3. Stock-Based Compensation and Stock Options

The Angeion Corporation 2007 Stock Incentive Plan (the "2007 Plan") and the Angeion Corporation 2002 Stock Option Plan (the "2002 Plan") both provide that incentive stock options and nonqualified stock options to purchase shares of common stock may be granted at prices determined by the Compensation Committee, except that the purchase price of incentive stock options may not be less than the fair market value of the stock at date of grant. Under the 2007 Plan, all options expire no later than seven years from the grant date while under the 2002 Plan all options expire no later than ten years from the grant date. Options under both plans are subject to various vesting schedules. In addition, the 2007 Plan allows the granting of restricted stock awards, stock appreciation rights and performance stock.

Total share-based compensation expense included in the Company's statement of operations for the three months ended January 31, 2012 and 2011 was $137,000 and $34,000, respectively.

Stock Options

A summary of our option activity for the three-month periods ended January 31, 2012 and 2011 follows:


			For the three months ended
	January 31, 2012				January 31, 2011
				Weighted				Weighted
				Average				Average
				Exercise				Exercise
	Shares			Price	Shares			Price
Outstanding at beginning of year	346,572		$	6.31	600,573		$	6.12
Exercised	(17,500	)		2.30	(14,500	)		3.32
Expired or cancelled	-			-	(14,000	)		6.23
Outstanding at end of period	329,072		$	6.53	572,073		$	6.19

The following table summarizes information concerning stock options outstanding as of January 31, 2012:


			Weighted
		Number	Average
		Outstanding	Remaining
		and Subject to	Contractual
	Exercise Prices	Exercise	Life
$	2.00	1,150	1.68
	2.53	7,000	2.46
	5.08	52,500	2.47
	5.16	37,584	3.55
	5.66	20,000	3.30
	6.23	24,500	2.29
	6.60	47,647	2.54
	7.79	41,500	1.68
	7.86	97,191	2.60

	Total	329,072	2.58

The total intrinsic value of options exercised during the three months ended January 31, 2012 and 2011 was $53,000 and $22,000, respectively. The total intrinsic value of options outstanding and exercisable at January 31, 2012 was $50,000, which was calculated using the closing stock price as of January 31, 2012 less the exercise price of in-the-money options. The Company issues new shares when stock options are exercised. Cash received from the exercise of stock options was $40,000 and $48,000 for the three months ended January 31, 2012 and 2011, respectively and there was no related tax benefit realized due to the Company's current tax loss position. There was no unrecognized compensation expense related to outstanding stock options as of January 31, 2012.

Valuation Assumptions

The Company uses the Black-Scholes option-pricing model ("Black-Scholes model") to determine the fair value of stock options as of the grant date. The fair value of stock options under the Black-Scholes model requires management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility of the Company's stock price and expected

dividends. The Company did not grant any options during the three-month periods ended January 31, 2012 and 2011.

Restricted Stock Awards

Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the awardee leaves the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the right to vote the shares. The value of stock awards was established by the market price on the date of grant. A summary of the Company's restricted stock activity for the three months ended January 31, 2012 is presented in the following table.


	For the three months ended
	January 31, 2012
			Weighted
			Average
			Grant Date
	Shares		Fair Value
Unvested, beginning of the period	126,852	$	4.12
Granted	12,000		5.10
Unvested, end of period	138,852	$	4.21

Unrecognized compensation expense related to outstanding restricted stock awards as of January 31, 2012 was $364,000. The Company expects to recognize this over a weighted average period of 2.02 years.

Employee Stock Purchase Plan

The Angeion Corporation 2003 Employee Stock Purchase Plan ("Purchase Plan") allows participating employees to purchase shares of the Company's common stock at a discount through payroll deductions. The Purchase Plan is available to all employees subject to certain eligibility requirements. Terms of the Purchase Plan provide that participating employees may purchase the Company's common stock on a voluntary after tax basis. Employees may currently purchase the Company's common stock at a price that is the lower of 85% of the fair market value of one share of common stock at the beginning or end of each stock purchase period or phase. The Purchase Plan is carried out in six-month phases, with phases beginning on January 1 and July 1 of each calendar year. For the phase that ended on December 31, 2011, employees purchased 2,504 shares at a price of $4.47 per share. As of January 31, 2012, the Company has withheld approximately $7,000 from employees participating in the phase that began on January 1, 2012. At January 31, 2012, 47,136 shares of common stock were available for future purchase under the Purchase Plan.

Performance Share Awards

As a part of the compensation arrangements, on December 15, 2011, the Company's chief executive officer was awarded 25,090 shares of Company common shares to be delivered if the Company meets the specified operating earnings target. The officer is not entitled to rights of ownership and shares are not regarded as outstanding until delivered. These shares are valued at $117,000, with $16,000 recognized as expense in the quarter ended January 31, 2012 leaving $101,000 to be amortized in the remaining three quarters of fiscal 2012.

Performance share awards to non-employee consultants are an obligation within a consulting arrangement that does not grant any ownership rights until the shares are issued. The value of stock awards to non-employees remains variable until performance criteria have been achieved, when individual shares groups to be granted vest, establishing the value of each group over the dates that its related performance criteria was completed. Under variable accounting, amounts are expensed in relation to the shares expected to be granted over the performance period, with value of those whose performance criteria has been met at the market value on the date earned and value of all others marked to market as of the reporting date. At January 31, 2012, of the 24,000 shares expected to be granted, 5,250 have vested with an aggregate market value fixed at $25,000. The remaining 18,750 expected to be earned have $101,000 in value at January 31, 2012. Expense for the three months ended January 31, 2012 was $35,000.

The following table presents the statement of operations classification of pre-tax stock-based compensation expense recognized for the three and three months ended January 31, 2012 and 2011:


		Three months ended
		January 31,
		2012	2011
Cost of revenues	$	-	$	1
Selling and marketing		13		24
General and administrative		115		(1	)
Research and development		9		10
Stock-based compensation expense	$	137	$	34