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Equity Incentive Plans

6 Months Ended

Dec. 31, 2021

14. Equity Incentive Plans

Aytu 2015 Plan. On June 1, 2015, the Company’s stockholders approved the Aytu BioPharma 2015 Stock Option and Incentive Plan (the “Aytu 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 Aytu 2015 Plan. On February 13, 2020, the Company’s stockholders approved an increase to 5.0 million total shares of common stock in the Aytu 2015 Plan. Stock options granted under this plan have contractual terms of 10 years from the grant date and a vesting period ranging from 3 to 4 years. The restricted stock awards have a vesting period ranging from 4 to 10 years, whereas the restricted stock units have a vesting period of 4 years. As of December 31, 2021, the Company had 2,603,044 shares available for grant under the Aytu 2015 Plan.

Neos 2015 Plan. Pursuant to the Neos Merger, the Company assumed 69,721 stock options and 35,728 restricted stock units (RSUs) previously granted under Neos plan. Accordingly, on April 19, 2021, the Company registered 105,449 shares of its common stock under the Neos Therapeutics, Inc. 2015 Stock Options and Incentive Plan (the "Neos 2015 Plan") with the SEC. The terms and conditions of the assumed equity securities will stay the same as they were under the previous Neos plan. In addition to the 105,449 registered shares to cover the assumed awards, the remaining 1,255,310 shares available under the legacy Neos plan was added back to the new Neos 2015 Plan. The Company allocated costs of the replacement awards attributable to pre- and post-combination service periods. The pre-combination service costs were included in the considerations transferred. The remaining costs attributable to the post-combination service period are being recognized as stock-based compensation expense over the remaining terms of the replacement awards. Stock options granted under this plan have contractual terms of 10 years from the grant date and a vesting period ranging from 1 to 4 years. As of December 31, 2021, the Company had 1,218,997 shares available for grant under the Neos 2015 Plan.

Stock Options

Stock option activity is as follows:


				Weighted
				Average
		Weighted		Remaining
	Number of	Average		Contractual
	Options	Exercise Price		Life in Years
Outstanding June 30, 2021	109,588	$	14.52	8.07
Forfeited/Cancelled	(9,355)		6.35
Expired	(9,502)		8.10
Outstanding at December 31, 2021	90,731	$	16.03	8.22

Exercisable at December 31, 2021	47,838	$	22.99	8.17

As of December 31, 2021, there was $0.3 million of total unrecognized compensation costs adjusted for estimated forfeitures, related to non-vested stock options granted under the Company’s equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2 years.

Restricted Stock

On August 2, 2021, the Company granted 220,000 shares of restricted stock, with certain accelerated vesting conditions, to a member of its management pursuant to the Aytu 2015 Plan, of which 1/3 vest on August 2, 2022 and 1/12 on

the first day of each quarter thereafter, subject to continuing employment with the Company through each vesting date until August 2, 2024. These restricted stocks grants have a grant date fair value of $4.02 per-share.

On October 11, 2021, the Company granted 75,000 shares of restricted stock to a member of its management pursuant to the Neos 2015 Plan, of which 1/3 vest on October 11, 2022 and 1/12 each quarter thereafter, subject to continuing employment with the Company through each vesting date until October 11, 2024. These restricted stocks grants have a grant date fair value of $2.65 per-share.

Restricted stock activity is as follows:


		Weighted
		Average Grant
	Number of	Date Fair
	Shares	Value
Unvested at June 30, 2021	1,955,268	$	7.83
Granted	295,000		3.67
Vested	(90,836)		7.97
Unvested at December 31, 2021	2,159,432	$	7.26

As of December 31, 2021, there was $11.9 million of total unrecognized compensation costs adjusted for estimated forfeitures, related to non-vested restricted stock granted under the Company’s equity incentive plan. The unrecognized compensation cost is expected to be recognized over a weighted average period of 3.1 years.

The Company previously issued 158 shares of restricted stock outside the Aytu 2015 Plan, which vest in July 2026. The unrecognized expense related to these shares was $0.9 million as of December 31, 2021 and is expected to be recognized over the weighted average period of 4.52 years.

Restricted Stock Unit

On December 1, 2021, the Company granted 20,000 shares of restricted stock units, to a member of its management pursuant to the Aytu 2015 Plan, of which 1/3 vest on December 1, 2022 and 1/12 on the first day of each quarter thereafter, subject to continuing employment with the Company through each vesting date until December 1, 2024. These restricted stocks grants have a grant date fair value of $1.86 per-share.

Restricted stock unit activity is as follows:



		Weighted
		Average Grant
	Number of	Date Fair
	Shares	Value
Unvested at June 30, 2021	78,318	$	7.20
Granted	20,000		1.86
Vested	(1,972)		6.04
Forfeited	(62,922)		7.44
Unvested at December 31, 2021	33,424	$	3.61

As of December 31, 2021, there was $0.1 million of total unrecognized compensation costs adjusted for any estimated forfeitures, related to non-vested RSUs granted under the Company’s equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2.0 years.

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


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2021		2020		2021		2020

					(In thousands)
Cost of sales	$	8	$	—	$	17	$	—
Research and development		75		—		394		—
Selling and marketing		19		—		28		—
General and Administrative		1,127		508		2,309		963
Total stock-based compensation expense	$	1,229	$	508	$	2,748	$	963

The stock-based compensation expense included in the table above attributable to stock options was $22,000 and $0.1 million for the three months ended December 31, 2021 and 2020, respectively, and $45,000 and $0.2 million for the six months ended December 31, 2021 and 2020, respectively. The stock-based compensation expense included in the table above attributable to restricted stock was $1.2 million and $0.4 million for the three months ended December 31, 2021 and 2020, respectively, and $2.7 million and 0.8 million for the six months ended December 31, 2021 and 2020, respectively.