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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>1. DESCRIPTION OF THE BUSINESS </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i></i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>THE COMPANY</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">8x8, Inc. ("8x8" or the "Company") develops
and markets cloud-based business communications services encompassing internally developed Voice over Internet Protocol ("VoIP")
technologies. These services enable telephony and video applications as well as web-based conferencing and unified communications
capabilities. The Company also provides managed hosting and cloud-based computing services. As of December 31, 2012, the Company
had approximately 31,500 business customers.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company was incorporated in California in February 1987 and
was reincorporated in Delaware in December 1996. The Company's fiscal year ends on March 31 of each calendar year. Each reference
to a fiscal year in these notes to the consolidated financial statements refers to the fiscal year ending March 31 of the calendar
year indicated (for example, fiscal 2013 refers to the fiscal year ending March 31, 2013).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif"><b>2. BASIS OF PRESENTATION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The accompanying interim condensed consolidated financial statements
are unaudited and have been prepared on substantially the same basis as our annual financial statements for the fiscal year ended
March 31, 2012. In the opinion of the Company's management, these financial statements reflect all adjustments (consisting only
of normal recurring adjustments) considered necessary for a fair statement of our financial position, results of operations and
cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported
amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The March 31, 2012 year-end condensed consolidated balance sheet
data in this document were derived from audited consolidated financial statements and do not include all of the disclosures required
by U.S. generally accepted accounting principles. These financial statements should be read in conjunction with the Company's audited
consolidated financial statements as of and for the fiscal year ended March 31, 2012 and notes thereto included in the Company's
fiscal 2012 Annual Report on Form 10-K.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The results of operations and cash flows for the interim periods
included in these financial statements are not necessarily indicative of the results to be expected for any future period or the
entire fiscal year.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>VoIP Service and Product Revenue</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company's VoIP service and product revenue is derived from the
sale of communications services and IP business telephones, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Financial Accounting Standards Board ("FASB") Accounting
Standards Codification ("ASC") 605-25 requires that revenue arrangements with multiple deliverables be divided into separate
units of accounting if the deliverables in the arrangement meet specific criteria. In addition, arrangement consideration must
be allocated among the separate units of accounting based on their relative fair values, with certain limitations. The provisioning
of the 8x8 service with the accompanying 8x8 IP telephone constitutes a revenue arrangement with multiple deliverables. In accordance
with the guidance of ASC 605-25, the Company allocates 8x8 revenues, including activation fees, among the 8x8 IP telephones and
subscriber services. Revenues allocated to these devices are recognized as product revenues during the period of the sale less
the allowance for estimated returns during the 30-day trial period. All other revenues are recognized as license and service revenues
when the related services are provided. The Company records revenue net of any sales-related taxes that are billed to its customers.
The Company believes this approach results in financial statements that are more easily understood by users.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Under the terms of the Company's typical subscription agreement,
new customers can terminate their service within 30 days of order placement and receive a full refund of fees previously paid.
The Company has determined that it has sufficient history of subscriber conduct to make a reasonable estimate of cancellations
within the 30-day trial period. Therefore, the Company recognizes new subscriber revenue in the month in which the new order was
shipped, net of an allowance for expected cancellations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Product Revenue </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company recognizes revenue from product sales for which there
are no related services to be rendered upon shipment to partners and end users provided that persuasive evidence of an arrangement
exists, the price is fixed, title has transferred, collection of resulting receivables is reasonably assured, there are no customer
acceptance requirements, and there are no remaining significant obligations. Gross outbound shipping and handling charges are recorded
as revenue, and the related costs are included in cost of goods sold. Reserves for returns and allowances for partner and end user
sales are recorded at the time of shipment.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Deferred Cost of Goods Sold</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Deferred cost of goods sold represents the cost of products sold
for which the end customer or distributor has a right of return. The cost of the products sold is recognized contemporaneously
with the recognition of revenue, when the subscriber has accepted the service.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Goodwill and Other Intangible Assets</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Amortization expense for the customer relationship intangible asset
is included in sales and marketing expenses. Amortization expense for technology is included in cost of service revenue. The carrying
values of intangible assets were as follows (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="7" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31, 2012</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td colspan="7" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>March 31, 2012</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>Gross</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Gross</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>Carrying</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Accumulated</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Net Carrying</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Carrying</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Accumulated</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Net Carrying</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amount</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amortization</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amount</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amount</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amortization</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amount</b></td></tr>
<tr style="vertical-align: bottom">
<td>Technology</td>
<td style="text-align: right">$</td>
<td style="text-align: right">8,242 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">(1,050)</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">7,192 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">8,242 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">(432)</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">7,810 </td></tr>
<tr style="vertical-align: bottom">
<td>Customer relationships</td>
<td style="text-align: right"> </td>
<td style="text-align: right">3,305 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">(903)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2,402 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3,305 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">(450)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2,855 </td></tr>
<tr style="vertical-align: top">
<td>Trade names/domains</td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">957 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">957 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">957 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">957 </td></tr>
<tr style="vertical-align: bottom">
<td>Total acquired identifiable</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>     intangible assets</td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">12,504 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">(1,953)</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">10,551 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">12,504 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">(882)</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">11,622 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">At December 31, 2012, annual amortization of intangible assets,
based upon our existing intangible assets and current useful lives, is estimated to be the following (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amount</b></td></tr>
<tr style="vertical-align: bottom">
<td>Remaining 2013</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">357 </td></tr>
<tr style="vertical-align: bottom">
<td>2014</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,334 </td></tr>
<tr style="vertical-align: bottom">
<td>2015</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,325 </td></tr>
<tr style="vertical-align: bottom">
<td>2016</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,325 </td></tr>
<tr style="vertical-align: bottom">
<td>2017</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,318 </td></tr>
<tr style="vertical-align: top">
<td>Thereafter</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">3,935 </td></tr>
<tr style="vertical-align: top">
<td>Total</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">9,594 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Deferred Rent</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In April 2012, the Company entered into an 87-month lease agreement
for its new headquarters. Under the terms of the lease agreement:</p>
<ul style="list-style-type: disc">
<li style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">the Company received a three month rent holiday from
rental payments;</font></li>
<li style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">base rent is $130,821 for the 15 months after the
rent holiday; and</font></li>
<li style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">rent expense increases 3% each year thereafter.</font></li>
</ul>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company also received a $1.7 million allowance for tenant improvements.
In accordance with the guidance in ASC 840-20, Leases, the Company accounts for its headquarters facility operating lease as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Rent Holidays. </i>The Company recognizes the related rent expense
on a straight-line basis at the earlier of the first rent payment or the date of possession of the leased property. The difference
between the amounts charged to expense and the rent paid is recorded as deferred lease incentives and amortized over the lease
term.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Rent Escalations. </i>The Company recognizes escalating rent
provisions on a straight-line basis over the lease term. The difference between the amounts charged to expense and the rent paid
is recorded as deferred lease incentives and amortized over the lease term.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Tenant Improvement Allowance</i>. The tenant improvement allowance
is deferred and amortized on a straight-line basis over the life of the lease as a reduction to rent expense.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In the second quarter of fiscal 2013, the Company received a $1.7
million reimbursement for the cost of tenant improvements that the Company included in cash flows from operating activities. At
December 31, 2012, total deferred rent included in Other accrued liabilities and Non-current liabilities was $0.1 million and $1.9
million, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Stock Purchase Right/Restricted Stock Unit and Option Activity</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Stock purchase right/restricted stock unit activity since March
31, 2012 is summarized as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Weighted</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Weighted</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Average</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Average</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Grant-Date</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Remaining</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>Number of</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Fair Market</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Contractual</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Shares</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Value</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Term (in Years)</b></td></tr>
<tr style="vertical-align: bottom">
<td>Balance at March 31, 2012</td>
<td> </td>
<td style="text-align: right">966,400 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">2.50 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2.61 </td></tr>
<tr style="vertical-align: bottom">
<td>Granted</td>
<td> </td>
<td style="text-align: right">409,936 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">5.65 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>Released</td>
<td> </td>
<td style="text-align: right">(281,938)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2.16 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>Forfeited</td>
<td> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(80,244)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2.72 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>Balance at December 31, 2012</td>
<td> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,014,154 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">3.85 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2.62 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Option activity since March 31, 2012 is summarized as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Weighted</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Shares</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Average</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>Shares</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Subject to</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Exercise</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>Available</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Options</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Price</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>for Grant</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Outstanding</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Per Share</b></td></tr>
<tr style="vertical-align: bottom">
<td>Balance at March 31, 2012</td>
<td> </td>
<td style="text-align: right">375,546 </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">6,034,335 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.90 </td></tr>
<tr style="vertical-align: bottom">
<td>     Change in options available for grant</td>
<td style="text-align: right"> </td>
<td style="text-align: right">4,100,000 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td></tr>
<tr style="vertical-align: bottom">
<td>     Granted - options</td>
<td> </td>
<td style="text-align: right">(932,000)</td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">932,000 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">5.80 </td></tr>
<tr style="vertical-align: bottom">
<td>     Stock purchase rights/restricted stock units</td>
<td style="text-align: right"> </td>
<td style="text-align: right">(409,936)</td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td></tr>
<tr style="vertical-align: bottom">
<td>     Exercised</td>
<td> </td>
<td style="text-align: right">- </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">(777,487)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1.48 </td></tr>
<tr style="vertical-align: bottom">
<td>     Canceled/forfeited</td>
<td> </td>
<td style="text-align: right">135,133 </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">(135,133)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">4.01 </td></tr>
<tr style="vertical-align: top">
<td>     Termination of plans</td>
<td> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(43,004)</td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td></tr>
<tr style="vertical-align: top">
<td>Balance at December 31, 2012</td>
<td> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">3,225,739 </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">6,053,715 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">2.51 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table summarizes the stock options outstanding and
exercisable at December 31, 2012:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="9" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Options Outstanding</b></td>
<td style="text-align: right"> </td>
<td colspan="7" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Options Exercisable</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Weighted</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Weighted</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Weighted</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Average</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Average</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Average</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Exercise</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Remaining</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Aggregate</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Exercise</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Aggregate</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Price</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Contractual</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Intrinsic</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Price</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Intrinsic</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Shares</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Per Share</b></td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Life (Years)</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Value</b></td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Shares</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Per Share</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Value</b></td></tr>
<tr style="vertical-align: bottom">
<td>$0.55 - $1.26</td>
<td> </td>
<td style="text-align: right">1,781,500 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.04 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">5.0 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">11,299,025 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,781,500 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.04 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">11,299,025 </td></tr>
<tr style="vertical-align: bottom">
<td>$1.27 - $1.72</td>
<td> </td>
<td style="text-align: right">1,504,919 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.53 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2.6 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">8,806,130 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,504,919 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.53 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">8,806,130 </td></tr>
<tr style="vertical-align: bottom">
<td>$1.73 - $3.35</td>
<td> </td>
<td style="text-align: right">1,326,608 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">2.56 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">5.6 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">6,396,028 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">886,007 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">2.43 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">4,382,974 </td></tr>
<tr style="vertical-align: bottom">
<td>$3.36 - $5.87</td>
<td> </td>
<td style="text-align: right">1,398,688 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">5.29 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">8.9 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2,919,012 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">204,018 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">5.04 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">477,705 </td></tr>
<tr style="vertical-align: top">
<td>$5.88 - $5.89</td>
<td> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">42,000 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">5.89 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">9.8 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">62,580 </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">1,750 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">5.89 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">2,608 </td></tr>
<tr style="vertical-align: top">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">6,053,715 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">29,482,775 </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">4,378,194 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">24,968,442 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Stock-based Compensation Expense</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table summarizes the classification of stock-based
compensation expense for the three and nine months ended December 31, 2012 and 2011 (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Three Months Ended</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Nine Months Ended</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td></tr>
<tr style="vertical-align: bottom">
<td>Cost of service revenues</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">63 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">41 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">149 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">87 </td></tr>
<tr style="vertical-align: bottom">
<td>Cost of product revenues</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td></tr>
<tr style="vertical-align: bottom">
<td>Research and development</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">125 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">72 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">295 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">176 </td></tr>
<tr style="vertical-align: bottom">
<td>Sales and marketing</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">355 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">255 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">979 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">610 </td></tr>
<tr style="vertical-align: top">
<td>General and administrative</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">222 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">50 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">403 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">140 </td></tr>
<tr style="vertical-align: bottom">
<td>Total stock-based compensation expense related to </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>     employee stock options and employee stock purchases, pre-tax</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">765 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">418 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,827 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,013 </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>Tax benefit</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td></tr>
<tr style="vertical-align: bottom">
<td>Stock based compensation expense related to employee</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>     stock options and employee stock purchases, net of tax</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">765 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">418 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,827 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,013 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">As of December 31, 2012, there was $7.4 million of unamortized stock-based
compensation expense related to unvested options and stock awards which is expected to be recognized over a weighted average period
of 3.14 years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">To value option grants and stock purchase rights/restricted stock
units for stock-based compensation, the Company used the Black-Scholes option valuation model. Fair value determined using the
Black-Scholes option valuation model varies based on assumptions used for the expected stock price volatility, expected life, risk-free
interest rates and future dividend payments. During the three and nine month periods ended December 31, 2012 and 2011, the Company
used the historical volatility of the Company's stock over a period equal to the expected life of the options. The expected life
assumptions represent the weighted-average period the stock-based awards are expected to remain outstanding. These expected life
assumptions are established through the review of historical exercise behavior of stock-based award grants with similar vesting
periods. The risk-free interest rate is based on the closing market bid yields on actively traded U.S. treasury securities in the
over-the-counter market for the expected term equal to the expected term of the option. The dividend yield assumption is based
on the Company's history and expectation of future dividend payouts.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table summarizes the assumptions used to estimate
the fair value of stock options to employees and directors for the three and nine months ended December 31, 2012 and 2011:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Three Months Ended</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Nine Months Ended</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td></tr>
<tr style="vertical-align: bottom">
<td>Expected volatility</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">68%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">75%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">68%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">76%</td></tr>
<tr style="vertical-align: bottom">
<td>Expected dividend yield</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td></tr>
<tr style="vertical-align: bottom">
<td>Risk-free interest rate</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.68%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.44%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.70%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.35%</td></tr>
<tr style="vertical-align: bottom">
<td>Weighted average expected option term</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">4.50 years</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3.25 years </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">5.28 years</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3.04 years </td></tr>
<tr style="vertical-align: bottom">
<td>Weighted average fair value of options granted</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">3.18</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.96 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">3.32</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">2.20 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Employee Stock Purchase Plan </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Under the Company's Employee Stock Purchase Plan, eligible employees
can participate and purchase common stock semi-annually through payroll deductions at a price equal to 85% of the fair market value
of the common stock at the beginning of each one-year offering period or the end of the applicable six-month purchase period within
that offering period, whichever is lower. The contribution amount may not exceed 10% of an employee's base compensation, including
commissions but not including bonuses and overtime, subject to a calendar year maximum total purchase price per employee of $25,000.
The Company accounts for the Employee Stock Purchase Plan as a compensatory plan and recorded compensation expense of $115,000
and $117,000 for the three months ended December 31, 2012 and 2011 and $356,000 and $312,000 for the nine months ended December
31, 2012 and 2011, respectively, in accordance with ASC 718.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The estimated fair value of stock purchase rights granted under
the Employee Stock Purchase Plan was estimated at the date of grant using Black-Scholes pricing model with the following weighted
average assumptions:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Three Months Ended</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Nine Months Ended</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td></tr>
<tr style="vertical-align: bottom">
<td>Expected volatility</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">34%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">68%</td></tr>
<tr style="vertical-align: bottom">
<td>Expected dividend yield</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td></tr>
<tr style="vertical-align: bottom">
<td>Risk-free interest rate</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.16%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.10%</td></tr>
<tr style="vertical-align: bottom">
<td>Weighted average expected option term</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.75 years</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.75 years</td></tr>
<tr style="vertical-align: bottom">
<td>Weighted average fair value of options granted</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.45</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.49</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">As of December 31, 2012, there was $84,000 of total unrecognized
compensation cost related to employee stock purchases. These costs are expected to be recognized over a weighted average period
of 0.5 years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The future realization of tax benefits related to stock-based compensation
is dependent upon the timing of employee exercises and future taxable income, among other factors. The Company did not realize
any tax benefit from the stock-based compensation charges incurred during the three and nine months ended December 31, 2012 and
2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Segment Reporting</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">No customer represented greater than 10% of the Company's total
revenue for the three and nine months ended December 31, 2012 or 2011. Revenue from technology licensing and related software and
customers outside the United States was not material for the three and nine months ended December 31, 2012 or 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>3. FAIR VALUE MEASUREMENT</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following tables present the Company's fair value hierarchy
for assets and liabilities measured at fair value on a recurring basis at December 31, 2012 and March 31, 2012 (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Quoted Prices </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>in Active </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Markets </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Other </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Significant </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>for Identical </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Observable </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Unobservable </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>Balance at</b></td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Assets </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Inputs </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Inputs </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>December 31,</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>(Level 1)</b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>(Level 2) </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>(Level 3) </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>2012</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="color: black">Cash equivalents:</font></td>
<td style="text-align: right"> </td>
<td style="text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="color: black">     Money market funds</font></td>
<td style="text-align: right">$</td>
<td style="text-align: right">14,373 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">14,373 </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="color: black">Short-term investments:</font></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td><font style="color: black">     Mutual funds (1)</font></td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-  </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">1,965 </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-  </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">1,965 </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>Total</td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">14,373 </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,965 </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-  </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">16,338 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Quoted Prices </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>in Active </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Markets </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Other </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Significant </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>for Identical </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Observable </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Unobservable </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Balance at</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Assets </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Inputs </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Inputs </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>March 31,</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>(Level 1)</b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>(Level 2) </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>(Level 3) </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>2012</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="color: black">Cash equivalents:</font></td>
<td style="text-align: right"> </td>
<td style="text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="color: black">     Money market funds</font></td>
<td style="text-align: right">$</td>
<td style="text-align: right">14,366 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">14,366 </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="color: black">Short-term investments:</font></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td><font style="color: black">     Mutual funds (1)</font></td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-  </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">1,942 </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-  </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">1,942 </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>Total</td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">14,366 </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,942 </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-  </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">16,308 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">(1) The fair value of mutual funds is determined
based on published net asset values. The Company uses such pricing data as the primary input to make its assessments and
determinations as to the ultimate valuation of its investment portfolio.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>4. BALANCE SHEET DETAIL</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>    March 31,    </b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td></tr>
<tr style="vertical-align: bottom">
<td>Inventory (in thousands):</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>     Work-in-process</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">24</td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">55</td></tr>
<tr style="vertical-align: top">
<td>     Finished goods</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">549</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">526</td></tr>
<tr style="vertical-align: top">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">573</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">581</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>5. NET INCOME PER SHARE</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Basic net income per share is computed by dividing net income available
to common stockholders (numerator) by the weighted average number of vested, unrestricted common shares outstanding during the
period (denominator). Diluted net income per share is computed on the basis of the weighted average number of shares of common
stock outstanding plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method.
Dilutive potential common shares include shares issuable upon exercise of outstanding stock options and warrants and under the
employee stock purchase plan.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Three Months Ended</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Nine Months Ended</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: center"> </td>
<td colspan="4" style="text-align: center">(in thousands, except per share amounts)</td>
<td style="text-align: center"> </td>
<td style="text-align: center"> </td>
<td colspan="4" style="text-align: center">(in thousands, except per share amounts)</td></tr>
<tr style="vertical-align: bottom">
<td>Numerator:</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>Net income available to common stockholders</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1,920 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">2,586 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">12,278 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">5,365 </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>Denominator:</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>Common shares</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">71,611 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">69,445 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">71,197 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">65,165 </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>Denominator for basic calculation</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">71,611 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">69,445 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">71,197 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">65,165 </td></tr>
<tr style="vertical-align: bottom">
<td>Employee stock options </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3,023 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3,364 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2,947 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3,413 </td></tr>
<tr style="vertical-align: bottom">
<td>Stock purchase rights</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">336 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">385 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">339 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">409 </td></tr>
<tr style="vertical-align: top">
<td>Employee stock purchase plan</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">18 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">20 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">26 </td></tr>
<tr style="vertical-align: top">
<td>Denominator for diluted calculation </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">74,988 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">73,214 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">74,483 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">69,013 </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>Net income per share</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>     Basic </td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.03 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.04 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.17 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.08 </td></tr>
<tr style="vertical-align: bottom">
<td>     Diluted </td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.03 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.04 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.16 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.08 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following shares attributable to outstanding stock options and
stock purchase rights/restricted stock units were excluded from the calculation of diluted earnings per share because their inclusion
would have been anti-dilutive (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Three Months Ended</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Nine Months Ended</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td></tr>
<tr style="vertical-align: top">
<td>Employee stock options and awards</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">885 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">604 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">878 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">637 </td></tr>
<tr style="vertical-align: top">
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">885 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">604 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">878 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">637 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b> </b></p>
<p style="font: bold x-small Times New Roman, Times, Serif"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>6. INCOME TAXES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">For the three and nine months ended December 31, 2012, the Company
recorded a provision for income taxes of $0.9 million and $7.7 million, respectively, which was primarily attributable to net income
from operations, including gain on the sale of patents. For the three and nine months ended December 31, 2011, the Company recorded
accruals for state gross receipt and franchise taxes and released a portion of its valuation allowance against the deferred tax
asset as the Company deemed it was more likely than not it would be used to offset the $0.3 million deferred tax liability recorded
in connection with the acquisition of Zerigo. During the period ended December 31, 2011, the provision for income taxes was not
significant due to the valuation allowance.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">At March 31, 2012, there was $2.5 million of unrecognized tax benefits
that, if recognized, would have affected the effective tax rate. The Company does not believe that there has been any significant
change in the unrecognized tax benefits in the three and nine month periods ended December 31, 2012 and does not believe it is
reasonably possible that the unrecognized tax benefit will materially change in the next 12 months. To the extent that the unrecognized
tax benefits are ultimately recognized they may have an impact on the effective tax rate in future periods.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company is subject to taxation in the U.S., California and various
other states and foreign jurisdictions in which it has or had a subsidiary or branch operations or it is collecting sales tax.
All tax returns from fiscal 1995 to fiscal 2012 may be subject to examination by the Internal Revenue Service, California and various
other states. As of January 22, 2013, there were no active federal or state income tax audits. Returns filed in foreign jurisdictions
may be subject to examination for the fiscal years 2009 to 2010.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: bold x-small Times New Roman, Times, Serif"> </p>
<p style="font: bold x-small Times New Roman, Times, Serif"> </p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>7. COMMITMENTS AND CONTINGENCIES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Guarantees </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Indemnifications</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In the normal course of business, the Company indemnifies other
parties, including customers, lessors and parties to other transactions with the Company, with respect to certain matters. Under
these arrangements, the Company typically agrees to hold the other party harmless against losses arising from a breach of representations
or covenants, intellectual property infringement or other claims made against certain parties. These agreements may limit the time
within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification
agreements with its officers and directors.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">It is not possible to determine the maximum potential amount of
the Company's exposure under these indemnification agreements due to the limited history of indemnification claims and the unique
facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements
have not had a material impact on the Company's operating results, financial position or cash flows. Under some of these agreements,
however, the Company's potential indemnification liability might not have a contractual limit.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Product Warranties</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company accrues for the estimated costs that may be incurred
under its product warranties upon revenue recognition. Changes in the Company's product warranty liability, which is included in
cost of product revenue in the condensed consolidated statements of income were as follows (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Three Months Ended</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Nine Months Ended</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: center"> </td>
<td style="text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: center"> </td>
<td style="text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td></tr>
<tr style="vertical-align: bottom">
<td>Balance at beginning of period</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">376 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">391 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">387 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">362 </td></tr>
<tr style="vertical-align: bottom">
<td>     Accruals for warranties</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">168 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">106 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">445 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">374 </td></tr>
<tr style="vertical-align: top">
<td>     Settlements</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(122)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(101)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(410)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(340)</td></tr>
<tr style="vertical-align: top">
<td>Balance at end of period</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">422 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">396 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">422 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">396 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Minimum Third Party Customer Support Commitments</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In the third quarter of fiscal 2010, the Company amended a contract
with one of its third party customer support vendors containing a minimum monthly commitment of approximately $430,000. The agreement
requires a 150-day notice to terminate. The total remaining obligation under the amended contract is $2.2 million.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Minimum Third Party Network Service Provider Commitments</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company entered into contracts with multiple vendors for third
party network services that expire on various dates in fiscal 2013 through 2016. At December 31, 2012, future minimum annual payments
under these third party network service contracts were as follows (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-decoration: underline"><u>Year ending March 31:</u></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>     2013</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">629 </td></tr>
<tr style="vertical-align: bottom">
<td>     2014</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2,155 </td></tr>
<tr style="vertical-align: bottom">
<td>     2015</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,579 </td></tr>
<tr style="vertical-align: top">
<td>     2016</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">52 </td></tr>
<tr style="vertical-align: top">
<td>          Total minimum payments</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">4,415 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Legal Proceedings</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">From time to time, the Company may become involved in various legal
claims and litigation that arise in the normal course of its operations. While the results of such claims and litigation cannot
be predicted with certainty, the Company is not currently aware of any such matters that it believes would have a material adverse
effect on its financial position, results of operations or cash flows.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">On March 15, 2011, the Company was named as a defendant in a lawsuit, Bear
Creek Technologies, Inc. v. 8x8, Inc. et al., along with more than 20 other defendants. On August 17, 2011, the suit against the
Company was dismissed without prejudice under Rule 21 of the Federal Rules of Civil Procedure. On August 17, 2011, the Company
was sued again by Bear Creek Technologies, Inc. in the United States District Court for the District of Delaware. The Company filed
a motion to dismiss the complaint on October 11, 2011. On May 2, 2012, the Judicial Panel on Multidistrict Litigation ordered the
suit against the Company and over a dozen related cases, to be coordinated or consolidated for pretrial proceedings.  On August
27, 2012, the Court denied several defendants' motions to dismiss the complaint including the Company's. On October 11, 2012, the
Company answered the complaint and alleged three counterclaims as well as affirmative defenses. The Company believes it has factual
and legal defenses to these claims and intends to litigate the case vigorously. The Company cannot estimate potential liability
or expense in this case at this early stage of litigation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">On October 25, 2011, the Company was named a defendant in a lawsuit, Klausner
Technologies, Inc. v. Oracle Corporation et al., along with 30 other defendants. On November 1, 2011, Klausner dismissed the complaint
voluntarily and filed new complaints separating the defendants, including a new complaint against the Company. The Company filed
a motion to dismiss the complaint on February 23, 2012, which was granted in part by the Court on September 11, 2012.  On
September 25, 2012, the plaintiff filed an amended complaint to which the Company responded by filing another motion to dismiss
on October 11, 2012. That motion as well as another motion for a change in venue filed by the Company on August 23, 2012 are pending.
The Company has not answered the complaint and believes it has meritorious defenses to this lawsuit. The Company intends to defend
the case vigorously. The Company cannot estimate potential liability or expense in this case at this early stage of litigation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>State and Municipal Taxes</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">From time to time, the Company has received inquiries from a number
of state and municipal taxing agencies with respect to the remittance of taxes. The Company collects or has accrued for taxes that
it believes are required to be remitted. The amounts that have been remitted have historically been within the accruals established
by the Company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i> </i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
7359000
-336000
0
372000
0
31358000
7730000
284000
53977000
54065000
11651000
9816000
33202000
27076000
2136000
1481000
6270000
4372000
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>BASIS OF PRESENTATION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The accompanying interim condensed consolidated
financial statements are unaudited and have been prepared on substantially the same basis as our annual financial statements for
the fiscal year ended March 31, 2012. In the opinion of the Company's management, these financial statements reflect all adjustments
(consisting only of normal recurring adjustments) considered necessary for a fair statement of our financial position, results
of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported
amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The March 31, 2012 year-end condensed consolidated balance sheet
data in this document were derived from audited consolidated financial statements and do not include all of the disclosures required
by U.S. generally accepted accounting principles. These financial statements should be read in conjunction with the Company's audited
consolidated financial statements as of and for the fiscal year ended March 31, 2012 and notes thereto included in the Company's
fiscal 2012 Annual Report on Form 10-K.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The results of operations and cash flows for the interim periods
included in these financial statements are not necessarily indicative of the results to be expected for any future period or the
entire fiscal year.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b><i>THE COMPANY</i></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">8x8, Inc. ("8x8" or the "Company")
develops and markets cloud-based business communications services encompassing internally developed Voice over Internet Protocol
("VoIP") technologies. These services enable telephony and video applications as well as web-based conferencing and
unified communications capabilities. The Company also provides managed hosting and cloud-based computing services. As of December
31, 2012, the Company had approximately 31,500 business customers.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company was incorporated in California in February 1987 and
was reincorporated in Delaware in December 1996. The Company's fiscal year ends on March 31 of each calendar year. Each reference
to a fiscal year in these notes to the consolidated financial statements refers to the fiscal year ending March 31 of the calendar
year indicated (for example, fiscal 2013 refers to the fiscal year ending March 31, 2013).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><i>VoIP Service and Product Revenue</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company's VoIP service and product revenue is derived from the
sale of communications services and IP business telephones, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Financial Accounting Standards Board ("FASB") Accounting
Standards Codification ("ASC") 605-25 requires that revenue arrangements with multiple deliverables be divided into separate
units of accounting if the deliverables in the arrangement meet specific criteria. In addition, arrangement consideration must
be allocated among the separate units of accounting based on their relative fair values, with certain limitations. The provisioning
of the 8x8 service with the accompanying 8x8 IP telephone constitutes a revenue arrangement with multiple deliverables. In accordance
with the guidance of ASC 605-25, the Company allocates 8x8 revenues, including activation fees, among the 8x8 IP telephones and
subscriber services. Revenues allocated to these devices are recognized as product revenues during the period of the sale less
the allowance for estimated returns during the 30-day trial period. All other revenues are recognized as license and service revenues
when the related services are provided. The Company records revenue net of any sales-related taxes that are billed to its customers.
The Company believes this approach results in financial statements that are more easily understood by users.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Under the terms of the Company's typical subscription agreement,
new customers can terminate their service within 30 days of order placement and receive a full refund of fees previously paid.
The Company has determined that it has sufficient history of subscriber conduct to make a reasonable estimate of cancellations
within the 30-day trial period. Therefore, the Company recognizes new subscriber revenue in the month in which the new order was
shipped, net of an allowance for expected cancellations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><i>Product Revenue </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company recognizes revenue from product
sales for which there are no related services to be rendered upon shipment to partners and end users provided that persuasive
evidence of an arrangement exists, the price is fixed, title has transferred, collection of resulting receivables is reasonably
assured, there are no customer acceptance requirements, and there are no remaining significant obligations. Gross outbound shipping
and handling charges are recorded as revenue, and the related costs are included in cost of goods sold. Reserves for returns and
allowances for partner and end user sales are recorded at the time of shipment.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><i>Deferred Cost of Goods Sold</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Deferred cost of goods sold represents the
cost of products sold for which the end customer or distributor has a right of return. The cost of the products sold is recognized
contemporaneously with the recognition of revenue, when the subscriber has accepted the service.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><i>Goodwill and Other Intangible Assets</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Amortization expense for the customer relationship intangible asset is included in sales and marketing expenses.
Amortization expense for technology is included in cost of service revenue.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><i>Accounting for Stock-Based Compensation
</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">To value option grants and stock purchase
rights/restricted stock units for stock-based compensation, the Company used the Black-Scholes option valuation model. Fair value
determined using the Black-Scholes option valuation model varies based on assumptions used for the expected stock price volatility,
expected life, risk-free interest rates and future dividend payments. During the three and nine month periods ended December 31,
2012 and 2011, the Company used the historical volatility of the Company's stock over a period equal to the expected life of the
options. The expected life assumptions represent the weighted-average period the stock-based awards are expected to remain outstanding.
These expected life assumptions are established through the review of historical exercise behavior of stock-based award grants
with similar vesting periods. The risk-free interest rate is based on the closing market bid yields on actively traded U.S. treasury
securities in the over-the-counter market for the expected term equal to the expected term of the option. The dividend yield assumption
is based on the Company's history and expectation of future dividend payouts.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New\000ARoman; margin-right: 0; margin-left: 0"><b>Net Income Per Share</b></p>
<p style="font: 10pt Times New\000ARoman; margin-right: 0; margin-left: 0">Basic net income per share is computed by dividing
net income available to common stockholders (numerator) by the weighted average number of vested, unrestricted common shares outstanding
during the period (denominator). Diluted net income per share is computed on the basis of the weighted average number of shares
of common stock outstanding plus the effect of dilutive potential common shares outstanding during the period using the treasury
stock method. Dilutive potential common shares include shares issuable upon exercise of outstanding stock options and warrants
and under the employee stock purchase plan.</p>
<p style="font: 10pt Times New\000ARoman; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New\000ARoman; margin-right: 0; margin-left: 0"><i>Product Warranties</i></p>
<p style="font: 10pt Times New\000ARoman; margin-right: 0; margin-left: 0">The Company accrues for the estimated costs that may
be incurred under its product warranties upon revenue recognition.</p>
<p style="font: 10pt Times New\000ARoman; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Amortization expense for the customer relationship
intangible asset is included in sales and marketing expenses. Amortization expense for technology is included in cost of service
revenue. The carrying values of intangible assets were as follows (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="7" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31, 2012</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td colspan="7" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>March 31, 2012</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>Gross</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Gross</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>Carrying</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Accumulated</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Net Carrying</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Carrying</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Accumulated</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Net Carrying</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amount</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amortization</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amount</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amount</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amortization</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amount</b></td></tr>
<tr style="vertical-align: bottom">
<td>Technology</td>
<td style="text-align: right">$</td>
<td style="text-align: right">8,242 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">(1,050)</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">7,192 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">8,242 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">(432)</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">7,810 </td></tr>
<tr style="vertical-align: bottom">
<td>Customer relationships</td>
<td style="text-align: right"> </td>
<td style="text-align: right">3,305 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">(903)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2,402 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3,305 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">(450)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2,855 </td></tr>
<tr style="vertical-align: top">
<td>Trade names/domains</td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">957 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">957 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">957 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">957 </td></tr>
<tr style="vertical-align: bottom">
<td>Total acquired identifiable</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>     intangible assets</td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">12,504 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">(1,953)</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">10,551 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">12,504 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">(882)</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">11,622 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">At December 31, 2012, annual amortization of intangible assets,
based upon our existing intangible assets and current useful lives, is estimated to be the following (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Amount</b></td></tr>
<tr style="vertical-align: bottom">
<td>Remaining 2013</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">357 </td></tr>
<tr style="vertical-align: bottom">
<td>2014</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,334 </td></tr>
<tr style="vertical-align: bottom">
<td>2015</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,325 </td></tr>
<tr style="vertical-align: bottom">
<td>2016</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,325 </td></tr>
<tr style="vertical-align: bottom">
<td>2017</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,318 </td></tr>
<tr style="vertical-align: top">
<td>Thereafter</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">3,935 </td></tr>
<tr style="vertical-align: top">
<td>Total</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">9,594 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table summarizes the stock options outstanding and
exercisable at December 31, 2012:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="9" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Options Outstanding</b></td>
<td style="text-align: right"> </td>
<td colspan="7" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Options Exercisable</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Weighted</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Weighted</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Weighted</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Average</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Average</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Average</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Exercise</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Remaining</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Aggregate</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Exercise</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Aggregate</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Price</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Contractual</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Intrinsic</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Price</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Intrinsic</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Shares</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Per Share</b></td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Life (Years)</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Value</b></td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Shares</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Per Share</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Value</b></td></tr>
<tr style="vertical-align: bottom">
<td>$0.55 - $1.26</td>
<td> </td>
<td style="text-align: right">1,781,500 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.04 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">5.0 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">11,299,025 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,781,500 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.04 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">11,299,025 </td></tr>
<tr style="vertical-align: bottom">
<td>$1.27 - $1.72</td>
<td> </td>
<td style="text-align: right">1,504,919 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.53 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2.6 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">8,806,130 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,504,919 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.53 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">8,806,130 </td></tr>
<tr style="vertical-align: bottom">
<td>$1.73 - $3.35</td>
<td> </td>
<td style="text-align: right">1,326,608 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">2.56 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">5.6 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">6,396,028 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">886,007 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">2.43 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">4,382,974 </td></tr>
<tr style="vertical-align: bottom">
<td>$3.36 - $5.87</td>
<td> </td>
<td style="text-align: right">1,398,688 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">5.29 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">8.9 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2,919,012 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">204,018 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">5.04 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">477,705 </td></tr>
<tr style="vertical-align: top">
<td>$5.88 - $5.89</td>
<td> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">42,000 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">5.89 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">9.8 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">62,580 </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">1,750 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">5.89 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">2,608 </td></tr>
<tr style="vertical-align: top">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">6,053,715 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">29,482,775 </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">4,378,194 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">24,968,442 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The following table summarizes the classification
of stock-based compensation expense for the three and nine months ended December 31, 2012 and 2011 (in thousands):</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Three Months Ended</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Nine Months Ended</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td></tr>
<tr style="vertical-align: bottom">
<td>Cost of service revenues</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">63 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">41 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">149 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">87 </td></tr>
<tr style="vertical-align: bottom">
<td>Cost of product revenues</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td></tr>
<tr style="vertical-align: bottom">
<td>Research and development</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">125 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">72 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">295 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">176 </td></tr>
<tr style="vertical-align: bottom">
<td>Sales and marketing</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">355 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">255 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">979 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">610 </td></tr>
<tr style="vertical-align: top">
<td>General and administrative</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">222 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">50 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">403 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">140 </td></tr>
<tr style="vertical-align: bottom">
<td>Total stock-based compensation expense related to </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>     employee stock options and employee stock purchases, pre-tax</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">765 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">418 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,827 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,013 </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>Tax benefit</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td></tr>
<tr style="vertical-align: bottom">
<td>Stock based compensation expense related to employee</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>     stock options and employee stock purchases, net of tax</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">765 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">418 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,827 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,013 </td></tr>
</table>
<p style="margin: 0"> </p>
<p style="margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Option activity since March 31, 2012 is summarized as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Weighted</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Shares</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Average</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>Shares</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Subject to</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Exercise</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>Available</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Options</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Price</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>for Grant</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Outstanding</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Per Share</b></td></tr>
<tr style="vertical-align: bottom">
<td>Balance at March 31, 2012</td>
<td> </td>
<td style="text-align: right">375,546 </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">6,034,335 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.90 </td></tr>
<tr style="vertical-align: bottom">
<td>     Change in options available for grant</td>
<td style="text-align: right"> </td>
<td style="text-align: right">4,100,000 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td></tr>
<tr style="vertical-align: bottom">
<td>     Granted - options</td>
<td> </td>
<td style="text-align: right">(932,000)</td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">932,000 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">5.80 </td></tr>
<tr style="vertical-align: bottom">
<td>     Stock purchase rights/restricted stock units</td>
<td style="text-align: right"> </td>
<td style="text-align: right">(409,936)</td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td></tr>
<tr style="vertical-align: bottom">
<td>     Exercised</td>
<td> </td>
<td style="text-align: right">- </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">(777,487)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1.48 </td></tr>
<tr style="vertical-align: bottom">
<td>     Canceled/forfeited</td>
<td> </td>
<td style="text-align: right">135,133 </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">(135,133)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">4.01 </td></tr>
<tr style="vertical-align: top">
<td>     Termination of plans</td>
<td> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(43,004)</td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td></tr>
<tr style="vertical-align: top">
<td>Balance at December 31, 2012</td>
<td> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">3,225,739 </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">6,053,715 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">2.51 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Stock purchase right/restricted stock unit activity since March
31, 2012 is summarized as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Weighted</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Weighted</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Average</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Average</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Grant-Date</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Remaining</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>Number of</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Fair Market</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"><b>Contractual</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Shares</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Value</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>Term (in Years)</b></td></tr>
<tr style="vertical-align: bottom">
<td>Balance at March 31, 2012</td>
<td> </td>
<td style="text-align: right">966,400 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">2.50 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2.61 </td></tr>
<tr style="vertical-align: bottom">
<td>Granted</td>
<td> </td>
<td style="text-align: right">409,936 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">5.65 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>Released</td>
<td> </td>
<td style="text-align: right">(281,938)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2.16 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>Forfeited</td>
<td> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(80,244)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2.72 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>Balance at December 31, 2012</td>
<td> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,014,154 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">3.85 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2.62 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The estimated fair value of stock purchase rights granted under
the Employee Stock Purchase Plan was estimated at the date of grant using Black-Scholes pricing model with the following weighted
average assumptions:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Three Months Ended</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Nine Months Ended</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td></tr>
<tr style="vertical-align: bottom">
<td>Expected volatility</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">34%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">68%</td></tr>
<tr style="vertical-align: bottom">
<td>Expected dividend yield</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td></tr>
<tr style="vertical-align: bottom">
<td>Risk-free interest rate</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.16%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.10%</td></tr>
<tr style="vertical-align: bottom">
<td>Weighted average expected option term</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.75 years</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.75 years</td></tr>
<tr style="vertical-align: bottom">
<td>Weighted average fair value of options granted</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.45</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.49</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"></font></p>
<p style="margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The following table summarizes the assumptions
used to estimate the fair value of stock options to employees and directors for the three and nine months ended December 31, 2012
and 2011:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Three Months Ended</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Nine Months Ended</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td></tr>
<tr style="vertical-align: bottom">
<td>Expected volatility</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">68%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">75%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">68%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">76%</td></tr>
<tr style="vertical-align: bottom">
<td>Expected dividend yield</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">-  </td></tr>
<tr style="vertical-align: bottom">
<td>Risk-free interest rate</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.68%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.44%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.70%</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">0.35%</td></tr>
<tr style="vertical-align: bottom">
<td>Weighted average expected option term</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">4.50 years</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3.25 years </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">5.28 years</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3.04 years </td></tr>
<tr style="vertical-align: bottom">
<td>Weighted average fair value of options granted</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">3.18</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1.96 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">3.32</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">2.20 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The following tables present the Company's
fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at December 31, 2012 and March 31,
2012 (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Quoted Prices </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>in Active </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Markets </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Other </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Significant </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>for Identical </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Observable </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Unobservable </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>Balance at</b></td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Assets </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Inputs </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Inputs </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>December 31,</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>(Level 1)</b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>(Level 2) </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>(Level 3) </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>2012</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="color: black">Cash equivalents:</font></td>
<td style="text-align: right"> </td>
<td style="text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="color: black">     Money market funds</font></td>
<td style="text-align: right">$</td>
<td style="text-align: right">14,373 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">14,373 </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="color: black">Short-term investments:</font></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td><font style="color: black">     Mutual funds (1)</font></td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-  </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">1,965 </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-  </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">1,965 </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>Total</td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">14,373 </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,965 </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-  </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">16,338 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Quoted Prices </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>in Active </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Markets </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Other </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Significant </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>for Identical </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Observable </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Unobservable </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Balance at</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Assets </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Inputs </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>Inputs </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><font style="color: black"><b>March 31,</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>(Level 1)</b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>(Level 2) </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>(Level 3) </b></font></td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><font style="color: black"><b>2012</b></font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: purple; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="color: black">Cash equivalents:</font></td>
<td style="text-align: right"> </td>
<td style="text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="color: black">     Money market funds</font></td>
<td style="text-align: right">$</td>
<td style="text-align: right">14,366 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">-  </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">14,366 </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="color: black">Short-term investments:</font></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td><font style="color: black">     Mutual funds (1)</font></td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-  </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">1,942 </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-  </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">1,942 </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>Total</td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">14,366 </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,942 </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-  </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">16,308 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">(1)The fair value of mutual funds is determined based
on published net asset values. The Company uses such pricing data as the primary input to make its assessments and determinations
as to the ultimate valuation of its investment portfolio.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"><b>    March 31,    </b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td></tr>
<tr style="vertical-align: bottom">
<td>Inventory (in thousands):</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>     Work-in-process</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">24</td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">55</td></tr>
<tr style="vertical-align: top">
<td>     Finished goods</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">549</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">526</td></tr>
<tr style="vertical-align: top">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">573</td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">581</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Basic net income per share is computed by dividing net income available
to common stockholders (numerator) by the weighted average number of vested, unrestricted common shares outstanding during the
period (denominator). Diluted net income per share is computed on the basis of the weighted average number of shares of common
stock outstanding plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method.
Dilutive potential common shares include shares issuable upon exercise of outstanding stock options and warrants and under the
employee stock purchase plan.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Three Months Ended</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Nine Months Ended</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: center"> </td>
<td colspan="4" style="text-align: center">(in thousands, except per share amounts)</td>
<td style="text-align: center"> </td>
<td style="text-align: center"> </td>
<td colspan="4" style="text-align: center">(in thousands, except per share amounts)</td></tr>
<tr style="vertical-align: bottom">
<td>Numerator:</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>Net income available to common stockholders</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">1,920 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">2,586 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">12,278 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">5,365 </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>Denominator:</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: top">
<td>Common shares</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">71,611 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">69,445 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">71,197 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">65,165 </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>Denominator for basic calculation</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">71,611 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">69,445 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">71,197 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">65,165 </td></tr>
<tr style="vertical-align: bottom">
<td>Employee stock options </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3,023 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3,364 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2,947 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">3,413 </td></tr>
<tr style="vertical-align: bottom">
<td>Stock purchase rights</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">336 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">385 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">339 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">409 </td></tr>
<tr style="vertical-align: top">
<td>Employee stock purchase plan</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">18 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">20 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">- </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">26 </td></tr>
<tr style="vertical-align: top">
<td>Denominator for diluted calculation </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">74,988 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">73,214 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">74,483 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">69,013 </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>Net income per share</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>     Basic </td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.03 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.04 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.17 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.08 </td></tr>
<tr style="vertical-align: bottom">
<td>     Diluted </td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.03 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.04 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.16 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">0.08 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following shares attributable to outstanding stock options and
stock purchase rights/restricted stock units were excluded from the calculation of diluted earnings per share because their inclusion
would have been anti-dilutive (in thousands):</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Three Months Ended</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Nine Months Ended</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: right"> </td>
<td style="font-weight: bold; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td></tr>
<tr style="vertical-align: top">
<td>Employee stock options and awards</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">885 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">604 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">878 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">637 </td></tr>
<tr style="vertical-align: top">
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">885 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">604 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">878 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">637 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
-44000
-8000
23000
-15000
1876000
2578000
12301000
5350000
<p style="font: 10pt Times New\000ARoman; margin-right: 0; margin-left: 0">Changes in the Company's product warranty liability,
which is included in cost of product revenue in the condensed consolidated statements of income were as follows (in thousands):</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Three Months Ended</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="font-weight: bold; text-align: center"><b>Nine Months Ended</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td colspan="4" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>December 31,</b></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: center"> </td>
<td style="text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td>
<td style="font-weight: bold; text-align: center"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2012</b></td>
<td style="text-align: center"> </td>
<td style="text-align: center"> </td>
<td style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center"><b>2011</b></td></tr>
<tr style="vertical-align: bottom">
<td>Balance at beginning of period</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">376 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">391 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">387 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">362 </td></tr>
<tr style="vertical-align: bottom">
<td>     Accruals for warranties</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">168 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">106 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">445 </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">374 </td></tr>
<tr style="vertical-align: top">
<td>     Settlements</td>
<td> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(122)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(101)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(410)</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(340)</td></tr>
<tr style="vertical-align: top">
<td>Balance at end of period</td>
<td> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">422 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">396 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">422 </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">396 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New\000ARoman; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New\000ARoman; margin-right: 0; margin-left: 0"></p>
12504000
8242000
8242000
3305000
3305000
957000
957000
12504000
882000
1050000
432000
903000
450000
0
0
1953000
11622000
7192000
7810000
2402000
2855000
957000
957000
10551000
31500
357000
1334000
1325000
1325000
1318000
3935000
9594000
30
526000
549000
0
0
0
0
356000
149000
87000
1000
0
295000
176000
979000
610000
403000
140000
312000
765000
418000
1827000
1013000
222000
63000
0
355000
125000
41000
0
72000
255000
50000
115000
117000
765000
418000
1827000
1013000
878000
637000
885000
604000
878000
637000
885000
604000
14366000
14373000
0
0
14366000
0
0
14373000
3023000
3364000
2947000
3413000
336000
385000
339000
409000
362000
396000
391000
387000
422000
376000
-122000
-101000
-410000
-340000
168000
106000
445000
374000
629000
2155000
1579000
4415000
409936
281938
80244
966400
1014154
2.62
2.61
2.50
3.85
5.65
2.16
2.72
6034335
1781500
1504919
1326608
1398688
42000
6053715
6053715
932000
777487
-135133
1.04
1.53
2.56
5.29
5.89
2.51
4.01
0
0
5.80
1.48
.55
1.27
1.73
3.36
5.88
0.55
1.26
1.72
3.35
5.87
5.89
5.89
5.0
2.6
5.6
8.9
9.8
11299025
8806130
6396028
2919012
62580
29482775
1781500
1504919
886007
204018
1750
4378194
1.04
1.53
2.43
5.04
5.89
11299025
8806130
4382974
477705
2608
24968442
0
0
11965000
0
1816000
1101000
1071000
431000
55000
24000
-409936
0.68
0.75
0.68
0.76
0
0
0.34
0.68
0
0
0
0
0
0
0
0
0.0068
0.0044
0.0070
0.0035
0
0
0.0016
0.0010
4.50
3.25
5.28
3.04
0
0
0.75
0.75
3.18
1.96
3.32
2.20
0
0
1.45
1.49
16308000
14373000
1965000
0
14366000
1942000
0
16338000
7400000
84000
0.5
3.14
71847417
52000
<p style="font: 10pt Times New\000ARoman; margin-right: 0; margin-left: 0">The Company entered into contracts with multiple vendors
for third party network services that expire on various dates in fiscal 2013 through 2016. At December 31, 2012, future minimum
annual payments under these third party network service contracts were as follows (in thousands):</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-decoration: underline"><u>Year ending March 31:</u></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom">
<td>     2013</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">$</td>
<td style="text-align: right">629 </td></tr>
<tr style="vertical-align: bottom">
<td>     2014</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">2,155 </td></tr>
<tr style="vertical-align: bottom">
<td>     2015</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right">1,579 </td></tr>
<tr style="vertical-align: top">
<td>     2016</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">52 </td></tr>
<tr style="vertical-align: top">
<td>          Total minimum payments</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">4,415 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New\000ARoman; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New\000ARoman; margin-right: 0; margin-left: 0"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>8. PATENT SALE</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">On June 22, 2012, the Company entered into a patent purchase agreement
and sold a family of patents to a third party for $12.0 million plus a future payment of up to a maximum of $3.0 million based
on future license agreements entered into by the third party purchaser. Under the terms and conditions of the patent purchase agreement,
the Company has retained certain limited rights to continue to use the patents. The patent purchase agreement contains representations
and warranties customary for transactions of this type.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Indemnifications</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In the normal course of business, the Company indemnifies other
parties, including customers, lessors and parties to other transactions with the Company, with respect to certain matters. Under
these arrangements, the Company typically agrees to hold the other party harmless against losses arising from a breach of representations
or covenants, intellectual property infringement or other claims made against certain parties. These agreements may limit the time
within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification
agreements with its officers and directors.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">It is not possible to determine the maximum potential amount of
the Company's exposure under these indemnification agreements due to the limited history of indemnification claims and the unique
facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements
have not had a material impact on the Company's operating results, financial position or cash flows. Under some of these agreements,
however, the Company's potential indemnification liability might not have a contractual limit.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
375546
3225739
-932000
4100000
0
135133
-43004
12000000
3000000
2500000
2500000
300000
2200000
430000
150
0
297000
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Deferred Rent</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In accordance with the guidance in ASC 840-20, Leases, the Company
accounts for its headquarters facility operating lease as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Rent Holidays.<b> </b></i>The Company recognizes the related
rent expense on a straight-line basis at the earlier of the first rent payment or the date of possession of the leased property.
The difference between the amounts charged to expense and the rent paid is recorded as deferred lease incentives and amortized
over the lease term.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Rent Escalations. </i>The Company recognizes escalating rent
provisions on a straight-line basis over the lease term. The difference between the amounts charged to expense and the rent paid
is recorded as deferred lease incentives and amortized over the lease term.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Tenant Improvement Allowance</i>. The tenant improvement allowance
is deferred and amortized on a straight-line basis over the life of the lease as a reduction to rent expense.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
0
0
25000
1900000
100000
1700000
October 2019
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In April
2012, the Company entered into an 87-month lease agreement. Under the terms of the lease agreement:</font></p>
<ul style="list-style-type: disc">
<li style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">the Company received a three month rent holiday from
rental payments before;</font></li>
<li style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">base rent is $130,821 for the 15 months after the
rent holiday; and</font></li>
<li style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">rent expense increases 3% each year thereafter.</font></li>
</ul>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company also received a $1.7 million allowance
for tenant improvements.</font></p>
<p style="margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="margin: 0"><font style="font-size: 10pt"> </font></p>
<p style="margin: 0"><font style="font-size: 10pt"> </font></p>
0
274000
0
-60000
18000
20000
0
26000
The fair value of mutual funds is determined based on published net asset values. The Company uses such pricing data as the primary input to make its assessments and determinations as to the ultimate valuation of its investment portfolio.