7. Share-based Compensation

As of December 31, 2014, we had one active plan for share-based compensation grants. Under the Uroplasty 2006 Amended Stock and Incentive Plan, as amended, if we have a change in control, all outstanding grants, including those subject to vesting or other performance targets, fully vest immediately. Under this plan, we reserved 3,450,000 shares of our common stock for share-based grants. As of December 31, 2014, we had 352,889 shares remaining that were available for grant.

We recognize share-based compensation expense in our Condensed Consolidated Statement of Operations based on the fair value at the time of grant of the share-based payment over the requisite service period. We incurred approximately $1,078,000 and $1,210,000 in share-based compensation expense for the nine months ended December 31, 2014 and 2013, respectively.

As of December 31, 2014, we had approximately $998,000 of unrecognized share-based compensation expense, net of estimated forfeitures, related to stock options that we expect to recognize over a weighted-average period of 1.7 years. We also had $1,138,000 of unrecognized share-based compensation expense, net of estimated forfeitures, related to restricted shares that we expect to recognize over a weighted-average period of 2.1 years.

Options. We grant option awards with an exercise price equal to the closing market price of our stock at the date of the grant. 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 determined the fair value of our option awards using the Black-Scholes option pricing model. We used the following weighted-average assumptions to value the options granted during the nine months ended December 31:

	2014			2013

Expected life in years		2.28			4.51
Risk-free interest rate		.74	%		1.35	%
Expected volatility		63.35	%		89.32	%
Expected dividend yield		0	%		0	%
Weighted-average grant date fair value	$	0.91		$	1.67

The expected life selected for options granted during the nine-months represents the period of time that we expect our options to be outstanding based on management’s expectation 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 volatilities are based upon historical volatility of our stock. We estimate the forfeiture rate for stock awards to be approximately zero percent for executive employees and directors and approximately 18% for non-executive employees based on our historical experience.

The following table summarizes the activity related to our stock options during the nine months ended December 31, 2014:

	Number of shares			Weighted average exercise price		Weighted average remaining life in years		Aggregate intrinsic value

Outstanding at March 31, 2014		2,328,043		$	3.39		3.85	$	1,781,415
Options granted		185,900			3.43
Options exercised		(85,000	)		0.80
Options surrendered		(624,451	)		5.03

Outstanding at December 31, 2014		1,804,492		$	2.94		4.12	$	0

Exercisable at December 31, 2014		1,020,168		$	3.19		2.94	$	0

The total fair value of stock options that vested during the nine months ended December 31, 2014 and 2013 was $626,000 and $379,000, respectively.

Restricted Stock. Our 2006 Amended Stock and Incentive Plan, as amended, also permits the compensation committee of our board of directors to grant other stock-based benefits, including restricted shares. Restricted shares are subject to risk of forfeiture for termination of employment or services. The forfeiture risk for grants to board members generally lapses over a six month period. The forfeiture risk to employees generally lapses over a period of three to four years.

The following table summarizes the activity related to our restricted shares during the nine months ended December 31, 2014:

	Number of Shares			Weighted average grant date fair value		Weighted average remaining life in years		Aggregate intrinsic value
Balance at March 31, 2014		146,262		$	3.38		2.23	$	540,000
Shares granted		420,100			3.22
Shares vested		(76,561	)		3.35
Shares forfeited		(9,212	)		3.94

Balance at December 31, 2014		480,589		$	3.23		2.07	$	990,013

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

Long-Term Incentive Plan and Awards. On October 1, 2014, the compensation committee of our board of directors and our board of directors approved and adopted a Performance Award Agreement under the Uroplasty, Inc. 2006 Amended Stock and Incentive Plan, as amended , and on October 2, 2014, grants of Performance Awards (the “Awards”) were made to members of our senior management team .

Performance goals for the Awards are based on the achievement of specified stock price targets during the period beginning on the date of grant and ending on the fourth anniversary of the date of grant or, if earlier, the closing date of a change of control (as defined in the Plan) of the Company (the “Performance Period”). The stock price targets under the Awards are: $5.50 price per share of common stock, $7.50 price per share of common stock and $10.00 price per share of common stock.

A stock price target is considered achieved on the date (a) the average closing price of the Uroplasty common stock equals or exceeds a stock price target for at least 45 consecutive trading days or (b) of the consummation of a change of control of the Company, provided the closing price of Uroplasty common stock on the last trading day immediately preceding the closing date of the change of control equals or exceeds a stock price target not previously achieved during the Performance Period.

The Awards are accounted for as liability awards under the share based compensation accounting guidance, as the awards are based on the performance of our common stock and are expected to be settled in cash. The fair value of the Awards is calculated on a quarterly basis using a Monte Carlo valuation model and is recognized over the derived service period of approximately 2.4 years. Vesting of the Awards is based on the probability of meeting the market criteria which is considered in determining the estimated fair value. We recorded a liability of $132,000 at December 31, 2014 and related expense was $132,000 for the quarter ending December 31, 2014 for the Awards.