NOTE 10: COMMON STOCK AND STOCK COMPENSATION

Common Stock

The following table presents information on shares of our Class A Common Stock issued as acquisition consideration. Fiscal 2013 shares were registered on a “shelf" Registration Statement on Form S-4 that was declared effective in January 2011, and fiscal 2015 shares were issued through an unregistered private placement transaction pursuant to Section 4(a)(2) of the Securities Act of 1933 to a small number of related individuals and entities who were either “accredited investors" or “sophisticated investors.”



	Fiscal Year Ended September 30,
	2015	2014	2013

	(in thousands)
Shares issued due to acquisitions	1,168	—	1,965
Shares issued due to purchase of subsidiary shares from noncontrolling interest	—	—	592

Stock Compensation

During fiscal 2015, we granted awards to employees based upon underlying shares that were not issued, and therefore we accounted for these as phantom share-based awards under FASB ASC 718-30. These awards were classified as a current liability and recorded at their fair value of $3.9 million in “Accounts payable and other accrued expenses” on our consolidated balance sheets for unvested share-based payment awards as of September 30, 2015.

Our net income includes the following compensation costs related to our stock compensation arrangements:



	Fiscal Year Ended September 30,
	2015			2014			2013

	(in thousands)
Gross compensation costs:
Phantom stock	$	3,932		$	—		$	—
Restricted stock	(1,558		)	6,845			7,128
Total gross compensation costs	2,374			6,845			7,128

Income tax benefits:
Restricted stock	—			(3,576		)	(2,460		)
Total income tax benefits	—			(3,576		)	(2,460		)
Net compensation expense	$	2,374		$	3,269		$	4,668

Our non-employee directors are eligible for grants of restricted stock awards and non-qualified stock options. All options and restricted stock relate to our Class A Common Stock. No options have been granted to non-employee directors since fiscal 2007. The restricted stock awards that have been granted to non-employee directors in fiscal 2015, 2014 and 2013 vest over two years from the date of grant (50% on or about the first anniversary of the date of grant and 50% on or about the second anniversary). Restricted stock awards, non-qualified options and incentive stock options have been granted to our officers and employees under our 1998, 2003, 2006 and 2010 Incentive Plans. A portion of the restricted stock awards granted in fiscal 2015, 2014 and 2013 contain both performance and time-based vesting provisions and generally vest over three years. Additionally, there are fiscal 2015 awards, accounted for as phantom share-based awards, that are market-conditioned in which a certain number of shares vest in specified amounts if the per-share trading price of our Class A Common Stock achieves specified levels ranging from $15 to $80 within six years. These market conditioned shares are also subject to a transfer restriction until the end of the vesting period. The derived service period on these shares is between 1.1 and 4 years and varies by tranche.

On May 1, 2010 our Board of Directors approved the adoption of the EZCORP, Inc. 2010 Long-Term Incentive Plan (the “2010 Plan”). The 2010 Plan permits grants of options, restricted stock awards and stock appreciation rights covering up to 1,575,750 shares of our Class A Common Stock plus any shares that become available for issuance under either the 2010 Plan or prior plans as a result of forfeitures or cancellations of awards without delivery of shares or as a result of withholding shares to satisfy tax withholding obligations. In February and March 2015, the Board of Directors and the voting stockholder approved the addition of 643,673 shares and 1,081,200 shares, respectively, to the 2010 Plan. The 1,081,200 shares have not yet been registered in a Form S-8, however, and will not be available to be issued in satisfaction of approved awards until so registered.

Generally, newly issued shares are used to satisfy stock option exercises and restricted stock awards. We measure the fair value of restricted stock awards and phantom share-based awards as of the grant date and record compensation expense ratably over the vesting period based on the closing market price of the Class A Common Stock as of the grant date for time-based and performance-based awards. We utilize Monte Carlo simulation models to estimate the fair value of certain stock price-based awards.

The fair value of fiscal 2015 phantom share-based awards that were estimated using the Monte Carlo simulation model incorporated the closing share price of our Class A Common Stock on the date of grant (considered, for this purpose, to be October 1, 2014), as well as the following assumptions, which we consider to be Level 3 inputs under the fair value hierarchy:



Expected volatility of EZCORP, Inc. Class A Common Stock	49.7	%
Risk-free interest rate	1.9	%
Expected term in years	6
Cost of equity	11.5	%
Dividend yield	—

The following is a summary of restricted stock award activity, excluding the 1,863,550 shares being accounted for as phantom stock as of September 30, 2015, for the fiscal year ended September 30, 2015:



	Shares		Weighted Average Grant Date Fair Value

Outstanding as of September 30, 2014	685,551		$	19.82
Granted	94,000		10.34
Released (a)	(132,412	)	14.03
Forfeited	(63,978	)	20.79
Outstanding as of September 30, 2015	583,161		$	18.94


(a)	Approximately 22,009 shares were withheld to satisfy related federal income tax withholding.



	Fiscal Year Ended September 30,
	2015		2014		2013

	(in millions except per share amounts)
Weighted average grant-date fair value per share granted (a)	$	10.34	$	14.58	$	20.43
Total grant date fair value of shares vested	$	1.8	$	7.6	$	10.7


(a)	2015 shares granted exclude phantom share-based awards. Including these shares, weighted average grant-date fair value was $5.69 per share.

In the first quarter of fiscal 2015, we determined the performance targets required for performance based awards to vest (which were based on EBITDA growth) were improbable of being achieved, and therefore we reversed all expense previously recognized in prior periods in the quarter ended December 31, 2014. In the first quarter of fiscal 2016, the Compensation Committee of the Board of Directors approved certain adjustments to the calculation of EBITDA for purposes of measuring year-over-year EBITDA growth. With these adjustments, the fiscal 2015 performance target was probable of being achieved. This triggered a type III modification, as defined under FASB ASC 718, creating a change from an improbable to probable vesting condition. This required that we calculate a new fair value as of the date of the modification (considered to be September 30, 2015) and catch up expense for all probable performance based awards as of September 30, 2015 at the new fair-value. The expense recorded to true-up these awards was $1.5 million.

As of September 30, 2015, the unamortized fair value of restricted stock awards and phantom share-based awards to be amortized over their remaining vesting periods was approximately $11.6 million and the fair value of all options had been fully amortized to expense. The weighted-average period over which these costs will be amortized is four years.

The following is a summary of option activity:



	Fiscal Year Ended September 30,
	2015		2014		2013

	(in millions except share amounts)
Shares issued due to stock option exercises	—		100		18,000
Proceeds due to stock option exercises	$	—	$	—	$	0.05
Tax benefit from stock option exercises	$	—	$	—	$	—
Intrinsic value of stock options exercised	$	—	$	—	$	0.28

On March 25, 2014, following the shareholders' approval, we filed with the Secretary of State of the State of Delaware a Certificate of Amendment to our Amended and Restated Certificate of Incorporation to increase the number of authorized Class A Common Stock from 55,550,000 to 100,000,000.

In connection with the retirement of our Executive Chairman effective June 30, 2014, we agreed to accelerate the vesting of 270,000 shares of restricted stock and recorded $2.2 million of the related gross compensation costs in the quarter ending March 31, 2014. Out of the 270,000 shares, 135,000 shares would have otherwise vested on October 2, 2014 and 135,000 shares would have otherwise vested on October 2, 2016.

In June 2014, in connection with the issuance of the Cash Convertible Notes discussed in Note 9, we repurchased 1.0 million shares of outstanding Class A Common Stock in privately negotiated transactions for an aggregate purchase price of $11.9 million. We recognized the total amount of the repurchased shares in “Treasury Stock” on our consolidated balance sheets. In July 2014, we retired all 1.0 million of the previously repurchased shares.