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9. Stock Compensation

9 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

9. Stock Compensation

The following table summarizes share-based compensation expenses relating to shares and options granted and the effect on basic and diluted loss per common share during the three and nine months ended December 31, 2015 and 2014.

		Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
		December 31, 2015				December 31, 2014				December 31, 2015				December 31, 2014
Vesting of stock options		$	50,711			$	77,900			$	152,133			$	338,580
Total stock-based compensation expense			50,711				77,900				152,133				338,580

Weighted average number of common shares outstanding – basic and diluted			7,616,619				6,032,126				7,318,019				5,254,459

Basic and diluted loss per common share		$	(0.01	)		$	(0.01	)		$	(0.02	)		$	(0.06	)

All of the stock-based compensation expense recorded during the nine months ended December 31, 2015 and 2014, which totaled $152,133 and $338,580, respectively, is included in payroll and related expense in the accompanying condensed consolidated statements of operations.

We review share-based compensation on a quarterly basis for changes to the estimate of expected award forfeitures based on actual forfeiture experience. The cumulative effect of adjusting the forfeiture rate for all expense amortization is recognized in the period the forfeiture estimate is changed. The effect of forfeiture adjustments for the nine months ended December 31, 2015 was insignificant and resulted in no adjustments.

In connection with our June 2015 financing (see Note 6), Mr. James Joyce, our Chief Executive Officer, Mr. James Frakes, our Chief Financial Officer and Dr. Chetan Shah, a director of our Company, each agreed to temporarily suspend their right to exercise certain stock options and warrants held by them representing the right to acquire 402,318 shares of common stock in the aggregate (the “Temporary Waivers”). The Temporary Waivers were required in order to make a sufficient number of shares of common stock available for issuance and will expire when we amend our Articles of Incorporation to increase sufficiently the number of authorized shares of common stock available for issuance.

There were no stock option grants during the nine months ended December 31, 2015.

During the nine months ended December 31, 2014, our Board of Directors approved the following grants of options to certain officers and directors of the Company:

o

To Mr. James A. Joyce, an option to acquire an aggregate of 30,000 shares of our common stock at an exercise price of $9.50 per share, the closing price of our common stock on the date of grant. The fair value of this stock option at the date of grant was $246,000. The option vested as to 10,000 shares on the grant date for a vesting expense of $82,000 and will vest as to an additional 10,000 shares on each of the first two anniversaries of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024.

o

To Mr. Rodney S. Kenley, an option to acquire an aggregate of 5,000 shares of our common stock at an exercise price of $9.50 per share, the closing price of our common stock on the date of grant. The fair value of this stock option at the date of grant was $41,000. The option vested as to 1,667 shares on the grant date for a vesting expense of $13,667 and will vest as to an additional 1,667 shares on the first anniversary of the grant date and 1,666 shares on the second anniversary of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024.

o

To Mr. James B. Frakes, an option to acquire an aggregate of 5,000 shares of our common stock at an exercise price of $9.50 per share, the closing price of our common stock on the date of grant. The fair value of this stock option at the date of grant was $41,000. The option vested as to 1,667 shares on the grant date for a vesting expense of $13,667 and will vest as to an additional 1,667 shares on the first anniversary of the grant date and 1,666 shares on the second anniversary of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024.

o

To Dr. Richard H. Tullis, an option to acquire an aggregate of 1,000 shares of our common stock at an exercise price of $9.50 per share, the closing price of our common stock on the date of grant. The fair value of this stock option at the date of grant was $8,200. The option vested as to 333 shares on the grant date for a vesting expense of $2,733 and will vest as to an additional 333 shares on the first anniversary of the grant date and 334 shares on the second anniversary of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024.

In addition to the above grants to our officers, during the nine months ended December 31, 2014, our Board of Directors also approved the grant of options to five employees to acquire an aggregate of 7,400 shares of our common stock at an exercise price of $9.50 per share, the closing price of our common stock on the date of grant. The aggregate fair value of those stock options at the date of grant was $60,680. Those options vested as to 2,467 shares on the grant date for a vesting expense of $20,227 and will vest as to an additional 2,467 shares on the first anniversary of the grant date and 2,466 shares on the second anniversary of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024.

Also during the nine months ended December 31, 2014, we issued 3,684 stock options to each of our three outside directors. Those grants vested over the fiscal year ending March 31, 2015 and have an exercise price of $9.50 per share.

The following outlines the significant weighted average assumptions used to estimate the fair value information presented, with respect to stock option grants utilizing the Binomial Lattice option pricing models at, and during the nine months ended December 31, 2014:

Risk free interest rate	2.6%
Average expected life	10 years
Expected volatility	90.23%
Expected dividends	None

The expected volatility was based on the historic volatility. The expected life of options granted was based on the "simplified method" as described in the SEC's guidance due to changes in the vesting terms and contractual life of current option grants compared to our historical grants.

Options outstanding that have vested and are expected to vest as of December 31, 2015 are as follows:

		Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term in Years
Vested			445,557			$	11.40				4.67
Expected to vest			50,133			$	6.36				7.98
Total			495,690

A summary of stock option activity during the nine months ended December 31, 2015 is presented below:

		Amount				Range of Exercise Price				Weighted Average Exercise Price
Stock options outstanding at March 31, 2015			501,690				$4.00-$20.50			$	12.50
Exercised			–				–				–
Granted			–				–				–
Cancelled/Expired			(6,000	)			$20.50			$	20.50
Stock options outstanding at December 31, 2015			495,690				$4.00-$20.50			$	10.89
Stock options exercisable at December 31, 2015			445,557				$4.00-$20.50			$	11.66

At December 31, 2015, there was approximately $189,850 of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted average period of 0.94 years.

On December 31, 2015, our stock options had a negative intrinsic value since the closing price on that date of $6.79 per share was below the weighted average exercise price of our stock options.