Employee Stock Option Plan

12 Months Ended

Mar. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

EMPLOYEE STOCK OPTION PLAN

16 EMPLOYEE STOCK OPTION PLAN

Employee Stock Option Scheme of Majesco Limited — Plan 1

Certain employees of the Group participate in the Group’s parent company Majesco Limited’s employee stock option plan. The plan termed as “ESOP plan 1”, became effective June 1, 2015, the effective date of the demerger of Mastek Ltd. Group employees who were having options in the earlier ESOP plans of Mastek Ltd. have now been given options of Majesco Limited. Under the plan, Majesco Limited during the year has also granted newly issued options to the employees of MSSIPL.

During the year ended March 31, 2019, 111,000 options were granted. The options were granted at the market price on the grant date.

As of March 31, 2019, the total future compensation cost related to non-vested options not yet recognized in the Statement of Operations was $398 and the weighted average period over which these awards are expected to be recognized was 1.55 years. The weighted average remaining contractual life of options expected to vest as of March 31, 2019 is 8.56 years.

Activity in the stock options granted under the Majesco Limited’s stock option plans granted to Majesco’s employees during the year was as follows:

	Year Ended March 31, 2019					Year Ended March 31, 2018					Year Ended March 31, 2017
Particulars	Number of Options			Weighted Average Exercise Price*		Number of Option			Weighted Average Exercise Price*		Number of Options			Weighted Average Exercise Price*
Outstanding at the beginning of the year		1,512,791		$	3.38		1,624,040		$	3.23		2,015,401		$	3.23
Granted during the year		111,000			3.29		151,900			5.60		37,500			7.96
Forfeited during the year		(94,039	)		4.73		(96,453	)		6.33		(257,705	)		5.57
Expired during the year		(1,643	)		2.75		(9,594	)		3.00		(18,145	)		2.79
Exercised during the year		(138,038	)		3.58		(157,102	)		1.67		(153,011	)		1.86
Transfer adjustment		(—)			—		(—)			—		(—)			—
Outstanding at the end of the year		1,390,071		$	2.93	$	1,512,791		$	3.38	$	1,624,040		$	3.06
Exercisable at the end of the year		1,063,444		$	2.62		942,450		$	2.69		807,695		$	2.18

* The per share value has been converted at year end rate 1 US$=Rs. 69.10, Rs. 64.479 and Rs. 64.85 as of March 31, 2019, 2018 and 2017, respectively.

The weighted average grant date fair values of options granted during the fiscal years ended March 31, 2019, 2018 and 2017 is $4.80, $2.70 and $4.65, respectively, per option. The weighted average grant date fair value of vested options as of March 31, 2019 and 2018 is $1.80 and $1.80, respectively, per option. The Aggregate Intrinsic Value of options outstanding is $114 and options exercisable is $66 as of March 31, 2019.

The Group calculated the fair value of each option grant on the date of grant using the Black-Scholes pricing method with the following assumptions:

	As of March 31,
Variables (range)	2019			2018			2017
Expected term of share options		2-6 Years			6 Years			6 Years
Risk-free interest rates		7.2-7.88	%		6.70	%		7.29	%
Expected volatility		34-46	%		48.97	%		51.16	%
Expected dividend yield		0	%		0	%		0	%

The volatility is determined based on annualized standard deviation of the continuously compounded rate of return on the stock over the time to maturity of the options. The risk free interest rates are determined using the expected life of options based on the zero-coupon yield curve for Government Securities in India. The expected dividend is based on the average dividend yields for the preceding seven years. Weighted average price is based on latest available closing market price on the stock exchange with the highest trading volume on the date of grant.

Summary of outstanding options as of March 31, 2019 is as follows

Exercise Price Range*	Number of shares arising out of options		Wtd. Avg. Exercise Price*		Wtd. Avg. remaining Contractual life
$0.01 – $3.00		762,918	$	1.17		5.98
$3.01 – $6.00		559,653		4.74		5.61
$6.01 – $9.00		67,500		8.10		8.80
Total		1,390,071	$	1.92		5.93

Summary of exercisable options as of March 31, 2019 is as follows:

Exercise Price range*	Number of shares arising out of options		Wtd. Avg. Exercise Price*		Wtd. Avg. remaining Contractual life
$0.01 – $3.00		692,916	$	1.22		5.83
$3.01 – $6.00		336,528		4.80		7.60
$6.01 – $9.00		34,000		8.26		7.87
Total		1,063,444	$	2.62		6.46

* The per share value has been converted at year end average rate 1 US$= Rs 69.10 as of March 31, 2019.

In accordance with FASB Accounting Standards Codification (“ASC”) 718, Accounting for Stock Options and Other Stock-Based Compensation , Majesco uses the simplified method for estimating the expected term when measuring the fair value of employee stock options using the Black-Scholes option pricing model. Majesco believes the use of the simplified method is appropriate due to the employee stock options qualifying as “plain-vanilla” options under the following criteria established by ASC 718:

● stock options are granted at-the-money;

● exercisability is conditional only on the completion of a service condition through the vesting date;

● employees who terminate their service prior to vesting forfeit the options;

● employees who terminate their service after vesting are granted limited time to exercise their stock options (typically 30 – 90 days); and

● stock options are nontransferable and non hedgeable.

Given our limited history with employee grants, we use the “simplified” method in estimating the expected term for our employee grants. The “simplified” method, as permitted by applicable regulations, is calculated as the average of the time-to-vesting and the contractual life of the options.

Majesco 2015 Equity Incentive Plan

In the fiscal year ended March 31, 2019, we recognized $2,220 compared to $1,650 in the fiscal year ended March 31, 2018, of stock-based compensation expense in our consolidated Financial Statements.

In June 2015, Majesco adopted the Majesco 2015 Equity Incentive Plan (the “2015 Plan”). On May 9, 2018, the Board of Directors of Majesco approved an increase of 2,000,000 shares in the amount of shares available for issuance under the 2015 Plan thereby increasing the number of shares available under such plan from 3,877,263 shares to 5,877,263 shares. This increase was approved by the shareholders of Majesco at the 2018 annual meeting of shareholders. Under the 2015 Plan, options, restricted stock and other equity incentive awards with respect to up to 5,877,263 shares may be granted by the Compensation Committee of the Board of Directors to our employees, consultants and directors at an exercise or grant price determined by the Compensation Committee of the Board of Directors on the date of grant. Options may be granted as incentive or nonqualified stock options with a term of not more than ten years. The 2015 Plan allows the grant of restricted or unrestricted stock awards or awards denominated in stock equivalent units or any combination of the foregoing, which may be paid in common stock or other securities, in cash, or in a combination of common stock or other securities and cash. On March 31, 2019, an aggregate of 2,081,983 shares were available for grant under the 2015 Plan.

Majesco uses the Black-Scholes-Merton option-pricing model (“Black-Scholes”) to measure fair value of the share-based awards. The Black-Scholes model requires us to make significant judgments regarding the assumptions used within the model, the most significant of which are the expected stock price volatility, the expected life of the option award, the risk-free interest rate of return and dividends during the expected term.

● Expected volatilities are based on peer entities as the historical volatility of Majesco’s common stock is limited.

● In accordance with ASC 718, Majesco uses the simplified method for estimating the expected term when measuring the fair value of employee stock options using the Black-Scholes option pricing model. Majesco believes the use of the simplified method is appropriate due to the employee stock options qualifying as “plain-vanilla” options under the criteria established by ASC 718.

● The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yields for an equivalent term at the time of grant.

● Majesco does not anticipate paying dividends during the expected term.

	2019		2018
Expected volatility		41% – 50%		41% – 50%
Weighted-average volatility		41%		41%
Expected dividends		0		0
Expected term (in years)		3 – 5 Years		3 – 5 Years
Risk-free interest rate		2.5%		0.46%

As of March 31, 2019, there was $5,054 of total unrecognized compensation costs related to non-vested share-based compensation arrangements previously granted by Majesco. That cost is expected to be recognized over a weighted-average period of 1.8 years.

A summary of the outstanding common stock options under the 2015 Plan is as follows:

	Shares			Exercise Price Per Share		Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price
Balance, April 1, 2015		—		$	—	—	$	—
Granted		2,279,882			4.81 – 7.72	9.07 Years		5.24
Canceled		(100,497	)		4.81 – 6.93			4.95
Balance, April 1, 2016		2,179,385		$	4.81 – 7.72	9.07 Years	$	5.25
Granted		860,331			4.79 – 6.22	9.41 Years		5.56
Exercised		(2,083	)		4.92			4.92
Canceled		(168,991	)		4.81 – 7.53			5.37
Balance, March 31, 2017		2,868,642		$	4.79 – 7.72	8.91 Years	$	5.34
Granted		715,000			4.85 – 5.64	8.77 Years		5.01
Exercised		(51,249	)		4.92 – 5.05			4.94
Canceled		(254,250	)		4.87 – 6.22			5.38
Balance, March 31, 2018		3,278,143		$	4.79 – 7.72	7.69 Years	$	5.27
Granted		370,890			5.25 – 7.64	9.56 Years		7.04
Exercised		(107,681	)		4.87 – 6.22			5.02
Canceled		(282,085	)		4.81 – 7.53			5.25
Balance, March 31, 2019		3,259,267		$	4.79 – 7.72	8.08 Years	$	5.49

The options granted during fiscal 2019 are distributed as follows, relative to the difference between the exercise price and the stock price at grant date:

	Weighted-Average		Weighted-Average
Number	Granted		Exercise Price		Fair Value
Exercise Price at Stock Price		370,890	$	7.04	$	3.09

The options granted during fiscal 2018 are distributed as follows, relative to the difference between the exercise price and the stock price at grant date:

	Number		Weighted-Average		Weighted-Average
	Granted		Exercise Price		Fair Value
Exercise Price at Stock Price		715,000	$	5.01	$	2.21

Exercisable options at March 31, 2019 were as follows:

	Number of Exercisable Options		Weighted-Average Exercise Price
March 31, 2019		1,729,358	$	5.36
March 31, 2018		1,200,212	$	5.45

The following table summarizes information about stock options at March 31, 2019:

	Outstanding Stock Options					Exercisable Stock Options
Range of Exercise Prices	Shares		Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price		Shares		Weighted-Average Exercise Price
$4.79 – $6.22		2,792,561	7.8 Years	$	5.16		1,573,542	$	5.14
$7.21 – $7.72		466,709	9.8 Years	$	7.41		155,816	$	7.64

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our employee stock options.

Among other items, ASC 718 requires companies to record the compensation expense for share-based awards issued to employees and directors in exchange for services provided. The amount of the compensation expense is based on the estimated fair value of the awards on their grant dates and is recognized over the required service periods. Our share-based awards include stock options and restricted stock awards. For restricted stock awards, the calculation of compensation expense under ASC 718 is based on the intrinsic value of the grant.

Restricted Stock Unit Awards

Restricted stock unit activity during the twelve months ended March 31, 2019 was as follows: 

	Number of RSUs		Weighted Average Grant-Date Fair Value
Balance, April 1, 2018		0	$	0
Granted		375,000	$	7.49
Balance, March 31, 2019		375,000	$	7.49

Majesco Employee Stock Purchase Plan

Majesco established the Majesco Employee Stock Purchase Plan (the “ESPP”). The ESPP is intended to be qualified under Section 423 of the Internal Revenue Code. If a plan is qualified under Section 423, employees who participate in the ESPP enjoy certain tax advantages. The ESPP allows employees to purchase shares of Majesco common stock at a discount, without being subject to tax until they sell the shares, and without having to pay any brokerage commissions with respect to the purchases.

The purpose of the ESPP is to encourage the purchase of Majesco common stock by our employees, to provide employees with a personal stake in our business and to help us retain our employees by providing a long range inducement for such employees to remain in our employ.

The ESPP provides employees with the right to purchase shares of common stock through payroll deductions. The total number of shares available for purchase under the ESPP is 2,000,000. The ESPP Plan became effective January 1, 2016. As of March 31, 2019, we had issued and sold 123,213 shares under the ESPP.

Warrants

As of March 31, 2019, there were warrants to purchase 25,000 shares of common stock outstanding. A summary of the terms of the outstanding warrants as of March 31, 2019, 2018, 2017, 2016 and 2015 is as follows:

	Outstanding and Exercisable Warrants			Exercise Price Per Warrant		Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price
Balance, April 1, 2015		—							—
Granted		334,064			6.84 – 7.00		1.7		6.85
Balance, March 31, 2016		334,064						$	6.85
Granted		—							—
Balance, March 31, 2017		334,064						$	6.85
Expired		(309,064	)						6.84
Balance, March 31, 2018		25,000					2.4	$	7.00
Granted		—							—
Balance, March 31, 2019		25,000					1.4	$	7.00

Exercisable Warrants at March 31, 2019 and 2018 were as follows:

	Number of Exercisable Warrants		Weighted-Average Exercise Price
March 31, 2019		25,000	$	7.00
March 31, 2018		25,000	$	7.00

On September 1, 2015, Majesco issued to Maxim Partners LLC a five year warrant to purchase 25,000 shares of common stock of Majesco at an exercise price of $7.00 per share. The warrant was issued in connection with the engagement of the holder to perform certain advisory services to the Group. The number of shares issuable upon exercise of the warrant may be reduced under certain circumstances of non-performance under the services agreement. The warrant may be exercised at any time after September 1, 2016 and will expire, if unexercised, on September 1, 2020. The warrant contains certain anti-dilution adjustment protection in case of certain future issuances of securities, stock dividends, split and other transactions affecting Majesco’s securities. The holder of the warrant is entitled to piggyback registration rights in case of certain registered securities offerings by Majesco.

Total employee stock option plans expenses

The total amount of compensation expense recognized in Majesco’s Statement of Operations in respect of employee stock option plans is as follows:

	Year Ended		Year Ended		Year Ended
	March 31,		March 31,		March 31,
	2019		2018		2017
Cost of revenue	$	255	$	639	$	360
Research and development expenses		233		72		118
Selling, general and administrative expenses		2,453		2,542		1,100
Total	$	2,941	$	3,253	$	1,578