Compensatory Equity Incentive Plan and Other Equity Incentives

3 Months Ended

Sep. 30, 2012

Compensatory Equity Incentive Plan And Other Equity Incentives

Compensatory Equity Incentive Plan and Other Equity Incentives

7. Compensatory Equity Incentive Plan and Other Equity Incentives

Share-Based Compensation Arrangements—The Company’s Amended and Restated Omnibus Incentive Plan (the “Plan”) included several available forms of stock compensation of which incentive stock options and restricted stock awards have been granted to date.

The 2004 Employee Stock Purchase Plan (“ESPP”) permits employees to purchase shares of 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 stock on specified dates (June 30 and December 31). In no event may any participant purchase more than $25,000 worth of shares of Class A common stock in any calendar year and an employee may purchase no more than 4,000 shares on any purchase date within an offering period of 12 months and 2,000 shares on any purchase date within an offering period of six months. The discount on market value is included in selling, general and administrative expense in the accompanying statements of operations and was $473 and $806 for the quarters ended September 30, 2012 and 2011, respectively.

These two plans are summarized below:

			Award Shares		Available for
			Outstanding		Issuance
	Award Shares		at September 30,		at September 30,
Equity Compensation Arrangement	Authorized		2012		2012
Amended and Restated Omnibus Incentive Plan		1,715,625		1,132,814		137,418
Employee Stock Purchase Plan		200,000		—		114,763
		1,915,625		1,132,814		252,181

Grant Date Fair Values and Underlying Assumptions; Contractual Terms—The Company estimates the fair value of each stock option as of the date of grant using the Black-Scholes-Merton pricing model. The ESPP fair value is the amount of the discounted market value the employee obtains at the date of the purchase transaction.

The Company did not grant any stock options in the first quarter of fiscal 2013 or 2012.

Most options granted under the Plan 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 options and restricted stock unit grants with both performance and service conditions were 20% and 0%, respectively, for the quarters ended September 30, 2012 and 2011. 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 Compensation Awards—A summary of the activity for share-based compensation awards in the three months ended September 30, 2012 is presented below:  

									Restricted
	Stock Options								Stock Units (RSUs)
					Weighted		Weighted				Weighted
					Average		Average				Average
					Exercise		Remaining				Remaining
					Price		Contract				Contract
		Shares			(per share)		Life (YRS)		Shares		Life (YRS)
June 30, 2012			576,393		$	2.61		6.4		594,700		1.0
Granted			—			—		—		—		—
Exercised			—			—		—		—		—
Cancelled			(38,279	)		2.41		7.5		—		—
September 30, 2012			538,114		$	2.35		6.2		594,700		0.9
Awards exercisable/ vested as of September 30, 2012			366,614		$	2.83		5.2		359,700		—
Awards unexercisable/ unvested as of September 30, 2012			171,500		$	2.14		8.3		235,000		0.9
			538,114							594,700

The total intrinsic value of options outstanding and exercisable at September 30, 2012 and 2011 was $0 and $21,000, respectively.

The total intrinsic value of RSUs exercised during the quarter ended September 30, 2012 and 2011 was $0 and $0, respectively.

The total intrinsic value of RSUs outstanding and exercisable at September 30, 2012 and 2011 was $352,542 and $338,000, respectively.

The total fair value of RSUs vested during the quarter ended September 30, 2012 and 2011 was $0 and $0, respectively.

The total fair value of option shares vested during the quarter ended September 30, 2012 and 2011 was $0, and $18,000, respectively.

As of September 30, 2012, there was $370,475 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including share options and restricted stock units) granted under the Plan.

The compensation cost is expected to be recognized as follows:

			Restricted
			Stock
	Stock		Share/
	Options		Units		Total
Remainder of the year ended June 30, 2013	$	72,846	$	101,885	$	174,731
Year ended June 30, 2014		71,589		81,133		152,722
Year ended June 30, 2015		24,144		15,494		39,638
Year ended June 30, 2016		3,384		—		3,384
	$	171,963	$	198,512	$	370,475

The table above does not include shares under the Company’s ESPP, which has purchase settlement dates in the second and fourth fiscal quarters of each year. The Company’s ESPP is not administered with a look-back option provision and, as a result, there is not a population of outstanding option grants during the employee contribution period.

Restricted stock unit awards vest immediately or from two to four years from the date of grant.

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 the Company’s unexercisable/unvested awards as of September 30, 2012 and changes during the three months then ended:

Unexercisable/unvested awards	Stock Options Shares			RSU Shares		Total Shares			Weighted-Average Grant Date Fair Values (per share)
June 30, 2012		198,125			235,000		433,125		$	2.42
Granted		—			—		—			—
Vested		(5,000	)		—		(5,000	)		2.93
Cancelled/Issued/Forfeited		(21,625	)		—		(21,625	)		2.19
September 30, 2012		171,500			235,000		406,500		$	2.06

Financial Statement Effects and Presentation—The following table shows total stock-based compensation expense for the three months ended September 30, 2012 and 2011 included in the consolidated statements of operations:

	(unaudited)			(unaudited)
	Three months ended			Three months ended
	September 30,			September 30,
	2012			2011
Stock options		13,523			22,575
RSU		47,291			41,971
Total		60,814			64,546
The amounts above were included in:
General & administrative		63,141			59,841
Cost of sales		(4,350	)		2,125
New product development		2,023			2,580
		60,814			64,546