(7)	Share-based Compensation

For the three months ended March 31, 2015 and 2014, the Company recorded share-based compensation expense related to grants from equity incentive plans of $0.6 million and $0.5 million, respectively. For the nine months ended March 31, 2015 and 2014, the Company recorded share-based compensation expense related to grants from equity incentive plans of $1.6 million and $1.4 million, respectively. No income tax benefit was recognized in the statements of operations and no share-based compensation expense was capitalized as part of any assets for the three and nine months ended March 31, 2015 and 2014.

Stock Options

The fair value of each stock option award was estimated at its respective date of grant using the Black-Scholes method with the following assumptions:

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2015			2014			2015			2014
Weighted-average risk-free interest rate		1.20	%		1.60	%		1.70	%		1.50	%
Dividend yield		—			—			—			—
Expected weighted-average volatility		.78			.78			.82			.78
Expected weighted-average life of options (years)		6.0			6.0			6.0			6.0
Weighted-average fair value of options granted	$	1.59		$	4.22		$	1.67		$	3.12

The risk-free interest rate is based on the expected life of the option and the corresponding U.S. Treasury bond, which in most cases is the five year U.S. Treasury bond. The expected term of stock options granted is derived from actual and expected option behavior and represents the period of time that options granted are expected to be outstanding. The Company uses historical data to estimate option exercise patterns and future employee terminations to determine expected life and forfeitures. Expected volatility is based on the historical volatility of the Company’s publicly-traded common stock.

Biota Pharmaceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(for the quarterly period ended March 31, 2015)

A summary of the Company’s outstanding stock option activity for the nine months ended March 31, 2015 is as follows:

	Number of Stock Options			Weighted Average Exercise Price Per Option		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value($000)
						(In Years)
Balance at June 30, 2014		2,463,369		$	9.09
Granted		1,355,000			2.44
Exercised		—			—
Forfeited or expired		(447,777	)		10.00
Balance at March 31, 2015		3,370,592		$	6.30		8.08	$	-

In August 2014, the Company's Board of Directors made a determination that a performance-based milestone was not achieved and as a result, 413,675 performance-based stock options previously issued during fiscal 2014 would not vest and were cancelled.

The total intrinsic value of stock options exercised during the three month period ended March 31, 2015 was zero, and no cash proceeds were received by the Company. Further, no actual tax benefits were realized, as the Company currently records a full valuation allowance for all tax benefits due to uncertainties with respect to its ability to generate sufficient taxable income in the future.

The following tables summarize information relating to outstanding and exercisable options as of March 31, 2015:

					March 31, 2015
					Outstanding
					Weighted Average						Exercisable
					Number of		Remaining		Weighted Average		Number of		Weighted Average
Exercise Prices					Stock Options		Contractual Life		Exercise Price		Stock Options		Exercise Price
							(In Years)
$	2.20	—	$	2.40		195,000		9.61	$	2.33		—	$	—
$	2.45	—	$	2.45		1,035,000		9.50		2.45		—		—
$	2.47	—	$	4.05		605,000		8.82		3.18		86,250		3.96
$	4.07	—	$	75.81		1,535,592		6.43		10.62		1,058,813		13.45
						3,370,592		8.08	$	6.30		1,145,063		12.74

Restricted and Market Stock Units (“MSUs”).

A summary of the Company’s outstanding restricted stock and MSU activity for the nine months ended March 31, 2015 is as follows:

	Shares			Weighted Average Grant Date Fair Value
Balance at June 30, 2014		261,447		$	3.98
Awarded		40,000			2.45
Released		—			—
Forfeited		(52,702	)		4.01
Balance at March 31, 2015		248,745		$	3.72

Biota Pharmaceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(for the quarterly period ended March 31, 2015)

In December 2013, the Company awarded 108,183 MSUs to employees that may vest on January 1, 2017. The vesting of these outstanding awards is subject to the respective employee’s continued employment through this settlement period. Further, the number of MSUs granted represents the target number of units that are eligible to be earned based on the attainment of certain market-based criteria involving the Company’s stock price. The number of MSUs actually earned, if any, is determined upon the vesting of the award. Participants may ultimately earn between 0% and 250% of the target number of units granted based on actual stock performance. Accordingly, additional MSUs may be issued or currently outstanding MSUs may be cancelled upon final determination of the number of awards earned. Compensation expense, including the effect of forfeitures, is recognized over the applicable service period.

As of March 31, 2015 there was $4.1 million of unrecognized share-based compensation expense related to all unvested share-based awards.

Unrecognized stock-based compensation expense for equity awards will be adjusted for future changes in estimated forfeitures. This balance is expected to be recognized over a weighted-average period of approximately two years.