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Stock-Based Compensation

6 Months Ended

Dec. 31, 2018

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

Stock-Based Compensation

Our directors, officers, and key employees were granted stock-based compensation through our Amended and Restated Omnibus Incentive Plan, as amended (the “Omnibus Plan”), through October 2018 and after that date, the 2018 Stock and Incentive Compensation Plan (the “SICP”). The awards include incentive stock options, non-qualified stock options, and restricted stock unit (“RSU”) awards. The stock-based compensation expense is based primarily on the fair value of the award as of the grant date, and is recognized as an expense over the requisite service period.

The following table shows total stock-based compensation expense for the six months ended December 31, 2018 and 2017 included in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income:

		Six Months Ended December 31,
		2018				2017

Stock options		$	29,468			$	21,280
RSUs			168,347				164,929
Total		$	197,815			$	186,209

The amounts above were included in:
Selling, general & administrative		$	196,378			$	182,277
Cost of sales			1,620				3,206
New product development			(183	)			726
		$	197,815			$	186,209

We also adopted the LightPath Technologies, Inc. Employee Stock Purchase Plan (the “2014 ESPP”). The 2014 ESPP permits employees to purchase Class A common stock through payroll deductions, subject to certain limitations. A discount of $2,084 and $1,915 for the six months ended December 31, 2018 and 2017, respectively, is included in the selling, general and administrative expense in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income, which represents the value of the 10% discount given to the employees purchasing stock under the 2014 ESPP.

Grant Date Fair Values and Underlying Assumptions; Contractual Terms

We estimate the fair value of each stock option as of the date of grant, using the Black-Scholes-Merton pricing model. The fair value of 2014 ESPP shares is the amount of the discount the employee obtains at the date of the purchase transaction.

Most stock options granted 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 RSU grants was 0%, and the assumed forfeiture rates used in calculating the fair value of options for performance and service conditions were 20% for each of the six months ended December 31, 2018 and 2017. 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.

For stock options granted under the Omnibus Plan or SICP, as applicable, in the six-month periods ended December 31, 2018 and 2017, we estimated the fair value of each stock option as of the date of grant using the following assumptions:

	Six Months Ended December 31,
	2018		2017
Weighted-average expected volatility	56% - 69%		63% - 75%
Dividend yields	0%		0%
Weighted-average risk-free interest rate	2.65% - 3.00%		1.28% - 1.80%
Weighted-average expected term, in years	2.53		7.25

Information Regarding Current Share-Based Compensation Awards

A summary of the activity for share-based compensation awards in the six months ended December 31, 2018 is presented below:

														Restricted
		Stock Options												Stock Units (RSUs)
						Weighted-				Weighted-								Weighted-
						Average				Average								Average
						Exercise				Remaining								Remaining
		Shares				Price				Contract				Shares				Contract
June 30, 2018			1,005,129			$	1.77				6.3				1,649,353				0.9

Granted			13,058			$	2.10				9.9				229,509				2.9
Exercised			(4,797	)		$	1.05				—				(14,336	)			—
Cancelled/Forfeited			(3,938	)		$	0.92				—				—				—
December 31, 2018			1,009,452			$	1.78				5.9				1,864,526				0.9

Awards exercisable/
vested as of
December 31, 2018			886,882			$	1.68				5.5				1,464,382				—

Awards unexercisable/
unvested as of
December 31, 2018			122,570			$	2.50				8.1				400,144				0.9
			1,009,452												1,864,526

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

As of December 31, 2018, there was approximately $720,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including share options and RSUs) granted. We expect to recognize the compensation cost as follows:

		Stock
		Options				RSUs				Total
Six months ending June 30, 2019			6,993				189,982				196,975

Year ending June 30, 2020			8,926				289,944				298,870

Year ending June 30, 2021			5,939				169,978				175,917

Year ending June 30, 2022			2,021				46,654				48,675
		$	23,879			$	696,558			$	720,437