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Note 11 - Stock-Based Compensation
 12 Months Ended
Dec. 31, 2011
Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]
11.     Stock Based Compensation

Under the 1998 Directors Stock Plan, as amended, 600,000 shares of the Company’s Common Stock are authorized under the plan and reserved for issuance to non-employee directors, in lieu of payment of directors’ fees in cash.  In November 2009, the Company’s Board of Directors approved the elimination of payment of directors’ fees in stock under this plan beginning in the fourth quarter of 2009.

The 1999 Director Stock Option Plan, as amended (the “Director Plan”), provides for the grant of stock options to non-employee directors of the Company at an exercise price equal to the fair market value per share on the date of the grant. An aggregate of 1,975,000 shares have been approved and authorized for issuance pursuant to this plan. A total of 1,939,798 options have been granted to non-employee directors through December 31, 2011. The options granted under the Director Plan vest in full one year after their respective grant dates and have a maximum term of ten years.

The 1999 Stock Incentive Plan, as amended (“1999 Plan”), replaced all previously authorized employee stock option plans, and no additional options may be granted under those plans. Under the 1999 Plan, options or stock awards may be granted to all of the Company's employees, officers, directors, consultants and advisors to purchase a maximum of 3,200,000 shares of common stock. However, pursuant to the terms of the 1999 Plan, no awards may be granted after March 16, 2009.  A total of 2,892,500 options, having a maximum term of ten years, have been granted at 100% of the fair market value of the Company's common stock at the time of grant. Options outstanding under the 1999 Plan are generally exercisable in cumulative increments over four years commencing one year from date of grant.

On June 26, 2009, the Board of Directors adopted, and the Company’s stockholders subsequently approved by partial written consent, the IGI Laboratories, Inc. 2009 Equity Incentive Plan (the “2009 Plan”).  The 2009 Plan became effective on July 29, 2009, 20 days after the initial mailing of the Company’s Information Statement on Schedule 14C to its stockholders.  The 2009 Plan allows the Company to continue to grant options and restricted stock, as under the 1999 Plan, but also authorizes the Board of Directors to grant a broad range of other equity-based awards, including stock appreciation rights, restricted stock units and performance awards.  The 2009 Plan has been created, pursuant to and consistent with the Company’s current compensation philosophy, to assist the Company in attracting, retaining and rewarding designated employees, directors, consultants and other service providers of the Company and its subsidiaries and affiliates, in a manner that will be cost efficient to the Company from both an economic and financial accounting perspective.  On April 12, 2010, the Board of Directors adopted, and the Company’s stockholders subsequently approved, an amendment and restatement of the 2009 Plan to increase the number of shares of Common Stock available for grant under such plan by adding 2,000,000 shares of Common Stock.  The 2009 Plan, as amended on May 19, 2010, authorizes up to 4,000,000 shares of the Company’s common stock for issuance pursuant to the terms of the 2009 Plan.  The maximum number of shares that may be subject to awards made to any individual in any single calendar year under the 2009 Plan is 1,000,000 shares.  As of December 31, 2011, options to purchase 490,000 shares of common stock were outstanding under the 2009 Plan and 1,039,000 shares of restricted stock had been granted under the 2009 Plan.

Stock Options

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing formula that uses assumptions noted in the following table. Expected volatilities and risk-free interest rates are based upon the expected life of the grant. The interest rates used are the U.S. Treasury yield curve in effect at the time of the grant.

Assumptions
 
2011
   
2010
 
             
Dividend yield
    0 %     0 %
Risk free interest rate
    0.76 %     1.58 %
Estimated volatility factor
    58 %     65 %
Expected life
 
3.2 years
   
3.2 years
 

Estimated volatility was calculated using the historical volatility of the Company’s stock over the expected life of the options. Through the third quarter of 2009, the expected life of the options was estimated based on the Company’s historical data, and prior to that time, the expected life of the options was estimated using the simplified method.  The forfeiture rates are estimated based on historical employment/directorship termination experience. The risk free interest rate is based on US Treasury yields for securities with terms approximating the terms of the grants. The assumptions used in the Black-Scholes option valuation model are highly subjective, and can materially affect the resulting valuation.

Stock option transactions in each of the past two years under the aforementioned plans in total were:

   
Shares
   
Exercise
Price Per Share
   
Weighted Average
Exercise Price
 
                   
January 1, 2010 shares issuable
                 
      Under option
    2,014,177     $ .50-$2.75     $ 1.12  
      Granted
    135,000       .79 - 1.61       0.97  
      Exercised
    (14,333 )      .50 - 1.00       0.79  
      Expired
    (65,000 )     1.88 - 2.75       1.95  
      Forfeited
    (771,328 )     .50 - 2.75       1.08  
December 31, 2010 shares issuable
                       
      Under option
    1,298,516       .52 - 1.52       1.09  
      Granted
    370,000       1.04 - 1.74       1.29  
      Exercised
    (81,663 )     .52 - 1.03       0.91  
      Expired
    (15,000 )     .80       0.80  
      Forfeited
    (123,837 )      .76 - 1.03       1.02  
December 31, 2011 shares issuable
                       
      Under option
    1,448,016       .55 - 1.74       1.16  
Exercisable options at:
                       
      December 31, 2011
    1,103,016             $ 1.13  
      December 31, 2010
    1,050,179             $ 1.12  

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2011:

     
Options Outstanding
   
Options Exercisable
 
 
Range of
Exercise Price
   
 
Number of
Options
   
Weighted
Average
Remaining
Life (Years)
   
Weighted
Average
Exercise
Price
   
 
Number of
Options
   
Weighted
Average
Exercise
Price
 
                                 
$ .55 to $1.00       307,000       5.61     $ .71       307,000     $ .71  
1.01 to 1.50
      909,000       6.47       1.20       684,000       1.25  
1.51 to 1.74
      232,016       7.29       1.64       112,016       1.59  
                                             
$ .55 to $1.74       1,448,016       6.42     $ 1.16       1,103,016     $ 1.13  

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2010:

     
Options Outstanding
   
Options Exercisable
 
 
Range of
Exercise Price
   
 
Number of
Options
   
Weighted
Average
Remaining
Life (Years)
   
Weighted
Average
Exercise
Price
   
 
Number of
Options
   
Weighted
Average
Exercise
Price
 
                                 
$ .50 to $1.00       357,500       5.74     $ .71       252,500     $ .68  
1.01 to 1.50
      854,000       6.76       1.21       740,663       1.23  
1.51 to 2.00
      87,016       5.39       1.55       57,016       1.52  
                                             
$ .50 to $2.00       1,298,516       6.39     $ 1.09       1,050,179     $ 1.12  

The Company has recorded an aggregate of $125,000 and $193,000 related to its stock option based expenses in cost of sales and selling, general and administrative expenses on the accompanying Statement of Operations for the year ended December 31, 2011 and 2010, respectively.

The aggregate intrinsic value of options outstanding was $130,250 at December 31, 2011 and $761,863 at December 31, 2010. The aggregate intrinsic value of the options exercisable was $15,750 at December 31, 2011 and $591,175 at December 31, 2010. The total intrinsic value of the options exercised during 2011 and 2010 was $13,250 and $8,600, respectively.

A summary of non-vested options at December 31, 2011 and changes during the year ended December 31, 2010 is presented below:

           
Weighted Average
 
   
Options
     
Grant Date Fair Value
 
               
Non-vested option at January 1, 2011
    248,337  
?
  $ 0.49  
      Granted
    370,000         0.29  
      Vested
    (160,000 )       0.41  
      Forfeited
    (113,337 )       0.56  
Non-vested options at December 31, 2011
    345,000       $ 0.25  

As of December 31, 2011, there was $88,765 of total unrecognized compensation cost related to non-vested share-based compensation arrangements under the Plan. The costs will be recognized through December 2014.

Restricted Stock

The Company periodically grants restricted stock awards to certain officers and other employees that typically vest one to three years from their grant date. The Company recognized $225,803 and $307,488, respectively, of compensation expense during the year ended December 31, 2011 and 2010 related to restricted stock awards.  Stock compensation expense is recognized over the vesting period of the restricted stock.  At December 31, 2011, the Company had approximately $257,536 of total unrecognized compensation cost related to non-vested restricted stock, all of which will be recognized through April 2013.

     
Number of
Restricted Stock
     
 Weighted Average 
Exercise Price
 
Non-vested balance at January 1, 2011
    939,000     $ 0.71  
                 
Changes during the period:
               
Shares granted
    -       -  
Shares vested
    (313,000 )     0.71  
Shares forfeited
     -       -  
                 
Non-vested balance at December 31, 2011
    626,000     $ 0.71  

See Note 18 below regarding restricted stock and stock options for Philip S. Forte, the Company’s former Chief Financial Officer, upon his resignation as of January 11, 2011.