Note 7. Share-based Compensation

The Company uses equity-based compensation programs to provide long-term performance incentives for its employees. These incentives consist primarily of stock options and restricted stock units (“RSUs”).

MEI Pharma’s 2008 Stock Omnibus Equity Compensation Plan (the “2008 Equity Plan”) provides for the grant of options and/or other share-based or share-denominated awards to the Company’s non-employee directors, officers, employees and advisors. The 2008 Equity Plan was initially adopted in 2008 and was amended and restated in 2011, 2013, 2014, and 2015. Effective December 1, 2016, the Company’s stockholders voted to further amend and restate the 2008 Equity Plan to increase the number of shares of common stock authorized for issuance under the plan to 10,186,000 shares, among other changes. As of December 31, 2016, there were 5,051,210 shares available for future grant under the 2008 Equity Plan.

Total share-based compensation expense for all stock awards consists of the following, in thousands:


	Three Months Ended December 31,				Six Months Ended December 31,
	2016		2015		2016		2015
Research and development	$	243	$	257	$	482	$	465
General and administrative		431		541		929		1,103

Total share-based compensation	$	674	$	798	$	1,411	$	1,568

Stock Options

Stock option activity for the six months ended December 31, 2016 was as follows:


	Number of Options			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at June 30, 2016		2,827,172		$	4.29
Granted		1,527,083			1.37
Forfeited / Cancelled		(33,333	)		1.36
Expired		(39,900	)		9.98

Outstanding at December 31, 2016		4,281,022		$	3.22		7.0	$	137,680

Vested and exercisable at December 31, 2016		1,773,019		$	4.78		4.8	$	8,534

The fair value of each stock option granted during the six months ended December 31, 2016 is estimated on the grant date under the fair value method using a Black-Scholes valuation model. Stock options granted to employees during the six months ended December 31, 2016 vest 25% one year from the date of grant and ratably each month thereafter for a period of 36 months and expire ten years from the date of grant. Stock options granted to directors during the six months ended December 31, 2016 vest ratably each month for a period of 12 months from the date of grant and expire ten years from the date of grant. The RSU equity awards are measured using the grant date fair value of the Company’s common stock. The estimated fair values of the stock options and RSUs, including the effect of estimated forfeitures, are expensed over the service period.

The following weighted-average assumptions were used to determine the fair value of options granted during the period:


	Six Months Ended December 31,
	2016			2015
Risk-free interest rate		1.2	%		1.8	%
Expected life (years)		5.9			5.7
Expected volatility		108.2	%		117.3	%
Dividend yield		0.0	%		0.0	%
Weighted-average grant date fair value	$	1.12		$	1.38

As of December 31, 2016, there was $1.8 million of unrecognized compensation expense related to the unvested portion of stock options. Such compensation expense is expected to be recognized over a weighted-average period of 1.5 years.

Restricted Stock Units

In March 2013, the Compensation Committee of the Board of Directors granted 400,000 RSUs to the Company’s Chief Executive Officer, Dr. Daniel P. Gold. Each RSU represents the contingent right to receive one share of the Company’s common stock. One-third of the RSUs vested on August 30, 2014, one-third vested on August 30, 2015, and the remaining one-third vested on August 30, 2016. The shares underlying the RSUs will be delivered to Dr. Gold on the earliest to occur of (i) March 29, 2018, (ii) Dr. Gold’s death, disability or separation from service from the Company for any reason, or (iii) a change in control involving the Company. The fair value of the RSUs on the date of grant was $3.5 million. The grant date fair value per unit was $8.63.

In June 2016, the Company granted 364,726 RSUs to employees. Each RSU represents the contingent right to receive one share of the Company’s common stock. The RSUs were subject to performance criteria that were met in August 2016. The RSUs will vest in August 2018. The fair value of the RSUs was measured at $1.61 per unit on the date the performance criteria were met. Under the terms of the 2008 Plan, each of these RSUs is calculated as 1.25 shares of common stock for purposes of determining the number of shares available for future grant. There were 363,014 unvested RSUs outstanding as of December 31, 2016.

As of December 31, 2016, unrecognized compensation expense related to the unvested portion of the Company’s RSUs was approximately $0.5 million and is expected to be recognized over approximately 1.6 years.