Shareholders' Equity

12 Months Ended

Mar. 31, 2013

Shareholders' Equity [Abstract]

Shareholders' Equity

3.   Shareholders' Equity

Share-based Compensation. At March 31, 2013, we had one active plan (2006 Amended Stock and Incentive Plan) for share-based compensation grants. Under the plan, if we have a change in control, all outstanding grants, including those subject to vesting or other performance targets, fully vest immediately.  Under this shareholder-approved plan, we reserved 2,700,000 shares of our common stock for share-based grants, and 1,011,000 shares remain available for grant at March 31, 2013.  We grant option awards with an exercise price equal to the closing market price of our stock at the date of the grant.  We have options outstanding to purchase 1,116,000 shares of common stock granted under this plan. Options granted under this plan generally expire over a period ranging from five to seven years from date of grant and vest at varying rates ranging up to three years.

We have fully vested options outstanding to purchase 900,000 shares of common stock, not granted under the 2006 plan, which expire up to ten years from date of grant.

We grant options at the discretion of our directors.  The options granted under the plan generally provide for the exercise of options during a limited period following termination of employment, death or disability.

We recognize share-based compensation expense in the statement of operations based on the fair value of the share-based payment over the requisite service period.  We incurred a total of approximately $812,000, $685,000 and $434,000 in share-based compensation expense (inclusive of $2,000, $5,000 and $11,000, respectively, for grants to consultants) in fiscal 2013, 2012 and 2011, respectively.

We determine the fair value of the option awards using the Black-Scholes option pricing model.  We used the following weighted-average assumptions to value the options granted during the years ended March 31:

	2013			2012			2011
Expected life, in years		6.00			5.32			5.25
Risk-free interest rate		1.15	%		1.57	%		1.76	%
Expected volatility		89.03	%		90.08	%		91.13	%
Expected dividend yield		0	%		0	%		0	%

The expected life selected for options granted represents the period of time we expect options to be outstanding based on historical data of option holder exercise and termination behavior for similar grants.  The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate over the expected life at the time of grant.  Expected volatility is based upon historical volatility of our stock.  We estimate the forfeiture rate for stock awards to range from 0% to 13.0% in fiscal 2013 based on our historical experience.  The expected life of the options is based on the historical life of previously granted options which are generally held to maturity.

The following table summarizes the activity related to our stock options in fiscal 2011, 2012 and 2013:

	Number of shares			Weighted average exercise price		Weighted average grant date fair value		Aggregate intrinsic value		Weighted average remaining life in years
Balance at March 31, 2010		2,038,000
Options granted		229,000				$	3.49
Options exercised		(161,000	)					$	502,000
Options surrendered		(40,000	)
Balance at March 31, 2011		2,066,000		$	3.39
Options granted		140,000			6.66		4.70
Options exercised		(94,000	)		2.22				430,000
Options surrendered		(29,000	)		5.36
Balance at March 31, 2012		2,083,000			3.64				968,000		2.96
Options granted		188,000			3.09		2.26
Options exercised		(40,000	)		3.75				18,000
Options surrendered		(215,000	)		4.36
Balance at March 31, 2013		2,016,000		$	3.51			$	598,000		2.64
Options exercisable at March 31, 2013		1,723,000		$	3.38			$	598,000		2.07

The total fair value of stock options vested during fiscal 2013, 2012 and 2011 was $490,000, $398,000 and $221,000 respectively.

We received net proceeds of $150,000 in fiscal 2012, $209,000 in fiscal 2012 and 343,000 in fiscal 2011 from the exercise of stock options.

We grant restricted shares at the discretion of our directors with vesting terms ranging from six months to four years.  The following table summarizes the activity related to our restricted stock in fiscal 2011, 2012 and 2013:

	Number of Shares			Weighted average grant date fair value		Weighted average remaining life in years		Aggregate intrinsic value
Balance at March 31, 2010		-
Shares granted		73,000		$	4.76
Shares vested		(18,000	)					$	75,000
Balance at March 31, 2011		55,000			4.96
Shares granted		50,000			6.80
Shares vested		(35,000	)		4.91				170,000
Balance at March 31, 2012		70,000			6.30		0.95		443,000
Shares granted		167,000			3.61
Shares vested		(47,000	)		4.76				225,000
Shares surrendered		(10,000	)		3.21
Balance at March 31, 2013		180,000		$	4.39		1.50	$	790,000

The aggregate intrinsic value shown above for the restricted shares represents the total pre-tax value based on the closing price of our Company's common stock on the grant date.

At March 31, 2013, we had approximately $1,174,000 of unrecognized share-based compensation cost, net of estimated forfeitures, related to stock options and restricted shares that we expect to recognize over a weighted-average requisite service period of approximately two years.

Warrants.  The following table summarizes the activity during fiscal 2011 related to warrants to purchase our common shares.  There was no warrant activity in fiscal 2012 and 2013.

	Number of shares			Weighted average exercise price
Outstanding at March 31, 2010		2,067,000
Warrants expired in fiscal 2011		(1,181,000	)
Warrants exercised in fiscal 2011		(886,000	)	$	2.49
Outstanding at March 31, 2011, 2012 and 2013		-

We received net proceeds of $2.2 million in fiscal 2011 from the exercise of warrants.

Subsequent Event.  On July 23, 2013, and in connection with the commencement of his employment, our new Chief Executive Officer will receive options to purchase 700,000 shares vesting in three equal annual increments, and a stock grant of 300,000 shares.  After giving effect to forfeitures since March 31, 2013 and these new grants we expect to have approximately 295,000 shares remaining available for grant of future awards under our 2006 Amended Stock and Incentive Plan at July 23, 2013.