(10) Stock-Based Compensation

Stock Option Plans

As of December 31, 2016, we had 4,600,000 shares of common stock authorized and 2,554,193 shares of common stock available for future grant to employees and consultants under our 2012 Equity Incentive Plan (“Plan”). The term of the 2012 Plan is ten years. Under the 2012 Plan, the exercise price of each option is set at the fair value of the common stock on the date of grant and the maximum term of the option is ten years from the date of grant. Options granted to employees generally have a ten year term and vest ratably over a three-year period. The maximum number of options that may be granted to an employee under the Plan in any calendar year is 500,000 options. Forfeitures under the Plan are available for re-issuance at any time prior to expiration of the Plan in 2022. Options granted under the Plan to employees require the option holder to abide by certain Company policies, which restrict their ability to sell the underlying common stock. Prior to the adoption of the 2012 Plan, we issued stock options under our 2002 Equity Incentive Plan. Forfeitures under the 2002 Equity Incentive Plan may not be re-issued.

We also have a Stock Option Plan for Non-Employee Directors (“Directors Plan”) pursuant to which Directors may elect to receive stock options in lieu of cash compensation for their services as directors. As of December 31, 2016, we had 1,000,000 shares of common stock authorized and 389,784 shares of common stock available for future grant under the Directors Plan. Option terms range from three to ten years from the date of grant. Option exercise prices are equal to the fair value of the common shares on the date of grant. Options granted under the plan vest immediately. Forfeitures under the Directors Plan are available for re-issuance at a future date.

Stock Bonus Plan

We have a Stock Bonus Plan (“Stock Plan”) administered by the Board of Directors. As of December 31, 2016, we had 2,554,994 shares of common stock authorized and there were 374,826 shares of common stock available for future grant under the Stock Plan. Under the Stock Plan, shares of common stock may be granted to employees, key consultants, and directors who are not employees as additional compensation for services rendered. Vesting requirements for grants under the Stock Plan, if any, are determined by the Board of Directors at the time of grant.

Stock Purchase Plan

We have established a Stock Purchase Plan under which eligible employees may contribute up to 10 percent of their compensation to purchase shares of our common stock at 85 percent of the fair market value at specified dates. At December 31, 2016, we had 700,000 shares of common stock authorized and 172,341 shares of common stock available for issuance under the Stock Purchase Plan.

Share-Based Compensation Expense

We use the straight-line attribution method to recognize share-based compensation costs over the requisite service period of the award. The exercise price of options is equal to the market price of our common stock (defined as the closing price reported by the NYSE MKT) on the date of grant. We adjust share-based compensation on a quarterly basis for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The 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 during the nine months ended December 31, 2016 and fiscal year ended March 31, 2016 was insignificant.

We use the Black-Scholes-Merton option pricing model for estimating the fair value of stock option awards. The expected volatility and the expected life of options granted are based on historical experience, and the risk free interest rate is obtained from the U.S. Department of the Treasury daily yield curve rates. The weighted average estimated values of employee and director stock option grants, as well as the weighted average assumptions that were used in calculating such values during the nine months ended December 31, 2016 and fiscal year ended March 31, 2016, were based on estimates at the date of grant as follows:


	Nine months ended December 31,						Year ended March 31,
	2016			2015			2016
					(Unaudited)
Weighted average estimated fair value of grant	$	0.74	per option	$	0.47	per option	$	0.45	per option
Expected life (in years)		6.6	years		6.8	years		6.5	years
Risk free interest rate		1.85	%		2.13	%		2.05	%
Expected volatility		84.95	%		78.51	%		79.03	%
Expected dividend yield		0.00	%		0.00	%		0.00	%

Total share-based compensation expense and the classification of these expenses for the nine months ended December 31, 2016 and 2015 and fiscal year ended March 31, 2016 were as follows:


	Nine months ended December 31,				Year ended March 31,
	2016		2015		2016
			(Unaudited)
Costs of product sales		8,553		13,021		15,301
Costs of contract services		6,679		4,420		6,345
Research and development		27,717		31,966		36,561
Selling, general and administrative		244,344		496,881		537,647
	$	287,293	$	546,288	$	595,854

Stock Option Plans Activity

Additional information with respect to stock option activity during the nine months ended December 31, 2016 under our Stock Option Plans is as follows:


				Weighted-
		Weighted-		Average
	Shares	Average		Remaining		Aggregate
	Under	Exercise		Contractual		Intrinsic
	Option	Price		Life		Value
Outstanding at April 1, 2016	2,561,769	$	1.40		6.2 years	$	-
Granted	632,098	$	0.68
Exercised	-	$	-			$	-
Forfeited	(189,069)	$	2.06

Outstanding at December 31, 2016	3,004,798	$	1.20		6.4 years	$	-

Exercisable at December 31, 2016	2,184,741	$	1.37		5.4 years	$	-

Vested and expected to vest at December 31, 2016	2,736,080	$	1.21		6.2 years	$	-

Additional information with respect to stock option activity during the fiscal year ended March 31, 2016 under our Stock Option Plans is as follows:


				Weighted-
		Weighted-		Average
	Shares	Average		Remaining		Aggregate
	Under	Exercise		Contractual		Intrinsic
	Option	Price		Life		Value
Outstanding at April 1, 2015	2,969,075	$	1.79		5.5 years	$	311,101
Granted	424,713	$	0.66
Exercised	-	$	-			$	-
Forfeited	(832,019)	$	2.43

Outstanding at March 31, 2016	2,561,769	$	1.40		6.2 years	$	-

Exercisable at March 31, 2016	2,107,828	$	1.50		5.5 years	$	-

Vested and expected to vest at March 31, 2016	2,534,662	$	1.40		6.2 years	$	-

Additional information with respect to stock option activity during the nine months ended December 31, 2015 (unaudited) under our Stock Option Plans is as follows:


				Weighted-
		Weighted-		Average
	Shares	Average		Remaining		Aggregate
	Under	Exercise		Contractual		Intrinsic
	Option	Price		Life		Value
Outstanding at April 1, 2015	2,969,075	$	1.79		5.5 years	$	311,101
Granted	424,713	$	0.66
Exercised	-	$	-			$	-
Forfeited	(620,636)	$	2.67

Outstanding at December 31, 2015	2,773,152	$	1.42		6.4 years	$	-

Exercisable at December 31, 2015	2,226,134	$	1.52		5.6 years	$	-

Vested and expected to vest at December 31, 2015	2,745,516	$	1.43		6.3 years	$	-

The weighted-average grant date fair value of options granted during the nine months ended December 31, 2016 and 2015 and fiscal year ended March 31, 2016 was $0.74, $0.47 (unaudited) and $0.45, respectively.

As of December 31, 2016, there was $327,055 of total unrecognized compensation costs related to stock options granted under our Stock Option Plans. The unrecognized compensation cost is expected to be recognized over a weighted-average period of twenty-six months. The total fair value of stock options that vested during the nine months ended December 31, 2016 and 2015 and fiscal year ended March 31, 2016 was $165,665, $316,641 (unaudited) and $414,981, respectively.

Cash received by us upon the exercise of stock options for the nine months ended December 31, 2016 and 2015 and fiscal year ended March 31, 2016 was zero for all periods. The source of shares of common stock issuable upon the exercise of stock options is from authorized and previously unissued common shares.

Stock Bonus Plan Activity

Activity with respect to non-vested shares under the Stock Bonus Plan as of December 31, 2016 and 2015 and March 31, 2016 and changes during the above noted periods are presented below:


	Nine months ended December 31,						Year ended March 31,
	2016			2015			2016
				(Unaudited)
		Weighted- Average			Weighted- Average			Weighted- Average
	Shares Under	Grant Date		Shares Under	Grant Date		Shares Under	Grant Date
	Contract	Fair Value		Contract	Fair Value		Contract	Fair Value
Unvested at beginning of period	88,214	$	1.36	432,039	$	1.26	432,039	$	1.26
Granted	160,389	$	0.68	23,600	$	0.66	23,600	$	0.66
Vested	(144,981)	$	0.98	(361,237)	$	1.22	(362,411)	$	1.22
Forfeited	(1,574)	$	1.25	(3,841)	$	5.15	(5,014)	$	3.95
Unvested at end of period	102,048	$	0.84	90,561	$	1.36	88,214	$	1.36

As of December 31, 2016, there was $63,625 of total unrecognized compensation costs related to common stock granted under our Stock Bonus Plan. The unrecognized compensation cost at December 31, 2016 is expected to be recognized over a weighted-average period of twenty-seven months.

Stock Purchase Plan Activity

During the nine months ended December 31, 2016 and 2015 and fiscal year ended March 31, 2016, we issued 60,325, 39,671 (unaudited) and 62,932 shares of common stock, respectively, under the Stock Purchase Plan. Cash received by us upon the purchase of shares under the Stock Purchase Plan for the nine months ended December 31, 2016 and 2015 and fiscal year ended March 31, 2016 was $31,347, $26,584 (unaudited) and $39,377, respectively.