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Equity Incentive Plan

12 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

2015 Stock Option and Incentive Plan. On June 1, 2015, Aytu’s stockholders approved the 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 June 30, 2019, we have 652,179 shares that are available for grant under the 2015 Plan.

Stock Options

Employee Stock Options: There were no grants of stock options to employees during the years ended June 30, 2019 and 2018, respectively, therefore, no assumptions are used for fiscal 2019.

Non-Employee Stock Options: During the year ended June 30, 2019, the Company issued 75,000 performance-based stock options out of the 2015 Plan to a consultant. These options vest based on meeting certain market criteria with an exercise price of $1.00. At June 30, 2019, the first of three market targets were not achieved, and all 75,000 performance stock options were forfeited.

Market options that require specific events before they begin to vest are valued at grant date. The fair value of the options granted has been calculated using a Monte Carlo simulation. The significant assumptions at issuance in valuing the non-employee performance stock options were as follows:

	As of June 30, 2019

Expected volatility		164.0	%
Expected term (years)		5.00
Risk-free interest rate		2.99	%
Dividend yield		0.00	%

Stock option activity is as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years
Outstanding June 30, 2017		1,947		$	326.20		8.40
Granted		–			–
Exercised		–			–
Forfeited/Cancelled		(149	)		328.00
Outstanding June 30, 2018		1,798			325.97		6.95
Granted		75,000			1.00
Exercised		–			–
Forfeited/Cancelled		(75,036	)		1.16
Expired		(155	)		328.00
Outstanding June 30, 2019		1,607			325.73		6.13
Exercisable at June 30, 2019		1,471		$	325.52		6.07

The following table details the options outstanding at June 30, 2019 by range of exercise prices:

Range of Exercise Prices			Number of Options Outstanding			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life of Options Outstanding			Number of Options Exercisable			Weighted Average Exercise Price
$	280.00			76		$	280.00			7.85			76		$	280.00
$	328.00			1,531		$	328.00			6.05			1,395		$	328.00
		1,607		$	325.73			6.13			1,471		$	325.52

As of June 30, 2019, there was $7,000 of total unrecognized stock-based compensation expense related to employee non-vested stock options. The Company expects to recognize this expense over a weighted-average period of 0.32 years. There was no unrecognized stock-based compensation expense related to non-employee performance options, as these were fully forfeited at June 30, 2019.

Restricted Stock

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, 2017		–		$	–		–
Granted		39,150		$	39.80
Vested		–		$	40.40
Forfeited		(1,950	)	$	40.40

Unvested at June 30, 2018		37,200		$	39.80		9.4
Granted		2,772,022		$	1.30
Vested		–			–
Forfeited		(463,008	)	$	1.23
Unvested at June 30, 2019		2,346,214		$	1.83		9.1

Activity During the Year Ended June 30, 2019

●	In October 2018, the Company issued 2,707,022 shares of restricted stock to executives, directors, employees pursuant to the 2015 Plan, which vest in October 2028.

●	In February 2019, The Company issued 65,000 shares of restricted stock to a director pursuant to the 2015 Plan, which vest in February 2029.

●	372,408 shares of restricted stock were exchanged with common stock, and the Company recognized an increase in aggregate stock compensation expense of $371,000

●	90,600 shares of restricted stock were forfeited due to employee turnover.

Activity during Year Ended June 30, 2018

●	In September 2017, The Company issued 10,000 shares of restricted stock to employees pursuant to the 2015 Plan, which vest in September 2027.

●	November 2017, the Company issued 24,750 shares of restricted stock to executives, directors and consultants pursuant to the 2015 Plan, which vest in November 2027.

●	In January 2018, The Company issued 3,750 shares of restricted stock to an officer pursuant to the 2015 Plan, which vest in January 2028.

●	In March 2018, The Company issued 650 shares of restricted stock to employees pursuant to the 2015 Plan, which vest in March 2028.

●	1,150 shares of restricted stock were exchanged with common stock due to employee turnover, and the Company recognized an increase in aggregate stock compensation expense of $14,000.

●	800 shares of restricted stock were forfeited due to employee turnover.

Under the 2015 Plan, there was $3,874,000 of total unrecognized stock-based compensation expense related to the non-vested restricted stock as of June 30, 2019. The Company expects to recognize this expense over a weighted-average period of 9.07 years.

The Company previously issued 1,540 shares of restricted stock outside the Company’s 2015 Plan, which vest in July 2026. The unrecognized expense related to these shares was $1,397,000 as of June 30, 2019 and is expected to be recognized over the weighted average period of 7.03 years.

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. Aytu determined the fair value of stock compensation as of the date of grant using the Black-Scholes option pricing model and expenses the fair value ratably over the service period which is commensurate with vesting period. The following table summarizes stock-based compensation expense for the stock option and restricted stock issuances for fiscal 2019 and 2018:

Selling, general and administrative:	2019		2018
Stock options	$	125,000	$	349,000
Restricted stock		897,000		248,000
Total stock-based compensation expense	$	1,022,000	$	597,000