Note 11 - Share-based Compensation

12 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

)

Share-Based Compensation

For the twelve months ended June 30, 2015, 2014 and 2013, the Company recorded share-based compensation expense related to grants from equity incentive plans of $2.1 million, $1.7 million and $2.6 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 twelve months ended June 30, 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 option-pricing model with the following weighted average assumptions:

	For the Twelve Month Period Ended June 30,
	201 5			201 4			201 3
Risk-free interest rate		1.70	%		1.50	%		1.50	%
Dividend yield		—			—			—
Expected volatility		.82			.79			.79
Expected life of options (years)		5.9			5.9			6.0
Fair value of options granted	$	1.65		$	2.47		$	2.39

Biota Pharmaceuticals

Inc

Notes to Consolidated Financial Statements

The risk-free rate interest rate is based on the expected life of the option and the corresponding U.S. Treasury bond, which in most cases is the U.S. five year 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. The following table summarizes the stock option activity for the year end:

				Weighted Average		Weighted-Average		Aggregate Intrinsic
	Number of			Exercise Price		Remaining Contractual		Value
	Stock Options			Per Option		Term		($0000)
Balance at June 30, 2014		2,463,369		$	9.09
Granted		1,432,000			2.42
Exercised		—			—
Forfeited or expired		(531,252	)		13.37
Balance at June 30, 2015		3,364,117		$	5.58		7.9	$	-

The total intrinsic value of stock options exercised during the twelve month period ended June 30, 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 stock options as of June 30, 2015:

			June 30, 2015
			Outstanding						Exercisable
					Weighted Average
			Number of		Remaining		Weighted Average		Number of		Weighted Average
Exercise Prices			Shares		Contractual Life		Exercise Price		Shares		Exercise Price
					(In Years)
$2.07	—	$2.40		272,000		8.62	$	2.29		5,000	$	2.20
$2.45	—	$2.45		1,035,000		9.25		2.45		—		—
$2.47	—	$4.05		605,000		8.58		3.18		248,750		3.47
$4.07	—	$75.81		1,452,117		6.55		9.42		975,338		11.91
				3,364,117		7.91	$	5.58		1,229,088	$	10.16

Restricted Stock Awards.

A summary of the Company’s outstanding restricted stock activity for the twelve months ended June 30, 2015 is as follows:

			Weighted-Average
			Grant Date
	Shares		Fair Value
Outstanding at June 30, 2014		8,750	$	3.93
Granted		—		—
Forfeited		—		—
Outstanding at June 30, 2015		8,750	$	3.93

Restricted Stock Units and Market Stock Units (MSUs).

A summary of the Company’s outstanding restricted stock and market stock unit (MSU) activity for the twelve months ended June 30, 2015 is as follows:

	Shares			Weighted Average Grant Date Fair Value
Outstanding at June 30, 2014		189,427		$	3.94
Awarded		47,500			2.41
Released		(80,144	)		3.94
Forfeited		(60,202	)		3.87
Unvested at June 30, 2015		96,581		$	3.23

In December 2013, the Company awarded 108,133 MSUs to employees that can vest on January 1, 2017. The vesting of these awards is subject to the respective employee’s continued employment through this settlement period. 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 is calculated 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.

Biota Pharmaceuticals

Inc

Notes to Consolidated Financial Statements

The Company values grants of MSUs using a lattice model with a Monte Carlo simulation. This valuation methodology utilizes several key assumptions, including the 20-day average closing stock price on the grant date, expected volatility of the Company’s stock price, risk-free rates of return and expected dividend yield. The assumptions used in the Company’s valuation of the MSU’s are summarized as follows:

	For the Twelve Month Period Ended June 3 0 ,
	201 5		2014		201 3
Expected dividend yield		—		0.00%		—
Expected stock price volatility		—		0.86%		—
Risk-free interest rate		—		0.64%		—
20-day trading average stock price on grant date		—		$3.98		—
Weighted-average per share grant date fair value		—		$7.69		—

As of June 30, 2015 there was $3.2 million of unrecognized share-based compensation expense related to all unvested share-based awards, not discounted for future forfeitures. This balance is expected to be recognized over a weighted-average period of two years.