Share-based Compensation

12 Months Ended

Jun. 30, 2020

Share-based Compensation

Note 9. Share-based Compensation

We use equity-based compensation programs to provide long-term performance incentives for our employees. These incentives consist primarily of stock options and RSUs. In December 2008, we adopted the MEI Pharma, Inc. 2008 Stock Omnibus Equity Compensation Plan (“2008 Plan”), as amended and restated in 2011, 2013, 2014, 2015, 2016 and 2018, under which 19,089,794 shares of common stock are authorized for issuance. The 2008 Plan provides for the grant of options and/or other stock-based or stock-denominated awards to our non-employee directors, officers, employees and advisors. As of June 30, 2020, there were 6,437,150 shares available for future grant under the 2008 Plan.

Total share-based compensation expense for all stock awards consists of the following, in thousands:

	Years Ended June 30,
	2020		2019		2018
Research and development	$	2,777	$	2,239	$	1,176
General and administrative		4,024		4,323		2,041
Total share-based compensation	$	6,801	$	6,562	$	3,217

Stock Options

Stock options granted to employees vest 25% one year from the date of grant and ratably each month thereafter for a period of 36 months and expire ten years from the date of grant. Stock options granted to directors vest ratably each month for a period of 12 months from the date of grant and expire ten years from the date of grant. As of June 30, 2020, there were a total of 11,252,976 options outstanding.

A summary of our stock option activity and related data follows:

	Number of Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at June 30, 2019		8,356,961		$	3.20
Granted		3,733,333		$	2.50
Exercised		(153,679	)	$	1.77
Forfeited / Cancelled		(125,749	)	$	2.45
Expired		(557,890	)	$	6.89
Outstanding at June 30, 2020		11,252,976		$	2.81		7.8	$	15,290,655
Vested and exercisable at June 30, 2020		5,475,069		$	2.66		7.0	$	8,330,387

As of June 30, 2020, the aggregate intrinsic value of outstanding options is calculated as the difference between the exercise price of the underlying options and the closing price of our common stock of $4.13 on that date. The total fair value of options that vested during the years ended June 30, 2020, 2019 and 2018 was $5.4 million, $3.4 million and $2.4 million, respectively.

A summary of our non-vested stock option activity:

	Number of Options			Weighted-Average Grant Date Fair Value
Nonvested at June 30, 2019		4,376,928		$	3.51
Granted		3,733,333		$	2.50
Forfeited		(76,563	)	$	2.86
Vested		(2,255,791	)	$	3.26
Nonvested at June 30, 2020		5,777,907		$	2.96

Unrecognized compensation expense related to non-vested stock options totaled $4.7 million as of June 30, 2020. Such compensation expense is expected to be recognized over a weighted-average period of 1.6 years. As of June 30, 2020, we expect all outstanding options to vest.

We use a Black-Scholes valuation model to estimate the grant date fair value of stock options. To calculate these fair values, the following weighted-average assumptions were used:

	Years Ended June 30,
	2020			2019			2018
Risk-free interest rate		1.7	%		2.7	%		2.3	%
Expected life (years)		6.0			6.0			6.0
Expected volatility		74.1	%		82.5	%		93.7	%
Dividend yield		0.0	%		0.0	%		0.0	%
Weighted-average grant date fair value	$	1.64		$	2.78		$	2.40

Restricted Stock Units

In March 2013, the Compensation Committee of the Board of Directors granted 400,000 RSUs to our Chief Executive Officer. Each RSU represented the contingent right to receive one share of our common stock. The shares underlying the RSUs were delivered on March 29, 2018, and we issued 271,080 shares of common stock, net of shares withheld to cover taxes and fees. The fair value of the RSUs on the date of grant was $3.5 million.

In June 2016, we granted 364,726 RSUs to employees. Each RSU represented the contingent right to receive one share of our common stock. The RSUs were subject to performance criteria that were met in August 2016. The fair value of the RSUs was measured at $1.61 per unit on the date the performance criteria were met. The RSUs vested in August 2018, and we released 332,193 RSU shares. We issued 245,782 shares of common stock to RSU holders; 86,411 shares were surrendered to us by RSU holders as payment for the employee portion of the required withholding of associated payroll taxes.