Compensatory Equity Incentive Plan and Other Equity Incentives

3 Months Ended

Sep. 30, 2017

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

Compensatory Equity Incentive Plan and Other Equity Incentives

9. 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. Stock based compensation is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. We estimate the fair value of each stock option as of the date of grant using the Black-Scholes-Merton pricing model. Most options granted under the Plan vest ratably over two to four years and generally have ten-year contract lives. The volatility rate is based on four-year historical trends in common stock closing prices and the expected term was determined based primarily on historical experience of previously outstanding options. The interest rate used is the U.S. Treasury interest rate for constant maturities. The likelihood of meeting targets for option grants that are performance based are evaluated each quarter. If it is determined that meeting the targets is probable then the compensation expense will be amortized over the remaining vesting period.

The LightPath Technologies, Inc. Employee Stock Purchase Plan (“2014 ESPP”) was adopted by our board of directors on October 30, 2014 and approved by our stockholders on January 29, 2015. The 2014 ESPP permits employees to purchase shares of our 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 our 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. A discount of $1,915 and $943 for the three months ended September 30, 2017 and 2016, respectively, is included in the selling, general and administrative expense in the accompanying consolidated statements of comprehensive income, which represents the value of the 10% discount given to the employees purchasing stock under the 2014 ESPP Plan.

These plans are summarized below:

	Award		Award Shares Outstanding at September 30,		Available for Issuance at September 30,
Equity Compensation Arrangement	Authorized		2017		2017
Amended and Restated Omnibus Incentive Plan		3,915,625		2,598,218		637,290
Employee Stock Purchase Plan		400,000		—		370,895
		4,315,625		2,598,218		1,008,185

Subsequent to September 30, 2017, the award shares authorized under the Plan was increased by 1,200,000 shares, to 5,115,625, as approved by our stockholders on October 26, 2017.

Grant Date Fair Values and Underlying Assumptions; Contractual Terms — We estimate the fair value of each stock option as of the date of grant. We use 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.

No stock options were granted in the three month periods ended September 30, 2017 and 2016.

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 restricted stock unit (“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 three months ended September 30, 2017 and 2016. 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, 2017 is presented below:

	Stock Options							Restricted Stock Units (RSUs)
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contract		Shares		Weighted Average Remaining Contract
June 30, 2017		1,096,186		$	1.68		6.3		1,508,782		0.9
Granted		—			—		—		—		—
Exercised		—			—		—		—		—
Cancelled/Forfeited		(6,750	)	$	3.01		—		—		—
September 30, 2017		1,089,436		$	1.67		6.1		1,508,782		0.9
Awards exercisable/
vested as of
September 30, 2017		848,675		$	1.69		5.5		1,069,870		—
Awards unexercisable/
unvested as of
September 30, 2017		240,761		$	1.60		8.4		438,912		0.9
		1,089,436							1,508,782

The total intrinsic value of options outstanding and exercisable at September 30, 2017 and 2016 was approximately $768,000 and $164,000, respectively.

No RSUs were exercised during the three months ended September 30, 2017 and 2016.

The total intrinsic value of RSUs outstanding and exercisable at September 30, 2017 and 2016 was approximately $2.7 million and $1.6 million, respectively.

The total fair value of RSUs vested during the three months ended September 30, 2017 and 2016 was approximately $0 and $50,000, respectively.

No option shares vested during the three months ended September 30, 2017 and 2016. 

As of September 30, 2017, there was approximately $391,000 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:

	Stock Options		RSUs		Total
Nine months ended June 30, 2018		26,566		165,025		191,591
Year ended June 30, 2019		18,083		144,984		163,067
Year ended June 30, 2020		4,276		29,989		34,265
Year ended June 30, 2021		2,105		—		2,105
	$	51,030	$	339,998	$	391,028

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

We issue 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 our unexercisable/unvested awards as of September 30, 2017 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, 2017		244,511			438,912		683,423		$	1.39
Granted		—			—		—			—
Vested		—			—		—			—
Cancelled/Forfeited		(3,750	)		—		(3,750	)	$	1.39
September 30, 2017		240,761			438,912		679,673		$	1.39

Financial Statement Effects and Presentation — The following table shows total stock-based compensation expense for the three months ended September 30, 2017 and 2016 included in the consolidated statements of comprehensive income:

	Three months ended September 30,
	2017		2016
Stock options	$	12,348	$	11,672
RSUs		79,893		108,268
Total	$	92,241	$	119,940
The amounts above were included in:
Selling, general & administrative	$	90,274	$	119,576
Cost of sales		1,603		79
New product development		364		285
	$	92,241	$	119,940