Note 9.

Stock-Based C

ompensation

We adopted stock option plans for the benefit of our employees and outside directors. Under terms of the plans, stock options are granted at an amount not less than 100% of the quoted market price of the underlying shares at the date of grant. Stock options are exercisable for terms of five to ten years and vest ratably over terms of four to seven years. All of our stock option plans have been approved by our shareholders.

On August 8, 2014 we adopted The Mesa Laboratories, Inc. 2014 Equity Plan (the “2014 Plan”), which was subsequently approved by our shareholders on October 2, 2014 at our 2014 Annual Meeting of Shareholders. The purpose of the 2014 Plan is to promote the success and enhance the value of the Company by linking the personal interests of our employees, officers and directors to those of our shareholders by providing such persons with an incentive for outstanding performance. A total of 1,100,000 shares of common stock were reserved for issuance under the 2014 Plan and are subject to terms as set by the Compensation Committee of the Board of Directors at the time of grant. As of March 31, 2016, we have 186,370 stock options outstanding under the 2014 Plan.

Under the December 8, 2006 plan (the “2006 Plan”), a total of 400,000 shares of common stock were reserved for issuance and were subject to terms as set by the Compensation Committee of the Board of Directors at the time of grant. On September 23, 2010, our shareholders approved an amendment to the 2006 Plan whereby the number of shares authorized for issuance was increased to 800,000. As a result of the approval of the 2014 Plan by our shareholders, no further awards will be made under the 2006 Plan and it will remain in effect only as long as awards previously made thereunder remain outstanding. As of March 31, 2016, we have 329,350 stock options outstanding under the 2006 Plan. On February 27, 2013, we filed a Registration Statement on Form S-8 whereby we registered the additional 400,000 shares of common stock underlying stock options issuable under the 2006 Plan.

Under the October 21, 1999 plan (the “1999 Plan”), a total of 300,000 shares of common stock were reserved for issuance and were subject to terms as set by the Compensation Committee of the Board of Directors at the time of grant. On October 18, 2004, our shareholders approved an amendment to the 1999 Plan to reserve an additional 200,000 shares of common stock for issuance under the plan. The 1999 Plan has expired and no new grants can be made under this plan. As of March 31, 2016, we have zero stock options outstanding under the 1999 Plan.

Amounts recognized in the consolidated financial statements related to stock-based compensation are as follows (in thousands, except per share data):

	Year E nded March 31,
	2016		201 5		201 4
Total cost of stock based compensation charged against income before income tax	$	1,327	$	993	$	840
Amount of income tax benefit recognized in earnings		374		373		263
Amount charged against net income	$	953	$	620	$	577
Impact on net income per common share:
Basic	$	0.26	$	0.18	$	0.17
Diluted		0.25		0.17		0.16

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses assumptions noted in the following table. We use historical data to estimate volatility, expected option life and forfeiture rate. The risk-free rate is based on the United States Treasury yield curve in effect at the time of grant. The dividend yield is calculated based upon the dividend payments made during the prior four quarters as a percent of the average stock price for that period.

	Year E nded March 31,
	2016			201 5			201 4
Volatility	27.1%	-	30.2%	24.4%	-	27.1%	26%	-	28.7%
Risk-free interest rate		1.09%		1.9%	-	2.3%	.8%	-	2.1%
Expected option life (years)		8		6	-	8	5	-	10
Dividend yield		.7%			.9%			1.1%

A summary of the option activity as of and for the years ended March 31, 2016, 2015 and 2014 is as follows:

	Number of Shares			Weighted- average Exercise Price		Weighted- average Remaining Contractual Term		Aggregate Intrinsic Value (000s)
Outstanding at March 31, 2013		416,125			29.87		3.7		9,529
Granted		128,124			55.33		6.4		--
Forfeited		(27,782	)		52.50		--		--
Expired		(410	)		52.50		--		--
Exercised		(117,885	)		22.17		--		--
Outstanding at March 31, 2014		398,172			38.75		4.4		20,505
Granted		147,720			88.62		7.0		--
Forfeited		(26,466	)		64.62		--		--
Expired		--			--		--		--
Exercised		(82,178	)		28.87		--		--
Outstanding at March 31, 2015		437,248			55.81		4.9		9,445
Granted		184,030			72.89		6.7		--
Forfeited		(16,334	)		75.16		6.5		--
Expired		--			--		--		--
Exercised		(89,224	)		38.28		--		--
Outstanding at March 31, 2016		515,720			64.32		5.2		16,561

Exercisable at March 31,
2016		157,457			42.49		3.6		8,481
2015		163,210			33.35		3.6		6,341
2014		140,825			26.70		3.5		8,949

A summary of the status of our unvested option shares as of and for the years ended March 31, 2016, 2015 and 2014 is as follows:

	Unvested Shares			Weighted- a verage Grant-date Fair Value
Unvested at March 31, 2013		257,805			9.55
Options granted		128,124			15.90
Options forfeited		(27,782	)		14.75
Options vested		(100,800	)		8.53
Unvested at March 31, 2014		257,347			11.86
Options granted		147,720			24.49
Options forfeited		(26,466	)		17.29
Options vested		(104,563	)		10.36
Unvested at March 31, 2015		274,038			18.42
Options granted		184,030			18.78
Options forfeited		(16,334	)		19.07
Options vested		(83,471	)		14.65
Unvested at March 31, 2016		358,263			19.46

The total intrinsic value of options exercised was $5,260,000, $3,546,000 and $6,287,000 for the years ended March 31, 2016, 2015 and 2014, respectively. As of March 31, 2016, there was $4,595,000 of total unrecognized compensation expense related to unvested options. As of March 31, 2016, we have 913,630 shares available for future option grants.