NOTE 7—STOCK-BASED COMPENSATION

As of September 30, 2014, 6,396,356 shares of common stock were available for grant under the Company’s 2007 Equity Incentive Plan.

The following table summarizes the Company’s stock option activities for the six months ended September 30, 2014:



			Weighted
		Number of Shares	Average	Weighted
	Shares	Underlying	Remaining	Average
	Available for	Options	Contractual	Exercise		Intrinsic
	Grant	Outstanding	Life (Years)	Price		Value
Balance at March 31, 2014	5,585,500	6,143,980			5.13
Options reserved	1,377,699	—			—
Granted	(575,043)	575,043			5.29
Exercised	—	(105,725)			4.04	$	224,178
Forfeited	8,200	(8,200)			5.97
Balance at September 30, 2014	6,396,356	6,605,098		$	5.16
Options vested and exercisable		4,188,255	4.45	$	4.83	$	3,742,830
Options vested and expected to vest		6,556,577	5.87	$	5.16	$	4,300,040

The weighted average fair value per underlying share of options granted during the three months ended September 30, 2014 and 2013 was $2.14 and $2.93, respectively, and for the six months ended September 30, 2014 and 2013 was $2.16 and $2.72, respectively.

Options outstanding by exercise price at September 30, 2014 were as follows:



				Number of	Options Outstanding			Options Exercisable
				Shares	Weighted		Weighted Average		Weighted
				Underlying	Average		Remaining	Number	Average
				Options	Exercise		Contractual	Vested and	Exercise
Exercise Price				Outstanding	Price		Life (Years)	Exercisable	Price
$	2.43	-	3.43	917,384	$	3.16	4.35	917,384	$	3.16
$	3.75	-	4.00	812,779	$	3.96	4.46	812,779	$	3.96
$	4.17	-	4.81	812,205	$	4.39	5.85	419,494	$	4.39
$	4.90	-	5.23	789,563	$	5.11	8.84	132,396	$	4.90
$	5.41			30,000	$	5.41	9.88	—	$	—
$	5.50			783,433	$	5.50	2.13	783,433	$	5.50
$	5.59	-	5.76	675,410	$	5.70	7.02	259,146	$	5.69
$	6.00	-	6.54	798,358	$	6.32	6.66	384,692	$	6.19
$	6.61	-	6.86	666,153	$	6.77	8.39	210,023	$	6.78
$	7.00	-	9.20	319,813	$	7.78	6.02	268,908	$	7.51
				6,605,098	$	5.16	5.89	4,188,255		4.83

The following table summarizes stock-based compensation expense by line item in the Condensed Consolidated Statements of Operations, all relating to employee stock plans:



	Three Months Ended September 30,				Six Months Ended September 30,
	2014		2013		2014		2013
	(In thousands)
Cost of revenues	$	104	$	102	$	204	$	196
Research and development		248		232		489		490
Selling, general and administrative		219		229		451		442
Total	$	571	$	563	$	1,144	$	1,128

As stock-based compensation expense recognized in the Condensed Consolidated Statement of Operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures in accordance with authoritative guidance. The Company estimates forfeitures at the time of grant and revises the original estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company recognized related income tax benefits of $0 and $29,000, respectively, for the three months ended September 30, 2014 and 2013, and $0 and $46,000, respectively, for the six months ended September 30, 2014, and 2013. Windfall tax benefits realized from exercised stock options were $0, and $226,000, respectively, for the three months ended September 30, 2014 and 2013 and $0 and $403,000, respectively for the six months ended September 30, 2014 and 2013. Compensation cost capitalized within inventory at September 30, 2014 was insignificant. As of September 30, 2014, the Company’s total unrecognized compensation cost was $3.9 million, which will be recognized over a weighted average period of 2.14 years. The Company calculated the fair value of stock-based awards in the periods presented using the Black-Scholes option pricing model and the following weighted average assumptions:



	Three Months Ended September 30,						Six Months Ended September 30,
	2014			2013			2014				2013
	(In thousands)						(In thousands)
Stock Option Plans:
Risk-free interest rate		1.70	%		1.51	%	1.66	-	1.70	%	0.91	-	1.51	%
Expected life (in years)		5.00			5.00				5.00				5.00
Volatility		44.8	%		47.6	%	44.5	-	44.8	%	47.6	-	48.4	%
Dividend yield		—	%		—	%			—	%			—	%
Employee Stock Purchase Plan:
Risk-free interest rate		—	%		—	%			0.05	%			0.09	%
Expected life (in years)		—			—				0.50				0.50
Volatility			%		—	%			30.8	%			30.4	%
Dividend yield		—	%		—	%			-	%			—	%