NOTE 7 — STOCK-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 March 31, 2021 (in thousands):

 

 

On March 31, 2021, the Company’s Board of Directors adopted, subject to stockholder approval, the Rezolute, Inc. 2021 Stock Incentive Plan (the “2021 Equity Plan”). The 2021 Equity Plan, if approved by stockholders, would provide authority to issue up to 1,200,000 shares of Common Stock with a plan termination date in ten years. Currently outstanding stock options under each of the stock option plans shown in the table above for an aggregated of approximately 874,000 shares will be governed by their own respective equity plans. The currently authorized shares available for grants under the 2016 Plan will no longer be available for future grants if stockholders approve the 2021 Equity Plan.

Stock Options Outstanding

The following table sets forth a summary of the stock option activity for options with time-based vesting and hybrid vesting granted under all of the Company’s stock option plans for the nine months ended March 31, 2021 (shares in thousands):

 

Stock-based compensation expense for the three and nine months ended March 31, 2021 and 2020 is included in compensation and benefits under the following captions in the unaudited condensed consolidated statements of operations (in thousands):

 

 

Unrecognized stock-based compensation expense related to stock options that provide solely for time-based vesting is approximately $1.5 million as of March 31, 2021. This amount is expected to be recognized over a remaining weighted average period of 1.6 years.

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”). Total unrecognized compensation cost, net of forfeitures, for the Hybrid Options amounted to approximately $1.9 million as of November 2, 2020. 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. On November 3, 2020, the performance condition to obtain a listing on a national stock exchange was achieved, when the Company’s shares began trading on the Nasdaq Capital Market. Prior to this date, no compensation cost had been recognized for the Hybrid Options as it was not considered probable that the performance condition would be achieved. Upon achievement of the performance condition, the Company recognized the cumulative effect of compensation cost of approximately $0.5 million for the period from the grant date through November 3, 2020. The remainder of the unrecognized compensation related to the Hybrid Options of approximately $1.4 million, is being recognized ratably through July 2024 when the Hybrid Options are expected to be fully vested. As of March 31, 2021, total unrecognized compensation cost, net of forfeitures, for the Hybrid Options amounted to approximately $1.2 million which is expected to be recognized over a weighted average term of 3.3 years.

Warrants

The Company has issued warrants in conjunction with various debt and equity financings and for services. The following table sets forth a summary of the warrant activity for the nine months ended March 31, 2021 (shares in thousands):