Stockholders' Equity

3 Months Ended

Jul. 31, 2011

Stockholders' Equity [Abstract]

Stockholders' Equity

(12) Stockholders’ Equity:

Common Stock

During the three months ended July 31, 2011, we issued 100,000 shares of common stock having a market value of $354,000 to a former employee upon the exercise of options granted to him while employed at our company. The purchase price of these shares was $180,000.

Earnings per Share

The following table provides a reconciliation of the income amounts and weighted average number of common and common equivalent shares used to determine basic and diluted earnings per share for the three months ended July 31, 2011 and 2010 (in thousands, except per share data):

	For the Three Months Ended July 31,
	2011						2010
	Net				Per Share		Net				Per Share
	Income		Shares		Amount		Income		Shares		Amount
Basic earnings	$	791		64,529	$	0.01	$	6,211		59,940	$	0.10
Effect of dilutive stock options and warrants		—		413		—		—		645		—
Effect of assumed conversion of convertible debt		—		—		—		506		6,485		—
Diluted earnings	$	791		64,942	$	0.01	$	6,717		67,070	$	0.10

For the three months ended July 31, 2011, 2,431,906 shares of common stock issuable upon conversion of the Convertible Notes and 1,160,132 shares of common stock issuable upon the exercise of stock options and the delivery of restricted stock units (“RSUs”) were excluded from the computation of diluted earnings per share because the effect would be antidilutive. For the three months ended July 31, 2010, 938,417 shares of common stock issuable upon the exercise of stock options and the delivery of RSUs were excluded from the computation of diluted earnings per share because the effect would be antidilutive.

Stock Option and Employee Stock Purchase Plans

We have two stock option plans (the “SOPs”): the 2001 Stock Option Plan and the 2004 Incentive Stock Plan. New grants under the 2001 Stock Option Plan have not been made since the approval of the 2004 Incentive Stock Plan at our September 13, 2004 annual meeting of stockholders. All new grants covering all participants are issued under the 2004 Incentive Stock Plan.

The 2004 Incentive Stock Plan authorizes the issuance of the lesser of (1) 15% of the shares of our common stock outstanding from time to time, or (2) 10,000,000 shares of our common stock. The plan permits the grant of options to acquire common stock, restricted common stock and deferred stock, RSUs, stock appreciation rights, and dividend equivalents. Our board of directors, or a committee established by our board, administers the SOPs, selects recipients to whom awards are granted, and determines the grants to be awarded. Options granted under the SOPs are exercisable at a price determined by our board or committee at the time of grant, but in no event less than fair market value of our common stock on the date granted. Grants of options may be made to employees and directors without regard to any performance measures. All options issued pursuant to the SOPs are nontransferable and subject to forfeiture.

Unless terminated earlier by our board of directors, the 2004 Incentive Stock Plan will terminate on the earlier of (1) ten years from the date of the later to occur of (i) the original date the plan was approved by our board of directors or our stockholders, whichever is earlier, or (ii) the date an increase in the number of shares reserved for issuance under the plan is approved by our board of directors (so long as such increase is also approved by our stockholders), and (2) such time as no shares of common stock remain available for issuance under the plan and our company has no further rights or obligations with respect to outstanding awards under the plan. The date of grant of an award is deemed to be the date upon which our board of directors or board committee authorizes the granting of such award. Generally, awards vest over a period of three years and are exercisable for a period of ten years. The plan also permits the grant of awards to non-employees, which the board has granted in the past. A separate option grant, outside of the 2004 Incentive Stock Plan, for 500,000 shares was made, at an exercise price of $1.47 per share, in connection with the hiring of our President and Chief Executive Officer during the fiscal year ended April 30, 2005. As of July 31, 2011, there were 450,000 options outstanding relating to this grant, which expire on December 6, 2014.

The number of shares and weighted average exercise prices of (i) options granted under the SOPs and (ii) the separate option grant to our President and Chief Executive Officer outside of the SOPs for the three months ended July 31, 2011 and 2010 are as follows:

	For the Three Months Ended July 31,
	2011					2010
				Weighted-					Weighted-
				Average					Average
	Shares			Price		Shares			Price
Options outstanding, beginning of year		3,137,565		$	4.73		3,207,264		$	4.84
Granted during year		554,100			3.56		35,000			4.32
Exercised during year		(100,000	)		1.80		—			—
Canceled/forfeited during year		(195,334	)		4.87		(6,666	)		3.05
Options outstanding, end of period		3,396,331		$	4.62		3,235,598		$	4.93
Weighted average remaining life	6.89 years					6.75 years
Options exercisable, end of period		1,883,035		$	5.09		2,057,103		$	4.46
Weighted average remaining life	5.02 years					5.53 years

The aggregate intrinsic value of outstanding options that were vested as of July 31, 2011 and 2010 was $1.3 million and $2.0 million, respectively.

We have an ESPP, which authorizes the sale of up to 10,000,000 shares of our common stock to employees. The ESPP commenced on June 24, 2002 and continues in effect for a term of ten years unless sooner terminated. The ESPP was implemented by a series of offering periods of two years in duration, with four six-month purchase periods in the offering period. The ESPP was amended in September 2004 so that future offering periods, commencing with the October 1, 2004 offering period, are six months, consistent with the six-month purchase period. The purchase price is 85% of the fair market value of our common stock on the offering date or on the purchase date, whichever is lower. A participant may elect to have payroll deductions made on each payday during the offering period in an amount not less than 1% and not more than 20% (or such greater percentage as the board may establish from time to time before an offering date) of such participant’s compensation on each payday during the offering period. The last day of each offering period is the purchase date for such offering period. An offering period commencing on April 1 ends on the next September 30. An offering period commencing on October 1 ends on the next March 31. Our board of directors has the power to change the duration and/or the frequency of offering and purchase periods with respect to future offerings and purchases without stockholder approval if such change is announced at least five days prior to the scheduled beginning of the first offering period to be affected. The maximum number of shares an employee may purchase during each purchase period is 12,500 shares or a total of $25,000 in shares, based on the fair market value on the first day of the purchase period.

All options and rights to participate in the ESPP are nontransferable and subject to forfeiture in accordance with the ESPP guidelines. In the event of certain corporate transactions, each option outstanding under the ESPP will be assumed or an equivalent option will be substituted by the successor corporation or a parent or subsidiary of such successor corporation. During the three months ended July 31, 2011 and 2010, no shares were purchased under the ESPP.

We measure the cost of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. We calculate the fair value of our stock options and warrants issued to employees using the Black-Scholes model at the time the options and warrants were granted. That amount is then amortized over the vesting period of the option or warrant. With our ESPP, fair value is determined at the beginning of the purchase period and amortized over the term of the offering period.

The following assumptions were used in valuing our options and ESPP purchases during the three-month periods ended July 31, 2011 and 2010:

	For the Three Months Ended July 31,
	2011		2010
Stock option grants:
Risk-free interest rate	1.47 - 2.20	%	2.27 - 2.47	%
Expected term	5.42 - 8.18 years		5.36 - 7.36 years
Expected volatility	66.9 - 73.9	%	76.4	%
Dividend yield	0%		0	%
Employee Stock Purchase Plan:
Risk-free interest rate	17.00	%	24.00%
Expected term	6 months		6 months
Expected volatility	28.1	%	52.5	%
Dividend yield	0	%	0	%

We estimate expected volatility using historical volatility for the expected term. The fair value of each stock option or ESPP purchase was estimated on the date of the grant using the Black-Scholes option pricing model (using the risk-free interest rate, expected term, expected volatility, and dividend yield variables, as noted in the above table). The weighted-average fair value of stock options granted during the three months ended July 31, 2011 was $2.35 per share. There were 554,100 and 35,000 options granted during the three months ended July 31, 2011 and 2010, respectively. The total stock-based compensation expense, including stock options, purchases under the ESPP, and RSU awards, was $587,000 and $568,000 for the three months ended July 31, 2011 and 2010, respectively. Stock-based compensation expense is included in general and administrative expenses.

We calculate the fair value of our performance-based RSUs (“PSUs”) issued to employees using the Monte-Carlo model at the time the PSUs were granted. We use the following assumptions in valuing our PSUs: (a) grant date market value of our common stock and the NASDAQ Composite Index, (b) expected volatilities of our common stock and the NASDAQ Composite Index (c) correlation coefficient between our common stock and the NASDAQ Composite Index, (d) risk-free interest rate, and (e) dividend yield.

During the three months ended July 31, 2011, we granted 95,200 PSUs, with an aggregate maximum award of 190,400 PSUs, to current employees. These PSUs were granted to certain of our named executive officers and vest based on the relative performance of our stock price against the NASDAQ Composite Index over a three-year period. During the three months ended July 31, 2010, we did not grant any PSUs. The aggregate fair market value of our RSU and PSU grants is being amortized to compensation expense over the vesting period (three years). During the three months ended July 31, 2011 and 2010, we issued 1,000 and 58,029 shares of common stock, respectively, under RSUs that had vested during such periods with a total market value of $3,000 and $235,000, respectively. Compensation expense recognized related to grants of RSUs and PSUs was $31,000 and $49,000 for the three months ended July 31, 2011 and 2010, respectively. As of July 31, 2011, there was $585,000 of unrecognized compensation cost related to unvested RSUs, much of which relates to PSUs. This cost is expected to be recognized over a weighted average of 2.3 years.

Stockholder Rights Plan

On August 9, 2005, we adopted a stockholder rights plan (the “Rights Plan”). Under the Rights Plan, we made a dividend distribution of one preferred share purchase right (a “Right”) for each outstanding share of common stock. The dividend is payable to stockholders of record at the close of business on August 26, 2005. Each Right entitles the registered holder to purchase from us one one-thousandth of a share of our Series A Junior Participating Preferred Stock, par value $.001 per share (the “Preferred Stock”), at a price of $36.00 per one one-thousandth of a share of Preferred Stock, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement dated as of August 25, 2005, as the same may be amended from time to time, between us and Interwest Transfer Company, Inc., as Rights Agent.

In general, until the earlier to occur of (i) ten days following a public announcement that a person or group of affiliated or associated persons (with certain exceptions) has acquired beneficial ownership of 15% or more of the outstanding shares of our common stock or (ii) ten business days (or such later date as may be determined by action of our board of directors prior to such time as any person or group of affiliated persons becomes an “Acquiring Person”) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 15% or more of the then outstanding shares of our common stock, the Rights will be evidenced, with respect to any of the common stock certificates outstanding as of August 25, 2005, by such common stock certificates together with a copy of a summary describing the Rights. As of July 31, 2011, we have not had any such changes that would have resulted in the execution of the Rights Plan.