Compensatory Equity Incentive Plan and Other Equity Incentives

9 Months Ended

Mar. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Compensatory Equity Incentive Plan and Other Equity Incentives

6. Compensatory Equity Incentive Plan and Other Equity Incentives

Share-Based Compensation Arrangements—The Plan includes 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”) permitted employees to purchase shares of Class A common stock through payroll deductions, which could 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 could any participant purchase more than $25,000 worth of shares of Class A common stock in any calendar year and an employee could 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 ESPP expired on December 6, 2014, and was replaced by the 2014 Employee Stock Purchase Plan, which 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 discount on market value is included in selling, general and administrative expense in the accompanying consolidated statements of operations and comprehensive income and was $1,356 and $755 for the nine months ended March 31, 2015 and 2014, respectively.

These two plans are summarized below: 

			Award Shares		Available for
	Award Shares		Outstanding		Issuance
	Authorized		at March 31,		at March 31,
Equity Compensation Arrangement			2015		2015
Amended and Restated Omnibus Incentive Plan		3,915,625		1,801,695		1,474,866
Employee Stock Purchase Plan		400,000		—		400,000
		4,315,625		1,801,695		1,874,866

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 was the amount of the discounted market value the employee obtained at the date of the purchase transaction.

For stock options granted in the nine month periods ended March 31, 2015 and 2014, the Company estimated the fair value of each stock option as of the date of grant using the following assumptions:

	Nine Months Ended			Nine Months Ended
	March 31, 2015			March 31, 2014
Expected volatility		118	%		105	%
Weighted average expected volatility		118	%		105	%
Dividend yields		0	%		0	%
Risk-free interest rate		1.76	%		1.60	%
Expected term, in years		7.50			7.49

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% for each of the nine months ended March 31, 2015 and 2014. 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 nine months ended March 31, 2015 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, 2014		654,158		$	2.25		5.5		856,300		0.9
Granted		103,000		$	1.35		9.6		219,000		2.6
Exercised		—			—		—		—		—
Cancelled/Forfeited		(30,763	)	$	3.32		3.0		—		—
March 31, 2015		726,395		$	2.08		5.5		1,075,300		1.0

Awards exercisable/vested as of March 31, 2015	501,895	$	2.43	4.1	671,430	—
Awards unexercisable/unvested as of March 31, 2015	224,500	$	1.29	8.8	403,870	1.0
	726,395				1,075,300

The total intrinsic value of options outstanding and exercisable at March 31, 2015 and 2014 was $1,198 and $39,243, respectively.

The total intrinsic value of RSUs exercised during the nine months ended March 31, 2015 and 2014 was $0 and $288,652, respectively.

The total intrinsic value of RSUs outstanding and exercisable at March 31, 2015 and 2014 was $658,673 and $778,095, respectively.

The total fair value of RSUs vested during the nine months ended March 31, 2015 and 2014 was $199,825 and $333,571, respectively.

The total fair value of option shares vested during the nine months ended March 31, 2015 and 2014 was $8,908 and $121,884, respectively.

As of March 31, 2015, there was $535,983 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including share options and restricted stock units) granted under the Plan. We expect to recognize the compensation cost as follows:

			Restricted
			Stock
	Stock		Share/
	Options		Units		Total
Three months ended June 30, 2015	$	13,241	$	60,194	$	73,435
Year ended June 30, 2016		44,425		211,931		256,356
Year ended June 30, 2017		34,682		120,513		155,195
Year ended June 30, 2018		20,915		24,906		45,821
Year ended June 30, 2019		5,176		—		5,176
	$	118,439	$	417,544	$	535,983

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 March 31, 2015 and changes during the nine months then ended:

	Stock Options						Total			Weighted-Average Grant Date Fair Values
Unexercisable/unvested awards	Shares			RSU Shares			Shares			(per share)
June 30, 2014		193,000			354,303			547,303		$	1.18
Granted		103,000			219,000			322,000		$	1.36
Vested		(71,500	)		(169,433	)		(240,933	)	$	1.32
Cancelled/Forfeited		—			—			—			—
March 31, 2015		224,500			403,870			628,370		$	1.23

Financial Statement Effects and Presentation—The following table shows total stock-based compensation expense for the nine months ended March 31, 2015 and 2014 included in the consolidated statements of operations and comprehensive income:

	(Unaudited)		(Unaudited)
	Nine months ended		Nine months ended
	March 31,		March 31,
	2015		2014
Stock options	$	40,344	$	54,793
RSU		171,172		238,745
Total	$	211,516	$	293,538
The amounts above were included in:
General & administrative	$	203,215	$	285,237
Cost of sales		79		—
New product development		8,222		8,301
	$	211,516	$	293,538