Stock Options and Warrants

3 Months Ended

Jun. 30, 2011

Stock Options and Warrants [Abstract]

STOCK OPTIONS AND WARRANTS

NOTE H — STOCK OPTIONS AND WARRANTS

The Company grants stock options under its 2003 Stock Option and 2004 Stock and Incentive Awards Plans (the Plans). Under the terms of the Plans, the Company has reserved 12,000,000 shares for issuance to key employees, consultants and directors. The Company’s board of directors approved an increase to the number of shares available under the 2004 Stock and Incentive Awards Plan of 1,500,000 shares, and such share increase was approved by the Company’s shareholders at the 2010 annual shareholders meeting and such shares are included above, other than as described below. The options generally vest and become exercisable ratably between one month and five years although longer vesting periods have been used in certain circumstances. Exercisability of the options granted to employees are contingent on the employees’ continued employment and non-vested options are subject to forfeiture if employment terminates for any reason. Options under the Plans have a maximum life of 10 years. In the past, the Company has granted both ISOs and NQSOs, although in July 2008, the Company adopted a policy of thereafter only granting NQSOs. Restricted stock awards have no vesting period and have been issued to certain non-employee directors in lieu of cash compensation pursuant to elections made under the Company’s non-employee director compensation program. The Plans also provide to certain employees accelerated vesting in the event of certain changes of control of the Company as well as under other special circumstances.

In fiscal 2011, the Company converted all of its existing ISO awards to NQSO awards. No consideration was given to the employees for their voluntary conversion of ISO awards.

The Company granted the accelerated vesting stock options in May 2011 under its 2004 Stock and Incentive Awards to provide an opportunity for its named executive officers to earn long-term equity incentive awards based on the Company’s financial performance for fiscal 2012. An aggregate of 459,041 stock options were granted on the third business day following the Company’s public release of its fiscal 2011 results at an exercise price per share of $4.19, which was the closing sale price of the Company’s Common Stock on that date. The stock options will only vest, however, if the optionee remains employed and the Company is successful in achieving at least 100% of the target levels for each of the Company’s three financial metric targets for fiscal 2012, and if the Company’s stock price equals or exceeds $5.00 per share for at least 20 trading days during any 90-day period during the option’s ten-year term.

For the three months ended June 30, 2010 and June 30, 2011, the Company granted 5,419 and 3,282 shares from the 2004 Stock and Incentive Awards Plan to certain non-employee directors who elected to receive stock awards in lieu of cash compensation. The shares were valued at $3.46 per share and $4.19 per share, the closing market prices as of the grant date.

The following amounts of stock-based compensation were recorded (in thousands):

	Three months ended June 30,
	2010		2011
Cost of product revenue	$	36	$	42
General and administrative		98		157
Sales and marketing		109		148
Research and development		5		5
Total	$	248	$	352

As of June 30, 2011, compensation cost related to non-vested common stock-based compensation, excluding performance stock option awards amounted to $4.1 million over a remaining weighted average expected term of 6.7 years.

The following table summarizes information with respect to the Plans:

				Options Outstanding
									Weighted
							Weighted		Average
	Shares						Average		Remaining		Aggregate
	Available for			Number			Exercise		Contractual		Intrinsic
	Grant			of Shares			Price		Term (in years)		value
Balance at March 31, 2011		1,577,676			3,658,768		$	3.83		6.60
Granted stock options		(873,311	)		873,311			4.11
Granted shares		(3,282	)		—
Forfeited		188,480			(188,480	)		7.42
Exercised		—			(77,013	)		1.21
Balance at June 30, 2011		889,563			4,266,586		$	3.88		7.08	$	2,882,478
Exercisable at June 30, 2011					1,874,548		$	3.70		5.11	$	1,965,319

The aggregate intrinsic value represents the total pre-tax intrinsic value, which is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s closing common stock price of $3.93 as of June 30, 2011.

A summary of the status of the Company’s outstanding non-vested stock options as of June 30, 2011 was as follows:

Non-vested at March 31, 2011	1,832,167
Granted	873,311
Vested	(124,960	)
Forfeited	(188,480	)
Non-vested at June 30, 2011	2,392,038

The Company has previously issued warrants in connection with various private placement stock offerings and services rendered. The warrants granted the holder the option to purchase common stock at specified prices for a specified period of time. No warrants were issued in fiscal 2011 or during the three months ended June 30, 2011.

Outstanding warrants were comprised of the following:

			Weighted
			Average
	Number of		Exercise
	Shares		Price
Balance at March 31, 2011		38,980	$	2.25
Issued		—		—
Exercised		—		—
Cancelled		—		—
Balance at June 30, 2011		38,980	$	2.25

A summary of outstanding warrants at June 30, 2011 follows:

Exercise Price		Number of Warrants		Expiration
$	2.25		38,980	Fiscal 2015