12. Stockholders’ Equity

Stock-Based Compensation

The components of employee stock-based compensation for the years ended March 31, 2015, 2014 and 2013 were as follows (in thousands):

	For the Years Ended March 31,
	2015		2014		2013
Stock options	$	1,851	$	2,730	$	3,389
Restricted stock and stock awards		4,063		7,936		4,698
Employee stock purchase plan		22		30		51
Total stock-based compensation expense	$	5,936	$	10,696	$	8,138

The estimated fair value of the Company’s stock-based awards, less expected annual forfeitures, is amortized over the awards’ service period. The total unrecognized compensation cost for unvested outstanding stock options was $1.2 million and $2.0 million for the years ended March 31, 2015 and 2014, respectively. This expense will be recognized over a weighted-average expense period of approximately 2.7 years. The total unrecognized compensation cost for unvested outstanding restricted stock was $2.6 million and $1.8 million for the years ended March 31, 2015 and 2014, respectively. This expense will be recognized over a weighted-average expense period of approximately 1.2 years.

The following table summarizes employee stock-based compensation expense by financial statement line item for the years ended March 31, 2015, 2014 and 2013 (in thousands):

	2015		2014		2013
Cost of revenues	$	719	$	1,002	$	726
Research and development		1,728		2,751		2,456
Selling, general and administrative		3,489		6,943		4,956
Total	$	5,936	$	10,696	$	8,138

The following table summarizes the information concerning currently outstanding and exercisable employee and non-employee options:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
	Options/			Exercise		Contractual		Intrinsic Value
	Shares			Price		Term		(thousands)
Outstanding at March 31, 2014		294,184		$	109.31
Granted		100,000			14.30
Exercised		-			-
Cancelled/forfeited		(13,244	)		103.51
Outstanding at March 31, 2015		380,940		$	84.57		6.6	$	-
Exercisable at March 31, 2015		210,869		$	135.95		5.0	$	-
Fully vested and expected to vest at March 31, 2015		363,021		$	87.94		6.5	$	-

The weighted-average grant-date fair value of stock option awards granted during the years ended March 31, 2015, 2014 and 2013 was $10.18 per share, $16.20 per share, and $25.60 per share, respectively. Intrinsic value represents the amount by which the market price of the common stock exceeds the exercise price of the options. Given the decline in the Company’s stock price, exercisable options as of March 31, 2015, 2014 and 2013 had no intrinsic value.

The weighted average assumptions used in the Black-Scholes valuation model for stock options granted during the years ended March 31, 2015, 2014, and 2013 are as follows:

	For the Years Ended March 31,
	2015			2014			2013
Expected volatility		85.5	%		75.1	%		72.0	%
Risk-free interest rate		1.9	%		1.7	%		0.9	%
Expected life (years)		5.8			5.9			5.9
Dividend yield	None			None			None

The expected volatility rate was estimated based on an equal weighting of the historical volatility of the Company’s common stock and the implied volatility of the Company’s traded options. The expected term was estimated based on an analysis of the Company’s historical experience of exercise, cancellation, and expiration patterns. The risk-free interest rate is based on the average of the five and seven year U.S. Treasury rates.

The following table summarizes the employee and non-employee restricted stock activity for the year ended March 31, 2015:

				Weighted		Intrinsic
				Average		Aggregate
				Grant Date		Value
	Shares			Fair Value		(thousands)
Outstanding at March 31, 2014		241,536		$	33.43
Granted		332,782			16.68
Vested		(210,942	)		29.09
Forfeited		(22,788	)		18.91
Outstanding at March 31, 2015		340,588		$	20.82	$	2,193

The total fair value of restricted stock that was granted during the years ended March 31, 2015, 2014 and 2013 was $5.6 million, $4.5 million, which includes $0.5 million for bonus and severance, and $10.6 million, which includes $1.6 million for bonus and severance, respectively. The total fair value of restricted stock that vested during the years ended March 31, 2015, 2014 and 2013 was $3.1 million, $3.7 million, which includes $0.5 million for bonus and severance, and $3.4 million, which includes $1.6 million for bonus and severance respectively.

The restricted stock granted during the years ended March 31, 2015, 2014 and 2013 includes approximately 38,021, 40,201, and 142,212 shares, respectively, of performance-based restricted stock, which would vest upon achievement of certain financial performance measurements. Included in the table above are 10,000 shares of restricted stock units outstanding.

The remaining shares granted vest upon the passage of time. For awards that vest upon the passage of time, expense is being recorded over the vesting period.

Stock-Based Compensation Plans

As of March 31, 2015, the Company had two active stock plans: the 2007 Stock Incentive Plan, as amended (the “2007 Plan”) and the Amended and Restated 2007 Director Stock Plan (the “2007 Director Plan”). The 2007 Stock Incentive Plan replaced the Company’s 2004 Stock Incentive Plan upon the approval by the Company’s stockholders on August 3, 2007. The 2007 Director Stock Plan replaced the Second Amended and Restated 1997 Director Stock Option Plan, which expired pursuant to its terms on May 2, 2007. Both the 2007 Plan and the 2007 Director Plan were approved by the Company’s stockholders on August 1, 2014.

The 2007 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. In the case of options, the exercise price shall be equal to at least the fair market value of the common stock, as determined by (or in a manner approved by) the Board of Directors, on the date of grant. The contractual life of options is generally 10 years. Options generally vest over a 3-5 year period while restricted stock generally vests over a 3 year period.

As of March 31, 2015, the 2007 Director Plan provided for the grant of nonstatutory stock options and stock awards to members of the Board of Directors who are not also employees of the Company (outside directors). Under the terms of the 2007 Director Plan as of March 31, 2014, each outside director was granted an option to purchase 1,000 shares of common stock upon his or her initial election to the Board of Directors with an exercise price equal to the fair market value of the Company’s common stock on the date of the grant. These options vest in equal annual installments over a two-year period. In addition, as of March 31, 2014, each outside director was granted an award of 300 shares of common stock three business days following each annual meeting of stockholders, provided that such outside director had served as a director for at least one year. Under the terms of the 2007 Director Plan effective April 1, 2014, each outside director is granted an option to purchase shares of common stock with an aggregate grant date value equal to $40,000 upon his or her initial election to the Board with an exercise price equal to the fair market value of the Company’s common stock on the date of the grant. These options vest in equal annual installments over a two-year period. In addition, effective April 1, 2014, each outside director is granted an award of shares of common stock with an aggregate grant date value equal to $40,000 three business days following the last day of each fiscal year, subject to proration for any partial fiscal year of service.

As of March 31, 2015, the 2007 Plan had 557,578 shares and the 2007 Director Plan had 64,700 shares available for future issuance.

Employee Stock Purchase Plan

The Company has an employee stock purchase plan (ESPP) which provides employees with the opportunity to purchase shares of common stock at a price equal to the market value of the common stock at the end of the offering period, less a 15% purchase discount. The Company recognized compensation expense of $0.1 million for each of the years ended March 31, 2015, 2014, and 2013, respectively, related to the ESPP. The Company issued 16,708 shares of common stock related to the ESPP during the year ended March 31, 2015. As of March 31, 2015, the ESPP had 8,168 shares available for future issuance.

ATM Arrangement

On November 15, 2013, the Company entered into an ATM arrangement, pursuant to which, the Company could, at its discretion, sell up to $30.0 million of the Company’s common stock through its sales agent, MLV & Co. LLC (“MLV”). Sales of common stock made under the ATM were made on The NASDAQ Global Market under the Company’s previously filed and currently effective Registration Statement on Form S-3 (File No. 333-191153) by means of ordinary brokers’ transactions at market prices. Under the terms of the ATM, the Company could sell shares of its common stock through MLV, on The NASDAQ Global Market or otherwise, at negotiated prices or at prices related to the prevailing market price. Under the terms of the ATM, MLV could not engage in any proprietary trading or trading as principal for MLV’s own account. MLV used its commercially reasonable efforts to sell the Company’s common stock from time to time, based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company paid MLV a commission of up to 3% of the gross proceeds from the sale of shares of its common stock under the ATM. The Company has also agreed to provide MLV with customary indemnification rights.

During the years ended March 31, 2015 and 2014, the Company received net proceeds of $5.8 million and $7.5 million, including sales commissions and offering expenses, from sales of approximately 375,000 and 487,000 shares of its common stock at an average sales price of approximately $16.05 and $16.24 per share under the ATM, respectively. The ATM arrangement was terminated on November 5, 2014.

November 2014 Offering

On November 13, 2014, the Company completed an equity offering to Hudson Bay Capital, under which the Company sold 909,090 units of its common stock at $11.00 per unit (adjusted to reflect our 1-for-10 reverse stock split). Each unit consisted of one share of common stock and 0.90 of a warrant to purchase one share of common stock, or a warrant to purchase 818,181 shares of common stock. (See Note 10, “Warrants and Derivative Liabilities”, for further information regarding the warrant.). After the underwriting discount and estimated offering expenses payable by the Company, the Company received net proceeds from the offering of approximately $9.1 million. The Company allocated the net proceeds first to the fair value of the warrants as determined under a lattice model on November 13, 2014 (See Note 10, “Warrants and Derivative Liabilities,” for a discussion on both warrants and the valuation assumptions used) with the residual fair value allocated to the common stock. Costs of the offering were allocated to other (expense) income and equity based on the relative fair value of the warrants and common stock, respectively.