4.	Stock-Based Compensation

The Company has adopted equity incentive plans that provide for the grant to employees, consultants and directors of stock-based awards, including stock options, restricted shares, and restricted stock units of Adept common stock. Option awards granted have an exercise price equal to or greater than the market price of the Company’s stock on the date of grant and generally have ten-year contractual terms. The Company also has an employee stock purchase plan (“ESPP”) that allows employees to purchase a limited number of shares of its common stock at a discount of 15% of the market value at certain plan-defined dates that are established at six-month intervals. As of June 30, 2014, there were options to purchase approximately 367,000 shares of common stock available for grant under all option plans and approximately 314,000 shares available for issuance under the ESPP.

Initial and annual non-employee director grants made prior to March 2010 vest in equal installments over four years, with initial grants having a 25% cliff vest on the anniversary of the grant. Starting in 2010, annual option grants of 6,000 shares to non-employee directors vest in full on the date of the annual meeting of stockholders following the meeting at which the director is elected and the annual grant is made, and the initial option grant of 10,000 shares to non-employee directors vests in the amount of 50% of the grant on the first annual meeting of stockholders following the initial appointment or election of the director and the remaining 50% vests at the second annual meeting of stockholders of the Company following the initial appointment or election of the director. All stock compensation has been accounted for as an equity instrument, and the Company recognizes the fair value of stock-based compensation as an expense ratably over the service period of the individual equity instruments. Employee option grants are subject to a change of control plan adopted by the Company in 2014 for equity awards that provides for acceleration and vesting in full of options in connection with a change of control transaction under certain circumstances when options are not assumed or replaced by an acquirer.

The Company recorded $2.0 million, $0.8 million and $1.3 million of stock-based compensation expense for the three years ended June 30, 2014, respectively. The Company did not record an income-tax benefit for the stock compensation expense because of the extent of its net operating loss carry-forwards. The Company utilized the Black-Scholes option pricing model for estimating the fair value of the stock-based compensation. The weighted average grant-date fair values were as follows:


Year Ended June 30, 2014			Year Ended June 30, 2013				Year Ended June 30, 2012
Equity Incentive and Stock Option Plans	ESPP		Equity Incentive and Stock Option Plans		ESPP		Equity Incentive and Stock Option Plans		ESPP
$3.03	$	3.56	$	2.31	$	1.21	$	2.52	$	1.46

The weighted average grant-date fair values were calculated using the following assumptions:


	Year Ended June 30, 2014						Year Ended June 30, 2013						Year Ended June 30, 2012
	Equity Incentive and Stock Option Plans			ESPP			Equity Incentive and Stock Option Plans			ESPP			Equity Incentive and Stock Option Plans			ESPP
Average risk free interest rate		0.76	%		0.11	%		0.55	%		0.13	%		0.67	%		0.10	%
Expected life (in years)		3.95			0.49			6.23			0.49			5.77			0.49
Expected volatility		77	%		75	%		80	%		67	%		82	%		62	%
Dividend yield		—	%		—	%		—	%		—	%		—	%		—	%

The dividend yield of zero is based on the fact that the Company has never paid cash dividends, is restricted from paying cash dividends on its common stock by its credit facility, and has no present intention to pay cash dividends on its common stock. Expected volatility is based on the historical volatility of Adept’s common stock over the period commensurate with the expected life of the options or ESPP shares. The risk-free interest rate is based on observed and expected time to post-vesting exercise and forfeitures of options or ESPP shares by Adept’s employees. The expected life in years is based on the historic time to post-vesting exercise and forfeitures of the options or ESPP shares.

Stock-based compensation expense was based on the Company’s historical experience of option cancellations prior to vesting. The Company has generally assumed an annualized forfeiture rate of 5% for each period for its options. The Company adjusts stock-based compensation expense if the actual forfeiture rate is different than estimated.

During the year ended June 30, 2014, Adept granted options for 871,000 shares of common stock with an estimated total grant date fair market value of $2.6 million. The intrinsic value of options exercised during the years ended June 30, 2014, 2013 and 2012 were $3.3 million. $0.1 million, and $0.1 million, respectively. As of June 30, 2014, there was $1.3 million of total unrecognized compensation cost that is expected to be recognized through fiscal year 2018, with a weighted average remaining period of 2.4 years. In 2014, the Company granted restricted stock units (“RSUs”) for up to 112,500 shares of common stock to its Chief Executive Officer (“CEO”). The RSUs vest upon the earlier of the CEO’s separation from service or a change in control. The number of shares issuable upon vesting and settlement of the RSUs, if any, will be determined based on the Company’s stock price on the vesting date and, in the case of a separation from service, the extent to which certain performance criteria has been met.

The following table summarizes activities under the Company’s equity incentive plans (in thousands, except per share data):


										Options
	Available for Grant			Options Outstanding			Restricted Stock Outstanding			Aggregate Price			Weighted Average Exercise Price Per Share
Balance at June 30, 2011		569			1,332			87		$	7,589		$	5.70
Shares added		750			—			—			—			—
Granted		(285	)		281			5			1,048			3.73
Canceled		110			(110	)		—			(1,018	)		9.25
Exercised		—			(30	)		—			(89	)		2.99
Vested		—			—			(56	)		—			—
Expired		(292	)		—			—			—			—
Forfeited due to cancellation or for taxes		36			—			(36	)		—			—

Balance at June 30, 2012		888			1,473			—			7,530			5.11
Granted		(758	)		414			344			1,500			3.62
Canceled		905			(905	)		—			(4,913	)		5.43
Exercised		—			(138	)		—			(408	)		2.95
Vested		—			—			(65	)		—			—
Expired		(72	)		—			—			—			—
Forfeited due to cancellation or for taxes		148			—			(148	)		—			—

Balance at June 30, 2013		1,111			844			131			3,709			4.39
Granted		(991	)		871			120			5,694			6.54
Canceled		202			(202	)		—			(1,033	)		5.11
Exercised		—			(355	)		—			(1,563	)		4.41
Vested		—			—			(66	)		—			—
Expired		(28	)		—			—			—			—
Forfeited due to cancellation or for taxes		73			—			(73	)		—			—

Balance at June 30, 2014		367			1,158			112		$	6,807		$	5.87


	Shares (in thousands)		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Options Vested/Expected to Vest at June 30, 2014		1,131	$	5.82		8.13	$	5,820

Options Exercisable at June 30, 2014		862	$	4.89		7.89	$	4,885

The following table summarizes information concerning outstanding and exercisable stock options at June 30, 2014:


	Options Outstanding						Options Exercisable
Range of Exercise Prices Per Share	Options Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Options Exercisable		Weighted Average Exercise Price
	(in thousands)		(years)		(per share)		(in thousands)		(per share)
$2.80 - $ 3.27		225		7.37	$	3.14		199	$	3.12
$3.51 - $ 3.51		40		7.92		3.51		12		3.51
$3.58 - $ 3.58		175		9.13		3.58		175		3.58
$3.73 - $ 4.31		61		6.89		3.86		42		3.88
$4.60 - $ 4.60		189		8.56		4.60		139		4.60
$4.86 - $ 6.76		139		7.64		6.08		122		6.02
$6.90 - $ 6.90		152		8.69		6.90		119		6.90
$8.00 - $ 15.00		117		7.42		11.16		46		9.43
$15.06 - $ 15.06		5		9.54		15.06		—		—
$17.36 - $ 17.36		55		9.54		17.36		8		17.36

$2.80 - $ 17.36		1,158		8.15	$	5.87		862	$	4.89

A summary of unregistered restricted stock activity outside of the equity incentive plans which were accounted for as compensation due to retention criteria in connection with acquisitions is presented below:


Awards	Shares			Grant Date Fair Market Value
Balance at June 30, 2011		230,589		$	5.01
Accelerated vesting		(115,383	)		5.10
Forfeited		(80,500	)		4.89
Vested		(27,103	)		4.95

Balance at June 30, 2012		7,603			5.10
Vested		(7,603	)		5.10

Balance at June 30, 2013		—		$	—