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Compensatory Equity Incentive Plan and Other Equity Incentives
 9 Months Ended
Mar. 31, 2017
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 $1,927 and $2,303 for the nine months ended March 31, 2017 and 2016, 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:

 

         Award Shares   Available for 
        Outstanding   Issuance 
     Award   at March 31,   at March 31, 
  Equity Compensation Arrangement  Authorized   2017   2017 
  Amended and Restated Omnibus Incentive Plan   3,915,625    2,602,968    633,701 
  Employee Stock Purchase Plan   400,000    —    377,988 
                  
      4,315,625    2,602,968    1,011,689 

 

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 nine month periods ended March 31, 2017 and 2016, we estimated the fair value of each stock option as of the date of grant using the following assumptions:

 

   Nine months   Nine months 
   March 31, 2017   March 31, 2016 
Weighted average expected volatility   77% - 83%    68% - 103% 
Dividend yields   0%    0%
Weighted average risk-free interest rate   1.18% - 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 (“RSU”) grants with both performance and service conditions were 20% for each of the nine months ended March 31, 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 Compensation Awards — A summary of the activity for share-based compensation awards in the nine months ended March 31, 2017 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   339,926   $1.61    9.6    230,772    2.6 
Exercised   —    —    —    (33,785)   — 
Cancelled/Forfeited   (65,000)  $4.26    —    —    — 
March 31, 2017   1,094,186   $1.67    6.6    1,508,782    1.0 
                          
Awards exercisable/vested as of                         
March 31, 2017   850,425   $1.70    5.9    1,069,870    — 
                          
Awards unexercisable/unvested as of                         
March 31, 2017   243,761   $1.56    8.8    438,912    1.0 
    1,094,186              1,508,782      

 

    Stock Options   RSUs   All Awards 
Weighted average fair value of share awards granted in period   $1.15   $1.56   $1.32 

 

The total intrinsic value of options outstanding and exercisable at March 31, 2017 and 2016 was $900,135 and $250,348, respectively.

 

The total intrinsic value of RSUs exercised during the nine months ended March 31, 2017 and 2016 was $79,395 and $0, respectively.

 

The total intrinsic value of RSUs outstanding and exercisable at March 31, 2017 and 2016 was $2,931,444 and $1,757,796, respectively.

 

The total fair value of RSUs vested during the nine months ended March 31, 2017 and 2016 was $333,117 and $388,858, respectively.

 

The total fair value of option shares vested during the nine months ended March 31, 2017 and 2016 was $406,450 and $37,415, respectively. 

 

As of March 31, 2017, there was $557,103 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   RSUs   Total 
              
Three months ended June 30, 2017    12,597    63,735    76,332 
                 
Year ended June 30, 2018    39,612    244,917    284,529 
                 
Year ended June 30, 2019    17,784    144,984    162,768 
                 
Year ended June 30, 2020    3,243    29,989    33,232 
                 
Year ended June 30, 2021    242    —    242 
    $73,478   $483,625   $557,103 

 

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 March 31, 2017 and changes during the nine 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   339,926    230,772    570,698   $1.32 
Vested   (274,665)   (233,459)   (508,124)  $1.28 
Cancelled/Forfeited   (3,750)   —    (3,750)  $1.08 
March 31, 2017   243,761    438,912    682,673   $1.38 

 

Financial Statement Effects and Presentation — The following table shows total stock-based compensation expense for the nine months ended March 31, 2017 and 2016 included in the consolidated statements of comprehensive income:

 

   Nine months ended   Nine months ended 
   March 31,   March 31, 
   2017   2016 
         
 Stock options  $34,882   $37,125 
 RSUs   284,300    224,490 
      Total  $319,182   $261,615 
           
 The amounts above were included in:          
 Selling, general & administrative  $315,429   $260,450 
 Cost of sales   2,792    238 
 New product development   961    927 
   $319,182   $261,615