11. Stock-Based Compensation

Our directors, officers, and key employees are granted stock-based compensation through our 2002 Amended and Restated Omnibus Incentive Plan, as amended (the “2002 Omnibus Plan”), through October 2018 and after that date, through our 2018 Stock and Incentive Compensation Plan (the “2018 SICP”). Such stock-based compensation may include, among other things, incentive stock options, non-qualified stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”). The 2018 SICP is administered by the Compensation Committee of the Company's Board of Directors. To date, our stockholders approved an aggregate of 13,715,625 shares of our Class A Common Stock for issuance pursuant to awards granted under the 2002 Omnibus Plan or SICP. As of September 30, 2026, 2,033,188 shares of Class A Common Stock were authorized and available for issuance pursuant to awards granted under the 2018 SICP. The Company’s executive officers are eligible to earn incentive compensation consisting of equity-based awards, as well as cash bonuses, based on the achievement of certain individual and/or Company performance goals set by the Compensation Committee.

Stock-based compensation expense is based primarily on the fair value of the award as of the grant date and is recognized as an expense over the requisite service period.

The following table shows total stock-based compensation expense for the three months ended September 30, 2026 and 2025, which is included in selling, general and administrative (“SG&A”) expenses in these unaudited Condensed Consolidated Statements of Comprehensive Income (Loss):

The LightPath Technologies, Inc. Employee Stock Purchase Plan (the “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 expired on January 29, 2025. A new Employee Stock Purchase Plan (the “2025 ESPP”) was approved by the stockholders on June 16, 2025 with the first offering period beginning July 1, 2025. The 2025 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 $6,600 for the three months ended September 30, 2026, is included in the selling, general and administrative expense in the accompanying Consolidated Statements of Comprehensive Income (Loss), which represents the value of the 15% discount given to the employees purchasing stock under the 2025 ESPP.

Grant Date Fair Values and Underlying Assumptions; Contractual Terms

We estimate the fair value of each stock option as of the date of grant, using the Black-Scholes-Merton pricing model. The fair value of 2025 ESPP shares is the amount of the discount the employee obtains at the date of the purchase transaction.

Most stock options granted 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 RSA and 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, 2026 and 2025. 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.

The Company estimated the fair value of each stock option award as of the date of grant using the following assumptions:

Beginning in March 2026, we granted stock options to certain executives with vesting criteria linked to the Company's financial performance. The stock compensation expense related to these grants reflects the application of estimated probability assumptions related to the achievement of those financial targets. These assumptions will be evaluated for adjustment each fiscal quarter.

Restricted Stock Awards

RSAs are granted primarily to our executive officers, employees and consultants, and typically vest over a one to three year period from the date of grant, although some may vest immediately upon grant. The stock underlying RSAs is issued upon vesting.

Restricted Stock Units

RSUs are granted primarily to our directors, although RSU awards may also be made to executive officers, employees and consultants. RSUs typically vest over a one to four year period from the date of grant, although some may vest immediately upon grant.

The Company issues new shares of Class A Common Stock upon the exercise of stock options and upon vesting of RSUs and RSAs, unless the recipient has elected to defer receipt of shares under the applicable Internal Revenue Service rules.

Information Regarding Current Share-Based Compensation Awards

A summary of the activity for share-based compensation awards in the three months ended September 30, 2026 is presented below:

As of September 30, 2026, there was approximately $21.4 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements, including stock options, RSAs and RSUs granted under the SICP. The expected compensation cost to be recognized is as follows: