Note 10 - Share-based Compensation

12 Months Ended

Jun. 30, 2014

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

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

(10) Share-Based Compensation 

For the twelve months ended June 30, 2014 and 2013, the Company recorded share-based compensation expense related to grants from equity incentive plans of $1.7 million and $2.6 million, respectively. No income tax benefit was recognized in the statements of operations and no share-based compensation expense was capitalized as part of any assets for the twelve months ended June 30, 2014 and 2013.

Stock Options. The fair value of each stock option award was estimated at its respective date of grant using the Black-Scholes method with the following assumptions:

	Twelve Months Ended
	2014			2013
Weighted-average risk-free interest rate		1.5	%		1.50	%
Dividend yield		—			—
Expected weighted-average volatility		.79			.79
Expected weighted-average term of options (years)		5.92			6.0
Weighted-average fair value of options granted	$	2.47		$	2.39

The risk-free rate interest rate is based on the expected life of the option and the corresponding United States (“U.S.”) Treasury bond, which in most cases is the U.S. five year Treasury bond. The expected term of stock options granted is derived from actual and expected option behavior and represents the period of time that options granted are expected to be outstanding. The Company uses historical data to estimate option exercise patterns and future employee terminations to determine expected life and forfeitures. Expected volatility is based on the historical volatility of the Company’s publicly traded common stock.

	Number of Stock Options			Weighted Average Exercise Price Per Option		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value ($0000)
Balance at June 30, 2013		1,658,529		$	13.57
Granted (1)		912,975			3.95
Exercised		—			—
Forfeited or expired		(108,135	)		34.36
Balance at June 30, 2014		2,463,369		$	9.09		6.34	$	-

(1) Includes performance-based options of 432,975, subject to specific performance conditions.

The Company granted performance-based stock options to purchase 432,975 during the year ending June 30, 2014 with an average exercise price of $4.15, resulting in total unrecognized share-based compensation expense of $1.0 million. Vesting is contingent upon meeting specific performance goals related to the development of laninamivir octanoate. As of June 30, 2014, no share-based compensation expense related to these performance-based options has been recognized as it is not probable that the performance condition will be achieved. The Company will evaluate the probability of achieving these performance goals quarterly, and if the Company determines that it is probable that a performance goal will occur, the effect of the change in estimate will be accounted in the period of change by recording a cumulative catch-up adjustment to retroactively apply the new estimate. As of June 30, 2014, all performance-based options are unvested and will expire six-years from the grant date, or will be forfeited if the performance goals are not achieved.

The total intrinsic value of stock options exercised during the twelve month period ended June 30, 2014 was zero, and no cash proceeds were received by the Company. Further, no actual tax benefits were realized, as the Company currently records a full valuation allowance for all tax benefits due to uncertainties with respect to its ability to generate sufficient taxable income in the future.

The following tables summarize information relating to outstanding and exercisable options as of June 30, 2014:

			June 30, 2014
			Outstanding
					Weighted Average				Exercisable
			Number of		Remaining		Weighted Average		Number of		Weighted Average
Exercise Prices			Shares		Contractual Life		Exercise Price		Shares		Exercise Price
					(In Years)
$2.56	—	$4.05		490,000		9.22	$	3.38		86,250	$	3.96
$4.07				931,590		8.37		4.07		310,531		4.07
$4.13	—	$6.65		628,675		3.49		4.38		—		—
$11.22	—	$93.36		413,104		2.69		34.37		413,104		34.37
				2,463,369		6.34	$	9.09		809,885		19.51

Restricted Stock Awards. A summary of the Company’s outstanding restricted stock activity for the twelve months ended June 30, 2014 is as follows:

				Weighted-Average
				Grant Date
	Shares			Fair Value
Outstanding at June 30, 2013		—		$	—
Granted		54,000			4.10
Released		(45,250	)		4.13
Forfeited		—			—
Outstanding at June 30, 2014		8,750		$	3.93

Restricted and Market Stock Units (MSUs). A summary of the Company’s outstanding restricted stock and market stock unit (MSU) activity for the twelve months ended June 30, 2014 is as follows:

	Shares			Weighted Average Grant Date Fair Value
Outstanding at June 30, 2013		170,139		$	4.07
Awarded		123,183		$	3.86
Released		(17,400	)	$	4.05
Forfeited		(13,850	)	$	4.02
Unvested at June 30, 2014		262,072		$	3.98

In December 2013, the Company awarded 108,183 MSUs to employees that vest on January 1, 2017. The vesting of these awards is subject to the respective employee’s continued employment through this settlement period. The number of MSUs granted represents the target number of units that are eligible to be earned based on the attainment of certain market-based criteria involving our stock price. The number of MSUs actually earned is calculated upon the vesting of the award. Participants may ultimately earn between 0% and 250% of the target number of units granted based on actual stock performance. Accordingly, additional MSUs may be issued or currently outstanding MSUs may be cancelled upon final determination of the number of awards earned. Compensation expense, including the effect of forfeitures, is recognized over the applicable service period.

The Company values grants of MSUs using a lattice model with a Monte Carlo simulation. This valuation methodology utilizes several key assumptions, including the 20-day average closing stock price on the grant date, expected volatility of the Company’s stock price, risk-free rates of return and expected dividend yield. The assumptions used in the Company’s valuation of the MSU’s are summarized as follows:

	For the Twelve Month Period Ended June 30,
	2014		2013
Expected dividend yield		0.00%		—
Expected stock price volatility		0.86		—
Risk-free interest rate		0.64%		—
20-day trading average stock price on grant date		$3.98		—
Weighted-average per share grant date fair value		$7.69		—

As of June 30, 2014 there was $3.5 million of unrecognized share-based compensation expense related to all unvested share-based awards, not discounted for future forfeitures. This balance is expected to be recognized over a weighted-average period of two years.

In August 2014, the Company's Board made a determination that the specific milestone was not and would not be achieved on 432,975 of performance-based stock options, therefore the options will not vest and are cancelled.