Stock-Based Compensation

6 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Note 3 - Stock-Based Compensation

The Company’s Equity Incentive Plan (the “Plan”) permits the grant of stock options, stock appreciation rights, restricted stock, or restricted stock units to officers, employees, directors, consultants, agents, and independent contractors of the Company. The Company believes that such awards better align the interests of its employees, directors, and consultants with those of its stockholders. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant; those option awards generally vest over two years from the grant date and generally have ten year contractual terms. Certain option awards provide for accelerated vesting (as defined in the Plan).

The Company has reserved 4,600,000 shares of common stock to be available for granting under the Plan.

The Company estimates the fair value of each option award using a Black Scholes Model (“BSM”) that uses the weighted average assumptions included in the table below. Expected volatilities are based on historical volatility of comparable companies. The Company uses historical data to estimate option exercise within the valuation model or estimates the expected option exercise when historical data is unavailable. The risk free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future. When calculating the amount of annual compensation expense, the Company has elected not to estimate forfeitures and instead accounts for forfeitures as they occur.

The following table summarizes the assumptions used for estimating the fair value of the stock options granted for the six months ended:

	December 31, 2021			December 31, 2020
Expected term (years)		6.00			6.00
Risk-free interest rate		0.12	%		0.14% - 0.15	%
Expected volatility		46.30	%		45% - 46.3	%
Dividend yield		0	%		0	%

A summary of option activity for the six months ended December 31, 2021 is presented below:

Options	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding at July 1, 2021		3,222,125		$	1.96		8.34
Granted		16,000			2.35		9.84
Cancelled		(139,125	)		3.09		9.16
Outstanding and expected to vest at December 31, 2021		3,099,000			1.91		7.79

The weighted-average grant-date fair value of options granted during the six months ended December 31, 2021 was $0.98. The options contained time-based vesting conditions satisfied over four years from the grant date.

For the three months ended December 31, 2021 and 2020, the Company recognized $422,526 and $217,075, in expense related to the Plan, respectively. For the six months ended December 31, 2021 and 2020, the Company recognized $811,611 and $429,488 in expense related to the Plan, respectively.  

As of December 31, 2021, there was approximately $1,016,481 of total unrecognized compensation cost for employees and non-employees related to nonvested options. That cost is expected to be recognized through July 2025.

On September 28, 2021, the Board approved certain stock awards to its board members in the form of stock options and restricted stock. The stock option awards are expected to vest ratably over twelve-month period from beginning September 28, 2021 through September 28, 2022. The restricted stock awards are expected to vest over a twelve-month period beginning July 1, 2021 through June 30, 2022. The total approved compensation was $172,702 in stock options and $600,000 in restricted stock. The number of options was determined based on the fair value of the Company’s share price as of the date of grant. The Company determined that there will be 337,078 of restricted shares issued upon vesting, based on the fair value of the Company’s share price on the grant date.

Accordingly, $43,176 and $44,135 related to the stock option grants made to the board members, was recognized as stock-based compensation expense for the three and six months ended December 31, 2021. The Company also recognized $150,000 and $300,000 as stock-based compensation expense related to the restricted stock unit grants made to the board members for the three and six months ended December 31, 2021, respectively. The cost related to the grants made to board members is expected to be recognized through September of 2022.

As of December 31, 2021, there is $128,567 and $300,000 in unrecognized compensation expense related to stock options and the unvested portion of the restricted stock units.