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Compensatory Equity Incentive Plan and Other Equity Incentives
 6 Months Ended
Dec. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Compensatory Equity Incentive Plan and Other Equity Incentives

7. Compensatory Equity Incentive Plan and Other Equity Incentives

 

Share-Based Compensation Arrangements — 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 six months ended December 31, 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 ESPP Plan.

 

These plans are summarized below:

 

Equity Compensation Arrangement  Award Shares
Authorized		     Award Shares
Outstanding
at December 31,
2016		   Available for
Issuance
at December 31,
2016		 
Amended and Restated Omnibus Incentive Plan   3,915,625    2,634,253    636,231 
Employee Stock Purchase Plan   400,000    —    384,546 
                
    4,315,625    2,634,253    1,020,777 

   

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.

 

For stock options granted in the six month periods ended December 31, 2016 and 2015, we estimated the fair value of each stock option as of the date of grant using the following assumptions:

 

   Six months     Six months  
   December 31, 2016     December 31, 2015 
Weighted average expected volatility   80% - 82%    68% - 103% 
Dividend yields   0%   0%
Weighted average risk-free interest rate   1.185% - 1.19%    0.37% - 1.49% 
Weighted average expected term, in years   7.49    4.75 

 

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 six months ended December 31, 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 six months ended December 31, 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   337,426   $1.59    9.8    230,772    2.8 
Exercised   —   $0.00    —    —    — 
Cancelled/Forfeited   (65,000)  $4.26    0.6    —    — 
December 31, 2016   1,091,686   $1.67    6.8    1,542,567    1.1 
                          
Awards exercisable/vested as of December 31, 2016   839,925   $1.71    6.2    1,103,655    — 
                         
Awards unexercisable/unvested as of December 31, 2016   251,761   $1.53    9.0    438,912    1.1 
    1,091,686              1,542,567      

              
    Options   RSU’s   All Awards 
Weighted average fair value of share awards granted in period   $1.15   $1.56   $1.31 

 

The total intrinsic value of options outstanding and exercisable at December 31, 2016 and 2015 was $95,020 and $590,174, respectively.

 

The total intrinsic value of RSUs outstanding and exercisable at December 31, 2016 and 2015 was $1,699,929 and $2,273,979, respectively.

 

The total fair value of RSUs vested during the six months ended December 31, 2016 and 2015 was $333,117 and $183,101, respectively.

 

The total fair value of option shares vested during the six months ended December 31, 2016 and 2015 was $306,414 and $223,229, respectively.

 

As of December 31, 2016, there was $663,326 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:

 

           Restricted      
           Stock      
      Stock    Share/      
      Options    Units    Total 
                  
 Six months ended June 30, 2017    24,872    159,838    184,710 
                  
 Year ended June 30, 2018    38,975    244,917    283,892 
                  
 Year ended June 30, 2019    17,146    144,984    162,130 
                  
 Year ended June 30, 2020    2,605    29,989    32,594 
     $83,598   $579,728   $663,326 

 

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 December 31, 2016 and changes during the six 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   337,426    230,772    568,198   $1.31 
Vested   (264,165)   (233,459)   (497,624)  $1.31 
Cancelled/Forfeited   (3,750)   —    (3,750)  $1.08 
December 31, 2016   251,761    438,912    690,673   $1.34 

 

Financial Statement Effects and Presentation — The following table shows total stock-based compensation expense for the six months ended December 31, 2016 and 2015 included in the consolidated statements of comprehensive income:

 

   Six months ended   Six months ended 
   December 31,   December 31, 
   2016   2015 
           
 Stock options  $22,804   $25,041 
 RSU   188,197    149,547 
      Total  $211,001   $174,588 
           
 The amounts above were included in:          
 Selling, general & administrative  $209,609   $173,663 
 Cost of sales   796    158 
 New product development   596    767 
   $211,001   $174,588