Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

 v2.3.0.11
Stock-Based Compensation
 3 Months Ended
Jun. 30, 2011
Disclosure Of Compensation Related Costs, Share-based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Note 7. Stock-Based Compensation

The Company accounts for share-based awards exchanged for employee services at the estimated grant date fair value of the award. The Company amortizes the fair value of employee stock options on a straight-line basis over the requisite service period of the awards.  Compensation expense includes the impact of an estimate for forfeitures for all stock options.

Employee stock-based compensation expense is as follows (in thousands):

   
Three Months
Ended
June 30,
 
   
2011
   
2010
 
Cost of service revenue
 
$
20
   
$
15
 
Research and development
   
62
     
51
 
Selling, general and administrative
   
473
     
695
 
Total stock-based compensation
 
$
555
   
$
761
 
 
No income tax benefit has been recognized related to stock-based compensation expense and no tax benefits have been realized from exercised stock options.

The Company estimated the fair value of employee stock options using the Black-Scholes option pricing model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service periods of the respective awards. The fair value of employee stock options was estimated using the following weighted-average assumptions:
   
Three Months
Ended
June 30,
 
   
2011
   
2010
 
Fair value of common stock
  $ 1.76     $ 1.97  
Expected Term
 
6.0 years
   
5.6 years
 
Risk-free interest rate
    1.52 %     1.95 %
Dividend yield
    0.00 %     0.00 %
Volatility
    83 %     84 %

The weighted average fair value of options granted during the three months ended June 30, 2011 and 2010 was $1.23 and $1.36, respectively.

The expected term of stock options represents the average period the stock options are expected to remain outstanding and is based on the expected term calculated using the approach prescribed by SAB 107 for “plain vanilla” options. The expected stock price volatility for the Company’s stock options was determined by examining the historical volatilities for industry peers and using an average of the historical volatilities of the Company’s industry peers as well as the trading history for the Company’s common stock. The Company will continue to analyze the stock price volatility and expected term assumptions as more data for the Company’s common stock and exercise patterns becomes available. The risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options.  The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company estimates forfeitures based on historical experience and reduces compensation expense accordingly. The estimated forfeiture rates used during the three months ended June 30, 2011 ranged from 0.53% to 0.76%.

At June 30, 2011, there were unrecognized compensation costs of $2,766,000 related to stock options which is expected to be recognized over a weighted-average amortization period of 2.18 years.

The Company did not capitalize any cost associated with stock-based compensation.


The Company issues new shares of common stock upon exercise of stock options.

A summary of all option activity as of June 30, 2011 and changes during the three months then ended is presented below:

   
Shares
(in thousands)
   
Weighted-
Average
Exercise
Price
   
Weighted-
Average
Contractual
Term
   
Aggregate
Intrinsic
Value
(in thousands)
 
Options
                           
Outstanding at April 1, 2011
   
4,396
   
$
2.76
             
Granted
   
1,328
     
1.76
             
Exercised
   
(39
)
   
0.40
             
Forfeited or expired
   
(19
)
   
2.32
             
Outstanding at June 30, 2011
   
5,666
   
$
2.54
     
7.78
   
$
1,569
 
Exercisable at June 30, 2011
   
3,384
   
$
3.05
     
6.90
   
$
1,108
 

The aggregate intrinsic value is calculated as the difference between the exercise price of the stock options and the underlying fair value of the Company’s common stock ($1.84) for stock options that were in-the-money as of June 30, 2011.

As provided under the Company’s 2006 Stock Incentive Plan (the “2006 Plan”), the aggregate number of shares authorized for issuance as awards under the 2006 Plan automatically increased on April 1, 2011 by 1,328,815 shares (which number constitutes 5% of the outstanding shares on the last day of the year ended March 31, 2011).