Compensatory Equity Incentive Plan and Other Equity Incentives

12 Months Ended

Jun. 30, 2022

Compensatory Equity Incentive Plan and Other Equity Incentives

Compensatory Equity Incentive Plan and Other Equity Incentives

9. 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.  The awards include incentive stock options, non-qualified stock options and restricted stock unit (“RSU”) awards.

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 $5,000 and $3,000 for fiscal years 2022 and 2021, 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, 2022		Available for Issuance at June 30, 2022
SICP (or Omnibus Plan)		5,115,625		2,614,131		365,324
2014 ESPP		400,000		—		277,443
		5,515,625		2,614,131		642,767

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.

For stock options and RSUs granted in the years ended June 30, 2022 and 2021, the Company estimated the fair value of each stock award as of the date of grant using the following assumptions:

	Year Ended June 30,
	2022			2021
Weighted-average expected volatility		80.8	%		72.0	%
Dividend yields		0	%		0	%
Weighted-average risk-free interest rate		2.09	%		0.74	%
Weighted-average expected term, in years		3.75			7.49

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 years ended June 30, 2022 and 2021.  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 Payment Awards — A summary of the activity for share-based payment awards in the years ended June 30, 2022 and 2021 is presented below:  

	Stock Options							Restricted Stock Units (RSUs)
				Weighted-		Weighted-					Weighted-
				Average		Average					Average
				Exercise		Remaining					Remaining
	Shares			Price		Contract		Shares			Contract
June 30, 2020		942,575		$	1.65		6.5		2,328,303			0.9
Granted		121,933		$	2.97		9.7		296,386			2.3
Exercised		(225,137	)	$	1.50				(862,804	)
Cancelled/Forfeited		(406,444	)	$	1.75				-
June 30, 2021		432,927		$	2.01		8.8		1,761,885			0.9
Granted		125,000		$	2.02				368,461			1.2
Exercised		-		$	-				(45,143	)
Cancelled/Forfeited		(23,465	)	$	1.67				(5,534	)
June 30, 2022		534,462		$	2.03		7.0		2,079,669			0.9
Awards exercisable/
vested as of
June 30, 2022		215,141		$	1.87		7.1		1,334,978			—
Awards unexercisable/
unvested as of
June 30, 2022		319,321		$	2.14		7.1		744,691			0.9
		534,462							2,079,669

No stock options were exercised during the year ended June 30, 2022.  The total intrinsic value of stock options exercised for the year ended June 30, 2021was approximately $344,000.

The total intrinsic value of stock options outstanding and exercisable at June 30, 2022 and 2021 was approximately $42,000 and $285,000, respectively. 

The total fair value of stock options vested during the years ended June 30, 2022 and 2021 was approximately $24,000 and $142,000, respectively. 

The total intrinsic value of RSUs exercised during the years ended June 30, 2022 and 2021 was approximately $77,000 and $2.8 million, respectively.

The total intrinsic value of RSUs outstanding and exercisable at June 30, 2022 and 2021 was approximately $1.6 million and $3.0 million, respectively. 

The total fair value of RSUs vested during the years ended June 30, 2022 and 2021 was approximately $395,000 and $1.1 million, respectively. 

As of June 30, 2022, there was approximately $1.1 million 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		RSUs		Total
June 30, 2023	$	205,978	$	531,850	$	737,828
June 30, 2024		94,196		190,864		285,060
June 30, 2025		33,885		54,308		88,193
	$	334,059	$	777,022	$	1,111,081

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.

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

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, estimated using the Black-Scholes-Merton pricing model, regarding the Company’s unexercisable/unvested awards as of June 30, 2022 and 2021 and changes during the two years then ended:

Unexercisable/Unvested Awards	Stock Options Shares			RSU Shares			Total Shares			Weighted-Average Grant Date Fair Values (per share)
June 30, 2020		266,282			669,526			935,808		$	1.10
Granted		121,933			296,386			418,319		$	2.48
Vested		(64,636	)		(367,325	)		(431,961	)	$	1.39
Cancelled/Forfeited		(1,595	)		-			(1,595	)	$	2.85
June 30, 2021		321,984			598,587			920,571		$	1.59
Granted		125,000			368,461			493,461		$	1.74
Vested		(118,696	)		(216,823	)		(335,519	)	$	1.42
Cancelled/Forfeited		(8,967	)		(5,534	)		(14,501	)	$	1.97
June 30, 2022		319,321			744,691			1,064,012		$	1.71

Acceleration of Vesting — The Company does not generally accelerate the vesting of any stock options or RSUs, 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, 2022 and 2021, which is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Comprehensive Income (Loss):

	Year Ended June 30,
	2022		2021
Stock options	$	144,682	$	76,616
RSUs		680,568		566,249
Total	$	825,250	$	642,865