NOTE 6. STOCK-BASED COMPENSATION
Stock Option Plan
Our 2000 Stock Option Plan, as amended, provides for issuance to employees, directors, and certain service providers of incentive stock options and nonstatutory stock options. Generally, the options may be exercised at any time prior to expiration, subject to vesting based on terms of employment. The period ranges from immediate vesting to vesting over a five-year period. The options have exercisable lives ranging from one year to ten years from the date of grant, and are generally not eligible to vest early in the event of retirement, death, disability, or change in control. Exercise prices are not less than fair market value of the underlying Common Stock at the date the options are granted.

Valuation assumptions
We use the Black-Scholes standard option-pricing model to determine the fair value of stock options. The following assumptions were used to estimate the fair value of options granted:

	Year Ended March 31
	2012		2011		2010
Risk-free interest rate	1.0	%	1.6	%	2.7	%
Expected volatility	42	%	56	%	55	%
Expected life (years)	4.1		4.2		4.1
Dividend yield	0	%	0	%	0	%

     The determination of the fair value of the awards on the date of grant using the Black-Scholes model is affected by our stock price as well as assumptions of other variables, including projected stock option exercise behaviors, risk-free interest rate, and expected volatility of our stock price in future periods. Our estimates and assumptions affect the amounts reported in the financial statements and accompanying notes.

Expected life
     We analyze historical exercise and termination data to estimate the expected life assumption. We believe historical data currently represents the best estimate of the expected life of a new option. We examined the historical pattern of option exercises to determine if there was a discernible pattern as to how different classes of optionees exercised their options. Our analysis showed that officers and directors held their stock options for a longer period of time before exercising compared to the rest of our employee population. Therefore we use different expected lives for officers and directors than we use for our general employee population for determining the fair value of options.

Risk-free interest rate
     The risk-free rate is based on the yield of U.S. Treasury securities on the grant date for maturities similar to the expected lives of the options.

Volatility
     We use historical volatility to estimate the expected volatility of our common stock.

Dividend yield
     We assume a dividend yield of zero because we do not anticipate paying dividends in the foreseeable future.

Expenses related to stock-based compensation
     The following table shows the effect of stock-based compensation on our net income and earnings per share for fiscal 2010 through 2012. Stock-based compensation expenses and costs are included in the same line or lines as cash compensation paid to the same employees. Therefore the effect of stock-based compensation is included in "Selling, general, and administrative expenses" and presented in the line titled "Stock-based compensation" on our Statements of Cash Flows:

	Year Ended March 31
	2012			2011			2010
Effect of stock-based compensation on net income	$	(80,160	)	$	(76,720	)	$	(100,842	)
Effect of stock-based compensation on net income per share:
Basic	$	(0.02	)	$	(0.02	)	$	(0.02	)
Diluted	$	(0.02	)	$	(0.02	)	$	(0.02	)

Tax effects of stock-based compensation
Stock-based compensation increased deferred tax assets by $29,122 for fiscal 2012 and $28,233 for fiscal 2011.

General stock option information
We had no nonvested shares as of March 31, 2012 or 2011.

The following table summarizes information about options outstanding at March 31, 2012, all of which were exercisable:

Ranges of Exercise Prices	Number Outstanding	Weighted Average Exercise Price		Weighted Remaining Contractual Life (years)
$ 15.08 - 16.33	52,000	$	15.53	3.6
29.65 - 31.27	38,000		29.78	2.4
34.71 - 58.27	19,000	46.25		6.8
	109,000	$	25.85	3.7

Our 2000 Stock Option Plan, as amended, provides for issuance to employees, directors, and certain service providers of incentive stock options and nonstatutory stock options. Generally, the options may be exercised at any time prior to expiration, subject to vesting based on terms of employment. The period ranges from immediate vesting to vesting over a five-year period. The options have exercisable lives ranging from one year to ten years from the date of grant. Exercise prices are not less than fair market value as determined by our Board at the date the options are granted.

A summary of our stock options and warrants are shown in the following table:

	Option Shares Reserved		Options Outstanding		Weighted Average Option Exercise Price		Warrants Outstanding	Weighted Average Warrant Exercise Price
At March 31, 2009	174,230		281,750		$	17.10	10,000	$	16.28
Granted	(4,000	)	4,000		$	51.04	-		-
Exercised	-		(31,250	)	$	19.92	-	-
At March 31, 2010	170,230		254,500		$	17.28	10,000	$	16.28
Granted	(4,000	)	4,000		$	42.45	-		-
Exercised	-		(83,500	)	$	9.56	-	-
At March 31, 2011	166,230		175,000		$	21.54	10,000	$	16.28
Granted	(4,000	)	4,000		$	58.25	-		-
Exercised	-		(70,000	)	$	16.93	-	-
At March 31, 2012	162,230		109,000		$	25.85	10,000	$	16.28

The remaining weighted-average exercisable life was 3.7 years at March 31, 2012; 4.3 years at March 31, 2011; and 4.0 years at March 31, 2010. All outstanding options were exercisable as of March 31, 2012, 2011, and 2010. The total intrinsic value of options exercised during fiscal 2012 was $2,681,700 based on the difference between the exercise price and stock price at the time of exercise for in-the-money options. The total intrinsic value of options outstanding March 31, 2012, based on our closing stock price for that day, was $2,985,470 all of which were exercisable. The total fair value of option grants was $80,160 in fiscal 2012. There was no unrecognized stock-based compensation at March 31, 2012.

No warrants were issued in the past three fiscal years. Remaining weighted-average exercisable warrant life was 0.9 years at March 31, 2012; 1.9 years at March 31, 2011; and 2.9 years at March 31, 2010.