STOCK-BASED COMPENSATION

3 Months Ended

Sep. 30, 2023

STOCK BASED COMPENSATION

Stock Options

The Company estimates the grant date fair value of the stock options with service conditions (i.e., a condition that requires an employee to render services to the Company for a stated period of time to vest) it grants using a Black-Scholes valuation model. The Company’s assumption for expected volatility is based on its historical volatility data related to market trading of its own common stock. The Company uses the simplified method to determine expected term, as the Company does not have adequate historical exercise and forfeiture behavior on which to base the expected life assumption. The dividend yield assumption is based on dividends expected to be paid over the expected life of the stock option. The risk-free interest rate assumption is determined by using the U.S. Treasury rates of the same period as the expected option term of each stock option.

The fair value of options granted during the three months ended September 30, 2023 and 2022 were determined using the following assumptions and includes only options with an established grant date under ASC 718:


	Three months ended September 30,
		2023			2022
Expected volatility (percent)		61.3% - 69.7%			74.6% - 75.1%
Weighted average expected life (years)		4.2 - 4.5			4.5
Dividend yield (percent)		0.0		%	0.0		%
Risk-free interest rate (percent)		4.2% - 4.3%			2.7% - 3.2%
Number of options granted		110,000			600,000
Weighted average exercise price		$	7.00		$	6.51
Weighted average grant date fair value		$	4.35		$	3.91

Stock based compensation related to stock options with an established grant date for the three months ended September 30, 2023 and 2022 was $1.1 million and $1.0 million, respectively.

Performance based awards

The Company has awarded stock options to certain executives which vest each year over a three to four year period. These stock options are subject to the achievement of performance goals to be established by the Company's Board for each fiscal year.

The Compensation Committee of the Board of Directors has established the performance metrics as a price target for the trading price of the Company’s common stock in each applicable fiscal year. The price target is achieved if the average closing price of the common stock during any consecutive 30-trading-day period during the applicable fiscal year meets or exceeds: (i) $10.50 in the case of fiscal year 2021; (ii) $13.50 in the case of fiscal year 2022; (iii) $16.50 in the case of fiscal year 2023; and (iv) $19.50 in the case of fiscal year 2024. If at least 80% of the performance goals for an applicable fiscal year are achieved, the Compensation Committee may determine that the portion of the option eligible to vest based on such fiscal year’s performance will vest on a prorated basis. In so determining, the Compensation Committee will consider the Company’s performance relative to its market competitors and any other considerations deemed relevant by the Compensation Committee. The Compensation Committee’s guideline is generally that for every percentage point the achieved price falls below the price target, the percentage of the performance options eligible to vest in respect of the applicable fiscal year should be reduced by 2%, but the Compensation Committee may vary this formula in its sole discretion.

For these performance based awards that provide discretion to the Compensation Committee, a mutual understanding of the key terms and conditions between the Company and the employees have not yet been met and a "Grant Date" as defined in ASC Topic 718 Compensation — Stock Compensation, has not been established. When the service period begins prior to the grant date, the Company begins recognizing compensation cost before there is a grant date. The Company estimates the award's fair value at each reporting period for these equity-classified awards, until the grant date, utilizing a Monte Carlo simulation valuation model. The total expense recognized for the three months ended September 30, 2023 for these awards was $0.3 million. The total benefits recognized for the three months ended September 30, 2022 for these awards was $(0.2) million, as a result of reversing unvested grants for terminated executives during the period.

Common Stock Awards

The total expense recognized for common stock awards for the three months ended September 30, 2023 and 2022 was $0.5 million.