Quarterly report pursuant to Section 13 or 15(d)

6. Stock-Based Compensation

6. Stock-Based Compensation
6 Months Ended
Sep. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Additional General Disclosures [Abstract]  
6. 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. The estimated forfeiture rates used during the six months ended September 30, 2013 ranged from 1.63% to 4.77%.


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


    Three Months     Six Months  
    Ended     Ended  
    September 30,     September 30,  
    2013     2012     2013     2012  
Cost of service revenue   $ 30     $ 34     $ 56     $ 66  
Research and development     45       63       78       130  
Selling, general and administrative     221       275       349       484  
Total stock-based compensation   $ 296     $ 372     $ 483     $ 680  


At September 30, 2013, there were unrecognized compensation costs of $1,403,000 related to stock options which are expected to be recognized over a weighted-average amortization period of 2.54 years.


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


September 30,


Six Months


September 30,

    2013     2012     2013     2012  
Expected life   5.89 years     5.85 years     5.89 years     5.85 years  
Risk-free interest rate     1.42%       0.73%       1.42%       0.73%  
Dividend yield     0.00%       0.00%       0.00%       0.00%  
Volatility     86%       88%       86%       88%  
Fair value of options granted   $ 2.10     $ 4.76     $ 2.10     $ 4.76  



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 the Securities and Exchange Commission's Staff Accounting Bulletin No. 110 for “plain vanilla” options. The expected stock price volatility for the Company’s stock options was determined by examining the historical volatility of the Company and the historical volatilities of the Company’s industry peers. 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 become 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.


A summary of all option activity as of September 30, 2013 and changes during the six months then ended is presented below:


    Number of
(in thousands)
Exercise Price
Outstanding at March 31, 2013     975     $ 15.08                  
Options granted     335       2.95                  
Options exercised                            
Options forfeited or expired     (81 )     15.86                  
Outstanding at September 30, 2013     1,229     $ 11.72       7.42     $  
Exercisable at September 30, 2013     816     $ 15.32       6.35     $  
Options available for grant as of September 30, 2013     848                          


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 ($2.74) for stock options that were in-the-money as of September 30, 2013.


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


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