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. Stock-based compensation expense was $53,200 in fiscal 2014, $66,720 in fiscal 2013, and $80,160 in fiscal 2012.

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
	2014		2013		2012
Risk-free interest rate	1.4	%	0.7	%	1.0	%
Expected volatility	30	%	38	%	42	%
Expected life (years)	4.3		4.1		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 currently plan to pay dividends.

Tax effects of stock-based compensation
Stock-based compensation increased deferred tax assets by $19,327 for fiscal 2014 and $24,239 for fiscal 2013.

General stock option information
We had no nonvested shares as of March 31, 2014 or 2013. The following table summarizes information about options outstanding at March 31, 2014, all of which were exercisable:


Ranges of Exercise Prices	Number Outstanding	Weighted Average Exercise Price		Weighted Remaining Contractual Life (years)
$ 15.08 - 16.33	20,000	$	16.21	1.8
31.27 - 42.45	5,000		37.12	4.8
51.04 - 58.25	13,000	53.69		7.6
	38,000	$	31.78	4.2

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, 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
Granted	(4,000	)	4,000		$	54.11	-			-
Exercised	-		(64,000	)	$	24.23	-		-
Terminated	-		-		$	-	(6,000	)		7.35
At March 31, 2013	158,230		49,000		$	30.27	4,000		$	29.69
Granted	(4,000	)	4,000		$	49.86	-			-
Exercised	-		(14,000	)	$	29.77	-		-
Terminated	1,000		(1,000	)	$	58.27	(2,000	)		21.99
At March 31, 2014	155,230		38,000		$	31.78	2,000		$	37.38

The remaining weighted-average exercisable life was 4.2 years at March 31, 2014; 4.6 years at March 31, 2013; and 3.7 years at March 31, 2012. All outstanding options were exercisable as of March 31, 2014, 2013, and 2012. The total intrinsic value of options exercised during fiscal 2014 was $356,413 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, 2014, based on our closing stock price for that day, was $964,640 all of which were exercisable. The total fair value of option grants was $53,200 in fiscal 2014. There was no unrecognized stock-based compensation at March 31, 2014.

No warrants were issued in the past three fiscal years. Remaining weighted-average exercisable warrant life was 0.4 years at March 31, 2014; 0.9 years at March 31, 2013; and 0.9 years at March 31, 2012.