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Compensatory Equity Incentive Plan and Other Equity Incentives

12 Months Ended

Jun. 30, 2024

Compensatory Equity Incentive Plan and Other Equity Incentives

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. Such stock-based compensation may include, among other things, incentive stock options, non-qualified stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”). The SICP is administered by the Compensation Committee of the Board of Directors. At the Company’s 2018 Annual Stockholders Meeting, our stockholders approved the SICP under which an aggregate of 1,650,870 shares of our Class A common stock were authorized for issuance pursuant to awards granted thereunder. At the Company’s 2022 Annual Stockholders Meeting, our stockholders authorized an additional 2,100,000 shares of our Class A common stock for issuance pursuant to awards granted thereunder. As of June 30, 2024, 863,305 shares of Class A common stock were authorized and available for issuance pursuant to awards granted under the SICP. The Company’s executive officers are eligible to earn incentive compensation consisting of equity-based awards, as well as cash bonuses, based on the achievement of certain individual and/or Company performance goals set by the Compensation Committee.

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 $4,000 for each of the fiscal years ended June 30, 2024 and 2023, 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, 2024				Available for Issuance at June 30, 2024
SICP (or Omnibus Plan)			7,215,625				1,965,361				863,305
2014 ESPP			400,000				-				213,473
			7,615,625				1,965,361				1,076,778

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.

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 years ended June 30, 2024 and 2023. 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.

No stock options were granted during the year ended June 30, 2023. For stock options granted in the year ended June 30, 2024, the Company estimated the fair value of each stock award as of the date of grant using the following assumptions:

		Year Ended June 30, 2024
Weighted-average expected volatility			74.0	%
Dividend yields			0	%
Weighted-average risk-free interest rate			3.98	%
Weighted-average expected term, in years			7.49

Restricted Stock Awards

RSAs are granted primarily to our executive officers, employees and consultants, and typically vest over a one to three year period from the date of grant, although some may vest immediately upon grant. The stock underlying RSAs is issued upon vesting.

Restricted Stock Units

RSUs are granted primarily to our directors, although RSU awards may also be made to executive officers, employees and consultants. RSUs typically vest over a one to four year period from the date of grant, although some may vest immediately upon grant.

Information Regarding Current Share-Based Payment Awards — A summary of the activity for share-based payment awards in the years ended June 30, 2024 and 2023 is presented below:

		Stock Options												Restricted Stock Units (RSUs)								Restricted Stock Awards (RSAs)
						Weighted-				Weighted-								Weighted-								Weighted-
						Average				Average								Average								Average
						Exercise				Remaining								Remaining								Remaining
		Shares				Price				Contract				Shares				Contract				Shares				Contract
June 30, 2022			534,462			$	2.03				7.0				2,079,669				0.9				-

Granted			-			$	-								611,386								246,942
Exercised			-			$	-								(1,068,291	)							(145,209	)
Cancelled/Forfeited			-			$	-								(26,542	)							-
June 30, 2023			534,462			$	2.03				6.1				1,596,222				1.1				101,733				0.7

Granted			28,736			$	1.74								543,305								270,070
Exercised			(3,000	)		$	1.38								(843,246	)							(191,007	)
Cancelled/Forfeited			(6,509	)		$	1.45								(46,149	)							(19,256	)
June 30, 2024			553,689			$	2.02				5.4				1,250,132				0.8				161,540				1.5

Awards exercisable/
vested as of
June 30, 2024			506,203			$	2.00				5.1				587,351				-				-

Awards unexercisable/
unvested as of
June 30, 2024			47,486			$	2.25				8.6				662,781				0.8				161,540				1.5
			553,689												1,250,132								161,540

The intrinsic and fair values for share-based payment awards exercised and vested in the years ended June 30, 2024 and 2023 are presented below:

		Year Ended June 30,
		2024				2023
Intrinsic Value - Exercised
Stock Options		$	720			$	-
RSUs			1,051,976				1,648,874
RSAs			243,231				190,720

Fair Value - Vested
Stock Options		$	124,744			$	6,500
RSUs			660,449				793,880
RSAs			243,223				189,473

The intrinsic values of share-based payment awards outstanding and exercisable as of June 30, 2024 and 2023 are presented below:

		As of June 30,
		2024				2023
Stock Options		$	-			$	2,430
RSUs			740,062				1,267,403

None of the outstanding RSAs were exercisable as of June 30, 2024 and 2023.

As of June 30, 2024, there was approximately $863,000 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:

Fiscal Year Ending:		Stock Options				RSAs				RSUs				Total
June 30, 2025		$	36,437			$	99,745			$	405,007			$	541,189
June 30, 2026			10,201				46,409				163,413				220,023
June 30, 2027			6,903				8,155				87,084				102,142
		$	53,541			$	154,309			$	655,504			$	863,354

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.

The Company issues new shares of Class A common stock upon the exercise of stock options and upon vesting of RSUs and RSAs, unless the recipient has elected to defer receipt of shares under the applicable IRS rules. The following table is a summary of the number and weighted-average grant date fair values, estimated using the Black-Scholes-Merton pricing model, regarding the Company’s unexercisable/unvested awards as of June 30, 2024 and 2023 and changes during the two years then ended:

Unexercisable/Unvested Awards		Stock Options Shares				RSU Shares				RSA Shares				Total Shares				Weighted-Average Grant Date Fair Values (per share)
June 30, 2022			319,321				744,691				-				1,064,012			$	1.71
Granted			-				611,386				246,942				858,328			$	1.24
Vested			(181,061	)			(672,130	)			(145,209	)			(998,400	)		$	1.52
Cancelled/Forfeited			-				(26,542	)			-				(26,542	)		$	-
June 30, 2023			138,260				657,405				101,733				897,398			$	1.40
Granted			28,736				543,305				270,070				842,111			$	1.40
Vested			(100,760	)			(509,579	)			(196,070	)			(806,409	)		$	1.57
Cancelled/Forfeited			(18,750	)			(28,350	)			(14,193	)			(61,293	)		$	1.43
June 30, 2024			47,486				662,781				161,540				871,807			$	1.42

Acceleration of Vesting — The Company does not generally accelerate the vesting of any stock options, RSUs or RSAs, however in the case of retirements, the Board of Directors may accelerate vesting.

Financial Statement Effects and Presentation — The following table shows total stock-based compensation expense for the years ended June 30, 2024 and 2023, which is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Comprehensive Income (Loss):

		Year Ended June 30,
		2024				2023

Stock options		$	94,124			$	200,854
RSAs			260,322				168,673
RSUs			664,577				941,430
Total		$	1,019,023			$	1,310,957