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5. Benefit Plans
 12 Months Ended
Apr. 30, 2019
Share-based Payment Arrangement [Abstract]  
Benefit Plans

Note 5 – Benefit Plans

 

Stock Incentive Plans

 

On October 4, 2018 (the “Effective Date”), our stockholders approved the Avid Bioservices, Inc. 2018 Omnibus Incentive Plan (the “2018 Plan”) which provides, among other things, the ability for us to grant stock options, restricted stock units and other forms of stock-based awards.

 

The number of shares of our common stock authorized for issuance under the 2018 Plan is the sum of (A) 2,350,000 and (B) the aggregate number of shares of common stock available for the grant of awards under our 2009, 2010, and 2011 Stock Incentive Plans (the “Prior Plans”) as of the Effective Date. The 2018 Plan replaced the Prior Plans, and no new awards will be granted under the Prior Plans as of the Effective Date. However, any awards outstanding under the Prior Plans on the Effective Date will remain subject to and be paid under the applicable Prior Plan, and any shares subject to outstanding awards under the Prior Plans that subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares will automatically become available for issuance under the 2018 Plan.

 

In addition, we currently maintain three expired stock incentive plans referred to as the 2005, 2003 and 2002 Stock Incentive Plans (collectively, the “Expired Plans”). No future grants of stock-based awards can be issued from the Expired Plans, however, all outstanding awards granted under the Expired Plans will remain subject to the terms of the Expired Plans until they are exercised, canceled or expired.

 

The 2018 Plan, the Prior Plans, and the Expired Plans are collectively referred to as the “Stock Plans”. As of April 30, 2019, we had an aggregate of 7,264,713 shares of our common stock reserved for issuance under the Stock Plans, of which, 3,474,590 shares were subject to outstanding stock options and restricted stock units and 3,790,123 shares were available for future grants of stock-based awards.

 

Stock Options

 

Stock options granted under our Stock Plans are granted at an exercise price not less than the fair market value of our common stock on the date of grant. Stock option grants to employees generally vest 25% on each of the first, second, third and fourth anniversaries of the date of grant, and stock option grants to non-employee directors generally vest over a period of one to three years from the date of grant. The maximum contractual term of any stock option granted under the Stock Plans is ten years.

 

The estimated fair value of stock options are measured at the grant date, using a fair value based method, such as a Black-Scholes option valuation model, and is amortized as stock-based compensation expense on a straight-line basis over the requisite service period of the award, which is generally the vesting period. The use of a valuation model requires us to make certain estimates and assumptions with respect to selected model inputs. The expected volatility is based on the daily historical volatility of our common stock covering the estimated expected term. The expected term of options granted reflects actual historical exercise activity and assumptions regarding future exercise activity of unexercised, outstanding options. The risk-free interest rate is based on U.S. Treasury notes with terms within the contractual life of the option at the time of grant. The expected dividend yield assumption is based on our expectation of future dividend payouts. We have never declared or paid any cash dividends on our common stock and currently do not anticipate paying such cash dividends.

 

The fair value of stock options on the date of grant and the weighted-average assumptions used to estimate the fair value of the stock options using the Black-Scholes option valuation model for fiscal years ended April 30, 2019, 2018 and 2017, were as follows:

 

   Fiscal Year Ended April 30, 
   2019   2018   2017 
Risk-free interest rate   2.81%    2.21%    1.32% 
Expected life (in years)   5.57    6.19    6.12 
Expected volatility   76.56%    110.43%    111.30% 
Expected dividend yield   –    –    – 

 

The following summarizes our stock option transaction activity for fiscal year ended April 30, 2019:

 

   Stock Options  

Grant Date

Weighted

Average Exercise

Price

  

Weighted

Average

Remaining

Contractual

Life (in years)

  

Aggregate

Intrinsic

Value (1)

 
Outstanding at May 1, 2018   3,597,738   $8.74           
Granted   973,614   $5.00           
Exercised   (371,327)  $3.45           
Canceled or expired   (925,810)  $11.28           
Outstanding at April 30, 2019   3,274,215   $7.51    5.53   $1,238 
Vested and expected to vest   3,274,215   $7.51    5.53   $1,238 
Exercisable at April 30, 2019   1,932,527   $9.45    3.87   $700 

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(1)Aggregate intrinsic value represents the difference between the exercise price of an option and the closing market price of our common stock on April 30, 2019, which was $4.79 per share.

 

The weighted-average grant date fair value of options granted to employees during the fiscal years ended April 30, 2019, 2018 and 2017 was $3.30, $3.50 and $2.86 per share, respectively.

 

The aggregate intrinsic value of stock options exercised during the fiscal years ended April 30, 2019, 2018 and 2017 was $547, $173 and $11, respectively. Cash received from stock options exercised during fiscal years ended April 30, 2019, 2018 and 2017, totaled $1,278, $752 and $31, respectively.

 

We issue shares of common stock that are reserved for issuance under the Stock Plans upon the exercise of stock options, and we do not expect to repurchase shares of common stock from any source to satisfy our obligations under our compensation plans.

 

As of April 30, 2019, the total estimated unrecognized compensation cost related to non-vested employee stock options was $3,880. This cost is expected to be recognized over a weighted average vesting period of 2.70 years based on current assumptions.

 

Restricted Stock

 

A restricted stock unit (“RSU”) represents the right to receive one share of our common stock upon the vesting of each unit. RSUs generally vest over four years at the rate of one-fourth of the shares granted on each anniversary of the date of grant. The estimated fair value of RSUs is based on the closing market value of our common stock on the date of grant, and is amortized as stock-based compensation expense on a straight-line basis over the period of vesting.

 

The following summarizes our RSUs transaction activity for fiscal year ended April 30, 2019:

 

    Shares  

Weighted Average

Grant Date

Fair Value

 
 Outstanding at May 1, 2018    –   $– 
 Granted    217,200    4.28 
 Vested    –    – 
 Forfeited    (16,825)   3.78 
 Outstanding at April 30, 2019    200,375   $4.32 

 

There were no RSUs granted during the fiscal years ended April 30, 2018 and 2017. As of April 30, 2019, the total estimated unrecognized compensation cost related to non-vested RSUs was $733. This cost is expected to be recognized over a weighted average vesting period of 3.34 years.

 

Employee Stock Purchase Plan

 

The Employee Stock Purchase Plan (the “ESPP”) is a stockholders’-approved plan under which allows eligible employees to purchase shares of our common stock through payroll deductions at a price equal to 85% of the lower of the fair market value our common stock as of the first trading day of the offering period or on the last trading day of the six-month offering period. Employee participants are limited to purchase no more than $25,000 of stock in any one calendar year. During the fiscal years ended April 30, 2019, 2018 and 2017, a total of 75,148, 88,327 and 270,075 shares of our common stock were purchased, respectively, under the ESPP at a weighted average purchase price per share of $3.44, $3.59 and $1.95, respectively. As of April 30, 2019, we had 1,196,261 shares of our common stock reserved for issuance under the ESPP.

 

The fair value of the shares purchased under the ESPP was determined using a Black-Scholes option pricing model (see explanation of valuation model inputs above under “Stock Options”), and is recognized as expense on a straight-line basis over the requisite service period (or six-month offering period).

 

The weighted average grant date fair value of purchase rights under the ESPP during fiscal years ended April 30, 2019, 2018 and 2017 was $1.49, $1.65 and $1.07, respectively, based on the following Black-Scholes option valuation model inputs:

 

   Fiscal Year Ended April 30, 
   2019   2018   2017 
Risk-free interest rate   2.26%    1.10%    0.46% 
Expected life (in years)   0.50    0.50    0.50 
Expected volatility   71.10%    75.18%    105.27% 
Expected dividend yield   –    –    – 

 

401(k) Plan

 

We have a 401(k) Plan (the “Plan”) pursuant to section 401(k) of the Internal Revenue Code that allows participating employees to contribute up to 100% of their compensation on a tax deferred basis up to the maximum amount permitted by the Internal Revenue Code. We match 50% of employee contributions of up to 6% of their annual eligible compensation. The expense related to our matching contributions to the Plan was $377, $564 and $845 for the fiscal years ended April 30, 2019, 2018 and 2017, respectively.

 

Stock-based Compensation Expense

 

Stock-based compensation expense for the fiscal years ended April 30, 2019, 2018 and 2017 was comprised of the following:

 

   Fiscal Year Ended April 30, 
   2019   2018   2017 
Cost of revenues  $474   $378   $108 
Selling, general and administrative expense   1,121    820    1,553 
Discontinued operations
   –    340    1,702 
   Total  $1,595   $1,538   $3,363 

 

Due to our net loss position, no tax benefits have been recognized in the Consolidated Statements of Cash Flows.