NOTE 9: STOCK-BASED COMPENSATION

Equity Incentive Plans:

In 1997, the Board of Directors of the Company approved a stock option plan covering 350,000 shares (increased to 829,629 shares after giving effect to stock splits effective October 15, 2003, November 15, 2005 and November 14, 2007) that was approved by the Company's shareholders at the 1997 meeting of shareholders (the "1997 Plan"). In 2001, the Board of Directors of the Company approved an equity incentive plan covering 350,000 shares (increased to 829,629 shares after giving effect to stock splits effective October 15, 2003, November 15, 2005 and November 14, 2007) that was approved by the Company's shareholders at the 2001 meeting of shareholders (the "2001 Plan"). In 2005, the Board of Directors of the Company approved an equity incentive plan covering 500,000 shares (increased to 888,888 shares after giving effect to stock splits effective November 15, 2005 and November 14, 2007) that was approved by the Company's shareholders at the 2005 meeting of shareholders (the "2005 Plan"). In 2008, the Board of Directors of the Company approved an equity incentive plan covering 750,000 shares that was approved by the Company's shareholders at the 2008 meeting of shareholders (the "2008 Plan"). These plans contain anti-dilution provisions that apply to stock splits and stock dividends declared by the Company.

The Company grants equity awards to its senior executives and non-employee Directors. Historically, this has consisted of stock option awards. In December 2010, the Company's Board of Directors approved a change in practice to begin awarding non-employee Directors restricted stock units ("RSUs").

Restricted Stock Units:

On June 6, 2012 and December 16, 2011, the Company awarded an aggregate of 15,465 RSUs and 8,385 RSUs, respectively, to its five non-employee Directors. Each RSU entitles the grantee to receive, from the Company, one common share at the vesting date in accordance with the terms of the award agreement. All of the awards granted on December 16, 2011 were issued upon vesting at the Annual Meeting of Shareholders on June 6, 2012. The awards granted on the date of the 2012 Annual Meeting of Shareholders on June 6, 2012 are scheduled to vest at the 2013 Annual Meeting of Shareholders. The award agreements provide for accelerated vesting in certain instances such as a "change in control" or death, and for pro-rata vesting in the event of a non-cause departure from the Board of Directors prior to the one year anniversary of the award. The weighted average grant fair value per unit for awards granted on June 6, 2012 was $9.70 (which is the average of the high and low price of the Company's common shares on the NYSE that day). Total stock-based compensation expense related to RSU awards was $150,009 for the fiscal year ended January 31, 2013. As of January 31, 2013, there was a total of $50,004 of unrecognized compensation expense related to the non-vested RSU awards.

The following table summarizes RSU transactions for the fiscal year ended January 31, 2013:

	Units
Non-vested at February 1, 2012		8,385
Granted		15,465
Vested		(8,385	)
Forfeited		-
Non-vested at January 31, 2013		15,465

Stock options:

On June 6, 2012, April 2, 2012, February 27, 2012 and December 17, 2010, the Company granted 3,300, 54,625, 97,299, and 125,448 stock options, respectively, to its senior executives, with one-third exercisable one year from the grant date and the remaining two-thirds vesting two and three years from grant date, respectively. In the event of a "change of control", certain unvested options may become immediately exercisable. Typically, the duration of options is for up to ten years from the date of grant, subject to early termination conditions. The fair value of options granted is amortized into compensation expense on a straight-line basis over the respective vesting period, net of estimated forfeitures. The fair value of the options is estimated as of the grant date using the Black-Scholes option valuation model. The per share fair value weighted-averages at the date of grant for stock options granted in the months of June 2012, April 2012, February 2012, and December 2010 were $2.91, $3.18, $2.96 and $3.95, respectively.

The application of this valuation model relies on the following assumptions that are judgmental and sensitive in the determination of the compensation expense:

	Fiscal Years Ended January 31,
	2013			2012		2011
Expected term (years)		5.0			-		5.0
Risk-free interest rate		0.88% - 2.11	%		-		1.90% - 3.53	%
Expected volatility		43% - 45	%		-		29% - 45	%
Dividend yield		2.18% - 2.93	%		-		1.88% - 2.48	%

Historical information was the principal basis for the selection of the expected term and dividend yield. The expected volatility is based on a weighted-average combination of historical and implied volatilities over a time period that approximates the expected term of the option. The risk-free interest rate was selected based upon the U.S. Treasury Bill rates in effect at the time of grant for the expected term of the option.

The following table summarizes stock option transactions for the fiscal year ended January 31, 2013:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Shares			Exercise Price		Life (years)		Value
Options:
Outstanding at February 1, 2012		1,223,292		$	10.2437		5.52		.
Granted		155,224			10.0439
Forfeited		(28,078	)		10.8943
Expired		(9,956	)		5.5476
Exercised		(37,290	)		7.9407
Outstanding at January 31, 2013		1,303,192		$	10.3077		4.83	$	766,478

Exercisable at January 31, 2013		1,134,088		$	10.2890		4.23	$	718,907

The aggregate intrinsic value of options exercised during the fiscal years ended January 31, 2013, 2012 and 2011 was $94,988, $93,570, and $617,594, respectively. The intrinsic value of stock options is the amount by which the market price of the stock on a given date, such as at the end of the period or on the day of exercise, exceeded the market price of stock on the date of grant.

In connection with the separation agreement between the Company and its former Chief Financial Officer, the Company agreed to accelerate the vesting date and extend the exercise date of certain stock options. This was considered a stock option modification, resulting in additional stock compensation expense of approximately $250,000 recorded in the fiscal year ended January 31, 2013.

The following table summarizes information about the options outstanding and options exercisable as of January 31, 2013:

	Options Outstanding						Options Exercisable
			Weighted Average
			Remaining		Weighted Average				Weighted Average
	Shares		Life (years)		Exercise Price		Shares		Exercise Price
Range of prices:
$7.00 – 8.99		108,450		2.06	$	7.4110		108,450	$	7.4110
$9.00 – 9.99		541,107		4.92		9.5475		451,010		9.4881
$10.00 – 10.99		203,391		4.90		10.7823		155,337		10.9000
$11.00 – 11.99		335,800		4.78		11.5426		335,800		11.5426
$12.00 – 12.99		114,444		7.12		12.1800		83,491		12.1800
		1,303,192		4.83	$	10.3077		1,134,088	$	10.2890

Total stock-based compensation expense related to options was $753,924, (including the aforementioned option modification of $250,000), for the fiscal year ended January 31, 2013. As of January 31, 2013, there was $401,624 of total unrecognized compensation cost related to non-vested options granted under the plans. The cost is expected to be recognized over a weighted-average period of 1.6 years.