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Equity Instruments

3 Months Ended

Sep. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Equity Instruments

Note 9 – Equity Instruments

Share-based Compensation Plans

On June 1, 2015, Aytu’s stockholders approved the Aytu BioScience 2015 Stock Option and Incentive Plan (the “2015 Plan”), which, as amended in July 2017, provides for the award of stock options, stock appreciation rights, restricted stock and other equity awards for up to an aggregate of 3.0 million shares of common stock. The shares of common stock underlying any awards that are forfeited, canceled, reacquired by Aytu prior to vesting, satisfied without any issuance of stock, expire or are otherwise terminated (other than by exercise) under the 2015 Plan will be added back to the shares of common stock available for issuance under the 2015 Plan. As of September 30, 2018, we have 2,961,863 shares that are available for grant under the 2015 Plan.

Pursuant to the 2015 Stock Plan, 3.0 million shares of the Company’s common stock, are reserved for issuance. The fair value of options granted has been calculated using the Black-Scholes option pricing model. In order to calculate the fair value of the options, certain assumptions are made regarding components of the model, including the estimated fair value of the underlying common stock, the risk-free interest rate, volatility, expected dividend yield and the expected option life. Changes to the assumptions could cause significant adjustments to valuation. Aytu estimates the expected term of granted options based on the average of the vesting term and the contractual term of the options. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant for treasury securities of similar maturity. There were no issuances during the three months ended September 30, 2018, therefore, no assumptions are used for this quarter.

Stock option activity is as follows:

		Number of Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life in Years
Outstanding June 30, 2018			1,798			$	325.97				6.95
Granted			-			$	-
Exercised			-			$	-
Forfeited/Cancelled			(11	)		$	328.00
Outstanding September 30, 2018			1,787			$	325.96				6.74
Exercisable at September 30, 2018			1,516			$	325.59				6.62

As of September 30, 2018, there was $95,000 of total unrecognized option-based compensation expense related to non-vested stock options. The Company expects to recognize this expense over a weighted-average period of 0.77 years.

Restricted stock activity is as follows:

		Number of Shares				Weighted Average Grant Date Fair Value				Weighted Average Remaining Contractual Life in Years

Unvested at June 30, 2018			37,200			$	39.80				9.4
Vested			(850	)		$	40.40
Granted			-			$	-
Cancelled			-			$	-
Unvested at September 30, 2018			36,350			$	39.81				9.1

As of September 30, 2018, there was $2,861,000 of total unrecognized share-based compensation expense related to the non-vested restricted stock. The Company expects to recognize this expense over a weighted-average period of 8.38 years. Under the 2015 Plan, there was $1,315,000 of total unrecognized share-based compensation expense related to the non-vested restricted stock. The Company expects to recognize this expense over a weighted-average period of 9.10 years. During the three months ended September 30, 2018, the expense related to these awards was $36,000.

Aytu previously issued 1,540 shares of restricted stock outside the Aytu BioScience 2015 Stock Option and Inventive Plan, which vest in July 2026. The unrecognized expense related to these shares was $1,546,000 as of September 30, 2018 and will be recognized over the 10-year vesting period, of which 7.78 years remain. During the three months ended September 30, 2018, the expense related to these awards was $50,000.

Stock-based compensation expense related to the fair value of stock options and restricted stock was included in the statements of operations as selling, general and administrative expenses as set forth in the table below:

		Three Months Ended September 30,
		2018				2017
Selling, general and administrative:

Stock options		$	66,000			$	195,000

Restricted Stock			86,000				72,000
Total share-based compensation expense		$	152,000			$	267,000

Warrants

A summary of all warrants is as follows:

		Number of Warrants				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life in Years
Outstanding June 30, 2018			1,882,661			$	25.94				4.61

Issued			-
Exercised			-

Outstanding September 30, 2018			1,882,661			$	25.94				4.36

The warrants related to the August Financing issued in fiscal 2018 were valued using the lattice option pricing model. These warrants were accounted for as liability warrants (see assumptions used in Note 6).