Share-Based Compensation Plans

12 Months Ended

Jun. 30, 2020

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

10.	Share-Based Compensation Plans

The Company uses stock options, performance service awards, restricted stock awards and restricted stock units to provide long-term incentives to its

employees, non-employee directors

and certain consultants. The Company has two equity compensation plans under which awards are currently authorized for issuance: the 2013 Employee Stock Purchase Plan and the 2013 Equity and Incentive Plan. No awards have been issued to date under the 2013 Employee Stock Purchase Plan and, as such, all of the 128,571 shares previously authorized under that plan remain available for issuance. As of June 30, 2020, the total number of shares available for issuance under the 2013 Equity and Incentive Plan was 1,297,930. See Note 14 in these Notes to Financial Statements for an increase in the shares available for issuance under such plan subsequent to June 30, 2020.

Currently, the Company issues new shares upon the exercise, release or settlement of share-based compensation awards.

The Compensation Committee of the Board of Directors, as the plan administrator, has the authority to select the individuals to whom share-based awards are granted and to determine the terms of each award, including: (i) the number of shares of common stock subject to a stock option or restricted stock award; (ii) the date on which a stock option becomes exercisable; (iii) the option exercise price, which, in the case of incentive stock options, must be at least 100% (110% in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company’s stock) of the fair market value of the common stock on the date of grant; (iv) the vesting term; and (v) the duration of an option (which, in the case of incentive stock options, may not exceed ten years). Employee options typically vest over a three- or four-year period.

Information about the Company’s stock options that do not have performance conditions is provided below.


	Year Ended June 30,
	2020					2019
(In thousands, except per share amounts)	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding, beginning of the year		3,585		$	9.19		3,107		$	10.93
Granted		1,219			3.28		1,172			4.49
Exercised		(100	)		3.94		(65	)		2.40
Forfeited		(474	)		3.82		(317	)		7.17
Expired		(384	)		12.06		(312	)		12.44

Outstanding, end of the year		3,846		$	7.82		3,585		$	9.19

Exercisable, end of the year		2,418					2,167

Weighted average fair value of options granted during the year	$	2.10				$	2.89

The intrinsic value of stock options exercised during the years ended June 30, 2020 and 2019 was $0.3 million and $0.2 million, respectively. The total fair value of stock options that vested during the years ended June 30, 2020 and 2019 was $2.8 million and $3.9 million, respectively.

The table below summarizes information about stock options (i) exercisable and (ii) vested and expected to vest as of June 30, 2020.


(In thousands, except per share amounts)	Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Contractual Life (in years)
Vested and expected to vest		3,720	$	7.96	$	4,156		6.80
Exercisable		2,418		10.15		1,912		5.76

The aggregate intrinsic value presented in the above table was calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s common stock on June 30, 2020 for the options that were in the money.

In addition to the stock option activity described above, the Company also granted 100,000 performance-based stock options to a senior officer during the year ended June 30, 2020 with an exercise price of $3.91. That award: (i) was issued under the 2013 Equity and Incentive Plan; (ii) has a term of ten years; and (iii) includes six separate tranches with performance criteria that will each vest 25% upon their achievement, with the remaining 75% of the tranche vesting on a monthly basis over a period of three years subsequent to achieving the underlying performance objective (assuming continued service by the awardee). Each tranche represents

one-sixth

of the total award. If any of the performance criteria are not satisfied, that tranche will be forfeited. As of June 30, 2020, one of the six performance criteria has been met. The Company used the Black-Scholes stock option pricing model to estimate the grant date fair value of each option to be $2.58; however, determining the appropriate periodic share-based compensation expense for this award requires management to estimate the likelihood of the achievement of the performance targets.

The Company granted 2,000 and 24,000 restricted stock awards to a senior officer during the years ended June 30, 2020 and 2019, respectively. Those awards were fully vested on the date of grant. The weighted average market prices of such restricted stock awards on the date of grant were $3.75 and $4.54 for the years ended June 30, 2020 and 2019, respectively.

During the year ended June 30, 2020, 175,500 restricted stock units, which included a market-based vesting condition related to the trading price of our common stock, were granted to certain of the Company’s employees under the 2013 Equity and Incentive Plan with a weighted average grant date fair value of $2.56. As of June 30, 2020, none of the restricted stock units had vested; however, the market condition embedded in the award had been met and 22,500 awards have been forfeited. On August 15, 2020, 76,500 restricted stock units vested and, assuming continuing service by the grantees, the remaining outstanding restricted stock units will vest on August 15, 2021. The fair value of each restricted stock unit awarded was estimated on the grant date using a Monte Carlo simulation pricing model, which incorporated the probability of satisfying the related market-based vesting condition.

Share-based compensation expense pertaining to stock options awarded to employees, nonemployee directors and consultants totaled $2.5 million and $3.9 million for the years ended June 30, 2020 and 2019, respectively. Share-based compensation expense pertaining to restricted stock awards and restricted stock units awarded to employees and consultants totaled $0.5 million and $0.1

million

for the years ended June 30, 2020 and 2019, respectively.

The table below presents the allocation of total share-based expense for the years indicated.


	Year Ended June 30,
In thousands	2020		2019
Research and development	$	1,451	$	1,895
General and administrative		1,547		2,134

Totals	$	2,998	$	4,029

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes stock option pricing model. Below are the assumptions that were used when estimating fair value for the years indicated.


	Year Ended June 30,
Assumption	2020			2019
Dividend yield		0.00	%		0.00	%
Expected term		6.00 to 6.25 years			6.00 to 6.25 years
Risk-free interest rate		0.42% to 1.90	%		1.82% to 3.11	%
Expected volatility		71.20	%		69.22	%

The dividend yield assumes that the Company will not declare dividends over the lives of the options. Since adopting ASC Topic 718,

Compensation—Stock Compensation,

the Company has been unable to use historical employee exercise and option expiration data to estimate the expected term for the Black-Scholes grant-date valuation. Therefore, the Company has utilized the “simplified” method, as prescribed by SEC Staff Accounting Bulletin No. 107,

Share-Based Payment

, to estimate, on a formula basis, the expected term of the Company’s stock options that are considered to have “plain vanilla” characteristics. The risk-free interest rate is based on the U.S. Treasury yield curve on the date of valuation with a maturity similar to the expected life of the award. Expected volatility is based on the historical volatility of the Company’s stock price. Forfeitures are estimated at the time of the grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Share-based compensation expense recognized in the Company’s Statements of Operations does not reflect

tax-related

effects due to the Company’s historical and anticipated operating losses and offsetting changes in its valuation allowance that fully reserve against any deferred tax assets.

Unrecognized share-based compensation cost related to

non-vested

employee stock options that do not have performance conditions totaled $3.4 million as of June 30, 2020. Such compensation cost is expected to be expensed over a weighted average period of approximately 2.5 years. As of June 30, 2020, unrecognized share-based compensation cost for the Company’s performance-based stock options and restricted stock units were $22,000 and $135,000, respectively. Such costs will be expensed over 2.1 years and 1.1 years, respectively.