Stock-Based Compensation

6 Months Ended

Jan. 31, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 6. Stock-Based Compensation

Stock Option Plans

        The following table provides information about stock-based awards outstanding at January 31, 2012:

	Shares		Weighted  Average  Exercise Price		Weighted  Average Fair  Value
Options outstanding beginning of period		517,029	$	2.68	$	2.16
For the period August 1, 2011 through January 31, 2012
Granted		235,734	$	6.21	$	4.75
Forfeited		--		--		--
Exercised		4,590	$	1.09	$	0.91
Options outstanding, end of period		748,173	$	2.98	$	3.80
Options exercisable, end of period		415,471	$	2.70	$	2.17

        During the second quarter of fiscal 2012, there were options to purchase 60,000 shares of Common Stock granted to the Company's independent directors, which vest pro-ratably on a quarterly basis over the next year of service.  Each independent director receives an option to purchase 10,000 shares of the Company's Common Stock each year in which he or she is elected, appointed, or re-elected to serve as a director pursuant to the Amended and Restated 2005 Non-Employee Directors' Stock Option Plan. These options vest pro-ratably on a quarterly basis over the next year of service on the Board.  The Company recorded $23,000 of compensation expense for the three months ended January 31, 2012 with respect to these options.  The Company recorded $23,000 and $59,000 of compensation expense for the three and six months ended January 31, 2012, respectively, for previously granted options.

        During the second quarter of fiscal 2012 there were options to purchases 175,734 shares of Common Stock granted to the officers of the Company.  These options were granted in conjunction with the Company's annual review of compensation as of August 1, 2011 and vest on a quarterly basis over the next five years of service. The Company recorded $13,000 of compensation expense for three months ended January 31, 2012 related to these options.  In addition, the Company recorded $17,000 and $37,000 of compensation expense for the three and six months ended January 31, 2012, respectively, for previously granted options.

       The Company expects to issue new shares as options are exercised. As of January 31, 2012, the future compensation cost expected to be recognized for currently outstanding stock options is approximately $249,000 for the remainder of fiscal 2012, $340,000 in fiscal 2013, $227,000 in fiscal 2014, $216,000 in fiscal 2015, $179,000 in fiscal 2016 and $66,000 in fiscal 2017.

       The fair value of all options granted during the second fiscal quarter of 2012 was determined at the date of the grant using the Black-Scholes option-pricing model and the following assumptions:

Expected average risk-free interest rate	1.92	%
Expected average life (in years)	10
Expected volatility	71.39	%
Expected dividend yield	0.0	%

        The expected average risk-free rate is based on the 10 year U.S. treasury yield curve in December 2011.  The expected average life represents the period of time that the options granted are expected to be outstanding giving consideration to the vesting schedules, historical exercises and forfeiture patterns.  Expected volatility is based on historical volatilities of the Company's Common Stock.  The expected dividend yield is based on historical information and management's plan.

       The intrinsic value of the in-the-money stock options outstanding was $2.2 million and $1.1 million at January 31, 2012 and 2011, respectively.  The intrinsic value of in-the-money exercisable stock options was $903,000 and $824,000 at January 31, 2012 and 2011, respectively.

Restricted Stock Plans

        Under our Amended and Restated Synergetics USA, Inc. 2001 Stock Plan (“2001 Plan”), our Common Stock may be granted at no cost to certain employees and consultants of the Company. Certain plan participants are entitled to cash dividends and voting rights for their respective shares. Restrictions limit the sale or transfer of these shares during a vesting period whereby the restrictions lapse either pro-ratably over a three-year or five-year vesting period or at the end of the third or fifth year. These shares also vest upon a change of control event. Upon issuance of stock under the 2001 Plan, unearned compensation equivalent to the market value at the date of the grant is charged to stockholders' equity and subsequently amortized to expense over the applicable restriction period. As of January 31, 2012, there was approximately $1.6 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2001 Plan. The cost is expected to be recognized over a weighted average period of four years. The following table provides information about restricted stock grants during the six month period ended January 31, 2012:

	Number of Shares		Weighted Average Grant Date Fair Value
Balance as of July 31, 2011		330,807	$	2.36
Granted		202,072	$	6.37
Forfeited		2,000	$	2.82
Balance as of January 31, 2012		530,879	$	3.88