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Compensatory Equity Incentive Plan and Other Equity Incentives

12 Months Ended

Jun. 30, 2017

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

Compensatory Equity Incentive Plan and Other Equity Incentives

10. Compensatory Equity Incentive Plan and Other Equity Incentives

Share-based payment arrangements — The Amended and Restated Omnibus Incentive Plan (the “Plan”) included several available forms of stock compensation of which incentive stock options, non-qualified stock options and restricted stock units have been granted to date. 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. The Company estimates 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 the Company’s board of directors on October 30, 2014 and approved by the Company’s stockholders on January 29, 2015. The 2014 ESPP permits employees to purchase 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 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. This discount of approximately $1,900 and $2,300 for fiscal 2017 and 2016, respectively, is included in the selling, general and administrative expense in the accompanying consolidated statements comprehensive income.

These plans are summarized below:


						Award Shares				Available for
						Outstanding				Issuance
		Award				at June 30,				at June 30,
Equity Compensation Arrangement		Authorized				2017				2017
Amended and Restated Omnibus Incentive Plan			3,915,625				2,604,968				631,701
Employee Stock Purchase Plan			400,000				—				377,988

			4,315,625				2,604,968				1,009,689

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. The Company uses 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.

For stock options and restricted stock units (“RSUs”) granted in the years ended June 30, 2017 and 2016, the Company estimated the fair value of each stock award as of the date of grant using the following assumptions:

		Year ended June 30,
		2017				2016
Weighted average expected volatility		77% - 83%				68% - 103%
Dividend yields			0%				0%
Weighted average risk-free interest rate			1.24% - 1.90%				0.37% - 1.49%
Weighted average expected term, in years			7.49				4.29 - 7.50

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% for each of the years ended June 30, 2017 and 2016. 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 Payment Awards — A summary of the activity for share-based payment awards in the years ended June 30, 2017 and 2016 is presented below:


		Stock Options												Restricted Stock Units (RSUs)
							Weighted				Weighted								Weighted
							Average				Average								Average
							Exercise				Remaining								Remaining
			Shares				Price				Contract				Shares				Contract
June 30, 2015			722,483			$	2.08				5.3				1,075,300				0.9

Granted			155,592			$	1.49				9.4				236,495				2.3
Exercised			(6,077	)		$	1.07				3.7				—				—
Cancelled/Forfeited			(52,738	)		$	3.26				—				—				—

June 30, 2016			819,260			$	1.90				5.6				1,311,795				0.9

Granted			346,926			$	1.63				9.4				230,772				2.3
Exercised			—				—				—				(33,785	)			—
Cancelled/Forfeited			(70,000	)		$	4.04				—				—				—

June 30, 2017			1,096,186			$	1.68				6.3				1,508,782				0.9

Awards exercisable/
vested as of
June 30, 2017			851,675			$	1.70				5.7				1,069,870				—

Awards unexercisable/
unvested as of
June 30, 2017			244,511			$	1.60				8.6				438,912				0.9
			1,096,186												1,508,782

The total intrinsic value of share options exercised for years ended June 30, 2017 and 2016 was approximately $0 and $10,000, respectively.

The total intrinsic value of shares options outstanding and exercisable at both June 30, 2017 and 2016 was approximately $803,000 and $148,000, respectively.

The total fair value of shares options vested during the years ended June 30, 2017 and 2016 was approximately $318,000 and $234,000, respectively.

The total intrinsic value of RSUs exercised during the years ended June 30, 2017 and 2016 was approximately $79,000 and $0, respectively.

The total intrinsic value of RSUs outstanding and exercisable at June 30, 2017 and 2016 was approximately $2.8 million and $1.5 million, respectively.

The total fair value of RSUs vested during the years ended June 30, 2017 and 2016 was approximately $386,000 and $389,000, respectively.

As of June 30, 2017, there was approximately $486,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangementS, including share options and restricted stock units (“RSUs”), granted under the Plan. The expected compensation cost to be recognized is as follows:

			Stock
			Options				RSUs				Total
Year ended June 30, 2018				40,004				244,917				284,921

Year ended June 30, 2019				19,088				144,984				164,072

Year ended June 30, 2020				5,197				29,989				35,186

Year ended June 30, 2021				2,105				—				2,105
			$	66,394			$	419,890			$	486,284

The table above does not include shares under the Company’s 2014 ESPP, which has purchase settlement dates in the second and fourth fiscal quarters. The Company’s 2014 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.

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

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 our unexercisable/unvested awards as of June 30, 2017 and 2016 and changes during the two years then ended:

Unexercisable/unvested awards		Stock Options Shares			RSU Shares			Total Shares			Weighted-Average Grant Date Fair Values (per share)
June 30, 2015		224,500			403,870			628,370			$	1.10
Granted		155,592			236,495			392,087			$	1.39
Vested		(197,842	)		(198,766	)		(396,608	)		$	1.21
Cancelled/Forfeited		—			—			—				—
June 30, 2016		182,250			441,599			623,849			$	1.35
Granted		346,926			230,772			577,698			$	1.33
Vested		(275,915	)		(233,459	)		(509,374	)		$	1.28
Cancelled/Forfeited		(8,750	)		—			(8,750	)		$	1.02
June 30, 2017		244,511			438,912			683,423			$	1.39

Acceleration of Vesting — The Company does not generally accelerate the vesting of any stock options.

Financial Statement Effects and Presentation — The following table shows total stock-based compensation expense for the years ended June 30, 2017 and 2016 included in the Consolidated Statement of Comprehensive Income:

		Year ended June 30,
		2017				2016

Stock options		$	46,840			$	49,293
RSUs			348,035				299,442
Total		$	394,875			$	348,735

The amounts above were included in:
Selling, general & administrative		$	389,675			$	347,206
Cost of sales			3,876				316
New product development			1,324				1,213
		$	394,875			$	348,735