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Stock-Based Compensation

9 Months Ended

Mar. 31, 2019

Share-based Payment Arrangement [Abstract]

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 nine months ended March 31, 2019 and 2018 included in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income:

	Nine Months Ended March 31,
	2019			2018

Stock options	$	32,963		$	29,450
RSUs		263,334			249,947
Total	$	296,297		$	279,397

The amounts above were included in:
Selling, general & administrative	$	294,859		$	274,005
Cost of sales		1,620			4,388
New product development		(182	)		1,004
	$	296,297		$	279,397

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 $3,856 and $4,879 for the nine months ended March 31, 2019 and 2018, 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 nine months ended March 31, 2019 and 2018. 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 nine-month periods ended March 31, 2019 and 2018, we estimated the fair value of each stock option as of the date of grant using the following assumptions:

	Nine Months Ended March 31,
	2019	2018
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 nine months ended March 31, 2019 is presented below:

				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		9.6		229,509			2.6
Exercised		(17,610	)	$	1.08		—		(14,336	)		—
Cancelled/Forfeited		(20,652	)	$	1.17		—		—			—
March 31, 2019		979,925		$	1.80		5.7		1,864,526			0.9

Awards exercisable/
vested as of
March 31, 2019		864,980		$	1.70		5.4		1,464,382			—

Awards unexercisable/
unvested as of
March 31, 2019		114,945		$	2.55		8.0		400,144			0.9
		979,925							1,864,526

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

As of March 31, 2019, there was approximately $589,000 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
Three months ending June 30, 2019		3,498		62,032		65,530

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
	$	20,384	$	568,608	$	588,992