STOCK BASED COMPENSATION

12 Months Ended

Mar. 31, 2012

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

NOTE 13 - STOCK BASED COMPENSATION

In 2006, the directors adopted, and the stockholders approved, the 2006 long-term incentive plan (the “Plan”) covering 1,000,000 shares of common stock. On August 5, 2010, the Plan was amended to increase the maximum number of shares of common stock that may be issued to an aggregate of 3,000,000 shares. On September 15, 2011, the directors adopted and the shareholders approved an amendment to increase the maximum number of shares of common stock that may be issued to an aggregate of 3,300,000 shares. The Plan provides for the grant of incentive and non-qualified options, stock grants, stock appreciation rights and other equity-based incentives to employees, including officers, and consultants. The Plan is to be administered by a committee of not less than two directors each of whom is to be an independent director. In the absence of a committee, the Plan is administered by the Board of Directors. Independent directors are not eligible for discretionary options.

Pursuant to the Plan, each newly elected independent director receives at the time of his election, a five-year option to purchase 50,000 shares of common stock at the market price on the date of his or her election.  In addition, the Plan provides for the annual grant of an option to purchase 10,000 shares of common stock on July 1st of each year following the third anniversary of the date of his or her first election.

On July 1, 2010, the Company granted stock options to two directors to purchase 10,000 shares of common stock at an exercise price of $0.76 per share, pursuant to the Plan provision following the third anniversary date of each director’s first election to the board. Fifty percent of the shares will vest in nine months and eighteen months from the grant date, respectively.

On August 4, 2010, the Company granted stock options to its CEO and CFO to purchase 1,000,000 and 150,000 shares of common stock, respectively, at an exercise price of $0.70 per share, the fair market value on the date of grant.  The options will vest in equal amounts over three years on the anniversary of the grant date.

On September 27, 2010, pursuant to the Plan, the Company granted options to purchase 50,000 shares of common stock at an exercise price of $0.82 per share to a new independent director.  The grant provided for 30,000 shares to vest immediately on the grant date and 10,000 shares each to vest on September 26, 2011 and 2012.

Also, during fiscal 2011, the Company granted stock options to employees to purchase 155,000 shares of common stock at exercise prices ranging from $1.22 - $1.70 per share or the fair market value on the grant date. The options will vest in three cumulative annual installments over three years on the grant date anniversary.

On April 19, 2011, the Company granted stock options to its CEO and CFO to purchase 250,000 and 100,000 shares of common stock, respectively, at an exercise price of $1.96 per share, the fair market value on the date of grant. The options will vest in equal amounts over three years on the anniversary of the grant date.

Also, on April 19, 2011, the Company granted stock options to certain employees to purchase 227,000 shares of common stock at an exercise price of $1.96 per share, the fair market value on the date of grant. The options will vest in equal amounts over three years on the anniversary of the grant date.

On July 1, 2011, the Company granted stock options to two directors to purchase 10,000 shares of common stock each at an exercise price of $1.62 per share, pursuant to the plan provision following the third anniversary date of each director’s first election to the board. Fifty percent of the shares will vest in six months and 50% in eighteen months from the grant date, respectively.

On July 21, 2011, the Company granted stock options to an employee to purchase 20,000 shares of common stock at an exercise price of $1.65 per share, the fair market value on the date of grant. The options vested immediately on the grant date.

On August 29, 2011, the Company granted stock options to certain employees to purchase 30,000 shares of common stock at an exercise price of $1.45 per share, the fair market value on the date of grant. The options will vest in equal amounts over three years on the anniversary of the grant date.

The fair value was estimated using the Black-Scholes option-pricing model based on the closing stock prices at the grant date and the weighted average assumptions specific to the underlying options. Expected volatility assumptions are based on the historical volatility of our common stock. The risk-free interest rate was selected based upon yields of five-year U.S. Treasury issues. The Company uses the simplified method for all grants to estimate the expected term of the option. We assume that stock options will be exercised evenly over the period from vesting until the awards expire. As such, the assumed period for each vesting tranche is computed separately and then averaged together to determine the expected term for the award. Because of our limited stock exercise activity we did not rely on our historical exercise data. The assumptions utilized for option grants during the periods presented ranged from 80% to 112% for volatility, a risk free interest rate of 0.92% to 2.09%, and expected term of approximately six years. At March 31, 2012, 403,840 shares of common stock were available for grant under the Plan.

The following table summarizes information about options for the most recent annual income statements presented:

	Number Of		Weighted Average		Aggregate Intrinsic		Weighted Average Remaining Contractual Life
	Options		Exercise Price		Value		(in years)
Outstanding at 3/31/2010	850,827		$	0.558
Granted	1,365,000		$	0.794
Exercised	(169,166	)	$	0.285	$	204,341
Outstanding at 3/31/2011	2,046,661		$	0.738	$	1,969,075	7.05
Granted	647,000		$	1.916
Forfeited	(73,000	)	$	1.662
Exercised	(204,995	)	$	0.385	$	138,238
Outstanding at 3/31/2012	2,415,666		$	1.040	$	107,375	7.71
Vested or expected to vest 3/31/2012	2,415,666		$	1.040	$	107,375	7.71
Exercisable at 3/31/2012	926,667		$	0.627	$	69,041	4.61

At March 31, 2012 there was $968,867 of total unrecognized compensation cost related to stock options. These costs are expected to be recognized over the next three years. The total fair value of shares vested during the year was $877,137.

The following is a summary of the status of the Company’s stock options outstanding but not vested for the year ended March 31, 2012 and 2011:

	Number of Options		Weighted Average
Outstanding at 3/31/2010	299,500		$	0.718
Granted	1,365,000		$	0.794
Vested	(224,500	)	$	0.808
Outstanding at 3/31/2011	1,440,000		$	0.783
Granted	647,000		$	1.916
Forfeited	(83,000	)	$	1.960
Vested	(515,000	)	$	0.798
Outstanding at 3/31/2012	1,489,000		$	1.205