Stockholders’ Equity

Equity Incentive Program

The Company’s equity incentive program is a broad-based, retention program comprised of stock options, restricted stock units and an employee stock purchase plan (“ESPP”) designed to align stockholder and employee interests. For a description of the Company’s equity plans, see the notes to consolidated financial statements contained in the Company’s Annual Report on Form

-K for the year ended

March 31, 2017.

Valuation Assumptions

During the

three

months ended

June 30, 2017,

the Company calculated the fair value of its employee stock options at the date of grant with the following weighted average assumptions:

	Three Months Ended
	June 30, 2017
Risk-free interest rate		1.91	%
Dividend yield		0	%
Expected volatility		54.00	%
Expected term in years		6.08
Weighted average fair value at grant date	$	1.81

The following tables summarize activity under the equity incentive plans for the

three

months ended

June 30, 2017:

	Options Outstanding					Restricted Stock Units Outstanding
	Number of shares (in thousands)			Weighted average exercise price		Number of shares (in thousands)			Weighted average fair value

Outstanding at April 1, 2017		4,530		$	3.02		181		$	3.94
Granted		65		$	3.44		-		$	-
Exercised/Released		-		$	-		(35	)	$	3.99
Cancelled		(21	)	$	3.95		-		$	-
Outstanding at June 30, 2017		4,574		$	3.02		146		$	3.93

Vested and expected to vest		4,303		$	3.07

	Shares Available for Grant
	(in thousands)
Balance at April 1, 2017		594
Options:
Granted from approved plans		(65	)
Cancelled		9
Balance at June 30, 2017		538

The weighted average remaining contractual term for exercisable options is

7.97

years. The intrinsic value is calculated as the difference between the market value as of

June 30, 2017

and the exercise price of the shares. The market value of the Company’s common stock as of

June 30, 2017

was

$2.63

as reported by the NASDAQ Capital Market. The aggregate intrinsic value of stock options outstanding at

June 30, 2017

and

2016

was

$2.6

million and

$0,

respectively. The aggregate intrinsic value of restricted stock units outstanding at

June 30, 2017

and

2016

was

$0.4

million and

$0.3

million, respectively.

The options outstanding and exercisable at

June 30, 2017

were in the following exercise price ranges:

				Options Outstanding				Options Vested
Range of Exercise Prices per share				Number of Shares (in thousands)		Weighted- Average Remaining Contractual Life (in years)		Number of Shares (in thousands)		Weighted- Average Exercise Price per Share
	$1.35	—	$1.35		103		8.96		29	$	1.35
	$1.64	—	$1.64		2,000		8.65		660	$	1.64
	$1.75	—	$2.00		575		9.12		108	$	1.78
	$2.59	—	$3.99		460		8.81		166	$	3.48
	$4.32	—	$4.32		634		8.08		304	$	4.32
	$5.18	—	$6.61		741		7.11		531	$	6.28
	$6.83	—	$6.83		50		6.64		50	$	6.83
	$7.20	—	$7.20		5		1.66		5	$	7.20
	$11.40	—	$11.40		5		1.15		5	$	11.40
	$18.90	—	$18.90		1		0.04		1	$	18.90
	$1.35	—	$18.90		4,574		8.37		1,859	$	3.75

The effect of recording stock-based compensation expense (including expense related to the ESPP discussed below) for each of the periods presented was as follows (in thousands):

	Three Months Ended

	June 30, 201 7		June 30, 201 6

Cost of revenues	$	28	$	59
Research and development		63		53
Sales and marketing		92		163
General and administrative		403		253
Impact on net loss	$	586	$	528

As of

June 30, 2017,

the unrecorded stock-based compensation balance related to stock options and restricted stock units outstanding excluding estimated forfeitures was

$2.9

million and

$0.4

million, respectively, and will be recognized over an estimated weighted average amortization period of

2.50

years for stock options and

0.98

years for restricted stock units. The amortization period is based on the expected remaining vesting term of the options and restricted stock units.

1999

Employee Stock Purchase Plan (“ESPP”)

The price paid for the Company’s common stock purchased under the ESPP is equal to

85%

of the lower of the fair market value of the Company’s common stock at the beginning of each offering period or at the end of each offering period. The compensation expense in connection with the ESPP for the

three

months ended

June 30, 2017

and

2016

was

$16,000

and

$29,000,

respectively. During the

three

months ended

June 30, 2017

and

2016,

there were

shares issued under the ESPP.

Registered Direct Offering

June 26, 2017,

the Company, pursuant to a securities purchase agreement with certain investors, sold

2,184,000

shares of the Company’s common stock at a price of

$2.50

per share for aggregate proceeds of

$4.9

million, net of

$0.3

million placement agency fees and

$0.2

million other offering expenses.