Rezolute, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION AND WARRANTS (Tables)

STOCK-BASED COMPENSATION AND WARRANTS (Tables)

6 Months Ended

Dec. 31, 2019

STOCK-BASED COMPENSATION AND WARRANTS

Schedule of the number of shares authorized, outstanding, and available for future grants under stock option

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 (in thousands):


		Termination	Number of Shares
Description	Date	Authorized	Outstanding	Available
2014 Plan	March 2019	2,185	2,185	—
2015 Plan	February 2020	6,850	4,605	2,245
2016 Plan	October 2021	28,000	26,231	1,769
2019 Plan	July 2029	15,000	15,000	—
Total		52,035	48,021	4,014

Schedule of options granted to executive officers and other employees

As of July 31, 2019, the number of shares subject to stock options, the related fair value and compensation that was immediately recognized for vested options are as follows (in thousands):


	Time-Based Vesting						Unvested
	Number of Shares						Hybrid
	Vested			Unvested			Options			Total

Executive officers		3,588	(1)		11,562	(1)(3)		7,550	(2)(3)	22,700
Other employees		921	(1)		6,629	(1)		3,700	(2)	11,250

Total		4,509			18,191			11,250	(6)	33,950

Total fair value	$	817	(4)	$	3,297	(5)

⁽¹⁾

Stock options are subject to time-based vesting in two tranches, whereby (i) 25% of such options are immediately exercisable for employees who have been employed by the Company for more than one year, and for employees that have been employed by the Company less than one year, 25% of such options will vest on the one year anniversary of the employee’s start date, and (ii) the remaining 75% of the stock options will vest ratably over a period of 36 months beginning on the vesting date for the initial 25% tranche.

⁽²⁾

Stock options that commence vesting upon the achievement of market, performance and service conditions (‘Hybrid Options”). These options will vest ratably over a period of 36 months beginning 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 $0.58 per share for 20 trading days in any consecutive 30 day period.

⁽³⁾

In August 2019, an executive officer terminated employment which resulted in forfeiture of stock options shown in the table above with time-based vesting for 0.8 million shares and Hybrid Options for 0.4 million shares.

⁽⁴⁾

Represents the aggregate grant date fair value for stock options that were immediately vested on the grant date, which is included in stock-based compensation expense for the six months ended December 31, 2019.

⁽⁵⁾

Represents the aggregate grant date fair value for stock options that were not immediately vested on the grant date and will be charged to expense from the grant date through the respective vesting dates through July 2023.

⁽⁶⁾

The Company has not recognized any expense related to these stock options for the three and six months ended December 31, 2019, since it is not yet probable that the performance condition will be achieved. The Company will begin recognizing compensation expense at such time that the performance condition is probable and continuing through the end of the requisite service period. Determination of the requisite service period and valuation of the Hybrid Options will be calculated on the date that the performance condition is considered probable.

In November 2019, the Company granted an additional 1,995,000 shares to certain employees, a director and members of the scientific advisory board at an exercise price of $0.29. These options were granted under the 2015 Plan, vest ratably over periods ranging from 36 to 48 months and expire ten years after the grant date. The estimated fair value of these stock options was $0.2 million as of the grant date.

Schedule of summary of combined stock option activity

The following table sets forth a summary of the combined stock option activity under all of the Company’s stock option plans for the six months ended December 31, 2019 (shares in thousands):


	Shares	Price (1)		Term (2)

Outstanding, beginning of period	13,865	$	1.60	6.4
Granted	35,945		0.29
Forfeited	(1,789)		0.43
Outstanding, end of period	48,021		0.66	8.6

Vested, end of period	17,237		1.20	7.0

⁽¹⁾

Represents the weighted average exercise price.

⁽²⁾

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

Schedule of the fair value of stock options was estimated on the date of grant using the BSM option-pricing model using following weighted-average assumptions


Valuation Inputs

Fair value of common stock on grant date	$	0.21
Exercise price of stock options		0.29
Expected volatility		118	%
Risk free interest rate		1.9	%
Expected term (years)		6.5
Dividend yield		0	%

Schedule of Stock-based compensation expense

Stock-based compensation expense is included in compensation and benefits under the following captions in the unaudited condensed consolidated statements of operations (in thousands):


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2019		2018		2019		2018

Research and development	$	351	$	61	$	925	$	191
General and administrative		314		755		1,134		1,503
Total	$	665	$	816	$	2,059	$	1,694

Summary of warrant activity

Presented below is a summary of warrant activity for the six months ended December 31, 2019 (shares in thousands):


	Shares		Price (1)		Term (2)
Outstanding, beginning of period	45,997		$	1.34	2.3
Warrants issued for consulting services	700	(3)		0.29
Warrant expirations	(361)			1.90
Outstanding, end of period	46,336			1.32	1.9

⁽¹⁾

Represents the weighted average exercise price.

⁽²⁾

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