STOCKHOLDERS' EQUITY

12 Months Ended

Feb. 28, 2014

STOCKHOLDERS' EQUITY [Abstract]

STOCKHOLDERS' EQUITY

NOTE 9 - STOCKHOLDERS' EQUITY

Sale of Common Stock

In February 2013, the Company raised cash of $44.8 million net of underwriter discount and offering costs from a public offering of 5,175,000 shares of its common stock.

Equity Awards

Under the Company's 2004 Incentive Stock Plan (the "2004 Plan"), which was adopted on July 30, 2004 and was amended effective July 30, 2009, various types of equity awards can be made, including stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs), phantom stock and bonus stock. To date, stock options, restricted stock, RSUs and bonus stock have been granted under the 2004 Plan. Options are generally granted with exercise prices equal to market value on the date of grant. All option grants expire 10 years after the date of grant.

Equity awards to officers and other employees become exercisable on a vesting schedule established by the Compensation Committee of the Board of Directors at the time of grant, generally over a four-year period. The Company treats an equity award with multiple vesting tranches as a single award for expense attribution purposes and recognizes compensation cost on a straight-line basis over the requisite service period of the entire award.

Under the 2004 Plan, on the day of the annual stockholders meeting each non-employee director receives an equity award of up to 20,000 award units. Annual equity awards granted to non-employee directors vest on the date of the next annual stockholders meeting or one year from the date of grant, whichever is earlier. In addition, under the Company's current director compensation program, new non-employee directors receive a restricted stock award with a grant date fair value of $60,000 that vests in full on the third anniversary of the grant date.

The following table summarizes stock option activity for fiscal years 2014, 2013 and 2012 (options in thousands):

			Weighted
	Number of		Average
	Options		Exercise Price
Outstanding at February 28, 2011	2,108		$	4.87
Granted	163			3.42
Exercised	(16	)		1.68
Forfeited or expired	(92	)		4.98
Outstanding at February 28, 2012	2,163			4.78
Granted	84			7.01
Exercised	(466	)		2.78
Forfeited or expired	(125	)		3.90
Outstanding at February 28, 2013	1,656			5.53
Granted	56			15.14
Exercised	(611	)		7.28
Forfeited or expired	(8	)		4.53
Outstanding at February 28, 2014	1,093		$	5.04
Exercisable at February 28, 2014	882		$	4.48

     The weighted average fair value for stock options granted in fiscal years 2014, 2013 and 2012 was $9.43, $4.41, and $2.22, respectively. The fair value of options at the grant date was determined using the Black-Scholes option pricing model with the following assumptions:

	Year Ended February 28,
Black-Scholes Valuation Assumptions	2014		2013		2012
Expected life (years) (1)	6		6		6
Expected volatility (2)	69	%	63	%	73	%
Risk-free interest rates (3)	1.7	%	0.8	%	1.9	%
Expected dividend yield	0	%	0	%	0	%

(1)	The expected life of stock options is estimated based on historical experience.
(2)	The expected volatility is estimated based on historical volatility of the Company's stock price.
(3)	Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of the stock options.

The weighted average remaining contractual term and the aggregate intrinsic value of outstanding options as of February 28, 2014 was 5.1 years and $29.5 million, respectively. The weighted average remaining contractual term and the aggregate intrinsic value of exercisable options as of February 28, 2014 was 4.3 years and $24.3 million, respectively.

In July 2012, upon the net share settlement exercise of 168,000 options held by a former executive officer of the Company, the Company retained 93,691 shares to cover the option exercise price and minimum required statutory amount of withholding taxes.

During the year ended February 28, 2014, upon the net share settlement exercise of 62,899 options held by four directors of the Company, the Company retained 37,417 shares to cover the aggregate option exercise price.

     Changes in the Company's outstanding restricted stock shares and RSUs during fiscal years 2014, 2013 and 2012 were as follows (shares and RSUs in thousands):

			Weighted
	Number of		Average Grant
	Shares		Date Fair
	and RSUs		Value
Outstanding at February 28, 2011	2,045		$	2.16
Granted	762			3.59
Vested	(819	)		2.21
Forfeited	(59	)		1.99
Outstanding at February 28, 2012	1,929			2.71
Granted	440			7.50
Vested	(916	)		2.53
Forfeited	(115	)		2.85
Outstanding at February 28, 2013	1,338			4.40
Granted	312			15.58
Vested	(592	)		3.83
Forfeited	(34	)		7.88
Outstanding at February 28, 2014	1,024		$	8.02

The Company retained 203,383, 308,898 and 279,764 shares of the vested restricted stock and RSUs to cover the minimum required statutory amount of withholding taxes in fiscal 2014, 2013 and 2012, respectively.

Stock-based compensation expense for the years ended February 28, 2014, 2013 and 2012 is included in the following captions of the consolidated statements of income (in thousands):

	Year Ended February 28,
	2014		2013		2012
Cost of revenues	$	191	$	136	$	100
Research and development		516		450		388
Selling		360		252		204
General and administrative		1,857		2,072		1,683
	$	2,924	$	2,910	$	2,375

As of February 28, 2014, there was $7.3 million of total unrecognized stock-based compensation cost related to nonvested equity awards. That cost is expected to be recognized over a weighted-average remaining vesting period of 2.8 years.

As of February 28, 2014, there were 649,160 award units in the 2004 Plan that were available for grant.

Tax Benefits from Exercise of Stock Options and Vesting of Restricted Stock and RSU Awards

Total cash received as a result of option exercises was $3,928,000 in fiscal 2014 and $913,000 in fiscal 2013. The aggregate fair value of options exercised and vested restricted stock-based awards as of the exercise date or vesting date was $17,532,000 for fiscal 2014 and $8,795,000 for fiscal 2013. In connection with these option exercises and vested restricted stock-based awards, the excess stock compensation tax deductions were $12,781,000 for fiscal 2014 and $5,306,000 for fiscal 2013. The Company has elected a policy of applying the "with-and-without" approach to determine the realized tax benefits for financial reporting purposes. Under this policy, none of the current year excess deductions would have been deemed to reduce regular taxes payable because the Company's NOL carryforwards would be deemed to reduce taxes payable prior to the utilization of any excess tax deductions from the exercise of stock options and vesting of restricted stock-based awards. The excess tax benefits when realized by the Company under the with-and-without approach will be recorded as an increase in additional paid-in capital in the consolidated balance sheet and will be classified as cash flows from financing activities rather than cash flows from operating activities in the consolidated cash flow statement.

Stock Warrants

     In fiscal 2010, the Company issued a total of 500,000 common stock purchase warrants to the holders of subordinated notes that were issued in December 2009 in the aggregate principal amount of $5 million. The warrants had an exercise price of $4.02 per share. The subordinated notes were repaid in fiscal 2012. During fiscal 2013, the Company received cash of $1,879,000 from the exercise of 467,500 common stock purchase warrants that were held by non-affiliates of the Company. In addition, the Company retained 15,850 shares to pay for the exercise price of 32,500 warrants held directly or beneficially by two officers and one director of the Company that were exercised on a net share settlement basis.

In October 2009, the Company issued 20,000 common stock purchase warrants to a key supplier at an exercise price of $1.00 per share. These warrants became vested in April 2010 and were exercised during fiscal 2013.