Arrowhead has three plans that provide for equity-based compensation. Under the 2004 Equity Incentive Plan and the 2013 Incentive Plan, as of December 31, 2021, 376,301 and 4,904,814 shares, respectively, of Arrowhead’s Common Stock are reserved for the grant of stock options, stock appreciation rights, and restricted stock unit awards to employees, consultants and others. No further grants may be made under the 2004 Equity Incentive Plan. As of December 31, 2021, there were options granted and outstanding to purchase 376,301 and 1,948,814 shares of Common Stock under the 2004 Equity Incentive Plan and the 2013 Incentive Plan, respectively, and there were 2,956,000 restricted stock units granted and outstanding under the 2013 Incentive Plan. Also, as of December 31, 2021, there were 889,890 shares reserved for options and 651,000 shares reserved for restricted stock units issued as inducement grants to new employees outside of equity compensation plans. Under the 2021 Incentive Plan, as of December 31, 2021, 3,000 shares of Common Stock and 76,400 restricted stock units were granted and outstanding under the 2021 Incentive Plan. As of December 31, 2021, the total number of authorized shares under the 2021 Incentive Plan was 8,012,543 shares, which includes 91,943 shares that were forfeited under the 2013 Incentive Plan.

	Number of Options Outstanding			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance at September 30, 2021		3,456,239		$	19.60
Granted		-			-
Cancelled		(30,420	)	35.57
Exercised		(207,814	)	10.32
Balance at December 31, 2021		3,218,005		$	20.05	5.4 years	$	149,311,699
Exercisable at December 31, 2021		2,460,188		$	13.69	4.6 years	$	129,520,403

Stock-based compensation expense related to stock options for the three months ended December 31, 2021 and 2020 was $3.0 million and $3.1 million, respectively. For non-qualified stock options, the expense creates a timing difference, resulting in a deferred tax asset, which is fully reserved by a valuation allowance.

The grant date fair value of the options granted by the Company for the three months ended December 31, 2021 and 2020 was $0 and $6.8 million, respectively.

The intrinsic value of the options exercised during the three months ended December 31, 2021 and 2020 was $12.5 million and $32.0 million, respectively.

As of December 31, 2021, the pre-tax compensation expense for all outstanding unvested stock options in the amount of $22.4 million will be recognized in the Company’s results of operations over a weighted average period of 2.2 years.

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. The determination of the fair value of each stock option is affected by the Company’s stock price on the date of grant, as well as assumptions regarding a number of highly complex and subjective variables. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

	Three Months Ended December 31,
	2021	2020
Dividend yield	N/A		-
Risk-free interest rate	N/A	0.4 – 0.6%
Volatility	N/A	90.0 – 90.4%
Expected life (in years)	N/A		6.25
Weighted average grant date fair value per share of options granted	N/A	$	47.34

Volatility is estimated based on volatility average of the Company’s Common Stock price.

Restricted stock units (“RSUs”), including time-based, market condition-based, and performance condition-based awards, have been granted under the Company’s 2013 Incentive Plan, 2021 Incentive Plan, and as inducements grants granted outside of the Company’s equity-based compensation plans under Rule 5635(c)(4) of the Nasdaq Listing Rules. At vesting, each outstanding RSU will be exchanged for one share of the Company’s Common Stock. RSU awards generally vest subject to the satisfaction of service requirements or the satisfaction of both service requirements and achievement of certain performance targets.

	Number of RSUs			Weighted- Average Grant Date Fair Value
Unvested at September 30, 2021		3,731,850		$	60.82
Granted		122,500			62.60
Vested		(263,700	)		61.11
Forfeited		(7,250	)		83.54
Unvested at December 31, 2021		3,583,400		$	60.82

During the three months ended December 31, 2021 and 2020, the Company recorded $21.5 million and $5.0 million of expense related to RSUs, respectively. Such expense is included in stock-based compensation expense in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). For RSUs, the expense creates a timing difference, resulting in a deferred tax asset, which is fully reserved by a valuation allowance.

For RSUs, the grant date fair value of the award is based on the Company’s closing stock price at the grant date, with consideration given to the probability of achieving performance conditions for performance-based awards. The grant date fair value of the RSUs granted by the Company for the three months ended December 31, 2021 and 2020 was $7.7 million and $7.4 million, respectively.

As of December 31, 2021, the pre-tax compensation expense for all unvested RSUs in the amount of $139.7 million will be recognized in the Company’s results of operations over a weighted average period of 2.6 years.

During the three months ended December 31, 2021, certain performance condition-based awards were modified to either add an additional market condition component, or to replace performance conditions with market conditions entirely. The Company assessed the modification date fair value based on a monte carlo simulation model. The fair value of market condition-based awards is expensed ratably over the service period and is not adjusted for actual achievement.