuous service to the Company through the applicable vesting date, with one third of the options vesting on each of the first, second and third anniversaries of the grant date, on or about August 1, 2021.

Mr. Mali is also entitled to a long-term incentive award related to the Company’s 2021 fiscal year, comprising an award of restricted stock equal to 85% of Mr. Mali’s base salary, or ZAR 5.95 million, divided by the product of the Fair Market Value of the Company’s common stock, as determined by the Company’s remuneration committee in its sole discretion, multiplied by the $ / ZAR exchange rate on the date of grant. Vesting of the award is subject to performance criteria to be determined by the Company’s remuneration committee and the continuous employment of Mr. Mali on each vesting date. The award of restricted stock vests ratably over a period of three years commencing on the first anniversary of the grant of the award.

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 March 31, 2021 and 2020, of $0.2 million and $0.3 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, 2021
	Stock-based compensation charge		$	245	$	-	$	245
		Total - three months ended March 31, 2021	$	245	$	-	$	245
Three months ended March 31, 2020
	Stock-based compensation charge		$	492	$	-	$	492
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(145)		-		(145)
		Total - three months ended March 31, 2020	$	347	$	-	$	347

The Company recorded a stock-based compensation charge, net during the nine months ended March 31, 2021 and 2020, of $0.9 million and $1.2 million respectively, which comprised:

			Total charge		Allocated to cost of goods sold, IT processing, servicing and support		Allocated to selling, general and administration
Nine months ended March 31, 2021
	Stock-based compensation charge		$	1,173	$	-	$	1,173
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(297)		-		(297)
		Total - nine months ended March 31, 2021	$	876	$	-	$	876
Nine months ended March 31, 2020
	Stock-based compensation charge		$	1,315	$	-	$	1,315
	Reversal of stock compensation charge related to stock options and restricted stock forfeited			(145)		-		(145)
		Total - nine months ended March 31, 2020	$	1,170	$	-	$	1,170

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 March 31, 2021, the total unrecognized compensation cost related to stock options was approximately $1.1 million, which the Company expects to recognize over approximately three years. As of March 31, 2021, 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 March 31, 2021, 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 March 31, 2021, 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.