10. Stockholders’ Deficit

At the June 29, 2017 Special Meeting, the Company’s stockholders approved the amendment and restatement of the Company’s Certificate of Incorporation to increase the maximum number of shares of the Company’s stock authorized up to 260,000,000 shares of stock consisting of 250,000,000 shares of common stock and 10,000,000 shares of preferred stock. Previously the Company’s Certificate of Incorporation authorized up to 165,000,000 shares of capital stock, consisting of 155,000,000 shares of common stock and 10,000,000 shares of preferred stock.

Preferred Stock

The Certificate of Incorporation of the Company authorizes 10,000,000 shares of preferred stock, $.01 par value per share. The preferred stock may be issued from time to time in one or more series, with such distinctive serial designations, rights and preferences as shall be determined by the Board of Directors.

On May 10, 2017, the Company issued in a private placement 1,000,000 shares (the “Preferred Shares”) of the Company’s Series A-1 Convertible Preferred Stock at a price of $125 per share for gross proceeds to the Company of $125 million, before deducting fees and expenses (the “Financing”). Each Preferred Share will be convertible into 23.10536 shares of common stock (or an aggregate of 23,105,348 shares of common stock). The conversion price per share of common stock is $5.41. For fiscal year ended June 30, 2016 the Company had no preferred stock outstanding.

Following the June 29 2017 Special Meeting and filing the Charter Amendment with the State of Delaware, the Company had authorized a sufficient number of unreserved shares of common stock to permit the conversion of the Preferred Shares. Preferred Shares will automatically convert to shares of common stock subsequent to the termination of the Licensing and Development Agreement entered into on February 10, 2017 by and between the Company and Seattle Genetics (the “License Agreement”); or, if such automatic conversion does not occur prior to January 1, 2018, the Purchasers may elect to convert at any time on or after January 1, 2018. On July 31, 2017, the Company filed a registration statement on Form S-3 to register the 23,105,348 shares of the Company’s common stock issuable upon the conversion of the Series A-1 Convertible Preferred Stock (in addition to 3,000,000 shares of Company’s common stock and 8,655,804 shares of common stock issuable upon the exercise of the warrants issued to Seattle Genetics, Inc as discussed below).

Common Stock

On February 10, 2017, in connection with the execution of a License Agreement, the Company entered into the Securities Purchase Agreement (“SPA”) with Seattle Genetics. Under the SPA, Seattle Genetics purchased 3,000,000 shares (the “Common Shares”) of the Company’s common stock at a price of $4.90 per share, for aggregate proceeds of $14.7 million. Concurrently with the sale of the Common Shares, pursuant to the SPA, the Company also agreed to issue the three-year warrant to purchase an aggregate of 8,655,804 shares of common stock. On July 31, 2017, the Company filed a registration statement on Form S-3 to register the 3,000,000 shares of Company’s common stock and 8,655,804 shares of common stock issuable upon the exercise of the warrants (in addition to the shares issuable upon the conversion of our Series A-1 Convertible Preferred Stock, as discussed above). The warrant became exercisable for cash on February 16, 2017, and will expire on January 31, 2018. The warrant was issued on February 16, 2017 and was originally exercisable until February 10, 2020. On the date of issuance, the fair value of these warrants was determined to be $22.3 million. The difference between such fair value and the proceeds of $14.7 million has been recognized as an expense and presented in the consolidated statement operations as a “warrant related expense.” On May 4, 2017, the Company and Seattle Genetics entered into the Termination Agreement, pursuant to which the Company and Seattle Genetics relinquished their respective rights under the License Agreement and agreed to amend the terms of the warrant to amend the expiration date from February 10, 2020 to December 31, 2017.

On October 11, 2016, the Company completed an underwritten public offering of 10 million shares of its common stock and accompanying warrants to purchase 10 million shares of common stock at a purchase price of $3.00 per unit, comprising of one share of common stock and one warrant. The Company received gross and net proceeds of $30.0 million and approximately $28.6 million, respectively after deducting the underwriting discounts and commissions and estimated expenses related to the offering payable. The warrants became exercisable six months following the date of issuance, and will expire on the second anniversary of the date of issuance and have an exercise price of $3.75. On the date of issuance, the fair value of these warrants was determined to be $7.3 million and recognized as a liability. The shares of common stock were sold pursuant to an effective shelf registration statement filed with the SEC. The warrants under certain situations require cash settlement by the Company.

Stock Incentive Plans

At the Annual Stockholder Meeting on December 3, 2014, the Company’s stockholders approved the Immunomedics, Inc. 2014 Long-Term Incentive Plan (the “Plan”). The Plan replaced the Company’s 2006 Stock Incentive Plan (the “2006 Plan”), which terminated on December 3, 2014. The Plan was established to promote the interests of the Company, by providing eligible persons with the opportunity to acquire a proprietary interest in the Company as an incentive to remain with the organization and to align the employee’s interest with our stockholders. The approval authorized issuance of 9,000,000 shares plus the number of unallocated share available for issuance as of the effective date under the 2006 Plan that were not subject to outstanding awards.

As under the 2006 Plan, option awards under the Plan are generally granted with an exercise price equal to the market price of the Plan, the Company’s common stock at the date of grant; those option awards generally vest based on four years of continuous service and have seven year contractual terms. Option awards that are granted to non-employee Board members under the annual option grant program are granted with an exercise price equal to the market price of the Company’s common stock at the date of grant, are vested immediately and have seven year contractual terms. Certain options provide for accelerated vesting if there is a change in control (as defined in the Plan). At June 30, 2017, there were 14,264,986 shares of common stock reserved for possible future issuance under the Plan, both currently outstanding (4,724,569 shares) and which were available to be issued for future grants (9,540,417 shares).

The Plan is divided into three separate equity incentive programs. These incentive programs consist of:

Discretionary Grant Program under which eligible persons may be granted options to purchase shares of common stock or stock appreciation rights tied to the value of the common stock;

Stock Issuance Program under which eligible persons may be issued shares of common stock pursuant to restricted stock awards, restricted stock shares, performance shares or other stock-based awards which vest upon completion of a designated service period or the attainment of pre-established performance milestones, or such shares of common stock may be a fully-vested bonus for services rendered; and

Automatic Grant Program under which eligible non-employee Board members will automatically receive grants at designated intervals over their period of continued Board service.

For the 2016 and 2015 fiscal years each of the Company’s outside Directors who had been a Director prior to July 1st of each year were granted, at the annual stockholder meeting of each year, options to purchase shares of the Company’s common stock at fair market value on the grant date. For fiscal years 2016 and 2015, stock options were granted to these outside directors to purchase an aggregate of 115,284 shares and 89,204 shares, respectively. The values of the granted options were $180 thousand for the fiscal years ended June 30, 2016 and 2015. Stock options granted to outside directors were vested when granted. No stock options were granted to outside directors in fiscal year 2017 as it was decided to defer the awarding of options until a revision to the program was completed in July, 2017. When an outside Director is elected to the Board of Directors, they are awarded options for 22,500 shares of the Company’s common stock. The Company recorded $184 thousand, $201 thousand and $180 thousand for stock-based compensation expense for these non-employee Board members stock options for the years ended June 30, 2017, 2016, and 2015, respectively. For new outside Directors elected on May 4, 2017, no options were awarded until a revision to the program was completed in July, 2017.

For the 2016 and 2015 fiscal years non-employee Board members who continue to serve would receive on the date of the annual stockholders meeting an annual grant of non-qualified stock options and restricted stock units, equal in value to $45 thousand. For fiscal years 2016 and 2015, restricted stock units were granted to these outside directors in an aggregate 57,876 units and 42,656 units, respectively. The value of the units granted were $180 thousand for the 2016 and 2015 fiscal years. Restricted stock units granted to outside directors become vested within one year of grant date. The Company recorded $31 thousand, $181 thousand, and $180 thousand for stock-based compensation expense for these non-employee Board members restricted stock units for the years ended June 30, 2017, 2016, and 2015, respectively. No restricted stock units or non-qualified stock options were granted to outside directors in fiscal year 2017, as it was decided to defer the awarding of options until a revision to the program was completed in July, 2017.

Information concerning options for the years ended June 30, 2017, 2016, and 2015 is summarized as follows:


	Number of Shares			Weighted Average Exercise Price
	2017	2016	2015	2017		2016		2015
Options outstanding, beginning of year	4,015,895	4,525,340	5,308,617	$	3.42	$	3.48	$	3.41
Options granted	376,032	880,681	955,361	$	4.07	$	2.15	$	3.82
Options exercised	(1,279,354)	(1,097,500)	(1,202,575)	$	3.35	$	2.53	$	2.46
Options expired or forfeited	(219,333)	(292,626)	(536,063)	$	4.15	$	3.88	$	4.50
Options outstanding, end of year	2,893,240	4,015,895	4,525,340	$	3.48	$	3.42	$	3.48
Options exercisable, end of year	2,495,650	2,733,842	3,115,798	$	3.42	$	3.64	$	3.27

The weighted average fair value at the date of grant for options granted during the years ended June 30, 2017, 2016 and 2015 were $2.21, $1.08 and $1.91 per share, respectively.

The aggregate intrinsic value of the outstanding stock options as of June 30, 2017 and 2016 is $15.5 million and $0.3 million, respectively. The aggregate intrinsic value of the exercisable stock options as of June 30, 2017 and 2016 is $13.5 million and $25 thousand, respectively. The aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s common stock exceeded the exercise price of the options at June 30, 2017, for those options for which the quoted market price was in excess of the exercise price. The total intrinsic value of options exercised during the 2017, 2016, and 2015 fiscal years was $2.6 million, $1.2 million, and $1.8 million, respectively. Included in research and development and general and administrative expense categories the Company has recorded $1.8 million, $1.5 million, and $1.4 million for stock-based compensation expense related to these stock options during the 2017, 2016, and 2015 fiscal years, respectively.

The following table summarizes information concerning options outstanding under the Plan at June 30, 2017:


		Weighted		Weighted		Weighted
	Number	average		average	Number	average
Range of	outstanding	exercise		remaining	exercisable	exercise
exercise price	at June 30, 2017	price		term (yrs.)	at June 30, 2017	price
$1.59 - 3.00	655,163	$	1.98	5.30	491,533	$	1.88
3.01 - 5.00	1,950,233		3.65	3.54	1,763,729		3.59
5.01 - 7.00	242,844		5.15	3.16	240,388		5.15
7.01 - 9.50	45,000		8.70	7.00	—		—
	2,893,240	$	3.48	3.96	2,495,650		3.42

At the Compensation Committee meeting held on August 14, 2014, the Company awarded an additional 226,657 restricted stock units to certain executive officers of the Company at the closing market price on that date ($3.32 per share). On August 20, 2015, the Company awarded an additional 214,205 restricted stock units to certain executive officers of the Company at the closing price on that date ($1.76 per share). On September 21, 2016, the Company awarded an additional 106,061 restricted stock units to an executive officer of the Company at the closing price on that date ($3.30 per share). These restricted stock units vest over a four year period. As of June 30, 2017 the 331,329 outstanding restricted stock units had vested in accordance with the terms of those agreements with the change in control which occurred on or before May 4, 2017. Consequently, as of June 30, 2017 there was no unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan for these restricted stock units. The Company recorded $1.2 million, $0.6 million, and $0.8 million for stock-based compensation expense for these executive officers for the fiscal years ended June 30, 2017, 2016, and 2015, respectively.

On August 16, 2013, the Company awarded certain executive officers Performance Units of up to 389,864 of restricted stock units which are subject to attainment of certain performance milestones as well as certain continued service requirements. All or a portion of the Performance Units would vest based upon the level of achievement of the milestones set forth in each agreement, which was expected to be achieved within five years of the grant date. The Performance Units had vested were based upon attainment of the Performance milestone and were exercised based on a percentage basis on the attainment of anniversary dates. As of June 30, 2017, all of these Performance Units have vested. The Company recorded $0.1 million, $0.3 million, and $0.4 million for the stock-based compensation for the fiscal years ended June 30, 2017, 2016, and 2015, respectively.

As part of the Amended and Restated Employment Agreement with Dr. Goldenberg which became effective July 1, 2015 (see Note 13), Dr. Goldenberg received a grant of 1,500,000 Restricted Stock Units, which would vest, if at all, after the three (3) year period commencing on the grant date of July 14, 2015, provided the applicable milestones based on achievement of certain market conditions (stock prices) were met and conditioned upon Dr. Goldenberg's continued employment through the vesting period, subject to the terms and conditions of the Restricted Stock Units Notice and the Restricted Stock Units Agreement and such other terms and conditions as set forth in the grant agreement. The Company recorded $1.1 million for the stock-based compensation for the fiscal years ended June 30, 2017 and 2016 for this agreement. The Company believes that a change in control occurred on or before May 4, 2017, as defined in Dr. Goldenberg's employment agreement as a result of the new Board of Directors being seated. According to the terms of his employment agreement and notice of award, the Company believes that these 1.5 million restricted stock units did not vest since at the time of the change in control the actual price per share of the common stock had not achieved the specified target price required to trigger the vesting of the Restricted Stock Units. The Company understands that Dr. Goldenberg contests the Company’s interpretation of both the timing of the change in control and the vesting requirements of the Restricted Stock Units upon a change in control. The 1.5 million Restricted Stock Units are the subject of arbitration, discussed above.

The Restricted Stock Units granted to Dr. Goldenberg were valued using Monte Carlo simulation technique using the following assumptions:


Expected dividend	0	%
Expected option term (years)	5
Expected stock price volatility	49.6	%
Risk-free interest rate	1.32	%

A summary of the Company’s non-vested restricted stock units at June 30, 2017, and changes during the year ended June 30, 2017 is presented below:


		Weighted-Average
		per Share of
		Market Value
Non-Vested Restricted Stock	Number of Awards	on Grant Date
Non-vested at June 30, 2016	2,066,041	$	2.57
Restricted Units Granted(a)	106,061		3.30
Cancelled	(14,469)		3.11
Vested/Exercised(b)	(657,633)		3.33
Non-vested at June 30, 2017	1,500,000	$	2.28

^(a)

For the year ended June 30, 2017, 106,061 restricted stock units were awarded to the Company’s former President and Chief Executive Officer.

^(b)

Represents restricted stock units to the Company’s former President and Chief Executive Officer which vested upon her termination and pursuant to the Company’s change of control, and the Chairman which vested upon the Company’s change of control.

As of June 30, 2017, the Company has 1,897,590 non-vested options and restricted stock units outstanding. As of June 30, 2017, 2016, and 2015 there was $2.0 million, $5.2 million, and $4.5 million, respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is being recognized over a weighted-average period of 2.0 years. The weighted average remaining contractual terms of the exercisable shares is 1.92 years and 3.15 years as of June 30, 2017 and 2016, respectively.

The following table summarizes the stock-based compensation expense by the consolidated statements of comprehensive loss line items for the fiscal years ended June 30, 2017, 2016 and 2015 (in thousands):


	Fiscal Year Ended June 30,
	2017		2016		2015
Research and development	$	2,600	$	2,245	$	1,673
General and administrative		1,733		1,496		1,116
Total expense	$	4,333	$	3,741	$	2,789