7. STOCKHOLDERS’ EQUITY AND STOCK OPTIONS

The Company has three main share-based payment plans: The Nonemployee Directors Option Plan (the “Directors Plan”) and two Restricted Stock Plans (the “2009 Equity Plan” and the “2012 Equity Plan”). Both the 2009 and 2012 Equity Plans have an identical structure. The below table summarizes the main provisions of each of these plans:

	Nature and terms
Nonemployee Director Stock Option Plan	The plan provides for an automatic one-time grant of options to purchase 5,000 shares of common stock to each nonemployee director newly elected or appointed. Options are granted at not less than fair market value, become exercisable commencing six months from the date of grant and expire six years from the date of grant. In addition, all nonemployee directors re-elected to the Company’s Board of Directors at any annual meeting of the stockholders will automatically be granted additional options to purchase 1,000 shares of common stock on that date. Such plan expired at December 31, 2012, as to any new awards. Existing options will expire based on individual award dates.
Restricted Stock Plan - employees	Long-term incentive compensation three-year plan. Employees are granted potential share awards at the beginning of the three-year cycle at baseline and maximum amounts. The level of award and final vesting is based on the Board of Director’s opinion as to the performance of the Company and management in the entire three-year cycle. All vesting is three-year “cliff” vesting - there is no partial vesting. The valuation is based on the stock price at the grant date and amortized to expense over the three-year period.
Restricted Stock Plan - Directors	Long-term incentive compensation-three-year plan. Directors are granted potential share awards at the beginning of the three-year cycle at baseline and maximum amounts. The level of award and final vesting is based on the Board of Director’s opinion as to the performance of the Company and management in the entire three-year cycle. All vesting is three-year “cliff” vesting - there is no partial vesting. The valuation is based on the stock price at the grant date and amortized to expense over the three-year period.
Matching award program	All participating employees are eligible to receive one share of restricted stock awarded for each two shares of Lakeland stock purchased on the open market. Such restricted shares are subject to three-year time vesting. The valuation is based on the stock price at the grant date and amortized to expense over the three-year period.
Bonus in stock program - employees	All participating employees are eligible to elect to receive any cash bonus in shares of restricted stock. Such restricted shares are subject to two-year time vesting. The valuation is based on the stock price at the grant date and amortized to expense over the two-year period. Since the employee is giving up cash for unvested shares, the amount of shares awarded is 133% of the cash amount based on the grant date stock price. The Chief Executive Officer, Chief Financial Officer and the Chief Operating Officer of the Company have all elected to take 30% of their cash compensation in restricted stock pursuant to this program, commencing in October 2012.
Director fee in stock program	All directors are eligible to elect to receive any director fees in shares of restricted stock. Such restricted shares are subject to two- year time vesting. The valuation is based on the stock price at the grant date and amortized to expense over the two-year period. Since the director is giving up cash for unvested shares, the amount of shares awarded is 133% of the cash amount based on the grant date stock price.

The Nonemployee Directors’ Option Plan (the “Directors’ Plan”) provides for an automatic one-time grant of options to purchase 5,000 shares of common stock to each nonemployee director elected or appointed to the Board of Directors. Under the Directors’ Plan, 60,000 shares of common stock have been authorized for issuance. Options are granted at not less than fair market value, become exercisable commencing six months from the date of grant and expire six years from the date of grant. In addition, all nonemployee directors re-elected to the Company’s Board of Directors at any annual meeting of the stockholders will automatically be granted additional options to purchase 1,000 shares of common stock on each of such dates.

The following table represents our stock options granted, exercised and forfeited during the fiscal year ended January 31, 2013.

Stock Options	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 31, 2012		18,200	$	7.31		3.38 years	$	10,230
Granted during the year ended January 31, 2013		10,000	$	6.44		5.39 years	$	100
Forfeited during the year ended January 31, 2013		(4,200)	$	10.67		—		—
Outstanding at January 31, 2013		24,000	$	7.47		3.95 years	$	1,300
Exercisable at January 31, 2013		24,000	$	7.47		3.95 years	$	1,300
Reserved for future issuance		0
Directors’ Plan (expired on December 31, 2012)

There were no exercises during the year ended January 31, 2013.

The fair value of the options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions for the year ended January 31, 2013: expected volatility of 44%; risk-free interest rate of 2.65%; expected dividend yield of 0.0%; and expected life of six years. All stock-based option awards were fully vested at January 31, 2013 and 2012.

The 2009 Equity Plan and the 2012 Equity Plan

On June 17, 2009, the stockholders of the Company approved a restricted stock plan (the “2009 Equity Plan”). A total of 253,000 shares of restricted stock were authorized under this plan. On June 20, 2012, the stockholders of the Company authorized 310,000 shares under a new restricted stock plan (the “2012 Equity Plan”). Under these restricted stock plans, eligible employees and directors are awarded performance-based restricted shares of the Company common stock. The amount recorded as expense for the performance-based grants of restricted stock are based upon an estimate made at the end of each reporting period as to the most probable outcome of this plan at the end of the three-year performance period (e.g., baseline, maximum or zero). In addition to the grants with vesting based solely on performance, certain awards pursuant to the plan have a time-based vesting requirement, under which awards vest from two to three years after grant issuance, subject to continuous employment and certain other conditions. Restricted stock has voting rights, and the underlying shares are not considered to be issued and outstanding until vested.

Under the 2009 Equity Incentive Plan, the Company has issued 152,582 fully vested shares as of January 31, 2013. The Company has granted up to a maximum of 36,278 restricted stock awards remaining unvested as of January 31, 2013. All of these restricted stock awards are nonvested at January 31, 2013, and have a weighted average grant date fair value of $8.57. The Company recognizes expense related to performance-based awards over the requisite service period using the straight-line attribution method based on the outcome that is probable.

Under the 2012 Equity Incentive Plan, the Company has granted 242,118 restricted stock awards as of January 31, 2013, assuming all maximum awards are achieved. All of these restricted stock awards are nonvested at January 31, 2013 (180,618 shares at “baseline”), and have a weighted average grant date fair value of $6.44. The Company recognizes expense related to performance-based awards over the requisite service period using the straight-line attribution method based on the outcome that is probable.

As of January 31, 2013, unrecognized stock-based compensation expense related to restricted stock awards totaled $33,004 pursuant to the 2009 Equity Incentive Plan and $1,486,361 pursuant to the 2012 Equity Incentive Plan, before income taxes, based on the maximum performance award level, less what has been charged to expense on a cumulative basis through October 31, 2012, which was set to zero. Such unrecognized stock-based compensation expense related to restricted stock awards totaled $33,004 for the 2009 Equity Incentive Plan and $1,007,788 for the 2012 Equity Incentive Plan at the baseline performance level. The cost of these nonvested awards is expected to be recognized over a weighted-average period of three years. The Board has estimated its current performance level to be at zero, and expenses have been recorded accordingly. The performance based awards are not considered stock equivalents for earnings per share (“EPS”) calculation purposes.

Stock-Based Compensation

The Company recognized total stock-based compensation costs of $332,761 and $543,542 for the years ended January 31, 2013 and 2012, respectively, of which $0 and $4,465 result from the 2006 Equity Plan, $144,617 and $516,797 result from the 2009 Equity Plan and $163,514 and $0 result from the 2012 Equity Plan for the years ended January 31, 2013 and 2012, respectively, and $24,630 and $22,280, respectively, from the Director Option Plan. These amounts are reflected in selling, general and administrative expenses. The total income tax benefit recognized for stock-based compensation arrangements was $119,795 and $197,030 for the years ended January 31, 2013 and 2012, respectively.

Restricted Stock Plan 2012 Equity Plan	Shares Authorized Under 2012 Plan as revised		Outstanding Unvested Grants at Maximum at End of FY13		Shares Remaining Available for Future Issuance
Restricted stock grants - employees		173,000		164,500		8,500
Restricted stock grants - directors		50,000		49,500		500
Matching award program		9,000		—		9,000
Bonus in stock - employees		40,000		21,517		18,483
Retainer in stock - directors		38,000		6,601		31,399
Total restricted stock plan		310,000		242,118		67,882

Total Restricted Shares	Outstanding Unvested Grants at Maximum at Beginning of FY13		Granted during FY13		Becoming Vested during FY13		Forfeited during FY13		Outstanding Unvested Grants at Maximum at End of FY13
Restricted stock grants - employees		129,536		164,500		79,313		50,223		164,500
Restricted stock grants - directors		63,184		49,500		45,232		17,952		49,500
Matching award program		3,500		—		—		—		3,500
Bonus in stock - employees		25,801		24,806		3,000		—		47,607
Retainer in stock - directors		5,572		7,717		—		—		13,289
Total restricted stock plan		227,593		246,523		127,545		68,175		278,396

Shares under 2012 Equity Plan	Outstanding Unvested Grants at Maximum at Beginning of FY13		Granted during FY13		Becoming Vested during FY13		Forfeited during FY13		Outstanding unvested grants at maximum at end of FY13
Restricted stock grants – employees		—		164,500		—		—		164,500
Restricted stock grants - directors		—		49,500		—		—		49,500
Matching award program		—		—		—		—		—
Bonus in stock - employees		—		21,517		—		—		21,517
Retainer in stock - directors		—		6,601		—		—		6,601
Total restricted stock plan		—		242,118		—		—		242,118

Shares under 2009 Equity Plan	Outstanding Unvested Grants at Maximum at Beginning of FY13		Granted during FY13		Becoming Vested during FY13		Forfeited during FY13		Outstanding unvested grants at maximum at end of FY13
Restricted stock grants - employees		129,536		—		79,313		50,223		—
Restricted stock grants - directors		63,184		—		45,232		17,952		—
Matching award program		3,500		—		—		—		3,500
Bonus in stock - employees		25,801		3,289		3,000		—		26,090
Retainer in stock - directors		5,572		1,116		—		—		6,688
Total restricted stock plan		227,593		4,405		127,545		68,175		36,278

Overall weighted average per share - all plans	Outstanding Unvested Grants at Maximum at Beginning of FY13		Granted during FY13		Becoming Vested during FY13		Forfeited during FY13		Outstanding unvested grants at maximum at end of FY13
Restricted stock grants – employees	$	8.00	$	6.44	$	8.00	$	8.00	$	6.44
Restricted stock grants - directors		8.00		6.44		8.00		8.00		6.44
Matching award program		8.14		—		—		—		8.14
Bonus in stock - employees		8.50		5.55		9.31		—		6.91
Retainer in stock - directors		8.49		6.65		—		—		7.42
Total restricted stock plan	$	8.07	$	6.36	$	8.03	$	8.00	$	6.59

Shares under 2012 Equity Plan	Outstanding Unvested Grants at Maximum at Beginning of FY13		Granted during FY13		Becoming Vested during FY13		Forfeited during FY13		Outstanding unvested grants at maximum at end of FY13
Restricted stock grants – employees	$	—	$	6.44	$	—	$	—	$	6.44
Restricted stock grants - directors		—		6.44		—		—		6.44
Matching award program		—		—		—		—		—
Bonus in stock - employees		—		5.41		—		—		5.41
Retainer in stock - directors		—		6.01		—		—		6.01
Total restricted stock plan	$	—	$	6.34	$	—	$	—	$	6.34

Shares under 2009 Equity Plan	Outstanding Unvested Grants at Maximum at Beginning of FY13		Granted during FY13		Becoming Vested during FY13		Forfeited during FY13		Outstanding unvested grants at maximum at end of FY13
Restricted stock grants - employees	$	8	$	—	$	8	$	8	$	8
Restricted stock grants - directors		8.00		—		8.00		8.00		8.00
Matching award program		8.14		—		—		—		8.14
Bonus in stock - employees		8.50		6.44		9.31		—		8.15
Retainer in stock - directors		8.49		10.45		—		—		8.82
Total restricted stock plan	$	8.07	$	7.46	$	8.03	$	8.00	$	8.27