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Compensatory Equity Incentive Plan and Other Equity Incentives

12 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Compensatory Equity Incentive Plan and Other Equity Incentives

Share-based payment arrangements — The Company’s directors, officers, and key employees were granted stock-based compensation through the Omnibus Plan, through October 2018 and after that date, the SICP. The awards include incentive stock options, non-qualified stock options and restricted stock unit (“RSU”) 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. 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 Omnibus Plan and the SICP 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 $2,500 and $3,900 for fiscal 2020 and 2019, respectively, is included in the selling, general and administrative expense in the accompanying Consolidated Statements Comprehensive Income (Loss), which represents the value of the 10% discount given to the employees purchasing stock under the 2014 ESPP.

These plans are summarized below:

Equity Compensation Arrangement	Award Shares Authorized		Outstanding at June 30, 2020		Available for Issuance at June 30, 2020
SICP (or Omnibus Plan)		5,115,625		3,262,426		930,326
2014 ESPP		400,000		—		306,600
		5,515,625		3,262,426		1,236,926

Grant Date Fair Values and Underlying Assumptions; Contractual Terms—The Company estimates the fair value of each equity 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 RSUs granted in the years ended June 30, 2020 and 2019, the Company estimated the fair value of each stock award as of the date of grant using the following assumptions:

	Year Ended June 30,
	2020			2019
Weighted-average expected volatility		64.4	%		69.5	%
Dividend yields		0	%		0	%
Weighted-average risk-free interest rate		1.53	%		3.00	%
Weighted-average expected term, in years		6.93			7.50

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, 2020 and 2019. 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, 2020 and 2019 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, 2018		1,005,129		$	1.77		6.3		1,649,353			0.9

Granted		13,058		$	2.10		9.4		229,509			2.4
Exercised		(17,610	)	$	1.08				(14,336	)
Cancelled/Forfeited		(20,652	)	$	1.17				—
June 30, 2019		979,925		$	1.80		5.5		1,864,526			0.9

Granted		314,817		$	1.60		9.6		484,000			2.4
Exercised		(29,356	)	$	1.35				(17,204	)
Cancelled/Forfeited		(322,811	)	$	2.08				(11,471	)
June 30, 2020		942,575		$	1.65		6.5		2,319,851			0.9

Awards exercisable/
vested as of
June 30, 2020		676,293		$	1.63		5.3		1,650,325			—

Awards unexercisable/
unvested as of
June 30, 2020		266,282		$	1.70		9.6		669,526			0.9
		942,575							2,319,851

The total intrinsic value of stock options exercised for the years ended June 30, 2020 and 2019 was approximately $35,000 and $580, respectively.

The total intrinsic value of stock options outstanding and exercisable at June 30, 2020 and 2019 was approximately $1.2 million and $320, respectively.

The total fair value of stock options vested during the years ended June 30, 2020 and 2019 was approximately $94,000 and $170,000, respectively.

The total intrinsic value of RSUs exercised during the years ended June 30, 2020 and 2019 was approximately $12,000 and $26,000, respectively.

The total intrinsic value of RSUs outstanding and exercisable at June 30, 2020 and 2019 was approximately $5.5 million and $1.3 million, respectively.

The total fair value of RSUs vested during the years ended June 30, 2020 and 2019 was approximately $443,000 and $393,000, respectively.

As of June 30, 2020, there was approximately $754,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements, including share options and RSUs, granted under the Omnibus Plan, through October 2018 and after that date, the SICP. The expected compensation cost to be recognized is as follows:

	Stock
Fiscal Year Ending:	Options		RSUs		Total
June 30, 2021	$	59,572	$	271,867	$	331,439
June 30, 2022		55,654		148,543		204,197
June 30, 2023		62,517		68,704		131,221
June 30, 2024		46,945		40,539		87,484
	$	224,688	$	529,653	$	754,341

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.

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, 2020 and 2019 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, 2018		218,419			361,983			580,402		$	1.53
Granted		13,058			229,509			242,567		$	1.80
Vested		(118,282	)		(191,348	)		(309,630	)	$	1.79
Cancelled/Forfeited		(2,500	)		-			(2,500	)	$	0.97
June 30, 2019		110,695			400,144			510,839		$	2.09
Granted		314,817			484,000			798,817		$	0.79
Vested		(99,151	)		(203,147	)		(302,298	)	$	1.78
Cancelled/Forfeited		(60,079	)		(11,471	)		(71,550	)	$	2.70
June 30, 2020		266,282			669,526			935,808		$	1.10

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, 2020 and 2019 included in the accompanying Consolidated Statements of Comprehensive Income (Loss):

	Year Ended June 30,
	2020			2019

Stock options	$	(59,019	)	$	36,461
RSUs		309,757			358,329
Total	$	250,738		$	394,790

The amounts above were included in:
Selling, general & administrative	$	250,738		$	393,352
Cost of sales		-			1,620
New product development		-			(182	)
	$	250,738		$	394,790

During the year ended June 30, 2020, an unusually large number of grants were forfeited unvested due to the departure of several executives.