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EQUITY | 9 Months Ended
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Mar. 31, 2018
EQUITY |
EQUITY | 13. EQUITY On July 25, 2017, the Company closed its underwritten public offering of 9,583,332 shares of its common stock at a public offering price of $4.50 per share. The foregoing included the full exercise of the underwriters' option to purchase 1,249,999 additional shares from the Company. The gross proceeds to the Company from the offering, before deducting underwriting discounts and commissions and other offering expenses, was approximately $43.1 million. On November 6, 2017, the Company entered into a Merger Agreement with Cantaloupe for cash and 3,423,367 shares of the company’s stock valued at $19.8 million. Refer to Footnote 3 for details on the Merger Agreement. WARRANTS During the three and nine months ended March 31, 2018, no warrants were exercised as compared to the nine months ended March 31, 2017 where 2.4 million warrants were exercised at $2.6058 per share, yielding proceeds of $6.2 million. The following table summarizes warrant activity for the three and nine months ended March 31, 2018 and 2017:
|  | Three months ended |  | Nine months ended
|  | March 31, |  | March 31,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Beginning balance |  | 23,978 |  | 23,978 |  | 23,978 |  | 2,445,653
Issued |  | — |  | — |  | — |  | —
Exercised |  | — |  | — |  | — |  | (2,401,408)
Expired |  | — |  | — |  | — |  | —
Cancelled |  | — |  | — |  | — |  | (20,267)
Ending balance |  | 23,978 |  | 23,978 |  | 23,978 |  | 23,978
STOCK OPTIONS The Company estimates the grant date fair value of the stock options it grants using a Black-Scholes valuation model. The Company’s assumption for expected volatility is based on its historical volatility data related to market trading of its own common stock. The Company bases its assumptions for expected life of the new stock option grants on the life of the option granted, and if relevant, its analysis of the historical exercise patterns of its stock options. The dividend yield assumption is based on dividends expected to be paid over the expected life of the stock option. The risk-free interest rate assumption is determined by using the U.S. Treasury rates of the same period as the expected option term of each stock option. In July 2017, 135,000 stock options were granted for 11 employees vesting 1/3 on July 26, 2018, 1/3 on July 26, 2019 and 1/3 on July 26, 2020 expiring if not exercised prior to July 26, 2022. The options are intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended. In August 2017, the Company awarded stock options to its Chief Executive Officer and Chief Financial Officer to purchase up to 19,047 and 25,000 shares respectively of common stock at an exercise price of $5.25 per share. The Chief Executive Officer options vest on August 16, 2018, expiring if not exercised prior to August 16, 2024. The Chief Financial Officer options vest 1/3 on August 16, 2018, 1/3 on August 16, 2019 and 1/3 on August 16, 2020, expiring if not exercised prior to August 16, 2024. The Chief Executive Officer options are intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, and the Chief Financial Officer options are non-qualified stock options. The fair value of options granted during the three and nine months ended March 31, 2018 was determined using the following weighted average assumptions:
|  | Nine months ended
|  | March 31,
|  | 2018 |  | 2017
Expected volatility (percent) |  |  | 50.2 - 50.9 |  |  | 49.0 - 50.0
Expected life (years) |  |  | 4.0 - 4.5 |  |  | 3.0 - 4.0
Expected dividends |  |  | — |  |  | —
Risk-free interest rate (percent) |  |  | 1.64 - 1.72 |  |  | 1.06 - 1.90
Number of options granted |  |  | 179,047 |  |  | 125,080
Weighted average exercise price |  | $ | 5.66 |  | $ | 4.17
Weighted average grant date fair value |  | $ | 2.42 |  | $ | 1.68
Stock based compensation related to all stock options for the three and nine months ended March 31, 2018 was $127 thousand and $403 thousand, respectively, and $61 thousand and $155 thousand for the three and nine months ended March 31, 2017, respectively. COMMON STOCK On July 1, 2017, $90 thousand of stock grants were awarded to each non-employee Director based on the closing price of the Company’s Common Stock on June 8, 2017 (the date for which the stock grants were initially approved), for a total of 98,184 shares. The shares vest ratably on a monthly basis over the two year period following July 1, 2017. The total expense recognized for these grants for the nine months ended March 31, 2018 was $394 thousand. During the nine months ended March 31, 2018, the Company awarded an aggregate of 177,363 shares to its Chief Executive Officer, Chief Financial Officer and Chief Services Officer under its fiscal year 2017 long term stock incentive plan and an aggregate of 9,472 shares to three non-employee Directors in satisfaction of board fees. LONG TERM INCENTIVE PLANS The Board approved the Fiscal Year 2018 Long-Term Stock Incentive Plan (the “2018 LTI Stock Plan”) which provides that executive officers would be awarded shares of common stock of the Company in the event that certain metrics relating to the Company’s 2018 fiscal year would result in specified ranges of year-over-year percentage growth. The metrics are total number of connections as of June 30, 2018 as compared to total number of connections as of June 30, 2017 (40% weighting) and adjusted EBITDA earned during the 2018 fiscal year as compared to the adjusted EBITDA earned during the 2017 fiscal year (60% weighting). If none of the minimum threshold year-over-year percentage target goals are achieved, the executive officers would not be awarded any shares. If all of the year-over-year percentage target goals are achieved, the executive officers would be awarded shares having the following value: Chief Executive Officer - $840,000 (160% of base salary), Chief Financial Officer - $300,000 (100% of base salary), Chief Services Officer - $275,000 (100% of base salary), and Chief Product Officer - $280,000 (100% of base salary and to be prorated to reflect the actual period of employment during the fiscal year). If all of the maximum distinguished year over year percentage target goals are achieved, the executive officers would be awarded shares having the following value: Chief Executive Officer - $1,260,000 (240% of base salary), Chief Financial Officer - $450,000 (150% of base salary), Chief Services Officer - $412,500 (150% of base salary), and Chief Product Officer - $420,000 (150% of base salary and to be prorated to reflect the actual period of employment during the fiscal year). Assuming the minimum threshold year-over-year percentage target goal would be achieved for a particular metric, the number of shares to be awarded for that metric would be determined on a pro rata basis, provided that the award would not exceed the maximum distinguished award for that metric. The shares awarded under the 2018 LTI Stock Plan would vest as follows: one-third at the time of issuance; one-third on June 30, 2019; and one-third on June 30, 2020. The Company had long-term stock incentive plans (“LTI”) in prior fiscal years for its then executive officers. Stock based compensation related to the LTI plans was as follows in the three and nine months ended March 31, 2018 and 2017:
|  | Three months ended |  | Nine months ended
|  | March 31, |  | March 31,
($ in thousands, except per share data) |  | 2018 |  | 2017 |  | 2018 |  | 2017
FY18 LTI Plan |  | $ | 287 |  | $ | — |  | $ | 777 |  | $ | —
FY17 LTI Plan |  |  | 64 |  |  | 81 |  |  | 192 |  |  | 236
FY16 LTI Plan |  |  | 9 |  |  | 23 |  |  | 28 |  |  | 73
FY15 LTI Plan |  |  | — |  |  | 3 |  |  | — |  |  | 6
Total |  | $ | 360 |  | $ | 107 |  | $ | 997 |  | $ | 315

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