Share-Based Compensation

3 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

Share-Based Compensation

In March 2015, the Company adopted its 2015 Equity Incentive Plan, which was amended and restated in June 2017 by its Board of Directors and became effective upon shareholder approval in August 2017 (the "2015 Plan"). A 1-for-8 reverse share split of the Company's outstanding common stock was effected on May 8, 2019 as approved by the Company's Board of Directors and a majority of its shareholders. The reverse share split reduced the number of shares authorized for issuance, the number of shares available for issuance, and the number of options outstanding under the 2015 Plan from approximately 24.8 million to 3.1 million, from approximately 8.4 million to 1.0 million, and from approximately 15.4 million to 1.9 million, respectively, as of March 31, 2019. As such, all references to share and per share amounts in these unaudited condensed consolidated financial statements and accompanying notes have been retroactively restated to reflect the 1-for-8 reverse share split, except for the authorized number of shares of the Company's common stock and the par value per share, which were not affected. In April 2020, the number of common shares authorized for issuance under the 2015 Plan increased automatically to approximately 5.6 million common shares in accordance with the terms of the 2015 Plan. Under the 2015 Plan at June 30, 2020, a total of 2.1 million common shares were available for future grant, RSUs for approximately 0.8 million common shares were outstanding, and options to purchase approximately 2.3 million common shares were outstanding with a weighted-average exercise price of $12.73 per share.

Stock options granted under the 2015 Plan provide option holders, if approved by the Board of Directors, the right to exercise their options prior to vesting. In the event that an option holder exercises the unvested portion of any option, such unvested portion will be subject to a repurchase option held by the Company at the lower of (1) the fair market value of its common shares on the date of repurchase and (2) the exercise price of the options. Any common shares underlying such unvested portion will continue to vest in accordance with the original vesting schedule of the option.

(A) Equity Awards:

During the three months ended June 30, 2020 and 2019, the Company granted options to purchase a total of 0.4 million and 1.3 million, respectively, of its common shares, with weighted-average exercise prices of $3.45 and $8.45, respectively, and estimated grant date fair values of $1.1 million and $6.4 million, respectively, under the 2015 Plan. Share-based compensation expense is included in research and development and general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. Time-based stock options granted to the Company's employees vest over a period of four years with 25% of the common shares underlying the option vesting on the first anniversary of the vesting commencement date and the remainder vesting in 12 quarterly installments thereafter, subject to continuing service. Initial stock options granted to the Company's non-employee directors vest in equal installments on the first, second and third anniversaries of the vesting commencement date, and stock options subsequently granted annually to the Company's non-employee directors vest fully on the first anniversary of the vesting commencement date, each subject to continuous service. The stock options granted to employees during the three months ended June 30, 2019 include options with market-based performance conditions to purchase 0.3 million common shares, with a weighted-average exercise price of $8.48 per share and corresponding estimated grant date fair value of $1.0 million which was estimated using Monte Carlo Simulation methods under the income approach. There were no options with market-based performance conditions granted during the three months ended June 30, 2020. As of June 30, 2020, options with market-based performance conditions to purchase 0.4 million common shares at a weighted-average exercise price of $10.66 per share were outstanding. The market-based performance options vest based on the trading price for the Company’s common shares exceeding certain closing price thresholds. As of June 30, 2020, stock options with market-based performance conditions to purchase approximately 19 thousand common shares with a weighted-average exercise price of $11.68 per share were outstanding and vested.

During the three months ended June 30, 2020, the Company granted RSUs for a total of 0.7 million common shares with an aggregate grant date fair value of $2.6 million to its employees under the 2015 Plan, with the RSUs granted scheduled to vest in three equal annual installments commencing on the first anniversary of the vesting commencement date, subject to continuing service.

The Company recorded total share-based compensation expense of $1.6 million and $2.0 million for the three months ended June 30, 2020 and 2019, respectively, related to options and RSUs granted to its employees, directors and consultants. The share-based compensation expense was recorded as research and development and general and administrative expenses in the Company's unaudited condensed consolidated statements of operations. At June 30, 2020, total unrecognized compensation expense related to non-vested outstanding equity awards related to options and RSUs granted to its employees, directors and consultants was $8.4 million, which is expected to be recognized over the remaining weighted-average service period of 2.47 years.

(B) Share-Based Compensation for Related Parties:

(1) RSL Common Share Awards and Options:

Certain employees of the Company have been granted RSL common share awards and options. The Company recorded share-based compensation expense of $25 thousand and $0.1 million for the three months ended June 30, 2020 and 2019, respectively, related to these awards.