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Stock-Based Compensation

6 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Our directors, officers, and key employees are 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”), including 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, 2019 and 2018 included in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income (Loss):

	Six Months Ended December 31,
	2019		2018
Stock options	$	5,307	$	29,468
RSUs		173,082		168,347
Total	$	178,389	$	197,815

The amounts above were included in:
Selling, general & administrative	$	178,389	$	196,378
Cost of sales		-		1,620
New product development		-		(183	)
	$	178,389	$	197,815

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 $1,203 and $2,084 for the six months ended December 31, 2019 and 2018, respectively, is included in the selling, general and administrative expense in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income (Loss), 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-month periods ended December 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 the six months ended December 31, 2019 and 2018, there were no stock options granted under the Omnibus Plan. For stock options granted under the SICP in the six-month periods ended December 31, 2019 and 2018, we estimated the fair value of each stock option as of the date of grant using the following assumptions:

	Six months Ended December 31,
	2019		2018
Weighted-average expected volatility		63.7%		56%-69%
Dividend yields		0%		0%
Weighted-average risk-free interest rate		1.57%		2.65%-3.00%
Weighted-average expected term, in years		7.50		2.53

Information Regarding Current Share-Based Compensation Awards

A summary of the activity for share-based compensation awards in the six months ended December 31, 2019 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, 2019		979,925		$	1.80		5.5		1,864,526			0.9

Granted		64,817		$	1.28		9.9		384,000			2.9
Exercised		—							(17,204	)
Cancelled/Forfeited		(191,366	)	$	1.73				—
December 31, 2019		853,376		$	1.77		5.3		2,231,322			0.9

Awards exercisable/
vested as of
December 31, 2019		788,229		$	1.73		5.1		1,650,325			—

Awards unexercisable/
unvested as of
December 31, 2019		65,147		$	1.72		5.1		580,997			0.9
		853,376							2,231,322

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

As of December 31, 2019, there was approximately $584,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including stock options and RSUs) granted. We expect to recognize the compensation cost as follows:

	Stock
Fiscal Year Ending:	Options		RSUs		Total
June 30, 2020 (remaining six months)	$	4,084	$	169,349	$	173,433
June 30, 2021		6,870		248,698		255,568
June 30, 2022		2,952		125,374		128,326
June 30, 2023		310		26,233		26,543
	$	14,216	$	569,654	$	583,870