4. Equity Transactions and Share-Based Compensation
The Company recognized share-based compensation expense related to
equity awards to employees, directors and consultants of
$2.6 million and $1.6 million during the three months
ended September 30, 2013 and 2012, respectively.
Stock Options and Warrants
The Company has granted stock options to certain employees and
directors under the Employee Share Option Plan (the
“Plan”). The Plan is designed to assist in the
motivation and retention of employees and to recognize the
importance of employees to the long-term performance and success of
the Company. The Company has also granted stock options to certain
consultants outside of the Plan. The majority of the options to
purchase common stock vest on the anniversary of the date of grant,
which ranges from one to three years. Additionally, certain stock
options vest upon the closing price of the Company’s common
stock reaching certain minimum levels, as defined in the
agreements. Share-based compensation expense related to options
granted to employees is recognized on a straight-line basis over
the related vesting term. Share-based compensation expense related
to options granted to consultants is recognized ratably over each
vesting tranche of the options.
In November 2009, the Company adopted the 2009 Stock Incentive Plan
(the “Stock Incentive Plan”). The Stock Incentive Plan
initially provided for a maximum of 6,000,000 shares of common
stock to be reserved for the issuance of stock options and other
stock-based awards. Commencing on January 1, 2012, and on each
January 1st thereafter,
through January 1, 2019, the share reserve automatically
adjusts so that it equals 17.5% of the weighted average number of
shares of common stock outstanding reduced by the sum of any shares
of common stock issued under the Stock Incentive Plan and any
shares of common stock subject to outstanding awards under the
Stock Incentive Plan.
In January 2010, the Company issued 1,000,000 options to purchase
common stock to a consultant under the Stock Incentive Plan in
consideration for various services to be performed for the Company.
The options to purchase common stock are exercisable at A$6.33 per
share and vest upon the trading price of the Company’s CHESS
Depositary Interests reaching certain minimum levels on the
Australian Securities Exchange, which range from A$1.75 to A$3.22
per share. The options are re-measured each reporting date and as
of September 30, 2013 were valued at $0.54 per option, which
is being expensed ratably over the vesting period of each tranche,
which ranges from 0.83 years to 0.98 years. The options
will be re-valued on a quarterly basis and marked to market until
exercised.
The following is a summary of activity related to stock options
held by employees and directors during three months ended
September 30, 2013:
C:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Number of
Options |
|
|
Weighted
Average
Exercise Price |
|
|
Weighted
Average
Remaining
Contractual
Life (in years) |
|
|
Aggregate Intrinsic
Value |
|
| |
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
C: C:
|
Outstanding as of July 1, 2013
|
|
|
5,121,807 |
|
|
$ |
4.09 |
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(74,396 |
) |
|
|
5.55 |
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,250,000 |
) |
|
|
1.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2013
|
|
|
3,797,411 |
|
|
$ |
4.80 |
|
|
|
5.7 |
|
|
$ |
516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of September 30, 2013
|
|
|
1,332,274 |
|
|
$ |
5.32 |
|
|
|
5.3 |
|
|
$ |
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C:
The following is a summary of activity related to stock options and
warrants held by persons other than employees and directors during
the three months ended September 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Number of
Options |
|
|
Weighted
Average
Exercise Price |
|
|
Weighted
Average
Remaining
Contractual
Life (in years) |
|
|
Aggregate Intrinsic
Value |
|
| |
|
|
|
|
|
|
|
|
|
|
(in
thousands) |
|
|
Outstanding as of July 1, 2013
|
|
|
4,258,937 |
|
|
$ |
7.19 |
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
300,000 |
|
|
|
3.11 |
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(55,000 |
) |
|
|
1.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2013
|
|
|
4,503,937 |
|
|
$ |
6.98 |
|
|
|
1.2 |
|
|
$ |
328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of September 30, 2013
|
|
|
3,503,937 |
|
|
$ |
7.30 |
|
|
|
1.2 |
|
|
$ |
328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value is defined as the difference between
the market value of the Company’s common stock as of the end
of the period and the exercise price of the in-the-money stock
options. The total intrinsic value of stock options exercised
during the three months ended September 30, 2013 was $1.8
million. There were no stock options exercised during the three
months ended September 30, 2012.
The Company used the following weighted average assumptions in
calculating the fair value of options granted during the three
months ended September 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
| |
|
Three Months
Ended
September 30, |
|
| |
|
2013 |
|
|
2012 |
|
|
Number of stock options granted
|
|
|
300,000 |
|
|
|
270,000 |
|
|
Expected dividend yield
|
|
|
0 |
% |
|
|
0 |
% |
|
Risk-free interest rate
|
|
|
1.54 |
% |
|
|
1.54 |
% |
|
Expected volatility
|
|
|
55 |
% |
|
|
57 |
% |
|
Expected life (in years)
|
|
|
5.0 |
|
|
|
6.0 |
|
The fair value of each stock option was estimated at the grant date
using the Black-Scholes option pricing model, with the exception of
grants subject to market conditions, which were valued using a
Monte Carlo option pricing model. The Company has not historically
paid dividends to its stockholders and, as a result, assumed a
dividend yield of 0%. The risk free interest rate is based upon the
rates of U.S. Treasury bonds with a term equal to the expected
term of the option. Due to the Company’s limited Nasdaq
trading history, the expected volatility used to value options
granted after January 27, 2010 is based upon a blended rate of
the historical share price of the Company’s stock on the
Australian Securities Exchange and the volatility of peer companies
traded on U.S. exchanges operating in the same industry as the
Company. The expected term of the options to purchase common stock
issued to employees and directors is based upon the simplified
method, which is the mid-point between the vesting date of the
option and its contractual term unless a reasonable alternate term
is estimated by management. The expected term of the options to
purchase common stock issued to consultants is based on the
contractual term of the awards.
Restricted Stock
The Company has granted shares of restricted stock to certain
employees and consultants under the Stock Incentive Plan. During
the period prior to vesting, the holder of the non-vested
restricted stock will have the right to vote and the right to
receive all dividends and other distributions declared. All
non-vested shares of restricted stock are reflected as outstanding;
however, they have been excluded from the calculation of basic
earnings per share.
For employees, the fair value of restricted stock is measured on
the date of grant using the price of the Company’s common
stock on that date. Share-based compensation expense for restricted
stock issued to employees is recognized on a straight-line basis
over the requisite service period, which is generally the longest
vesting period. For restricted stock granted to consultants, the
fair value of the awards is re-valued on a quarterly basis and
marked to market until vested. Share-based compensation expense for
restricted stock issued to consultants is recognized ratably over
each vesting tranche.
The following is a summary of activity related to restricted stock
awards during the three months ended September 30, 2013:
|
|
|
|
|
|
|
|
|
| |
|
Number of Restricted
Stock Awards |
|
|
Weighted Average
Grant Date Fair Value |
|
|
Unvested as of July 1, 2013
|
|
|
3,254,403 |
|
|
$ |
3.31 |
|
|
Granted
|
|
|
55,000 |
|
|
|
3.38 |
|
|
Vested
|
|
|
(402,750 |
) |
|
|
3.25 |
|
|
Cancelled
|
|
|
(4,500 |
) |
|
|
3.46 |
|
|
|
|
|
|
|
|
|
|
|
Unvested as of September 30, 2013
|
|
|
2,902,153 |
|
|
$ |
3.32 |
|
|
|
|
|
|
|
|
|
