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Equity Incentive Plan

3 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Share-based Compensation Plans

On June 1, 2015, the Company’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, 2020, we have 4,837 shares that are available for grant under the 2015 Plan. On February 13, 2020, the Company’s stockholders approved an increase to 5.0 million total shares of common stock in the 2015 Plan.

Stock Options

Employee Stock Options:

The fair value of the options is 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, risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to valuation. Aytu estimates the expected term 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 grants of stock options to employees during the quarters ended September 30, 2020 and 2019, respectively, therefore, no assumptions are used for fiscal 2021.

Stock option activity is as follows:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Outstanding June 30, 2020		765,937	$	1.85		9.67
Granted		—		—
Exercised		—		—
Forfeited/Cancelled		—		—
Expired		—		—
Outstanding September 30, 2020		765,937		1.85		9.44		70,320
Exercisable at September 30, 2020		8,926	$	52.81		8.68	$	1,650

As of September 30, 2020, there was $601,000 unrecognized option-based compensation expense related to non-vested stock options. The Company expects to recognize this expense over a weighted-average period of 2.73 years.

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, 2020		4,184,516		$	1.47		6.4
Granted		—			—
Vested		(369,198	)		—
Forfeited		—			—
Unvested at September 30, 2020		3,815,318		$	1.53		6.3

Under the 2015 Plan, there was $4.7 million of total unrecognized stock-based compensation expense related to the non-vested restricted stock as of September 30, 2020. The Company expects to recognize this expense over a weighted-average period of 6.3 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 $1.1 million as of September 30, 2020 and is expected to be recognized over the weighted average period of 5.8 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:

	Three Months Ended September 30,
Selling, general and administrative:	2020		2019
Stock options	$	72,000	$	5,000
Restricted stock		383,000		160,000
Total stock-based compensation expense	$	455,000	$	165,000