Stock Options

12 Months Ended

Mar. 31, 2012

Notes to Financial Statements [Abstract]

11. Stock Options

We adopted an employee incentive stock plan effective September 15, 1997 (“1997 Plan”).  Under the 1997 Plan, 350,000 shares were available for distribution.  Awards, granted at the discretion of the compensation committee of the board of directors, include stock options or restricted stock.  Stock options may be an incentive stock option or a nonqualified stock option.  Options to purchase common stock under the plan are granted at the fair market value of the common stock at the date of grant, become exercisable to the extent of 25% of the shares optioned on each of four anniversaries of the date of grant, expire ten years from the date of grant and are subject to forfeiture if employment terminates.  Restricted stock awards may be granted with a condition to attain a specified goal.  The purchase price was at least $5.00 per share of restricted stock.  The awards of restricted stock must be accepted within 60 days and vest as determined by agreement.  Holders of restricted stock have all rights of a shareholder of the Company.

In September 2004, we adopted the 2004 Incentive Stock Plan (“2004 Plan”) to replace, modify and extend the termination date of the 1997 Plan to September 14, 2009.  The 2004 Plan provided for the award of stock options up to 375,000 shares of which 125,000 may have been subject of stock grants without restrictions and without payment by the recipient and stock awards of up to 125,000 shares with restrictions including payment for the shares and employment of not less than three years from the date of the award.  The terms of the stock options were similar to those of the 1997 Plan except that the term of the options was five years from the date of grant.  Although shares were remaining unissued at the termination date of the 2004 Plan, the shares are no longer eligible to be granted.

In September 2009, we adopted the 2009 Employee Incentive Stock Plan (“2009 Plan”) to replace the 1997 and 2004 Plans.  The 2009 Plan provides for the award of stock options up to 200,000 shares and includes option awards as well as stock awards.  Option awards are granted with the restriction of requiring payment for the shares.  Stock awards are granted without restrictions and without payment by the recipient.  Neither option awards nor stock awards may exceed 25,000 shares granted to any one individual in any fiscal year.  The 2009 Plan expires ten years from the date of adoption.

According to our employee stock incentive plans, new shares will be issued upon the exercise of stock options and the Company can repurchase shares exercised under these plans.  The plans also provide for the granting of stock awards.  No stock awards were granted during fiscal 2012, 2011 and 2010.

We recognized compensation expense of $120,124, $51,350 and $26,030 in general and administrative expense in the Consolidated Statements of Operations for fiscal 2012, 2011 and 2010, respectively.  The total cost related to non-vested awards not yet recognized at March 31, 2012 totals $249,947, which is expected to be recognized over a weighted average of 3.1 years.

The fair value of each stock option is estimated on the date of grant using the Binomial valuation model.  Expected volatilities are based on historical volatility of the Company’s stock over the contractual term of 120 months and other factors.  We use historical data to estimate option exercise and employee termination within the valuation model.  The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding.  The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.  As the Company has never declared dividends, no dividend yield is used in the calculation.  Actual value realized, if any, is dependent on the future performance of the Company’s common stock and overall stock market conditions.  There is no assurance the value realized by an optionee will be at or near the value estimated by the Binomial model.

During the year ended March 31, 2012, the Compensation Committee of the Board of Directors approved and we issued 40,000 stock options to board members, officers and employees of Mexco exercisable at $6.80 per share.  During the year ended March 31, 2011, the Compensation Committee of the Board of Directors approved and we issued 42,500 stock options to board members, officers and employees of Mexco exercisable at prices ranging from $6.06 to $6.29 per share.  No stock options were granted during the year ended March 31, 2010.  These options are exercisable at a price not less than the fair market value of the stock at the date of grant, have an exercise period of ten years and generally vest over four years.

Included in the following table is a summary of the grant-date fair value of stock options granted and the related assumptions used in the Binomial models for stock options granted in fiscal 2012, 2011 and 2010.  All such amounts represent the weighted average amounts for each period.

	For the year ended March 31,
	2012			2011			2010
Grant-date fair value	$	5.69		$	5.15			-
Volatility factor		85.92	%		82.83	%		-
Dividend yield		-			-			-
Risk-free interest rate		1.49	%		2.07	%		-
Expected term (in years)		7.25			7			-

No forfeiture rate is assumed for stock options granted to directors or employees due to the forfeiture rate history for these types of awards.  There were no stock options forfeited or expired during the year ended March 31, 2012.  During the year ended March 31, 2011, 1,000 vested stock options expired because they were not exercised prior to the end of their ten-year term and 10,000 unvested stock options were forfeited due to the termination of a consulting agreement with a consultant and the resignation of an employee.  There were no stock options forfeited or expired during the year ended March 31, 2010.

For the year ended March 31, 2012, employees and directors exercised options on a total of 10,000 shares at exercise prices of $4.00 per share.  We received proceeds of $40,000 from these exercises. The total intrinsic value of the exercised options was $38,600.  No tax deduction is recorded when options are awarded.  Mexco issued new shares of common stock to settle these option exercises.  For the years ended March 31, 2011 and 2010, stock options covering 85,250 and 41,250 shares were exercised, respectively, with 29,950 and 4,750 of these exercised options resulted in a disqualifying disposition.  We received proceeds of $533,625 and $259,372 from these option exercises for the years ended March 31, 2011 and 2010, respectively.

The following table is a summary of activity of stock options for the year ended March 31, 2012, 2011 and 2010:

	Number of Shares			Weighted Average Exercise Price Per Share		Weighted Aggregate Average Remaining Contract Life  in Years		Intrinsic Value
Outstanding at April 1, 2009		148,750		$	6.04		3.04	$	813,703
Granted		-			-
Exercised		(41,250	)		6.29
Forfeited or Expired		-			-
Outstanding at March 31, 2010		107,500		$	5.94		2.51	$	237,088
Granted		42,500			6.24
Exercised		(85,250	)		6.26
Forfeited or Expired		(11,000	)		5.89
Outstanding at March 31, 2011		53,750		$	5.69		7.33	$	401,200
Granted		40,000			6.80
Exercised		(10,000	)		4.00
Forfeited or Expired		-			-
Outstanding at March 31, 2012		83,750		$	6.42		8.65	$	127,363
Vested at March 31, 2012		13,750		$	5.72		6.30	$	30,538
Exercisable at March 31, 2012		13,750		$	5.72		6.30	$	30,538

Other information pertaining to option activity was as follows during the year ended March 31:

	2012		2011		2010
Weighted average grant-date fair value of stock options granted (per share)	$	5.69	$	5.15	$	-
Total fair value of options vested	$	59,875	$	37,200	$	343,663
Total intrinsic value of options exercised	$	38,600	$	533,831	$	130,051

The following table summarizes information about options outstanding at March 31, 2012:

Range of Exercise Prices		Number of Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contract Life in Years		Aggregate Intrinsic Value
$	4.00 – 5.24		3,750	$	4.35
	5.25 – 6.29		40,000		6.23
	6.30 – 6.80		40,000		6.80
$	4.00 – 6.29		83,750	$	6.42		8.65	$	127,363

Outstanding options at March 31, 2012 expire between December 2012 and November 2021 and have exercise prices ranging from $4.35 to $6.80.