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Compensatory Equity Incentive Plan and Other Equity Incentives
 3 Months Ended
Sep. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Compensatory Equity Incentive Plan and Other Equity Incentives
6.Compensatory Equity Incentive Plan and Other Equity Incentives

 

Share-Based Compensation Arrangements — The Amended and Restated Omnibus Incentive Plan (the “Plan”) includes several available forms of stock compensation of which incentive stock options and restricted stock awards. Stock based compensation is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. We estimate the fair value of each stock option as of the date of grant using the Black-Scholes-Merton pricing model. Most options granted under the Plan vest ratably over two to four years and generally have ten-year contract lives. The volatility rate is based on four-year historical trends in common stock closing prices and the expected term was determined based primarily on historical experience of previously outstanding options. The interest rate used is the U.S. Treasury interest rate for constant maturities. The likelihood of meeting targets for option grants that are performance based are evaluated each quarter. If it is determined that meeting the targets is probable then the compensation expense will be amortized over the remaining vesting period.

 

The LightPath Technologies, Inc. Employee Stock Purchase Plan (“2014 ESPP”) was adopted by our board of directors on October 30, 2014 and approved by our stockholders on January 29, 2015.

 

The 2014 ESPP permits employees to purchase shares of our 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 our Class A common stock on specified dates (June 30 and December 31). In no event can any participant purchase more than $25,000 worth of shares of Class A common stock in any calendar year and an employee cannot purchase more than 8,000 shares on any purchase date within an offering period of 12 months and 4,000 shares on any purchase date within an offering period of six months. A discount of $943 and $846 for the three months ended September 30, 2016 and 2015, respectively, is included in the selling, general and administrative expense in the accompanying consolidated statements of comprehensive income, which represents the value of the 10% discount given to the employees purchasing stock under the 2014 Plan.

 

These plans are summarized below:

 

Equity Compensation Arrangement  Award Shares
Authorized		   Award Shares
Outstanding
at September 30,
2016		   Available for
Issuance
at September 30,
2016		 
Amended and Restated Omnibus Incentive Plan   3,915,625    2,111,055    1,159,429 
Employee Stock Purchase Plan   400,000    —    384,546 
                
    4,315,625    2,111,055    1,543,975 

 

Grant Date Fair Values and Underlying Assumptions; Contractual Terms — We estimate the fair value of each stock option as of the date of grant. We use the Black-Scholes-Merton pricing model. The 2014 ESPP fair value is the amount of the discount the employee obtains at the date of the purchase transaction.

 

No stock options were granted in the three month periods ended September 30, 2016 and 2015.

 

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 (“RSU”) grants with both performance and service conditions were 20% for each of the three months ended September 30, 2016 and 2015. 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, 2016 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, 2016   819,260   $1.90    5.6    1,311,795    0.9 
                          
Granted   —   $0.00    —    —    — 
Exercised   —   $0.00    —    —    — 
Cancelled/Forfeited   (20,000)  $2.92    —    —    — 
September 30, 2016   799,260   $1.88    5.4    1,311,795    0.8 
                          
Awards exercisable/                         
vested as of                         
September 30, 2016   620,760   $2.03    4.7    903,981    — 
                          
                          
Awards unexercisable/                         
unvested as of                         
September 30, 2016   178,500   $1.35    7.9    407,814    0.8 
    799,260              1,311,795      

 

The total intrinsic value of options outstanding and exercisable at September 30, 2016 and 2015 was $164,180 and $45,590, respectively.

 

The total intrinsic value of RSUs exercised during the three months ended September 30, 2016 and 2015 was $0 and $0, respectively.

 

The total intrinsic value of RSUs outstanding and exercisable at September 30, 2016 and 2015 was $1,618,126 and $1,000,431, respectively.

 

The total fair value of RSUs vested during the three months ended September 30, 2016 and 2015 was $50,002 and $0, respectively.

 

The total fair value of option shares vested during the three months ended September 30, 2016 and 2015 was $0 and $0, respectively.

 

As of September 30, 2016, there was $372,197 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including share options and restricted stock units) granted under the Plan. We expect to recognize the compensation cost as follows:

 

    Stock
Options		   Restricted
Stock
Share/
Units		   Total 
 Nine months ended June 30, 2017    29,520    149,752    179,272 
                  
 Year ended June 30, 2018    27,883    124,912    152,795 
                  
 Year ended June 30, 2019    12,537    24,988    37,525 
                  
 Year ended June 30, 2020    2,605    —    2,605 
     $72,545   $299,652   $372,197 

 

RSU awards vest immediately or from two to four years from the date of grant.

 

We issue 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 our unexercisable/unvested awards as of September 30, 2016 and changes during the three months then ended:

 

Unexercisable/unvested awards  Stock
Options
Shares		   RSU Shares   Total
Shares		   Weighted-Average
Grant Date Fair Values
(per share)		 
June 30, 2016                    
    182,250    441,599    623,849   $1.35 
Granted                    
    —    —    —   $— 
Vested                    
    —    (33,785)   (33,785)  $1.48 
Cancelled/Forfeited                    
    (3,750)   —    (3,750)  $1.08 
September 30, 2016   178,500    407,814    586,314   $1.34 

 

Financial Statement Effects and Presentation — The following table shows total stock-based compensation expense for the three months ended September 30, 2016 and 2015 included in the consolidated statements of comprehensive income:

 

   Three months ended
September 30,
2016		   Three months ended
September 30,
2015		 
         
Stock options  $11,672   $13,232 
RSU   108,268    60,178 
Total  $119,940   $73,410 
           
The amounts above were included in:          
Selling, general & administrative  $119,576   $70,143 
Cost of sales   79    79 
New product development   285    3,188 
   $119,940   $73,410