Stock-based compensation

3 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock-based compensation

Stock-based compensationUnder our 2019 Equity Incentive Plan, or the 2019 Plan, (and historically under our 2009 Equity Incentive Plan, which terminated as to new awards in October 2019), eligible employees, directors and consultants are able to participate in our future performance through awards of nonqualified stock options, incentive stock options and restricted stock units as authorized by our board of directors.

A summary of our stock option activity is as follows (in thousands except per share and contractual life amounts):

	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Options outstanding as of June 30, 2020	1,638	$	6.55
Granted	—	—
Exercised	(14)	4.92
Canceled or expired	(9)	5.56
Options outstanding as of September 30, 2020	1,615	$	6.56	4.95	$	—
As of September 30, 2020:
Options vested and expected to vest	1,603	$	6.58	4.92	$	—
Options exercisable	1,468	$	6.70	4.64	$	—

A summary of our restricted stock unit, or RSU, activity is as follows (in thousands except contractual life amounts):

	Number of Shares	Weighted Average Remaining Contractual  Life (years)	Aggregate Intrinsic  Value
RSUs outstanding as of June 30, 2020	2,476
Granted	380
Vested	(235)
Canceled	(77)
RSUs outstanding as of September 30, 2020	2,544	1.32	$	9,157
As of September 30, 2020:
RSUs expected to vest	2,269	1.23	$	8,168

Performance-based RSUs

In September 2020, the Compensation Committee of our Board of Directors (the “Compensation Committee”) approved the grant under our 2019 Plan of performance-based RSUs covering a target of 195,000 shares of common stock under individual grants to certain of our executive officers, which we refer to as the 2021 PSU Awards. The 2021 PSU Awards are subject to four performance milestones, each requiring achievement of a specified trailing average closing stock price for a 30-trading day period on or before the four-year anniversary of the 2021 PSU Awards’ grant date. In the event our Board of Directors approves entering a transaction which, if consummated, would constitute a “change in control” of the Company as defined in the 2019 Plan, the performance milestones are increased with respect to shares not already eligible to vest under the 2021 PSU Awards, and the performance period is extended to the five-year anniversary of the 2021 PSU Awards’ grant date. Achieving each individual stock price performance milestone will result in one quarter of the shares subject to the 2021 PSU Awards becoming eligible to vest. If a stock price performance milestone is achieved, then the shares that became eligible to vest will vest in four equal quarterly installments as of the ensuing March 1, June 1, September 1 and December 1 following the date of certification of the date the performance milestone was achieved, in each case subject to the respective executive’s continued service with the Company through the applicable vesting date. Vesting under the 2021 PSU Awards may be accelerated under certain conditions involving a change in control of our Company, including as provided under respective change in control agreements entered between us and the executive. The maximum number of shares subject to the 2021 PSU Awards that may vest is 195,000. No shares had vested as of September 30, 2020 under the 2021 PSU Awards.

In February 2020, the Compensation Committee approved the grant under our 2019 Plan of performance-based RSUs covering a target of 500,000 shares of common stock under individual grants to certain of our executive officers, which we refer to as the 2020 PSU Awards. The 2020 PSU Awards are subject to four performance milestones, each requiring achievement of a specified trailing average closing stock price for a 30-trading day period on or before the three-year anniversary of the 2020

PSU Awards’ grant date. In the event our Board of Directors approves entering a transaction which, if consummated, would constitute a “change in control” of the Company as defined in the 2019 Plan, the performance milestones are increased with respect to shares not already eligible to vest under the 2020 PSU Award, and the performance period is extended to the four-year anniversary of the 2020 PSU Awards’ grant date. Achieving each individual stock price performance milestone will result in one quarter of the shares subject to the 2020 PSU Award becoming eligible to vest. If a stock price performance milestone is achieved, then the shares that became eligible to vest will vest in four equal quarterly installments as of the ensuing March 10, June 10, September 10 and December 10 following the date of certification of the date the performance milestone was achieved, in each case subject to the respective executive’s continued service with the Company through the applicable vesting date. Vesting under the 2020 PSU Award may be accelerated under certain conditions involving a change in control of our Company, including as provided under respective change in control agreements entered between us and the executive. The maximum number of shares subject to the 2020 PSU Award that may vest is 500,000. No shares had vested as of September 30, 2020 under the 2020 PSU Awards.

In September 2019, the Compensation Committee approved the grant under our 2009 Equity Incentive Plan of performance-based RSUs covering a target of 560,000 shares of common stock under individual grants to several of our executive officers, which we refer to as the 2019 PSU Awards. The 2019 PSU Awards are subject to four performance milestones, each requiring achievement of a specified trailing average closing stock price for a 30 trading day period on or before the three-year anniversary of the 2019 PSU Awards’ grant date. Achieving each individual stock price performance milestone will result in one quarter of the shares subject to the 2019 PSU Award becoming eligible to vest. If a stock price performance milestone is achieved, then one half of the shares that became eligible to vest under the 2019 PSU Award upon achievement of that stock price performance milestone will vest on the later of November 1, 2020, or the date that the Compensation Committee certifies achievement of the milestone, and the remaining one half of the shares that became eligible to vest will vest on the one-year anniversary of the date the performance milestone was achieved, in each case subject to the respective executive’s continued service with the Company through the applicable vesting date. The 2019 PSU Award milestones are subject to change upon a change in control, as defined in the agreement. The maximum number of shares subject to the 2019 PSU Award that may vest is 560,000. No shares had vested as of September 30, 2020 under the 2019 PSU Awards.

In October 2018, the Compensation Committee approved the grant under our 2009 Equity Incentive Plan of performance-based RSUs covering a target of 240,000 shares of common stock to Dr. HP Jin, our CEO, which we refer to as the CEO PSU Award. The CEO PSU Award is subject to four performance milestones, each requiring achievement of a specified trailing average closing stock price for a 30 trading day period on or before the three-year anniversary of the CEO PSU Award’s grant date. Achieving each individual stock price performance milestone will result in one quarter of the shares subject to the CEO PSU Award becoming eligible to vest. If a stock price performance milestone is achieved, then one half of the shares that became eligible to vest under the CEO PSU Award upon achievement of that stock price performance milestone will vest on the later of November 1, 2019, or the date that the Compensation Committee certifies achievement of the milestone, and the remaining one half of the shares that became eligible to vest will vest on the one-year anniversary of the date the performance milestone was achieved, in each case subject to Dr. Jin’s continued service with the Company through the applicable vesting date. The CEO PSU Award milestones are subject to change upon a change in control, as defined in the agreement. The maximum number of shares subject to the CEO PSU Award that may vest is 240,000. No shares had vested as of September 30, 2020 under the CEO PSU Award.

Since achievement of the awards is dependent on a market condition, stock-based compensation expense associated with these awards is recognized regardless of whether the market condition is satisfied, provided that the requisite service period has been met. We utilized the Monte Carlo valuation method to determine the fair value and derived service periods of each of the stock price performance milestones. Total stock-based compensation expense associated with all PSU Awards, included in the stock-based compensation expense table below, was $1.1 million for the three months ended September 30, 2020 and not material for the three months ended September 30, 2019.

As of September 30, 2020, no performance-based RSU awards had been earned or canceled, and 1,495,000 shares subject to performance-based RSU awards remained outstanding.

Shares available for grant

In November 2019, our stockholders approved the 2019 Plan, pursuant to which 5,700,000 shares were initially reserved for future grants and up to an additional 5,800,000 shares are reserved to the extent shares subject to grants under the previous 2009 Equity Incentive Plan, or 2009 Plan, were outstanding as of November 20, 2019 but later expire or otherwise terminate without having been exercised in full (in which case the shares subject to such grants will be returned to the 2019 Plan and

available for future issuance). The 2019 Plan became effective on November 20, 2019 and will automatically terminate 10 years from its date of adoption by our Board of Directors. A summary of our shares available for grant activity is as follows (in thousands):

	Number of Shares
Shares available for grant as of June 30, 2020	5,280
Shares added from 5,800,000 reserved share pool available(1)	84
Granted	(575)
RSUs withheld for taxes in net share settlements	5
Canceled or expired	2
Shares available for grant as of September 30, 2020	4,796
(1) Additional shares are available up to a maximum of 5,800,000 shares only to the extent shares subject to grants under the 2009 Plan were outstanding as of November 20, 2019 but later expire or otherwise terminate without having been exercised in full.

Employee Stock Purchase Plan

In November 2019, the Company’s stockholders approved the 2019 Employee Stock Purchase Plan, or ESPP, which became effective on November 20, 2019. A total of 2,500,000 shares were authorized for issuance to participating employees upon adoption of the ESPP. The ESPP provides for 12-month offering periods beginning March 1 and September 1 of each year, and each offering period will consist of two six-month purchase periods. The initial offering period commenced on March 1, 2020 and will end on March 1, 2021. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (i) the fair market value of our stock on the enrollment date of the offering period or (ii) the fair market value of our stock on the exercise date.

During the three months ended September 30, 2020, the Company’s employees purchased 304,964 shares of its common stock under the ESPP. The shares were purchased at a weighted-average purchase price of $3.94 per share, with total proceeds to the Company of $1.2 million.

As of September 30, 2020, there was $1.6 million of unrecognized stock-based compensation expense related to the ESPP that is expected to be recognized over an average vesting period of 0.64 years.

Stock-based compensation expense

The following table summarizes the stock-based compensation expense for continuing operations recorded for stock options, RSUs, including performance-based RSUs, and ESPP purchase rights (in thousands):

	Three Months Ended September 30,
	2020		2019
Stock option awards	$	108	$	308
RSU awards	2,351		1,444
ESPP	398		—
Total stock-based compensation expense	$	2,857	$	1,752

We use valuation pricing models to determine the fair value of stock-based awards. The determination of the fair value of stock-based payment awards on the date of grant is affected by the stock price as well as assumptions regarding a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates and expected dividends.

No stock option awards were granted during the three months ended September 30, 2020 and 2019.

The weighted average assumptions used to value ESPP purchase rights during the initial offering period beginning March 1, 2020 and subsequent offering period beginning September 1, 2020 were as follows:

Expected volatility	88	%
Expected term (in years)	0.65
Risk-free interest rate	0.38	%
Dividend yield	—	%