Annual report pursuant to Section 13 and 15(d)

SHARE-BASED COMPENSATION AND WARRANTS

v3.21.2
SHARE-BASED COMPENSATION AND WARRANTS
12 Months Ended
Jun. 30, 2021
SHARE-BASED COMPENSATION AND WARRANTS  
SHARE-BASED COMPENSATION AND WARRANTS

NOTE 8 — SHARE-BASED COMPENSATION AND WARRANTS

Stock Option Plans

Presented below is a summary of the number of shares authorized, outstanding, and available for future grants under each of the Company’s stock option plans as of June 30, 2021 (in thousands):

 

 

 

 

 

 

 

 

 

 

    

Termination

    

Number of Shares

Description

    

Date

    

Authorized

    

Outstanding

    

Available

2014 Plan

 

March  2019

 

 2

 

 2

 

 —

2015 Plan

 

February 2020

 

51

 

51

 

 —

2016 Plan

 

October 2021

 

327

 

327

 

 —

2019 Plan

 

July 2029

 

200

 

200

 

 —

2021 Plan

 

March 2030

 

1,200

 

705

 

495

Total

 

  

 

1,780

 

1,285

 

495

 

The Company currently has one active stock option plan, the 2021 Equity Incentive Plan (the “2021 Equity Plan”). On March 31, 2021, the Company’s Board of Directors adopted the 2021 Equity Plan that will terminate on March 31, 2030. On May 26, 2021, the 2021 Equity plan was approved by the Company’s shareholders with authority to issue up to 1.2 million shares of common stock. Pursuant to the 2021 Equity Plan, no awards may be granted under the four legacy stock option plans shown in the table above, but all outstanding awards previously granted under those plans shall remain outstanding and subject to the terms of the respective plans. Stock options outstanding under these plans expire pursuant to their contractual provisions on various dates through 2031.

June 2021 Grants

On June 14, 2021, the Board of Directors granted stock options for an aggregate of approximately 0.7 million shares of common stock to certain officers, employees and independent directors at an exercise price of $12.28 per share (the “June 2021 Grants”). Stock options for an aggregate of approximately 0.5 million shares were granted to the Company’s chief executive officer, independent directors and employees with less than one year of service that provide for vesting of 1/36th of the total award each month commencing on July 1, 2021, and stock options for approximately 0.2 million shares granted to employees with more than one year of service that provided for vesting of 25% of the award on grant date with the remainder of the award vesting for approximately 2.1% the total award each month until full vesting occurs. The aggregate fair value of the June 2021 Grants was $7.3 million, of which $0.6 million was recognized in June 2021 and the remaining $6.7 million will be recognized over the respective vesting periods.

Stock Option Cancellations

Certain outstanding stock options held by officers and other employees of the Company were either subject to restrictive vesting terms (requiring a sustained increase in market price to $29.00 per share before vesting commenced) or that had relatively high exercise prices ranging from $50.00 to $103.00 per share. On June 29, 2021, three officers of the Company voluntarily surrendered their awards for approximately 0.3 million shares for no consideration. The previously unrecognized compensation cost for these awards amounted to approximately $0.7 million that was charged to expense on the date of cancellation.

Hybrid Options

In July 2019, the Company granted employee stock options for approximately 0.2 million shares that commence vesting upon the achievement of market, performance and service conditions (“Hybrid Options”). The Hybrid Options will become exercisable when all of the following have occurred: (i) the option recipient has been employed by the Company for at least one year, (ii) the Company’s shares of common stock have been listed for trading on a national stock exchange, and (iii) such date no later than July 31, 2023, when the Company’s closing stock price exceeds $29.00 per share for 20 trading days in any consecutive 30-day period. Total unrecognized compensation cost, net of forfeitures, for the Hybrid Options amounted to approximately $1.9 million as of November 3, 2020 when the performance condition to obtain a listing on a national stock exchange was achieved. Prior to this date, no compensation cost had been recognized for the Hybrid Options since it was not considered probable that the performance condition would be achieved. Upon achievement of the performance condition, the Company recognized compensation cost of approximately $0.5 million for the period from the grant date through November 3, 2020.

Stock Options Outstanding

The following table sets forth a summary of the combined stock option activity under all of the Company’s stock option plans for the fiscal years ended June 30, 2021 and 2020 (shares in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

2020

 

    

Shares

    

Price (1)

    

Term (2)

    

Shares

    

Price (1)

    

Term (2)

Outstanding, beginning of fiscal year

 

963

 

$

33.06

 

8.1

 

277

 

$

79.88

 

6.4

Stock options granted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Awards with time-based vesting

 

713

 

 

12.41

 

 

 

497

 

 

14.50

 

 

Awards with performance-based vesting

 

 —

 

 

 —

 

 

 

225

 

 

14.50

 

 

Stock options cancelled:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Awards with time-based vesting

 

(146)

 

 

69.66

 

 

 

 —

 

 

 —

 

 

Awards with performance-based vesting

 

(128)

 

 

14.50

 

 

 

 —

 

 

 —

 

 

Stock options forfeited:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Awards with time-based vesting

 

(82)

 

 

86.72

 

 

 

(25)

 

 

24.39

 

 

Awards with performance-based vesting

 

(35)

 

 

14.50

 

 

 

(11)

 

 

14.50

 

 

Outstanding, end of fiscal year

 

1,285

 

 

16.35

 

8.7

 

963

 

 

33.06

 

8.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vested, end of fiscal year

 

440

 

 

23.07

 

7.1

 

431

 

 

53.14

 

6.9


(1)

Represents the weighted average exercise price.

(2)

Represents the weighted average remaining contractual term until the stock options expire.

For the fiscal year ended June 30, 2021, the aggregate fair value of stock options granted for approximately 0.7 million shares of common stock that provide solely for time-based vesting, amounted to $7.5 million or approximately $10.47 per share as of the grant dates. For the fiscal year ended June 30, 2020, the aggregate fair value of stock options granted for approximately 0.5 million shares of common stock that provide solely for time-based vesting, amounted to $4.2 million or approximately $8.38 per share as of the grant date. For the fiscal year ended June 30, 2020, the aggregate fair value of stock options granted for approximately 0.2 million shares of common stock that provide for hybrid vesting, amounted to $2.1 million or approximately $9.51 per share as of the grant date. Fair value was computed using the BSM option-pricing model and will result in the recognition of compensation cost ratably over the expected vesting period of the stock options. For the fiscal years ended June 30, 2021 and 2020, the fair value of stock options that provide for time-based and hybrid vesting was estimated on the date of grant using the BSM option-pricing model, with the following weighted-average assumptions:

 

 

 

 

 

 

 

 

 

 

 

 

    

2021

 

2020

 

 

 

Time-Based

 

Time-Based

 

Hybrid

 

Market price of common stock on grant date

 

$

12.41

 

$

10.23

 

$

10.61

 

Expected volatility

    

 

118

%

 

118

%

 

118

%

Risk free interest rate

 

 

0.9

%

 

1.9

%

 

2.0

%

Expected term (years)

 

 

5.7

 

 

5.7

 

 

8.0

 

Dividend yield

 

 

 0

%

 

 0

%

 

 0

%

 

Share-based compensation expense is included in compensation and benefits under the following captions in the consolidated statements of operations for the fiscal years ended June 30, 2021 and 2020 (in thousands):

 

 

 

 

 

 

 

 

    

2021

    

2020

Research and development

 

$

1,880

 

$

1,589

General and administrative

 

 

2,085

 

 

1,728

Total

 

$

3,965

 

$

3,317

 

Unrecognized share-based compensation expense for stock options that provide solely for time-based vesting as of June 30, 2021 was approximately $7.9 million. This amount is expected to be recognized over a remaining weighted average period of 2.7 years. As of June 30, 2021, unrecognized compensation of $0.3 million related to the remaining Hybrid Options is being recognized ratably over a weighted average term of 3.1 years.

Warrants

The Company has issued warrants to purchase shares of common stock in conjunction with various debt and equity financings and for services. As of June 30, 2021 and 2020, all of the warrants are vested. For the fiscal years ended June 30, 2021 and 2020, no warrants were exercised. Presented below is a summary of grants and expirations for the fiscal years ended June 30, 2021 and 2020 (shares in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

2020

 

    

Shares

    

Price (1)

    

Term (2)

    

Shares

     

Price (1)

    

Term (2)

Outstanding, beginning of fiscal year

 

618

  

$

57.46

 

2.3

 

920

  

$

66.80

 

3.4

Warrants issued

 

820

(4)  

 

19.50

 

  

 

14

(3)  

 

14.50

 

  

Warrant expirations

 

(186)

  

 

82.39

 

  

 

(316)

  

 

82.78

 

  

Outstanding, end of fiscal year

 

1,252

  

 

28.91

 

4.8

 

618

  

 

57.46

 

2.3


(1)

Represents the weighted average exercise price.

(2)

Represents the weighted average remaining contractual term for the number of years until the warrants expire.

(3)

Represents warrants granted for consulting services in November 2019 with an expiration date in November 2024. The fair value of the warrants of $67,000 was determined using the BSM option-pricing model. Since the warrants were immediately vested, this entire amount is included in consulting and outside services under research and development expenses for the fiscal year ended June 30, 2020. Key assumptions for the valuation of these warrants included the closing price of the Company’s shares of common stock of $14.50 on the grant date, the exercise price of $6.50 per share, historical volatility of 119%, and an expected term of 5.0 years.

(4)

Represents warrants granted in connection with the Fiscal 2021 Equity Financing on October 9, 2020 as discussed in Note 7. The warrants are exercisable at $19.50 per share for a period of 7 years and may be exercised on a cash or cashless basis at the election of the holder.