XML 30 R16.htm IDEA: XBRL DOCUMENT

Equity Instruments

9 Months Ended

Mar. 31, 2019

Share-based Payment Arrangement [Abstract]

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 March 31, 2019, we have 205,562 shares available for grant under the 2015 Plan.

Pursuant to the 2015 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 March 31, 2019, 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		(132	)	$	328.00
Outstanding March 31, 2019		1,666		$	325.81		6.49
Exercisable at March 31, 2019		1,514		$	325.59		6.43

As of March 31, 2019, there was $28,000 of total unrecognized share-based compensation expense related to non-vested stock options. The Company expects to recognize this expense over a weighted-average period of 0.43 years.

During the quarter ended December 31, 2018, Aytu 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. 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. Significant assumptions at issuance in valuing the options were as follows:

Expected volatility	164%
Risk free interest rate	2.99%
Expected term (years)	5.0
Dividend yield	0%

As of March 31, 2019, there was $44,000 of total unrecognized share-based compensation expense related to these non-vested stock options. The Company expects to recognize this expense over a weighted-average period of 0.63 years.

Restricted stock issued from the 2015 Plan 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		2,772,022		$	1.30
Forfeited		(90,600	)	$	-
Unvested at March 31, 2019		2,717,772		$	1.81		9.3

In October 2018, Aytu issued 2,707,022 shares of restricted stock to executives, directors, employees pursuant to the 2015 Plan, which vest in October 2028. Expense will be recognized over the 10-year vesting period.

In January 2019, Aytu modified 168,288 shares of restricted stock for accelerated vesting and recognized an increase in aggregate stock compensation expense of $207,000. Also, in January 2019, Aytu forfeited 57,000 shares of restricted stock.

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

In March 2019, Aytu forfeited 33,600 shares of restricted stock.

Under the 2015 Plan, there was $4,288,000 of total unrecognized share-based compensation expense related to the non-vested restricted stock as of March 31, 2019. The Company expects to recognize this expense over a weighted-average period of 9.32 years. During the three months ended March 31, 2019, the expense related to these awards was $313,000. During the nine months ended March 31, 2019, the expense related to these awards was $452,000.

Aytu previously issued 1,540 shares of restricted stock outside the Aytu 2015 Plan, which vest in July 2026. The unrecognized expense related to these shares was $1,447,000 as of March 31, 2019 and will be recognized over the 10-year vesting period, of which 7.28 years remain. During the three months ended March 31, 2019, the expense related to these awards was $49,000. During the nine months ended March 31, 2019, the expense related to these awards was $149,000.

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 March 31,				Nine Months Ended March 31,
	2019		2018		2019		2018
Selling, general and administrative:
Stock options	$	15,000	$	12,000	$	122,000	$	288,000

Restricted stock		362,000		55,000		601,000		159,000
Total share-based compensation expense	$	377,000	$	67,000	$	723,000	$	447,000

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

Warrants issued in connection with the October 2018 offering		10,120,000		$	1.50
Warrants issued to underwriters in connection with the October 2018 offering		303,600		$	1.50
Warrants exercised		(172,331	)	$	1.50
Outstanding March 31, 2019		12,133,930		$	5.29		4.42

In connection with our October 2018 registered offering, we issued warrants to investors and underwriters to purchase an aggregate of 10,423,600 shares of the Company’s common stock at an exercise price of $1.50 and a term of five years. These warrants are accounted for under equity treatment. These warrants had a relative fair value of $1.8 million and a fair value of $2.0 million.

In March 2019, warrants issued from the October registered offering to purchase an aggregate of 172,331 shares of common stock were exercised for aggregate gross proceeds to our Company of approximately $259,000.