Note 5. Share-based Compensation

The Company uses equity-based compensation programs to provide long-term performance incentives for its employees. These incentives consist primarily of stock options and restricted stock units (RSUs). In December 2008, the Company adopted the MEI Pharma, Inc. 2008 Stock Omnibus Equity Compensation Plan (the “2008 Plan”), as amended and restated in 2011 and 2013, under which 2,186,000 shares of common stock are authorized for issuance. The 2008 Plan provides for the grant of options and/or other stock-based or stock-denominated awards to the Company’s non-employee directors, officers, employees and advisors.

Stock Options

As of June 30, 2013, there were a total of 635,094 options outstanding, including options representing the right to purchase a total of 66,333 shares of common stock which were granted to two of the Company’s officers outside of the 2008 Plan. As of June 30, 2013, there were 1,217,239 shares available for future grant under the 2008 Plan.

A summary of the Company’s stock option activity and related data follows:


	Outstanding Options
	Number of Shares		Weighted- Average Exercise Price
Balance at June 30, 2011		99,364	$	12.48
Granted		44,562		9.78
Forfeited/Expired		—		—

Balance at June 30, 2012		143,926		11.64
Granted		491,168		7.27
Forfeited/Expired		—		—

Balance at June 30, 2013		635,094	$	8.26

As of June 30, 2013, there were 145,596 options vested and exercisable, with a weighted-average exercise price of $10.83 and a remaining contractual term of 3.1 years. No stock option exercises occurred during the years ended June 30, 2013 or 2012. As of June 30, 2013, the total intrinsic value of outstanding options, which is the difference between the exercise price of the underlying options and the closing price of the Company’s common stock of $7.13 on that date, was $426,000.

Unrecognized compensation expense related to non-vested stock options totalled $1,948,000 as of June 30, 2013. Such compensation expense is expected to be recognized over a weighted-average period of 3.3 years.

The Company uses a binomial valuation model to estimate the grant date fair value of stock options. To calculate these fair values, the following assumptions were used:


	Year ended June 30,
	2013		2012
Risk-free interest rate		.62% - 1.01%		.62% - 1.32%
Expected life		5 years		5 years
Expected volatility		153% - 161%		145% - 152%
Dividend yield		0%		0%
Weighted-average grant date fair value	$	6.57	$	8.56

Exercise prices and weighted-average remaining contractual lives for the options outstanding as of June 30, 2013 were:


Options Outstanding	Exercise Price	Weighted Average Remaining Contractual Life (Years)	Options Exercisable		Weighted Average Exercise Price of Options Exercisable
833	$37.80	0.6		833	$	37.80
18,365	$30.30	1.8		14,549	$	30.30
18,365	$11.16	1.8		14,549	$	11.16
12,243	$9.12	2.0		9,181	$	9.12
13,705	$4.62	2.2		9,433	$	4.62
6,250	$6.90	2.3		4,033	$	6.90
29,603	$7.68	2.9		14,805	$	7.68
23,083	$11.40	3.1		10,581	$	11.40
332	$9.18	3.2		146	$	9.18
16,776	$8.04	3.3		9,280	$	8.04
4,194	$8.04	2.7		4,194	$	8.04
177	$3.66	3.9		44	$	3.66
5,401	$2.82	4.0		—	$	—
67,892	$2.76	4.1		—	$	—
15,872	$4.26	4.2		—	$	—
3,968	$4.26	2.7		3,968	$	4.26
50,000	$8.52	4.4		50,000	$	8.52
5,000	$7.05	4.5		—	$	—
6,319	$5.19	4.6		—	$	—
2,500	$8.23	4.7		—	$	—
194,153	$8.63	4.7		—	$	—
51,000	$8.74	4.8		—	$	—
4,063	$8.09	4.9		—	$	—
85,000	$7.25	5.0		—	$	—

635,094		4.1		145,596	$	10.83

Restricted Stock Units

On March 29, 2013, the Compensation Committee of the Board of Directors granted 400,000 RSUs to the Company’s Chief Executive Officer, Dr. Daniel P. Gold. Each RSU represents the contingent right to receive one share of the Company’s common stock. One third of the RSUs will vest on each of August 30, 2014, August 30, 2015 and August 30, 2016. The shares underlying the vested RSUs will be delivered to Dr. Gold on the earliest to occur of (i) March 29, 2018, (ii) Dr. Gold’s death, disability or separation from service from the Company for any reason, or (iii) a change in control involving the Company.

The fair value of the RSUs on the date of grant was $3,452,000. The grant date fair value per unit was $8.63. As of June 30, 2013, unrecognized compensation expense related to the unvested portion of the Company’s RSUs was approximately $3,039,000 and is expected to be recognized over approximately 3.2 years.