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Compensatory Equity Incentive Plan and Other Equity Incentives
 3 Months Ended
Sep. 30, 2013
Compensatory Equity Incentive Plan And Other Equity Incentives  
Compensatory Equity Incentive Plan and Other Equity Incentives

7. Compensatory Equity Incentive Plan and Other Equity Incentives

 

Share-Based Compensation Arrangements—The Company’s Amended and Restated Omnibus Incentive Plan (the “Plan”) included several available forms of stock compensation of which incentive stock options and restricted stock awards have been granted to date.

 

The 2004 Employee Stock Purchase Plan (“ESPP”) permits employees to purchase shares of Class A common stock through payroll deductions, which may not exceed 15% of an employee’s compensation, at a price not less than 85% of the market value of the stock on specified dates (June 30 and December 31). In no event may any participant purchase more than $25,000 worth of shares of Class A common stock in any calendar year and an employee may purchase no more than 4,000 shares on any purchase date within an offering period of 12 months and 2,000 shares on any purchase date within an offering period of six months. The discount on market value is included in selling, general and administrative expense in the accompanying consolidated statements of operations and was $248 and $473 for the three months ended September 30, 2013 and 2012, respectively.

 

These two plans are summarized below:

       Award Shares   Available for 
   Award Shares   Outstanding   Issuance 
   Authorized   at September 30,   at September 30, 
       2013   2013 
Equity Compensation Arrangement          
Amended and Restated Omnibus Incentive Plan   2,715,625    1,419,709    848,012 
Employee Stock Purchase Plan   200,000    —    105,918 
    2,915,625    1,419,709    953,930 

 

Grant Date Fair Values and Underlying Assumptions; Contractual Terms—The Company estimates the fair value of each stock option as of the date of grant using the Black-Scholes-Merton pricing model. The ESPP fair value is the amount of the discounted market value the employee obtains at the date of the purchase transaction.

 

The Company did not grant any stock options in the first quarter of fiscal 2014 or 2013.

 

Most options granted under the Plan vest ratably over two to four years and are generally exercisable for ten years. The assumed forfeiture rates used in calculating the fair value of options and restricted stock unit grants with both performance and service conditions were 20% and 0%, respectively, for the three months ended September 30, 2013 and 2012. The volatility rate and expected term are based on seven-year historical trends in Class A common stock closing prices and actual forfeitures. The interest rate used is the U.S. Treasury interest rate for constant maturities.

  

Information Regarding Current Share-Based Compensation Awards—A summary of the activity for share-based compensation awards in the three months ended September 30, 2013 is presented below:  

 

               Restricted 
   Stock Options   Stock Units (RSUs) 
       Weighted   Weighted       Weighted 
       Average   Average       Average 
       Exercise   Remaining       Remaining 
       Price   Contract       Contract 
   Shares   (per share)   Life (YRS)   Shares   Life (YRS) 
June 30, 2013   585,009   $2.38    5.9    834,700    1.1 
                          
Granted   —    —    —    —    — 
Exercised   —    —    —    —    — 
Cancelled   —    —    —    —    — 
                          
September 30, 2013   585,009   $2.38    5.7    834,700    1.0 
                          
Awards exercisable/                         
vested as of                         
September 30, 2013   401,759   $2.76    4.5    463,030    — 
                          
                          
Awards unexercisable/                         
unvested as of                         
September 30, 2013   183,250   $1.53    8.2    371,670    1.0 
    585,009              834,700      

 

The total intrinsic value of options outstanding and exercisable at September 30, 2013 and 2012 was $7,563 and $0, respectively.

 

The total intrinsic value of RSUs exercised during the three months ended September 30, 2013 and 2012 was $0 and $0, respectively.

 

The total intrinsic value of RSUs outstanding and exercisable at September 30, 2013 and 2012 was $495,737 and $352,542, respectively.

 

The total fair value of RSUs vested during the three months ended September 30, 2013 and 2012 was $0 and $0, respectively.

 

The total fair value of option shares vested during the three months ended September 30, 2013 and 2012 was $0 and $0, respectively.

 

As of September 30, 2013, there was $316,828 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including share options and restricted stock units) granted under the Plan. The compensation cost is expected to be recognized as follows:

  

       Restricted     
   Stock   Stock     
   Options   Units   Total 
Nine months ended June 30, 2014  $39,695   $111,617   $151,312 
Year ended June 30, 2015   27,092    88,056    115,148 
Year ended June 30, 2016   12,749    34,597    47,346 
Year ended June 30, 2017   3,022    —    3,022 
   $82,558   $234,270   $316,828 

 

The table above does not include shares under the Company’s ESPP, which has purchase settlement dates in the second and fourth fiscal quarters of each year and issuance dates in the first and third fiscal quarters of each year. The Company’s ESPP is not administered with a look-back option provision and, as a result, there is not a population of outstanding option grants during the employee contribution period.

 

Restricted stock unit awards vest immediately or from two to four years from the date of grant.

 

The Company issues new shares of Class A common stock upon the exercise of stock options. The following table is a summary of the number and weighted average grant date fair values regarding the Company’s unexercisable/unvested awards as of September 30, 2013 and changes during the three months then ended: 

 

Unexercisable/unvested awards   Stock Options Shares    RSU Shares     Total Shares     Weighted-Average Grant Date Fair Values 
June 30, 2013   183,250    371,670    554,920   $1.57 
Granted   —    —    —    — 
Vested   —    —    —    — 
Cancelled/Forfeited   —    —    —    — 
September 30, 2013   183,250    371,670    554,920   $1.57 

 

Financial Statement Effects and Presentation—The following table shows total stock-based compensation expense for the three months ended September 30, 2013 and 2012 included in the consolidated statements of operations and comprehensive income:

 

   (Unaudited)   (Unaudited) 
   Three Months Ended   Three Months Ended 
   September 30,   September 30, 
   2013   2012 
         
Stock options   17,676    13,523 
RSU   52,152    47,291 
Total   69,828    60,814 
           
The amounts above were included in:          
General & administrative   67,330    63,141 
Cost of sales   —    (4,350)
New product development   2,498    2,023 
    69,828    60,814